<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
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EXCALIBUR TECHNOLOGIES CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: common
stock, par value $0.01 per share, of Excalibur Technologies
Corporation.
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
15,068,979 shares of Excalibur common stock.
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined). The filing
fee of $129,412 has been calculated on the basis of Exchange Act Rule
0-11(c)(1) as one-fiftieth of one percent of $647,061,958, the
underlying value of the transaction. The underlying value of the
transaction has been calculated pursuant to Exchange Act Rule
0-11(a)(4) by calculating the product of (i) $42.94 (the average of
the bid and asked prices of Excalibur common stock on the Nasdaq
National Market System on August 10, 2000) multiplied by (ii)
15,068,979 (the number of Excalibur shares outstanding as of July 15,
2000).
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $647,061,958
------------------------------------------------------------------------
(5) Total fee paid: $129,412
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
EXCALIBUR TECHNOLOGIES CORPORATION
1921 GALLOWS ROAD, SUITE 200
VIENNA, VIRGINIA 22182
, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Excalibur Technologies Corporation to be held at [PLACE], located at [ADDRESS],
on [DAY], [DATE], 2000, at [TIME], local time.
At the Excalibur annual meeting, stockholders will be asked to approve and
adopt a combination transaction between Excalibur and Intel Corporation and a
related Agreement and Plan of Contribution and Merger dated as of April 30,
2000, as amended. Upon completion of the combination:
- Excalibur will become a wholly owned subsidiary of a new holding company,
Exca Holdings, Inc.; [NOTE: WE USE THE TERM "NEWCO" THROUGHOUT. PRIOR TO
THE DEFINITIVE FILING OF THE PROXY STATEMENT, THE PARTIES WILL DECIDE ON
THE NAME OF THE NEWLY FORMED COMPANY]
- Each outstanding share of Excalibur common stock will be converted into
one share of Newco Class A common stock, resulting in Excalibur
stockholders receiving 51% of the Newco Class A common stock in exchange
for their Excalibur stock, which represents 40% of the common stock of
Newco, on a fully-diluted basis after giving effect to the conversion of
outstanding preferred stock and exercise of assumed Excalibur options.;
- Each outstanding share of Excalibur preferred stock will be converted
into one share of Newco preferred stock; and
- Intel Corporation will contribute to Newco its Interactive Media Services
division, intellectual property assets and other assets used by that
division, as well as approximately $155 million in cash, $150 million of
which will be paid at closing and the balance of which will be payable in
2001 to fund retention bonuses to former Intel employees, in exchange for
49% of the Newco Class A common stock and 100% of the Newco Class B
non-voting common stock, which together represent a total of 60% of the
common stock of Newco, on a fully-diluted basis after giving effect to
the conversion of outstanding preferred stock and exercise of assumed
Excalibur options.
The board of directors of Excalibur has decided that the combination is
fair to and in the best interests of the Excalibur stockholders and unanimously
recommends that you vote "FOR" the combination at the annual meeting.
As part of the transaction with Intel, we are also asking you at the annual
meeting to approve the Newco 2000 Stock Option Plan in order to permit Newco the
opportunity to provide employees, consultants, advisors and non-employee
directors the opportunity to receive stock options and restricted stock.
Approval of this option plan is a condition to completing our combination with
the Interactive Media Services division of Intel.
We have enclosed our proxy statement relating to the annual meeting, which
also constitutes Newco's prospectus covering the Newco shares offered to you in
exchange for your Excalibur shares and the Newco shares to be received by Intel.
The proxy statement/prospectus includes the recommendation of the board of
directors of Excalibur in favor of the combination and the reasons for that
recommendation, as well as the background of the transaction, the conditions to
closing and other important information regarding the proposed combination.
PLEASE READ THE ENTIRE PROXY STATEMENT/PROSPECTUS CAREFULLY. APPROVAL OF
THE COMBINATION REQUIRES THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE
OUTSTANDING EXCALIBUR SHARES. YOUR VOTE IS IMPORTANT REGARDLESS OF HOW MANY
SHARES YOU OWN. IN ORDER TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE
ANNUAL MEETING WHETHER OR NOT YOU ARE ABLE TO ATTEND IN PERSON, WE STRONGLY URGE
YOU TO COMPLETE THE ENCLOSED PROXY CARD PROMPTLY AND RETURN IT IN THE ENVELOPE
PROVIDED.
<PAGE> 3
Please do not send us any of your stock certificates at this time.
Following the closing of the combination, you will receive information about the
procedure for surrendering your Excalibur stock certificates in exchange for
Newco stock certificates.
On behalf of the board of Excalibur, I thank you for your support and urge
you to vote for the approval of the combination.
Sincerely yours,
Patrick C. Condo
President and Chief Executive Officer
<PAGE> 4
EXCALIBUR TECHNOLOGIES CORPORATION
1921 GALLOWS ROAD, SUITE 200
VIENNA, VIRGINIA 22182
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD , 2000
TO THE STOCKHOLDERS OF EXCALIBUR TECHNOLOGIES CORPORATION:
NOTICE IS HEREBY GIVEN that Excalibur Technologies Corporation will hold an
annual meeting of stockholders on , 2000, at [PLACE AND ADDRESS]
(including any adjournments or postponements thereof) for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Contribution and Merger dated as of April 30, 2000,
as amended, by and among Excalibur, Intel Corporation, Exca Holding, Inc.,
a wholly owned subsidiary of Excalibur, and Excalibur Transitory, Inc., a
wholly owned subsidiary of Newco. This contribution and merger agreement
provides, among other things, that (a) Transitory will be merged with and
into Excalibur, as a result of which Excalibur will become a wholly owned
subsidiary of Newco; (b) each outstanding share of Excalibur common stock
will be converted into one share of Newco Class A common stock, resulting
in Excalibur stockholders receiving 51% of the Newco Class A common stock,
which represents 40% of the common stock of Newco, on a fully-diluted basis
after giving effect to the conversion of outstanding preferred stock and
exercise of assumed Excalibur options; (c) each outstanding share of
Excalibur preferred stock will be converted into one share of Newco
preferred stock; and (d) Intel will contribute to Newco its Interactive
Media Services division, intellectual property assets and other assets used
by that division, as well as approximately $155 million in cash, $150
million of which will be paid at closing and the balance of which will be
payable in 2001 to fund retention bonuses to certain former Intel
employees, in exchange for 49% of the Newco Class A common stock and 100%
of the Newco Class B non-voting common stock, which together represent a
total of 60% of the common stock of Newco, on a fully-diluted basis after
giving effect to the conversion of outstanding preferred stock and exercise
of assumed Excalibur options.
2. In connection with the combination transaction with Intel, to
consider and vote upon a proposal to approve the Newco 2000 stock option
plan.
3. To elect ten members of the board of directors of Excalibur for
terms expiring at the completion of the combination or, if the combination
is not completed, at the 2001 annual meeting of Excalibur.
4. To transact such other business as may properly come before the
annual meeting.
Only the holders of record of Excalibur common stock as of the close of
business on , 2000 are entitled to notice of, and to vote at, the
annual meeting and at any adjournment or postponement thereof. A list of these
stockholders will be open to examination by any Excalibur stockholder at the
annual meeting and for a period of ten days prior to the date of the annual
meeting during ordinary business hours at Excalibur's headquarters, located at
1291 Gallows Road, Suite 200, Vienna, Virginia 22182. The approval of the
contribution and merger agreement and the combination requires the affirmative
vote of the holders of at least a majority of the shares of Excalibur common
stock outstanding on the record date for the annual meeting.
<PAGE> 5
If you attend the meeting, you may vote your shares in person, which will
revoke any previously executed proxy. FAILURE TO RETURN A PROPERLY EXECUTED
PROXY CARD OR TO VOTE AT THE ANNUAL MEETING WILL GENERALLY HAVE THE SAME EFFECT
AS A VOTE AGAINST THE COMBINATION.
By Order of the Board of Directors,
Patrick C. Condo
President and Chief Executive Officer
Vienna, Virginia
, 2000
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 6
WHERE YOU CAN FIND MORE INFORMATION
Excalibur files annual, quarterly and special reports, proxy statements and
other information with the United States Securities and Exchange Commission. You
may read and copy any document filed by Excalibur at the SEC's public reference
facilities. Please call the SEC at 1-800-SEC-0330 for further information about
its public reference facilities. These SEC filings are also available to the
public at the SEC's web site at "www.sec.gov". Reports, proxy statements and
other information concerning Excalibur can also be inspected at the offices of
the Nasdaq Stock Exchange, 33 Whitehall Street, New York, New York 10004.
This proxy statement/prospectus incorporates documents by reference which
relate to Excalibur and which are not included in this proxy
statement/prospectus. The documents relating to Excalibur are available to any
person, including any beneficial owner to whom this proxy statement/prospectus
is delivered, on written or oral request, without charge, to Excalibur
Technologies Corporation, 1921 Gallows Road, Suite 200, Vienna, Virginia 22182
(telephone number (703) 761-3700), Attention: Chief Financial Officer. In order
to ensure timely delivery of the documents, any requests should be made by
, 2000.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Excalibur to "incorporate by reference" the information it
files with the SEC which means that Excalibur can disclose important information
to you by referring you to documents it has previously filed with the SEC. The
information incorporated by reference is considered to be a part of this proxy
statement/prospectus, and any later information that Excalibur files with the
SEC will automatically update and supersede this information. Excalibur
incorporates by reference the documents listed below, and any further filings
made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until the offering of the securities is terminated. This
proxy statement/prospectus is part of a registration statement on Form S-4 filed
by Newco with the SEC (Registration No. ). The documents Excalibur is
incorporating by reference are:
1. Excalibur's Annual Report on Form 10-K for the fiscal year ended
January 31, 2000;
2. Excalibur's Quarterly Report on Form 10-Q for the quarter ended
April 30, 2000;
3. Excalibur's Current Reports on Form 8-K dated April 30, 2000 and
July 19, 2000; and
4. the description of Excalibur common stock in Excalibur's
Registration Statement filed pursuant to Section 12 of the Exchange Act,
and any amendment or report filed for the purpose of updating any such
description.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains and incorporates by reference
certain statements that constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include all statements regarding the intent, belief
or current expectations regarding the matters discussed or incorporated by
reference in this proxy statement/prospectus (including statements as to
"beliefs," "expectations," "anticipations," "intentions" or similar words) and
all statements which are not statements of historical fact. Actual results,
performance or events may differ materially for a variety of reasons, including,
but not limited to, risks related to the realization of anticipated revenues,
profitability and cost synergies of the combination, trends affecting the growth
of Excalibur and other risks and uncertainties described in "Risk Factors" or in
the other SEC filings of Excalibur.
TRADEMARKS
This proxy statement/prospectus contains trademarks of Excalibur and may
contain trademarks of other parties.
i
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TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION......................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... i
TRADEMARKS.................................................. i
QUESTIONS AND ANSWERS ABOUT THE COMBINATION................. 1
SUMMARY..................................................... 3
The Companies............................................. 3
The Annual Meeting........................................ 4
Our Recommendation to Excalibur Stockholders Concerning
the Combination........................................ 4
Record Date; Voting Power................................. 4
Votes Required for the Combination........................ 4
Share Ownership of Management and Certain Stockholders.... 4
The Contribution and Merger Agreement..................... 4
The Contributed Assets.................................... 5
What Excalibur Security Holders will Receive in the
Combination............................................ 5
Ownership of Newco following the Combination.............. 5
Federal Income Tax Consequences........................... 5
Opinion of Excalibur's Financial Advisor.................. 5
Accounting Treatment...................................... 6
Listing of Excalibur Stock................................ 6
Conditions to the Closing of the Combination.............. 6
Circumstances where the Parties can Terminate the
Contribution and Merger Agreement...................... 7
Termination Fee; Expenses................................. 7
No Appraisal Rights for Common Stock Holders.............. 7
Board of Directors and Management of Newco Following the
Combination............................................ 8
The Newco 2000 Stock Option Plan.......................... 8
Election of the Board of Directors of Excalibur........... 8
Market Price Information.................................. 8
Summary Selected Consolidated Financial Data of
Excalibur.............................................. 9
Summary Selected Historical Financial Data of Intel's
Interactive Media Services Division.................... 10
Summary Selected Pro Forma Combined Financial
Information............................................ 11
RISK FACTORS................................................ 12
THE ANNUAL MEETING.......................................... 18
Time and Place............................................ 18
Matters to be Considered at the Annual Meeting............ 18
Record Date and Quorum.................................... 18
Votes Required............................................ 18
Proxies................................................... 19
THE COMBINATION............................................. 21
Background of the Combination............................. 21
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Our Reasons for the Combination; Recommendation of Our
Board.................................................. 25
Opinion of Excalibur's Financial Advisor.................. 27
Interests of Certain Persons in the Combination........... 32
Material Federal Income Tax Consequences.................. 33
Accounting Treatment...................................... 34
Regulatory Approvals...................................... 35
Appraisal Rights.......................................... 35
DIRECTORS AND MANAGEMENT OF NEWCO FOLLOWING THE
COMBINATION............................................... 36
Directors................................................. 36
Committees of the Board of Directors...................... 36
Compensation of Directors................................. 36
Management And Executive Officers of Newco................ 36
Executive Compensation.................................... 37
THE CONTRIBUTION AND MERGER AGREEMENT AND RELATED
AGREEMENTS................................................ 38
The Combination........................................... 38
The Contribution.......................................... 38
Conversion of Shares...................................... 38
Exchange of Stock Certificates............................ 38
Stock Options............................................. 39
Representations and Warranties............................ 39
Material Covenants........................................ 40
Conditions to Consummation of the Combination............. 47
Termination; Termination Fees and Expenses................ 48
Amendment................................................. 51
Voting Agreements......................................... 51
Registration Rights Agreement............................. 52
License Agreements........................................ 52
COMPARISON OF STOCKHOLDERS' RIGHTS.......................... 58
Authorized Capital Stock.................................. 58
Voting Rights............................................. 58
Allocation of Corporate Opportunities Between Newco and
Intel and Other Matters Concerning Intel............... 58
Transactions Between Newco and Related Parties, including
Intel.................................................. 60
Number of Directors....................................... 60
Voting by Directors....................................... 61
Quorum for Stockholders Meetings.......................... 61
Amendment of Certificate of Incorporation................. 61
Amendment of Bylaws....................................... 61
Nominations and Stockholder Business...................... 61
DESCRIPTION OF NEWCO CAPITAL STOCK FOLLOWING THE
COMBINATION............................................... 63
Authorized Capital Stock.................................. 63
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Newco Common Stock........................................ 63
Newco Preferred Stock..................................... 64
Transfer Agent and Registrar.............................. 65
Nasdaq Listing of the Class A Common Stock................ 65
BUSINESS OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION..... 66
Entertainment Content Services............................ 66
Enhanced Video Services................................... 66
Internet Security Services................................ 67
SELECTED FINANCIAL DATA OF INTEL'S INTERACTIVE MEDIA
SERVICES DIVISION......................................... 68
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION FOR INTEL'S INTERACTIVE MEDIA
SERVICES DIVISION......................................... 69
Overview.................................................. 69
Entertainment Content Services............................ 69
Enhanced Video Services................................... 69
Internet Security Services................................ 70
Results of Operations-Inception to December 26, 1998
compared to fiscal 1999................................ 70
Results of Operations-Three months ended March 27, 1999
compared to Three months ended April 1, 2000........... 71
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 72
APPROVAL AND ADOPTION OF NEWCO'S 2000 STOCK OPTION PLAN..... 76
Proposal.................................................. 76
Vote Required............................................. 76
Eligibility............................................... 76
Administration............................................ 76
Terms and Conditions of Options........................... 77
Amendments................................................ 77
Effective Date............................................ 77
Term of Plan.............................................. 77
Federal Income Tax Consequences........................... 77
ELECTION OF EXCALIBUR DIRECTORS............................. 79
General................................................... 79
Information Concerning Excalibur Directors and Nominees... 79
Information Concerning the Excalibur Board of Directors
and Its Committees..................................... 80
EXECUTIVE COMPENSATION OF EXCALIBUR......................... 82
Identification of Excalibur Executive Officers and Key
Employees.............................................. 82
Summary Compensation Table................................ 83
Option Grants in Last Fiscal Year......................... 84
Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Values........................................ 84
Description of the Excalibur 1989 Incentive Plan.......... 84
Description of the Excalibur 1995 Stock Option Plan....... 85
Description of the Excalibur 1999 Stock Option Plan....... 85
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Description of the Excalibur Stock Purchase Plan.......... 86
Report of the Excalibur Compensation Committee............ 87
Compensation Committee Interlocks and Insider
Participation.......................................... 87
Employment Agreements..................................... 87
Performance Graph......................................... 89
Security Ownership of Certain Beneficial Owners and
Management of Excalibur................................ 90
Certain Relationships and Related Transactions............ 91
Beneficial Ownership Reporting Compliance................. 92
Stockholder Proposals to be Presented at Next Annual
Meeting................................................ 92
OTHER MATTERS............................................... 93
Excalibur's and Newco's Independent Auditors.............. 93
Discretionary Authority................................... 94
LEGAL MATTERS............................................... 94
EXPERTS..................................................... 94
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APPENDIX A1 Agreement and Plan of Contribution and Merger dated as of
April 30, 2000, by and among Excalibur Technologies
Corporation, Intel Corporation, Exca Holding, Inc., a wholly
owned subsidiary of Excalibur, and Excalibur Transitory,
Inc., a wholly owned subsidiary of Newco
APPENDIX A2 Amendment, dated August 14, 2000 to Agreement and Plan of
Contribution and Merger, dated April 30, 2000, by and among
Excalibur Technologies Corporation, Intel Corporation, Exca
Holding, Inc., a wholly owned subsidiary of Excalibur, and
Excalibur Transitory, Inc., a wholly owned subsidiary of
Newco
APPENDIX B Opinion of Needham & Company, Inc.
APPENDIX C Newco 2000 Stock Option Plan
APPENDIX D Amended and Restated Certificate of Incorporation of Newco,
as Currently Proposed
APPENDIX E Bylaws of Newco, as Currently Proposed
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<PAGE> 11
QUESTIONS AND ANSWERS ABOUT THE COMBINATION
Q: WHY IS EXCALIBUR EFFECTING THE COMBINATION?
A:The Excalibur board of directors unanimously approved the combination as fair
to and in the best interests of Excalibur and its stockholders. The Excalibur
board of directors believes that the combination will provide an opportunity
for Excalibur to create a leading supplier of interactive media services to
the Internet economy. The newly-formed company will combine our market-leading
content management technologies with Intel's expertise and patented technology
in content protection. Our strategy is to provide a business-to-business
solution that allows content owners a new and exciting way to enable end-
users to interact with their valuable content. For a full discussion of
Excalibur's reasons for the combination, see page 25.
Q: WHAT WILL I RECEIVE IN THE COMBINATION?
A:You will receive one share of Newco Class A common stock for each share of
Excalibur common stock you own and one share of Newco preferred stock for each
share of Excalibur preferred stock you own.
Q: WHAT ARE THE FINANCIAL TERMS OF THE COMBINATION?
A:Under the terms of the contribution and merger agreement, Intel will
contribute to Newco its Interactive Media Services division, intellectual
property assets and other assets (through assignment and non-exclusive
license) used by that division, as well as approximately $155 million in cash,
$150 million of which will be paid at closing and the balance of which will be
payable in 2001 to fund retention bonuses to certain former Intel employees,
in exchange for 49% of the Newco Class A common stock and 100% of the Newco
Class B non-voting common stock, which together represent a total of 60% of
the common stock of Newco, on a fully-diluted basis after giving effect to the
conversion of outstanding preferred stock and exercise of assumed Excalibur
options. Excalibur will combine its entire business operations with those of
Newco, with Excalibur stockholders receiving 51% of the Newco Class A common
stock in exchange for their Excalibur common stock, which represents a total
of 40% of the common stock of Newco, on a fully-diluted basis after giving
effect to the conversion of outstanding preferred stock and exercise of
assumed Excalibur options.
Q: WHAT IS THE DIFFERENCE BETWEEN THE NEWCO CLASS A COMMON STOCK AND THE NEWCO
CLASS B COMMON STOCK TO BE ISSUED IN THE COMBINATION?
A:Newco's Class A common stock will carry one vote per share. Immediately after
the closing of the combination, Excalibur stockholders will own 51% of Newco's
outstanding Class A common stock, and Intel will own the remaining 49% of the
outstanding Class A common stock. Class B common stock, which will be issued
solely to Intel, will not have any voting rights, but otherwise will be
identical to the Class A common stock. The Class B common stock may be
converted, at Intel's election, into Class A common stock on a one-for-one
basis, but Intel will not be able to convert Class B common stock into Class A
common stock if, as a result of such conversion, Intel would beneficially own
50% or more of the voting power of Newco.
Q: DOES INTEL HAVE AN OBLIGATION TO SUPPORT NEWCO AFTER THE COMBINATION?
A:After the combination, other than the payment to be made by Intel to Newco to
fund retention bonus payments to certain former Intel employees employed by
Newco on April 30, 2001, Intel will not be obligated to provide Newco with any
support, including without limitation, financial, technical, marketing, human
resources or intellectual property support.
Q: WHAT WILL BE THE NAME OF THE COMBINED COMPANY?
A:The combined company will be named Newco.
Q: WHAT WILL HAPPEN TO OUTSTANDING EXCALIBUR OPTIONS?
A:Newco will assume the outstanding Excalibur stock option plans and the
outstanding options. Each Excalibur option will become an option to acquire
shares of Newco Class A common stock. The terms and conditions of the
replacement Newco option will be the same as the pre-existing Excalibur option
it replaces. The assumed options will be exercisable for the number of shares
of Newco Class A common stock equal to the number of shares that were
purchasable immediately prior to the closing of the
1
<PAGE> 12
combination. The exercise price per share of each assumed option immediately
after the combination will be unchanged. Under the terms of Excalibur's 1989,
1995 and 1999 Stock Option Plans, all unvested options under such plans other
than those granted on April 28, 2000 will immediately vest upon completion of
the combination, including unvested options to acquire 314,877 shares owned by
Excalibur's executive officers.
Q: WHY IS NEWCO ADOPTING ITS 2000 STOCK OPTION PLAN?
A:Newco is adopting its 2000 stock option plan to grant employees, consultants,
advisors and non-employee directors of Newco options to acquire shares of
Class A common stock of Newco. Newco intends to grant options to employees of
Intel and Excalibur who agree to become employees of Newco after the
combination.
Q: WHAT DO I NEED TO DO NOW?
A:Just indicate on your proxy card how you want to vote, sign the proxy card and
mail it in the enclosed return envelope as soon as possible, so that your
shares may be represented at the annual meeting of the Excalibur stockholders.
If you sign and send in your proxy card without marking a vote for or against,
your proxy will be counted as a vote in favor of the combination. If you do
not vote, or you abstain, it will have the effect of a vote against the
combination.
The annual meeting will take place on , 2000. You may attend the
meeting and vote your shares in person, rather than signing and mailing your
proxy card. In addition, you may take back your proxy up to and including the
day of the annual meeting by following the directions on page 19 and either
change your vote or attend the meeting and vote in person.
The board of directors of Excalibur unanimously recommends that you vote in
favor of the combination.
Q: WHEN DO YOU EXPECT THE COMBINATION TO BE COMPLETED?
A:Excalibur, Intel and Newco are working toward completing the combination as
quickly as possible. We expect to complete the combination immediately
following the Excalibur annual meeting of stockholders, subject to
satisfaction or waiver of all other conditions to closing.
Q: WHAT IS THE REQUIRED VOTE TO APPROVE THE COMBINATION?
A:Approval of the combination requires the affirmative vote of the holders of a
majority of the outstanding shares of Excalibur common stock. Holders of
approximately 31% of Excalibur's outstanding voting stock have agreed to vote
in favor of the combination.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE COMBINATION TO ME?
A:The exchange of shares by you is intended to be tax-free to you for federal
income tax purposes. To review the tax consequences to you in greater detail,
see pages 33 through 34.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A:You should instruct your broker to vote your shares according to your
directions. Without instructions, your broker will not vote your shares, with
certain exceptions.
Q: IF I AM NOT GOING TO ATTEND THE ANNUAL MEETING, SHOULD I RETURN MY PROXY CARD
INSTEAD?
A:Yes. Please fill out your proxy card and mail it to us in the enclosed return
envelope as soon as possible. Returning your proxy card ensures that your
shares will be represented at the annual meeting.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A:You should send in a later-dated, signed proxy card to Excalibur's corporate
secretary before the meeting or you should attend the meeting and vote in
person.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A:If you would like additional copies of this proxy statement/prospectus or if
you have questions, you can either contact us at Excalibur Technologies
Corporation, 1921 Gallows Road, Suite 200, Vienna, Virginia 22182, Attention:
Investor Relations or you can call , which Excalibur has retained to
assist in the solicitation of proxies, at .
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<PAGE> 13
SUMMARY
This summary highlights selected information from this document and does
not contain all of the information that is important to you. To understand the
combination and the other proposals fully and for a more complete description of
the legal terms of the combination, you should read carefully this entire
document and the documents to which we have referred you. See "Where You Can
Find More Information."
THE COMPANIES
EXCALIBUR TECHNOLOGIES CORPORATION
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
(703) 761-3700
Excalibur designs, develops, markets and supports high-performance,
accurate, scalable and secure search-powered multimedia software solutions.
Excalibur offers a suite of intelligent search solutions for corporate
intranets, Internet e-commerce, online publishing, application service providers
and the original equipment manufacturer market that enables individuals to
quickly capture, analyze, index, catalog, access, navigate, retrieve, publish
and share relevant information residing on an enterprise's networks, intranets,
extranets and the Internet. Retrievable assets or data types include paper
documents, text, databases, word processing documents, PDF (Portable Document
Format) files, newsfeeds, groupware systems, e-mails, images, audio and video.
INTEL CORPORATION
2200 Mission College Boulevard,
Santa Clara, California, 95052
(408) 765-8080
Intel, the world's largest semiconductor chip maker, supplies the computing
and communications industries with chips, boards, systems and software that are
integral in computers, servers, and networking and communications products.
These products are used by industry members to create advanced computing and
communications systems and are offered at various levels of integration.
Intel's Interactive Media Services, or IMS, division is comprised of three
separate business groups that were formally established between June and October
1998:
- the Entertainment Content Services group;
- the Enhanced Video Services group; and
- the Internet Security Services group.
The Interactive Media Services division provides solutions for content
customers and broadcast networks as they deliver digital content to end users
using the internet and emerging broadband environments, such as satellite,
cable, DSL (Digital Subscriber Line) and wireless. Services offered by the
Interactive Media Services division include digital video and data integration
services, security and content protection services, conditional access and
subscriber management services and scalable distribution management services.
EXCA HOLDINGS, INC. (NEWCO)
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
(703) 761-3700
Newco is a newly-formed wholly-owned subsidiary of Excalibur. In the
combination, Excalibur will combine all of its business operations with Newco
and become a wholly-owned subsidiary of Newco, and Intel will contribute to
Newco its Interactive Media Services division, intellectual property assets and
other assets used by that division, as well as approximately $155 million in
cash, $150 million of which will be paid at closing and the balance of which
will be payable in 2001 to fund retention bonuses to certain former Intel
employees.
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<PAGE> 14
EXCALIBUR TRANSITORY, INC.
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
(703) 761-3700
Transitory is a wholly owned subsidiary of Newco. In the combination,
Transitory will merge into Excalibur and cease to exist.
THE ANNUAL MEETING
The Excalibur annual meeting will be held at [PLACE AND ADDRESS] on [DATE]
at [TIME]. At the annual meeting, you will be asked to approve and adopt the
contribution and merger agreement and approve the combination. In connection
with the combination, you will also be asked to approve the Newco 2000 stock
option plan.
At the annual meeting, you will also be asked to vote on one other
proposal. You will be asked to elect ten members of the Excalibur board of
directors to serve until the completion of the combination or, if the
combination is not completed, until the 2001 annual meeting.
OUR RECOMMENDATION TO EXCALIBUR STOCKHOLDERS CONCERNING THE COMBINATION
The board of directors of Excalibur believes that the combination is fair
to you and in your best interests and unanimously recommends that you vote "for"
the proposal to approve and adopt the contribution and merger agreement and
approve the combination.
RECORD DATE; VOTING POWER
You are entitled to vote at the meeting if you owned shares of Excalibur
common stock as of the close of business on , 2000, the record date
for the annual meeting.
On the record date, there were 15,068,979 shares of Excalibur common stock
allowed to vote at the annual meeting. Excalibur stockholders will have one vote
for each share of Excalibur common stock they owned at the record date.
VOTES REQUIRED FOR THE COMBINATION
Stockholders holding at least a majority of the shares of Excalibur common
stock outstanding on the record date must vote to approve and adopt the
contribution and merger agreement and approve the combination.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
On the record date, Allen & Company Incorporated and the directors and
executive officers of Excalibur beneficially owned and were allowed to vote
4,672,660 shares of Excalibur common stock constituting approximately 31% of the
shares of Excalibur common stock outstanding on the record date.
Allen & Company Incorporated and each director and executive officer of
Excalibur, in their capacity as stockholders of Excalibur, have executed voting
agreements with Intel in which they have agreed to vote their Excalibur common
stock "for" adoption and approval of the contribution and merger agreement and
approval of the combination. Please refer to page 50 for more information on the
voting agreements.
THE CONTRIBUTION AND MERGER AGREEMENT
The contribution and merger agreement, as amended, is summarized on pages
38 to 50 and attached as Appendix A to this document. We encourage you to read
the contribution and merger agreement. It is the legal document governing the
combination.
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<PAGE> 15
THE CONTRIBUTED ASSETS
Intel will contribute to Newco its Interactive Media Services division,
intellectual property assets and other assets used by that division, as well as
approximately $155 million in cash, $150 million of which will be paid at
closing and the balance of which will be payable in 2001 to fund retention
bonuses to former Intel employees. The contributed intellectual property assets
include:
- 14 patents and patent applications in the area of content security;
- source code components;
- non-exclusive licenses to additional source code components and other
Intel patents and patent applications;
- Intel's rights under certain contracts entered into by the Interactive
Media Services division, exclusive of certain cash payments or certain
components of equity received by the division under the contracts prior
to the closing; and
- technical employee resources in key areas, primarily in software and
engineering.
WHAT EXCALIBUR SECURITY HOLDERS WILL RECEIVE IN THE COMBINATION
You will receive one share of Newco Class A common stock for each share of
common stock of Excalibur and one share of Newco preferred stock for each share
of preferred stock of Excalibur.
You should not send in your stock certificates until instructed to do so
after the combination is completed.
OWNERSHIP OF NEWCO FOLLOWING THE COMBINATION
In the combination, Intel will receive 49% of the Newco Class A common
stock and 100% of the Newco Class B non-voting common stock, which together
represent a total of 60% of the common stock of Newco, on a fully-diluted basis
after giving effect to the conversion of outstanding preferred stock and
exercise of assumed Excalibur options. Excalibur stockholders will receive 51%
of the Newco Class A common stock, which represents 40% of the common stock of
Newco on a fully diluted basis after giving effect to the conversion of
outstanding preferred stock and exercise of assumed Excalibur options. Based on
the shares of common stock outstanding, the shares of preferred stock
outstanding that are convertible into common stock and the number of outstanding
options, in each case as of July 15, 2000, we anticipate that Newco will have
approximately 29,547,018 shares of Class A common stock outstanding, 12,633,646
shares of Class B common stock outstanding, options outstanding to purchase
2,733,628 shares of Class A common stock and preferred stock outstanding
convertible into 271,800 shares of Class A common stock after the combination.
Based on these amounts, and after giving effect to the shares of Class A common
stock issuable upon conversion of Newco preferred stock and the exercise of
Excalibur options assumed by Newco, Excalibur stockholders would receive
15,068,979 shares of Class A common stock and Intel would receive 14,478,039
shares of Class A common stock and 12,633,646 shares of Class B common stock.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of shares by you is intended to be tax-free to you for federal
income tax purposes. To review the tax consequences to you in greater detail,
see pages 33 through 34.
Tax matters are very complicated, and the tax consequences of the
combination to you will depend in part on the facts of your own situation. You
should consult your tax advisors for a full understanding of the tax
consequences of the combination to you.
OPINION OF EXCALIBUR'S FINANCIAL ADVISOR
Needham & Company, Inc. has delivered to the Excalibur board of directors
its written opinion stating that, as of the date of the opinion and based upon
and limited by matters stated in the opinion, the exchange ratios of one share
of Newco Class A common stock for each share of Excalibur common stock and one
share of Newco preferred stock for each share of Excalibur preferred stock were
fair, from a financial point of view, to the holders of Excalibur common stock
and Excalibur preferred stock, respectively. The full text of the written
opinion of Needham & Company, Inc. which states the assumptions made, matters
considered and
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<PAGE> 16
limits on the review undertaken, is attached as Appendix B to this proxy
statement/prospectus. We urge Excalibur's stockholders to read the opinion
carefully and in its entirety.
ACCOUNTING TREATMENT
We intend to account for the combination under the purchase method of
accounting. For accounting purposes, Excalibur is treated as the acquirer of the
Interactive Media Services division of Intel. On the date of the completion of
the combination, we will record the tangible and identifiable intangible assets
of the Interactive Media Services division at their fair values. The purchase
price in excess of the fair value of the net assets of the Interactive Media
Services division will be recorded as goodwill. The purchase price was
determined based on the average market price of Excalibur's common stock before
and after the date the combination was announced plus the costs incurred to
execute the combination. See "Unaudited Pro Forma Condensed Combined Financial
Statements" for additional information related to the application of the
purchase accounting method. We will include the results of operations of the
Interactive Media Services division in Newco's financial statements from the
date of the completion of the combination.
LISTING OF EXCALIBUR STOCK
The Newco Class A common stock to be issued in connection with the
combination will be approved for quotation on the Nasdaq National Market at the
time the combination takes effect.
CONDITIONS TO THE CLOSING OF THE COMBINATION
Excalibur and Intel will complete the combination only if we satisfy or (in
some cases) waive several conditions, including the following:
- the holders of at least a majority of the Excalibur common stock approve
the contribution and merger agreement and the combination;
- any governmental or regulatory requirements necessary to consummate the
combination are fulfilled;
- this proxy statement/prospectus is cleared by the SEC and the
registration statement, of which this proxy statement/prospectus is a
part, is effective under the Securities Act of 1933 and Newco has
received all required state securities laws authorizations;
- the shares of Newco Class A common stock to be issued in the combination
are approved for quotation on the Nasdaq National Market;
- the waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the combination have
expired or been terminated;
- in connection with the compliance by Newco or Intel with any applicable
law or obtaining any necessary consent from a governmental agency,
neither Newco nor Intel shall be required to sell any assets or
businesses, and Intel shall not be prohibited from owning any material
portion of Newco's stock, business or assets, and Newco shall not be
prohibited from owning any material portion of Excalibur's business or
assets or the assets contributed by Intel;
- Newco has adopted its 2000 stock option plan;
- Newco has granted options under its 2000 stock option plan to the Intel
employees and certain of our employees who become Newco employees, in
form and amount reasonably satisfactory to Intel and us;
- 70% of the employees of Intel named on a schedule to the contribution and
merger agreement and 50% of all other employees who are currently working
in Intel's Interactive Media Services division have indicated their
intent to become employed by Newco or shall have been seconded to Newco
by Intel, as long as, in any case, at least 40% of these other IMS
employees become employees of Newco;
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<PAGE> 17
- the representations and warranties of each party contained in the
contribution and merger agreement continue to be true and correct, and
each party has performed all of its obligations under the contribution
and merger agreement;
- no material adverse change has occurred on the businesses of Excalibur or
the assets to be contributed to Newco by Intel; and
- nothing has occurred, in the reasonable opinion of Intel, that would
create a significant risk that the combination would no longer be a
tax-free transaction.
CIRCUMSTANCES WHERE THE PARTIES CAN TERMINATE THE CONTRIBUTION AND MERGER
AGREEMENT
Excalibur and Intel can jointly agree to terminate the contribution and
merger agreement at any time without completing the combination. Either company
can terminate the contribution and merger agreement under various circumstances,
including if:
- a court or a governmental agency has taken a final action that prohibits
the combination from occurring;
- the other party fails to perform any material covenant or agreement or
there shall have been one or more breaches of the other party's
representations and warranties in the contribution and merger agreement
that together cause a material adverse effect;
- the other party has not met its closing conditions (and the terminating
party has not waived such conditions) by December 31, 2000; or
- Excalibur has convened the annual meeting and failed to acquire the
necessary approval of Excalibur stockholders.
Excalibur can terminate the contribution and merger agreement if:
- it receives a superior proposal for the acquisition of at least 20% of
the equity or assets of Excalibur by a third party and pays a termination
fee to Intel as set forth in the contribution and merger agreement; or
- there has been a material adverse effect on the assets to be contributed
to Newco by Intel.
Intel can terminate the contribution and merger agreement if:
- the Excalibur board of directors has recommended a proposal for the
acquisition of at least 20% of the equity or assets of Excalibur by a
third party to the Excalibur stockholders, in which case a termination
fee will be payable;
- the board of Excalibur has withdrawn or adversely modified its approval
of the combination, in which case a termination fee will be payable; or
- there has been a material adverse effect on Excalibur.
TERMINATION FEE; EXPENSES
Excalibur will be required to pay Intel a termination fee of $20 million
and an additional $2.5 million as reimbursement for expenses, and Intel will be
required to pay to Excalibur $2.5 million as reimbursement for expenses upon the
occurrence of the events resulting in termination of the contribution and merger
agreement described in "The Contribution and Merger Agreement -- Termination;
Termination Fees and Expenses."
NO APPRAISAL RIGHTS FOR COMMON STOCK HOLDERS
Excalibur is incorporated under Delaware law. Under Delaware law,
stockholders of Excalibur common stock do not have rights to an appraisal of the
value of their shares of Excalibur common stock in connection with the
combination. Allen & Company, the sole holder of Excalibur preferred stock, has
waived its rights to appraisal under Delaware law.
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<PAGE> 18
BOARD OF DIRECTORS AND MANAGEMENT OF NEWCO FOLLOWING THE COMBINATION
Ronald J. Whittier, a senior vice president of Intel, will become Newco's
chief executive officer and chairman of the board, and Patrick C. Condo,
president and chief executive officer of Excalibur, will become Newco's
president.
The board of Newco will consist of seven members.
THE NEWCO 2000 STOCK OPTION PLAN
As part of the combination, the board of Excalibur and the board of Newco
approved the Newco 2000 stock option plan. The purpose of the stock option plan
is to encourage employees, consultants, advisors and directors to contribute to
the growth of Newco by giving them the opportunity to receive grants of
incentive stock options, nonqualified stock options and restricted stock.
To comply with the requirements of the tax code, the public stockholders of
Newco must adopt and approve the stock option plan. Because the current
stockholders of Excalibur will be, along with Intel, the public stockholders of
Newco, we need your approval of the option plan. Approval by you of the option
plan is a condition to the completion of the combination. The Newco 2000 stock
option plan is attached as Appendix C to this proxy statement/prospectus.
The Excalibur board of directors recommend that you vote "for" the approval
and adoption of the Newco 2000 stock option plan.
INTERESTS OF CERTAIN PERSONS IN THE COMBINATION
When you consider our board of directors' recommendation that you vote in
favor of the combination, you should be aware that a number of our officers and
directors will be entitled to receive certain benefits if the combination occurs
that they will not be entitled to receive if the combination does not occur as
described in "The Combination -- Interests of Certain Persons in the
Combination" beginning on page 32.
ELECTION OF THE BOARD OF DIRECTORS OF EXCALIBUR
You are also being asked to elect ten members of the board of Excalibur who
will serve until the completion of the combination or, if the combination is not
completed, until the 2001 annual meeting of Excalibur. The Excalibur board of
directors recommend that you vote "for" the directors named in this proxy
statement/prospectus.
MARKET PRICE INFORMATION
Excalibur common stock is traded on the Nasdaq National Market under the
symbol "EXCA." On April 28, 2000, the last trading day before the parties
publicly announced the execution of the contribution and merger agreement, the
last reported sale price of Excalibur common stock was $35.50.
On , 2000, the last trading day before the date of this proxy
statement/prospectus, the last reported sale price of Excalibur common stock was
$ .
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<PAGE> 19
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA OF EXCALIBUR
(DOLLARS IN THOUSANDS)
Excalibur is providing the following information to aid you in your
analysis of the financial aspects of the combination. Excalibur derived this
information from the audited financial statements for the fiscal years ended
January 31, 1996 through January 31, 2000 and the unaudited financial statements
for the three months ended April 30, 2000. This information is only a summary
and you should read it in conjunction with Excalibur's historical financial
statements (and related notes) and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the annual reports,
quarterly reports and other information on file with the Securities and Exchange
Commission. See "Where You Can Find More Information" and "Incorporation of
Certain Documents by Reference" on page (i).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JANUARY 31, APRIL 30,
----------------------------------------------- -------------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $18,675 $20,259 $22,417 $27,939 $37,934 $ 7,759 $ 9,384
Operating expenses................. 20,103 27,872 30,592 31,732 38,053 9,228 11,147
------- ------- ------- ------- ------- ------- -------
Operating loss..................... (1,428) (7,613) (8,175) (3,793) (119) (1,468) (1,763)
Net loss........................... (884) (7,173) (8,326) (3,854) (340) (1,882) (1,668)
Dividends on cumulative,
convertible preferred stock...... 14 14 14 14 14 3 3
------- ------- ------- ------- ------- ------- -------
Net loss applicable to common
stock............................ $ (898) $(7,187) $(8,340) $(3,868) $ (354) $(1,885) $(1,671)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per
common share..................... ($ 0.08) $ (0.58) $ (0.64) $ (0.29) $ (0.02) $ (0.14) $ (0.11)
======= ======= ======= ======= ======= ======= =======
Weighted average number of common
shares outstanding............... 11,496 12,351 12,934 13,526 14,282 13,927 14,714
BALANCE SHEET DATA:
(at end of period)(1)
Cash and cash equivalents.......... $ 2,903 $ 2,685 $ 4,939 $ 5,851 $10,884 $ 9,224 $10,625
Working capital.................... 12,973 14,566 9,748 8,006 19,349 12,754 18,669
Total assets....................... 23,046 26,147 20,045 19,712 30,687 23,150 29,354
Total shareholders' equity(2)...... 15,251 18,563 13,098 13,174 22,305 17,141 21,738
</TABLE>
---------------
(1) Excalibur had no significant long-term debt for any of the periods
presented.
(2) No dividends have been declared or paid on Excalibur's common stock.
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<PAGE> 20
SUMMARY SELECTED HISTORICAL FINANCIAL DATA
OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
(DOLLARS IN THOUSANDS)
Intel is providing the following information concerning its Interactive
Media Services division to aid you in your analysis of the financial aspects of
the combination. Intel derived this information from the audited statements of
assets to be contributed and the related statements of net revenues and direct
expenses for its Interactive Media Services division for the fiscal year ended
December 25, 1999 and the period from inception to December 26, 1998, and the
unaudited financial statements for the three months ended April 1, 2000 and
March 27, 1999. This information is only a summary and you should read it in
conjunction with Intel's Interactive Media Services division's Financial
Statements (and related notes) beginning on page F-1 and the Interactive Media
Services division Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on page 69.
<TABLE>
<CAPTION>
PERIOD FROM FOR THE THREE MONTHS ENDED
INCEPTION TO YEAR ENDED -------------------------------
DECEMBER 26, DECEMBER 25, MARCH 27, APRIL 1,
1998(1) 1999 1999 2000
------------ ------------ -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF NET REVENUES AND DIRECT
EXPENSES
Net revenues........................... $ 0 $ 1,568 $ 0 $ 0
Direct expenses........................ $ 6,219 $ 7,783 $ 2,045 $ 2,219
Direct expenses in excess of net
revenues............................. $(6,219) $(6,215) $(2,045) $(2,219)
ASSETS TO BE CONTRIBUTED
At period end:(2)...................... $ 123 $ 1,200 $ 3,937
</TABLE>
---------------
(1) The Interactive Media Services Division is comprised of three separate but
related groups within Intel which were each formally established with
operations commencing between June 1998 and October 1998.
(2) Assets to be contributed at April 1, 2000 excludes the approximately $155
million in cash to be contributed to Newco pursuant to the terms of the
contribution and merger agreement, as the contribution and merger agreement
was executed subsequent to April 1, 2000.
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<PAGE> 21
SUMMARY SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following table contains selected unaudited pro forma combined
financial information for Excalibur and Intel's Interactive Media Services
division. The pro forma amounts included in the table below assume the
combination will be accounted for as a purchase where Excalibur is considered
the accounting acquiror. This information is only a summary and should be read
together with the unaudited pro forma combined financial statements and
accompanying notes contained elsewhere in this proxy statement/prospectus
beginning on page 72. The following table should also be read in conjunction
with the historical consolidated financial statements of Excalibur contained in
the annual reports, quarterly reports and other information on file with the
Securities and Exchange Commission and the historical financial statements of
the Interactive Media Services division prepared for and included elsewhere in
this proxy statement/prospectus beginning on page F-1.
These pro forma amounts are not necessarily indicative of the results of
operations of the combined company that would have actually occurred had we
completed the combination on February 1, 1999 or of the financial condition of
the combined company had we completed the combination on April 30, 2000 or of
the future results of operations or financial condition of the combined company.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR FOR THE THREE MONTHS
ENDED ENDED
JANUARY 31, 2000 APRIL 30, 2000
------------------- --------------------
<S> <C> <C>
PRO FORMA COMBINED
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 39,502,000 $ 9,384,000
Net loss.................................................... $(141,108,000) $(37,525,000)
Basic and diluted net loss per common share................. $ (3.41) $ (0.90)
Weighted average number of common shares outstanding........ 41,394,000 41,826,000
PRO FORMA COMBINED
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................................... $160,625,000
Working capital............................................. 171,215,000
Total assets................................................ 951,914,000
Total shareholders' equity.................................. 943,098,000
</TABLE>
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<PAGE> 22
RISK FACTORS
We urge you to carefully consider these risk factors together with all of
the other information included in this proxy statement/prospectus and the
information incorporated in this proxy statement/prospectus by reference before
voting on the combination proposal.
RISKS RELATING TO THE COMBINATION
OUR INABILITY TO SUCCESSFULLY INTEGRATE OUR OPERATIONS MAY AFFECT OUR ABILITY TO
REALIZE THE ANTICIPATED BENEFITS OF THE COMBINATION.
The success of the combination will depend on our ability to unite our
business strategies and technologies with those of Intel's Interactive Media
Services division. The difficulties of combining the Excalibur operations with
those of the Interactive Media Services division include the necessity of
coordinating geographically separated organizations and integrating personnel
with diverse business backgrounds. The combining of management from Excalibur
and the Interactive Media Services division will result in changes affecting all
employees and operations. Differences in management approach and corporate
culture may strain employee relations. The process of integrating operations
could cause an interruption of, or loss of momentum in, the activities of the
combined businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
combination and the integration of the two operations could have an adverse
effect on the business, results of operations, financial condition or prospects
of the combined businesses after the combination.
Among the factors considered by the Excalibur board of directors in
connection with its approval of the contribution and merger agreement were the
perceived opportunities for Newco to have the capabilities, resources and
technology to become a leader in the interactive media services market. We
cannot give any assurance that we will realize the anticipated benefits of our
combination.
THE TERMINATION FEE AND VOTING AGREEMENTS MAY DETER THIRD PARTIES FROM MAKING
BIDS TO ACQUIRE EXCALIBUR WHICH MAY BE MORE BENEFICIAL TO YOU.
The existence of the termination fee in the contribution and merger
agreement between Excalibur and Intel and the voting agreements obtained by
Intel from Excalibur stockholders holding approximately 31% of the outstanding
stock may make it more difficult for a third party to acquire Excalibur and
therefore may deter third parties from making competing bids for our company.
Excalibur is required to pay Intel a termination fee of $20 million and/or to
reimburse Intel for up to $2.5 million of out-of-pocket fees and expenses upon
termination of the contribution and merger agreement in connection with
specified types of transactions or proposed transactions with third parties.
Together, the maximum amount that Excalibur may be required to pay Intel is
$22.5 million.
FOLLOWING THE COMBINATION, INTEL, AS THE HOLDER OF 49% OF THE CLASS A COMMON
STOCK, MAY BE ABLE TO INFLUENCE DECISIONS SUBMITTED TO NEWCO STOCKHOLDERS FOR
APPROVAL.
Following the combination, Intel will own approximately 49% of the Newco
Class A common stock and 100% of the Newco Class B non-voting common stock,
which together represent a total of 60% of the common stock of Newco, on a
fully-diluted basis after giving effect to the conversion of outstanding
preferred stock and exercise of assumed Excalibur options. The Class B common
stock may be converted, at Intel's election, into Class A common stock on a
one-for-one basis, but Intel will not be able to convert Class B common stock
into Class A common stock if, as a result of such conversion, Intel would
beneficially own 50% or more of the voting power of Newco. As a result of
Intel's ownership interest, Intel will be able to influence the outcome of
matters requiring a stockholder vote, including offers to acquire Excalibur and
elections of directors. Intel may have interests which are different than the
interests of other Newco stockholders.
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<PAGE> 23
INTEL IS A SEPARATE ENTITY; INTEL WILL NOT BE OBLIGATED TO SUPPORT NEWCO AND
WILL BE ABLE TO PURSUE CORPORATE OPPORTUNITIES IN CONFLICT WITH NEWCO.
After the combination, other than the payment to be made by Intel to Newco
to fund retention bonus payments to former Intel employees employed by Newco on
April 30, 2001, Intel will not be obligated to provide financial, technical,
marketing, human resources, intellectual property or other support to Newco. In
the event that we need any such services or resources, we cannot assure you that
Intel will provide any such services or resources.
In addition, Newco's certificate of incorporation provides that Intel has
the right to do each of the following:
- engage in the same or similar business activities or lines of business as
Newco;
- compete against Newco;
- do business with any potential or actual competitor, customer or supplier
of Newco; and
- employ or otherwise engage any officer or employee of Newco.
Newco's certificate of incorporation also provides that if Intel acquires
knowledge of a potential transaction or other matter that may be a corporate
opportunity or otherwise of interest to Intel and Newco, Intel has no duty to
communicate or present the corporate opportunity to Newco and shall not be
liable to Newco or its stockholders for breach of any fiduciary duty as a
stockholder of Newco by reason of the fact that Intel pursues or acquires the
corporate opportunity for itself, directs the corporate opportunity to another
person, or does not present the corporate opportunity to Newco. Other procedures
apply with respect to individuals who will be affiliated, as directors, officers
or employees, of both Intel and Newco. These provisions, together with the
specific rights of Intel above, do not prohibit Intel from competing with Newco.
Intel has significantly greater resources than we do and competition with Intel
may adversely and materially affect our business and operating results.
See "Comparison of Stockholders' Rights -- Allocation of Corporate
Opportunities Between Intel and Newco and Other Matters Concerning Intel."
EXECUTIVE OFFICERS AND DIRECTORS WHO ARE ASKING YOU TO APPROVE THE COMBINATION
HAVE POTENTIAL CONFLICTS OF INTEREST BECAUSE THEY WILL RECEIVE ADDITIONAL
BENEFITS IN THE COMBINATION.
Stockholders should be aware of a potential conflict of interest and the
benefits available to executive officers and directors when considering the
decision of the Excalibur board of directors to approve the combination. As
discussed below under "Interests of Certain Persons in the Combination," a
number of executive officers and directors of Excalibur will be executive
officers and directors of Newco following the combination and will derive
economic benefits that are different from, or in addition to, your interests as
stockholders.
RISKS RELATING TO OUR BUSINESS
WE HAVE HAD A HISTORY OF OPERATING LOSSES AND MAY INCUR FUTURE LOSSES.
We believe that our future profitability will depend on our ability to
effectively market existing and newly-developed software products through a
balanced multi-channel distribution network. We cannot assure you that our costs
to develop, introduce and promote enhanced or new products will not exceed our
expectations, or that these products will generate revenues sufficient to offset
these expenses. We have operated at a loss for each of the past three fiscal
years. These losses reflect our expenditures associated with building a sales
and marketing organization to sell new software products and further developing
software products during these years. We plan to continue to invest in these
programs and, accordingly, we cannot assure you that our operating losses will
not continue in the future.
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WE EXPERIENCE QUARTERLY FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH MAY
ADVERSELY AFFECT OUR STOCK PRICE.
Our quarterly operating results have varied substantially in the past and
are likely to vary substantially from quarter to quarter in the future, due to a
variety of factors including the following:
- seasonality of individual customer buying patterns;
- the size and timing of individual transactions;
- the delay or deferral of customer implementations;
- the budget cycles of our customers;
- the timing of new software introductions and software enhancements by us
and our competitors; and
- the mix of sales by products.
In particular, our period-to-period operating results have historically
been significantly dependent upon the timing of the closing of significant
license agreements. Because purchasing our products often requires significant
capital investment, our customers may defer or decide not to make their
purchases. This means our sales can involve long sales cycles of six months or
more. We have generally recorded a significant portion of our total quarterly
license fee revenues in the third month of a quarter, with a concentration of
these revenues occurring in the last half of that third month. This is in part
because our customers tend to make significant capital expenditures at the end
of a fiscal quarter. We expect these revenue patterns to continue.
Despite these uncertainties in our revenue patterns, our operating expenses
are based upon anticipated revenue levels and are incurred on an approximately
ratable basis throughout a quarter. As a result, if expected revenues are
deferred or otherwise not realized in a quarter for any reason, our business,
operating results and financial condition would be materially adversely
affected. Moreover, such factors could cause our operating results in a given
quarter to be below the expectations of public market analysts and investors. In
either case, the price of our common stock could be materially adversely
affected.
BECAUSE OF THE TECHNICAL NATURE OF OUR BUSINESS, OUR INTELLECTUAL PROPERTY IS
EXTREMELY IMPORTANT TO OUR BUSINESS AND ADVERSE CHANGES TO OUR INTELLECTUAL
PROPERTY WOULD HARM OUR COMPETITIVE POSITION
We believe that our success depends, in part, on our ability to protect our
proprietary rights and technology, including the intellectual property rights to
be contributed by Intel upon completion of the combination. Historically we have
not had any patents and have relied primarily on a combination of copyright,
trademark and trade secret laws, employee confidentiality and invention
assignment agreements, distribution and OEM software protection agreements and
other methods to safeguard our technology and software products. We have one
pending patent application, and if the combination is completed we will acquire
rights to several issued and pending patents, as well as non-exclusive licenses
to other intellectual property. Some of these contributed assets are the subject
of prior licenses to others. We face risks associated with our intellectual
property, including the following:
- pending patent applications may not be issued;
- intellectual property laws may not protect our intellectual property
rights;
- third parties may challenge, invalidate, or circumvent any patent issued
to us;
- rights granted under patents issued to us may not provide competitive
advantages to us;
- unauthorized parties may attempt to obtain and use information that we
regard as proprietary despite our efforts to protect our proprietary
rights;
- others may independently develop similar technology or design around any
patents issued to us; and
- effective protection of intellectual property rights may be limited or
unavailable in some foreign countries in which we operate.
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If we fail to meaningfully protect our intellectual property, our business
and financial results could be materially and adversely affected.
OUR OPERATIONS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
We cannot assure you that a third party will not assert that our technology
violates its intellectual property rights. Particular aspects of our technology
could be found to infringe on the intellectual property rights of others. Other
companies may hold or obtain patents on inventions or may otherwise claim
proprietary rights to technology necessary to our business. We cannot predict
the extent to which we may be required to seek licenses or alter our products so
that they no longer infringe the rights of others. We cannot guarantee that the
terms of any licenses we may be required to seek will be reasonable. Similarly,
changing our products or processes to avoid infringing the rights of others may
be costly or impractical or could detract from the value of our products.
WE ARE IN AN EXTREMELY COMPETITIVE MARKET, AND IF WE FAIL TO COMPETE EFFECTIVELY
OR RESPOND TO RAPID TECHNOLOGICAL CHANGE, OUR REVENUES AND MARKET SHARE WILL BE
ADVERSELY AFFECTED.
Our business environment, and the computer software industry in general,
are characterized by intense competition, rapid technological changes, changes
in customer requirements and emerging new market segments. Our competitors
include many companies which are larger and more established and have
substantially more resources than we do. Current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address the needs of
the markets served by us. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse
effect on our business, financial condition or results of operations.
In addition, our continued success will be dependent upon our ability to
continue to enhance our existing software and services offerings, develop and
introduce, in a timely manner, new software products incorporating technological
advances and respond to customer requirements. Our present or future competitors
may be able to develop products comparable or superior to those offered by us,
offer lower price products or adapt more quickly than we do to new technologies
or evolving customer requirements. We can make no assurance that we will be
successful in developing and marketing new products or enhancements to our
existing products on a timely basis or that any new or enhanced products will
adequately address the changing needs of the marketplace. If we are unsuccessful
in this regard, our business and operating results could be adversely affected.
WE DESIGN OUR PRODUCTS TO WORK WITH CERTAIN SYSTEMS AND CHANGES TO SUCH SYSTEMS
MAY RENDER OUR PRODUCTS INCOMPATIBLE WITH THESE SYSTEMS.
Our ability to sell our products depends on the compatibility of our
products with other software and hardware products. These products may change or
new products may appear that are incompatible with our products. If we fail to
adapt our products to remain compatible with other vendors' software and
hardware products or fail to adapt our products as quickly as our competitors,
we may be unable to sell our products.
IF WE ARE UNABLE TO MANAGE OUR GROWTH SUCCESSFULLY, IT MAY DIVERT OUR RESOURCES
AND HARM OUR OPERATING RESULTS.
Our future operating results will be affected by our ability to expand our
product distribution channels and to manage our expected growth. Our future
results may also be impacted by our ability to execute future acquisitions and
integrate the operations of acquired companies with ours. Any further growth is
likely to continue to place, a significant strain on our managerial,
operational, financial and other resources. This growth will require us to
implement additional management information systems, to further develop our
operating, administrative, financial and accounting systems and controls and to
maintain close coordination among our research and development, accounting,
finance, sales and marketing and customer service and
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support departments. In addition, we may be required to add and retain
additional personnel to adequately support our growth. If we cannot effectively
manage our expanding operations, we may not be able to continue to grow, or we
may grow at a slower pace. Our failure to successfully manage growth and to
develop financial controls and accounting and operating systems or to add and
retain personnel that adequately support our growth would harm our business and
financial results.
WE DEPEND ON OUR KEY PERSONNEL AND MAY HAVE DIFFICULTY ATTRACTING AND RETAINING
SKILLED EMPLOYEES.
Our success depends to a significant degree upon the continued
contributions of our key management, marketing, technical and operational
personnel, and, after the combination, will depend on the contributions of the
employees of Intel's Interactive Media Services division as well. The
contribution and merger agreement provides that either party may terminate the
agreement if a significant number of employees of the other party do not agree
to work for Newco. However, this closing condition does not mean that any
existing employees of Excalibur or employees of the Interactive Media Services
division must remain in the employ of Newco for any particular period of time
after closing. There can be no guarantee that any such employees will remain
employees of Newco. In addition, we generally do not utilize employment
agreements for our key employees. The loss of the services of one or more key
employees could have a material adverse effect on our operating results. We also
believe our future success will depend in large part upon our ability to attract
and retain additional highly skilled management, technical, marketing, product
development, operational personnel and consultants. Competition for such
personnel, particularly software developers, professional service consultants
and other technical personnel, is intense, and pay scales in the software
industry have significantly increased. There can be no assurance that we will be
successful in attracting and retaining such personnel.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS, OR AT ALL.
If we consummate the combination, we expect the approximately $155 million
which Intel will contribute and our current cash and cash equivalents will be
sufficient to meet our working capital and capital expenditure requirements for
the foreseeable future. However, after that time, we may need to raise
additional funds for the following purposes:
- to fund our operations;
- to fund any growth we experience;
- to enhance and/or expand the range of services we offer;
- to increase our promotional and marketing activities; or
- to respond to competitive pressures and/or perceived opportunities, such
as investment, acquisition and international expansion activities.
Notwithstanding these possible needs, Newco has agreed in the combination
and merger agreement that it will not incur indebtedness in excess of
$500,000,000 during the 12 months following the closing of the combination. In
addition, Intel will not be obligated to provide additional capital or other
financial support and other financing may not be available on terms favorable to
us, or at all. If a need for indebtedness in excess of the $500,000,000 maximum
arises during the first 12 months, or if otherwise adequate funds are not
available when required or on acceptable terms, our business and financial
results could suffer.
WE ARE DEPENDENT ON INTERNATIONAL SALES, WHICH EXPOSE US TO FOREIGN POLITICAL
AND ECONOMIC RISKS THAT COULD IMPEDE OUR PLANS FOR INTERNATIONAL EXPANSION AND
GROWTH.
A material portion of our revenues is derived from international sales and
we plan to continue to seek opportunities to expand our international operations
and sales. Our international operations expose us to a
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variety of risks that could seriously impede our financial condition and growth.
These risks include the followings:
- political, social and economic instability;
- trade restrictions and changes in tariffs;
- import and export license requirements and restrictions;
- fluctuations in currency exchange rates; and
- uncertainty of the effective protection of our intellectual property
rights in certain foreign countries.
If any of these risks described above materialize, our international sales
could decrease and our foreign operations could suffer.
WE MAY NOT BE ABLE TO USE NET OPERATING LOSS CARRYFORWARDS.
As of January 31, 2000, we had net operating loss carryforwards of
approximately $64.7 million. The deferred tax assets representing the benefits
of these carryforwards have been offset completely by a valuation allowance due
to our lack of an earnings history. Our accumulated deficit at January 31, 2000
was $56.1 million. The realization of the benefits of these carryforwards
depends on sufficient taxable income in future years. Lack of future earnings or
a change in our ownership could adversely affect our ability to utilize these
carryforwards. Despite the carryforwards, we may have income tax liability in
future years due to the application of the alternative minimum tax rules of the
United States Internal Revenue Code.
OUR STOCK PRICE MAY FLUCTUATE WHICH MAY MAKE IT DIFFICULT TO RESELL YOUR SHARES
WHEN YOU WANT TO OR AT PRICES YOU FIND ATTRACTIVE.
The market prices of our common stock have been highly volatile. This
volatility may adversely effect the price of our common stock and, after the
combination, the common stock of Newco. You may not be able to resell your
shares of common stock following periods of volatility because of the market's
adverse reaction to this volatility. We anticipate that this volatility, which
frequently affects the stock of software companies, will continue. Factors that
could cause such volatility include:
- quarterly variations in our operating results;
- actual or anticipated announcements of technical innovations or new
product developments by us or our competitors;
- changes in analysts' estimates of our financial performance;
- general conditions in our industry; and
- worldwide economic and financial conditions.
On occasion, the equity markets, and in particular the markets for software
companies, have experienced significant price and volume fluctuations. These
fluctuations have affected the market price for many companies' securities even
though the fluctuations are often unrelated to the companies' operating
performance.
NEWCO'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE
LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE A THIRD PARTY FROM ACQUIRING NEWCO
AND CONSEQUENTLY DECREASE THE MARKET VALUE OF YOUR INVESTMENT.
Some provisions of Newco's amended and restated certificate of
incorporation and bylaws and of Delaware law could delay or prevent a change of
control or changes in Newco's management that a stockholder might consider
favorable. Any delay or prevention of a change of control or change in
management could cause the market price of Newco's common stock to decline. For
more information about particular anti-takeover provisions, see "Description of
Newco Capital Stock Following the Combination."
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THE ANNUAL MEETING
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from the holders of Excalibur common stock to be voted
at the annual meeting of stockholders of Excalibur.
TIME AND PLACE
The annual meeting will be held at the [PLACE] located at [ADDRESS] on
, 2000, starting at , local time.
This proxy statement/prospectus and the accompanying forms of proxies are
first being mailed to the Excalibur stockholders on or about , 2000.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the annual meeting stockholders of Excalibur will be asked to consider
and vote upon:
1) a proposal to approve and adopt the contribution and merger
agreement, as amended, and to approve the combination. We included a copy
of the contribution and merger agreement, as amended, in this proxy
statement/prospectus as Appendix A;
2) in connection with and as a condition to the combination, a
proposal to adopt the Newco 2000 stock option plan;
3) the election of ten members of the board of Excalibur for terms
expiring at the completion of the combination or, if the combination is not
completed, until the 2001 annual meeting of Excalibur; and
4) such other matters as may be properly brought before the annual
meeting or any adjournment thereof.
RECORD DATE AND QUORUM
The board of Excalibur has fixed the close of business on ,
2000 as the record date. Only record holders of shares of Excalibur common stock
on the record date are entitled to notice of and to vote at the annual meeting,
and any adjournments or postponements thereof. On the record date, there were
15,068,979 shares of Excalibur common stock outstanding and entitled to vote at
the annual meeting held by approximately stockholders of record.
At the annual meeting:
- each holder of record on the record date is entitled one vote per share
of common stock, either in person or by proxy, on each proposal properly
submitted to a vote; and
- the presence, in person or by proxy, of the holders of one-third of the
outstanding shares of Excalibur common stock entitled to vote is
necessary to constitute a quorum.
VOTES REQUIRED
Under Delaware Law:
- adoption and approval of the combination and the contribution and merger
agreement require the affirmative vote, in person or by proxy, of the
holders of at least a majority of the shares of Excalibur common stock
outstanding. A failure to vote or abstention will have the same legal
effect as a vote by an Excalibur stockholder against approval and
adoption of the contribution and merger agreement and against the
combination.
- adoption and approval of the Newco stock option plan require the
affirmative vote of a majority of the shares present in person or
represented by proxy at the annual meeting and entitled to vote; and
- election of the ten members of the board of Excalibur requires the
affirmative vote of a plurality of the of the shares present in person or
represented by proxy at the annual meeting and entitled to vote.
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Voting Agreements. As of the record date, Allen & Company Incorporated and
each of the directors and executive officers of Excalibur together beneficially
owned 4,672,660 shares of Excalibur common stock, or approximately 31% of the
outstanding shares of Excalibur common stock on the record date. These
stockholders of Excalibur have entered into voting agreements in which they have
agreed, among other things, to vote all of their shares of Excalibur common
stock in favor of the combination. See "The Combination -- Voting Agreements."
PROXIES
- Completed Proxies. If you sign, complete and return a proxy, and we
receive the proxy prior to or at the annual meeting, your proxy will be
voted as you instructed.
- Proxies with No Instructions. If you sign and return a proxy but you do
not provide instructions as to your vote, your proxy will be voted FOR
the combination, the Newco stock option plan, the election of the ten
members of the board of Excalibur.
- Proxies Marked Abstain -- The Combination Proposal. If you execute and
return a proxy marked ABSTAIN, your proxy will count for purposes of
determining whether there is a quorum and for purposes of determining the
voting power and number of shares entitled to vote at the annual meeting,
but your proxy will not be voted. Since, under Delaware law, approval of
the combination proposal requires the affirmative vote of a majority of
the shares outstanding, proxies marked ABSTAIN will have the effect of a
vote against the combination proposal.
- Broker Non-Votes -- The Combination Proposal. Nasdaq broker-dealer rules
generally preclude brokers and nominees from exercising their voting
discretion. Absent specific instructions from the beneficial owner of
shares, these rules do not give them the power to vote on the combination
proposal. We will count shares as represented by broker non-votes for
purposes of determining whether there is a quorum at the annual meeting,
but we will not count broker non-votes as shares present at the annual
meeting and entitled to vote on any proposal. Broker non-votes will have
the same effect as a proxy marked ABSTAIN and will have the effect of a
vote against the combination proposal.
- Proxies Marked Abstain -- The Stock Option Plan Proposal, the Proposal to
Elect Directors. Under Delaware law, approval of the stock option plan
proposal requires the affirmative vote of a majority of the shares
present in person or represented by proxy at the special meeting and
entitled to vote, and the proposal to elect members of the board of
Excalibur requires the affirmative vote of a plurality of the shares
present in person or represented by proxy at the annual meeting and
entitled to vote. Accordingly, proxies marked ABSTAIN are considered
present and entitled to vote and will have the effect of a vote against
the stock option plan proposal but will have no effect on the proposal to
elect directors.
- Broker Non-Votes -- The Stock Option Plan Proposal, the Proposal to Elect
Directors. Shares represented by "broker non-votes" are counted for
purposes of determining whether there is a quorum at the annual meeting,
but we will not count broker non-votes as shares present at the meeting
and entitled to vote on the proposal. Therefore, these shares will have
no effect on the stock option plan proposal and the proposal to elect
directors.
- Other Business. We are not aware of any business for consideration at
the annual meeting other than as described in this proxy
statement/prospectus. However, if matters are properly brought before the
annual meeting or any adjournments or postponements, then the people
appointed as proxies will have the discretion to vote or act thereon
according to their best judgment.
- Adjournments. We may adjourn the annual meeting in order to solicit
additional proxies. Proxies marked AGAINST approval and adoption of the
combination will be voted against a proposal to adjourn the meeting for
the purpose of soliciting additional proxies.
- Revocation. You may revoke your proxy at any time prior to its use. In
order to revoke your proxy, you must deliver to James Buchanan, Secretary
of Excalibur, a signed notice of revocation or you must
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deliver a later-dated proxy changing your vote. In addition, you may
choose to attend the annual meeting and vote in person. Please realize
that simply attending the meeting will not in itself constitute the
revocation of your proxy.
- Confidentiality of Proxies. It is our policy to keep confidential proxy
cards, ballots and voting tabulations that identify individual
stockholders. Realize that disclosure may be required by law and in other
limited circumstances.
- Costs of Solicitation. We will pay the costs associated with soliciting
proxies from our stockholders. In addition to solicitation by mail, we
retained to aid in the solicitation of proxies
for a fee of $ plus expenses. In order to ensure sufficient
representation at our meetings, we may request by telephone or telegram
the return of your proxy card. Please assist us by promptly returning
your proxy card without delay.
The matters to be considered at the annual meeting are of great importance
to the stockholders of Excalibur. Accordingly, you are urged to read and
carefully consider the information presented in this proxy statement/prospectus,
and to complete, date, sign and promptly return the enclosed proxy in the
enclosed postage-paid envelope.
YOU SHOULD NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS. WE WILL
MAIL YOU A SEPARATE TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF YOUR
CERTIFICATES AS SOON AS PRACTICABLE AFTER THE CONSUMMATION OF THE COMBINATION.
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THE COMBINATION
BACKGROUND OF THE COMBINATION
In August 1999, our senior management discussed with our board the
possibility of focusing our strategic direction and organizing our operations
around our text and video content management product lines. Our management and
board of directors believed that creating a distinct identity for the video
product line could enhance stockholder value. This discussion centered around
the following factors:
- text and video businesses serve different markets,
- a combined multi-media product was assumed to be at least two years away
from large market acceptance,
- the text business required direct sales to end-users while video was
moving to an application service provider market; and
- the text and video business each had its own distinct competitors.
Further, our board and management noted that the text business was
profitable, while the video business was incurring losses and needed additional
capital to fund sales, marketing and branding activities.
In November 1999, our board authorized the regrouping of our company into
two business units. On November 17, 1999, we announced:
- that in response to market opportunities, we aligned our operations more
specifically along the text and video product lines and related markets;
- the formation of the Excalibur Applications Group which develops,
markets, sells and services the Excalibur RetrievalWare suite of products
and licenses products to end-users through a combination of direct and
indirect sales channels; and
- the formation of the Excalibur Media Services Group which develops,
markets and sells the Screening Room product line and concentrates on
opportunities with application service providers hosting Screening Room.
Our board and senior management agreed at this time that we would consider
strategic alternatives, including specifically equity arrangements with
strategic partners, to fund the sales, marketing and branding activities for the
Excalibur Media Services Group.
In November and December 1999, Patrick C. Condo, our President and Chief
Executive Officer, and James H. Buchanan, our Chief Financial Officer, as well
as other members of our senior management held discussions with representatives
of Intel, including Chris Lawless, Senior Product Manager for an Intel division,
Gary Mittelstaedt, Corporate Business Development Manager for an Intel division,
and Ken Rhodes, Intel's Director, Enhanced Video Services unit, to explore
potential opportunities for Excalibur to provide the encoding, indexing and
retrieval technology for a new service to be offered by Intel's Internet Media
Services division. The initial opportunity discussed with Intel was an OEM
license of Excalibur's technology to Intel. In December 1999, Excalibur and
Intel executed a mutual confidentiality agreement in connection with these
discussions.
On January 17, 2000, Messrs. Condo and Buchanan participated on a
conference call with Messrs. Lawless and Mittelstaedt, as well as Jim Kiles, an
executive with Intel's Corporate Business Development, in which the parties
continued their discussions concerning the OEM license. The teleconference also
included discussions about a possible equity investment by Intel in Excalibur in
conjunction with the OEM license. Intel's representatives also indicated that
Excalibur's products could be of broader interest to Intel and extend beyond
Intel's Internet Media Services division. The parties also met in Portland,
Oregon on January 20, 2000, at which meeting they reviewed a first draft of an
OEM license agreement. At this meeting and at a meeting in Vienna, Virginia on
February 8, 2000, the parties continued their discussions concerning the
possibility of an equity investment by Intel. Intel's representatives mentioned
that the Internet Media
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Services division was inclined to consider alternatives to a transaction with
Excalibur but that there were opportunities within Intel for a broader
application of Excalibur's products to Intel's other operations, including
Intel's Internet Security Services, Enhanced Video Services and Entertainment
Content Services business units. These three business units comprise Intel's
Interactive Media Services division.
In addition to our discussions with Intel, during December 1999 and the
first quarter of 2000, we engaged in preliminary discussions with several
leading public technology companies to explore whether there were other
strategic alternatives to enhance stockholder value. We entered into
confidentiality agreements and Excalibur's senior management held preliminary
discussions of varying depths with these parties. None of these other parties
commenced formal due diligence investigations of Excalibur, nor did Excalibur
and any of these other parties advance discussions to the point where a specific
proposal was made containing the structure and terms of a potential transaction
with Excalibur. During this period, Excalibur's management felt that, among the
opportunities available to them, a relationship with Intel would best promote
Excalibur's products and services.
On February 15, 2000, Messrs. Condo and Buchanan and Ronald J. Whittier,
Intel's Senior Vice President and General Manager of Intel Content Services, and
Mr. Kiles met at Intel's headquarters in Santa Clara, California. At this
meeting, Intel's representatives explained that Intel was considering plans to
spin out certain businesses to form a company in the interactive media services
area. The parties discussed the concept of merging one or more of these
businesses with Excalibur to create a company with broad technical capabilities
in the interactive media market segment. The parties agreed to exchange more
information and consider the possibility of some type of business combination in
more detail.
From February 23, 2000 through March 7, 2000, members of senior management
of Excalibur and Intel held further discussions in person and by teleconference.
During this period, Excalibur's management also briefed the executive committee
of the Excalibur board of directors of the status and nature of the discussions
with Intel. Intel's representatives explained that Intel had a strong interest
in working with Excalibur to create an interactive media services solution. The
possibilities discussed ranged from a straight OEM arrangement coupled with an
equity investment to the acquisition of Excalibur by Intel where Intel would
integrate Excalibur's technology with Intel's Internet Security Services,
Enhanced Video Services and Entertainment Content Services business units and
consider a spin-out of the new company at a later date. The parties discussed
various proposals in which Excalibur's stockholders would receive cash and an
equity interest in a combined entity in exchange for their Excalibur shares, but
the parties did not reach an understanding on proposed terms or structure.
During this period, the parties discussed their belief that the time to market
for the interactive media service business was a factor in successful
commercialization and that the parties would need to take this into account in
structuring a transaction. After further discussion, the parties concluded that
a combination of Excalibur and the three Interactive Media Services business
units would provide the fastest way to market for the proposed interactive media
products and services. Intel's management proposed a combination in which Intel
would contribute its Interactive Media Services division and cash in exchange
for 60% of the new company.
On March 10, 2000, Messrs. Condo and Buchanan, Herbert A. Allen, the
President of Allen & Company Incorporated, a significant stockholder of
Excalibur, and Excalibur's outside counsel met with Intel senior management,
including Messrs. Whittier and Kiles, in Santa Clara, California. Intel's
management explained the proposed deal structure and provided more information
about the Internet Security Services, Entertainment Content Services and the
Enhanced Video Services business units they proposed to include in the
combination. Intel provided certain financial information, a presentation of
current customers and potential market segments, a review of the technologies
developed by these business units and an overview of the employees associated
with the business units. The parties discussed the perceived time to market
advantage this proposed deal structure could be expected to provide over an
acquisition of Excalibur by Intel. The parties acknowledged the delay in
rolling-out the new products and services which would be caused by the time
required to complete an acquisition of Excalibur by Intel, the required
integration of Excalibur's operations with Intel's businesses and subsequent
spinout of the combined entity and that the projected timetable made an
acquisition of Excalibur by Intel less attractive. The parties concluded that
the interactive media service capabilities could likely be offered commercially
earlier under a structure in which Intel contributed its
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<PAGE> 33
Interactive Media Services division to Excalibur. The parties also discussed a
proposal suggested by Excalibur's representatives of offering Excalibur's
stockholders a put option by which, for a limited time, Excalibur stockholders
could put their shares in the combined company to Intel at a price to be agreed
upon.
On a series of conference calls from March 13, 2000 to March 15, 2000,
Excalibur's and Intel's senior management held further discussions regarding
various matters relating to the proposed combination, including the valuation of
Intel's assets to be contributed to the new company, the structure of the
proposed put option and management of the new company. Intel's representatives
expressed concern with a put option. The parties reached a preliminary
understanding that the board of directors of the new company should be comprised
initially of seven directors: two designated by Intel, one representing the
Excalibur stockholders, two from the management of the new company and two
outside directors. These conversations also led the parties to recommend that
Mr. Whittier would be proposed as chairman and chief executive officer of the
new company and that Mr. Condo would be proposed as its president and chief
operating officer. The parties also discussed the need for Intel to contribute a
substantial amount of cash to fund the new company. On March 14, 2000, Intel's
management proposed that Intel contribute the Interactive Media Services
division and related assets and $100 million in cash for an ownership stake of
62.5% in the new company. Excalibur's management agreed to review the proposal
and respond. On March 15, 2000, Excalibur's management proposed that Intel
contribute $150 million at closing plus the Interactive Media Services division
and related assets for a 60% ownership stake in the new company. Intel's
representatives indicated that the counterproposal was tentatively acceptable,
subject to negotiation of other deal terms and documentation, provided that the
put option proposal be excluded from the transaction.
From March 20, 2000 through March 22, 2000, members of Excalibur's and
Intel's senior management met in Santa Clara, California to review numerous
structural issues, including structures which would allow for a tax free
reorganization within the meaning of the federal tax code. The parties also
discussed a proposed transaction schedule, including the due diligence process
each party would require to review the proposed transaction, and the expected
business model the new company would pursue.
On March 30, 2000 and March 31, 2000, members of senior management of
Excalibur and Intel, together with Excalibur's outside counsel, Heller Ehrman
White & McAuliffe LLP, and Intel's outside counsel, Gibson Dunn & Crutcher LLP,
met in Santa Clara, California and by teleconference. Among the matters
discussed were tax and accounting issues in connection with the proposed
transaction, plans for product and service offerings in the new company and
sales and marketing structures for the new company. At these meetings, the
parties discussed possible structures for the combination, including the
contribution of assets and cash by Intel to a newly formed holding company and
Excalibur becoming a subsidiary of the holding company by way of a merger with
an indirect wholly-owned subsidiary.
On March 31, 2000, the Excalibur board of directors held a telephonic board
meeting to consider the potential combination transaction with Intel. Mr. Condo
made a presentation to the board regarding the business rationale for the
transaction, the proposed strategy for the combined company and a description of
the products and services which the combined company would be expected to offer.
Mr. Buchanan and Excalibur's outside counsel reviewed for the board the proposed
structure of the combination, including the tax, accounting and legal
implications. Also at this meeting, the Excalibur board appointed a special
committee of non-management directors comprised of John G. McMillian, Harry S.
Payne and John S. Hendricks to consider the proposed transaction with Intel and
make a recommendation to the full board. Mr. McMillian was appointed chairman of
the special committee. By unanimous written consent, the board later added an
additional non-management director, Philip J. O'Reilly, to the special
committee. The special committee retained the law firm of Proskauer Rose LLP to
advise the special committee with respect to the proposed combination.
On April 12, 2000, the special committee met and appointed a sub-committee
of Messrs. McMillian, O'Reilly and Payne to interview and appoint a financial
advisor. After contacting several investment banks and reviewing the proposals
and discussing the qualifications of two firms, the special committee selected
Needham & Company, Inc. to act as financial advisor to the special committee and
the board in connection with its consideration and evaluation of the proposed
combination.
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<PAGE> 34
Over the first three weeks of April 2000, members of Intel's legal and
finance department and its outside legal counsel performed their due diligence
investigation of Excalibur. During this time, members of Excalibur's finance
department and Excalibur's outside legal counsel also performed their due
diligence investigation of Intel's business units proposed to be contributed in
the combination, and Needham & Company began its analysis. During this period,
members of Excalibur's finance department and representatives of Excalibur's
independent auditors had discussions with members of Intel's finance staff
regarding financial accounting matters related to the proposed combination.
On April 21, 2000, Intel delivered initial drafts of the contribution and
merger agreement and related agreements to Excalibur. From April 21, 2000 to
April 30, 2000, Excalibur, Intel and their respective legal advisors negotiated
the terms of the definitive agreements. The special committee and Proskauer Rose
also reviewed the drafts of the contribution and merger agreement and related
documents and conveyed their comments to Excalibur's legal counsel. During this
time, the parties discussed various issues related to the proposed combination,
including the exact nature of the assets to be contributed or licensed by Intel
to the combined company, and the amount of, and terms and conditions upon which
Intel would be entitled to receive, a termination fee. As part of these
discussions, the parties agreed that Intel's 60% of the total equity of the
combined company would take into account all of Excalibur's stock options
outstanding at the time of the combination.
On April 27, 2000, the special committee of the Excalibur board held a
meeting in New York to review and discuss with its legal and financial advisors
the proposed terms of the contribution and merger agreement and related
documents. Mr. Condo presented to the special committee the history of the
discussions with Intel, including alternatives which were considered, and the
expected benefits of the proposed combination. Needham & Company reviewed with
the special committee its financial analyses with respect to the proposed
combination. The special committee, together with Proskauer Rose, then discussed
their remaining comments on the contribution and merger agreement. After
discussing these issues, the special committee approved the proposed
combination, subject to the resolution of the remaining issues on the
transaction agreements. Proskauer Rose then conveyed the special committee's
remaining comments to Excalibur's legal counsel.
On April 28, 2000, the special committee met again and Proskauer Rose
reported on the resolution of the remaining issues on the transaction
agreements. The special committee was satisfied with the resolution of these
issues and confirmed its approval of the combination. Immediately thereafter,
the full board of directors of Excalibur held a special meeting at which the
members of the special committee of the board, together with its outside legal
counsel, reported to the full board that it recommended approval of the
combination. Excalibur's legal advisors made a preliminary presentation of the
principal terms of the proposed agreement with Intel, as well as legal analyses
of the proposed transaction. In anticipation of the meeting, each board member
was provided with, among other information, the most current draft of the
contribution and merger agreement as well as financial analyses prepared by
Needham & Company. Representatives of Needham & Company also presented their
financial analyses and delivered their oral opinion that, as of that date, the
exchange ratios of one share of Newco Class A common stock for each share of
Excalibur common stock and one share of Newco preferred stock for each share of
Excalibur preferred stock were fair, from a financial point of view, to the
holders of Excalibur common stock and Excalibur preferred stock, respectively.
These exchange ratios will result in the holders of Excalibur common stock
receiving, at the completion of the combination, 40% of the equity of Newco on a
fully diluted basis after giving effect to the conversion of preferred stock and
the exercise of assumed Excalibur options. Following a presentation by Mr. Condo
regarding the strategy and proposed business plan for the combined company, the
board adjourned their meeting to the following day to allow them to reflect on
the matters presented at the board meeting. Following the adjourned meeting,
representatives of Excalibur and Intel and their respective legal counsel
continued their negotiations in order to finalize the terms of the definitive
combination agreements.
The negotiation of the contribution and merger agreement and related
documents continued through the morning of April 29, 2000. On that date, at the
reconvened special meeting of the Excalibur board, Excalibur management updated
the board on the status and terms of the proposed transaction with Intel.
Excalibur's legal advisors also reviewed the substantially final terms of the
contribution and merger agreement, including the changes made to the agreement
from the draft given to the board for the April 28, 2000 meeting. After
discussion, the board unanimously determined that the contribution and merger
agreement and the combina-
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<PAGE> 35
tion with Intel are advisable and in the best interests of Excalibur's
stockholders and the board approved the contribution and merger agreement. The
board authorized Messrs. Condo and Buchanan, together with Excalibur's outside
counsel, to negotiate any final changes to the definitive transaction agreements
consistent with the terms of the transaction approved by the board. The board
also unanimously resolved to recommend that Excalibur's stockholders vote to
adopt the contribution and merger agreement.
Following the completion of final changes to the contribution and merger
agreement, the related agreements and disclosure schedules, representatives of
Excalibur and Intel executed the contribution and merger agreement on April 30,
2000. In addition, Allen & Company Incorporated and each director and executive
officer of Excalibur executed voting agreements with Intel pursuant to which
they agreed, among other things, to vote in favor of the contribution and merger
agreement. As of the record date, stockholders who have executed voting
agreements with Intel owned approximately 31% of Excalibur's outstanding common
stock. On the morning of May 1, 2000, Excalibur and Intel issued a joint press
release announcing the combination.
OUR REASONS FOR THE COMBINATION; RECOMMENDATION OF OUR BOARD
We believe that the combined company will allow us to build on our current
business by being among the first to offer a media services solution that
enables content owners, such as entertainment companies and sports leagues, to
distribute their content securely over the Internet. We believe that the
technologies of the combined company will permit it to consolidate and rapidly
bring to market a solution that benefits from separate, but complementary,
efforts by Intel and Excalibur to develop technologies capable of exploiting the
opportunity for internet-based interactive media. For Excalibur's part, these
efforts have focused on content management -- the encoding, indexing, searching,
retrieving and publishing of multimedia -- and have resulted in products able to
organize and search all kinds of content. Intel's efforts have focused on
content protection and content enrichment through video and data integration and
have resulted in products and services that provide the infrastructure required
to deliver branded content over the internet. The technologies and capabilities
provided by each company are compatible and represent a significant dollar
investment in research and development. As a unified offering, our business plan
is to provide a solution customers need to encode, protect, organize and deliver
branded, high-value content on the internet using new business models such as
subscription and pay-per-view.
We have considered the current market environment in which the creators and
owners of branded content, such as sporting events and highlights, movies and
music, lack the effective means to distribute their programming in a secure,
compelling, and profitable way over the internet. To our knowledge, no one
company currently exists with all the technologies and capabilities to enable
branded, valuable content to be delivered to subscribers over the internet. We
believe that this transaction represents an opportunity for Excalibur to
transition branded content owners to digital media delivery and to take
advantage of a growing number of broadband connected homes. The combined company
will also allow these customers to deliver their content in a form that allows
consumers to interact with the material in new ways. The combined company will
combine Excalibur's content management technologies with Intel's expertise and
patented technology in content protection. We believe that these complementary
technologies -- one to produce valuable asset data bases, and the other to allow
secure distribution of the valuable assets -- combined in a single end-to-end
solution will enable content owners to create new internet business models such
as pay-per-view and subscription. As a result, consumers will have access to a
new class of branded interactive media, including some content not previously
generally available on the internet such as old newsreels, films, sports
highlights and television programs.
Our mission with this transaction is to position the new company as a
leading supplier of interactive media services to the internet economy. Our
strategy is to provide a business-to-business solution that allows content
owners a new and exciting way to enable end-users to interact with their
valuable content. We will continue to serve Excalibur's customer base and
believe that the combination will make available new products and services that
will be advantageous to our current customers.
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<PAGE> 36
Our board of directors, in reaching its decision on the combination,
consulted with its financial and legal advisors and its senior management,
reviewed a significant amount of information and considered a number of factors.
The most relevant information reviewed and factors considered are set forth
below:
- the reasons described above under "Our Reasons for the Combination" and
the risks described under "Risk Factors";
- the strategic fit between Excalibur and Intel's Interactive Media
Services division, and the belief that the combined company has the
potential to enhance stockholder value through creating a leading company
in the interactive media services market that is well positioned to
attract branded media content customers;
- the current industry, economic and market conditions and trends,
including the absence of any other single company in the market which
currently combines the technologies, human resources and other
capabilities to act as a single source to allow customers of valuable
content to distribute their content over the internet in a secure and
profitable manner;
- the opportunity for the Excalibur stockholders to participate in a
larger, more diverse company;
- the corporate governance for the combined company, including, initially,
representation of Excalibur and Intel designees on the company's board of
directors, as well as the fact that Mr. Patrick C. Condo, our president
and chief executive officer, will initially serve as president and chief
operating officer of the combined company;
- information concerning the financial performance, business operations,
and asset quality of Excalibur and Intel's Interactive Media Services
division;
- Intel's contributions of assets and intellectual property to the combined
company, including the existing operations of the Interactive Media
Services division with its base of customers, 14 patents and patent
applications in the area of content security, source code, non-exclusive
licenses to additional source code components and other Intel patents and
patent applications, and a cash contribution at closing to the combined
company of $150 million;
- the talented pool of personnel from Intel to which the combined company
would offer employment, including Mr. Ronald J. Whittier, the current
senior vice president and general manager of Intel Content Services, who
has agreed to take the helm as chairman and chief executive officer of
the combined company, and the 60 or more engineers and other
professionals who currently comprise the Interactive Media Services
division and who have been offered employment with the combined company
subject to completion of the combination;
- the ability to successfully integrate Excalibur and Intel's Interactive
Media Services division, including the risks associated with the
integration;
- the oral opinion of Needham & Company as of April 28, 2000, subsequently
confirmed in writing as of June 30, 2000, that, as of the opinions' dates
and subject to the assumptions and limitations set forth in the opinions,
the exchange ratios of one share of Newco Class A common stock for each
share of Excalibur common stock and one share of Newco preferred stock
for each share of Excalibur preferred stock were fair, from a financial
point of view, to the holders of Excalibur common stock and Excalibur
preferred stock, respectively, and the financial presentation made by
Needham & Company to our board of directors on April 28, 2000;
- the strategic and financial alternatives available to Excalibur,
including contacts and preliminary discussions Excalibur's management had
with third parties regarding possible investments in or business
combinations with Excalibur;
- the likely impact of the combination on the employees and customers of
Excalibur and Intel's Interactive Media Services division;
- the expected effect of the combination on our relationships with third
parties;
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<PAGE> 37
- the ability to consummate the combination, including the conditions to
the combination requiring the receipt of necessary regulatory approvals
in accordance with the terms of the contribution and merger agreement;
- the interests of officers and directors of each company in the
combination, as described under "Interests of Officers and Directors in
the Combination";
- the terms of the contribution and merger agreement, including the fact
that Excalibur is permitted to terminate the contribution and merger
agreement upon receipt of a superior acquisition proposal, subject to the
payment of specified termination fees, and the impact that the
termination fees may have on potential third-party acquirers; and
- the qualification of the combination as a tax-free transaction for United
States federal income tax purposes.
The foregoing discussion of the information and factors considered by our
board of directors is not intended to be exhaustive. In view of the wide variety
of the material factors considered in connection with their respective
evaluations of the combination and the complexity of these matters, our board of
directors did not find it practicable to, and did not, quantify or otherwise
attempt to assign any relative weight to the various factors considered. In
addition, our board of directors did not undertake to make any specific
determination as to whether any particular factor, or any aspect of any
particular factor, was favorable or unfavorable to our board of directors'
ultimate determination, but rather our board of directors conducted an overall
analysis of the factors described above, including discussions with and
questioning of our respective management and legal and financial advisors. In
considering the factors described above, individual members of our boards of
directors may have given different weight to different factors.
There can be no assurance that any of the potential opportunities
considered by our boards of directors will be achieved through consummation of
the combination. See "Risk Factors" beginning on page 12.
Recommendation of the Board of Directors of Excalibur
Excalibur's board of directors unanimously recommends that Excalibur
stockholders vote "for" approval and adoption of the contribution and merger
agreement, as amended, and approval of the combination.
OPINION OF EXCALIBUR'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated April 7, 2000, Excalibur retained
Needham & Company, Inc. to furnish financial advisory and investment banking
services with respect to the proposed combination and to render an opinion as to
the fairness, from a financial point of view, of the exchange ratios of Newco
common stock and preferred stock for Excalibur common stock and preferred stock
in the proposed combination. The combination exchange ratios were determined
through arm's length negotiations between Excalibur and Intel and not by Needham
& Company.
At a meeting of the Excalibur board of directors on April 28, 2000, Needham
& Company delivered its oral opinion (subsequently confirmed in writing) that,
as of that date and based upon and subject to the assumptions and other matters
described in the written Needham & Company opinion, the proposed exchange ratio
of one share of Newco common stock per share of Excalibur common stock, and the
proposed exchange ratio of one share of Newco convertible preferred stock per
share of Excalibur convertible preferred stock, are fair to the holders of
Excalibur common stock and Excalibur preferred stock, respectively, in each case
from a financial point of view. Subsequent to April 28, 2000 and at the request
of Excalibur, Needham & Company reviewed the final terms of the combination,
including the final form of the combination and merger agreement, and additional
financial information provided by management of Intel's Interactive Media
Services, or IMS, division about that division. Based on all of the analysis
conducted by Needham & Company, on June 30, 2000, Needham & Company delivered a
written opinion that, as of that date and based upon and subject to the
assumptions and other matters described in the written Needham & Company
opinion, the proposed exchange ratio of one share of Newco common stock per
share of Excalibur common stock, and the proposed exchange ratio of one share of
Newco convertible preferred stock per share of
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<PAGE> 38
Excalibur convertible preferred stock, are fair to the holders of Excalibur
common stock and Excalibur preferred stock, respectively, in each case from a
financial point of view. The Needham & Company opinion is addressed to the
Excalibur board, is directed only to the financial terms of the contribution and
merger agreement, and does not constitute a recommendation to any Excalibur
stockholder as to how such stockholder should vote at the Excalibur annual
meeting.
The complete text of the Needham & Company opinion, which sets forth the
assumptions made, matters considered, limitations on and scope of the review
undertaken by Needham & Company, is attached to this proxy statement/prospectus
as Appendix B, and the summary of the Needham & Company opinion set forth in
this proxy statement/prospectus is qualified in its entirety by reference to the
Needham & Company opinion. Excalibur stockholders are urged to read the Needham
& Company opinion carefully and in its entirety for a description of the
procedures followed, the factors considered, and the assumptions made by Needham
& Company.
In arriving at its opinion, Needham & Company, among other things:
- reviewed the contribution and merger agreement;
- reviewed certain publicly available information concerning Excalibur and
IMS and certain other information concerning Excalibur and IMS furnished
to it by Excalibur and Intel;
- reviewed the historical stock prices and trading volumes of Excalibur
common stock;
- held discussions with members of senior management of Excalibur and
Intel's IMS division concerning the current and future business prospects
of Excalibur and IMS and the joint prospects of the combined businesses,
including synergies that may be achieved by the combined businesses;
- reviewed certain financial forecasts and estimates prepared by the
respective managements of Excalibur and IMS;
- compared certain publicly available financial data of companies whose
securities are traded in the public markets and that Needham & Company
deemed relevant to similar data for Excalibur and IMS;
- reviewed the financial terms of certain other business combinations that
Needham & Company deemed generally relevant; and
- performed and/or considered such other studies, analyses, inquiries and
investigations as Needham & Company deemed appropriate.
Needham & Company assumed and relied upon, without independent
verification, the accuracy and completeness of the information reviewed by or
discussed with it for purposes of rendering its opinion. Needham & Company
assumed that the financial forecasts provided to Needham & Company by
Excalibur's and IMS' managements and information relating to the joint prospects
of the combined businesses were reasonably prepared on bases reflecting the best
currently available estimates and judgments of these managements, at the time of
preparation, of Excalibur's and IMS' and the combined businesses' future
operating and financial performance. Needham & Company relied on estimates of
Excalibur's management of the synergies that may be achieved as a result of the
proposed combination. Needham & Company did not assume any responsibility for or
make or obtain any independent evaluation, appraisal or physical inspection of
the assets or liabilities of Excalibur or the assets of Intel to be contributed
to Newco. The Needham & Company opinion states that it was based on economic,
monetary and market conditions existing as of its date. Needham & Company
expressed no opinion as to what the value of Newco common stock or preferred
stock will be when issued to the stockholders of Excalibur pursuant to the
combination or the prices at which Newco
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<PAGE> 39
or Excalibur stock will actually trade at any time. In addition, Needham &
Company was not asked to consider, and the Needham & Company opinion does not
address:
- Excalibur's underlying business decision to engage in the combination,
- the relative merits of the combination as compared to any alternative
business strategies that might exist for Excalibur, or
- the effect of any other transaction in which Excalibur might engage.
No limitations were imposed by Excalibur on Needham & Company with respect
to the investigations made or procedures followed by Needham & Company in
rendering its opinion.
Based on this information, Needham & Company performed a variety of
financial analyses of the combination and the exchange ratios. The following
paragraphs summarize the material financial analyses performed by Needham &
Company in arriving at its opinion.
Contribution Analysis. Needham & Company reviewed and analyzed the pro
forma contribution of each of Excalibur and IMS to pro forma combined balance
sheet information as of April 30, 2000 and to pro forma projected operating
results provided by Excalibur's management for the fiscal years ending January
31, 2001 and 2002. Needham & Company reviewed, among other things, the pro forma
contributions to revenues, net income, assets and stockholders' equity. This
analysis indicated that Excalibur would have contributed:
- 54.4% of estimated fiscal 2001 pro forma combined revenues,
- 49.6% of estimated fiscal 2002 pro forma combined revenues,
- 16% of the pro forma combined total assets, and
- 13% of the pro forma combined stockholders' equity.
An analysis of Excalibur's contribution to fiscal 2002 net income and
earnings before interest and taxes was not meaningful due to the projected pro
forma positive earnings before interest and taxes and net income of Excalibur
and the projected loss before interest and taxes and projected net loss of IMS
for that year. An analysis of Excalibur's contribution to fiscal 2001 earnings
was also not meaningful due to the projected losses before interest and net
losses of Excalibur and IMS for that year. Based on the terms of the
contribution and merger agreement, Excalibur's stockholders will own 40% of
Newco common stock after the combination on a fully-diluted basis after giving
effect to the conversion of outstanding preferred stock and the exercise of
assumed Excalibur options. The results of the contribution analysis are not
necessarily indicative of the contributions that the respective businesses may
have in the future.
Accretion/Dilution Analysis. Needham & Company reviewed certain pro forma
financial impacts of the combination (assuming that it had closed on October 31,
2000, the end of the third quarter of Excalibur's fiscal year ending January 31,
2001) on the holders of Excalibur common stock based on the proposed combination
consideration and Excalibur's and IMS' respective managements' projected
financial results, and projected cost savings resulting from the combination.
Based upon these projections and assumptions, Needham & Company noted that the
combination would result in dilution of the projected earnings per share of
Excalibur common stock for the fiscal years ending January 31, 2001 and 2002.
The actual operating or financial results achieved by the combined entity may
vary from projected results, and these variations may be material.
Selected Transaction Analysis. Needham & Company also analyzed publicly
available financial information for 15 selected completed and pending mergers
and acquisitions of companies in the technology sector that represent
transactions since June 1, 1998. In examining the selected merger and
acquisition transactions, Needham & Company analyzed:
- the premium of consideration offered to the acquired company's stock
price one day, one week and four weeks prior to the announcement of the
transaction;
- the enterprise value (market value plus debt less cash) as a multiple of
net sales for the last twelve months, commonly referred to as "LTM
sales";
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- the enterprise value as a multiple of net sales for the last full quarter
before the transaction, annualized, commonly referred to as "LQA sales";
- the enterprise value as a multiple of net sales projected for the next
twelve months, commonly referred to as "forward twelve months sales";
- the enterprise value as a multiple of earnings before interest and taxes
for the last twelve months;
- the enterprise value as a multiple of earnings before interest, taxes,
depreciation and amortization for the last twelve months; and
- market value as a multiple of net income for the last twelve months.
In certain cases, complete financial data was not publicly available for
the selected merger and acquisition transactions, and only partial information
was used in such instances.
The following table sets forth information concerning the stock price
premiums in the selected transactions.
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
----------------------------------
HIGH LOW MEAN MEDIAN
----- ------ ----- ------
<S> <C> <C> <C> <C>
One day stock price premium............................... 120.8% (11.2%) 33.6% 19.7%
One week stock price premium.............................. 138.9% 4.2% 50.4% 39.6%
Four week stock price premium............................. 250.9% (31.5%) 65.8% 54.3%
</TABLE>
The following table sets forth information concerning the multiples of
enterprise value to forward twelve months sales and LQA sales for the selected
merger and acquisition transactions and the implied valuations of IMS implied by
those multiples. An analysis based on IMS' LTM earnings was not meaningful due
to IMS' indication that it incurred losses for that period.
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
------------------------------------------
HIGH LOW MEAN MEDIAN
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Enterprise value to forward twelve months sales.... 106.6x 5.4x 39.0x 25.3x
Implied IMS value (millions)....................... $4,740.6 $240.9 $1,736.1 $1,127.1
</TABLE>
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
--------------------------------------
HIGH LOW MEAN MEDIAN
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Enterprise value to LQA sales......................... 541.0x 6.3x 97.6x 46.7x
Implied IMS value (millions).......................... $2,164.2 $25.3x $390.5 $186.9
</TABLE>
No company, transaction or business used as a comparison in the "Selected
Transaction Analysis" is identical to Excalibur, IMS or the proposed
combination. Accordingly, these analyses are not simply mathematical; rather,
they involve complex considerations and judgments concerning differences in the
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the selected transactions and the
companies involved in them or the transaction to which they are being compared.
Discounted Cash Flow Analysis.
Needham & Company also analyzed IMS based on an unlevered discounted cash
flow analysis of the estimated performance of IMS. For this purpose, Needham &
Company used estimated financial statements for IMS for fiscal years 2001
through 2002 provided by Excalibur's management. The discounted cash flow
analysis determined the estimated unlevered after-tax cash flows to be generated
over the period commencing with the beginning of fiscal 2001 and then added a
terminal value based upon a range of revenue multiples for the three business
units of IMS: Entertainment Content Services, Enhanced Video Services and
Internet Security Services. These multiples ranged from 5.5x to 7.5x revenues
for the Entertainment Content Services unit, 19.0x to 21.0x revenues for the
Enhanced Video Services unit, and 21.0x to 23.0x revenues for the Internet
Security Services unit.
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The unlevered after-tax cash flows and terminal values for IMS were
discounted using a range of discount rates (representing the opportunity cost of
capital, determined by applying the capital asset pricing model) of 15% to 25%
for IMS' three business units. The present value of unlevered cash flows of IMS
was negative due to the operating losses estimated by Excalibur's management to
occur through fiscal 2002. Accordingly, the terminal value (based upon the
terminal year's projected revenues) represented more than 100% of the present
value of the IMS equity determined by the discounted cash flow analysis. Needham
& Company also added cash of $150 million, which Intel has agreed to contribute
to Newco at closing under the contribution and merger agreement, in the equity
value of IMS for purposes of the analysis. The discounted cash flow analysis
resulted in a range of discounted cash flow values for IMS from $777.5 million
to $964.3 million.
Other Analyses. In rendering its opinion, Needham & Company considered
certain other analyses, including, among other things, a history of trading
prices and volumes for Excalibur, and an analysis of the stock price performance
and certain financial and operating data of a broad group of companies in the
industry.
The summary set forth above does not purport to be a complete description
of the analyses performed by Needham & Company in connection with the rendering
of the Needham & Company opinion. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant quantitative and
qualitative methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, Needham & Company believes that
its analyses must be considered as a whole and that considering any portions of
such analyses and of the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying its opinion. In its analyses, Needham & Company made various
assumptions with respect to industry performance, general business and economic
and other matters, many of which are beyond the control of Excalibur or Intel.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable. Additionally, analyses relating to the
values of businesses or assets do not purport to be appraisals or necessarily
reflect the prices at which businesses or assets may actually be sold.
Accordingly, these analyses and estimates are inherently subject to substantial
uncertainty. The Needham & Company opinion and Needham & Company's related
analyses were only one of many factors considered by Excalibur's board of
directors in its evaluation of the proposed combination and should not be viewed
as determinative of the views of Excalibur's board of directors or management
with respect to the proposed combination or the consideration to be received by
Excalibur stockholders the proposed combination.
Under the terms of the Needham & Company engagement letter, Excalibur has
paid or agreed to pay Needham & Company fees for rendering the Needham & Company
opinion and for financial advisory services of $400,000. None of Needham &
Company's fees are contingent on consummation of the combination. Excalibur has
also agreed to reimburse Needham & Company for certain of its reasonable
out-of-pocket expenses and to indemnify it against certain liabilities relating
to or arising out of services performed by Needham & Company as financial
advisor to Excalibur.
Needham & Company is a nationally recognized investment banking firm. As
part of its investment banking services, Needham & Company is frequently engaged
in the evaluation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes. Needham & Company was
retained by the Excalibur board of directors to act as Excalibur's financial
advisor in connection with the combination based on Needham & Company's
experience as a financial advisor in mergers and acquisitions as well as Needham
& Company's familiarity with the technology sector. In the normal course of its
business, Needham & Company may actively trade the equity securities of
Excalibur or Intel for its own account or for the account of its customers and,
therefore, may at any time hold a long or short position in such securities.
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INTERESTS OF CERTAIN PERSONS IN THE COMBINATION
Patrick C. Condo Employment Agreement
In May 1998, Patrick C. Condo entered into an agreement with Excalibur
under which Mr. Condo would be paid an amount equal to twelve months of base
salary plus bonus compensation and continuation of his employee benefits for one
year in the event Mr. Condo's employment is terminated or he is removed from his
position as chief executive officer within six months following certain "change
of control" events relating to Excalibur. In connection with the combination,
Mr. Condo waived all rights to this payment that he would have been entitled to
as a result of the combination. Simultaneously, he entered into an agreement
with Newco under which Mr. Condo will be paid an amount equal to twelve months
of base salary plus bonus compensation and continuation of his employee benefits
for one year in the event Mr. Condo's employment is terminated or he is removed
from his position as president of Newco within six months following certain
"change of control" events relating to Newco.
Options of Excalibur Officers and Directors
In consideration for services rendered by certain of Excalibur's executive
officers in structuring and negotiating the combination transaction with Intel,
on April 28, 2000, the compensation committee of Excalibur's board of directors
granted:
- Mr. Condo options to purchase 100,000 shares of Excalibur common stock;
- Mr. Buchanan options to purchase 100,000 shares of Excalibur common
stock;
- Kamran Khan, a senior vice president of Excalibur, options to purchase
50,000 shares of Excalibur common stock; and
- David Nunnerley, a senior vice president of Excalibur, options to
purchase 50,000 shares of Excalibur common stock.
All of these stock options were granted under Excalibur's 1999 Stock Option
Plan, have an exercise price of $33.75 per share and vest on April 28, 2002.
Upon the closing of the combination, each option to purchase Excalibur
common stock under one of Excalibur's stock option plans will become an option
to acquire Newco Class A common stock. Other than the acceleration of vesting of
options granted under these plans described below, the terms and conditions of
the replacement Newco option will be the same as the pre-existing Excalibur
option it replaces. Except for the options granted on April 28, 2000 to certain
of Excalibur's executive officers, pursuant to the terms of Excalibur's 1989
Stock Option Plan, 1995 Stock Option Plan and 1999 Stock Option Plan, all
options to purchase shares of Excalibur common stock that were granted under
these plans, including those owned by Excalibur executive officers, and not
previously vested will vest immediately upon completion of the combination. The
April 28, 2000 options will not accelerate upon the consummation of the
combination. As of August 8, 2000, Excalibur's executive officers, Messrs.
Condo, Buchanan, Khan and Nunnerly, owned unvested options to acquire 168,750,
50,000, 40,377 and 55,750 shares, respectively, which would vest upon the
completion of the combination. The replacement Newco option will be for the
number of shares of Newco Class A common stock equal to the number of shares
that were purchasable immediately prior to the closing of the combination. The
exercise price per share of each option after the combination will be unchanged.
Incentive Bonus for Intel Employees Who Will Become Newco Employees
Excalibur, Newco and Transitory will not be obligated to close the
combination unless at least 70% of certain specified IMS employees and at least
50% of the remaining IMS employees (there are approximately 62 of these
remaining employees) have indicated their intent to become employed by Newco or
been seconded by Newco. Intel employees who agree to become employed by Newco
would be required to forfeit certain benefits currently provided by Intel,
including unvested Intel stock options. Intel has discussed such employment with
a number of these employees, and Intel and Excalibur have agreed that, in order
to entice these employees to agree to employment with Newco, Intel and Newco
would offer these employees certain
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financial incentives. Excalibur and Intel have agreed that each of these
employees who becomes employed by Newco and remains employed by Newco or its
subsidiaries on September 30, 2002, will be entitled to receive from Newco a
payment payable on or promptly after September 30, 2002 to the extent that the
built-in gain as of September 30, 2002 attributable to the Newco stock options
granted to each of these employees on the closing date of the combination does
not equal or exceed the built-in gain attributable to Intel stock options that,
by their terms, vest in 2002 through 2005 and that these employees will be
required to forfeit upon becoming a Newco employee.
The built-in gain attributable to the Newco stock options granted at
closing, for each share of stock subject to an option, will be equal to the
positive difference, if any, between (i) the average of the closing prices of
the Newco Class A common stock as reported by Nasdaq (or any other national
securities exchange on which the Newco Class A common stock is then traded) for
the five trading days immediately prior to and including September 30, 2002 and
(ii) the per share exercise price of the Newco stock options. The built-in gain
attributable to these employees' forfeited Intel stock options is equal to the
positive difference, if any, between (i) $61.50 and (ii) the per share exercise
price of the forfeited Intel stock options. The amount of Newco's payment will
equal the excess, if any, of the built-in gain for the forfeited Intel stock
options over the built-in gain for the Newco stock options. The maximum
aggregate amount of the built-in gain for the forfeited Intel stock options
which Newco could be required to pay to these employees is equal to
approximately $10.9 million.
In addition, Intel has agreed to make certain payments concurrent with the
closing of the combination to these employees and to make an additional capital
contribution to fund retention bonuses to certain former Intel employees that
remain employed by Newco on April 30, 2001. Intel will pay to Newco the
aggregate amount required to fund retention bonuses in amounts previously agreed
by Newco and Intel. Intel will make these payments within five days of receiving
written confirmation from Newco of those former Intel employees that remain
employed by Newco on April 30, 2001. Newco will pay those retained employees
within five days of receiving the retention bonus funds from Intel.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes the material federal income tax
consequences of the combination, assuming the combination is completed as
contemplated in this proxy statement/prospectus and in the contribution and
merger agreement. The discussion below is based upon current provisions of the
tax code, currently applicable Treasury regulations, and judicial and
administrative decisions and rulings. Future legislative, judicial or
administrative changes or interpretations, which changes or alterations could be
retroactive, could alter or modify the statements and conclusions below and
could affect the tax consequences to Excalibur and Newco and the stockholders of
Excalibur and Newco.
Tax Implications to Excalibur Stockholders. Based in part on
representations contained in certificates of officers of Excalibur and Newco,
except as limited by the matters discussed below under "-- Assumption and
Limitations" and assuming the combination is completed in the manner
contemplated in the proxy statement/prospectus and in accordance with the
contribution and merger agreement:
- The combination will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the tax code
and/or, as a transfer of property to Newco by holders of Excalibur common
stock described in Section 351 of the tax code;
- Holders of Excalibur common stock and preferred stock who exchange their
Excalibur common stock and preferred stock for Newco common stock and
preferred stock in the combination will not recognize gain or loss for
federal income tax purposes with respect to the exchange;
- The aggregate tax basis of Newco common stock and preferred stock
received by an Excalibur stockholder as a result of the combination will
be the same as the stockholder's aggregate tax basis in the Excalibur
common stock and preferred stock surrendered in the exchange; and
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- The holding period of the Newco common stock and preferred stock held by
a former Excalibur stockholder as a result of the exchange will include
the period during which the stockholder held the Excalibur common stock
and preferred stock exchanged.
Tax Implications to Excalibur. Excalibur will not recognize any gain or
loss for federal income tax purposes as a result of the combination.
Reporting Requirements and Backup Withholding. Each stockholder receiving
Newco common stock or preferred stock as a result of the combination will be
required to retain records and file with the stockholder's federal income tax
return a statement containing facts relating to the combination.
Backup withholding at the rate of 31% may apply with respect to payments
unless the recipient (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (b) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A stockholder who does not provide Newco with its correct
taxpayer identification number may have to pay penalties imposed by the IRS. Any
amounts withheld under the backup withholding rules may be allowed as a refund
or a credit against the stockholder's federal income tax liability provided that
any required information is furnished to the IRS. Newco will report to
stockholders of Newco and to the IRS the amount of "reportable payments" and any
amount withheld with respect to Newco common stock and preferred stock during
each calendar year.
Assumptions and Limitations. The above discussion does not address all
aspects of federal income taxation that may be important to you in light of your
particular circumstances and does not address any state, local or foreign tax
considerations. Further, the discussion does not address all aspects of federal
income taxation that may be applicable to holders covered by special rules, such
as:
- holders who are not United States persons;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers or brokers in securities;
- holders who do not hold their Excalibur stock as capital assets;
- holders who hold their stock as part of a hedge, appreciated financial
position, straddle or conversion transaction; or
- holders who acquired their Excalibur shares upon the exercise of employee
stock options or otherwise as compensation.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE COMBINATION. THUS,
EXCALIBUR STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE COMBINATION, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL
AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
ACCOUNTING TREATMENT
We intend to account for the combination under the purchase method of
accounting. For accounting purposes, Excalibur is treated as the acquirer of the
Interactive Media Services division of Intel. On the date of the completion of
the combination, we will record the tangible and identifiable intangible assets
of the Interactive Media Services division at their fair values. The purchase
price in excess of the fair value of the net assets of the Interactive Media
Services division will be recorded as goodwill. The purchase price was
determined based on the average market price of Excalibur's common stock before
and after the date the combination was announced plus the costs incurred to
execute the combination. See "Unaudited Pro Forma
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Condensed Combined Financial Statements" for additional information related to
the application of the purchase accounting method. We will include the results
of operations of the Interactive Media Services division in Newco's financial
statements from the date of the completion of the combination.
REGULATORY APPROVALS
Intel and Herbert A. Allen, a director of Excalibur and president of Allen
& Company Incorporated, a significant stockholder of Excalibur, are required to
make filings with or obtain pre-combination approvals from United States
regulatory authorities in connection with the combination. Intel's and Mr.
Allen's separate notifications and reports were submitted for filing with the
Federal Trade Commission and the Department of Justice by August 3, 2000, and
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, will expire on September 2, 2000.
APPRAISAL RIGHTS
The holders of Excalibur common stock are not entitled to appraisal rights
in connection with the approval and adoption of the combination proposal. Allen
& Company Incorporated, the only holder of Excalibur preferred stock, has waived
any appraisal rights it has by entering into a voting agreement and irrevocable
proxy with Intel.
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DIRECTORS AND MANAGEMENT OF NEWCO FOLLOWING THE COMBINATION
DIRECTORS
The Newco bylaws address the number and classification of the Newco board
of directors. The Newco bylaws provide that the board of directors will consist
of seven persons.
Excalibur and Intel have agreed that five of the members of the Newco board
of directors will be:
Herbert A. Allen, 59 years old, is President, Chief Executive Officer and
Managing Director of Allen & Company Incorporated, a privately held investment
banking firm, and has held these positions for more than the past five years.
Andrew D. Bryant, 49 years old, has been Senior Vice President and Chief
Financial and Enterprise Services Officer of Intel since December 1999. Prior to
that, Mr. Bryant was Senior Vice President and Chief Financial Officer of Intel
from January 1999 to December 1999 and Vice President and Chief Financial
Officer of Intel from 1994 to January 1999.
Patrick C. Condo, 43 years old, was named President and Chief Executive
Officer of Excalibur in November 1995, and a Director in January 1996. Mr. Condo
was President from May 1995 to November 1995. He became Executive Vice President
in January 1995 after serving as the Director of Business Development from
November 1992. From October 1987 to November 1992, Mr. Condo held several
manager level positions for Digital Equipment Corporation's Image, Video and
Voice Business Unit and Software Business Group in New Hampshire.
Gerhard H. Parker, 56 years old, has been Executive Vice President and
General Manager, New Business Group of Intel, since 1998. Prior to that, Dr.
Parker was Executive Vice President and General Manager, Technology and
Manufacturing Group of Intel, from 1996 to 1998 and Senior Vice President and
General Manager, Technology and Manufacturing Group of Intel, from 1992 to 1996.
Ronald J. Whittier, 64 years old, has been Senior Vice President and
General Manager of Intel's Interactive Media Services division since 1999. From
1995 to 1999, he was responsible for coordinating Intel's various activities in
content, applications and authoring tools. Prior to 1995, he held various jobs
at Intel, including manager of Intel Architecture Labs, Director of Corporate
Marketing and general manager of the Memory Products Division. Mr. Whittier
joined Intel in 1970.
Excalibur and Intel will agree upon two additional members of the board of
directors of Newco prior to the completion of the combination, neither of whom
will be affiliated with Intel.
COMMITTEES OF THE BOARD OF DIRECTORS
Newco expects to appoint the following committees of its board of directors
prior to the completion of the combination: executive committee, audit
committee, compensation committee and nominating committee.
COMPENSATION OF DIRECTORS
Directors who are employees of Newco will not receive any compensation for
service on the Newco board. We have not yet determined the specific terms of the
compensation to be paid to non-employee directors of Newco.
MANAGEMENT AND EXECUTIVE OFFICERS OF NEWCO
In addition to Ronald Whittier and Patrick Condo, we expect the senior
management team and executive officers of Newco to include the following
individual:
James Buchanan, age 44, Chief Financial Officer. Mr. Buchanan joined
Excalibur as Chief Financial Officer in September 1995. Mr. Buchanan was elected
Secretary and Treasurer of Excalibur on November 17, 1995. From March 1991 to
August 1995, Mr. Buchanan was Vice President, Controller and Treasurer of
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Legent Corporation, a software development company. Prior to that, he held
several financial management positions with Norfolk Southern Corporation and
PepsiCo. Mr. Buchanan is a certified public accountant.
Newco expects to appoint the other members of the senior management team
and executive officers prior to the completion of the combination.
EXECUTIVE COMPENSATION
The Newco board will rely on its compensation committee, composed of
non-employee directors, to recommend the form and amount of compensation to be
paid to Newco's executive officers.
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THE CONTRIBUTION AND MERGER AGREEMENT AND RELATED AGREEMENTS
The following summarizes the material terms of the contribution and merger
agreement, a copy of which we have attached as Appendix A to this proxy
statement/prospectus and is incorporated herein by reference. We urge you to
read the contribution and merger agreement in its entirety for a more complete
description of the terms and conditions of the combination.
THE COMBINATION
Following stockholder approval and the satisfaction of the other conditions
to the combination, Excalibur will become a wholly-owned subsidiary of Newco.
Current Excalibur stockholders will become holders of Newco Class A common stock
and preferred stock and own, in the aggregate, approximately 51% of the Class A
common stock and 40% of the common stock of Newco, on a fully diluted basis
after giving effect to the conversion of outstanding preferred stock and the
exercise of assumed Excalibur options.
On the date the combination closes, Excalibur will file a certificate of
merger and articles of merger with the Secretary of State of Delaware. See
"-- Conditions to Obligations to Effect the Combination."
THE CONTRIBUTION
On the date of the closing of the combination, Intel will contribute to
Newco its Interactive Media Services division, intellectual property assets and
other assets used by that division, as well as approximately $155 million in
cash, $150 million of which will be paid at closing and the balance of which
will be payable in 2001 to fund retention bonuses to certain former Intel
employees, in exchange for 49% of the Newco Class A common stock and 100% of the
Newco Class B non-voting common stock, which together represent a total of 60%
of the common stock of Newco, on a fully-diluted basis after giving effect to
the conversion of outstanding preferred stock and the exercise of assumed
Excalibur options.
In the combination, Intel will contribute to Newco its Interactive Media
Services division and related intellectual property (generally under
non-exclusive licenses) and other assets. These assets include:
- a broad set of technical capabilities in the areas of video and data,
security and content protection;
- 14 patents and patent applications in the area of content security;
- source code components;
- non-exclusive licenses to additional source code components and other
Intel patents and patent applications;
- Intel's rights under certain contracts entered into by the Interactive
Media Services division, exclusive of certain cash payments or payments
of equity earned by the division under the contracts prior to the
closing; and
- technical employee resources in key areas, primarily in software and
engineering.
CONVERSION OF SHARES
- Each share of Excalibur common stock will be converted into one share of
Newco Class A common stock.
- Each share of Excalibur preferred stock will be converted into one share
of Newco preferred stock.
EXCHANGE OF STOCK CERTIFICATES
After the closing of the combination, an exchange agent will mail you a
letter of transmittal and instructions for exchanging your Excalibur stock
certificates for your shares of Newco stock. Upon surrender of a stock
certificate to the exchange agent, together with the executed letter of
transmittal, you will be entitled to receive shares of Newco stock. The
surrendered Excalibur stock certificates will promptly be canceled.
No Further Ownership Rights in Excalibur Common Stock. All shares of Newco
common stock issued in exchange for certificates of Excalibur common stock will
be considered to have been exchanged in full payment for your shares. After the
closing of the combination, the transfer agent will not register transfers of
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shares that were outstanding prior to the closing. If shares of Excalibur common
stock are presented to Excalibur after the combination for any reason, the
certificates will be canceled and exchanged for shares of Newco.
No Liability. Excalibur, Intel, Newco and the exchange agent will not be
liable to any Excalibur stockholder for any shares of Newco common stock
delivered to a public official pursuant to abandoned property, escheat or
similar laws.
Lost Certificates. If your stock certificates of Excalibur are lost,
stolen, or destroyed prior to the closing of the combination, you must submit an
affidavit of that fact to the exchange agent. Also, if required by Newco, or the
exchange agent, you must post a bond in a reasonable amount as determined by
Newco as indemnity against any potential claim regarding the lost certificates.
In exchange for lost, stolen or destroyed stock certificates, after you have
made the affidavit and, if required by Newco or the exchange agent, posted the
bond, the exchange agent will issue to you shares of Newco stock.
STOCK OPTIONS
After the closing of the combination, each option to purchase Excalibur
common stock under one of Excalibur's stock option plans will become an option
to acquire Newco Class A common stock. The terms and conditions of the
replacement Newco option will be the same as the pre-existing Excalibur option
it replaces. The assumed option will be exercisable for the number of shares of
Newco Class A common stock equal to the number of shares that were purchasable
immediately prior to the closing of the combination. The exercise price per
share of each assumed option after the combination will be unchanged.
Newco will reserve for issuance a sufficient number of shares of Newco
Class A common stock for delivery under the Newco stock option plan. As soon as
practicable after the closing of the combination, Newco will file a registration
statement on Form S-8 for the shares of Newco Class A common stock subject to
the assumed options and will use reasonable efforts to maintain the
effectiveness of that registration statement for as long as the assumed options
remain outstanding.
REPRESENTATIONS AND WARRANTIES
The contribution and merger agreement contains representations and
warranties made by Excalibur and Intel. These are assumptions upon which each
company relied when agreeing to the combination. These representations and
warranties deal with issues such as:
- the organization, valid existence and good standing of Intel and
Excalibur and their subsidiaries, and similar corporate matters;
- the capital structure of Excalibur, Newco and Transitory;
- the authorization, execution, delivery and enforceability of the
contribution and merger agreement;
- the consummation of the transactions contemplated by the contribution and
merger agreement and related matters;
- the conflicts under charters or bylaws;
- the required consents or approvals of the combination;
- the violations of any instruments or law;
- the documents and financial statements filed by Excalibur with the
Securities and Exchange Commission and the accuracy of information
contained in them;
- the filing of the necessary proxy statements and registration statements
by Excalibur;
- the absence of defaults;
- the absence of undisclosed liabilities for Excalibur;
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- the absence of material adverse events or changes to Excalibur or the
assets to be contributed by Intel;
- taxes and tax returns of Excalibur;
- intellectual property;
- litigation;
- environmental matters and hazardous materials of Excalibur;
- employee benefit plans of Excalibur;
- compliance with laws;
- the accuracy of information supplied by Excalibur and Intel in connection
with this proxy statement/prospectus;
- labor matters of Excalibur;
- insurance of Excalibur;
- no unlawful business practices of Excalibur;
- product warranties;
- suppliers and customers;
- vote required of Excalibur stockholders;
- opinions of the financial advisor for Excalibur;
- broker's fees; and
- the inapplicability to the combination of certain provisions of Delaware
law.
MATERIAL COVENANTS
The contribution and merger agreement includes a number of covenants, most
of which provide parameters within which Excalibur will operate its business and
Intel will conduct its business related to the assets it will contribute to
Newco until the combination closes.
Conduct of Business of Excalibur
From the date of the contribution and merger agreement until the closing of
the combination Excalibur will:
- continue to operate its business according to its customary course of
business; and
- use reasonable efforts to preserve its business organization, management
team and business relationships.
Additional Covenants
The contribution and merger agreement also provides that, from the date of
the contribution and merger agreement until the closing of the combination,
Excalibur will not, without the prior written consent of Intel:
- amend its certificate of incorporation or bylaws;
- issue or sell any stock or securities convertible into shares of its
stock, or any subscriptions, rights, warrants or options, subject to some
exceptions;
- except as required under Excalibur's certificate of designation for its
outstanding preferred stock, declare or pay dividends on or make
distributions on any of its stock or make other changes in its
capitalization;
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- adopt a plan of liquidation, dissolution or merger other than the
combination;
- alter the structure of any subsidiary;
- incur any long-term or short-term debt or issue any debt securities other
than borrowings under existing lines of credit in the ordinary course of
business;
- enter into or terminate any compensation or benefit plan;
- increase the compensation or fringe benefits of officers or employees,
other than increases to non-officer employees consistent with past
practices and intended to incentivize employees;
- grant any severance pay or termination pay to any officer, director,
employee or consultant subject to certain exceptions;
- accelerate the vesting of any stock option as a result of the combination
or any other change of control event affecting Excalibur or otherwise;
- sell, lease, license or otherwise dispose of material assets outside the
ordinary course of business;
- make any material change in its accounting policies;
- revalue in any material respect any of its assets, including the writing
down of inventory or writing-off notes or accounts receivable other than
in the ordinary course of business consistent with past practice or as
required by generally accepting accounting principles;
- make any material acquisitions;
- enter into or amend any agreement or contract that would be material to
Excalibur and its subsidiaries taken as a whole;
- authorize or make capital expenditures in excess of $250,000 individually
or $1 million in the aggregate;
- make or rescind any material tax elections, settle any tax claims, fail
to file any tax returns or fail to pay any taxes or other material debts;
- settle any litigation relating to the combination or, that would require
payment over $250,000 or, that would be otherwise material to Excalibur
or that relates to any intellectual property;
- take any action that would alter the tax treatment of the combination; or
- take, or agree in writing to take, any of the actions described above.
The contribution and merger agreement also provides that, from the date of
the contribution and merger agreement until the closing of the combination,
Intel will not, without the prior written consent of Excalibur:
- mortgage or pledge any material asset included in the contributed assets
or create a material lien on these assets;
- sell, lease, license or otherwise dispose of a material portion of the
contributed assets outside the ordinary course of business;
- make any material change in its accounting policies used by any business
unit or division that comprises a part of the contributed assets;
- revalue in any material respect any of the contributed assets, including
the writing down of inventory or writing-off notes or accounts receivable
other than in the ordinary course of business consistent with past
practice or as required by generally accepting accounting principles;
- enter into or amend any agreement or contract that would be material to
the contributed assets;
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- authorize or make capital expenditures with respect to the contributed
assets in excess of $250,000 individually or $1 million in the aggregate,
except to the extent the expenditure would not have a material adverse
effect on the assets;
- permit any insurance policy covering the contributed assets to expire, be
canceled or terminated unless it obtains a substitute policy acceptable
to Excalibur;
- settle any litigation relating to the combination that would be material
to the contributed assets or that relates to any intellectual property
included in the contributed assets; or
- take, or agree in writing to take, any of the actions described above.
No Solicitation
From the date of the contribution and merger agreement until the closing of
the combination, we have agreed not to, directly or indirectly continue,
encourage, solicit, participate in or initiate discussions or negotiations with
or provide any information to any person or group (other than Intel or any
designees of Intel) concerning a "third party acquisition," as defined below.
A "third party acquisition" is any of the following:
- the acquisition of Excalibur by merger or otherwise by any person other
than Intel or any affiliate thereof;
- the acquisition by a third party of 20% or more of the assets of
Excalibur and its subsidiaries, taken as a whole;
- the acquisition by a third party of 20% or more of the outstanding shares
of Excalibur;
- the adoption by Excalibur of a plan of liquidation or the declaration or
payment of an extraordinary dividend;
- the repurchase by Excalibur or any of its subsidiaries of more than 20%
of its outstanding shares; or
- the acquisition or any group of acquisitions by Excalibur or any of its
subsidiaries by merger, purchase of stock or assets, joint venture or
otherwise of a direct or indirect ownership interest or investment in any
business or businesses whose annual revenues, net income or assets is
equal or greater than 20% of the annual revenues, net income or assets of
Excalibur.
However, if the Excalibur board determines in good faith, after consulting
with its outside legal counsel, that it is necessary to do so in order to comply
with its fiduciary duties to the stockholders under Delaware law, it may:
- furnish information to a third party making a third party acquisition
proposal that is similar to the information Excalibur provided Intel
prior to the execution of the contribution and merger agreement; and
- participate in the discussions and negotiations regarding the proposal or
offer.
In order for the Excalibur board to take the above actions in response to a
proposal for a third party acquisition:
- the proposal for the third party acquisition must be unsolicited;
- the board must determine, based on consultation with its financial
advisor, that the proposal is from a third party that is capable of
consummating a "superior proposal" as defined below; and
- the board may only take these actions for so long as the board determines
that its actions are likely to lead to a superior proposal.
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Excalibur is not prevented from taking and disclosing to its stockholders
its position with respect to a third party acquisition proposal in order to
comply with Rules 14d-9 and 14e-2 under the Securities Exchange Act of 1934.
A "superior proposal" for Excalibur under the contribution and merger
agreement means a bona fide proposal:
- to acquire for consideration consisting solely of cash and/or securities,
all of the outstanding shares of Excalibur, all or substantially all of
the assets, of Excalibur, or newly issued securities of Excalibur or its
successor representing at least 60% of the equity of Excalibur or its
successor after giving effect to the issuance of the securities;
- that is fully-financed and contains terms that a majority of the
Excalibur board determines in good faith, based on the written advice of
its financial advisor, to be more favorable to the Excalibur stockholders
than the combination;
- that a majority of the Excalibur board determines in good faith, after
consulting with its financial advisor, to be reasonably capable of being
completed taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal;
- that does not contain a "right of first refusal" or "right of first
offer" with respect to any counter-proposal that Intel might make; and
- that does not contain any financing or "due diligence" condition.
Under the contribution and merger agreement, the Excalibur board may not
withdraw or modify its recommendation of the combination unless a majority of
the board members determine in good faith, after consulting with outside legal
counsel, that they would be required to do so in order to comply with their
fiduciary duties to the Excalibur stockholders under Delaware law. In this case,
the board may withdraw its recommendation of the combination or approve or
recommend a superior proposal, but only after the occurrence of the following
events:
- providing written notice to Intel advising Intel that the board has
received a superior proposal, specifying the material terms and
conditions of the superior proposal and identifying the person or group
making the superior proposal, and
- if Intel does not, within five business days after Intel's receipt of
Excalibur's notice, make an offer that a majority of the board members
determine in good faith, after consultation with its financial advisors,
to be at least as favorable to Excalibur's stockholders as the superior
proposal.
In any event, Excalibur shall not be entitled to enter into any agreement
with respect to a superior proposal until it terminates the contribution and
merger agreement and pays Intel the termination fees and all other amounts
required under the agreement.
Stockholders' Meetings
We agreed to call a meeting of our stockholders to be held as promptly as
practicable to vote on the combination. Subject to the discussion above under
"-- No Solicitation," we agreed to recommend that our stockholders adopt and
approve the combination and the Newco stock option plan.
Director and Officer Indemnification
After the closing of the combination, Newco will indemnify the present and
former directors and officers of Excalibur. The directors and officers will be
indemnified against costs or expenses (including attorneys' fees), liabilities
or amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation pertaining to any matter existing at or prior to the
closing of the combination. The officers and directors will be indemnified
whether the claim is asserted or claimed prior to, at or after the closing of
the combination. The indemnification will be to the fullest extent required or
permitted under Delaware law. We will also be obligated to advance expenses as
incurred to the fullest extent permitted.
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For six years after the closing of the combination, Newco will, or will
cause Excalibur to, maintain, to the extent available in the market, a
directors' and officers' liability insurance policy covering those persons who
are covered as of the date of the contribution and merger agreement by our
directors' and officers' liability insurance policy. The coverage will be at
least as favorable as our existing coverage. However, Newco and Excalibur will
not be required to spend over three times the annual premium paid by us for
coverage. If the premium would at any time exceed three times the current
premium, then Newco or Excalibur will maintain insurance policies which provide
the maximum coverage available at an annual premium equal to three times the
current premium of Excalibur.
Newco is required to maintain directors' and officers' liability insurance
covering its directors and officers on terms and in amounts as are substantially
similar to those provided for in Excalibur's current directors' and officers'
liability insurance policies. This requirement will last until the sixth
anniversary of the closing of the combination or sooner if Intel beneficially
owns less than 20% of the outstanding Newco Class A and Class B common stock
considered as a single class.
Employee Benefits
Newco will assume and honor and make required payments when due under all
benefit plans maintained or contributed to by Excalibur that are applicable to
any employee, director or stockholder of Excalibur or any subsidiary, whether
current or former, or their beneficiaries. However, Newco may amend or terminate
any Excalibur benefit plan according to its terms.
For any welfare plans in which Excalibur or Intel employees are eligible to
participate after the closing of the combination, Newco will:
- waive all limitations about preexisting conditions exclusions and waiting
periods for participation and coverage requirements for these employees;
and
- provide each of these employees with credit for any co-payments and
deductibles paid prior to the closing of the combination in satisfying
any applicable deductible or out-of-pocket requirements under any welfare
plan.
Intel shall be designated a "Predecessor Employer" for Excalibur's 401(k) plan
that Newco will assume.
Non-Disclosure Agreements with Excalibur Employees
Excalibur will take reasonable efforts to cause its employees to sign
invention assignment and non-disclosure agreements that are acceptable to Intel.
These agreements will be in effect as long as the employee works for Newco.
Takeover Statutes
If any law concerning corporate takeover is or becomes applicable to the
combination, Excalibur and the board of Excalibur shall promptly take any action
and grant any approvals necessary to allow the combination to be completed.
Stock Options
Excalibur will take any required action that:
- is necessary for Newco to assume options to purchase Excalibur common
stock that will become options to purchase Newco stock as a result of the
combination;
- prevents the voluntary acceleration of the vesting or exercisability of
any options to purchase Excalibur common stock granted after April 30,
2000; or
- prevents the transactions contemplated by the contribution and merger
agreement from causing any Excalibur stock option to be exchanged for
cash, converted into cash or the right to receive a cash payment or
otherwise be cashed out.
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We have agreed that grants of Excalibur options after the date of the
contribution and merger agreement to new employees or in connection with the
offer of new employment with existing employees will:
- not include or be subject to any provisions that accelerate vesting or
exercisability because of the combination;
- not be greater than those grants made to employees of a similar grade,
consistent with past practices; and
- not have an exercise price below the fair market value of the Excalibur
common stock on the date of grant.
Prior to the closing of the combination, Excalibur cannot grant options to any
one new employee to purchase in excess of 25,000 shares of Excalibur common
stock unless approved by Intel.
Nasdaq
Newco has filed an initial listing application with the Nasdaq National
Market relating to the shares of the Newco Class A common stock to be issued in
connection with the combination. Newco will use reasonable efforts to cause
these shares to be listed, upon official notice of issuance, prior to the
closing of the combination. Newco, for as long as it satisfies the applicable
listing requirements of Nasdaq, or any other national securities exchange on
which the capital stock of Newco is traded, shall use commercially reasonable
efforts to cause the Newco Class A common stock to be listed on Nasdaq, or any
other national securities exchange. However, Newco is not prohibited from taking
any action or entering into any transaction that would cause Newco, or its
capital stock, to fail to satisfy any of these requirements.
Registration under the Securities Exchange Act of 1934
Newco has filed a registration statement on Form 8-A to register the Newco
Class A common stock under the Exchange Act and will use reasonable efforts to
cause this registration statement to be declared effective prior to the closing
of the combination.
Executive Officers and Board of Directors of Newco
See "Directors and Management of Newco Following the
Combination -- Management and Executive officers of Newco" and "-- Directors."
Tax Matters
Excalibur and Newco will not take any action that would cause the
combination to become a taxable transaction.
Incurrence of Debt
Newco will not, during the year after the closing of the combination,
directly or indirectly incur any debt in excess of $500 million in the
aggregate.
Subcontract
Intel will use Newco as the subcontract provider of services under a
software and license agreement between Intel and Quokka Sports, Inc. The
services were previously provided by the Enhanced Video Services group of
Intel's Interactive Media Services division. Intel and Newco will agree in good
faith to the terms of such subcontract. The terms of the subcontract will be
customary for subcontracts and projects of this type and will be comparable to
similar subcontracts entered into by Intel with others.
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Retention Bonuses
Intel will pay to Newco the aggregate amount required to fund retention
bonuses for each of the employees in Intel's Interactive Media Services division
who become Newco employees in amounts previously agreed to by Newco and Intel.
Intel will make this payment within five days of receiving written confirmation
from Newco of those former Intel employees that remain employed by Newco on
April 30, 2001. Newco will pay those retained employees within five days of
receiving the retention bonus funds from Intel.
Secondment
In order to assist with the transition of Intel's Interactive Media
Services division to Newco, Intel will second to Newco a number of employees in
Intel's Interactive Media Services division who do not become Newco employees on
the closing of the combination. The secondment will last for up to 12 months
from the closing of the combination. The number of seconded Intel employees will
be limited to that number of employees, which when added to the number of
employees in Intel's Interactive Media Services division who become Newco
employees, satisfies the condition to closing contained in the merger and
contribution agreement relating to the minimum number of IMS employees that
shall become employees of Newco or seconded by Newco. See "The Merger and
Contribution and Related Agreements -- Conditions to Consummation of the
Combination." Newco will reimburse Intel for all amounts payable by Intel for
each seconded employee up to the amount of aggregate compensation Newco would
have paid to the seconded employee if the seconded employee were an employee of
Newco during the secondment period. The amount which Newco would have paid will
be based on compensation paid by Newco to similarly situated former Intel
employees.
Sublease
Intel will sublease to Newco its sales office in Santa Clara, California
previously agreed to by Intel and Newco on terms and conditions to be agreed by
Intel and Newco.
Other Covenants
Under the contribution and merger agreement, each of Excalibur and Intel
has also agreed to:
- file with the SEC this proxy statement/prospectus and the registration
statement;
- do all things necessary and proper under the law to complete the
combination;
- cooperate with each other in preparation of any filings made with
governmental entities in connection with the combination;
- give the other party access to all its employees, properties, books,
contracts, commitments and records, and to furnish related information
reasonably requested by the other party;
- provide the other party with unaudited consolidated balance sheets or
management accounting reports monthly;
- consult with the other party, and use reasonable efforts to agree upon
press releases or other public statements concerning the combination;
- give prompt notice to the other party of, and use reasonable efforts to
cure, any circumstance which causes a breach of any representation,
warranty, covenant or agreement;
- make any necessary additions or modifications to the disclosure schedules
of the contribution and merger agreement;
- work together to develop procedures to protect the intellectual property
rights of Newco and Excalibur and to protect the confidential information
related to this intellectual property; and
- cooperate to minimize any sales or similar taxes imposed upon Intel's
contribution of assets to Newco.
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CONDITIONS TO CONSUMMATION OF THE COMBINATION
The obligations of Excalibur and Intel to effect the combination do not
arise until the following conditions have been satisfied or waived:
- approval of the combination by the Excalibur stockholders;
- no government entity or regulatory body action which has the effect of
making the combination illegal or otherwise prohibits the combination;
- receipt of approvals and completion of filings with government entities
or regulatory bodies necessary to complete the combination;
- this proxy statement/prospectus has been cleared by the SEC and is not
subject to any stop order;
- effectiveness of the registration statement which this proxy
statement/prospectus forms a part;
- receipt of all necessary state securities laws permits or qualifications;
- expiration or termination of any applicable antitrust waiting period;
- the shares of Newco Class A common stock have been registered under Form
8-A of the Exchange Act, and this registration will have been declared
effective and not subject to any stop order;
- the shares of Newco Class A common stock to be issued in the combination
will have been approved for listing on the Nasdaq National Market;
- Newco and Intel have entered into licensing agreements related to the
contributed assets;
- Newco has adopted the amended and restated certificate of incorporation
and bylaws as set forth in the contribution and merger agreement;
- Newco has adopted the Newco 2000 stock option plan;
- Newco has adopted a standard director and officer indemnification
agreement and obtained a directors' and officers' liability insurance
policy; and
- Newco has granted, under the Newco stock option plan, options to purchase
shares of Newco Class A common stock to employees of Intel and certain
employees of Excalibur, with an exercise price equal to the greater of
(i) $32.16 and (ii) 25% of the average of the closing prices of Excalibur
common stock as reported on the Nasdaq Stock Market for the five trading
days immediately preceding the consummation of the combination; except
that if the average of the closing prices of Excalibur common stock for
the five trading days immediately preceding the consummation of the
combination is less than $32.16, then the exercise price for these
options shall be the average of the closing prices of the Excalibur
common stock for the five trading days immediately preceding the
consummation of the combination.
In addition to the obligations described above, the obligation of Excalibur
to complete the combination is subject to the satisfaction or waiver of the
following conditions:
- the representations and warranties of Intel in the contribution and
merger agreement will be true and correct as of the date of the
contribution and merger agreement and as of the closing of the
combination, except for inaccuracies which, have not had and are not
likely to have a material adverse effect on the contributed assets;
- Intel will have materially performed all obligations required to be
performed by it under the contribution and merger agreement at or prior
to the closing of the combination unless these breaches have not and are
not likely to have a material adverse effect on the contributed assets;
- 70% of the employees of Intel named on a schedule to the contribution and
merger agreement and 50% of all other employees who are currently working
in Intel's Interactive Media Services division have
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indicated their intent to become employed by Newco or shall have been seconded
to Newco by Intel, as long as, in any case, at least 40% of these other IMS
employees become employees of Newco;
- Intel has transferred the contributed assets to Newco;
- from the date of the contribution and merger agreement through the
closing of the combination, there shall not have occurred a material
adverse effect on the contributed assets; and
- in connection with the compliance by Newco with any applicable law or
obtaining any necessary consent from a governmental agency, Newco shall
not be required to sell any assets or business, and Newco shall not be
prohibited from owning any material portion of Excalibur's business or
assets or the assets contributed by Intel.
Similarly, the obligations of Intel to complete the combination are subject
to the satisfaction or waiver of the following conditions:
- the representations and warranties of Newco, Excalibur and Transitory in
the contribution and merger agreement will be true and correct as of the
date of the contribution and merger agreement and as of the closing of
the combination, except for inaccuracies which, have not had and are not
likely to have a material adverse effect on Excalibur;
- Excalibur, Newco and Transitory will have materially performed all
obligations required to be performed by them under the contribution and
merger agreement at or prior to the closing of the combination unless
these breaches have not and are not likely to have a material adverse
effect on Excalibur;
- from the date of the contribution and merger agreement through the
closing of the combination, there shall not have occurred a material
adverse effect on Excalibur;
- in connection with the compliance by Intel with any applicable law or
obtaining any necessary consent form a governmental agency, Intel shall
not be required to sell any assets or business, and Intel shall not be
prohibited from owning any material portion of Excalibur's business or
assets;
- 70% of the employees of Excalibur named on a schedule to the contribution
and merger agreement and 50% of all other Excalibur employees have
indicated their intent to become employed by Newco;
- Excalibur shall have entered into invention assignment and non-disclosure
agreements with the nine people named on a schedule to the contribution
and merger agreement;
- nothing has happened, in the reasonable opinion of Intel, that would
create a significant risk that the transaction would become taxable; and
- Intel and Newco have entered into a registration rights agreement.
TERMINATION; TERMINATION FEES AND EXPENSES
The contribution and merger agreement may be terminated at any time before
the closing of the combination. This termination may occur before or after
approval of the combination by the stockholders of Excalibur in the following
manner:
- by mutual written consent of Intel and Excalibur;
- by either Intel or Excalibur if a court of competent jurisdiction or
other governmental entity has issued a nonappealable final order or taken
any other nonappealable final action permanently restraining, enjoining
or prohibiting the combination; or
- by either Excalibur or Intel if the combination has not been consummated
by December 31, 2000; however, the right to terminate under this clause
is not available to a party whose failure to fulfill an obligation under
the contribution and merger agreement is the cause of the failure of the
combination to occur.
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- by Excalibur, if any of the following occurs:
-- Intel breaches its representations and warranties or its
representations and warranties become untrue, in either case resulting
in a material adverse effect on the contributed assets, so long as
Excalibur, Newco and Transitory do not materially breach any of their
obligations;
-- Intel breaches its covenants in a manner that causes or would
reasonably be expected to cause a material adverse effect on the
contributed assets or Intel's ability to complete the combination, and
Intel does not cure this breach within ten business days so long as
Excalibur, Newco and Transitory do not materially breach any of their
obligations;
-- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger
agreement and combination;
-- the board of Excalibur receives a superior proposal to the combination
and pays the termination fee to Intel as described below; or
-- there occurs a material adverse effect on the assets to be contributed
by Intel to Newco.
- by Intel, if any of the following occurs:
-- Excalibur, Newco or Transitory breaches its representations and
warranties or its representations and warranties become untrue, in
either case resulting in a material adverse effect on Excalibur, so
long as Intel does not materially breach any of its obligations;
-- Excalibur, Newco or Transitory breaches its covenants in a manner that
causes or would reasonably be expected to cause a material adverse
effect on Excalibur or Excalibur's ability to complete the combination
and Excalibur, Newco or Transitory does not cure this breach within ten
business days so long as Intel does not breach any of its obligations;
-- the board of Excalibur recommends to its stockholders a superior
proposal to the combination;
-- the board of Excalibur withdraws or adversely modifies its approval or
recommendation of the combination;
-- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger
agreement and combination; or
-- there occurs a material adverse effect on Excalibur.
In the event of the termination of the contribution and merger agreement by
Intel or Excalibur as provided above, the contribution and merger agreement will
become void. In that case, there will be no liability or obligation, except as
described below, on the part of Intel, Excalibur, Newco or Transitory, or their
respective officers, directors, stockholders or affiliates.
There are exceptions to the limitation of liability with respect to
termination fees and expenses, and termination will not limit liability for a
willful breach of the merger agreement.
Except as described below, whether or not the combination is consummated,
all fees, costs and expenses incurred in connection with the combination will be
paid by the party incurring the expenses.
Termination Fee and Expenses
Excalibur will pay to Intel, as liquidated damages and not as a penalty, a
termination fee of $20 million immediately upon the occurrence of any of the
following events:
- the Excalibur board receives a superior proposal from a third party,
complies with the requirements of the contribution and merger agreement
for responding to a superior proposal and terminates the contribution and
merger agreement as a result of entering into an agreement for the
superior proposal;
- the board of directors of Excalibur recommends to the Excalibur
stockholders a superior proposal to the combination;
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- the board of directors of Excalibur withdraws or adversely modifies its
approval or recommendation of the combination;
- Excalibur, Newco or Transitory breaches its representations and
warranties or its representations and warranties become untrue, in either
case resulting in a material adverse effect on Excalibur, so long as
Intel does not materially breach any of its obligations and (i) there is
outstanding or announced an offer by a third party for a third party
acquisition and the third party acquisition occurs or (ii) there is no
similar offer outstanding or announced, but Excalibur enters into an
agreement for a third party acquisition within nine months after the
termination of the contribution and merger agreement;
- Excalibur, Newco or Transitory breaches its covenants in a manner that
causes or would reasonably be expected to cause a material adverse effect
on Excalibur or Excalibur's ability to complete the combination and
Excalibur, Newco or Transitory does not cure this breach within ten
business days so long as Intel does not materially breach any of its
obligations and (i) there is outstanding or announced an offer by a third
party for a third party acquisition and the third party acquisition
occurs or (ii) there is no similar offer outstanding or announced, but
Excalibur enters into an agreement for a third party acquisition within
nine months after the termination of the contribution and merger
agreement;
- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger agreement
and combination and (i) at the time of the meeting there is outstanding
an offer by a third party for a third party acquisition and (ii)
Excalibur enters into an agreement for a third party acquisition within
nine months after the termination of the contribution and merger
agreement.
If the combination is terminated because of any of the following events,
Excalibur shall also pay to Intel $2.5 million as reimbursement for costs, fees
and expenses:
- Excalibur convenes the annual meeting and fails to obtain the necessary
vote of its stockholders to approve the contribution and merger agreement
and combination;
- the Excalibur board receives a superior proposal from a third party,
complies with the requirements of the contribution and merger agreement
for responding to a superior proposal, terminates the contribution and
merger agreement as a result of entering into an agreement for the
superior proposal and pays the termination fee to Intel;
- Excalibur, Newco or Transitory breaches its representations and
warranties or its representations and warranties have become untrue, in
either case resulting in a material adverse effect on Excalibur, so long
as Intel does not materially breach any of its obligations;
- Excalibur, Newco or Transitory breaches its covenants in a manner that
causes or would reasonably be expected to cause a material adverse effect
on Excalibur or Excalibur's ability to complete the combination and
Excalibur, Newco or Transitory does not cure this breach within ten
business days so long as Intel does not materially breach any of its
obligations;
- the board of directors of Excalibur recommends to Excalibur stockholders
a superior proposal to the combination; or
- the board of directors of Excalibur withdraws or adversely modifies its
approval or recommendation.
This reimbursement payment shall be in addition to the termination fee
which may otherwise be payable by Excalibur to Intel.
If the contribution and merger agreement is terminated on account of either
of the following events, Intel shall pay to Excalibur $2.5 million as
reimbursement for costs, fees and expenses.
- Intel breaches its representations and warranties or its representations
and warranties become untrue, in either case resulting in a material
adverse effect on the assets to be contributed to Newco, so long as
Excalibur, Newco and Transitory do not materially breach any of their
obligations; or
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- Intel breaches its covenants in a manner that causes or would reasonably
be expected to cause a material adverse effect on the contributed assets
or Intel's ability to complete the combination, and Intel does not cure
this breach within ten business days so long as Excalibur, Newco and
Transitory do not materially breach any of their obligations.
AMENDMENT
The contribution and merger agreement may be amended by Excalibur, Intel,
Newco and Transitory at any time before or after approval of the combination by
the stockholders of Excalibur. However, after stockholder approval, the parties
may not amend the contribution and merger agreement if the amendment requires
the approval of the Excalibur stockholders unless they obtain stockholder
approval of the amendment. Amendments must be in a written document signed by
each of the parties.
VOTING AGREEMENTS
Allen & Company Incorporated and each of the directors and executive
officers of Excalibur, who together owned approximately 31% of the Excalibur
common stock outstanding on the record date, have executed a voting agreement
and irrevocable proxy with Intel.
The stockholders signing the voting agreement have agreed to vote their
Excalibur shares, including shares acquired by them following the date of the
agreement, in favor of approval of the contribution and merger agreement and the
combination and against each of the following actions:
- any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or
agreement of Excalibur, Newco or Transitory under the contribution and
merger agreement;
- any third party acquisition of Excalibur;
- any change in a majority of the individuals who, as of the date of the
agreement, constitute the board of directors of Excalibur;
- any extraordinary corporate transaction, such as a merger, consolidation
or other business combination involving Excalibur or any of its
subsidiaries and any third party;
- a sale, lease, transfer or disposition of any assets of Excalibur's or
any of its subsidiaries' business outside the ordinary course of
business, or any assets which are material to its business whether or not
in the ordinary course of business, or a reorganization,
recapitalization, dissolution or liquidation of Excalibur or any of its
subsidiaries;
- any material licensing, distribution or reseller agreement or arrangement
involving Excalibur;
- any change in the present capitalization of Excalibur or any amendment of
the certificate of incorporation or bylaws of Excalibur or its
subsidiaries;
- any other material change in Excalibur's corporate structure or affecting
its business; or
- any other action which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or materially adversely affect
the combination or any of the transactions contemplated by the
contribution and merger agreement.
In addition, these stockholders have granted to Intel an irrevocable proxy
to vote their Excalibur shares as specified above, and they have agreed not to
transfer any of their shares unless the transferee becomes similarly obligated.
The voting agreements will continue in effect until the earliest of:
- the termination of the contribution and merger agreement in accordance
with its terms;
- the closing of the combination; and
- December 31, 2000.
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REGISTRATION RIGHTS AGREEMENT
The contribution and merger agreement provides that as a condition to the
combination, Newco will enter into a registration rights agreement with Intel.
The form of registration rights agreement provides that so long as Intel owns at
least 20% of the outstanding common equity of Newco, Intel has the right to
demand that Newco file a registration statement under the Securities Act of 1933
with respect to Intel's shares of Newco Class A common stock, as well as any
Class A common stock issuable upon conversion of the Newco Class B common stock
to be issued to Intel. Intel has the right to demand up to a maximum of two of
these registrations, and Newco is required to use its best efforts to effect
these registrations. If Intel owns less than 5% of the outstanding common
equity, these demand registration rights may also be exercised by Intel's
permitted assignees, which include Intel's wholly-owned subsidiaries and
transferees acquiring 5% or more of Newco's outstanding Class A common stock.
Intel or the permitted assignees are not entitled to demand a registration prior
to one year from the closing of the combination unless Newco incurs more than
$500 million of debt. During the three month period following the first
anniversary of the closing of the combination, Intel may exercise the demand
registration rights with respect to a maximum of 50% of the Class A common stock
received by Intel in the combination, including any Class A common stock
issuable upon conversion of the Class B common stock received by Intel in the
combination. Thereafter, Intel may exercise the demand registration rights with
respect to all of its shares of Class A common stock, including any Class A
common stock issuable upon conversion of the Class B common stock.
Intel or Intel's permitted assignees are also entitled to demand an
unlimited number of times that Newco register the shares of Class A common stock
under the Securities Act on Form S-3 or any similar short form registration
statement then available to Newco, provided the aggregate offering price of the
shares registered exceeds $1,000,000. Intel or the permitted assignees are not
entitled to demand an S-3 registration prior to one year from the closing of the
combination unless Newco incurs more than $500 million of debt. During the three
month period following the first anniversary of the closing of the combination,
Intel or the permitted assignees may exercise the S-3 demand registration rights
with respect to a maximum of 50% of the Class A Common Stock received by Intel
in the combination, including any Class A common stock issuable upon conversion
of the Class B common stock received by Intel in the combination. Thereafter,
Intel or the permitted assignees may exercise the S-3 demand registration rights
with respect to all of its shares of Class A common stock, including any Class A
common stock issuable upon conversion of the Class B common stock.
In addition to the demand and S-3 registration rights described above, the
registration rights agreement also provides Intel with piggyback registration
rights which allow Intel to include its shares on registrations initiated by
Newco. These registration rights are subject to various conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares that may be included in the offering. Newco is generally
required to bear all of the expenses of these registrations, except underwriting
discounts and selling commissions. The registration rights granted to Intel and
its permitted assignees terminate after seven years, except that they will
terminate sooner with respect to Intel or any assignee if all of the shares held
by Intel or an assignee may be sold under Rule 144 under the Securities Act in
one transaction without exceeding the volume limitations of Rule 144. Under the
registration rights agreement, Newco may not grant registration rights to other
parties without the consent of Intel unless the rights which are granted to
other parties are subordinate to Intel's rights. Registration of any of Intel's
shares will result in these shares becoming freely tradable without restriction
under the Securities Act immediately upon the effectiveness of the registration
with the SEC.
LICENSE AGREEMENTS
The contribution and merger agreement also provides that as a condition to
the combination, Newco will enter into two separate intellectual property
agreements with Intel at the closing of the combination. The IP license
contribution agreement provides for a non-exclusive license by Intel to Newco of
intellectual property retained by Intel. The transferred IP license agreement
provides for a license by Newco to Intel of intellectual property to be
transferred to Newco as part of Intel's contribution of assets upon the closing
of the combination.
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IP License Contribution Agreement from Intel to Newco
The combination and merger agreement provides that Intel will license to
Newco, on a non-exclusive basis, certain patents and other intellectual property
owned or controlled by Intel for the purpose of Newco's making, selling and
otherwise commercially exploiting specified products or providing related
services on the terms set forth in the IP license contribution agreement. Under
the IP license contribution agreement, Intel will grant to Newco a
non-exclusive, royalty free, fully paid and worldwide license to the six patents
and 29 patent applications owned or controlled by Intel listed on a schedule to
the IP license contribution agreement. Under this license, Newco will have the
right:
- to make, have made, use and import, and directly or indirectly sell,
offer to sell and otherwise dispose of, in any manner and to any person
or entity, any software product that incorporates licensed intellectual
property that is developed by or on behalf of Newco;
- to perform related services; and
- to make, use and/or import any equipment and practice any method or
process for use in the manufacture of any licensed products or the
provision of related services.
Intel will also grant to Newco a non-exclusive, royalty free, fully paid
and worldwide license under the licensed intellectual property to use, copy,
display, perform, create derivative works and modifications, distribute or
otherwise dispose of or commercially exploit in any manner and to any person or
entity any software product that is developed by or on behalf of Newco that
incorporates or utilizes any copyrightable subject matter or any derivatives
thereof or any licensed trade secrets and to provide any related services.
The license granted under the IP license contribution agreement only covers
the products of Newco. This license does not cover foundry activities that Newco
may undertake on behalf of third parties.
Without Intel's prior written consent, which may be given or withheld in
Intel's sole discretion, Newco shall not sublicense, distribute or otherwise
make available any source code of any of the licensed software to any person
(including any entity that is manufacturing products for Newco through the
exercise of Newco's "have made" rights) except in the following instances:
- to a wholly-owned subsidiary that has agreed in writing to be bound by
all of the terms of the agreement; and
- in the case of source code of licensed software consisting of application
program interfaces, Newco may grant a sublicense to any OEM, systems
integrator or other third party reseller that is integrating object code
of licensed software in a hardware device, solely to the extent necessary
for that object code to be integrated in that device.
However, Newco may retain independent contractors to develop, improve,
maintain and support licensed products and licensed services on behalf of and
for the benefit of Newco, including in source code form.
Without Intel's prior written consent, which may be given or withheld in
Intel's sole discretion, Newco may not sublicense its license under the licensed
patents to use and sell licensed products, perform services related to the
licensed products, make and use any equipment or practice any method or process
for use in the manufacture of any licensed products or the provision of any
licensed services. However, Newco may sublicense this license without Intel's
prior written consent to any wholly-owned subsidiary that agrees in writing to
be bound by the terms of the IP license contribution agreement.
Without Intel's prior written consent, which may be given or withheld in
Intel's sole discretion, Newco may not sublicense its license under the licensed
intellectual property to use, modify, distribute or otherwise commercially
exploit any licensed product that incorporates any copyrightable subject matter
or uses any licensed trade secrets or provide any related licensed services.
However, Newco may sublicense this license without Intel's prior written consent
in accordance with the above-described provisions that are applicable to
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source code of licensed software and to the granting of sublicenses under the
license of licensed patents, and to:
- any wholly-owned subsidiary that agrees in writing to be bound by the
terms of the IP license contribution agreement; or
- in the case of object code of any licensed software or any derivatives
thereof, as and to the extent necessary to permit any Newco customer,
including any distributor, OEM, systems integrator or other third party
reseller, to sublicense, resell, integrate or other otherwise distribute
or commercially exploit any of this object code.
Neither Newco nor Intel may ever sublicense, distribute or otherwise make
available to any third party in any form certain specified technology of Intel.
Each of Intel and Newco agree not to assert any patent that is related to
any licensed patent and that is owned or exclusively licensed by it against the
other party or the other party's subsidiaries or their customers, distributors,
agents and contractors based on an allegation that the manufacture, use, import,
offer for sale or sale of any licensed products by the other party or any of its
subsidiaries or any process or method employed in the manufacture, testing,
distribution or use thereof by the other party or any of its subsidiaries
constitutes an infringement, contributory infringement of, or an inducement to
infringe, any of the related patents owned by it.
Newco agrees not to assert any patent owned or exclusively licensed by it
against Intel or Intel's subsidiaries or their customers, distributors and
contractors based on an allegation that the manufacture, use, import, offer for
sale or sale of any chipsets, integrated circuits or processors by Intel or any
of its subsidiaries or the practice or utilization of any process or method
employed in the manufacture, testing, distribution or use of any chipsets,
integrated circuits or processors by Intel or any of its subsidiaries
constitutes an infringement, contributory infringement of, or an inducement to
infringe, any patents owned or exclusively licensed by Newco.
Both of these covenants not to sue will survive any termination of the IP
license contribution agreement and remain in full force and effect until
mutually agreed otherwise by the parties.
Within ten days after the execution of the IP license contribution
agreement, Intel shall deliver possession to Newco of the source code and object
code associated with the current versions of the licensed software and copies of
technical documentation embodying licensed intellectual property, including
documentation, flow charts, diagrams and other related materials relating to the
licensed software and other licensed intellectual property, in the possession or
control of Intel. If any of these materials are not available to be transmitted
to Newco on the required date, copies of these materials shall be provided to
Newco within a reasonable time following that date.
Subject to the licenses granted by Intel to Newco, Intel will retain sole
and exclusive ownership of, and all right, title and interest in, all licensed
intellectual property and all enhancements, improvements, modifications or other
new developments conceived, created, acquired, or made by Intel after the date
of the IP license contribution agreement, including all related intellectual
property rights. Newco shall have no right, license or interest in those
improvements.
Newco will have and retain sole and exclusive ownership of, and all right,
title and interest in all enhancements, improvements, modifications or other new
developments conceived, created, acquired, or made by Newco after the date of
the IP license contribution agreement, and Intel shall have no right, license or
interest in those improvements.
Neither party will have any obligation to disclose or license to the other
party any improvements it makes to the licensed intellectual property after the
date of the IP license contribution agreement. No license of any of these
improvements shall be granted unless the parties mutually agree otherwise in
writing.
If Intel allows any of the licensed patents that are or have become issued
patents to lapse or become otherwise abandoned or forfeited, Intel will use
reasonable efforts to notify Newco of its intention to do so, and
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Newco shall have the right to assume control of, and to be transferred all right
to, the licensed patent at its own expense. Intel would then retain an
unrestricted, royalty-free, irrevocable, worldwide and non-exclusive license in
the patent.
The term of the IP license contribution agreement will begin on the date
that the combination closes. It will remain in effect in perpetuity unless Intel
terminates it upon written notice to Newco if Newco breaches any material term
or condition of the IP license contribution agreement and this breach is not
cured within 30 days after notice of the breach is given by Intel to Newco. The
license of any licensed patent will expire on its expiration, however.
If Intel terminates the IP license contribution agreement, Newco shall not
have any continuing rights under the agreement. Neither party will have any
right to any compensation at any time from the other party arising out of or by
reason of a termination, subject to any damages to which Intel is entitled by
reason of that breach. If the IP license contribution agreement is terminated
for any reason, Newco shall immediately:
- return to Intel all items of proprietary or confidential information
delivered by Intel to Newco, and
- discontinue the use of all licensed intellectual property.
Termination of the IP license contribution agreement for any reason will not
affect the validity of any valid sublicenses granted by Newco to its customers.
Any confidential information that Newco and Intel exchange in connection
with the IP license contribution agreement will be subject to the terms of an
Intel non-disclosure agreement which Intel and Newco will enter into at the same
time as they execute the IP license contribution agreement.
Transferred IP License Agreement from Newco to Intel
The combination and merger agreement provides that Newco will grant to
Intel a non-exclusive license under all of the patents, patent applications,
patent rights and other intellectual property assigned by Intel to Newco under
the combination and merger agreement on the terms set forth in the transferred
IP license agreement. Under the transferred IP license agreement, Newco will
grant to Intel a non-exclusive, royalty free, fully paid and worldwide license
to the three patents and seven patent applications to be owned by Newco upon the
closing of the combination listed on a schedule to the transferred IP license
agreement. Under this license, Intel will have the right to:
- make, have made, use and import, and directly or indirectly sell, offer
to sell and otherwise dispose of, in any manner and to any person or
entity, any software product that incorporates licensed intellectual
property that is developed by or on behalf of Intel;
- perform related services; and
- make, use and/or import any equipment and practice any method or process
for use in the manufacture of any licensed products or the provision of
related services.
Newco will also grant to Intel a non-exclusive, royalty free, fully paid
and worldwide license under the licensed intellectual property to use, copy,
display, perform, create derivative works and modifications, distribute or
otherwise dispose of or commercially exploit in any manner and to any person or
entity any software product that is developed by or on behalf of Intel and that
incorporates or utilizes any copyrightable subject matter or any derivatives
thereof or any licensed trade secrets and to provide any related services.
Without Newco's prior written consent, which may be given or withheld in
Newco's sole discretion, Intel may not sublicense, distribute or otherwise make
available any source code of any of the transferred software to any person
(including any entity that is manufacturing products for Intel through the
exercise of Intel's "have made" rights) except in the following instances:
- to a wholly-owned subsidiary that has agreed in writing to be bound by
all of the terms of the agreement; and
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- in the case of source code of transferred software consisting of
application program interfaces, Intel may grant a sublicense to any OEM,
systems integrator or other third party reseller that is integrating
object code of transferred software in a hardware device, solely to the
extent necessary for that object code to be integrated in that device.
However, Intel may retain independent contractors to develop, improve,
maintain and support licensed products and licensed services on behalf of and
for the benefit of Intel, including in source code form.
The license granted under the transferred IP license agreement only covers
the products of Intel. This license does not cover foundry activities that Intel
may undertake on behalf of third parties.
Without Newco's prior written consent, which may be given or withheld in
Newco's sole discretion, Intel may not sublicense its license under the licensed
patents to use and sell licensed products, perform services related to the
licensed products, make and use any equipment or practice any method or process
for use in the manufacture of any licensed products or the provision of any
licensed services. However, Intel may sublicense this license without Newco's
prior written consent to any wholly-owned subsidiary that agrees in writing to
be bound by the terms of the transferred IP license agreement.
Without Newco's prior written consent, which may be given or withheld in
Newco's sole discretion, Intel may not sublicense its license under the licensed
intellectual property to use, modify, distribute or otherwise commercially
exploit any licensed product that incorporates any copyrightable subject matter
or uses any licensed trade secrets or provide any related licensed services.
However, Intel may sublicense this license without Newco's prior written consent
in accordance with the above-described provisions that are applicable to source
code of licensed software and the granting of sublicenses under the license of
licensed patents, and to:
- any wholly-owned subsidiary that agrees in writing to be bound by the
terms of the transferred IP license agreement; or
- in the case of object code of any transferred software or any derivatives
thereof, as and to the extent necessary to permit any distributor, OEM,
systems integrator or other third party reseller, to sublicense, resell,
integrate or other otherwise distribute or commercially exploit any of
this object code.
Each of Newco and Intel agree not to assert any patent that is related to
any transferred patent that is owned by it against the other party or the other
party's subsidiaries or their customers, distributors, agents and contractors
based on an allegation that the manufacture, use, import, offer for sale or sale
of any licensed products by the other party or any of its subsidiaries or any
process or method employed in the manufacture, testing, distribution or use
thereof by the other party or any of its subsidiaries constitutes an
infringement, contributory infringement of, or an inducement to infringe, any of
the related patents owned by it.
This covenant not to sue will survive any termination of the transferred IP
license agreement and remain in full force and effect until mutually agreed
otherwise by the parties.
Intel shall retain tangible and electronic copies of all available source
code and object code associated with the software transferred to Newco in the
combination and copies of technical documentation embodying licensed
intellectual property, including documentation, flow charts, diagrams and other
related materials relating to the transferred software and other licensed
intellectual property, in the possession or control of Intel.
Subject to the licenses Newco granted to Intel, Newco will have and retain
sole and exclusive ownership of, and all right, title and interest in, all
intellectual property licensed to Intel and all enhancements, improvements,
modifications or other new developments conceived, created, acquired, or made by
Newco after the date of the transferred IP license agreement, including all
related intellectual property rights. Intel shall have no right, license or
interest in those improvements. Intel will have and retain sole and exclusive
ownership of, and all right, title and interest in all enhancements,
improvements, modifications or other new developments conceived, created,
acquired, or made by Intel after the after the date of the transferred IP
license agreement, and Newco shall have no right, license or interest in those
improvements.
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Neither party will have any obligation to disclose or license to the other
party any improvements it makes to the licensed intellectual property after the
date of the transferred IP license agreement. No license of any of these
improvements shall be granted unless the parties mutually agree otherwise in
writing.
If Newco allows any of the patents transferred by Intel in the combination
that are or have become issued patents to lapse or become otherwise abandoned or
forfeited, Newco will use reasonable efforts to notify Intel of its intention to
do so, and Intel shall have the right to assume control of, and to be
transferred all right to, the transferred patent at its own expense Newco would
then retain an unrestricted, royalty-free, irrevocable, worldwide and
non-exclusive license in the patent.
The term of the transferred IP license agreement will begin on the date
that the combination closes. It will remain in effect in perpetuity unless Newco
terminates it upon written notice to Intel if Intel breaches any material term
or condition of the IP license contribution agreement and this breach is not
cured within thirty days after notice of the breach is given by Newco to Intel.
The license of any transferred patent will expire on its expiration, however.
If Newco terminates the transferred IP license agreement, Intel shall not
have any continuing rights under the agreement. Neither party will have any
right to any compensation at any time from the other party arising out of or by
reason of this termination, subject to any damages to which Newco is entitled by
reason of that breach. If the transferred IP license agreement is terminated for
any reason, Intel shall immediately:
- return to Newco or destroy all items of proprietary or confidential
information of Newco retained by Intel; and
- discontinue the use of all licensed intellectual property.
Termination of the transferred IP license agreement for any reason will not
affect the validity of any valid sublicenses granted by Intel to its customers.
Any confidential information that Newco and Intel exchange in connection
with the transferred IP license agreement will be subject to the terms of an
Intel non-disclosure agreement which Newco and Intel will enter into at the same
time as they execute the transferred IP license agreement.
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COMPARISON OF STOCKHOLDERS' RIGHTS
The rights of Excalibur stockholders are currently governed by Delaware law
and the certificate of incorporation and bylaws of Excalibur. In accordance with
the contribution and merger agreement, at the closing of the combination, the
stockholders of Excalibur will become stockholders of Newco. Accordingly, upon
consummation of the combination, the rights of Excalibur stockholders who become
stockholders of Newco will be governed by Delaware corporate law and Newco's
amended and restated certificate of incorporation and bylaws. The following are
summaries of material differences between current rights of Excalibur
stockholders and those of Newco's stockholders following the combination.
The following discussions are not intended to be complete. You should also
refer to Delaware law, the Newco amended and restated certificate of
incorporation and the Newco bylaws. Copies of Newco's amended and restated
certificate of incorporation and bylaws as currently proposed, are attached to
this proxy statement/prospectus as Appendices D and E. Copies of the Excalibur
certificate of incorporation and bylaws will be sent to the holders of shares of
Excalibur common stock upon request. See "Where You Can Find More Information."
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Excalibur consists of 40 million shares of
common stock, par value $.01 per share, and one million shares of preferred
stock, par value $.01 per share, of which 49,587 shares have been designated as
"Cumulative Convertible Preferred Stock." The authorized capital stock of Newco
consists of 100 million shares of Class A common stock, par value $.01 per
share, 40 million shares of Class B common stock, par value $.01 per share, and
five million shares of preferred stock, par value $.01 per share, of which
49,587 shares have been designated as "Cumulative Convertible Preferred Stock."
The Newco Class B common stock is convertible into Newco Class A common stock as
described under "Description of Newco Capital Stock Following the Combination."
VOTING RIGHTS
Each outstanding share of Excalibur common stock is entitled to one vote,
and Excalibur's outstanding preferred stock has no voting rights. Each
outstanding share of Newco's Class A common stock is entitled to one vote, and
neither Newco's Class B common stock nor Newco's preferred stock has any voting
rights, except as may be required by Delaware law.
ALLOCATION OF CORPORATE OPPORTUNITIES BETWEEN NEWCO AND INTEL AND OTHER MATTERS
CONCERNING INTEL
Newco's amended and restated certificate of incorporation contains in
Article Tenth provisions which are meant to regulate, define and guide the
conduct of certain affairs of Newco which involve Intel and Intel's officers and
directors, including the allocation of corporate opportunities between Newco and
Intel. Contracts or other transactions which do not comply with these charter
procedures are not automatically void or in violation of law but shall be
governed by the remaining provisions of Newco's amended and restated certificate
of incorporation and bylaws, Delaware law and other applicable law.
Unless Intel otherwise agrees in writing, Intel has the right to do each of
the following:
- engage in the same or similar business activities or lines of business as
Newco;
- compete against Newco;
- do business with any potential or actual competitor, customer or supplier
of Newco; and
- employ or otherwise engage any officer or employee of Newco.
If Intel acquires knowledge of a potential transaction or other matter that
may be a corporate opportunity or otherwise of interest to Intel and Newco,
Intel has no duty to communicate or present the corporate opportunity to Newco
and shall not be liable to Newco or its stockholders for breach of any fiduciary
duty as a stockholder of Newco by reason of the fact that Intel pursues or
acquires the corporate opportunity for itself,
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directs the corporate opportunity to another person, or does not present the
corporate opportunity to Newco. Intel shall have no duty and shall not be liable
even if a director or officer of Newco (including, without limitation, any such
officer or director who is also a director, officer or employee of Intel)
becomes aware of the transaction or matter in his or her capacity as a director
or officer of Newco and the director or officer discloses the transaction or
matter to directors, officers, employees or other representatives of Intel, so
long as Intel also learns or develops the information independently.
Newco's amended and restated certificate of incorporation provides that the
following procedures apply when a director or officer of Newco who is also a
director, officer or employee of Intel acquires knowledge of a potential
transaction or matter that may be a corporate opportunity or otherwise of
interest to Newco and Intel:
- a corporate opportunity offered or disclosed to any person who is a
director but not an officer of Newco and who is also an officer or
employee (whether or not a director) of Intel shall belong to Intel,
unless the opportunity is expressly offered to the person primarily in
his or her capacity as a director of Newco, in which case the opportunity
shall belong to Newco;
- a corporate opportunity offered or disclosed to any person who is an
officer (whether or not a director) of Newco and who is also a director
but not an officer or employee of Intel shall belong to Newco, unless the
opportunity is expressly offered to the person primarily in his or her
capacity as a director of Intel, in which case the opportunity shall
belong to Intel; and
- a corporate opportunity offered or disclosed to any other person who is
either an officer of both Newco and Intel, or a director of both Newco
and Intel, shall belong to Intel if the opportunity is expressly offered
to the person primarily in his or her capacity as an officer or director
of Intel or to Newco if the opportunity is expressly offered to the
person primarily in his or her capacity as an officer or director of
Newco; otherwise, the opportunity shall belong to Intel.
Any corporate opportunity that belongs to Intel or to Newco pursuant to the
foregoing policy shall not be pursued by the other, or directed by the other to
another person, unless and until the party to whom the corporate opportunity
belongs determines not to pursue the opportunity. This prohibition shall cease
if the party to whom the corporate opportunity belongs does not pursue the
opportunity within a reasonable time or fails to do so diligently and in good
faith.
For purposes of the amended and restated certificate of incorporation,
corporate opportunities of Newco consist of business opportunities which meet
all of the following criteria:
- Newco is financially able to undertake them;
- they are, from their nature, in the line or lines of Newco's business as
described in Newco's periodic reports filed with the SEC and are of
practical advantage to Newco; and
- they are ones in which Newco has an interest or reasonable expectancy.
For purposes of the amended and restated certificate of incorporation,
corporate opportunities do not include any transaction or matter in which Newco
or Intel is permitted to participate pursuant to any agreement between Newco and
Intel that has been approved by a majority of the directors of Newco who are
disinterested.
Intel shall be deemed to have satisfied its duties under Delaware law if
any agreement, arrangement or transaction between Newco and Intel involves a
corporate opportunity and is approved in accordance with these charter
procedures. These provisions in Newco's amended and restated certificate of
incorporation relating to Intel apply so long as Intel owns at least 5% of the
outstanding Class A common stock, after giving effect to the conversion of all
convertible securities held by Intel. For purposes of Newco's amended and
restated certificate of incorporation, all references to Intel also include
entities in which Intel beneficially owns 50% or more of the voting stock, other
than Newco and any majority held subsidiary of Newco.
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TRANSACTIONS BETWEEN NEWCO AND RELATED PARTIES, INCLUDING INTEL
Newco's amended and restated certificate of incorporation contains in
Article Eleventh provisions which are meant to regulate and guide certain
contractual relations and other business relations of Newco which involve Intel,
Newco's officers and directors or their respective affiliates. These provisions
are meant to supplement and not to limit the provisions of Delaware law and the
other provisions of the amended and restated certificate of incorporation.
Contracts or business relations which do not comply with these charter
procedures are not automatically void or in violation of law but shall be
governed by the remaining provisions of Newco's amended and restated certificate
of incorporation and bylaws, Delaware law and other applicable law.
Newco's amended and restated certificate of incorporation provides that no
agreement, arrangement or transaction between Newco, on the one hand, and Intel,
Newco's directors or officers or their respective affiliates, on the other hand,
shall be void or in violation of law solely because Intel, Newco's officers or
directors or their respective affiliates are parties to the transaction, or
solely because any of Newco's directors or officers are present at or
participate in the meeting of Newco's board of directors or committee of the
board which authorizes the transaction or solely because his, her or their votes
are counted for the purpose of approving the transaction, if any of the
following requirements are met:
- the material facts of the transaction are disclosed or are known to the
board of directors or the committee of the board that authorizes the
transaction and the board of directors or committee in good faith
approves the transaction by a majority vote of disinterested directors,
even though the disinterested directors are less than a quorum;
- the material facts of the transaction are disclosed or are known to the
holders of Newco's voting stock entitled to vote on the transaction, and
the transaction is specifically approved in good faith by vote of the
holders of a majority of the then outstanding voting stock not owned by
the related party involved in the transaction, voting together as a
single class;
- the transaction is effected in accordance with guidelines which are
approved in good faith by the majority vote of disinterested directors on
the board of directors or a committee of the board after disclosure of
the material facts related to the transaction, even though the
disinterested directors are less than a quorum, or by vote of the holders
of a majority of the then outstanding voting stock not owned by the
related party involved in the transaction, voting together as a single
class; or
- the transaction is fair as to Newco as of the time it is approved by the
board of directors, a committee of the board or Newco's stockholders.
If any of these requirements are met, the related party involved in the
transaction will deemed to have satisfied his, her or its duties to Newco under
Delaware law.
Newco's amended and restated certificate of incorporation provides that
Intel shall not be liable to Newco or its stockholders for breach of any
fiduciary duty it may have by reason of the fact that Intel takes any action or
exercises any rights or gives or withholds any consent in connection with any
transaction between Intel and Newco. Also, no vote cast or other action taken by
any person who is an officer, director or other representative of Intel in the
person's capacity as a director of Newco shall constitute an action or consent
of or exercise of a right by Intel for the purpose of the transaction.
NUMBER OF DIRECTORS
Excalibur's board of directors currently consists of ten directors.
Excalibur's bylaws provide that the number of directors may increased or
decreased by a resolution of the board of directors as long as the number of
directors is no fewer than one nor more than ten. The Newco board of directors
shall initially consist of seven directors, as is specified in Newco's bylaws.
The Newco amended and restated certificate of incorporation provides that the
number of directors shall be as specified in Newco's bylaws, as the same may be
amended, as long as the number of directors is no fewer than six nor more than
twelve. See "Directors and Management of Newco Following the Combination." The
Newco amended and restated certificate of
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incorporation also provides that for a period of five years from the closing of
the combination, the Newco board shall include at least two directors that are
not affiliated with Intel.
VOTING BY DIRECTORS
At meetings of the Excalibur board of directors, the presence of a majority
of the directors constitutes a quorum for the transaction of business at the
meeting. A vote of a majority of the directors present at a meeting of the
Excalibur board is required to take actions. At meetings of the Newco board of
directors, the presence of a majority of the directors constitutes a quorum for
the transaction of business at the meeting. A vote of a majority of the
directors present at a meeting of the Newco board is required to take actions.
QUORUM FOR STOCKHOLDERS MEETINGS
Excalibur's certificate of incorporation provides that the presence of at
least one third of the shares entitled to vote at a stockholders' meeting will
constitute a quorum for the transaction of business at the meeting. Newco's
amended and restated certificate of incorporation provides that the presence of
at least a majority of the shares entitled to vote at a stockholders' meeting
will constitute a quorum for the transaction of business at the meeting.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Excalibur's certificate of incorporation may be amended if the change is
proposed by the board of directors and approved by the holders of a majority of
the outstanding shares of common stock. Newco's amended and restated certificate
of incorporation may be amended if the change is proposed by the board of
directors and approved by the holders of a majority of the outstanding shares,
except that any change in the provisions of the amended and restated certificate
of incorporation discussed below under "Transactions Between Newco and Related
Parties" and "Allocation of Corporate Opportunities Between Newco and Intel and
Other Matters Concerning Intel" must be approved by the holders of more than 80%
of the outstanding shares of Class A common stock.
AMENDMENT OF BYLAWS
Excalibur's bylaws may be amended by a majority of the whole board of
directors or by the holders of a majority of the outstanding shares of common
stock. Newco's bylaws may be amended by a majority of the whole board of
directors or by the holders of a majority of the outstanding shares of Class A
common stock.
NOMINATIONS AND STOCKHOLDER BUSINESS
Excalibur's certificate of incorporation and bylaws do not contain specific
provisions relating to the nomination of directors or other stockholder business
for annual or special meetings of stockholders.
Newco Annual Meeting of Stockholders
Newco's bylaws provide that director nominations or proposals of other
business to be considered at annual meetings of stockholders may be made in any
of the following manners:
- pursuant to Newco's notice of meeting;
- by or at the direction of the Newco board of directors; or
- by any stockholder of Newco who is a stockholder of record at the time of
giving of notice of an annual meeting, who is entitled to vote at the
meeting with respect to the business proposed to be considered and who
complied with the bylaws' procedures.
For nominations or other business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice in
writing to Newco's corporate secretary, and the business must be a proper
subject for stockholder action under Delaware law. To be timely, a stockholder's
notice shall be delivered to the secretary not less than 45 days nor more than
120 days prior to the date on which Newco first
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mailed its proxy materials for the prior year's annual meeting of stockholders.
If however the date of the annual meeting is advanced by more than 30 days or
delayed, other than by adjournment, by more than 30 days from the anniversary of
the previous year's annual meeting, notice by the stockholder to be timely must
be delivered not later than the close of business on the later of the 60th day
prior to the annual meeting or the 10th day following the day on which Newco
first publicly announces the date of the meeting. The stockholder's notice must
set forth:
- all information required by the SEC's proxy rules for each person whom
the stockholder proposes to nominate for election or reelection as a
director;
- a brief description of other business that the stockholder proposes to
bring before the meeting, the reasons for conducting the business at the
meeting and any material interest in the business by the stockholder and
of any beneficial owner on whose behalf the proposal is made; and
- the name and address of the stockholder and of any beneficial owner on
whose behalf the nomination or proposal is made, as well as the class and
number of shares which are owned beneficially by them.
If the number of directors to be elected to the Newco board is increased
and there is no public announcement about it by Newco at least 70 days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by the bylaws shall also be considered timely, but only for
nominees for any newly created positions, if it is delivered to the Newco
corporate secretary not later than the close of business on the 10th day
following the day of Newco's first public announcement about the increase.
Newco Special Meetings of Stockholders
The only business which may be conducted at a special meeting of
stockholders is that which is contained in Newco's notice of meeting. Director
nominations may be made at a special meeting of stockholders at which directors
are to be elected by Newco's notice of meeting by either of the following
manners:
- by or at the direction of the Board of Directors; or
- by any stockholder who is a stockholder of record at the time of giving
of notice of the special meeting, who is entitled to vote at the meeting
with respect to the election of directors and who complies with the
bylaws' notice procedures.
Nominations by stockholders of persons for election to the board of
directors may be made at a special meeting of stockholders if the stockholder's
notice is delivered to Newco's corporate secretary not earlier than the 120th
day prior to the special meeting and not later than the close of business on the
later of the 60th day prior to the special meeting or the 10th day following the
day on which Newco first publicly announces the date of the special meeting and
the nominees proposed by the board of directors to be elected at the meeting.
Only the persons nominated in accordance with the these bylaw provisions
shall be eligible for election at any meeting of stockholders. Similarly, the
only business which may be conducted at a meeting of stockholders is that which
is brought before the meeting in accordance with these bylaw procedures. The
bylaws do not affect a stockholder's obligation to otherwise comply with the
applicable provisions of the Exchange Act concerning stockholder meetings. Also,
these bylaw provisions do not affect any rights of stockholders to request
inclusion of proposals in Newco's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
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DESCRIPTION OF NEWCO CAPITAL STOCK FOLLOWING THE COMBINATION
The following summarizes the terms of the Newco capital stock following the
combination, including the Class A common stock you will receive in the
combination. Please read the amended and restated certificate of incorporation
and the bylaws of Newco which are attached hereto as Appendices D and E.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Newco will consist of:
- 100 million shares of Class A common stock, par value $.01 per share;
- 40 million shares of Class B common stock, par value $.01 per share; and
- Five million shares of preferred stock, par value $.01 per share, of
which 49,587 shares are designated as "Cumulative Convertible Preferred
Stock."
The following summary description of the capital stock of Newco does not
purport to be complete and is qualified in its entirety by reference to Newco's
amended and restated certificate of incorporation and to the Delaware General
Corporation Law.
NEWCO COMMON STOCK
Newco's common stock is divided into two classes designated Class A common
stock and Class B common stock. Subject to the rights of holders of any
outstanding Newco preferred stock, the holders of outstanding shares of Newco
common stock are entitled to share ratably in dividends declared out of assets
legally available therefor at that time and in those amounts as the Newco board
of directors may from time to time lawfully determine. The Class A common stock
and the Class B common stock are equal in respect of rights to dividends and
other distributions.
Each holder of Class A common stock is entitled to one vote for each share
held and, except as otherwise provided by law or by the Newco board of directors
with respect to any series of Newco preferred stock, the holders of Class A
common stock will exclusively possess all voting power. The shares of Class B
common stock are not entitled to any voting rights, except as otherwise provided
by law or in the amended and restated certificate of incorporation. Holders of
Class A common stock are not entitled to accumulate votes for the election of
directors. The Newco common stock is not entitled to preemptive rights and is
not subject to redemption or assessment. Subject to the rights of holders of any
outstanding Newco preferred stock, upon liquidation, dissolution or winding up
of Newco, any assets legally available for distribution to stockowners as such
are to be distributed ratably among the holders of the Newco common stock at
that time outstanding. The Class B common stock will be assumed to have been
converted into Class A common stock immediately prior to a distribution upon a
liquidation, dissolution or winding up of Newco. We have filed an application to
have the Class A common stock of Newco traded on the Nasdaq National Market
under the ticker symbol " ."
The Class B common stock may be converted at the rate of one share of Class
A common stock for each share of Class B common stock. As long as Intel remains
a holder of Class B common stock, it shall not be entitled to convert shares of
Class B common stock if Intel would beneficially own 50% or more of the voting
power or Newco immediately after the conversion. The conversion rate shall be
subject to antidilution adjustments in case of stock splits, stock dividends,
reverse stock splits, recapitalizations or similar events affecting the Class A
common stock. In the event Newco consummates any reclassification or
consolidation, merger or similar business combination, pursuant to which the
Class A common stock of Newco is exchanged solely for or changed, reclassified
or converted into a different security or other property of Newco or any
successor, a holder of the Class B common stock will thereafter have the right
to receive upon conversion of the Class B common stock the kind and amount of
shares or stock and other securities and property receivable by a holder of the
number of shares of Class A common stock into which the Class B common stock
might have been converted immediately prior to that event. Newco shall at all
times reserve a sufficient number of authorized Class A common stock to allow
for the conversion of the outstanding shares of Class B common stock.
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NEWCO PREFERRED STOCK
General
The Newco board of directors has the authority to issue Newco preferred
stock in one or more series with such distinctive serial designations, at such
price or prices and for such other consideration as may be fixed by the Newco
board of directors. Newco preferred stock of all series shall be in all respects
entitled to the same preferences, rights and privileges and subject to the same
qualifications, limitations and restrictions; provided, however, that different
series of Newco preferred stock may vary with respect to, among other things,
dividend rates, conversion rights, voting rights, redemption rights, liquidation
preferences and the number of shares constituting each such series as shall be
determined and fixed by resolution or resolutions of the Newco board of
directors providing for the issuance of such series, without any further vote or
action by the stockholders of Newco. All the shares of any one series will be
alike in every particular.
The ability of the Newco board of directors to issue Newco preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of Newco.
Cumulative Convertible Preferred Stock
Designation and Amount. Newco's amended and restated certificate of
incorporation designates 49,587 shares of cumulative convertible preferred stock
which will have substantially identical rights as Excalibur's currently
authorized cumulative convertible preferred stock. Newco's cumulate convertible
preferred stock will have a par value of $.01 per share and a liquidation
preference of $10 per share, plus accrued and unpaid dividends.
Rank. With respect to dividend rights and rights on liquidation,
dissolution and winding-up, the cumulative convertible preferred stock will rank
senior to the common stock and all other classes of stock of Newco except those
classes of preferred stock expressly designated as ranking senior or on a parity
with the cumulative convertible preferred stock.
Dividends. The holders of the cumulative convertible preferred stock will
be entitled to receive, when, as and if declared by the board of directors of
the combined company out of funds legally available therefor, cash dividends in
an amount of $.50 per share. The dividend shall be payable in cash or shares of
Class A common stock valued at the lower of $1.00 per share or the market price
on the date of declaration. Dividends shall be payable on April 1 of each year
if they are declared by the board of directors.
Redemption. The cumulative convertible preferred stock is not redeemable
at the option of Newco. The holders of cumulative convertible preferred stock
cannot cause Newco to redeem the shares.
Conversion Rights. The holders of shares of cumulative convertible
preferred stock will have the right, at their option, to convert any or all of
such shares into shares of Class A common stock initially at the rate of ten
shares of Class A common stock for each share of cumulative convertible
preferred stock. The conversion rate will be subject to antidilution adjustments
in case of stock splits, stock dividends, reverse stock splits,
recapitalizations or similar events affecting the Class A common stock. Newco
shall at all times reserve a sufficient number of authorized Class A common
stock to allow for the conversion of the outstanding shares of cumulative
convertible preferred stock.
Voting Rights. The shares of cumulative convertible preferred stock are
not entitled to any voting rights, nor do the shares have any preemptive rights.
Liquidation Rights. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the company, the holders of cumulative convertible
preferred stock will be entitled to receive liquidating distributions in the
amount of $10 per share, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for distribution, before any distribution or
payment is made to holders of common stock of Newco or on any other class of the
company stock ranking junior to the cumulative convertible preferred stock. A
voluntary sale, lease, exchange or transfer of all or substantially all of
Newco's assets, the
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consolidation or merger of Newco with one or more corporations or the redemption
of Newco's capital stock shall not be deemed a liquidation, dissolution or
winding-up of Newco for purposes of these liquidation rights of the preferred
stock.
Consolidation, Merger. In the event Newco consummates any reclassification
or consolidation, merger or similar business combination, pursuant to which the
Class A common stock of Newco is exchanged solely for or changed, reclassified
or converted into a different security or other property of Newco or any
successor, a holder of the cumulative convertible preferred stock will
thereafter have the right to receive upon conversion of the preferred stock the
kind and amount of shares or stock and other securities and property receivable
by a holder of the number of shares of Class A common stock into which the
preferred stock might have been converted immediately prior to such event.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Newco common stock is
Computershare Investor Services, formerly American Securities Transfer & Trust,
Inc., in Colorado.
NASDAQ LISTING OF THE CLASS A COMMON STOCK
It is a condition to the consummation of the combination that the shares of
Newco Class A common stock to be issued in the combination be approved for
listing on the Nasdaq National Market, subject to official notice of issuance.
If the combination is completed, the Newco Class A common stock will be listed
on the Nasdaq National Market under the symbol " " and the Excalibur
common stock will cease to be listed on the Nasdaq National Market.
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BUSINESS OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
Intel's Interactive Media Services division is comprised of three separate
business groups that were formally established between June and October 1998:
- the Entertainment Content Services group;
- the Enhanced Video Services group; and
- the Internet Security Services group.
The Interactive Media Services division provides solutions for content
customers and broadcast networks as they deliver digital content to end users
using the internet and emerging broadband environments, such as satellite,
cable, DSL (Digital Subscriber Line) and wireless. Services offered by the
Interactive Media Services division include digital video and data integration
services, security and content protection services, conditional access and
subscriber management services and scalable distribution management services.
In the combination, Intel will contribute to Newco its Interactive Media
Services division and related intellectual property and other assets. These
assets include:
- a broad set of technical capabilities in the areas of video and data,
security and content protection;
- 14 patents and patent applications in the area of content security;
- source code components;
- non-exclusive licenses to additional source code components and other
Intel patents and patent applications; and
- technical employee resources in key areas, primarily in software and
engineering. Newco has offered employment to the 60 or more engineers and
other professionals who currently comprise Intel's Interactive Media
Services division, subject to completion of the combination.
ENTERTAINMENT CONTENT SERVICES
The Entertainment Content Services group acts as a systems integrator to
provide consumer-oriented offerings for customers operating in the entertainment
industry. It employs its resources and knowledge in program management, human
factors engineering and software, and software engineering, together with third
party technologies, to define and implement end-to-end solutions for its
customers. Services provided by the Entertainment Content Services group
include:
- Graphical user interface development
- Human factors engineering
- Systems interaction and engineering
- Program management
- Back-end integration
- Emotional analysis & data-mining
The services provided by the Entertainment Content Services group are
targeted at companies in the music, sports, lifestyles and film and video game
industries. Current customers include Supertracks and Avid Sports.
ENHANCED VIDEO SERVICES
The Enhanced Video Services group provides consulting services and
web-based services for the creation, management and delivery of enhanced video
content over the internet, digital broadcast and wireless technologies. The
services are designed to enable content owners or producers to create immersive
interactive content and then protect it and deliver it in measured quantities to
end-users on a variety of devices. The Enhanced Video Services group
technologies may be applied to a variety of interactive information and
entertainment markets, such as sports, news and entertainment. Current customers
include Choice Seat and Avid Sports.
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INTERNET SECURITY SERVICES
The Internet Security Services group provides software products and
services that are designed to enable providers to develop and commercialize
frameworks for secure protection of digital content distribution and playback on
personal computers and other digital devices. The Internet Security Services
group markets a generalized security product, as well as an ongoing service of
manufacturing and shipping content protection agents and keys, to the music,
documents and streaming video industries. The Internet Security Services group
works with both hardware and software vendors to develop products and services
that provide a complete end-to-end solution for secure digital content
distribution and playback in the marketplace. Current customers include Preview
Systems and Softlock.com.
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SELECTED FINANCIAL DATA
OF INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
Intel is providing the following information concerning its Interactive
Media Services division to aid you in your analysis of the financial aspects of
the combination. Intel derived this information from the audited statements of
assets to be contributed and the related statements of net revenues and direct
expenses for its Interactive Media Services division for the fiscal year ended
December 25, 1999 and the period from inception to December 26, 1998, and the
unaudited financial statements for the three months ended April 1, 2000 and
March 27, 1999. This information is only a summary and you should read it in
conjunction with Intel's Interactive Media Services division's Financial
Statements (and related notes) beginning on page F-1 and the Interactive Media
Services division Management's Discussion and Analysis of Financial Condition
and Results of Operations beginning on page 69.
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF ASSETS TO BE CONTRIBUTED
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 25, APRIL 1, 2000
1998(1) 1999 (UNAUDITED)
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Investments........................................... $ -- $ 884 $3,255
Costs in excess of consideration due or received on
uncompleted contracts............................... 35 98 491
Property, plant and equipment
Computer equipment.................................. 111 322 322
Accumulated depreciation............................ (23) (104) (131)
---- ------ ------
Net property, plant and equipment..................... 88 218 191
---- ------ ------
Assets to be contributed(2)........................... $123 $1,200 $3,937
==== ====== ======
</TABLE>
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF NET REVENUES AND DIRECT EXPENSES
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS ENDED
INCEPTION TO YEAR ENDED -------------------------------
DECEMBER 26, DECEMBER 25, MARCH 27, 1999 APRIL 1, 2000
1998 1999 (UNAUDITED) (UNAUDITED)
------------ ------------ -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues........................... $ -- $ 1,568 $ -- $ --
Cost of revenues....................... -- 129 -- --
Direct operating expenses:
Research and development............. 409 1,945 453 604
Selling, marketing and
administrative.................... 5,810 5,709 1,592 1,615
------- ------- ------- -------
Total direct operating expenses........ 6,219 7,654 2,045 2,219
------- ------- ------- -------
Total direct expenses.................. 6,219 7,783 2,045 2,219
------- ------- ------- -------
Direct expenses in excess of net
revenues............................. $(6,219) $(6,215) $(2,045) $(2,219)
======= ======= ======= =======
</TABLE>
---------------
(1) The Interactive Media Services Division is comprised of three separate but
related groups within Intel which were each formally established with
operations commencing between June 1998 and October 1998.
(2) Assets to be contributed at April 1, 2000 excludes the approximately $155
million in cash to be contributed to Newco pursuant to the terms of the
contribution and merger agreement, as the contribution and merger agreement
was executed subsequent to April 1, 2000.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION FOR INTEL'S INTERACTIVE MEDIA SERVICES DIVISION
OVERVIEW
Intel's Interactive Media Services division (IMS) is comprised of three
separate but related groups that were each formally established with operations
commencing between June and October 1998: the Entertainment Content Services
(ECS) group, the Enhanced Video Services (EVS) group and the Internet Security
Services (ISS) group. These groups were not separate legal entities or segments
of Intel and did not operate as discrete operating units, but were embedded in
Intel's overall operations. As a result, separate financial statements have not
been maintained for these operations. The financial statements of the IMS
division included in this proxy statement/prospectus were prepared from the
historical accounting records of Intel and do not purport to reflect the assets
to be contributed, and the net revenues and direct expenses that would have
resulted if the IMS division had operated as an unaffiliated independent
company. The statements of net revenues and direct expenses include an
allocation of expenses for facilities, information technology, management,
finance and administrative support services provided by Intel. These allocations
were derived from the direct operating expenses of the New Business Group within
which the IMS division operated in Intel, based on the number of employees
within the IMS division relative to the total employees within the New Business
Group. These statements do not include allocations for legal, human resources,
sales and marketing support, certain profit dependent amounts in excess of
accruals allocated to the IMS division, or for interest income, interest expense
and income taxes, as such expenses and income were not allocated by Intel to the
New Business Group or the IMS division. This Management's Discussion and
Analysis of Financial Condition and Results of Operation should be read in
conjunction with the Interactive Media Services division's financial statements
(and related notes) beginning on page F-1.
ENTERTAINMENT CONTENT SERVICES
The Entertainment Content Services group acts as a systems integrator to
provide consumer-oriented offerings for customers operating in the entertainment
industry. It employs its resources and knowledge in program management, human
factors engineering and software, and software engineering, together with third
party technologies, to define and implement end-to-end solutions for its
customers. Services provided by the Entertainment Content Services group
include:
- Graphical user interface development
- Human factors engineering
- Systems interaction and engineering
- Program management
- Back-end integration
- Emotional analysis & data-mining
The services provided by the Entertainment Content Services group are
targeted at companies in the music, sports, lifestyles and film and video game
industries. Current customers include Supertracks and Avid Sports.
ENHANCED VIDEO SERVICES
The Enhanced Video Services group provides consulting services and
web-based services for the creation, management and delivery of enhanced video
content over the internet, digital broadcast and wireless technologies. The
services are designed to enable content owners or producers to create immersive
interactive content and then protect it and deliver it in measured quantities to
end-users on a variety of devices. The Enhanced Video Services group
technologies may be applied to a variety of interactive information and
entertainment markets, such as sports, news and entertainment. Current customers
include Choice Seat and Avid Sports.
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INTERNET SECURITY SERVICES
The Internet Security Services group provides software products and
services that are designed to enable providers to develop and commercialize
frameworks for secure protection of digital content distribution and playback on
personal computers and other digital devices. The Internet Security Services
group markets a generalized security product, as well as an ongoing service of
manufacturing and shipping content protection agents and keys, to the music,
documents and streaming video industries. The Internet Security Services group
works with both hardware and software vendors to develop products and services
that provide a complete end-to-end solution for secure digital content
distribution and playback in the marketplace. Current customers include Preview
Systems and SoftLock.com.
The IMS division employs approximately 60 engineers and other
professionals.
IMS provides a range of services to its customers including the licensing
of software, technical support services and consulting. The arrangements to
provide software typically require significant modification or customization of
the software under a long-term development contract.
For such contracts, revenue is recognized in accordance with AICPA
Statement of Position (SOP) 97-2, Software Revenue Recognition. Given the
essential nature of the customization and development efforts to the licensed
software, the arrangements have been accounted for in accordance with SOP 81-1,
Accounting for Performance of Construction Type and Certain Production-Type
Contracts and Accounting Research Bulletin (ARB) No. 45, Long-Term
Construction-Type Contracts. In accordance with SOP 81-1, IMS has elected to
account for these contracts using the completed contract method because IMS does
not have substantial history of making estimates of the extent of progress
towards completion. In addition, certain of the contracts lack clearly defined
deliverables, terms and conditions. Accordingly, revenue is recognized when all
remaining costs, IMS obligations and potential risks are insignificant and the
product has been delivered and accepted by the customer. Consideration due or
received from customers on uncompleted contracts and which has not been
recognized as revenue was $1,450,000 and $984,000 for fiscal 1999 and the three
months ended April 1, 2000, respectively. Additionally, for those contracts that
have not been completed, the costs incurred in support of the contract were
capitalized based on the relative efforts incurred to date for the specific
contracts and includes such costs as direct labor and materials. Capitalized
costs totaled $1,548,000 and $1,377,000 for fiscal 1999 and the three months
ended April 1, 2000, respectively. These capitalized costs, net of the
consideration due or received from the customer, have been classified in the
Statement of Assets to be Contributed as costs in excess of related
consideration due or received on uncompleted contracts. Anticipated losses, if
any, on uncompleted contracts are recognized in the period in which the losses
are probable and estimable. No such losses have been identified relative to the
IMS division contracts.
Consideration due or received by IMS in connection with certain contracts
may be in the form of equity instruments issued by the customer. Any equity
instruments received from the customer in connection with arrangements entered
into on or before March 16, 2000 are valued at the date of the arrangement.
Amounts for equity instruments (and other consideration) which have not been
earned are netted against the costs incurred to date on uncompleted contracts
and reflected on this basis in the Statement of Assets to be Contributed.
Amounts for equity instruments (and other consideration) which have been earned
and for which the related contracts have been completed have been recorded as
net revenues in the Statement of Net Revenues and Direct Expenses. For equity
instruments received in connection with arrangements entered into after March
16, 2000, the related equity instruments are valued at the date the revenue will
be recognized by IMS, generally the date IMS has fulfilled all of its
obligations under the arrangement, in accordance with Emerging Issues Task Force
(EITF) 00-8, Accounting by a Grantee for an Equity Instrument to Be Received in
Conjunction with Providing Goods or Services. Between March 17, 2000 and April
1, 2000, no arrangements were entered into which included equity instruments
received by IMS.
RESULTS OF OPERATIONS-INCEPTION TO DECEMBER 26, 1998 COMPARED TO FISCAL 1999
Net revenues for fiscal 1999 were $1,568,000, with no revenue recorded in
the period from inception to December 26, 1998. The 1999 net revenue was the
result of services delivered under completed contracts. No contracts were
completed between inception and December 26, 1998.
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Direct expenses increased $1,564,000, from $6,219,000 to $7,783,000, for
the period of inception to December 26, 1998 compared to fiscal 1999. Research
and development expenses increased $1,536,000, largely as a result of
significant additional development initiatives within ISS during 1999. Selling,
marketing and administrative expenses during 1999 reflect a decrease of $101,000
from the period from inception to December 26, 1998. This decrease is primarily
the result of $1,229,000 in expenses that would otherwise be reflected as
selling, marketing and administrative expenses during 1999 which have been
capitalized in connection with certain uncompleted contracts. By comparison,
during the period from inception to December 26, 1998, $35,000 of such expenses
were capitalized. Offsetting this decrease were costs incurred in 1998 for two
particular development initiatives which produced no revenues.
Direct expenses in excess of net revenues for the IMS division were
($6,219,000) in the period from inception to December 26, 1998 compared to
($6,215,000) for the year ended December 25, 1999.
RESULTS OF OPERATIONS-THREE MONTHS ENDED MARCH 27, 1999 COMPARED TO THREE MONTHS
ENDED APRIL 1, 2000
There were no revenues recognized by the IMS division in the three months
ended March 27, 1999 or April 1, 2000, as no contracts were completed in these
quarters.
Direct expenses increased $174,000 from $2,045,000 in the first three
months of 1999 to $2,219,000 in the same period in 2000. Research and
development expenses increased $151,000 mainly as a result of continued growth
in development efforts within ISS and the overall expansion in IMS division
activity and customer agreements. Research and development costs would have been
higher during the period but for $498,000 of such costs that were capitalized
during the period in connection with certain uncompleted contracts. Selling,
marketing and administrative expenses increased only $23,000 in the first three
months of 2000 compared to the first three months of 1999. Selling, marketing
and administrative expenses would have been higher during the period but for
$879,000 of such costs that were capitalized during the period in connection
with certain uncompleted contracts due to expansion of the overall business and
its customer relationships.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information combines
the historical consolidated statements of operation of Excalibur with the
historical statements of net revenues and direct expenses of Intel's Interactive
Media Services division of Intel after giving effect to the combination, as if
the combination had occurred on February 1, 1999, and the historical balance
sheet of Excalibur with the historical statement of assets to be contributed of
the Interactive Media Services division as if the combination had occurred on
April 30, 2000. The historical financial statements for Excalibur are for the
fiscal year ended January 31, 2000 and as of and for the three months ended
April 30, 2000. The historical financial information of the Interactive Media
Services division is for the fiscal year ended December 25, 1999 and as of and
for the three months ended April 1, 2000. The statements of operations of the
two entities have been combined using their respective fiscal years.
The pro forma amounts are presented for illustrative purposes only and are
not necessarily indicative of the results of operations of the combined company
that would have actually occurred had we completed the combination on February
1, 1999 or of the financial condition of the combined company had we completed
the combination on April 30, 2000 or of the future results of operations or
financial condition of the combined company.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
INTERACTIVE
EXCALIBUR MEDIA SERVICES PRO FORMA PRO FORMA
APRIL 30, 2000 APRIL 1, 2000 ADJUSTMENTS COMBINED
-------------- -------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.................. $10,625 $ -- $150,000(1f) $160,625
Short term investments..................... 178 3,255 3,433
Accounts receivable, net................... 13,124 13,124
Costs in excess of consideration due or
received on uncompleted contracts....... 491 491
Prepaid expenses and other................. 2,358 2,358
------- ------ -------- --------
Total current assets.................... 26,285 3,746 150,000 180,031
Equipment and leasehold improvements, net.... 2,066 191 2,257
Other assets................................. 767 767
Intangibles.................................. 236 768,623(1a) 768,859
------- ------ -------- --------
Total assets............................ $29,354 $3,937 $918,623 $951,914
======= ====== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable........................... 2,092 -- -- 2,092
Accrued expenses........................... 1,633 -- 1,200(1b) 2,833
Deferred revenues.......................... 3,891 -- -- 3,891
------- ------ -------- --------
Total current liabilities............... 7,616 -- 1,200 8,816
------- ------ -------- --------
Total shareholders' equity.............. 21,738 -- 921,360(1c) 943,098
------- ------ -------- --------
Total liabilities and shareholders'
equity................................ $29,354 $ -- $922,560 $951,914
======= ====== ======== ========
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Financial Statements
72
<PAGE> 83
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
INTERACTIVE
EXCALIBUR MEDIA SERVICES EXCALIBUR
FISCAL YEAR FISCAL YEAR THREE MONTHS
ENDED ENDED ENDED
JANUARY 31, DECEMBER 25, PRO FORMA PRO FORMA APRIL 30,
2000 1999 ADJUSTMENTS COMBINED 2000
----------- -------------- ----------- --------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................ $37,934 $ 1,568 $ -- $ 39,502 $ 9,384
Expenses:
Cost of revenues...... 6,867 129 -- 6,996 1,529
Sales and marketing... 16,210 3,214 -- 19,424 5,569
Research and product
development......... 9,456 1,945 -- 11,401 2,688
General and
administrative...... 5,402 2,495 -- 7,897 1,331
Amortization of
acquired intangible
assets and
goodwill............ 118 -- 134,539(1d) 134,657 30
------- ------- -------- --------- -------
38,053 7,783 180,375 11,147
------- ------- -------- --------- -------
Operating loss.......... (119) (6,215) -- (140,873) (1,763)
Interest income, net.... 250 -- -- 250 95
Write-off of investment
in affiliate.......... (471) -- -- (471) --
------- ------- -------- --------- -------
Net loss................ (340) (6,215) -- (141,094) (1,668)
Dividends on cumulative,
convertible preferred
stock................. 14 -- -- 14 3
------- ------- -------- --------- -------
Net income (loss)
applicable to common
stock................. $ (354) $(6,215) $ -- $(141,108) $(1,671)
======= ======= ======== ========= =======
Basic and diluted net
loss per common
share................. $ (0.02) $ -- $ -- $ (3.41) $ (0.11)
Weighted average number
of common shares
outstanding........... 14,282 -- 27,112(1e) 41,394 14,714
======= ======= ======== ========= =======
<CAPTION>
INTERACTIVE
MEDIA SERVICES
THREE MONTHS
ENDED
APRIL 1, PRO FORMA PRO FORMA
2000 ADJUSTMENTS COMBINED
-------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues................ $ -- $ -- $ 9,384
Expenses:
Cost of revenues...... -- -- 1,529
Sales and marketing... 1,035 -- 6,604
Research and product
development......... 604 -- 3,292
General and
administrative...... 580 -- 1,911
Amortization of
acquired intangible
assets and
goodwill............ -- 33,635(1d) 33,665
------- ------- --------
2,219 47,001
------- ------- --------
Operating loss.......... (2,219) -- (37,617)
Interest income, net.... -- -- 95
Write-off of investment
in affiliate.......... -- -- --
------- ------- --------
Net loss................ (2,219) -- (37,522)
Dividends on cumulative,
convertible preferred
stock................. -- -- 3
------- ------- --------
Net income (loss)
applicable to common
stock................. $(2,219) $ -- $(37,525)
======= ======= ========
Basic and diluted net
loss per common
share................. $ -- $ -- $ (0.90)
Weighted average number
of common shares
outstanding........... -- 27,112(1e) 41,826
======= ======= ========
</TABLE>
See accompanying Notes to Unaudited Combined Pro Forma Financial Statements
73
<PAGE> 84
NOTES TO UNAUDITED COMBINED PRO FORMA FINANCIAL INFORMATION
1. PRO FORMA ADJUSTMENTS
(a) The Pro Forma combined balance sheet reflects the application of the
purchase method of accounting for the acquisition of the IMS division of Intel.
The estimated purchase price is $923,360,000 including transaction costs of
approximately $1,200,000. The estimated purchase price includes the
consideration to be issued for the IMS division which was calculated by
multiplying 27,112,000 shares by $34.013, the Excalibur five day average common
stock price surrounding the May 1, 2000 announcement of the merger. Based on a
preliminary allocation of the purchase price, the application of the purchase
method results in approximately $769,423,000 in excess of purchase price over
net tangible assets to be acquired, including the $150,000,000 of cash to be
contributed by Intel upon consummation of the combination, as of April 30, 2000.
Based on a preliminary analysis done by Excalibur, this amount is expected to be
allocated as follows: (i) acquired in-process research and development of
$800,000, which will be written off when the combination is recorded; (ii) value
associated with specific acquired contracts of $5,090,000, which will be
amortized over one year; (iii) other identified intangibles of $13,160,000,
which will be amortized over three years; and (iv) goodwill of $750,373,000,
which will be amortized over six years.
(b) Accrued expenses have been increased by the estimated transaction costs
of $1,200,000.
(c) Computation of Pro Forma Purchase Price
<TABLE>
<S> <C>
Issuance of 27,112,000 shares of Excalibur common stock,
representing 60% ownership of Newco....................... $922,160,000
Transaction costs........................................... 1,200,000
------------
Pro forma purchase price.................................. $923,360,000
Preliminary allocation of purchase price:
Value of IMS division's net tangible assets at April 1,
2000...................................................... $ 3,937,000
Cash to contributed by Intel per the agreement.............. 150,000,000
Acquired in-process research and development................ 800,000
Customer contracts (1 year useful life)..................... 5,090,000
Developed technology and assembled workforce (three year
useful life).............................................. 13,160,000
Goodwill (six year useful life)............................. 750,373,000
------------
Total allocated........................................... $923,360,000
Shareholders' equity has been adjusted as follows:
Common stock, $0.01 par value, issuance of 27,112,000
shares.................................................... $ 270,000
Additional paid-in capital.................................. 921,890,000
Accumulated deficit (acquired in-process research and
development).............................................. (800,000)
------------
Pro forma increase in shareholders' equity................ $921,360,000
</TABLE>
(d) The pro forma combined statements of operations reflect the
amortization of the customer contracts, other intangibles and goodwill of
$134,539,000 for the year ended January 31, 2000 and $33,635,000 for the three
months ended April 30, 2000 based on expected estimated useful lives of one
year, three years and six years, respectively.
(e) The weighted average shares adjustment is based on the issuance of
27,112,000 shares of common stock to Intel for the IMS division. The effect of
2,734,000 shares of common stock issued upon the exercise of outstanding stock
options of Excalibur which vest upon consummation of this combination and
272,000 shares of common stock issued upon the conversion of cumulative
convertible preferred stock have not been included in the computation as their
effect would be anti-dilutive.
(f) Reflects the cash to be contributed by Intel upon consummation of the
combination.
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<PAGE> 85
2. STOCK-BASED COMPENSATION
Upon consummation of the combination, Newco shall grant under the Newco
2000 Stock Option Plan to all Newco employees, options to purchase shares of
Newco Class A common stock with the exercise price of such options to be the
greater of (i) $32.16 (the average of the closing prices of the Excalibur common
stock as reported on the Nasdaq National Market for the five (5) trading days
immediately preceding the announcement of execution of the contribution and
merger agreement) or (ii) twenty-five percent (25%) of the average of the
closing prices of the Excalibur common stock as reported on the Nasdaq National
Market for the five (5) trading days immediately preceding the closing date of
the combination; provided, however, that if the average of the closing prices of
the Excalibur common stock as reported on the Nasdaq National Market for the
five (5) trading days immediately preceding the closing date of the combination
is less than $32.16, then the exercise price for such options shall be the
average of the closing prices of the Excalibur common stock as reported on the
Nasdaq National Market for the five (5) trading days immediately preceding the
closing date. The Newco 2000 Stock Option Plan is being submitted for
stockholder approval at Excalibur's 2000 Annual Meeting.
The difference between the stock option exercise price and the fair market
value of Newco's stock on the grant date, if any, will be recognized as
compensation expense over the vesting period of the options. Under the terms of
the Newco 2000 Stock Option Plan, the vesting period is up to four years.
In addition, the former Intel employees who become Newco employees will
receive a payment, for the excess, if any, of the calculated gain they would
have realized on forfeited Intel stock options over the gain on Newco stock
options as of September 30, 2002. The maximum aggregate amount that Newco would
be required to pay is approximately $10.9 million.
Because Excalibur is unable to predict the market value of Excalibur's
common stock on the transaction consummation date or on September 30, 2002, the
pro forma financial statements do not reflect compensation expense related to
the granting of options under the Newco Stock Option Plan or the potential
payments to former Intel employees. In addition, the loss per share computation
included in the pro-forma financial statements does not consider the effect of
these options. Even if these options were to be considered, they would be
excluded from the net loss per common share computation as their effect would be
anti-dilutive.
3. RETENTION BONUSES
Newco will pay bonuses to certain former employees of Intel that remain
employed by Newco as of April 30, 2001, funded through an additional capital
contribution from Intel. These employee payments will be charged to expense on
Newco's statement of operations over the period from consummation of the
combination through April 30, 2001. The payment from Intel will be considered a
capital contribution to Newco since Intel will be a principal shareholder of
Newco. This additional capital contribution was contemplated in the
determination of the Newco shares to be issued to Intel and will not change the
Intel share ownership. The retention bonuses are contingent on the continuing
employment of the Intel contributed employees with Newco through April 30, 2001
and as such the amount cannot be determined and has not been included in the pro
forma combined statement of operations.
4. GENERAL AND ADMINISTRATIVE EXPENSES
Excalibur does not anticipate an increase in its general and administrative
expenses due to the combination. Accordingly, no additional expense has been
reflected in the pro forma financial statements. Excalibur does expect its
general and administrative expenses to increase due to the overall growth in its
business.
75
<PAGE> 86
APPROVAL AND ADOPTION OF NEWCO'S 2000 STOCK OPTION PLAN
PROPOSAL
The contribution and merger agreement makes it a condition to the
completion of the combination that Newco adopt the Newco 2000 stock option plan.
To comply with the requirements of the tax code, we need your approval of this
plan. The Excalibur board of directors propose and recommend that you approve
and adopt the Newco stock option plan. The Newco 2000 stock option plan is
attached to this proxy statement/ prospectus as Appendix C.
In August 2000, the Newco board of directors adopted the Newco stock option
plan. The stock option plan authorizes the granting of stock options and other
forms of incentive compensation to purchase up to 11.25 million shares of
Newco's common stock in order to attract and retain competent, experienced and
motivated personnel. The stock option plan gives all employees, including
officers and directors who are also employees, the opportunity to receive grants
of incentive stock options, also referred to as ISOs, nonqualified stock
options, also referred to as NQSOs, and or stock appreciation rights. The stock
option plan encourages participants to contribute to Newco's growth. This
benefits Newco stockholders because it aligns the participant's economic
interests with Newco stockholder interests.
If the stock option plan is approved by the Excalibur stockholders, it will
become effective on the effective date of the combination.
VOTE REQUIRED
To be adopted, the stock option proposal must be approved by the
affirmative vote of the majority of the shares voting on the proposal present in
person or represented by proxy at the annual meeting. Any shares not voted (by
abstention, broker non-vote or otherwise) have no effect on such vote.
The following is a summary of the principal features of the stock option
plan which will be in effect if the stock option is approved and adopted by the
stockholders. A copy of the actual stock option plan document is available to
any stockholder upon request.
ELIGIBILITY
Under the stock option plan, all employees, including officers and
directors who are also employees, are eligible to be granted incentive stock
options under the stock option plan. Newco may grant non-qualified stock options
under the stock option plan to employees or to other persons who perform
substantial services for or on behalf of Newco, including officers and
directors. Option holders may not transfer options, other than by will or the
laws of descent and distribution.
ADMINISTRATION
A committee, appointed by the Newco board will administer and interpret the
stock option plan. Non-employee directors and outside directors may be on the
committee.
The committee determines:
- the individuals who may receive grants under the stock option plan;
- the exercise price and number of shares subject to each grant;
- the time or times during which all or a portion of each grant may be
exercised; and
- any other terms of each option.
The maximum term of options granted under the stock option plan is ten years.
76
<PAGE> 87
TERMS AND CONDITIONS OF OPTIONS
Under the stock option plan, Newco may grant incentive stock options to
officers and key employees of Newco to purchase shares of the common stock at a
purchase price equal to the fair market value of the common stock on the date of
grant. Newco may also grand NQSOs. The committee may, when and to the extent it
deems appropriate and with the consent of option holders, substitute outstanding
options with replacement options at a lower exercise price. Options granted and
outstanding under the stock option plan vest over a period of up to four years.
The stock option plan provides that the board of Newco may grant stock
appreciation rights to option holders.
Upon termination of an employee for cause, that employee's stock options
will terminate. If the employee is involuntarily terminated without cause, his
stock options will be exercisable for three months following termination or
until the end of the option period, whichever is shorter. Upon the disability or
retirement of the employee, stock options will be exercisable within the lesser
of the remainder of the option period or one year from the date of disability or
retirement. Upon the death of an employee, stock options will be exercisable by
the deceased employee's representative within the lesser of the remainder of the
option period or one year from the date of the employee's death. Unless
otherwise determined by the committee, only options which are exercisable on the
date of termination, death, disability or retirement may be subsequently
exercised. Options granted to non-employees including directors do not terminate
upon termination of such persons' relationship with Newco.
AMENDMENTS
The board of Newco may amend the stock option plan, but no amendment shall
be made which would impair the rights of an option holder under a stock option
already granted, without the option holder's consent, or which, without the
approval of Newco's stockholders, would cause the stock option plan to no longer
comply with Rule 16b-3 under the Exchange Act or any successor rule or other
regulatory requirements.
EFFECTIVE DATE
The stock option plan shall be effective as of completion of the
combination. Any grants made under the stock option plan prior to approval by a
majority of the votes of stockholders in person or by proxy at the annual
meeting shall be effective when made.
TERM OF PLAN
Unless sooner terminated by the board of Newco, the stock option plan will
terminate on the tenth anniversary of the date of stockholder approval, but
awards granted prior to the tenth anniversary may extend beyond that date.
FEDERAL INCOME TAX CONSEQUENCES
Under the stock option plan, Newco may grant non-qualified options and
incentive stock options and stock appreciation rights. In general, under present
tax laws, an option holder will not be deemed to recognize any income for
federal income tax purposes at the time a stock option or stock appreciation
right is granted, nor will Newco be entitled to a tax deduction at that time.
However, when a stock option or a stock appreciation right is exercised, the
federal income tax consequences are summarized as follows:
Incentive Stock Options
When an incentive stock option is exercised, there is no ordinary income
tax liability. However, the excess of the fair market value of the stock on the
exercise date over the exercise price is included in the option holder's income
for purposes of the alternative minimum tax, and, therefore, exercise of an
incentive stock option may give rise to liability for alternative minimum tax.
If the stock is held for a period of at least two years from the date of grant
of the option and one year from exercise of the option, then the option holder
will recognize long-term capital gain or loss equal to the difference between
the sale price and the exercise price. If these holding period requirements are
not met when the stock is sold, the difference between the option price and the
market price on the date of exercise (or the sale price if lower) is treated as
ordinary income, and if
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<PAGE> 88
the stock is sold for more than the market price on the date of exercise, the
excess of the sale price over the market value on the date of exercise is
treated as a capital gain (long-term or short-term depending on the holding
period of the stock). If the stock is sold for less than the exercise price, the
difference will be treated as capital loss (long-term or short-term depending on
the holding period of the stock).
Non-Qualified Options
When a non-qualified option is exercised, the option holder recognizes
ordinary income equal to the excess of the market price on the date of exercise
over the exercise price in the year of exercise of the option. When the stock is
sold, the option holder recognizes long-term or short-term capital gain or loss
(depending on the holding period of the stock) equal to the difference between
the sale price and the market price on the date of exercise.
Newco will not receive an income tax deduction as a result of the exercise
of an incentive stock option, provided that the stock received on exercise of
the option is held for the required periods described above. Upon the exercise
of a non-qualified stock option or the failure to hold incentive stock option
stock for the required period described above, Newco will generally be allowed
an income tax deduction equal to the ordinary income recognized by the
participant. However, pursuant to section 162(m) of the Internal Revenue Code,
deductibility is denied to any publicly held corporation for compensation of
more than $1 million that is paid in a taxable year to an individual who, on the
last day of a taxable year, is the company's chief executive officer or among
one of its four other highest compensated officers for that year. It is possible
that compensation attributable to stock options granted under the stock option
plan may be subject to this deduction limit.
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<PAGE> 89
ELECTION OF EXCALIBUR DIRECTORS
GENERAL
At the annual meeting, you will be asked to vote on a proposal to elect ten
directors of Excalibur who will serve until the completion of the combination
or, if the combination is not completed, the next annual meeting of Excalibur
and until their respective successors are elected and qualified. Ten
individuals, who are members of the present board of directors of Excalibur,
have been nominated for election as directors of Excalibur.
The persons named in this proxy statement/prospectus, who have been
designated by the management, intend, unless otherwise instructed on the proxy
card, to vote for the election to the board of directors of the persons named
below. If any nominee should become unavailable to serve, the proxy may be voted
for the election of another person designated by the board of directors. The
board of directors has no reason to believe any of the persons named will be
unable to serve if elected. The affirmative vote of the holders of a plurality
of the shares of common stock voting at the annual meeting is necessary for the
election of directors. Any shares not voted (by abstention, broker non-vote, or
otherwise) have no impact on the vote. The board of directors recommends a vote
FOR the nominees listed below.
INFORMATION CONCERNING EXCALIBUR DIRECTORS AND NOMINEES
Information regarding each nominee for director is set forth in the
following table.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Donald R. Keough..................... Chairman of the Board of Directors
Patrick C. Condo..................... President and Chief Executive
Officer, Director
Herbert A. Allen..................... Director
Susan K. Allen....................... Director
Richard M. Crooks, Jr................ Director
John S. Hendricks.................... Director
W. Frank King III.................... Director
John G. McMillian.................... Director
Philip J. O'Reilly................... Director
Harry C. Payne....................... Director
</TABLE>
Donald R. Keough, 73, has been Chairman of the Board of Directors and a
Director of Excalibur since June 1996. Since April 15, 1993, Mr. Keough has been
Chairman of the Board of Allen & Company Incorporated, a New York investment
banking firm that is Excalibur's largest stockholder. Mr. Keough retired as
President, Chief Operating Officer and a Director of The Coca-Cola Company on
April 15, 1993, where he had been employed since 1950. He served as an Advisor
to the Board of Directors of The Coca-Cola Company from April 1993 to April
1998. From 1986 to 1993, he also served as Chairman of the Board of Coca-Cola
Enterprises, Inc., the world's largest bottling system. Mr. Keough serves on the
Board of Directors of Allen & Company Incorporated, H.J. Heinz Company, The
Washington Post Company, McDonald's Corporation, USA Networks, Inc. and
YankeeNets LLC.
Patrick C. Condo, 43 was named President and Chief Executive Officer in
November 1995, and a Director in January 1996. Mr. Condo was President from May
1995 to November 1995. He became Executive Vice President in January 1995 after
serving as the Director of Business Development from November 1992. From October
1987 to November 1992, Mr. Condo held several manager level positions for
Digital Equipment Corporation's Image, Video and Voice Business Unit and
Software Business Group in New Hampshire.
Herbert A. Allen, 59, was named director in June 2000. Mr. Allen is
President, Chief Executive Officer and Managing Director of Allen & Company
Incorporated, a privately held investment banking firm, and has held these
positions for more than the past five years. Mr. Allen serves on the Board of
Directors of The Coca-Cola Company.
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<PAGE> 90
Susan K. Allen, 63, was named director in June 2000. Ms. Allen is a
private investor. She has been a stockholder of Allen Holding, Inc., the parent
of Allen & Company Incorporated, since its inception. She is the sister of
Herbert A. Allen.
Richard M. Crooks, Jr., 61, has been a Director of Excalibur since June
1990 and was Chairman of the Board from June 1990 to June 1996. Mr. Crooks has
been President of RMC Consultants, a financial advisory services firm, since
June 1990. Mr. Crooks is a director of and consultant to Allen & Company
Incorporated. Mr. Crooks served as a Managing Director of Allen & Company
Incorporated for more than five years prior to June 1990.
John S. Hendricks, 48, was appointed as a Director of Excalibur in May
1997. He has been Chairman and Chief Executive Officer of Discovery
Communications, Inc., a privately held, diversified media company, since he
founded the company in 1982 in order to develop a new cable television service.
The effort resulted in the launch of the Discovery Channel in 1985, which has
become one of the world's largest cable television networks. Mr. Hendricks is a
director of Internet Pictures Corporation, a provider of visual content
solutions for the Internet, TiVo, Inc., a provider of personal television
services and equipment, and a member of the boards of various cable television
industry groups, educational institutions and other organizations promoting
natural history and science.
W. Frank King III, 60, was elected a Director of Excalibur in June 1992. He
is presently a private investor. Dr. King served as President, Chief Executive
Officer, and a Director of PSW Technologies, Inc., a leading provider of
technology for open systems computing, from 1992 to August 1998. From 1988 to
November 1991, Dr. King was a Senior Vice President of Development of Lotus
Development Corporation. Prior to joining Lotus, Dr. King held various positions
with IBM over 19 years, the most recent as Vice President of Development in its
Entry Systems Division. Dr. King is a director of PSW Technologies, Inc.,
Auspex, Inc., a computer server manufacturer; EonCommunications, a provider of
Linux based communications servers, Perficient, Inc., a provider of outsourced
services to Internet software companies, Natural Microsystems, Inc., a developer
of telephone products; and several private technology companies.
John G. McMillian, 74, was elected a Director in June 1996. He is the
Chairman and CEO of Chaparral Resources, Inc. Mr. McMillian has an interest in
Peter Hughes Diving Company, a charter company, and Contender Boats, Inc., a
boat manufacturer, and serves on those boards. He also serves on the boards of
Steadman Hawkins Sports Medicine Foundation, American Country Insurance Company
and U.S. Ski Educational Foundation, and is a member of the Sun Trust/Miami
Advisory Board Committee. He was Chairman and Chief Executive Officer of
Allegheny & Western Energy Corporation, a natural gas production and
distribution company, from July 1987 until July 1995.
Philip J. O'Reilly, 62, has been a Director of Excalibur since April 1988.
Mr. O'Reilly is a partner in the law firm of O'Reilly, Marsh, Kearney &
Corteselli P.C., in Mineola, New York. Mr. O'Reilly has been in private practice
for more than the past five years.
Harry C. Payne, 53, is President of Woodward Academy, Atlanta, Georgia.
From 1994-1999, Dr. Payne served as President of Williams College. From 1988
until 1993, Dr. Payne was President of Hamilton College, Clinton, New York. Dr.
Payne is a former Chair of the Board of the National Association of Independent
Colleges and Universities and serves on the board of Barnard College. He chairs
the Academic Advisory Board of New Forum Publishers, Inc., Conshohocken,
Pennsylvania.
INFORMATION CONCERNING THE EXCALIBUR BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors held six meetings during the fiscal year ended
January 31, 2000 and acted by unanimous written consent on four occasions. Each
incumbent director attended more than 75% of the aggregate number of meetings of
the board of directors and appropriate committees held during fiscal year 2000
since their election.
The board of directors has established a number of committees. The audit
committee, consisting of Mr. McMillian (Chairman), Dr. King and Mr. O'Reilly,
met four times during fiscal year 2000. The audit committee meets with
Excalibur's management, including its chief financial officer, and its
independent
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<PAGE> 91
accountants several times a year to discuss internal controls and accounting
matters, Excalibur's financial statements, and the scope and results of the
auditing programs of the independent accountants. The compensation committee,
currently composed of three directors, Messrs. Crooks (Chairman), Hendricks and
O'Reilly, administers management compensation and makes recommendations in that
regard to the Board. The compensation committee met once during fiscal 2000. The
stock option plan administration committee, which currently consists of Messrs.
Crooks (Chairman) and O'Reilly, administers Excalibur's stock option plans. The
stock option administration committee met once during fiscal 2000.
Each non-employee director is paid $5,000 for each meeting of the board or
its committees attended, whether in person or by telephone, up to a maximum of
$20,000 per fiscal year. Messrs. Keough and Crooks are not paid the foregoing
fees. All directors are reimbursed for their expenses in attending meetings of
the board or its committees. Each non-employee director receives options to
purchase 25,000 shares of common stock of Excalibur upon joining the board and
additional options to purchase 25,000 shares of common stock of Excalibur after
each subsequent five-year period of service as a member of the board. The
chairman may be granted additional options to purchase 25,000 shares of common
stock of Excalibur upon being elected chairman and after each subsequent
five-year period of service. Mr. Keough has not been granted any stock options.
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<PAGE> 92
EXECUTIVE COMPENSATION OF EXCALIBUR
IDENTIFICATION OF EXCALIBUR EXECUTIVE OFFICERS AND KEY EMPLOYEES
Each year, the board of directors appoints the executive officers of
Excalibur to serve until the next annual meeting of stockholders and until their
successors have been duly appointed and qualified. The following information
indicates the position, age and business experience of the current Excalibur
executive officers, Messrs. Condo, Buchanan, Nelson, Khan and Nunnerley, as well
as key employees of Excalibur. There are no family relationships between any of
the executive officers of Excalibur.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Patrick C. Condo..................... President and Chief Executive
Officer, Director
James H. Buchanan.................... Vice President, Chief Financial
Officer, Treasurer and Secretary
Kamran Khan.......................... Senior Vice President and General
Manager, Applications Group
Paul E. Nelson....................... Chief Technology Officer
David Nunnerley...................... Senior Vice President and General
Manager, Media Services Group
Daniel C. Agan....................... Vice President, Corporate Marketing
Nancy McKinley....................... Vice President, Human Resources &
Administration
</TABLE>
See the discussion included in the preceding section for the business
experience of Mr. Condo.
James H. Buchanan, 44, joined Excalibur as Chief Financial Officer in
September 1995. Mr. Buchanan was elected Secretary and Treasurer of Excalibur on
November 17, 1995. From March 1991 to August 1995, Mr. Buchanan was Vice
President, Controller and Treasurer of Legent Corporation, a software
development company. Prior to that, he held several financial management
positions with Norfolk Southern Corporation and PepsiCo. Mr. Buchanan is a
certified public accountant.
Kamran Khan, 37, was named Senior Vice President and General Manager,
Applications Group in November 1999. Previously, Mr. Khan held several sales
management positions since joining Excalibur in September 1993, most recently as
Vice President, Worldwide Sales. Mr. Khan served as general manager of
Excalibur's international sales operation and wholly-owned subsidiary Excalibur
Technologies, Ltd., located in the United Kingdom, from August 1995 until his
appointment to Vice President. Prior to joining Excalibur, Mr. Khan held various
positions, including regional business manager, with PAFEC Limited, a leading
firm in the United Kingdom involved with the development and implementation of
computer-aided engineering and engineering document management software systems.
Paul E. Nelson, 37, was named Excalibur's Chief Technology Officer in
November 1999. Mr. Nelson previously served as Senior Vice President, Product
Development from January 1998 and as a Director of Excalibur from January 1,
1997 to July 21, 1997. He joined Excalibur as Vice President, Text Products in
July 1995 in connection with Excalibur's acquisition of ConQuest Software, Inc.,
a company that Mr. Nelson co-founded in 1990. Mr. Nelson was Senior Vice
President of Product Development and a Director of ConQuest Software, Inc.
David Nunnerley, 43, was named Senior Vice President and General Manager,
Media Services Group in November 1999. Mr. Nunnerley previously served as Vice
President, Visual Product Development since February 1998 and has been
instrumental in the development of Excalibur's visual products since joining
Excalibur in 1996. From 1994 to 1996, Mr. Nunnerley was Vice President of
Engineering for Videopress Software, a software company providing video delivery
products and solutions to cable companies deploying cable modems. Prior to that,
Mr. Nunnerley held various product management/marketing roles and management
positions with Digital Equipment Corporation.
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<PAGE> 93
Daniel C. Agan, 47, joined Excalibur as Vice President, Corporate Marketing
in September 1996. From 1991 through 1996, Mr. Agan was President and Chief
Executive Officer of Agan Associates, Limited, a marketing consulting firm with
experience providing executive-level service to a diverse range of clients in
the technology, online and broadcasting industries. Prior to this, Mr. Agan
spent fifteen years with the Public Broadcasting Service (PBS) where he served
in a variety of capacities, most notably as Senior Vice President for National
Programming and Promotion.
Nancy McKinley, 50, was named Vice President of Human Resources and
Administration in November 1999 after serving as Excalibur's Director of Human
Resources and Administration since 1996 during which she developed the human
resource function for Excalibur. Prior to 1996, Ms. McKinley was Director of
Human Resources and Administration for the Pelavin Research Institute of the
American Institute for Research as well as holding similar positions in other
firms in the high technology and international areas.
SUMMARY COMPENSATION TABLE
The following table presents information concerning the compensation of
Excalibur's chief executive officer and each of the other most highly
compensated executive officers of Excalibur during the 2000 fiscal year for
services rendered in all capacities to Excalibur for the fiscal year ended
January 31, 2000, as well as the previous two fiscal years:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- ---------------------------------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING LTIP OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYMENTS COMPENSATION
NAME YEAR ($) ($) ($) ($) ($) ($) ($)
---- ---- ------- ------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick C. Condo........... 2000 275,000 102,369 -- -- 175,000 -- --
Chief Executive Officer 1999 225,000 71,281 -- -- -- -- --
and President 1998 200,000 86,000 -- -- 400,000(1) -- --
James H. Buchanan.......... 2000 230,000 84,425 -- -- 35,000 -- --
Vice President, Chief 1999 180,000 57,024 -- -- 10,000 -- --
Financial Officer, 1998 165,514 70,950 -- -- 150,000(2) -- --
Secretary and Treasurer
Paul E. Nelson............. 2000 181,500 72,725 -- -- -- -- --
Chief Technology Officer 1999 165,000 81,800 -- -- -- -- --
1998 157,500 69,586 -- -- 84,750(3) -- --
</TABLE>
---------------
(1) This amount includes options to purchase 300,000 shares that were granted in
prior years and subsequently repriced on May 8, 1997.
(2) This amount includes options to purchase 100,000 shares that were granted in
prior years and subsequently repriced on May 8, 1997.
(3) Represents options to purchase 84,750 shares that were granted in prior
years and subsequently repriced on May 8, 1997.
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<PAGE> 94
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted by Excalibur during fiscal 2000 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------- ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(2)
EMPLOYEES IN OR BASE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR(1) PRICE DATE 5% ($) 10% ($)
---- ----------- -------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Patrick C. Condo............ 175,000 25.9% $15.00 12/17/09 1,650,848 4,183,574
James H. Buchanan........... 35,000 5.2% $15.00 12/17/09 330,170 836,715
Paul E. Nelson.............. -- -- -- -- --
</TABLE>
---------------
(1) These options vest in equal 12 1/2% increments every six months from the
dates of original grant.
(2) The amounts shown are hypothetical gains that would exist for the respective
options if exercised at the end of the option term. The assumed 5% and 10%
rates of stock price appreciation are mandated by rules of the Securities
and Exchange Commission and do not represent Excalibur's estimate or
projection of future increases in the price of its common stock.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth, as of January 31, 2000, the number of
options and the value of exercised and unexercised options held by the named
executive officers of Excalibur.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ --------------------- ---------------------
<S> <C> <C> <C> <C>
Patrick C. Condo.......... -- -- 350,000/225,000 $6,024,750/$2,027,875
James H. Buchanan......... -- -- 128,750/66,250 $2,191,594/$727,531
Paul E. Nelson............ -- -- 84,750/0 $1,493,719/$0
</TABLE>
---------------
(1) The closing price of Excalibur's common stock on January 31, 2000, the last
trading day of Excalibur's fiscal year, was $22.375 per share.
DESCRIPTION OF THE EXCALIBUR 1989 INCENTIVE PLAN
In September 1989, Excalibur adopted and its stockholders approved the 1989
incentive plan which authorized the granting of options to purchase shares of
Excalibur's common stock, and other forms of incentive compensation, in order to
attract and retain competent, experienced and motivated personnel. At present,
options to purchase 1,592,318 shares have been granted and are outstanding
pursuant to the 1989 incentive plan. Because the 1989 Incentive Plan expired in
April 1999, no further options may be granted under the 1989 incentive plan.
The 1989 incentive plan provided for the issuance of incentive stock
options and non-qualified stock options, as well as stock appreciation rights.
All employees, including officers and directors who were also employees, were
eligible to be granted incentive stock options under the 1989 incentive plan.
Non-qualified stock options were eligible to be granted under the 1989 incentive
plan to employees or to other persons who performed substantial services for or
on behalf of Excalibur, including officers and directors who were not members of
the stock option plan administration committee of the board of Excalibur.
Options are not transferable by the option holder, other than by will or the
laws of descent and distribution, and are exercisable during the option holder's
lifetime only by the option holder.
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<PAGE> 95
The 1989 incentive plan is currently administered by the committee. Subject
to the terms of the 1989 incentive plan, the committee had the authority to
determine all terms and provisions under which stock options were granted under
the 1989 incentive plan, including determining the individuals to whom options
could be granted, the exercise price and number of shares subject to each
option, the time or times during which all or a portion of each option could be
exercised and certain other terms of each option. The maximum term of options
granted under the 1989 incentive plan is ten years.
Under the 1989 incentive plan, incentive stock options have been granted to
officers and key employees of Excalibur to purchase shares of the common stock
at a purchase price equal to the fair market value of the common stock on the
date of grant. The committee had the power, when and to the extent it deemed
appropriate and with the consent of option holders, to substitute outstanding
options with replacement options at a lower exercise price. Options granted and
outstanding under the 1989 incentive plan vest over a period of up to four
years. The 1989 incentive plan provided that option holders may be granted stock
appreciation rights at the discretion of the board of Excalibur. No stock
appreciation rights have been granted to date under the 1989 incentive plan.
Upon termination of an employee for cause, such employee's stock options
will terminate. If the employee is involuntarily terminated without cause, his
stock options will be exercisable for three months following termination or
until the end of the option period, whichever is shorter. Upon the disability or
retirement of the employee, stock options will be exercisable within the lesser
of the remainder of the option period or one year from the date of disability or
retirement. Upon the death of an employee, stock options will be exercisable by
the deceased employee's representative within the lesser of the remainder of the
option period or one year from the date of the employee's death. Unless
otherwise determined by the committee, only options which are exercisable on the
date of termination, death, disability or retirement may be subsequently
exercised. Options granted to non-employees including directors do not terminate
upon termination of such persons' relationship with Excalibur.
The 1989 incentive plan may be amended by the board of Excalibur, except
that the board of Excalibur may not, without the approval of Excalibur's
stockholders, increase the number of shares available for distribution, decrease
the option price of a stock option below 100% of the fair market value at grant,
change the pricing rule applicable for stock purchase rights, change the class
of employees eligible to receive awards under the 1989 incentive plan or extend
the term of any option award.
DESCRIPTION OF THE EXCALIBUR 1995 STOCK OPTION PLAN
The 1995 stock option plan authorizes the granting of stock options and
other forms of incentive compensation to purchase up to 400,000 shares of
Excalibur's common stock in order to attract and retain competent, experienced
and motivated personnel. The terms of the 1995 stock option plan are identical
to the 1989 incentive plan described above, except that the 1995 stock option
plan does not provide that option holders may be granted stock appreciation
rights. The 1995 stock option plan is administered by the committee. At present,
options to purchase 186,635 shares have been granted and are outstanding
pursuant to the 1995 stock option plan.
DESCRIPTION OF THE EXCALIBUR 1999 STOCK OPTION PLAN
In August 1999, Excalibur adopted and its stockholders approved the 1999
stock option plan which authorized the granting of options to purchase up to 1
million shares of Excalibur's common stock, and other forms of incentive
compensation, in order to attract and retain competent, experienced and
motivated personnel. At present, options to purchase 919,826 shares have been
granted and are outstanding pursuant to the 1999 stock option plan.
The 1999 stock option plan provided for the issuance of incentive stock
options and non-qualified stock options, as well as stock appreciation rights.
All employees, including officers and directors who were also employees, were
eligible to be granted incentive stock options under the 1999 stock option plan.
Non-qualified stock options were eligible to be granted under the 1999 stock
option plan to employees or to other persons who performed substantial services
for or on behalf of Excalibur, including officers and directors who were not
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<PAGE> 96
members of the stock option plan administration committee of the board of
Excalibur. Options are not transferable by the option holder, other than by will
or the laws of descent and distribution, and are exercisable during the option
holder's lifetime only by the option holder.
The 1999 stock option plan is currently administered by the committee.
Subject to the terms of the 1999 stock option plan, the committee had the
authority to determine all terms and provisions under which stock options were
granted under the 1999 stock option plan, including determining the individuals
to whom options could be granted, the exercise price and number of shares
subject to each option, the time or times during which all or a portion of each
option could be exercised and certain other terms of each option. The maximum
term of options granted under the 1999 stock option plan is ten years.
Under the 1999 stock option plan, incentive stock options have been granted
to officers and key employees of Excalibur to purchase shares of the common
stock at a purchase price equal to the fair market value of the common stock on
the date of grant. The committee had the power, when and to the extent it deemed
appropriate and with the consent of option holders, to substitute outstanding
options with replacement options at a lower exercise price. Options granted and
outstanding under the 1999 stock option plan vest over a period of up to four
years. The 1999 stock option plan provided that option holders may be granted
stock appreciation rights at the discretion of the board of Excalibur. No stock
appreciation rights have been granted to date under the 1999 stock option plan.
Upon termination of an employee for cause, such employee's stock options
will terminate. If the employee is involuntarily terminated without cause, his
stock options will be exercisable for three months following termination or
until the end of the option period, whichever is shorter. Upon the disability or
retirement of the employee, stock options will be exercisable within the lesser
of the remainder of the option period or one year from the date of disability or
retirement. Upon the death of an employee, stock options will be exercisable by
the deceased employee's representative within the lesser of the remainder of the
option period or one year from the date of the employee's death. Unless
otherwise determined by the committee, only options which are exercisable on the
date of termination, death, disability or retirement may be subsequently
exercised. Options granted to non-employees including directors do not terminate
upon termination of such persons' relationship with Excalibur.
The 1999 stock option plan may be amended by the board of Excalibur, except
that the board of Excalibur may not, without the approval of Excalibur's
stockholders, increase the number of shares available for distribution, decrease
the option price of a stock option below 100% of the fair market value at grant,
change the pricing rule applicable for stock purchase rights, change the class
of employees eligible to receive awards under the 1999 stock option plan or
extend the term of any option award.
DESCRIPTION OF THE EXCALIBUR STOCK PURCHASE PLAN
In June 1996, the stockholders approved the stock purchase plan for the
purpose of encouraging eligible employees to acquire shares of Excalibur's
common stock. All active employees of Excalibur are eligible to participate. The
aggregate number of shares of common stock which may be purchased under the
stock purchase plan shall not exceed 250,000, subject to adjustment in the event
of stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding common stock.
Excalibur makes grants of options on February 1 and/or August 1 of each
year the stock purchase plan is in effect or on such other designated date. Each
eligible employee on a date of exercise is entitled to purchase shares of common
stock at a purchase price equal to 85% of the closing sale price of shares of
common stock in the over-the-counter market on the applicable date of exercise.
Options are exercised on April 30, July 31, October 31 and January 31 of each
fiscal year.
Payment for shares of common stock purchased under the stock purchase plan
is made by authorized payroll deductions from an eligible employee's eligible
compensation. Eligible employees who elect to participate in the Stock Purchase
Plan designate that a stated whole percentage equaling at least 1%, but no more
than 10% of eligible compensation be deducted. No participant in the stock
purchase plan is permitted to
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<PAGE> 97
purchase common stock under the stock purchase plan at a rate that exceeds
$25,000 in fair market value of common stock, determined at the time options are
granted, for each calendar year.
It is intended that the stock purchase plan constitutes an "employee stock
purchase plan" under the provisions of Section 423 of the Internal Revenue Code.
No Federal income tax liability results from the grant or exercise of an option
to purchase shares of common stock pursuant to the stock purchase plan, although
amounts deducted from payroll are included in an employee's compensation as
ordinary income.
The board of Excalibur shall have the right to terminate the stock purchase
plan or any offering at any time for any reason. The stock purchase plan is
anticipated to continue in effect through July 31, 2001.
REPORT OF THE EXCALIBUR COMPENSATION COMMITTEE
The following is the report of the compensation committee of the board of
Excalibur, describing the compensation policies and rationale applicable to
Excalibur's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended January 31, 2000 (the information
contained in the report shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission (SEC) nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the Securities Act), or the Securities
Exchange Act of 1934, as amended (the Exchange Act), except to the extent that
Excalibur specifically incorporates it by reference into such filing):
As members of the compensation committee, it is our duty to set
compensation policies applicable to Excalibur's executive officers and to
evaluate the performance of Excalibur's executive officers.
The compensation policy of Excalibur is that a substantial portion of the
annual compensation of each executive officer should relate to and be contingent
upon the performance of Excalibur, as well as the individual contribution of
each executive officer. In addition, the compensation committee believes that
the total compensation package must be competitive with other companies in the
industry to ensure that Excalibur can continue to attract, retain and motivate
key executives who are critical to the long-term success of Excalibur. Under
Excalibur's bonus scheme, bonuses are paid based upon Excalibur attaining
certain sales, expense and profitability goals and on each officer's individual
contribution to Excalibur's attainment of such goals.
Mr. Condo's base salary for the fiscal year ended January 31, 2000 was
$275,000. Mr. Condo's salary was determined by negotiation between Mr. Condo and
Excalibur. Mr. Condo was paid $102,369 during fiscal year 2000 for the
achievement of certain goals during the fiscal year. Fifty percent of Mr.
Condo's potential bonus was based on the achievement of corporate revenue goals;
twenty percent was based on the achievement of corporate profitability goals;
and thirty percent was based on the achievement of quarterly management
objectives as determined by the chief executive officer and the chairman of the
compensation committee.
Compensation Committee: Richard M. Crooks, Jr., Chairman
John S. Hendricks
Philip J. O'Reilly
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee during fiscal 2000 were Messrs.
Crooks, Hendricks and O'Reilly, none of whom is an officer or employee of
Excalibur or its subsidiaries. No member of the compensation committee or
executive officer of Excalibur has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
EMPLOYMENT AGREEMENTS
In May 1998, Patrick C. Condo entered into an agreement with Excalibur
under which Mr. Condo would be paid an amount equal to twelve months of base
salary plus bonus compensation and continuation of his employee benefits for one
year in the event Mr. Condo's employment is terminated or he is removed from his
87
<PAGE> 98
position as chief executive officer within six months following certain "change
of control" events relating to Excalibur. The full board of Excalibur approved
this arrangement. For fiscal 2000, Mr. Condo's annual salary and bonus amounted
to $377,369. In connection with the combination, Mr. Condo waived all rights to
this payment that he would have been entitled to as a result of the combination.
Simultaneously, he entered into an agreement with Newco under which Mr. Condo
will be paid an amount equal to twelve months of base salary plus bonus
compensation and continuation of his employee benefits for one year in the event
Mr. Condo's employment is terminated or he is removed from his position as
president of Newco within six months following certain "change of control"
events relating to Newco.
The offer of employment letter dated September 7, 1995 for James H.
Buchanan, chief financial officer, secretary and treasurer of Excalibur,
stipulates that Mr. Buchanan will be paid an amount equal to twelve months of
base salary in semi-monthly installments should his employment be terminated by
Excalibur without cause. Newco will assume this employment agreement if the
combination is completed.
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<PAGE> 99
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total return to
stockholders of Excalibur's common stock at January 31, 2000 since January 31,
1995 to the cumulative total return over such period of (i) the Nasdaq Stock
Market-U.S., and (ii) the Standard & Poor's High Tech Composite, assuming an
investment in each of $100 on January 31, 1995 and the reinvestment of
dividends. The information contained in the Performance Graph shall not be
deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that Excalibur
specifically incorporates it by reference into such filing.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG EXCALIBUR TECHNOLOGIES CORPORATION,
THE NASDAQ STOCKMARKET (U.S.) INDEX
AND THE S & P TECHNOLOGY SECTOR INDEX
LOGO
* $100 INVESTED ON 1/31/95 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JANUARY 31.
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<PAGE> 100
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF EXCALIBUR
The following table sets forth, as of July 15, 2000, information concerning
the ownership of Excalibur common stock of (i) all persons known to Excalibur to
beneficially own 5% or more of Excalibur's common stock, (ii) each director of
Excalibur, (iii) each named executive officer of Excalibur and (iv) all
directors and executive officers of Excalibur as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER OR GROUP BENEFICIAL OWNERSHIP(1) CLASS OWNED
--------------------------------- ----------------------- ----------------
<S> <C> <C>
Allen & Company Incorporated.......................... 3,315,846(2)(3) 21.6%
Donald R. Keough...................................... 155,500(4) 1.0%
Herbert A. Allen...................................... 556,515(5) 3.7%
Susan K. Allen........................................ 516,599(6) 3.4%
Patrick C. Condo...................................... 420,605(7) 2.7%
Richard M. Crooks, Jr................................. 404,750(8) 2.7%
John S. Hendricks..................................... 25,000(9) *
W. Frank King III..................................... 38,000(10) *
John G. McMillian..................................... 58,500(11) *
Philip J. O'Reilly.................................... 55,000(12) *
Harry C. Payne........................................ 25,000(13) *
James H. Buchanan..................................... 154,170(14) 1.0%
Paul E. Nelson........................................ 0 *
All directors and executive officers as a group (14 15.9% as a group
persons)............................................ 2,545,914(15) (14 persons)
</TABLE>
---------------
* Represents less than one percent of the outstanding common stock.
(1) To Excalibur's knowledge, each person listed has sole voting and investment
power as to the shares indicated, except as described below.
(2) Does not include shares owned by persons, including Messrs. Allen, Keough
and Crooks, or Ms. Allen, and entities which, together with Allen & Company
Incorporated, may be considered a "group," as such term is defined by
Section 13(d) of the Securities Exchange Act of 1934, because (as reported
on Schedule 13D filed with the SEC on July 21, 1997) many of these persons
or entities are Allen stockholders, officers, directors, relatives or
affiliates of the foregoing. No person or entity included in this possible
"group," with the exception of Allen & Company Incorporated, owns 5% or
more of the outstanding common stock.
(3) Includes 271,800 shares of common stock issuable upon conversion of 27,180
shares of Excalibur's cumulative convertible preferred stock.
(4) Does not include shares owned by Allen & Company Incorporated, of which Mr.
Keough is Chairman of the Board, and as to which shares Mr. Keough
disclaims beneficial ownership.
(5) Does not include shares owned by Allen & Company Incorporated, of which Mr.
Allen is President and Chief Executive Officer, and as to which shares Mr.
Allen disclaims beneficial ownership.
(6) Does not include shares owned by Allen & Company Incorporated. Ms. Allen is
a stockholder of Allen & Company Incorporated's parent, and Ms. Allen
disclaims beneficial ownership of these shares.
(7) Includes (a) 10,000 shares of common stock owned beneficially but not of
record upon exercise of stock options at a price of $4.75 per share
expiring November 13, 2002; (b) 15,000 shares of common stock owned
beneficially but not of record upon exercise of stock options at a price of
$4.75 per share, expiring January 4, 2004; (c) 75,000 shares of common
stock owned beneficially but not of record upon exercise of stock options
at a price of $4.75 per share, expiring December 6, 2004; (d) 100,000
shares of common stock owned beneficially but not of record, issuable upon
exercise of stock options at a price of $4.75 per share, expiring June 2,
2005; (e) 100,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options at a price of $4.75 per
share expiring November 1, 2005; (f) 75,000 shares of common stock owned
beneficially but not of record, issuable upon exercise of stock
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<PAGE> 101
options at a price of $7.63 per share expiring August 13, 2007; and (g)
43,750 shares of common stock owned beneficially but not of record,
issuable upon exercise of stock options at a price of $15.00 per share
expiring December 16, 2009.
(8) Includes (a) 50,000 shares of common stock issuable upon exercise of stock
options of Excalibur at a price of $20.56 per share expiring November 27,
2005, and (b) 25,000 shares of common stock issuable upon exercise of stock
options of Excalibur at a price of $26.00 per share expiring February 17,
2010. Does not include shares owned by Allen & Company Incorporated, of
which Mr. Crooks is a director and as to which shares Mr. Crooks disclaims
beneficial ownership.
(9) Represents 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$4.875 per share expiring June 2, 2007.
(10) Includes (a) 13,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$12.50 per share, expiring July 2, 2002; and (b) 25,000 shares of common
stock owned beneficially but not of record, issuable upon exercise of stock
options of Excalibur at a price of $4.75 per share, expiring May 8, 2007.
(11) Includes (a) 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$22.50 per share, expiring June 28, 2006, and (b) 10,000 shares of common
stock owned beneficially but not of record, issuable upon exercise of stock
options of Excalibur at a price of $14.00 per share, expiring October 28,
2006.
(12) Includes (a) 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$13.00 per share expiring March 12, 2003; and (b) 25,000 shares of common
stock owned beneficially but not of record, issuable upon exercise of stock
options of Excalibur at a price of $6.75 per share expiring December 1,
2008.
(13) Represents 25,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$8.188 per share expiring August 25, 2009.
(14) Includes (a) 30,000 shares of common stock owned beneficially but not of
record, issuable upon exercise of stock options of Excalibur at a price of
$4.75 per share expiring September 13, 2005; (b) 70,000 shares owned
beneficially but not of record, issuable upon exercise of stock options of
Excalibur at a price of $4.75 per share expiring November 1, 2005; (c)
37,500 shares of common stock owned beneficially but not of record,
issuable upon exercise of stock options of Excalibur at a price of $7.63
per share expiring August 13, 2007; (d) 6,250 shares of common stock owned
beneficially but not of record, issuable upon exercise of stock options of
Excalibur at a price of $6.25 per share expiring September 1, 2008; and (e)
8,750 shares of common stock owned beneficially but not of record, issuable
upon exercise of stock options of Excalibur at a price of $15.00 per share
expiring December 16, 2009.
(15) Includes 948,623 shares of common stock owned beneficially but not of
record, issuable upon the exercise of options to purchase common stock of
Excalibur.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Donald R. Keough, the chairman of the board of Excalibur, is the chairman
of the board of Allen & Company Incorporated. Herbert A. Allen, a director of
Excalibur, is the president and chief executive officer of Allen & Company
Incorporated. Susan K. Allen, a director of Excalibur, is a stockholder of the
parent of Allen & Company Incorporated. Richard M. Crooks, Jr., a director of
Excalibur, is a director of and consultant to Allen & Company Incorporated.
Excalibur's policy is that it will not make loans to, or enter into other
transactions with directors, officers or affiliates unless such loans or
transactions are approved by a majority of Excalibur's independent disinterested
directors, may reasonably be expected to benefit Excalibur, and will be on terms
no less favorable to Excalibur than could be obtained from unaffiliated third
parties.
91
<PAGE> 102
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
SEC thereunder require Excalibur's executive officers and directors, and persons
who own more that ten percent of a registered class of Excalibur's equity
securities, to file reports of initial ownership and changes in ownership with
the SEC. Based solely on its review of copies of such forms received by
Excalibur, or on written representations from certain reporting persons that no
other reports were required for such persons, Excalibur believes that during or
with respect to the period from February 1, 1999 to January 31, 2000 all of the
Section 16(a) filing requirements applicable to its executive officers,
directors and ten percent stockholders were complied with on a timely basis.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
If the combination is not completed, proposals of stockholders intended to
be presented by such stockholders at next year's annual meeting must be received
by Excalibur at its principal office no later than , 2001 and must
satisfy the conditions established by the Securities and Exchange Commission for
stockholder proposals to be included in Excalibur's proxy statement for that
meeting. There will be no such annual meeting of Excalibur if the combination is
completed.
92
<PAGE> 103
OTHER MATTERS
EXCALIBUR'S AND NEWCO'S INDEPENDENT AUDITORS
Excalibur's and Newco's Current Auditors
On the recommendation of the audit committee of the Excalibur board of
directors, the board has selected Ernst & Young LLP as our independent auditors
for the fiscal year ending January 31, 2001. Following the closing of the
combination, Ernst & Young will serve as the independent auditors of Newco for
the fiscal year ending January 31, 2001. Representatives of Ernst & Young are
expected to be present at the annual meeting to respond to appropriate questions
and to make a statement if they so desire.
Information Concerning Prior Changes in Excalibur's Auditors
On October 28, 1998, Excalibur disengaged its independent accounting firm,
Arthur Andersen LLP. The decision to dismiss Arthur Andersen was approved by the
board of directors of Excalibur on the recommendation of its audit committee.
During the fiscal year ended January 31, 1998 and any subsequent interim
period, none of Arthur Andersen's reports on Excalibur's financial statements
contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles. During that
reporting period, there were no matters of disagreement with Arthur Andersen on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to the
satisfaction of Arthur Andersen, would have caused Arthur Andersen to make a
reference thereto in its report, except for the following:
- In Arthur Andersen's report to the audit committee issued in May 1997,
Arthur Andersen noted that in the quarter ending April 30, 1996, Arthur
Andersen and Excalibur disagreed on the accounting treatment of two
sales. Arthur Andersen stated that the issues were ultimately resolved to
their satisfaction.
- In Excalibur's quarter ending July 31, 1998, Arthur Andersen and
Excalibur had a difference of opinion on the appropriate accounting
treatment of a contract which granted the licensee the rights to
distribute Excalibur's software products as an original equipment
manufacturer and use Excalibur's software products for the licensee's
internal business operations. The contract also provided for custom
development to Excalibur's software products to be distributed by the
licensee. The internal use license did not require custom developments to
Excalibur's software products. The difference of opinion between Arthur
Andersen and Excalibur related to the accounting treatment for the
internal use license granted in the contract. After discussion, Excalibur
accepted Arthur Andersen's proposed accounting treatment and employed the
percentage-of-completion method of accounting on the entire contract.
The audit committee has discussed each of the matters described above with
Arthur Andersen.
On November 9, 1998, Excalibur engaged PricewaterhouseCoopers LLP as its
independent accounting firm. The decision to engage PricewaterhouseCoopers was
approved by Excalibur's board of directors on the recommendation of its audit
committee.
On July 14, 2000, PricewaterhouseCoopers, resigned in anticipation of a
conflict of interests resulting from Excalibur's proposed combination with Intel
and the prior existence of a business alliance between PricewaterhouseCoopers
and Intel which PricewaterhouseCoopers expects would impair its auditor
independence with regard to Newco.
During the fiscal years ended January 31, 1999 and January 31, 2000 and
through July 14, 2000, none of PricewaterhouseCoopers' reports on Excalibur's
financial statements contained an adverse opinion or a disclaimer of opinion, or
were qualified or modified as to uncertainty, audit scope or accounting
principles. During that reporting period, there were no matters of disagreement
with PricewaterhouseCoopers on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
93
<PAGE> 104
which, if not resolved to the satisfaction of PricewaterhouseCoopers, would have
caused PricewaterhouseCoopers to make a reference thereto in its report.
On July 19, 2000, Excalibur engaged Ernst & Young as its new independent
accounting firm. The decision to engage Ernst & Young was approved by the board
of directors of Excalibur on the recommendation of its audit committee.
DISCRETIONARY AUTHORITY
The annual meeting is called for the specific purposes set forth in this
proxy statement/prospectus and discussed above, and also for the purpose of
transacting such other business as may properly come before the annual meeting.
At the date of this proxy statement/prospectus, Excalibur does not expect that
any other matters will be submitted for consideration at the annual meeting
other than those specifically referred to above. If any other matters properly
come before the annual meeting, the proxy holders will be entitled to exercise
discretionary authority to the extent permitted by applicable law.
LEGAL MATTERS
The validity of the Newco common stock to be issued in connection with the
combination will be passed upon by Heller Ehrman White & McAuliffe LLP, New
York, New York, counsel to Excalibur.
EXPERTS
The financial statements of Excalibur as of and for the years ended January
31, 2000 and 1999, incorporated in this proxy statement/prospectus by reference
to the Annual Report of Excalibur on Form 10-K for the year ended January 31,
2000 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. The financial statements of
Excalibur as of January 31, 1998 and for the year ended January 31, 1998,
incorporated by reference in this proxy statement/prospectus, have been audited
by Arthur Andersen, LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of the Interactive Media Services division of
Intel at December 25, 1999 and December 26, 1998 and for the year ended December
25, 1999 and the period from inception to December 26, 1998, which are referred
to and made a part of this proxy statement/prospectus, have been audited by
Ernst & Young, LLP, independent auditors, as set forth in their report appearing
elsewhere herein, and are included in reliance upon said report given upon the
authority of said firm as experts in accounting and auditing.
94
<PAGE> 105
FINANCIAL STATEMENTS
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
YEAR ENDED DECEMBER 25, 1999 AND THE PERIOD
FROM INCEPTION TO DECEMBER 26, 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Financial Statements
Statement of Assets to be Contributed....................... F-3
Statement of Net Revenues and Direct Expenses............... F-4
Notes to Financial Statements............................... F-5
</TABLE>
F-1
<PAGE> 106
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Intel Corporation
We have audited the accompanying statement of assets to be contributed of
the Interactive Media Services division of Intel Corporation as of December 25,
1999 and December 26, 1998, and the related statements of net revenues and
direct expenses for the year ended December 25, 1999 and the period from
inception to December 26, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1, the accompanying financial statements were prepared
solely to present the assets to be contributed and the related net revenues and
direct expenses of the Interactive Media Services division of Intel Corporation
pursuant to the Agreement and Plan of Contribution and Merger, dated April 30,
2000, between Intel Corporation, Excalibur Technologies Corporation, Exca
Holdings, Inc., and Excalibur Transitory, Inc., as amended on August 14, 2000,
and are not intended to be a complete presentation of the assets and liabilities
or the results of operations of the Interactive Media Services division of Intel
Corporation.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets to be contributed of the Interactive Media
Services division of Intel Corporation as of December 25, 1999 and December 26,
1998 and the related net revenues and direct expenses for the year ended
December 25, 1999 and the period from inception to December 26, 1998 in
conformity with accounting principles generally accepted in the United States.
San Jose, California
August 14, 2000
F-2
<PAGE> 107
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF ASSETS TO BE CONTRIBUTED
<TABLE>
<CAPTION>
APRIL 1,
DECEMBER 26, DECEMBER 25, 2000
1998 1999 (UNAUDITED)
------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Investments........................................... $ -- $ 884 $3,255
Costs in excess of consideration due or received on
uncompleted contracts............................... 35 98 491
Property, plant and equipment:
Computer equipment.................................. 111 322 322
Accumulated depreciation............................ (23) (104) (131)
---- ------ ------
Net property, plant and equipment..................... 88 218 191
---- ------ ------
Assets to be contributed.............................. $123 $1,200 $3,937
==== ====== ======
</TABLE>
F-3
<PAGE> 108
INTERACTIVE MEDIA SERVICES DIVISION OF INTEL CORPORATION
STATEMENT OF NET REVENUES AND DIRECT EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
PERIOD FROM ----------------------------
INCEPTION TO YEAR ENDED MARCH 27, APRIL 1,
DECEMBER 26, DECEMBER 25, 1999 2000
1998 1999 (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues............................. $ -- $ 1,568 $ -- $ --
Cost of revenues......................... -- 129 -- --
Direct operating expenses:
Research and development............... 409 1,945 453 604
Selling, marketing and
administrative...................... 5,810 5,709 1,592 1,615
------- ------- ------- -------
Total direct operating expenses.......... 6,219 7,654 2,045 2,219
------- ------- ------- -------
Total direct expenses.................... 6,219 7,783 2,045 2,219
------- ------- ------- -------
Direct expenses in excess of net
revenues............................... $(6,219) $(6,215) $(2,045) $(2,219)
======= ======= ======= =======
</TABLE>
F-4
<PAGE> 109
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF APRIL 1, 2000 AND FOR THE THREE MONTHS
ENDED APRIL 1, 2000 AND MARCH 27, 1999 IS UNAUDITED)
1. BASIS OF PRESENTATION
RELATIONSHIP WITH INTEL CORPORATION
The Interactive Media Services division (IMS or the IMS division) is
comprised of three separate but related groups within the New Business Group of
Intel Corporation (Intel or the Company). IMS provides solutions to content
customers and broadcast networks as they deliver digital content to end users
using the internet and emerging broadband environments, such as satellite,
cable, digital subscriber lines and wireless. The accompanying financial
statements of IMS were prepared to present, pursuant to the Agreement and Plan
of Contribution and Merger dated April 30, 2000, as amended August 14, 2000 (the
Agreement) between Intel, Excalibur Technologies Corporation (Excalibur), Exca
Holdings, Inc. (Newco) and Excalibur Transitory, Inc., the assets to be
contributed and the related net revenues and direct expenses of IMS, and are not
intended to be a complete presentation of the results of operations of IMS. In
connection with this transaction, Excalibur will combine all of its business
operations with Newco and become a wholly-owned subsidiary of Newco, and Intel
will contribute its IMS division, intellectual property assets and other assets
used by that division, as well as approximately $155,000,000 of cash to Newco.
The Statement of Assets to be Contributed excludes the $155,000,000 of cash to
be contributed by Intel to Newco as the Agreement was executed subsequent to
April 1, 2000. The Statement of Net Revenues and Direct Expenses includes an
allocation of certain expenses for services provided by Intel in support of IMS.
The closing of the Agreement and Plan of Contribution and Merger is subject to
regulatory approval and Excalibur shareholder approval.
The three groups comprising the IMS division were each formally established
and operations began between June 1998 and October 1998. These groups were not
separate legal entities or segments of Intel and did not operate as discrete
operating units, but were embedded in Intel's overall operations. As a result,
separate financial statements have not been maintained for the operations to be
contributed to Newco.
The accompanying financial statements have been prepared from the
historical accounting records of Intel and do not purport to reflect the assets
to be contributed, and the net revenues and direct expenses that would have
resulted if IMS had operated as an unaffiliated independent company. Since only
certain assets are being contributed, statements of stockholders' equity and
cash flows are not applicable.
All contracts referred to herein as contracts of IMS have actually been
executed by Intel, and all cash or equity instruments described as received by
IMS under such contracts have actually been received by Intel. Certain of these
contracts, and certain portions of the equity instruments and cash received or
receivable by Intel, will be assigned to Newco under the Agreement.
UNAUDITED FINANCIAL STATEMENTS
The financial information as of March 27, 1999 and April 1, 2000 and for
the three months ended March 27, 1999 and April 1, 2000 is unaudited, but
includes all adjustments (consisting of normal recurring adjustments) that IMS
considers necessary for a fair presentation of its assets to be contributed at
such dates and its results for those periods. The net revenues and direct
expenses for the three months ended April 1, 2000 are not necessarily indicative
of the results that may be expected for the entire year or any future period.
FISCAL YEAR END
The Company has a fiscal year that ends the last Saturday in December.
Fiscal 1999 had a 52 week year. Periodically, there will be a 53 week year. The
next 53 week year will end December 30, 2000. The three month period ended April
1, 2000 represented a fourteen week period.
F-5
<PAGE> 110
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
RISKS AND UNCERTAINTIES
The preparation of the financial statements requires management to make
estimates and assumptions which affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Included in the Statement of Assets to be Contributed are costs in
excess of related consideration due or received on uncompleted contracts.
Management believes that these costs will ultimately be fully recoverable for
each of the individual contracts included; however, given the relatively early
stages of certain of the contracts, subsequent impairment may be possible which
would result in some of the costs not being fully recoverable.
INVESTMENTS
Investments included in the Statement of Assets to be Contributed represent
those equity instruments received by IMS in connection with certain customer
arrangements and which under the terms of the Agreement are to be transferred to
Newco. These equity investments have been accounted for in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities, and classified as available
for sale. Available for sale securities are recorded at fair value. For all
periods presented there have been no sales of these equity investments and,
accordingly, no realized gains or losses. Unrealized gains and losses on these
investments do not impact the Statement of Assets to be Contributed due to the
absence of stockholders' equity.
The balance in the Investments account included on the Statement of Assets
to be Contributed represents the fair value of IMS's holding of Customer A
common stock to be transferred to Newco. See Note 3 for further discussion.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
for financial reporting purposes principally by the use of the straight line
method over the estimated useful lives of the assets, approximately four years.
Direct operating expenses include depreciation expense of $7,000, $49,000,
$4,000 and $19,000 for the period from inception to December 26, 1998, the year
ended December 25, 1999, and the three month periods ended March 27, 1999 and
April 1, 2000, respectively, related to the assets to be contributed.
REVENUE RECOGNITION
IMS provides a range of services to its customers including the licensing
of software, technical support services and consulting. The arrangements to
provide software typically require significant modification or customization of
the software under a long-term development contract.
For such contracts, revenue is recognized in accordance with AICPA
Statement of Position (SOP) 97-2, Software Revenue Recognition. Given the
essential nature of the customization and development efforts to the licensed
software, the arrangements have been accounted for in accordance with SOP 81-1,
Accounting for Performance of Construction Type and Certain Production-Type
Contracts and Accounting Research Bulletin (ARB) No. 45, Long-Term
Construction-Type Contracts. In accordance with SOP 81-1, IMS has determined it
is appropriate to account for these contracts using the completed contract
method because IMS does not have substantial history of making estimates of the
extent of progress towards completion. In addition, certain of the contracts
lack clearly defined deliverables, terms and conditions. Accordingly, revenue is
recognized when all remaining costs, IMS obligations and potential risks are
insignificant and the product has been delivered and accepted by the customer.
For those contracts that have not been completed, the related costs incurred to
date, net of the consideration due or received from the customer, have been
classified
F-6
<PAGE> 111
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in the Statement of Assets to be Contributed as costs in excess of related
consideration due or received on uncompleted contracts. Anticipated losses, if
any, on uncompleted contracts are recognized in the period in which the losses
are probable and estimable.
Consideration due or received by IMS in connection with certain contracts
may be in the form of the customer's equity instruments. Any equity instruments
received from the customer in connection with arrangements entered into on or
before March 16, 2000 have been valued at the date of the arrangement. Amounts
for equity instruments (and other consideration) which have not been earned are
netted against the costs incurred to date on uncompleted contracts and reflected
on this basis in the Statement of Assets to be Contributed. Amounts for equity
instruments (and other consideration) which have been earned and for which the
related contracts have been completed have been recorded as net revenues in the
Statement of Net Revenues and Direct Expenses. For equity instruments received
in connection with arrangements entered into after March 16, 2000, the related
equity instrument is valued at the date the revenue will be recognized by IMS,
generally the date IMS has fulfilled all of its obligations under the
arrangement, in accordance with Emerging Issues Task Force (EITF) 00-8,
Accounting by a Grantee for an Equity Instrument to Be Received in Conjunction
with Providing Goods or Services. Between March 17, 2000 and April 1, 2000, no
arrangements were entered into which included equity instruments received by
IMS.
DIRECT OPERATING EXPENSES
The caption "Direct operating expenses" on the accompanying financial
statements represents that portion of the total direct operating expenses of
Intel incurred by IMS and/or allocated to IMS. Intel does not maintain separate
accounts to capture the cost of revenues, research and development, marketing,
or general and administrative expenses for IMS. Since IMS operated within the
New Business Group of Intel and Intel maintained separate accounts to capture
certain of the aforementioned expenses for this Group, the IMS direct operating
expenses have been derived from this Group's direct operating expenses. IMS's
direct operating expenses were derived by multiplying the estimated number of
IMS employees compared to the total Group employees by the Group's direct
operating expenses. Included in IMS's direct operating expenses is an allocation
of approximately $1,396,000, $2,495,000, $934,000 and $580,000 for facilities,
information technology, management, finance and administrative support charged
to IMS for fiscal 1998 and 1999 and the three months ended March 27, 1999 and
April 1, 2000, respectively. IMS's direct operating expenses do not include any
allocations for human resource, legal, sales and marketing support, or certain
profit dependent amounts in excess of accruals allocated to the IMS division.
Additionally, IMS's Statement of Net Revenues and Direct Expenses also excludes
allocations of interest income, interest expense and income taxes. None of the
aforementioned expenses or income are allocated by Intel to either IMS or the
New Business Group.
The direct operating expenses are not necessarily indicative of the
expenses that would have been incurred had IMS operated as an unaffiliated,
independent business.
COST OF REVENUES AND COSTS IN EXCESS OF CONSIDERATION DUE OR RECEIVED ON
UNCOMPLETED CONTRACTS
Cost of revenues and costs in excess of consideration due or received on
uncompleted contracts includes direct labor costs and materials related to the
specific contracts. The direct labor costs are computed based on management's
estimate of the percentage of time incurred by IMS employees and contractors
identified as working on the contracts. Management believes these estimates are
reasonable. The cost of revenues is not necessarily indicative of the costs that
would have been incurred had IMS operated as an unaffiliated, independent
business.
F-7
<PAGE> 112
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. COSTS IN EXCESS OF RELATED CONSIDERATION DUE OR RECEIVED ON UNCOMPLETED
CONTRACTS
The following represents the cumulative costs incurred, net of the
accumulated related consideration due or received on uncompleted contracts as of
the following dates:
<TABLE>
<CAPTION>
APRIL 1,
DECEMBER 26, DECEMBER 25, 2000
1998 1999 (UNAUDITED)
------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONTRACT COSTS INCURRED TO DATE:
Customer A.................................... $-- $ 19 $ 45
Customer B.................................... -- 592 1,062
Customer C.................................... -- -- 319
Customer D.................................... -- 784 1,132
Customer E.................................... -- 153 367
Customer F.................................... 35 -- --
CONSIDERATION DUE OR RECEIVED:
Customer A.................................... $-- $1,010 $1,085
Customer B.................................... -- -- 183
Customer C.................................... -- -- 726
Customer D.................................... -- -- --
Customer E.................................... -- 440 440
Customer F.................................... -- -- --
--- ------ ------
Costs in excess of related consideration due
or received on uncompleted contracts........ $35 $ 98 $ 491
=== ====== ======
</TABLE>
The above contracts are at varying stages of completion, and some have
significant efforts remaining before delivery of the product is complete and
accepted by the customer.
CONSIDERATION DUE OR RECEIVED
On November 5, 1999, the Company received warrants to purchase 209,000
shares of Series A convertible preferred stock and 994,938 shares of Series B
convertible preferred stock of Customer E in connection with certain software
development services to be performed. The warrants were immediately exercisable.
The Company determined the fair value of the warrants using the Black-Scholes
valuation model assuming a fair value of Customer E's common stock of $.56 per
share for Series A preferred stock and $1.61 for Series B preferred stock, a
volatility factor of 50% for Series A and B preferred stock, a risk-free
interest rate of 6.55% for Series A preferred stock and 5.81% for Series B
preferred stock and lives of 10 years for Series A preferred stock and 1 year
for Series B preferred stock. At November 5, 1999, the fair value of the
warrants for Series A preferred stock and Series B preferred stock was $82,000
and $358,000, respectively. In accordance with the Agreement, these shares will
not be transferred to Newco and accordingly have been excluded from the
Investment balance on the Statement of Assets to be Contributed.
On November 12, 1999, IMS received 224,514 shares of Customer A common
stock in connection with certain software development services to be performed.
IMS determined the fair value of the common stock of $1,010,000 using Customer
A's IPO offering price of $4.50 per share on November 22, 1999. The shares are
subject to a recoupment provision in the operating agreement between IMS and
Customer A. As of April 1, 2000, IMS has earned 20% of these shares. In
accordance with the Agreement, all 224,514 shares will be transferred to Newco
and have been included in the Investments balance on the Statement of Assets to
be Contributed at their fair value at the respective dates indicated.
Additionally, in the first quarter of 2000, the Company received a $75,000
advance cash payment from Customer A.
F-8
<PAGE> 113
INTERACTIVE MEDIA SERVICES DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 12, 1999, Intel received 450,000 shares of Customer F common
stock in connection with certain software development services to be performed.
A portion of the development services were performed by divisions within Intel
separate from IMS. Intel assessed the relative effort performed by the multiple
divisions, including IMS, to determine the proportion of this stock to be
allocated to IMS. As a result, Intel allocated 150,000 shares of Customer F
common stock under this arrangement to IMS. The Company determined the fair
value of these shares of $771,000 using the Customer F common stock price on
November 12, 1999 of $5.14 per share. This amount has been included in revenue,
and the related costs have been included in cost of revenues for fiscal 1999 as
the services related to these shares were completed during fiscal 1999. In
accordance with the Agreement, these shares will not be transferred to Newco and
accordingly have been excluded from the investment balance on the Statement of
Assets to be Contributed.
On January 27, 2000, IMS entered into an agreement with Customer C to
purchase up to 304,878 warrants exercisable for shares of Series A convertible
preferred stock for $8.95 per share in connection with certain software
development services to be performed. The shares shall become exercisable based
upon the completion of certain milestones identified within the development
agreement entered into simultaneously with the warrant agreement. The amount of
warrants that become exercisable is determined by criteria defined in the
warrant agreement. At the end of the first quarter of 2000 a milestone fee of
$726,000 was due from Customer C, of which IMS expects to receive $507,000 in
cash and approximately 45,000 shares of Series A convertible preferred stock
upon exercise of an equivalent number of warrants. In accordance with the
Agreement, neither these shares nor the cash will be transferred to Newco and
accordingly they have been excluded from the Investment balance on the Statement
of Assets to be Contributed. Newco will retain the right to earn any remaining
unearned warrants, subsequent to the closing of the Agreement.
4. SIGNIFICANT CUSTOMERS
Those customers which account for more than 10% of net revenues in each
period are as follows:
<TABLE>
<CAPTION>
APRIL 1,
DECEMBER 26, DECEMBER 25, 2000
1998 1999 (UNAUDITED)
------------ ------------ -----------
<S> <C> <C> <C>
Customer F..................................... -- 81% --
Customer G..................................... -- 19% --
</TABLE>
F-9
<PAGE> 114
APPENDIX A1
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
DATED AS OF APRIL 30, 2000
AMONG
INTEL CORPORATION,
EXCALIBUR TECHNOLOGIES CORPORATION,
EXCA HOLDINGS, INC.
AND
EXCALIBUR TRANSITORY, INC.
<PAGE> 115
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE 1 THE CONTRIBUTION................................................. A1-1
Section 1.1. The Contribution............................................ A1-1
Section 1.2. Excluded Assets............................................. A1-2
Section 1.3. Excluded Liabilities........................................ A1-2
Section 1.4. Assignment of Contracts and Rights.......................... A1-2
Section 1.5. Method of Contribution...................................... A1-2
Section 1.6. Omitted Assets.............................................. A1-2
ARTICLE 2 THE MERGER....................................................... A1-3
Section 2.1. The Merger.................................................. A1-3
Section 2.2. Effective Time.............................................. A1-3
Section 2.3. Closing of the Merger....................................... A1-3
Section 2.4. Effects of the Merger....................................... A1-3
Section 2.5. Certificate of Incorporation and Bylaws..................... A1-3
Section 2.6. Directors................................................... A1-3
Section 2.7. Officers.................................................... A1-3
Section 2.8. Conversion of Shares........................................ A1-3
Section 2.9. Exchange of Certificates.................................... A1-4
Section
2.10. Assumed Stock Options....................................... A1-5
Section
2.11. Dissenters' Rights.......................................... A1-6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY, NEWCO AND
TRANSITORY....................................................... A1-6
Section 3.1. Organization and Qualification; Subsidiaries; Investments... A1-6
Section 3.2. Capitalization of the Company and its Subsidiaries.......... A1-7
Section 3.3. Authority Relative to this Agreement; Recommendation........ A1-9
Section 3.4. SEC Reports; Financial Statements........................... A1-10
Section 3.5. Registration Statement and Proxy Statement.................. A1-10
Section 3.6. Consents and Approvals; No Violations....................... A1-10
Section 3.7. No Default.................................................. A1-11
Section 3.8. No Undisclosed Liabilities; Absence of Changes.............. A1-11
Section 3.9. Litigation.................................................. A1-12
Section
3.10. Compliance with Applicable Law.............................. A1-12
Section
3.11. Employee Benefits........................................... A1-12
Section
3.12. Labor and Employment Matters................................ A1-15
Section
3.13. Environmental Laws and Regulation........................... A1-16
Section
3.14. Taxes....................................................... A1-17
Section
3.15. Intellectual Property....................................... A1-19
Section
3.16. Insurance................................................... A1-22
Section
3.17. Certain Business Practices.................................. A1-22
Section
3.18. Product Warranties.......................................... A1-22
Section
3.19. Suppliers and Customers..................................... A1-23
Section
3.20. Vote Required............................................... A1-23
Section
3.21. Opinion of Financial Advisor................................ A1-23
Section
3.22. Brokers..................................................... A1-23
Section
3.23. Takeover Statute............................................ A1-23
Section
3.24. Representations Complete.................................... A1-23
</TABLE>
A1-i
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INTEL.......................... A1-23
Section 4.1. Organization and Qualification.............................. A1-23
Section 4.2. Authority Relative to this Agreement........................ A1-24
Section 4.3. Information Supplied........................................ A1-24
Section 4.4. Consents and Approvals; No Violations....................... A1-24
Section 4.5. No Default.................................................. A1-24
Section 4.6. Litigation.................................................. A1-25
Section 4.7. Compliance with Applicable Law.............................. A1-25
Section 4.8. Intellectual Property....................................... A1-25
Section 4.9. Product Warranties.......................................... A1-27
Section
4.10. Suppliers and Customers..................................... A1-27
Section
4.11. Brokers..................................................... A1-28
Section
4.12. Representations Complete.................................... A1-28
ARTICLE 5 COVENANTS........................................................ A1-28
Section 5.1. Conduct of Business of the Company.......................... A1-28
Section 5.2. Conduct of Business Related to the Contributed Assets....... A1-30
Section 5.3. No Solicitation or Negotiation.............................. A1-31
Section 5.4. Registration Statement...................................... A1-33
Section 5.5. Certain Filings; Reasonable Effort.......................... A1-33
Section 5.6. Meeting of Stockholders..................................... A1-34
Section 5.7. Access to Information....................................... A1-34
Section 5.8. Public Announcements........................................ A1-35
Section 5.9. Indemnification and Directors' and Officers' Insurance...... A1-35
Section
5.10. Notification of Certain Matters............................. A1-36
Section
5.11. Additions to and Modification of Disclosure Schedules....... A1-36
Section
5.12. Employee Matters............................................ A1-37
Section
5.13. Non-Disclosure Agreements with Employees of the Company..... A1-37
Section
5.14. Takeover Statutes........................................... A1-37
Section
5.15. Stock Options............................................... A1-37
Section
5.16. Nasdaq...................................................... A1-38
Section
5.17. Exchange Act Registration................................... A1-38
Section
5.18. Executive Officers of Newco................................. A1-38
Section
5.19. Board of Directors of Newco................................. A1-38
Section
5.20. Intellectual Property Matters............................... A1-38
Section
5.21. Financial Reporting......................................... A1-38
Section
5.22. Certain Actions............................................. A1-39
Section
5.23. Incurrence of Indebtedness.................................. A1-39
Section
5.24. Sales Taxes................................................. A1-39
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE CONTRIBUTION AND THE MERGER.... A1-39
Section 6.1. Conditions to Each Party's Obligations to Effect the A1-39
Contribution and the Merger...............................
Section 6.2. Conditions to the Obligations of the Company, Newco and A1-40
Transitory................................................
Section 6.3. Conditions to the Obligations of Intel...................... A1-41
</TABLE>
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER................................... A1-42
Section 7.1. Termination................................................. A1-42
Section 7.2. Effect of Termination....................................... A1-43
Section 7.3. Fees and Expenses........................................... A1-43
Section 7.4. Extension; Waiver........................................... A1-44
ARTICLE 8 MISCELLANEOUS.................................................... A1-44
Section 8.1. Nonsurvival of Representations and Warranties............... A1-44
Section 8.2. Entire Agreement; Assignment................................ A1-44
Section 8.3. Validity.................................................... A1-45
Section 8.4. Notices..................................................... A1-45
Section 8.5. Governing Law and Venue; Waiver of Jury Trial............... A1-45
Section 8.6. Descriptive Headings........................................ A1-46
Section 8.7. Parties in Interest......................................... A1-46
Section 8.8. Certain Definitions......................................... A1-46
Section 8.9. Personal Liability.......................................... A1-47
Section
8.10. Specific Performance........................................ A1-47
Section
8.11. Counterparts................................................ A1-48
Section
8.13. Ambiguities................................................. A1-48
Section
8.13. Waiver...................................................... A1-48
Section
8.14. Execution................................................... A1-48
Section
8.15. Schedules................................................... A1-48
Section
8.16. Amendment................................................... A1-48
</TABLE>
A1-iii
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TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM IN AGREEMENT
---- ---------------
<S> <C>
affiliate................................................... Section 8.8 (a)
Agreement................................................... Preamble
Applicable Law.............................................. Section 8.8 (b)
Assumed Option Plan......................................... Section 2.10 (a)
Assumed Option Plans........................................ Section
2.10 (a)
Assumed Option.............................................. Section 2.10 (a)
business day................................................ Section 8.8 (c)
Business System............................................. Section 3.15 (p)(i)
capital stock............................................... Section 8.8 (d)
Certificate of Merger....................................... Section 2.2
Certificates................................................ Section 2.9 (b)
Closing Date................................................ Section 2.3
Closing..................................................... Section 2.3
Code........................................................ Section 3.14 (a)(i)
Combination................................................. Preamble
Commonly Controlled Entity.................................. Section 3.11 (a)
Company Board............................................... Preamble
Company Common Stock........................................ Section 1.1
Company Disclosure Schedule................................. Article 3
Company Permits............................................. Section 3.10
Company Plans............................................... Section 8.8 (e)
Company..................................................... Preamble
Company Preferred Stock..................................... Section 1.1
Company SEC Reports......................................... Section 3.4 (a)
Company Securities.......................................... Section 3.2 (a)
Company Stock Option........................................ Section 3.2 (a)
Compensation and Benefit Plans.............................. Section 3.11 (a)
Confidentiality Agreement................................... Section 5.7 (c)
Contributed Assets.......................................... Preamble
Contribution................................................ Preamble
Cooper Disclosure Schedule.................................. Article 4
Cooper Outbound License Agreements.......................... Section 4.8 (f)
Cooper Permits.............................................. Section 4.7
Cooper...................................................... Preamble
Cooper SEC Reports.......................................... Section 4.6
Copyrights.................................................. Section 3.15 (a)
DGCL........................................................ Section 2.1
Dissenting Preferred Stock.................................. Section 2.11
Effective Time.............................................. Section 2.2
Environmental Laws.......................................... Section 3.13 (a)
ERISA....................................................... Section 3.11 (a)
Exchange Act................................................ Section 3.2 (e)
Exchange Agent.............................................. Section 2.9 (a)
Exchange Fund............................................... Section 2.9 (a)
Final Date.................................................. Section 7.1 (b)
</TABLE>
A1-iv
<PAGE> 119
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM IN AGREEMENT
---- ---------------
<S> <C>
Financial Advisor........................................... Section 3.21
Foreign Plans............................................... Section 3.11 (k)
Governmental Entity......................................... Section 3.6
Hazardous Material.......................................... Section 3.13 (a)
hereof, herein and herewith................................. Section 8.8 (f)
HSR Act..................................................... Section 3.6
Inbound License Agreements.................................. Section 3.15 (f)
include..................................................... Section 8.8 (g)
Indemnified Liabilities..................................... Section 5.9 (a)
Indemnified Persons......................................... Section 5.9 (a)
Insurance Policies.......................................... Section 3.16
Insured Parties............................................. Section 5.9 (c)
Intellectual Property....................................... Section 3.15 (a)
knowledge or known.......................................... Section 8.8 (h)
Lien........................................................ Section 3.2 (d)
Material Adverse Effect on the Company...................... Section 3.1 (b)
Material Adverse Effect on the Contributed Assets........... Section 4.1 (b)
Meeting..................................................... Section 5.6 (c)
Merger...................................................... Preamble
Newco Common Stock.......................................... Preamble
Newco Common Stock.......................................... Section 3.2 (c)
Newco Non-Voting Common Stock............................... Preamble
Newco....................................................... Preamble
Newco Preferred Stock....................................... Section 2.8 (b)
Newco Stock Options......................................... Section 2.10 (b)
Notice of Superior Proposal................................. Section 5.3 (b)
Omitted Assets.............................................. Section 1.6
Other Interests............................................. Section 3.1 (c)
Outbound License Agreements................................. Section 3.15 (f)
Patents..................................................... Section 3.15 (a)
Pension Plans............................................... Section 3.11 (a)
person...................................................... Section 8.8 (i)
Proxy Statement............................................. Section 5.4
Registration Statement...................................... Section 5.4
SEC......................................................... Section 3.4 (a)
Securities Act.............................................. Section 2.10 (b)
Shares...................................................... Section 2.8 (a)
Software.................................................... Section 3.15 (m)
subsidiary or subsidiaries.................................. Section 8.8 (j)
Superior Proposal........................................... Section 5.3 (c)
Surviving Corporation....................................... Section 2.1
Takeover Statute............................................ Section 3.23
Tax Affiliates.............................................. Section 3.14 (a)(iii)
Tax or Taxes................................................ Section 3.14 (a)(ii)
Tax Return.................................................. Section 3.14 (a)(iv)
Third Party Acquisition..................................... Section 5.3 (c)
Third Party................................................. Section 5.3 (c)
</TABLE>
A1-v
<PAGE> 120
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM IN AGREEMENT
---- ---------------
<S> <C>
Trade Secrets............................................... Section 3.15 (a)
Trademarks.................................................. Section 3.15 (a)
Transitory Common Stock..................................... Section 3.2 (c)
Transitory.................................................. Preamble
Year 2000 Capable........................................... Section 3.15 (p)(i)
</TABLE>
A1-vi
<PAGE> 121
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
THIS AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER (this "Agreement"),
dated as of April 30, 2000, is by and among Intel Corporation, a Delaware
corporation ("Intel"), Excalibur Technologies Corporation, a Delaware
corporation (the "Company"), Exca Holdings, Inc., a Delaware corporation and a
wholly owned subsidiary of the Company ("Newco"), and Excalibur Transitory,
Inc., a Delaware corporation and a wholly owned subsidiary of Newco
("Transitory"). Initially capitalized and certain other terms not otherwise
defined herein shall have the meanings ascribed to such terms in Section 8.8 of
this Agreement.
WHEREAS, the Company, Intel, Newco and Transitory have each determined that
it is in the best interests of their respective stockholders to combine certain
assets of Intel related to interactive media services with the business and
operations of the Company;
WHEREAS, in order to effect such combination, the parties contemplate,
among other things, that (i) Intel, at the Effective Time (as defined in Section
2.1) and upon satisfaction of the conditions set forth herein, will contribute
(the "Contribution") the assets of Intel set forth on Exhibit A hereto (the
"Contributed Assets") to Newco in exchange for 14,168,655 shares of the Class A
Common Stock, $.01 par value per share, of Newco (the "Newco Common Stock") and
12,865,738 shares of the Class B Common Stock, $.01 par value per share, of
Newco (the "Newco Non-Voting Common Stock"), subject to adjustment as provided
in Section 1.1 hereof, and (ii) that Transitory will merge with and into the
Company (the "Merger"), with the Company surviving the Merger as a wholly owned
subsidiary of Newco, the holders of the Company's common stock receiving one (1)
share of Newco Common Stock for each share of the common stock of the Company
outstanding immediately prior to the Effective Time and the holders of the
Company's preferred stock receiving one (1) share of preferred stock of Newco
for each share of Company preferred stock outstanding immediately prior to the
Effective Time;
WHEREAS, the Boards of Directors of the Company (the "Company Board") and
Transitory have each (i) determined that this Agreement, the Merger, the
Contribution and the other transactions contemplated by this Agreement
(collectively, the "Combination") are advisable and fair and in the best
interests of their respective stockholders and (ii) approved the Combination
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, certain stockholders of the Company have entered into Voting
Agreements and Irrevocable Proxies with Intel providing that such stockholders
will vote or cause all Shares (as defined in Section 2.8(a)) beneficially owned
by them to be voted in favor of the Combination;
WHEREAS, the parties to this Agreement intend that the Contribution and the
Merger constitute a single integrated transaction that will be treated as a
transfer of the Contributed Assets by Intel to Newco and a transfer of the
Company Common Stock and the Company Preferred Stock by the shareholders of the
Company to Newco governed by Section 351 of the Code, and that the Merger
constitute a "reorganization" within the meaning of Section 368(a) of the Code;
and
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Newco, Transitory and Intel
hereby agree as follows:
ARTICLE 1
THE CONTRIBUTION
Section 1.1. The Contribution. At the Effective Time and upon the terms
and subject to the conditions set forth in Section 6.3 hereof, Intel will
contribute the Contributed Assets to Newco, free and clear of all Liens other
than as set forth on Exhibit A, in exchange for 14,168,655 shares of the Newco
Common Stock
<PAGE> 122
and 12,865,738 shares of the Newco Non-Voting Common Stock; provided that the
number of shares to be issued to Intel shall be increased if the Company issues
additional shares of the Company's common stock, $.01 par value per share (the
"Company Common Stock") (other than upon exercise of options or conversion of
the Company's cumulative convertible preferred stock, $.01 par value per share
(the "Company Preferred Stock") outstanding on the date of this Agreement) or
securities convertible into shares of Company Common Stock prior to the
Effective Time, such that (i) the Newco Common Stock issued to Intel represents
49% of the outstanding shares of Newco Common Stock immediately after the
Effective Time, and (ii) the Newco Non-Voting Common Stock issued to Intel, when
aggregated with the Newco Common Stock issued to Intel, represents 60% of the
common equity of Newco immediately after the Effective Time, giving effect to
the issuance of shares of Newco Common Stock issuable upon exercise of the
Assumed Options (as defined below) and upon conversion of the Newco Preferred
Stock.
Section 1.2. Excluded Assets. Subject to Section 1.6, the parties
acknowledge that Intel shall be under no obligation to contribute, sell, assign
or otherwise transfer to the Company, Newco, Transitory or any affiliates
thereof any assets other than the Contributed Assets to be transferred under the
terms, and subject to the conditions, hereof.
Section 1.3. Excluded Liabilities. The parties acknowledge that none of
the Company, Newco or Transitory shall assume any liabilities in connection with
the Contribution other than those liabilities required to be performed after the
Effective Time pursuant to those agreements included in the Contributed Assets.
Section 1.4. Assignment of Contracts and Rights. Notwithstanding any
provision hereof to the contrary, this Agreement shall not constitute an
agreement to contribute, sell, assign or otherwise transfer any Contributed
Asset or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment thereof, without the consent of a party
thereto, would constitute a breach or other contravention thereof or in any way
adversely affect the rights of Intel or Newco thereunder.
Section 1.5. Method of Contribution. At the Effective Time, Intel shall
deliver to Newco a bill of sale and such other endorsements, consents,
assignments, instruments of conveyance and transfer documents as Newco may
reasonably request to vest in Newco all right, title and interest in, to and
under the Contributed Assets, and Intel will take all other actions reasonably
required to put Newco into full possession and enjoyment of all Contributed
Assets.
Section 1.6. Omitted Assets. With respect to assets of Intel with an
individual value of Five Thousand Dollars ($5,000) or more, that are not
included in Exhibit A, and are being used as of the date of this Agreement or
are used between the date of this Agreement and the Effective Time by the
Enhanced Video Services, the Enhanced Content Services or the Internet Security
Services departments of Intel (except for third party computer software programs
that, because of license restrictions imposed on Intel by the licensor, may not
be transferred to Newco), if the parties reasonably conclude that such assets
should have been included in Exhibit A (collectively, the "Omitted Assets"),
then Intel and Newco will execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be reasonably necessary or desirable in order to consummate or implement
expeditiously the contribution of such Omitted Assets to Newco. The foregoing
obligation shall terminate one hundred eighty (180) days after the Effective
Time. Any such contribution of Omitted Assets by Intel shall be for no
additional consideration payable to Intel. Intel shall contribute any Omitted
Asset that was used (i) exclusively by the Enhanced Video Services, the Enhanced
Content Services or the Internet Security Services department by assignment to
Newco, subject to a license back to Intel, and (ii) on a shared basis by such
departments and other departments of Intel by license to Newco, in each case on
terms comparable to the manner of contribution utilized with respect to
Contributed Assets that were used exclusively or on a shared basis, as the case
may be, by such departments prior to the Effective Time. Upon any such
contribution of an Omitted Asset, such Omitted Asset shall be deemed for all
purposes hereof to constitute a "Contributed Asset." Notwithstanding the
foregoing, Intel shall not have any obligation to expend any funds or to incur
any other obligation in connection with the contribution, if any, of Omitted
Assets other than normal out-of-pocket expenses (such as fees and expenses of
counsel and accountants) reasonably necessary to consummate such contribution.
Intel shall use commercially reasonable efforts to obtain consents of third
parties required for the transfer of any
A1-2
<PAGE> 123
Omitted Assets, provided that Intel shall not be obligated to make any payment
or assume any obligation in order to obtain any consent.
ARTICLE 2
THE MERGER
Section 2.1. The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the
provisions of the Delaware General Corporation Law (the "DGCL"), Transitory
shall be merged with and into the Company. Following the Merger, the Company
shall continue as the surviving corporation (the "Surviving Corporation") and as
a wholly owned subsidiary of Newco, and the separate corporate existence of
Transitory shall cease. Newco, as the sole stockholder of Transitory, hereby
approves the Combination.
Section 2.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, on the Closing Date, a Certificate of Merger substantially in
the form of Exhibit B (the "Certificate of Merger") shall be duly executed and
acknowledged by Transitory and the Company and delivered for filing to the
Secretary of State of the State of Delaware as provided in the DGCL. The Merger
shall become effective at such time as a properly executed copy of the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or such later time as Intel and the Company may agree upon and as may
be set forth in the Certificate of Merger (the time the Merger becomes effective
being referred to herein as the "Effective Time").
Section 2.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver) of the latest to occur of the conditions set
forth in Article 7, at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page
Mill Road, Palo Alto, California 94304, unless another time, date or place is
agreed to in writing by the parties hereto.
Section 2.4. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all the properties, rights, privileges and
powers of the Company and Transitory shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Transitory shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 2.5. Certificate of Incorporation and Bylaws. At the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
amended to read in its entirety as set forth on Exhibit C. At the Effective
Time, the bylaws of the Surviving Corporation shall be amended to read in their
entirety as set forth on Exhibit D.
Section 2.6. Directors. The board of directors of the Surviving
Corporation at the Effective Time shall be comprised of seven persons,
determined as set forth on Exhibit E.
Section 2.7. Officers. The persons specified in Exhibit F hereto as
holding the titles set forth in such Exhibit shall be the initial officers of
the Surviving Corporation, each to hold such offices in accordance with the
Certificate of Incorporation and bylaws of the Surviving Corporation until such
officer's successor is duly elected or appointed and qualified.
Section 2.8. Conversion of Shares.
(a) At the Effective Time, each share (collectively, the "Shares") of the
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than Shares held in the Company's treasury or by Newco or
Transitory) shall, by virtue of the Merger and without any action on the part of
Intel, Newco, Transitory, the Company or the holder thereof, be converted into
and shall become one (1) share of Newco Common Stock. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Newco Common Stock or the Shares shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification,
A1-3
<PAGE> 124
recapitalization, split, combination or exchange of shares, then the exchange
ratio contemplated by the Merger shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(b) At the Effective Time, each share of the Company Preferred Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
the Company Preferred Stock held in the Company's treasury or by Newco or
Transitory) shall, by virtue of the Merger and without any action on the part of
Intel, Newco, Transitory, the Company or the holder thereof, be converted into
and shall become one (1) share of the cumulative convertible preferred stock,
$.01 par value per share, of Newco (the "Newco Preferred Stock").
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding shares of Newco Preferred Stock or the Company
Preferred Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, then the exchange
ratio contemplated by the Merger shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(c) At the Effective Time, each outstanding share of the common stock, par
value $.01 per share, of Transitory shall, by virtue of the Merger and without
any action on the part of Transitory, Newco, Intel, the Company or the holder
thereof, be converted into one share of common stock, par value $.01 per share,
of the Surviving Corporation.
Section 2.9. Exchange of Certificates.
(a) From time to time following the Effective Time, Newco shall deliver to
its transfer agent, or a depository or trust institution of recognized standing
selected by the Company and Newco and reasonably satisfactory to Intel (the
"Exchange Agent"), for the benefit of the holders of Shares and Company
Preferred Stock for exchange in accordance with this Article 2, certificates
representing the appropriate number of shares of Newco Common Stock and Newco
Preferred Stock issuable pursuant to Section 2.8 (such certificates are
hereinafter referred to as the "Exchange Fund") in exchange for outstanding
Shares in connection with the Merger.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding Shares or shares of Company Preferred Stock (the "Certificates") and
whose shares were converted into shares of Newco Common Stock or Newco Preferred
Stock pursuant to Section 2.8: (i) a letter of transmittal (which shall specify
that delivery shall be effected and risk of loss and title to the Certificates
shall pass only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Newco and the Company
may reasonably specify) and (ii) instructions for use in effecting surrender of
the Certificates in exchange for shares of Newco Common Stock or Newco Preferred
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Newco Common Stock or Newco
Preferred Stock which such holder has the right to receive pursuant to the
provisions of this Article 2, and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Shares or Company
Preferred Stock that is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Newco Common Stock or
Newco Preferred Stock may be issued to a transferee if the Certificate
representing such Shares or such Company Preferred Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.9, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Newco
Common Stock or Newco Preferred Stock as contemplated by this Section 2.9.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Newco Common Stock or Newco Preferred Stock with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Newco Common Stock or
Newco
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Preferred Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of Newco
Common Stock or Newco Preferred Stock issued in exchange therefore, without
interest, (i) the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Newco Common Stock or Newco Preferred Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Newco Common Stock or
Newco Preferred Stock.
(d) In the event that any Certificate for Shares or Company Preferred Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefore, upon the making of an affidavit of that fact by the holder
thereof, such shares of Newco Common Stock or Newco Preferred Stock as may be
required pursuant to this Agreement; provided, however, that Newco or the
Exchange Agent may, in its discretion, require the delivery of a reasonable and
customary bond or indemnity.
(e) All shares of Newco Common Stock and Newco Preferred Stock issued upon
the surrender for exchange of Shares or Company Preferred Stock in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares and such Company Preferred Stock,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such Shares or such
Company Preferred Stock in accordance with the terms of this Agreement or prior
to the date hereof and which remain unpaid at the Effective Time, and there
shall be no further registration of transfer on the stock transfer books of the
Surviving Corporation of the Shares or the Company Preferred Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.
(f) Any portion of the Exchange Fund that remains undistributed to the
stockholders of the Company upon the expiration of one hundred eighty (180) days
after the Effective Time shall be delivered to Newco upon demand and any
stockholders of the Company who have not theretofore complied with this Article
2 shall thereafter look only to Newco as general creditors for payment of their
claims for Newco Common Stock or Newco Preferred Stock and any applicable
dividends or distributions with respect to Newco Common Stock or Newco Preferred
Stock, as the case may be.
(g) None of Intel, Newco nor the Surviving Corporation shall be liable to
any holder of Shares, Company Preferred Stock, Newco Common Stock or Newco
Preferred Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 2.10. Assumed Stock Options.
(a) At the Effective Time, each option to purchase Shares granted to
employees, directors or consultants of the Company under the Company's 1989
Incentive Plan, the Company's 1995 Incentive Plan, the Company's ConQuest
Software, Inc. Stock Option Plan and the Company's 1999 Incentive Stock Option
Plan (collectively, the "Assumed Option Plans" and individually an "Assumed
Options Plan"), which are then outstanding and unexercised, shall cease to
represent a right to acquire Shares and shall be converted automatically into
options to purchase shares of Newco Common Stock, and Newco shall assume each
such option (hereinafter, an "Assumed Option") subject to the terms of the
applicable Assumed Option Plan, in each case as heretofore amended or restated,
as the case may be, and the agreement evidencing the grant thereunder of such
Assumed Option; provided, however, that from and after the Effective Time, (i)
the number of shares of Newco Common Stock purchasable upon exercise of such
Assumed Option shall be equal to the number of Shares that were purchasable
under such Assumed Option immediately prior to the Effective Time and (ii) the
per share exercise price under each such Assumed Option shall be unchanged. The
duration and other terms of the Assumed Option shall be the same as the original
option except that all references to the Company shall be deemed to be
references to Newco. The terms of each Assumed Option shall, in
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accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction with respect to Newco Common Stock on or subsequent to the Effective
Time.
(b) Newco shall reserve for issuance a sufficient number of shares of Newco
Common Stock for delivery upon (i) the conversion of shares of Newco Non-Voting
Common Stock, (ii) the exercise of Assumed Options, (iii) the conversion of
shares of Newco Preferred Stock and (iv) the exercise of options to purchase
shares of Newco Common Stock issuable upon the exercise of all options granted
under Newco's 2000 Stock Option Plan in the form attached hereto as Exhibit G
(the "Newco Stock Options"). As soon as practicable following the Effective
Time, Newco shall take all action necessary to register the Newco Common Stock
subject to the Assumed Options and the Newco Stock Options under the Securities
Act of 1933, as amended, and the rules and regulations of the Securities and
Exchange Commission thereunder (the "Securities Act") pursuant to a registration
statement on Form S-8 (or any successor form) to the extent such registration is
required under the Securities Act, and to cause the effectiveness of such
registration statement or registration statements (and the current status of the
prospectus or prospectuses contained therein) to be maintained for so long as
the Assumed Options and the Newco Stock Options remain outstanding.
Section 2.11. Dissenters' Rights. In accordance with the DGCL, holders of
shares of Company Common Stock will not be entitled to appraisal rights.
Notwithstanding any provision of this Agreement to the contrary, if and to the
extent required by the DGCL, shares of Company Preferred Stock which are issued
and outstanding immediately prior to the Effective Time and which are held by
holders of such shares of Company Preferred Stock who have properly exercised
appraisal rights with respect thereto (the "Dissenting Preferred Stock") in
accordance with Section 262 of the DGCL, shall not be exchangeable for the right
to receive shares of Newco Preferred Stock, and holders of such shares of
Dissenting Preferred Stock shall be entitled to receive payment of the appraised
value of such shares of Dissenting Preferred Stock in accordance with the
provisions of Section 262 of the DGCL unless and until such holders fail to
perfect or effectively withdraw or otherwise lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Preferred Stock shall thereupon be treated as if they had been converted into
and to have become exchangeable for, at the Effective Time, the right to receive
shares of Newco Preferred Stock, without any interest thereon. Notwithstanding
anything to the contrary contained in this Section 2.11, if (i) the Merger is
rescinded or abandoned or (ii) the stockholders of the Company revoke the
authority to effect the Merger, then the right of any stockholder to be paid the
fair value of such stockholder's Dissenting Preferred Stock pursuant to Section
262 of the DGCL shall cease. The Company shall give Intel prompt notice of any
demands received by the Company for appraisals of shares of Dissenting Preferred
Stock. The Company shall not, except as required by applicable law or with the
prior written consent of Intel, make any payment with respect to any demands for
appraisals or offer to settle or settle any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, NEWCO AND TRANSITORY
Each of the Company, Newco and Transitory, jointly and severally, hereby
represent and warrant to Intel, subject to the exceptions set forth in the
Disclosure Schedule (the "Company Disclosure Schedule") delivered by the
Company, Newco and Transitory to Intel in accordance with Section 5.11 (which
exceptions shall specifically identify a Section or subsection, as applicable,
to which such exception relates) that:
Section 3.1. Organization and Qualification; Subsidiaries; Investments.
(a) Section 3.1(a) of the Company Disclosure Schedule sets forth a true and
complete list of all the Company's subsidiaries, together with the jurisdiction
of incorporation of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company. Each of the Company and its subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now
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being conducted. The Company has heretofore made available to Intel accurate and
complete copies of the certificate of incorporation and bylaws (or similar
governing documents), as currently in full force and effect, of the Company and
each of its subsidiaries. Section 3.1(a) of the Company Disclosure Schedule
specifically identifies each subsidiary of the Company that contains any
material assets or through which the Company conducts any material operations.
(b) The Company and each of its subsidiaries are duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by them or the nature of the business conducted by
them makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company. When used in connection with the
Company or its subsidiaries, the term "Material Adverse Effect on the Company"
means any circumstance, change in, or effect on the Company and its
subsidiaries, taken as a whole, that is, or is reasonably likely in the
foreseeable future to be, materially adverse to the assets, operations,
financial condition, earnings or results of operations, or the business
(financial or otherwise), of the Company and its subsidiaries, taken as a whole;
provided that none of the following shall be deemed, either alone or in
combination, to constitute a Material Adverse Effect on the Company: (i)
conditions affecting either the internet media services and distribution
industry, as a whole, or the text search retrieval industry, as a whole, and
(ii) any disruption of customer relationships arising solely out of or resulting
solely from actions contemplated by the parties in connection with, or which is
attributable to, the execution and announcement of this Agreement or to the
identity of Intel.
(c) Section 3.1(c) of the Company Disclosure Schedule sets forth a true and
complete list of each equity investment in an amount of One Hundred Thousand
Dollars ($100,000) or more or that represents a five percent (5%) or greater
ownership interest in the subject of such investment made by the Company or any
of its subsidiaries in any person other than the Company's subsidiaries ("Other
Interests"). The Other Interests are owned by the Company, by one or more of the
Company's direct or indirect subsidiaries or by the Company and one or more of
its direct or indirect subsidiaries, in each case free and clear of all Liens
(as defined in Section 3.2).
(d) Each of Newco and Transitory was formed solely for the purpose of
engaging in the Combination and has never owned any asset (other than the
capital stock of Transitory, in the case of Newco), received any revenue or
income or had any employees, operations or contractual relationships (other than
such contractual relationships as are required in connection with this
Agreement).
Section 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of Forty Million
(40,000,000) shares of Company Common Stock, of which, as of the close of
business on April 28, 2000, Fourteen Million Seven Hundred Forty-Six Thousand
Nine Hundred and Sixty-Seven (14,746,967) shares of Company Common Stock were
issued and outstanding, and One Million (1,000,000) shares of preferred stock,
of which Forty-Nine Thousand Five Hundred Eighty-Seven (49,587) have been
designated as Company Preferred Stock; Twenty-Seven Thousand One Hundred Eighty
(27,180) shares of Company Preferred Stock are outstanding and no other shares
of preferred stock of the Company are outstanding. All of the outstanding Shares
and shares of Company Preferred Stock have been validly issued and are fully
paid, nonassessable and free of preemptive rights. As of the close of business
on April 28, 2000, approximately One Hundred Thousand (100,000) Shares were
reserved for issuance and, as of the close of business on April 28, 2000, Three
Million Four Thousand One Hundred and Sixty-Two (3,004,162) Shares were issuable
upon or otherwise deliverable in connection with the exercise of outstanding
Company Stock Options. For purposes hereof, "Company Stock Option" means any
option, warrant or other right to purchase Shares. Between the close of business
on April 28, 2000 and the date hereof, no shares of the Company's capital stock
have been issued other than pursuant to Company Stock Options already in
existence on April 28, 2000 and, between the close of business on April 28, 2000
and the date hereof, no stock options have been granted, except as set forth in
Section 3.2(a) of the Company Disclosure Schedule. Section 3.2(a) of the Company
Disclosure Schedule sets forth a true and complete list of all holders of
outstanding options and other awards under the Assumed
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Option Plans, the exercise or vesting schedule thereof, the exercise price per
Share, the term of each such option or other award, whether an option is a
nonqualified stock option or incentive stock option and any restrictions on
exercise or sale of such option or underlying Shares. On the Closing Date, the
Company shall deliver to Intel a complete and correct updated Section 3.2(a) of
the Company Disclosure Schedule. Except as set forth above or in Section 3.2(a)
of the Company Disclosure Schedule, as of the date hereof, there are outstanding
(i) no shares of capital stock or other voting securities of the Company, (ii)
no securities of the Company or any of its subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or other securities of
the Company, (iii) no options, preemptive or other rights to acquire from the
Company or any of its subsidiaries, and, except as publicly disclosed in the
Company SEC Reports (as defined below), no obligations of the Company or any of
its subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or other
securities of the Company and (iv) no equity equivalent interests in the
ownership or earnings of the Company or its subsidiaries or other similar rights
(collectively "Company Securities"). Except as set forth in Section 3.2(a) of
the Company Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company. The Company has not voluntarily accelerated the
vesting of any Company Stock Options as a result of the Combination or any other
change in control of the Company, and the Company has taken all action required
to provide that no Company Stock Option will be exchanged for cash, converted
into cash or into the right to receive a cash payment or otherwise cashed out as
a result of the Combination.
(b) The authorized capital stock of Newco consists of One Thousand (1,000)
shares of common stock, $.0001 par value per share (the "Newco Common Stock").
As of the date hereof, 100 shares of Newco Common Stock were issued and
outstanding. All of the outstanding shares of Newco Common Stock have been
validly issued, are fully paid, nonassessable and free of preemptive rights and
are owned beneficially and of record by the Company. As of the date hereof, no
shares of Newco Common Stock are reserved for issuance and, as of the date
hereof, no shares of Newco Common Stock are issuable upon or otherwise
deliverable in connection with the exercise of outstanding options, warrants or
other securities exercisable for or convertible into Newco Common Stock. Except
as set forth above or in Section 3.2(b) of the Company Disclosure Schedule, as
of the date hereof, there are outstanding (i) no shares of capital stock or
other voting securities of Newco, (ii) no securities of Newco or any of its
subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or other securities of Newco, (iii) no options, preemptive or
other rights to acquire from Newco or any of its subsidiaries, and no
obligations of Newco or any of its subsidiaries to issue, any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or other securities of Newco and (iv) no equity equivalent
interests in the ownership or earnings of Newco or its subsidiaries or other
similar rights. Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, there are no stockholder agreements, voting trusts or other agreements
or understandings to which Newco is a party or by which it is bound relating to
the voting or registration of any shares of capital stock of Newco.
(c) The authorized capital stock of Transitory consists of One Thousand
(1,000) shares of common stock, $.0001 par value per share (the "Transitory
Common Stock"). As of the date hereof, 100 shares of Transitory Common Stock
were issued and outstanding. All of the outstanding shares of Transitory Common
Stock have been validly issued, are fully paid, nonassessable and free of
preemptive rights and are owned beneficially and of record by Newco. As of the
date hereof, no shares of Transitory Common Stock are reserved for issuance and,
as of the date hereof, no shares of Transitory Common Stock are issuable upon or
otherwise deliverable in connection with the exercise of outstanding options,
warrants or other securities exercisable for or convertible into Transitory
Common Stock. Except as set forth above or in Section 3.2(b) of the Company
Disclosure Schedule, as of the date hereof, there are outstanding (i) no shares
of capital stock or other voting securities of Transitory, (ii) no securities of
Transitory or any of its subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock or other securities of Transitory, (iii)
no options, preemptive or other rights to acquire from Transitory or any of its
subsidiaries, and no obligations of Transitory or any of its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or other securities of Transitory
and (iv) no equity equivalent
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interests in the ownership or earnings of Transitory or its subsidiaries or
other similar rights. Except as set forth in Section 3.2(c) of the Company
Disclosure Schedule, there are no stockholder agreements, voting trusts or other
agreements or understandings to which Transitory is a party or by which it is
bound relating to the voting or registration of any shares of capital stock of
Transitory.
(d) Except as set forth in Section 3.2(d) of the Company Disclosure
Schedule, all of the outstanding capital stock of the Company's subsidiaries is
owned by the Company, directly or indirectly, free and clear of any Lien or any
other limitation or restriction (including any restriction on the right to vote
or sell the same except as a matter of Applicable Law). Except as set forth in
Section 3.2(d) of the Company Disclosure Schedule, any director's qualifying
shares issued by a foreign subsidiary of the Company to any director of such
subsidiary are beneficially owned by the Company or another subsidiary of the
Company. Except as set forth in Section 3.2(d) of the Company Disclosure
Schedule, there are no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for, or other rights to acquire
from the Company or any of its subsidiaries, any capital stock or other
ownership interests in or any other securities of any subsidiary of the Company,
and there exists no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any such capital stock. Except as set forth in Section 3.2(d) of
the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. With respect to any exception to
ownership set forth in Section 3.2(d) of the Company Disclosure Schedule, the
schedule completely and correctly identifies the record and the beneficial owner
of any such shares, whether such record or beneficial owner is an employee,
agent or affiliate of the Company, and any agreement, arrangement or
understanding, whether written or oral, with respect to such ownership. With
respect to any exception to the contractual obligations of the Company set forth
in Section 3.2(d) of the Company Disclosure Schedule, the schedule completely
and correctly identifies the parties to such obligations and the nature of any
relationship of such party or any third party beneficiary of such obligations to
the Company and any agreement, arrangement or understanding, whether written or
oral, with respect to such relationship. For purposes of this Agreement, "Lien"
means, with respect to any asset (including any security), any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset; provided, however, that the term "Lien" shall not include (i) statutory
liens for Taxes that are not yet due and payable or are being contested in good
faith by appropriate proceedings and are disclosed in Section 3.14 of the
Company Disclosure Schedule or that are otherwise not material, (ii) statutory
or common law liens to secure obligations to landlords, lessors or renters under
leases or rental agreements confined to the premises rented, (iii) deposits or
pledges made in connection with, or to secure payment of, workers' compensation,
unemployment insurance, old age pension or other social security programs
mandated by Applicable Law, (iv) statutory or common law liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies and other like liens, and (v) restrictions on transfer of
securities imposed by applicable state and federal securities laws.
(e) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Section 3.3. Authority Relative to this Agreement; Recommendation.
(a) Each of the Company, Newco and Transitory has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by the Company Board, Newco and Transitory, and no other corporate
proceedings on the part of the Company, Newco or Transitory are necessary to
authorize this Agreement, or to consummate the transactions contemplated hereby,
except the approval of this Agreement by the holders of a majority of the
outstanding Shares. This Agreement has been duly and validly executed and
delivered by the Company, Newco and Transitory and, assuming the due
authorization, execution and delivery by Intel, constitute the valid, legal and
binding agreements of the Company, Newco and Transitory, enforceable against
each of the Company, Newco and Transitory in
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accordance with its terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or to general principles of equity.
(b) Without limiting the generality of the foregoing, the Company Board has
unanimously (i) approved the Combination, (ii) resolved to recommend approval
and adoption of this Agreement and the Combination by the Company's
stockholders, and (iii) has not withdrawn or modified such approval or
resolution to recommend.
Section 3.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents (the
"Company SEC Reports") with the Securities and Exchange Commission ("SEC") since
February 1, 1997, each of which complied at the time of filing in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, except as set forth in Section 3.4 of the Company Disclosure Schedule. None
of such Company SEC Reports, including any financial statements or schedules
included or incorporated by reference therein, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein in light of the circumstances under which they were made not
misleading, except to the extent superseded by a Company SEC Report filed
subsequently and prior to the date hereof. The audited consolidated financial
statements of the Company included in the Company SEC Reports fairly present, in
conformity in all material respects with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated results
of operations and changes in financial position for the periods then ended.
Notwithstanding the foregoing, the Company shall not be deemed to be in breach
of any of the representations or warranties in this Section 3.4(a) as a result
of any changes to the Company SEC Reports that the Company may make in response
to comments received from the SEC on the Proxy Statement (as defined in Section
5.4).
(b) The Company has heretofore made, and hereafter will make, available to
Intel a complete and correct copy of any amendments or modifications that are
required to be filed with the SEC but have not yet been filed with the SEC to
agreements, documents or other instruments that previously had been filed by the
Company with the SEC pursuant to the Exchange Act.
Section 3.5. Registration Statement and Proxy Statement. The Registration
Statement (as defined in Section 5.4) and the Proxy Statement (as defined in
Section 5.4) will not, at the date mailed to stockholders of the Company, at the
time of the meeting of stockholders of the Company to be held in connection with
the Combination and at the time of issuance of shares of Newco Common Stock to
Intel in the Combination, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made not misleading. The Proxy Statement and the Registration Statement
will comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, none of the Company, Newco or Transitory make any
representation, warranty or covenant with respect to any information provided in
writing by Intel specifically for inclusion in the Registration Statement or the
Proxy Statement that is contained in or omitted from the Registration Statement
or Proxy Statement.
Section 3.6. Consents and Approvals; No Violations. Except for (i)
filings, permits, authorizations, consents and approvals as may be required
under applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) any filings under similar merger
notification laws or regulations of foreign Governmental Entities (as defined
below), (iii) the filing of the Certificate of Merger as required by the DGCL
and (iv) any filings, permits, authorizations, consents and approvals the
nonexistence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, no filing with or
notice to and no permit, authorization, consent or approval of any United States
(federal, state or local) or foreign court or tribunal, or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company, Newco
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and Transitory of this Agreement or the consummation by the Company, Newco and
Transitory of the transactions contemplated hereby. Neither the execution,
delivery and performance of this Agreement by the Company, Newco and Transitory,
nor the consummation by the Company, Newco and Transitory of the transactions
contemplated hereby, will, (a) conflict with or result in any breach of any
provision of the respective Certificate of Incorporation or bylaws (or similar
governing documents) of the Company or any of its subsidiaries, (b) result in a
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties and assets is bound or (c) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its
subsidiaries, or any of their respective properties or assets, except, with
respect to clauses (b) and (c) above, for matters set forth in Section 3.6 of
the Company Disclosure Schedule and for matters the existence of which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
Section 3.7. No Default. Except as set forth in Section 3.7 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is in
breach, default or violation (and no event has occurred that with notice or the
lapse of time or both would constitute a breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries, is now a party or by which it or any of
its properties and assets is bound or (iii) any order, writ, injunction, decree,
law, statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of its properties or assets, except, with respect to clauses
(ii) and (iii) above, for matters the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
publicly disclosed in the Company SEC Reports or as set forth in Section 3.8 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
has any material liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company (including the notes thereto). Except as publicly disclosed in the
Company SEC Reports or as set forth in Section 3.8 of the Company Disclosure
Schedule, since February 1, 2000, there have been no events, changes or effects
with respect to the Company or its subsidiaries that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company. Without limiting the generality of the foregoing, except as
publicly disclosed in the Company SEC Reports or as set forth in Section 3.8 of
the Company Disclosure Schedule, since February 1, 2000, the Company and its
subsidiaries have conducted their respective businesses in all material respects
only in, and have not engaged in any material transaction other than according
to, the ordinary and usual course of such businesses consistent with past
practices, and there has not been any (i) damage, destruction or other casualty
loss with respect to any material asset or property owned, leased or otherwise
used by the Company or any of its subsidiaries, not covered by insurance; (ii)
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any of its subsidiaries (other
than wholly-owned subsidiaries) or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding shares
of capital stock or other securities of, or other ownership interests in, the
Company or any of its subsidiaries; (iii) amendment of any material term of any
outstanding security of the Company or any of its subsidiaries; (iv) incurrence,
assumption or guarantee by the Company or any of its subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices; (v) creation or
assumption by the Company or any of its subsidiaries of any Lien on any material
asset other than in the ordinary course of business consistent with past
practices; (vi) loan, advance or capital contributions made by the Company or
any of its subsidiaries to, or investment in, any person other than (1) loans or
advances to employees in connection with business-related expenses incurred in
the ordinary course of business consistent with past practices, (2) loans made
to employees consistent with past practices that are not in the aggregate in
excess of Fifty Thousand Dollars ($50,000), and (3) loans, advances or capital
contributions to or investments in wholly-owned subsidiaries,
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and in each case made in the ordinary course of business consistent with past
practices; (vii) transactions or commitments made, or any contracts or
agreements entered into, by the Company or any of its subsidiaries relating to
its assets or business (including the acquisition (by sale, license or
otherwise) or disposition (by sale, license or otherwise) of any assets) or any
relinquishment by the Company or any of its subsidiaries of any contract,
agreement or other right, in any such case, material to the Company and its
subsidiaries, taken as a whole; (viii) license, reseller, distribution,
marketing, sales or other agreement entered into that either (1) provides for an
exclusive relationship or arrangement or (2) provides for the annual payment by
the Company for services or products rendered, or the obligation of the Company
to render products or services, in excess of Two Hundred Fifty Thousand Dollars
($250,000), or any agreement to enter into any such license, reseller,
distribution, marketing, sales or other agreement; or (ix) change by the Company
or any of its subsidiaries in any of its accounting principles, practices or
methods. Since February 1, 2000, except as publicly disclosed in the Company SEC
Reports filed prior to the date hereof or in Section 3.8 of the Company
Disclosure Schedule, except for increases in the ordinary course of business
consistent with past practices and except for any of the following made in
accordance with existing contractual provisions, there has not been any increase
in the compensation payable or that could become payable by the Company or any
of its subsidiaries to (a) officers of the Company or any of its subsidiaries or
(b) any employee of the Company or any of its subsidiaries whose annual cash
compensation is One Hundred Thousand Dollars ($100,000) or more.
Section 3.9. Litigation. Except as publicly disclosed in the Company SEC
Reports or as set forth in Section 3.9 of the Company Disclosure Schedule, there
is no suit, claim, action, arbitration, proceeding or investigation pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity or brought by any person that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or would reasonably be expected to prevent or delay the consummation of
the transactions contemplated by this Agreement beyond the Final Date. Except as
publicly disclosed in the Company SEC Reports, neither the Company nor any of
its subsidiaries is subject to any outstanding order, writ, injunction or decree
that would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company or would reasonably be expected to
prevent or delay the consummation of the transactions contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly disclosed
in the Company SEC Reports, the Company and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses, except
for any permits, licenses, variances, exemptions, orders or approvals the
non-existence of which would not reasonably, individually or in the aggregate,
be expected to have a Material Adverse Effect on the Company (the "Company
Permits"). Except as publicly disclosed in the Company SEC Reports, the Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except for any non-compliance the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company. Except as publicly disclosed in the Company SEC Reports, the
businesses of the Company and its subsidiaries have been and are being conducted
in compliance with all Applicable Laws, except for any non-compliance the
existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company. Except as publicly
disclosed in the Company SEC Reports, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same.
Section 3.11. Employee Benefits.
(a) For purposes of this Agreement, "Compensation and Benefit Plans" means,
collectively, each written bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, severance,
compensation, medical, health, or other plan, agreement, policy or arrangement,
that covers employees or directors of the Company or any of its subsidiaries, or
pursuant to which former employees or directors of the Company or any of its
subsidiaries are entitled to current or future benefits. There are no oral
Compensation and Benefit
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Plans to which the Company is a party. The Company has made available to Intel
copies of all "employee pension benefit plans" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(l) of ERISA) and all other Compensation and
Benefit Plans maintained, or contributed to, by the Company or of its
subsidiaries or any person that, together with the Company and its subsidiaries,
is treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (the Company and each such other person, a "Commonly Controlled Entity")
for the benefit of any current or former employees, officers or directors of the
Company or any of its subsidiaries. The Company has also made available to Intel
true, complete and correct copies of (i) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Compensation
and Benefit Plan (if any such report was required), (ii) the most recent summary
plan description for each Compensation and Benefit Plan for which such summary
plan description is required and (iii) each trust agreement and group annuity
contract related to any Compensation and Benefit Plan. Each Compensation and
Benefit Plan has been administered in accordance with its terms. Neither the
Company nor any Commonly Controlled Entity maintains or has ever maintained a
"defined benefit plan" (as defined in Section 415 of the Code). The Company,
each of Company's subsidiaries and each of the Compensation and Benefit Plans
are in compliance with applicable provisions of ERISA and the Code. Section
3.11(a) of the Company Disclosure Schedule sets forth a complete and correct
list of all Compensation and Benefit Plans.
(b) Except as otherwise provided in Section 3.11(b) of the Company
Disclosure Schedule, the Company and its subsidiaries have performed in all
material respects their obligations under each Compensation and Benefit Plan;
each Compensation and Benefit Plan and each trust or other funding medium, if
any, established in connection therewith has at all times been established,
maintained and operated in material compliance with its terms and the
requirements prescribed by Applicable Law, including ERISA and the Code.
(c) With respect to those Pension Plans that are intended to be qualified
under Section 401(a) of the Code, except as set forth in Section 3.11(c) of the
Company Disclosure Schedule, each such Pension Plan has been the subject of a
determination letter from the Internal Revenue Service to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, and no such determination letter
has been revoked nor has any event occurred since the date of its most recent
determination letter or application therefor that would materially adversely
affect its qualification or materially increase its costs.
(d) At all times on and after the effective date of ERISA, neither Company
nor any of its subsidiaries nor any entity which is under "common control" with
the Company (within the meaning of Section 4001 of ERISA) has maintained,
contributed to or otherwise had any obligation with respect to any
"multiemployer plan" (as defined in Section 3(37) of ERISA).
(e) Except as disclosed in Section 3.11(e) of the Company Disclosure
Schedule, there are no suits, actions, disputes, claims (other than routine
claims for benefits), arbitrations, administrative or other proceedings pending
or, to the knowledge of Company, threatened, anticipated or expected to be
asserted with respect to any Compensation and Benefits Plan or any related trust
or other funding medium thereunder or with respect to Company or its
subsidiaries, as the sponsor or fiduciary thereof or with respect to any other
fiduciary thereof.
(f) No Compensation and Benefit Plan maintained by Company or its
subsidiaries or any related trust or other funding medium thereunder or any
fiduciary thereof is, to the knowledge of Company, the subject of a material
audit, investigation or examination by an governmental or quasi-governmental
agency.
(g) Except as provided in Section 3.11(g) of the Company Disclosure
Schedule, (i) no "reportable event" (as such term is used in Section 4043 of
ERISA) or "prohibited transaction" (as such term is used in Section 4975 of the
Code and/or Section 406 of ERISA), has occurred with respect to any Compensation
and Benefit Plan established or maintained by Company or its subsidiaries
primarily for the benefit of participants employed within the United States;
(ii) neither Company nor its subsidiaries has any commitment, intention or
understanding to create, terminate or adopt any Compensation and Benefit Plan
that would result in any
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additional liability to Intel, the Company or its subsidiaries; and (iii) since
the beginning of the current fiscal year of any Compensation and Benefit Plan,
no event had occurred and no condition or circumstance has existed that could
result in a material increase in the benefits under or the expense of
maintaining such Compensation and Benefit Plan maintained by Company, and its
subsidiaries from the level of benefits or expense incurred for the most
recently completed fiscal year of such Compensation and Benefit Plan.
(h) Section 3.11(h) of the Company Disclosure Schedule lists all
outstanding Company Stock Options as of the date hereof, identifying for each
such option: (i) the holder of such option and such holder's relationship to the
Company, (ii) the number of shares issuable, (iii) the number of vested shares,
(iv) the date of expiration and (v) the exercise price.
(i) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made.
(j) Except as provided by this Agreement or in Section 3.11(j) of the
Company Disclosure Schedule, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either along with or upon
the occurrence of any additional or subsequent events) constitute an event under
any Compensation and Benefit Plan or agreement that will or may reasonably be
expected to result in any payment (whether severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any employee,
former employee or director of the Company, or its subsidiaries, whether or not
any such payment would be an "excess parachute payment" (within the meaning of
Section 280G of the Code).
(k) With respect to each Compensation and Benefit Plan required to be
maintained or contributed to by the law or applicable custom or rule of the
relevant jurisdiction outside of the United States (the "Foreign Plans"), are
listed on Section 3.11(k) of the Company Disclosure Schedule. As regards each
such Foreign Plan:
(i) Each of the Foreign Plans is in compliance in all material
respects with the provisions of the laws of each jurisdiction in which each
such Foreign Plan is maintained, to the extent those laws are applicable to
the Foreign Plans;
(ii) All contributions to, and payments from, the Foreign Plans which
may have been required to be made in accordance with the terms of any such
Foreign Plan, and, when applicable, the law of the jurisdiction in which
such Foreign Plan is maintained, have been timely made or shall be made by
the Closing Date. All such contributions to the Foreign Plans, and all
payments under the Foreign Plans, for any period ending before the Closing
Date that are not yet, but will be, required to be made, are reflected as
an accrued liability on the balance sheet included in the most recently
filed Company SEC Report;
(iii) All material reports, returns and similar documents, if any,
with respect to any Foreign Plan required to be filed with any governmental
body or distributed to any Foreign Plan participant have been duly and
timely filed or distributed or will be filed or distributed by the Closing
Date, and all of the Foreign Plans have obtained from the governmental body
having jurisdiction with respect to such plans any required determinations,
if any, that such Foreign Plans are in compliance with the laws of the
relevant jurisdiction if such determinations are required in order to give
effect to the Foreign Plan;
(iv) Each of the Foreign Plans has been administered at all times, and
in all material respects, in accordance with its terms. To the knowledge of
Company, there are no pending investigations by any governmental body
involving the Foreign Plans, and no pending claims (except for claims for
benefits payable in the normal operation of the Foreign Plans), suits or
proceedings against any Foreign Plan or asserting any rights or claims to
benefits under any Foreign Plan; and
(v) The consummation of the transactions contemplated by this
Agreement will not by itself create or otherwise result in any material
liability with respect to any Foreign Plan other than the triggering of
payment to participants.
(l) Each Compensation and Benefit Plan complies in all material respects
with all applicable requirements of (i) the Age Discrimination in Employment Act
of 1967, as amended, and the regulations thereunder and (ii) Title VII of the
Civil Rights Act of 1964, as amended, and the regulations thereunder and all
other
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applicable laws. All amendments and actions required to bring each of the
Compensation and Benefit Plans into conformity with all of the applicable
provisions of ERISA and other applicable laws have been made or taken except to
the extent that such amendments or actions are not required by law to be made or
taken until a date after the Effective Time and are disclosed in Section 3.11(l)
of the Company Disclosure Schedule or will be provided to Intel within fourteen
(14) days of the date hereof.
(m) Each group medical plan sponsored by the Company or its subsidiaries
materially complies with the Medicare Secondary Payor Provisions of Section 1826
(b) of the Social Security Act, and the regulations promulgated thereunder.
(n) Except as set forth on Section 3.11(n) of the Company Disclosure
Schedule, Intel, the Surviving Corporation, the Company and its subsidiaries may
terminate or amend any Compensation and Benefit Plan maintained by the Company
or its subsidiaries or may cease contributions to any such Compensation and
Benefit Plans without incurring any material liability other than a benefit
liability accrued in accordance with the terms of such Compensation and Benefit
Plan immediately prior to such amendment, termination or ceasing of
contributions.
(o) Neither the Company nor any of its subsidiaries maintained any
Compensation and Benefit Plan that is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code) that has not been administered and
operated in all respects in compliance with the applicable requirements of
Section 601 of ERISA and section 4980B(b) of the Code and the Company and its
subsidiaries are not subject to any liability, including without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation.
(p) Neither the Company nor any of its subsidiaries has incurred, nor does
the Company reasonably expect either it or any subsidiary to incur, any
liability for any tax imposed under Sections 4971 through 4980B of the Code or
civil liability under Section 501(i) or (1) of ERISA;
(q) Neither the Company nor any of its subsidiaries has incurred any
liability for any tax, excise tax, penalty or fee with respect to any
Compensation and Benefit Plan, including, but not limited to, taxes arising
under Section 4971, 4977, 4978, 4878B, 4979, 4980 or 4980B of the Code, and no
event has occurred and no circumstance has existed that could give rise to any
such liability.
(r) Except as provided in Section 3.11(r) of the Company Disclosure
Schedule, no insurance policy nor any other contract or agreement affecting any
Compensation and Benefit Plan requires or permits a retroactive increase in
premiums or payments due thereunder.
Section 3.12. Labor and Employment Matters. Except as set forth on Section
3.12 of the Company Disclosure Schedule:
(a) No collective bargaining agreement exists that is binding on the
Company or any of its subsidiaries, and the Company has not been officially
apprised that any petition has been filed or proceeding instituted by an
employee or group of employees of the Company, or any of its subsidiaries,
with the National Labor Relations Board seeking recognition of a bargaining
representative.
(b) (i) There is no labor strike, dispute, slow down or stoppage
pending or threatened against the Company or any of its subsidiaries; and
(ii) Neither the Company nor any of its subsidiaries has received any
demand letters, civil rights charges, suits or drafts of suits with respect
to claims made by any of their respective employees.
(c) All individuals who are performing consulting or other services
for the Company or any of its subsidiaries are or were correctly classified
by the Company as either "independent contractors" or "employees" as the
case may be, and, at the Closing Date, will qualify for such
classification.
(d) Section 3.12(d) of the Company Disclosure Schedule contains a list
of the name of each officer, employee and consultant of the Company or any
of the Company's subsidiaries, together with such person's position or
function, annual base salary or wages and any incentives or bonus
arrangement with respect to each such officer and employee and such
person's compensation arrangement with respect
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to each such consultant. To the Company's knowledge, without independent
investigation or inquiry and except as otherwise disclosed to Intel, no
person who is identified on Section 3.12(d) of the Company Disclosure
Schedule as having an annual base salary in excess of One Hundred Thousand
Dollars ($100,000) will cease to be employed by the Company or such
subsidiary for any reason, including because of the consummation of the
transactions contemplated by this Agreement.
(e) The Company and each of its subsidiaries is in compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees,
except for any non-compliance the existence of which would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect on the Company.
(f) The Company and each of its subsidiaries has withheld and reported
all amounts required by law or by agreement to be withheld and reported
with respect to wages, salaries and other payments to employees, except for
any failure to withhold or report the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
(g) There are no pending or, to the Company's knowledge, threatened
claims or actions against the Company or any of its subsidiaries under any
worker's compensation policy or long-term disability policy, except for any
claim or action the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company.
Section 3.13. Environmental Laws and Regulations.
(a) The term "Environmental Laws" means any applicable federal, state,
local or foreign law, statute, treaty, ordinance, rule, regulation, policy,
permit, consent, approval, license, judgment, order, decree or injunction
relating to: (i) Releases (as defined in 42 U.S.C. sec. 9601(22)) or threatened
Releases of Hazardous Material (as hereinafter defined) into the environment,
(ii) the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material, (iii) the health or safety of
employees in the workplace, (iv) protecting or restoring natural resources or
(e) the environment. The term "Hazardous Material" means (1) hazardous
substances (as defined in 42 U.S.C. sec. 9601(14)), including "hazardous waste"
as defined in 42 U.S.C. sec. 6903, (2) petroleum, including crude oil and any
fractions thereof, (3) natural gas, synthetic gas and any mixtures thereof, (4)
asbestos and/or asbestos containing materials, (5) PCBs or materials containing
PCBs, (6) any material regulated as a medical waste, (7) lead containing paint,
(8) radioactive materials and (9) "Hazardous Substance" or "Hazardous Material"
as those terms are defined in any indemnification provision in any contract,
lease, or agreement to which the Company or any of its subsidiaries is a party.
(b) During the period of ownership or operation by the Company and its
subsidiaries of any of their current or previously owned or leased properties,
there have been no Releases of Hazardous Material by the Company or any of its
subsidiaries in, on, under or affecting such properties or any surrounding site,
and neither the Company nor any of its subsidiaries has disposed of any
Hazardous Material in a manner that has led, or would reasonably be anticipated
to lead to a Release, except in each case for those which would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company. There have been no Releases of Hazardous Material by the Company
or any of its subsidiaries in, on, under or affecting their current or
previously owned or leased properties or any surrounding site at times outside
of such periods of ownership, operation or lease, except in each case for those
which would not reasonably be expected, individually on in the aggregate, to
have a Material Adverse Effect on the Company. Since 1995, neither the Company
nor any of its subsidiaries has received any written notice of, or entered into
any order, settlement or decree relating to: (i) any violation of any
Environmental Laws or the institution or pendency of any suit, action, claim,
proceeding or investigation by any Governmental Entity or any third party in
connection with any alleged violation of Environmental Laws or (ii) the response
to or remediation of Hazardous Material at or arising from any of the Company's
properties or any subsidiary's properties. There have been no violations of any
Environmental Laws by the Company or any subsidiary which violations would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
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(c) There are no past or present events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans that constitute a
violation by the Company or any of its subsidiaries of, or are reasonably likely
to prevent or interfere with the Company's or any of its subsidiaries' future
compliance with, any Environmental Laws, other than any of the foregoing that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
Section 3.14. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Code" means the Internal Revenue Code of 1986, as amended;
(ii) the term "Tax" (including "Taxes") means (1) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, whether disputed or not, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, (2) any liability for payment of amounts described in clause (1)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (3) any liability for the payment of amounts described in
clauses (1) or (2) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to pay or
indemnify, any other person;
(iii) the term "Tax Affiliates" (including "Tax Affiliate") means the
subsidiaries and any person for whose Taxes the Company or any subsidiary is or
could be held liable, whether as a successor, by agreement, by operation of law
or otherwise; and
(iv) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document filed or required to be
filed with respect to Taxes.
(b) Except as set forth in Section 3.14(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have duly and timely filed all Tax
Returns required to be filed; and such Tax Returns are complete and accurate, in
all material respects, and correctly reflect the Tax liability required to be
reported thereon. Such Tax Returns do not contain a disclosure statement under
Section 6662 of the Code (or any predecessor provision or comparable provision
of state, local or foreign law). All Tax Returns provided or made available to
Intel are true and correct copies of such Tax Returns actually filed.
(c) The Company and Tax Affiliates have timely paid all Taxes that have
become due and payable, and have adequately provided in the financial statements
included in the SEC Reports for all Taxes accrued through the date of such
financial statements that were not yet due and payable as of the date thereof;
all Taxes of the Company and Tax Affiliates accrued following the end of the
most recent period covered by the most recent SEC Reports have been accrued in
the ordinary course of business of the Company and Tax Affiliates, are based on
normal operations of the Company and Tax Affiliates from the date thereof and
are properly reflected in the books and records of the Company and Tax
Affiliates. All Taxes that the Company and Tax Affiliates have been or are
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid over to the appropriate Governmental Entity or
are accrued, reserved against and entered on the books and records of the
Company and Tax Affiliates.
(d) Except as set forth in Section 3.14(d) of the Company Disclosure
Schedule, no claim for assessment or collection of Taxes has been or is
presently being asserted against any of the Company or any Tax Affiliate; no
rationale underlying a claim for Taxes has been asserted previously by any
taxing authority that reasonably could be expected to be asserted in any other
period; none of the Company or any Tax Affiliate is (or has been during the last
five years) a party to any action, proceeding, audit or investigation by any
taxing authority nor does Company or any Tax Affiliate have knowledge of any
such threatened action, proceeding, audit or investigation; there are no
outstanding agreements extending the statutory period of limitation applicable
to any claim for, or the period for the collection or assessment of, Taxes due
from the Company or any Tax Affiliate for any taxable period; and neither the
Company nor any Tax Affiliate is a party to an agreement with,
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or is subject to any private ruling from, any Governmental Entity with respect
to Taxes. The Company has provided to Intel copies of all notices, reports and
other documentation received during the last five years from any Governmental
Entity with respect to any audit, examination, claim, inquiry or proceeding with
respect to Taxes of the Company or any Tax Affiliate. No power of attorney with
respect to Taxes is currently in effect.
(e) Except as set forth in Section 3.14(e) of the Company Disclosure
Schedule, neither the Company nor any Tax Affiliate is a party to any agreement,
contract, arrangement or plan that has resulted or would result, individually or
in the aggregate, in connection with this Agreement or any other change of
control of Newco, the Company or any subsidiary, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code (or any
comparable provision of state, local or foreign law).
(f) Except as set forth in Section 3.14(f) of the Company Disclosure
Schedule, neither the Company nor any Tax Affiliate is a party to or bound by
any obligation under any Tax sharing, Tax allocation, Tax indemnity or similar
agreement or arrangement. Other than by reason of withholding Taxes incurred in
the ordinary course of business, neither the Company nor any Tax Affiliate is or
could be held liable for the Taxes of any other person.
(g) Except as set forth in Section 3.14(g) of the Company Disclosure
Schedule, there is no limitation on the utilization by the Company and Tax
Affiliates of net operating losses, built in losses, tax credits or similar
items of the Company and Tax Affiliates under Section 382, 383, 384 or 1502 of
the Code and the Treasury Regulations thereunder (and comparable provisions of
state, local or foreign law).
(h) Except as set forth in Section 3.14(h) of the Company Disclosure
Schedule, neither the Company nor any Tax Affiliate has agreed to, or is
required to make, any adjustment under Section 481 of the Code (or any
comparable provision of state, local or foreign law) by reason of a change in
accounting method, or has any application pending with any Governmental Entity
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company or Tax Affiliates.
(i) Neither the Company nor any Tax Affiliate has ever been a member of an
affiliated, combined, consolidated unitary or other tax filing group, other than
such a group having Company as the common parent. Neither the Company nor any
Tax Affiliates is a member or partner of an entity treated as a partnership for
purposes of the Code.
(j) neither the Company nor any Tax Affiliate is a "consenting corporation"
within the meaning of Section 341(f)(1) of the Code.
(k) Neither the Company nor any Tax Affiliate has taken any action not in
accordance with past practice that would have the effect of deferring a measure
of Tax (including but not limited to income, sales, gross receipts or payroll)
from a period (or portion thereof) ending on or prior to the Closing to a period
(or portion thereof) beginning after the Closing; and no election has been made
with respect to Taxes of the Company or any Tax Affiliate in any Tax Return that
has not been provided to Intel. No material item of income or gain of the
Company or any Tax Affiliate reported or to be reported for financial reporting
purposes in any pre-Closing period is required to be included in taxable income
in a post-Closing period.
(l) No property owned by any of the Company or any Tax Affiliate (i) is
property required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(ii) is property described in Section 168(g)(1) of the Code; or (iii) is subject
to any provision of state, local or foreign law comparable to any of the
provisions listed above.
(m) Neither the Company nor any Tax Affiliate that is a United States
person (as defined in the Code) has engaged in business in any jurisdiction
outside of the United States in a manner that would subject person to tax in
that jurisdiction; and no Tax Affiliate that is not a United States person (as
so defined) has engaged in business in the United States in a manner that would
subject such Tax Affiliate to tax in the United States.
(n) There are no deferred intercompany items or excess loss accounts with
respect to the Company or any Tax Affiliates, and there are no elections in
effect under the sec.sec. 1.1502-1 et. seq. of the United States Treasury
Regulations.
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(o) Each Assumed Option designated as or otherwise purporting to be an
incentive stock option has at all times since the issuance of such Assumed
Option qualified as an "incentive stock option" as such term is defined in
Section 422 of the Code, and immediately prior to the Effective Time will be
held by a person whose exercise of such Assumed Option would be governed by
Section 421(a) of the Code (determined without regard to Section 422(a)(1) of
the Code).
(p) No plan, agreement, arrangement, understanding or intention is or will
be in effect that would cause any of the Newco Common Stock or Newco Preferred
Stock to be acquired by shareholders of the Company in the Merger not to be
taken into account in determining whether the "control" requirement in Section
351(a) of the Code will be satisfied with respect to the transactions
contemplated by this Agreement. Neither the Company, Newco, Transitory nor any
of their shareholders has taken any action that would jeopardize the status of
the Contribution and the Merger, taken together, as a transaction governed by
Section 351(a) of the Code.
Section 3.15. Intellectual Property.
(a) Section 3.15(a) of the Company Disclosure Schedule sets forth, for the
Intellectual Property owned, in whole or in part, including jointly with others,
by the Company or any of its subsidiaries, a complete and accurate list of all
United States and foreign (i) patents and patent applications; (ii) Trademark
registrations and applications and material unregistered Trademarks; and (iii)
copyright registrations and applications, indicating for each, the applicable
jurisdiction, registration number (or application number) and date issued (or
date filed). For purposes of this Agreement, "Intellectual Property" means:
trademarks and service marks (whether registered or unregistered), trade names
and designs, together with all goodwill related to the foregoing (collectively,
"Trademarks"); patents (including any continuations, continuations in part,
renewals and applications for any of the foregoing) (collectively "Patents");
copyrights (including any registrations and applications therefor and whether
registered or unregistered) (collectively, "Copyrights"); computer software;
databases; works of authorship; mask works; technology; trade secrets and other
confidential information, know-how, proprietary processes, formulae, algorithms,
models, user interfaces, customer lists, inventions, discoveries, concepts,
ideas, techniques, methods, source codes, object codes, methodologies and, with
respect to all of the foregoing, related confidential data or information
(collectively, "Trade Secrets").
(b) Trademarks.
(i) The Company and its subsidiaries have complied with all legal
requirements for applying for, registering and maintaining its registered
Trademarks.
(ii) No registered Trademark has been within the last three (3) years
or is now involved in any opposition or cancellation proceeding in the
United States Patent and Trademark Office. To the Company's knowledge, no
such action has been threatened in writing within the one (1)-year period
prior to the date of this Agreement.
(iii) To the Company's knowledge, there has been no prior use of any
Trademark of the Company or its subsidiaries by any third party that
confers upon said third party superior rights in any such Trademark. No
adverse claims have been made or, to the Company's knowledge, threatened
against the Trademarks of the Company and its subsidiaries.
(iv) The Company and its subsidiaries have adequately policed their
Trademarks against third party infringement, and the Trademarks registered
in the United States have been continuously used by the Company or one of
its subsidiaries since the date set forth in, the form appearing in, and in
connection with the goods and services listed in, their respective
registration certificates or renewal certificates, as the case may be.
(c) Patents. Neither the Company nor any of its subsidiaries has any
issued Patents.
(d) Trade Secrets. The Company and each of its subsidiaries have taken
reasonable steps to protect their respective rights in confidential information
and Trade Secrets.
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(e) Assignment and Protection. The Company and each of its subsidiaries
enforces a policy of requiring each employee to execute proprietary information,
confidentiality and assignment agreements substantially in the Company's
standard forms that assign to the Company or such subsidiary, as the case may
be, all rights to any Intellectual Property relating to the Company's or such
subsidiary's business that is developed by the employee in the course of his or
her activities for the Company or any of its subsidiaries or is developed during
working hours using the resources of the Company or any such subsidiary, and has
obtained from consultants and contractors the appropriate level of intellectual
property ownership, protection or other rights sufficient to conduct the
business of the Company and its subsidiaries. To the knowledge of the Company,
there has been no disclosure by the Company or any subsidiary of confidential
information or Trade Secrets except under confidentiality agreements.
(f) License Agreements. Section 3.15(f)(i) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements
granting to the Company or any of its subsidiaries any right to use or practice
any rights under any Intellectual Property other than standard desktop
applications that are sold pursuant to "shrink-wrap" licenses (collectively, the
"Inbound License Agreements"), indicating for each the title and the parties
thereto and the amount of any future royalty or license fee payable thereunder.
Section 3.15(f)(ii) of the Company Disclosure Schedule sets forth a complete and
accurate list of all license agreements which involved license payments (or the
right to license payments) of Fifty Thousand Dollars ($50,000) or more in the
year ended January 31, 2000, or are reasonably expected to involve license
payments (or the right to license payments) of Fifty Thousand Dollars ($50,000)
or more in the year ending January 31, 2001 under which the Company or any of
its subsidiaries licenses software or grants other rights in to use or practice
any rights under any Intellectual Property (collectively, the "Outbound License
Agreements"), indicating for each the title and the parties thereto. There is no
outstanding or, to the Company's knowledge, threatened dispute or disagreement
with respect to any Inbound License Agreement or any Outbound License Agreement.
(g) Ownership; Sufficiency of IP Assets. The Company or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of Intellectual Property
used in its business. The Intellectual Property identified in Section 3.15(a) of
the Company Disclosure Schedule, together with the Company's and its
subsidiaries' unregistered Copyrights and the Company's and such subsidiaries'
rights under the licenses granted to the Company or any of its subsidiaries
under the Inbound License Agreements, constitute all the material Intellectual
Property rights used in the operation of the Company's and its subsidiaries'
businesses as they are currently conducted.
(h) Protection of IP. The Company has taken reasonable steps to protect
the Intellectual Property of the Company and its subsidiaries.
(i) No Infringement by the Company. To the knowledge of the Company, the
products and services used, manufactured, marketed, sold or licensed by the
Company and its subsidiaries, and all Intellectual Property used in the conduct
of the Company's and its subsidiaries' businesses as currently conducted, do not
infringe upon, violate or constitute the unauthorized use of any valid and
enforceable rights owned or controlled by any third party, including any
Intellectual Property of any third party.
(j) No Pending or Threatened Infringement Claims. Except as publicly
disclosed in the Company SEC Reports or in Section 3.15(j) of the Company
Disclosure Schedule, no litigation is now or, within the five (5) years prior to
the date of this Agreement, was pending and no notice or other claim in writing
has been received by the Company within the one (1) year prior to the date of
this Agreement, (i) alleging that the Company any of its subsidiaries has
engaged in any activity or conduct that infringes upon, violates or constitutes
the unauthorized use of the Intellectual Property rights of any third party or
(ii) challenging the ownership, use, validity or enforceability of any
Intellectual Property owned or exclusively licensed by or to the Company. No
Intellectual Property (x) that is owned by the Company or any of its
subsidiaries is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use thereof by the Company or any such subsidiary,
except as may be specifically provided in any such Inbound License Agreement,
(y) that is the subject of an Outbound License Agreement is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
sale, transfer, assignment or licensing thereof by the Company
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or any of its subsidiaries to any person or (z) that is the subject of an
Inbound License Agreement is subject to any outstanding judgment, decree, order,
stipulation or agreement restricting the use thereof by the Company or any of
its subsidiaries.
(k) No Infringement by Third Parties. Except as publicly disclosed in the
Company SEC Reports, to the knowledge of the Company, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property
owned or exclusively licensed by the Company or any of its subsidiaries, and no
such claims have been brought against any third party by the Company or any of
its subsidiaries.
(l) Assignment; Change of Control. Except as set forth in Section 3.15(l)
of the Company Disclosure Schedule, the execution, delivery and performance by
the Company, Newco and Transitory of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or impairment of,
or give rise to any right of any third party to terminate or alter, any of the
Company's or any of its subsidiaries' rights to own any of its Intellectual
Property or their respective rights under any Inbound License Agreement or
Outbound License Agreement, nor require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
(m) Software. The Software owned or purported to be owned by the Company
or any of its subsidiaries was either (i) developed by employees of the Company
or any of its subsidiaries within the scope of their employment; (ii) developed
by independent contractors who have assigned their rights to the Company or any
of its subsidiaries pursuant to written agreements; or (iii) otherwise acquired
by the Company or a subsidiary from a third party. Except as set forth in
Section 3.15(m) of the Company Disclosure Schedule, the Software does not
contain any programming code, documentation or other materials or development
environments that embody Intellectual Property rights of any person other than
the Company or any of its subsidiaries, except for such materials or development
environments obtained by the Company or any of its subsidiaries from other
persons who make such materials or development environments generally available
on non-discriminatory commercial terms. For purposes of this Section 3.15(m) and
Section 4.9(l), "Software" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, schematics, flow-charts and other work product
used to design, plan, organize and develop any of the foregoing, and (iv) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
(n) Performance of Existing Software Products. The Company's and its
subsidiaries' existing and currently manufactured and marketed Software products
listed and described on Section 3.15(n) of the Company Disclosure Schedule
perform in all material respects, free of significant bugs, viruses or
programming errors, the functions described in any agreed specifications or end
user documentation or other information provided to customers of the Company or
any of its subsidiaries on which such customers relied when licensing or
otherwise acquiring such products.
(o) Documentation. The Company and its subsidiaries have taken all actions
customary in the software industry to document the Software and its operation,
such that the materials comprising the Software, including the source code and
documentation, have been written in a clear and professional manner so that they
may be understood, modified and maintained in an efficient manner by reasonably
competent programmers.
(p) Year 2000 Capability.
(i) Except as set forth in Section 3.15(p) of the Company Disclosure
Schedule, all of the Company's and its subsidiaries' products (including
products currently under development) have recorded, stored, processed and
calculated and presented calendar dates falling on and after December 31,
1999, and will continue to calculate any information dependent on or
relating to such dates in the same manner and with the same functionality,
data integrity and performance as the products recorded, stored, processed,
calculated and presented calendar dates on or before December 31, 1999, or
calculated any information dependent on or relating to such dates, except
for any failure to satisfy the foregoing the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material
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Adverse Effect on the Company (collectively, "Year 2000 Capable"). Except
as set forth in Section 3.15(p) of the Company Disclosure Schedule, (i) all
of the Company's and its subsidiaries' products did not lose, and will not
lose, any significant functionality with respect to the introduction of
records containing dates falling on or after December 31, 1999; and (ii)
all of the Company's and its subsidiaries' internal computer systems
comprised of software, hardware, databases or embedded control systems
(microprocessor controlled, robotic or other device) related to the
Company's and its subsidiaries' businesses (collectively, a "Business
System"), that constitutes any part of, or is used in connection with the
use, operation or enjoyment of, any tangible or intangible asset or real
property of the Company and its subsidiaries, including its accounting
systems, are Year 2000 Capable. Except as set forth on Section 3.15(p) of
the Company Disclosure Schedule, the current versions of the Company's and
its subsidiaries' software and all other Intellectual Property may be used
after December 31, 1999 such that such Software and Intellectual Property
will operate after such time period without error caused by date data that
represents or references different centuries or more than one century.
(ii) Except as set forth on Section 3.15(p) of the Company Disclosure
Schedule, the Company's products and the conduct of the Company's business
with its customers and suppliers were not impaired by the advent of the
year 2000, the advent of the twenty-first century or the transition from
the twentieth century through the year 2000 and into the twenty-first
century, except for any such impairment the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company. Except as set forth on Section
3.15(p) of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries incurred expenses arising from or relating to the failure
of any of its Business Systems or any products (including all products sold
on or prior to the date hereof) as a result of the advent of the year 2000,
the advent of the twenty-first century or the transition from the twentieth
century through the year 2000.
(q) Third Party NDA. To the knowledge of the Company, neither the Company
nor any subsidiary is a party to, or is bound by, any non-disclosure or similar
agreement that is materially different from the Company's standard
non-disclosure agreement, a copy of which has previously been delivered by the
Company to Intel.
Section 3.16. Insurance. Except as set forth in Section 3.16 of the
Company Disclosure Schedule, each of the Company and its subsidiaries maintains
insurance policies (the "Insurance Policies") against all risks of a character
and in such amounts as are customarily insured against by similarly situated
companies in the same or similar businesses. Each Insurance Policy is in full
force and effect and is valid, outstanding and enforceable, and all premiums due
thereon have been paid in full. None of the Insurance Policies will terminate or
lapse (or be affected in any other manner that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company) by reason of the transactions contemplated by this Agreement. Each of
the Company and its subsidiaries has complied with the provisions of each
Insurance Policy under which it is the insured party, except for any
non-compliance the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company. No insurer under any Insurance Policy has canceled or generally
disclaimed liability under any such policy or, to the Company's knowledge,
indicated any intent to do so or not to renew any such policy. All claims under
the Insurance Policies have been filed in a timely fashion.
Section 3.17. Certain Business Practices. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 3.18. Product Warranties. Section 3.18 of the Company Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by the Company or any of its subsidiaries currently in effect with
respect to its products. Except for any of the following the existence of which
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on
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the Company, there have not been any deviations from such warranties and
guaranties, and neither the Company, any of its subsidiaries nor any of their
respective salesmen, employees, distributors and agents is authorized to
undertake obligations to any customer or to other third parties in excess of
such warranties or guaranties. Except for any of the following the existence of
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company, neither the Company nor any of
its subsidiaries has made any oral warranty or guaranty with respect to its
products not described on such schedule.
Section 3.19. Suppliers and Customers. Section 3.19 of the Company
Disclosure Schedule sets forth the names of the ten (10) largest customers of
the Company and its subsidiaries during the last twelve (12) months ended
January 31, 2000 and of each supplier who supplied the Company and its
subsidiaries with over Two Hundred Thousand Dollars ($200,000) of supplies
during such twelve month period. During the last twelve (12) months, the Company
has received no notices of termination or written threats of termination from
any such supplier or any such customer.
Section 3.20. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the Company's capital
stock necessary to approve the Merger and adopt this Agreement.
Section 3.21. Opinion of Financial Advisor. The Company has received a
fairness opinion of Needham & Company, Inc. (the "Financial Advisor"), with
respect to the Combination and such fairness opinion has not, as of the date
hereof, been withdrawn, revoked or modified. A true and complete copy of such
opinion will be delivered to Intel within three (3) business days of the date
hereof.
Section 3.22. Brokers. No broker, finder or investment banker (other than
the Financial Advisor, a true and correct copy of whose engagement agreement
have been provided to Intel) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company, Newco or
Transitory.
Section 3.23. Takeover Statute. With respect to the Combination, no
restrictions of any "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation (each a "Takeover Statute")
are or will be applicable to the Company, the Shares, the Company Preferred
Stock or any of the other transactions contemplated by this Agreement.
Section 3.24. Representations Complete. None of the representations or
warranties made by the Company, Newco and Transitory in this Agreement nor any
statement made in any Schedule or certificate furnished by the Company, Newco
and Transitory pursuant to this Agreement, contains or will contain at the
Effective Time, any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INTEL
Intel hereby represents and warrants to the Company, Newco and Transitory,
subject to the exceptions set forth in the Disclosure Schedule (the "Intel
Disclosure Schedule") delivered to the Company by Intel in accordance with
Section 5.11 (which exceptions shall specifically identify a Section or
subsection, as applicable, to which such exception relates) as follows:
Section 4.1. Organization and Qualification.
(a) Intel is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted.
(b) Intel is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the ownership or operation of any of the
Contributed Assets or the nature of the business of the Contributed Assets
conducted by Intel makes such qualification or licensing necessary, except in
such jurisdictions where
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the failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on the
Contributed Assets. When used in connection with Intel or its subsidiaries, the
term "Material Adverse Effect on the Contributed Assets" means any circumstance,
change in, or effect on the Contributed Assets that is, or is reasonably likely
in the foreseeable future to be, materially adverse to the operations, financial
condition, earnings or results of operations, or the business (financial or
otherwise), of the Contributed Assets, taken as a whole; provided, however, that
a change in conditions affecting either the internet media services and
distribution industry, as a whole, or the text search retrieval industry, as a
whole, shall not be deemed to constitute a Material Adverse Effect on the
Contributed Assets.
Section 4.2. Authority Relative to this Agreement. Intel has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations under this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly and validly
authorized by Intel, and no other corporate proceedings on the part of Intel are
necessary to authorize this Agreement, or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Intel and, assuming the due authorization, execution and delivery
by the Company, Newco and Transitory, constitutes the valid, legal and binding
agreement of Intel, enforceable against it in accordance with its terms, subject
to any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally or to
general principles of equity.
Section 4.3. Information Supplied. None of the information provided or to
be provided in writing by Intel specifically for inclusion or incorporation by
reference in the Registration Statement (as defined in Section 5.4) or the Proxy
Statement (as defined in Section 5.4) will, at the date mailed to stockholders
of the Company, at the time of the meeting of stockholders of the Company to be
held in connection with the Combination and at the time of issuance of shares of
Newco Common Stock to Intel in the Combination, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein in light of the
circumstances under which they are made not misleading.
Section 4.4. Consents and Approvals; No Violations. Except for (i)
filings, permits, authorizations, consents and approvals as may be required
under applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the HSR Act, (ii) any filings under similar
merger notification laws or regulations of foreign Governmental Entities, (iii)
the filing of the Certificate of Merger as required by the DGCL and (iv) any
filings, permits, authorizations, consents and approvals the nonexistence of
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Contributed Assets, no filing with or
notice to and no permit, authorization, consent or approval of any Governmental
Entity is necessary for the execution and delivery by Intel of this Agreement or
the consummation by Intel of the transactions contemplated hereby. Neither the
execution, delivery and performance of this Agreement by Intel, nor the
consummation by Intel of the transactions contemplated hereby, will (a) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or bylaws (or similar governing documents) of Intel, (b) result in
a violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Intel is a party or by
which it or any of its properties and assets is bound or (c) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to Intel
or any of its properties or assets, except, with respect to clauses (b) and (c),
for the matters set forth on Section 4.4 of the Intel Disclosure Schedule and
for matters the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Contributed Assets.
Section 4.5. No Default. Except as set forth in Section 4.5 of the Intel
Disclosure Schedule, Intel is not in breach, default or violation (and no event
has occurred that with notice or the lapse of time or both would constitute a
breach, default or violation) of any term, condition or provision of (i) its
Certificate of Incorporation or bylaws (or similar governing documents), (ii)
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Intel is now a party or by which it or
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any of its properties and assets is bound or (iii) any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Intel or any of its
properties or assets, except, with respect to clauses (i), (ii) and (iii) above,
for matters the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Contributed Assets.
Section 4.6. Litigation. Except as publicly disclosed in the forms,
reports and documents (the "Intel SEC Reports") filed by Intel with the SEC
since January 1, 1997, or as set forth in Section 4.6 of the Intel Disclosure
Schedule, there is no suit, claim, action, arbitration, proceeding or
investigation pending or, to the knowledge of Intel, threatened against any of
the Contributed Assets before any Governmental Entity or brought by any person
that would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Contributed Assets or that would reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement beyond the Final Date. Except as publicly disclosed in the
Intel SEC Reports, Intel is not subject to any outstanding order, writ,
injunction or decree that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets or would
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 4.7. Compliance with Applicable Law. Except as publicly disclosed
in the Intel SEC Reports, Intel holds all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for the
lawful conduct of the business and operation of the Contributed Assets, except
for any permits, licenses, variances, exemptions, orders or approvals the
non-existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets (the
"Intel Permits"). Except as publicly disclosed in the Intel SEC Reports, Intel
is in compliance with the terms of the Intel Permits, except for any
non-compliance the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Contributed Assets. Except as publicly disclosed in the Intel SEC Reports, the
business and operations of the Contributed Assets have been and are being
conducted in compliance with all Applicable Laws, except for any non-compliance
the existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets. Except
as publicly disclosed in the Intel SEC Reports, no investigation or review by
any Governmental Entity with respect to the Contributed Assets is pending or, to
the knowledge of Intel, threatened, nor, to the knowledge of Intel, has any
Governmental Entity indicated an intention to conduct the same.
Section 4.8. Intellectual Property.
(a) Section 4.8(a) of the Intel Disclosure Schedule sets forth, for the
Intellectual Property included in the Contributed Assets, a complete and
accurate list of all United States and foreign (i) patents and patent
applications; and (ii) copyright registrations and applications, indicating for
each, the applicable jurisdiction, registration number (or application number)
and date issued (or date filed).
(b) Patents.
(i) Intel has complied with all legal requirements for applying for
the issuance of and maintaining the grant of Patents included in the
Contributed Assets.
(ii) No Patent included in the Contributed Assets has been or is now
involved in any interference, reissue, reexamination or opposing proceeding
in the United States Patent and Trademark Office. To Intel's knowledge, no
such action has been threatened within the one (1)-year period prior to the
date of this Agreement.
(c) Trade Secrets. Intel has taken reasonable steps to protect its rights
in confidential information and Trade Secrets related to the Contributed Assets.
(d) Assignment and Protection. Intel has enforced a policy of requiring
each employee to execute proprietary information, confidentiality and assignment
agreements substantially in Intel's standard forms that assign to Intel all
rights to any Intellectual Property included in the Contributed Assets that is
developed by the employee in the course of his or her activities for Intel or is
developed during working hours using the
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resources of Intel, and has obtained from consultants and contractors the
appropriate level of intellectual property ownership, protection or other rights
sufficient to use the Intellectual Property included in the Contributed Assets.
To the knowledge of Intel, there has been no disclosure by Intel of confidential
information or Trade Secrets related to the Contributed Assets except under
confidentiality agreements.
(e) License Agreements. Section 4.8(e)(i) of the Intel Disclosure Schedule
sets forth a complete and accurate list of all license agreements under which
any of the Enhanced Video Services, the Enhanced Content Services or the
Internet Security Services departments of Intel licenses software or grants
other rights to use or practice any rights under any Intellectual Property
included in the Contributed Assets (collectively, the "Intel Outbound License
Agreements"), indicating for each the title and the parties thereto. There is no
outstanding or, to Intel's knowledge, threatened dispute or disagreement with
respect to any Intel Outbound License Agreement.
(f) Ownership. To the knowledge of Intel, Intel owns or possesses adequate
licenses or other rights to use, free and clear of Liens, orders and arbitration
awards, all of the Intellectual Property included in the Contributed Assets.
(g) Protection of IP. Intel has taken reasonable steps to protect the
Intellectual Property included in the Contributed Assets.
(h) No Infringement by Intel. To the knowledge of Intel, the products and
services used, manufactured, marketed, sold or licensed in connection with the
Contributed Assets, and all Intellectual Property included in the Contributed
Assets, do not infringe upon, violate or constitute the unauthorized use of any
valid and enforceable rights owned or controlled by any third party, including
any Intellectual Property of any third party.
(i) No Pending or Threatened Infringement Claims. No litigation is now or,
within the five (5) years prior to the date of this Agreement, was pending and
no notice or other claim in writing has been received by Intel within the one
(1) year prior to the date of this Agreement, (i) alleging that the use by Intel
of the Intellectual Property included in the Contributed Assets infringes upon,
violates or constitutes the unauthorized use of the Intellectual Property rights
of any third party or (ii) challenging the ownership, use, validity or
enforceability of any Intellectual Property included in the Contributed Assets.
Except as disclosed in Section 4.8(i) of the Intel Disclosure Schedule, no
Intellectual Property included in the Contributed Assets (y) is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by Intel, or (z) is the subject of an Outbound License Agreement and
is subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the sale, transfer, assignment or licensing thereof by Intel to any
person.
(j) No Infringement by Third Parties. To the knowledge of Intel, no third
party is misappropriating, infringing, diluting or violating any Intellectual
Property included in the Contributed Assets, and no such claims have been
brought against any third party by Intel.
(k) Assignment; Change of Control. Except as set forth in Section 4.8(k)
of the Intel Disclosure Schedule, the execution, delivery and performance by
Intel of this Agreement, and the consummation of the transactions contemplated
hereby, will not result in the loss or impairment of, or give rise to any right
of any third party to terminate or alter, any of Intel's rights to own any of
the Intellectual Property included in the Contributed Assets or its rights under
any Outbound License Agreement, nor require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
(l) Software. The Software purported to be included in the Contributed
Assets was either (i) developed by employees of Intel within the scope of their
employment; (ii) developed by independent contractors who have assigned their
rights to Intel or any of its subsidiaries pursuant to written agreements; or
(iii) otherwise acquired by Intel or a subsidiary from a third party. Except as
set forth in Section 4.8(l) of the Intel Disclosure Schedule, the Software
included in the Contributed Assets does not contain any programming code,
documentation or other materials or development environments that embody
Intellectual Property rights of any person other than Intel, except for such
materials or development environments obtained by Intel from
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other persons who make such materials or development environments generally
available on non-discriminatory commercial terms.
(m) Performance of Existing Software Products. The existing and currently
manufactured and marketed Software products listed and described on Section
4.8(m) of the Intel Disclosure Schedule and included in the Contributed Assets
perform in all material respects, free of significant bugs, viruses or
programming errors, the functions described in any agreed specifications or end
user documentation or other information provided to customers of Intel on which
such customers relied when licensing or otherwise acquiring such products.
(n) Documentation. Intel has taken all actions customary in the software
industry to document the Software included in the Contributed Assets and its
operation, such that the materials comprising the Software included in the
Contributed Assets, including the source code and documentation, have been
written in a clear and professional manner so that they may be understood,
modified and maintained in an efficient manner by reasonably competent
programmers.
(o) Year 2000 Capability.
(i) Except as set forth in Section 4.8(o) of the Intel Disclosure
Schedule, all products included in the Contributed Assets (including
products currently under development) have recorded, stored, processed and
calculated and presented calendar dates falling on and after December 31,
1999, and will continue to calculate any information dependent on or
relating to such dates in the same manner and with the same functionality,
data integrity and performance as the products recorded, stored, processed,
calculated and presented calendar dates on or before December 31, 1999, or
calculated any information dependent on or relating to such dates, except
for any failure to satisfy the foregoing the existence of which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Intel. Except as set forth in Section 4.8(o) of
the Intel Disclosure Schedule, all products included in the Contributed
Assets did not lose, and will not lose, any significant functionality with
respect to the introduction of records containing dates falling on or after
December 31, 1999. Except as set forth on Section 4.8(o) of the Intel
Disclosure Schedule, the current versions of the Software and all other
Intellectual Property included in the Contributed Assets may be used after
December 31, 1999 such that such Software and Intellectual Property will
operate after such time period without error caused by date data that
represents or references different centuries or more than one century.
(ii) Except as set forth on Section 4.8(o) of the Intel Disclosure
Schedule, the products included in the Contributed Assets were not
adversely affected by the advent of the year 2000, the advent of the
twenty-first century or the transition from the twentieth century through
the year 2000 and into the twenty-first century.
(p) Foundry Relationship. The Contributed Assets do not include any (i)
foundry relationship, wafer or digital signal processor manufacturing and
fabricating agreement, understanding or commitment, or (ii) integrated circuit
die or device purchase, supply or service agreement, understanding or
commitment, whether written or oral.
Section 4.9. Product Warranties. Section 4.9 of the Intel Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by Intel currently in effect with respect to products included in the
Contributed Assets. Except for any of the following the existence of which would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Contributed Assets, there have not been any deviations
from such warranties and guaranties, and neither Intel nor any of its salesmen,
employees, distributors and agents is authorized to undertake obligations to any
customer or to other third parties in excess of such warranties or guaranties.
Except for any of the following the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Contributed Assets, Intel has not made any oral warranty or guaranty with
respect to the products included in the Contributed Assets not described on such
schedule.
Section 4.10. Suppliers and Customers. Section 4.10 of the Intel
Disclosure Schedule sets forth the names of the ten (10) largest customers of
the business of the Contributed Assets during the last twelve (12)
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months ended January 31, 2000 and of each supplier who supplied the business of
the Contributed Assets with over Two Hundred Thousand Dollars ($200,000) of
supplies during such twelve month period. During the last twelve (12) months,
Intel has received no notices of termination or written threats of termination
from any such supplier or such customer.
Section 4.11. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Intel.
Section 4.12. Representations Complete. None of the representations or
warranties made by Intel in this Agreement nor any statement made in any
Schedule or certificate furnished by Intel pursuant to this Agreement, contains
or will contain at the Effective Time, any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE 5
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or as described in Section 5.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company will and will cause each of its subsidiaries to (a) conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement, and (b) use all commercially
reasonable efforts to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors, creditors,
employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall not be materially
impaired at the Effective Time. Notwithstanding the foregoing, during the period
from the date hereof to the Effective Time, the Company will cause each of Newco
and Transitory to take no action other than actions taken in furtherance of the
Combination as contemplated by this Agreement. Without limiting the generality
of the foregoing, except as otherwise expressly provided in this Agreement or in
Section 5.1 of the Company Disclosure Schedule, prior to the Effective Time,
neither the Company nor any of its subsidiaries shall, without the prior written
consent of Intel:
(a) amend its Certificate of Incorporation or bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other debt or equity securities or
equity equivalents (including any stock options or stock appreciation
rights) except for the issuance and sale of Shares pursuant to Company
Stock Options outstanding on the date hereof, grants of shares of Company
Stock Options consistent with Section 5.15, the issuance of shares of Newco
Common Stock and Newco Non-Voting Common Stock pursuant to the Contribution
and the grant of Newco Stock Options;
(c) other than as required under the Company's Certificate of
Designation with respect to dividends payable with respect to the Company
Preferred Stock, split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, make any other actual, constructive or deemed
distribution in respect of its capital stock or otherwise make any payments
to stockholders in their capacity as such, or redeem or otherwise acquire
any of its securities or any securities of any of its subsidiaries, except
as may be required under the terms of any Company Stock Option;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Combination);
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(e) alter through merger, liquidation, reorganization, restructuring
or any other fashion the structure of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except, in each case, for borrowings under existing lines
of credit in the ordinary course of business, or modify or agree to any
amendment of the terms of any of the foregoing; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except
for obligations of subsidiaries of the Company incurred in the ordinary
course of business consistent with past practice, other than third-party
guarantees and lease agreements not to exceed One Hundred Fifty Thousand
Dollars ($150,000) individually or Five Hundred Thousand Dollars ($500,000)
in the aggregate; (iii) make any loans, advances or capital contributions
to or investments in any other person (other than to subsidiaries of the
Company or customary loans or advances to employees in each case in the
ordinary course of business consistent with past practice); (iv) pledge or
otherwise subject to any Lien shares of capital stock of the Company or any
of its subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material Lien
thereupon;
(g) except as may be required by Applicable Law, enter into, adopt or
amend or terminate any Compensation and Benefit Plan in any manner or
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Compensation and
Benefit Plan as in effect as of the date hereof (including the granting of
stock appreciation rights or performance units), except in accordance with
Section 5.15 and except for salary increases to employees in the ordinary
course of business consistent with past practice and intended to
incentivize employees to remain employed by the Company, provided that no
such salary increase shall be in excess of the greater of Twenty-Five
Thousand Dollars ($25,000) or twenty percent (20%) of the employee's
current salary;
(h) grant any severance or termination pay to any director, officer,
employee or consultant, except (i) payments made pursuant to written
agreements outstanding on the date, (ii) payments, with respect to any
person identified as a Named Company Employee on Exhibit I-1 hereto, for no
more than nine (9) months of salary, and with respect to any person
identified as an Other Company Employee on Exhibit I-2 hereto, for no more
than six (6) months of salary, and (iii) as required by applicable federal,
state or local law or regulations;
(i) exercise its discretion or otherwise voluntarily accelerate the
vesting of any Company Stock Option as a result of the Combination, any
other "change in control" of the Company (as defined in the Company Plans)
or otherwise.
(j) (i) sell, lease, license, transfer or otherwise dispose of any
material assets in any single transaction or series of related transactions
(including in any transaction or series of related transactions having a
fair market value in excess of Two Hundred Fifty Thousand Dollars
($250,000) individually or One Million Dollars ($1,000,000) in the
aggregate), other than sales of its products and licenses of software in
the ordinary course of business consistent with past practices, (ii) enter
into any license, reseller, distribution, marketing, sales or other
agreement that either (A) provides for an exclusive relationship or
arrangement or (B) provides for the annual payment by the Company, or the
obligation of the Company to perform services or deliver products, in
excess of Two Hundred Fifty Thousand Dollars ($250,000), or sell, transfer
or otherwise dispose of any Intellectual Property, or (iii) license any
source code to any third party;
(k) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(l) revalue in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts
receivable, other than in the ordinary course of business consistent with
past practice or as required by generally accepted accounting principles;
(m) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other person or division thereof or
any equity interest therein; (ii) enter into any contract or agreement that
would be material to the Company and its subsidiaries, taken as a whole;
(iii) amend,
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modify or waive any right under any contract of the Company or any of its
subsidiaries, except to the extent such amendment, modification or waiver
would not reasonably be expected to have a Material Adverse Effect on the
Company; (iv) modify its standard warranty terms for its products or amend
or modify any product warranties in effect as of the date hereof in any
manner that is adverse to the Company or any of its subsidiaries, except to
the extent such modification or amendment would not reasonably be expected
to have a Material Adverse Effect on the Company; (v) authorize any new
capital expenditure or expenditures that are not set forth in Section
5.1(m)(v) of the Company Disclosure Schedule and that are in excess of Two
Hundred Fifty Thousand Dollars ($250,000) individually or One Million
Dollars ($1,000,000) in the aggregate; or (vi) acquire any other asset or
related group of assets, or make any investment other than cash
investments, made in the ordinary course of business and in accordance with
the Company's past cash management practices, in a single transaction or
series of related transactions with a cost in excess of One Hundred
Thousand Dollars ($100,000), provided that in no event shall the aggregate
of all acquisitions and investments exceed Five Hundred Thousand Dollars
($500,000);
(n) make any material Tax election, settle or compromise any material
income Tax liability, amend any Tax Return or permit any insurance policy
naming it as a beneficiary or loss-payee to expire, or to be canceled or
terminated, unless a comparable insurance policy reasonably acceptable to
Intel is obtained and in effect;
(o) fail to file any Tax Returns when due (or, alternatively, fail to
file for available extensions) or fail to cause such Tax Returns when filed
to be complete and accurate in all material respects;
(p) fail to pay any Taxes or other material debts when due;
(q) settle or compromise any pending or threatened suit, action or
claim that (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which would involves more than Two Hundred
Fifty Thousand Dollars ($250,000) or that would otherwise be material to
the Company or that relates to any Intellectual Property matters;
(r) take any action or fail to take any action that would reasonably
be expected to (i) limit the utilization of any of the net operating
losses, built-in losses, tax credits or other similar items of the Company
or its subsidiaries under Section 382, 383, 384 or 1502 of the Code and the
Treasury Regulations thereunder, or (ii) cause any transaction in which the
Company or any of its subsidiaries was a party that was intended to be
treated as a reorganization under Section 368(a) of the Code to fail to
qualify as a reorganization under Section 368(a) of the Code; or
(s) take or agree in writing or otherwise to take any of the actions
described in Sections 5.1(a) through 5.1(r) (and it shall use all
reasonable efforts not to take any action that would make any of the
representations or warranties of the Company, Newco or Transitory contained
in this Agreement untrue or incorrect).
Section 5.2. Conduct of Business Related to the Contributed Assets. Except
as contemplated by this Agreement or as described in Section 5.2 of the Intel
Disclosure Schedule, during the period from the date hereof to the Effective
Time, Intel will (a) conduct the operation of the business of the Contributed
Assets in the ordinary course of business consistent with past practice and, to
the extent consistent therewith, with no less diligence and effort than would be
applied in the absence of this Agreement, and (b) use all commercially
reasonable efforts to preserve intact the current business organizations solely
related to the Contributed Assets, keep available the service of the officers
and employees currently employed solely with respect to the Contributed Assets
and preserve its relationships with customers, suppliers, distributors, lessors,
creditors, employees, contractors and others having business dealings with the
business of the Contributed Assets with the intention that the goodwill and
ongoing business of the Contributed Assets shall not be materially impaired at
the Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided
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in this Agreement or in Section 5.2 of the Intel Disclosure Schedule, prior to
the Effective Time, Intel shall not, without the prior written consent of the
Company:
(a) mortgage or pledge any material asset included in the Contributed
Assets, tangible or intangible, or create or suffer to exist any material
Lien thereupon;
(b) sell, lease, license, transfer or otherwise dispose of any
material portion of the Contributed Assets in any single transaction or
series of related transactions (including in any transaction or series of
related transactions having a fair market value in excess of Two Hundred
Fifty Thousand Dollars ($250,000) individually or One Million Dollars
($1,000,000) in the aggregate), other than sales of its products and
licenses of software in the ordinary course of business consistent with
past practices, (ii) enter into any exclusive license, distribution,
marketing, sales or other agreement with respect to the Contributed Assets
or sell, transfer or otherwise dispose of any Intellectual Property
included in the Contributed Assets, or (iii) license any source code
included in the Contributed Assets to any third party;
(c) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, practices or methods used by any business unit or division
constituting a part of the Contributed Assets;
(d) revalue in any material respect any of the Contributed Assets,
including writing down the value of inventory or writing-off notes or
accounts receivable, other than in the ordinary course of business
consistent with past practice or as required by generally accepted
accounting principles;
(e) (i) enter into any contract or agreement that would be material to
the Contributed Assets, taken as a whole; (ii) amend, modify or waive any
right under any material contract included in the Contributed Assets; (iii)
modify the standard warranty terms for the products included in the
Contributed Assets or amend or modify any product warranties in effect with
respect to any portion of the Contributed Assets as of the date hereof in
any material manner that is adverse to the Contributed Assets; or (iv)
authorize any new capital expenditure or expenditures with respect to the
Contributed Assets that are not set forth in Section 5.2(e)(i) of the Intel
Disclosure Schedule and that are in excess of Two Hundred Fifty Thousand
Dollars ($250,000) individually or One Million Dollars ($1,000,000) in the
aggregate, except to the extent such capital expenditure or expenditures
would not reasonably be expected to have a Material Adverse Effect on the
Contributed Assets;
(f) permit any insurance policy covering any of the Contributed Assets
to expire, or to be canceled or terminated, unless a comparable insurance
policy reasonably acceptable to the Company is obtained and in effect;
(g) settle or compromise any pending or threatened suit, action or
claim that (i) relates to the transactions contemplated hereby or (ii)
would be material to the Contributed Assets or that relates to any
Intellectual Property included in the Contributed Assets; or
(h) take or agree in writing or otherwise to take any of the actions
described in Sections 5.2(a) through 5.2(h) (and Intel shall use all
reasonable efforts not to take any action that would make any of the
representations or warranties of Intel contained in this Agreement untrue
or incorrect).
Section 5.3. No Solicitation or Negotiation.
(a) The Company, its subsidiaries and other affiliates and their respective
officers and other employees with managerial responsibilities, directors,
representatives (including the Financial Advisor or any other investment banker
and any attorneys and accountants and agents shall immediately cease any
discussions or negotiations with any other persons with respect to any Third
Party Acquisition (as defined in Section 5.3(c)). The Company also agrees
promptly to request each person that has heretofore executed a confidentiality
agreement in connection with its consideration of acquiring (whether by merger,
acquisition of stock or assets or otherwise) the Company or any of its
subsidiaries or any of their respective assets, if any, to the extent such
confidentiality agreement remains in effect, to return all confidential
information heretofore furnished to such person by or on behalf of the Company
or any of its subsidiaries. None of the Company nor any of its subsidiaries and
other affiliates shall, nor shall the Company authorize or permit any of its or
their respective
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officers, directors, employees, representatives or agents to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with or provide any information to any person or group (other than
Intel or any designees of Intel) concerning any Third Party Acquisition;
provided, however, that if the Board of Directors of the Company determines in
good faith, after consultation with and taking into account the advice of
outside legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under the DGCL as such duties
would exist in the absence of this Section 5.3, the Company may, in response to
a proposal or offer for a Third Party Acquisition that was not solicited and
that the Board of Directors of the Company determines, based on consultation
with the Company Financial Advisor, is from a Third Party that is capable of
consummating a Superior Proposal and only for so long as the Board of Directors
so determines that its actions are likely to lead to a Superior Proposal, (i)
furnish information only of the type and scope with respect to the Company that
the Company provided to Intel prior to the date hereof to any such person
pursuant to a customary confidentiality agreement as was executed by Intel prior
to the execution of this Agreement and (ii) participate in the discussions and
negotiations regarding such proposal or offer; provided, further, nothing herein
shall prevent the Company Board from taking and disclosing to the Company's
stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender or exchange offer. The Company shall
promptly (and in any event within one business day after becoming aware thereof)
(i) notify Intel in the event the Company or any of its subsidiaries and other
affiliates or any of their respective officers, directors, employees and agents
receives any proposal or inquiry concerning a Third Party Acquisition, including
the terms and conditions thereof and the identity of the party submitting such
proposal, and any request for confidential information in connection with a
potential Third Party Acquisition, (ii) provide a copy of any written
agreements, proposals or other materials the Company receives from any such
person or group (or its representatives), and (iii) advise Intel from time to
time of the status, at any time upon Intel's request, and promptly following any
developments concerning the same.
(b) Except as set forth in this Section 5.3(b), the Company Board shall
not, subject to its fiduciary obligations, withdraw or modify its recommendation
of the transactions contemplated hereby and shall not approve or recommend, or
cause or permit the Company to enter into any agreement or obligation with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if the
Company Board by a majority vote determines in its good faith judgment, after
consultation with and taking into account the advice of outside legal counsel,
that it would be required to do so in order to comply with its fiduciary duties
to the Company's stockholders under the DGCL if the Company Board could
unilaterally terminate the Agreement, the Company Board may withdraw its
recommendation of the transactions contemplated hereby or approve or recommend a
Superior Proposal, but in each case only (i) after providing written notice to
Intel (a "Notice of Superior Proposal") advising Intel that the Company Board
has received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person or group making such
Superior Proposal and (ii) if Intel does not, within five (5) business days
after Intel's receipt of the Notice of Superior Proposal, make an offer that the
Company Board by a majority vote determines in its good faith judgment (based on
the advice of the Financial Advisor or another financial advisor of nationally
recognized reputation) to be at least as favorable to the Company's stockholders
as such Superior Proposal; provided, however, that the Company shall not be
entitled to enter into any agreement with respect to a Superior Proposal unless
and until this Agreement is terminated pursuant to Section 7.1 and the Company
has paid all amounts due to Intel pursuant to Section 7.3. Any disclosure that
the Company Board may be compelled to make with respect to the receipt of a
proposal for a Third Party Acquisition or otherwise in order to comply with its
fiduciary duties or Rule 14d-9 or 14e-2 will not constitute a violation of this
Agreement if such disclosure states that no action will be taken by the Company
Board in violation of this Section 5.3(b).
(c) For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Intel or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
twenty percent (20%) or more of the assets of the Company and its subsidiaries,
taken as a whole; (iii) the acquisition by a Third Party of twenty percent (20%)
or more of the outstanding Shares; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by the Company or any of its
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subsidiaries of more than twenty percent (20%) of the outstanding Shares; or
(vi) the acquisition (or any group of acquisitions) by the Company or any of its
subsidiaries by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business (or
businesses) whose annual revenues, net income or assets is equal or greater than
twenty percent (20%) of the annual revenues, net income or assets of the
Company, respectively. For purposes of this Agreement, a "Superior Proposal"
means any bona fide proposal (1) to acquire, directly or indirectly, for
consideration consisting solely of cash and/or securities, all of the Shares
then outstanding, all or substantially all of the assets, of the Company, or
newly issued securities of the Company (or its successor) representing at least
60% of the equity of the Company (or its successor), giving effect to the
issuance of such securities, (2) that is fully-financed and contains terms that
the Company Board by a majority vote determines in its good faith judgment
(based, as to the financial terms, on the written advice of the Financial
Advisor or another financial advisor of nationally recognized reputation) to be
more favorable to the Company's stockholders than the Combination, (3) that the
Company Board by a majority vote determines in its good faith judgment
(following and based on consultation with the Financial Advisor or another
financial advisor of nationally recognized reputation and its legal and other
advisors) to be reasonably capable of being completed (taking into account all
legal, financial, regulatory and other aspects of the proposal and the person
making the proposal), (4) that does not contain a "right of first refusal" or
"right of first offer" with respect to any counter-proposal that Intel might
make and (5) that does not contain any financing or "due diligence" condition.
Section 5.4. Preparation of Registration Statement and Proxy Statement. As
promptly as practicable following the date of this Agreement, the Company and
Newco shall prepare and file with the SEC under the Securities Act and the
Exchange Act and shall use all reasonable efforts to have cleared by the SEC, a
proxy statement/prospectus or information statement/prospectus, as appropriate
(the "Proxy Statement"), with respect to the Meeting, including a registration
statement (together with any amendments thereto, the "Registration Statement")
for the purpose of registering the shares of Newco Common Stock and Newco
Non-Voting Common Stock to be issued in connection with the Combination;
provided, however that, prior to any filing, Newco or the Company shall deliver
a copy of any proposed filing (including any amendments thereto) to Intel and
provide Intel with a reasonable time period in which to review and comment upon
such filings, it being agreed that the Company and Newco will not make any such
filings without the prior consent of Intel, such consent not to be unreasonably
withheld. As promptly as practicable after the Proxy Statement has been cleared
by the SEC and the Registration Statement has been declared effective, the
Company and Newco shall mail the Proxy Statement to the stockholders of the
Company as of the record date for the Meeting. Newco shall take such action as
may be required to be taken under applicable state securities or "blue sky" laws
in connection with issuance of the shares of Newco Common Stock and Newco
Preferred Stock to be issued in connection with the Combination; provided that
Newco shall not be required to become qualified as a foreign corporation in any
jurisdiction. The Proxy Statement shall, subject to the provisions of Section
5.3(b), include the recommendation of the Company Board that stockholders of the
Company vote in favor of the Combination, the approval of the 2000 Newco Stock
Option Plan and the other transactions contemplated herein that require such
adoption and approval in connection with the Combination, and the written
opinion of the Financial Advisor that the consideration to be received by the
stockholders of the Company in connection with the Combination is fair to such
stockholders from a financial point of view.
Section 5.5. Certain Filings; Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, including Section
5.3(b), each of the parties hereto agrees to use all reasonable efforts to take
or cause to be taken all action and to do or cause to be done all things
reasonably necessary, proper or advisable under Applicable Law to consummate and
make effective the transactions contemplated by this Agreement, including using
all reasonable efforts to do the following: (i) cooperate in the preparation and
filing of the Registration Statement, the Proxy Statement and any amendments
thereto, any filings that may be required under the HSR Act and any filings
under similar merger notification laws or regulations of foreign Governmental
Entities; (ii) obtain consents of all third parties and Governmental Entities
necessary, proper, advisable or reasonably requested by Intel or the Company,
for the consummation of the transactions contemplated by this Agreement; (iii)
contest any legal proceeding relating to the Combination; and (iv) execute any
additional instruments necessary to consummate the transactions
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contemplated hereby. Intel and the Company each agree to use all reasonable
efforts to encourage its employees to accept offers of employment, if any,
extended by Newco or the Surviving Corporation. If at any time after the
Effective Time any further action is necessary to carry out the purposes of this
Agreement the proper officers and directors of each party hereto shall take all
such necessary action.
(b) Intel and the Company will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, letters, white papers, memoranda, briefs,
arguments, opinions or proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other foreign, federal, or state antitrust, competition, or fair trade law. In
this regard but without limitation, each party hereto shall promptly inform the
other of any material communication between such party and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice,
or any other federal, foreign or state antitrust or competition Governmental
Entity regarding the transactions contemplated herein.
(c) Intel and the Company each shall, upon request by the other, furnish
the other with all information concerning itself, its subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Combination or any statement, filing, notice
or application made by or on behalf of Intel or the Company or any of their
respective subsidiaries to any third party and/or Governmental Entity in
connection with the Combination.
(d) Intel and the Company each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by Intel or the Company, as the case may be, or any of
its subsidiaries, from any third party and/or any Governmental Entity with
respect to the Combination.
Section 5.6. Meeting of Stockholders.
(a) The Company shall take all actions necessary in accordance with the
DGCL, its Certificate of Incorporation and bylaws to duly call, give notice of,
convene and hold a meeting of its stockholders as promptly as practicable to
consider and vote upon the adoption and approval of the Combination, the
approval of the 2000 Newco Stock Option Plan and the other transactions
contemplated herein that require such adoption and approval in connection with
the Combination (the "Meeting"). The stockholder vote required for the adoption
and approval of the Combination and such other transactions shall be the vote
required by the DGCL, the Company's Certificate of Incorporation and bylaws. The
Company will, through the Company Board, recommend to its stockholders approval
of such matters, subject to the provisions of Section 5.3(b). Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone (i) the Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement is provided to the Company's
stockholders in advance of a vote on the Combination or such other transactions
or (ii) the time for which the Meeting is originally scheduled (as set forth in
the Proxy Statement), if there are insufficient Shares represented, either in
person or by proxy, to constitute a quorum necessary to conduct the business of
the Meeting.
(b) Intel agrees to vote in favor of the Combination, and all such other
transactions, all Shares, if any, owned by it.
Section 5.7. Access to Information.
(a) Between the date hereof and the Effective Time, upon reasonable notice
and subject in each instance to the requirements of Applicable Law, the Company
will give Intel and its authorized representatives access to all employees,
plants, offices, warehouses and other facilities and to all books and records of
the Company and its subsidiaries as Intel may reasonably require, and will cause
its officers and those of its subsidiaries to furnish Intel with such financial
and operating data and other information with respect to the business and
properties of the Company and its subsidiaries as Intel may from time to time
reasonably request.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Intel (i) within two (2) business days following preparation thereof
(and in any event within twenty (20) business days after the end of each
calendar month, commencing with May 2000), an unaudited consolidated balance
sheet as of the
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end of such month and the related consolidated statements of earnings,
stockholders' equity and cash flows, without notes to such consolidated
financial statements, (ii) within two (2) business days following preparation
thereof (and in any event within twenty (20) business days after the end of each
fiscal quarter) an unaudited consolidated balance sheet as of the end of such
quarter and the related consolidated statements of earnings, stockholders'
equity and cash flows for the quarter then ended, with condensed notes to such
consolidated financial statements, and (iii) within two (2) business days
following preparation thereof (and in any event within ninety (90) calendar days
after the end of each fiscal year) an audited consolidated balance sheet as of
the end of such year and the related consolidated statements of earnings,
stockholders' equity (deficit) and cash flows, all of such consolidated
financial statements referred to in clauses (i), (ii) and (iii) to be prepared
in accordance with generally accepted accounting principles in conformity with
the practices consistently applied by the Company with respect to such
consolidated financial statements. All the foregoing shall be in accordance with
the books and records of the Company and its subsidiaries and shall fairly
present the consolidated financial position of the Company and its subsidiaries
(taking into account the differences between the monthly, quarterly and annual
financial statements prepared by the Company in conformity with its past
practices) as of the last day of the period then ended.
(c) Between the date hereof and the Effective Time, upon reasonable notice
and subject in each instance to the requirements of Applicable Law, Intel will
give the Company and its authorized representatives, to the extent any of the
following are included in the Contributed Assets, access to all employees,
plants, offices, warehouses and other facilities and to all books and records as
the Company may reasonably request, and will cause its officers to furnish the
Company with such financial and operating data and other information with
respect to the Contributed Assets as the Company may from time to time
reasonably request.
(d) Between the date hereof and the Effective Time, Intel shall furnish to
the Company, within two (2) business days following preparation thereof (and in
any event within twenty (20) business days after the end of each calendar month,
commencing with May 2000), the management accounting reports prepared with
respect to the departments that constitute part of the Contributed Assets.
(e) Each of the parties hereto will hold, and will cause its consultants
and Advisors to hold, in confidence all documents and information furnished to
it by or on behalf of another party to this Agreement in connection with the
transactions contemplated by this Agreement pursuant to the terms of that
certain Standard Non-Disclosure Agreement entered into between the Company and
Intel dated December 10, 1999 (the "Confidentiality Agreement").
Section 5.8. Public Announcements. None of Intel, Newco, Transitory nor
the Company shall issue any press release or otherwise make any public
statements with respect to the Combination, or any Third Party Acquisition,
without the prior consent of Intel (in the case of the Company, Newco or
Transitory) or the Company (in the case of Intel), except (i) as may be required
by Applicable Law, or by the rules and regulations of, or pursuant to any
agreement with, the Nasdaq National Market, (ii) following a change, if any, of
the Company Board's recommendation of the Combination in accordance with Section
5.3(b) or (iii) only in the case of a release or statement relating to a Third
Party Acquisition, if the Company Board has been advised by outside legal
counsel that a press release or other public statement is required by Applicable
Law. The first public announcement of the Combination shall be a joint press
release agreed upon by Intel and the Company.
Section 5.9. Indemnification and Directors' and Officers' Insurance.
(a) From and after the Effective Time, Newco shall indemnify, defend and
hold harmless (and shall also advance expenses as incurred to the fullest extent
permitted under Applicable Law to) each person who is now or has been prior to
the date hereof or who becomes prior to the Effective Time an officer or
director of the Company or any of the Company's subsidiaries (the "Indemnified
Persons") against (i) all losses, claims, damages, costs, expenses (including
counsel fees and expenses), settlement, payments or liabilities arising out of
or in connection with any claim, demand, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was an officer or director of the Company or any
of its subsidiaries, whether or not pertaining to any matter existing or
occurring at or prior to the Effective Time and whether or not asserted or
claimed prior to or at or after the Effective Time ("Indemnified
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Liabilities"); and (ii) all Indemnified Liabilities based in whole or in part on
or arising in whole or in part out of or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the fullest extent required or
permitted under Applicable Law. Nothing contained herein shall make Intel,
Newco, the Company or Transitory an insurer, a co-insurer or an excess insurer
in respect of any insurance policies which may provide coverage for Indemnified
Liabilities, nor shall this Section 5.9 relieve the obligations of any insurer
in respect thereto. The parties hereto intend, to the extent not prohibited by
Applicable Law, that the indemnification provided for in this Section 5.9,
including the advancement of expenses upon the demand of any Indemnified Person,
shall apply without limitation to negligent acts or omissions by an Indemnified
Person. Each Indemnified Person is intended to be a third party beneficiary of
this Section 5.9 and may specifically enforce its terms. This Section 5.9 shall
not limit or otherwise adversely affect any rights any Indemnified Person may
have under any agreement with the Company or under the Company's Certificate of
Incorporation or bylaws as presently in effect or as provided by Delaware law.
(b) From and after the Effective Time, Newco shall, or shall cause the
Surviving Corporation to, fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of or prior to the date hereof (or indemnification
agreements in the Company's customary form for directors joining the Company
Board prior to the Effective Time) and any indemnification provisions under the
Company's certificate of incorporation or bylaws as in effect immediately prior
to the Effective Time.
(c) For a period of six (6) years after the Effective Time, Newco will
maintain or cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who, as of
immediately prior to the Effective Time, are covered by the Company's directors'
and officers' liability insurance policy (the "Insured Parties") on terms no
less favorable to the Insured Parties than those of the Company's present
directors' and officers' liability insurance policy; provided, however, that in
no event shall Newco or the Surviving Corporation be required to expend on an
annual basis in excess of 300% of the annual premium currently paid by the
Company for such coverage (or such coverage as is available for 300% of such
annual premium); provided further, that, in lieu of maintaining such existing
insurance as provided above, Newco, at its election, may cause coverage to be
provided under any policy maintained for the benefit of Newco or any of its
subsidiaries, so long as the terms are not materially less advantageous to the
intended beneficiaries thereof than such existing insurance.
(d) For a period ending on the later of (i) the sixth anniversary of the
Effective Time or (ii) the date upon which Intel beneficially owns less than
twenty percent (20%) of the Newco Common Stock and the Newco Non-Voting Common
Stock, considered as a single class, then outstanding, Newco will maintain
directors' and officers' liability insurance covering its directors and
officers, which insurance shall be on terms, and in such amounts, as are
substantially similar to those provided for in the Company's current directors'
and officers' liability insurance policies.
Section 5.10. Notification of Certain Matters. The Company shall give
prompt notice to Intel, and Intel shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which has caused or would be likely to cause any representation or warranty
contained in this Agreement by such first party to be untrue or inaccurate in
any material respect at or prior to the Effective Time and (ii) any material
failure by such first party to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.10 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 5.11. Additions to and Modification of Disclosure Schedules.
(a) Concurrently with the execution and delivery of this Agreement, the
Company, Newco and Transitory have delivered a Company Disclosure Schedule that
includes all of the information required by the relevant provisions of this
Agreement. In addition, the Company, Newco and Transitory shall deliver to Intel
such additions to or modifications of any Sections of the Company Disclosure
Schedule necessary to make the information set forth therein true, accurate and
complete in all material respects as soon as practicable after such information
is available to the Company, Newco or Transitory after the date of execution and
delivery of
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this Agreement; provided, however, that such disclosure shall not be deemed to
constitute an exception to their respective representations and warranties under
Article 3, nor limit the rights and remedies of Intel under this Agreement for
any breach by the Company, Newco and Transitory of such representation and
warranties.
(b) Concurrently with the execution and delivery of this Agreement, Intel
has delivered a Intel Disclosure Schedule that includes all of the information
required by the relevant provisions of this Agreement. In addition, Intel shall
deliver to the Company such additions to or modifications of any Sections of the
Intel Disclosure Schedule necessary to make the information set forth therein
true, accurate and complete in all material respects as soon as practicable
after such information is available to Intel after the date of execution and
delivery of this Agreement; provided, however, that such disclosure shall not be
deemed to constitute an exception to Intel's representations and warranties
under Article 4, nor limit the rights and remedies of the Company, Newco and
Transitory under this Agreement for any breach by Intel of such representation
and warranties.
Section 5.12. Employee Matters.
(a) Newco will assume and honor, in accordance with their terms, and make
required payments when due under, all Benefit Plans maintained or contributed to
by the Company or any subsidiary or to which the Company or any subsidiary is a
party (including but not limited to employment, incentive and severance
agreements and arrangements), that are applicable with respect to any employee,
director or stockholder of the Company or any subsidiary (whether current or
former) or their beneficiaries; provided, however, that the foregoing shall not
preclude Newco from amending or terminating any such Benefit Plan in accordance
with its terms.
(b) With respect to any welfare plans in which employees of the Company and
its subsidiaries or employees of Intel are eligible to participate after the
Effective Time, Newco will (i) waive all limitations as to preexisting
conditions exclusions and waiting periods with respect to participation and
coverage requirements applicable to such employees and (ii) provide each such
employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any such plan. With respect to the Company's 401(k) plan to
be assumed by Newco, Intel shall be designated a "Predecessor Employer."
Section 5.13. Non-Disclosure Agreements with Employees of the
Company. Promptly after the date hereof, the Company will use reasonable
efforts to obtain the signature of its current employees to invention assignment
and non-disclosure agreements, in form and substance reasonably satisfactory to
Intel, covering the duration of such employees' employment with the Company.
Section 5.14. Takeover Statutes. If any Takeover Statute is or may become
applicable to the Combination or any of the other transactions contemplated by
this Agreement, the Company and the Company Board shall promptly grant such
approvals and take such lawful actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or by the Combination, and otherwise act to
eliminate or minimize the effects of such statute, and any regulations
promulgated thereunder, on such transactions.
Section 5.15. Stock Options.
(a) The Company agrees that, from and after the date hereof, it will take
any required action that (i) is necessary or appropriate for Newco to assume any
of the Assumed Options or any of the Assumed Option Plans, (ii) prevents the
voluntary acceleration of the vesting or exercisability of any options to
purchase Shares granted after the date hereof or (iii) prevents the transactions
contemplated by this Agreement from causing any Company Stock Option to be
exchanged for cash, converted into cash or the right to receive a cash payment
or otherwise cashed out, and the Company further agrees that it will refrain
from taking any other action that is not consistent with the foregoing.
(b) From and after the date hereof, the Company agrees that with respect to
each grant of a Company Option in connection with an offer of employment for a
new employee or an existing employee, (i) such grant will not include or be
subject to any provisions that accelerate vesting or exercisability in the event
of, or
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otherwise in connection with, the Combination or a change of control or similar
transaction, (ii) such grant will not be in an amount in excess of such grants
made to employees of a similar grade, consistent with past practices, (iii) such
grant will not have an exercise price below the fair market value of the Shares
on the date of grant and (iv) in no event will any one new employee receive
options to purchase in excess of 25,000 Shares unless approved by Intel.
(c) The Company agrees to cause the Company Board to adopt all resolutions
reasonably necessary or appropriate to further the purposes of subsections (a)
and (b) of this Section 5.15 and provide that all options outstanding under each
Assumed Option Plan can be assumed by Newco.
(d) Newco agrees to take all actions required to adopt Newco's 2000 Stock
Option Plan in the form attached hereto as Exhibit G.
(e) The Company agrees that, if between the date hereof and the earlier of
the termination hereof and the Effective Time, the grant of Company Stock
Options is permitted under the terms hereof, and any option grant is made, any
such grant shall be made only under the Company's 1999 Incentive Stock Option
Plan.
Section 5.16 Nasdaq. Promptly after the date hereof, Newco shall file an
initial listing application with the Nasdaq National Market relating to the
shares of the Newco Common Stock to be issued in connection with the Combination
(including, without limitation, shares issuable upon Assumed Options and Newco
Stock Options) and shall use reasonable efforts to cause such shares of the
Newco Common Stock to be listed, upon official notice of issuance, prior to the
Closing Date. Newco, for as long as it satisfies the applicable listing
requirements of NASDAQ, or any other national securities exchange on which the
capital stock of Newco is traded, shall use commercially reasonable efforts to
cause the Newco Common Stock to be listed on NASDAQ, or any other national
securities exchange; provided, however, that nothing herein shall be construed
or interpreted to require Newco to refrain from taking any action or entering
into any transaction that would cause Newco, or its capital stock, to fail to
satisfy any such requirements.
Section 5.17 Exchange Act Registration. Promptly after the date hereof,
Newco shall file a registration statement on Form 8-A to register under the
Exchange Act the Newco Common Stock and shall use reasonable efforts to cause
such registration statement to be declared effective prior to the Closing Date.
Section 5.18. Executive Officers of Newco. The Executive Officers of Newco
upon consummation of the Combination shall be as set forth on Exhibit F. Newco
shall obtain the signature of each such person consenting to such appointment
immediately prior to the Effective Time.
Section 5.19. Board of Directors of Newco. The Board of Directors of Newco
upon consummation of the Combination shall be as set forth on Exhibit E. Newco
shall obtain the signature of each such person consenting to such appointment
immediately prior to the Effective Time.
Section 5.20. Intellectual Property Matters. The Company, Newco and
Surviving Corporation, on the one hand, and Intel, on the other hand, will work
together to develop procedures and an implementation plan, reasonably
satisfactory to each of them, with respect to the protection of the Intellectual
Property rights of the Company, Newco and Surviving Corporation, as well as the
protection of confidential information related thereto.
Section 5.21. Financial Reporting. Following the Closing Date, Newco shall
furnish to Intel (i) within two (2) business days following preparation thereof
(and in any event within twenty (20) business days after the end of each
calendar month, commencing with May 2000), an unaudited consolidated balance
sheet as of the end of such month and the related consolidated statements of
earnings and stockholders' equity and cash flows, without notes to such
consolidated financial statements, (ii) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each fiscal quarter) an accountant reviewed consolidated balance sheet as
of the end of such quarter and the related consolidated statements of earnings,
stockholders' equity and cash flows for the quarter then ended, with condensed
notes to such consolidated financial statements, and (iii) within two (2)
business days following preparation thereof (and in any event within ninety (90)
calendar days after the end of each fiscal year) an audited consolidated balance
sheet as of the end of such year and the related consolidated statements of
earnings, stockholders'
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equity (deficit) and cash flows, all of such consolidated financial statements
referred to in clauses (i), (ii) and (iii) to be prepared in accordance with
generally accepted accounting principles in conformity with the practices
consistently applied by Newco with respect to such consolidated financial
statements. All the foregoing shall be in accordance with the books and records
of Newco and its subsidiaries and shall fairly present the consolidated
financial position of Newco and its subsidiaries (taking into account the
differences between the monthly, quarterly and annual financial statements
prepared by Newco in conformity with its past practices) as of the last day of
the period then ended.
Section 5.22. Certain Actions. None of the Company, Transitory or Newco
shall take any action inconsistent with the treatment of the Combination as a
transaction governed by Section 351(a) of the Code.
Section 5.23 Incurrence of Indebtedness. Newco agrees that it will not,
during the twelve (12) month period following the Effective Time, directly or
indirectly, create, incur, assume, guarantee or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness in excess of
$500,000,000 in the aggregate. For purposes of this provision, "Indebtedness,"
means, without limitation, (i) all indebtedness for borrowed money, (ii) that
portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with generally
accepted accounting principles, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services, which purchase price is (a) due more
than six months from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, (excluding any trade
payables payable in the ordinary course of business), (v) all indebtedness
secured by any Lien on any property or asset owned or held by Newco regardless
of whether the indebtedness secured thereby shall have been assumed or is
nonrecourse and (vi) any direct or indirect liability, contingent or otherwise,
(a) with respect to any Indebtedness, lease, dividend or other obligation of
another person if the primary purpose or intent is to provide assurance to the
obligee of such obligation of an other person that such obligation will be
protected (in whole or in part) against loss in respect thereof, (b) with
respect to any letter of credit issued for the account of Newco or as to which
Newco is otherwise liable for reimbursement of drawings, or (c) under interest
rate agreements and currency agreements.
Section 5.24 Sales Taxes. The parties shall cooperate to minimize the
amount of any sales, use, transfer, license or other similar taxes imposed upon
the contribution of the Contributed Assets to Newco.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE CONTRIBUTION AND THE MERGER
Section 6.1. Conditions to Each Party's Obligations to Effect the
Contribution and the Merger. The respective obligations of each party hereto to
effect the Contribution and the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) this Agreement and the Combination shall have been approved and
adopted by the requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental Entity that prohibits, restrains, enjoins or restricts the
consummation of the Combination;
(c) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby
shall have been given, obtained or complied with, as applicable;
(d) the Proxy Statement shall have been cleared by the SEC and shall
not be the subject of any stop order;
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(e) the Registration Statement shall have been declared effective by
the SEC and shall not be the subject of any stop order and Newco shall have
received all state securities laws or "blue sky" permits and authorizations
necessary (i) to issue shares of Newco Common Stock and shares of Newco
Non-Voting Common Stock in exchange for the Contribution and (ii) to issue
shares of Newco Common Stock in exchange for Shares in the Merger;
(f) the waiting periods (and any extension thereof) applicable to the
Combination under the HSR Act shall have expired or been terminated;
(g) the Newco Common Stock shall have been registered under the
Exchange Act on Form 8-A and such registration statement shall have been
declared effective and no stop order with respect thereto shall be in
effect at the Effective Time;
(h) the Newco Common Stock shall have been approved for listing,
subject only to official notice of issuance, on the Nasdaq National Market;
(i) the Licensing Agreements, substantially in the forms of Exhibit
H-1 and Exhibit H-2 hereto, shall have been executed and delivered by Intel
and Newco;
(j) the Certificate of Incorporation and Bylaws of Newco shall be in
the forms attached hereto as Exhibits I and J, respectively;
(k) Newco shall have adopted its 2000 Stock Option Plan in the form
attached hereto as Exhibit G;
(l) Newco shall have adopted a standard director and officer
indemnification agreement and obtained a directors' and officers' liability
insurance policy, in each case reasonably acceptable to Intel and Newco;
and
(m) Newco, in a form and amount reasonably satisfactory to Intel and
the Company, shall have granted, under the Newco 2000 Stock Option Plan,
options to purchase shares of Newco Common Stock to the employees of Intel
and certain of the employees of the Company who will, upon consummation of
the Combination, become employees of Newco or the Surviving Corporation,
with the exercise price of such options to be the greater of (i) the
average of the closing prices of the Company Common Stock as reported on
NASDAQ for the five (5) trading days immediately preceding the announcement
of execution of this Agreement or (ii) twenty-five percent (25%) of the
average of the closing prices of the Company Common Stock as reported on
NASDAQ for the five (5) trading days immediately preceding the Closing
Date.
Section 6.2. Conditions to the Obligations of the Company, Newco and
Transitory. The obligations of the Company, Newco and Transitory to effect the
Merger is subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of Intel contained in this
Agreement shall be true and correct (except to the extent that the
aggregate of all breaches thereof would not reasonably be expected to have
a Material Adverse Effect on the Contributed Assets) at and as of the
Effective Time with the same effect as if made at and as of the Effective
Time (except to the extent such representations specifically relate to an
earlier date, in which case such representations shall be true and correct
as of such earlier date, and in any event, subject to the foregoing
Material Adverse Effect qualification) and, at the Closing, Intel shall
have delivered to the Company a certificate to that effect, executed by an
executive officer of Intel;
(b) each of the covenants and obligations of Intel to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed (except to the extent the aggregate of all
breaches thereof would not reasonably be expected to have a Material
Adverse Effect on the Contributed Assets) at or before the Effective Time
and, at the Closing, Intel shall have delivered to the Company a
certificate to that effect, executed by an executive officer of Intel;
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(c) seventy percent (70%) and fifty percent (50%) of the employees of
Intel set forth on Exhibit K-1 and Exhibit K-2 hereto, respectively, shall
have indicated their intent to become employed, on terms reasonably
satisfactory to the Company, by the Surviving Corporation or Newco;
(d) the Contribution shall have been consummated;
(e) since the date hereof, there shall have been no events, changes or
effects, individually or in the aggregate, that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on the Contributed Assets;
(f) in connection with the compliance by Newco with any Applicable Law
(including the HSR Act) or obtaining the consent or approval of any
Governmental Entity whose consent or approval may be required to consummate
the transactions contemplated by this Agreement, Newco shall not be (i)
required, or be construed to be required, to sell or divest any assets or
business or to restrict any business operations in order to obtain the
consent or successful termination of any review of any such Governmental
Entity regarding the transactions contemplated hereby or (ii) prohibited
from owning, and no material limitation shall be imposed on Newco's
ownership of, any material portion of the Company's business or assets or
the Contributed Assets.
Section 6.3. Conditions to the Obligations of Intel. The obligations of
Intel to effect the Contribution are subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) the representations and warranties of the Company, Newco and
Transitory contained in this Agreement shall be true and correct (except to
the extent that the aggregate of all breaches thereof would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect on the Company) at and as of the Effective Time with the same effect
as if made at and as of the Effective Time (except to the extent such
representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date, and in
any event, subject to the foregoing Material Adverse Effect qualification)
and, at the Closing, the Company, Newco and Transitory shall have delivered
to Intel a certificate to that effect, executed by an executive officer of
the Company, Newco or Transitory, as the case may be;
(b) each of the covenants and obligations of the Company, Newco and
Transitory to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed (except to the
extent the aggregate of all breaches thereof would not reasonably be
expected to have a Material Adverse Effect on the Company) at or before the
Effective Time and, at the Closing, the Company, Newco and Transitory shall
have delivered to Intel a certificate to that effect, executed by an
executive officer of the Company, Newco or Transitory, as the case may be;
(c) since the date hereof, there shall have been no events, changes or
effects, individually or in the aggregate, with respect to the Company or
its subsidiaries that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, other than any
such event, change or effect that results solely from the election by
Intel, after receipt of proper notice to not consent to the Company's
entering into an agreement, the consent to which has been requested by the
Company pursuant to Section 5.1(j) hereof;
(d) in connection with the compliance by Intel with any Applicable Law
(including the HSR Act) or obtaining the consent or approval of any
Governmental Entity whose consent or approval may be required to consummate
the transactions contemplated by this Agreement, Intel shall not be (i)
required, or be construed to be required, to sell or divest any assets or
business or to restrict any business operations in order to obtain the
consent or successful termination of any review of any such Governmental
Entity regarding the transactions contemplated hereby or (ii) prohibited
from owning, and no material limitation shall be imposed on Intel's
ownership of, any material portion of Newco's stock, business or assets;
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(e) seventy percent (70%) and fifty percent (50%) of the employees of
the Company set forth on Exhibit L-1 and Exhibit L-2 hereto, respectively,
shall have indicated their intent to become employed, on terms reasonably
satisfactory to Intel, by the Surviving Corporation or Newco;
(f) the Company shall have entered into invention assignment and
non-disclosure agreements with the individuals set forth on Exhibit M
hereto;
(g) Nothing shall have occurred that would, in the reasonable opinion
of Intel, create a significant risk that the Contribution and the Merger,
taken together, would not be governed entirely by Section 351 of the Code;
and
(h) Intel shall be reasonably satisfied that all of the conditions to
the Merger set forth in Sections 6.1 and 6.2 shall have been satisfied or,
in the case of Section 6.2, waived by the Company, and the Company shall
have provided to Intel a certificate to the effect that the Merger is
contemplated to be effected concurrently with the Contribution.
(i) Intel and Newco shall have entered into a Registration Rights
Agreement substantially in the form of Exhibit N.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the
Combination may be abandoned at any time prior to the Effective Time whether
before or after approval and adoption of the Combination by the Company's
stockholders:
(a) by mutual written consent of Intel and the Company;
(b) by Intel or the Company if (i) any court of competent jurisdiction
in the United States or other United States federal or state Governmental
Entity shall have issued a final order, decree or ruling, or taken any
other final action, restraining, enjoining or otherwise prohibiting the
Combination and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Combination has not been consummated by
December 31, 2000 (the "Final Date"); provided, however, that no party may
terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall have
been a principal reason that the Effective Time shall not have occurred on
or before said date;
(c) by the Company if (i) there shall have been a breach of any
representations or warranties on the part of Intel set forth in this
Agreement or if any representations or warranties of Intel shall have
become untrue such that, in either such instance, the conditions set forth
in Section 6.2(a) would be incapable of being satisfied by the Final Date,
provided that the Company, Newco and Transitory have not breached any of
their respective obligations hereunder in any material respect; (ii) there
shall have been a breach by Intel of any of its covenants or agreements
hereunder that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Contributed Assets or
materially adversely affecting (or materially delaying) the ability of
Intel to consummate the Combination, and Intel has not cured such breach
within ten (10) business days after notice by the Company thereof, provided
that none of the Company, Newco or Transitory has breached any of its
respective obligations hereunder in any material respect; (iii) the Company
shall have convened the Meeting and shall have failed to obtain the
requisite vote of its stockholders thereat (including any adjournments
thereof) for approval of this Agreement, the Combination and the
transactions consummated thereby; (iv) the Company Board has received a
Superior Proposal, has complied with the provisions of Section 5.3(b), and
concurrently makes the payment called for by Section 7.3(a); or (v) there
shall have occurred events, changes or effects with respect to the
Contributed Assets having a Material Adverse Effect on the Contributed
Assets.
(d) by Intel if (i) there shall have been a breach of any
representations or warranties on the part of the Company, Newco or
Transitory set forth in this Agreement or if any representations or
warranties of
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the Company, Newco or Transitory shall have become untrue such that, in
either such instance, the conditions set forth in Section 6.3(a) would be
incapable of being satisfied by the Final Date, provided that Intel has not
breached any of its obligations hereunder in any material respect; (ii)
there shall have been a breach by the Company, Newco or Transitory of one
or more of their respective covenants or agreements hereunder that would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company (or, in the case of Section 5.3, any
material breach thereof) or materially adversely affecting (or materially
delaying) the ability of the Company, Newco or Transitory to consummate the
Combination, and, with respect to all breaches other than breaches under
Section 5.3, the Company, Newco or Transitory have not cured such breach
within ten (10) business days after notice by Intel thereof, provided that
Intel has not breached any of its obligations hereunder in any material
respect; (iii) the Company Board shall have recommended to the Company's
stockholders a Superior Proposal; (iv) the Company Board shall have
withdrawn or adversely modified its approval or recommendation of the
Combination or the Company Board shall have ceased using all reasonable
efforts to call, give notice of, or convene or hold the Meeting as promptly
as practicable or shall have adopted a resolution not to effect any of the
foregoing; (v) the Company shall have convened the Meeting, and the Company
shall have failed to obtain the requisite vote of its stockholders thereat
(including any adjournments thereof) for approval of this Agreement, the
Combination and the transactions consummated thereby; or (vi) there shall
have occurred events, changes or effects with respect to the Company having
a Material Adverse Effect on the Company.
Section 7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 7.2 and Sections 5.7(c) and 7.3. Nothing
contained in this Section 7.2 shall relieve any party from liability for any
breach of any covenant in this Agreement prior to such termination.
Section 7.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Section 7.1(c)(iv) or 7.1(d)(iii) or (iv);
(ii) Section 7.1(d)(i) or (ii) and, at the time of such termination,
(x) there is outstanding an offer by a Third Party to consummate, or a
Third Party shall have publicly announced (and not withdrawn) a plan or
proposal with respect to, a Third Party Acquisition and such Third Party
Acquisition occurs, or (y) there is no such Third Party offer outstanding
or plan or proposal announced but within nine (9) months after the date on
which this Agreement has been terminated the Company enters into an
agreement with respect to a Third Party Acquisition or a Third Party
Acquisition occurs involving any person other than Intel or one of its
subsidiaries; or
(iii) Section 7.1(c)(iii) or 7.1(d)(v) and at the time of the Meeting
at which the Company failed to obtain the requisite vote (A) there shall be
outstanding an offer by a Third Party to consummate, or a Third Party shall
have publicly announced (and not withdrawn) a plan or proposal with respect
to, a Third Party Acquisition and (B) within nine (9) months after the date
on which this Agreement has been terminated the Company enters into an
agreement with respect to a Third Party Acquisition or a Third Party
Acquisition occurs involving any person other than Intel or one of its
subsidiaries;
Intel would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty. To compensate Intel for such damages, the
Company shall pay to Intel the amount of Twenty Million Dollars ($20,000,000) in
liquidated damages immediately upon the occurrence of the event described in
this Section 7.3(a) giving rise to such damages. It is specifically agreed that
the amount to be paid pursuant to this Section 7.3(a) represents liquidated
damages and not a penalty. The Company hereby waives any right to set-off or
counterclaim against such amount.
(b) Upon termination of this Agreement pursuant to Section 7.1(c)(iii) or
(iv), or Section 7.1(d)(i), (ii), (iii), (iv) or (v), in addition to any other
remedies that Intel or its affiliates may have as a result of such termination
(including pursuant to Section 7.3(a) or otherwise), the Company shall pay to
Intel the amount
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of Two Million Five Hundred Thousand Dollars ($2,500,000) as reimbursement for
the out-of-pocket costs, fees and expenses incurred by any of them or on their
behalf in connection with this Agreement, the Merger and the consummation of all
transactions contemplated by this Agreement (including fees payable to
investment bankers, counsel to any of the foregoing and accountants). Nothing
contained in this Section 7.3(b) shall relieve any party of any liability for
breach of this Agreement.
(c) Upon termination of this Agreement pursuant to Section 7.1(c)(i) or
(ii), in addition to any other remedies that the Company or its affiliates may
have as a result of such termination, Intel shall pay to the Company the amount
of Two Million Five Hundred Thousand Dollars ($2,500,000) as reimbursement for
the out-of-pocket costs, fees and expenses incurred by any of them or on their
behalf in connection with this Agreement, the Merger and the consummation of all
transactions contemplated by this Agreement (including fees payable to
investment bankers, counsel to any of the foregoing and accountants). Nothing
contained in this Section 7.3(c) shall relieve any party of any liability for
breach of this Agreement.
(d) Except as specifically provided in this Section 7.3, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby, including the fees imposed in connection with its filing
under the HSR Act; provided, however, that the filing fees to be paid in
connection with the filing of the Proxy Statement and Registration Statement
shall be borne equally.
(e) The parties acknowledge that the agreements contained in this Article 7
(including this Section 7.3) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, the parties
would not enter into this Agreement. Accordingly, if any party fails promptly to
pay the amounts required pursuant to Section 7.3 when due (including
circumstances where, in order to obtain such payment a party commences a suit
that results in a final nonappealable judgment against another party for such
amounts), the defaulting party shall pay to the other party (i) their costs and
expenses (including attorneys' fees) in connection with such suit and (ii)
interest on the amount that was determined to be due and payable hereunder at
the rate announced by Chase Manhattan Bank as its "reference rate" in effect on
the date such payment was required to be made.
Section 7.4. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein and the covenants that require full
performance on or prior to the Effective Time shall not survive beyond the
Effective Time or a termination of this Agreement; provided that the
representations and warranties of Intel set forth in Section 4.8(a), (f) and (h)
shall survive until six (6) months after the Closing Date. This Section 8.1
shall not limit any covenant or agreement of the parties hereto that by its
terms requires performance after the Effective Time.
Section 8.2. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule, the Intel Disclosure Schedule and the Exhibits, all
of which are incorporated by reference into this Agreement) (a) constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all other prior and contemporaneous agreements and
understandings both written and oral between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise.
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Section 8.3. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth below or to such other
address as the party to whom notice is to be given may have furnished to the
other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (i) in the
case of personal delivery, on the date of such delivery, (ii) in the case of
telecopier, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested), (iii) in the case of a nationally-recognized overnight courier in
circumstances under which such courier guarantees next business day delivery, on
the next business day after the date when sent and (iv) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted:
if to Intel: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1855
Attention: General Counsel
and
Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Attention: Treasurer
with a copy to: Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, California 90071
Telecopier: (213) 229-7520
Attention: Karen E. Bertero, Esq.
if to the Company,
Newco or Transitory to: Excalibur Technologies, Inc.
1921 Gallows Road, Suite 200
Vienna, Virginia 22182
Telecopier: (703) 761-1990
Attention: Chief Financial Officer
with a copy to: Heller, Ehrman, White & McAuliffe LLP
711 Fifth Avenue
New York, NY 10028
Telecopier: (212) 832-3353
Attention: Stephen M. Davis, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.5. Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OR CHOICE OF LAW PRINCIPLES
THEREOF OR OF ANY OTHER JURISDICTION. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State of Delaware and the Federal courts
of the United States of America
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located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 8.4 or in such other manner as may be permitted by Applicable Law, shall
be valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.5.
Section 8.6. Descriptive Headings; Article and Section References. The
table of contents and the descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement. All Article, Section,
Subsection, Schedule and Exhibit references in this Agreement are to Articles,
Sections, subsections, Schedules and Exhibits, respectively, of or to this
Agreement unless specified otherwise.
Section 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except for Sections 6.7 and 8.2, nothing in this
Agreement is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.8. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means a person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned person.
(b) "Applicable Law" means, with respect to any person, any domestic
or foreign, federal, state or local statute, law, ordinance, rule,
regulation, order, writ, injunction, judgment, decree or other requirement
of any Governmental Entity existing as of the date hereof or as of the
Effective Time applicable to such Person or any of its respective
properties, assets, officers, directors, employees, consultants or agents.
(c) "business day" means any day other than a day on which the New
York Stock Exchange is closed.
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(d) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
(e) "Company Plans" means the Assumed Option Plans, together with the
Company's Employee Stock Purchase Plan.
(f) "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as
a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(g) "include" or "including" means "include, without limitation" or
"including, without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set forth an
exhaustive list.
(h) "knowledge" or "known" means, with respect to any Person, the
actual knowledge of such Person, after reasonable inquiry. Without limiting
the generality of the foregoing, with respect to any Person that is a
corporation, limited liability company, partnership or other business
entity, actual knowledge shall be deemed to include the actual knowledge of
all directors, officers, partners and members of any such Person; provided
that with respect to Intel, actual knowledge shall be deemed to be the
actual knowledge of the individuals identified on Exhibit 8.8A; provided,
further that with respect to the Company, Newco and Transitory, actual
knowledge shall be deemed to be the actual knowledge of the individuals
identified on Exhibit 8.8B.
(i) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity including any Governmental Entity.
(j) "subsidiary" or "subsidiaries" of the Company, Intel, the
Surviving Corporation or any other person means any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, Intel, the
Surviving Corporation or any such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the capital stock the holders of which are
generally entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity; provided,
however, that in all events the subsidiaries of the Company shall include
Newco and Transitory.
All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the gender and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
A reference to any legislation or to any provision of any legislation shall
include any modification or re-enactment thereof, any legislative provision
substituted therefor and all regulations and statutory instruments issued
thereunder or pursuant thereto.
Section 8.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company, Intel, Newco or Transitory or
any officer, director, employee, agent, representative or investor of any party
hereto.
Section 8.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Combination, will cause irreparable injury to
the other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of
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such party's obligations and to the granting by any court of the remedy of
specific performance of its obligations hereunder; provided, however, that if a
party hereto is entitled to receive any payment or reimbursement of expenses
pursuant to Section 7.3(a), (b) or (c), it shall not be entitled to specific
performance to compel the consummation of the Combination.
Section 8.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 8.13. Ambiguities. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 8.13. Waiver. Any waiver of compliance with any obligation,
covenant, agreement, provision or condition of this Agreement or consent
pursuant to this Agreement shall not be effective unless evidenced by an
instrument in writing executed by the party to be charged. Any waiver of
compliance with any such obligation, covenant, agreement, provision or condition
of this Agreement shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other non-compliance.
Section 8.14. Execution. This Agreement may be executed by facsimile
signatures and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.
Section 8.15. Schedules. The Intel Disclosure Schedule and the Company
Disclosure Schedule shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
Section 8.16. Amendment. This Agreement may be amended by action taken by
the Company, Intel, Newco and Transitory at any time before or after approval of
the Combination by the stockholders of the Company but after any such approval
no amendment shall be made that requires the approval of such stockholders under
Applicable Law without such approval. This Agreement (including, subject to
Section 5.11, the Company Disclosure Schedule and the Intel Disclosure Schedule)
may be amended only by an instrument in writing signed on behalf of the parties
hereto.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
------------------------------------
Name: Arvind Sodhani
Title: Vice President and Treasurer
Date: April 30, 2000
EXCALIBUR TECHNOLOGIES CORPORATION,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: April 30, 2000
EXCA HOLDINGS, INC.,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: April 30, 2000
EXCALIBUR TRANSITORY, INC.
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: April 30, 2000
SIGNATURE PAGE TO AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER BY AND AMONG
INTEL CORPORATION, EXCALIBUR TECHNOLOGIES CORPORATION, EXCA HOLDINGS, INC. AND
EXCALIBUR TRANSITORY, INC.
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APPENDIX A2
AMENDMENT
TO
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
This AMENDMENT dated as of August 14, 2000 (this "Amendment") to AGREEMENT
AND PLAN OF CONTRIBUTION AND MERGER, dated as of April 30, 2000 (the
"Agreement"), is by and among INTEL CORPORATION, a Delaware corporation
("Intel"), EXCALIBUR TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Company"), EXCA HOLDINGS, INC., a Delaware corporation and wholly owned
subsidiary of the Company ("Newco"), and EXCALIBUR TRANSITORY, INC., a Delaware
corporation and wholly owned subsidiary of Newco ("Transitory"). Initially
capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Agreement.
WHEREAS, Section 6.1(m) of the Agreement provides that as a condition to
the respective obligations of the parties to the Agreement to effect the
Contribution and Merger, Newco, in form and amount reasonably satisfactory to
Intel and the Company, shall have granted, under the Newco 2000 Stock Option
Plan, options to purchase shares of Newco Company Stock to the employees of
Intel and certain employees of the Company who will, upon consummation of the
Combination, become employees of Newco or the Surviving Corporation, with the
exercise price of such options to be the greater of (i) the average of the
closing prices of the Company Common Stock as reported on the Nasdaq National
Market for the five (5) trading days immediately preceding the announcement of
execution of this Agreement or (ii) twenty-five percent (25%) of the average of
the closing prices of the Company Common Stock as reported on the Nasdaq
National Market for the five (5) trading days immediately preceding the Closing
Date (the "Closing Date Average Price");
WHEREAS, Intel, the Company, Newco and Transitory wish to amend Section
6.1(m) of the Agreement to provide that if the Closing Date Average Price is
less than $32.16, then the exercise price of the options to purchase shares of
Newco Common Stock shall be the Closing Date Average Price; and
WHEREAS, Intel, the Company, Newco and Transitory also wish to provide
additional covenants in the Agreement, amend the closing condition in Section
6.2(c) of the Agreement and amend certain Exhibits attached to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Intel, the Company, Newco and Transitory agree as follows:
1. Amendments to the Agreement.
(a) Section 5.25 is added to the Agreement to read in its entirety as
follows:
"Section 5.25 Subcontract. Intel agrees that it will use Newco as
the subcontract provider of services to be provided by Intel pursuant
to that certain Software License and Development Agreement, dated as
of March 20, 1998, by and between Intel and Quokka Sports, Inc., as
the same may be amended from time to time, that were previously
provided by the enhanced video service group of Intel's interactive
media services division, and which Newco is capable of providing in
full after the Effective Time. Intel and Newco will agree in good
faith to the terms of such subcontract, which terms shall be
customary for subcontracts with respect to similarly situated
subcontractors and projects and shall be comparable to similar
subcontracts entered into by Intel with similarly situated providers
of subcontracting services in connection with similar projects and
services, including a right of termination for nonperformance or
breach."
(b) Section 5.26 is added to the Agreement to read in its entirety as
follows:
"Section 5.26 Retention Bonuses. Intel agrees that, within five days
of receiving written confirmation from Newco of those former Intel
employees that remain employed by Newco as of April 30, 2001 (each a
"Retained Employee"), Intel shall pay to Newco the aggregate amount
required to fund retention bonuses for each Retained Employee in
amounts previously
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agreed by Newco and Intel. Newco agrees that, within five business
days of receiving the aggregate retention bonus funds from Intel,
Newco shall pay the bonus amounts previously agreed by Intel and
Newco to each Retained Employee."
(c) Section 5.27 is added to the Agreement to read in its entirety as
follows:
"Section 5.27 Secondment. For the purposes of assisting with the
transition of Intel's interactive media services division to Newco,
Intel agrees that, for a period to be determined by Newco of up to
twelve (12) months from the Closing Date (the "Secondment Period"),
it will second to Newco that number of employees in Intel's
interactive media services division who do not become Newco employees
upon the Effective Time (the "Seconded Employees") necessary for
satisfaction of the condition in Section 6.2(c). In connection
therewith, Newco shall reimburse Intel for all amounts payable by
Intel to the Seconded Employees in such a manner that Intel shall
bear no costs for the Seconded Employees' employment during the
Secondment Period; provided, that the amount reimbursed by Newco for
any Seconded Employee shall be no greater than the amount of
aggregate compensation Newco would have paid to such Seconded
Employee (based on compensation paid by Newco to similarly situated
former Intel employees) if such Seconded Employee were an employee of
Newco during the Secondment Period."
(d) Section 5.28 is added to the Agreement to read in its entirety as
follows:
"Section 5.28 Sublease. Intel agrees to sublease to Newco its sales
office in Santa Clara, California previously agreed to by Intel and
Newco on terms and conditions to be agreed by Intel and Newco."
(e) Section 6.1(m) of the Agreement is amended to read in its entirety
as follows:
"(m) Newco, in form and amount reasonably satisfactory to Intel and
the Company, shall have granted, under the Newco 2000 Stock Option
Plan, options to purchase shares of Newco Company Stock to the
employees of Intel and certain employees of the Company who will,
upon consummation of the Combination, become employees of Newco or
the Surviving Corporation, with the exercise price of such options to
be the greater of (i) $32.16 (the average of the closing prices of
the Company Common Stock as reported on the Nasdaq National Market
for the five (5) trading days immediately preceding the announcement
of execution of this Agreement) or (ii) twenty-five percent (25%) of
the average of the closing prices of the Company Common Stock as
reported on the Nasdaq National Market for the five (5) trading days
immediately preceding the Closing Date; provided, however, that if
the average of the closing prices of the Company Common Stock as
reported on the Nasdaq National Market for the five (5) trading days
immediately preceding the Closing Date is less than $32.16, then the
exercise price for such options shall be the average of the closing
prices of the Company Common Stock as reported on the Nasdaq National
Market for the five (5) trading days immediately preceding the
Closing Date."
(f) Section 6.2(c) of the Agreement is amended to read in its entirety
as follows:
"(c) seventy percent (70%) of the employees of Intel set forth on
Exhibit K-1 hereto shall have indicated their intent to become
employed, on terms reasonably satisfactory to the Company, by the
Surviving Corporation or Newco and fifty percent (50%) of the
employees of Intel set forth on Exhibit K-2 hereto (i) shall have
indicated their intent to become employed, on terms reasonably
satisfactory to the Company, by the Surviving Corporation or Newco or
(ii) shall have been seconded to Newco pursuant to Section 5.27;
provided, however, that, in any case, at least forty percent (40%) of
the employees of Intel set forth on Exhibit K-2 hereto shall have
indicated their intent to become employed, on terms reasonably
satisfactory to the Company, by the Surviving Corporation or Newco;"
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2. Amendments to Exhibit A.
(a) Section II of Exhibit A to the Agreement ("Exhibit A") is amended
to read in its entirety as follows:
"II. CONTRACTS
License Agreement, dated as of November 10, 1999, by and between Intel Internet
Security Services of Intel Corporation and SoftLock.com, Inc. (Intel will
also assign to Newco 224,514 shares of the common stock of SoftLock.com,
Inc. The assignment also includes the right to receive shares of the common
stock of SoftLock.com, Inc. issuable as service fees).
Software License Agreement, dated as of December 17, 1999, by and between Intel
Corporation and Lucent Technologies Inc.
Cooperation Agreement, dated as of September 14, 1999, by and between the
Renewable Security Services Group of Intel Corporation and Preview Systems,
Inc.
Intel Internet Services Avid Sports Development Agreement, dated as of January
2000, by and between Intel Corporation and Avid Sports, Inc.
Warrants to purchase approximately 242,078 shares of Series A Preferred Stock of
Avid Sports, Inc., dated as of January 27, 2000 (Intel holds a warrant to
purchase 304,878 shares of Series A Preferred Stock, a portion of which
will be vested at the Effective Time. The unvested portion of the warrant
at the Effective Time will be assigned to Newco. Warrants to purchase
45,000 shares of Series A Preferred Stock are currently exercisable by
Intel and warrants to purchase approximately 17,800 additional shares of
Series A Preferred Stock are expected to vest prior to the Effective Time.
That portion of the warrants that is vested as of the Effective Time will
not be assigned to Newco).
"Miami" Master Agreement, dated as of August 9, 1999, by and between Intel
Corporation and CSI Incorporated.
Intel/Supertracks Cooperation Agreement, dated as of November 5, 1999, by and
between Intel Corporation and Supertracks.com, Inc.
MEI/Intel Secure Run Time Layer Collaboration Agreement, dated as of July 11,
2000, by and between Intel Corporation and Matsushita Electric Industrial
Co., Ltd.
Except as set forth above, any equity securities associated with the assigned
contracts will not be assigned to Newco.
To the extent any new contracts that will be assigned to Newco are entered into
by Intel prior to the Effective Time and such contracts include as part of the
consideration shares of equity or warrants to acquire equity of a third party,
the parties intend that the portion of any such shares or warrants that is
vested prior to the Effective Time, or will become vested after the Effective
Time with respect to the percentage of work completed before the Effective Time,
will be retained by Intel and the portion of any such shares or warrants that is
not vested as of the Effective Time or may become vested with respect to work
completed after the Effective Time will be assigned to Newco.
To the extent that a consent to any such assignment of the portion of shares of
equity or a warrant that is not vested as of the Effective Time, or that may
become vested with respect to work completed after the Effective Time, is
required and not obtained, but the contract to which it relates is assigned,
Newco shall have the right to direct Intel to take, or refrain from taking, all
actions with respect to the portion of any such shares of equity or warrant that
would have otherwise been assigned to Newco as a result of work actually
performed by Newco and Newco shall be entitled to the economic benefit of any
such portion."
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(b) Section III "Contributed Assets: ECS Software List" of Exhibit A
is amended to read in its entirety as follows:
"CONTRIBUTED ASSETS: ECS SOFTWARE LIST
AVID SPORTS
ASP Programs
Java Programs
PRISMA DEMO
WebActivate plug-in
Packaging/Installation
SUPERTRACKS
Data model and document"
(c) Section III "Contributed Assets: EVS Hardware List" of Exhibit A
is amended to read in its entirety as follows:
"CONTRIBUTED ASSETS: EVS HARDWARE LIST
<TABLE>
<CAPTION>
DESCRIPTION QUANTITY
<S> <C>
Desktops 103
Laptops 37
Servers 126
Office Equipment (printers, fax machines, telephones, etc.) 37
Monitors 105
Other (networking equipment, power supplies, etc.) 18
</TABLE>
(d) Section III "Contributed Patent Assets" of Exhibit A is amended to
read in its entirety as follows:
"CONTRIBUTED PATENT ASSETS
<TABLE>
<CAPTION>
NO. IDENTIFICATION
<S> <C>
1 US Pat. 5,991,399
2 US Pat. 5,974,550
3 US Pat. 6,041,122
4 App. filed 5/20/99 (P6534)
5 App. filed 11/16/99 (P7393)
6 App. filed 12/30/99 (P7618)
7 App. filed 3/1/00 (P8352)
8 App. filed 3/1/00 (P8379)
9 App. filed 2/15/00 (P8353)
10 App. filed 4/23/99 (P6309)
11 App. (P8775)
12 App. (P8778)
13 App. (P8779)
14 App. (P8781)"
</TABLE>
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<PAGE> 174
(e) Section III "Contributed Assets: Licensed EVS Software List" of
Exhibit A is amended to read in its entirety as follows:
"CONTRIBUTED ASSETS: LICENSED EVS SOFTWARE LIST
To be separately licensed to Newco on prevailing reasonable non-discriminatory
terms.
ATVEF SDK and tools
"Holmdel" consumer multimedia publishing
Pentium III-processor optimized alpha blending.
Oregon Retail Center components"
3. Amendment to By-Laws.
(a) Section 2.06 of the Form of Surviving Corporation By-Laws attached
to the Agreement as Exhibit D (the "By-Laws") is amended to read in its
entirety as follows:
"Section 2.06 Quorum; Voting. Except as otherwise required by these
By-Laws, at all meetings of the Board of Directors, the presence of a
majority of the total number of Directors shall constitute a quorum
for the transaction of business. Except as otherwise required by law,
the vote of a majority of the Directors present at any meeting at
which a quorum is present shall be the act of the Board of
Directors."
(b) Section 9.01 of the By-Laws is amended to read in its entirety as
follows:
"Section 9.01 Amendment. These By-Laws may be amended, altered or
repealed at any regular or special meeting of the stockholders, if,
in the case of such special meeting only, notice of such amendment,
alteration or repeal is contained in the notice or waiver of notice
of such meeting. Any amendment, alteration or repeal must be approved
by holders of a majority of the voting power of the Corporation
entitled to vote. These By-laws may also be amended, altered or
repealed by a majority of the whole Board of Directors."
4. Amendment to Stock Option Plan.
(a) The first paragraph of Section 3 ("Stock Subject to the Plan") of
the Newco 2000 Stock Option Plan attached to the Agreement as Exhibit G is
amended to read in its entirety as follows:
"The total number of shares of Stock reserved and available for
distribution under the Plan shall be 11,250,000 shares. Such shares
may consist, in whole or in part, of authorized and unissued shares
or treasury shares. Subject to Section 6(b)(iv) below, if any shares
of Stock that have been optioned cease to be subject to a Stock
Option, or if any such shares of Stock that are subject to any
Restricted Stock or Deferred Stock award, Stock Purchase Right or
Other Stock-Based Award granted hereunder are forfeited or any such
award otherwise terminates, without a payment being made to the
participant in the form of Stock, such shares shall again be
available for distribution in connection with future awards under the
Plan."
5. Amendment to Employee List.
(a) The list of "Other Intel Employees" attached to the Agreement as
Exhibit K-2 is amended to read in its entirety as follows:
"Other Intel Employees
All employees of Intel's Enhanced Video Services, Enhanced Content Services
and Internet Security Services departments not listed on Exhibit K-1 (aggregate
of 62 employees as of April 30, 2000)."
6. General.
(a) This Amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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<PAGE> 175
(b) THIS AMENDMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OR CHOICE OF
LAW PRINCIPLES THEREOF OR OF ANY OTHER JURISDICTION.
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<PAGE> 176
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.
INTEL CORPORATION,
a Delaware corporation
By: /s/ Leslie Vadasz
------------------------------------
Name: Leslie Vadasz
Title: Executive Vice President
Date: August 14, 2000
EXCALIBUR TECHNOLOGIES
CORPORATION,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: August 14, 2000
EXCA HOLDINGS, INC.,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: August 14, 2000
EXCALIBUR TRANSITORY, INC.,
a Delaware corporation
By: /s/ PATRICK C. CONDO
------------------------------------
Name: Patrick C. Condo
Title: President and Chief Executive
Officer
Date: August 14, 2000
[Signature Page to Amendment to Agreement and Plan of Contribution and Merger by
and among Intel Corporation, Excalibur Technologies Corporation, Exca Holdings,
Inc. and Excalibur Transitory, Inc.]
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<PAGE> 177
APPENDIX B
June 30, 2000
CONFIDENTIAL
Board of Directors
Excalibur Technologies Corporation
1921 Gallows Road, Suite 200
Vienna, VA 22182
Ladies and Gentlemen:
We understand that Excalibur Technologies Corporation ("Excalibur"), Intel
Corporation ("Intel"), Exca Holdings, Inc., a wholly owned subsidiary of
Excalibur ("Newco"), and Excalibur Transitory, Inc., a wholly owned subsidiary
of Newco ("Transitory"), have entered into an Agreement and Plan of Contribution
and Merger dated as of April 30, 2000 (the "Contribution and Merger Agreement")
whereby Intel will contribute certain assets specified therein to Newco,
Transitory will be merged with and into Excalibur and Excalibur will become a
wholly-owned subsidiary of Newco (the "Contribution and Merger"). The terms of
the Contribution and Merger are set forth more fully in the Contribution and
Merger Agreement.
Pursuant to the Contribution and Merger Agreement, we understand that Intel
will contribute $150 million in cash and certain assets of the Interactive Media
Services division of Intel ("IMS") to Newco (collectively, the "Contributed
Assets") in exchange for shares of the Class A Common Stock, $.01 par value, of
Newco ("Newco Common Stock") and shares of the Class B Common Stock, $.01 par
value per share, of Newco (the "Newco Non-Voting Common Stock"), all as
specified in the Contribution and Merger Agreement.
Pursuant to the Contribution and Merger Agreement, we understand that (i)
each share of Excalibur Common Stock issued and outstanding immediately prior to
the Effective Time (other than Shares held in Excalibur's treasury or by Newco
or Transitory) shall, by virtue of the Merger, be converted into and shall
become one (1) share (the "Common Stock Exchange Ratio") of Newco Common Stock,
and (ii) each share of cumulative convertible preferred stock, $.01 par value
per share, of Excalibur (the "Excalibur Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Excalibur
Preferred Stock held in Excalibur's treasury or by Newco or Transitory) shall,
by virtue of the Merger, be converted into and shall become one (1) share (the
"Preferred Stock Exchange Ratio") of the cumulative convertible preferred stock,
$.01 par value per share, of Newco (the "Newco Preferred Stock").
You have asked us to advise you as to the fairness, from a financial point
of view, of the Common Stock Exchange Ratio to the holders of Excalibur Common
Stock and of the Preferred Stock Exchange Ratio to the holders of Excalibur
Preferred Stock. Needham & Company, Inc., as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
other purposes. We have been engaged by Excalibur as financial advisor to render
this opinion in connection with the Contribution and Merger and will receive a
fee for rendering this opinion, none of which is contingent upon the
consummation of the Contribution and Merger. In addition, Excalibur has agreed
to indemnify us for certain liabilities arising from our role as financial
advisor and out of the rendering of this opinion.
For purposes of this opinion we have, among other things: (i) reviewed the
Contribution and Merger Agreement; (ii) reviewed certain publicly available
information concerning Excalibur and IMS, and certain other information
concerning Excalibur and IMS furnished to us by Excalibur and IMS; (iii) held
discussions with members of senior management of Excalibur and IMS concerning
the current and future business prospects of the respective companies and joint
prospects of the combined companies; (iv) reviewed certain financial forecasts
and projections prepared by the management of Excalibur and IMS; (v) compared
certain publicly available financial data of companies whose securities are
traded in the public markets and that we deemed relevant to similar data for IMS
and Excalibur; (vi) reviewed the financial terms of certain other business
combinations that we deemed generally relevant; and (vii) performed and/or
considered such other studies, analyses, inquiries and investigations as we
deemed appropriate.
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In connection with our review and in arriving at our opinion, we have
assumed and relied on the accuracy and completeness of all of the financial and
other information publicly available or furnished to or otherwise reviewed by or
discussed with us for purposes of rendering this opinion and have neither
attempted to verify independently nor assumed responsibility to verify any of
such information. In addition, we have assumed, with your consent, (i) that the
voting powers, rights, preferences and qualifications, limitations and
restrictions thereon of the Newco Preferred Stock are substantially the same as
those of the Excalibur Preferred Stock, (ii) that any material liabilities
(contingent or otherwise, known or unknown) of Excalibur and the Contributed
Assets (including IMS) are set forth in the consolidated financial statements of
Excalibur and Intel, respectively, (iii) that the Contribution and Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and (iv) that all conditions to the closing of
the Contribution and Merger will be satisfied without waiver. With respect to
the IMS and Excalibur financial forecasts provided to us by management of IMS
and Excalibur, and with respect to the information relating to the joint
prospects of the combined companies, we have assumed for purposes of our opinion
that such forecasts and information have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of such
respective managements, at the time of preparation, of the future operating and
financial performance of IMS and Excalibur and the combined companies, and we
have relied upon estimates of the management of Excalibur of the synergies that
may be achieved as a result of the proposed Contribution and Merger. We express
no opinion with respect to such forecasts or information or the assumptions on
which they were based. We have not assumed any responsibility for or made or
obtained any independent evaluation, appraisal or physical inspection of the
assets or liabilities of the Contributed Assets (including IMS) or Excalibur.
Further, our opinion is based on economic, monetary and market conditions as
they exist and can be evaluated as of the date hereof. Our opinion as expressed
herein is limited to the fairness, from a financial point of view, of the Common
Stock Exchange Ratio to the holders of Excalibur Common Stock and of the
Preferred Stock Exchange Ratio to the holders of Excalibur Preferred Stock and
does not address Excalibur's underlying business decision to engage in the
Contribution and Merger. Our opinion does not constitute a recommendation to any
stockholder of Excalibur as to how such stockholder should vote on the proposed
Contribution and Merger. We are not expressing any opinion as to the prices at
which the stock of Excalibur or Newco will actually trade at any time.
In the ordinary course of our business, we may actively trade the equity
securities of Excalibur and Intel for our own account or for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This letter and the opinion expressed herein are provided at the request
and for the information of the Board of Directors of Excalibur and may not be
quoted or referred to or used for any purpose without our prior written consent,
except that this letter may be disclosed in connection with any registration or
proxy statement used in connection with the Contribution and Merger so long as
this letter is quoted in full in such registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Common Stock Exchange Ratio is fair to the holders of Excalibur
Common Stock, and the Preferred Stock Exchange Ratio is fair to the holders of
Excalibur Preferred Stock, in each case from a financial point of view.
Very truly yours,
/s/ NEEDHAM & COMPANY, INC.
--------------------------------------
Needham & Company, Inc.
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<PAGE> 179
APPENDIX C
EXCA HOLDINGS, INC.
2000 STOCK OPTION PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Exca Holdings, Inc. 2000 Stock Option Plan (the "Plan")
is to enable Exca Holdings, Inc. (the "Company") to attract, retain and reward
officers, directors and key employees of the Company and its Subsidiaries and
Affiliates and any other individual as determined by the Committee who is
responsible for or contributes to the management, growth and/or profitability of
the business of the Company and/or its Subsidiaries and Affiliates, and
strengthen the mutuality of interests between such persons and the Company's
stockholders, by offering such persons performance-based stock incentives and/or
other equity interests or equity-based incentives in the Company, as well as
performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer
under the Plan, provided that the Company directly or indirectly owns at
least 20% of the combined voting power of all classes of stock of such
entity or at least 20% of the ownership interests in such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i)
the stockholders' Equity in the Company as of the end of the immediately
preceding fiscal year as reflected in the Company's consolidated balance
sheet, subject to such adjustments as the Committee shall specify at or
after grant, divided by (ii) the number of then outstanding shares of Stock
as of such year-end date (as adjusted by the Committee for subsequent
events).
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
(f) "Company" means Exca Holdings, Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
(g) "Deferred Stock" means an award made pursuant to Section 8 below
of the right to receive Stock at the end of a specified deferral period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(i) "Fair Market Value" means, as of any given date, unless otherwise
determined by the Committee in good faith, the mean between the highest and
lowest quoted bid price, regular way, of the Stock on the NASDAQ System or,
if no such sale of Stock occurs on such date, the fair market value of the
Stock as determined by the Committee in good faith.
(j) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section
422A of the Code.
(k) "Non-Employee Directors" shall have the meaning set forth in Rule
16b-3(b)(3) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor
definition adopted by the Commission.
(1) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
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<PAGE> 180
(m) "Other Stock-Based Award" means an award under Section 10 below
that is valued in whole or in part by reference to, or is otherwise based
on, Stock.
(n) "Restricted Stock" means an award of shares of Stock that is
subject to restrictions under Section 7 below.
(o) "Stock" means the Class A Common Stock, $.01 par value per share,
of the Company.
(p) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to surrender to the Company all (or a
portion) of a Stock Option in exchange for an amount equal to the
difference between (i) the Fair Market Value, as of the date such Stock
Option (or such portion thereof) is surrendered, of the shares of Stock
covered by such Stock Option (or such portion thereof), subject, where
applicable, to the pricing provisions in Section 6(b)(ii) and (ii) the
aggregate exercise price of such Stock Option (or such portion thereof).
(q) "Stock Option" or "Option" means any option to purchase shares of
Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 below.
(r) "Stock Purchase Right" means the right to purchase Stock pursuant
to Section 9.
(s) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if the
corporation (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
In addition, the term "Cause" shall have the meaning set forth in Section
5(h) below.
SECTION 2. ADMINISTRATION
The Plan shall be administered by a Committee of no fewer than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. The functions of the Committee specified in the
Plan shall be exercised by the Board, if and to the extent that no Committee
exists which has the authority to so administer the Plan.
The Committee shall have full authority to grant, pursuant to the terms of
the Plan, to officers, directors and other key employees and any other
individual as determined by the Committee who is responsible for or contributes
to the management, growth and/or profitability of the business of the Company
and/or its Subsidiaries and Affiliates eligible under Section 4: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred
Stock, (v) Stock Purchase Rights and/or (vi) Other Stock-Based Awards. In
particular, the Committee shall have the authority:
(a) to select the officers, directors and other key employees of the
Company and its Subsidiaries and Affiliates and any other individual as
determined by the Committee who is responsible for or contributes to the
management, growth and/or profitability of the business of the Company
and/or its Subsidiaries and Affiliates to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase
Rights and/or Other Stock-Based Awards may from time to time be granted
hereunder;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or
any combination thereof, are to be granted hereunder to one or more
eligible officers, directors, employees and any other individual as
determined by the Committee who is responsible for or contributes to the
management, growth and/or profitability of the business of the Company
and/or its Subsidiaries and Affiliates;
(c) to determine the number of shares to be covered by each such award
granted hereunder;
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(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions regarding any
Stock Option or other award and/or the shares of Stock relating thereto,
based in each case on such factors as the Committee shall determine, in its
sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash, Restricted Stock and/or Deferred Stock under
Section 5(j) or (k), as applicable, instead of Stock;
(f) to determine whether, to what extent and under what circumstances
grants and/or other awards under the Plan and/or other cash awards made by
the Company are to be made, and operate, on a tandem basis vis-a-vis other
awards under the Plan and/or cash awards made outside of the Plan, or on an
additive basis;
(g) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this Plan
shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount (if any) of
any deemed earnings on any deferred amount during any deferral period);
(h) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Stock purchased by exercising such Rights; and
(i) to grant with the consent of the optionee, in substitution for
outstanding Stock Options, replacement Stock Options, which may be at a
lower exercise price, provided that, in the case of Incentive Stock
Options, at an exercise price less than the Fair Market Value of the Stock
at the time of replacement.
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be made in the Committee's sole discretion and shall be final and binding
on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 11,250,000 shares. Such shares may consist, in whole or
in part, of authorized and unissued shares or treasury shares. Subject to
Section 6(b)(iv) below, if any shares of Stock that have been optioned cease to
be subject to a Stock Option, or if any such shares of Stock that are subject to
any Restricted Stock or Deferred Stock award, Stock Purchase Right or Other
Stock-Based Award granted hereunder are forfeited or any such award otherwise
terminates, without a payment being made to the participant in the form of
Stock, such shares shall again be available for distribution in connection with
future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, spin-offs, spin-outs or other
change in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares reserved for issuance
under the Plan, in the number and option price of shares subject to outstanding
Options granted under the Plan, in the number and purchase price of shares
subject to outstanding Stock Purchase Rights under the Plan, and in the number
of shares subject to other outstanding awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
Such adjusted option price shall also be used to determine the amount payable by
the Company upon the exercise of any Stock Appreciation Right associated with
any Stock Option.
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SECTION 4. ELIGIBILITY
Officers, directors and key employees of the Company and its Subsidiaries
and Affiliates and any other individual as determined by the Committee who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company and/or its Subsidiaries and Affiliates are eligible
to be granted awards under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone, in addition to or in tandem with other
awards granted under the Plan and/or cash awards made outside of the Plan. Any
Stock Option granted under the Plan shall be in such form as the Committee may
from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Committee shall have the authority to grant to any optionee Incentive
Stock Options, Non-Qualified Stock options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights).
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
under an Incentive Stock Option shall be determined by the Committee at the
time of grant but shall be not less than 100% of the Fair Market Value of
the Stock at the time of grant. Non-Qualified Stock Options may, in the
discretion of the Committee, may be granted at a price per share less than
the Fair Market Value of the Stock at the time of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten years
after the date the option is granted.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at or after grant. If the Committee provides, in its sole
discretion, that any Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time at or
after grant in whole or in part, based on such factors as the Committee
shall determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
provisions apply under Section 5(c), Stock Options may be exercised in
whole or in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as the
Committee may accept. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part may also be made
in the form of Stock or, in the case of the exercise of a Non-Qualified
Stock Option, Restricted Stock or Deferred Stock subject to an award
hereunder (based, in each case, on the Fair Market Value of the Stock on
the date the option is exercised, as determined by the Committee).
No shares of Stock shall be issued until full payment therefor has
been made. An optionee shall generally have the rights to dividends or
other rights of a shareholder with respect to shares subject to the Option
when the optionee has given written notice of exercise, has paid in full
for such shares, and if requested, has given the representation described
in Section 13(a).
(e) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee.
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(f) Termination by Death. Subject to Section 5(j), if an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent such option was exercisable at the time of death
or on such accelerated basis as the Committee may determine at or after
grant (or as may be determined in accordance with procedures established by
the Committee), by the legal representative of the estate or by the legatee
of the optionee under the will of the optionee, for a period of one year
(or such other period as the Committee may specify at grant) from the date
of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Subject to Section 5(j), if
an optionee's employment by the Company and any Subsidiary or Affiliate
terminates by reason of Disability, any Stock Option held by such optionee
may thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), for a period of
one year (or such other period as the Committee may specify at grant) from
the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter,
provided, however, that, if the optionee dies within such one-year period
(or such other period as the Committee shall specify at grant), any
unexercised Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of death
for a period of one year from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability,
if an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422A of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(h) Other Termination. Unless otherwise determined by the Committee
(or pursuant to procedures established by the Committee) at or after grant,
if an optionee's employment by the Company or any Subsidiary or Affiliate
terminates for any reason other than death or Disability, the Stock Option
shall thereupon terminate, except that such Stock Option may be exercised,
to the extent otherwise then exercisable, for the lesser of three months or
the balance of such Stock Option's term if the optionee is involuntarily
terminated by the Company or any Subsidiary or Affiliate without Cause. For
purposes of this Plan, "Cause" means a felony conviction of an optionee or
the failure of an optionee to contest prosecution for a felony, or an
optionee's willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company or any
Subsidiary or Affiliate.
(i) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422A of the Code, or, without the consent of the
optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422A.
To the extent required for "incentive stock option" status under
Section 422A(b)(7) of the Code (taking into account applicable Internal
Revenue Service regulations and pronouncements), the Plan shall be deemed
to provide that the aggregate Fair Market Value (determined as of the time
of grant) of the Stock with respect to which Incentive Stock Options
granted are exercisable for the first time by the optionee during any
calendar year under the Plan and/or any other stock option plan of the
Company or any Subsidiary or parent corporation (within the meaning of
Section 425 of the Code) shall not exceed $100,000. If Section 422A is
hereafter amended to delete the requirement now in Section 422A(b)(7) that
the plan text expressly provide for the $100,000 limitation set forth in
Section 422A(b)(7), then this first paragraph of Section 5(i) shall no
longer be operative.
(j) Buyout Provisions. The Committee may at any time offer to buy out
for a payment in cash, Stock, Deferred Stock or Restricted Stock an option
previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the optionee at the time that such offer
is made.
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(k) Settlement Provisions. If the option agreement so provides at
grant or is amended after grant and prior to exercise to so provide (with
the optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the spread value of an exercised Option
take the form of Deferred or Restricted Stock, which shall be valued on the
date of exercise on the basis of the Fair Market Value (as determined by
the Committee) of such Deferred or Restricted Stock determined without
regard to the deferral limitations and/or forfeiture restrictions involved.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject to such
provisions as the Committee may specify at grant where a Stock Appreciation
Right is granted with respect to less than the full number of shares covered by
a related Stock Option.
A Stock Appreciation Right may be exercised by an optionee, subject to
Section 6(b), in accordance with the procedures established by the Committee for
such purpose. Upon such exercise, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options
relating to exercised Stock Appreciation Rights shall no longer be exercisable
to the extent that the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 5 and
this Section 6 of the Plan; provided, however, that any Stock Appreciation
Right granted to an optionee subject to Section 16(b) of the Exchange Act
subsequent to the grant of the related Stock Option shall not be
exercisable during the first six months of its term, except that this
special limitation shall not apply in the event of death or Disability of
the optionee prior to the expiration of the six-month period. The exercise
of Stock Appreciation Rights held by optionees who are subject to Section
16(b) of the Exchange Act shall comply with Rule 16b-3 thereunder, to the
extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash and/or shares of Stock equal
in value to the excess of the Fair Market Value of one share of Stock over
the option price per share specified in the related Stock Option multiplied
by the number of shares in respect of which the Stock Appreciation Right
shall have been exercised, with the Committee having the right to determine
the form of payment. When payment is to be made in shares, the number of
shares to be paid shall be calculated on the basis of the Fair Market Value
of the shares on the date of exercise. When payment is to be made in cash,
such amount shall be calculated on the basis of the average of the highest
and lowest quoted bid price, of the Stock on the NASDAQ System during the
applicable period referred to in Rule 16b-3(e) under the Exchange Act.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable under
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 3 on the number of shares of Stock to be issued under the Plan,
but only to the extent of the number of shares issued under the Stock
Appreciation Right at the time of exercise based on the value of the Stock
Appreciation Right at such time.
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SECTION 7. RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be issued either alone,
in addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside the Plan. The Committee shall determine the eligible persons
to whom, and the time or times at which, grants of Restricted Stock will be
made, the number of shares to be awarded, the price (if any) to be paid by the
recipient of Restricted Stock (subject to Section 7(b)), the time or times
within which such awards may be subject to forfeiture, and all other terms and
conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the Committee
may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same with respect
to each recipient.
(b) Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock may be equal to or
less than their par value and may be zero.
(ii) Awards of Restricted Stock must be accepted within a period of 60 days
(or such shorter period as the committee may specify at grant) after the award
date, by executing a Restricted Stock Award Agreement and paying whatever price
(if any) is required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock award shall be issued a
stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such participant, and shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(iv) The Committee shall require that the stock certificates evidencing
such shares be held in custody by the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of such award
(the "Restricted Period"), the participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee, in its sole discretion, may
provide for the lapse of such restrictions in installments and may
accelerate or waive such restriction in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may
determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
the participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company, including the right to
vote the shares and the right to receive any cash dividends. The Committee,
in its sole discretion, as determined at the time of award, may permit or
require the payment of cash dividends to be deferred and, if the Committee
so determines, reinvested, subject to Section 14(e), in additional
Restricted Stock, to the extent shares are available under Section 3, or
otherwise reinvested. Pursuant to Section 3 above, Stock dividends issued
with respect to Restricted Stock shall be treated as additional shares of
Restricted Stock that are subject to the same restrictions and other terms
and conditions that apply to the shares with respect to which such
dividends are issued.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a participant's employment with the
Company or any Subsidiary or Affiliate for any reason during the
Restriction Period, all shares still subject to restriction will vest or be
forfeited, in accordance with the terms and conditions established by the
Committee at or after grant.
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(iv) If and when the Restricted Period expires without a prior
forfeiture of the Restricted Stock subject to such Restricted Periods,
certificates for an appropriate number of unrestricted shares shall be
delivered to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a Restricted Stock award, subject to such
performance, future service deferral and other terms and conditions as may be
specified by the Committee.
SECTION 8. DEFERRED STOCK
(a) Administration. Deferred Stock may be awarded either alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom and the time or times at which Deferred Stock shall be awarded,
the number of shares of Deferred Stock to be awarded to any person, the duration
of period (the "Deferral Period") during which, and the conditions under which,
receipt of the Stock will be deferred, and the other terms and conditions of the
award in addition to those set forth in Section 8(b).
The Committee may condition the grant of Deferred Stock upon the attainment
of specified performance goals or such other factors or criteria as the
Committee shall determine, in its sole discretion.
The provisions of Deferred Stock awards need not be the same with respect
to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant to
this Section 8 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award agreement
referred to in Section 8(b)(vi) below, Deferred Stock awards may not be
sold, assigned, transferred, pledged or otherwise encumbered during the
Deferral Period. At the expiration of the Deferral Period (or the Elective
Deferral Period referred to in Section 8(b)(v), where applicable), share
certificates shall be delivered to the participant, or his legal
representative, in a number equal to the shares covered by the Deferred
Stock award.
(ii) Unless otherwise determined by the Committee at grant, amounts
equal to any dividends declared during the Deferral Period with respect to
the number of shares covered by a Deferred Stock award shall be paid to the
participant currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested, all as determined at or
after the time of the award by the Committee, in its sole discretion.
(iii) Subject to the provision of the award agreement and this Section
8, upon termination of a participant's employment with the Company or
Subsidiary or Affiliate for any reason during the Deferral Period for a
given award, the Deferred Stock in question will vest or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee may, at or after
grant, accelerate the vesting of all or any part of any Deferred Stock
award and/or waive the deferral limitations for all or any part of such
award.
(v) A participant may elect to further defer receipt of an award (or
an installment of an award) for a specified period or until a specified
event (the "Elective Deferral Period"), subject in each case to the
Committee's approval and to such terms as are determined by the Committee,
all in its sole discretion. Subject to any exceptions adopted by the
Committee, such election must generally be made at least one year prior to
completion of the Deferral Period for such Deferred Stock award (or such
installment).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock agreement executed by the Company and the participant.
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(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a deferred stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
SECTION 9. STOCK PURCHASE RIGHTS
(a) Awards and Administration. Subject to Section 3 above, the Committee
may grant eligible participants Stock Purchase Rights which shall enable such
participants to purchase Stock (including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at 50% of such Fair Market Value on such date;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on such date.
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof.
The terms of Stock Purchase Rights awards need not be the same with respect
to each participant.
Each Stock Purchase Right award shall be confirmed by, and be subject to
the terms of, a Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be exercisable
for such period after grant as is determined by the Committee not to exceed 30
days. However, the Committee may provide, in its sole discretion, that the Stock
Purchase Rights of persons potentially subject to Section 16(b) of the Exchange
Act shall not become exercisable until six months and one day after the grant
date, and shall then be exercisable for ten trading days at the purchase price
specified by the Committee in accordance with Section 9(a).
SECTION 10. OTHER STOCK-BASED AWARDS
(a) Administration. Other awards of Stock and other awards that are valued
in whole or in part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, performance shares,
convertible preferred stock, convertible debentures, exchangeable securities and
Stock awards or options valued by reference to Book Value or subsidiary
performance, may be granted either alone or in addition to or in tandem with
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock or
Stock Purchase Rights granted under the Plan and/or cash awards made outside of
the Plan.
Subject to the provision of the Plan, the Committee shall have authority to
determine the persons to whom and the time or times at which such awards shall
be made, the number of shares of Stock to be awarded pursuant to such awards,
and all other conditions of the awards. The Committee may also provide for the
grant of Stock upon the completion of a specified performance period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provision of the Plan and the award agreement
referred to in Section 10(b)(v) below, shares subject to awards made under
this Section 10 may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the shares are issued, or,
if later, the date on which any applicable restriction, performance or
deferral period lapses.
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(ii) Subject to the provisions of the Plan and the award agreement and
unless otherwise determined by the Committee at grant, the recipient of an
award under this Section 10 shall be entitled to receive, currently or on a
deferred basis, interest or dividends or interest or dividend equivalents
with respect to the number of shares covered by the award, as determined at
the time of the award by the Committee, in its sole discretion, and the
Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(iii) Any award under this Section 10 and any Stock covered by any
such award shall vest or be forfeited to the extent so provided in the
award agreement, as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's retirement, Disability or
death, or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining
limitations imposed hereunder (if any) with respect to any or all of an
award under this Section 10.
(v) Each award under this Section 10 shall be confirmed by, and
subject to the terms of, an agreement or other instrument by the Company
and by the participant.
(vi) Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 10 may be issued for no cash consideration.
Stock (including securities convertible into Stock) purchased pursuant to a
purchase right awarded under this Section 10 shall be priced at least 50%
of the Fair Market Value of the Stock on the date of grant.
SECTION 11. AMENDMENT AND TERMINATION
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted or Deferred Stock award, Stock Purchase Right or Other Stock-Based
Award theretofore granted, without the optionee's or participant's consent, or
which, without the approval of the Company's stockholders, would cause the Plan
to no longer comply with Rule 16b-3 under the Exchange Act or any successor rule
or other regulatory requirements.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules.
SECTION 12. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that, unless the Committee otherwise determines
with the consent of the affected participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 13. GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option or other award under the Plan to represent and to agree with the
Company in writing that the optionee or participant is
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acquiring the shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan shall be subject to such stock-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or any Subsidiary or Affiliate any right to continued employment with
the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the participant for Federal income tax purposes with
respect to any award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Committee,
withholding obligations may be settled with Stock, including Stock that is part
of the award that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such payment or arrangements
and the Company and its Subsidiaries and Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment or
any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend equivalents
in additional Restricted Stock (or in Deferred Stock or other types of Plan
awards) at the time of any dividend payment shall be permissible only if
sufficient shares of Stock are available under Section 3 for such reinvestment
(taking into account then outstanding Stock Options, Stock Purchase Rights and
other Plan awards).
(f) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
SECTION 14. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of , 2000, subject to the
approval of the Plan by a majority of the holders of the Stock. Any grants made
under the Plan prior to such approval shall be effective when made (unless
otherwise specified by the Committee at the time of grant), but shall be
conditioned on, and subject to, such approval of the Plan by such shareholders.
SECTION 15. TERM OF PLAN
No Stock Option, Stock Appreciation Right, Restricted Stock award, Deferred
Stock award, Stock Purchase Right or Other Stock-Based Award shall be granted
pursuant to the Plan on or after the tenth anniversary of the date of
stockholder approval, but awards granted prior to such tenth anniversary may
extend beyond that date.
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APPENDIX D
CERTIFICATE OF INCORPORATION
OF
EXCA HOLDINGS, INC.
* * * *
FIRST: The name of the Corporation is Exca Holdings, Inc..
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purpose to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law.
FOURTH: The Corporation will have authority to issue One Hundred Forty-One
Million (141,000,000) shares of capital stock, of which One Hundred Million
(100,000,000) shares are Class A Common Stock, $.01 par value per share (the
"Class A Common Stock") Forty Million (40,000,000) shares are Class B Common
Stock, $.01 par value per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock") and Five Million (5,000,000)
shares are Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
which 49,587 shares are designated as Cumulative Convertible Preferred Stock
(the "Convertible Preferred Stock").
A. Preferred Stock
1. The Board of Directors of the Corporation is expressly authorized at
any time, and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series, with such designations, preferences and
relative, participating, optional or other special rights, and qualification,
limitations, or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof adopted by the Board
of Directors, and as are not stated and expressed in this Certificate, or any
amendment thereto, including, without limiting the generality of the foregoing,
the following:
(a) the designation and the number of shares of Preferred Stock which
shall constitute such series;
(b) the rate and time at which, and the terms and conditions upon
which, dividends, if any, on the Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such dividends
to the dividends payable on any other class or classes or of any other
series of capital stock of the Corporation and whether such dividends shall
be cumulative or noncumulative;
(c) whether the shares of such series shall be subject to redemption
by the Corporation, and, if made subject to redemption, the times, prices
and other terms and conditions of such redemption;
(d) the terms and amount of any sinking fund or redemption or purchase
account provided for the Preferred Stock of such series;
(e) whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes of capital stock
of the Corporation, and, if provision be made for conversion or exchange,
the times, prices, rates, adjustments, and other terms and conditions of
such conversion or exchange;
(f) the extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with respect to
the election of the directors or otherwise;
(g) the restriction, if any, on the issue or reissue of any additional
Preferred Stock; and
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(h) the rights of the holders of the shares of such series of
Preferred Stock upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding up of
the Corporation.
2. Except as otherwise required by law and except for such voting powers
with respect to the election of directors or other matters as may be stated in
the resolutions of the Board of Directors creating any series of Preferred
Stock, the holders of any such series shall have no voting power whatsoever.
B. Cumulative Convertible Preferred Stock
1. The Convertible Preferred Stock shall entitle the holders thereof to
receive, as and when declared by the Board of Directors, out of the funds and
other assets of the Corporation legally available therefor, and the Corporation
shall be bound to pay thereon, dividends cumulative from the date of issue, at
the rate of $.50 per share payable at the discretion of the Board of Directors
in cash or shares of Class A Common Stock valued at the lower of $1.00 per share
of Class A Common Stock or the market price on the date of declaration.
Dividends shall be payable, if declared by the Board of Directors, on April 1 of
each year.
2. In the event that the Board of Directors elects to pay dividends in
shares of Class A Common Stock, the market price per share of Class A Common
Stock at any date shall be deemed to be the average of the daily closing prices
for the ten consecutive business days next preceding the day in question. The
closing price for each day shall be the last sales price regular way or, in case
no sale takes place on such day, the average of the closing bid and asked prices
as furnished by any two firms selected in good faith from time to time by the
Corporation for that purpose.
3. The holders of Convertible Preferred Stock are not entitled to vote on
any matter voted on by stockholders of the Corporation. Holders of Convertible
Preferred Stock do not have cumulative voting rights in electing directors and
have no subscription or preemptive rights.
4. In the event of any liquidation, dissolution or other winding-up of the
Corporation, whether voluntary or involuntary, the holders of the Convertible
Preferred Stock shall be entitled to receive, before any distribution or payment
is made upon any stock ranking junior to the Convertible Preferred Stock, $10
per share in cash, together with an amount in cash equal to all accrued and
unpaid dividends thereon to the date of distribution or payment.
A voluntary sale, lease, exchange or transfer of all or substantially all
of the corporation's property or assets to one or more corporations, the
consolidation or merger of the Corporation with one or more corporations, or a
redemption of the Corporation's capital stock or stated capital shall not be
deemed a dissolution, liquidation or winding-up of the Corporation.
5. (a) Any share or shares of Convertible Preferred Stock may be converted
on and after the date of issue, at the option of the holder thereof, in the
manner hereinafter provided, into fully paid and non-assessable shares of Class
A Common Stock; provided, however, that on any liquidation of the Corporation,
the right of conversion shall terminate at the close of business on the date
fixed for the initial payment of distributable amounts on the Convertible
Preferred Stock.
(b) The conversion rate shall be ten share(s) of Class A Common Stock for
each share of Convertible Preferred Stock, subject to adjustment as hereinafter
provided:
(i) In case the shares of Class A Common Stock at any time outstanding
shall be combined into a lesser number of shares, whether by
reclassification, reduction of capital stock or otherwise, the conversion
rate shall be proportionately decreased.
(ii) In case the shares of Class A Common Stock at any time
outstanding shall be subdivided, by reclassification, recapitalization or
otherwise (including the issuance of shares of Class A Common Stock as a
dividend or distribution on the Class A Common Stock), into a greater
number of shares without the actual receipt by the Corporation of any
consideration for the additional number of shares so issued, the conversion
rate shall be proportionately increased.
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(c) Any conversion rate determined or adjusted as herein provided shall
remain in effect until further adjustment as required herein. Upon each
adjustment of the conversion rate a written instrument signed by an officer of
the Corporation, setting forth such adjustment and the computation and a summary
of the facts upon which it is based, shall forthwith be filed with the Transfer
Agent for the Convertible Preferred Stock and made available for inspection by
the holders of such stock, and any adjustment so evidenced, made in good faith,
shall be binding upon all such holders and upon the Corporation. Upon any
conversion, fractional shares shall not be issued but any fractions shall be
adjusted by the payment of the cash equivalent thereof, computed as set forth in
paragraph B.5.(d) below. Upon any conversion, no payment or adjustment shall be
made for dividends on the Convertible Preferred Stock surrendered for conversion
or on the Class A Common Stock delivered. The Corporation shall pay all issue
taxes, if any, incurred in respect of the issue of the Class A Common Stock on
conversion; provided, however, that the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such Class A
Common Stock in names other than those in which the Convertible Preferred Stock
may stand.
(d) For the purpose of any computation under paragraph B.5.(c) of the cash
equivalent of a fractional share, the market price per share of Class A Common
Stock at any date shall be deemed to be the average of the daily closing prices
for the ten consecutive business days next preceding the day in question. The
closing price for each day shall be the last sales price, regular way or, in
case no sale takes place on such day, the average of the closing bid and asked
prices as furnished by any two firms selected in good faith from time to time by
the Corporation for that purpose.
(e) Any conversion of Convertible Preferred Stock into shares of Class A
Common Stock shall be made by the surrender to the Corporation, at the office of
any Transfer Agent for the Convertible Preferred Stock, of the certificate or
certificates representing the share or shares of Convertible Preferred Stock to
be converted, duly endorsed or assigned (unless such endorsement or assignment
be waived by the Corporation), together with written request for conversion.
(f) All shares of Convertible Preferred Stock which shall have been
converted as herein provided shall no longer be deemed to be outstanding and all
rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall forthwith cease except only the right of the holders
thereof to receive Class A Common Stock in exchange therefor.
(g) In case of any reclassification or change of outstanding shares of
Class A Common Stock issuable upon conversion of the shares of Convertible
Preferred Stock (including any such reclassification or change in connection
with any merger to which the Corporation is a party and in which the Corporation
is the continuing corporation), the holder of each share of Convertible
Preferred Stock then outstanding shall have the right thereafter to receive upon
the conversion of such share such kind and amount of shares of stock and other
securities and property receivable, upon such reclassification or change, by a
holder of the number of shares of Class A Common Stock (whole or fractional) of
the Corporation into which such share of Convertible Preferred Stock might have
been converted had such conversion occurred immediately prior to such
reclassification or change; provided that effective provision shall be made, in
the charter of the Corporation or otherwise, so that, in the opinion of the
Board of Directors of the Corporation, the provisions set forth herein for the
protection of the conversion rights of the Convertible Preferred Stock shall
thereafter be applicable, as nearly as reasonably may be, to any such other
shares of stock and other securities and property deliverable upon conversion of
the Convertible Preferred Stock remaining outstanding. In case of any
consolidation or merger to which the Corporation is a party and in which the
Corporation is not the continuing corporation, or in case of any sale or
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, the holder of each share of
Convertible Preferred Stock then outstanding shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable, upon such consolidation, merger, sale or
conveyance, by a holder of the number of shares of Class A Common Stock (whole
or fractional) of the Corporation into which such share of Convertible Preferred
Stock might have been converted had such conversion occurred immediately prior
to such consolidation, merger, sale or conveyance; provided that effective
provision shall be made, in the charter of the successor corporation or
otherwise, so that, in the opinion of the Board of Directors of the Corporation,
the provisions set forth herein for the protection of the conversion rights of
the Convertible Preferred Stock
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shall thereafter be applicable, as nearly as reasonably may be, to any such
other shares of stock and other securities and property deliverable upon
conversion of the Convertible Preferred Stock remaining outstanding; and
provided, further, that any such successor corporation shall expressly assume
the obligation to deliver, upon the exercise of the conversion privilege, such
shares, securities or property as the holders of shares of the Convertible
Preferred Stock remaining outstanding shall be entitled to receive pursuant to
the provisions hereof, and to make provisions for the protection of the
conversion right as above provided. In case securities or property other than
Class A Common Stock shall be issuable or deliverable upon conversion as
aforesaid, then all references in this paragraph B.5(g) shall be deemed to
apply, so far as appropriate and as nearly as may be, to such other securities
or property.
(h) A number of shares of the authorized Class A Common Stock sufficient to
provide for the conversion of the Convertible Preferred Stock outstanding upon
the basis hereinbefore provided shall at all times be reserved for such
conversion. If the Corporation shall propose to make any change in its capital
structure which would change the number of shares of Class A Common Stock to
which each share of the Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Class A Common Stock authorized and reserved for conversion of the outstanding
Convertible Preferred Stock on the new basis.
C. Common Stock.
1. The Common Stock shall consist solely of two classes designated "Class
A Common Stock" and "Class B Common Stock". The Board of Directors of the
Corporation is expressly authorized at any time, and from time to time, to
provide for the issuance of shares of Class A Common Stock and shares of Class B
Common Stock subject to the foregoing. The Board of Directors shall have no
power to alter the rights, preferences or privileges with respect to Class A
Common Stock or Class B Common Stock.
2. After any requirements with respect to preferential dividends on the
Preferred Stock to the end of the then current dividend period for said stock,
fixed in accordance with the provisions of Parts A and B of this ARTICLE FOURTH,
shall have been met and after the Corporation shall have complied with all the
requirements, if any, with respect to the setting aside of sums of sinking funds
or purchase or redemption accounts (fixed in accordance with the provisions of
Parts A and B of this ARTICLE FOURTH), and subject further to any conditions
which may be fixed in accordance with the provisions of Parts A and B of this
ARTICLE FOURTH), the holders of the Common Stock shall be entitled to receive
out of any remaining net profits or net assets of the Corporation available for
dividends such dividends as may from time to time be declared by the Board of
Directors, provided that each share of Class A Common Stock and Class B Common
Stock shall be equal in respect of rights to dividends and other distributions
in cash, stock or property of the Corporation, and provided that in the case of
dividends or other distributions payable in Class A Common Stock or Class B
Common Stock, including distributions pursuant to stock split-ups or divisions
of Class A Common Stock or Class B Common Stock which occur after the first date
upon which the Corporation has issued shares of both Class A Common Stock and
Class B Common Stock, only shares of Class A Common Stock shall be distributed
with respect to Class A Common Stock and only shares of Class B Common Stock
shall be distributed with respect to Class B Common Stock.
3. In the event of any voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding up of the Corporation, after payment
in full of the amounts payable in respect of the Preferred Stock (fixed in
accordance with the provisions of Parts A and B of this ARTICLE FOURTH), the
holders of the Common Stock shall be entitled, to the exclusion of the holders
of the Preferred Stock, to share ratably per share of Common Stock in all the
assets of the Corporation then remaining, assuming for such purpose that all
outstanding shares of Class B Common Stock have been converted into shares of
Class A Common Stock immediately prior to any distribution pursuant to this
paragraph C.3.
4. Except as otherwise provided in this Certificate or as otherwise made
mandatory by law, stockholders of Class A Common Stock shall be entitled to one
vote for each full share of such stock then outstanding and of record in his or
her name on the books of the Corporation, and the holders of the Class A Common
Stock shall vote together with the holders of any series of Preferred Stock
which may then have voting rights (fixed in accordance with Part A of this
ARTICLE FOURTH) entitled to vote in such manner, and not as a
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separate class. Except as otherwise provided in this Certificate or as otherwise
made mandatory by law, shares of Class B Common Stock shall not be entitled to
any voting rights.
5. (a) Any share or shares of Class B Common Stock may be converted on and
after the date of issue, at the option of the holder thereof, in the manner
hereinafter provided, into fully paid and non-assessable shares of Class A
Common Stock; provided that while Intel Corporation remains a holder of Class B
Common Stock, it shall not be entitled to convert shares of Class B Common Stock
to the extent that, immediately after the conversion, Intel Corporation would
beneficially own 50% or more of the voting power of the Corporation.
(b) The conversion rate shall be one share of Class A Common Stock for each
share of Class B Common Stock, subject to adjustment as hereinafter provided:
(i) In case the shares of Class A Common Stock at any time outstanding
shall be combined into a lesser number of shares, whether by
reclassification, reduction of capital stock or otherwise, the conversion
rate shall be proportionately decreased.
(ii) In case the shares of Class A Common Stock at any time
outstanding shall be subdivided, by reclassification, recapitalization or
otherwise (including the issuance of shares of Class A Common Stock as a
dividend or distribution on the Class A Common Stock), into a greater
number of shares without the actual receipt by the Corporation of any
consideration for the additional number of shares so issued, the conversion
rate shall be proportionately increased.
(c) Any conversion rate determined or adjusted as herein provided shall
remain in effect until further adjustment as required herein. Upon each
adjustment of the conversion rate a written instrument signed by an officer of
the Corporation, setting forth such adjustment and the computation and a summary
of the facts upon which it is based, shall forthwith be filed with the Transfer
Agent for the Class B Common Stock and made available for inspection by the
holders of such stock, and any adjustment so evidenced, made in good faith,
shall be binding upon all such holders and upon the Corporation. Upon any
conversion, fractional shares shall not be issued but any fractions shall be
adjusted by the payment of the cash equivalent thereof, computed as set forth in
paragraph C.5.(d) below. Upon any conversion, no payment or adjustment shall be
made for dividends on the Class B Common Stock surrendered for conversion or on
the Class A Common Stock delivered. The Corporation shall pay all issue taxes,
if any, incurred in respect of the issue of the Class A Common Stock on
conversion; provided, however, that the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such Class A
Common Stock in names other than those in which the Class B Common Stock may
stand.
(d) For the purpose of any computation under paragraph C.5.(c) of the cash
equivalent of a fractional share, the market price per share of Class A Common
Stock at any date shall be deemed to be the average of the daily closing prices
for the ten consecutive business days next preceding the day in question. The
closing price for each day shall be the last sales price, regular way or, in
case no sale takes place on such day, the average of the closing bid and asked
prices as furnished by any two firms selected in good faith from time to time by
the Corporation for that purpose.
(e) Any conversion of Class B Common Stock into shares of Class A Common
Stock shall be made by the surrender to the Corporation, at the office of any
Transfer Agent for the Class B Common Stock, of the certificate or certificates
representing the share or shares of Class B Common Stock to be converted, duly
endorsed or assigned (unless such endorsement or assignment be waived by the
Corporation), together with written request for conversion.
(f) All shares of Class B Common Stock which shall have been converted as
herein provided shall no longer be deemed to be outstanding and all rights with
respect to such shares shall forthwith cease except only the right of the
holders thereof to receive Class A Common Stock in exchange therefor.
(g) In case of any reclassification or change of outstanding shares of
Class A Common Stock issuable upon conversion of the shares of Class B Common
Stock (including any such reclassification or change in connection with any
merger to which the Corporation is a party and in which the Corporation is the
continuing corporation), the holder of each share of Class B Common Stock then
outstanding shall have the right
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thereafter to receive upon the conversion of such share such kind and amount of
shares of stock and other securities and property receivable, upon such
reclassification or change, by a holder of the number of shares of Class A
Common Stock (whole or fractional) of the Corporation in which such share of
Class B Common Stock might have been converted had such conversion occurred
immediately prior to such reclassification or change; provided that effective
provision shall be made, in the charter of the Corporation or otherwise, so
that, in the opinion of the Board of Directors of the Corporation, the
provisions set forth herein for the protection of the conversion rights of the
Class B Common Stock shall thereafter be applicable, as nearly as reasonably may
be, to any such other shares of stock and other securities and property
deliverable upon conversion of the Class B Common Stock remaining outstanding.
In case of any consolidation or merger to which the Corporation is a party and
in which the Corporation is not the continuing corporation, or in case of any
sale or conveyance to another corporation of the property of the Corporation as
an entirety or substantially as an entirety, the holder of each share of Class B
Common Stock then outstanding shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable, upon such consolidation, merger, sale or conveyance, by a
holder of the number of shares of Class A Common Stock (whole or fractional) of
the Corporation into which such share of Class B Common Stock might have been
converted had such conversion occurred immediately prior to such consolidation,
merger, sale or conveyance; provided that effective provision shall be made, in
the charter of the successor corporation or otherwise, so that, in the opinion
of the Board of Directors of the Corporation, the provisions set forth herein
for the protection of the conversion rights of the Class B Common Stock shall
thereafter be applicable, as nearly as reasonably may be, to any such other
shares of stock and other securities and property deliverable upon conversion of
the Class B Common Stock remaining outstanding; and provided, further, that any
such successor corporation shall expressly assume the obligation to deliver,
upon the exercise of the conversion privilege, such shares, securities or
property as the holders of shares of the Class B Common Stock remaining
outstanding shall be entitled to receive pursuant to the provisions hereof, and
to make provisions for the protection of the conversion right as above provided.
In case securities or property other than Class A Common Stock shall be issuable
or deliverable upon conversion as aforesaid, then all references in this
paragraph B.5(g) shall be deemed to apply, so far as appropriate and as nearly
as may be, to such other securities or property.
(h) A number of shares of the authorized Class A Common Stock sufficient to
provide for the conversion of the Class B Common Stock outstanding upon the
basis hereinbefore provided shall at all times be reserved for such conversion.
If the Corporation shall propose to make any change in its capital structure
which would change the number of shares of Class A Common Stock to which each
share of the Class B Common Stock shall be convertible as herein provided, the
Corporation shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of shares of Class A Common Stock authorized
and reserved for conversion of the outstanding Class B Common Stock on the new
basis.
FIFTH: The name and mailing address of the incorporator is as follows:
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SIXTH: The shareholders will have no preemptive rights to acquire unissued
or treasury shares or securities convertible into such shares, or carrying a
right to subscribe to or acquire shares.
SEVENTH: The presence at a meeting of shareholders of at least a majority
of the shares entitled to vote at that meeting will constitute a quorum for the
transaction of business at that meeting.
EIGHTH: To the fullest extent permitted by Delaware statutory or
decisional law, as amended or interpreted, no director of this Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. This ARTICLE EIGHTH does not affect
the availability of equitable remedies for breach of fiduciary duties. The
Corporation shall indemnify, in the manner and to the fullest extent permitted
by the Delaware General Corporation Law as the same exists or may hereafter be
amended (but in the case of any such amendment, only to the extent that such
amendment
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permits the Corporation to provide broader indemnification rights than permitted
prior thereto), any person (or the estate of any person) who is or was a party
to, or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise. Any repeal or modification of the provisions
of this ARTICLE EIGHTH by the stockholders of the Corporation shall not
adversely affect any right or protection of any director existing at the time of
such repeal or modification.
NINTH: The number of directors that shall constitute the whole Board shall
be as specified in the Bylaws of the Corporation, as the same may be amended
from time to time, but in no event shall such number be less than six (6) nor
greater than twelve (12). The Board shall for a period of five (5) years from
include at least two (2) directors that are not affiliated with
Holder. Notwithstanding the foregoing, during any period in which the holders of
any one or more series of Preferred Stock, voting as a class, shall be entitled
pursuant to the terms of the Certificate of Designation with respect to such
series of Preferred Stock to elect a specified number of directors by reason of
dividend arrearages or other contingencies giving them the right to do so, then
and during such time as such right continues, (i) the then otherwise authorized
number of directors shall be increased by such specified number of directors and
the holders of shares of such series of Preferred Stock, voting as a class,
shall be entitled to elect such specified number of directors in accordance with
the provisions of such Preferred Stock, and (ii) each such additional director
shall serve until the next annual meeting of stockholders and until his or her
successor shall be elected and shall qualify, or until his or her right to hold
such office terminates pursuant to the provisions of such Preferred Stock or
series, whichever occurs earlier. Whenever the holders of shares of such series
of Preferred Stock are divested of such right to elect directors pursuant to the
provisions of such Preferred Stock or series, the terms of office of all
directors elected by the holders of such series of Preferred Stock pursuant to
such provisions, or elected to fill any vacancies resulting from the death,
resignation or removal of directors so elected by the holders of such Preferred
Stock or series, shall forthwith terminate and the authorized number of
directors shall be reduced accordingly.
TENTH: 1. For purposes of this Certificate, "Holder" shall mean Intel
Corporation, for so long as Intel Corporation holds at least five percent (5%)
of the outstanding shares of Class A Common Stock (taking into account any
securities held by Holder that are convertible into shares of Class A Common
Stock at the time of any determination into), all successors to Holder by way of
merger, consolidation or sale of all or substantially all of Holder's assets,
and all existing or future corporations, partnerships, joint ventures,
associations and other entities (each a "Subsidiary Entity") in which such
person or entity beneficially owns, directly or indirectly, fifty percent (50%)
or more of the outstanding voting stock, but excluding the Corporation or any
Subsidiary Entity in which the Corporation beneficially owns, directly or
indirectly, fifty percent (50%) or more of the outstanding voting stock.
2. In anticipation that:
(a) Holder will remain, for some period of time, a stockholder of the
Corporation;
(b) the Corporation and Holder may engage in the same or similar
activities or lines of business and may have an interest in the same or
similar areas of corporate opportunities;
(c) there will or may be benefits to be derived by the Corporation
through its continued or potential contractual, corporate and business
relations with Holder (including without limitation service of officers of
Holder as directors of the Corporation); and
(d) there will be benefits in providing guidelines for directors and
officers of Holder and of the Corporation with respect to the allocation of
corporate opportunities and other matters; the provisions of this Article
TENTH are set forth to regulate, define and guide the conduct of certain
affairs of the Corporation as they may involve Holder and its officers and
directors, and the powers, rights, duties and liabilities of the
Corporation and its officers, directors and stockholders in connection
therewith.
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3. Except as Holder may otherwise agree in writing, Holder shall have the
right to, and shall have no duty not to, (a) engage in the same or similar
business activities or lines of business as the Corporation, (b) compete against
the Corporation, (c) do business with any potential or actual competitor,
customer or supplier of the Corporation, and (d) employ or otherwise engage any
officer or employee of the Corporation. Neither Holder nor any officer, director
or employee thereof (except as provided in paragraph 4 of this Article TENTH)
shall be liable to the Corporation or its stockholders, regardless of the impact
any such activities may have on the Corporation, for breach of any fiduciary
duty by reason of any such activities of Holder or of the participation therein
of such person. In the event that Holder acquires knowledge of a potential
transaction or matter that may be a corporate opportunity or otherwise of
interest to Holder and the Corporation, Holder shall have no duty to communicate
or present such corporate opportunity to the Corporation and, without limiting
the generality of the foregoing, shall not be liable to the Corporation or its
stockholders for breach of any fiduciary duty as a stockholder of the
Corporation by reason of the fact that Holder pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person, or
does not present such corporate opportunity to the Corporation. Without limiting
the generality of the foregoing, Holder shall have no such duty and shall not be
so liable even if a director or officer of the Corporation (including, without
limitation, any such director or officer who is also a director, officer or
employee of Holder) becomes aware of such transaction or matter in his or her
capacity as a director or officer of the Corporation and such director or
officer discloses such transaction or matter to directors, officers, employees
or other representatives of Holder, so long as Holder also learns, discovers,
acquires or develops such transaction or matters independently or otherwise in a
manner that was not based on such director's or officer's awareness of such
transaction or matter. The provisions of this paragraph 3 of Article TENTH shall
apply and not be affected by any other provision of this Certificate of
Incorporation including, without limitation, paragraph 4 or 5 of Article TENTH.
4. In the event that a director or officer of the Corporation who is also a
director, officer or employee of Holder acquires knowledge of a potential
transaction or matter that may be a corporate opportunity or otherwise of
interest to the Corporation and Holder, such director or officer of the
Corporation (a) shall have fully satisfied and fulfilled the fiduciary duties of
such director or officer to the Corporation and its stockholders with respect to
such corporate opportunity, (b) shall not be liable to the Corporation or its
stockholders for breach of any fiduciary duty with respect to such corporate
opportunity by reason of his or her not communicating information regarding such
corporate opportunity to the Corporation, and/or Holder's pursuing or acquiring
such corporate opportunity for itself or directing such corporate opportunity to
another person, (c) shall be deemed to have acted in good faith and in a manner
such person reasonably believes to be in and not opposed to the best interests
of the Corporation, and (d) shall be deemed not to have breached his or her duty
of loyalty to the Corporation or its stockholders and not to have derived an
improper benefit therefrom, if such corporate opportunity belongs to Holder in
accordance with the following policy:
(i) a corporate opportunity offered or disclosed to any person who is
a director but not an officer of the Corporation and who is also an officer
or employee (whether or not a director) of Holder shall belong to Holder,
unless such opportunity is expressly offered to such person primarily in
his or her capacity as a director of the Corporation, in which case such
opportunity shall belong to the Corporation;
(ii) a corporate opportunity offered or disclosed to any person who is
an officer (whether or not a director) of the Corporation and who is also a
director but not an officer or employee of Holder shall belong to the
Corporation, unless such opportunity is expressly offered to such person
primarily in his or her capacity as a director of Holder, in which case
such opportunity shall belong to Holder; and
(iii) a corporate opportunity offered or disclosed to any other person
who is either an officer of both the Corporation and Holder, or a director
of both the Corporation and Holder, shall belong to Holder or to the
Corporation, as the case may be, if such opportunity is expressly offered
to such person primarily in his or her capacity as an officer or director
of Holder or of the Corporation, respectively; otherwise, such opportunity
shall belong to Holder.
5. Except as otherwise provided in paragraph 3 of Article TENTH, any
corporate opportunity that belongs to Holder or to the Corporation pursuant to
the foregoing policy shall not be pursued by the other, or
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directed by the other to another person, unless and until Holder or the
Corporation, as the case may be, determines not to pursue the opportunity. The
foregoing prohibition shall cease if the party to whom the corporate opportunity
belongs does not within a reasonable period of time begin to pursue, or
thereafter continue to pursue, such opportunity diligently and in good faith.
6. For purposes of this Article TENTH, "corporate opportunities" shall
consist of business opportunities which (a) the Corporation is financially able
to undertake, (b) are, from their nature, in the line or lines of the
Corporation's business as described in the Corporation's periodic reports filed
with the Securities and Exchange Commission and are of practical advantage to
it, and (c) are ones in which the Corporation has an interest or reasonable
expectancy. "Corporate opportunities" shall not include any transaction or
matter in which the Corporation or Holder is permitted to participate pursuant
to any agreement between the Corporation and Holder that has been approved by a
majority of the directors of the Corporation who are disinterested
("Disinterested Directors"), it being acknowledged that the rights of the
Corporation under any such agreement shall be deemed to be contractual rights
and shall not be corporate opportunities of the Corporation for any purpose;
provided, however, that no presumption or implication as to corporate
opportunities relating to any transaction not explicitly covered by such an
agreement shall arise from the existence or absence of any such agreement.
7. Any person purchasing or otherwise acquiring any interest in any shares
of stock or other securities (including without limitation stock options) of the
Corporation shall be deemed to have notice of and consented to the provisions of
this Article TENTH.
8. Nothing in this Article TENTH is intended to, and shall not be construed
to, expand any party's fiduciary duties under applicable law.
9. If any contract, agreement, arrangement or transaction between the
Corporation and Holder involves a corporate opportunity and is approved in
accordance with the procedures set forth in Article TENTH hereof, Holder and its
officers and directors (including without limitation, any such person who is
also a director or officer of the Corporation) shall also, for the purposes of
this Article TENTH and the other provisions of this Certificate of
Incorporation, be deemed to have fully satisfied and fulfilled any fiduciary
duties they may have to the Corporation and its stockholders. Any such contract,
agreement, arrangement or transaction involving a corporate opportunity not so
approved shall not by reason thereof result in any such breach of any fiduciary
duty, but shall be governed by the other provisions of this Article TENTH, this
Certificate, the bylaws, the Delaware General Corporation Law and other
applicable law.
10. For purposes of this Article TENTH, a director of the Corporation who
is Chairman of the Board of Directors of the Corporation shall not be deemed to
be an officer of the Corporation by reason of holding such position (regardless
of whether such position is deemed an office of the Corporation under the bylaws
of the Corporation), unless such person is a full-time employee of the
Corporation.
ELEVENTH: 1. In anticipation that:
(a) Holder will remain, for some period of time, a stockholder of the
Corporation and have continued contractual, corporate and business
relations with the Corporation;
(b) the Corporation and Holder may enter into contracts or otherwise
transact business with each other and the Corporation may derive benefits
therefrom; and
(c) the Corporation may from time to time enter into contractual,
corporate or business relations with one or more of its directors, or one
or more corporations, partnerships, associations or other organizations in
which one or more of its directors have a financial interest (collectively,
"Related Entities");
the provisions of this Article ELEVENTH are set forth to regulate and guide
certain contractual relations and other business relations of the Corporation as
they may involve Holder, Related Entities and their respective officers and
directors, and the powers, rights, duties and liabilities of the Corporation and
its officers, directors and stockholders in connection therewith.
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2. The provisions of this Article ELEVENTH are in addition to, and not in
limitation of, the provisions of the Delaware General Corporation Law and the
other provisions of this Certificate. Any contract or business relation which
does not comply with procedures set forth in this Article ELEVENTH shall not by
reason thereof be deemed void or voidable or result in any breach of any
fiduciary duty to, or duty of loyalty to, or failure to act in good faith or in
the best interests of, the Corporation, or the derivation of any improper
personal benefit, but shall be governed by the remaining provisions of this
Certificate, the Bylaws, the Delaware General Corporation Law and other
applicable law.
3. No contract, agreement, arrangement or transaction between the
Corporation, on the one hand, and Holder or a Related Entity or one or more of
the directors or officers of the Corporation, on the other hand, or any
amendment, modification or termination thereof, shall be void or voidable solely
for the reason that Holder or Related Entity or any one or more of the officers
or directors of the Corporation are parties thereto, or solely because any such
directors or officers are present at or participate in the meeting of the Board
of Directors or committee thereof which authorizes such contract, agreement,
arrangement, transaction, amendment, modification or termination (each, a
"Transaction") or solely because his, her or their votes are counted for such
purpose, and Holder, any Related Entity and such directors and officers (a)
shall have fully satisfied and fulfilled any fiduciary duties they may have to
the Corporation and its stockholders with respect thereto, (b) shall not be
liable to the Corporation or its stockholders for any breach of any fiduciary
duty they may have by reason of their approving any such Transaction or the
Corporation's entering into, performing or consummating any such Transaction,
(c) shall be deemed to have acted in good faith and in a manner such persons
reasonably believed to be in and not opposed to the best interests of the
Corporation, to the extent such standard is applicable to such person's conduct,
and (d) shall be deemed not to have breached any duties of loyalty to the
Corporation or its stockholders, whether or not they have derived a personal
benefit therefrom, if:
(i) the material facts as to the Transaction are disclosed or are
known to the Board of Directors or the committee thereof that authorizes
the Transaction and the Board of Directors or such committee in good faith
authorizes or approves the Transaction by the affirmative vote of a
majority of the Disinterested Directors on the Board of Directors or such
committee (even though the Disinterested Directors are less than a quorum);
(ii) the material facts as to the Transaction are disclosed or are
known to the holders of the voting stock entitled to vote thereon, and the
Transaction is specifically approved in good faith by vote of the holders
of a majority of the then outstanding voting stock not owned by Holder or
such Related Entity, voting together as a single class;
(iii) such Transaction is effected pursuant to, and consistent with,
terms and conditions specified in any arrangements, standards, protocols or
guidelines (collectively, the "Guidelines") which are in good faith
authorized or approved, after disclosure or knowledge of the material facts
related thereto, by the affirmative vote of a majority of the Disinterested
Directors on the Board of Directors or the applicable committee thereof
(even though the Disinterested Directors are less than a quorum) or by vote
of the holders of a majority of the then outstanding voting stock not owned
by Holder or such Related Entity, voting together as a single class (such
authorization or approval of such Guidelines constituting or being deemed
to constitute authorization or approval of such Transaction); or
(iv) such Transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified by the Board of Directors, a committee
thereof or the stockholders of the Corporation.
In addition, each Transaction authorized, approved or effected, and such
Guidelines so authorized or approved, as described in (i), (ii), or (iii) above,
shall be deemed to be entirely fair to the Corporation and its stockholders;
provided, however, that if such authorization or approval is not obtained, or
such Transaction is not so effected, no presumption shall arise that such
Transaction or such Guidelines are not fair to the Corporation and its
stockholders.
4. Directors of the Corporation who are also directors, officers or
employees of Holder or any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
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committee that authorizes or approves any such Transaction or any such
Guidelines. Voting stock owned by the Holder and any Related Entities may be
counted in determining the presence of a quorum at a meeting of stockholders
that authorizes or approves any such Transaction or any such Guidelines.
5. The Holder shall not be liable to the Corporation or its stockholders
for breach of any fiduciary duty it may have by reason of the fact that Holder
takes any action or exercises any rights or gives or withholds any consent in
connection with any Transaction between Holder and the Corporation. No vote cast
or other action taken by any person who is an officer, director or other
representative of Holder, which vote is cast or action is taken by such person
in his capacity as a director of the Corporation, shall constitute an action of,
or the exercise of a right by, or a consent of, Holder for the purpose of any
such Transaction.
6. Any person purchasing or otherwise acquiring any interest in any shares
of stock or other securities (including without limitation stock options) of the
Corporation shall be deemed to have notice of and to have consented to the
provisions of this Article ELEVENTH.
7. Nothing in this Article ELEVENTH is intended to, nor shall anything in
this Article ELEVENTH be construed to, expand any party's fiduciary duties under
applicable law.
TWELFTH: The Board of Directors is expressly authorized to make, alter or
repeal the Bylaws of the Corporation.
THIRTEENTH: Notwithstanding anything in this Certificate to the contrary,
and in addition to any vote of the Board of Directors required by applicable law
or this Certificate, the affirmative vote of the holders of more than eighty
percent (80%) of the outstanding Class A Common Stock, voting together as a
single class, shall be required to alter, amend or repeal, or adopt any
provision inconsistent with, any provision of Articles TENTH or ELEVENTH.
Neither the alteration, amendment or repeal of Articles TENTH or ELEVENTH nor
the adoption of any provision inconsistent with Articles TENTH or ELEVENTH shall
eliminate or reduce the effect of Articles TENTH or ELEVENTH in respect of any
matter occurring, or any cause of action, suit or claim that, but for Articles
TENTH or ELEVENTH, would accrue or arise, prior to such alteration, amendment,
repeal or adoption.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, for the purposes of forming a corporation pursuant to the Delaware
General Corporation Law, does make this certificate, hereby declaring and
certifying that it is such person's act and deed and that the facts herein
stated are true, and accordingly has set [HIS/HER] hand this day
of , 2000.
By:
--------------------------------------
Incorporator
[SIGNATURE PAGE TO EXCA HOLDINGS, INC. CERTIFICATE OF INCORPORATION]
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APPENDIX E
EXCA HOLDINGS, INC.
BY-LAWS
Adopted as of , 2000
<PAGE> 203
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I STOCKHOLDERS...................................... 1
ARTICLE II BOARD OF DIRECTORS............................... 4
ARTICLE III EXECUTIVE COMMITTEE AND OTHER COMMITTEES........ 6
ARTICLE IV OFFICERS......................................... 7
ARTICLE V CAPITAL STOCK..................................... 9
ARTICLE VI INDEMNIFICATION.................................. 11
ARTICLE VII OFFICES......................................... 13
ARTICLE VIII GENERAL PROVISIONS............................. 13
ARTICLE IX AMENDMENT OF BY-LAWS............................. 14
</TABLE>
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EXCA HOLDINGS, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as properly may come before such meeting shall be held at such
place, within or without the State of Delaware, and on such date and at such
hour as may be fixed from time to time by resolution of the Board of Directors
and set forth in the notice or waiver of notice of the meeting. [Sections
211(a), (b).]*
Section 1.02 Special Meetings. Special meetings of the stockholders may be
called at any time by the Chairman of the Board or by the President (or, in the
event of their absence or disability, by any Vice President), or by the Board of
Directors. A special meeting shall be called by the Chairman of the Board or the
President (or, in the event of their absence or disability, by any Vice
President), or by the Secretary, immediately upon receipt of a written request
therefor by stockholders holding in the aggregate not less than a majority of
the outstanding shares of the Corporation at the time entitled to vote at any
meeting of the stockholders. If such officers shall fail to call such meeting
within 20 days after receipt of such request, any stockholder executing such
request may call such meeting. Such special meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as shall be
specified in the respective notices or waivers of notice thereof. [Section
211(d).]
Section 1.03 Notice of Meetings; Waiver. The Secretary or any Assistant
Secretary shall cause written notice of the place, date and hour of each meeting
of the stockholders, and, in the case of a special meeting, the purpose or
purposes for which such meeting is called, to be given personally or by mail,
not less than ten nor more than sixty days prior to the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of the Corporation, or, if
he shall have filed with the Secretary of the Corporation a written request that
notices to him be mailed to some other address, then directed to him at such
other address. Such further notice shall be given as may be required by law. No
notice of any meeting of stockholders need be given to any stockholder who
submits a signed waiver of notice, whether before or after the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in a written waiver of notice. The
attendance of any stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. [Sections 222, 229.]
Section 1.04 Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05 Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote at
a meeting of stockholders shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation at the close of business
on such record date. If no record date has been fixed, then every holder of
record of shares entitled to vote at a meeting of stockholders shall be entitled
to one vote for each share of stock standing in his name on the books of the
Corporation at the close of business on the day next preceding the day on which
notice of the meeting is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. Except
as otherwise required by law, by the Certificate of Incorporation or by these
By-Laws, the vote of a
---------------
* Citations are to the General Corporation Law of the State of Delaware, as in
effect on , 2000, are inserted for reference only, and do not
constitute a part of the By-Laws.
<PAGE> 205
majority of the shares represented in person or by proxy at any meeting at which
a quorum is present shall be sufficient for the transaction of any business at
such meeting. [Sections 212(a), 216.]
Section 1.06 Voting by Ballot. No vote of the stockholders need be taken
by written ballot, unless otherwise required by law. Any vote which need not be
taken by ballot may be conducted in any manner approved by the meeting.
[Sections 211(e), 212.]
Section 1.07 Adjournment. If a quorum is not present at any meeting of the
stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a notice
of the adjourned meeting, conforming to the requirements of Section 1.03 hereof,
shall be given to each stockholder of record entitled to vote at such meeting.
At any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted on the original date of the meeting.
[Section 222(c).]
Section 1.08 Proxies. Any stockholder entitled to vote at any meeting of
the stockholders or to express consent to or dissent from corporate action
without a meeting may, by a written instrument signed by such stockholder or his
attorney-in-fact, authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. [Sections
212(b), (c).]
Section 1.09 Organization; Procedure. At every meeting of stockholders the
presiding officer shall be the Chairman of the Board or, in the event of his
absence or disability, the President or, in the event of his absence or
disability, a presiding officer chosen by a majority of the stockholders
entitled to vote at the meeting and present in person or by proxy. The
Secretary, or in the event of his absence or disability, an appointee of the
presiding officer, shall act as Secretary of the meeting. The order of business
and all other matters of procedure at every meeting of stockholders may be
determined by such presiding officer.
Section 1.10 Nominations and Stockholder Business. (a) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors, or (iii) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Section 1.10, who is entitled to vote at
the meeting with respect to the business proposed to be considered and who
complied with the notice procedures set forth in this Section 1.10.
(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to this Section 1.10, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation, and such business must be a proper subject for stockholder action
under the Delaware General Corporation Law. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
Corporation not less than 45 days nor more than 120 days prior to the date on
which the Corporation first mailed its proxy materials for the prior year's
annual meeting of stockholders; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed (other
than as a result of adjournment) by more than 30 days from the anniversary of
the previous year's annual meeting, notice by the stockholder to be timely must
be delivered not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in
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the proxy statement as a nominee and to serving as a director if elected); (ii)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owners if any on whose behalf the
nomination or proposal is made (x) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner, and (y)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(c) Notwithstanding anything in this Section 1.10 to the contrary, in the
event that the number of directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 1.10 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, it if shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Corporation.
(d) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the Board of Directors or (ii) by any stockholder of
the Corporation who is a stockholder of record at the time of giving of notice
provided for in this section, who is entitled to vote at the meeting with
respect to such election of Directors and who complies with the notice
procedures set forth in this section. Nominations by stockholders of persons for
election to the Board of Directors may be made at such a special meeting of
Stockholders if the stockholder's notice required by this section shall be
delivered to the secretary at the principal executive offices of the Corporation
not earlier than the 120th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special meeting
or the 10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(e) Only those persons who are nominated in accordance with the procedures
set forth in this section shall be eligible for election as directors at any
meeting of stockholders. Only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this section. The chairman of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this section and, if any proposed nomination or business is not in
compliance with this section, to declare that such defective proposal shall be
disregarded.
(f) For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 9,
13, 14 or 15(d) of the Exchange Act.
(g) Notwithstanding the foregoing provisions of this Section 1.10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.10. Nothing in this Section 1.10 shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 1.11 Consent of Stockholders in Lieu of Meeting. To the fullest
extent permitted by law, whenever the vote of stockholders at a meeting thereof
is required or permitted to be taken for or in connection with any corporate
action, such action may be taken without a meeting, without prior notice and
without a vote of stockholders, if the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
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thereon were present and voted shall consent in writing to such corporate action
being taken. Any such consent or consents shall be delivered to the Corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder or member who signs the consent and no
written consent shall be effective to take the corporate action refereed to
therein unless, within sixty days of the earliest dated consent delivered in the
manner required by this Section 1.10 of these By-Laws to the Corporation,
written consents signed by a sufficient number of holders or members to take
action are delivered to the Corporation in such manner. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not so consented in
writing. [Section 228.]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 General Powers. Except as may otherwise be provided by law,
by the Certificate of Incorporation or by these By-Laws, the business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors and the Board of Directors may exercise all the powers of the
Corporation. [Section 141(a).]
Section 2.02 Number and Term of Office. The number of Directors shall be
seven. Each Director (whenever elected) shall hold office until his successor
has been duly elected and qualified, or until his earlier death, resignation or
removal. [Section 141(b).]
Section 2.03 Election of Directors. The Directors shall be appointed
initially by the incorporator. Thereafter, except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election. [Sections 107, 108(a), 211(b), (c), 216.]
Section 2.04 Annual and Regular Meetings. The annual meeting of the Board
of Directors for the purpose of electing officers and for the transaction of
such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time to
time may by resolution provide for the holding of regular meetings and fix the
place (which may be within or without the State of Delaware) and the date and
hour of such meetings. Notice of regular meetings need not be given, provided,
however, that if the Board of Directors shall fix or change the time or place of
any regular meeting, notice of such action shall be mailed promptly, or sent by
telegram, telex or cable, to each Director who shall not have been present at
the meeting at which such action was taken, addressed to him at his usual place
of business, or shall be delivered to him personally. Notice of such action need
not be given to any Director who attends the first regular meeting after such
action is taken without protesting the lack of notice to him, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting. [Sections 141(g), 229, 230.]
Section 2.05 Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or by the
President or, in the event of their absence or disability, by any Vice
President, at such place (within or without the State of Delaware), date and
hour as may be specified in the respective notices or waivers of notice of such
meetings. Special meetings of the Board of Directors may be called on 24 hours'
notice, if notice is given to each Director personally or by telephone, telex or
telegram, or on five days' notice, if notice is mailed to each Director,
addressed to him at his usual place of business. Notice of any special meeting
need not be given to any Director who attends such meeting
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without protesting the lack of notice to him, prior to or at the commencement of
such meeting, or to any Director who submits a signed waiver of notice, whether
before or after such meeting, and any business may be transacted thereat.
[Sections 141(g), 229.]
Section 2.06 Quorum; Voting. Except as otherwise required by these
By-Laws, at all meetings of the Board of Directors, the presence of a majority
of the total number of Directors shall constitute a quorum for the transaction
of business. Except as otherwise required by law, the vote of a majority of the
Directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors.
Section 2.07 Adjournment. A majority of the Directors present, whether or
not a quorum is present, may adjourn any meeting of the Board of Directors to
another time or place. No notice need be given of any adjourned meeting unless
the time and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section 2.05
shall be given to each Director.
Section 2.08 Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board of Directors consent thereto in writing, and such
writing or writings are filed with the minutes of proceedings of the Board of
Directors. [Section 141(f).]
Section 2.09 Regulations; Manner of Acting. To the extent consistent with
applicable law, the Certificate of Incorporation and these By-Laws, the Board of
Directors may adopt such rules and regulations for the conduct of meetings of
the Board of Directors and for the management of the property, affairs and
business of the Corporation as the Board of Directors may deem appropriate. The
Directors shall act only as a Board, and the individual Directors shall have no
power as such.
Section 2.10 Action by Telephonic Communications. Members of the Board of
Directors may participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear one another, and participation in
a meeting pursuant to this provision shall constitute presence in person at such
meeting. [Section 141(i).]
Section 2.11 Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
Chairman or the President. Unless otherwise specified therein, such resignation
shall take effect upon delivery. [Section 141(b).]
Section 2.12 Removal of Directors. Any Director may be removed at any
time, either for or without cause, by vote of the stockholders entitled to vote
for the election of such Director. Any vacancy in the Board of Directors caused
by any removal of a Director by vote of the stockholders may be filled by the
stockholders entitled to vote for the election of the Director so removed. If
such stockholders do not fill such vacancy at the meeting at which such removal
was effected (or in the written instrument effecting such removal, if such
removal was effected by consent without a meeting), such vacancy may be filled
in the manner provided in Section 2.13 of these By-Laws. [Section 141(k).]
Section 2.13 Vacancies and Newly Created Directorships. If any vacancies
shall occur in the Board of Directors, by reason of death, resignation, removal
or otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies and newly
created directorships may be filled by a majority of the Directors then in
office, although less than a quorum. A Director elected to fill a vacancy or a
newly created directorship shall hold office until his successor has been
elected and qualified or until his earlier death, resignation or removal. Any
such vacancy or newly created directorship may also be filled it any time by
vote of the stockholders entitled to elect the Director with respect to whom a
vacancy exists. [Section 223.]
Section 2.14 Compensation. The amount, if any, which each Director shall
be entitled to receive as compensation for his services as such shall be fixed
from time to time by resolution of the Board of Directors. [Section 141(h).]
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Section 2.15 Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees of the Board of Directors, or by any other person as to
matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01 How Constituted. The Board of Directors may, by resolution
adopted by a majority of the whole Board, designate one or more Committees,
including an Executive Committee, each such Committee to consist of such number
of Directors as from time to time may be fixed by the Board of Directors. The
Board of Directors may designate one or more Directors as alternate members of
any such Committee, who may replace any absent or disqualified member or members
at any meeting of such Committee. Thereafter, members (and alternate members, if
any) of each such Committee may be designated at the annual meeting of the Board
of Directors. Any such Committee may be abolished or re-designated from time to
time by the Board of Directors. Each member (and each alternate member) of any
such Committee (whether designated at an annual meeting of the Board of
Directors or to fill a vacancy or otherwise) shall hold office until his
successor shall have been designated or until he shall cease to be a Director,
or until his earlier death, resignation or removal. [Section 141(c).]
Section 3.02 Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section or by resolutions of the Board of Directors adopted from time to
time by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
property, affairs and business of the Corporation, including the power to
declare dividends and to authorize the issuance of stock. Each such other
Committee, except as otherwise provided in this section, shall have and may
exercise such powers of the Board of Directors as may be provided by resolution
or resolutions of the whole Board. Neither the Executive Committee nor any such
other Committee shall have the power or authority to:
(a) approve or adopt, or recommend to stockholders, any action or
matter expressly required by the Delaware General Corporation Law to be
submitted to stockholders for approval, or
(b) amend or repeal these By-Laws.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03 Proceedings. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall report
such proceedings to the Board of Directors at the Meeting of the Board of
Directors next following any such proceedings.
Section 3.04 Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such Committee.
Any action required or permitted to be taken at any meeting of any such
Committee may be taken without a meeting, if all members of such Committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the Committee.
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The members of any such Committee shall act only as a Committee, and the
individual members of such Committee shall have no power as such. [Sections
141(c), (f).]
Section 3.05 Action by Telephonic Communications. Members of any Committee
designated by the Board of Directors may participate in a meeting of such
Committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear one another,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting. [Section 141(i).]
Section 3.06 Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. [Section 141(c).]
Section 3.07 Resignations. Any member (and any alternate member) of any
Committee may resign at any time by delivering a written notice of resignation,
signed by such member, to the Chairman or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 3.08 Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by resolution
adopted by majority of the whole Board of Directors.
Section 3.09 Vacancies. If any vacancy shall occur in any Committee, by
reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the Corporation shall be elected by
the Board of Directors and shall be a President and a Secretary. The Board of
Directors also may elect a Chairman and one or more Vice Presidents, a Treasurer
and one or more Assistant Secretaries and Assistant Treasurers in such numbers
as the Board of Directors may determine. Any number of offices may be held by
the same person. No officer need be a Director of the Corporation. [Sections
142(a), (b).]
Section 4.02 Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at its initial meeting and thereafter annually at the annual meeting
of the Board of Directors. In the event of the failure to elect officers at any
annual meeting, officers may be elected at any regular or special meeting of the
Board of Directors. Subject to the provisions of Section 4.11, each officer
(whether chosen at any annual meeting of the Board of Directors or to fill a
vacancy or otherwise) shall hold office until the next succeeding annual meeting
of the Board of Directors and until his successor has been elected and
qualified, or until his earlier death, resignation or removal. [Section 142(b).]
Section 4.03 Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04 Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors the Chairman or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Sections
142(b), (e).]
Section 4.05 Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-Laws or in a resolution of the Board
of Directors which is not inconsistent with these By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
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Section 4.06 The Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and directors at which he is
present, and shall exercise such other powers and perform such other duties as
may from time to time be assigned to him by these By-Laws or by the Board of
Directors.
Section 4.07 The President. The President shall exercise such powers and
perform such duties as may from time to time be assigned to him by these By-Laws
or by the Board of Directors.
Section 4.08 The Vice Presidents. Each Vice President shall exercise such
powers and perform such duties as from time to time may be assigned to him by
these By-Laws or by the Board of Directors or by the President. At the request
of the President or in the event of his absence or disability, the Vice
President designated by the Board of Directors or, if no such designation shall
have been made, then the Vice President designated by the President shall
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any Vice
President may sign (unless the President or another Vice President shall have
signed), certificates representing shares of the Corporation the issuance of
which shall have been authorized by the Board of Directors.
Section 4.09 The Secretary. The Secretary shall have the following powers
and duties:
(a) He shall keep or cause to be kept a record of all the proceedings
of the meetings of the stockholders and of the Board of Directors in books
provided for that purpose.
(b) He shall cause all notices to be duly given in accordance with the
provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a resolution
of the Board of Directors, he shall furnish a copy of such resolution to
the members of such Committee.
(d) He shall be the custodian of the records and of the seal of the
Corporation and cause such seal (or a facsimile thereof) to be affixed to
all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf of
the Corporation under its seal shall have been duly authorized in
accordance with these By-Laws, and when so affixed he may attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shell cause the stock and transfer books to be kept in such
manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names (alphabetically
arranged) and the addresses of the holders of record of such shares, the
number of shares held by each holder and the date as of which each became
such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer or
Assistant Secretary shall have signed) certificates representing shares of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(h) He shall perform, in general, all duties incident to the office of
Secretary and such other duties as may be given to him by these By-Laws or
as may be assigned to him from time to time by the Board of Directors or
the President.
Section 4.10 The Treasurer. The Treasurer shall have the following powers
and duties:
(a) He shall have charge and supervision over and be responsible for
the moneys, securities, receipts and disbursements of the Corporation, and
shall keep or cause to be kept full and accurate records of all receipts of
the Corporation.
(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 8.05 of these
By-Laws.
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(c) He shall cause the moneys of the Corporation to be disbursed by
checks or drafts (signed as provided in Section 8.06 of these By-Laws) upon
the authorized depositaries of the Corporation and cause to be taken and
preserved proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the
Corporation and of all his transactions as Treasurer, and render a full
financial report at the annual meeting of the stockholders, if called upon
to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the Secretary or an
Assistant Secretary shall have signed) certificates representing stock of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
Section 4.11 Additional Officers. The Board of Directors may appoint such
other officers and agents as it may deem appropriate, and such other officers
and agents shall hold their offices for such terms and shall exercise such
powers and perform such duties as may be determined from time to time by the
Board of Directors. The Board of Directors from time to time may delegate to any
officer or agent the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may remove any such subordinate officer or agent appointed
by him, for or without cause. [Sections 142(a), (b).]
Section 4.12 Security. The Board of Directors may require any officer,
agent or employee of the Company to provide security for the faithful
performance of his duties, in such amount and of such character as may be
determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
Section 5.01 Certificates of Stock. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman, or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, representing
the number of shares registered in certificate form. Such certificate shall be
in such form as the Board of Directors may determine, to the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws.
[Section 158.]
Section 5.02 Signatures; Facsimile. Any or all the signatures on such
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed, or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
[Section 158.]
Section 5.03 Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate or uncertificated shares be issued
in place of any certificate theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon delivery to the Board of Directors of
an affidavit of the owner or owners of such certificate, setting forth such
allegation. The Board of Directors may require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate or uncertificated shares. [Section 167.]
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Section 5.04 Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by appropriate evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate or uncertificated shares
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Transfer of uncertificated shares shall be governed
by applicable provisions of law. Subject to the provisions of the Certificate of
Incorporation and these By-Laws, the Board of Directors way prescribe such
additional rules and regulations as it may deem appropriate relating to the
issue, transfer and registration of shares of the Corporation.
Section 5.05 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the date next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
law, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by delivery
to its registered office in the State, its principal place of business, or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action. In
order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. [Section 213.]
Section 5.06 Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer or transfer of uncertificated shares,
the Corporation may treat the registered owner as the person exclusively
entitled to receive dividends and other distributions, to vote, to receive
notice and otherwise to exercise all the rights and powers of the owner of the
shares represented by such certificate or such uncertificated shares, and the
Corporation shall not be bound to recognize any equitable or legal claim to or
interest in such shares on the part of any other person, whether or not the
Corporation shall have notice of such claim or interests. Whenever any transfer
of shares shall be made for collateral security, and not absolutely, it shall be
so expressed in the entry of the transfer if, when the certificates are
presented to the Corporation for transfer or uncertificated shares are requested
to be transferred, both the transferor and transferee request the Corporation to
do so. [Section 159.]
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Section 5.07 Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01 Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any parson who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (a) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (b) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith or in a manner in which he reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02 Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 6.03 Determination that Indemnification is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01.
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01. Any indemnification of an employee or agent
of the Corporation under Section 6.01 (unless ordered by a court) may be made by
the Corporation upon a determination that indemnification of the employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 6.01. Any such determination shall be made (a)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
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Section 6.04 Advance Payment of Expenses. Expenses incurred by a director
or officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by this Article.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's counsel to represent such
director, officer, employee or agent in any action, suit or proceeding, whether
or not the Corporation is a party to such action, suit or proceeding.
Section 6.05 Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Sections 6.01
and 6.02 or advance of costs, charges and expenses to a director or officer
under Section 6.04, shall be made promptly, and in any event within 30 days,
upon the written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this Article is required, and the Corporation fails to respond within sixty
days to a written request for indemnity, the Corporation shall be deemed to have
approved such request. If the Corporation denies a written request for indemnity
or advancement of expenses, in whole or in part, or if payment in full pursuant
to such request is not made within 30 days, the right to indemnification or
advances as granted by this Article shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a Claim for the advance of costs, charges and
expenses under Section 6.04 where the required undertaking, if any, has been
received by the Corporation) that the claimant has not met the standard of
conduct set forth in Section 6.01, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in Section 6.01, nor the fact
that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 6.06 Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which any person indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07 Insurance. By action of the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was or has agreed to become a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him or on his behalf
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
Section 6.08 Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and
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may indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01 Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. [Section 131.]
Section 7.02 Other Offices. The Corporation may maintain offices or places
of business at such other locations within or without the State of Delaware as
the Board of Directors may from time to time determine or as the business of the
Corporation may require. [Section 122(8).]
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 Dividends. Subject to any applicable provisions of law and
the Certificate of Incorporation, dividends upon the shares of the Corporation
may be declared by the Board of Directors at any regular or special meeting of
the Board of Directors and any such dividend may be paid in cash, property, or
shares of the Corporation. [Section 173.]
Section 8.02 Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may similarly modify or abolish any such reserve.
[Section 171.]
Section 8.03 Execution of Instruments. Subject to any limitation contained
in the Certificate of Incorporation or these By-Laws, the Chairman of the Board
or the President may enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation and in the ordinary
course of its business. The Board of Directors may, subject to any limitation
contained in the Certificate of Incorporation or these By-Laws, authorize any
officer or agent to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. Any such authorization
may be general or limited to specific contracts or instruments.
Section 8.04 Corporate Indebtedness. No loan shall be contracted on behalf
of the Corporation, and no evidence of indebtedness shall be issued in its name,
unless authorized by the Board of Directors. Such authorization may be general
or confined to specific instances. Loans so authorized may be effected at any
time for the Corporation from any bank, trust company or other institution, or
from any firm, corporation or individual. All bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation issued for such
loans shall be made, executed and delivered as the Board of Directors shall
authorize. When so authorized by the Board of Directors, any part of or all the
properties, including contract rights, assets, business or good will of the
Corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
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Section 8.05 Deposits. Any funds of the Corporation may be deposited from
time to time in such banks, trust companies or other depositaries as may be
determined by the Board of Directors, or by such officers or agents as may be
authorized by the Board of Directors to make such determination.
Section 8.06 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the Board of Directors from time to
time may determine.
Section 8.07 Sale, Transfer, etc. of Securities. To the extent authorized
by the Board of Directors, the Chairman of the Board, the President, or any Vice
President together with the Secretary or Treasurer or an Assistant Secretary or
Assistant Treasurer may sell, transfer, endorse, and assign any shares of stock,
bonds or other securities owned by or held in the name of the Corporation, and
may make, execute and deliver in the name of the Corporation, under its
corporate seal, any instruments that may be appropriate to effect any such sale,
transfer, endorsement or assignment.
Section 8.08 Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the Chairman of the Board or the President
shall have full power and authority on behalf of the Corporation to attend any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and to act, vote (or execute proxies to vote) and exercise in person or
by proxy all other rights, powers and privileges incident to the ownership of
such stock. Such officers acting on behalf of the Corporation shall have full
power and authority to execute any instrument expressing consent to or dissent
from any action of any such corporation without a meeting. The Board of
Directors may by resolution from time to time confer such power and authority
upon any other person or persons.
Section 8.09 Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of February in each calendar year and terminate on the
31st day of January.
Section 8.10 Seal. The seal of the Corporation shall be circular in form
and shall contain the name of the Corporation, the year of its incorporation and
the words "Corporate Seal" and "Delaware." The form of such seal shall be
subject to alteration by the Board of Directors. The seal may be used by causing
it or a facsimile thereof to be impressed, affixed or reproduced, or may be used
in any other lawful manner.
Section 8.11 Books and Records; Inspection. Except to the extent otherwise
required by law, the books and records of the Corporation shall be kept at such
place or places within or without the State of Delaware as may be determined
from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01 Amendment. These By-Laws may be amended, altered or repealed
at any regular or special meeting of the stockholders, if, in the case of such
special meeting only, notice of such amendment, alteration or repeal is
contained in the notice or waiver of notice of such meeting. Any amendment,
alteration or repeal must be approved by holders of a majority of the voting
power of the Corporation entitled to vote. These By-laws may also be amended,
altered or repealed by a majority of the whole Board of Directors.
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DETACH HERE
PROXY
EXCALIBUR TECHNOLOGIES CORPORATION
1921 GALLOWS ROAD
SUITE 200
VIENNA, VIRGINIA 22182
The undersigned stockholder of Excalibur Technologies Corporation ("Excalibur")
hereby appoints Patrick C. Condo and James H. Buchanan, and each of them, as
Proxies, each with the power of substitution and resubstitution for and in the
name of the undersigned, to vote all of the shares of Excalibur common stock,
par value $0.01 per share, held of record by the undersigned as of ________,
2000 at Excalibur's Annual Meeting of Stockholders (the "Annual Meeting") to be
held on ________, 2000, at ____, local time, at ________, and at all
adjournments or postponements thereof, with all powers the undersigned would
possess if then and there personally present. Without limiting the general
authorization and power hereby given, the undersigned directs said Proxies to
cast the undersigned's vote as specified on the reverse side hereof.
IF NO DIRECTION IS GIVEN, THE UNDERSIGNED'S VOTE WILL BE CAST "FOR" THE
PROPOSALS IN PARAGRAPHS 1, 2, AND 3 ON THE REVERSE SIDE HEREOF. IN THEIR
DISCRETION, THE PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
Stockholders who plan to attend the Annual Meeting may revoke their proxy by
casting their vote at the meeting in person.
Receipt is acknowledged of the Notice of Annual Meeting dated ___, 2000 and the
Proxy Statement accompanying said notice.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
------------------------------------------
<PAGE> 219
DETACH HERE
[X] Please mark
votes as in
this example.
1. Approval and adoption of the Agreement and Plan of Merger dated as of April
30, 2000, as amended, by and among Excalibur Technologies Corporation, Intel
Corporation, Exca Holding, Inc. and Excalibur Transitory, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of the Newco 2000 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Election of the following ten (10) nominees to serve as directors of
Excalibur for terms expiring at the completion of the combination or, if the
combination is not completed, at the 2000 annual meeting of Excalibur: Donald R.
Keough, Patrick C. Condo, Herbert A. Allen, Susan K. Allen, Richard M. Crooks,
Jr., John S. Hendricks, W. Frank King III, John G. McMillian, Philip J. O'Reilly
and Harry C. Payne.
FOR WITHHELD
[ ] [ ]
[ ]_____________________________________
For all nominees except as listed above
4. To vote at the discretion of the Proxies upon such other matters as may
properly come before the Annual Meeting or any adjournment or postponement
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EXCALIBUR
TECHNOLOGIES CORPORATION
Signature: Date: Signature: Date
---------- ----- ---------- ----
(Note: Please complete, date and sign exactly as your name appears hereon. When
signing as attorney, administrator, executor, guardian, trustee or corporate
official, please add your title. If shares are held jointly, each holder should
sign.)
