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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES ACT OF 1934
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AMATI COMMUNICATIONS CORPORATION
(NAME OF SUBJECT COMPANY)
AMATI COMMUNICATIONS CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.20 PER SHARE
(TITLE OF CLASS OF SECURITIES)
023115 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MR. JAMES E. STEENBERGEN
AMATI COMMUNICATIONS CORPORATION
2043 SAMARITAN DRIVE
SAN JOSE, CALIFORNIA 95124
(408) 879-2000
(NAME AND ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSONS(S) FILING STATEMENT)
WITH A COPY TO:
RICHARD A. PEERS, ESQ.
HELLER EHRMAN WHITE & MCAULIFFE
525 UNIVERSITY AVENUE
PALO ALTO, CALIFORNIA 94301-1900
(650) 324-7000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Amati Communications Corporation, a
Delaware corporation (the "Company"), and the address of the principal executive
offices of the Company is 2043 Samaritan Drive, San Jose, California 95124. The
title of the class of equity securities to which this statement relates is the
common stock, par value $0.20 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer (the "Offer") by DSL Acquisition
Corporation (the "Purchaser"), a Delaware corporation and direct wholly owned
subsidiary of Texas Instruments Incorporated ("TI"), a Delaware corporation, to
purchase all outstanding Shares at $20.00 per share (the "Offer Price"), net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Agreement and Plan of Merger, dated as of November 19, 1997 among the
Company, TI and Purchaser (the "Merger Agreement"), which Offer is disclosed in
a Tender Offer Statement on Schedule 14D-1, dated November 25, 1997 (the
"Schedule 14D-1").
Based on the information contained in the Schedule 14D-1, the principal
executive offices of each of TI and Purchaser are located at: 13500 North
Central Expressway, Dallas, Texas 75265-5474.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements and understandings
between the Company or its affiliates and its executive officers, directors or
affiliates are set forth in the "Information Statement Pursuant to Section 14(f)
of the Securities and Exchange Act of 1934 and Rule 14f-1 Thereunder" dated
November 25, 1997 as attached hereto as Annex I and incorporated herein by
reference in its entirety (the "Information Statement").
(b)(2) In addition to the Merger Agreement, the Company is a party to a
Loan and Security Agreement dated November 19, 1997 by and between the Company
and TI (the "Loan Agreement") and a Confidentiality Agreement dated July 22,
1997 between TI and the Company (the "Confidentiality Agreement"). The Merger
Agreement, the Loan Agreement and the Confidentiality Agreement are filed as
Exhibit (c)(1), Exhibit (c)(2) and Exhibit (c)(3), respectively, hereto, and are
summarized below and incorporated herein by reference in their entirety. TI has
entered into a retention agreement with Mr. James Steenbergen, Director, Chief
Executive Officer, President and Chief Financial Officer of the Company, which
is filed as Exhibit (c)(4) hereto, and is summarized below and incorporated
herein by reference in its entirety. TI has entered into similar retention
agreements with Mr. Ronald Carlini, the Company's Vice President of Corporate
Development, and Mr. James Hood, the Company's Vice President of Engineering,
which are filed as Exhibits (c)(5) and (c)(6), respectively, hereto. In
addition, the Company understands that TI is in the process of negotiating a
consulting agreement with Dr. John Cioffi, a director and Chief Technical
Officer of the Company. The Company has no knowledge of the terms on which such
agreement may be entered into and the execution of such agreement is not a
condition to the Offer. For information relating to Dr. Cioffi's current
Employment Agreement with the Company see Annex I hereto.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
The summary is not a complete description of the terms thereof and is qualified
in its entirety by reference to the Merger Agreement, which is incorporated
herein by reference and a copy of which has been filed as Exhibit (c)(1) hereto.
Capitalized terms used and not otherwise defined herein have the meaning
ascribed to them in the Merger Agreement.
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The Offer. The Merger Agreement provides for the commencement of the Offer
within five business days of the public announcement of the execution of the
Merger Agreement. The Merger Agreement provides that the Purchaser cannot amend
or waive the Minimum Condition or decrease the Offer Price or the number of
Shares sought, or amend any other term or condition of the Offer in any manner
adverse to the holders of Shares or extend the expiration date of the Offer
without the prior written consent of the Company. Notwithstanding the foregoing,
the Purchaser has agreed to extend the Offer from time to time until February
23, 1998 if, and to the extent that, at the initial expiration date of the
Offer, or any extension thereof, all conditions to the Offer have not been
satisfied or waived. In addition, the Offer Price may be increased and the Offer
may be extended to the extent required by law in connection with such increase,
in each case with or without the consent of the Company.
The obligation of the Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to certain conditions. Assuming the
prior satisfaction or waiver of the conditions to the Offer, the Purchaser has
agreed to accept for payment and pay for any and all Shares tendered as soon as
it is legally permitted to do so under applicable law; provided that, if the
number of Shares that have been physically tendered and not withdrawn are more
than 80% but less than 90% of the outstanding Shares determined on a fully
diluted basis, the Purchaser may extend the Offer for up to five business days
and thereafter on a day-to-day basis for up to an additional five business days
from the date that all conditions to the Offer shall first have been satisfied
or waived.
Directors. The Merger Agreement provides that promptly upon TI's purchase
of and payment for Shares which represent at least a majority of the outstanding
Shares (on a fully diluted basis), TI shall be entitled to designate a number of
directors, rounded up to the next whole number, on the Company's board of
directors (the "Company Board"), subject to compliance with Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, equal to the product of the
total number of directors on the Company Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by the Purchaser, TI and any of
their affiliates (including Shares accepted for payment) bears to the total
number of Shares then outstanding. The Company shall, upon request of the
Purchaser, on the date of such request, either increase the size of the Company
Board or secure the resignations of such number of its incumbent directors as is
necessary to enable TI's designees to be elected to the Company Board, and shall
cause TI's designees to be so elected. Notwithstanding the foregoing, until the
Effective Time, the Company shall retain as members of the Company Board at
least two directors who were directors of the Company on the date of the Merger
Agreement; provided, that subsequent to the purchase of and payment for Shares
pursuant to the Offer, TI shall always have its designees represent at least a
majority of the entire Company Board.
The Merger Agreement also provides that from and after the time, if any,
that TI's designees constitute a majority of the Company Board, any amendment of
the Merger Agreement, any termination of the Merger Agreement by the Company,
any extension of time for performance of any of the obligations of TI or the
Purchaser under the Merger Agreement, and any waiver of any condition or any of
the Company's rights under the Merger Agreement or other action by the Company
in connection with the rights of the Company under the Merger Agreement may be
effected only by the action of a majority of the directors of the Company then
in office who were directors on the date of the Merger Agreement, which action
shall be deemed to constitute the action of the full Company Board; provided,
that if there are no such directors, such actions may be effected by unanimous
vote of the entire Company Board.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company continuing as the Surviving Corporation (the
"Surviving Corporation") and a direct wholly owned subsidiary of TI. At the
effective time of the Merger (the "Effective Time"), by virtue of the Merger and
without any action on the part of the holders of any Shares, each issued and
outstanding Share (other than Shares owned by TI, the Purchaser or any other
wholly-owned subsidiary of TI and Shares held by stockholders who have demanded
and perfected dissenters' rights under the Delaware General Corporation Law, as
amended (the "DGCL") shall be converted into the right to receive the Offer
Price without interest (the "Merger Consideration"). Each issued and outstanding
share of common stock, par value $.01 per share, of the Purchaser shall be
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converted into and become one fully paid and non-assessable share of common
stock of the Surviving Corporation. The Merger Agreement also provides that (i)
the directors of the Purchaser immediately prior to the Effective Time will be
the initial directors of the Surviving Corporation and the officers of the
Company immediately prior to the Effective Time will be the initial officers of
the Surviving Corporation; (ii) the Certificate of Incorporation of the Company
(the "Certificate of Incorporation") will be the initial Certificate of
Incorporation of the Surviving Corporation; and (iii) the By-laws of the Company
(the "By-laws") will be the initial By-laws of the Surviving Corporation.
Treatment of Options and Warrants. The Merger Agreement provides that the
options (the "Options") to purchase Shares under the Company's 1981 Stock Option
Plan, 1981 Supplemental Stock Option Plan, 1990 Stock Option Plan, Old Amati
1992 Stock Option Plan, 1990 Non-Employee Directors' Stock Option Plan and 1996
Stock Option Plan (the "Option Plans") shall, pursuant to the terms of such
Option Plans, not automatically vest as a consequence of the transactions
contemplated by the Merger Agreement and that the Company Board shall not
exercise any discretionary authority to vest such Options in connection with the
transactions contemplated by the Merger Agreement. Notwithstanding the
foregoing, Options ("Director Options") granted to non-employee directors under
the 1990 Non-Employee Directors' Stock Option Plan shall vest immediately prior
to the Effective Time pursuant to their terms and Director Options granted under
any of the other Option Plans shall vest immediately prior to the Effective Time
by action of the Company Board. At the Effective Time, each outstanding Director
Option shall be converted into the right to receive cash in an amount equal to
the product of (i) the number of Shares subject to such Director Option and (ii)
the excess of (A) the Merger Consideration over (B) the per share exercise price
of such Director Option.
Holders of outstanding Options (other than Director Options) that are
vested at the Effective Time shall be given the opportunity to make an
irrevocable election, on a grant by grant basis to be effective immediately
following the Effective Time, to receive in exchange for the cancellation of
each such vested Option either (i) cash in an amount equal to the product of (a)
the number of Shares subject to such Option and (b) the excess of (1) the Merger
Consideration over (2) the per share exercise price of such Option or (ii) a
substitute option to purchase TI common stock (a "Substitute Option") (a) which
will be exercisable for a number of shares of TI's common stock equal to (1) the
number of Shares subject to the Option multiplied by (2) the ratio obtained by
dividing the Offer Price by the average closing price per share of TI's common
stock on the New York Stock Exchange for the five consecutive trading days
ending immediately prior to closing date of the Merger (the "Option Ratio"),
rounded down to the next whole number of shares, (b) the exercise price for
which shall equal the exercise price for the Shares otherwise purchasable
pursuant to the Option divided by the Option Ratio, rounded to the nearest
hundredth of a cent, and (c) which shall be subject to substantially the same
terms and conditions as applicable to the Option.
Holders of outstanding Options (other than Director Options) that are not
vested as of the Effective Time shall, at the Effective Time, receive in
substitution and cancellation for each such nonvested Option a Substitute
Option, which Substitute Option shall be subject to the same vesting schedule as
applicable to the Option.
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each unexpired and unexercised warrant
("Warrant") to purchase Shares shall be converted into the right to receive an
amount in cash equal to the product of (i) the number of Shares subject to such
Warrant and (ii) the excess of (a) the Merger Consideration over (b) the per
share exercise price of such Warrant, upon surrender of the certificate
representing such Warrant; provided, that any Warrant as to which the per share
exercise price is equal to or greater than the Merger Consideration shall be
cancelled and terminated as of the Effective Time without payment of any
consideration therefor.
Stockholders' Meeting. Pursuant to the Merger Agreement, if the Company
owns less than 90% of the Shares following the purchase of Shares by the
Purchaser pursuant to the Offer, the Company shall, in accordance with
applicable law, duly call, give notice of, convene and hold a special meeting of
its stockholders as soon as practicable following the acceptance for payment and
purchase of Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the Merger Agreement.
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The Merger Agreement also provides that the Company shall, in accordance
with applicable law, prepare and file with the Commission a preliminary proxy or
information statement relating to the Merger and the Merger Agreement, obtain
and furnish the information required to be included by the Commission in the
Proxy Statement (as hereinafter defined) and, after consultation with TI,
respond promptly to any comments made by the Commission with respect to the
preliminary proxy or information statement and cause a definitive proxy or
information statement (the "Proxy Statement") to be mailed to its stockholders
and obtain the necessary adoption of the Merger Agreement by its stockholders.
The Merger Agreement also provides that the Company shall, subject to the
fiduciary obligations of the Company Board under applicable law as advised by
the Company's outside counsel, include in the Proxy Statement the recommendation
of the Company Board that stockholders of the Company vote in favor of the
approval of the adoption of the Merger Agreement. In the event that the
Purchaser shall acquire at least 90% of the outstanding shares of each class of
capital stock of the Company, pursuant to the Offer or otherwise, the parties
shall take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without a meeting of
the Company's stockholders in accordance with Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains
representations and warranties of the Company with respect to, among other
things (i) organization and good standing, certificate of incorporation, bylaws
and minute books, (ii) capitalization (including the ownership of subsidiaries),
(iii) authorization, validity of the Merger Agreement and Company action, (iv)
consents and approvals and absence of violations, (v) Commission reports and
financial statements, (vi) no undisclosed liabilities, (vii) absence of certain
changes (including material adverse changes), (viii) certain contracts
(including material agreements), (ix) employee benefit plans and ERISA, (x)
litigation, (xi) permits, absence of defaults and compliance with applicable
laws, (xii) taxes, (xiii) certain property, (xiv) intellectual property, (xv)
environmental matters, (xvi) employee and labor matters, (xvii) information in
tender offer documents, (xviii) brokers and finders, (xix) insurance and (xx)
opinion of financial advisor.
The Merger Agreement contains joint and several representations and
warranties of TI and the Purchaser with respect to, among other things (i)
organization and good standing, (ii) authorization, validity of the Merger
Agreement and necessary action, (iii) consents and approvals and absence of
violations, (iv) Commission reports and financial statements, (v) information in
the tender offer documents and the proxy statement pertaining to the Merger,
(vi) sufficiency of funds, (vii) Share ownership and (viii) the Purchaser's
operations.
Interim Operations. In the Merger Agreement, the Company has agreed that,
among other things, between the date of the Merger Agreement and prior to the
time the Purchaser's designees have been elected to, and constitute a majority
of, the Company Board, unless TI otherwise agrees in writing and except as
otherwise contemplated by the Merger Agreement, (i) the business of the Company
and its subsidiaries shall be conducted only in the ordinary course of business
and, to the extent consistent therewith, each of the Company and its
subsidiaries shall use its reasonable best efforts to preserve in all material
respects its business organization intact and maintain its existing relations
with customers, suppliers, employees and business associates; (ii) neither the
Company nor any of its subsidiaries shall, directly or indirectly, amend its
certificate of incorporation or bylaws or similar organizational documents or
split, combine or reclassify its outstanding capital stock; (iii) neither the
Company nor any of its subsidiaries shall (a) declare, set aside or pay any
dividend or other distribution (whether payable in cash, stock or property) with
respect to its capital stock (other than dividends from any subsidiary of the
Company to the Company or any other subsidiary of the Company); (b) issue or
sell any additional shares of, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or its subsidiaries,
other than issuances pursuant to the exercise of Options and Warrants
outstanding on the date of the Merger Agreement; (c) sell, lease or dispose of
any assets or properties, other than in the ordinary course of business; (d)
incur or modify any material debt, other than in the ordinary course of business
consistent with past practice; (e) license or sublicense any asset or property
of the Company or any of its subsidiaries except in the ordinary course of
business consistent with past practice on a basis that results in a positive
current royalty net of any royalties due by the Company or any of its
subsidiaries on account of sales by the licensee or sublicensee; or (f) redeem,
purchase or otherwise acquire, directly or
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indirectly, any of its or its subsidiaries' capital stock; (iv) neither the
Company nor any of its subsidiaries shall enter into, adopt or materially amend
or terminate any employee benefit plans, amend any employment or severance
agreement or increase in any manner the compensation or other benefits of its
officers or directors or increase in any manner the compensation of any other
employees (except for normal increases in the ordinary course of business); (v)
neither the Company nor any of its subsidiaries shall (a) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the material obligations of any other person
(other than subsidiaries of the Company), except pursuant to contractual
indemnification agreements entered into in the ordinary course of business; (b)
make any loans, advances or capital contributions to, or investments in, any
other person (other than to subsidiaries of the Company and payroll, travel and
similar advances made in the ordinary course of business); or (c) make capital
expenditures other than pursuant to the Company's current capital expenditure
budget; (vi) neither the Company nor any of its subsidiaries shall change any of
the accounting methods used by it unless required by generally accepted
accounting principles or applicable law; (vii) the Company shall not settle or
compromise any claim (including arbitration) or litigation involving payments by
the Company in excess of $250,000 individually which are not subject to
insurance reimbursement without the prior written consent of TI, which consent
shall not be unreasonably withheld; (viii) the Company shall not amend, modify
or terminate in any material respect or enter into any new agreement material to
the business of the Company without the prior written consent of TI, which
consent shall not be unreasonably withheld; or (ix) neither the Company nor any
of its subsidiaries shall authorize or enter into an agreement to do any of the
foregoing.
Approvals and Consents; Cooperation; Notification. TI, the Purchaser and
the Company have agreed to use their respective reasonable best efforts, and
cooperate with each other, to (i) determine as promptly as practicable all
governmental and third party authorizations, approvals, consents or waivers,
including pursuant to the HSR Act, advisable (in TI's and Purchaser's
discretion) or required in order to consummate the transactions contemplated by
the Merger Agreement, including, the Offer and the Merger and (ii) obtain such
authorizations, approvals, consents or waivers as promptly as practicable. The
Company, TI and the Purchaser have agreed to take all actions necessary to file
as soon as practicable all notifications, filings and other documents required
to obtain all governmental authorizations, approvals, consents or waivers,
including under the HSR Act, and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission, the Antitrust Division of
the Department of Justice and any other governmental entity for additional
information or documentation and to respond as promptly as practicable to all
inquiries and requests received from any governmental entity in connection
therewith. The Company is required give prompt notice to TI of (i) the
occurrence of any event, condition or development material to the Company and
its subsidiaries, taken as a whole, and (ii) any notice from any Person claiming
its consent is required in connection with the transactions contemplated by this
Agreement. Each of the Company and TI have agreed to give prompt notice to the
other of the occurrence or failure to occur of an event that would, or, with the
lapse of time would cause any condition to the consummation of the Offer or the
Merger not to be satisfied.
Employee Benefits. TI and the Purchaser have agreed that the Surviving
Corporation and its subsidiaries and successors shall provide those persons who,
immediately prior to the Effective Time, were employees of the Company or its
subsidiaries ("Retained Employees") with employee plans and programs that
provide benefits that are no less favorable in the aggregate than those provided
to such Retained Employees immediately prior to the date hereof. With respect to
such employee programs provided by the Surviving Corporation and its
subsidiaries and successors, service accrued by such Retained Employees during
employment with the Company and its subsidiaries prior to the Effective Time
shall be recognized for all purposes, except to the extent necessary to prevent
duplication of benefits. TI and the Purchaser have also agreed to honor, and
cause the Surviving Corporation to honor, without modification, all employment
and severance agreements and arrangements, as amended through the date of the
Merger Agreement, with respect to employees and former employees of the Company
disclosed to TI and the Purchaser pursuant to the Merger Agreement. TI and the
Company have agreed that prior to the Effective Time, they shall reasonably
cooperate to develop and adopt an employee retention plan for key employees of
the Company, which plan shall be subject to TI's approval.
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No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it and its subsidiaries shall not (and shall use their best efforts to
cause their respective officers, directors, employees and investment bankers,
attorneys or other agents retained by or acting on behalf of the Company or any
of its subsidiaries not to), (i) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal that constitutes or is
reasonably likely to lead to any Acquisition Proposal (as defined below); (ii)
engage in negotiations or discussions (other than to advise as to the existence
of the restrictions described in this paragraph) with, or furnish any
information or data to, any third party relating to an Acquisition Proposal; or
(iii) enter into any agreement with respect to any Acquisition Proposal or
approve any Acquisition Proposal. Notwithstanding the foregoing or anything to
the contrary in the Merger Agreement, the Company and the Company Board may
participate in discussions or negotiations (including, as a part thereof, making
any counterproposal) with or furnish information to any third party making an
unsolicited Acquisition Proposal (a "Potential Acquiror") or approve an
unsolicited Acquisition Proposal if the Company Board is advised by its
financial advisor that such Potential Acquiror has the financial wherewithal to
be reasonably capable of consummating such an Acquisition Proposal, and the
Company Board determines in good faith (i) after receiving advice from its
financial advisor, that such third party has submitted to the Company an
Acquisition Proposal which is a Superior Proposal (as defined below), and (ii)
based upon advice of outside legal counsel, that the failure to participate in
such discussions or negotiations or to furnish such information or approve an
Acquisition Proposal would violate the Company Board's fiduciary duties under
applicable law.
"Acquisition Proposal" means any bona fide proposal, whether in writing or
otherwise, made by a third party to acquire beneficial ownership (as defined
under Rule 13d-3 of the Exchange Act) of all or a material portion of the assets
of, or any material equity interest in, the Company or its material subsidiaries
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction involving the Company or its material subsidiaries including
any single or multi-step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of any
material portion of the assets of, or any material portion of the equity
interest in, the Company or its material subsidiaries. "Superior Proposal" means
any bona fide proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than a majority of the Shares then
outstanding or all or substantially all the assets of the Company, and otherwise
on terms which the Company Board determines in good faith to be more favorable
to the Company and its stockholders than the Offer and the Merger (based on
advice of the Company's financial advisor that the value of the consideration
provided for in such proposal is superior to the value of the consideration
provided for in the Offer and the Merger), for which financing, to the extent
required, is then committed or which, in the good faith reasonable judgment of
the Company Board, after receiving advice from its financial advisor, is
reasonably capable of being financed by such third party.
The Merger Agreement also provides that the Company shall (i) in the event
the Company shall determine to provide any information as described above or
shall receive any Acquisition Proposal, promptly inform TI in writing as to the
fact that information is to be provided and shall furnish to TI the identity of
the recipient of such information and/or the Potential Acquiror and the terms of
such Acquisition Proposal and (ii) inform TI of any material amendment to the
essential terms of any such Acquisition Proposal, except, in either case, to the
extent that the Company Board determines in good faith, based upon the advice of
outside legal counsel that any such action would violate the Company Board's
fiduciary duties under, or otherwise violate, applicable law. The Company has
agreed that any non-public information furnished to a Potential Acquiror will be
pursuant to a confidentiality agreement containing confidentiality and
standstill provisions substantially similar to the confidentiality and
standstill provisions of the confidentiality agreement entered into between the
Company and TI and described below.
Pursuant to the Merger Agreement, the Company has agreed that the Company
Board shall not (i) withdraw or modify, or propose to withdraw or modify, in any
manner adverse to TI, its approval or recommendation of the Merger Agreement,
the Offer or the Merger or (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal unless, in each case, the Company Board
determines in good faith, after receiving advice from its financial advisor,
that such Acquisition Proposal is a Superior
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Proposal and, based upon advice of its outside legal counsel, that the failure
to take such action would violate its fiduciary duties under applicable law.
Indemnification. The Company shall, and from and after the consummation of
the Offer, TI and the Surviving Corporation shall jointly and severally,
indemnify, defend and hold harmless the present and former directors and
officers of the Company and its subsidiaries (the "Indemnified Parties") from
and against all losses, expenses, claims, damages or liabilities arising out of
the transactions contemplated by the Merger Agreement to the fullest extent
permitted or required under applicable law. All rights to indemnification
existing in favor of the directors and officers of the Company as provided in
the Company's certificate of incorporation or by-laws, as in effect as of the
date of the Merger Agreement, with respect to matters occurring through the
Effective Time, shall survive the Merger and shall not be amended, repealed or
otherwise modified for a period of six years after the consummation of the Offer
in any manner that would adversely affect the rights of the individuals who at
or prior to the consummation of the Offer were directors or officers of the
Company with respect to occurrences at or prior to the consummation of the Offer
and TI shall cause the Surviving Corporation to honor all such rights to
indemnification.
Shareholder Litigation. The Merger Agreement provides that in connection
with any litigation which may be brought against the Company or its directors
relating to the transactions contemplated thereby, the Company will keep TI, and
any counsel which TI may retain at its own expense, informed of the course of
such litigation, to the extent TI is not otherwise a party thereto. The Company
has also agreed that it will consult with TI prior to entering into any
settlement or compromise of any such shareholder litigation and will not enter
into any such settlement or compromise without TI's prior written consent, which
consent shall not be unreasonably withheld.
Further Assurances. Pursuant to the Merger Agreement, each of the parties
has agreed to use its respective, reasonable best efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Merger Agreement, including the
Offer and the Merger.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(i) the Merger Agreement shall have been adopted by the requisite vote of the
Company's stockholders if required by applicable law and the Company's
certificate of incorporation; (ii) any waiting period applicable to the Merger
under the HSR Act shall have expired or been terminated; (iii) no statute, rule,
regulation, order, decree or injunction shall have been enacted, promulgated or
issued by any Governmental Entity or court which prohibits consummation of the
Merger; and (iv) TI, the Purchaser or their affiliates shall have purchased
Shares pursuant to the Offer.
The Merger Agreement provides that the obligation of the Company to effect
the Merger is further subject to the conditions that the representations and
warranties of TI and the Purchaser shall be true and accurate and that each of
TI and the Purchaser shall have performed in all material respects all of the
respective obligations required under the Merger Agreement to be performed by TI
or the Purchaser, as the case may be, at or prior to the Effective Time. The
Merger Agreement also provides that the obligations of TI and the Purchaser to
effect the Merger are further subject to the conditions that the Company's
representations and warranties shall be true and accurate in all material
respects as of the Effective Time as if made at and as of such time, and that
the Company shall have performed in all material respects all of the respective
obligations required under the Merger Agreement to be performed by the Company
at or prior to the Effective Time. The conditions described in the two preceding
sentences shall cease to be conditions if the Purchaser shall have accepted for
payment and paid for Shares validly tendered pursuant to the Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Merger abandoned at any time prior to the Effective Time: (i) by mutual
consent of TI, the Purchaser and the Company; (ii) by either the Company, on the
one hand, or TI and the Purchaser, on the other hand, (a) if the Shares shall
not have been purchased pursuant to the Offer on or prior to February 23, 1998,
which date may be extended by TI, in its sole discretion, for up to an
additional thirty days; provided, however, that a party may not terminate the
Merger Agreement pursuant to this clause (a) if such party's failure to fulfill
any obligation under the
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<PAGE> 9
Merger Agreement was the cause of, or resulted in, the failure of TI or the
Purchaser to purchase the Shares on or prior to such date or (b) if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement or prohibiting TI to acquire
or hold or exercise rights of ownership of the Shares, and such order, decree,
ruling or other action shall have become final and non-appealable; (iii) by the
Company (a) if prior to the purchase of Shares pursuant to the Offer, either (1)
a third party shall have made an Acquisition Proposal that the Company Board
determines in good faith, after consultation with its financial advisor, is a
Superior Proposal and the Company shall have concurrently executed a definitive
agreement with such third party in respect of such Superior Proposal, or (2) the
Company Board shall have withdrawn, or modified or changed in any manner adverse
to TI or the Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger (or the Company Board resolves to do any of the
foregoing), (b) if TI or the Purchaser shall have terminated the Offer, or the
Offer shall have expired, without TI or the Purchaser purchasing any Shares
pursuant thereto; provided, that, the Company may not terminate the Merger
Agreement pursuant to the provision described in this clause (b) if the Company
is in willful breach of the Merger Agreement or (c) if, due to an occurrence
that if occurring after the commencement of the Offer would result in a failure
to satisfy any of the conditions to completion of the Offer, TI or the Purchaser
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer, provided,
that, the Company may not terminate the Merger Agreement pursuant to the
provision described in this clause (c) if the Company is in willful breach of
the Merger Agreement; or (iv) by TI and the Purchaser (a) if, prior to the
purchase of Shares pursuant to the Offer, the Company Board shall have
withdrawn, modified or changed in a manner adverse to TI or the Purchaser its
approval or recommendation of the Offer, the Merger Agreement or the Merger or
shall have recommended an Acquisition Proposal or shall have executed an
agreement in principle or definitive agreement relating to an Acquisition
Proposal or similar business combination with a person or entity other than TI,
the Purchaser or their affiliates (or the Company Board resolves to do any of
the foregoing) or (b) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions to completion of the Offer, TI or the Purchaser shall have failed to
commence the Offer on or prior to five business days following the date of the
initial public announcement of the Offer; provided, that, TI may not terminate
the Merger Agreement pursuant to the provision described in this clause (b) if
TI or the Purchaser is in willful breach of the Merger Agreement.
Termination Fee. The Company has agreed to pay to TI a termination fee of
$8 million if the Merger Agreement is terminated by the Company pursuant to the
provisions described in clause (iii)(a) under "Termination" above, or by TI and
the Purchaser pursuant to the provisions described above in clause (iv)(a) under
"Termination" above.
Amendment. Subject to applicable law, the Merger Agreement may be amended,
modified and supplemented in any and all respects, whether before or after any
vote of the stockholders of the Company, by written agreement of the parties
thereto, by action taken by their respective Boards of Directors at any time
prior to the date of closing with respect to any of the terms contained therein;
provided, however, that after the approval of the Merger Agreement by the
stockholders of the Company, no such amendment, modification or supplement shall
reduce or change the Merger Consideration or adversely affects the rights of the
Company's stockholders under the Merger Agreement without the approval of such
stockholders.
LOAN AGREEMENT
The following is a summary of the Loan and Security Agreement, dated as of
November 19, 1997, by and between the Company, as Borrower, and TI, as Lender
(the "Loan Agreement"). This summary is qualified in its entirety by reference
to the Loan Agreement, which is incorporated herein by reference and a copy of
which has been filed with the Commission as Exhibit (c)(2) hereto.
The Commitments and the Loans. Subject to the terms and conditions of the
Loan Agreement and in reliance on the representations and warranties of the
Company set forth therein, TI has agreed to make (i) a term loan (the "Term
Loan") to the Company in the amount of $14,774,000 and (ii) revolving loans
(each
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<PAGE> 10
individually, a "Revolving Loan" and collectively, the "Revolving Loans," and
together with the Term Loan, the "Loans") to the Company from time to time in an
aggregate amount not to exceed at any time $5,000,000. The Term Loan was funded
on November 19, 1997 in a single advance. All proceeds of the Term Loan were
used to pay to Westell Technologies, Inc. ("Westell") the termination fee
required to be paid to it pursuant to the Agreement and Plan of Merger, dated as
of September 30, 1997, by and among the Company, Westell and Kappa Acquisition
Corp. A Revolving Loan in the amount of $3,989,000 was funded on November 19,
1997. As required pursuant to the Loan Agreement, $3,557,000 of the Revolving
Loan proceeds were used by the Company to pay in full all amounts outstanding
under the Company's Loan and Security Agreement, dated as of September 30, 1997,
between the Company and Westell. The balance of the Revolving Loan proceeds were
used by the Company to pay in full all amounts outstanding to Silicon Valley
Bank ("SVB") under the Loan and Security Agreement, dated as of April 25, 1997,
between the Company and SVB.
Interest Rate. The interest rate applicable to the Loans is the Prime Rate
(as hereinafter defined) plus two percent (2%). Interest is payable monthly in
arrears. Upon and during the continuance of an event of default under the Loan
Agreement, the Term Loan and the Revolving Loans shall bear interest at a rate
that is three percent (3%) in excess of the rate otherwise applicable at such
time.
Prepayments; Repayments. The Company may prepay the loans in whole or in
part in increments of $100,000 at its option. The Company will be required to
prepay the Loans as follows: (i) in full, immediately upon termination of the
Merger Agreement for any of the reasons described in clauses (iii)(a) or (iv)
under "Merger Agreement -- Termination" above, (ii) in full, within 180 days
after the termination of the Merger Agreement for any of the reasons described
under "Merger Agreement -- Termination" above (other than those described in
clauses (iii)(a) or (iv) of such section) and (iii) if at any time the Revolving
Loans exceed $5,000,000, in an amount equal to the excess. The Loans shall
otherwise be payable in full on September 30, 1999, the termination date of the
Loan Agreement.
Forgiveness. Notwithstanding anything to the contrary in the Loan
Agreement, TI has agreed to forgive the repayment of the Term Loan in the event
that the Merger Agreement is terminated, except if the Merger Agreement is
terminated (i) for any of the reasons described in clauses (iii)(a) or (iv)(a)
under "Merger Agreement -- Termination" above, (ii) for any of the reasons
described in clauses (ii)(a), (iii)(b), (iii)(c) or (iv)(b) under "Merger
Agreement -- Termination" above and at the time of such termination the Company
is in breach of certain of the conditions to completion of the Offer or (iii) in
accordance with its terms and within six months after such termination, the
Company or its stockholders consummate a transaction or enter into a definitive
agreement with respect to an Acquisition Proposal that was pending at the time
of such termination.
Security. The Revolving Loans are secured by liens on and security
interests in substantially all of the Company's personal property, including,
without limitation, its inventory, equipment, accounts receivable, general
intangibles, patents, trademarks, copyrights, computer hardware and software,
and the proceeds thereof. The Term Loan is an unsecured obligation of the
Company.
Representations and Warranties. In addition to the Company's
representations and warranties in the Merger, which are incorporated by
reference into the Loan Agreement, the Company has made representations and
warranties with respect to (i) the location of the collateral securing the
Revolving Loans, (ii) the absence of other liens (other than certain permitted
liens), (iii) the possession and control of its equipment and inventory, (iv)
the delivery of instruments and chattel paper and (v) the absence of defaults or
events of default.
Covenants. So long as any of TI's lending commitments under the Loan
Agreement remain in effect and until all of the Company's liabilities under the
Loan Agreement have been irrevocably paid in full, the Company will be required
to perform or comply with certain covenants, including, without limitation,
covenants relating to (i) limitations on indebtedness, (ii) limitations on
liens, (iii) notice and information delivery requirements, (iv) the payment of
taxes and claims, (v) the maintenance of assets and properties, (vi) the
maintenance of insurance policies, (vii) compliance with laws and (vii) reports
to other creditors. In addition, certain covenants set forth in the Merger
Agreement are incorporated by referenced into the Loan Agreement.
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<PAGE> 11
Events of Default. The Loan Agreement contains customary events of default
including, without limitation, (i) the failure to pay principal or interest on
the Loans when due, (ii) any representation or warranty proving to have been
false when made, the failure to comply with any other term, covenant or
agreement of the Loan Agreement (subject, in certain instances, to a grace
period of ten days), (iv) defaults with respect to certain other indebtedness,
(v) bankruptcy and insolvency and (vi) the failure of the Loan Agreement or any
collateral documents to remain in full force and effect and to create a valid
and perfected first priority security interest in the collateral securing the
Revolving Loans.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement, dated as of July 22, 1997, between TI and the Company (the
"Confidentiality Agreement"). This summary is qualified in its entirety by
reference to the Confidentiality Agreement, which is incorporated herein by
reference and a copy of which has been filed as Exhibit (c)(3) hereto.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, TI agreed to keep confidential all nonpublic,
confidential or proprietary information furnished to it by the Company relating
to the Company, subject to certain exceptions (the "Confidential Information"),
and to use the Confidential Information solely in connection a possible
transaction involving the Company and TI. TI has agreed in the Confidentiality
Agreement that for a period of two years from the date of the Confidentiality
Agreement, without the prior written consent of the Company, neither it nor any
of its affiliates would, among other things, directly or indirectly, acquire or
offer to acquire any securities of the Company, solicit proxies with respect to
the Company's securities, or propose to enter into any extraordinary transaction
involving the Company. TI further agreed that, for a period of two years from
the date of the Confidentiality Agreement, neither TI nor any of its affiliates
would, without the written consent of the Company, employ or solicit the
employment of any employee of the Company or any of its subsidiaries with whom
TI or its representatives had contact during the negotiations and investigations
in connection with a possible transaction between TI and the Company.
RETENTION AGREEMENTS WITH CERTAIN OF THE COMPANY'S EXECUTIVE OFFICERS
The following is a summary of certain provisions of the retention
agreement, dated as of November 19, 1997, by and between TI and James E.
Steenbergen, the Company's Chief Executive Officer, President and Chief
Financial Officer (the "Retention Agreement"). This summary is qualified in its
entirety by reference to the Retention Agreement, which is incorporated herein
by reference and a copy of which has been filed as Exhibit (c)(4) hereto. Under
the Retention Agreement, TI agreed that in the event the Company or TI
terminates without cause Mr. Steenbergen's full-time employment with the Company
or TI following the Merger, then TI will retain Mr. Steenbergen as an employee
on an approved leave of absence until such time as all of his options to
purchase Amati Common Stock that were granted prior to the Merger (and which
will be converted into options to purchase stock of TI) become fully
exercisable. In addition, under the Retention Agreement Mr. Steenbergen has
agreed to certain non-competition and non-solicitation covenants in favor of TI.
TI has entered into similar retention agreements with Mr. Ronald Carlini,
the Company's Vice President of Corporate Development and Mr. James D. Hood, the
Company's Vice President of Engineering.
COOPERATIVE DEVELOPMENT & PRODUCT SALE AGREEMENT
The Company and TI entered into a Cooperative Development and Product Sale
Agreement (the "Development Agreement") as of October 16, 1996 pursuant to which
the Company agreed to develop and sell to TI certain software to be incorporated
into TI's digital signal processing products. Pursuant to the Development
Agreement, the Company granted to TI certain licenses to use, copy, sell and
manufacture certain of the Company's intellectual property included in the
software to be developed by the Company.
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ITEM 4. THE SOLICITATION OF RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. For the reasons discussed in
Item 4(b) below, the Company Board (the "Board of Directors") has unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, has determined that the Offer and the Merger
are fair to and in the best interests of the Company's stockholders and
unanimously recommends that the stockholders of the Company accept the Offer and
tender their Shares thereunder to the Purchaser.
(b) BACKGROUND; REASONS FOR RECOMMENDATION.
In May 1997, the Company's Board of Directors began to consider possible
strategic transactions involving the Company, including the possibility of an
acquisition by a larger company. The Board of Directors determined to retain an
independent financial advisor to investigate possible business combinations and
strategic alternatives and to advise the Board of Directors with respect
thereto. The Board authorized a committee composed of its outside directors to
select a financial advisor.
In June 1997, this committee selected Deutsche Morgan Grenfell Inc. ("DMG")
to be retained as the Company's financial advisor. Thereafter, DMG contacted
over fifteen companies, including TI, to determine interest in a possible
business combination or other transaction with the Company. The companies
included a large number of domestic and international semiconductor, telephone
equipment and data communications equipment manufacturers.
Effective as of July 22, 1997, the Company and TI entered into the
Confidentiality Agreement for the purpose of investigating and further
discussing a possible business combination. The Company also entered into
similar confidentiality agreements with four other parties, including Westell
Technologies, Inc. ("Westell"), for the same purpose. In addition, DMG and the
Company made management presentations to six possible transaction candidates,
including TI and Westell. Following these presentations and further discussions,
only TI and Westell indicated interest in a business combination with the
Company. During September 1997, TI conducted a due diligence review of the
Company while Westell, but not TI, had active and continuous negotiations with
the Company regarding an acquisition proposal which culminated in the execution
of the Agreement and Plan of Merger among the Company, Westell and Kappa
Acquisition Corp., a wholly-owned subsidiary of Westell, dated September 30,
1997 (the "Westell Merger Agreement"), pursuant to which the stockholders of the
Company would receive Class A Common Stock of Westell in exchange for their
Shares based on a conversion ratio of 0.9 shares of Westell Class A Common Stock
for each Share of Company Common Stock (the "Westell Ratio"). One day before
those negotiations were finalized, TI submitted a preliminary written proposal
regarding an acquisition of the Company. Due to Westell's requirement that the
Westell Merger Agreement be executed prior to October 1, 1997, or its offer
would be withdrawn, and the preliminary and conditional nature of TI's proposal,
the Board of Directors decided to proceed with the execution of the Westell
Merger Agreement. Execution of the Westell Merger Agreement was publicly
announced on October 1, 1997.
On November 4, 1997, the Company received a letter from TI proposing a cash
tender offer to purchase all of the outstanding Shares for $18 per share. On
November 4, and again on November 6, the Board of Directors met to discuss this
proposal. After consultation with DMG and the Company's legal counsel, the Board
of Directors determined that this proposal constituted a "Superior Proposal" as
defined in the provision of the Westell Merger Agreement relating to the
Company's right to negotiate with an alternate bidder, and determined to enter
into negotiations with TI.
On November 5, 1997, representatives of the Company informed Westell and
its representatives of the proposal made by TI and initiated discussions with
representatives of Westell to determine whether, in light of the TI proposal,
Westell was prepared to improve its offer.
On November 7, 1997, the Company and its representatives initiated
negotiations with TI and its representatives regarding the TI proposal, and TI
began to conduct an additional due diligence review of the Company, by, among
other things, holding discussions with certain of the Company's executives and
representatives. As a result of these negotiations, on November 12, 1997, TI
increased its proposal to $20 per
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share, eliminated or modified certain conditions and advised the Company that it
had completed its due diligence review. The Board of Directors met to consider
the increased proposal by TI and to review the terms of the proposed Merger
Agreement.
On November 13, 1997, the Company notified Westell that it had determined
to accept the Offer and to terminate the Westell Merger Agreement in accordance
with its terms, which required the Company to provide at least three business
days notice of termination to Westell and pay to Westell a fee of approximately
$14.8 million (the "Termination Fee").
On November 18, 1997, the Board of Directors again met to consider and
review the terms of the proposed Merger Agreement. At the meeting DMG made a
presentation to the Board of Directors and delivered its oral opinion,
subsequently confirmed in writing (the "Fairness Opinion"), that as of such
date, the $20 per share cash consideration proposed to be received by the
stockholders of the Company pursuant to the Offer and the Merger was fair to
such stockholders (other than TI and its affiliates) from a financial point of
view. The full text of the Fairness Opinion is attached and filed as Exhibit
(a)(2) to this statement. STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY. After discussion (which, among other things, took note of information
the Company's advisors had received that Westell was unlikely to make any
proposal to improve the terms of the Westell Merger Agreement), the Board of
Directors unanimously approved the Merger Agreement and the transactions
contemplated thereby and unanimously recommended that stockholders of the
Company accept the Offer and tender their shares.
On November 19, 1997, subsequent to the expiration of the three business
day notice period required by the Westell Merger Agreement, the Company arranged
to pay to Westell the Breakup Fee, effecting the termination of the Westell
Merger Agreement. Effective November 19, 1997, the Company, TI and Purchaser
executed and delivered the Merger Agreement. On November 19, 1997, TI issued a
press release announcing the execution of the Merger Agreement.
In arriving at its decision regarding its recommendation set forth above,
the Board of Directors considered (among other things) the following:
- The opinion of DMG, dated November 18, 1997, to the effect that, as of
the date of the Fairness Opinion, the $20 per Share cash consideration to
be received by the stockholders of the Company pursuant to the Offer and
the Merger was fair to such stockholders (other than TI and its
affiliates) from a financial point of view. The full text of the Fairness
Opinion is attached and filed as Exhibit (a)(2) to this statement.
STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
- The determination that the Offer and the Merger were superior to the
transaction contemplated by the Westell Merger Agreement insofar as the
$20 per Share price was payable in cash compared with the consideration
offered by Westell in the form of Westell Class A Common Stock, and
represented a premium of approximately 25% over the effective price per
Share being offered under the Westell Merger Agreement (based on the
closing price per Share of the Westell Class A Common Stock on the Nasdaq
National Market on November 18, 1997).
- The determination that the Offer and the Merger presented less risk to
the stockholders of the Company than the merger contemplated by the
Westell Merger Agreement insofar as, under the latter agreement, the
Westell Ratio was fixed and not subject to adjustment in the event of any
increase or decrease in the market price of the Westell Class A Common
Stock, resulting in possible fluctuations in the value of the
consideration to be received by the Company's stockholders under the
Westell Merger Agreement.
- The determination that the $20 per Share offered fair value to the
Company's stockholders for their Common Stock and exceeded the market
price that the Company's stockholders could reasonably expect to realize
in the foreseeable future, taking into account the following factors: (a)
information presented to the Board of Directors relating to the recent
financial condition and results of operations of
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<PAGE> 14
the Company and management's evaluation of the Company's prospects, as
well as the Board of Directors' general familiarity with the Company's
business, operations, financial condition and earnings on both an
historical and a prospective basis; (b) the relationship of the $20 per
Share price to the historical market prices for Company Common Stock,
including that the $20 per Share represented a premium of approximately
31% over the closing price of the Company Common Stock on the Nasdaq
National Market on November 18, the day on which the Board of Directors
approved the Merger Agreement; (c) the vigorous arms-length nature of the
negotiations that resulted in TI offering the $20 per Share price in the
Offer and the Merger; and (d) the results of the process undertaken by
DMG to approach and contact potential transaction candidates and the fact
that, despite these contacts, only Westell and TI had made written
proposals regarding a business combination prior to the public
announcement of the Westell Merger Agreement and that, since the public
announcement of the Westell Merger Agreement on October 1, 1997, no
unsolicited expressions of interest had been received by the Company or
DMG from any other third party.
- The fact that, even though the Company encouraged Westell to improve its
proposal for acquiring the Shares in light of the Offer, Westell declined
to do so on November 18, 1997.
- The terms and conditions of the TI Merger Agreement, including the amount
and form of the consideration being offered to the Company's
stockholders, the conditions to the Purchaser's obligations to consummate
the Offer and the Merger, which the Board of Directors believes provides
greater, or no less, certainty to the Company's stockholders than the
Westell Merger Agreement, and TI's agreement to loan funds to the Company
for the Company's payment of the Westell Termination Fee and repayment of
amounts loaned to the Company by Westell in connection with the execution
of the Westell Merger Agreement.
The foregoing discussion of factors considered by the Board of Directors is
not intended to be exhaustive. It summarizes all material factors considered.
The Board of Directors did not assign any relative or specific weights to the
foregoing factors, nor did it specifically characterize any factor as positive
or negative (except as described above), and individual directors may have given
differing weights to differing factors and may have viewed certain factors more
positively or negatively than others. Throughout its deliberations, the Board of
Directors received the advice of its financial and legal advisors. The Board of
Directors viewed its recommendation as being based upon the totality of the
information presented and considered by them.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained DMG to act as financial adviser to the Company for
the purpose of evaluating the fairness, from a financial point of view, of the
cash consideration to be received by the Company's stockholders pursuant to the
Offer and the Merger. DMG had previously been retained by the Company to provide
similar financial advisory services in connection with the Westell Merger
Agreement. As compensation for DMG's services as financial adviser, the Company
has agreed to pay DMG a retainer of $50,000 and a transaction fee of
approximately $7.4 million upon consummation of the Merger, against which the
retainer would be credited. In addition, the Company has agreed to reimburse DMG
for its reasonable out-of-pocket expenses (including fees and expenses of its
legal counsel) incurred in connection with its engagement, and to indemnify DMG
and certain related persons against certain liabilities and expenses arising out
of or in conjunction with its rendering of services under its engagement,
including certain liabilities under the federal securities laws.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other persons
to make solicitations or recommendations to security holders on its behalf
concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares has been effected during the past 60 days
by the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
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(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director and affiliate of the Company presently intends to tender in the Offer
all shares held of record or beneficially owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth Item 3(b) above, the Company is not engaged in any
negotiation in response to the Offer that relates to or would result in (1) any
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary or the Company; (3) a
tender offer for or other acquisition of securities by or of the Company; or (4)
any material change in the present capitalization or dividend policy of the
Company.
(b) Except as described in Item 3(b) above, there are no transactions,
Board of Directors resolutions, agreements in principal or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Annex I is being furnished
pursuant to Rule 14f-1 under the Exchange Act in connection with the possible
designation by TI and Purchaser, pursuant to the Merger Agreement, of certain
persons to be appointed to the Board of Directors other than at a meeting of the
Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- ------------------------------------------------------------------------------
<S> <C>
Exhibit(a)(1) Press Release, dated November 19, 1997 issued by Texas Instruments
Incorporated
Exhibit(a)(2) Opinion of Deutsche Morgan Grenfell Inc.*
Exhibit(a)(3) Form of Letter to Stockholders of the Company dated November 25, 1997*
Exhibit(c)(1) Agreement and Plan of Merger, dated as of November 19, 1997 among Amati
Communications Corporation, Texas Instruments Incorporated and DSL Acquisition
Corporation
Exhibit(c)(2) Loan and Security Agreement, dated as of November 19, 1997 among Amati
Communications Corporation and Texas Instruments Incorporated
Exhibit(c)(3) Confidentiality Agreement
Exhibit(c)(4) Retention Agreement between Texas Instruments Incorporated and James
Steenbergen
Exhibit(c)(5) Retention Agreement between Texas Instruments Incorporated and Ronald Carlini
Exhibit(c)(6) Retention Agreement between Texas Instruments Incorporated and James Hood
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders.
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<PAGE> 16
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: November 25, 1997 AMATI COMMUNICATIONS
CORPORATION
By: /s/ JAMES E. STEENBERGEN
------------------------------------
Name: James E. Steenbergen
Title: President, Chief Executive
Officer and
Chief Financial Officer
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<PAGE> 18
ANNEX I
AMATI COMMUNICATIONS CORPORATION
2043 SAMARITAN DRIVE
SAN JOSE, CA 95124
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED
NOT TO SEND THE COMPANY A PROXY.
------------------------
This Information Statement, which is being mailed on or about November 25,
1997, to the holders of record of shares of the Common Stock, $0.20 par value
per share (the "Shares"), of Amati Communications Corporation (the "Company"),
is part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"). Unless otherwise defined herein, capitalized terms used
herein are used as defined in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible election of persons
designated by Texas Instruments Incorporated ("TI") to the Board of Directors of
the Company (the "Board") and the Board's recommendation that you tender your
Shares to TI pursuant to the Offer as set forth in Schedule 14D-9. The Company
expects TI's designees will constitute a majority of the Board promptly
following the purchase of Shares pursuant to the Offer, which the Company
anticipates will be on or after December 23, 1997. This Information Statement is
required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 promulgated thereunder. You are urged to
read this Information Statement carefully. You are not, however, required to
take any action.
Pursuant to the Merger Agreement, Purchaser commenced the Offer, which is
currently scheduled to expire on December 23, 1997, at which time, if the Offer
is not extended and all conditions of the Offer have been satisfied or waived,
Purchaser will be obligated to purchase all Shares validly tendered pursuant to
the Offer and not withdrawn; provided that, if the number of Shares that have
been physically tendered and not withdrawn are more than 80% but less than 90%
of the outstanding Shares determined on a fully diluted basis, TI may extend the
Offer for up to five business days and thereafter on a day-to-day basis for up
to an additional five business days from the date that all conditions to the
Offer shall first have been satisfied or waived.
RIGHT TO DESIGNATE DIRECTORS
The Merger Agreement provides that promptly upon the purchase of and
payment for Shares by TI or any of its subsidiaries which represent at least a
majority of the outstanding Shares (on a fully diluted basis), TI shall be
entitled to designate such number of directors, rounded up to the next whole
number, as will give TI, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board equal to the product of the total
number of directors on the Board (giving effect to any increase in the number of
directors pursuant to the Merger Agreement) multiplied by the percentage that
such aggregate number of Shares so purchased or otherwise beneficially owned by
TI or any affiliate of TI bears to the total number of outstanding Shares. The
Company shall, upon request by TI, as promptly as is reasonably practicable,
increase the size of the Board of the Company to the extent permissible, or
exercise its best efforts to secure the resignations of such number of directors
as is necessary to enable TI's designees to be elected to the Company's Board of
Directors and will cause TI's designees to be so elected.
The Merger Agreement provides that, notwithstanding TI's right to designate
directors to the Company's Board of Directors, the Company shall retain, until
the effective date of the Merger, at least two directors who were members of the
Board of Directors on November 19, 1997 (the "Amati Directors"). Any action by
the
A-1
<PAGE> 19
Company in connection with the rights of the Company under the Merger Agreement
may be effected only by a majority of the Amati Directors, provided that if
there are no Amati Directors such actions may be effected by a unanimous vote of
the entire Board of Directors. The Board of Directors has appointed Donald Lucas
and Aamer Latif to serve as the Amati Directors.
IN THE EVENT THAT TI AND ITS SUBSIDIARIES DO NOT ACQUIRE ANY SHARES
PURSUANT TO THE OFFER, OR TERMINATES THE OFFER, OR IF THE MERGER AGREEMENT IS
TERMINATED PURSUANT TO ITS TERMS PRIOR TO THE ELECTION OR APPOINTMENT OF TI'S
DESIGNEES, PURCHASER WILL NOT HAVE ANY RIGHT UNDER THE MERGER AGREEMENT TO HAVE
TI'S DESIGNEES ELECTED OR APPOINTED TO THE COMPANY'S BOARD OF DIRECTORS.
The information contained in this Information Statement concerning TI and
TI's designees has been furnished to the Company by TI, and the Company assumes
no responsibility for the accuracy or completeness of such information.
THE TI DESIGNEES
TI's designees to the Company's Board of Directors, and certain information
about each, are described on Schedule A hereto. TI has advised the Company that
all such persons have consented to act as directors of the Company if so
designated. TI has informed the Company that none of the designees (i) is
currently a director of, or holds any position with, the Company; (ii) has any
familial relationship with any of the directors or executive officers of the
Company; or (iii) to the best knowledge of TI and the Purchaser, beneficially
owns any securities (or rights to acquire any securities) of the Company. The
Company has been advised by TI and Purchaser that, to the best of TI's and
Purchaser's knowledge, none of the designees has been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed in the Schedule 14D-9.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
CURRENT BOARD OF DIRECTORS
DR. JAMES GIBBONS AGE: 65
Dr. James Gibbons served as Chairman of the Board of Directors of Old Amati
since 1992. Dr. Gibbons is a Special Counsel to the President of Stanford
University and served as the Dean of the School of Engineering at Stanford
University from 1984 to 1996. Dr. Gibbons currently serves on the Board of
Directors of Lockheed Corporation, Raychem Corporation, Centigram Corporation,
El Paso Natural Gas Company and Cisco Systems, Incorporated. Dr. Gibbons was
elected as Chairman of the Company's Board effective December 4, 1995.
DONALD L. LUCAS AGE: 67
Mr. Donald L. Lucas, a venture capitalist, has been a Director of the
Company since 1968. He is also a director of Cadence Design Systems, Inc.,
Coulter Pharmaceutical, Inc., Macromedia, Inc., Oracle Corp., Racotek, Inc.,
Transcend Services, Inc., and Tricord Systems, Incorporated.
JAMES E. STEENBERGEN AGE: 50
Mr. James Steenbergen, President and CEO, has been Chief Executive Officer
and President for several hightechnology companies involved in the manufacture
and development of systems for the telecommunications industry. These companies
include Optilink Corporation, SRX and Granger Associates. Mr. Steenbergen became
CEO and was elected to the Company's Board effective December 4, 1995.
A-2
<PAGE> 20
DR. JOHN CIOFFI AGE: 40
Dr. John Cioffi, Chief Technical Officer, is the founder of Old Amati and
also served as Vice President of Engineering, Chief Technical Officer and
Director of Old Amati. Dr. Cioffi has also been a Professor of Electrical
Engineering at Stanford University since 1986. Dr. Cioffi sits on the technical
boards of C-Cube Microsystems, Inc., and has served on the technical staffs of
Bell Laboratories Inc. and IBM's Almaden Research Laboratories. Dr. Cioffi was
elected to the Company's Board effective December 4, 1995.
AAMER LATIF AGE: 39
Mr. Aamer Latif was elected President, Chief Executive Officer, Chief
Financial Officer and Director of the Company in May 1993; he was elected
Chairman in July 1995 and served in that capacity until December 1995. Prior to
1993, Mr. Latif served in various positions in Engineering with the Company
since 1980. He resigned as an officer of the Company on November 27, 1995.
CURRENT EXECUTIVE OFFICERS
Set forth below is information regarding executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE OFFICES HELD
- --------------------------------- ---- ---------------------------------------------
<S> <C> <C>
James Steenbergen................ 50 Chief Executive Officer, President and Chief
Financial Officer
Dr. John Cioffi.................. 40 Chief Technical Officer
Christopher Barnes............... 48 Vice President of European Sales
Benjamin Berry................... 48 Vice President of Marketing
David Bivolcic................... 40 Senior Vice President
Ronald Carlini................... 58 Vice President of Corporate Development
Joseph Grady, Jr. ............... 50 Vice President of Worldwide Sales
James Hood....................... 56 Vice President of Engineering
Teresita Medel................... 49 Treasurer, Secretary and Controller
</TABLE>
Mr. Christopher Barnes, Vice President of European Sales, joined the
Company in July 1996. Mr. Barnes has extensive experience in global high
technology markets, having previously been responsible for international sales
in various leading communications companies, including Marconi. UK, DSC
Communications and Telesciences.
Mr. Benjamin Berry, Vice President of Marketing since December 1995, was
previously Vice President of Marketing and Business Development for Digital Link
Corporation, a manufacturer of high-speed data communications equipment from
1989 until 1994. He has also been a Division Manager at Granger Associates and a
Member of Technical Staff for Bell Laboratories.
Mr. David Bivolcic was elected Senior Vice President of the Company in May
1993. Prior to that, he served as the Company's Vice President, Operations since
December 1989.
Mr. Ronald Carlini, Vice President of Corporate Development, came to the
Company after holding a variety of senior management positions in the computer
and telecommunications industries, including General Manager and Executive Vice
President at ADACOM Corporation; General Manager and Vice President of Telex
Corporation; and Division Account Marketing Manager at IBM Corporation.
Mr. Joseph Grady, Jr., served as Old Amati's Vice President of Worldwide
Sales from August of 1994 until the merger with the Company, and continues in
that position with the Company. Previously, Mr. Grady served as Assistant Vice
President of Sales of Newbridge Networks Corporation from 1992 to 1994. Mr.
Grady served as Manager of Distribution, Sales and Development for Octel
Communications Corporation from 1991 to 1992. Mr. Grady also served as Vice
President of Telephone Company Sales for Racal Data Communications Inc. for 1985
to 1991.
A-3
<PAGE> 21
Mr. James Hood, Vice President of Engineering since January 1996, has 30
years of industry experience. He previously served as President and Executive
Officer of MERET Optical Communications, Inc. from 1992 through 1993. Prior to
that, he was President and Chief Executive Officer of CATEL Telecommunications
Inc.
Ms. Teresita Medel was elected Secretary of the Company in December 1994.
She has served as Treasurer and Controller of the Company since July 1993. Prior
to 1993, she had served as the Company's Accounting Manager since 1979.
Background information concerning Messrs. Steenbergen and Cioffi are set
forth under "Current Directors of the Company." There are no family
relationships among the foregoing persons. All officers of the Company serve at
the pleasure of the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of Shares beneficially owned as
of October 2, 1997, by (i) each stockholder known to the Company to be a
beneficial owner of more than 5% of the Shares; (ii) each director; and (iii)
each executive officer named in the Summary Compensation Table below; and (iv)
all executive officers and directors as a group. Except as otherwise indicated,
each of the listed persons or entities has sole voting and investment power with
respect to the Shares listed as beneficially owned by them, subject to community
property laws, where applicable.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR NUMBER NUMBER OF SHARES PERCENT
OF INDIVIDUALS IN GROUP BENEFICIALLY HELD(1) OF CLASS(1)
---------------------------------------------- -------------------- -----------
<S> <C> <C>
Dr. John Cioffi............................... 1,617,978(2) 9.1
Dr. James Gibbons............................. 367,507(3) 2.1
Donald L. Lucas............................... 54,716(4) *
Aamer Latif................................... 75,000(5) *
James Steenbergen............................. 237,500(6) 1.3
Christopher Barnes............................ 41,250(7) *
Benjamin Berry................................ 91,000(8) *
David Bivolcic................................ 49,250(9) *
James Hood.................................... 80,000(10) *
All directors and executive officers, as a
group (12 persons).......................... 2,885,041(11) 16.3
</TABLE>
- ---------------
* Less than 1%.
(1) Based upon information supplied or confirmed by officers, directors and the
principal stockholders. The percentage of class assumes the exercise of all
options and warrants held by the named individual that are exercisable on
October 2, 1997, or within 60 days thereafter, but not the exercise of any
other options or warrants that are outstanding.
(2) Includes 618,950 Shares that are deemed beneficially owned by Dr. Cioffi by
virtue of options held by him that are exercisable within 60 days of
October 2, 1997.
(3) Includes 147,880 Shares that are deemed beneficially owned by Dr. Gibbons
by virtue of options held by him that are exercisable within 60 days of
October 2, 1997.
(4) Includes 30,000 Shares that are deemed beneficially owned by Mr. Lucas by
virtue of options held by him that are exercisable within 60 days of
October 2, 1997. Also includes 23,716 Shares that are held in a living
trust for Mr. Lucas and his wife. As trustee of the joint trusts, Mr. Lucas
holds voting and investment power with respect to such Shares.
(5) Includes 75,000 Shares that are deemed beneficially owned by Mr. Latif by
virtue of options held by him that are exercisable within 60 days of
October 2, 1997.
A-4
<PAGE> 22
(6) Includes 237,500 Shares that are deemed beneficially owned by Mr.
Steenbergen by virtue of options held by him that are exercisable within 60
days of October 2, 1997.
(7) Includes 40,000 Shares that are beneficially owned by Mr. Barnes by virtue
of options that are exercisable within 60 days of October 2, 1997.
(8) Includes 90,000 Shares that are deemed beneficially owned by Mr. Berry by
virtue of options held by him that are exercisable within 60 days of
October 2, 1997.
(9) Includes 49,250 Shares that are deemed beneficially owned by Mr. Bivolcic
by virtue of options held by him that are exercisable within 60 days of
October 2, 1997.
(10) Includes 80,000 Shares that are deemed beneficially owned by Mr. Hood by
virtue of options held by him that are exercisable within 60 days of
October 2, 1997.
(11) In addition to the Shares identified in footnotes (2) through (10) above,
also includes 270,840 Shares that are deemed beneficially owned by virtue
of options that are exercisable within 60 days of October 2, 1997.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors is responsible for the overall affairs of the
Company. During the fiscal year ended August 2, 1997, the Board of Directors met
four times.
To assist in carrying out its duties, the Board of Directors has delegated
certain authority to the following two committees: the Compensation Committee
and the Audit Committee. Members of each standing committee are appointed by the
Board of Directors at its organizational meeting following each annual meeting
of the stockholders. The following sets forth information about each standing
committee:
The Audit Committee. The Board of Directors has an Audit Committee, the
current members of which are Donald L. Lucas and Aamer Latif. During fiscal
1997, the Audit Committee held one meeting, at which all members were present.
The principal functions of the Audit Committee are to meet with the Company's
management and independent auditors to review financial controls and practices,
and make recommendations to the Board with respect to the engagement of the
independent auditors.
The Compensation Committee. The Board of Directors has a Compensation
Committee which oversees and approves officers' compensation and administers the
Company's Stock Option Plans. The current members are Donald L. Lucas and Aamer
Latif. During fiscal 1997, the Compensation Committee held one meeting, at which
all members were present.
Director's Fees and Benefits. The Company has a policy of reimbursing
directors for reasonable travel and related expenses incurred in attending Board
and Committee meetings. Donald L. Lucas, a director of the Company received
$27,000 in fiscal 1997 in consulting fees for services rendered to the Company.
Directors who are not employees of the Company or an affiliate of the
Company are eligible to participate in the Company's 1990 Non-Employee
Directors' Stock Option Plan. Pursuant to such plan (i) each individual elected
to the Company's Board as a non-employee Director for the first time is granted
an option to purchase up to 25,000 shares of the Company's Common Stock at an
exercise price equal to the fair market value of such stock on the date of
grant; and (ii) each non-employee Director then in office (other than
individuals receiving first-time grants as described in (i) above) receives an
option to purchase 20,000 shares of the Company's Common Stock on September 1,
at an exercise price equal to the fair market value of the Common Stock on such
date. Grants are automatically made annually under this plan. In lieu of
participating in the 1990 Non-Employee Directors' Stock Option Plan on an annual
basis, Dr. James Gibbons received a one-time grant of an option to purchase up
to 25,000 shares of the Company's Common Stock under this plan and an additional
option to purchase up to 125,000 shares pursuant to the 1990 Supplemental Stock
Option Plan, both at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant of such options.
A-5
<PAGE> 23
Treatment of Directors' Options in the Merger. In connection with the
Merger, options issued pursuant to the 1990 Non-Employee Directors Stock Option
plan automatically vest. In addition, under the terms of the Merger Agreement,
all other options held by non-employee directors of the Company shall vest upon
consummation of the Merger. As a result all options held by Donald Lucas, Aamer
Latif and Dr. James Gibbons will vest upon consummation of the Merger.
EXECUTIVE COMPENSATION
The following table shows certain information concerning compensation paid
and earned during the fiscal years ended July 29, 1995, July 27, 1996 and August
2, 1997 to the Chief Executive Officer and the other four most highly
compensated Executive Officers of the Company whose salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
NAME AND BONUS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) EARNED(1) OPTIONS/SARS(#) COMPENSATION($)
- --------------------------------------- ----- -------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
James Steenbergen...................... 1997 185,000 -- 6,864(2)
President, CEO, CFO 1996 124,994 75,000 500,000 4,125(2)
David J. Bivolcic...................... 1997 145,000 25,375 306(3)
Senior Vice President 1996 142,638 50,000 165,000 198(3)
1995 132,000 57,000 198(3)
James D. Hood.......................... 1997 145,000 43,500 1,238(3)
Vice President of Engineering 1996 88,428 30,000 200,000
Benjamin Berry......................... 1997 135,000 20,250 6,522(2)
Vice President of Marketing 1996 87,577 34,000 200,000 4,000(2)
Christopher Barnes..................... 1997 120,000 84,000 218(3)
Vice President of International Sales 1996 2,307 160,000
</TABLE>
- ---------------
(1) Bonuses for fiscal year 1997 approved by the Board, subject to completion of
the Merger. The Board of Directors has determined that the bonus payable to
Mr. Steenbergen for fiscal 1997 should be determined after the Merger.
(2) Car allowances and payments made by the Company for premiums on group life
policies for Messrs. Steenbergen and Berry.
(3) Payments made by the Company for premiums on group life insurance policies
for Messrs. Bivolcic, Barnes and Hood.
A-6
<PAGE> 24
The following table sets forth certain information regarding options
exercised during the last fiscal year and held at the end of such year by the
Executive Officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
FISCAL YEAR 1997
<TABLE>
<CAPTION>
NUMBER SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISABLE AT
SHARES OPTIONS FY-END ($)
ACQUIRED ON VALUE FY-END EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ----------------------------- ----------- -------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
James Steenbergen............ 0 $ 0 237,500/250,000 $2,256,250/$2,375,000
David J. Bivolcic............ 8,250 90,534 49,250/117,500 231,648/400,875
James D. Hood................ 0 0 80,000/100,000 449,600/562,000
Benjamin Berry............... 4,000 40,730 90,000/100,000 618,300/687,000
Christopher Barnes........... 0 0 40,000/120,000 0/0
</TABLE>
- ---------------
(1) Value realized is the aggregate market value of the underlying securities at
exercise date less the aggregate exercise price.
(2) Aggregate market value of underlying securities at fiscal year-end less the
aggregate exercise price of "in the money" options. On August 2, 1997, the
closing price for the company's common stock was reported on the Nasdaq
National Market System as $13.75.
In the fiscal year ended August 2, 1997, no options were granted to the
named executive officers.
EMPLOYMENT AGREEMENTS WITH THE COMPANY
Dr. Cioffi is a party to an employment agreement with the Company dated May
5, 1995(the "Cioffi Employment Agreement"). The Cioffi Employment Agreement
establishes a base salary for Dr. Cioffi of $9,000 per month subject to upward
(but not downward) adjustments by the Board of Directors. Under the Cioffi
Employment Agreement, the Company may terminate Dr. Cioffi's employment at any
time, however if Dr. Cioffi is terminated without cause he will be entitled to
receive his full salary until September 30, 1998. In addition, upon termination
without cause by the Company all of Dr. Cioffi's then unvested options granted
prior to the date of the Cioffi Employment Agreement would become immediately
vested and any notes given by Dr. Cioffi to the Company to exercise options
would be forgiven. Dr. Cioffi has also agreed, for a period of one year
following the termination of the Cioffi Employment Agreement, not to (i) compete
with the Company, (ii) solicit the customers of the Company or (iii) solicit the
employees of the Company.
INFORMATION REGARDING INDEMNIFICATION
The Company has the power to indemnify its officers and directors against
liability for certain acts pursuant to Section 145 of the General Corporation
Law of the State of Delaware. The Restated Certificate of Incorporation of the
Company provides that a director of the Company, to the full extent permitted by
the Delaware General Corporation Law, shall not be liable to the Company or its
stockholders for monetary damage for breach of fiduciary duty as a director.
Article IX of the Company's Bylaws provides for the indemnification of
officers, directors, employees and agents of the Company. The Bylaws provide
that the Company shall indemnify its officers, directors, employees and agents
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any threatened, pending, or
completed action, suit or proceeding (other than an action by or in the right of
the corporation), if they acted in good faith and in a manner they reasonably
believe to be in or not opposed to the best interest of the corporation and had
no reasonable cause to believe the conduct was unlawful. In relation to a
proceeding by or in the right of the
A-7
<PAGE> 25
Company, a director, officer, employee or agent shall be indemnified against
expenses actually and reasonably incurred in connection with the defense or
settlement of such proceeding if the officer, director, employee and agent acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, except that 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 for negligence or misconduct in the
performance of his or her duty to the corporation unless and only to the extent
that the Delaware Court of Chancery shall determine that such person is fairly
and reasonably entitled to indemnity. The Bylaws also provide that expenses
incurred by a director, officer, employee or agent may be advanced by the
Company upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he or she is entitled to be indemnified by the Company as authorized in the
Bylaws.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing compensation policies applicable to the Company's executive
officers and, pursuant to such policies, determining the compensation payable to
the Company's Chief Executive Officer and, taking into account recommendations
of the Chief Executive Officer, all other executive officers. The following
report relates to compensation payable to the Company's executive officers for
the year-ended August 2, 1997.
Components of Compensation
There are three components to the compensation payable to the Company's
executive officers: (1) base salary; (2) annual incentive compensation in the
form of cash bonuses; and (3) equity-based incentive compensation in the form of
stock options.
Compensation Policies
The compensation policies of the Compensation Committee are (i) to
establish base salaries which are competitive with those payable by regional
high-technology companies with which the Company competes in the recruitment of
senior management and which fall within the top one-half of salaries payable by
such regional high-technology companies; (ii) to tie cash bonuses to achievement
of pre-established company goals; and (iii) to use stock options to promote
equity ownership in the Company at percentage levels appropriate to executive
positions within the Company.
Compensation Payable to Executive Officers
Base Salaries. Base salaries of executive officers are reviewed and
adjusted annually based on information regarding competitive salaries, including
salary survey data provided by third parties regarding regional high-technology
companies and information prepared by management regarding salaries payable by
the Company's competitors. The average increase in base salaries for all
executive officers corresponds to the average percentage increase in salaries
payable to all employees. Individual increases are established by the
Compensation Committee, taking into account recommendations of the Chief
Executive Officers concerning the overall effectiveness of each executive.
Cash Bonuses. Cash bonuses are determined under the Company's senior
executive incentive program, adopted by the Compensation Committee, which
annually establishes Company goals, and the percentage of target bonus for each
executive officer (a percentage of base salary). If all applicable goals are
achieved, the bonus is paid in full to each executive. No bonus is payable
unless a minimum threshold of the Company's goals are achieved, and larger
bonuses, up to a maximum, are payable in the event the goals are exceeded.
Stock Options. Stock options are granted by the Compensation Committee to
provide equity-based, long term incentive compensation to the Company's
executive officers. The Compensation Committee establishes the maximum amount of
options which may be granted to all employees each year. Individual grants to
executive officers are then made by the Compensation Committee, taking into
account recommendations of
A-8
<PAGE> 26
the Chief Executive Officer, to reflect the executive's overall effectiveness,
as well as the equity ownership goal for each executive. The Compensation
Committee believes that encouraging equity ownership through stock options will
enhance management incentives to improve shareholder value. In addition, the
grant of stock options which vest over time also encourages executives to remain
with the Company and to focus on longer-term results.
Chief Executive Officer Compensation
Compensation payable to the Company's Chief Executive Officer consists of
the same three components described above, and is determined by the Compensation
Committee following the same policies utilized for all executives. Base salary
is reviewed and adjusted annually, utilizing regional salary survey data
provided by outside sources and comparable company information generated by
management, based on the Compensation Committee's evaluation of the Chief
Executive Officer's overall effectiveness. The Chief Executive Officer is
entitled to a bonus under the senior executive incentive program, although his
target bonus represents a greater percentage of base salary than for other
executive officers. The Chief Executive Officer's bonus is primarily tied to the
achievement of Company goals established for the entire year. Consequently, the
Chief Executive Officer's total compensation is more dependent on the Company's
performance than is compensation for other executive officers of the Company. In
addition, the Chief Executive Officer is granted stock options based on the
Compensation Committee's evaluation of the Chief Executive Officer's overall
effectiveness.
COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
DONALD L. LUCAS
AAMER LATIF
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange commission.
Officers, Directors and greater than ten percent stockholders are required by
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review on the copies of such forms received by the
Company during fiscal year 1997 and written representations from certain
reporting persons, the Company believes that all Section 16(a) filing
requirements applicable to all officers, directors, and greater than ten percent
beneficial owners were complied with during fiscal year 1997.
A-9
<PAGE> 27
SCHEDULE A
TEXAS INSTRUMENTS INCORPORATED DESIGNEES
TI's designees to the Company's Board of Directors and certain information
about each, are described below.
WILLIAM A. AYLESWORTH
Senior Vice President, Treasurer and Chief Financial Officer of TI since 1985.
Joined TI in 1967; elected Vice President and Treasurer in 1982.
GEORGE BARBER
President of the Purchaser since its incorporation in November 1997; Vice
President, Semiconductor Group, of TI since August 1995. Joined TI in 1980;
appointed Vice President of TI's Asian operations in 1994.
MARVIN S. SELF
Vice President of the Purchaser since its incorporation in November 1997; Senior
Vice President and Chief Financial Officer, Semiconductor Group, of TI since
August 1996. Joined TI in 1966; appointed Senior Vice President and Chief
Financial Officer, Defense Systems and Software Businesses, of TI in 1995.
RICHARD K. TEMPLETON
Executive Vice President and President, Semiconductor Group, of TI since June
1996. Joined TI in 1980; elected Senior Vice President, Semiconductor Group, in
1994.
GREGORY L. WATERS
Vice President of the Purchaser since its incorporation in November 1997;
Director of Network Access Products, Semiconductor Group, of TI since September
1997. Joined TI in 1983; appointed Manager of TI Networking Business,
Semiconductor Group, of TI in 1996.
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- ------------------------------------------------------------------------------
<S> <C>
Exhibit(a)(1) Press Release, dated November 19, 1997 issued by Texas Instruments
Incorporated
Exhibit(a)(2) Opinion of Deutsche Morgan Grenfell Inc.*
Exhibit(a)(3) Form of Letter to Stockholders of the Company dated November 25, 1997*
Exhibit(c)(1) Agreement and Plan of Merger, dated as of November 19, 1997 among Amati
Communications Corporation, Texas Instruments Incorporated and DSL Acquisition
Corporation
Exhibit(c)(2) Loan and Security Agreement, dated as of November 19, 1997 among Amati
Communications Corporation and Texas Instruments Incorporated
Exhibit(c)(3) Confidentiality Agreement
Exhibit(c)(4) Retention Agreement between Texas Instruments Incorporated and James
Steenbergen
Exhibit(c)(5) Retention Agreement between Texas Instruments Incorporated and Ronald Carlini
Exhibit(c)(6) Retention Agreement between Texas Instruments Incorporated and James Hood
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders.
<PAGE> 29
EXHIBIT (a)(1)
NEWS RELEASE
C-97087
TI TO ACQUIRE AMATI COMMUNICATIONS FOR $395 MILLION
MOVE STRENGTHENS TI POSITION IN EMERGING $6 BILLION MARKET
Dallas (November 19, 1997) -- Texas Instruments (NYSE:TXN, today announced
it has entered into an agreement to acquire Amati Communications Corporation
(NASDAQ:AMTX), further strengthening TI's leadership in providing digital
signal processing solutions for high-speed Internet connectivity. The
agreement provides for an all-cash tender offer for all outstanding shares of
Amati's common stock at $20 per share, or $395 million.
Amati, located in San Jose, California, is a world leader in digital modem
technology, also known as Digital Subscriber Line (xDSL), which lets ordinary
phone lines transmit data as much as 200 times faster than today's typical
analog voiceband modems. Robust implementation of xDSL makes extensive use of
digital signal processing semiconductor technology, an area where TI is the
world leader.
"We are investing in TI's position in the emerging xDSL segment of the
semiconductor market, which we expect to grow rapidly over the next decade to
more than $6 billion," said Rich Templeton, president of TI's semiconductor
group. "Our
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TI to Acquire Amati Communications for $395 million Page 2
vision is to provide digital signal processing solutions across the spectrum of
communications -- from voiceband to broadband."
Digital modems, such as xDSL, will use a digital signal processing
solution at the front and back ends of every connection to the Internet. With
790 million phone lines in use today around the world, that would mean a market
opportunity of more than 1.5 billion sockets, each using a DSP solution.
"The combination of Amati's xDSL technology and TI's digital signal
processing solutions will enable faster, more reliable access to the Internet
and the ability to use a single, existing phone line to simultaneously access
voice, data and video," Templeton said.
For example, home computer users could use the phone lines already in
their homes to log onto network services, send a fax and play an interactive
game on the Internet -- all at the same time. Software and electronic content
companies could leverage the higher bandwidth to distribute their products over
the Internet instead of delivering floppy disks and CD-ROMs through traditional
retail channels.
"The combination of both companies' leadership technologies enables the
large scale deployment of digital modems, and provides a worldwide reach for
the experience and accomplishments of Amati's employees," said Jim Steenbergen,
president and CEO of Amati Communications.
This acquisition broadens the cooperative relationship that TI and Amati
have had during the last year to build an xDSL chipset using TI's TMS320C6x
core DSP technology and precision mixed-signal components, and Amati's leading
discrete multitone (DMT) technology software. This chipset will be the
industry's first fully software-programmable xDSL solution, which will mean that
customers can upgrade their modems through a software download as new standards
become available. Customer samples of this chipset are expected to be
available in the first quarter of 1998.
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TI to Acquire Amati Communications for $395 million Page 3
TI will, subject to satisfaction of certain conditions, commence the
all-cash tender offer on November 25, 1997, and the tender offer is scheduled
to expire at midnight EST, December 23, 1997, unless extended. TI intends to
acquire the Amati common stock through a wholly-owned subsidiary of TI. Any
shares not purchased in the tender offer will be acquired for the tender offer
price in cash in a second-step merger.
The boards of directors of both companies have unanimously approved the
acquisition, and the Amati board of directors has recommended that Amati's
stockholders accept TI's all-cash tender offer. Consummation of the
acquisition is contingent upon the tender of a majority of Amati's outstanding
common stock on a fully-diluted basis, the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act and other customary requirements.
Concurrently, TI announced that TI and Westell Technologies, Inc. have
entered into a strategic technology development program that will accelerate
the use of TI's DSP-based xDSL technologies into Westell's DSL systems. These
solutions will incorporate Amati's Discrete Multi-Tone software technology.
This arrangement is contingent on the consummation of TI's acquisition of
Amati.
TI expects to take a one-time charge in the fourth quarter for in-process
research and development. Amati will become a wholly-owned subsidiary of TI
reporting into the Semiconductor Group and will continue to operate from its
facilities in San Jose. Amati had fiscal year sales of $13.2 million for 1997
and has approximately 120 employees.
Amati terminated its merger agreement with Westell Technologies to enter
into the definitive agreement with TI for the acquisition of Amati.
Termination of the Westell merger agreement required the payment of a break-up
fee of $14.8 million to Westell.
TI has made a number of strategic investments in recent months in support
of digital signal processing solutions. Acquisitions have included SSi, Tartan
and Intersect Technologies, which brought TI additional expertise in the areas
of hard-disk drives/mass
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TI to Acquire Amati Communications for $395 million Page 4
storage and DSP software tools. Recently, TI announced a $100 million venture
fund to seed new markets related to digital signal processing, and $25 million
for additional university research in DSP. On September 9, TI formally opened
a $150 million research and development center in Dallas that will serve as the
technology base for the ongoing creation of leading-edge digital signal
processing solutions.
# # #
NOTE TO EDITORS: Texas Instruments Incorporated is a global semiconductor
company and the world's leading designer and supplier of digital signal
processing solutions, the engines driving the digitization of electronics.
Headquartered in Dallas, Texas, the company's businesses also include
calculators, productivity products, controls and sensors, metallurgical
materials and digital light processing technologies. The company has
manufacturing or sales operations in more than 25 countries.
Texas Instruments is traded on the New York Stock Exchange under the symbol
TXN. More information is located on the World Wide Web at http://www.ti.com
Amati is a pioneer and leading developer of advanced transmission equipment
utilizing DMT technology for the Asymmetric Digital Subscriber Line (ADSL),
Very High-Speed Digital Subscriber Line (VDSL) and xDSL markets. Amati is the
holder of the ADSL/DMT patents and has licensed the technology to companies
such as Alcatel, Analog Devices, Inc., Nortel, Pairgain and Motorola. The
ADSL/DMT technology, recently selected by BC TEL, Canada for a proposed rollout
of commercial ADSL services, is an effective means of transmitting high-speed
data over existing copper phone lines, making internet access, interactive
services, broadcast quality video and video-on-demand realizable to many
subscribers.
More information is located on the World Wide Web at http://www.amati.com
<PAGE> 33
EXHIBIT (a)(2)
LOGO
Board of Directors
Amati Communications Corporation
2043 Samaritan Drive
San Jose, CA 95124
Members of the Board:
We understand that Amati Communications Corporation ("Amati"), Texas
Instruments, Inc. ("TI") and DSL Acquisition Corp. ("Acquisition Sub"), a
wholly-owned subsidiary of TI, have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
TI, through Acquisition Sub, will make a tender offer for all of the outstanding
shares of common stock, par value $.20 per share, of Amati (the "Amati Common
Stock") for $20.00 per share net to the seller in cash (the "Offer") and,
following consummation of the Offer, TI will cause Acquisition Sub to be merged
with and into Amati (the "Merger"). Pursuant to the Merger, Amati will become a
wholly-owned subsidiary of TI and each outstanding share of Amati Common Stock,
other than shares held in treasury or held by TI or any affiliate of TI or as to
which dissenters' rights have been perfected, will be converted into the right
to receive $20.00 per share in cash. The terms and conditions of the Offer and
the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the cash consideration to be
received by the holders of Amati Common Stock (other than TI and its affiliates)
in the Offer and the Merger is fair from a financial point of view to such
holders.
For purposes of the opinion set forth herein, we have:
i. analyzed certain publicly available financial statements and other
information of Amati and TI, respectively;
ii. analyzed certain internal financial statements and other financial
and operating data concerning Amati prepared by the management of
Amati;
iii. analyzed certain financial projections relating to Amati prepared by
the management of Amati;
iv. discussed the past and current operations and financial condition and
the prospects of Amati with senior executives of Amati;
v. reviewed the reported prices and trading activity for the Amati
Common Stock;
<PAGE> 34
LOGO
vi. compared the financial performance of Amati and the prices and
trading activity of the Amati Common Stock with that of certain other
comparable publicly-traded companies and their securities;
vii. reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
viii. participated in discussions and negotiations among representatives
of Amati and TI and their respective financial and legal advisors;
ix. reviewed the Merger Agreement and certain related agreements; and
x. performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of Amati.
We have not made any independent valuation or appraisal of the assets,
liabilities or technology of Amati nor have we been furnished with any such
appraisals. We have assumed that the Offer and the Merger will each be
consummated in accordance with the terms set forth in the Merger Agreement. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Amati in
connection with this transaction and will receive a fee for our services. In
addition, in the ordinary course of our business, we may actively trade the
securities and loans of Amati and TI for our own account and for the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities and loans.
It is understood that this letter is for the information of the Board of
Directors of Amati and may not be used for any other purpose without our prior
written consent. In addition, we express no recommendation to the stockholders
of Amati as to whether or not to tender shares of Amati Common Stock pursuant to
the Offer.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the cash consideration to be received by the holders of Amati Common
Stock (other than TI and its affiliates) in the Offer and Merger is fair from a
financial point of view to such holders.
Very truly yours,
DEUTSCHE MORGAN GRENFELL INC.
By: /s/ GEORGE F. BOUTROS
--------------------------------------
George F. Boutros
Managing Director
By: /s/ DAVID A. POPOWITZ
--------------------------------------
David A. Popowitz
Vice President
2
<PAGE> 35
EXHIBIT (a)(3)
LOGO
November 25, 1997
Dear Stockholders:
I am pleased to inform you that on November 19, 1997, Amati Communications
Corporation entered into an Agreement and Plan of Merger with Texas Instruments
Incorporated. Pursuant to this merger agreement, a subsidiary of Texas
Instruments is commencing a cash tender offer to purchase all of the outstanding
shares of Amati's Common Stock at a price of $20.00 per share. Following
completion of the tender offer, upon the terms and subject to the conditions of
the merger agreement, the Texas Instruments subsidiary will be merged with and
into Amati, and each share of Amati's Common Stock not purchased in the tender
offer (other than any shares owned by Amati or any of its subsidiaries, Texas
Instruments or any of its subsidiaries and any dissenting stockholders) will be
converted into the right to receive $20.00 per share in cash, without interest.
Upon consummation of these transactions, Texas Instruments and its affiliates
will own the entire equity interest in Amati.
THE BOARD OF DIRECTORS OF AMATI HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE TENDER OFFER
AND THE MERGER, HAS DETERMINED THAT THE TENDER OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF AMATI'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS OF AMATI ACCEPT THE TEXAS INSTRUMENTS TENDER OFFER AND
TENDER THEIR SHARES THEREUNDER.
Accompanying this letter, in addition to the attached Schedule 14D-9
relating to the tender offer, is the Offer to Purchase, dated November 25, 1997,
of the Texas Instruments subsidiary making the tender offer together with
related materials including a Letter of Transmittal to be used for tendering
your shares. These documents set forth the terms and conditions of the offer and
the merger, provide detailed information about the transactions and include
instructions as to how to tender your shares. I urge you to read the enclosed
materials carefully.
Very truly yours,
LOGO
James E. Steenbergen
President and Chief Financial Officer
2043 Samaritan Drive, San Jose, CA 95124 Tel 408.879.2000 408.879.2900
<PAGE> 36
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
TEXAS INSTRUMENTS INCORPORATED
DSL ACQUISITION CORPORATION
and
AMATI COMMUNICATIONS CORPORATION
November 19, 1997
<PAGE> 37
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.4 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.5 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.7 Directors and Officers of the Surviving Corporation . . . . . . . . . . . . . . . . . . . . 5
Section 1.8 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.9 Merger Without Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.4 Company Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.5 Company Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3 Authorization; Validity of Agreement; Company Action . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.9 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.11 Permits; No Default; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . 19
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.13 Certain Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<PAGE> 38
<TABLE>
<S> <C> <C>
Section 3.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.16 Employee and Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.17 Information in Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.18 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.20 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.2 Authorization; Validity of Agreement; Necessary Action . . . . . . . . . . . . . . . . . . 25
Section 4.3 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.5 Information in Offer Documents; Proxy Statement . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.6 Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.7 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.8 Purchaser's Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.3 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.7 Approvals and Consents; Cooperation; Notification . . . . . . . . . . . . . . . . . . . . . 31
Section 5.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.10 Shareholder Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.11 Loan and Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . 33
Section 6.2 Conditions to the Obligations of the Company to Effect the Merger . . . . . . . . . . . . . 33
Section 6.3 Conditions to the Obligations of Parent and the Purchaser to Effect the Merger . . . . . . 33
</TABLE>
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<TABLE>
<S> <C> <C>
Section 6.4 Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
TERMINATION
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.2 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.6 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.9 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.10 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.13 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.14 Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ANNEX A
CONDITIONS TO THE OFFER
</TABLE>
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<PAGE> 40
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 19, 1997 (this
"Agreement"), by and among TEXAS INSTRUMENTS INCORPORATED, a Delaware
corporation ("Parent"), DSL ACQUISITION CORPORATION, a Delaware corporation and
a wholly-owned subsidiary of Parent (the "Purchaser"), and AMATI COMMUNICATIONS
CORPORATION, a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, the Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the acquisition of the Company by Parent
and the Purchaser upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as practicable (but in
no event later than five business days from the public announcement of the
execution hereof), the Purchaser shall commence (within the meaning of Rule
14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), an offer (the "Offer") to purchase for cash any and all of the issued
and outstanding shares of Common Stock, par value $0.20 per share (referred to
herein as either the "Shares" or "Company Common Stock"), of the Company at a
price of $20.00 per Share, net to the seller in cash (such price, or such
higher price per Share as may be paid in the Offer, being referred to herein as
the "Offer Price"). The Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
pay for Shares tendered as soon as it is legally permitted to do so under
applicable law; provided that, if the number of Shares that have been
physically tendered and not withdrawn are more than 80% but less than 90% of
the outstanding Shares determined on a fully diluted basis, the Purchaser may
extend the Offer for up to five business days and thereafter on a day-to-day
basis for up to an additional five business days from the date that all
conditions to the Offer shall first have been satisfied or waived. The
obligations of the Purchaser to accept for payment and to pay for any and all
Shares validly tendered on or prior to the expiration of the Offer and not
withdrawn shall be subject only to there being validly tendered and not
withdrawn prior to the expiration of the Offer, that number of Shares which,
together with any Shares beneficially owned by Parent or the Purchaser,
represent at least a
<PAGE> 41
majority of the Shares outstanding on a fully diluted basis (the "Minimum
Condition") and the other conditions set forth in Annex A hereto. The Offer
shall be made by means of an offer to purchase (the "Offer to Purchase")
containing the terms set forth in this Agreement, the Minimum Condition and the
other conditions set forth in Annex A hereto. The Purchaser shall not amend or
waive the Minimum Condition and shall not decrease the Offer Price or decrease
the number of Shares sought, or amend any other term or condition of the Offer
in any manner adverse to the holders of the Shares or extend the expiration
date of the Offer without the prior written consent of the Company (such
consent to be authorized by the Board of Directors of the Company or a duly
authorized committee thereof). Notwithstanding the foregoing, the Purchaser
shall, and Parent agrees to cause the Purchaser to, extend the Offer from time
to time until February 23, 1998 if, and to the extent that, at the initial
expiration date of the Offer, or any extension thereof, all conditions to the
Offer have not been satisfied or waived. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase, in each case without the consent of the Company.
(b) As soon as practicable on the date the Offer is
commenced, Parent and the Purchaser shall file with the United States
Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer (together with all amendments and
supplements thereto and including the exhibits thereto, the "Schedule 14D-1").
The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form
of letter of transmittal and summary advertisement (collectively, together with
any amendments and supplements thereto, the "Offer Documents"). The Offer
Documents will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall
not 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 were made,
not misleading, except that no representation is made by Parent or the
Purchaser with respect to information supplied by the Company in writing for
inclusion in the Offer Documents. Each of Parent and the Purchaser further
agrees to take all steps necessary to cause the Offer Documents to be filed
with the SEC and to be disseminated to holders of Shares, in each case as and
to the extent required by applicable federal securities laws. Each of Parent
and the Purchaser, on the one hand, and the Company, on the other hand, agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false and misleading
in any material respect and the Purchaser further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Company and its counsel
shall be given a reasonable opportunity to review the initial Schedule 14D-1
before it is filed with the SEC. In addition, Parent and the Purchaser agree
to provide the Company and its counsel in writing with any comments or other
communications that Parent, the Purchaser or their counsel may receive from
time to time from the SEC or its staff
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with respect to the Offer Documents promptly after the receipt of such comments
or other communications.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the
Offer and represents that the Board of Directors, at a meeting duly called and
held, has (i) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (as defined in Section 1.4), which approvals
constitute approval of this Agreement, the Offer and the Merger for purposes of
Section 203 of the General Corporation Law of the State of Delaware (the
"DGCL"), and (ii) resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares thereunder to the Purchaser and approve
and adopt this Agreement and the Merger, which recommendation shall not be
withdrawn, modified or amended except as permitted by Section 5.4(b) hereof.
(b) The Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-9") which shall, subject to the fiduciary duties of the Company's
directors under applicable law and to the provisions of this Agreement, contain
the recommendation referred to in clause (ii) of Section 1.2(a) hereof. The
Company will use its reasonable best efforts to cause the Schedule 14D-9 to be
filed on the same date that the Schedule 14D-1 is filed; provided, however,
that in any event the Schedule 14D-9 will be filed no later than ten business
days following the commencement of the Offer. The Schedule 14D-9 will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, sent
or given to the Company's shareholders, shall not 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 were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Offer Documents. The
Company further agrees to take all steps necessary to cause the Schedule 14D-9
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws. Each
of the Company, on the one hand, and Parent and the Purchaser, on the other
hand, agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false and
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws. Parent and its
counsel shall be given a reasonable opportunity to review the initial Schedule
14D-9 before it is filed with the SEC. In addition, the Company agrees to
provide Parent, the Purchaser and their counsel in writing with any comments or
other communications that the Company or its counsel may receive from time to
time from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments or other communications.
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(c) In connection with the Offer, the Company will
promptly furnish or cause to be furnished to the Purchaser mailing labels,
security position listings and any available listing or computer file
containing the names and addresses of the record holders of the Shares as of a
recent date (which shall in no event be more than ten days prior to the date
hereof), and shall furnish the Purchaser with such additional information
(including updated lists of holders of Shares and their addresses, mailing
labels and lists of security positions) and such other assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to
the record and beneficial shareholders of the Company. Except for such steps
as are necessary to disseminate the Offer Documents, Parent and the Purchaser
shall hold in confidence the information contained in any of such labels and
lists and the additional information referred to in the preceding sentence,
will use such information only in connection with the Offer, and, if this
Agreement is terminated, will upon request of the Company deliver or cause to
be delivered to the Company all copies of such information then in its
possession or the possession of its agents or representatives.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for Shares
by Parent or any of its subsidiaries which represent at least a majority of the
outstanding shares of Company Common Stock (on a fully diluted basis), Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as is equal to the
product of the total number of directors on such Board (giving effect to the
directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser, Parent and any of their affiliates (including Shares accepted for
payment) bears to the total number of shares of Company Common Stock then
outstanding. The Company shall, upon request of the Purchaser, on the date of
such request, either increase the size of its Board of Directors or secure the
resignations of such number of its incumbent directors as is necessary to
enable Parent's designees to be so elected to the Company's Board, and shall
cause Parent's designees to be so elected as either may be necessary to comply
with the preceding sentence. Notwithstanding the foregoing, until the
Effective Time (as defined in Section 1.5 hereof), the Company shall retain as
members of its Board of Directors at least two directors who are directors of
the Company on the date hereof; provided, that subsequent to the purchase of
and payment for Shares pursuant to the Offer, Parent shall always have its
designees represent at least a majority of the entire Board of Directors. The
Company's obligations under this Section 1.3(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to such Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.3(a),
including mailing to stockholders the information required by such Section
14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected
to the Company's Board of Directors. Parent or the Purchaser will supply the
Company any information with respect to either of them and their nominees,
officers, directors and affiliates required by such Section 14(f) and Rule
14f-1.
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(b) From and after the time, if any, that Parent's
designees constitute a majority of the Company's Board of Directors, any
amendment of this Agreement, any termination of this Agreement by the Company,
any extension of time for performance of any of the obligations of Parent or
the Purchaser hereunder, any waiver of any condition or any of the Company's
rights hereunder or other action by the Company in connection with the rights
of the Company hereunder may be effected only by the action of a majority of
the directors of the Company then in office who were directors of the Company
on the date hereof, which action shall be deemed to constitute the action of
the full Board of Directors; provided, that if there shall be no such
directors, such actions may be effected by unanimous vote of the entire Board
of Directors of the Company.
Section 1.4 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section 1.5 hereof), the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
which (a) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (b) the
Company shall be the successor or surviving corporation in the Merger (the
"Surviving Corporation") and shall continue to be organized under the laws of
the State of Delaware, and (c) the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. Pursuant to the Merger, (x) the Certificate
of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation, and (y) the By-laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation
and such Bylaws. The Merger shall have the effects set forth in the DGCL.
Section 1.5 Effective Time. On the date of the Closing (as
defined in Section 1.6 hereof) (or on such other date as the parties may
agree), the parties shall file a certificate of merger or other appropriate
document (in any such case, the "Certificate of Merger") executed in accordance
with the relevant provisions of the DGCL, and shall make all other filings,
recordings and publications required by the DGCL with respect to the Merger.
The Merger shall become effective on the date specified in the Certificate of
Merger (the time the Merger becomes effective is hereinafter referred to as the
"Effective Time").
Section 1.6 Closing. The closing of the Merger (the "Closing")
will take place at 11:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300,
Dallas, Texas 75201, unless another date or place is agreed to in writing by
the parties hereto.
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Section 1.7 Directors and Officers of the Surviving Corporation.
The directors of the Purchaser immediately prior to the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws. The
officers of the Company immediately prior to the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation until
their successors shall have been duly elected or appointed or qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-laws.
Section 1.8 Stockholders' Meeting.
(a) If the Purchaser owns less than 90% of the Shares
following the purchase of Shares by the Purchaser pursuant to the Offer, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as
soon as practicable following the acceptance for payment and
purchase of Shares by the Purchaser pursuant to the Offer for
the purpose of considering and taking action upon this
Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement, obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, respond promptly
to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a
definitive proxy or information statement (the "Proxy
Statement") to be mailed to its stockholders and use its best
efforts to obtain the necessary adoption of this Agreement by
its stockholders; and
(iii) subject to the fiduciary obligations of the
Board under applicable law as advised by the Company's outside
counsel, include in the Proxy Statement the recommendation of
the Board that stockholders of the Company vote in favor of
the adoption of this Agreement.
(b) Parent agrees that it will provide the Company with
the information concerning Parent and the Purchaser required to be included in
the Proxy Statement and will vote, or cause to be voted, all of the Shares then
owned by Parent, the Purchaser or any of its other subsidiaries and affiliates
in favor of the approval of the Merger and the adoption of this Agreement.
Section 1.9 Merger Without Meeting of Stockholders.
Notwithstanding Section 1.8 hereof, in the event that the Purchaser shall
acquire at least 90% of the outstanding shares of
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<PAGE> 46
each class of capital stock of the Company, pursuant to the Offer or otherwise,
the parties hereto agree to take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any shares of Company Common Stock or common stock of the Purchaser (the
"Purchaser Common Stock"):
(a) Each issued and outstanding share of the Purchaser
Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Any shares of Company Common Stock owned by Parent,
the Purchaser or any other wholly owned Subsidiary (as defined in Section 3.1
hereof) of Parent shall be cancelled and retired and shall cease to exist and
no consideration shall be delivered in exchange therefor.
(c) Each issued and outstanding share of Company Common
Stock (other than Shares to be cancelled in accordance with Section 2.1(b)
hereof and any Dissenting Shares (if applicable and as defined in Section 2.3
hereof)), shall be converted into the right to receive the Offer Price, payable
to the holder thereof, without interest (the "Merger Consideration"), upon
surrender of the certificate formerly representing such share of Company Common
Stock in the manner provided in Section 2.2 hereof. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance
with Section 2.2 hereof, without interest, or to perfect any rights of
appraisal as a holder of Dissenting Shares (as hereinafter defined) that such
holder may have pursuant to Section 262 of the DGCL.
Section 2.2 Exchange of Certificates.
(a) Parent shall designate a bank or trust company, or an
affiliate thereof, of nationally recognized standing to act as agent for the
holders of shares of Company Common Stock in connection with the Merger (the
"Paying Agent") to receive the funds to which holders of shares of Company
Common Stock shall become entitled pursuant to Section 2.1(c) hereof. Prior to
the Effective Time, Parent shall take all steps necessary to deposit or cause
to
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<PAGE> 47
be deposited with the Paying Agent such funds for timely payment hereunder.
Such funds shall be invested by the Paying Agent as directed by Parent or the
Surviving Corporation.
(b) As soon as reasonably practicable after the Effective
Time but in no event more than three business days thereafter, the Paying Agent
shall mail to each holder of record of a certificate or certificates, which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates"), whose shares were converted pursuant
to Section 2.1 hereto into the right to receive the Merger Consideration (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 Paying Agent and shall be in such form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration for each share of Company Common Stock
formerly represented by such Certificate and the Certificate so surrendered
shall forthwith be cancelled. If payment of the Merger Consideration is to be
made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) At the Effective Time, the stock transfer books of
the Company shall be closed and thereafter there shall be no further
registration of transfers of shares of Company Common Stock on the records of
the Company. From and after the Effective Time, the holders of Certificates
evidencing ownership of shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(d) At any time following one year after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent
to deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect
to the Merger Consideration
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<PAGE> 48
payable upon due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with the DGCL ("Dissenting Shares") shall not be converted into a
right to receive the Merger Consideration, unless and until such holder fails
to perfect or withdraws or otherwise loses his or her right to appraisal. A
holder of Dissenting Shares shall be entitled to receive payment of the
appraised value of such Shares held by him or her in accordance with the
provisions of Section 262 of the DGCL, unless, after the Effective Time, such
holder fails to perfect or withdraws or loses his or her right to appraisal, in
which case such Shares shall be treated as if they had been converted as of the
Effective Time into a right to receive the Merger Consideration, without
interest thereon.
Section 2.4 Company Option Plans.
(a) The options (the "Options") to purchase shares of
Company Common Stock outstanding under the Company's 1981 Stock Option Plan,
1981 Supplemental Stock Option Plan, 1990 Stock Option Plan, Old Amati 1992
Stock Option Plan, 1990 Non-Employee Directors' Stock Option Plan and 1996
Stock Option Plan (the "Option Plans") shall, pursuant to the terms of such
Option Plans, not automatically vest as a consequence of the transactions
contemplated hereby nor shall the Board of Directors of the Company exercise
any discretionary authority to vest such Options in connection with the
transactions contemplated hereby; provided, that notwithstanding the foregoing,
Options (the "Director Options") granted to non-employee directors of the
Company pursuant to any of the Option Plans shall be treated in the manner
contemplated by Section 2.4(d).
(b) The holders of outstanding Options (other than
Director Options) that are vested as of the Effective Time shall be given the
opportunity to make an irrevocable election, on a grant by grant basis to be
effective immediately following the Effective Time, to receive in exchange for
the cancellation of each such vested Option either:
(i) cash in the amount equal to the product of (A) the
number of shares of Company Common Stock subject to
such Option and (B) the excess of (1) the Merger
Consideration over (2) the per share exercise price
of such Option; or
(ii) a substitute option to purchase Parent common stock
(a "Substitute Option") on the following terms:
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(A) the Substitute Option will be exercisable for
a number of shares of Parent common stock
equal to (1) the number of shares of Company
Common Stock subject to the Option multiplied
by (2) the Option Ratio (as defined below),
rounded down to the next whole number of
shares;
(B) the exercise price for the Substitute Option
shall equal the exercise price for the shares
of Company Common Stock otherwise purchasable
pursuant to such Option divided by the Option
Ratio, rounded to the nearest hundredth of a
cent; and
(C) shall otherwise be subject to substantially
the same terms and conditions as applicable
to the Option.
For purposes of this Section 2.4, "Option Ratio"
shall mean the Offer Price divided by the average
closing price per share of Parent common stock on the
New York Stock Exchange for the five consecutive
trading days ending immediately prior to the Closing
Date.
(c) The holders of outstanding Options (other than
Director Options) that are not vested as of the Effective Time shall, at the
Effective Time, receive in substitution and cancellation for each such
nonvested Option a Substitute Option, which Substitute Option shall be subject
to the same vesting schedule as applicable to the Option.
(d) Each of the outstanding Director Options granted
pursuant to (i) the 1990 Non-Employee Directors Stock Option Plan shall, in
accordance with the terms thereof, be vested immediately prior to the Effective
Time and (ii) any other Option Plan shall, in accordance with the discretionary
authority granted to the Board of Directors of the Company under the applicable
Option Plan, be vested immediately prior to the Effective Time by action of the
Board of Directors of the Company. Each outstanding Director Option shall, at
the Effective Time, be converted into the right to receive in cash an amount
equal to the product of (i) the number of shares of Company Common Stock
subject to such Director Option and (ii) the excess of (A) the Merger
Consideration over (B) the per share exercise price of such Director Option.
(e) As soon as practicable after the Effective Time and
in no event more than three (3) business days thereafter, to the extent
necessary to provide for registration of shares of Parent common stock subject
to such Substitute Options, Parent shall file a registration statement on Form
S-8 (or any successor form) with respect to such shares of Parent common stock
and shall use its reasonable best efforts to maintain such registration
statement, including the current status of any related prospectus or
prospectuses, for so long as the Substitute Options remain outstanding.
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<PAGE> 50
Section 2.5 Company Warrants. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
each unexpired and unexercised warrant ("Warrant") to purchase shares of
Company Common Stock shall be converted into the right to receive an amount in
cash equal to the product of (a) the number of shares of Company Common Stock
subject to such Warrant and (b) the excess of the (i) Merger Consideration over
(ii) the per share exercise price of such Warrant, upon surrender of the
certificate formerly representing such Warrant; provided, that any Warrant as
to which the per share exercise price is equal to or greater than the Merger
Consideration shall be cancelled and terminated as of the Effective Time
without payment of any consideration therefor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Parent and Purchaser in a letter
delivered to it at or prior to the execution hereof (the "Company Disclosure
Letter"), the Company represents and warrants to Parent and Purchaser as
follows:
Section 3.1 Organization; Subsidiaries. (a) Each of the Company
and its Subsidiaries (as hereinafter defined) is a corporation or other entity
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 business as it is now being conducted, except where failure to be
in good standing would not have a Company Material Adverse Effect (as
hereinafter defined). Each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so duly qualified
and in good standing would not have a Company Material Adverse Effect. As used
in this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation, partnership or other entity or organization, whether incorporated
or unincorporated, of which (i) such party or any other Subsidiary of such
party is a general partner (excluding such partnerships where such party or any
Subsidiary of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries. As used in this Agreement, "Company Material
Adverse Effect" means any change in or effect on the business of the Company
and its Subsidiaries that is materially adverse to the business, financial
condition, assets or results of operations of the Company and its Subsidiaries
taken as a whole except for any events, changes or effects substantially
resulting from (i) any material and adverse change in the financial markets;
(ii) any political, economic or financial conditions affecting the
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<PAGE> 51
industry or business generally; or (iii) the announcement of the transactions
contemplated by this Agreement. Section 3.1 of the Company Disclosure Letter
sets forth a complete and correct list of all of the Company's Subsidiaries and
their respective jurisdictions of incorporation or organization. Except as set
forth in Section 3.1 of the Company Disclosure Letter, neither the Company nor
any Company Subsidiary holds any interest in a partnership or joint venture of
any kind.
(b) The Company has heretofore delivered to Parent a
complete and correct copy of each of its Certificate of Incorporation and
By-Laws, as currently in effect, and has heretofore made available to Parent a
complete and correct copy of the charter and by-laws of each of its
Subsidiaries, as currently in effect. In all material respects, the minute
books of the Company and the Company Subsidiaries through November 1, 1997
contain accurate records of all meetings and accurately reflect all other
actions taken by the stockholders, the Boards of Directors and all committees
of the Boards of Directors of the Company and the Company Subsidiaries since
July 30, 1995. Complete and accurate copies of all such minute books (except
for the portions relating to deliberations regarding the Merger or the proposed
acquisition of the Company by Westell Technologies, Inc. ("Westell"), which
were redacted, or otherwise redacted on the basis of statutory or common law
privilege), and of the stock register of the Company and each Company
Subsidiary have been made available by the Company to Parent.
Section 3.2 Capitalization. (a) As of the date hereof, the
authorized capital stock of the Company consists of 45,000,000 shares of
Company Common Stock and 5,000 shares of preferred stock, par value $100.00 per
share (the "Company Preferred Stock"). As of October 31, 1997, (i) 19,768,978
shares of Company Common Stock were issued and outstanding, (ii) 4,885,599
shares of Company Common Stock were reserved for issuance upon exercise of
Options granted pursuant to the Option Plans, (iii) 630,476 shares of the
Company Common Stock were reserved for issuance upon exercise of the Warrants,
(iv) no shares of Company Common Stock were issued and held in the treasury of
the Company and (v) there were no shares of Company Preferred Stock issued and
outstanding. All the outstanding shares of the Company's capital stock are
duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights. Since October 31, 1997, no additional shares of capital
stock or securities convertible into or exchangeable for such capital stock,
have been issued other than any shares of Company Common Stock issued upon
exercise of the Warrants or Options granted under the Option Plans, and no
shares of Company Preferred Stock have been issued. Section 3.2 of the Company
Disclosure Letter identifies (i) the holders of each of the Options, (ii) the
number of Options vested for each holder, (iii) the Option Plan under which
each Option was issued, and (iv) the exercise price of each of the Options.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance prior to the Effective Time on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.
Except as provided in Section 2.4(d), no vesting of the Options or the Warrants
shall accelerate by virtue of the transactions contemplated by this Agreement
and the Board of Directors of the
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<PAGE> 52
Company has not accelerated any of the Options or Warrants. None of the
Options are "incentive stock options" within the meaning of Section 422 of the
Code. Except for shares of Company Common Stock issuable upon exercise of the
Options or the Warrants described in Section 3.2 of the Company Disclosure
Letter or as otherwise set forth in Section 3.2 of the Company Disclosure
Letter, there are no (i) options, warrants, calls, subscriptions or other
rights, convertible securities, agreements or commitments of any character
obligating the Company or any Company Subsidiary to issue, transfer or sell any
shares of capital stock or other equity interest in, the Company or any Company
Subsidiary or securities convertible into or exchangeable for such shares or
equity interests, (ii) outstanding contractual obligations or commitments of
any character of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any capital stock of the Company or any Company Subsidiary,
(iii) outstanding contractual obligations or commitments of any character
restricting the transfer of, or requiring the registration for sale of, any
capital stock of the Company or any Company Subsidiary, (iv) outstanding
contractual obligations or commitments of any character granting any preemptive
or antidilutive right with respect to, any capital stock of the Company or any
Company Subsidiary or (v) voting trusts or similar agreements to which the
Company or any Company Subsidiary is a party with respect to the voting of the
capital stock of the Company or any Company Subsidiary. Except as set forth in
Section 3.3 of the Company Disclosure Letter, there are no outstanding
contractual obligations of the Company or any Company Subsidiary to provide
funds to, or make any investment (in the form of a loan, capital contribution
or otherwise) in, any Company Subsidiary or any other person, other than
guarantees by the Company of any indebtedness of any Company Subsidiary.
(b) Each outstanding share of capital stock of each
Company Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as disclosed in Section
3.2(b) of the Company Disclosure Letter, all of the outstanding shares of
capital stock of each of Company Subsidiary are owned of record and
beneficially, directly or indirectly, by the Company, free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever, except
where failure to own such shares free and clear would not, individually or in
the aggregate, have a Company Material Adverse Effect.
Section 3.3 Authorization; Validity of Agreement; Company Action.
The Company has full corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the necessary approval of its stockholders,
to consummate the transactions contemplated hereby. The execution, delivery
and performance by the Company of this Agreement, and the consummation by it of
the transactions contemplated hereby, have been duly authorized by its Board of
Directors and, except for those actions contemplated by Section 1.2(a) hereof
and obtaining the approval of its stockholders as contemplated by Section 1.8
hereof, no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by
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the Company and, subject to approval and adoption of this Agreement by the
Company's stockholders (and assuming due and valid authorization, execution and
delivery hereof by Parent and the Purchaser) is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
Section 3.4 Consents and Approvals; No Violations. Except as
disclosed in Section 3.4 of the Company Disclosure Letter and except for (a)
filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (b) applicable requirements under the Exchange Act,
(c) the filing of the Certificate of Merger, (d) applicable requirements under
"takeover" or "blue sky" laws of various states, or (e) matters specifically
described in this Agreement, neither the execution, delivery or performance of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) violate any provision of the
Certificate of Incorporation or By-Laws of the Company or the charter or
by-laws of any of its Subsidiaries, (ii) result in a violation or breach of, or
result in any loss of benefit or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, acceleration or modification) under, any of the terms, conditions
or provisions of any material 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
properties or assets may be bound (the "Material Agreements"), (iii) violate
any order, writ, judgment, injunction or decree applicable to the Company, any
of its Subsidiaries or any of their properties or assets, (iv) violate any law,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, or (v) require on the part of the Company
or any of its Subsidiaries any filing or registration with, notification to, or
authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency (a "Governmental Entity"); except in the case of
clauses (ii), (iv) or (v) for such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations, consents or approvals
the failure of which to obtain, would not have a Company Material Adverse
Effect or would not materially adversely affect the ability of the Company to
consummate the transactions contemplated by this Agreement.
Section 3.5 SEC Reports and Financial Statements. The Company
has filed all reports required to be filed by it with the SEC pursuant to the
Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"),
since July 30, 1995 (as such documents have been amended since the date of
their filing, collectively, the "Company SEC Documents"). The Company SEC
Documents (a) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (b) as of their
respective filing dates, or if amended, as of the date of the last such
amendment, did not contain any untrue
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statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Each of the
historical consolidated balance sheets (including the related notes) included
in the Company SEC Documents fairly presents in all material respects the
financial position of the Company and its consolidated Subsidiaries as of the
date thereof, and the other related historical statements (including the
related notes) included in the Company SEC Documents fairly present in all
material respects the results of operations and cash flows of the Company and
its consolidated Subsidiaries for the respective periods or as of the
respective dates set forth therein. Each of the historical consolidated
balance sheets and historical statements of operations and cash flow (including
the related notes) included in the Company SEC Documents has been prepared in
all material respects in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved, except as otherwise noted therein and, in the case of unaudited
interim financial statements, subject to normal year-end adjustments and except
as permitted by Form 10-Q of the SEC. The books and records of the Company and
its Subsidiaries have been, and are being, maintained in accordance with GAAP
and any other applicable legal and accounting requirements.
Section 3.6 No Undisclosed Liabilities. Except (a) for
liabilities and obligations incurred in the ordinary course of business
consistent with past practices since August 2, 1997, (b) for liabilities and
obligations disclosed in the Company SEC Documents filed prior to the date
hereof, (c) for liabilities and obligations incurred in connection with the
Offer and the Merger or otherwise as contemplated by this Agreement and (d) as
disclosed in Section 3.6 of the Company Disclosure Letter, since August 2,
1997, neither the Company nor any of its Subsidiaries has incurred any material
liabilities or obligations that would be required to be reflected or reserved
against in a consolidated balance sheet of the Company and its consolidated
Subsidiaries prepared in accordance with GAAP as applied in preparing the
consolidated balance sheet of the Company and its consolidated Subsidiaries as
of August 2, 1997.
Section 3.7 Absence of Certain Changes. Except as (a) disclosed
in the Company SEC Documents filed prior to the date hereof, (b) disclosed in
Section 3.7 of the Company Disclosure Letter, (c) contemplated by this
Agreement or (d) occurring pursuant to the express terms of that certain
Agreement and Plan of Merger dated as of September 30, 1997, among Westell,
Kappa Acquisition Corp., a Delaware corporation, and the Company, since August
2, 1997, the Company has conducted its business in the ordinary and usual
course and there has not been:
(i) any transaction, commitment, dispute or other event
or condition (financial or otherwise) of any character (whether or not
in the ordinary course of business) which, alone or in the aggregate,
has had or would have a Company Material Adverse Effect;
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(ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock of the Company 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 such Subsidiary;
(iii) any amendment of any material term of any outstanding
security of the Company or any of its Subsidiaries;
(iv) any acquisition, sale or transfer of any material
assets of the Company or any of its Subsidiaries;
(v) any material contract entered into by the Company or
any of its Subsidiaries or any material amendment or termination of,
or default under, any Material Agreement;
(vi) any making of any loan, advance or capital
contributions to or investment in any Person other than loans,
advances or capital contributions to or investments in wholly-owned
Subsidiaries of the Company made in the ordinary course of business
and payroll, travel and similar advances made in the ordinary course
of business;
(vii) any change in any method of accounting or accounting
practice by the Company or any of its Subsidiaries, except as required
by GAAP; or
(viii) any entering into of any severance, termination pay,
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer
or employee of the Company or any of its Subsidiaries, increase in
benefits payable under any existing severance or termination pay
policies or employment agreements or increase in compensation, bonus
or other benefits payable to directors, officers or employees of the
Company or any of its Subsidiaries, other than in the ordinary course
of business.
Section 3.8 Contracts. Except as disclosed in or attached as
exhibits to the Company SEC Documents or as disclosed in Section 3.8 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) as of the date hereof, which
requires expenditures in excess of $1,000,000 or which requires annual
expenditures in excess of $500,000 and is not cancelable within one year by the
Company, that has not been filed or incorporated by reference in the Company
SEC Documents, (ii) which contains any material non-compete provisions with
respect to any line of business or geographic area in which business is
conducted with respect to the Company or any of the Company
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Subsidiaries or which restricts the conduct of any line of business by the
Company or any of the Company Subsidiaries or any geographic area in which the
Company or any of the Company Subsidiaries may conduct business, in each case
in any material respect, (iii) which are terminable by the other party thereto
which if so terminated would result in a Company Material Adverse Effect, or
(iv) which would prohibit or materially delay the consummation of the
transactions contemplated by this Agreement. The Company has previously made
available to Parent true and correct copies of all such agreements and of all
employment and deferred compensation agreements with directors, officers and
employees, and material agreements with consultants, which are in writing and
to which the Company or any of the Company Subsidiaries is a party. Each
Material Agreement is valid and binding on the Company or any of the Company
Subsidiaries, as applicable, and in full force and effect, and the Company and
each of the Company Subsidiaries have in all material respects performed all
obligations required to be performed by them to date under each Material
Agreement, except where such noncompliance, individually or in the aggregate,
would not have a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary knows of, or has received notice of, any violation or
default under (nor does there exist any condition which with the passage of
time or the giving of notice would cause such a violation of or default under)
any Material Agreement or any other loan or credit agreement, note, bond,
mortgage, indenture or lease, or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that would not, individually
or in the aggregate, result in a Company Material Adverse Effect. Set forth in
Section 3.8 of the Company Disclosure Letter is a description, including
amounts as of the date hereof, of all indebtedness of the Company and the
Company Subsidiaries other than trade payables and accruals. Section 3.8 of
the Company Disclosure Letter sets forth a list of each contract, agreement or
other instrument or obligation between the Company or any of its affiliates, on
the one hand, and Westell or any of its affiliates, on the other hand. Section
3.8 of the Company Disclosure Letter also sets forth a summary of all DMT
licenses in which the Company is a licensee identifying (i) the parties, (ii)
the royalties and basis thereof receivable by the Company as a licensor, (iii)
the royalties and basis thereof payable by the Company to third parties in
respect of any sales by the licensee, (iv) whether for each license, on a
current basis, the amounts receivable by the Company under (ii) above exceed
the amounts payable by the Company under subsection (iii) above and (v) amounts
which would be owing to licensors with respect to a sale by the Company of
products incorporating licensed products purchased from sublicensees.
Section 3.9 Employee Benefit Plans; ERISA.
(a) Section 3.9(a) of the Company Disclosure Letter lists
(i) all "employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all stock
option, stock award, stock purchase or other equity-based compensation, bonus
or other incentive compensation, severance, tuition assistance, salary
continuation, and vacation plans, policies or agreements, written or unwritten,
under which the Company or any of its Subsidiaries has any obligation or
liability (collectively, "Benefit Plans") and (ii) all employment and
consulting agreements with current
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or former officers, employers, consultants, advisors or directors of the
Company or any of its Subsidiaries (collectively, "Benefit Arrangements").
(b) With respect to each Benefit Plan and Benefit
Arrangement, a complete and correct copy of each of the following documents (if
applicable) has been made available to Purchaser: (i) the most recent plan and
related trust documents, and all amendments thereto; (ii) the most recent
summary plan description, and all related summaries of material modifications;
(iii) the most recent Form 5500 (including schedules); (iv) the most recent IRS
determination letter; and (v) the most recent actuarial reports (including for
purposes of Financial Accounting Standards Board report nos. 87, 106 and 112).
(c) Except as set forth in Section 3.9(c) of the Company
Disclosure Letter, with respect to each Benefit Plan: (i) if intended to
qualify under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the rules and regulations promulgated thereunder, such plan
has received a determination letter from the Internal Revenue Service stating
that it so qualifies and that its trust is exempt from taxation under section
501(a) of the Code and nothing has occurred to the knowledge of the Company
since the date of such determination that could adversely affect such
qualification or exempt status; (ii) such plan has been administered in
accordance with its terms and applicable law, except for such non-compliance
which would not have, individually or in the aggregate, a Company Material
Adverse Effect; (iii) no disputes are pending, or, to the knowledge of the
Company, threatened that, individually or in the aggregate, would have a
Company Material Adverse Effect; and (iv) all contributions required to be made
to such plan as of the date hereof (taking into account any extensions for the
making of such contributions) have been made in full.
(d) No Benefit Plan is subject to Title IV of ERISA or
section 412 of the Code. None of the Benefit Plans is a plan described in
Section 3(37), 4063 or 4064 of ERISA.
(e) Except as set forth in Section 3.9(e) of the Company
Disclosure Letter, no liability relating to any Benefit Plan has been or is
expected to be incurred by the Company or any Subsidiary of the Company (either
directly or indirectly, including as a result of an indemnification obligation)
under or pursuant to Part 4 of Title I of ERISA or Title IV of ERISA or the
penalty or the excise tax provisions of the Code, which would have a Company
Material Adverse Effect.
(f) Except as set forth in Section 3.9(f) of the Company
Disclosure Letter, no employee or former employee of the Company or any of its
Subsidiaries will become entitled to any bonus, retirement, severance, job
security or similar or enhanced benefit (including acceleration of vesting,
time of payment, or exercise of a stock option or an incentive award) as a
result of the transactions contemplated hereby.
Section 3.10 Litigation. Except as disclosed in Section 3.10 of
the Company Disclosure Letter or as disclosed in the Company SEC Documents
filed prior to the date
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hereof, there is no action, suit, proceeding, audit or investigation pending
or, to the best knowledge of the Company, action, suit, proceeding, audit or
investigation threatened, involving the Company or any of its Subsidiaries, by
or before any court, governmental or regulatory authority or by any third party
that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement or that, if adversely determined,
would have a Company Material Adverse Effect. Except as disclosed in Section
3.10 of the Company Disclosure Letter or as disclosed in the Company SEC
Documents filed prior to the date hereof, neither the Company nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which has had or, insofar as can be reasonably foreseen, individually or in the
aggregate, would have a Company Material Adverse Effect.
Section 3.11 Permits; No Default; Compliance with Applicable Laws.
Each of the Company and the Company Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals, clearances and orders of any
Governmental Entity necessary for the Company or any Company Subsidiary to own,
lease and operate its properties or to carry on their respective businesses
substantially in the manner described in the Company SEC Documents and as it is
now being conducted (the "Company Permit"), and all such Company Permits are
valid, and in full force and effect, except where the failure to have, or the
suspension or cancellation of, any of the Company Permits would neither,
individually or in the aggregate, (a) have a Company Material Adverse Effect
nor (b) materially adversely affect the ability of the Company to consummate
the transactions contemplated by this Agreement, and no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Company Permits would neither, individually or in
the aggregate, (x) have a Company Material Adverse Effect nor (y) materially
adversely affect the ability of the Company to consummate the transactions
contemplated by this Agreement. The business of the Company and each of its
Subsidiaries is not in default or violation of any term, condition or provision
of (i) its respective certificate of incorporation or by-laws, (ii) any
Material Agreement or (iii) any statute, law, rule, regulation, judgment,
decree, order, permit, license or other governmental authorization or approval
(including any Company Permit) applicable to the Company or any of its
Subsidiaries or by which any property, asset or operation of the Company or any
of its Subsidiaries is bound or affected, including, laws, rules and
regulations relating to the environment, occupational health and safety,
employee benefits, wages, workplace safety, equal employment opportunity and
race, religious or sex discrimination, excluding from clauses (ii) and (iii)
defaults or violations which would not have a Company Material Adverse Effect.
Section 3.12 Taxes. Except as disclosed in Section 3.12 of the
Company Disclosure Letter:
(a) All material Tax Returns required to be filed by or
with respect to the Company and each of its Subsidiaries have been filed. The
Company and each of its
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Subsidiaries has paid (or there has been paid on its behalf) all material Taxes
that are due, except for Taxes being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in the
Company's financial statements (as of the date thereof).
(b) There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to the collection or
assessment of material Taxes due from the Company or any of its Subsidiaries
for any taxable period. No audit or other proceeding by any court,
governmental or regulatory authority, or similar person is pending or, to the
knowledge of the Company, threatened in regard to any material Taxes due from
or with respect to the Company or any of the Subsidiaries. Neither the Company
nor any Subsidiary of the Company has received written notice that any
assessment of material Taxes is proposed against the Company or any of its
Subsidiaries.
(c) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Company or any of its
Subsidiaries by reason of Section 280G of the Code in connection with the
transactions contemplated by this Agreement.
(d) There are no Tax liens upon any property or assets of
the Company or any of the Company Subsidiaries except liens for current Taxes
not yet due and except for liens which have not had and are not reasonably
likely to have a Company Material Adverse Effect.
(e) Neither the Company nor any of its Subsidiaries has
been required to include in income any adjustment pursuant to Section 481 of
the Code by reason of a voluntary change in accounting method initiated by the
Company or any of its Subsidiaries, and the IRS has not initiated or proposed
any such adjustment or change in accounting method, in either case which
adjustment or change has had or is reasonably likely to have a Company Material
Adverse Effect.
(f) Except as set forth in the financial statements
described in Section 3.5, neither the Company nor any of its Subsidiaries has
entered into a transaction which is being accounted for under the installment
method of Section 453 of the Code, which would be reasonably likely to have a
Company Material Adverse Effect. No compensation paid or payable by the
Company is subject to Section 162(m) of the Code.
(g) The term "Taxes" shall mean all taxes, charges, fees,
levies, or other similar assessments or liabilities imposed by the United
States of America, or by any state, local, or foreign government, or any
subdivision, agency, or other similar person of the United States or any such
government, including without limitation (i) income, gross receipts, ad
valorem, premium, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll, and franchise taxes; and (ii) any
interest, penalties or additions to taxes resulting from, attributable to, or
incurred in connection with any Tax or any contest, dispute,
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or refund thereof. The term "Tax Returns" shall mean any report, return, or
statement required to be supplied to a taxing authority in connection with
Taxes.
Section 3.13 Certain Property. The Company and its Subsidiaries,
as the case may be, have good and marketable title in fee simple to all of
their respective real property and good title to all of their respective
leasehold interests and other properties, as reflected in the most recent
balance sheet included in the Company SEC Documents, except for properties and
assets that have been disposed of in the ordinary course of business since the
date of such balance sheet, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever, except (i) the lien for
current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company) or (iii) as
disclosed in the Company SEC Documents, and except for such matters, which
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect. All leases under which the Company leases any
real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or
both would become a default which could reasonably be expected to have a
Company Material Adverse Effect. Section 3.13 of the Company Disclosure Letter
sets forth all liens and security interests granted by the Company or any of
the Company Subsidiaries to third parties.
Section 3.14 Intellectual Property.
(a) The Company has previously given to Parent detailed
information (including, where applicable, federal registration numbers and
dates of registrations or applications for registration) concerning the
following: (i) all of the Company's and the Company Subsidiaries' trademarks,
trademark rights, service marks, trade names, and other trade rights,
indicating which are registered and which are not, including all pending
applications for any registrations thereof, and all patents, patent rights and
copyrights used or proposed to be used by the Company in its business and all
pending applications therefore; (ii) all computer software presently used by
the Company which has been purchased or licensed from outside parties with a
purchase price or license fee in excess of $5,000; and (iii) all other trade
secrets, mailing lists, know-how, designs, plans, specifications and other
intellectual property rights of the Company (whether or not registered or
registrable) (collectively, "Intellectual Property"). Section 3.14 of the
Company Disclosure Letter identifies (i) each patent or registration which has
been issued (and which has not expired or lapsed) to the Company or any of the
Company
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Subsidiaries with respect to any Intellectual Property, (ii) each pending
patent application or application for registration which the Company or any of
the Company Subsidiaries has made with respect to any Intellectual Property,
and (iii) any Intellectual Property that any third party owns and that the
Company or any of the Company Subsidiaries use or propose to use in its
business (including any marketing rights granted to the Company or any of the
Company Subsidiaries under patents owned or licensed by third parties). Except
as set forth in Section 3.14 of the Company Disclosure Letter, (i) the Company
or one of the Company Subsidiaries solely owns or is in sole and exclusive
possession of adequate licenses or other legal rights to use all Intellectual
Property now used or held for use in connection with the business as currently
conducted or as contemplated to be conducted and (ii) neither the Company nor
any of the Company Subsidiaries has disclosed any of the Intellectual Property
other than in a manner reasonably necessary for the operation of their
business. None of the Company or any of the Company Subsidiaries have granted
any licenses of or other rights to use any of the Intellectual Property to any
third party. The Intellectual Property comprises all of the intellectual
property rights that are in the aggregate necessary in any material respect for
the operation of its business as it is presently conducted.
(b) To the Company's knowledge, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
rights of the Company or any of its Subsidiaries, or any Intellectual Property
right of any third party to the extent licensed by or through the Company or
any of its Subsidiaries, by any third party, including any employee or former
employee of the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property.
(c) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property.
(d) All patents, registered trademarks, service marks and
copyrights held by the Company are valid and subsisting. The Company (i) has
not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; (ii) has no
knowledge that the manufacturing, marketing, licensing or sale of its products
infringes any patent, trademark, service mark, copyright, trade secret or other
proprietary right of any third party; and (iii) has not brought any action,
suit or proceeding for infringement of Intellectual Property or breach of any
license or agreement involving Intellectual Property against any third party.
(e) The Company has secured valid written assignments
from all consultants and employees who contributed to the creation or
development of Intellectual Property of the rights to such contributions that
the Company does not already own by operation of law.
(f) The Company has taken all necessary and appropriate
steps to protect and preserve the confidentiality of all Intellectual Property
not otherwise protected by patents, patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by the Company by or to a third party has
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been pursuant to the terms of a written agreement between the Company and such
third party. All use, disclosure or appropriation of Confidential Information
not owned by the Company has been pursuant to the terms of a written agreement
between the Company and the owner of such Confidential Information, or is
otherwise lawful.
Section 3.15 Environmental Matters. Except as disclosed in
Section 3.15 of the Company Disclosure Letter or as disclosed in the Company
SEC Documents:
(a) no notice, request for information, order, complaint
or penalty has been received relating to, and there are no judicial,
administrative or other actions, suits or proceedings pending or, to the
knowledge of the Company, threatened which allege a violation of, any law,
regulation, rule or governmental restriction relating to the environment or to
pollutants, contaminants or wastes, in each case relating to the current or
prior business of the Company or any of its Subsidiaries which, individually or
in the aggregate, would have a Company Material Adverse Effect; and
(b) there has been no environmental assessment,
investigation or audit conducted of which the Company has knowledge in relation
to the current or prior business of the Company or any of its Subsidiaries or
any property or facility now or previously owned, leased or operated by the
Company or any of its Subsidiaries which has not been made available to the
Parent.
Section 3.16 Employee and Labor Matters. Except as set forth in
Section 3.16 of the Company Disclosure Letter and except to the extent that the
failure of any of the following representations to be accurate would not have a
Company Material Adverse Effect: (i) since January 1, 1996 there has been no
labor strike or work stoppage against, or lockout by, the Company or any of its
Subsidiaries, (ii) there is no unfair labor practice charge or complaint
against the Company or any of its Subsidiaries pending before, or, to the
knowledge of the Company or any of its Subsidiaries, threatened by, the
National Labor Relations Board, and (iii) there is no pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened union grievance
against the Company or any of its Subsidiaries.
Section 3.17 Information in Offer Documents. None of the
information supplied or to be supplied by the Company or any of its or agents
for inclusion or incorporation by reference in the Offer Documents or the
Schedule 14D-9, including any amendments or supplements thereto, will at the
respective times the Offer Documents and the Schedule 14D-9 are filed with the
SEC or first published, sent or given to the Company's shareholders, contain
any statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein
not false or misleading. Notwithstanding the foregoing, the Company does not
make any representation or warranty with respect to the information that has
been or will be supplied by Parent or the Purchaser or their officers,
directors, employees, representatives Subsidiaries, or any of their officers,
directors, employees, representatives
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or agents for inclusion or incorporation by reference in any of the foregoing
documents. The Schedule 14D-9 and any amendments or supplements thereto will
comply in all material respects with the applicable provisions of the Exchange
Act and the rules and regulations thereunder.
Section 3.18 Brokers or Finders. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except Deutsche
Morgan Grenfell ("DMG"), the fees and expenses of which will be paid by the
Company in accordance with the Company's agreement with such firm, a true and
complete copy of which has heretofore been furnished to Parent. The Company
has no obligations or commitments to any investment banker or financial advisor
in connection with any future transactions that may be considered or entered
into by the Company after the Effective Time.
Section 3.19 Insurance. The Company maintains insurance coverage
with reputable insurers in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to that of the Company (taking into account the cost and availability
of such insurance).
Section 3.20 Opinion of Financial Advisor. The Company has
received the opinion of DMG to the effect that, as of the date hereof, the
consideration to be received by the stockholders of the Company in the Offer
and the Merger is fair from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND THE PURCHASER
Parent and the Purchaser jointly and severally represent and warrant
to the Company as follows:
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation 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 business as now being conducted. Parent and each of its Subsidiaries is
duly qualified to do business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so duly qualified and in good standing would not have a material
adverse effect on the consummation of the transactions contemplated hereby.
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Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and the Purchaser of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly authorized by their Boards of
Directors and no other corporate action on the part of Parent and the Purchaser
is necessary to authorize the execution and delivery by Parent and the
Purchaser of this Agreement and the consummation by them of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and the Purchaser, as the case may be and (assuming due and valid
authorization, execution and delivery hereof by the Company) is a valid and
binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against them in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for
(a) filings pursuant to the HSR Act, (b) applicable requirements under the
Exchange Act, (c) the filing of the Certificate of Merger, (d) applicable
requirements under "takeover" or "blue sky" laws of various states, or (e) as
described in this Agreement, neither the execution, delivery or performance of
this Agreement by Parent and the Purchaser nor the consummation by Parent and
the Purchaser of the transactions contemplated hereby will (i) violate any
provision of the charter or by-laws or other comparable constituent documents
of Parent or the Purchaser, (ii) result in a violation or breach of, or result
in any loss of benefit or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation, acceleration or modification) 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 Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, (iii) violate any order, writ, judgment, injunction or
decree applicable to Parent, any of its Subsidiaries or any of their properties
or assets, (iv) violate any law, statute, rule or regulation applicable to
Parent, any of its Subsidiaries or any of their properties or assets, or (v)
require on the part of Parent or the Purchaser any filing or registration with,
notification to, or authorization, consent or approval of, any Governmental
Entity, except in the case of clauses (ii), (iv) or (v) for such violations,
breaches or defaults which, or filings, registrations, notifications,
authorizations, consents or approvals the failure of which to obtain, would not
materially adversely affect the ability of Parent and the Purchaser to
consummate the transactions contemplated by this Agreement.
Section 4.4 SEC Reports and Financial Statements. Parent has
filed all reports required to be filed by it with the SEC pursuant to the
Exchange Act and the Securities Act since July 30, 1995 (as such documents have
been amended since the date of their filing, collectively, the "Parent SEC
Documents"). The Parent SEC Documents (a) were prepared in
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accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (b) as of their respective filing dates, or if amended, as
of the date of the last such amendment, did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
historical consolidated balance sheets (including the related notes) included
in the Parent SEC Documents fairly presents in all material respects the
financial position of the Parent and its consolidated Subsidiaries as of the
date thereof, and the other related historical statements (including the
related notes) included in the Parent SEC Documents fairly present in all
material respects the results of operations and cash flows of Parent and its
consolidated Subsidiaries for the respective periods or as of the respective
dates set forth therein. Each of the historical consolidated balance sheets
and historical statements of operations and cash flow (including the related
notes) included in the Parent SEC Documents has been prepared in all material
respects in accordance with GAAP applied on a consistent basis during the
periods involved, except as otherwise noted therein and, in the case of
unaudited interim financial statements, subject to normal year-end adjustments
and except as permitted by Form 10-Q of the SEC. The books and records of
Parent and its Subsidiaries have been, and are being, maintained in accordance
with GAAP and any other applicable legal and accounting requirements.
Section 4.5 Information in Offer Documents; Proxy Statement.
None of the information supplied or to be supplied by Parent or the Purchaser,
or any of their officers, directors, employees, representatives or agents for
inclusion or incorporation by reference in the Offer Documents, the Schedule
14D-9 or the Proxy Statement, including any amendments or supplements thereto,
will, in the case of the Offer Documents and the Schedule 14D-9, at the
respective times the Offer Documents and the Schedule 14D-9 are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the date the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Special Meeting, contain any
statement which, at such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
false or misleading. Notwithstanding the foregoing, Parent and the Purchaser
do not make any representation or warranty with respect to the information that
has been supplied by the Company or any of its Subsidiaries or their officers,
directors, employees, representatives or agents for inclusion or incorporation
by reference in any of the foregoing documents. The Offer Documents and the
Proxy Statement and any amendments or supplements thereto will comply in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder.
Section 4.6 Sufficient Funds. Either Parent or the Purchaser has
sufficient funds available to purchase all of the Shares outstanding on a fully
diluted basis and to pay all fees and expenses related to the transactions
contemplated by this Agreement.
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Section 4.7 Share Ownership. None of Parent, the Purchaser or
any of their respective affiliates beneficially owns any Shares.
Section 4.8 Purchaser's Operations. The Purchaser was formed
solely for the purpose of engaging in the transactions contemplated hereby and
has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as contemplated by this Agreement, (ii)
as disclosed in Section 5.1 of the Company Disclosure Letter or (iii) as agreed
in writing by Parent, after the date hereof, and prior to the time the
directors of the Purchaser have been elected to, and shall constitute a
majority of, the Board of Directors of the Company pursuant to Section 1.3:
(a) the business of the Company and its Subsidiaries
shall be conducted only in the ordinary course of business and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall use its
reasonable best efforts to preserve in all material respects its business
organization intact and maintain its existing relations with customers,
suppliers, employees and business associates;
(b) each of the Company and its Subsidiaries will not,
directly or indirectly, (i) amend its Certificate of Incorporation or By-laws
or similar organizational documents or (ii) split, combine or reclassify its
outstanding capital stock;
(c) neither the Company nor any of its Subsidiaries
shall: (i) declare, set aside or pay any dividend or other distribution
(whether payable in cash, stock or property) with respect to its capital stock
(other than dividends from any Subsidiary of the Company to the Company or any
other Subsidiary of the Company); (ii) issue or sell any additional shares of,
or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries, other than issuances
pursuant to the exercise of Options outstanding on the date hereof; (iii) sell,
lease, license or dispose of any assets or properties, other than in the
ordinary course of business; (iv) incur or modify any material debt, other than
in the ordinary course of business consistent with past practice; (v) license
or sublicense any asset or property of the Company or any Company Subsidiary
except in the ordinary course of business consistent with past practice on a
basis that results in a positive current royalty net of any royalties due by
the Company or any Company Subsidiary on account of sales by the licensee or
sublicensee; or
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(vi) redeem, purchase or otherwise acquire, directly or indirectly, any of its
or its Subsidiaries' capital stock;
(d) neither the Company nor any of its Subsidiaries
shall, except as may be required or contemplated by this Agreement or by
applicable law, (i) enter into, adopt, materially amend or terminate any
employee benefit plans, (ii) amend any employment or severance agreement, (iii)
increase in any manner the compensation or other benefits of its officers or
directors or (iv) increase in any manner the compensation of any other
employees (except, in the case of this clause (iv), for normal increases in the
ordinary course of business);
(e) neither the Company nor any of its Subsidiaries
shall: (i) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the material obligations of
any other person (other than Subsidiaries of the Company), except pursuant to
contractual indemnification agreements entered into in the ordinary course of
business; (ii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to Subsidiaries of the Company and
payroll, travel and similar advances made in the ordinary course of business);
or (iii) make capital expenditures other than pursuant to the Company's current
capital expenditure budget, a copy of which has been provided to Parent;
(f) neither the Company nor any of its Subsidiaries shall
change any of the accounting methods used by it unless required by GAAP or
applicable law;
(g) the Company will not settle or compromise any claim
(including arbitration) or litigation involving payments by the Company in
excess of $250,000 individually which are not subject to insurance
reimbursement without the prior written consent of Parent, which consent will
not be unreasonably withheld;
(h) the Company will not amend, modify or terminate in
any material respect any Material Agreement or enter into any new agreement
material to the business of the Company without the prior written consent of
Parent, which consent shall not be unreasonably withheld; and
(i) neither the Company nor any of its Subsidiaries will
authorize or enter into an agreement to do any of the foregoing.
Section 5.2 Access to Information. Upon reasonable notice, the
Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, access, during normal business hours during the
period prior to the Closing Date, to all its properties, books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the
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requirements of federal securities laws or regulatory boards or agencies and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. Unless otherwise required by law and until the
Closing Date, Parent will hold any such information which is nonpublic in
confidence in accordance with the provisions of the Confidentiality Agreement
between the Company and Parent, dated as of July 22, 1997 (the "Confidentiality
Agreement").
Section 5.3 Employee Benefits.
(a) Parent and the Purchaser agree that the Surviving
Corporation and its Subsidiaries and successors shall provide those persons
who, immediately prior to the Effective Time, were employees of the Company or
its Subsidiaries ("Retained Employees") with employee plans and programs that
provide benefits that are no less favorable in the aggregate to those provided
to such Retained Employees immediately prior to the date hereof. With respect
to such employee plans and programs provided by the Surviving Corporation and
its Subsidiaries and successors, service accrued by such Retained Employees
during employment with the Company and its Subsidiaries prior to the Effective
Time shall be recognized for all purposes, except to the extent necessary to
prevent duplication of benefits.
(b) Parent and the Purchaser agree to honor, and cause
the Surviving Corporation to honor, without modification, all employment and
severance agreements and arrangements, as amended through the date hereof, with
respect to employees and former employees of the Company that are listed in
Section 3.8 of the Company Disclosure Letter (collectively, the "Severance
Agreements").
(c) After the date hereof and prior to the Effective
Time, Parent and the Company shall reasonably cooperate to develop and adopt an
employee retention plan for key employees of the Company, which shall be
subject to Parent approval.
Section 5.4 No Solicitation. (a) The Company and its
Subsidiaries will not, and will use their best efforts to cause their
respective officers, directors, employees and investment bankers, attorneys or
other agents retained by or acting on behalf of the Company or any of its
Subsidiaries not to, (i) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal that constitutes or is
reasonably likely to lead to any Acquisition Proposal (as defined in Section
5.4(c) hereof), (ii) engage in negotiations or discussions (other than to
advise as to the existence of the restrictions set forth in this Section 5.4)
with, or furnish any information or data to, any third party relating to an
Acquisition Proposal, or (iii) enter into any agreement with respect to any
Acquisition Proposal or approve any Acquisition Proposal. Notwithstanding
anything to the contrary contained in this Section 5.4 or in any other
provision of this Agreement, the Company and its Board of Directors (i) may
participate in discussions or negotiations (including, as a part thereof,
making any counterproposal) with or furnish information to any third party
making an unsolicited Acquisition Proposal (a "Potential Acquiror") or approve
an unsolicited Acquisition Proposal if the Company's Board
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of Directors is advised by its financial advisor that such Potential Acquiror
has the financial wherewithal to be reasonably capable of consummating such an
Acquisition Proposal, and the Board determines in good faith (A) after
receiving advice from its financial advisor, that such third party has
submitted to the Company an Acquisition Proposal which is a Superior Proposal
(as defined in Section 5.4(d) hereof), and (B) based upon advice of outside
legal counsel, that the failure to participate in such discussions or
negotiations or to furnish such information or approve an Acquisition Proposal
would violate the Board's fiduciary duties under applicable law. The Company
agrees that any non-public information furnished to a Potential Acquiror will
be pursuant to a confidentiality agreement containing confidentiality and
standstill provisions substantially similar to the confidentiality and
standstill provisions of the Confidentiality Agreement. In the event that the
Company shall determine to provide any information as described above, or shall
receive any Acquisition Proposal, it shall promptly inform Parent in writing as
to the fact that information is to be provided and shall furnish to Parent the
identity of the recipient of such information and/or the Potential Acquiror and
the terms of such Acquisition Proposal, except to the extent that the Board
determines in good faith, based upon advice of its outside legal counsel, that
any such action described in this sentence would violate such Board's fiduciary
duties under, or otherwise violate, applicable law. The Company will inform
Parent of any material amendment to the essential terms of any such Acquisition
Proposal except to the extent that the Board determines in good faith, based
upon advice of outside legal counsel, that any such action would violate such
Board's fiduciary duties under, or otherwise violate, applicable law.
(b) The Board of Directors of the Company shall not (i)
withdraw or modify or propose to withdraw or modify, in any manner adverse to
Parent, the approval or recommendation of such Board of Directors of this
Agreement, the Offer or the Merger or (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal unless, in each case, the Board
determines in good faith (A) after receiving advice from its financial advisor,
that such Acquisition Proposal is a Superior Proposal and (B) based upon advice
of outside legal counsel, that the failure to take such action would violate
the Board's fiduciary duties under applicable law.
(c) For purposes of this Agreement, "Acquisition
Proposal" shall mean any bona fide proposal, whether in writing or otherwise,
made by a third party to acquire beneficial ownership (as defined under Rule
13d-3 of the Exchange Act) of all or a material portion of the assets of, or
any material equity interest in, the Company or its material Subsidiaries
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction involving the Company or its material Subsidiaries
including any single or multi-step transaction or series of related
transactions which is structured to permit such third party to acquire
beneficial ownership of any material portion of the assets of, or any material
portion of the equity interest in, the Company or its material Subsidiaries
(other than the transactions contemplated by this Agreement).
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(d) The term "Superior Proposal" means any bona fide
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than a majority of the Shares then outstanding or
all or substantially all the assets of the Company, and otherwise on terms
which the Board of Directors of the Company determines in good faith to be more
favorable to the Company and its stockholders than the Offer and the Merger
(based on advice of the Company's financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Offer and the Merger), for which financing,
to the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors, after receiving advice from its
financial advisor, is reasonably capable of being financed by such third party.
Section 5.5 Publicity. The initial press releases with respect
to the execution of this Agreement shall be acceptable to Parent and the
Company and shall be in the form of Annex B hereto. Thereafter, so long as
this Agreement is in effect, neither the Company, Parent nor any of their
respective affiliates shall issue or cause the publication of any press release
with respect to the Merger, this Agreement or the other transactions
contemplated hereby without prior consultation with the other party, except as
may be required by law or by any listing agreement with a national securities
exchange or national securities quotation system.
Section 5.6 Indemnification. The Company shall, and from and
after the consummation of the Offer, Parent and the Surviving Corporation shall
jointly and severally, indemnify, defend and hold harmless the present and
former directors and officers of the Company and its Subsidiaries (the
"Indemnified Parties") from and against all losses, expenses, claims, damages
or liabilities arising out of the transactions contemplated by this Agreement
to the fullest extent permitted or required under applicable law. All rights
to indemnification existing in favor of the directors and officers of the
Company as provided in the Company's Certificate of Incorporation or By-laws,
as in effect as of the date hereof, with respect to matters occurring through
the Effective Time, shall survive the Merger and shall not be amended, repealed
or otherwise modified for a period of six years after the consummation of the
Offer in any manner that would adversely affect the rights of the individuals
who at or prior to the consummation of the Offer were directors or officers of
the Company with respect to occurrences at or prior to the consummation of the
Offer and Parent shall cause the Surviving Corporation to honor all such rights
to indemnification.
Section 5.7 Approvals and Consents; Cooperation; Notification.
(a) The parties hereto shall use their respective reasonable best efforts, and
cooperate with each other, to (i) determine as promptly as practicable all
governmental and third party authorizations, approvals, consents or waivers,
including, pursuant to the HSR Act, advisable (in Parent's and Purchaser's
discretion) or required in order to consummate the transactions contemplated by
this Agreement, including, the Offer and the Merger and (ii) obtain such
authorizations, approvals, consents or waivers as promptly as practicable.
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(b) The Company, Parent and the Purchaser shall take all
actions necessary to file as soon as practicable all notifications, filings and
other documents required to obtain all governmental authorizations, approvals,
consents or waivers, including, under the HSR Act, and to respond as promptly
as practicable to any inquiries received from the Federal Trade Commission, the
Antitrust Division of the Department of Justice and any other Governmental
Entity for additional information or documentation and to respond as promptly
as practicable to all inquiries and requests received from any Governmental
Entity in connection therewith.
(c) The Company shall give prompt notice to Parent of (i)
the occurrence of any event, condition or development material to the Company
and its Subsidiaries, taken as a whole, and (ii) any notice from any Person
claiming its consent is required in connection with the transactions
contemplated by this Agreement. Each of the Company and Parent shall give
prompt notice to the other of the occurrence or failure to occur of an event
that would, or, with the lapse of time would cause any condition to the
consummation of the Offer or the Merger not to be satisfied.
Section 5.8 Further Assurances. Each of the parties hereto
agrees to use its respective reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, the Offer
and the Merger.
Section 5.9 Taxes. With respect to any Taxes, the Company shall
not (i) make any material tax election or (ii) settle or compromise any
material income tax liability (whether with respect to amount or timing), in
each case without the prior written consent of Parent which consent shall not
be unreasonably withheld.
Section 5.10 Shareholder Litigation. The Company and Parent agree
that in connection with any litigation which may be brought against the Company
or its directors relating to the transactions contemplated hereby, the Company
will keep Parent, and any counsel which Parent may retain at its own expense,
informed of the course of such litigation, to the extent Parent is not
otherwise a party thereto, and the Company agrees that it will consult with
Parent prior to entering into any settlement or compromise of any such
shareholder litigation; provided, that, no such settlement or compromise will
be entered into without Parent's prior written consent, which consent shall not
be unreasonably withheld.
Section 5.11 Loan and Security Agreement. Concurrently with the
execution and delivery of this Agreement, the Company and Parent shall execute
and deliver the Loan and Security Agreement in the form of Annex C attached
hereto.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been adopted by the
requisite vote of the holders of Company Common Stock, if required by
applicable law and the Certificate of Incorporation (provided that Parent shall
comply with its obligations in respect of the voting of Shares set forth in
Section 1.8(b));
(b) any waiting period applicable to the Merger under the
HSR Act shall have expired or been terminated;
(c) no statute, rule, regulation, order, decree or
injunction shall have been enacted, promulgated or issued by any Governmental
Entity or court which prohibits the consummation of the Merger; and
(d) Parent, the Purchaser or their affiliates shall have
purchased shares of Company Common Stock pursuant to the Offer.
Section 6.2 Conditions to the Obligations of the Company to
Effect the Merger. The obligation of the Company to effect the Merger shall be
further subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of Parent and the
Purchaser shall be true and accurate in all material respects as of the
Effective Time as if made at and as of such time (except for those
representations and warranties that address matters only as of a particular
date or only with respect to a specific period of time which need only be true
and accurate as of such date or with respect to such period); and
(b) each of Parent and the Purchaser shall have performed
in all material respects all of the respective obligations hereunder required
to be performed by Parent or the Purchaser, as the case may be, at or prior to
the Effective Time.
Section 6.3 Conditions to the Obligations of Parent and the
Purchaser to Effect the Merger. The obligations of Parent and the Purchaser to
effect the Merger shall be further subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) the representations and warranties of the Company
shall be true and accurate in all material respects as of the Effective Time as
if made at and as of such time
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(except for those representations and warranties that address matters only as
of a particular date or only with respect to a specific period of time which
need only be true and accurate as of such date or with respect to such period);
and
(b) the Company shall have performed in all material
respects all of the respective obligations hereunder required to be performed
by the Company, at or prior to the Effective Time.
Section 6.4 Exception. The conditions set forth in Section 6.2
and 6.3 hereof shall cease to be conditions to the obligations of the parties
if the Purchaser shall have accepted for payment and paid for Shares validly
tendered pursuant to the Offer.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and
the Merger contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) By the mutual consent of Parent, the Purchaser and
the Company.
(b) By either of the Company, on the one hand, or Parent
and the Purchaser, on the other hand:
(i) if shares of Company Common Stock shall not
have been purchased pursuant to the Offer on or prior to
February 23, 1998, which date may be extended by Parent, in
its sole discretion, for up to an additional 30 days; provided
further, however, that the right to terminate this Agreement
under this Section 7.1(b)(i) shall not be available to any
party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure
of Parent or the Purchaser, as the case may be, to purchase
shares of Company Common Stock pursuant to the Offer on or
prior to such date; or
(ii) if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties hereto shall
use their respective reasonable best efforts to lift), in each
case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement or
prohibiting Parent to acquire or hold or exercise rights of
ownership of the Shares, and such order, decree, ruling or
other action shall have become final and non-appealable.
34
<PAGE> 74
(c) By the Company:
(i) if, prior to the purchase of shares of
Company Common Stock pursuant to the Offer, either (A) a third
party shall have made an Acquisition Proposal that the Board
of Directors of the Company determines in good faith, after
consultation with its financial advisor, is a Superior
Proposal and the Company shall have concurrently executed a
definitive agreement with such third party in respect of such
Superior Proposal, or (B) the Board of Directors of the
Company shall have withdrawn, or modified or changed in any
manner adverse to Parent or the Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger (or
the Board of Directors of the Company resolves to do any of
the foregoing); or
(ii) if Parent or the Purchaser shall have
terminated the Offer, or the Offer shall have expired, without
Parent or the Purchaser, as the case may be, purchasing any
shares of Company Common Stock pursuant thereto; provided that
the Company may not terminate this Agreement pursuant to this
Section 7.1(c)(ii) if the Company is in willful breach of this
Agreement; or
(iii) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure
to satisfy any of the conditions set forth in Annex A hereto,
Parent or the Purchaser shall have failed to commence the
Offer on or prior to five business days following the date of
the initial public announcement of the Offer; provided, that
the Company may not terminate this Agreement pursuant to this
Section 7.1(c)(iii) if the Company is in willful breach of
this Agreement.
(d) By Parent and the Purchaser:
(i) if, prior to the purchase of shares of
Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have withdrawn, modified or
changed in a manner adverse to Parent or the Purchaser its
approval or recommendation of the Offer, this Agreement or the
Merger or shall have recommended an Acquisition Proposal or
shall have executed an agreement in principle or definitive
agreement relating to an Acquisition Proposal or similar
business combination with a person or entity other than
Parent, the Purchaser or their affiliates (or the Board of
Directors of the Company resolves to do any of the foregoing);
or
(ii) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure
to satisfy any of the conditions set forth in Annex A hereto,
Parent or the Purchaser shall have failed to commence the
Offer on or prior to five business days following the date of
the initial public
35
<PAGE> 75
announcement of the Offer; provided that Parent may not
terminate this Agreement pursuant to this Section 7.1(d)(ii)
if Parent or the Purchaser is in willful breach of this
Agreement.
Section 7.2 Effect of Termination.
(a) In the event of the termination of this Agreement as
provided in Section 7.1, written notice thereof shall forthwith be given to the
other party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void,
and there shall be no liability on the part of Parent, the Purchaser or the
Company or their respective directors, officers, employees, shareholders,
representatives, agents or advisors other than, with respect to Parent, the
Purchaser and the Company, the obligations pursuant to this Section 7.2,
Sections 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.10, 8.11, 8.12, 8.13 and the
last sentence of Section 5.2. Nothing contained in this Section 7.2 shall
relieve Parent, the Purchaser or the Company from liability for willful breach
of this Agreement.
(b) In the event that this Agreement is terminated by the
Company pursuant to Section 7.1(c)(i) hereof or by Parent and the Purchaser
pursuant to Section 7.1(d)(i) hereof, the Company shall pay to Parent by
certified check or wire transfer to an account designated by Parent immediately
following receipt of a request therefor, an amount equal to $8 million (the
"Termination Fee").
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action
taken by their respective Boards of Directors (which in the case of the Company
shall include approvals as contemplated in Section 1.3(b)), at any time prior
to the Closing Date with respect to any of the terms contained herein;
provided, however, that after the approval of this Agreement by the
stockholders of the Company, no such amendment, modification or supplement
shall reduce or change the Merger Consideration or adversely affect the rights
of the Company's stockholders hereunder without the approval of such
stockholders.
Section 8.2 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time. This Section
36
<PAGE> 76
8.2 shall not limit any covenant or agreement contained in this Agreement which
by its terms contemplates performance after the Effective Time.
Section 8.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by an overnight courier
service, such as Federal Express, with delivery by such service confirmed, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Texas Instruments Incorporated
7839 Churchill Way
P.O. Box 650311, M/S 3995
Dallas, Texas 75265
Telephone: (972) 917-3810
Telecopy: (972) 917-3804
Attention: Charles D. Tobin
with copies to:
Texas Instruments Incorporated
P.O. Box 655474, M/S 241
Dallas, Texas 75265
Telephone: (972) 995-2551
Telecopy: (972) 995-9133
Attention: Richard J. Aqnich, Esq.
and
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Telephone: (214) 746-7738
Telecopy: (214) 746-7777
Attention: R. Scott Cohen, Esq.
(b) if to the Company, to:
Amati Communications Corporation
2043 Samaritan Drive
San Jose, California 95124
Telephone: (408) 879-2000
37
<PAGE> 77
Telecopy: (408) 879-2900
Attention: James Steenbergen
with a copy to:
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, California 94301-1900
Telephone: (650) 324-7025
Telecopy: (650) 324-0638
Attention: Richard A. Peers, Esq.
Any notice which is not sent to the party's counsel in the manner and at the
address or telecopy number set forth above within 24 hours following the time
such notice is given to such party shall be deemed not to be validly delivered
to such party.
Section 8.4 Interpretation. The words "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. Whenever the words
"include", "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation". The words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations and partnerships and vice versa. The phrase "to the best
knowledge of" or any similar phrase shall mean such facts and other information
which as of the date of determination are actually known to any vice president,
chief financial officer, general counsel, chief compliance officer, controller,
and any officer superior to any of the foregoing, of the referenced party after
the conduct of a reasonable investigation under the circumstances by such
officer. The phrases "the date of this Agreement", "the date hereof" and terms
of similar import, unless the context otherwise requires, shall be deemed to
refer to November 19, 1997. As used in this Agreement, the term "affiliate(s)"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act. 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 favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
Section 8.5 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
38
<PAGE> 78
Section 8.6 Entire Agreement; Third Party Beneficiaries. This
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein) (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Sections 5.3 and 5.6, are not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 8.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof or of any other
jurisdiction.
Section 8.9 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any other
remedy to which they may be entitled at law or in equity, to compel specific
performance of this Agreement in any action instituted in a court of competent
jurisdiction.
Section 8.10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective permitted successors and assigns.
Section 8.11 Expenses. Except as set forth in Section 7.2 hereof,
all costs and expenses incurred in connection with the Offer, the Merger, this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Offer
or the Merger is consummated.
Section 8.12 Headings. Headings of the Articles and Sections of
this Agreement are for convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
Section 8.13 Waivers. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument
39
<PAGE> 79
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure.
Section 8.14 Disclosure Letter. The Company Disclosure Letter
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. Any matter disclosed
pursuant to the Company Disclosure Letter shall be deemed to be disclosed for
all purposes under this Agreement but such disclosure shall not be deemed to be
an admission or representation as to the materiality of the item so disclosed.
40
<PAGE> 80
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
TEXAS INSTRUMENTS INCORPORATED
By: /s/ RICHARD K. TEMPLETON
-------------------------------------
Name: Richard K. Templeton
Title: President, Semiconductor Group
DSL ACQUISITION CORPORATION
By: /s/ GEORGE BARBER
-------------------------------------
Name: George Barber
Title: President
AMATI COMMUNICATIONS CORPORATION
By: /s/ JAMES STEENBERGEN
-------------------------------------
Name: James Steenbergen
Title: President and Chief Executive
Officer
41
<PAGE> 81
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, subject to the
provisions of the Merger Agreement, the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate the Offer and not accept for
payment any tendered Shares if (i) any applicable waiting period under the HSR
Act has not expired or been terminated prior to the expiration of the Offer,
(ii) the Minimum Condition has not been satisfied, or (iii) at any time on or
after November 19, 1997, and before the time of acceptance of Shares for
payment pursuant to the Offer, any of the following events shall occur:
(a) there shall have been any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted or issued
applicable to the Offer or the Merger by any federal or state governmental
regulatory or administrative agency or authority or court or legislative body
or commission which (1) prohibits the consummation of the Offer or the Merger,
(2) prohibits, or imposes any material limitations on, Parent's or the
Purchaser's ownership or operation of all or a material portion of the
Company's businesses or assets or the Shares, except for such prohibitions or
limitations which would not have a Company Material Adverse Effect, (3)
prohibits, or makes illegal the acceptance for payment, payment for or purchase
of Shares or the consummation of the Offer, or (4) renders the Purchaser unable
to accept for payment, pay for or purchase a material portion or all of the
Shares; provided, that the parties shall have used their reasonable best
efforts to cause any such statute, rule, regulation, judgment, order or
injunction to be vacated or lifted;
(b) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and accurate as of the date of
consummation of the Offer as though made on or as of such date (except for
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and accurate as of such date or with respect to such period),
except where the failure of such representations and warranties to be true and
accurate (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), do not, individually or in the
aggregate, have a Company Material Adverse Effect;
(c) the Company shall have breached or failed to perform
or comply with, in all material respects, any material obligation, agreement or
covenant required by the Merger Agreement to be performed or complied with by
it as of the date of consummation of the Offer
A-1
<PAGE> 82
(d) the Merger Agreement shall have been terminated in
accordance with its terms;
(e) the Board of Directors of the Company shall have
withdrawn, modified or changed in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the Merger
or shall have recommended an Acquisition Proposal or shall have executed an
agreement in principle or definitive agreement relating to an Acquisition
Proposal or similar business combination with a person or entity other than
Parent, the Purchaser or their affiliates or the Board of Directors of the
Company shall have adopted a resolution to do any of the foregoing;
(f) Thirty percent (30%) or more of the key personnel of
the Company and its Subsidiaries identified on Schedule A(h) of the Company
Disclosure Letter shall no longer be employed by the Company or its
Subsidiaries or shall have submitted their resignations.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and, subject to the Merger Agreement, may be asserted by either of them
or may be waived by Parent or the Purchaser, in whole or in part at any time
and from time to time in the sole discretion of Parent or the Purchaser. The
failure by Parent or the Purchaser at any time to exercise any such rights
shall not be deemed a waiver of any right and each right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
A-2
<PAGE> 83
EXHIBIT (c)(2)
$19,774,000
LOAN AND SECURITY AGREEMENT
dated as of November 19, 1997
between
AMATI COMMUNICATIONS
CORPORATION
as Borrower
and
TEXAS INSTRUMENTS
INCORPORATED
as Lender
<PAGE> 84
THE FOLLOWING TABLE OF CONTENTS HAS BEEN INSERTED FOR CONVENIENCE ONLY AND
DOES NOT CONSTITUTE A PART OF THIS AGREEMENT.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.3 Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
THE LOAN COMMITMENTS
SECTION 2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.2 Borrowing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.3 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
NOTES EVIDENCING LOANS
SECTION 3.1 Term Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.2 Revolving Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.3 Recordation of Loans and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
INTEREST, ETC.
SECTION 4.1 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.2 Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.3 Default Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.4 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
PAYMENTS AND PREPAYMENTS
SECTION 5.1 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.2 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 85
<TABLE>
<S> <C>
SECTION 5.3 Making of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.4 Due Date Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.6 Forgiveness of Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI
SECURITY
SECTION 6.1 Grant of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.2 Security for Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.3 Continuing Security Interest; Transfer of Note . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.4 Borrower Remains Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.1.1 Location of Collateral, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.1.2 Ownership, No Liens, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.1.3 Possession and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.1.4 Negotiable Documents, Instruments and Chattel Paper . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.1.5 No Default or Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.1.6 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1 Condition Precedent to Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.2 Conditions Precedent to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
COVENANTS AND OTHER AGREEMENTS
SECTION 9.1 Limit on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.2 Prohibition on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 9.3 Notice of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.4 Notice of Defaults and Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.5 ERISA Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9.6 SEC Filings and Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.7 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.8 Maintenance of Assets and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
ii
<PAGE> 86
<TABLE>
<S> <C> <C>
SECTION 9.10 Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.11 Reports to Other Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.12 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.13 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 11.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.6 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 11.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 11.8 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 11.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
iii
<PAGE> 87
EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A Form of Copyright Security Agreement
EXHIBIT B Form of Patent Security Agreement
EXHIBIT C Form of Trademark Security Agreement
EXHIBIT D Form of Term Note
EXHIBIT E Form of Revolving Note
EXHIBIT F Form of Opinion of Borrower's Counsel
SCHEDULES
SCHEDULE I Copyright Collateral
SCHEDULE II Patent Collateral
SCHEDULE III Permitted Liens
SCHEDULE IV Trademark Collateral
SCHEDULE V Collateral Locations
SCHEDULE VI Permitted Indebtedness
iv
<PAGE> 88
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of November 19,
1997, is made by and between AMATI COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Borrower"), and TEXAS INSTRUMENTS INCORPORATED, a Delaware
corporation (together with its successors and assigns, the "Lender").
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided in the Merger Agreement (as hereinafter defined).
RECITALS
WHEREAS, the Borrower desires that the Lender extend financing
to the Borrower pursuant to the terms of this Agreement;
WHEREAS, the Lender is willing to extend financing to the
Borrower pursuant to the terms of this Agreement for the purposes specified
herein; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition precedent thereto, the Borrower, the Lender and
DSL Acquisition Corporation ("Merger Sub") have entered into that certain
Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
pursuant to which the Merger Sub will commence a tender offer for all
outstanding shares of common stock, par value $.20 per share, of the Borrower
and, subject to the consummation of such tender offer, Merger Sub will be
merged with and into the Borrower with the Borrower continuing as the surviving
corporation and a wholly-owned subsidiary of the Lender;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and subject to the terms and conditions hereof, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Agreement" means this Loan and Security Agreement, as
hereafter amended, modified, restated, refinanced, refunded or renewed from
time to time in whole or in part.
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"Authorized Officer" means any one of the following officers
of the Borrower: the Chief Executive Officer, the Chief Financial Officer or
the Vice President, Business Development.
"Borrower" - see Preamble.
"Business Day" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of Texas or is a
day on which banking institutions located in such state are authorized or
required by law or other governmental action to close.
"Code" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations thereunder.
"Collateral" - see Section 6.1.
"Commitments" means the commitments of the Lender to make the
Term Loan and the Revolving Loans pursuant to Sections 2.1(a) and 2.1(b),
respectively.
"Computer Hardware and Software" shall mean (a) all computer
and other electronic data processing hardware, integrated computer systems,
central processing units, memory units, display terminals, printers, features,
computer elements, card readers, tape drives, hard and soft disk drives,
cables, electrical supply hardware, generators, power equalizers, accessories
and all peripheral devices and other related computer hardware, whether now
owned, licensed or leased or hereafter acquired by the Borrower; (b) all
software programs, including source code and object code whether now owned,
licensed or leased or hereafter acquired by the Borrower, designed for use on
the computers and electronic data processing hardware described in clause (a)
above; (c) all firmware associated therewith, whether now owned, licensed or
leased or hereafter acquired by the Borrower; and (d) all documentation for
such hardware, software and firmware described in the preceding clauses (a),
(b) and (c), whether now owned, licensed or leased or hereafter acquired by the
Borrower.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under section 414(b) or section
414(c) of the Code or section 4001 of ERISA.
"Copyright Collateral" shall mean all of the Borrower's right,
title and interest in and to registered and unregistered copyrights (including,
without limitation, copyrights for
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any of the Computer Hardware and Software), copyright registrations and
copyright applications, which, in the case of registrations and applications,
have been or are hereafter issued by or filed with the CRO or any similar
office or agency of any other countries, including, without limitation, the
copyrighted works, copyright registrations and copyright applications listed on
Schedule I attached hereto and made a part hereof.
"Copyright Security Agreement" means a Copyright Security
Agreement in substantially the form attached hereto as Exhibit A.
"CRO" shall mean the United States Copyright Office.
"Default" means any event which if it continues uncured would,
with lapse of time or notice, or both, constitute an Event of Default.
"Dollars" and the sign "$" means lawful money of the United
States of America.
"Equipment" - see Section 6.1.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means any of the events described in
Section 10.1.
"GAAP" - see Section 1.3.
"Indebtedness", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) all notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iii) any obligation owed for all or any part of the deferred
purchase price of property or services (excluding obligations incurred under
ERISA) which purchase price is (x) due more than six months from the date of
incurrence of the obligation in respect thereof or (y) evidenced by a note or
similar written instrument, (iv) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person and (v) that portion of obligations
with respect to capital leases that is properly classified as a liability on a
balance sheet in conformity with GAAP.
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"Intellectual Property Collateral" shall mean (i) the
Trademark Collateral, Copyright Collateral and Patent Collateral; (ii) all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any of the foregoing; (iii) all license agreements
related to any of the foregoing set forth in this definition; (iv) all income,
royalties, damages and payments now and hereafter due or payable with respect
thereto, including without limitation, payments, under all licenses entered
into in connection therewith and damages, settlements and payments for past or
future infringements thereof; (v) all books, records, writings, computer tapes
or disks, flow diagrams, specification sheets, source codes, object codes and
other physical manifestations, embodiments or incorporation of the foregoing
set forth in this definition; and (vi) the right to sue for all past, present
and future infringements of any of the foregoing set forth in this definition.
"Inventory" - see Section 6.1.
"Lender" - see Preamble.
"Liabilities" means all obligations of the Borrower to the
Lender howsoever created, arising or evidenced, whether direct or indirect,
joint or several, absolute or contingent, or now or hereafter existing, or due
or to become due, which arise out of or in connection with this Agreement, the
Notes or any other Related Document.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), claim, charge or other priority or preferential arrangement of any kind
or nature whatsoever.
"Loan(s)" - see Section 2.1.
"Material Adverse Effect" means any material adverse effect on
the business, assets, liabilities, financial condition or results of operations
of the Borrower and its Subsidiaries taken as a whole.
"Merger Agreement" - see third recital.
"Notes" means, collectively, the Term Note and the Revolving
Note.
"Payment Date" - see Section 4.2.
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"Patent Collateral" shall mean all of the Borrower's right,
title and interest in and to patents, patent applications, inventions, trade
secrets, know-how and proprietary information, which, in the case of patents or
patent applications, have been or are hereafter issued by or filed with the PTO
or any similar office or agency of any other countries, including, without
limitation, the patents and patent applications listed on Schedule II attached
hereto and made part thereof.
"Patent Security Agreement" means a Patent Security Agreement
in substantially the form attached hereto as Exhibit B.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined
in section 3(2) of ERISA (including a multi-employer plan as defined in section
4001 (a) (3) of ERISA), to which the Borrower or any corporation, trade or
business that is, along with the Borrower, a member of a Controlled Group, may
have liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Permitted Liens" shall mean the Liens described on Schedule
III attached hereto.
"Person" means any natural person, corporation, limited
partnership, general partnership, limited liability company, limited liability
partnership, joint stock company, joint venture, association, company, trust,
bank, trust company, land trust, business trust or other organization, whether
or not a legal entity, or any government, agency or other administrative or
regulatory body.
"Prime Rate" means the rate that NationsBank announces as its
prime lending rate, as in effect from time to time.
"PTO" shall mean the United States Patent and Trademark
Office.
"Receivables" - see Section 6.1.
"Related Contracts" - see Section 6.1.
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"Related Documents" shall mean the Term Note, the Revolving
Note, the Copyright Security Agreement, the Patent Security Agreement and the
Trademark Security Agreement.
"Reportable Event" shall have the meaning assigned to such
term in ERISA.
"Revolving Loan Commitment" means the commitment of the Lender
to make the Revolving Loans pursuant to Section 2.1(b).
"Revolving Loan Commitment Termination Date" - see Section
2.1(b).
"Subsidiary" means, with respect to any party, any
corporation, partnership or other entity or organization, whether incorporated
or unincorporated, of which (i) such party or any other Subsidiary of such
party is a general partner (excluding such partnerships where such party or any
Subsidiary of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting powers to elect a majority of the board
of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
"SVB" means Silicon Valley Bank.
"SVB Loan Agreement" means the Loan and Security Agreement
dated as of April 25, 1997 between Borrower and SVB.
"Termination Date" means September 30, 1999.
"Trademark Collateral" shall mean all of the Borrower's right,
title and interest in and to registered and unregistered trademarks, service
marks, trade names, designs, logos, indicia, and/or other source and/or
business identifiers and the goodwill of the business relating to any and all
of the foregoing and any registrations or applications therefor, which, in the
case of applications or registrations, have been or are hereafter issued by or
filed with the PTO, with any similar office or agency of any state, territory
or possession of the United States or any similar office or agency of any other
countries or, if not so filed, are otherwise used in the United States, any
state, territory or possession thereof or any other country, including, without
limitation, the marks, names, logos, indicia, trademark registrations and
trademark applications listed on Schedule IV attached hereto and made a part
hereof.
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"Trademark Security Agreement" means a Trademark Security
Agreement in substantially the form attached hereto as Exhibit C.
"U.C.C." shall mean the Uniform Commercial Code or comparable
statute or any successor statute thereto, as in effect from time to time in the
relevant jurisdiction.
SECTION 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
above-defined meanings when used in any certificate, report or other
document made or delivered pursuant to this Agreement, unless the
context therein shall clearly otherwise require.
(b) The words "hereof," "herein," "hereunder" and similar
terms when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(c) The words "amended or modified" when used in this
Agreement shall mean with respect to this Agreement or any Related
Document, this Agreement or Related Document as from time to time, in
whole or in part, amended, modified, supplemented, restated,
refinanced, refunded or renewed.
(d) In the computation of periods of time in this
Agreement from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each
means "to but excluding."
SECTION 1.3 Accounting and Financial Determinations. For
purposes of this Agreement, unless otherwise specified, all accounting terms
used herein shall be interpreted, all accounting determinations and
computations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with, those generally
accepted accounting principles ("GAAP") applied in the preparation of the
financial statements referred to in Section 3.5 of the Merger Agreement.
ARTICLE II
THE LOAN COMMITMENTS
SECTION 2.1 Commitments. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties of Company
herein set forth, Lender agrees to
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make the loans described in subsections 2.1(a) and 2.1(b) (each referred to
herein individually, as a "Loan", and collectively, as the "Loans").
(a) Term Loan. Lender agrees to make a loan (the "Term
Loan) to Borrower on the date hereof in a single advance in the amount
of $14,774,000. Amounts borrowed pursuant to this subsection 2.1(a)
and subsequently repaid or prepaid may not be reborrowed.
(b) Revolving Loans. Lender agrees to make loans (each
referred to herein individually, as a "Revolving Loan," and
collectively, as "Revolving Loans") to Borrower from time to time
during the period from the date hereof to the earlier of (i) the
Effective Time and (ii) the termination of the Merger Agreement (the
"Revolving Loan Commitment Termination Date") in an aggregate amount
not to exceed at any time $5,000,000 (the "Maximum Revolver Amount").
Amounts borrowed pursuant to this subsection 2.1(b) may be repaid and,
subject to the Maximum Revolver Amount and the other terms and
conditions herein, reborrowed.
SECTION 2.2 Borrowing Procedures. Any Authorized Officer of
the Borrower may request a Loan on any Business Day prior to the Revolving Loan
Commitment Termination Date (provided, however, that the Term Loan shall be
made only on the date hereof) by giving the Lender telephonic or facsimile
notice (which notice shall be irrevocable once given and shall be promptly
confirmed in writing if given telephonically). Each request for a Loan must be
received by the Lender prior to 12:00 noon, Dallas time, on the proposed date
of borrowing (which must be a Business Day) and shall specify (a) the principal
amount of such borrowing and (b) the proposed date of such borrowing. Each
Revolving Loan shall be in a principal amount of $100,000 or an integral
multiple of $100,000 in excess thereof. Subject to satisfaction of the
applicable conditions precedent set forth in Section 8 hereof and the
requirements as to the use of proceeds set forth in Section 5.5 hereof, the
Lender shall make the proceeds of each Loan available to the Borrower by
causing an amount of same day funds equal to the principal amount of the Loan
to be credited to the account of the Borrower at a bank designated by the
Borrower.
SECTION 2.3 Repayment of Loans. Subject to the provisions of
Sections 5.2, 5.6 and 10.2, the Loans shall be payable (and the Borrower agrees
to pay such Loans) in full in immediately available funds on the Termination
Date.
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ARTICLE III
NOTES EVIDENCING LOANS
SECTION 3.1 Term Note. The Term Loan shall be evidenced by a
promissory note (the "Term Note") substantially in the form attached hereto as
Exhibit D, with appropriate insertions, in a principal amount equal to the
amount of the Term Loan.
SECTION 3.2 Revolving Note. The Revolving Loans shall be
evidenced by a promissory note (the "Revolving Note") substantially in the form
attached hereto as Exhibit E, with appropriate insertions, in the principal
amount of $5,000,000.
SECTION 3.3 Recordation of Loans and Payments. The date and
amount of each Loan made by the Lender and of each repayment of principal
thereon received by the Lender shall be recorded by the Lender in its records,
or at its option, on a schedule attached to the Term Note or the Revolving
Note, as the case may be. The aggregate unpaid principal amount so recorded
shall be rebuttable presumptive evidence of the principal amount owing and
unpaid on such Note in the absence of manifest error. The failure to so record
or any error in so recording any such amount shall not, however, limit or
otherwise affect the obligations of the Borrower hereunder or under the Notes
to repay the principal amount of the Loans together with all interest accrued
thereon.
ARTICLE IV
INTEREST, ETC.
SECTION 4.1 Interest Rate. Subject to Section 4.3, the Term
Loan and each Revolving Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration, required
prepayment or otherwise) a rate per annum equal to the Prime Rate plus two
percent (2.0%).
SECTION 4.2 Interest Payment Dates. Subject to Section 4.3,
accrued interest on the Loans shall be payable monthly in arrears on the first
Business Day of each month and at maturity (each a "Payment Date"), commencing
with the first of such dates to occur after the date hereof.
SECTION 4.3 Default Interest Rate. Upon and during the
continuance of an Event of Default (as defined in Section 10.1), the
outstanding principal amount of all Loans, and, to the extent permitted by
applicable law, any interest payments thereon not paid when
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due and any fees and other amounts then due and payable under this Agreement,
shall bear interest (including post-petition interest in any proceeding under
Title 11 of the United States Code, as now and hereinafter in effect, or any
successor statute (the "Bankruptcy Code") or any other applicable bankruptcy
laws) payable on demand at a rate that is three percent (3.0%) per annum in
excess of the interest rate otherwise payable under this Agreement. Payment or
acceptance of the increased rates of interest provided for in this Section 4.3
is not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or
remedies of the Lender.
SECTION 4.4 Computation of Interest. All interest on the
Loans shall be computed for the actual number of days elapsed on the basis of a
360-day year.
ARTICLE V
PAYMENTS AND PREPAYMENTS
SECTION 5.1 Voluntary Prepayments. The Borrower may from
time to time prepay the Loans in whole or in part, provided that (a) each
partial prepayment of a Loan shall be in a principal amount of $100,000 or an
integral multiple thereof, and (b) any prepayment of the entire principal
amount of all Loans shall include accrued interest to the date of prepayment.
SECTION 5.2 Mandatory Prepayments. Subject to Section 5.6,
the Borrower shall make mandatory repayments of the Loans as follows:
(a) If the Merger Agreement shall be terminated by the
Borrower pursuant to Section 7.1(c)(i) of the Merger Agreement or by
Parent and Purchaser pursuant to Section 7.1(d)(i) or (ii) of the
Merger Agreement, the Borrower shall, immediately on demand, repay the
Loans (including interest accrued thereon) and any other Liabilities
in full in immediately available funds.
(b) If the Merger Agreement shall be terminated for any
reason under Section 7.1 of the Merger Agreement (other than pursuant
to Sections 7.1(c)(i) or 7.1(d)(i) or (ii), Borrower shall, within 180
days of demand, repay the Loans (including interest accrued thereon)
and any other Liabilities in full in immediately available funds.
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(c) If at any time the amount of Revolving Loans
outstanding shall exceed the Maximum Revolver Amount, the Borrower
shall immediately repay the Revolving Loans in an amount equal to such
excess.
SECTION 5.3 Making of Payments. Except as otherwise
provided, all payments in respect of the Loans shall be made by the Borrower to
the Lender in immediately available funds. All such payments shall be made to
the Lender at its account at NationsBank or as otherwise directed by Lender,
not later than 12:30 P.M., Dallas time, on the date due. Funds received after
such time shall be deemed to have been received by the Lender on the next
following Business Day.
SECTION 5.4 Due Date Extension. If any Payment Date falls on
a day which is not a Business Day, then such Payment Date shall be extended to
the next following Business Day (except as provided in Section 4.3), and
additional interest shall accrue and be payable for the period of such
extension.
SECTION 5.5 Use of Proceeds. The proceeds of the Term Loan
shall be used by the Borrower solely for the purpose of paying to Westell
Technologies, Inc. the fee required to be paid to it pursuant to Section 8.1(e)
of the Agreement and Plan of Merger dated September 30, 1997 by and among
Westell Technologies, Inc. ("Westell"), Kappa Acquisition Corp. and Borrower.
The proceeds of the Revolving Loans shall be used by the Borrower (i) to repay
in full on the date hereof (x) all amounts owing to Westell under the Loan and
Security, dated as of September 30, 1997, between Westell and the Borrower (the
"Westell Loan Agreement") and (y) all amounts owing to SVB under the SVB Loan
Agreement and (ii) subsequent to such repayments, for general working capital
purposes to the extent permitted by the Merger Agreement. The Borrower will
not, directly or indirectly, use any part of such proceeds for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock.
SECTION 5.6 Forgiveness of Term Loan. Notwithstanding
anything to the contrary contained herein, the Lender agrees to forgive the
outstanding principal amount of the Term Loan in the event that the Merger
Agreement is terminated, except in the following circumstances:
(a) the Merger Agreement is terminated by the Borrower
pursuant to Section 7.1(c)(i) of the Merger Agreement;
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(b) the Merger Agreement is terminated by the Lender and
Merger Sub pursuant to Section 7.1(d)(i) of the Merger Agreement;
(c) the Merger Agreement is terminated either by the
Borrower pursuant to Section 7.1(b)(i), (c)(ii) or (c)(iii) or by the
Lender and Merger Sub pursuant to Section 7.1(b)(i) or (d)(ii), and at
the time of such termination any of the events specified in clauses
(b), (c) or (e) of Annex A to the Merger Agreement shall have occurred
and be continuing; and
(d) the Merger Agreement is terminated in accordance with
its terms and, within six months after such termination, the Borrower
or its stockholders consummate a transaction or enter into a
definitive agreement with respect to an Acquisition Proposal (as
defined in the Merger Agreement) pending at the time of such
termination.
In connection with clause (d) above, the Lender and the Borrower agree
that notwithstanding anything to the contrary contained herein, during the six
month period specified in such clause (d), the Term Loan shall remain
outstanding and the Lender shall forebear from enforcing its right to repayment
of the Term Loan. If at the conclusion of such six month period no event
described in clause (d) has occurred, the outstanding principal amount of the
Term Loan shall be forgiven. If prior to the conclusion of such six month
period an event described in clause (d) has occurred, the outstanding principal
amount of the Term Loan shall thereupon become immediately due and payable.
ARTICLE VI
SECURITY
SECTION 6.1 Grant of Security. The Borrower hereby assigns,
pledges and grants to the Lender a security interest in all of the Borrower's
right, title and interest in and to the following, whether now or hereafter
existing, acquired or created (the "Collateral"):
(a) As such terms are defined in the U.C.C., all
"equipment", in all of its forms, wherever located and all fixtures
and all parts thereof and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefore,
including, but not limited to, Computer Hardware and Software (any and
all of the foregoing being the "Equipment");
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(b) As such terms are defined in the U.C.C., all
"inventory", in all of its forms, wherever located including, without
limitation, (i) all raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the
manufacture or production thereof, (ii) all goods in which the
Borrower has an interest in mass or a joint or other interest or right
of any kind (including, without limitation, goods in which the
Borrower has an interest or right as consignee), and (iii) all goods
which are returned to or repossessed by the Borrower, and all
accessions thereto and products thereof and documents therefor,
including Computer Hardware and Software (any and all of the foregoing
being the "Inventory");
(c) As such terms are defined in the U.C.C., all
"accounts" (including, without limitation, any intercompany accounts),
"contracts", "contract rights", "chattel paper", "documents",
"instruments", "deposit accounts" and "general intangibles", and other
obligations of any kind whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services, and all
rights now or hereafter existing in and to all security agreements,
guarantees, leases and other contracts securing or otherwise relating
to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, deposit accounts, general intangibles and
other obligations including, without limitation, to the extent
applicable, the Material Contracts (as defined in the Merger
Agreement), and all payments under contract rights constituting
Collateral (any and all of the foregoing being the "Receivables," and
any and all documents and written instruments related thereto being
the "Related Contracts");
(d) All Intellectual Property Collateral;
(e) All Computer Hardware and Software;
(f) All books, records, writings, data bases, information
and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Section 6.1;
(g) All of the Borrower's other personal property and
rights of every kind and description and interests therein, including,
but not limited to, Computer Hardware and Software;
(h) All products, rents, issues, profits, returns, income
and proceeds of and from and claims relating to any and all of the
foregoing Collateral (including, without
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limitation, proceeds which constitute property of the types described
in clauses (a) through (g) of this Section 6.1), and, to the extent
not otherwise included, all (i) payments under insurance (whether or
not the Lender is the loss payee thereof), or any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral, and (ii) cash.
SECTION 6.2 Security for Liabilities. The security interests
granted pursuant to Section 6.1 secure the prompt payment in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code), of all of the Liabilities in respect of the Revolving Loans now or
hereafter existing, whether for principal, interest, fees, expenses or
otherwise (the "Secured Liabilities"). Liabilities in respect of the Term Loan
shall be unsecured obligations of the Borrower.
SECTION 6.3 Continuing Security Interest; Transfer of Note.
This Agreement shall create a continuing security interest in the Collateral,
which security interest shall:
(a) remain in full force and effect until the irrevocable
payment in full of all Secured Liabilities and the termination of the
Revolving Loan Commitment;
(b) be binding upon the Borrower, its successors,
transferees and assigns; and
(c) inure to the benefit of the Lender, its successors,
transferees and assigns.
Without limiting the generality of the foregoing clause (c), the Lender may
assign or otherwise transfer (in whole or in part) the Loans or the
Commitments, or any portion thereof, to any other Person or entity, and such
other Person or entity shall thereupon become vested with all the rights and
benefits in respect the security interest granted to the Lender under this
Agreement or any Related Document or otherwise. Upon the payment in full of
all Secured Liabilities and the termination of the Revolving Loan Commitment,
the security interest granted herein shall terminate and all rights to the
Collateral shall revert to the Borrower. Upon any such termination, the Lender
will, at the Borrower's sole expense, execute and deliver to the Borrower such
documents as the Borrower shall reasonably request to evidence such
termination.
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SECTION 6.4 Borrower Remains Liable. Anything herein to the
contrary notwithstanding:
(a) Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein,
and shall perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed;
(b) the exercise by the Lender of any of its rights
hereunder shall not release the Borrower from any of its duties or
obligations under the contracts or agreements included in the
Collateral; and
(c) the Lender shall not have any obligation or liability
under such contracts or agreements included in the Collateral by
reason of this Agreement, nor shall the Lender be obligated to perform
any of the obligations or duties of the Borrower thereunder or to take
any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 6.5 Further Assurances.
(a) The Borrower agrees that from time to time, at the
expense of the Borrower, the Borrower will promptly execute and
deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Lender may
request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, the
Borrower will: (i) mark conspicuously each item of chattel paper
included in the Receivables and, at the request of the Lender, each of
its records pertaining to the Collateral, with a legend, in form and
substance satisfactory to the Lender, indicating that such Collateral
is subject to the security interest granted hereby, (ii) at the
request of the Lender, deliver and pledge to the Lender hereunder all
promissory notes and other instruments (including checks) and all
original counterparts of chattel paper constituting Collateral, duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Lender,
(iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Lender may request, in order to
perfect and preserve the security interests granted or purported to be
granted hereby, (iv) promptly after the acquisition
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by the Borrower of any item of Equipment which is covered by a
certificate of title under a statute of any jurisdiction under the law
of which indication of a security interest on such certificate is
required as a condition of perfection thereof, execute and file with
the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation
or other indication of the security interest created hereunder on such
certificate of title, (v) within thirty (30) days after the end of
each calendar quarter, deliver to the Lender copies of all such
applications or other documents filed during such calendar quarter
indicating and copies of all such certificates of title issued during
such calendar quarter indicating the security interest created
hereunder in the items of Equipment covered thereby, (vi) at any
reasonable time, upon request by the Lender, exhibit the Collateral to
and allow inspection of the Collateral by the Lender, or persons
designated by the Lender, and (vii) at the Lender's request, appear in
and defend any action or proceeding that may affect the Borrower's
title to or the Lender's security interest in all or any part of the
Collateral.
(b) The Borrower hereby authorizes the Lender to file one
or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of
the Borrower. The Borrower agrees that a carbon, photographic or
other reproduction of this Agreement or of a financing statement
signed by the Borrower shall be sufficient as a financing statement
and may be filed as a financing statement in any and all
jurisdictions.
(c) The Borrower will furnish to the Lender from to time
to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable
detail.
SECTION 6.6 Notice Requirements. The Borrower shall notify
the Lender of any change in the Borrower's name, identity or corporate
structure within fifteen (15) days of such change and shall give the Lender
thirty (30) days' prior written notice of any change in the Borrower's chief
place of business, chief executive office or residence or the office where the
Borrower keeps its records regarding the Receivables and all originals of all
chattel paper that evidence Receivables.
SECTION 6.7 The Lender May Perform. If the Borrower fails to
perform any agreement contained herein, the Lender may itself perform, or cause
performance of, such
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agreement, and the expenses of the Lender incurred in connection therewith
shall be payable by the Borrower under Section 11.5.
SECTION 6.8 Standard of Care. The powers conferred on the
Lender hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
exercise of reasonable care in the custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the Lender
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining
to any Collateral. The Lender shall be deemed to have exercised reasonable
care in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the Lender
accords its own property.
SECTION 6.9 Remedies. If any Event of Default shall have
occurred and be continuing, the Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral), and also may (a) require the Borrower to, and Borrower hereby
agrees that it will at its expense and upon request of the Lender forthwith,
assemble all or part of the Collateral as directed by the Lender and make it
available to the Lender at a place to be designated by the Lender that is
reasonably convenient to both parties, (b) enter onto the property where any
Collateral is located and take possession thereof with or without judicial
process, (c) prior to the disposition of the Collateral, store, process, repair
or recondition the Collateral or otherwise prepare the Collateral for
disposition in any manner to the extent the Lender deems appropriate, and (d)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Lender's offices or elsewhere, for cash, on credit or for future delivery, at
such time or times and at such price or prices and upon such other terms as the
Lender may deem commercially reasonable. The Lender may be the purchaser of
any or all of the Collateral at any such sale and the Lender shall be entitled,
for the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Collateral sold at any public sale, to use
and apply any of the Liabilities as a credit on account of the purchase price
for any Collateral payable by the Lender at such sale. Each purchaser at any
such sale shall hold the property sold absolutely free from any claim or right
on the part of the Borrower, and the Borrower hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule or law or
statute now existing or hereafter enacted. The Borrower agrees that, to the
extent notice of sale shall be required by law, at least ten (10) days' notice
to the Borrower of the time and place of any public sale or the time
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after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. The Borrower hereby waives any claims
against the Lender arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if the Lender accepts the
first offer received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Liabilities, the Borrower shall be liable for
the deficiency and the fees of any attorneys employed by the Lender to collect
such deficiency.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1 Representations and Warranties. The Borrower
represents and warrants to the Lender as set forth in this Section 7.
SECTION 7.1.1 Location of Collateral, etc. All of
the Equipment and Inventory is located at the places specified in Item A and
Item B, respectively, of Schedule V hereto. The chief place of business and
chief executive office of the Borrower and the office where Borrower keeps its
records concerning the Receivables, and all originals of all chattel paper that
evidence Receivables, and the original copies of the contracts, are located at
its address specified in Item C of Schedule V hereto. The Borrower has not
been known by any legal name different from the one set forth on the signature
page hereto, nor has the Borrower been the subject of any merger or other
corporate reorganization (other than as contemplated by the Merger Agreement).
None of the Receivables is evidenced by a promissory note or other instrument.
SECTION 7.1.2 Ownership, No Liens, etc. The
Borrower is the legal and beneficial owner of the Collateral free and clear of
any Lien except for the security interest created by this Agreement and
Permitted Liens. No effective financing statement or other document similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed by or with respect to the Borrower
relating to this Agreement and Permitted Liens.
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SECTION 7.1.3 Possession and Control. The Borrower
has exclusive possession and control of the Equipment and Inventory.
SECTION 7.1.4 Negotiable Documents, Instruments and
Chattel Paper. The Borrower has, contemporaneously herewith, delivered to the
Lender possession of all originals of all negotiable documents (other than
checks received by the Borrower in the ordinary course of business),
instruments and chattel paper currently owned or held by the Borrower (duly
endorsed in blank, if requested by the Lender).
SECTION 7.1.5 No Default or Event of Default. No
Default or Event of Default has occurred and is continuing with respect to the
Borrower and no violation or breach of any provision has occurred and is
continuing under the Merger Agreement.
SECTION 7.1.6 Incorporation by Reference. The
Borrower agrees that the representations and warranties of the Borrower set
forth in Article III of the Merger Agreement shall be incorporated by reference
in this Agreement in their entirety as if fully set forth herein with the same
effect as if applied to this Agreement. All capitalized terms set forth in
Article III of the Merger Agreement shall have the meanings provided in the
Merger Agreement; provided that for purposes of this Agreement, to the extent
set forth in the Merger Agreement, the term "Company" shall be deemed to refer
to the Borrower. Such representations and warranties shall not be affected in
any manner by the termination of the Merger Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1 Condition Precedent to Initial Loans. The
obligation of the Lender to make the initial Loans to the Borrower is subject
to the condition precedent that the Borrower shall have delivered or caused to
be delivered to Lender on or before the day of such Loans each of the
following, in form and substance satisfactory to the Lender and its counsel:
(a) Notes. The Term Note and the Revolving Note, each
duly executed by the Borrower;
(b) Intellectual Property Security Documents. The
Copyright Security Agreement, the Patent Security Agreement and the
Trademark Security Agreement, each duly executed by the Borrower;
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(c) Financing Statements. (i) financing statements
(UCC-1), in form and substance satisfactory to the Lender, for filing
in all jurisdictions necessary or, in the opinion of the Lender or its
counsel, desirable to perfect the security interests created by this
Agreement; and (ii) certified copies of Requests for Information (Form
UCC-11) identifying all of the financing statements on file with
respect to the Borrower in all jurisdictions referred to under clause
(i) herein, indicating that the Collateral is free of all Liens,
except for Permitted Liens;
(d) Insurance. Evidence of the existence of insurance on
the property of the Borrower, together with evidence establishing the
Lender as a loss payee and/or additional insured on all related
insurance policies;
(e) Certificate of the Borrower. A certificate (dated as
of the date of this Agreement) of the Secretary of the Borrower
certifying: (i) a copy of the certificate of incorporation of the
Borrower as theretofore amended; (ii) a copy of the bylaws of the
Borrower, as theretofore amended; (iii) copies of all corporate action
taken by the Borrower, including resolutions of its Board of
Directors, authorizing the execution, delivery, and performance of
this Agreement and the Related Documents by the Borrower and each
other document to be delivered pursuant to this Agreement and
authorizing borrowings by each of the Authorized Officers; and (iv)
the names and true signatures of the officers of the Borrower
authorized to sign this Agreement, the Related Documents and the other
documents and instruments to be delivered by the Borrower under this
Agreement;
(f) Certified Charter and Good Standing. A certificate
of the due formation, valid existence and good standing of the
Borrower in its state of incorporation, issued by the appropriate
authorities of such jurisdictions, and certificates of the Borrower's
good standing and due qualification to do business, issued by
appropriate officials in any states in which Borrower owns Collateral
subject to this Agreement;
(g) Opinion of counsel for the Borrower. A favorable
opinion of Heller Ehrman White & McAuliffe, counsel for the Borrower,
in substantially the form of Exhibit F and as to such other matters as
the Lender may reasonably request;
(h) Merger Agreement. The Borrower, the Lender and the
Merger Sub shall have executed and delivered the Merger Agreement on
terms and conditions satisfactory to the Lender;
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(i) SVB Lien Releases. All termination statements, lien
releases or similar documents or instruments duly executed by SVB for
filing in all applicable jurisdictions as may be necessary to
terminate all of SVB's Liens against the Collateral; and
(j) Other Matters. The Lender shall have received such
other approvals, opinions, or documents as the Lender may reasonably
request.
SECTION 8.2 Conditions Precedent to All Loans. The
obligation of the Lender to make each Loan (including the initial Loan) shall
be subject to the further conditions precedent that on the date of such Loan:
(a) The following statements shall be true and correct
and the Lender shall have received a certificate signed by an
Authorized Officer of the Borrower, dated the date of such Loan,
stating that:
(i) The representations and warranties contained
in Article 7 of this Agreement and Article III of the Merger
Agreement are true and correct on and as of the date of such
Loan as though made on and as of such date;
(ii) No Default or Event of Default has occurred
and is continuing, or would result from the borrowing of such
Loan; and
(iii) No Material Adverse Effect has occurred since
the date of the most recent financial statements delivered or
required to be delivered pursuant to the Merger Agreement.
(b) The Lender shall have received such other approvals,
opinions, or documents as the Lender may reasonably request.
ARTICLE IX
COVENANTS AND OTHER AGREEMENTS
The Borrower covenants and agrees that, so long as either of
the Commitments hereunder shall remain in effect and until all Liabilities have
been irrevocably paid in full, the Borrower shall perform all covenants in this
Article IX:
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SECTION 9.1 Limit on Indebtedness. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or guaranty, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness other than the Liabilities and the
Indebtedness described on Schedule VI to this Agreement.
SECTION 9.2 Prohibition on Liens. Except to the extent permitted in
the following sentence, the Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to the Collateral, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing the filing of, or permit to remain in effect, any financing statement or
other similar notice of any Lien with respect to the Collateral under the
U.C.C. of any state or under any similar recording or notice statute,
including, without limitation, any filings made with the CRO or the PTO, except
for Permitted Liens. Notwithstanding the foregoing, the Borrower may permit to
exist the Liens held by Westell pursuant to the Westell Loan Agreement;
provided, however, that the Borrower shall use its best efforts to obtain
within twenty (20) days after the date hereof all termination statements, lien
releases or similar documents or instruments duly executed by Westell for
filing in all applicable jurisdictions as may be necessary to terminate all of
Westell's Liens against the Collateral.
SECTION 9.3 Notice of Litigation. Promptly after the commencement
thereof, the Borrower shall notify the Lender of all actions, suits, and
proceedings before any court or governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, affecting the Borrower
or any of its Subsidiaries, which, if determined adversely to the Borrower or
such Subsidiary, could have a Material Adverse Effect.
SECTION 9.4 Notice of Defaults and Events of Default. As soon as
possible and in any event within five (5) days after the occurrence of each
Default or Event of Default, the Borrower shall deliver to the Lender a written
notice setting forth the details of such Default or Event of Default and the
action which is proposed to be taken by the Borrower with respect thereto.
SECTION 9.5 ERISA Reports. Promptly after the filing or receiving
thereof, the Borrower shall deliver to the Lender copies of all reports,
including annual reports, and notices which the Borrower or any of its
Subsidiaries files with or receives from the PBGC or the U.S. Department of
Labor under ERISA. As soon as possible, and in
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any event within ten (10) days after the Borrower or any of its Subsidiaries
knows or has reason to know that any Reportable Event has occurred with respect
to any Pension Plan or that the PBGC or the Borrower or any of its Subsidiaries
has instituted or will institute proceedings under Title IV of ERISA to
terminate any Pension Plan, the Borrower shall deliver to the Lender a
certificate of the chief financial officer of the Borrower setting forth
details as to such Reportable Event or Pension Plan termination and the action
the Borrower has taken or proposes to take with respect thereto.
SECTION 9.6 SEC Filings and Press Releases. The Borrower shall
deliver to the Lender, promptly upon their becoming available, copies of all
(i) financial statements, reports, notices and proxy statements sent or made
available generally by the Borrower to its security holders, (ii) all regular
and periodic reports and all registration statements and prospectuses, if any,
filed by the Borrower or any of its Subsidiaries with any securities exchange,
the United States Securities and Exchange Commission or any governmental or
private regulatory authority and (iii) all press releases and other statements
made available generally by the Borrower or any of its Subsidiaries to the
public concerning material developments in the business of the Borrower or any
of its Subsidiaries.
SECTION 9.7 Payment of Taxes and Claims. The Borrower shall, and
shall cause each of its Subsidiaries to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its income, businesses or franchises before any penalty
accrues thereon, and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided, however, that no such charge or claim need be paid
if it is being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, so long as (i) such reserve or other
appropriate provision, if any, as shall be required in accordance with GAAP
shall have been made therefor and (ii) in the case of a charge or claim which
has or may become a Lien against any of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such charge or claim.
SECTION 9.8 Maintenance of Assets and Properties. The Borrower
shall, and shall cause each of its Subsidiaries to maintain or cause to be
maintained in good repair, working order and condition, ordinary wear tear
excepted, all material assets and properties used or useful in the business of
the Borrower and its Subsidiaries
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(including, without limitation, the Collateral) and from time to time make or
cause to be made all appropriate repairs, renewals and replacements thereof.
SECTION 9.9 Insurance. The Borrower shall maintain or cause
maintained, with financially sound and reputable insurers, such public
liability insurance, third party property damage insurance, business
interruption insurance and casualty insurance with respect to liabilities,
losses or damage in respect of the assets, properties and business of the
Borrower and its Subsidiaries as may customarily be carried or maintained under
similar circumstances by corporations of established reputation engaged in
similar businesses, in each case in such amounts (giving effect to any
self-insurance), with such deductibles, covering such risks and otherwise on
such terms and conditions as shall be customary for corporations similarly
situated in the Borrower's industry.
SECTION 9.10 Compliance with Laws, Etc. The Borrower shall comply,
and shall cause each of its Subsidiaries to comply, with the requirements of
all applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could cause, individually or in the
aggregate, a Material Adverse Effect.
SECTION 9.11 Reports to Other Creditors. Promptly after the
furnishing thereof, the Borrower shall deliver to the Lender copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan, or credit or similar agreement (including, without limitation,
the SVB Loan Agreement) and not otherwise required to be furnished to the
Lender pursuant to Article IX.
SECTION 9.12 Incorporation by Reference. The Borrower shall comply
with the covenants and other agreements set forth in Sections 5.1, 5.2, 5.3,
5.7, 5.8 and 5.9 of the Merger Agreement and the terms and provisions set forth
therein shall be incorporated by reference in this Agreement in their entirety
as if fully set forth herein with the same effect as if applied to this
Agreement. All capitalized terms set forth in Sections 5.1, 5.2, 5.3, 5.7,
5.8, and 5.9 of the Merger Agreement shall have the meanings provided in the
Merger Agreement; provided, however, that for purposes of this Agreement, to
the extent set forth in the Merger Agreement, the term "Company" shall be
deemed to refer to the Borrower. Such covenants and agreements shall not be
affected in any manner by the termination of the Merger Agreement.
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SECTION 9.13 General Information. Such other information respecting
the condition or operations, financial or otherwise, of the Borrower or any of
its Subsidiaries as the Lender may from time to time reasonably request.
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1 Events of Default. Each of the following events
shall constitute an "Event of Default" under this Agreement:
(a) The Borrower shall fail to pay the principal of, or
interest on, the Notes or any of the other Liabilities as and when due
and payable (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise);
(b) Any representation or warranty made or deemed made by
the Borrower in this Agreement or any Related Document or which is
contained in any certificate, document, opinion, or financial or other
statement furnished at any time under or in connection with this
Agreement or any Related Document shall prove to have been incorrect
in any material respect on the date made;
(c) The Borrower shall fail to perform or comply with any
term, covenant or agreement contained in Article IX of this Agreement;
(d) The Borrower shall fail to perform or comply with any
other term, covenant, or agreement contained in this Agreement or any
Related Document (other than any such term, covenant or agreement
referred to in any other subsection of this Section 10.1) on its part
to be performed or complied with, which failure is not cured within
ten (10) days;
(e) The Borrower or any of its Subsidiaries shall fail to
(i) pay when due and payable any principal of or interest on or any
other amount payable in respect of one or more items of Indebtedness
(other than Indebtedness referred to in Section 10.1(a)) in an
individual amount of $500,000 or more or with an aggregate principal
amount of $1,000,000 or more, in each case beyond the end of any grace
period provided therefor, or (ii) perform or comply with the any other
term of (x) one or more items of Indebtedness in the individual or
aggregate principal amounts set forth on clause (i) above or (y) any
loan agreement, mortgage, indenture or other agreement relating to
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such items of Indebtedness, if the effect of such failure is to cause,
or to permit the holder or holders of that Indebtedness (or a trustee
on behalf of such holder or holders) to cause, that Indebtedness to
become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligation, as the case may
be(upon the giving of notice, lapse of time or both);
(f) The Borrower or any of its Subsidiaries (i) shall
generally not, or shall be unable to, or shall admit in writing its
inability to pay its debts as such debts become due; or (ii) shall
make an assignment for the benefits of creditors, petition or apply to
any tribunal for the appointment of a custodian, receiver, or trustee
for it or a substantial part of its assets; or (iii) shall commence
any proceeding under any bankruptcy, reorganization, arrangements,
readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (iv) shall
have any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or
adjudication or appointment is made and which remains undismissed for
a period of sixty (60) days or more; or (v) by any act or omission
shall indicate its consent to, approval of, or acquiescence in any
such petition, application, or proceeding, or order for relief, or the
appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (vi) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged
for a period of sixty (60) days or more; and
(g) This Agreement, the Copyright Security Agreement, the
Patent Security Agreement or the Trademark Security Agreement shall at
any time after their execution and delivery for any reason cease: (i)
to create a valid and perfected first priority security interest in
and to the Collateral covered thereby or (ii) to be in full force and
effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Borrower, or the
Borrower shall deny it has any further liability or obligation under
or shall fail to perform any of its obligations under any of the
foregoing.
SECTION 10.2 Remedies. If any Event of Default described in
Section 10(f) shall occur and be continuing, the Commitments shall immediately
terminate and all Liabilities of the Borrower shall become immediately due and
payable, all without presentment, demand, protest or notice of
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any kind. If any other Event of Default shall occur and be continuing, the
Lender may declare the Commitments to be terminated and all Liabilities to be
due and payable, whereupon the Commitments shall immediately terminate and all
Liabilities shall become immediately due and payable, all without presentment,
demand, protest or notice of any kind. The Lender shall promptly advise the
Borrower of any such declaration, but failure to do so shall not impair the
effect of such declaration. Notwithstanding anything to the contrary contained
herein, the Lender hereby agrees that it shall not declare the Liabilities due
and payable unless and until such time as the Merger Agreement shall have been
terminated.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Amendments, Etc. No amendment, modification,
termination, or waiver of any provision of this Agreement, nor consent to any
departure by the Borrower from this Agreement, shall in any event be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 11.2 Notices, Etc. All notices and other
communications provided for under this Agreement shall be in writing (including
telegraphic or facsimile communication) and mailed or telecommunicated or
delivered, if to the Borrower or Lender at the addresses set forth in the
Merger Agreement, or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 11.2. All such notices and
communications shall, when mailed or telecommunicated, be effective when
deposited in the mails, transmitted by facsimile or delivered to the telegraph
company, respectively, addressed as aforesaid, except that notices to the
Lender pursuant to the provisions of Section 2.2 shall not be effective until
received by the Lender.
SECTION 11.3 No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right, power, or remedy
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under this Agreement preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in this Agreement are cumulative and not exclusive of any remedies
provided by law.
SECTION 11.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights under this Agreement without the prior written
consent of the Lender.
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SECTION 11.5 Indemnity and Expenses.
(a) The Borrower agrees to indemnify the Lender from and
against any and all claims, losses and liabilities in any way relating
to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation,
enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from the Lender's gross negligence
or willful misconduct as finally determined by a court of competent
jurisdiction.
(b) The Borrower shall pay to the Lender upon demand the
amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that
the Lender may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of
the Lender hereunder, or (iv) the failure by the Borrower to perform
or observe any of the provisions hereof.
SECTION 11.6 Right of Setoff. Upon the occurrence of any
Event of Default, the Lender is hereby authorized at any time and from time to
time, without notice to the Borrower (any such notice being expressly waived by
the Borrower), to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness
at any time owing by the Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement, the Notes or any other Related
Document, irrespective of whether or not the Lender shall have made any demand
under this Agreement, the Notes or such other Related Document and although
such obligations may be unmatured. The Lender agrees promptly to notify the
Borrower after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of the Lender under this Section 11.6 are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which the Lender may have.
SECTION 11.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA (INCLUDING WITHOUT LIMITATION SECTION 1646.5 OF THE CIVIL CODE OF
THE STATE OF CALIFORNIA), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE U.C.C. PROVIDES THAT THE
28
<PAGE> 116
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF CALIFORNIA. Unless otherwise defined herein, terms
used in Article 9 of the U.C.C. in the State of California are used herein as
therein defined.
SECTION 11.8 Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 11.9 Headings. Section headings in this Agreement
are included in this Agreement for the convenience of reference only and shall
not constitute a part of this Agreement or for any other purpose.
SECTION 11.10 WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS AGREEMENT, ANY RELATED DOCUMENT OR UNDER ANY OTHER DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
SECTION 11.11 Counterparts. This Agreement may be executed
in one or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
29
<PAGE> 117
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
BORROWER:
AMATI COMMUNICATIONS CORPORATION
By: /s/ JAMES STEENBERGEN
------------------------------------
Name: James Steenbergen
----------------------------------
Title: President and Chief Executive
Officer
---------------------------------
LENDER:
TEXAS INSTRUMENTS INCORPORATED
By: /s/ RICHARD K. TEMPLETON
------------------------------------
Name: Richard K. Templeton
----------------------------------
Title: President, Semiconductor Group
---------------------------------
30
<PAGE> 118
EXHIBIT (c)(3)
[AMATI LETTERHEAD]
Texas Instruments Inc. July 22, 1997
7829 Churchill Way
Mail Station 3995
Dallas, TX 75261
CONFIDENTIALITY AGREEMENT
-------------------------
Ladies and Gentlemen:
In connection with your possible interest in an acquisition or other business
combination (the "Transaction") involving Amati Communications Corporation
("Amati" or the "Company"), you have requested that we or our representatives
furnish you or your representatives with certain information relating to the
Company or the Transaction. All such information (whether written or oral)
furnished (whether before or after the date hereof) by us or our directors,
officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents
(collectively, "our Representatives") to you or your directors, officers,
employees, affiliates, representatives (including, without limitation, financial
advisors, attorneys and accountants) or agents of your potential sources of
financing for the Transaction (collectively "your Representatives") and all
analysis, compilations, forecasts, studies or other documents prepared by you
or your Representatives in connection with your or their review of, or your
interest in, the Transaction which contain or reflect any such information is
hereinafter referred to as the "Information". The term information will not,
however, include information which (i) is or becomes publicly available other
than as a result of a disclosure by you or your Representatives or (ii) is or
becomes available to you on a nonconfidential basis from a source (other than
us or our Representatives) which, to the best of your knowledge after due
inquiry, is not prohibited from disclosing such information to you by a legal,
contractual or fiduciary obligation to us.
Accordingly, you hereby agree that:
1. You and your Representatives (i) will keep the information
confidential and will not (except as permitted by paragraph 3 below),
without our prior written consent, disclose any information in any
manner whatsoever, and (ii) will not use any information other than
in connection with the Transaction; provided, however, that you may
reveal the information to your Representatives (a) who need to know
this information for the purpose of evaluating the Transaction, (b)
who are informed by you of the confidential nature of the information
and (c)
<PAGE> 119
Texas Instruments Inc.
July 22, 1997
Page 2
who agree to act in accordance with the terms of this letter
agreement. You will cause your Representatives to observe the terms of
this letter agreement, and you will be responsible for any breach of
this letter agreement by any of your Representatives.
2. You and your Representatives will not (except as permitted by
paragraph 3 below), without our prior written consent, disclose to any
person the fact that the information exists or has been made
available, that you are considering the Transaction or any transaction
involving the Company, or that discussions or negotiations are taking
or have taken place concerning the Transaction or involving the
Company or any term, condition or other fact relating to the
Transaction or such discussions or negotiations, including, without
limitation, the status thereof.
3. In the event that you or any of your Representatives are requested
pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the information, you will notify us
promptly so that we may seek a protective order or other appropriate
remedy or, in our sole discretion, waive compliance with the terms of
this letter agreement. In the event that no such protective order or
other remedy is obtained, or that the Company waives compliance with
the terms of the letter agreement, you will furnish only that portion
of the information which you are advised by counsel is legally
required and will exercise all reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the
information.
4. At any time upon the request of the Company or any of our
Representatives, and in any event upon your decision not to proceed
with a Transaction, you will either (i) promptly destroy all copies
of the written information in your or your Representatives'
possession and confirm such destruction to us in writing, or (ii)
promptly deliver to the Company at your own expense all copies of the
written information in you or your Representatives' possession. Any
oral information will continue to be subject to the terms of this
letter agreement.
5. You acknowledge that neither we, nor DMG or its affiliates, nor our
other Representatives, nor any of our or their respective officers,
directors, employees, agents or controlling persons within the
meaning of Section 20 of the Securities Exchange Act of 1934, as
amended, makes any express or implied representation or warranty as
to the accuracy or completeness of the information, and you agree
that no such person will have any liability relating to the
information or for any errors therein or omissions therefrom. You
further agree that you are not entitled to rely on the accuracy or
completeness of the information and that you will be entitled to rely
solely on such representations and warranties as may be included in
any definitive agreement with respect to the Transaction, subject to
such limitations and restrictions as may be contained therein.
6. You agree that, for a period of two years from the date of this
letter agreement, you will not, directly or indirectly, solicit for
employment or hire any employee of the Company or any of its
subsidiaries with whom you have had contact or who became known to
you in connection with your consideration of the Transaction;
provided, however, that the foregoing provision will not prevent you
from employing any such person who contacts you on his or her
<PAGE> 120
Texas Instruments Inc.
July 22, 1997
Page 3
own initiative without any direct or indirect solicitation by or
encouragement from you (excluding generalized solicitation by
advertisement or other method).
7. You agree that, for a period of two years from the date of this
Confidentiality Agreement, neither you nor any of your affiliates will,
without the prior written consent of the Company or the Company's Board of
Directors: (i) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor corporation; (ii) make, or in any
way participate in, directly or indirectly, any "solicitation" of
"proxies" (as such terms are used in the Rules of the Securities Exchange
Commission) to vote, or seek to advise or influence any person or entity
with respect to the voting of, any voting securities of the Company; (iii)
make any public announcement with respect to, or submit a proposal for, or
offer of any extraordinary transaction involving the Company or its
securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended) in connection with any of the foregoing; or (v) request
the Company or any of the Company's Representatives to amend or waive any
provision of this paragraph 7; provided that the foregoing provisions shall
not preclude you from submitting any offer to acquire the Company or voting
securities thereof in response to any publicly announced transaction or
proposed acquisition of the Company by a third party. You will promptly
advise the Company of any inquiry or proposal made to it with respect to
any of the foregoing.
8. You acknowledge that remedies at law may be inadequate to protect us
against any actual or threatened breach of this letter agreement by you or
by your Representatives. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines in a
final, nonappealable order that this letter agreement has been breached by
your or by your Representatives, then you will reimburse the company for its
legal expenses incurred in connection with all such litigation.
9. You agree that no failure or delay by us in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege hereunder.
10.This letter agreement will by governed by and construed in accordance with
the laws of the State of California applicable to contracts between
residents of that State and executed in and to be performed in that State.
11.This letter agreement contains the entire agreement between you and us
concerning the confidentiality of the Information, and no modifications of
this letter agreement or waiver of the terms and conditions hereof will be
binding upon you or us, unless approved in writing by each of you and us.
12.This letter agreement shall terminate on the earlier of the consummation of
the Transaction by you or your affiliates or the second anniversary of
the date hereof.
<PAGE> 121
Texas Instruments Inc.
July 22, 1997
Page 4
Please confirm your agreement with the foregoing by signing and returning to
the undersigned the duplicate copy of this letter enclosed herewith.
Sincerely,
Amati Communications Corporation
By: /s/ JAMES STEENBERGEN
--------------------------------
Name: James Steenbergen
------------------------------
Title: President & CEO
-----------------------------
Accepted and Agreed as of the date
first written above:
Texas Instruments Inc.
- ----------------------------------------
By: /s/ CHARLES D. TOBIN
-------------------------------------
Name: Charles D. Tobin
-----------------------------------
Title: Vice President Corporate Staff,
----------------------------------
Manager, Corporate Development
<PAGE> 122
EXHIBIT (c)(4)
TEXAS INSTRUMENTS INCORPORATED
November 19, 1997
Mr. James Steenbergen
President, CEO and CFO
Amati Communications Corporation
2043 Samaritan Drive
San Jose, California 95124
Dear Mr. Steenbergen:
It is our understanding that you were granted an option to
purchase 500,000 shares of Amati Communications Corporation ("Amati") common
stock on November 27, 1995 at an exercise price of $4.25. It is also our
understanding that your right to exercise the option vested with respect to 25%
of these shares, or 125,000 shares six months after at grant, and that the
remaining 375,000 shares would vest in three equal annual installments on May
27, 1997, 1998 and 1999.
In connection with the acquisition of Amati by Texas
Instruments Incorporated ("TI"), your Amati options will be converted on the
closing date into options on TI common stock. The number of shares covered by
the TI options will be determined by the exchange ratio contained in the merger
agreement and the per share option price shall be adjusted so that the
aggregate option price for the TI shares will be equal to the aggregate option
price of the Amati shares subject to your existing option. The TI options
shall be subject to the same vesting schedule and other terms and conditions as
now exist in your outstanding Amati options. In the event Amati or its
successor terminates your full-time employment with Amati and its affiliates
without cause following the acquisition, you will be retained as an employee on
an approved leave of absence until the date on which your TI converted options
are completely vested.
In consideration of the conversion of the Amati options into
TI options and the acquisition of the common stock of Amati by TI, you agree to
abide by the following non-competition and non-solicitation covenants through
the term of your employment with Amati or its successor and for a period of one
year following the termination of your full-time employment with Amati or its
successors for any reason.
<PAGE> 123
Mr. James Steenbergen
November 19, 1997
Page 2
You shall not own, directly or indirectly, a debt or equity
interest in or provide any labor or services (whether as an employee,
consultant, partner, joint venturer, director, agent, trustee or otherwise) to
any person or entity that is engaged in the business of developing, designing,
manufacturing, marketing or selling digital signal processing solutions and/or
physical layer coding attributes of high speed digital lines ("Competing
Business"); provided, however, that the Employee shall be permitted to own 5%
or less of a Competing Business which is publicly- traded entity or is a
non-publicly traded entity (but the fair market value of such interest in the
non-publicly-traded entity is $50,000 or less). You shall not directly or
indirectly solicit, on behalf of yourself or any person other than Amati or its
successors, any customer of Amati or its successors to purchase, lease, license
or otherwise exploit any goods or services that are similar to or competitive
with any goods or services offered (or then under active development) by Amati
or its successor. You shall not directly or indirectly solicit, on behalf of
yourself or any person other than Amati or its successors, or assist any such
person to solicit any employee of Amati or its successors to terminate such
employee's employment relationship with Amati and its successors or provide any
labor or services to any person or entity other than Amati or its successors.
Please indicate your agreement with the terms and conditions
of the conversion of your options by affixing your signature to the enclosed
copy of this letter and returning the same to the undersigned as soon as
possible.
Very truly yours,
TEXAS INSTRUMENTS INCORPORATED
By: /s/ BARBARA GIBBS
--------------------------------
Barbara Gibbs,
Vice President, Corporate Staff
I agree to the foregoing
terms and conditions:
/s/ JAMES STEENBERGEN
11-19-97 --------------------------------
- ---------------------- James Steenbergen
Date
<PAGE> 124
EXHIBIT (c)(5)
TEXAS INSTRUMENTS INCORPORATED
November 19, 1997
Mr. Ronald Carlini
V.P. Business Development
Amati Communications Corporation
2043 Samaritan Drive
San Jose, California 95124
Dear Mr. Carlini:
It is our understanding that you were granted options to
purchase an aggregate of 190,000 shares of Amati Communications Corporation
("Amati") common stock on various dates at exercise prices ranging from $1.19
to $10.75. It is also our understanding that all of such options would become
fully vested no later than July 27, 2000.
In connection with the acquisition of Amati by Texas
Instruments Incorporated ("TI"), your Amati options will be converted on the
closing date into options on TI common stock. The number of shares covered by
the TI options will be determined by the exchange ratio contained in the merger
agreement and the per share option price shall be adjusted so that the
aggregate option price for the TI shares will be equal to the aggregate option
price of the Amati shares subject to your existing option. The TI options
shall be subject to the same vesting schedule and other terms and conditions as
now exist in your outstanding Amati options. In the event Amati or its
successor terminates your full-time employment with Amati and its affiliates
without cause following the acquisition, you will be retained as an employee on
an approved leave of absence until the date on which your TI converted options
are completely vested.
In consideration of the conversion of the Amati options into
TI options and the acquisition of the common stock of Amati by TI, you agree to
abide by the following non-competition and non-solicitation covenants through
the term of your employment with Amati or its successor and for a period of one
year following the termination of your full-time employment with Amati or its
successors for any reason.
You shall not own, directly or indirectly, a debt or equity
interest in or provide any labor or services (whether
<PAGE> 125
Mr. Ronald Carlini
November 19, 1997
Page 2
as an employee, consultant, partner, joint venturer, director, agent, trustee
or otherwise) to any person or entity that is engaged in the business of
developing, designing, manufacturing, marketing or selling digital signal
processing solutions and/or physical layer coding attributes of high speed
digital lines ("Competing Business"); provided, however, that the Employee
shall be permitted to own 5% or less of a Competing Business which is
publicly-traded entity or is a non-publicly traded entity (but the fair market
value of such interest in the non-publicly-traded entity is $50,000 or less).
You shall not directly or indirectly solicit, on behalf of yourself or any
person other than Amati or its successors, any customer of Amati or its
successors to purchase, lease, license or otherwise exploit any goods or
services that are similar to or competitive with any goods or services offered
(or then under active development) by Amati or its successor. You shall not
directly or indirectly solicit, on behalf of yourself or any person other than
Amati or its successors, or assist any such person to solicit any employee of
Amati or its successors to terminate such employee's employment relationship
with Amati and its successors or provide any labor or services to any person or
entity other than Amati or its successors.
Please indicate your agreement with the terms and conditions
of the conversion of your options by affixing your signature to the enclosed
copy of this letter and returning the same to the undersigned as soon as
possible.
Very truly yours,
TEXAS INSTRUMENTS INCORPORATED
By: /s/ BARBARA GIBBS
--------------------------------
Barbara Gibbs,
Vice President, Corporate Staff
I agree to the foregoing
terms and conditions:
/s/ RONALD CARLINI
11/19/97 --------------------------------
- -------------------------- Ronald Carlini
Date
<PAGE> 126
EXHIBIT (c)(6)
TEXAS INSTRUMENTS INCORPORATED
November 19, 1997
Mr. James D. Hood
V.P. Engineering
Amati Communications Corporation
2043 Samaritan Drive
San Jose, California 95124
Dear Mr. Hood:
It is our understanding that you were granted options to
purchase an aggregate of 180,000 shares of Amati Communications Corporation
("Amati") common stock at an exercise prices of $8.13. It is also our
understanding that all of such options would become fully vested no later than
July 2, 1999.
In connection with the acquisition of Amati by Texas
Instruments Incorporated ("TI"), your Amati options will be converted on the
closing date into options on TI common stock. The number of shares covered by
the TI options will be determined by the exchange ratio contained in the merger
agreement and the per share option price shall be adjusted so that the
aggregate option price for the TI shares will be equal to the aggregate option
price of the Amati shares subject to your existing option. The TI options
shall be subject to the same vesting schedule and other terms and conditions as
now exist in your outstanding Amati options. In the event Amati or its
successor terminates your full-time employment with Amati and its affiliates
without cause following the acquisition, you will be retained as an employee on
an approved leave of absence until the date on which your TI converted options
are completely vested.
In consideration of the conversion of the Amati options into TI
options and the acquisition of the common stock of Amati by TI, you agree to
abide by the following non-competition and non-solicitation covenants through
the term of your employment with Amati or its successor and for a period of one
year following the termination of your full-time employment with Amati or its
successors for any reason.
You shall not own, directly or indirectly, a debt or equity
interest in or provide any labor or services (whether
<PAGE> 127
Mr. James D. Hood
November 19, 1997
Page 2
as an employee, consultant, partner, joint venturer, director, agent, trustee or
otherwise) to any person or entity that is engaged in the business of
developing, designing, manufacturing, marketing or selling digital signal
processing solutions and/or physical layer coding attributes of high speed
digital lines ("Competing Business"); provided, however, that the Employee shall
be permitted to own 5% or less of a Competing Business which is publicly-traded
entity or is a non-publicly traded entity (but the fair market value of such
interest in the non-publicly-traded entity is $50,000 or less). You shall not
directly or indirectly solicit, on behalf of yourself or any person other than
Amati or its successors, any customer of Amati or its successors to purchase,
lease, license or otherwise exploit any goods or services that are similar to or
competitive with any goods or services offered (or then under active
development) by Amati or its successor. You shall not directly or indirectly
solicit, on behalf of yourself or any person other than Amati or its successors,
or assist any such person to solicit any employee of Amati or its successors to
terminate such employee's employment relationship with Amati and its successors
or provide any labor or services to any person or entity other than Amati or its
successors.
Please indicate your agreement with the terms and conditions
of the conversion of your options by affixing your signature to the enclosed
copy of this letter and returning the same to the undersigned as soon as
possible.
Very truly yours,
TEXAS INSTRUMENTS INCORPORATED
By: /s/ BARBARA GIBBS
--------------------------------
Barbara Gibbs,
Vice President, Corporate Staff
I agree to the foregoing
terms and conditions:
/s/ JAMES D. HOOD
11/18/97 --------------------------------
- ------------------------- James D. Hood
Date
