<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MOTOROLA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-1115800
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
----------------
1303 EAST ALGONQUIN ROAD
SCHAUMBURG, ILLINOIS 60196
TELEPHONE: (847) 576-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL OFFICES)
----------------
CARL F. KOENEMANN
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
1303 EAST ALGONQUIN ROAD
SCHAUMBURG, ILLINOIS 60196
TELEPHONE: (847) 576-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
CAROL H. FORSYTE PETER M. ASTIZ
SENIOR COUNSEL GRAY CARY WARE & FREIDENRICH LLP
MOTOROLA, INC. 400 HAMILTON AVENUE
1303 E. ALGONQUIN ROAD PALO ALTO, CA 94301
SCHAUMBURG, IL 60196 TELEPHONE: (650) 833-2036
TELEPHONE: (847) 576-7646
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger (the "Merger") of Starfish Software, Inc., a
California corporation, with and into SS Acquisition Corporation, a California
corporation and wholly-owned subsidiary of the Registrant, pursuant to the
Agreement and Plan of Merger dated as of July 1, 1998, as amended (attached as
Annex A1 and A2 to the enclosed Proxy Statement/Prospectus), have been
satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(3) PRICE(2)(3) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$3.00 per share(1)..... 1,979,098(2) (3) (3) $0
- -----------------------------------------------------------------------------------
</TABLE>
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(1) With attached rights to purchase additional shares of Common Stock in
certain circumstances.
(2) Based upon an estimate of the maximum number of shares of the Common Stock
of the Registrant, $3.00 par value per share, issuable as described
herein.
(3) Pursuant to Rule 457(f) of the Securities Act of 1933, as amended, the
registration fee has been calculated on the basis that the book value of
the securities of Starfish Software, Inc. that would be cancelled in the
Merger, if the closing date of the Merger was August 6, 1998, is less than
the amount of cash to be paid by Motorola, Inc. in connection with the
Merger.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
STARFISH SOFTWARE, INC.
1700 GREEN HILLS ROAD
SCOTTS VALLEY, CALIFORNIA 95066
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
TO: THE SHAREHOLDERS OF STARFISH SOFTWARE, INC.
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of
Starfish Software, Inc., a California corporation ("Starfish"), will be held
at a.m. local time, on , 1998, at the offices of
Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California
94301 (the "Special Meeting"), to consider and vote upon the following
proposals:
1. To approve and adopt the Agreement and Plan of Merger dated as of July
1, 1998 by and among Starfish, Motorola, Inc., a Delaware corporation
("Motorola"), and SS Acquisition Corporation, a California corporation and
wholly-owned subsidiary of Motorola ("Sub"), as amended by that certain
Amendment No. 1 dated as of July 24, 1998 (the "Merger Agreement"), and to
approve the merger (the "Merger") of Starfish with and into Sub pursuant to
the Merger Agreement. As a result of the Merger: (i) the separate corporate
existence of Starfish will cease and Sub shall continue as the surviving
corporation and as a wholly-owned subsidiary of Motorola; (ii) each
outstanding share of common stock, no par value per share, of Starfish
("Starfish Common Stock") and Series A Preferred Stock, no par value per
share, of Starfish ("Starfish Series A Preferred Stock") (except Dissenting
Shares (as defined in the attached Proxy Statement/Prospectus), if any)
will be converted into the right to receive: (a) $3.50 in cash ($.55 of
which is conditional and will be withheld to secure certain indemnification
obligations), and (b) .0661 shares of Common Stock, $3.00 par value per
share, of Motorola ("Motorola Common Stock") (.0104 shares of which are
conditional and will be withheld to secure certain indemnification
obligations); (iii) each outstanding share of Series B Preferred Stock, no
par value per share, of Starfish ("Starfish Series B Preferred Stock" and,
together with Starfish Series A Preferred Stock, collectively, "Starfish
Preferred Stock") (except shares owned by Motorola and Dissenting Shares,
if any) will be converted into the right to receive: (a) $35.00 in cash
($5.50 of which is conditional and will be withheld to secure certain
indemnification obligations), and (b) .6608 shares of Motorola Common Stock
(.1038 shares of which are conditional and will be withheld to secure
certain indemnification obligations); and (iv) each outstanding option to
purchase Starfish Common Stock will be converted into an option to purchase
a fraction of a share of Motorola Common Stock determined based on the
Option Exchange Ratio (as defined in the attached Proxy
Statement/Prospectus).
2. To transact such other business as may properly come before the
Special Meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on , 1998 as
the record date for the determination of the holders of Starfish Common Stock
and Starfish Series A Preferred Stock and Series B Preferred Stock for
purposes of the Special Meeting (the "Record Date"). Accordingly, only
shareholders of record at the close of business on such date are entitled to
notice of, and to vote at, the Special Meeting and any adjournments or
postponements thereof.
Details of the proposed Merger, including the indemnification obligations
and other important information concerning Starfish and Motorola, are more
fully described in the accompanying Proxy Statement/Prospectus. Please give
this material your careful attention.
Certain officers, directors and shareholders of Starfish have entered into
Voting Agreements with Motorola in respect of an aggregate of approximately
% of the outstanding Starfish Common Stock and approximately 1% of the
outstanding Starfish Series B Preferred Stock as of the Record Date pursuant
to which such shareholders, among other things, have agreed to vote such
shares in favor of the Merger and any matter which could reasonably be
expected to facilitate the Merger. Motorola holds approximately 56.6% of the
outstanding Starfish Preferred Stock and intends to vote all such shares in
favor of the Merger and any matter which could reasonably be expected to
facilitate the Merger.
<PAGE>
STARFISH'S BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE
TERMS OF THE PROPOSED MERGER, HAS DETERMINED THAT THE MERGER IS FAIR TO AND IN
THE BEST INTEREST OF STARFISH AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE
STARFISH BOARD UNANIMOUSLY RECOMMENDS THAT STARFISH SHAREHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
By Order of the Board of Directors
-------------------------
Norman Cheung
Chief Financial Officer
Scotts Valley, California
, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED TO
SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY CARD. A RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THAT
PURPOSE. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE SPECIAL
MEETING. ANY SHAREHOLDER ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON,
EVEN IF HE OR SHE HAS RETURNED A PROXY. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
PLEASE DO NOT SEND ANY STARFISH STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER
OF YOUR CERTIFICATES.
<PAGE>
SUBJECT TO COMPLETION DATED AUGUST 7, 1998
----------------
STARFISH SOFTWARE, INC. PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , 1998
----------------
MOTOROLA, INC. PROSPECTUS
----------------
This Proxy Statement/Prospectus is being furnished to shareholders of
Starfish Software, Inc., a California corporation whose principal executive
offices are located at 1700 Green Hills Road, Scotts Valley, California 95066
("Starfish"), in connection with the solicitation of proxies by the Starfish
Board of Directors for use at the Special Meeting of Starfish shareholders
(the "Special Meeting") to be held at a.m., local time, on , 1998
at the offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo
Alto, California 94301, and at any adjournments or postponements thereof.
This Proxy Statement/Prospectus constitutes a prospectus of Motorola, Inc.,
a Delaware corporation ("Motorola"), with respect to up to 1,979,098 shares of
its Common Stock, par value $3.00 per share (together with the rights (if any)
attaching to such stock pursuant to that certain Rights Agreement dated as of
November 9, 1988, as amended, by and between Motorola and Harris Trust and
Savings Bank, "Motorola Common Stock"), to be issued in connection with the
proposed merger (the "Merger") of Starfish with and into SS Acquisition
Corporation, a California corporation and wholly-owned subsidiary of Motorola
("Sub"), pursuant to the terms set forth in the Agreement and Plan of Merger
dated as of July 1, 1998, by and among Motorola, Sub and Starfish, as amended
by that certain Amendment No. 1 dated as of July 24, 1998 (the "Merger
Agreement"), a copy of which is attached hereto as Annex A1 and A2.
All information contained in this Proxy Statement/Prospectus relating to
Starfish has been supplied by Starfish and all information relating to
Motorola has been supplied by Motorola. Motorola has filed a Registration
Statement on Form S-4 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of 1933,
as amended, covering up to 1,979,098 shares of Motorola Common Stock to be
issued in connection with the Merger.
----------------
SEE "RISK FACTORS" COMMENCING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED CAREFULLY BY STARFISH SHAREHOLDERS BEFORE APPROVING
AND ADOPTING THE MERGER AGREEMENT AND APPROVING THE MERGER.
NEITHER THIS TRANSACTION NOR THE SECURITIES OF MOTOROLA OFFERED HEREBY HAVE
BEEN APPROVED OR DISAPPROVED BY THE COMMISSION OR ANY STATE SECURITIES COM-
MISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY REP-
RESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus and the accompanying forms of proxies are
first being mailed to shareholders of Starfish on or about ,
1998.
The date of this Proxy Statement/Prospectus is , 1998.
<PAGE>
AVAILABLE INFORMATION
Motorola is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, information statements and other
information with the Commission. Such reports, information statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, reports, proxy statements and
other information concerning Motorola may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605.
Motorola is subject to the electronic filing requirements of the Commission.
Accordingly, pursuant to the rules and regulations of the Commission, certain
documents, including annual and quarterly reports and proxy statements, filed
by Motorola with the Commission have been and will be filed electronically.
The Commission maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants,
including Motorola, that file electronically with the Commission.
As permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. For such information, reference is made to the
Registration Statement. Statements made in this Proxy Statement/Prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete but are complete in all material respects for the
purposes made herein. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference. The Registration Statement (and exhibits thereto) should be
available for inspection at the offices of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies thereof may be obtained from the
Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by Motorola with the Commission
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus and shall be deemed to be a part hereof:
1. Motorola's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.
2. Motorola's Quarterly Reports on Form 10-Q for the quarters ended March
28, 1998 and June 27, 1998.
3. Motorola's Current Report on Form 8-K dated June 5, 1998.
4. The description of Motorola's Common Stock contained in its Registration
Statement on Form 8-B dated July 2, 1973, including any amendments or
reports filed for the purpose of updating such description.
5. The description of Motorola's Preferred Share Purchase Rights included
in the Registration Statement on Form 8-A, dated November 15, 1988, as
amended by Forms 8 dated August 9, 1990 and December 2, 1992 and by Form
8-A dated February 28, 1994.
All documents filed by Motorola with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and
to be a part hereof from their respective dates of filing. Any statement
contained herein or in any document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for all purposes of this
Proxy Statement/Prospectus to the extent that a statement contained in this
Proxy Statement/Prospectus or in any subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
i
<PAGE>
Motorola will provide without charge to each person to whom a copy of this
Proxy Statement/Prospectus has been delivered, upon written or oral request of
such person, a copy of any and all of the information that has been
incorporated by reference in this Proxy Statement/Prospectus (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Proxy Statement/Prospectus
incorporates). Requests should be directed to: A. Peter Lawson, Secretary,
Motorola, Inc., 1303 East Algonquin Road, Schaumburg, Illinois 60196,
telephone number (847) 576-5000. In order to ensure timely delivery of the
documents, any such request should be made by , 1998.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER
MOTOROLA OR STARFISH. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THE MOTOROLA COMMON STOCK TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT BE LEGALLY MADE. THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION CONTAINED HEREIN OR THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN ARE CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
This Proxy Statement/Prospectus contains separate trademarks of Motorola and
Starfish.
SAFE HARBOR
FOR FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Such statements are identified by the use of forward-looking
words or phrases including, but not limited to, "intended," "will be
positioned," "expects," "expected," "anticipates," and "anticipated." These
forward-looking statements are based on current expectations of Motorola or
Starfish, as the case may be. All statements other than statements of
historical facts included in this Proxy Statement/Prospectus, including those
regarding the financial position, business strategy, projected costs, backlog
and plans and objectives of management for future operations of Motorola or
Starfish, as the case may be, are forward-looking statements. Although
Motorola or Starfish believes that the expectations of Motorola or Starfish,
as the case may be, reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will prove to
have been correct. Because forward-looking statements involve risks and
uncertainties, the actual results of Motorola and Starfish, as the case may
be, could differ materially. Important factors that could cause actual results
to differ materially from the expectations of Motorola or Starfish, as the
case may be ("Cautionary Statements"), are disclosed under "Risk Factors,"
"Starfish Management's Discussion and Analysis of Results of Operations and
Financial Condition," in Motorola's 1998 Proxy Statement on pages F-8 and F-9
and in Motorola's other SEC filings, and elsewhere in this Proxy
Statement/Prospectus including, without limitation, in conjunction with the
forward-looking statements included in this Proxy Statement/Prospectus. These
forward-looking statements represent the judgment of Motorola or Starfish, as
the case may be, as of the date of this Proxy Statement/Prospectus. All
subsequent written and oral forward-looking statements attributable to
Motorola or Starfish or persons acting on behalf of Motorola or Starfish are
expressly qualified in their entirety by the Cautionary Statements. Motorola
and Starfish disclaim, however, any intent or obligation to update their
respective forward-looking statements.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION...................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ i
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS................................. ii
SUMMARY.................................................................... 1
The Companies............................................................ 1
Special Meeting of Shareholders of Starfish.............................. 1
The Merger............................................................... 3
Selected Summary Historical Financial Information........................ 9
Comparative Per Share Data............................................... 11
Market Price Data........................................................ 12
RISK FACTORS............................................................... 13
General Risks............................................................ 13
Risks Related to the Merger.............................................. 16
Risks Relating to Starfish............................................... 18
THE SPECIAL MEETING........................................................ 21
General.................................................................. 21
Matters to be Considered at the Meeting.................................. 21
Record Date; Shareholders Entitled to Vote; Outstanding Shares........... 21
Quorum; Abstentions...................................................... 21
Vote Required; Voting Agreements......................................... 22
Voting; Revocability of Proxies.......................................... 22
Solicitation of Proxies.................................................. 22
THE MERGER................................................................. 23
Background of the Merger................................................. 23
Reasons for the Merger; Recommendation of the Starfish Board of
Directors............................................................... 24
Conduct of Starfish if Merger is not Consummated......................... 26
Shares of Motorola Common Stock to be Issued............................. 26
Shares of Starfish Stock Outstanding..................................... 26
Interests of Certain Persons in the Merger............................... 26
Material Contracts Between Motorola and Starfish......................... 26
Voting Agreements........................................................ 27
Non-Competition Agreements............................................... 27
Accounting Treatment..................................................... 28
Certain Federal Income Tax Consequences.................................. 28
Management and Operations After the Merger............................... 30
Regulatory Approvals..................................................... 30
Resale of Motorola Common Stock.......................................... 31
New York Stock Exchange Listing.......................................... 31
Dissenters' Rights....................................................... 31
THE MERGER AGREEMENT....................................................... 33
The Merger............................................................... 33
Effective Time of the Merger............................................. 33
Effect of the Merger on Starfish Stock................................... 33
Effect of the Merger on Starfish Stock Owned by Motorola................. 34
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Merger Consideration.................................................... 34
Assumption of Starfish Options.......................................... 35
Surrender of Certificates............................................... 35
Indemnification, Escrowed Shares and Holdback Amount.................... 35
Appointment of Shareholder Representative............................... 36
Bonus Pool.............................................................. 37
Representations and Warranties.......................................... 37
Certain Covenants and Agreements........................................ 38
Conditions.............................................................. 38
Termination............................................................. 39
Amendment and Waiver.................................................... 39
Expenses................................................................ 39
STARFISH MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 40
PRINCIPAL SHAREHOLDERS OF STARFISH........................................ 43
COMPARISON OF RIGHTS OF HOLDERS OF MOTOROLA COMMON STOCK AND HOLDERS OF
STARFISH STOCK........................................................... 44
Number of Directors..................................................... 44
Cumulative Voting for Directors......................................... 45
Classified Board of Directors........................................... 45
Director Voting......................................................... 45
Removal of Directors.................................................... 45
Filling Vacancies on the Board of Directors............................. 46
Advance Notice of Stockholder/Shareholder Proposals..................... 46
Power to Call Special Meetings of Stockholders/Shareholders............. 46
Business Combination Following a Change of Control...................... 46
Amendment of Charter Documents.......................................... 47
Indemnification......................................................... 47
Restriction on Sales of Stock........................................... 47
Inspection of Stockholders/Shareholders List............................ 48
Dissenters' Rights...................................................... 48
Shareholder Rights Plan................................................. 48
INFORMATION REGARDING MOTOROLA............................................ 49
INFORMATION REGARDING STARFISH............................................ 49
LEGAL MATTERS............................................................. 49
EXPERTS................................................................... 49
INDEX TO FINANCIAL STATEMENTS............................................. F-1
ANNEX A1--Agreement and Plan of Merger.................................... A1-1
ANNEX A2--Amendment No. 1 dated July 24, 1998 to the Agreement and Plan of
Merger................................................................... A2-1
ANNEX B--Form of Exchange Agreement....................................... B-1
ANNEX C--Chapter 13 of the California Corporations Code................... C-1
</TABLE>
iv
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) contained
elsewhere (including the Annexes hereto), or incorporated by reference, in this
Proxy Statement/Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Proxy Statement/Prospectus. Unless the context
otherwise requires, references to "Motorola" mean Motorola, Inc., a Delaware
corporation, and its subsidiaries. Unless the context otherwise requires,
references to "Starfish" mean Starfish Software, Inc., a California
corporation. Shareholders are urged to read this Proxy Statement/Prospectus
(including the Annexes hereto) in its entirety.
THE COMPANIES
MOTOROLA
Motorola is a corporation organized under the laws of the State of Delaware
as the successor to an Illinois corporation organized in 1928. Motorola's
principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 and its telephone number at that address is (847)
576-5000. Motorola is one of the world's leading providers of wireless
communications, semiconductors and advanced electronic systems, components and
services. Major equipment businesses include cellular telephone, two-way radio,
paging and data communications, personal communications, automotive, defense
and space electronics and computers. Motorola semiconductors power
communication devices, computers and millions of other products. "Motorola" is
a registered trademark of Motorola.
STARFISH
Starfish provides customized solutions for the connected information device
("CID") market, which includes smart pagers, smart phones and PC companions.
Starfish's core device, server and desktop technologies form the basis of its
TrueSync Technology Platform which has been designed to deliver rapid, cost
effective, solutions to help its customers introduce products and services in
the CID market quickly and with advanced functionality. The TrueSync Technology
Platform facilitates the exchange and management of information between
wireline and wireless devices based on the premise that this information should
be accessible by the user on an "anywhere/everywhere" basis. Starfish
technology is used with a variety of products including the REX PC Companion
and TrueSync CE. Starfish was incorporated in California in March 1994.
Starfish maintains its executive offices at 1700 Green Hills Road, Scotts
Valley, California 95066 and its telephone number is (408) 461-5800.
"Starfish," "Starfish Software" and "TrueSync" are registered trademarks of
Starfish.
SS ACQUISITION CORPORATION
Sub is a California corporation incorporated on June 29, 1998. Sub has no
operations and has not engaged in any significant activities other than in
connection with the Merger Agreement and the transactions contemplated thereby.
Sub's principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 and its telephone number at that address is (847)
576-5000.
SPECIAL MEETING OF SHAREHOLDERS OF STARFISH
TIME, DATE AND PLACE
The Special Meeting will be held at the offices of Gray Cary Ware &
Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301, on
, 1998, at a.m., local time.
PURPOSE OF SPECIAL MEETING
At the Special Meeting, shareholders of record of Starfish will be asked to
consider and vote on a proposal to approve and adopt the Merger Agreement and
to approve the Merger (which will also constitute approval of
<PAGE>
the appointment of Philippe Kahn as the Shareholder Representative (as defined
in the Merger Agreement) to act in accordance with the terms of the Exchange
Agreement (a form of which is attached hereto as Annex B)). As a result of the
Merger, the separate corporate existence of Starfish will cease and Sub will
continue as the surviving corporation and as a wholly-owned subsidiary of
Motorola.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; OUTSTANDING SHARES
Only holders of record at the close of business on , 1998 (the
"Record Date") of issued and outstanding shares of common stock, no par value
per share ("Starfish Common Stock" and, together with Starfish Preferred Stock
(as defined below), collectively, "Starfish Stock"), Series A Preferred Stock,
no par value per share ("Starfish Series A Preferred Stock") or Series B
Preferred Stock, no par value per share ("Starfish Series B Preferred Stock",
and, together with Starfish Series A Preferred Stock, collectively, "Starfish
Preferred Stock") of Starfish are entitled to notice of and to vote at the
Special Meeting.
As of the Record Date, there were shares of Starfish Common
Stock, 356,506 shares of Starfish Series A Preferred Stock and 473,725 shares
of Starfish Series B Preferred Stock outstanding and held by
shareholders of record. Holders of shares of Starfish Common Stock are entitled
to one vote per share, and holders of shares of Starfish Preferred Stock, are
entitled to one vote per share at the Special Meeting. Each share of Starfish
Series A Preferred Stock is convertible into one share of Starfish Common Stock
and each share of Starfish Series B Preferred Stock is convertible into ten
shares of Starfish Common Stock. See "Special Meeting--Vote Required."
VOTE REQUIRED; QUORUM; VOTING AGREEMENTS
Approval and adoption of the Merger Agreement and the approval of the Merger
requires the affirmative vote of holders of (i) a majority of the outstanding
shares of Starfish Common Stock entitled to vote, and (ii) a majority of the
outstanding shares of Starfish Preferred Stock entitled to vote, voting
together as a single class.
The presence in person or by properly executed proxy of holders of a majority
of the outstanding shares of Starfish Common Stock and the outstanding shares
of Starfish Preferred Stock (determined in the aggregate, on an as converted
basis) is necessary to constitute a quorum at the Special Meeting. Votes cast
by proxy or in person at the Special Meeting will be tabulated to determine
whether or not a quorum is present. Abstentions will be counted for purposes of
determining the presence of a quorum, but will have the effect of a vote
against the approval and adoption of the Merger Agreement and the approval of
the Merger.
As of the Record Date, certain directors, executive officers and 5% or
greater shareholders of Starfish held or may be deemed to have held
shares of Starfish Common Stock directly or beneficially, representing % of
the outstanding shares of Starfish Common Stock. In addition, as of the Record
Date, such persons held no shares of Starfish Series A Preferred Stock. As of
the Record Date, Motorola held or may be deemed to have held 99% of the
outstanding shares of Starfish Series B Preferred Stock. The remaining Starfish
Series B Preferred Stock is held by certain directors of Starfish.
Certain officers, directors and shareholders of Starfish have entered into
Voting Agreements with Motorola (the "Voting Agreements"), in respect of an
aggregate of approximately % of the outstanding shares of Starfish Common
Stock and approximately 1% of the outstanding shares of Starfish Series B
Preferred Stock as of the Record Date whereby they have agreed, among other
things, to vote such shares of Starfish Common Stock and Starfish Series B
Preferred Stock in favor of the approval and adoption of the Merger Agreement,
the approval of the Merger and any matter which could reasonably be expected to
facilitate the Merger. Motorola holds approximately 56.6% of the outstanding
Starfish Preferred Stock and intends to vote all such shares in favor of the
Merger and any matter which could reasonably be expected to facilitate the
Merger.
2
<PAGE>
RECOMMENDATION OF THE STARFISH BOARD OF DIRECTORS
The Board of Directors of Starfish has carefully reviewed and considered the
terms of the proposed Merger, has determined that the Merger is fair to and in
the best interest of Starfish and its shareholders and has unanimously approved
the Merger Agreement and the transactions contemplated thereby. The Board
unanimously recommends that holders of Starfish Stock vote "FOR" approval and
adoption of the Merger Agreement and approval of the Merger. See "The Merger--
Reasons for the Merger; Recommendation of the Starfish Board of Directors."
THE MERGER
EFFECTIVE TIME OF THE MERGER
It is anticipated that the Merger will become effective as promptly as
practicable after the requisite shareholder approval has been obtained and all
other conditions to the Merger have been satisfied or waived (the "Effective
Time"). It is anticipated that, assuming all conditions are met, the Merger
will occur on or about , 1998.
EFFECT OF THE MERGER
Starfish Stock. At the Effective Time, each stock certificate representing
shares of Starfish Common Stock, Starfish Series A Preferred Stock and Starfish
Series B Preferred Stock (except for shares owned by Motorola and Dissenting
Shares (as defined below), if any) will, without any action on the part of the
holder thereof, be converted into a right to receive the Merger Consideration
(as described below). The Merger Consideration will only be paid to holders of
record of Starfish Stock at the Effective Time and will be paid only upon
surrender to the Exchange Agent (as defined below) by a Starfish shareholder of
the stock certificates representing shares of Starfish Stock, together with a
properly completed Letter of Transmittal (as defined below). Fractional shares
of Motorola Common Stock will not be issuable in connection with the Merger.
Starfish shareholders otherwise entitled to a fractional share will be paid the
value of such fraction in cash determined as described herein under "The Merger
Agreement--Merger Consideration."
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT MARKET VALUE OF MOTOROLA COMMON
STOCK OR THE VALUATION PERIOD STOCK PRICE (AS DEFINED BELOW) OF $52.97 WILL BE
EQUIVALENT TO THE MARKET VALUE OF MOTOROLA COMMON STOCK ON THE DATE SUCH STOCK
IS RECEIVED BY A STARFISH SHAREHOLDER OR AT ANY OTHER TIME. SUCH MARKET VALUE
MAY BE MORE OR LESS THAN THE CURRENT MARKET VALUE OR THE VALUATION PERIOD STOCK
PRICE OF MOTOROLA COMMON STOCK DUE TO NUMEROUS FACTORS. ON , 1998, THE
CLOSING SALES PRICE OF MOTOROLA COMMON STOCK ON THE NYSE COMPOSITE TRANSACTION
REPORTING SYSTEM WAS $ PER SHARE.
STARFISH SHAREHOLDERS ARE URGED TO READ CAREFULLY THE INFORMATION SET FORTH
UNDER "THE MERGER--CERTAIN FEDERAL INCOME TAX CONSIDERATIONS."
Stock Options. At the Effective Time, each option granted by Starfish under
the Starfish 1995 Stock Option Plan or the Starfish 1997 Stock Option Plan to
purchase Starfish Common Stock outstanding immediately prior thereto (a
"Starfish Option") will cease to represent a right to acquire shares of
Starfish Common Stock and will be assumed by Motorola and automatically
converted into an option (an "Exchanged Option") to purchase shares of Motorola
Common Stock exercisable until the current termination of the Starfish Option
(and subject to the terms of either the 1995 Stock Option Plan or the 1997
Stock Option Plan of Starfish as the case may be). The number of shares of
Motorola Common Stock (rounded down to the nearest whole number) that the
holder of such Exchanged Option will be entitled to purchase will be equal to
the product of the number of shares of Starfish Common Stock subject to the
Starfish Option immediately prior to the Effective Time and .13215 (as
3
<PAGE>
calculated below, the "Option Exchange Ratio"). The exercise price per share of
Motorola Common Stock (rounded up to the nearest $.001) under the Exchanged
Option will be equal to the exercise price per share of Starfish Common Stock
under the Starfish Option divided by the Option Exchange Ratio. The Option
Exchange Ratio of .13215 is the quotient of (i) $7.00 divided by (ii) $52.97
(as calculated below, the "Valuation Period Stock Price"). See "The Merger
Agreement--Assumption of Starfish Options."
Starfish Stock Owned By Motorola. Each share of Starfish Stock owned by
Motorola or by any direct or indirect wholly-owned subsidiary of Motorola
immediately prior to the Effective Time will be canceled and extinguished
without any conversion thereof and no payment will be made with respect
thereto. See "The Merger Agreement--Effect of the Merger on Starfish Stock
Owned by Motorola."
MERGER CONSIDERATION
Starfish Common Stock and Starfish Series A Preferred Stock. At the Effective
Time, each share of Starfish Common Stock and Starfish Series A Preferred Stock
that is issued and outstanding prior thereto (except for Dissenting Shares, if
any) will be converted into the right to receive (i) $3.50 in cash ($.55 of
which is conditional and will be withheld to secure certain indemnification
obligations) and (ii) .0661 (as calculated below, the "Common and Series A
Exchange Ratio") shares of Motorola Common Stock (.0104 shares of which are
conditional and will be withheld to secure certain indemnification
obligations). No fractional shares of Motorola Common Stock will be issued.
Starfish shareholders will receive cash in lieu of any fractional shares to
which they are otherwise entitled. The Common and Series A Exchange Ratio of
.0661 is the quotient (calculated to the nearest 0.0001) of (i) $3.50 divided
by (ii) $52.97, the Valuation Period Stock Price. The Valuation Period Stock
Price of $52.97 is based on the average of the high and low sale prices of
Motorola Common Stock as reported on the New York Stock Exchange--Composite
Transactions for the period beginning May 12, 1998 and ending June 30, 1998.
Starfish Series B Preferred Stock. At the Effective Time, each share of
Starfish Series B Preferred Stock that is issued and outstanding prior thereto
(except for shares held of record by Motorola and Dissenting Shares, if any)
will be converted into the right to receive (i) $35.00 in cash ($5.50 of which
is conditional and will be withheld to secure certain indemnification
obligations), and (ii) .6608 (as calculated below, the "Series B Exchange
Ratio") shares of Motorola Common Stock (.1038 shares of which will be withheld
to secure certain indemnification obligations). The Series B Exchange Ratio of
.6608 is the quotient (calculated to the nearest 0.0001) of (i) $35.00 divided
by (ii) $52.97, the Valuation Period Stock Price.
CONDITIONS TO THE MERGER; TERMINATION
The obligations of Motorola and Starfish to consummate the Merger are subject
to the satisfaction of certain conditions, including, but not limited to,
obtaining requisite shareholder and regulatory approvals, approval for listing
on the New York Stock Exchange of the Motorola Common Stock to be issued
pursuant to the Merger, the absence of any injunction prohibiting consummation
of the Merger, the accuracy of the representations made in the Merger Agreement
(subject to certain limitations set forth therein), and the receipt of certain
legal opinions with respect to corporate, securities and, subject to certain
limitations, tax matters. See "The Merger--Certain Federal Income Tax
Consequences" and "The Merger Agreement--Conditions." Consummation of the
Merger is conditioned upon the satisfaction or waiver of certain conditions set
forth in the Merger Agreement. See "The Merger Agreement--Conditions."
The consummation of the Merger is also subject to the expiration of the
relevant waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). See "The Merger--Regulatory Approvals."
The Merger Agreement may be terminated (i) by the mutual consent of Motorola,
Sub and Starfish, (ii) by either Motorola or Starfish if the Merger has not
been consummated by October 31, 1998, and (iii) under certain other
circumstances. See "The Merger Agreement--Termination and Amendment and
Waiver."
4
<PAGE>
INDEMNIFICATION, ESCROWED SHARES AND HOLDBACK AMOUNT
At the Effective Time (and, with respect to those shares held by holders of
Starfish Stock which qualify as "dissenting shares" as defined in Section
1300(b) of the California Corporations Code ("CA Code") (the "Dissenting
Shares") for which appraisal rights have not been perfected or lost, such later
time as determined in accordance with Section 2.4 of the Merger Agreement),
Motorola will deposit with Harris Bank & Trust (the "Exchange Agent")
certificates representing approximately 15.7% of the shares of Motorola Common
Stock issuable to the holders of Starfish Stock in the Merger. Such shares (the
"Escrowed Shares") will be registered in the name of and deposited with the
Exchange Agent pursuant to the terms of the Merger Agreement.
In addition, Motorola will deposit into escrow: (i) on the day six months
following the Closing Date (as defined in the Merger Agreement), $5,000,000
plus any interest accrued thereon from the Closing Date (such interest to be
determined in accordance with Section 1(e) of the Exchange Agreement (as
defined in the Merger Agreement)); (ii) on the first anniversary of the Closing
Date, $5,000,000 plus any interest accrued thereon from the Closing Date (such
interest to be determined in accordance with Section 1(e) of the Exchange
Agreement); (iii) on the second anniversary of the Closing Date, $2,500,000
plus any interest accrued thereon from the Closing Date (such interest to be
determined in accordance with Section 1(e) of the Exchange Agreement); and (iv)
on the third anniversary of the Closing Date, the remaining Holdback Amount,
estimated to be $2,500,000 plus any interest accrued thereon from the Closing
Date (such interest to be determined in accordance with Section 1(e) of the
Exchange Agreement) (the "Holdback Amount"). The Holdback Amount is an
aggregate amount of approximately $15,000,000 plus interest (subject to
adjustment), which is equal to the sum of $0.55 per share of Starfish Common
Stock and Starfish Series A Preferred Stock issued and outstanding and $5.50
per share of Starfish Series B Preferred Stock issued and outstanding
(excluding shares held by Motorola).
The Holdback Amount and the Escrowed Shares will be available to indemnify
Motorola, its affiliates, their representatives, and their successors for
specified damages that Motorola has incurred or reasonably anticipates
incurring by reason of: (a) any inaccuracy in or breach of any representation
or warranty of Starfish; (b) any breach of any covenant or obligation of
Starfish under the Merger Agreement; (c) any claim relating to Intellectual
Property (as such term is defined in the Merger Agreement) for damages arising
out of certain Starfish agreements (as specified in the Merger Agreement); (d)
any claim with respect to the fees or expenses of a broker or finder payable by
the Starfish shareholders; (e) any Legal Proceeding (as such term is defined in
the Merger Agreement) relating to any inaccuracy, breach or expense of the type
referred to in (a)-(d) hereof; or (f) any obligation or duty agreed to or
assumed by Starfish in any contract, license or agreement not listed in Part
3.8(k) of the Starfish Disclosure Statement furnished by Starfish in connection
with the Merger Agreement, entered into between Starfish and any other party,
to indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement by Starfish or such other party of
the Intellectual Property of any third party. In the event that Motorola makes
a claim for indemnification, such claim shall be made, first, against the
Holdback Amount, and, second, against the Escrowed Shares. Claims against the
Holdback Amount and the Escrowed Shares shall be Motorola's sole remedy
following the Merger for any such breaches. Motorola's right to make a claim
against the Holdback Amount and the Escrowed Shares is subject to certain
limitations. The obligation to indemnify will continue for two years from the
Closing Date, except for indemnification obligations relating to certain of
Starfish's Intellectual Property which will continue for three years from the
Closing Date. See "The Merger Agreement--Indemnification, Escrowed Shares and
Holdback Amount."
The Exchange Agent shall distribute portions of the Holdback Amount and
Escrowed Shares to the Starfish shareholders as soon as practicable, but in no
event later than five business days, after certain portions of the Holdback
Amount are deposited with the Exchange Agent by Motorola in the manner
described above.
APPOINTMENT OF SHAREHOLDER REPRESENTATIVE
In connection with the Merger, Philippe Kahn, Starfish's President, Chief
Executive Officer and Chairman of the Starfish Board of Directors, shall be
appointed as the Shareholder Representative to act for and on behalf
5
<PAGE>
of each of the Starfish shareholders. In such capacity, Mr. Kahn may, among
other things, give and receive notices and communications, authorize delivery
to Motorola of the Holdback Amount in satisfaction of indemnification
obligations to Motorola, object to such deliveries, agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
court orders and arbitrators awards with respect to such claims. As the
Shareholder Representative, Mr. Kahn's decisions, acts, consents or
instructions shall constitute a decision of all Starfish shareholders and shall
be binding and final. In the event that a claim is brought against Mr. Kahn in
his capacity as Shareholder Representative, the Starfish shareholders shall
indemnify Mr. Kahn against any loss provided that Mr. Kahn acted in good faith
and not in a manner constituting gross negligence. APPROVAL BY THE STARFISH
SHAREHOLDERS OF THE MERGER AGREEMENT SHALL BE DEEMED TO CONSTITUTE APPROVAL OF
THE APPOINTMENT OF PHILIPPE KAHN AS THE SHAREHOLDER REPRESENTATIVE.
BONUS POOL
In connection with the Merger, Motorola shall establish a bonus pool of
$24.11 million (the "Pool") for certain Starfish employees (the "Recipients"),
excluding Mr. Kahn and Sonia Lee Kahn, to establish additional incentives for
such employees. The Pool shall be funded in three equal installments on the
one-year, two-year and three-year anniversaries of the Closing Date. $19
million of the Pool will be funded by Motorola. In addition, on the third
anniversary of the Closing Date, subject to certain conditions, Mr. Kahn and
Ms. Lee Kahn (together, the "Principal Shareholders") shall collectively
contribute $5.11 million of the Pool (the "Principal Shareholders'
Contribution"). The Principal Shareholders' Contribution shall be payable first
by withholding amounts payable to the Principal Shareholders from the Holdback
Amount and second from canceling shares of Motorola Common Stock issuable to
the Principal Shareholders from the Escrowed Shares. In the event that amounts
remaining in the Holdback Amount and Escrowed Shares are less than $5.11
million, Motorola shall fund the shortfall and the Principal Shareholders
shall, within 30 days of written request from Motorola, pay to Motorola the
amount of such shortfall.
The allocation of the Pool shall be the target bonuses for the Recipients.
Subject to certain conditions which may be set by the Starfish Board of
Directors and the Shareholder Representative, payments shall be made on a pro-
rata basis over the three-year period; provided, however, that each Recipient
remains in the employ of Motorola during the relevant annual period. In
addition, payments shall be made on a date determined by the Board of Directors
of the surviving corporation (subject to approval of the Shareholder
Representative), but in any event the full amount of the Pool for such period
shall be paid with 45 days of the end of the period. In the event that the full
amount of the Pool is not payable because some or all of the Recipients have
left the employment of Starfish before earning all or part of the Pool
allocated to them or otherwise, the Principal Shareholders' Contribution shall
be reduced for each dollar of the Pool that is not payable. In the event that
the payable portion of the Pool is reduced below $19 million due to such
Recipient terminations or otherwise, the amount of such reduction up to $19
million shall be distributed to the other Starfish employees as determined by
the Board of Directors of the surviving corporation (subject to the approval of
the Shareholder Representative).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of June 30, 1998, directors and executive officers of Starfish and their
affiliates may be deemed to be beneficial owners of approximately 82% of the
outstanding shares of Starfish Stock. Each of the directors and executive
officers of Starfish has advised Starfish that he or she intends to vote or
direct the vote of all the outstanding shares of Starfish Stock over which he
or she has voting control in favor of the Merger and any matter which could
reasonably be expected to facilitate the Merger. In addition, the Starfish
Board of Directors agreed to accelerate options to purchase, in the aggregate,
450,000 shares of Starfish Common Stock held by
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<PAGE>
Messrs. Porat, Mikailli and Meresman, each a non-employee director of Starfish,
effective prior to consummation of the Merger and provided that such options
are exercised immediately prior to the consummation of the Merger. See "The
Merger--Interests of Certain Persons in Merger."
Certain officers and key employees of Starfish, other than the Principal
Shareholders, are eligible to participate in the Bonus Pool.
SURRENDER OF CERTIFICATES
If the Merger becomes effective, a Letter of Transmittal (a "Letter of
Transmittal") with instructions will be mailed to all holders of record of
Starfish Stock within three business days after the Effective Time of the
Merger for use in surrendering their stock certificates in exchange for cash
consideration, certificates representing shares of Motorola Common Stock and a
cash payment in lieu of fractional shares, if any. CERTIFICATES SHOULD NOT BE
SURRENDERED UNTIL THE LETTER OF TRANSMITTAL IS RECEIVED. See "The Merger
Agreement--Surrender of Certificates."
DISSENTERS' RIGHTS
Holders of Motorola Common Stock are not entitled to appraisal, dissenters'
or other similar rights under the Delaware General Corporation Law (the "DGCL")
in connection with the Merger. See "The Merger--Dissenters' Rights."
Starfish shareholders will be entitled to exercise dissenters' rights
pursuant to the provisions of Chapter 13 of the CA Code. In accordance with
these provisions, dissenting Starfish shareholders will have the right to be
paid the "fair market value" of their shares of Starfish Stock by fully
complying with the procedures specified in the CA Code. The failure of a
dissenting Starfish shareholder to timely and properly comply with such
procedures will result in the termination or waiver of such rights. See "The
Merger--Dissenters' Rights" and Annex C hereto.
As a condition to their obligation to consummate the Merger, Motorola and Sub
are also requiring that shareholders of Starfish holding no more than 10% of
the Starfish Stock have perfected, or might be able to perfect, dissenters'
rights in connection with the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned upon Motorola and Starfish each
receiving opinions dated as of the Closing Date (the "Tax Opinions"), from
their respective tax advisors to the effect that the Merger will be treated for
federal income tax purposes as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); provided,
however, that the consummation of the Merger shall not be conditioned upon
receipt by either Motorola or Starfish of said Tax Opinions in the event that
the aggregate value of the Motorola Common Stock received by Starfish
shareholders at the Effective Time is less than two-thirds of the aggregate
amount of cash received by said shareholders at the Effective Time. Assuming
that the Merger constitutes a reorganization within the meaning in the Code, a
Starfish shareholder who exchanges Starfish Common Stock or Starfish Preferred
Stock for a combination of cash and Motorola Common Stock and realizes gain
will recognize such gain in an amount equal to the lesser of (i) the amount of
gain realized by such shareholder (i.e., the excess of the sum of cash and fair
market value of Motorola Common Stock received by the shareholder over the
shareholder's tax basis in the Starfish Stock surrendered), and (ii) the amount
of cash received by the shareholder. If, however, a Starfish shareholder
realizes a loss upon the exchange of Starfish Stock for a combination of cash
and Motorola Common Stock, such loss cannot be recognized by the shareholder.
7
<PAGE>
Gain recognized by a Starfish shareholder will generally be capital gain,
provided that the Starfish Stock is held as a capital asset at the Effective
Time. No gain or loss will be recognized by Motorola, Sub or Starfish in
connection with the Merger. In addition, because a portion of the Merger
Consideration will be received by Starfish shareholders after the close of the
taxable year in which the Merger occurs, each Starfish shareholder will report
gain from the surrender of Starfish Stock only as payments are actually
received. See "The Merger--Certain Federal Income Tax Consequences."
STARFISH SHAREHOLDERS ARE URGED TO CAREFULLY READ THE INFORMATION SET FORTH
UNDER "THE MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES" AND TO CONSULT
THEIR TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting, in
accordance with generally accepted accounting principles.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
After the Merger, the separate corporate existence of Starfish will cease and
Sub will continue as the surviving corporation under the corporate name
Starfish Software, Inc., and succeed to and assume all the rights and
obligations of Starfish. Sub will operate as one of Motorola's business units
and Motorola currently intends to maintain the headquarters of Sub in
California. After the Merger, Sub will have access to resources generally
available to Motorola's other business units, will participate in appropriate
activities with other Motorola business units and will operate under the
direction and guidance of Motorola's senior management. See "The Merger--
Management and Operations After the Merger."
NO SOLICITATION
Starfish has agreed that it will not (and will use its best efforts to assure
that its officers, directors, employees, agents, and affiliates do not on its
behalf), and certain shareholders of Starfish have agreed that they will not,
take any action to solicit or otherwise encourage any negotiations regarding
the acquisition of Starfish nor will Starfish enter into any such agreement.
STOCK EXCHANGE LISTING
Motorola has agreed to use its best efforts to cause the Motorola Common
Stock to be issued pursuant to the Merger Agreement (including Motorola Common
Stock issuable upon exercise of an Exchanged Option) to be listed for trading
on the New York Stock Exchange. See "The Merger--New York Stock Exchange
Listing."
COMPARISON OF SHAREHOLDER RIGHTS
See "The Merger Agreement--Comparison of Rights of Holders of Motorola Common
Stock and Holders of Starfish Stock" for a summary of the material differences
between the rights of holders of Motorola Common Stock and Starfish Stock.
RISK FACTORS
See "Risk Factors" for a discussion of certain risks that should be
considered by holders of Starfish Stock in evaluating whether to approve the
Merger Agreement and the Merger and thereby become holders of Motorola Common
Stock.
8
<PAGE>
SELECTED SUMMARY HISTORICAL FINANCIAL INFORMATION
Motorola Summary Financial Information. The following table sets forth for
the periods and the dates indicated certain historical consolidated financial
data of Motorola which should be read in conjunction with the "Consolidated
Financial Statements" and notes thereto and "Management's Discussion and
Analysis of financial Condition and Results of Operations" contained in
Motorola's proxy statement for the 1998 annual meeting of shareholders ("1998
Proxy Statement") and incorporated by reference into its Annual Report on Form
10-K for the fiscal year ended December 31, 1997. The selected historical
consolidated financial information below under the captions "Operating
Results," "Per Share Data" and "Balance Sheet" for, and as of the end of, each
of the years in the five-year period ended December 31, 1997, are derived from
the consolidated financial statements of Motorola, which financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The consolidated financial statements as of December 31, 1997 and
1996, and for each of the years in the three-year period ended December 31,
1997, and the audit report thereon, are incorporated by reference elsewhere in
this Prospectus. The "Operating Results" and "Per Share Data" for the six
months ended June 27, 1998 and June 28, 1997, and the "Balance Sheet" data as
of June 27, 1998 are derived from the unaudited consolidated financial
statements of Motorola. The unaudited consolidated financial statements have
been prepared by Motorola on a basis consistent with Motorola's audited
consolidated financial statements and, in the opinion of Motorola's management,
include all adjustments necessary for a fair presentation of Motorola's results
of operations for such periods and financial condition at such dates.
Five Year Financial Summary
MOTOROLA, INC. AND SUBSIDIARIES
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 SIX MONTHS
--------------------------------------- ENDED SIX MONTHS ENDED
1997 1996 1995 1994 1993 JUNE 27, 1998 JUNE 28, 1997(1)
------- ------- ------- ------- ------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Net Sales $29,794 $27,973 $27,037 $22,245 $16,963 $13,909 $14,163
Results Manufacturing and other costs of sales 20,003 18,990 17,545 13,760 10,351 9,832 9,403
Selling, general and administrative expenses 5,515 4,715 4,642 4,381 3,776 2,588 2,473
Depreciation expense 2,329 2,308 1,919 1,525 1,170 1,058 1,137
Restructuring charges -- -- -- -- -- 1,980 170
Interest expense, net 131 185 149 142 141 91 68
Total costs and expenses 27,978 26,198 24,255 19,808 15,438 15,549 13,251
Net gain on Nextel asset exchange -- -- 443 -- -- -- --
Earnings (loss) before income taxes 1,816 1,775 3,225 2,437 1,525 (1,640) 912
Income tax (benefit) provision 636 621 1,177 877 503 (492) 319
Net earnings (loss) $ 1,180 $ 1,154 $ 2,048 $ 1,560 $ 1,022 $(1,148) 593
Per Share Basic earnings (loss) per share $ 1.98 $ 1.95 $ 3.47 $ 2.76 $ 1.86 $ (1.92) $ 1.00
Data (2) Diluted earnings (loss) per share 1.94 1.90 3.37 2.66 1.78 (1.92) 0.97
Dividends declared $ 0.48 $ 0.46 $ 0.40 $ 0.31 $ 0.22 $ 0.24 $ 0.24
Balance Total assets $27,278 $24,076 $22,738 $17,495 $13,498 $28,672
Sheet Working capital 4,181 3,324 2,717 3,008 2,324 2,223
Long-term debt 2,144 1,931 1,949 1,127 1,360 2,129
Total debt 3,426 3,313 3,554 2,043 1,915 5,102
Total shareholders' equity $13,272 $11,795 $10,985 $ 9,055 $ 6,409 12,072
</TABLE>
- --------
(1) Certain amounts have been reclassified to conform with the 1998
presentation.
(2) Per share data reflects the requirements of SFAS 128.
9
<PAGE>
Starfish Summary Financial Information. The following table sets forth for
the periods and the dates indicated certain historical financial data of
Starfish which should be read in conjunction with the "Starfish Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere herein. The
statement of operations data for each of the three years in the period ended
December 31, 1997, and the balance sheet data at December 31, 1995, 1996 and
1997 are derived from the financial statements of Starfish which have been
audited by PricewaterhouseCoopers LLP, independent accountants, and of which
the financial statements for the years ended December 31, 1996 and 1997 are
included elsewhere in this Proxy Statement/Prospectus. The statements of
operations data for the three months ended March 31, 1997 and 1998, and the
balance sheet data as of March 31, 1997 and 1998 are derived from unaudited
financial statements of Starfish included elsewhere herein or from the
accounting records of Starfish. The unaudited financial statements have been
prepared by Starfish on a basis consistent with Starfish's audited financial
statements and, in the opinion of Starfish's management, include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of Starfish's results of operations for such periods and financial
condition at such dates.
STARFISH SOFTWARE, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------- ----------------
1997 1996 1995 1998 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
For the Year/Quarter Ended
Total net revenues.............. $ 6,419 $ 9,031 $ 7,935 $ 1,357 $ 1,336
Gross profit.................... 4,488 7,392 5,618 849 1,140
Total operating expenses........ 9,739 10,926 8,500 2,560 2,922
Loss from operations............ (5,251) (3,534) (2,882) (1,711) (1,782)
Net loss........................ (5,380) (3,641) (2,973) (1,591) (1,852)
Basic and diluted net loss per
share.......................... $ (0.22) $ (0.15) $ (0.13) $ (0.06) $ (0.08)
Shares used in per share
calculations................... 24,737 23,982 23,650 25,600 24,335
At End of Year/Quarter
Working capital (deficit)....... $ 4,603 $(2,625) $ (809) $ 3,261
Total assets.................... 10,874 3,807 2,464 11,955
Long-term obligations........... -- 2,832 1,163 --
Total shareholders' equity
(deficit)...................... 5,240 (4,569) (975) 3,857
</TABLE>
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Motorola
and Starfish. This data should be read in conjunction with the selected summary
historical financial information, and the historical financial statements of
Motorola incorporated by reference in this Proxy Statement/Prospectus and the
historical financial statements of Starfish included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 27, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Historical--Motorola:
Net income (loss) per share basic and
diluted (1)............................ $(1.92) / $(1.92) $1.98 / $1.94
Book Value per share (2)................ $20.18 $22.21
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Historical--Starfish:
Net loss per share basic and diluted
(1).................................... $(0.06) $(0.22)
Book Value per share (3)................ $ 0.12 $ 0.17
</TABLE>
(1) The historical net income (loss) per common and equivalent share is based
upon the weighted average number of common and equivalent shares
outstanding of Motorola and Starfish for each period, except in loss
periods in which the equivalent shares are excluded as their effect would
be antidilutive.
(2) The historical book value per share is computed by dividing shareholders'
equity by the number of shares of Motorola Common Stock outstanding at the
end of each period.
(3) The historical book value per share is computed by dividing shareholders'
equity by the number of shares of Starfish Common Stock outstanding at the
end of each period assuming the conversion of Starfish Preferred Stock into
Starfish Common Stock and exercise of the outstanding warrant to acquire
Starfish Common Stock.
The pro forma per share data of Motorola and the equivalent pro forma per
share data of Starfish that reflects the Merger has not been presented due to
the fact that the change resulting from the pro forma data would not be
material to the historical data.
11
<PAGE>
MARKET PRICE DATA
MOTOROLA STOCK AND DIVIDEND INFORMATION
Motorola Common Stock is listed and traded on the New York Stock Exchange
under the symbol "MOT." Motorola Common Stock is also listed and traded on the
Chicago Stock Exchange, London Stock Exchange and Tokyo Stock Exchange. The
table below sets forth, for the quarters indicated, (i) the high and low prices
of Motorola Common Stock as reported by the NYSE Composite Transactions
Reporting System, and (ii) the quarterly per share cash dividends declared and
paid on the Motorola Common Stock.
<TABLE>
<CAPTION>
PRICE OF
MOTOROLA
COMMON STOCK DIVIDENDS
------------- DECLARED/PAID
HIGH LOW PER SHARE
------ ------ -------------
<S> <C> <C> <C>
Year ended December 31, 1995:
First Quarter............................... $64.75 $53.00 $0.10/0.10
Second Quarter.............................. 67.88 51.50 0.10/0.10
Third Quarter............................... 82.50 66.75 0.10/0.10
Fourth Quarter.............................. 77.38 56.00 0.10/0.10
Year ended December 31, 1996:
First Quarter............................... $59.00 $45.00 $0.10/0.10
Second Quarter.............................. 67.13 50.63 0.12/0.10
Third Quarter............................... 68.50 46.75 0.12/0.12
Fourth Quarter.............................. 63.68 44.13 0.12/0.12
Year ended December 31, 1997:
First Quarter............................... 69.75 54.00 $0.12/0.12
Second Quarter.............................. 78.94 54.88 0.12/0.12
Third Quarter............................... 90.44 66.00 0.12/0.12
Fourth Quarter.............................. 75.19 54.13 0.12/0.12
Quarter ended March 28, 1998.................. 65.88 52.00 0.12/0.12
Quarter ended June 27, 1998................... 61.63 48.19 0.12/0.12
</TABLE>
On June 30, 1998, the last trading day prior to the execution of the Merger
Agreement, the closing price of Motorola Common Stock as reported on the NYSE
Composite Transaction Reporting System was $52 9/16 per share. On ,
1998 (the latest practicable date preceding the mailing of this Proxy
Statement/Prospectus for which such price information was available), the
closing price per share of Motorola Common Stock on the NYSE Composite
Transaction Reporting System was $ . As of June 27, 1998, there were
approximately 598,117,115 shares of Motorola Common Stock outstanding.
Because the market price of Motorola Common Stock is subject to fluctuation,
the market value of the shares of Motorola Common Stock that holders of
Starfish Stock will receive in the Merger may increase or decrease. Starfish
shareholders are urged to obtain a current market quotation for Motorola Common
Stock.
Following the Merger, Motorola Common Stock will continue to be traded on the
New York Stock Exchange under the symbol "MOT."
STARFISH STOCK AND DIVIDEND INFORMATION
Starfish is a privately-held company and there is no established trading
market for shares of Starfish Common Stock or Starfish Preferred Stock.
Since its incorporation in 1994, Starfish has never paid cash dividends on
its capital stock. In the event the Merger is not consummated and Starfish
remains an independent entity, it currently expects that it would retain any
future earnings for use in the operation and expansion of its business and
would not anticipate paying cash dividends in the foreseeable future.
12
<PAGE>
RISK FACTORS
The following risk factors should be considered by holders of Starfish Stock
in evaluating whether to approve the Merger Agreement and the Merger and
thereby become holders of Motorola Common Stock. These factors should be
considered in conjunction with the other information included and incorporated
by reference in this Proxy Statement/Prospectus. The cautionary statements set
forth below identify important factors that could cause actual results to
differ materially from those in any forward-looking statements which may be
contained in this Proxy Statement/Prospectus.
GENERAL RISKS
Competitive Risks
Motorola's future operating results may be affected by various trends and
factors that Motorola must successfully manage in order to achieve favorable
operating results. In addition, there are trends and factors beyond Motorola's
control which affect its operations. Such trends and factors include, but are
not limited to, adverse changes in general economic conditions or conditions
in the specific markets for Motorola's products, governmental regulation or
intervention affecting communications or data networking, fluctuations in
foreign exchange rates, and other factors, including those listed below.
Motorola participates in a highly volatile and rapidly growing industry
which is characterized by vigorous competition for market share and rapid
technological development carried out amidst uncertainty over adoption of
industry standards and protection of proprietary intellectual property rights.
This could result in aggressive pricing practices and growing competition both
from start-up companies and from well-capitalized companies. Motorola's
ability to compete in this environment depends upon a number of competitive
and market factors and is subject to the risks set forth in this Proxy
Statement/Prospectus.
Risks Related to Motorola's Renewal Plan
On June 4, 1998, Motorola announced a comprehensive series of manufacturing
consolidations, cost reductions and restructuring steps intended to improve
its financial performance. Many factors could affect Motorola's ability to
improve its financial performance, including the timely implementation of
these steps, the success of these steps, the ability of Motorola to integrate
its businesses to reduce costs and improve efficiencies, and the unanticipated
impact of these steps on productivity and retention and hiring of key
employees such as engineers.
Uncertainties Related to the Weak Economic Conditions in Asia
Motorola does a sizable amount of business in Asia and its business has been
impacted by the weak economic conditions in Southeast Asia. Sales and orders
in Southeast Asia have declined and are expected to continue to remain below
historical levels through at least the end of 1998. In addition, Motorola has
experienced significant pricing pressures for its products throughout the
world as competitors manufacturing in the Southeast Asia region sell products
at reduced costs. If the weak economic conditions spread to other countries in
Asia, such as China and Japan where a majority of Motorola's sales in Asia
are, Motorola's results could be materially affected. Other factors in Asia
that could materially affect results are the various efforts to stabilize
economic conditions in Asia, including efforts by the International Monetary
Fund, China's actions with respect to the valuation of its currency, continued
pricing pressures and weak demand for products in the region and the
possibility that deteriorating economic conditions in Japan could continue or
worsen.
Competition in Motorola's Cellular Businesses
Motorola has experienced significant competition in its cellular handset and
cellular infrastructure businesses over the last few years. Motorola's overall
market share in these businesses has declined as a result of this competition
and the industry's transition to digital technology. Motorola's results could
be materially affected by its ability to transition to digital technology and
regain market share.
13
<PAGE>
Competition in Motorola's Semiconductor Business
The semiconductor industry is highly competitive. Factors that could affect
Motorola's ability to compete in the industry include: production
inefficiencies and higher costs related to underutilized facilities, both
wholly-owned and joint venture facilities; shortage of manufacturing capacity;
start-up expenses, inefficiencies, delays and increased depreciation costs in
connection with the capital investments in 1997 for facilities in Korea,
China, Arizona and Texas; competitive factors, such as rival chip
architectures, mix of products, acceptance of new products and price
pressures; risk of inventory obsolescence due to shifts in market demand; and
the effect of lower orders from Motorola's other businesses such as the
Cellular Subscriber Sector and the Automotive, Component, Computer and Energy
Sector.
Risks Related to Foreign Sales
Because more than half of Motorola's sales are outside the U.S., Motorola's
results could be significantly affected by weak economic conditions in
countries in which it does significant business and by changes in foreign
currency exchange rates affecting those countries.
Rapid Technological Change
The markets for Motorola's products are characterized by rapidly changing
technology. Motorola's success depends, in substantial part, on the timely and
successful introduction of new products. An unexpected change in one or more
of the technologies affecting data networking or in market demand for products
based on a particular technology could have a material adverse effect on
Motorola's operating results if Motorola does not respond timely and
effectively to such changes.
Development and Introduction of New Products
There are significant risks related to Motorola's significant investment in
developing and introducing new products such as two-way and voice paging, Code
Division Multiple Access ("CDMA") for cellular and Personal Communication
Service ("PCS") systems, wireless local loop products, flat panel display
products, products for transmission of telephony and high-speed data over
hybrid fiber coaxial cable systems, integrated digital radios, smart cards and
other semiconductor products, and the success of those products. Factors that
could affect that success include: the ability of Motorola to recruit and
retain engineers to develop products; difficulties and delays in the
development, production, testing and marketing of products; customer
acceptance of products, particularly as Motorola's focus on the consumer
market increases; and the ability of Motorola to differentiate its products
from those of its competitors.
New Product Transitions
Motorola's business is characterized by the continuous introduction of new
products and the management of the transition of those products from prior
generations of technology or product platforms. In each product transition
cycle, Motorola faces the challenge of managing the inventory of its older
products, including materials, work-in-process, and products held by
resellers. If Motorola is not successful in managing these transitions, there
could be an adverse impact on the financial results of Motorola.
Ability to Attract Qualified People
Motorola's business is dependent upon its ability to attract and retain
highly qualified managerial, technical and sales personnel. Competition for
such personnel is intense. There can be no assurance that Motorola can retain
its key managerial, technical and sales personnel or that it can attract,
assimilate or retain such personnel in the future. The inability of Motorola
to attract and retain such personnel could have a material adverse effect on
the business, results of operations and financial condition of Motorola. To
attract and retain qualified employees, Motorola strives to maintain excellent
employee relations, attractive office facilities and challenging working
environments, and offers competitive compensation and benefits packages.
14
<PAGE>
Iridium(R) Project
The risks related to Motorola's Iridium(R) project include: the ability of
investors to timely obtain licenses and sign agreements for, and to market,
the service, to timely receive and, as appropriate, operate and sell
telecommunications equipment and to otherwise timely finance and operate a
successful telecommunications business; the successful and timely orbiting of
the project's low-earth orbit satellites and the successful and timely
operation of such satellites and related ground equipment; the ability of
Iridium LLC to raise the significant funds it needs during at least the next
few years to continue to make contractual payments to Motorola and to make
debt payments and otherwise operate, including raising needed funds in 1998;
the risks associated with the large Iridium systems contracts and the
financial risk to Motorola under those contracts, including the difficulty in
projecting costs associated with those contracts; the market acceptance (both
on its own and when compared to possible competitors) of what is expected to
be the first worldwide global satellite-based communications service and of
the related equipment; and the significant technological and other risks
associated with the development and commercial operation of the project,
including any software and support systems-related risks.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This could result in system failures or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements.
Motorola has formed a company-wide task force to address Year 2000 issues.
Milestones have been established and detailed plans are actively being
implemented so that Motorola research programs, products and internal
computer, financial, manufacturing and other infrastructure systems are
reviewed and the necessary changes are addressed. Additionally, Motorola
customer and supplier relationships are being reviewed to assess and address
Year 2000 issues. Motorola has undertaken internal reviews and has contacted
certain of its customers to assess, to the extent possible, Year 2000 issues
related to Motorola products. While Motorola is taking all reasonable efforts
to make information on the Year 2000 readiness of Motorola products available
to its customers, this information may not reach all customers, particularly
indirect purchasers. Although Motorola believes that it can address Year 2000
readiness issues related to its products, there still may be disruptions
and/or product failures that are unforeseen, particularly with respect to its
infrastructure equipment. Also, Motorola is requesting assurances from its
major suppliers that they are addressing this issue and that products procured
by Motorola will function properly in the Year 2000. Certain critical
suppliers, such as energy providers, have been unwilling to provide such
assurances and do not expect to provide such assurances prior to the Year
2000. Other critical suppliers do not expect to be able to provide such
assurances until 1999. In both instances, this is particularly the case
outside of the United States where Motorola has significant operations. In
addition, many governmental agencies are not expected to be Year 2000
compliant. As a result, it is difficult for Motorola to assess the
likelihood, or the impact on its business, of such entities' failure to be
Year 2000 compliant.
While Motorola's efforts to address Year 2000 issues will involve additional
costs and the time and effort of a number of Motorola employees, Motorola
believes, based on currently available information, that it will be able to
manage its total Year 2000 transition without any material adverse effect on
Motorola's future consolidated results of operations, liquidity and capital
resources.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European
Union are scheduled to establish fixed conversion rates between their existing
sovereign currencies and the euro. The participating countries have agreed to
adopt the euro as their common legal currency on that date. Motorola has
formed a task force and has begun to assess the potential impact to Motorola
from the euro conversion. In addition to tax and
15
<PAGE>
accounting considerations, Motorola is assessing the potential impact from the
euro conversion in a number of areas, including the following: (1) the
technical challenges to adapt information technology and other systems to
accommodate euro-denominated transactions; (2) the competitive impact of
cross-border price transparency, which may make it more difficult for
businesses to charge different prices for the same products on a country-by-
country basis; (3) the impact on currency exchange costs and currency exchange
rate risk; and (4) the impact on existing contracts.
At this early stage of its assessment, Motorola can not yet predict the
anticipated impact of the euro conversion on Motorola.
Government Laws and Regulations
Motorola is subject to risks relating to the effect of, and change in,
trade, monetary and fiscal policies, laws and regulations, other activities of
U.S. and non-U.S. governments, agencies and similar organizations, and social
and economic conditions, affecting Motorola's operations, including emerging
markets in Asia and Latin America and other emerging markets.
Certain Charter Provisions
Certain charter provisions and Motorola's Shareholder Rights Plan, adopted
in November 1988 (as amended, the "Shareholder Rights Plan") could have the
effect of delaying, deferring or preventing a change in control of Motorola.
In addition, Motorola's charter eliminates the personal monetary liability of
its directors for breach of their duty of care, and Motorola has entered into
agreements with its officers and directors indemnifying them against losses
they may incur in legal proceedings resulting from their service to Motorola.
See "Comparison of Rights of Holders of Motorola Common Stock and Holders of
Starfish Stock--Shareholder Rights Plan."
RISKS RELATED TO THE MERGER
Merger Consideration
Pursuant to the terms of the Merger Agreement, upon consummation of the
Merger, each share of Starfish Stock issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares and shares held by
Motorola) will be converted into the right to receive the Merger
Consideration, consisting of cash and a fraction of a share of Motorola Common
Stock. The Merger Agreement does not contain any provisions for adjustment of
the Merger Consideration based upon fluctuations in the price of Motorola
Common Stock. Accordingly, the market value of the Motorola Common Stock to be
received by holders of Starfish Stock upon the consummation of the Merger is
not presently ascertainable and will depend upon the market price of Motorola
Common Stock at the Effective Time. On June 30, 1998, the last trading day
prior to the execution of the Merger Agreement, the closing price per share of
Motorola Common Stock on the NYSE Composite Transaction Reporting System was
$52 9/16 per share. On , 1998 (the latest practicable date preceding
the mailing of this Proxy Statement/Prospectus for which such price
information was available), the closing price per share of Motorola Common
Stock on the NYSE Composite Transaction Reporting System was $ . Holders of
Starfish Stock are urged to obtain current market quotations prior to making
any decisions with respect to the Merger. The Merger Agreement does not
provide Starfish or Motorola the right to terminate the Merger Agreement based
upon fluctuations in the price of Motorola Common Stock.
No Public Market for Starfish Stock
There is no public market for Starfish Stock and therefore there is no
reported price for the shares based on trading in a public market. In
addition, Starfish has not obtained a "fairness" opinion from an investment
bank as to the fairness of the Merger Consideration. As a result, there can be
no assurances that Starfish shareholders will be paid a "fair" price for their
shares.
16
<PAGE>
Uncertainties Related to the Integration of Starfish's Business
The successful combination of companies in the high technology industry may
be more difficult to accomplish than in other industries. There can be no
assurance that Motorola will be successful in developing products based on
Starfish's technology or engineering expertise, that Motorola will be
successful in integrating its own distribution channels with those of
Starfish, that Motorola will be successful in penetrating Starfish's installed
customer base, that Motorola will be successful in selling Starfish's products
to Motorola's customer base, that the combined companies will retain their key
personnel or that Motorola will realize any of the other anticipated benefits
of the Merger.
Conditions to the Merger
The Merger Agreement contains conditions that, if not satisfied, would
result in the Merger not occurring, even though the Starfish shareholders
approved it. There can be no assurances that all of the closing conditions
will be satisfied, that any unsatisfied conditions will be waived or that the
Merger will occur. If the Merger does not occur, Starfish will incur
substantial expenses that could have a material adverse affect on the
operating results of Starfish.
Volatility of Stock Price; Stock Escrow
The market price of Motorola Common Stock has been, and may continue to be,
extremely volatile. Factors such as new product announcements by Motorola or
its competitors, quarterly fluctuations in Motorola's operating results and
challenges associated with integration of businesses may have a significant
impact on the market price of Motorola Common Stock. These conditions, as well
as factors which generally affect the market for stocks of high technology
companies, could cause the price of Motorola Common Stock to fluctuate
substantially over short periods.
In addition, at the Effective Time, Motorola will deposit with the Exchange
Agent, certificates representing approximately 15.7% of the shares of Motorola
Common Stock to be issued to the holders of Starfish Stock in the Merger in
order to secure the indemnification obligations of the Starfish shareholders
under the Merger Agreement (the "Escrowed Shares"). As provided in the Merger
Agreement, after satisfying indemnification obligations to Motorola, if any,
the Escrowed Shares will be released to the former Starfish shareholders over
a 3-year period. During such 3-year period, the former Starfish shareholders
will be unable to dispose of any Escrowed Shares held by the Exchange Agent
and thus will be forced to bear the economic risk of fluctuations in the
market price of Motorola Common Stock during that period with respect to such
unreleased Escrowed Shares.
Tax Considerations
The Merger is intended to qualify as a reorganization under the Code with
respect to the Motorola Common Stock received by Starfish shareholders in
exchange for their Starfish Stock. A principal condition of such qualification
is that former Starfish shareholders will satisfy the continuity of equity
interest requirement with respect to the Motorola Common Stock received
pursuant to the Merger. It is uncertain whether the Merger will comply with
the continuity of equity interest guidelines published by the Internal Revenue
Service ("IRS") for the issuance of advance rulings. While the guidelines
published by the IRS are merely for ruling purposes and do not purport to
state substantive law, the IRS may assert that the Merger does not constitute
a reorganization under the Code for, among other reasons, the failure to meet
the continuity of interest requirement. In the event that the IRS is
successful in such an assertion, former Starfish shareholders will recognize
gain upon the exchange of Starfish Stock for Motorola Common Stock and cash in
an amount equal to the excess of (i) the sum of the fair market value of the
Motorola Common Stock plus the amount of cash received pursuant to the Merger
over (ii) the shareholder's tax basis in the Starfish Stock surrendered. See
"The Merger--Certain Federal Income Tax Consequences."
17
<PAGE>
RISKS RELATING TO STARFISH
In the event the Merger is not completed and Starfish remains an
independent, privately-held entity, it will be subject to the following risk
factors:
Limited Operating History
Starfish was incorporated in 1994 and has been shipping products since early
1995. As the business of Starfish is rapidly changing, the history of Starfish
is only of limited relevance in considering the risk factors inherent in and
affecting the business of Starfish in the future. The prospects of Starfish as
an independent company must be considered in light of the risks, expenses and
difficulties frequently encountered upon entry into an area of new business,
particularly for entry into a new area of an evolving industry which is likely
to be characterized by an increasing number of market entrants and intense
competition, as well as the risks, expenses and difficulties encountered in
the shift from development to commercialization of new products based on
innovative technology. There can be no assurance that Starfish will be
successful or profitable in its operations.
Historical and Projected Losses
Starfish has incurred operating losses since its inception and, as of March
31, 1998, had an accumulated deficit of approximately $14 million. Starfish
expects to continue to incur operating losses through at least the fourth
quarter of 1998. There can be no assurance that Starfish will be able to
achieve or sustain profitable operations.
Potential Fluctuations in Financial Results
Starfish expects that its future operating results will fluctuate
significantly as a result of numerous factors, including demand for Starfish's
and its customers' products, Starfish's success in developing new products and
enhancing its existing technologies, the timing of new product introductions
and product enhancements by Starfish and its competitors, market acceptance of
Starfish's new and enhanced products, the emergence of new industry standards,
the timing of customer orders, the mix of products sold, competition, the mix
of distribution channels employed, the evolving and unpredictable nature of
the markets for Starfish's products and general economic conditions.
Starfish's revenue is difficult to forecast in part because the market for
connected information devices ("CID") is new and evolving.
Starfish expects that a substantial portion of its ongoing revenues will be
derived from relatively large OEM embedded solution royalty payments. It is
difficult for Starfish to predict when or if such agreements will be completed
or payments will be due under such agreements. Because Starfish's expense
levels are for the most part fixed in advance based on Starfish's forecasts of
future revenue, if revenue is below expectations in any given quarter,
Starfish may not be in a position to reduce its spending proportionately. As a
result, a shortfall from forecast revenue would have an immediate adverse
effect on Starfish's business, financial condition and results of operations
that could be material.
Product Concentration; Risks Associated with New and Evolving Markets
To date, Starfish has received a substantial portion of its revenues from
its personal information management ("PIM") software. Although Starfish
continues to enhance, market and sell such products, Starfish anticipates that
such products will represent a decreasing proportion of its revenues in the
future. Starfish's growth is substantially dependent upon the development of
the CID market which is new and evolving. There can be no assurance that
Starfish will be successful in developing, introducing or marketing new or
enhanced products. A decline in the demand for Starfish's PIM products, as a
result of competition, technological change or other factors, or the failure
to successfully develop, introduce or market new or enhanced products would
have a material adverse effect on Starfish's business, financial condition and
results of operations.
18
<PAGE>
Dependence on OEM and Strategic Business Relationships
Starfish anticipates that a significant portion of its future revenue will
be derived from the licensing of its technology to third party hardware and
device manufacturers who will incorporate Starfish's technology into their
product offerings. Starfish is dependent upon the close cooperation of such
companies in order for Starfish to understand their future product plans and
to coordinate the development of Starfish's products to meet the anticipated
needs. Any failure of Starfish to develop or maintain such close OEM and
strategic business relationships would have a material adverse effect on
Starfish's business, financial condition and results of operations.
Management of Growth
If Starfish achieves successful market acceptance of its products and
technology, Starfish may undergo a period of rapid growth. To accommodate this
growth, Starfish must implement new or upgraded operating and financial
systems, procedures and controls, including the enhancement of its accounting
and other internal management systems. There can be no assurance that such
efforts can be accomplished successfully. Any failure to expand these areas in
an efficient manner could have a material adverse effect on Starfish.
Moreover, there can be no assurance that Starfish's systems, procedures and
controls will be adequate to support Starfish's future operations.
Intense Competition
Starfish expects to experience intense competition from current and future
competitors, including competition from companies which are existing or
potential customers for Starfish. Certain of Starfish's competitors have
significantly greater financial, technical, marketing and other resources than
Starfish. There can be no assurance that Starfish will be able to compete
successfully against current and future competition, and the failure to do so
would have a material adverse effect upon Starfish's business, financial
condition and results of operations.
Dependence Upon Key Personnel
Starfish's success depends largely on the efforts and abilities of certain
key personnel, particularly Philippe Kahn, Starfish's President, Chief
Executive Officer and Chairman of the Starfish Board of Directors. The loss of
Mr. Kahn's services or those of other key personnel could have a material
adverse effect on Starfish's business, financial condition and results of
operations.
Intellectual Property Rights
Starfish relies on a combination of patent, copyright, trademark and trade
secret laws, non-disclosure agreements and other intellectual property
protection methods to protect its proprietary technology. Despite Starfish's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of Starfish's products or to obtain and use information that
Starfish regards as proprietary. Moreover, although there are no pending
lawsuits against Starfish regarding infringement of any third-party patents or
other intellectual property rights, there can be no assurance that such
infringement claims will not be asserted by third parties in the future.
Starfish's involvement in any patent dispute or other intellectual property
dispute or action to protect trade secrets and know-how may have a material
adverse effect on Starfish.
Software Defects; Product Liability
Software products may contain errors or defects, especially when first
introduced or when new versions or enhancements are released. There can be no
assurance that, despite testing by Starfish and by current and potential
customers, defects and errors will not be found in current versions, new
versions or enhancements after commencement of commercial shipments, resulting
in loss of revenues, delay in market acceptance, or
19
<PAGE>
unexpected re-programming costs, which could have a material adverse effect
upon Starfish's business, operating results and financial condition. Starfish
seeks to include in agreements with its customers provisions designed to limit
Starfish's exposure to potential product liability claims. However, Starfish
is not always able to include such provisions. Moreover, the limitation of
liability provisions contained in Starfish's license agreements may not be
effective as a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions. The sale and support of products
by Starfish may entail the risk of such claims. A successful product liability
claim brought against Starfish could have a material adverse effect upon
Starfish's business, operating results and financial condition.
Continued Control by Management
As of June 30, 1998, the executive officers and directors of Starfish, as a
group, held or were deemed to beneficially own approximately 82% of the
outstanding voting Common Stock. Existing management will continue to hold
sufficient voting power to enable it to continue to elect all directors and to
control the business and affairs of Starfish for the foreseeable future. Such
concentration of ownership may also have the effect of delaying, deferring or
preventing a change in control of Starfish.
Rapid Technological Change
The market for Starfish's products is characterized by rapidly changing
technology. Starfish's success depends, in substantial part, on the timely and
successful introduction of new products. An unexpected change in one or more
of the technologies affecting data networking or in market demand for products
based on a particular technology could have a material adverse effect on
Starfish's operating results if Starfish does not respond timely and
effectively to such changes.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This could result in system failures or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements. Starfish utilizes third-party equipment and software that
may not be Year 2000 compliant. Starfish is in the early stages of conducting
an audit of its third-party suppliers as to the Year 2000 compliance of their
systems. Starfish does not believe it will incur significant costs in order to
comply with Year 2000 requirements. However, failure of Starfish's internal
computer systems or of such third-party equipment or software, or of systems
maintained by Starfish's suppliers, to operate properly with regard to the
Year 2000 and thereafter could require Starfish to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
Starfish's business, financial condition and results of operations.
Need of Additional Working Capital
Starfish requires substantial working capital to fund its business. Since
inception, Starfish has financed its operations primarily from cash provided
by development contracts, royalty advances, shareholder loans and through the
sale of private equity securities. Starfish currently anticipates that in the
event that the Merger is not consummated, Starfish will be able to meet its
capital requirements for at least the next twelve months. However, there can
be no assurance that Starfish will not have additional working capital needs
within this period. In such event, Starfish may be required to raise
additional funds to meet such needs. There can be no assurance that such
financing will be available if and when required by Starfish on terms
acceptable to Starfish, or at all.
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Future Dilution
Holders of Starfish Stock will likely suffer dilution in the future in
connection with share issuances in future financings, the exercise of options
and warrants to be granted in the future, acquisitions and other transactions.
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to shareholders of
Starfish in connection with the solicitation of proxies by the Starfish Board
of Directors for use at the Special Meeting (the "Special Meeting") to be held
at a.m., local time, on , 1998 at the offices of Gray Cary Ware &
Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301, and at any
adjournments or postponements thereof.
This Proxy Statement/Prospectus and the accompanying form of proxies are
first being mailed to shareholders of Starfish on or about , 1998.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Special Meeting, shareholders of record of Starfish will be asked to
consider and vote upon proposals (i) to approve and adopt the Merger Agreement
and approve the Merger (which will also constitute approval of the appointment
of Philippe Kahn as the Shareholder Representative (as defined in the Merger
Agreement) to act in accordance with the terms of the Exchange Agreement (a
form of which is attached as Annex B hereto), and (ii) to transact such other
business as may properly come before the Special Meeting.
THE STARFISH BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; OUTSTANDING SHARES
The Starfish Board of Directors has fixed the close of business on
, 1998 as the record date for purposes of the Special Meeting (the
"Record Date"). Only holders of record of issued and outstanding shares of
Starfish Common Stock, Starfish Series A Preferred Stock and Starfish Series B
Preferred Stock on the Record Date will be entitled to notice of and to vote
at the Special Meeting.
As of the Record Date, there were shares of Starfish Common Stock,
356,506 shares of Starfish Series A Preferred Stock and 473,725 shares of
Starfish Series B Preferred Stock outstanding and held by shareholders
of record. Holders of shares of Starfish Common Stock are entitled to one vote
per share, and holders of shares of Starfish Preferred Stock, are entitled to
one vote per share at the Special Meeting. Each share of Starfish Series A
Preferred Stock is convertible into one share of Starfish Common Stock and
each share of Starfish Series B Preferred Stock is convertible into ten shares
of Starfish Common Stock. See "Special Meeting--Vote Required; Voting
Agreements."
QUORUM; ABSTENTIONS
The presence in person or by properly executed proxy of holders of a
majority of the outstanding shares of Starfish Common Stock and the
outstanding shares of Starfish Preferred Stock (determined in the aggregate,
on an as converted basis) is necessary to constitute a quorum at the Special
Meeting.
Votes cast by proxy or in person at the Special Meeting will be tabulated by
the inspector of elections appointed for the meeting. The inspector of
elections will also determine whether or not a quorum is present. Abstentions
will be counted for purposes of determining the presence of a quorum, but will
have the effect of a vote against approval of the Merger Agreement and the
Merger.
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VOTE REQUIRED; VOTING AGREEMENTS
Approval and adoption of the Merger Agreement and approval of the Merger
requires the affirmative vote of holders of (i) a majority of the outstanding
shares of Starfish Common Stock entitled to vote, and (ii) a majority of the
outstanding shares of Starfish Preferred Stock, voting together as a single
class.
As a condition to their obligation to consummate the Merger, Motorola and
Sub are also requiring that shareholders of Starfish holding no more than 10%
of the Starfish Stock have perfected, or might be able to perfect, dissenters'
or appraisal rights in connection with the Merger.
As of the Record Date, certain directors and executive officers of Starfish
and certain 5% or greater shareholders held or may be deemed to have held
shares of Starfish Common Stock directly or beneficially, representing
% of the outstanding shares of Starfish Common Stock. In addition, as of
the Record Date, such persons held no shares of Starfish Series A Preferred
Stock. As of the Record Date, Motorola held or may be deemed to have held 99%
of the outstanding shares of Starfish Series B Preferred Stock. The remaining
Series B Preferred Stock is held by certain non-employee directors of
Starfish. The Starfish Series A Preferred Stock and Starfish Series B
Preferred Stock vote together as a single class on the approval and adoption
of the Merger Agreement and the approval of the Merger.
Pursuant to the terms of the Voting Agreements, certain directors, executive
officers and shareholders of Starfish have agreed, among other things, to vote
an aggregate of approximately % of the outstanding shares of Starfish Common
Stock and approximately 1% of the outstanding shares of Starfish Series B
Preferred Stock as of the Record Date in favor of approval of the Merger and
any matter which could reasonably be expected to facilitate the Merger and, in
connection therewith, have granted irrevocable proxies to the Board of
Directors of Motorola. Motorola holds approximately 56.6% of the outstanding
Starfish Preferred Stock and intends to vote all such shares in favor of the
Merger or any matter which could reasonably be expected to facilitate the
Merger. See "The Merger--Voting Agreements."
VOTING; REVOCABILITY OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Special Meeting in accordance with the instructions contained therein. IF NO
INSTRUCTIONS ARE INDICATED, THE SHARES OF STARFISH STOCK REPRESENTED BY SUCH
PROXIES WILL BE VOTED IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND APPROVAL OF THE MERGER and as the proxy holders deem advisable
on any other proposals submitted to a vote, in accordance with the
recommendations of the Starfish Board of Directors.
A shareholder who has executed and returned a proxy may revoke it at any
time before it is voted at the Special Meeting by (i) executing and returning
a proxy bearing a later date, (ii) filing written notice of such revocation
with the Secretary of Starfish stating that the proxy is revoked, or (iii)
attending the Special Meeting and voting in person (however, mere attendance
at the Special Meeting will not in and of itself have the effect of revoking
the proxy). Any written notice of revocation or subsequent proxy should be
sent so as to be delivered to Starfish Software, Inc., 1700 Green Hills Road,
Scotts Valley, California 95066, Attention: Secretary, or hand delivered to
the Secretary of Starfish, at or before the taking of the vote at the Special
Meeting.
SOLICITATION OF PROXIES
The costs of soliciting proxies from the holders of Starfish Stock will be
borne by Starfish. In addition to solicitation by mail, the directors,
officers and employees of Starfish may, without additional compensation,
solicit proxies from shareholders by telephone, facsimile or letter or in
person.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF STARFISH. ACCORDINGLY, SHAREHOLDERS
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ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS
PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS THEREOF UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT. SEE "THE MERGER
AGREEMENT--SURRENDER OF CERTIFICATES."
THE MERGER
This Proxy Statement/Prospectus contains certain information set forth more
fully in the Merger Agreement, which is attached hereto as Annex A1 and A2,
and is qualified in its entirety by reference to the Merger Agreement, which
is hereby incorporated herein by reference. The Merger Agreement should be
read carefully by each Starfish shareholder in formulating his or her decision
with respect to the proposed Merger.
BACKGROUND OF THE MERGER
In November 1996, Starfish and representatives of the Motorola Platform
Software Division made contact and began discussions of possible technical and
business relationships between the companies.
In December 1996, Starfish and Motorola issued a joint press release
announcing a technical alliance. Later in December 1996, Starfish was
introduced to representatives of other Motorola divisions representing the
paging and cellular phone businesses.
From January through June 1997, representatives of Motorola and Starfish
engaged in ongoing technical and business discussions.
In June 1997, Starfish and Motorola signed a Development and License
Agreement under which Starfish agreed to provide device and PC applications to
Motorola.
In June 1997, Starfish and Ralph Smith, Director, Corporate Business
Development of Motorola, began discussions regarding an equity investment in
Starfish by Motorola.
In October 1997, the foregoing discussions culminated in Motorola's purchase
of approximately $14.75 million principal amount of shares of Starfish Series
B Preferred Stock and Motorola obtaining a representative on the Starfish
Board of Directors.
In December 1997, Starfish and Motorola signed a Services Agreement pursuant
to which Starfish granted Motorola certain license rights to Starfish
technology for evaluation, research and development purposes.
In early March 1998, Mr. Smith indicated to Philippe Kahn, President, Chief
Executive Officer and Chairman of the Starfish Board of Directors, that
Motorola might be interested in acquiring Starfish. On March 12, 1998,
following a Starfish Board of Directors meeting, Mr. Smith and Mr. Kahn
discussed a possible acquisition of Starfish by Motorola. Mr. Kahn informed
Mr. Smith that Starfish would consider any offer which Motorola would wish to
propose.
During April 1998, Mr. Smith and Mr. Jerry Upton, Vice President and General
Manager Platform Software Division of Motorola (and the representative of the
Starfish Series B Preferred Stock on the Starfish Board of Directors),
continued to have discussions with Mr. Kahn regarding a possible acquisition
of Starfish by Motorola. On May 12, 1998, Motorola provided Mr. Kahn with a
proposed term sheet for the acquisition of Starfish by Motorola. Over the next
several days, the proposed terms for the acquisition were the subject of
further negotiation and an agreement in principle was reached with respect to
the acquisition. During this period, Mr. Kahn had informal discussions with
members of the Starfish Board of Directors regarding the acquisition.
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During the last two weeks of May through the end of June, Motorola conducted
legal, financial, technical and other due diligence reviews of Starfish.
During the same period, draft documents relating to the acquisition were
circulated and negotiated between counsel for Motorola and counsel for
Starfish.
By unanimous written consents effective as of June 29 and June 25, 1998,
respectively, the Motorola and Starfish Boards of Directors approved the terms
of the Merger.
On July 1, 1998, the Merger Agreement was executed by Starfish, Motorola and
Sub.
In connection with the execution of the Merger Agreement, certain directors,
executive officers and shareholders of Starfish executed Voting Agreements in
respect of approximately % of the outstanding shares of Starfish Common
Stock and approximately 1% of the outstanding shares of Starfish Series B
Preferred Stock pursuant to which they agreed, among other things, to vote
their shares in favor of the approval and adoption of the Merger Agreement and
the approval of the Merger.
On July 13, 1998, after the close of trading on the New York Stock Exchange,
Motorola and Starfish issued a joint press release and held a press conference
announcing the execution of the Merger Agreement and the proposed Merger.
On July 24, 1998, Amendment No. 1 to the Merger Agreement was executed by
Starfish, Motorola, Sub and the Principal Shareholders (as defined below).
REASONS FOR THE MERGER; RECOMMENDATION OF THE STARFISH BOARD OF DIRECTORS
Motorola's Reasons for the Merger and Further Background
The Board of Directors of Motorola approved the terms and provisions of the
Merger Agreement by unanimous written consent dated June 29, 1998. The Board
of Directors of Motorola believes that consummation of the Merger is in the
best interests of Motorola.
In arriving at its decision to approve the Merger Agreement, the Board of
Directors of Motorola considered a number of factors. Among the factors that
the Board considered were: (i) information concerning Starfish's and
Motorola's respective businesses, prospects, historical financial performances
and conditions, operations, technologies, managements, competitive positions,
products, customers and future development plans; (ii) the opportunity to
expand and improve Motorola's products; (iii) the strategic importance of the
TrueSync Technology Platform to Motorola products and Starfish's position in
the overall market for that platform; (iv) the experience that Motorola had in
working with Starfish and its technology; (v) comparative equity valuation and
comparisons of market values and recent acquisition prices for comparable
companies; (vi) the compatibility of management and businesses of Motorola and
Starfish; and (vii) reports from management on specific terms of the relevant
agreements, including the Merger Agreement.
In view of the wide variety of factors considered, the Motorola Board of
Directors did not find it practical to, and did not, quantify or otherwise
assign relative weights to the specific factors considered. After taking into
consideration all of the factors set forth above, among others, the Motorola
Board of Directors unanimously determined that the Merger was fair to and in
the best interests of Motorola and its shareholders and that Motorola should
proceed with the Merger.
Recommendation of the Starfish Board of Directors; Starfish's Reasons for The
Merger
The Board of Directors of Starfish unanimously approved the terms and
provisions of the Merger Agreement by written consent dated June 25, 1998. The
Board of Directors of Starfish believes the terms of the Merger are fair to
and in the best interests of Starfish and its shareholders and recommends that
the shareholders approve the Merger and approve and adopt the Merger Agreement
(and the transactions contemplated thereby).
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The Board of Directors of Starfish believes that the following are benefits
of the Merger:
Access to Motorola's Significant Wireless Product Line. The Merger will
provide Starfish with access to one of the leading manufacturers of
wireless and other electronic products.
Technology Synergies. The Merger presents an opportunity to capitalize on
synergies and realize costs savings associated with combining the Starfish
research and development organization and technologies with Motorola's
research and development organization and technologies.
Increased Resources to Compete. The CID market is intensely competitive
and Starfish expects such competition to increase in the future,
particularly as Microsoft enters the market. As a result, Starfish believes
that its combination with a leading provider of wireless and other
electronics products will significantly assist Starfish in this intensely
competitive environment.
Larger Sales Force. The Merger will allow Starfish to leverage on
Motorola's substantial direct sales force.
Build on Motorola's International Marketing Expertise. The Merger will
allow Starfish to take advantage of Motorola's strong distribution channels
and its extensive sales and market infrastructure worldwide.
Provide Liquidity for Starfish shareholders. The Merger will be a means
by which Starfish shareholders and optionholders will be able to obtain
liquidity for their equity interests. The Merger was considered in view of
possible alternatives. In addition, the Merger is expected to be
accomplished in significant part as a tax-deferred exchange of Starfish
shares for Motorola shares under the Internal Revenue Code.
In the course of its consideration of the Merger, the Starfish Board of
Directors reviewed the anticipated benefits summarized above and a number of
additional factors relevant to the Merger. In particular, the Starfish Board
of Directors considered, among other things: (i) information concerning, and
their knowledge of, Starfish's and Motorola's respective businesses,
prospects, historical financial performances and conditions, operations,
technologies, managements, competitive positions, products, customers and
future development plans; (ii) the historical market prices, volatility and
trading information with respect to the Motorola Common Stock; (iii) the
consideration to be received by Starfish shareholders in the Merger and the
market value of the shares of Motorola Common Stock to be issued in exchange
for Starfish Stock and upon exercise of outstanding Starfish Options and
warrants; (iv) the terms of the Merger Agreement; (v) an evaluation of the
prospects of Starfish on a stand-alone basis; (vi) an evaluation of other
strategic alternatives potentially available to Starfish, including other
merger opportunities and a potential initial public offering; (vii) the
compatibility of the managements and businesses of Starfish and Motorola, as
well as the fact that certain members of Starfish's senior management would
manage the operations relating to Starfish's products and business for the
combined company; and (viii) the fact that the Merger is expected to qualify
in significant part as a tax-free reorganization.
The Starfish Board of Directors also considered a variety of potentially
negative factors in its deliberations concerning the Merger, including, among
other things: (i) the slower growth of Motorola's revenues compared to the
potential growth of Starfish's revenues as a stand-alone entity; (ii) the
possibility of management disruption associated with the Merger and the risk
that, despite the efforts of the combined company, the combined company may
not be able to retain key technical, sales and management personnel of
Starfish; (iii) the risk that the combined company's ability to increase or
maintain revenues might be diminished by potential loss of existing Starfish
partners, loss of personnel or other factors resulting from the Merger; (iv)
the risk that the benefits sought to be achieved by the Merger will not be
achieved; (v) the ability of Starfish to remain as a stand-alone company; and
(vi) other risks described above under "Risk Factors."
In view of the wide variety of factors considered, the Starfish Board of
Directors did not find it practical to, and did not, quantify or otherwise
assign relative weights to the specific factors considered. After taking into
consideration all of the factors set forth above, among others, the Starfish
Board of Directors unanimously determined that the Merger was fair to and in
the best interests of Starfish and its shareholders and that Starfish should
proceed with the Merger.
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CONDUCT OF STARFISH IF MERGER IS NOT CONSUMMATED
In the event that the proposed Merger is not consummated, Starfish will
continue to operate its business as currently conducted. It is anticipated
that Starfish would consider the possibility of an initial public offering or
a strategic arrangement with another company possessing complementary
technologies. See "Risk Factors--Risks Relating to Starfish--Need of
Additional Working Capital."
SHARES OF MOTOROLA COMMON STOCK TO BE ISSUED
Based on Starfish's capitalization as of June 30, 1998, assuming exercise of
all Starfish options which had vested on June 30, 1998 (but excluding the
potential exercise of any Starfish options which may vest between such date
and the Effective Time), Motorola will issue approximately 1,777,197 shares of
Motorola Common Stock in exchange for all of the outstanding shares of
Starfish Stock (other than shares of Starfish Series B Preferred Stock held by
Motorola and Dissenting Shares, if any). As of June 27, 1998, there were
598,117,115 shares of Motorola Common Stock outstanding.
SHARES OF STARFISH STOCK OUTSTANDING
As of June 30, 1998, and assuming that the outstanding warrant to acquire
Starfish Common Stock is exercised and that all Starfish Preferred Stock is
converted into Starfish Common Stock, there were 31,969,850 shares of Starfish
Common Stock and options to acquire 4,746,832 shares of Starfish Common Stock
outstanding.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of June 30, 1998, directors and executive officers of Starfish and their
affiliates may be deemed to be beneficial owners of approximately 82% of the
outstanding shares of Starfish Stock. See "The Merger Agreement--Principal
Shareholders of Starfish" for additional information concerning such
ownership. Each of the directors and executive officers of Starfish has
advised Starfish that he or she has agreed to vote or direct the vote of all
the outstanding shares of Starfish Stock over which he or she has voting
control in favor of approval and adoption of the Merger Agreement.
In June, 1998, the Starfish Board of Directors agreed to accelerate options
to purchase, in the aggregate, 450,000 shares of Starfish Common Stock held by
Messrs. Porat, Mikailli and Meresman, each a non-employee director of
Starfish, effective prior to consummation of the Merger and provided that such
options are exercised immediately prior to the consummation of the Merger.
In addition, certain officers and key employees of Starfish, other than the
Principal Shareholders (as defined below), are eligible to participate in the
Bonus Pool (as defined below).
MATERIAL CONTRACTS BETWEEN MOTOROLA AND STARFISH
License Agreement. In June 1997, the parties entered into a Development and
License Agreement pursuant to which Starfish granted Motorola nontransferable
right and license to certain Starfish technology for distribution with certain
Motorola devices still under development.
Services Agreement. In December 1997, the parties entered into a Services
Agreement pursuant to which Starfish granted Motorola a non-exclusive,
internal use license to certain Starfish technology for evaluation, research
and development purposes.
Starfish Series B Preferred Stock. In October 1997, the parties entered into
a Series B Preferred Stock Purchase Agreement pursuant to which Motorola
purchased 469,745 shares of Starfish Series B Preferred Stock for an aggregate
purchase price of approximately $14.5 million. A share of Starfish Series B
Preferred Stock is convertible into ten shares of Starfish Common Stock. In
connection therewith, the parties also entered into an Investors' Rights
Agreement which granted Motorola certain rights, including, but not limited
to, registration
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rights and rights of first refusal in subsequent Starfish equity offerings. In
addition, Motorola has the right to elect one director to the Starfish Board.
Jerry Upton, the Vice President and General Manager of Motorola's Platform
Software Division, has served as a Starfish director since October, 1997.
VOTING AGREEMENTS
In connection with the execution of the Merger Agreement, certain directors,
officers and shareholders of Starfish entered into Voting Agreements with
Motorola in respect of approximately 13,247,498 shares of Starfish Common
Stock, or % of the total number of shares of outstanding Starfish Common
Stock as of the Record Date, and approximately 3,980 shares of Starfish Series
B Preferred Stock, or 0.4% of the total number of shares of outstanding
Starfish Preferred Stock as of the Record Date, pursuant to which they have
agreed, subject to certain limited exceptions, not to transfer, pledge, sell,
exchange or offer to transfer or sell or otherwise dispose of or encumber at
any time prior to the Expiration Date (as defined below) any of the shares of
Starfish Stock owned by them or acquired by them prior to the Expiration Date
(as defined below). The term "Expiration Date" is defined in the Voting
Agreements as the earlier to occur of (i) such date as the Merger shall become
effective in accordance with the terms and provisions of the Merger Agreement,
or (ii) such date as the Merger Agreement shall be terminated.
At every meeting of the shareholders of Starfish (and at any adjournments
thereof), and with respect to every action or approval by written consent
solicited from such shareholders prior to the Expiration Date, each such
Starfish shareholder has agreed to vote all such shares of Starfish Stock (i)
in favor of approval of the Merger Agreement and the Merger and any matter
which could reasonably be expected to facilitate the Merger, (ii) against
approval of any proposal made in opposition to or competition with
consummation of the Merger and the Merger Agreement, (iii) against any merger
or consolidation of Starfish with, sale of assets or stock of Starfish to, or
reorganization or recapitalization involving Starfish with any party other
than Motorola and Sub, (iv) against any liquidation or winding up of Starfish
and (v) against any other matter which would, or could reasonably be expected
to, prohibit or discourage the Merger. Each such shareholder, as the holder of
voting stock of Starfish, has agreed to be present, in person or by proxy, at
all meetings of shareholders of Starfish so that all such shares of Starfish
Stock are counted for the purposes of determining the presence of a quorum at
such meetings.
The Voting Agreements are intended to bind the shareholders only with
respect to the specific matters set forth in such Voting Agreements, and shall
not prohibit such shareholders from acting in accordance with their fiduciary
duties as officers and/or directors of Starfish.
Concurrently with the execution of each Voting Agreement, each shareholder
executing such agreement has delivered to Motorola an irrevocable proxy
pursuant to which each shareholder has appointed Motorola as such
shareholder's proxy to vote all his or her shares of Starfish Stock with
respect to the matters specified in the proxy, which are consistent with the
provisions of the Voting Agreements.
NON-COMPETITION AGREEMENTS
In connection with the Merger, each Starfish executive officer and certain
other officers and key employees will enter into a non-competition and non-
solicitation agreement (a "Non-Compete") with Motorola. Pursuant to the Non-
Compete, each such person will agree not to engage in, either directly or
indirectly, or have any ownership interest in, or participate in the
financing, operation, management or control of, any person, firm, corporation
or business that engages in a Restricted Business (as defined therein) in the
Restricted Territory (as defined therein). In addition, each such person will
agree not to solicit, encourage or otherwise induce employees of Starfish
and/or Motorola to terminate their employment with Starfish or Motorola, as
the case may be, or knowingly and intentionally interfere in the contractual
or employment relationship between Starfish or Motorola and any employee,
supplier or customer. The obligations under the Non-Competes run for a period
of (i) three years for Philippe Kahn, Starfish's President, Chief Executive
Officer and Chairman of the Starfish Board of Directors, and Sonia Lee Kahn,
Secretary and Vice-Chairman of the Starfish Board of Directors, and (ii) two
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years for the other officers and key employees, and terminate if Motorola (a)
terminates such officer without cause, or (b) makes relocation of such person
outside of Santa Cruz County (subject to certain exceptions) or a reduction in
such person's salary a condition to ongoing employment with Motorola or
Starfish.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting, in
accordance with generally accepted accounting principles. Under the purchase
method of accounting, the purchase price paid by Motorola for Starfish
(including direct costs of the Merger) will be allocated to the identifiable
assets and liabilities of Starfish based upon the fair value of Starfish's
identifiable assets and liabilities as of the Effective Time, with the excess
of the purchase price over the fair value of net identifiable assets being
allocated to goodwill and in-process research and development. After the
Merger, the financial condition and results of operations of Starfish will be
included (but not separately reported) in the consolidated financial condition
and results of operations of Motorola.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain of the federal income tax
considerations of the Merger that are generally applicable to holders of
Starfish Stock. This discussion does not deal with all federal income tax
considerations that may be relevant to particular Starfish shareholders in
light of their particular circumstances, such as shareholders who are dealers
in securities, foreign persons or shareholders who acquired their shares in
connection with stock option plans or in other compensatory transactions. In
addition, the following discussion generally does not address the tax
consequences of other transactions effectuated prior to, at the time of or
after the Merger (whether or not such transactions are in connection with the
Merger) including, without limitation, the exercise of options, warrants or
similar rights to purchase stock, or the exchange, assumption or substitution
of options, warrants or similar rights to purchase Starfish Stock for rights
to purchase Motorola Common Stock. Furthermore, no foreign, state or local tax
considerations are addressed herein. This discussion is based on legal
authorities in existence as of the date hereof. No assurances can be given
that future legislation, regulations, administrative pronouncements or court
decisions will not significantly change the law and materially affect the
conclusions expressed herein. Any such change, even though made after
consummation of the Merger, could be applied retroactively. ACCORDINGLY, ALL
STARFISH SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO
THEM.
The Merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Code. Subject to the limitations and qualifications
described herein, and assuming the Merger so qualifies, then the following tax
consequences should generally result:
(a) A Starfish shareholder who exchanges Starfish Common Stock or
Starfish Preferred Stock for a combination of cash and Motorola Common
Stock and realizes gain will recognize such gain in an amount equal to the
lesser of (i) the amount of gain realized by such shareholder (i.e., the
excess of the sum of cash and fair market value of Motorola Common Stock
received by the shareholder over the shareholder's tax basis in the
Starfish Stock surrendered), and (ii) the amount of cash received by the
Starfish shareholder. If, however, a Starfish shareholder realizes a loss
upon the exchange of Starfish Stock for a combination of cash and Motorola
Common Stock, such loss cannot be recognized by the shareholder;
(b) If a Starfish shareholder recognizes gain upon the exchange of
Starfish Stock for Motorola Common Stock, the shareholder's aggregate basis
in Motorola Common Stock received will equal the shareholder's aggregate
basis in his, her or its Starfish Stock, increased by the amount of gain
recognized, but decreased by the aggregate amount of cash received. If a
Starfish shareholder realizes a loss which is not recognizable, the
shareholder's aggregate basis in the Motorola Common Stock received will
equal the shareholder's aggregate basis in his, her or its Starfish Stock,
decreased by the aggregate amount of cash received;
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(c) The holding period of the Motorola Common Stock received in the
Merger should include the period for which the Starfish Stock surrendered
in exchange therefor was held, provided that the Starfish Stock is held as
a capital asset at the Effective Time;
(d) Gain recognized by a Starfish shareholder will generally be capital
gain, provided that the Starfish Stock is held as a capital asset at the
Effective Time; and provided further that the payment is neither
essentially equivalent to a dividend within the meaning of Section 302 of
the Code nor has the effect of a distribution of a dividend within the
meaning of Section 356(a)(2) of the Code (collectively, a "Dividend
Equivalent Transaction"). The receipt of cash from Motorola pursuant to the
Merger will generally not be a Dividend Equivalent Transaction if the
shareholders do not own any shares of Motorola Common Stock prior to the
Merger (either actually or constructively within the meaning of Section 318
of the Code). Because Starfish shareholders will receive part of the cash
portion of the Merger Consideration after the close of the shareholder's
taxable year in which the Merger occurs, any gain realized by a shareholder
attributable to the deferred payments will be taken into account under the
installment method of tax accounting and recognized for tax purposes only
as such payments are actually received. While the gain component of each
deferred payment generally should constitute capital gain, the portion of
each deferred payment that is attributable to interest will be taxed at
ordinary income rates. In addition, any dividends paid to Starfish
shareholders with respect to Motorola Common Stock also will be taxed at
ordinary income rates;
(e) Cash received by a Starfish shareholder in lieu of a fractional share
of Motorola Common Stock should be treated as received for a fractional
share of Motorola Common Stock that had been issued in the Merger and then
redeemed by Motorola from such Starfish shareholder. A Starfish shareholder
receiving such cash should generally recognize gain or loss upon such
payment equal to the difference (if any) between such shareholder's basis
in the fractional share and the amount of cash received. Such gain or loss
should be a capital gain or loss if, at the Effective Time, the Starfish
Stock is held as a capital asset;
(f) A shareholder who exercises dissenters' rights with respect to a
share of Starfish Stock and receives payment for such share in cash will
generally recognize capital gain or capital loss (if such share was held as
a capital asset at the Effective Time), measured by the difference between
the holder's basis in such share and the amount of cash received; provided,
however, the payment does not constitute a Dividend Equivalent Transaction.
A sale of shares pursuant to an exercise of dissenters' rights will
generally not be a Dividend Equivalent Transaction if, as a result of such
exercise, the shareholder exercising dissenters' rights owns no shares of
Motorola Common Stock (either actually or constructively within the meaning
of Section 318 of the Code) after such sale; and
(g) Neither Motorola, Starfish nor Sub should recognize gain or loss as a
result of the Merger.
The parties are not requesting a ruling from the Internal Revenue Service
("IRS") regarding the consequences of the Merger. It is a condition to the
obligations of Starfish and Motorola respectively, to consummate the Merger
that, to the extent that such counsel can render an opinion, Starfish receive
an opinion of Gray Cary Ware & Freidenrich LLP and Motorola receive an opinion
of Jackson Tufts Cole & Black, LLP (collectively, the "Tax Opinions") to the
effect that the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code; provided, however, that the consummation of the
Merger shall not be conditioned upon receipt by either Motorola or Starfish of
said Tax Opinions in the event that the aggregate value of the Motorola Common
Stock received by Starfish shareholders at the Effective Time is less than
two-thirds of the aggregate amount of cash received by said shareholders at
the Effective Time. The Tax Opinions will neither bind the IRS nor preclude
the IRS from adopting a contrary position. In addition, this discussion and
the Tax Opinions will be subject to certain assumptions and qualifications,
will address only the status of the Merger itself as a reorganization (and not
the potential effect on such status of events or transactions that may occur
after the Effective Time) and will be based on the truth and accuracy of
certain representations and warranties made by Motorola, Sub, Starfish and
certain shareholders of Starfish.
Of particular importance, the above discussions and the Tax Opinions will be
based on certain assumptions, representations and warranties relating to the
satisfaction of the "continuity of interest" requirement for
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reorganization treatment. To satisfy the continuity of interest requirement,
Starfish shareholders, as a group, must receive a meaningful continuity of
equity interest in Motorola after the Merger. Although it is uncertain as to
what constitutes a sufficient continuity of interest, so long as the aggregate
value of the Motorola Common Stock (as determined at the Effective Time) to be
received by Starfish shareholders pursuant to the Merger equals or exceeds 40%
of the total Merger Consideration, this requirement should be satisfied. While
it is presently contemplated that approximately 50% of the value of the total
Merger Consideration will constitute Motorola Common Stock, in the event that
such value is less than 40%, Motorola and Starfish have agreed to consider
whether increasing the number of shares of Motorola Common Stock (and
decreasing the cash component of the Merger Consideration) is in the best
interests of the parties but are under no obligation to change the current
structure.
A successful IRS challenge to the reorganization status of the Merger (as a
result of a failure of the "continuity of interest" requirement or otherwise)
would result in a Starfish shareholder recognizing gain or loss with respect
to each share of Starfish Stock equal to the difference between the
shareholder's basis in such share and the fair market value, as of the
Effective Time, of the Motorola Common Stock and the cash received in exchange
therefor. A shareholder's aggregate basis in the Motorola Common Stock so
received would equal its fair market value, and his or her holding period for
such stock would begin the day after the Merger. See "Risk Factors--Risks
Related to the Merger Tax Considerations."
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. STARFISH SHAREHOLDERS SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER TO THEM, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, AND
OTHER TAX LAWS.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
After the Merger, the separate corporate existence of Starfish will cease
and Sub will continue as the surviving corporation under the corporate name
Starfish Software, Inc., and succeed to and assume all the rights and
obligations of Starfish. Sub will operate as one of Motorola's business units
and Motorola currently intends to maintain the headquarters of Sub in
California. After the Merger, Sub will have access to resources generally
available to Motorola's other business units, will participate in appropriate
activities with other Motorola business units and will operate under the
direction and guidance of Motorola's senior management.
REGULATORY APPROVALS
Antitrust. Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to
the FTC and the Antitrust Division of the Department of Justice (the
"Antitrust Division") and specified waiting period requirements have been
satisfied. Motorola and Philippe Kahn and Sonia Lee Kahn (together, the
"Principal Shareholders") filed notification and report forms under the HSR
Act with the FTC and the Antitrust Division on July 13, 1998. On July 27,
1998, Motorola was granted early termination of the waiting period. On July
28, 1998, the Principal Shareholders were granted early termination of the
waiting period. Notwithstanding this early termination of the HSR Act waiting
period, at any time before or after consummation of the Merger, the Antitrust
Division or the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of Motorola or the Principal Shareholders. At any time before or after
the Effective Time of the Merger, and notwithstanding the early termination of
the HSR Act waiting period, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of Starfish or businesses of Motorola or the Principal
Shareholders. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances.
Based on available information, Motorola and Starfish believe that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation
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of the Merger on antitrust grounds will not be made or that, if such a
challenge was made, Motorola and Starfish would prevail or would not be
required to accept certain conditions including certain divestitures in order
to consummate the Merger. In this regard, it is a condition to the obligation
of Motorola to consummate the Merger that no litigation or proceeding shall be
threatened or pending against Motorola or Starfish which would have the
probable effect of requiring Motorola to divest or hold separate any business
in connection with the Merger.
RESALE OF MOTOROLA COMMON STOCK
The shares of Motorola Common Stock to be issued in the Merger have been
registered under the Securities Act pursuant to the Registration Statement,
thereby allowing such securities to be traded without restriction by all
former holders of Starfish Stock not deemed to be "affiliates" (as such term
is defined for purposes of Rule 145 under the Securities Act of 1933, as
amended (the "Securities Act") of Starfish at the time the transaction is
submitted for a vote to Starfish shareholders. Persons who may be deemed to be
affiliates of Starfish generally include individuals or entities that control,
are controlled by, or are under common control with, such party and may
include certain officers and directors of such party as well as principal
shareholders of such party. Rule 145(d) under the Securities Act requires
that, for specified periods, such sales be made in compliance with the volume
limitations, manner of sale provisions and current information requirements of
Rule 144 under the Securities Act. The volume limitations should not pose any
limitations on any Starfish shareholder.
NEW YORK STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of Motorola Common Stock to
be issued pursuant to the Merger Agreement and required to be reserved for
issuance in connection with the Merger be approved for listing on the New York
Stock Exchange. An application has been filed for listing the shares of
Motorola Common Stock on the New York Stock Exchange.
DISSENTERS' RIGHTS
Motorola. Holders of Motorola Common Stock are not entitled to dissenters',
appraisal or other similar rights under the DGCL in connection with the
Merger.
Starfish. Starfish shareholders are entitled to dissent from the Merger and
to demand payment for their shares pursuant to by Chapter 13 of the California
Corporations Code (the "CA Code"), the full text of which is attached hereto
as Annex C. The summary of these rights set forth below is not intended to be
complete and is qualified in its entirety by reference to Annex C hereto.
Starfish shareholders will be entitled to exercise dissenters' rights
pursuant to the provisions of Chapter 13 of the CA Code. In accordance with
these provisions, dissenting Starfish shareholders will have the right to be
paid the "fair market value" of their shares of Starfish Stock by fully
complying with the procedures specified in Chapter 13 of the CA Code. Under
the CA Code, "fair market value" is determined as of the day before the first
announcement of the terms of the Merger, excluding any appreciation or
depreciation in consequence of the Merger, but adjusted for any stock split,
reverse stock split or share dividend which becomes effective thereafter.
Dissenters' rights cannot be validly exercised by persons other than
shareholders of record regardless of the beneficial ownership of the shares.
Persons who are beneficial owners of shares held of record by another person,
such as a broker, a bank or a nominee, should instruct the record holder to
follow the procedures outlined below if they wish to dissent from the Merger
with respect to any or all of their shares.
In order to perfect their dissenters' rights, shareholders of record must:
(i) make written demand for the purchase of their dissenting shares upon
Starfish within 30 days after the mailing to shareholders by Starfish of the
notice of approval of the principal terms of the Merger (the "Approval
Notice"); (ii) not vote their shares for the adoption and approval of the
Merger Agreement; and (iii) within 30 days after the mailing of the Approval
Notice, submit the certificate(s) representing their dissenting shares to
Starfish or its transfer agent for notation thereon that they represent
dissenting shares. Failure to follow any of these procedures may result in the
loss of statutory dissenters' rights.
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Dissenting shareholders must submit to Starfish at its principal office,
1700 Green Hills Road, Scotts Valley, California 95066, Attention: Secretary,
a written demand that Starfish purchase for cash some or all of their shares.
The notice must state the number of shares held of record which the
shareholder demands to be purchased and the amount claimed to be the "fair
market value" of those shares. That statement of fair market value will
constitute an offer by the dissenting shareholder to sell such shares at that
price. Such demand will not be effective unless it is received by Starfish
within 30 days after the date the Approval Notice was mailed to Starfish
shareholders.
Dissenting shareholders may not withdraw their demand for payment without
the consent of the Starfish Board. The rights of dissenting shareholders to
demand payment terminate if: (i) the Merger is abandoned (although dissenting
shareholders are entitled upon demand to reimbursement of expenses incurred in
a good faith assertion of their dissenters' rights); (ii) the shares are
transferred prior to submission for endorsement as dissenting shares; (iii)
the dissenting shareholder withdraws, with the consent of the Starfish Board,
his or her demand for purchase of the dissenting shares; or (iv) the
dissenting shareholder and Starfish do not agree as to the fair market value
of such shares and a complaint is not filed within six months of the date on
which the Approval Notice was mailed.
No shareholder who has a right to demand payment for cash for such
shareholder's shares and who in fact makes such a demand will have any right
to attack the validity of the Merger or have the Merger set aside or
rescinded, except in an action to test whether the number of shares required
to approve the Merger have been legally voted in favor thereof. Any
shareholder who does not demand payment of cash for such shareholder's shares
and who institutes an action to attack the validity of the Merger or to have
the Merger set aside or rescinded would not thereafter have any right to
demand payment of cash pursuant to the exercise of dissenters' rights.
Dissenting shareholders must not vote their dissenting shares for the Merger
Agreement. Record shareholders may vote part of the shares which they are
entitled to vote in favor of the Merger Agreement without jeopardizing their
dissenters rights as to other shares; however, if record shareholders vote
part of the shares they are entitled to vote in favor of the Merger Agreement
and fail to specify the number of shares they are so voting, it is
conclusively presumed under the CA Code that their approving vote is with
respect to all shares which they are entitled to vote. Refraining from voting
for the Merger Agreement will not, of itself, absent compliance with the
provisions summarized herein, satisfy the requirements of the CA Code for
exercise and perfection of dissenters' rights. However, any Starfish
shareholder desiring to exercise dissenters' rights must not vote for the
Merger Agreement.
Starfish will mail to each shareholder the Approval Notice within 10 days
after the date of shareholder approval, stating the price determined by it to
represent the "fair market value" of the dissenting shares. The statement of
price will constitute an offer to purchase any dissenting shares at that
price.
Within 30 days after the mailing of the Approval Notice, dissenting
shareholders must submit to Starfish at the address set forth above,
certificates representing the dissenting shares with respect to which a
purchase demand has been made, to be stamped or endorsed with a statement that
the shares are dissenting shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed. The Approval Notice will
specify the date by which the submission of certificates for endorsement must
be made and a submission made after that date will not be effective for any
purpose.
If a dissenting shareholder and Starfish agree that shares are dissenting
shares and agree upon the price of the shares, Starfish, upon surrender of the
certificates, will make payment of that amount (plus interest thereon at the
legal rate on judgments from the date of such agreement) within 30 days after
such agreement. Any agreement between dissenting shareholders and Starfish
fixing the "fair market value" of any dissenting shares must be filed with the
Secretary of Starfish.
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If Starfish denies that the shares are dissenting shares, or Starfish and a
dissenting shareholder fail to agree upon the "fair market value" of the
shares, the dissenting shareholder may, within six months after the date on
which Approval Notice was mailed to the shareholder, but not thereafter, file
a complaint (or intervene in a pending action, if any) in the Superior Court
for the County of Santa Cruz, State of California, requesting that the
Superior Court determine whether the shares are dissenting shares and the
"fair market value" of such dissenting shares. The Superior Court may appoint
one or more impartial appraisers to determine the "fair market value" per
share of the dissenting shares. The costs of the action will be assessed or
apportioned as the Superior Court considers equitable, but if the "fair market
value" is determined to exceed the price offered by Starfish, Starfish will be
required to pay such costs including, in the discretion of the Superior Court,
attorneys' fees, fees of expert witnesses and interest at the legal rate on
judgments, if such "fair market value" is determined to exceed 125% of the
price offered by Starfish. A dissenting shareholder must bring such an action
within six months after the date on which the Approval Notice was mailed to
the shareholder, whether or not Starfish responds within such time to the
shareholder's written demand that Starfish purchase for cash shares voted
against the Merger Agreement.
The obligation of Motorola to consummate the Merger is subject to the
condition, among others, that the holders of not more than 10% of the
outstanding shares of Starfish Stock have perfected, or might be able to
perfect, dissenters' rights in connection with the Merger. See "The Merger
Agreement--Conditions."
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Annex A1 and A2 to this Proxy
Statement/Prospectus and incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Merger Agreement. Starfish
shareholders are urged to read the Merger Agreement in its entirety for a more
complete description of the Merger. The Merger Agreement rather than the
summary set forth herein, will control the terms of the Merger and the rights
of the parties and the Starfish shareholders of thereunder.
THE MERGER
The Merger Agreement provides that, following the approval and adoption of
the Merger Agreement by the shareholders of Starfish and the satisfaction or
waiver of the other conditions to the Merger, Starfish will be merged with and
into Sub, with Sub continuing as the surviving corporation, which shall be a
wholly-owned subsidiary of Motorola.
If all such conditions to the Merger are satisfied or waived, the Merger
will become effective upon the filing by Sub and Starfish of a duly executed
Agreement of Merger with the Secretary of State of the State of California.
EFFECTIVE TIME OF THE MERGER
It is anticipated that the Merger will become effective as promptly as
practicable after the requisite shareholder approval has been obtained and all
other conditions to the Merger have been satisfied or waived. It is
anticipated that, assuming all conditions are met, the Merger will occur on or
about , 1998.
EFFECT OF THE MERGER ON STARFISH STOCK
At the Effective Time, each stock certificate representing shares of
Starfish Common Stock and Starfish Preferred Stock (except for shares owned by
Motorola and Dissenting Shares, if any) will, without any action on
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the part of the holder thereof, be converted into a right to receive the
Merger Consideration (as defined below). The Merger Consideration will only be
paid to holders of record of Starfish Stock at the Effective Time and will be
paid only upon surrender to the Exchange Agent by a Starfish shareholder of
the stock certificates representing shares of Starfish Stock, together with a
properly completed Letter of Transmittal. Fractional shares of Motorola Common
Stock will not be issuable in connection with the Merger. Starfish
shareholders otherwise entitled to a fractional share will be paid the value
of such fraction in cash based upon the applicable Exchange Ratio (as defined
below).
EFFECT OF THE MERGER ON STARFISH STOCK OWNED BY MOTOROLA
At the Effective Time, each share of Starfish Stock owned by Motorola or any
direct or indirect wholly-owned subsidiary of Motorola or of Starfish
immediately prior to the Effective Time will be canceled and extinguished
without any conversion thereof and no payment will be made with respect
thereto.
MERGER CONSIDERATION
At the Effective Time, each share of Starfish Common Stock and Starfish
Series A Preferred Stock that is issued and outstanding prior thereto (except
for Dissenting Shares, if any) will be converted into the right to receive (i)
$3.50 in cash ($.55 of which is conditional and will be withheld to secure
certain indemnification obligations) and (ii) .0661 (as calculated below, the
"Common and Series A Exchange Ratio") shares of Motorola Common Stock (.0104
shares of which are conditional and will be withheld to secure certain
indemnification obligations). No fractional shares of Motorola Common Stock
will be issued. Starfish shareholders will receive cash in lieu of fractional
shares. The Common and Series A Exchange Ratio of .0661 is the quotient
(calculated to the nearest 0.0001) of (i) $3.50 divided by (ii) $52.97 (the
Valuation Period Stock Price). The Valuation Period Stock Price is $52.97
based on the average of the high and low sale prices of Motorola Common Stock
as reported on the New York Stock Exchange--Composite Transactions Reporting
System for the Period beginning May 12, 1998 and ending June 30, 1998.
As an example, the Merger Consideration for 100 shares of Starfish Common
Stock or 100 shares of Starfish Series A Preferred Stock would be (i)(a)
$295.00 in cash, (b) 5 shares of Motorola Common Stock and (c) $30.15 in cash
in lieu of a fractional share, each payable upon receipt by the Exchange Agent
of the certificate(s) representing the Starfish Common Stock or Starfish
Series A Preferred Stock and the other requisite documents, and (ii) up to (a)
$55.00 in cash and (b) 1.04 shares of Motorola Common Stock (with cash to be
paid in lieu of any fractional shares), each conditionally payable, subject to
the indemnification obligations specified in the Merger Agreement, at the
times indicated in the Merger Agreement. See "The Merger Agreement--
Indemnification, Escrowed Shares and Holdback Amount."
At the Effective Time, each share of Starfish Series B Preferred Stock that
is issued and outstanding prior thereto (except for shares held of record by
Motorola and Dissenting Shares, if any) will be converted into the right to
receive (i) $35.00 in cash ($5.50 of which is conditional and will be withheld
to secure certain indemnification obligations), and (ii) .6608 (as calculated
below, the "Series B Exchange Ratio") shares of Motorola Common Stock (.1038
shares of which will be withheld to secure certain indemnification
obligations). The Series B Exchange Ratio of .6608 is the quotient (calculated
to the nearest 0.0001) of (i) $35.00 divided by (ii) $52.97, the Valuation
Period Stock Price.
As an example, the Merger Consideration for 100 shares of Starfish Series B
Preferred Stock would be (i)(a) $2,950.00 in cash, (b) 55 shares of Motorola
Common Stock and (c) $36.55 in cash in lieu of a fractional share, each
payable upon receipt by the Exchange Agent of the certificate(s) representing
the Starfish Series B Preferred Stock and the other requisite documents, and
(ii) up to (a) $550.00 in cash and (b) 10.38 shares of Motorola Common Stock
(with cash to be paid in lieu of any fractional shares), each conditionally
payable, subject to the indemnification obligations specified in the Merger
Agreement, at the times indicated in the Merger Agreement. See "The Merger
Agreement--Indemnification, Escrowed Shares and Holdback Amount."
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ASSUMPTION OF STARFISH OPTIONS
At the Effective Time, each option granted by Starfish under either the
Starfish 1995 Stock Option Plan or the Starfish 1997 Stock Option Plan to
purchase Starfish Common Stock outstanding immediately prior thereto (a
"Starfish Option") will cease to represent a right to acquire shares of
Starfish Common Stock and will be assumed by Motorola and automatically
converted into an option (an "Exchanged Option") to purchase shares of
Motorola Common Stock exercisable until the current termination of the
Starfish Option (and subject to the terms of either of the 1995 Stock Option
Plan and the 1997 Stock Option Plan of Starfish, as the case may be). The
number of shares of Motorola Common Stock (rounded down to the nearest whole
number) that the holder of such Exchanged Option will be entitled to purchase
will be equal to the product of the number of shares of Starfish Common Stock
subject to the Starfish Option immediately prior to the Effective Time and
.13215 (as calculated below, the "Option Exchange Ratio"). The exercise price
per share of Motorola Common Stock (rounded up to the nearest $.001) under the
Exchanged Option will be equal to the exercise price per share of Starfish
Common Stock under the Starfish Option divided by the Option Exchange Ratio.
The Option Exchange Ratio of .13215 is the quotient of (i) $7.00 divided by
(ii) $52.97, the Valuation Period Stock Price.
Each optionee who is an employee or consultant of Starfish at the Effective
Time will be credited for continuous employment or consultancy with Starfish,
whether occurring before or after the Effective Time, for purposes of
determining the number of shares subject to exercise, vesting or repurchase
after the Effective Time.
Upon the Effective Time, Motorola will issue to each holder of an
outstanding Starfish Option a document evidencing the assumption of such
Starfish Option by Motorola. No fractional shares of Motorola Common Stock
will be issued in connection with the exercise of Motorola Options. All
fractional shares which would otherwise be issuable will be rounded down to
the nearest whole share. All of the other terms of each Motorola Option will
remain the same as the corresponding assumed Starfish Option including, among
others, the vesting and holding periods. The holders of Starfish Options are
urged to consult their own tax advisors as to the consequences to them of such
assumption.
Motorola will use its best efforts to cause the shares of Motorola Common
Stock issuable upon exercise of the Starfish Options to be subject to
Motorola's existing Form S-8 or, in the alternative, Motorola shall use its
best efforts to prepare, file with the SEC and to cause to become effective a
registration statement on Form S-8 with respect to the shares of Motorola
Common Stock issuable upon the exercise of the Starfish Options within thirty
days of the Closing Date.
SURRENDER OF CERTIFICATES
Promptly after the Effective Time, but no later than three business days
thereafter, the Exchange Agent will mail transmittal forms and exchange
instructions (the "Letter of Transmittal") to each holder of record of
Starfish Stock to be used to surrender and exchange certificates evidencing
shares of Starfish Stock for certificates evidencing the shares of Motorola
Common Stock and cash to which such holder has become entitled. After receipt
of the Letter of Transmittal, each holder of certificates formerly
representing Starfish Stock will be able to surrender such certificates to the
Exchange Agent, and each such holder will receive an amount of cash and a
certificate evidencing the number of whole shares of Motorola Common Stock to
which such holder is entitled. In addition, the holders of Starfish Stock will
be entitled to receive, on a pro-rata basis, certain distributions of portions
of the Holdback Amount on each of the six-month, one-year, two-year and three-
year anniversaries of the Closing Date. See "The Merger Agreement--
Indemnification, Escrowed Shares and Holdback Amount." STARFISH SHAREHOLDERS
SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF
TRANSMITTAL.
INDEMNIFICATION, ESCROWED SHARES AND HOLDBACK AMOUNT
At the Effective Time (and, with respect to those shares held by holders of
Starfish Stock which qualify as "dissenting shares" as defined in Section
1300(b) of the CA Code (the "Dissenting Shares") for which appraisal rights
have not been perfected or lost, such later time as determined in accordance
with Section 2.4 of the Merger
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Agreement), Motorola will deposit with Harris Bank & Trust (the "Exchange
Agent") certificates representing approximately 15.7% of the shares of
Motorola Common Stock issuable to the holders of Starfish Stock in the Merger.
Such shares (the "Escrowed Shares") will be registered in the name of and
deposited with the Exchange Agent pursuant to the terms of the Merger
Agreement.
In addition, Motorola will deposit into escrow: (i) on the day six months
following the Closing Date (as defined in the Merger Agreement), $5,000,000
plus any interest accrued thereon from the Closing Date (such interest to be
determined in accordance with Section 1(e) of the Exchange Agreement); (ii) on
the first anniversary of the Closing Date, $5,000,000 plus any interest
accrued thereon from the Closing Date (such interest to be determined in
accordance with Section 1(e) of the Exchange Agreement); (iii) on the second
anniversary of the Closing Date, $2,500,000 plus any interest accrued thereon
from the Closing Date (such interest to be determined in accordance with
Section 1(e) of the Exchange Agreement); and (iv) on the third anniversary of
the Closing Date, the remaining Holdback Amount, estimated to be approximately
$2,500.000 plus any interest accrued thereon from the Closing Date (such
interest to be determined in accordance with Section 1(e) of the Exchange
Agreement) (collectively, the "Holdback Amount"). The Holdback Amount is an
aggregate amount of approximately $15,000,000 plus interest (subject to
adjustment), which is equal to the sum of $0.55 per share of Starfish Common
Stock and Starfish Series A Preferred Stock issued and outstanding and $5.50
per share of Starfish Series B Preferred Stock issued and outstanding
(excluding shares held by Motorola).
The Holdback Amount and the Escrowed Shares will be available to indemnify
Motorola, its affiliates, their representatives, and their successors for
specified damages that Motorola has incurred or reasonably anticipates
incurring by reason of: (a) any inaccuracy in or breach of any representation
or warranty of Starfish; (b) any breach of any covenant or obligation of
Starfish under the Merger Agreement; (c) any claim relating to Intellectual
Property (as such term is defined in the Merger Agreement) for damages arising
out of certain Starfish agreements (as specified in the Merger Agreement); (d)
any claim with respect to the fees or expenses of a broker or finder payable
by the Starfish shareholders; (e) any Legal Proceeding (as such term is
defined in the Merger Agreement) relating to any inaccuracy, breach or expense
of the type referred to in (a)-(d) hereof; or (f) any obligation or duty
agreed to or assumed by Starfish in any contract, license or agreement not
listed in Part 3.8(k) of the Starfish Disclosure Statement furnished by
Starfish in connection with the Merger Agreement, entered into between
Starfish and any other party, to indemnify, hold harmless or otherwise assume
or incur any obligation or liability with respect to the infringement by
Starfish or such other party of the Intellectual Property of any third party.
In the event that Motorola makes a claim for indemnification, such claim shall
be made, first, against the Holdback Amount, and, second, against the Escrowed
Shares. Claims against the Holdback Amount and the Escrowed Shares shall be
Motorola's sole remedy following the Merger for any such breaches. Motorola's
right to make a claim against the Holdback Amount and the Escrowed Shares is
subject to certain limitations. The obligation to indemnify will continue for
two years from the Closing Date, except for indemnification obligations
relating to certain of Starfish's Intellectual Property which will continue
for three years from the Closing Date.
The Exchange Agent shall distribute portions of the Holdback Amount and
Escrowed Shares to the Starfish shareholders as soon as practicable, but in no
event later than five business days, after certain portions of the Holdback
Amount are deposited with the Exchange Agent by Motorola in the manner
described above.
APPOINTMENT OF SHAREHOLDER REPRESENTATIVE
In connection with the Merger, Philippe Kahn, Starfish's President, Chief
Executive Officer and Chairman of the Starfish Board of Directors, shall be
appointed as the Shareholder Representative to act for and on behalf of each
of the Starfish shareholders. In such capacity, Mr. Kahn may, among other
things, give and receive notices and communications, authorize delivery to
Motorola of the Holdback Amount in satisfaction of indemnification obligations
to Motorola, object to such deliveries, agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with court
orders and arbitrators awards with respect to such claims. As the Shareholder
Representative, Mr. Kahn's decisions, acts, consents or instructions shall
constitute a decision of all Starfish shareholders and shall be binding and
final. In the event that a claim is brought against Mr. Kahn in his capacity
as Shareholder Representative, the Starfish shareholders shall indemnify Mr.
Kahn against any loss provided that Mr. Kahn acted in good faith and not in a
manner constituting gross
36
<PAGE>
negligence. APPROVAL BY THE STARFISH SHAREHOLDERS OF THE MERGER AGREEMENT
SHALL BE DEEMED TO CONSTITUTE APPROVAL OF PHILIPPE KAHN AS THE SHAREHOLDER
REPRESENTATIVE.
BONUS POOL
In connection with the Merger, Motorola shall establish a bonus pool of
$24.11 million (the "Pool") for certain Starfish employees (the "Recipients"),
excluding Mr. Kahn and Sonia Lee Kahn, to establish additional incentives for
such employees. The Pool shall be funded in three equal installments on the
one-year, two-year and three-year anniversaries of the Closing Date. $19
million of the Pool will be funded by Motorola. In addition, on the third
anniversary of the Closing Date, subject to certain conditions, Mr. Kahn and
Ms. Lee Kahn (together, the "Principal Shareholders") shall collectively
contribute $5.11 million of the Pool (the "Principal Shareholders'
Contribution"). The Principal Shareholders' Contribution shall be payable
first by withholding amounts payable to the Principal Shareholders from the
Holdback Amount and second from canceling shares of Motorola Common Stock
issuable to the Principal Shareholders from the Escrowed Shares. In the event
that amounts remaining in the Holdback Amount and Escrowed Shares are less
than $5.11 million, Motorola shall fund the shortfall and the Principal
Shareholders shall, within 30 days of written request from Motorola, pay to
Motorola the amount of such shortfall.
The allocation of the Pool shall be the target bonuses for the Recipients.
Subject to certain conditions which may be set by the Starfish Board of
Directors and the Shareholder Representative, payments shall be made on a pro-
rata basis over the three-year period; provided, however, that each Recipient
remains in the employ of Motorola during the relevant annual period. In
addition, payments shall be made on a date determined by the Board of
Directors of the surviving corporation (subject to approval of the Shareholder
Representative), but in any event the full amount of the Pool for such period
shall be paid with 45 days of the end of the period. In the event that the
full amount of the Pool is not payable because some or all of the Recipients
have left the employment of Starfish before earning all or part of the Pool
allocated to them or otherwise, the Principal Shareholders' Contribution shall
be reduced for each dollar of the Pool that is not payable. In the event that
the payable portion of the Pool is reduced below $19 million due to such
Recipient terminations or otherwise, the amount of such reduction up to $19
million shall be distributed to the other Starfish employees as determined by
the Board of Directors of the surviving corporation (subject to the approval
of the Shareholder Representative).
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties relating to Starfish, including, among other things: (a) the due
organization, valid existence and good standing of Starfish and certain
similar corporate matters; (b) the capital structure of Starfish; (c) the
authorization, execution, delivery and enforceability of the Merger Agreement,
the consummation of the transactions contemplated by the Merger Agreement and
related matters and the absence of conflicts under charters or bylaws,
required consents or approvals, and the absence of violations of any
instruments or law; (d) the financial statements and the absence of material
undisclosed liabilities; (e) taxes, tax returns and audits; (f) the absence or
certain material adverse changes or events; (g) title to properties; (h)
intellectual property; (i) employee benefits; (j) bank accounts and
receivables; (k) contracts; (l) orders, commitments and returns; (m)
compliance with laws; (n) the absence of labor difficulties and
discrimination; (o) trade regulation; (p) insider transactions; (q) employees,
independent contractors and consultants; (r) insurance; (s) litigation; (t)
Section 341(f)(2) of the Internal Revenue Code; (u) compliance with
environmental requirements; (v) corporate documents; (w) the absence of
brokers or finders; and (x) disclosure.
The Merger Agreement also contains various customary representations and
warranties relating to Motorola, including, among other things: (a) the due
organization, valid existence and good standing of Motorola and certain
similar corporate matters; (b) the capital structure of Motorola; (c) the
authorization, execution, delivery and enforceability of the Merger Agreement,
the consummation of the transactions contemplated by the Merger Agreement and
related matters; (d) the absence of conflicts under charters or bylaws,
required consents or
37
<PAGE>
approvals; (e) documents and financial statements filed by Motorola with the
Commission and the accuracy of information contained therein; (f) compliance
with other instruments or laws; (g) litigation; and (h) disclosure.
CERTAIN COVENANTS AND AGREEMENTS
Pursuant to the Merger Agreement, Starfish has agreed that, during the
period from the date of the Merger Agreement until the Effective Time, except
as otherwise consented to in writing by Motorola or as set forth in Starfish's
disclosure schedule, Starfish will: (a) continue to conduct its business and
maintain its business relationships in the ordinary and usual course; (b) not
take certain actions, including borrowing money in excess of certain amounts,
raising salaries, undertaking new obligations in excess of certain amounts,
and similar matters; (c) allow Motorola access to its records, books and
information; (d) not initiate, encourage or support any discussion or
negotiation with any third party regarding the acquisition, through merger or
otherwise, of Starfish; and (e) ensure the accuracy of the information
relating to Starfish used in the preparation of this Proxy
Statement/Prospectus.
Pursuant to the Merger Agreement, Motorola has agreed that, during the
period from the date of the Merger Agreement until the Effective Time, except
as otherwise consented to in writing by Starfish, Motorola will: (a) provide
reasonable assistance and cooperation to Starfish in obtaining necessary
consents; (b) advise Starfish of any change affecting a representation or
warranty provided by Motorola in the Merger Agreement; (c) reserve for
issuance the shares of Motorola Common Stock to be issued in the Merger; (d)
ensure the accuracy of the information relating to Motorola used in the
preparation of the Proxy Statement/Prospectus; (e) use its best efforts to
cause the shares of Motorola Common Stock issuable upon the exercise of the
Starfish Options to be subject to Motorola's existing Form S-8 (or if not,
file a new Form S-8 within thirty days of the Effective Time) and use its best
efforts to maintain the effectiveness of such Registration Statement (and
maintain the current status of the prospectus contained therein) for so long
as such Exchanged Options remain outstanding; and (f) use its best efforts to
cause the Motorola Common Stock to be issued in the Merger to be approved for
listing on the New York Stock Exchange.
CONDITIONS
The respective obligations of Motorola and Starfish to effect the Merger are
subject to the following conditions, among others: (a) the Merger Agreement
shall have been approved and authorized by the shareholders of Starfish; (b)
holders of not more than 10% of the outstanding shares of Starfish Stock have
perfected, or may be able to perfect, dissenters' rights in connection with
the Merger; (c) the waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (d) the
Registration Statement shall have become effective and shall not be the
subject of a stop order or proceedings seeking a stop order; (e) no litigation
or proceeding shall be threatened or pending with the probable effect of
enjoining or preventing the Merger or the enforcement of any of the non-
competition agreements contemplated by the Merger Agreement or requiring
Motorola to divest or hold separate any business, and no judgment, decree,
injunction, rule or order shall be outstanding against Starfish that would
otherwise have a material adverse effect on Motorola; (f) the approval of the
shares of Motorola Common Stock to be issued in the Merger for listing on the
New York Stock Exchange; (g) subject to certain limitations, the receipt by
Starfish and Motorola of an opinion of the respective legal counsel to
Starfish and Motorola to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code (see "The
Merger--Certain Federal Income Tax Consequences"); (h) receipt by Motorola of
all permits and other authorizations required under applicable state blue sky
laws for the issuance of Motorola Common Stock pursuant to the Merger; (i) the
Common Stock Purchase Warrant dated October 10, 1997 issued by Starfish to
PaineWebber Incorporated shall have been exercised in full or terminated; (j)
the representations and warranties of Motorola and Sub shall be true and
correct in all material respects as of the date of the Merger Agreement and as
of the Closing Date; (k) the representations and warranties of Starfish shall
be true and correct in all material respects as of the date of the Merger
Agreement, except where (1) the failure of such representation or warranty to
be true and correct would not have a Material Adverse Effect (as defined in
the Merger Agreement), (2) the failure of such representation or warranty to
be true and correct has been remedied prior to the Closing Date or (3) the
failure of such
38
<PAGE>
representation or warranty is the result of the announcement of the
acquisition of Starfish by Motorola; and (l) the performance in all material
respects of all obligations of the other party required to be performed under
the Merger Agreement except where, with respect to Starfish, such
nonperformance does not have a Material Adverse Effect (as defined in the
Merger Agreement).
TERMINATION
The Merger Agreement may be terminated at any time prior to the Closing
Date: (a) by mutual consent of Motorola, Sub and Starfish; (b) by either
Motorola or Starfish if the Merger shall not have been consummated by October
31, 1998, unless otherwise mutually agreed in writing by the parties; provided
that a party cannot terminate under this provision of the Merger Agreement if
the failure to occur of the Closing is the result of the failure on the part
of such party to perform any of its obligations thereunder (except the failure
on the part of such party to satisfy a closing condition over which such party
has no control); or (c) by either Motorola or Starfish if any Governmental
Entity (as such term is defined in the Merger Agreement) shall have issued an
order, injunction, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
injunction, decree, ruling or other action shall have become final and
nonappealable.
In the event of any termination of the Merger Agreement by either Motorola,
Sub or Starfish as provided above, the Merger Agreement will become void and
there will be no liability or obligation, except to the extent that such
termination results from the willful failure by a party to carry out its
obligations set forth in the Merger Agreement, then such party shall be liable
for damages incurred by the other parties in pursuing their rights and
remedies (including reasonable attorney's fees).
AMENDMENT AND WAIVER
Any term or provision of the Merger Agreement may be amended, and the
observance of any term of the Merger Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by
a writing signed by the party to be bound thereby. The waiver by a party of
any breach thereof for default in payment of any amount due thereunder or
default in the performance thereof shall not be deemed to constitute a waiver
of any other default or any succeeding breach or default.
EXPENSES
Motorola, Sub and Starfish shall each pay its own costs and expenses
incurred with respect to the negotiation, execution and delivery of the Merger
Agreement and the exhibits thereto, except that the Starfish shareholders
shall pay any costs and expenses relating to brokers and finders retained by
Starfish or its shareholders.
39
<PAGE>
STARFISH MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Except for historical information contained in this section, the matters
discussed herein are forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those in these forward-looking statements. Factors that could cause
actual results to differ materially include, but are not limited to, the
timing of orders and shipments, the timely development and market acceptance
of new products, the impact of competitive products and pricing and other
risks detailed below.
RESULTS OF OPERATIONS
The following table sets forth certain revenue and expense items from
Starfish's statement of operations expressed as a percentage of total net
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH DECEMBER
31, 31,
--------------- -------------
1998 1997 1997 1996
------ ------ ----- -----
<S> <C> <C> <C> <C>
Total net revenues..................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues....................... 37.4 14.7 30.1 18.1
------ ------ ----- -----
Gross profit........................... 62.6 85.3 69.9 81.9
------ ------ ----- -----
Operating expenses:
Research and development............. 82.2 107.6 69.1 53.2
Selling and marketing................ 45.5 68.2 48.7 46.9
General and administrative........... 61.0 42.9 33.9 20.9
------ ------ ----- -----
Total operating expenses........... 188.7 218.7 151.7 121.0
------ ------ ----- -----
Loss from operations................... (126.1) (133.4) (81.8) (39.1)
Interest expense....................... -- (5.9) (4.0) (1.9)
Interest and other income.............. 8.9 0.7 1.9 0.7
------ ------ ----- -----
Net loss........................... (117.2)% (138.6)% (83.8)% (40.3)%
====== ====== ===== =====
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Total Net Revenue. Starfish's total net revenue consists primarily of
license fees, royalties, software product revenues and development revenues.
Licensing revenue represents fees from the licensing of Starfish's
technologies. Royalty revenue represents payments to Starfish in connection
with sales of third-party products and services incorporating Starfish
technologies. Software product revenues represent sales of Starfish software
products. Development revenues represent non-recurring fees earned under
customer specific engineering contracts and are generally recognized using the
percentage-of-completion method based on costs incurred to date compared to
total estimated costs of completion.
Starfish's total net revenue for the three months ended March 31, 1998 was
$1,357,000, representing a 1.5% increase over total net revenue of $1,336,000
recorded during the comparable period in 1997. This increase included an
increase in development revenue of $440,000 offset by a decline in licensing
and royalty fees of Starfish's desktop products as a result of a strategy
shift to the CID market. Starfish did not have any development revenue during
the first three months of 1997 because no development contracts were in place
during the period.
Starfish anticipates a significant increase in total revenue in 1998
compared to 1997 due to an expected increase in licensing fees derived from
increased shipments of the REX PC Companion and other CIDs. There can be no
assurance that other CIDs will be released on time or at all, or that
Starfish's business partners will be
40
<PAGE>
able to successfully market these devices and achieve market acceptance. The
failure of one or more of Starfish's partners to successfully introduce new
products and services which are based on the TrueSync Technology Platform and
other Starfish technologies could have a material adverse effect upon its
business, operating results and financial condition.
Cost of License, Royalty and Other Revenues. Cost of license, royalty and
other revenues includes product packaging, documentation, production and
shipping for Starfish desktop products sold to the retail channels and direct
end users. Cost of license, royalty and other revenues decreased from $196,000
during the three months ended March 31, 1997 to $85,000 during the three
months ended March 31, 1998. The decline in cost of revenue during the first
quarter of 1998 was due to a general decline in license, royalty and other
revenue and the implementation of more effective material and inventory
controls. Cost of development revenue, comprised primarily of engineering
salaries, was $423,000 during the three months ended March 31, 1998 reflecting
development projects in progress that were not in effect during the same
period in 1997.
Gross Profit. Gross profit decreased by 26% to $849,000 during the three
months ended March 31, 1998 from $1,140,000 during the three months ended
March 31, 1997. The decrease is primarily as result of a decrease in higher
margin license and royalty revenues and product sales, and an increase in
lower margin development revenues. Development contacts are generally priced
on a cost recovery basis, and accordingly do not generate significant gross
profit.
Research and Development. Research and development expenses decreased from
$1,438,000 during the three months ended March 31, 1997 to $1,115,000 during
the comparable period in 1998. The decrease in the dollar amount of research
and development expenses was primarily due to a shift during 1997 to funded
contract development work for which Starfish earns revenues. Total funded and
unfunded research and development expenses increased by $117,000 during the
three months ended March 31, 1998 compared to the comparable period during
1997. To date, Starfish has expensed all software development costs as
incurred.
Selling, General and Administrative. Selling, general and administrative
expenses decreased from $1,484,000 during the three months ended March 31,
1997 to $1,445,000 during the three months ended March 31, 1998. The decrease
was due to a reduction of $294,000 in marketing and selling expenses during
the first quarter of 1998 as a result of lower sales in desktop software
products, offset by increases in general and administrative expenses of
$255,000, comprised primarily of stock compensation expense and bonuses paid
during the three months ended March 31, 1998.
Interest Expense. Interest expense during the three months ended March 31,
1997 was comprised of interest expense on related party notes payable that
were repaid by Starfish in 1997. Starfish incurred no interest expense during
the three months ended March 31, 1998.
Interest and Other Income. Interest and other income increased to $120,000
during the three months ended March 31, 1998 from $9,000 during the comparable
period in 1997 due to higher average cash and cash equivalent balances held by
Starfish during the three months ended March 31, 1998, primarily as a result
of additional financing received.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1996
Total Net Revenue. Total net revenue for Starfish was $6.4 million and $9.0
million during 1997 and 1996, respectively. The decrease in total net revenue
from 1996 to 1997 was primarily due to a decline in licensing and royalty fees
of Starfish's desktop products as a result of a strategy shift to the CID
market, partially offset by development revenue of $1.5 million during 1997.
Starfish did not have any development revenue during 1996.
Cost of License, Royalty and Other Revenues. Cost of license, royalty and
other revenues were $488,000 and $1.6 million during 1997 and 1996,
respectively. The decline in cost of revenue from 1996 to 1997 was due to a
general decline in software product revenue and the implementation of more
effective material and inventory
41
<PAGE>
controls. Cost of development revenue was $1,443,000 during the year ended
December 31, 1997 reflecting development projects in progress that were not in
effect during the year ended December 31, 1996.
Gross Profit. Gross profit decreased by 39% to $4.5 million during the year
ended December 31, 1997 from $7.4 million during the year ended December 31,
1996. The decrease is primarily as result of a decrease in license, royalty
and other revenue, a decrease in higher margin license and royalty revenues
and product sales, and an increase in low margin development revenues.
Research and Development. Research and development expenses were $4.4
million and $4.8 million during 1997 and 1996, respectively. The decrease in
the dollar amount of research and development expenses was primarily due to a
shift during 1997 to funded contract development work for which Starfish earns
revenues. Total funded and unfunded research and development expenses
increased by $1.1 million during the year ended December 31, 1997 compared to
the year ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses were $5.3 million and $6.1 million during 1997 and 1996,
respectively. The decrease from 1996 to 1997 was due to a reduction of $1.1
million in marketing and selling expenses during 1997 as Starfish reduced its
emphasis on marketing its desktop software products, offset by increases in
general and administrative expenses.
Interest Expense. Interest expense during the years ended December 31, 1997
and 1996 was comprised of interest expense on related party notes payable that
were repaid by Starfish in 1997.
Interest and Other Income. Interest and other income increased to $125,000
during the year ended December 31, 1997 from $62,000 during the year ended
December 31, 1996 due to higher average cash and cash equivalent balances held
by Starfish during the year ended December 31, 1997 primarily as a result of
additional financing received.
LIQUIDITY AND CAPITAL RESOURCES
From inception through March 31, 1998, Starfish has financed its operations
primarily from cash provided by development contracts, royalty advances,
shareholder loans and through the sale of private equity securities generating
approximately $14.9 million in net proceeds.
Starfish expects that its cash and cash equivalents balances of $10.6
million as of March 31, 1998, will be adequate to fund its operations for at
least the next twelve months. However, there can be no assurance that Starfish
will not have additional working capital needs within this period. In such
event, Starfish may be required to raise additional funds to meet such needs.
There can be no assurance that such financing will be available if and when
required by Starfish on terms acceptable to Starfish, or at all.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This could result in system failures or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements. Starfish utilizes third-party equipment and software that
may not be Year 2000 compliant. Starfish is in the early stages of conducting
an audit of its third-party suppliers as to the Year 2000 compliance of their
systems. Starfish does not believe it will incur significant costs in order to
comply with Year 2000 requirements. However, failure of Starfish's internal
computer systems or of such third-party equipment or software, or of systems
maintained by Starfish's suppliers, to operate properly with regard to the
Year 2000 and thereafter could require Starfish to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
Starfish's business, financial condition and results of operations.
42
<PAGE>
PRINCIPAL SHAREHOLDERS OF STARFISH
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table set forth information with respect to the beneficial
ownership of shares of Starfish Common Stock (assuming the conversion of (i)
all of the then outstanding shares of Starfish Series A Preferred Stock on a
one-for-one basis and (ii) all of the then outstanding shares of Starfish
Series B Preferred Stock on a ten-for-one basis) for each person who is known
to own beneficially more than 5% of Starfish Common Stock, each director of
Starfish, each current executive officer and all current executive officers
and directors of Starfish as a group: (i) the total number of shares of
Starfish owned as of June 30, 1998 and (ii) the percent of Starfish Common
Stock owned as of that date:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED PERCENT(2)
--------------------------- ------------------ ----------
<S> <C> <C>
Philippe Kahn(3)(4)........................ 21,000,000 65.69%
Sonia Lee Kahn(3)(5)....................... 9,261,990 28.97%
Motorola, Inc.............................. 4,697,450 14.69%
1303 East Algonquin Road
Schaumburg, Illinois, 60196
Inprise Corporation........................ 2,889,388 9.04%
100 Enterprise Way
Scotts Valley, California 95066
Stanley J. Meresman(6)(7)(9)(10)........... 211,375 *
Reza Mikailli(7)(8)(9)(10)................. 211,375 *
Eli Porat(7)(9)(10)........................ 180,682 *
Jerry Upton(7)(11)......................... 4,697,450 14.69%
All current executive officers and direc-
tors as a group
(6 persons)(12)........................... 26,300,882 82.27%
</TABLE>
- --------
*Less than 1%.
(1) Except as indicated in the footnotes to this table, to Starfish's
knowledge, the persons named in the table have sole voting and investment
power with respect to all shares of capital stock shown as beneficially
owned by them, subject to community property laws, where applicable.
(2) Calculated on the basis of 31,969,850 shares of Starfish Common Stock
outstanding as of June 30, 1998, assuming the conversion of the Starfish
Series A Preferred Stock, the Starfish Series B Preferred Stock and the
exercise of the outstanding warrant to acquire Starfish Common Stock. All
of the 356,506 outstanding shares of Starfish Series A Preferred Stock
are held by General Magic, Inc. The outstanding shares of Starfish Series
B Preferred Stock are held by Motorola (469,745 shares), Eli Porat (796
shares), Reza Mikailli (1,592 shares) and the Meresman Family Trust U/D/T
9/19/89 (as described in Note 6 below) (1,592 shares). Each of Messrs.
Porat, Mikailli and Stanley J. Meresman, a trustee of the Meresman Family
Trust, are members of the Starfish Board. Each share of the Starfish
Series B Preferred Stock is convertible into ten shares of Starfish
Common Stock.
(3) The person indicated is an executive officer and director of Starfish.
(4) Includes 10,500,000 shares of common stock held pursuant to a Voting
Trust Agreement by and between Mr. Kahn and certain shareholders of
Starfish, dated March 31, 1994, of which Mr. Kahn is Trustee and has sole
voting power and no power of disposition over such shares (the "Voting
Trust"). The Voting Trust terminates upon the earlier of (i) December 31,
2003, (ii) the closing of a merger or sale of Starfish or (iii) the
closing of Starfish's initial public offering. Pursuant to a Voting
Agreement dated July 1, 1998, Mr. Kahn, as Trustee of the Voting Trust,
agreed, among other things, to vote the shares of common stock held by
the Voting Trust in favor of the Merger and delivered to Motorola an
irrevocable proxy pursuant
43
<PAGE>
to which the Voting Trust appointed Motorola as the Voting Trust's proxy
with respect to such shares and with respect to the matters specified in
the proxy.
(5) Represents 9,261,990 shares held pursuant the Voting Trust. Pursuant to a
Voting Agreement dated July 1, 1998, Mr. Kahn, as Trustee of the Voting
Trust, agreed, among other things, to vote the shares of common stock
held by the Voting Trust in favor of the Merger and delivered to Motorola
an irrevocable proxy pursuant to which the Voting Trust appointed
Motorola as the Voting Trust's proxy with respect to such shares and with
respect to the matters specified in the proxy.
(6) Represents 61,375 shares owned by the Meresman Family Trust U/D/T
9/19/89, as amended, for which Stanley J. Meresman and Sharon A. Meresman
serve as Trustees and have shared voting and investment power over such
shares.
(7) The person indicated is a director of Starfish.
(8) Includes 61,375 shares held jointly by Mr. Mikailli and Zahra Mikailli,
his spouse.
(9) Includes 37,500 shares subject to options exercisable within 60 days of
June 30, 1998 and 112,500 shares subject to options immediately
exercisable. In June 1998, the Starfish Board of Directors agreed to
accelerate such options, effective immediately prior to the consummation
of the Merger and provided that such options are exercised immediately
prior to the consummation of the Merger.
(10) All such shares are subject to a Voting Agreement dated July 1, 1998,
pursuant to which the holder agreed, among other things, to vote all such
shares in favor of the Merger and delivered to Motorola an irrevocable
proxy pursuant to which the holder appointed Motorola as such holder's
proxy with respect to such shares and with respect to the matters set
forth in the proxy.
(11) Mr. Upton is an employee of Motorola and the designee of Motorola to the
Starfish Board of Directors. Mr. Upton does not own any shares of
Starfish in his individual capacity and disclaims beneficial ownership of
shares owned by Motorola.
(12) See footnotes 4 and 5 above. Includes 10,500,000 shares held pursuant to
the Voting Trust of which 9,261,990 are beneficially owned by Sonia Lee
Kahn.
COMPARISON OF RIGHTS OF HOLDERS OF MOTOROLA
COMMON STOCK AND HOLDERS OF STARFISH STOCK
Motorola is incorporated under the laws of the State of Delaware and the
rights of its stockholders are governed by the Delaware General Corporation
Law ("DGCL"), the Certificate of Incorporation (with all amendments and
restatements thereof, "Motorola Certificate") and the Bylaws ("Motorola
Bylaws") of Motorola and that certain Rights Agreement dated as of November 9,
1988, as amended, by and between Motorola and Harris Trust and Savings Bank
(the "Rights Plan"). Starfish is incorporated under the laws of the State of
California and the rights of its shareholders are governed by the California
Corporations Code (the "CA Code") and the Articles of Incorporation (with all
amendments and restatements thereof, "Starfish Articles") and Bylaws
("Starfish Bylaws") of Starfish. If the Merger is consummated, former Starfish
shareholders will become stockholders of Motorola and the rights of such
former Starfish shareholders will be governed by the DGCL and the Motorola
Certificate and Motorola Bylaws. The following summarizes differences in the
charter documents of Starfish and Motorola that could materially affect the
rights of shareholders of Starfish after consummation of the Merger. A number
of the provisions of Motorola's charter documents and the Rights Plan may have
the effect of delaying, deferring or preventing a change in control of
Motorola.
NUMBER OF DIRECTORS
The Motorola Certificate and Motorola Bylaws fix the authorized number of
directors at 16, or such other number fixed from time to time by the Board of
Directors. The Motorola Certificate requires that the Board consist of not
less than three directors.
44
<PAGE>
Under the CA Code, although changes in the number of directors must in
general be approved by the shareholders, the board of directors may fix the
exact number of directors within a stated range set forth in the articles of
incorporation or bylaws, if the stated range has been approved by the
shareholders. The Starfish Bylaws permit the Starfish Board of Directors to
adjust the size of the Board from a minimum of four directors to a maximum of
seven. The current number of directors is fixed at six.
CUMULATIVE VOTING FOR DIRECTORS
Under the DGCL, unless the corporation's articles or certificate of
incorporation provide otherwise, there can be no cumulative voting for the
election of directors. The Motorola Certificate does not provide for
cumulative voting. Under the CA Code, shareholders of a California corporation
may, unless such corporation's articles of incorporation or bylaws expressly
eliminate cumulative voting, cumulate their votes in the election of directors
so long as at least one shareholder has given notice of such shareholder's
intent to cumulate his or her votes at the meeting prior to the voting. The
Starfish Articles do not contain any provision eliminating cumulative voting.
In addition, the holders of Starfish Series B Preferred Stock have the right
to elect one director to the Starfish Board of Directors under the Starfish
Articles.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one to which a certain number, but not all, of the
directors are elected on a rotating basis each year. The DGCL permits, but
does not require, a classified board of directors, with staggered terms under
which one-half or one-third of the directors are elected for terms of two or
three years, respectively. Under the CA Code, California corporations meeting
certain qualifications may amend their articles of incorporation to provide
for a classified board, but for corporations not so qualified directors must
be elected annually and a classified board is not permitted. This method of
electing directors makes changes in the composition of the board of directors,
and thus a potential change in control of a corporation, a lengthier and more
difficult process. Neither of the companies currently have a staggered board
and the surviving corporation will not have a staggered board.
DIRECTOR VOTING
The Motorola Bylaws provide that the number of directors constituting a
quorum shall be one third of the number of authorized directors. The Starfish
Bylaws provide that the number of directors constituting a quorum shall be a
majority of the number of directors then in office.
REMOVAL OF DIRECTORS
Under the DGCL, a director of a corporation such as Motorola that does not
have a classified board of directors or cumulative voting may be removed with
or without cause with the approval of a majority of the outstanding shares
entitled to vote.
Under the CA Code, any or all of the directors of a California corporation
may be removed if such removal is approved by the affirmative vote of a
majority of the outstanding shares; provided, however, that no director of
such corporation may be removed (unless the entire board of directors of such
corporation is removed) when the votes cast against removal, or not consenting
in writing to the removal, would be sufficient to elect the director if voted
cumulatively at an election at which the same total number of votes were cast
(or, if the action is taken by written consent, all shares entitled to vote
were voted) and (1) for a corporation without a classified board, the entire
number of directors authorized at the time of the director's most recent
election were then being elected, or (2) for a corporation with a classified
board, either the number of directors elected at the most recent annual
meeting of shareholders, or if greater, the number of directors for whom
removal is being sought, were then being elected. The Starfish Articles and
the Starfish Bylaws do not contain any provisions which are inconsistent with
the CA Code with respect to removal of directors. In addition, under the
Starfish Articles the holders of Starfish Series B Preferred Stock have the
right to elect and remove the Series B Preferred Stock representative to the
Starfish Board of Directors.
45
<PAGE>
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the DGCL, vacancies and newly created directorships may be filled by a
majority of the directors then in office (even though less than a quorum)
unless otherwise provided in the certificate of incorporation or bylaws (and
unless the certificate of incorporation directs that a particular class is to
elect such director, in which case any other directors elected by such class,
or a sole remaining director, shall fill such vacancy). The Motorola Bylaws
allow any vacancy on the Board of Directors to be filled by a majority of the
directors then in office, although less than a quorum.
Under the CA Code, any vacancy on the board of directors may be filled by
the unanimous written consent of the directors then in office, by the
affirmative vote of a majority of the directors at a meeting held pursuant to
notice or waivers of notice or by a sole remaining director. Under the
Starfish Bylaws, a vacancy created by the removal of a director may be filled
only by the approval of the shareholders.
ADVANCE NOTICE OF STOCKHOLDER/SHAREHOLDER PROPOSALS
The Motorola Bylaws provide that no matter proposed by Motorola stockholders
will be considered at an annual meeting or special stockholder meeting unless
(1) it is specified in the notice of meeting, (2) it is brought by or at the
direction of the Board of Directors or (3) it is brought by a stockholder of
the corporation who was a stockholder of record on the record date and written
notice of such matter is provided to Motorola in compliance with the time
frames set forth in the Motorola Bylaws. The Starfish Bylaws do not expressly
require advance notice of shareholder proposals.
POWER TO CALL SPECIAL MEETINGS OF STOCKHOLDERS/SHAREHOLDERS
Under the DGCL, a special meeting of shareholders may be called by the board
of directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. Pursuant to the Motorola Bylaws, special meetings
may be called by the Chairman of the Board or the Board of Directors.
Under the CA Code, a special meeting of shareholders may be called by the
board of directors, the chairman of the board, the president, the holders of
shares entitled to cast not less than ten (10%) percent of the votes at such
meeting and such additional persons as are authorized by the articles of
incorporation or the bylaws. Pursuant to the Starfish Bylaws, special meetings
may be called by shareholders holding 10% of the voting stock, the Board of
Directors and the President.
BUSINESS COMBINATION FOLLOWING A CHANGE OF CONTROL
In the last several years, a number of states (but not California) have
adopted special laws designed to make certain kinds of "unfriendly" corporate
takeovers, or other transactions involving a corporation and one or more of
its significant shareholders, more difficult. Under Section 203 of the DGCL
("Section 203"), certain "business combinations" by Delaware corporations with
"interested stockholders" are subject to a three-year moratorium unless
specified conditions are met. Section 203 prohibits a Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
three years following the date that such person becomes an interested
stockholder. With certain exceptions, an interested stockholder is a person or
group who or which owns 15% or more of the corporation's outstanding voting
stock (including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
15% or more of such voting stock at any time within the previous three years.
Under Section 1203 of the CA Code, certain business combinations with a
majority shareholder are subject to specified conditions, but there is no
equivalent provision to Section 203, which addresses business combinations
with a significant but not majority shareholder.
46
<PAGE>
AMENDMENT OF CHARTER DOCUMENTS
Under the DGCL, an amendment to a corporation's certificate of incorporation
requires the approval of the board of directors and the approval of holders of
a majority of the outstanding stock entitled to vote thereon. The holders of
the outstanding shares of a class are entitled to vote as a separate class on
a proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. The
Motorola Certificate can be amended, altered or repealed in any manner now or
hereafter prescribed by the DGCL. The Motorola Bylaws may be altered, amended
or repealed at any meeting of the Board of Directors by a majority vote of the
directors present at the meeting.
Under the CA Code, a corporation's articles of incorporation can be amended
by the affirmative vote of the majority of the board of directors of the
corporation and of the holders of a majority of the outstanding shares
entitled to vote, unless the corporation's articles of incorporation require
the vote of a larger portion of the shares. The Starfish Articles do not
require a larger percentage affirmative vote than a majority of the shares
entitled to vote thereon. However, Starfish may not, without the consent of
two thirds and a majority of the holders of the then outstanding shares of
Starfish Series A Preferred Stock amend or repeal any provision of, or add any
provisions to the Starfish Articles or the Starfish Bylaws, if such action
would alter any of the rights, preferences or privileges of any shares of the
Starfish Series A Preferred Stock. In addition, Starfish may not, without the
consent of a majority of the holders of the then outstanding shares of
Starfish Series B Preferred Stock amend or repeal any provision of, or add any
provisions to the Starfish Articles or Starfish Bylaws if such action would
alter any of the rights, preferences or privileges of any shares of the
Starfish Series B Preferred Stock.
INDEMNIFICATION
The Motorola Certificate eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under the DGCL, such provision may not
eliminate or limit director monetary liability for: (a) breaches of the
director's duty of loyalty to the corporation or its shareholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. The Motorola Certificate also provides that
Motorola shall indemnify any person to the fullest extent permitted by the
DGCL in connection with claims arising by reason of that person acting as a
director, officer or agent of Motorola. The Motorola Certificate authorizes it
to provide insurance for its directors, officers and/or agents, against any
expense, liability or loss, whether or not Motorola would have the power to
indemnify such person against such expense, liability or loss under the DGCL.
The Starfish Articles and Starfish Bylaws provide that the liability of the
directors of Starfish for monetary damages shall be eliminated to the fullest
extent permissible under the CA Code, and that Starfish is authorized to
provide indemnification of directors, officers, employees and agents in excess
of the indemnification required under the Starfish Articles to the extent
permitted under the CA Code. The Starfish Articles and Starfish Bylaws do not
expressly establish a procedure for processing indemnification requests but do
expressly authorize insurance for directors, officers and/or agents.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
RESTRICTION ON SALES OF STOCK
Motorola is a public company the shares of which are listed and traded on
the New York Stock Exchange and other exchanges. As a result, the Motorola
Certificate and Motorola Bylaws do not provide for any restrictions on the
transfer of outstanding shares, other than those imposed by federal securities
laws for shares offered under certain exempt transactions. Starfish is a
private company and, as such, the agreements relating to outstanding shares
provide for various restrictions on the resale or transfer of outstanding
stock.
47
<PAGE>
INSPECTION OF STOCKHOLDERS/SHAREHOLDERS LIST
The DGCL permits any stockholder upon written demand under oath stating the
purpose thereof to inspect (during regular business hours) a corporation's
stock ledger, a list of its stockholders and its other books and records and
to make copies of extracts therefrom. If the corporation refuses such request,
or fails to respond within five business days after the demand has been made,
the shareholder may petition the Court for an order to compel such inspection.
The Court may prescribe limitations or conditions upon the inspection, or
award any other or further relief the court deems just and proper.
The CA Code permits any shareholder to inspect and copy a corporation's
shareholder list for a purpose reasonably related to such person's interest as
a shareholder. The CA Code also provides for an absolute right to inspect and
copy the corporation's shareholder list by persons holding an aggregate of 5%
or more of a corporation's voting shares, or shareholders holding an aggregate
of 1% or more of such shares who have filed a Schedule 14B with the Commission
relating to the election of directors.
DISSENTERS' RIGHTS
Under both the DGCL and the CA Code, a stockholder/shareholder of a
corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
stockholder/shareholder may receive cash in the amount of the fair market
value of his or her shares in lieu of the consideration he or she would
otherwise receive in the transaction. Under Delaware law, such dissenters'
rights are not available (a) with respect to the sale, lease or exchange of
all or substantially all of the assets of a corporation, (b) with respect to a
merger or consolidation by a corporation the shares of which are either listed
on a national securities exchange or are held of record by more than 2,000
holders if such stockholders receive only shares of the surviving corporation
or shares of any other corporation which are either listed on a national
securities exchange or held of record by more than 2,000 holders, plus cash in
lieu of fractional shares or (c) to stockholders of a corporation surviving a
merger if no vote of the stockholders of the surviving corporation is required
to approve the merger because the merger agreement does not amend the existing
certificate of incorporation, each share of the surviving corporation
outstanding prior to the merger is an identical outstanding or treasury share
after the merger, and the number of shares to be issued in the merger does not
exceed 20% of the shares of the surviving corporation outstanding immediately
prior to the merger and if certain other conditions are met. See also "The
Merger Dissenters' Rights."
In contrast, shareholders of a California corporation whose shares are
listed on a national securities exchange or on a list of over-the-counter
margin stocks issued by the Board of Governors of the Federal Reserve System
generally do not have appraisal rights unless the holders of at least 5% of
the class of outstanding shares claim the right. Dissenters' rights are
unavailable, however, if the shareholders of a corporation or the corporation
itself, or both, immediately prior to the reorganization will own immediately
after the reorganization equity securities constituting more than five-sixths
of the voting power of the surviving or acquiring corporation or its parent
entity, and if the shares of the surviving corporation have the same rights,
preferences, privileges and restrictions as the shares of the disappearing
corporation that are surrendered in exchange.
DISSENTERS' RIGHTS MAY BE AVAILABLE TO SHAREHOLDERS OF STARFISH WITH RESPECT
TO THE MERGER. SEE "ANNEX C."
SHAREHOLDER RIGHTS PLAN
The Board of Directors of Motorola adopted a Shareholder Rights Plan in
November 1988, which, as amended, provides for distribution of rights to
holders of outstanding shares of Motorola Common Stock. Starfish does not have
a similar rights plan. Therefore, after the Effective Time, the shares of
Motorola Common Stock held by former Starfish shareholders will be subject to
the Motorola Shareholder Rights Plan.
48
<PAGE>
INFORMATION REGARDING MOTOROLA
Motorola is a corporation organized under the laws of the State of Delaware
as the successor to an Illinois corporation organized in 1928. Motorola's
principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 and its telephone number at that address is (847)
576-5000. Motorola is one of the world's leading providers of wireless
communications, semiconductors and advanced electronic systems, components and
services. Major equipment businesses include cellular telephone, two-way
radio, paging and data communications, personal communications, automotive,
defense and space electronics and computers. Motorola semiconductors power
communication devices, computers and millions of other products. "Motorola" is
a registered trademark of Motorola.
INFORMATION REGARDING STARFISH
Starfish provides complete, customized solutions for the CID market, which
includes smart pagers, smart phones and PC companions. Starfish's core device,
server and desktop technologies form the basis of its TrueSync Technology
Platform which has been designed to deliver rapid, cost effective, solutions
to help its customers introduce products and services in the CID market
quickly and with advanced functionality. The TrueSync Technology Platform
facilitates the exchange and management of information between wireline and
wireless devices based on the premise that this information should be
accessible by the user on an "anywhere/everywhere" basis. Starfish technology
is used with a variety of products including the REX PC Companion and TrueSync
CE. Starfish was incorporated in California in March 1994. Starfish maintains
its executive offices at 1700 Green Hills Road, Scotts Valley, California
95066 and its telephone number is (408) 461-5800.
LEGAL MATTERS
The validity of the shares of Motorola Common Stock to be issued in
connection with the Merger will be passed upon for Motorola by Carol H.
Forsyte of the Motorola Law Department. As of July 31, 1998, Ms. Forsyte owned
75 shares of Motorola Common Stock and held options to purchase 3,800 shares
of Motorola Common Stock, of which options to purchase 1,600 shares were
currently exercisable.
The federal income tax consequences of the Merger will be passed upon for
Motorola by Jackson Tufts Cole & Black, LLP, San Jose, California. The federal
income tax consequences of the Merger will be passed upon for Starfish by Gray
Cary Ware & Freidenrich LLP, Palo Alto, California. As of the date hereof, a
partner of such firm is the beneficial owner of 180,000 shares of Starfish
Common Stock.
EXPERTS
The consolidated financial statements and schedule of Motorola, Inc. as of
December 31, 1997 and 1996 and for each of the years in the three-year period
ended December 31, 1997, incorporated by reference herein and in the
Registration Statement on Form S-4 have been so included in reliance on the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
and upon the authority of said firm as experts in accounting and auditing.
The financial statements of Starfish as of December 31, 1996 and 1997 and
for the years then ended included in this Proxy Statement/Prospectus have been
so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
49
<PAGE>
STARFISH SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Shareholders' Equity (Deficit)............................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Starfish Software, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of shareholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Starfish Software,
Inc. at December 31, 1996 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
March 11, 1998, except for the
third paragraph of Note 2,
which is as of July 1, 1998
F-2
<PAGE>
STARFISH SOFTWARE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 2,119 $ 9,353 $ 10,626
Accounts receivable, net....................... 423 657 529
Other current assets........................... 377 227 204
------- ------- --------
Total current assets....................... 2,919 10,237 11,359
Property and equipment, net...................... 611 485 458
Other assets..................................... 277 152 138
------- ------- --------
$ 3,807 $10,874 $ 11,955
======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable............................... $ 894 $ 533 $ 383
Deferred revenue............................... 2,529 3,887 6,288
Deferred compensation.......................... 644 -- --
Accrued employee compensation.................. 363 552 816
Accrued liabilities............................ 1,114 662 611
------- ------- --------
Total current liabilities.................. 5,544 5,634 8,098
Note payable to shareholder...................... 2,832 -- --
------- ------- --------
Total liabilities............................ 8,376 5,634 8,098
------- ------- --------
Commitments (Note 7)
Shareholders' Equity (Deficit):
Convertible Preferred Stock; no par value;
5,000 shares authorized....................... -- -- --
Series A; 357 shares designated, none, 357
and 357 (unaudited) issued and outstanding.. -- 985 985
Series B; 500 shares designated, none, 470
and 474 (unaudited) issued and outstanding.. -- 13,920 14,045
Common Stock, no par value; 60,000 shares
authorized; 24,335, 25,557 and 25,966
(unaudited) shares issued and outstanding..... 2,177 2,484 3,100
Deferred stock compensation.................... -- -- (283)
Note receivable from shareholder............... -- (23) (273)
Accumulated deficit............................ (6,746) (12,126) (13,717)
------- ------- --------
Total shareholders' equity (deficit)....... (4,569) 5,240 3,857
------- ------- --------
$ 3,807 $10,874 $ 11,955
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STARFISH SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------- --------------------
1996 1997 1997 1998
------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues:
License, royalty and other........... $ 9,031 $ 4,918 $ 1,336 $ 917
Development revenue--related parties. -- 1,501 -- 440
------- ------- --------- ---------
Total net revenues................. 9,031 6,419 1,336 1,357
------- ------- --------- ---------
Cost of revenues:
License, royalty and other........... 1,639 488 196 85
Development revenue--related parties. -- 1,443 -- 423
------- ------- --------- ---------
Total cost of revenues............. 1,639 1,931 196 508
------- ------- --------- ---------
Gross profit........................... 7,392 4,488 1,140 849
------- ------- --------- ---------
Operating expenses:
Research and development............. 4,802 4,435 1,438 1,115
Selling and marketing................ 4,237 3,129 911 617
General and administrative........... 1,887 2,175 573 828
------- ------- --------- ---------
Total operating expenses........... 10,926 9,739 2,922 2,560
------- ------- --------- ---------
Loss from operations................... (3,534) (5,251) (1,782) (1,711)
Interest expense....................... (169) (254) (79) --
Interest and other income.............. 62 125 9 120
------- ------- --------- ---------
Net loss............................... $(3,641) $(5,380) $ (1,852) $ (1,591)
======= ======= ========= =========
Net loss per share:
Basic and diluted.................... $ (0.15) $ (0.22) $ (0.08) $ (0.06)
======= ======= ========= =========
Shares used in per share
calculations........................ 23,982 24,737 24,335 25,600
======= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STARFISH SOFTWARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK NOTE
---------------------------- DEFERRED RECEIVABLE
SERIES A SERIES B COMMON STOCK STOCK FROM ACCUMU-
------------- -------------- ------------- COMPEN- SHARE- LATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SATION HOLDERS DEFICIT TOTAL
------ ------ ------ ------- ------ ------ -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... -- $-- -- $ -- 23,889 $2,130 $ -- $ -- $ (3,105) $ (975)
Exercise of stock
options............... -- -- -- -- 446 47 -- -- -- 47
Net loss............... -- -- -- -- -- -- -- -- (3,641) (3,641)
--- ---- --- ------- ------ ------ ----- ----- -------- -------
Balance at December 31,
1996................... -- -- -- -- 24,335 2,177 -- -- (6,746) (4,569)
Exercise of stock
options............... -- -- -- -- 1,222 307 -- (23) -- 284
Issuance of Series A
Convertible Preferred
Stock at $2.803 per
share, net............ 357 985 -- -- -- -- -- -- -- 985
Issuance of Series B
Convertible Preferred
Stock at $31.40 per
share, net, including
Common Stock warrants. -- -- 470 13,920 -- -- -- -- -- 13,920
Net loss............... -- -- -- -- -- -- -- -- (5,380) (5,380)
--- ---- --- ------- ------ ------ ----- ----- -------- -------
Balance at December 31,
1997................... 357 985 470 13,920 25,557 2,484 -- (23) (12,126) 5,240
Exercise of stock
options (unaudited)... -- -- -- -- 295 53 -- -- -- 53
Issuance of Common
Stock to directors
(unaudited)........... -- -- -- -- 114 125 -- (125) -- --
Issuance of Series B
Convertible Preferred
Stock to directors at
$31.40 per share
(unaudited)........... -- -- 4 125 -- -- -- (125) -- --
Deferred stock
compensation
(unaudited)........... -- -- -- -- -- 438 (283) -- -- 155
Net loss (unaudited)... -- -- -- -- -- -- -- -- (1,591) (1,591)
--- ---- --- ------- ------ ------ ----- ----- -------- -------
Balance at March 31,
1998 (unaudited)....... 357 $985 474 $14,045 25,966 $3,100 $(283) $(273) $(13,717) $ 3,857
=== ==== === ======= ====== ====== ===== ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STARFISH SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
---------------- ----------------
1996 1997 1997 1998
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................. $(3,641) $(5,380) $(1,852) $(1,591)
Adjustments to reconcile net loss to cash
provided by (used in) operating
activities:
Depreciation, amortization and other... 798 403 122 96
Accrued interest on note payable to
shareholder........................... 169 254 79 --
Stock compensation expense............. -- 158 -- 155
Change in assets and liabilities:
Accounts receivable.................. (179) (234) 71 128
Other assets......................... (163) 184 (37) 23
Accounts payable..................... 141 (361) 64 (150)
Deferred revenue..................... 2,477 1,358 (21) 2,401
Other accrued liabilities............ 229 (452) (297) (51)
Deferred compensation................ 242 (644) 59 --
Accrued employee compensation........ 179 189 165 264
------- ------- ------- -------
Net cash provided by (used in)
operating activities.............. 252 (4,525) (1,647) 1,275
------- ------- ------- -------
Cash flows from investing activities:
Acquisition of property and equipment.... (515) (186) (66) (55)
------- ------- ------- -------
Cash flows from financing activities:
Proceeds from (repayment of) borrowings
from shareholder........................ 1,500 (3,086) 79 --
Proceeds from issuance of Convertible
Preferred Stock, net.................... -- 14,905 -- --
Proceeds from exercise of stock options.. 47 126 1 53
------- ------- ------- -------
Net cash provided by financing
activities........................ 1,547 11,945 80 53
------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................... 1,284 7,234 (1,633) 1,273
Cash and cash equivalents, beginning of
period.................................... 835 2,119 2,119 9,353
------- ------- ------- -------
Cash and cash equivalents, end of period... $ 2,119 $ 9,353 $ 486 $10,626
======= ======= ======= =======
Supplemental cash flow disclosure:
Cash paid for interest................... $ -- $ 481 $ -- $ --
======= ======= ======= =======
Supplemental disclosure of non-cash
financing and operating activities:
Issuance of Common and Preferred Stock in
exchange for notes receivable........... $ -- $ 23 $ -- $ 250
======= ======= ======= =======
Issuance of compensatory stock options... $ -- $ -- $ -- $ 438
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
Starfish Software, Inc. ("Starfish" or the "Company") was incorporated in
California in March 1994. The Company develops and licenses software
technology primarily for use in connected information devices. The Company's
development efforts have been focused on the TrueSync Technology Platform, a
set of modular software technologies (including integrated device, server,
desktop and synchronization components) available to device manufacturers
seeking to deliver complete connected information device solutions. By
integrating devices, servers and desktops, the TrueSync Technology Platform
allows Starfish to deliver rapid, cost effective, high quality complete
solutions to help its customers introduce products and services faster, more
frequently and with more advanced functionality.
Starfish commenced its operations in February 1995 upon acquiring certain
assets from Inprise Corporation (formerly Borland International, Inc.)
("Inprise") in exchange for one share of the Company's Series A Convertible
Preferred Stock (the "Consideration") under an Asset Acquisition Agreement
(the "Agreement"). In addition, under the Agreement, Starfish agreed to pay
royalties to Inprise on future sales of certain versions of the software
products acquired from Inprise up to a maximum payment of $4,000,000 (see Note
3). In October of 1995, in accordance with the terms of the Agreement, the
Consideration issued to Inprise was converted into 2,889,000 shares of the
Company's Common Stock. Pursuant to the Agreement, the Company acquired
technology and other assets from Inprise. The transaction was accounted for as
a purchase and, accordingly, the purchase price was allocated to the assets
acquired and the liabilities assumed based upon an independent appraisal of
their estimated fair values at the date of the acquisition, including certain
amounts allocated to in-process research and development.
In May 1997, the Company issued 356,506 shares of its Series A Convertible
Preferred Stock ("Series A Preferred Stock") at a price of $2.805 per share
generating net proceeds of $985,000. In October 1997, the Company issued
469,745 shares of its Series B Convertible Preferred Stock ("Series B
Preferred Stock" or, together with the Series A Preferred Stock, the
"Preferred Stock") at a price of $31.40 per share generating net proceeds of
$13,920,000. Each share of Series B Preferred Stock is convertible into ten
shares of Common Stock under various conditions (see Note 5.)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION AND SIGNIFICANT CUSTOMERS
Revenue from the sale of software products is recognized upon shipment.
Revenue from sales to certain distributors and retailers is subject to
agreements allowing certain rights of return and price protection on unsold
merchandise held by those distributors. Accordingly, reserves for estimated
future returns, exchanges and credits for price protection are also provided
upon shipment. Product revenue from sales through international distributors
and original equipment manufacturers ("OEM") is recognized in the period
reported to the Company. Periodic maintenance fees received provide customers
access to technical support and minor enhancements to licensed releases. Such
fees are recognized ratably over the related maintenance period.
F-7
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company has limited control over the extent to which products sold to
distributors and resellers are sold through to end users. Accordingly, a
portion of the Company's sales may from time to time result in increased
inventory at its distributors and resellers. The Company provides sales
returns reserves for estimated returns from distributors. These reserves are
based on the Company's estimates of expected sell through by distributors and
resellers of its products. Actual results could differ from these estimates.
The Company provides rebates to customers under certain programs. The
estimated costs of these rebates are accrued at the time revenue is
recognized.
Revenue from long-term software license and royalty agreements is recognized
in the period licensed sales are reported to the Company. Nonrefundable
license and royalty fees are recognized as revenue when there is no
significant continuing performance obligation under the agreement and
collection of the fees is probable. Revenue from development contracts is
generally recognized as services are performed using the percentage of
completion method based on costs incurred to date compared to total estimated
costs to completion. Amounts received in advance of performance under these
contracts are recorded as deferred revenue and are generally recognized within
one year from receipt.
In October 1997, the AICPA issued Statement of Position 97-2 ("SOP 97-2"),
"Software Revenue Recognition", which the Company has adopted for transactions
entered during the year beginning January 1, 1998. SOP 97-2 provides guidance
for recognizing revenue on software transactions and supersedes SOP 91-1,
"Software Revenue Recognition." In March 1998, the AICPA issued Statement of
Position No. 98-4 ("SOP 98-4"), "Deferral of the Effective Time of a Provision
of SOP 97-2, Software Revenue Recognition." SOP 98-4 defers, for one year, the
application of certain passages in SOP 97-2 which limit what is considered
vendor-specific objective evidence ("VSOE") necessary to recognize revenue for
software licenses in multiple-element arrangements when undelivered elements
exist. Additional guidance is expected to be provided prior to adoption of the
deferred provision of SOP 97-2. The Company will determine the impact, when
issued, the additional guidance will have on current revenue recognition
practices. Adoption of the remaining provisions of SOP 97-2 did not have a
material impact on revenue recognition during the three months ended March 31,
1998.
Revenues from customers representing 10% or more of revenues were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------- ---------------------
1996 1997 1997 1998
------ ------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Distributor A.................. 9% 5% -- 17%
Distributor B.................. 13% 3% 10% 11%
Company C...................... 48% 12% 16% --
Company D--Related Party....... -- 12% -- 22%
Company E--Related Party
(Motorola).................... -- 12% -- 10%
</TABLE>
CASH EQUIVALENTS
The Company considers all investments with an original maturity of three
months or less at the time of purchase to be cash equivalents. Cash
equivalents consist principally of money-market deposit accounts that are
stated at cost which approximates fair value.
INVENTORY
Inventory consists primarily of purchased materials and is stated at the
lower of cost or market, cost being determined on a first-in, first-out basis.
F-8
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the useful life of the assets, generally
three years.
RESEARCH AND DEVELOPMENT COSTS
Expenditures for research and development are charged to expense as
incurred. Under Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," certain software development costs are capitalized after
technological feasibility has been established. The period between achievement
of technological feasibility, which the Company defines as the establishment
of a working model, until the general availability of such software to
customers, has been short and software development costs qualifying for
capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs as of March 31, 1998.
INTANGIBLES
Intangibles, which include tradenames and purchased technology, are being
amortized over their estimated useful lives ranging from two to five years.
The Company evaluates the recoverability of intangible assets based on future
cash flows. Charges for the impairment of intangible assets are recorded to
the extent unamortized book value of such assets exceed the related future
cash flows.
INCOME TAXES
Income taxes are accounted for using an asset and liability approach. The
asset and liability approach requires the recognition of taxes payable or
refundable for the current year and deferred tax liabilities and assets for
the future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The measurement of current and
deferred tax liabilities and assets are based on provisions of the enacted tax
law; the effect of future changes in tax laws or rates are not anticipated.
The measurement of deferred tax assets is reduced, if necessary, by the amount
of any tax benefits that, based on available evidence, are not expected to be
realized.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss available to
Common Shareholders by the weighted average number of common shares
outstanding during the period. Diluted net loss per share is calculated using
the weighted average number of outstanding shares of Common Stock plus
dilutive Common Stock equivalents. For all periods presented, Common Stock
equivalents, consisting of Preferred Stock, Common Stock options and warrants
using the treasury stock method based on the average stock price for the
period, were antidilutive and were accordingly excluded from the diluted net
loss per share calculations.
During 1996, 1997 and the three months ended March 31, 1997 and 1998,
antidilutive Common Stock equivalents aggregating 5,530,000, 10,443,000,
5,535,000 (unaudited) and 10,447,000 (unaudited) shares were excluded from the
diluted net loss per share calculations.
COMPREHENSIVE INCOME (LOSS)
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income."
Comprehensive income is defined as the change in equity of a company from
transactions, other events and circumstances excluding transactions resulting
from investments by owners and distributions to owners. There is no difference
between net loss and comprehensive loss for the Company for all periods
presented.
F-9
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Stock-based compensation
The Company applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for its
stock-based compensation plans, as permitted by the Financial Accounting
Standards Board's Statement No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." SFAS 123 defines a "fair value" based method of accounting for
an employee stock option or similar equity instrument and encourages, but does
not require, entities to adopt that method of accounting for their employee
stock compensation plans. The Company makes pro forma disclosures of its net
losses as required under SFAS 123.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents
and trade accounts receivable.
The Company by policy and practice maintains its cash and cash equivalents
with high quality financial institutions. The Company's accounts receivable
are derived from development projects, royalty and license agreements, and
sales to distributors and resellers located primarily in the United States. At
December 31, 1997, four customers comprised 24%, 22%, 19% and 11% of accounts
receivable, respectively. At March 31, 1998, three customers comprised 36%,
23%, and 23% of accounts receivable (unaudited), respectively. The Company
performs ongoing credit evaluations of its customers' financial condition and
maintains an allowance for uncollectible accounts receivable based upon the
expected collectibility of all accounts. To date, the Company has not
experienced any material losses from uncollectible accounts receivable.
New accounting pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS No. 131"), "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131 supersedes
SFAS No. 14 and requires segment information to be reported on the basis that
is used internally for evaluating segment performance and deciding how to
allocate resources to segments in quarterly and annual reports. SFAS No. 131
is effective for annual reports for fiscal years beginning after December 15,
1997, and is applicable to interim financial statements beginning with the
second year of application. The Company has not yet determined the effect, if
any, of adoption of this new standard on its financial statements.
Interim financial information (unaudited)
The accompanying interim financial statements as of March 31, 1998 and for
the three months ended March 31, 1997 and 1998 are unaudited. In the opinion
of the management, these interim statements have been prepared on the same
basis as the annual financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the results of the interim periods. The financial and other
data disclosed in these notes to the financial statements for these interim
periods are also unaudited. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full year
or any future periods.
F-10
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--TRANSACTIONS WITH MOTOROLA:
In June 1997, the Company entered into a development agreement with
Motorola, Inc. ("Motorola") under which the Company receives periodic payments
in exchange for certain development work to be performed. Under this
development agreement, the Company recognized revenues of $680,000 and
$140,000 (unaudited) in the year ended December 31, 1997 and three months
ended March 31, 1998, respectively. In December 1997, under a separate service
agreement, the Company also recognized $66,000 for a non-exclusive, internal
use license to certain Starfish technology granted to Motorola for evaluation,
research and development purposes.
In October 1997, Motorola acquired 469,745 shares of the Company's Series B
Preferred Stock at a purchase price of $31.40 per share, resulting in net cash
proceeds to the Company of $13,920,000. (See Note 5.) As a result of this
acquisition, Motorola owned approximately 15% and 15% (unaudited) of the
Company's outstanding voting shares of Common Stock on an as-if-converted
basis at December 31, 1997 and March 31, 1998, respectively.
In July 1998, the Company entered into an Agreement and Plan of Merger with
Motorola, which was thereafter amended, setting forth the terms for Motorola's
acquisition of the Company (the "Merger"). Under the terms of the Merger, the
Company will become a wholly-owned subsidiary of Motorola. The Merger will be
effected through the exchange of Common Stock, including Preferred Stock on an
as if converted basis, based upon an agreed upon exchange ratio and cash
consideration of an agreed upon per share amount. The Merger is intended to be
accounted for as a purchase. A certain percentage of the Common Stock and cash
consideration is subject to hold back for potential claims and adjustments.
NOTE 3--RELATED PARTY TRANSACTIONS:
The Company leases its facilities from Inprise. The Company paid rent of
$224,000 and $293,000 for the use of this facility for the years ended
December 31, 1996 and 1997, respectively.
The Company has a royalty agreement with Inprise related to certain versions
of products purchased from Inprise (see Note 1). Under this agreement, the
Company pays Inprise 4% of net receipts related to the sale of certain
products which operate on the Microsoft Windows 3.1 operating system. The
maximum amount payable pursuant to this agreement is $4,000,000. For the years
ended December 31, 1996 and 1997, total royalties owed Inprise under this
agreement were approximately $46,000 and $18,000, respectively.
In February 1995, the Company entered into a $3,000,000 unsecured credit
agreement and deferred compensation arrangement with its majority shareholder
who is also its President, Chief Executive Officer and Chairman of its Board
of Directors. Interest on the outstanding borrowings, accruing at a rate of
10% per annum, amounted to $169,000, $254,000 and $79,000 in the years ended
December 31, 1996 and 1997 and the three months ended March 31, 1997,
respectively. During 1997, the Company repaid in full the outstanding deferred
compensation and the amounts borrowed under the unsecured credit agreement and
related interest totaling $3,475,000. The credit agreement expired in February
1998. During 1997, the Company also repaid in full $277,000 of deferred
compensation owed to another member of its Board of Directors.
In May 1997, the Company entered into a development agreement with a holder
of 356,506 shares of Series A Preferred Stock. Under this agreement, the
Company recognized $800,000 and $300,000 (unaudited) for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively.
F-11
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable........................... $1,406 $ 911 $ 764
Less: allowance for doubtful accounts......... (17) (17) (17)
Less: sales return reserves................... (966) (237) (218)
------ ------ ------
$ 423 $ 657 $ 529
====== ====== ======
Inventory..................................... $ 21 $ 11 $ 11
Income tax receivable......................... 254 127 127
Other......................................... 102 89 66
------ ------ ------
$ 377 $ 227 $ 204
====== ====== ======
Computer equipment and software............... $ 679 $ 877 $ 932
Furniture and fixtures........................ 192 150 150
------ ------ ------
871 1,027 1,082
Less accumulated depreciation................. (260) (542) (624)
------ ------ ------
$ 611 $ 485 $ 458
====== ====== ======
Accrued marketing development obligations..... $ 326 $ 77 $ 75
Reserve for rebates........................... 214 174 160
Other accrued liabilities..................... 574 411 376
------ ------ ------
$1,114 $ 662 $ 611
====== ====== ======
</TABLE>
NOTE 5--CONVERTIBLE PREFERRED STOCK AND WARRANTS:
In October 1997, the shareholders approved an amendment to the Company's
Articles of Incorporation which increased the authorized shares to 60,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock, of which
357,000 shares were designated as Series A Preferred Stock and 500,000 shares
were designated as Series B Preferred Stock.
In connection with the issuance of Series B Preferred Stock to Motorola in
October 1997, the Company incurred legal costs of approximately $77,000 and
paid $761,000 in cash and issued warrants to purchase 376,000 shares of the
Company's Common Stock at an exercise price of $3.14 per share to an
investment banker. The warrants expire on October 10, 2002.
The holders of Preferred Stock have various rights and preferences as
follows:
Voting
Each share of Series A and B Preferred Stock has voting rights equal to an
equivalent number of shares of Common Stock into which it is convertible and
votes together as one class with the Common Stock.
As long as any shares of Preferred Stock remain outstanding, the Company
must obtain approval from at least two-thirds of the then outstanding shares
of Series A and a majority of the then outstanding shares of Series B
Preferred Stock in order to alter the articles of incorporation as related to
the Preferred Stock, change the authorized number of shares of the Preferred
Stock, or alter or change the rights, preferences or privileges of shares of
the Preferred Stock. With respect to Series A Preferred Stock, the Company
must obtain approval to redeem more than 50% of the outstanding Common Stock
or offer to redeem any percentage of shares of
F-12
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Common Stock from more than half of the holders of Common Stock. With respect
to Series B Preferred Stock, the Company must obtain approval for the issuance
of any class or series of security senior to the Series B Preferred Stock and
for payment of cash dividends or distributions on Common Stock.
Dividends
Holders of Series A and B Preferred Stock are entitled to receive
noncumulative dividends at the per annum rate of $0.22 and $2.50 per share,
respectively, when, as, and if declared by the Board of Directors. The holders
of Series A and B Preferred Stock will also be entitled to participate in
dividends on Common Stock, when and if declared by the Board of Directors,
based on the number of shares of Common Stock held on an as-if converted
basis. No dividends on Preferred Stock or Common Stock have been declared by
the Board from inception through March 31, 1998.
Liquidation
In the event of a liquidation, dissolution or winding up of the Company,
including a merger or other corporate reorganization in which the preferred
and common shareholders of the Company own less than 50% of the voting power
immediately after the transaction, the holders of the then outstanding Series
A Preferred Stock and Series B Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Company to the holders of the Common Stock, the amounts of $2.805
and $31.40 per share, respectively, adjusted for any stock split, stock
dividends, recapitalization or the like, plus all declared but unpaid
dividends. After payment has been made to the holders of the Preferred Stock
of the full preferential amounts to which they shall be entitled, the
remaining assets shall be distributed until the holders of the Common Stock
shall have received an aggregate amount per share of Common Stock equal to the
amount paid the Series A Preferred Stock. Thereafter, the holders of the
Common Stock and Series A Preferred Stock shall be entitled to share ratably
in all remaining assets to be distributed, based on the number of shares of
Common Stock held on a converted basis.
Conversion
Each share of Series A and B Preferred Stock is convertible, at the option
of the holder, according to a conversion ratio, subject to adjustment for
certain dilution events. The initial conversion ratio of the Series A and B
Preferred Stock into shares of Common Stock is one-to-one and one-to-ten,
respectively.
Each share of Series A Preferred Stock automatically converts into the
number of shares of Common Stock into which such shares are convertible at the
then effective conversion ratio upon: (1) the closing of the sale of the
Company's securities pursuant to a firm commitment underwritten public
offering or (2) the time the consent to such conversion of at least a majority
of the outstanding Series A Preferred Stock is obtained.
Each share of Series B Preferred Stock automatically converts into the
number of shares of Common Stock into which such shares are convertible at the
then effective conversion ratio upon: (1) the closing of the sale of the
Company's securities pursuant to a firm commitment underwritten public
offering covering the offer and sale of Common Stock to the public at an
aggregate gross offering price of not less than $15.0 million and an offering
price per share of not less than 150% of the then-applicable Series B
Preferred Stock conversion price, (2) the time the consents of at least a
majority of the outstanding Series B Preferred Stock to such conversion is
obtained or (3) immediately prior to the closing of an acquisition transaction
in which the proceeds per share of Series B Preferred Stock payable will be in
excess of the liquidation preference for such shares.
Of the Common Stock authorized but unissued, the Company is required to
reserve the maximum number of shares that would be issued upon conversion of
the Series A and B Preferred Stock.
F-13
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--OPTIONS AND DIRECTORS' SHARES:
Stock option plans
In May 1995, the Board of Directors adopted the 1995 Stock Option Plan (the
"95 Plan") which provides for the issuance of incentive, and nonstatutory
stock options to employees, officers, directors, and consultants of the
Company. Under the 95 Plan, a total of 6,900,000 shares have been authorized
for issuance. Options granted under the 95 Plan are generally for periods not
to exceed ten years, and generally must be issued at prices not less than 100%
and 85%, for incentive and nonstatutory stock options, respectively, of the
fair market value of the stock on the date of grant as determined by the Board
of Directors. Options granted to shareholders who own greater than 10% of the
outstanding stock are for periods not to exceed five years, and must be issued
at prices not less than 110% of the fair market value of the stock on the date
of grant. Options granted under the 95 Plan generally vest 25% at the end of
the twelve full months from the date of grant of the options and ratably each
month thereafter over the remaining thirty-six month period.
In August 1997, the Board of Directors adopted the 1997 Stock Option Plan
(the "97 Plan") which provides for the issuance of incentive and nonstatutory
stock options to employees, officers, directors, and consultants of the
Company. Under the 97 Plan, a total of 2,000,000 shares have been authorized
for issuance. Options under the 97 Plan are generally for periods not to
exceed ten years, and generally must be issued at prices not less than 100%
and 85%, for incentive and nonstatutory stock options, respectively, of the
fair market value of the stock on the date of grant as determined by the Board
of Directors. Options granted to shareholders who own greater than 10% of the
outstanding stock are for periods not to exceed five years, and must be issued
at prices not less than 110% of the fair market value of the stock on the date
of grant. Options granted under the 97 Plan generally vest 25% at the end of
the twelve full months from the date of grant of the options and ratably each
month thereafter over the remaining thirty-six month period.
Transactions under the 1997 and 1995 Stock Option Plans are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------- THREE MONTHS ENDED
1996 1997 MARCH 31, 1998
---------------- ---------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(in thousands, except
per share data)
Outstanding at beginning
of period.............. 5,403 $0.12 5,530 $0.18 5,386 $ 0.44
Granted............... 1,488 0.27 2,380 0.82 306 1.36
Exercised............. (446) 0.11 (1,222) 0.12 (295) 0.18
Canceled.............. (915) 0.11 (1,302) 0.22 (46) 0.30
----- ------ ---------
Outstanding at period
end.................... 5,530 0.18 5,386 0.44 5,351 0.51
===== ====== =========
Options exercisable at
period end............. 1,619 0.12 1,501 0.15 1,580
===== ====== =========
Weighted average grant
date fair value of
options granted during
the year............... $0.08 $0.22 $ 0.36
===== ===== =========
</TABLE>
At March 31, 1998, 1,586,000 shares were available for future grant.
F-14
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information about employee stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- --------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING PRICE LIFE OUTSTANDING PRICE
- ------------------------ ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
(in thousands, except
per share data)
$0.10-$0.13............. 1,613 $0.11 7.3 years 1,007 $0.11
$0.15-$0.30............. 1,515 0.24 8.3 years 494 0.24
$0.80-$1.10............. 2,258 0.82 9.5 years -- --
----- -----
5,386 0.44 8.5 years 1,501 0.15
===== =====
</TABLE>
During the three months ended March 31, 1998, the Company granted options
for the purchase of approximately 306,000 (unaudited) shares of Common Stock
to employees at exercise prices ranging from $1.10 (unaudited) to $1.40
(unaudited) per share. In connection with the option grants, the Company
recorded deferred stock compensation of $290,000 (unaudited) in the three
months ended March 31, 1998. Compensation expense is recognized on a straight-
line basis over the vesting period of these options and aggregated $7,000
(unaudited) for the three months ended March 31, 1998.
Directors' shares
In March 1998, the Company issued to three outside directors 113,637
(unaudited) shares of Common Stock at $1.10 (unaudited) per share and 3,980
(unaudited) shares of Series B Preferred Stock at $31.40 (unaudited) per
share. In connection with the Common Stock issuances, the Company recorded
$148,000 (unaudited) in compensation costs during the three months ended March
31, 1998.
Minimum value disclosures
Had compensation cost for options granted in 1996 and 1997 been determined
based on the minimum value at the grant dates, as prescribed in FAS 123, the
Company's net loss and basic and diluted pro forma net loss per share would
have been as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Net Loss:
As reported.......................................... $(3,641) $(5,380)
Pro forma............................................ (3,654) (5,469)
Basic and diluted net loss per share:
As reported.......................................... $ (0.15) $ (0.22)
Pro forma............................................ (0.15) (0.22)
</TABLE>
Under SFAS No. 123, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
----------- -----------
<S> <C> <C>
Stock Option Assumptions:
Expected dividend yield......................... -- --
Expected stock price volatility................. -- --
Risk-free interest rate......................... 5.23%-6.70% 5.05%-6.50%
Expected life (years)........................... 5 5
</TABLE>
F-15
<PAGE>
STARFISH SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--LEASE COMMITMENTS:
The Company leases its facilities from a shareholder (see Note 3). Future
minimum lease payments under this noncancelable operating lease as of December
31, 1997 are as follows:
<TABLE>
<S> <C>
(in thousands)
1998............................ $ 587
1999............................ 602
2000............................ 592
------
$1,781
======
</TABLE>
NOTE 8--401(K) PLAN:
In November 1995, the Board of Directors adopted an employee savings and
retirement plan (the "401(k) Plan") covering substantially all of the
Company's employees. Pursuant to the 401(k) Plan, eligible employees may elect
to reduce their current compensation by up to the statutory prescribed limit
and have the amount of such reduction contributed to the 401(k) Plan. The
Company may make discretionary contributions to the 401(k) Plan on behalf of
eligible employees contributing to the 401(k) Plan. Employees are immediately
vested in such contributions. The 401(k) Plan became effective on January 1,
1996. The Company did not make contributions to the 401(k) Plan during 1996 or
1997.
NOTE 9--INCOME TAXES:
For the years ended December 31, 1996 and 1997, the Company recorded no
provision for income taxes.
Significant components of the Company's deferred income tax assets consist
of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
(in thousands)
Net operating loss and credit carryforward.............. $ 907 $ 3,393
Depreciation and amortization........................... 808 775
Accruals and reserves not currently deductible.......... 1,126 425
------- -------
Total deferred tax assets............................. 2,841 4,593
Less the valuation allowance............................ (2,841) (4,593)
------- -------
Net deferred tax assets............................... $ -- $ --
======= =======
</TABLE>
For financial reporting purposes, the Company has incurred a loss in each
year since its inception. Based on the available objective evidence, including
the Company's history of losses, management believes it is more likely than
not that the deferred tax assets will not be fully realizable. Accordingly,
the Company has provided for a full valuation allowance against its deferred
tax assets at December 31, 1996 and 1997.
At December 31, 1997, the Company had approximately $8,792,000 of federal
net operating loss carryforwards available to offset future taxable income
which expire in varying amounts beginning in 2010. Under the Tax Reform Act of
1986, the amounts of and benefits from net operating loss carryforwards may be
impaired or limited in certain circumstances. Events which cause limitations
in the amount of net operating losses that the Company may utilize in any one
year include, but are not limited to, a cumulative ownership change of more
than 50%, as defined, over a three year period.
F-16
<PAGE>
ANNEX A1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into this
1st day of July 1998, by and among MOTOROLA, INC., a Delaware corporation
("Motorola"), SS ACQUISITION CORPORATION, a California corporation and a
wholly-owned subsidiary of Motorola ("Sub"), and STARFISH SOFTWARE, INC., a
California corporation ("Starfish"). Certain other capitalized terms used in
this Agreement are defined in Exhibit A attached hereto.
RECITALS
WHEREAS, Starfish, Motorola and Sub believe it is in the best interests of
each company, the shareholders of Motorola and the shareholders of Starfish
that Motorola acquire Starfish through the statutory merger of Starfish with
and into Sub pursuant to which Sub shall continue as the surviving corporation
and as a wholly-owned subsidiary of Motorola (the "Merger");
WHEREAS, pursuant to the Merger, among other things, each issued and
outstanding share of capital stock of Starfish (assuming conversion or
exercise of the outstanding warrants to purchase shares of Starfish common
stock) ("Starfish Capital Stock"), other than shares owned directly by
Motorola and Dissenting Shares (as defined in Section 2.1 below), will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1(d));
WHEREAS, Starfish shareholders holding approximately 49% of the Starfish
Common Stock and approximately one percent (1%) of the Series B Preferred
Stock have entered into Voting Agreements substantially in the form attached
hereto as Exhibit B (the "Voting Agreements") pursuant to which such
shareholders, among other things, have agreed to vote their shares of Starfish
Capital Stock in favor of the Merger;
WHEREAS, for federal income tax purposes, it is intended that (i) the Merger
shall qualify as a reorganization, and (ii) this Agreement (and the other
agreements entered into in connection herewith) shall qualify as a plan of
reorganization within the meaning of the regulations issued pursuant to
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger.
NOW, THEREFORE, in reliance on the foregoing recitals and in and for the
consideration and mutual covenants set forth herein, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2 below) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California Corporations Code (the "California
Code"), Starfish shall be merged with and into Sub, the separate corporate
existence of Starfish shall cease and Sub shall continue as the surviving
corporation and as a wholly-owned subsidiary of Motorola. Sub, as the
surviving corporation after the Merger, is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Closing; Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 10.1 below, the closing of the Merger ("Closing") will
take place as promptly as practicable, but no later than five (5) business
days following satisfaction or waiver of the conditions set forth in Article
VIII and Article IX, at the offices of Jackson Tufts Cole & Black, LLP, 60
South Market Street, San Jose, California, unless another place or time is
agreed to in writing by Motorola and Starfish. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing an
agreement of merger in the form required by the California Code with the
Secretary of State of
A1-1
<PAGE>
California (the "Merger Articles"), in accordance with the relevant provisions
of applicable law (the later to occur of the time of acceptance by the
Secretary of State of California of such filing being referred to herein as
the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the California Code.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
Starfish and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Starfish and Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Sub shall be the
Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation.
(b) At the Effective Time, the Bylaws of Sub shall be the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. At the Effective Time, each member of the Board
of Directors of Sub immediately prior to the Effective Time shall become a
member of the Board of Directors of the Surviving Corporation (the "Surviving
Corporation Board"). Immediately following the Effective Time, each officer of
Sub immediately prior to the Effective Time shall become an officer of the
Surviving Corporation, each to hold office in accordance with the Bylaws of
the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Conversion of Capital Stock.
(a) As of the Effective Time, each share of Starfish Common Stock and each
share of Starfish Series A Preferred Stock (collectively, the "Starfish
Shares") that is issued and outstanding immediately prior to the Effective
Time of the Merger (except for those Starfish Shares held of record by
Motorola and Dissenting Shares) shall, by virtue of the Merger and without any
action on the part of Motorola, Sub, Starfish, or the shareholders of
Starfish, be canceled and extinguished and each Starfish Share then
outstanding shall be converted into the right to receive:
(i) an amount in cash equal to Two Dollars and Ninety-Five Cents ($2.95)
per share (together with the amount payable pursuant to Section 2.1(b)(i),
the "Initial Cash Merger Consideration");
(ii) a number of shares of Common Stock, $3.00 par value per share, of
Motorola and any rights attaching to such stock pursuant to that certain
Rights Agreement dated as of November 9, 1988 (as amended through the date
hereof), by and between Motorola and Harris Trust and Savings Bank
("Motorola Common Stock"), equal to the quotient (calculated to the nearest
0.0001) of (A) Two Dollars and Ninety-Five Cents ($2.95) (together with the
shares issuable pursuant to Section 2.1(b)(ii), the "Initial Non-Cash
Merger Consideration") divided by (B) the Valuation Period Stock Price;
(iii) a conditional amount of cash equal to Fifty-Five Cents ($0.55)
(together with the amount payable pursuant to Section 2.1(b)(iii), the
"Holdback Amount"); and
(iv) a conditional number of shares of Motorola Common Stock equal to the
quotient (calculated to the nearest 0.0001) of (A) Fifty-Five Cents ($0.55)
(together with the shares issuable pursuant to Section 2.1(b)(iv), the
"Escrowed Non-Cash Merger Consideration") divided by (B) the Valuation
Period Stock Price.
(b) As of the Effective Time, each share of Starfish Series B Preferred
Stock ("Starfish Series B Shares") that is issued and outstanding immediately
prior to the Effective Time of the Merger (except for those Starfish Series B
Shares of held of record by Motorola and Dissenting Shares) shall, by virtue
of the Merger and without
A1-2
<PAGE>
any action on the part of Motorola, Sub, Starfish, or the shareholders of
Starfish, be canceled and extinguished and each Starfish Series B Share then
outstanding shall be converted into the right to receive:
(i) an amount in cash equal to Twenty-Nine Dollars and Fifty Cents
($29.50) per share;
(ii) a number of shares of Motorola Common Stock, equal to the quotient
(calculated to the nearest 0.0001) of (A) Twenty-Nine Dollars and Fifty
Cents ($29.50) divided by (B) the Valuation Period Stock Price;
(iii) a conditional amount of cash equal to Five Dollars and Fifty Cents
($5.50); and
(iv) a conditional number of shares of Motorola Common Stock equal to the
quotient (calculated to the nearest 0.0001) of (A) Five Dollars and Fifty
Cents ($5.50) divided by (B) the Valuation Period Stock Price.
(c) If between the date of this Agreement and the Effective Time the
outstanding shares of Motorola Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares, the exchange ratios set forth in Sections 2.1(a)(ii)
and (iv) and 2.1(b)(ii) and (iv) above shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. The "Valuation Period Stock Price"
means $52.97.
(d) The Initial Merger Consideration, the Initial Non-Cash Merger
Consideration, the Holdback Amount and the Escrowed Non-Cash Merger
Consideration (as adjusted pursuant to this Agreement) shall constitute the
"Merger Consideration" which shall be payable per share in accordance with the
provisions of Section 2.2 below. All such Starfish Shares, when so converted,
and all the Starfish Shares held of record by Motorola, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate presenting any such shares shall cease
to have any rights with respect thereto, except the right to receive the
Merger Consideration represented by such certificate upon the surrender of
such certificate in accordance with Section 2.2, without interest. No
fractional shares of Motorola Common Stock shall be issued and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.2(e). "Dissenting
Share" means any Starfish Share in respect of which any Starfish Shareholder
has exercised his or its dissenters rights under the California Code.
2.2 Exchange of Certificates.
(a) Exchange Agent. Motorola shall deposit with such bank or trust company
as may be designated by Motorola (the "Exchange Agent") appointed pursuant to
the terms of the Exchange Agreement substantially in the form attached hereto
as Exhibit C (the "Exchange Agreement"), for the benefit of the holders of
shares of Starfish Capital Stock, for exchange in accordance with this Article
II, through the Exchange Agent, (i) as of the Effective Time certificates
representing the Initial Non-Cash Merger Consideration and the Escrowed Non-
Cash Merger Consideration and (ii) as of the Effective Time cash in the amount
sufficient to pay the Initial Cash Merger Consideration, and (iii) on each of
six (6) months following the Closing Date and the first (1st), second (2nd)
and third (3rd) anniversaries of the Closing Date and such time as all claims
by Motorola with respect to the Holdback Amount have been determined without
possibility of appeal, cash in the amount specified in Section 2.2(b) in
respect of the Holdback Amount (such shares and cash consideration, together
with any dividends or distributions with respect thereto with a record date on
or after the day on which the Effective Time occurs and any cash payable in
lieu of any fractional shares of Motorola Common Stock being hereinafter
referred to as the "Exchange Fund").
(b) Exchange Procedures. No later than three business days after the
Effective Time, the Exchange Agent shall, in accordance with the terms of the
Exchange Agreement, mail to each holder of record of a Certificate or
Certificates immediately prior to the Effective Time, whose shares were
converted into the right to receive the Merger Consideration pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Motorola may reasonably specify)
A1-3
<PAGE>
and (ii) instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration (collectively, the "Letter of
Transmittal"). Upon the later of the Effective Time or the surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Motorola, together with such Letter of
Transmittal, duly executed, and such other documents as may be reasonably
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing the
number of whole shares of Motorola Common Stock constituting the Initial Non-
Cash Merger Consideration payable to such holder and (y) a certified or bank
cashier's check in the amount equal to the cash that such holder has the right
to receive pursuant to the provisions of this Article II in respect of the
Initial Cash Merger Consideration payable to such holder and fractional shares
(in each case, less the amount of any withholding taxes required under
applicable law), and the Certificate so surrendered shall forthwith be
canceled. Six (6) months following the Closing Date, Motorola shall deposit
Five Million Dollars ($5,000,000); on the first (1st) anniversary of the
Closing Date, Motorola shall deposit Five Million Dollars ($5,000,000); on the
second (2nd) anniversary of the Closing Date, Motorola shall deposit Two
Million Five Hundred Thousand Dollars ($2,500,000); and on the third (3rd)
anniversary of the Closing Date Motorola shall deposit the balance of the
Holdback Amount in each case as such amount may be adjusted in accordance with
Section 2.6 below, plus interest thereon as determined in the manner set forth
below, in the Exchange Fund, for distribution by the Exchange Agent in
accordance with the terms of the Exchange Agreement. The interest to be added
to the amount of the Holdback Amount paid on each anniversary of the Closing
Date (as provided for by the previous sentence) shall be calculated as
follows: (i) at the end of the sixth (6th) month following the Closing Date,
interest shall be paid for the six (6) month period from the Closing Date
until paid on Five Million Dollars ($5,000,000) as adjusted by any adjustments
to the Holdback Amount made since the Closing Date in accordance with Section
2.6, at the Prime Rate as quoted by the Wall Street Journal on the Closing
Date, (ii) on the first (1st) anniversary of the Closing Date, interest shall
be paid for the period from the Closing Date until paid on Five Million
Dollars ($5,000,000) as adjusted by any adjustments to the Holdback Amount
made since the Closing Date in accordance with Section 2.6, at the Prime Rate
as quoted by the Wall Street Journal on the Closing Date, (iii) on the second
(2nd) anniversary of the Closing Date, interest shall be paid for the period
from the Closing Date until paid on Two Million Five Hundred Thousand Dollars
($2,500,000) as adjusted by any adjustments to the Holdback Amount made since
the Closing Date in accordance with Section 2.6, at the Prime Rate as quoted
by the Wall Street Journal on the date of the preceding anniversary of the
Closing Date; and (iv) on the third (3rd) anniversary, interest shall be paid
for the period from the Closing Date until paid on the balance of the Holdback
Amount as adjusted by any adjustments to the Holdback Amount made since the
Closing Date in accordance with Section 2.6 and less any Holdback Amount
deposited with the Exchange Agent on or prior to the preceding anniversary, at
the Prime Rate as quoted by the Wall Street Journal on the date of the
preceding anniversary of the Closing Date. In the event of a transfer of
ownership of Starfish Capital Stock which is not registered in the transfer
records of Starfish, a certificate representing the proper number of shares of
Motorola Common Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required
by reason of the issuance of shares of Motorola Common Stock to a person other
than the registered holder of such Certificate or establish to the
satisfaction of Motorola that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2(b), each Certificate
(other than those representing Dissenting Shares) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration and any cash in lieu of a fractional share
of Motorola Common Stock which the holder thereof has the right to receive in
respect of such Certificate pursuant to this Article II. Except as set forth
with respect to the Holdback Amount, no interest will be paid or will accrue
on any cash payable to holders of Certificates pursuant to this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding any
other provisions of this Agreement, no dividends or other distributions with
respect to shares of Motorola Common Stock with a record date on or after the
day on which the Effective Time occurs shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Motorola Common Stock
represented thereby, and no cash in lieu of a fractional share of Motorola
Common Stock shall be paid to any such holder pursuant to this Article II, and
all
A1-4
<PAGE>
such dividends, other distributions and cash in lieu of any fractional share
of Motorola Common Stock shall be paid by Motorola to the Exchange Agent (less
the amount of any required withholding taxes) and shall be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article II. Following surrender of any such Certificate,
there shall be issued or paid, as applicable, to the holder thereof (i) at the
time of such surrender, (x) a certificate representing whole shares of the
Initial Non-Cash Merger Consideration issued in exchange therefor, (y) the
portion of the Initial Cash Merger Consideration and any cash payable in lieu
of a fractional share of Motorola Common Stock to which such holder is
entitled pursuant to this Article II and (z) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Motorola Common Stock (in each case,
without interest and less the amount of any required withholding taxes); and
(ii) at the appropriate payment date, (x) the amount of any dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Motorola Common Stock and (y) the portion of
the Holdback Amount and the Escrowed Non-Cash Merger Consideration to which
such holder is entitled pursuant to this Article II and the Exchange
Agreement.
(d) No Further Ownership Rights in Starfish Capital Stock. All shares of
Motorola Common Stock issued and cash paid upon the surrender for exchange of
Certificates in accordance with this Article II shall be deemed to have been
issued (and paid) in full satisfaction of all rights pertaining to the shares
of Starfish Capital Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay (i) any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by Starfish on such shares
of Starfish Capital Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time and (ii) the Holdback Amount, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Starfish Capital Stock which were outstanding immediately prior to
the Effective Time. Subject to applicable law, Certificates presented after
the Effective Time to the Surviving Corporation or the Exchange Agent for any
reason shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Motorola
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Motorola shall relate to such
fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Motorola.
(ii) Notwithstanding any other provision of this Agreement, each holder
of record of shares of Starfish Capital Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a
share of Motorola Common Stock (after taking into account all shares and
Certificates delivered by such holder of record) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part
of a share of Motorola Common Stock multiplied by the Valuation Period
Stock Price.
(f) Termination of Exchange Fund. The Exchange Fund shall terminate in
accordance with the terms of the Exchange Agreement.
(g) No Liability. None of Motorola, Sub, Starfish and the Exchange Agent
shall be liable to any person in respect of any shares of Motorola Common
Stock (or any dividends or distributions with respect thereto or with respect
to any shares of Starfish Capital Stock theretofore represented by any
Certificate) or any cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificate shall not have been surrendered prior to the date on which any
Merger Consideration or any cash in lieu of a fractional share of Motorola
Common Stock or other dividends or distributions payable to the holder of such
Certificate pursuant to this Article II would otherwise escheat to or become
the property of any Governmental Body (as defined in Exhibit A), any such
Merger Consideration or cash or other dividends or distributions shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person
previously entitled thereto.
A1-5
<PAGE>
(h) Lost, Stolen and Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or destroyed and,
if required by Motorola, the posting by such person of a bond in such
reasonable amount as Motorola may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration, cash in lieu of a fractional share of Motorola Common
Stock and unpaid dividends and distribution on shares of Motorola Common Stock
as provided in this Article II, deliverable in respect thereof pursuant to
this Agreement.
2.3 Stock Options.
(a) At the Effective Time and subject to Section 6.6 each option granted by
Starfish to purchase shares of Starfish Common Stock (each, a "Starfish
Option") which is outstanding immediately prior thereto shall cease to
represent a right to acquire shares of Starfish Common Stock and shall be
assumed automatically by Motorola and converted automatically into an option
(the "Exchanged Option") to purchase shares of Motorola Common Stock
exercisable until the current termination of the Starfish Option in an amount
and at an exercise price determined as provided below (and subject to the
terms of the 1995 Stock Option Plan and the 1997 Stock Option Plan of Starfish
(the "Starfish Stock Plans") and the agreements evidencing such grants:
(i) The number of shares of Motorola Common Stock to be subject to each
Exchanged Option shall be equal to the product of the number of shares of
Starfish Common stock subject immediately prior to the Effective Time to
the Starfish Option to be converted into such Exchanged Option and the
Option Exchange Ratio, provided that any fractional share of Motorola
Common Stock resulting from such multiplication shall be rounded down to
the nearest share; and
(ii) The exercise price per share of Motorola Common Stock under the
Exchanged Option shall be equal to the exercise price per share of Starfish
Common Stock under the Starfish Option to be converted into such Exchanged
Option divided by the Option Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest one-tenth of a cent; and
(iii) provided further, however, that with respect to each Starfish
Option which, immediately prior to the Effective Time, is intended to
qualify as an "incentive stock option" within the meaning of Section 422(b)
of the Code, the number of shares of Motorola Common Stock subject to the
Exchanged Option into which such Starfish Option is converted and the
exercise price, terms and conditions of such Exchanged Option shall be
determined in compliance with the requirements of Section 424(a) of the
Code.
For purposes of this Agreement, the "Option Exchange Ratio" shall be
calculated as Seven Dollars ($7.00) divided by the Valuation Period Stock
Price.
(b) Motorola shall (i) reserve for issuance the number of shares of Motorola
Common Stock that will become issuable upon the exercise of the Exchanged
Options and (ii) promptly after the Effective Time, issue to each holder of an
Exchanged Option a document evidencing Motorola's assumption of Starfish's
obligations under the Starfish Options. The Exchanged Options shall have the
same terms and conditions as the Starfish Options.
2.4 Dissenting Shares. Any Dissenting Shares shall not be converted into a
right to receive Motorola Common Stock but shall be converted into the right
to receive such consideration as may be determined to be due with respect to
such Dissenting Shares pursuant to the California Code; provided, however,
that if the status of any such shares as Dissenting Shares shall not be
perfected, or if any such shares shall lose their status as Dissenting Shares,
then, as of the later of the Effective Date or the time of the failure to
perfect such status, such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the
Certificate or Certificates representing such shares) Motorola Common Stock in
accordance with Section 2.1 (and cash in lieu of fractional shares in
accordance with Section 2.2(e)). Starfish shall give Motorola prompt notice of
any demand received by Starfish for appraisal of Starfish Capital Stock, and
Motorola shall have the right to participate in all negotiations and
proceedings with respect to such demand. Starfish agrees that, except with the
prior written consent of Motorola or as required under Chapter 13 of the
California Code, it will not
A1-6
<PAGE>
voluntarily make any payment with respect to, or settle or offer to settle,
any such demand for appraisal. Each holder of Dissenting Shares ("Dissenting
Shareholder") who, pursuant to the provisions of the California Code, becomes
entitled to payment of the value of shares of Starfish Capital Stock shall
receive payment therefor from the Surviving Corporation (but only after the
value therefor shall have been agreed upon or finally determined pursuant to
such provisions).
2.5 Tax Free Reorganization. The parties intend to adopt and hereby do adopt
this Agreement as a plan of reorganization within the meaning of the
regulations issued pursuant to Section 368 of the Code and intend to
consummate the Merger in accordance with the provisions of Sections
368(a)(1)(A) and (a)(2)(D) of the Code. Each party agrees that it will not
take or assert any position on any tax return, report, or otherwise which is
inconsistent with the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code and will take no action, either
prior or subsequent to the Merger, which would cause the Merger to fail to
qualify as a reorganization. The provisions and representations contained or
referred to in this Section 2.5 shall survive until the expiration of the
applicable statute of limitations.
2.6 Post-Closing Adjustment to Holdback Amount. The Holdback Amount may be
reduced from time to time in accordance with the provisions of Article XI of
this Agreement. Any reduction to the Holdback Amount pursuant to Article XI
shall be made (i) by first reducing the amount payable by Motorola pursuant to
Section 2.2 above at the end of the sixth (6th) month period, provided that if
the amount then payable is less than the amount of such reduction, or if such
six (6) month period has passed and the portion of the Holdback Amount then
payable has been paid, by then reducing the amount payable by Motorola by the
amount of such difference on the first (1st) anniversary of the Closing Date;
(ii) to the extent that the amount then payable is less than the amount of
such reduction, or if such first (1st) anniversary has passed and the portion
of the Holdback Amount then payable has been paid, by then reducing the amount
payable by Motorola by the amount of such difference on the second (2nd)
anniversary of the Closing Date; (iii) to the extent that the amount then
payable is less than the amount of such reduction, or if such second (2nd)
anniversary has passed and the portion of the Holdback Amount then payable has
been paid, by then reducing the amount payable by Motorola by the amount of
such difference on the third (3rd) anniversary of the Closing Date and (iv) to
the extent that the amount then payable is less than the amount of the
Holdback Amount then remaining, then by reducing the Escrowed Non-Cash Merger
Consideration by the amount of such shortfall in accordance with the terms of
the Exchange Agreement.
2.7 Discussion of Adjustment of Merger Consideration. If the value of the
total Initial Non-Cash Merger Consideration as of the Effective Time
(determined by the closing price of Motorola Common Stock on the Closing Date)
is not equal to or in excess of two-thirds of the total Initial Cash Merger
Consideration then Motorola and Starfish will discuss in good faith whether an
increase in the number of shares of Motorola Common Stock (and a corresponding
decrease in the cash component of the Merger Consideration) is in the best
interests of the parties. In the event that the parties are unable to agree on
such adjustment (within five (5) business days), then the conditions set forth
in Sections 8.8 and 9.16 of this Agreement shall be deemed waived by Starfish
and Motorola and Sub, respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STARFISH
Except as otherwise set forth in the "Starfish Disclosure Schedule" provided
to Motorola on the date hereof, Starfish represents and warrants to Motorola
as set forth below. No fact or circumstance disclosed to Motorola shall
constitute an exception to these representations and warranties unless such
fact or circumstance is set forth in the Starfish Disclosure Schedule.
3.1 Organization. Starfish is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has
corporate power and authority to carry on its business as it is now being
conducted and as it is proposed to be conducted. Starfish is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or properties makes such qualification or
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licensing necessary, except where the failure to qualify would not have a
Material Adverse Effect on Starfish's business. The Starfish Disclosure
Schedule contains a true and complete listing of the locations of all sales
offices, manufacturing facilities, and any other offices or facilities of
Starfish and a true and complete list of all states and countries in which
Starfish maintains any employees. The Starfish Disclosure Schedule contains a
true and complete list of all states in which Starfish is duly qualified to
transact business as a foreign corporation. True and complete copies of
Starfish's articles of incorporation and bylaws, as in effect on the date
hereof and as to be in effect immediately prior to the Closing, have been
provided to Motorola or its representatives. Starfish owns and on the Closing
Date will own no equity securities of any other corporation, limited
partnership or similar entity. Starfish does not have any ownership interest
in any joint venture, partnership or similar arrangement.
3.2 Capitalization. The authorized capital stock of Starfish, as of the date
of this Agreement, consists of: sixty million (60,000,000) shares of Common
Stock, 26,500,298 shares of which are issued and outstanding, 6,051,332 shares
of which are reserved for future issuance to employees upon the exercise of
Starfish Options, 4,746,832 of which are currently outstanding, and 375,796
shares of which are reserved for issuance upon exercise of the Warrant to
purchase 375,796 shares of Starfish Common Stock; and five million (5,000,000)
shares of Preferred Stock, of which 356,506 shares have been designated Series
A Preferred Stock, all of which are issued and outstanding, and of which
500,000 shares have been designated Series B Preferred Stock, 473,725 of which
are issued and outstanding. All issued and outstanding shares of Starfish
Common Stock and Starfish Preferred Stock (i) have been duly authorized and
validly issued, (ii) are fully paid and nonassessable, and (iii) were issued
in compliance with all applicable state and federal laws concerning the
issuance of securities. Except for Starfish Options and the Warrant, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholder agreements, or
agreements of any kind for the purchase or acquisition from Starfish of any of
its securities. Except as set forth in Part 3.2 of the Starfish Disclosure
Schedule, there are no voting or other agreements which restrict voting or
dividend rights on the Starfish Capital Stock. None of the outstanding shares
of Starfish Capital Stock was issued in consideration in whole or in part for
any contribution, transfer or assignment of the Starfish Products or
Proprietary Assets or any proprietary rights incorporated therein or otherwise
related thereto.
3.3 Power, Authority and Validity
(a) Starfish has the corporate power and authority to enter into this
Agreement and the other Transaction Documents to which it is a party and to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated herein and therein have been
duly authorized by the board of directors of Starfish, and no other corporate
proceedings, other than shareholder approval of the Merger, are necessary to
authorize this Agreement and the other Transaction Documents. Starfish is not
subject to or obligated under any charter, bylaw or contract provision or any
license, franchise or permit, or subject to any order or decree, which would
be breached or violated in a manner by or in conflict with its executing and
carrying out this Agreement and the transactions contemplated herein and under
the Transaction Documents. Except for (i) the filing of the Merger Articles
and any required officers' certificates with the Secretary of State of the
State of California and appropriate documents with the relevant authorities of
other states in which Starfish is qualified to do business, (ii) filings under
applicable securities laws, (iii) the termination of the waiting period under
the HSR Act and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country in which Starfish conducts any business or owns any
property or assets, no consent of any person who is a party to a contract
which is material to Starfish's business, nor consent of any governmental
body, is required to be obtained on the part of Starfish to permit the
transactions contemplated herein and continue the business activities of
Starfish as previously conducted by Starfish. This Agreement constitutes, and
the other Transaction Documents to which Starfish is a party when executed and
delivered by Starfish shall constitute, valid and binding obligations of
Starfish enforceable in accordance with their respective terms, subject to (i)
laws of general application relating to public policy, bankruptcy, insolvency,
and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
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(b) Except as set forth in Part 3.3(b) of the Starfish Disclosure Schedule,
all Starfish Options outstanding as of the Effective Date have been issued in
accordance with the terms of the Starfish Stock Plans and pursuant to the
forms of option agreement previously provided to legal counsel for Motorola.
Except for the changes resulting from the application of Section 2.3(a)
hereof, no Starfish Options will by its terms require an adjustment in
connection with the Merger. Neither the transactions contemplated in this
Agreement nor any action taken by Starfish will result in (i) any additional
benefits for any optionee under Starfish Options or (ii) the inability of
Motorola after the Effective Date to exercise any right or benefit held by
Starfish prior to the Effective Date with respect to a Starfish Option assumed
by Motorola, including, without limitation, the right to repurchase an
optionee's unvested shares on termination of such optionee's employment. The
assumption by Motorola of Starfish Options in accordance with Section 2.3
hereunder will not constitute a breach of the Starfish Stock Plans or any
material agreement entered into pursuant to the Starfish Stock Plans.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein will conflict with, or
result in a material breach or violation of, any provision of Starfish's
articles of incorporation, and bylaws as currently in effect, any instrument
or contract to which Starfish is a party or by which Starfish is bound, or any
federal, state or local judgment, writ, decree, order, statute, rule or
regulation applicable to Starfish. Neither the execution and delivery of this
Agreement, nor any Agreement attached hereto as an Exhibit, nor the
consummation of the transactions contemplated herein or therein will have a
Material Adverse Effect on the operations, assets, or financial condition of
Starfish.
3.4 Financial Statements.
(a) Starfish has delivered to Motorola copies of Starfish's audited balance
sheet as of December 31, 1997 and statements of operations, shareholders'
equity and cash flow for the twelve-month period then ended (the "Starfish
Audited Financial Statements") and the unaudited balance sheet as of April 30,
1998 and statements of operations, shareholder's equity and cash flow for the
four-month period then ended (collectively, the "Starfish Financial
Statements").
(b) The Starfish Financial Statements are complete and in accordance with
the books and records of Starfish and present fairly in all material respects
the financial position of Starfish as of the dates thereof. The Starfish
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, as to the Starfish unaudited financial
statements, for the absence of footnotes) applied on a basis consistent with
prior periods. Except and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), Starfish does not have, as of
the dates of such balance sheets, any liabilities or obligations (absolute or
contingent) of a nature required to be or customarily reflected in a balance
sheet (or the notes thereto) prepared in accordance with GAAP. The reserves,
if any, reflected on the Starfish Financial Statements are adequate in light
of the contingencies with respect to which they are made. The statements of
operations, shareholders' equity and cash flow are complete and in accordance
with the books and records of Starfish and present fairly the results of
operations, equity transactions and changes of Starfish for the periods
indicated, subject, in the case of the Starfish unaudited Financial
Statements, to normal year end adjustments.
(c) Starfish has no debt, liability, or obligation of any nature, whether
known, unknown, accrued, absolute, contingent, or otherwise, and whether due
or to become due and which is required to be reflected in a financial
statement in accordance with GAAP except for those (i) that are reflected or
reserved against in the face of (as opposed to the notes to) the Starfish
Financial Statements and (ii) that may have been incurred after the date of
the Starfish Financial Statements in the ordinary course of business, all of
which are usual and normal in amount, both individually and in the aggregate.
3.5 Tax Matters.
(a) Starfish has fully and timely, properly and accurately filed all tax
returns and reports required to be filed by it, including all federal,
foreign, state and local tax returns and estimates for all years and periods
(and portions thereof) for which any such returns, reports or estimates were
due. All such returns, reports and
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estimates were prepared in the manner required by applicable law in all
material respects. All income, sales, use, occupation, property or other taxes
or assessments due from Starfish prior to the Closing Date have been paid or
will be paid on or before the Closing Date. There are no pending assessments,
asserted deficiencies or claims for additional taxes that have not been paid.
The reserves for taxes, if any, reflected on the Starfish Financial Statements
are adequate, and there are no tax liens on any property or assets of Starfish
(other than liens for taxes not yet due and payable). There have been no
audits or examinations of any tax returns or reports by any applicable
governmental agency. No state of facts exists or has existed which would
constitute grounds for the assessment of any penalty or any further tax
liability in a material amount, either individually or in the aggregate,
beyond that shown on the respective tax reports, returns or estimates or
accrued for or reserved on the Starfish Financial Statements. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, foreign state or local tax return or report for any
period.
(b) All taxes that Starfish has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper taxing authority.
(c) Starfish is not a party to any tax-sharing agreement or similar
arrangement with any other party.
(d) At no time has Starfish been included in the federal consolidated income
tax return of any affiliated group of corporations.
(e) No payment which Starfish is obliged to pay to any director, officer,
employee or independent contractor pursuant to the terms of an employment
agreement, severance agreement or otherwise will constitute an excess
parachute payment as defined in Section 280G of the Code.
(f) Starfish will not be required to include any adjustment in taxable
income for any tax period (or portion thereof) ending after the Closing Date
pursuant to Section 481(c) of the Code or any provision of the tax laws of any
jurisdiction requiring tax adjustments as a result of a change in method of
accounting implemented by Starfish prior to the Closing Date for any tax
period (or portion thereof) ending on or before the Closing Date or pursuant
to the provisions of any agreement entered into by Starfish prior to the
Closing Date with any taxing authority with regard to the tax liability of
Starfish for any tax period (or portion thereof) ending on or before the
Closing Date.
(g) Starfish is not currently under any contractual obligation to pay to any
Governmental Body any tax obligations of, or with respect to any transaction
relating to, any other person or to indemnify any other person with respect to
any tax, other than pursuant to this Agreement.
3.6 Absence of Certain Changes or Events. Except as set forth in Part 3.6 of
the Starfish Disclosure Statement, from April 30, 1998, to the date of this
Agreement, Starfish has not:
(a) suffered any Material Adverse Change in its financial condition or in
the operations of its business, nor any Material Adverse Change in its balance
sheet, and including but not limited to cash distributions or material
decreases in the net assets of Starfish;
(b) suffered any damage, destruction or loss, whether covered by insurance
in an amount in excess of Fifty Thousand Dollars ($50,000);
(c) granted or agreed to make any increase in the compensation payable or to
become payable by Starfish to its officers or employees, except those
occurring in the ordinary course of business;
(d) declared, set aside or paid any dividend or made any other distribution
on or in respect of the shares of Starfish Capital Stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition by
Starfish of such shares other than repurchases of Starfish Capital Stock at
original issue prices from former employees or consultants pursuant to written
agreements providing for their repurchase in the event of termination of
employment or consultancy;
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(e) issued any shares of capital stock of Starfish or any warrants, rights
or options or entered into any commitment relating to the shares of Starfish
except for the issuance of shares of Starfish Capital Stock pursuant to the
exercise of outstanding Starfish Options or upon conversion of outstanding
shares of Starfish Preferred Stock;
(f) made any change in the accounting methods or practices it follows,
whether for general financial or tax purposes, or any change in depreciation
or amortization policies or rates adopted therein other than changes required
by changes in GAAP;
(g) sold, leased, abandoned or otherwise disposed of any real property or
any machinery, equipment or other operating property other than in the
ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed of any
patent, trademark, trade name, brand name, copyright (or pending application
for any patent, trademark or copyright), invention, work of authorship,
process, know-how, formula or trade secret or interest thereunder or other
intangible asset except in the ordinary course of its business;
(i) suffered any dispute involving any employee that to Starfish's knowledge
may reasonably result in a material liability to Starfish;
(j) engaged in any activity or entered into any material commitment or
transaction (including without limitation any borrowing or capital
expenditure), in either case, other than in the ordinary course of business;
(k) incurred any liabilities, contingent or otherwise, either matured or
unmatured (whether or not required to be reflected in financial statements in
accordance with GAAP, and whether due or to become due), except for (i)
liabilities identified as such in the "liabilities" column of the Starfish
Financial Statements, and (ii) accounts payable or accrued salaries that have
been incurred by Starfish since April 30, 1998 in the ordinary course of
business and consistent with Starfish's past practices;
(l) permitted or allowed any of its material property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except those permitted under Section 3.7
hereof, other than any purchase money security interests incurred in the
ordinary course of business;
(m) made any capital expenditure or commitment for additions to property,
plant or equipment individually in excess of Fifty Thousand Dollars ($50,000),
or in the aggregate, in excess of Two Hundred Thousand Dollars ($200,000);
(n) paid, loaned or advanced any amount to, or sold, transferred or leased
any properties or assets to, or entered into any agreement or arrangement with
any of its Affiliates, officers, directors or shareholders or, to Starfish's
knowledge, any Affiliate or associate of any of the foregoing;
(o) made any amendment to or terminated any agreement which, if not so
amended or terminated, would be required to be disclosed on the Starfish
Disclosure Schedule; or
(p) agreed to take any action described in this Section 3.6 or outside of
its ordinary course of business or which would constitute a breach of any of
the representations contained in this Agreement.
3.7 Title and Related Matters. Starfish has good and marketable title to all
the properties, interests in properties and assets, real and personal,
reflected in the Starfish Financial Statements or acquired after the date of
the Starfish Financial Statements (except properties, interests in properties
and assets sold or otherwise disposed of since the date of the Starfish
Financial Statements in the ordinary course of business), free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except the lien of current taxes not yet due and payable and except
for liens which in the aggregate do not secure more than Fifty Thousand
Dollars ($50,000) in liabilities. The equipment of Starfish used in the
operation of its business is in good
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operating condition and repair, normal wear and tear excepted. All real or
personal property leases to which Starfish is a party are valid, binding,
enforceable and effective in accordance with their respective terms, subject
to (i) laws of general application relating to bankruptcy, insolvency, and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. There is not under any of such
leases any existing default by Starfish (or to the knowledge of Starfish, by
any other party thereto) or event of default or event which, with notice or
lapse of time or both, would constitute a material default. The Starfish
Disclosure Schedule contains a description of all real property and personal
property with a value in excess of $50,000 leased or owned by Starfish,
describing its interest in said property and with respect to owned real
property, a description of each parcel and a summary description of the
buildings, structures and improvements thereon. True and correct copies of the
leases of Starfish have been provided to Motorola or its representatives.
3.8 Intellectual Property
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisional, continuations and continuations in part
thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating
to any of the foregoing, (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all mask works, mask work registrations and applications
therefor, and all other rights corresponding thereto throughout the world; (v)
all industrial designs and any registrations and applications therefor
throughout the world; (vi) all trade names, logos, common law trademarks and
service marks; trademark and service mark registrations and applications
therefor throughout the world; (vii) all databases and data collections and
all rights therein throughout the world; and (viii) all computer software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded, and all
documentation related to any of the foregoing throughout the world.
"Software" shall mean all computer code and data in source code, object code
or other form incorporated in the Starfish Products or used by Starfish in the
preparation or support of the Starfish Products.
"Software Authors" shall mean all authors of the Software, or any other
Person or entity who participated in the development of the Software or any
portion thereof or performed any work related to the Software; provided,
however, that Software Authors shall not include any Persons who are not
involved in the development or modification of Software source code.
"Starfish Intellectual Property" shall mean any Intellectual Property that:
(i) is owned by or exclusively licensed to Starfish.
(b) Part 3.8(b) of the Starfish Disclosure Statement lists all of Starfish's
United States and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent to use applications or other registrations related
to trademarks; (iii) registered copyrights and applications for copyright
registration; (iv) mask work registrations and applications to register mask
works; and (v) any other Intellectual Property of Starfish that is the subject
of an application, certificate or registration filed with, issued by, or
recorded by, any state, government or other public legal authority (all of the
foregoing, the "Registered Intellectual Property") and Part 3.8(b) of the
Starfish Disclosure Statement identifies the principal Starfish Intellectual
Property comprised in such Registered Intellectual Property.
(c) Each patent, registered trademark, registered copyright and mask work
registration which is an item of Registered Intellectual Property
(collectively "Issued Registered Intellectual Property") is valid and
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Issued Registered Intellectual Property have been made
and all necessary documents and certificates in connection with such Issued
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Issued
Registered Intellectual Property.
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(d) The contracts, licenses and agreements listed on Part 3.8(d) of the
Starfish Disclosure Statement include all contracts, licenses and agreements
currently in effect relating to any Intellectual Property, to which Starfish
is a party, other than: (i) "shrink wrap" software; (ii) rights to use
Intellectual Property granted by Starfish in the ordinary course of Starfish's
business in connection with sales of products or services; (iii) third party
software generally available to the public at a cost of less than Ten Thousand
Dollars ($10,000); and (iv) contracts, licenses or agreements which Starfish
has no continuing obligations or for which liability is contractually limited
to less than $50,000 (collectively, such exceptions being referred to as
"Excluded Licenses").
(e) Except as disclosed in Part 3.8(e) of the Starfish Disclosure Statement,
the contracts, licenses and agreements listed on Part 3.8(d) of the Starfish
Disclosure Statement are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of the
contracts, licenses and agreements listed on Part 3.8(d) of the Starfish
Disclosure Statement. Except as disclosed in Part 3.8(e) of the Starfish
Disclosure Statement, Starfish is in compliance in all material respects with
and has not breached any material term of, the contracts, licenses and
agreements listed on Part 3.8(d) of the Starfish Disclosure Statement and, to
the knowledge of Starfish, all other parties to the contracts, licenses and
agreements listed on Part 3.8(d) of the Starfish Disclosure Statement are in
compliance with, and have not breached any term of the contracts, licenses and
agreements. Except as disclosed in Part 3.8(e) of the Starfish Disclosure
Statement, following the Closing Date, Starfish will be permitted to exercise
all of its rights under the contracts, licenses and agreements listed in Part
3.8(d) of the Starfish Disclosure Statement without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Starfish would otherwise be required to pay.
(f) Except as set forth in Part 3.8(f) of the Starfish Disclosure Statement
and other than Excluded Licenses or other agreements which are not currently
in effect: (i) no Person other than Starfish has any rights to use any
Starfish Intellectual Property other than immaterial rights granted from time
to time in the ordinary course of business which do not individually or in
aggregate materially affect the value of the Starfish Intellectual Property in
question; and (ii) Starfish has not granted to any Person, nor authorized any
Person to retain, any rights or interests of any nature in or with respect to
Starfish Intellectual Property.
(g) Except as set forth in Part 3.8(g) of the Starfish Disclosure Statement:
(i) Starfish owns and has good and exclusive title to each item of Starfish
Intellectual Property listed on Part 3.8(b) of the Starfish Disclosure
Statement, free and clear of any encumbrance; and (ii) Starfish owns, or has
the right, pursuant to a valid contract to use or operate under, all other
Starfish Intellectual Property.
(h) Except as set forth on Part 3.8(h) of the Starfish Disclosure Statement,
the operation of the business of Starfish, to Starfish's knowledge, including
the design, development, manufacture and sale of its products (including with
respect to products currently under development) and provision of services,
does not infringe or misappropriate the Intellectual Property of any other
Person, violate the rights of any Person (including rights to privacy or
publicity), or constitute unfair competition. Notwithstanding the foregoing,
it is expressly understood that the foregoing does not limit the
indemnification provided by the Starfish Shareholders pursuant to Section
11.2(a)(iii) of this Agreement.
(i) In the last five years, except as set forth on Part 3.8(i) of the
Starfish Disclosure Statement, Starfish has not received notice from any
Person that the operation of the business of Starfish or the Business,
including its design, development, manufacture and sale of its products
(including with respect to products currently under development) and provision
of its services, infringes or misappropriates the Intellectual Property of any
Person, violates the rights of any Person (including rights to privacy or
publicity), or constitutes unfair competition.
(j) Except as disclosed in Part 3.8(j) of the Starfish Disclosure Statement,
Starfish owns or has the right to all Intellectual Property necessary to the
conduct of the business of Starfish as it currently is conducted, including
its design, development, manufacture and sale of its products (including with
respect to products currently under development and provision of services).
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(k) Part 3.8(k) of the Starfish Disclosure Statement lists all contracts,
licenses and agreements between Starfish and any other Person wherein or
whereby Starfish has agreed to, or assumed, any obligation or duty to
indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement by Starfish or such other Person of
the Intellectual Property rights of any other Person; provided that the
foregoing only applies to agreements for which Starfish's obligations are
continuing as of the date of this Agreement and does not apply to contracts,
licenses or agreements for which liability of Starfish is contractually
limited to less than $50,000.
(l) Except as listed on Part 3.8(l) of the Starfish Disclosure Statement,
there are no contracts, licenses and agreements between Starfish and any other
Person with respect to Starfish Intellectual Property with respect to which
Starfish has received notice of any dispute which could be reasonably
considered to be a material dispute regarding the scope of such agreement, or
performance under such agreement including with respect to any payments to be
made or received by Starfish thereunder.
(m) Except as listed on Part 3.8(m) of the Starfish Disclosure Statement, to
the knowledge of Starfish, no Person is infringing or misappropriating any
Starfish Intellectual Property.
(n) Except as listed on Part 3.8(n) of the Starfish Disclosure Statement,
there are no claims asserted against Starfish, or to Starfish's knowledge,
against any customer of Starfish, related to any product or service of
Starfish.
(o) No Starfish Intellectual Property or product or service of Starfish, is
subject to any outstanding decree, order, judgment, or stipulation restricting
in any manner the use or licensing thereof by Starfish.
(p) Except as disclosed in Part 3.8(p) of the Starfish Disclosure Statement,
Starfish has, and enforces, a policy requiring each employee and contractor to
execute proprietary information and confidentiality agreements substantially
identical to the form of the Employee Agreement previously delivered to
Motorola, and all current and former employees and contractors of Starfish
have executed such an agreement.
(q) To Starfish's knowledge, no (i) product, service or publication of
Starfish, (ii) material published or distributed by Starfish or (iii) conduct
or statement of Starfish, constitutes obscene material, a defamatory statement
or material, or violates any rights, including rights of publicity or privacy,
of any Person.
(r) Part 3.8(r) of the Starfish Disclosure Statement lists all the Software
Authors who were not employees of Starfish. Each Software Author made his
contribution to the Software within the scope of employment with Starfish as
an employee or independent contractor, as a "work made for hire," and was
directed by Starfish to work on the Software.
(s) Except for technology supplied by third party vendors disclosed in Part
3.8(s) of the Starfish Disclosure Statement, the Software and every portion
thereof are an original creation of the Software Authors and do not contain
any source code or portions of source code (including any "canned program")
created by any parties other than the Software Authors. To Starfish's
knowledge, Starfish has not, by any of its acts or omissions, or by acts or
omissions of its directors, officers, employees, agents, or representatives
caused any of its proprietary rights in the Software, including copyrights,
trademarks, and trade secrets to be diminished, or adversely affected to any
material extent.
(t) Except as set forth in Part 3.8(t) of the Starfish Disclosure Statement:
(i) to the best of Starfish's knowledge, there are no defects in the
Software, and there are no errors in any accompanying design documentation,
which defects or errors would in any material respect affect Motorola's or
its licensee's use of the Software or the functioning of the Software in
accordance with the specifications for the Software published by Starfish;
the Software has all the material features described in the user manuals
made available to Starfish's customers;
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(ii) the Software does not contain any "back door," "time bomb," "Trojan
horse," "worm," "drop dead device," "virus" (as these terms are commonly
used in the computer software industry), or other software routines or
hardware components designed to permit unauthorized access, to disable or
erase software, hardware, or data, or to perform any other similar type of
functions;
(iii) the Software (A) shall not fail to perform any function specified
in the product specifications therefor or otherwise be adversely affected
in any material respect as a result of the date change from December 31,
1999 to January 1, 2000; and (B) to ensure Year 2000 compatibility
includes, without limitation, date data century recognition, calculations
which accommodate same century and multi-century formulas and date values,
and date data interface values which reflect the correct century.
(iv) no government funding or university or college facilities were used
in the development of the Software, and the Software was not developed
pursuant to a contract with any Person or entity, and no situation, matter,
or agreement exists that would preclude Motorola from making any change to
the Software or combining it with other software in any lawful manner; and
(v) all copies of the Software contain appropriate copyright legends; no
third party has any interest in, or right to compensation from Starfish by
reason of, the use, exploitation, or sale of the Software; there are no
restrictions on the ability of Starfish (or any successor or assignee of
Starfish) to use or otherwise exploit the Software, and such use or
exploitation does not and will not obligate Starfish (or any successor or
assign of Starfish) to pay any royalty, fee, or other compensation to any
Person or entity; and Starfish has not received any notice and do not have
any knowledge of any complaint, assertion, threat, or allegation
inconsistent with the preceding statements in this paragraph.
(u) Starfish has made available to Motorola complete and accurate records of
Starfish with respect to Software fixes (including fixes currently in
progress), problem lists and maintenance of the Software, and customer
complaints. All warranty claims (including any pending claims) of any material
nature related to the Software are described in the Starfish Disclosure
Statement. Except as set forth in Part 3.8(u) of the Starfish Disclosure
Statement, Starfish has made no written representations and warranties with
respect to the Software as to which Starfish has surviving obligations or
liabilities.
3.9 Employee Benefit Plans. (a) Starfish does not maintain, nor is it
obligated to contribute to, any defined benefit pension plan or any employee
benefit plan that is subject to either Title IV of the Employee Retirement
Income Security Act of 1974 ("ERISA") or the minimum funding standards of
ERISA or the Internal Revenue Code. Each bonus, deferred compensation,
pension, profit-sharing, retirement, stock purchase, stock option, and other
employee benefit or fringe benefit plans, whether formal or informal,
maintained by Starfish conforms in all material respects, to the applicable
requirements, if any, of ERISA. The Starfish Disclosure Schedule lists any
formal or informal (i) stock purchase or stock option, nonqualified deferred
compensation or retirement plans, programs or arrangements which may be
"employee pension benefit plans" as defined in Section 3(2) of ERISA, (ii)
qualified defined contribution plans or arrangements, and defined benefit
plans or arrangements which are "employee pension benefit plans" as defined in
Section 3(2) of ERISA, (iii) employee welfare benefit plans, as defined in
Section 3(1) of ERISA or material fringe benefit plans or programs (the
"Welfare Plans"), including any bonus, incentive, or vacation arrangement,
program or policy maintained by or to which Starfish contributes on behalf of
current or former employees of Starfish. If no plan or other written document
for the plans, policies, programs or arrangements listed on the Starfish
Disclosure Schedule has been provided to Motorola, the Starfish Disclosure
Schedule shall briefly summarize the principal features of such plans,
policies, programs or arrangements.
(b) Starfish maintains an Employee Pension Benefit Plan (as defined in
Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) which is a defined contribution plan (as defined in Section
3(34) of ERISA) named the Starfish Software, Inc. 401(k) Savings Plan (the
"Plan").
(c) The Plan is the only Employee Pension Benefit Plan, whether a defined
contribution plan or a defined benefit plan (as defined in Section 3(35) of
ERISA), ever maintained or participated in by Starfish.
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(d) The Plan (and its related trust) has received a favorable determination
letter on its qualified status under Section 401(a) and 501(b) of the Internal
Revenue Code of 1986, as amended (the "Code") from the Internal Revenue
Service dated February 10, 1997, and has been operated and administered in all
material respects in compliance with the applicable requirements of ERISA, the
Code and all other applicable laws, rules and regulations, and, to the
knowledge of Starfish or any of the employees with responsibility for employee
benefits matters, no event has occurred which will or could cause the Plan to
fail to comply with such requirements. Neither Starfish nor any of the
employees with responsibility for employee benefits matters has any knowledge,
of any fact, situation, circumstance, condition or occurrence that would or
could adversely affect the qualified status of the Plan.
(e) All contributions (including all employer and employee contributions)
which are due have been paid to the Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
the Plan or properly accrued and reflected on the financial statements of
Starfish.
(f) The fair market value of the assets of the Plan equals or exceeds the
present value of all vested and nonvested liabilities thereunder.
(g) Starfish has delivered to Motorola correct and complete copies of the
Plan documents and Summary Plan Description, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report and all related trust agreements, insurance contracts and other
funding agreements which implement the Plan.
(h) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) have been
timely filed and/or distributed appropriately with respect to the Plan.
(i) The Plan has not been partially or completely terminated.
(j) There have been no prohibited transactions (as defined in Section 406 of
ERISA and Section 4975 of the Code) with respect to the Plan, and, to the
knowledge of Starfish or any of the employees with responsibility for employee
benefits matters, no fiduciary (as defined in Section 3(21) of ERISA) has any
liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration, or investment of the assets, of the
Plan.
(k) No claim, action, suit, proceeding, hearing or investigation with
respect to the Plan, the administration of the Plan or the investment of the
assets of the Plan (other than routine claims for benefits) is pending or, to
the knowledge of Starfish or any of the employees with responsibility for
employees benefits matters, is threatened, and neither Starfish nor any of the
employees with responsibility for employees benefits matter has any knowledge
of any basis for any such claim, action, suit, proceeding, hearing or
investigation.
(l) Starfish has not incurred, and neither Starfish nor any of the employees
with responsibility for employee benefits matters has any reason to expect
that Starfish will incur, any liability, fine, penalties, taxes or charges
under ERISA, the Code or other applicable laws or regulations with respect to
the Plan.
(m) The Plan is not a Multi-employer Plan (as defined in Section 3(37) of
ERISA, and neither Starfish nor any member of the controlled group of
corporations (as defined in Section 1563 of the Code) that includes Starfish
contributes to, ever has contributed to, or ever has been required to
contribute to, any Multi-employer Plan or has any liability (including
withdrawal liability) under any Multi-employer Plan.
(n) Except as set forth on Schedule 3.9(n) of the Starfish Disclosure
Statement, the Welfare Plans (and any related trusts, insurance contracts, any
funding agreements that implement the Welfare Plans, any provider agreements
and any other agreements relating to the Welfare Plans) meet the requirements
of ERISA and the Code, if applicable, and neither Starfish nor any of the
employees with responsibility for employee benefits matters has no knowledge,
of any fact, situation, circumstance, condition or occurrence that the Welfare
Plans do not meet the requirements of ERISA or the Code.
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(o) All contributions or premiums (including all employer and employee
contributions or premiums) which are due have been paid to the Welfare Plans
and all contributions or premiums for any period ending on or before the
Closing Date which are not yet due have been paid to the Welfare Plans or
properly accrued and reflected on the financial statements of Starfish.
(p) Starfish has delivered to Motorola correct and complete copies of the
plan documents, summary plan descriptions, summary of material modifications,
a copy of the most recent Form 5500 Annual Report relating to the Welfare
Plans, and all related trust agreements, insurance contracts, provider
agreements, any funding agreements which implement the Welfare Plans and any
other agreements relating to the Welfare Plans.
(q) All required reports and descriptions (including Form 5500 Annual
Reports, summary Annual Reports, and Summary Plan Descriptions) have been
timely filed and/or distributed appropriately as required under ERISA and the
Code with respect to the Welfare Plans.
(r) Except as set forth on Schedule 3.9(r) of the Starfish Disclosure
Statement, with respect to the Welfare Plans, Starfish has complied with the
requirements of Section 4980B of the Code and Sections 601 through 609 of
ERISA, Sections 701 though 734 of ERISA and the applicable regulations and all
other applicable federal and state laws.
(s) There have been no prohibited transactions (as defined in Section 406 of
ERISA and Section 4975 of the Code) with respect to the Welfare Plans, and, to
the knowledge of Starfish and the employees with responsibility for employee
benefits matters, no fiduciary (as defined in Section 3(21) of ERISA) has any
liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the assets of the
Welfare Plans.
(t) No claim, action, suit, proceeding, hearing or investigation with
respect to the Welfare Plans, the administration of the Welfare Plans or the
investment of the assets of the Welfare Plans (other than routine claims for
benefits) is pending, and neither Starfish nor any of the employees with
responsibility for employee benefits matters has knowledge of any basis for
any such claim, action suit, proceeding, hearing or investigation.
(u) Starfish has not incurred, and neither Starfish nor any of the employees
with responsibility for employee benefits matters has any reason to expect
that Starfish will incur, any liability, fines, penalties, taxes or charges
under ERISA, the Code or other applicable laws or regulations with respect to
the Welfare Plans.
(v) Starfish does not maintain or have an obligation to contribute to a
Welfare Plan that provides health, accident or life insurance benefits to
former employees, their spouses or dependents, other than in accordance with
Sections 601-609 of ERISA and Section 4980B of the Code.
(w) Starfish does not maintain or have an obligation to contribute to a
plan, program, policy or arrangement that provides severance benefits and the
transaction contemplated by this Agreement shall not result in any liability
to provide severance pay or severance benefits.
3.10 Bank Accounts and Receivables. Part 3.10 of the Starfish Disclosure
Schedule sets forth the names and locations of all banks, trusts, companies,
savings and loan associations, and other financial institutions at which
Starfish maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom. The Starfish
Disclosure Schedule sets forth an accurate and complete breakdown and aging of
all accounts receivable, notes receivable, and other receivables of Starfish
as of March 31, 1998. Except as set forth on the Starfish Disclosure Schedule
all existing accounts receivable of Starfish (including those accounts
receivable reflected on the Starfish unaudited financial statements that have
not yet been collected and those accounts receivable that have arisen since
March 31, 1998 and have not yet been collected) represent valid obligations of
customers of Starfish arising from bona fide transactions entered into in the
ordinary course of business.
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3.11 Contracts.
(a) Part 3.11(a) of the Starfish Disclosure Schedule identifies each
material agreement (including without limitation each employment agreement and
each material license agreement, development agreement, manufacturing
agreement, distribution agreement, and OEM agreement) to which Starfish is a
party ("Material Contract").
(b) Except as set forth in Part 3.11(b) of the Starfish Disclosure Schedule,
(i) Starfish has no agreements, contracts or commitments that call for
prospective fixed and/or contingent payments or expenditures by or to
Starfish of more than Twenty-five Thousand Dollars ($25,000) other than
those entered into in the ordinary course of business concerning the sale
of products of Starfish;
(ii) Starfish has no purchase agreement, contract or commitment that
calls for fixed and/or contingent payments by Starfish that are in excess
of the normal, ordinary and usual requirements of the business of Starfish;
(iii) There is no outstanding sales contract, commitment or proposal
(including, without limitation, development projects) of Starfish that
Starfish currently expects to result either individually or in the
aggregate in any material loss to Starfish on a consolidated basis upon
completion or performance thereof;
(iv) Starfish has no outstanding agreements, contracts or commitments
with officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by it on
notice of not longer than ninety (90) days and without liability, penalty
or premium exceeding Five Thousand Dollars ($5,000) in any single instance
or Twenty Five Thousand Dollars ($25,000) in the aggregate;
(v) Starfish has no currently effective collective bargaining or union
agreements, contracts or commitments;
(vi) Starfish is not restricted by agreement from competing with any
person or from carrying on its business anywhere in the world;
(vii) Starfish is under no liability or obligation, and no such
outstanding claim has been made, with respect to the return to Starfish of
inventory or merchandise in the possession of wholesalers, distributors,
retailers, or other customers, except such liabilities, obligations and
claims as, in the aggregate, do not exceed the reserves therefor set forth
in the Starfish Financial Statements;
(viii) Starfish has not guaranteed any obligations of other persons or
made any agreements to acquire or guarantee any obligations of other
Persons;
(ix) Starfish has no outstanding loan or advance to any Person; nor is it
party to any line of credit, standby financing, revolving credit or other
similar financing arrangement of any sort which would permit the borrowing
by Starfish of any sum not reflected in the Starfish Financial Statements;
and
(x) All material contracts, agreements and instruments to which Starfish
is a party are valid, binding, in full force and effect, and enforceable by
Starfish in accordance with their respective terms, subject to (i) laws of
general application relating to public policy, bankruptcy, insolvency and
the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. No such contract, agreement
or instrument contains any liquidated damages, penalty or similar
provision. To Starfish's knowledge, no party to any such contract,
agreement or instrument intends to cancel, withdraw, modify or amend such
contract, agreement or instrument.
(c) Part 3.11(c) of the Starfish Disclosure Schedule describes all
agreements pursuant to which Starfish has agreed to manufacture for or supply
to any third party any Starfish Products or components thereto requiring, or
expected to require, payments of Fifty Thousand Dollars ($50,000) or more over
the life of any such agreement. Part 3.11(c) of the Starfish Disclosure
Schedule also lists each vendor which is the sole source for any product or
component included in the Starfish Products which Starfish believes is not
readily available from other sources.
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(d) Starfish has delivered to Motorola accurate and complete copies of all
Material Contracts, including all amendments thereto. Starfish has not entered
into any material oral contracts. Each Material Contract is valid and in full
force and effect, and, to the best of the knowledge of Starfish, is
enforceable by Starfish in accordance with its terms, subject to (i) laws of
general application relating to public policy, bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(e) Except as set forth in Part 3.11(e) of the Disclosure Schedule:
(i) Starfish has not violated or breached, or committed any default
under, any Material Contract, and, to Starfish's knowledge, no other Person
has violated or breached, or committed any default under, any Material
Contract except as in any such case where such default would not have a
Material Adverse Effect; and
(ii) to Starfish's knowledge, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) will,
or could reasonably be expected to, (A) result in a violation or breach of
any of the provisions of any Material Contract, (B) give any Person the
right to declare default or exercise any remedy under any Material
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Material Contract or (D) give any Person the right to
cancel, terminate or modify any Material Contract except to the extent that
any of the foregoing would not have a Material Adverse Effect.
(f) Except as set forth in Part 3.11(f) of the Starfish Disclosure
Statement, none of the Material Contracts contains any provision which would
require the consent of third parties to the Merger or which would be altered
in any material respect as a result of the Merger.
3.12 Orders, Commitments and Returns. All accepted and unfilled orders
entered into by Starfish for the sale, license, or lease or other disposition
by Starfish of the Starfish Products, and all agreements, contracts, or
commitments for the purchase of supplies by Starfish, were made in the
ordinary course of business. To Starfish's knowledge, no outstanding material
purchase or outstanding lease commitment of Starfish is in excess of the
normal, ordinary and usual requirements of its business or was made at a price
(on both a per unit and aggregate basis) in excess of the current market price
at the time made, or contains terms and conditions materially more onerous to
Starfish than those usual and customary in the industry.
3.13 Compliance with Law. Starfish is in compliance with all applicable laws
and regulations in all material respects. Neither Starfish, nor to Starfish's
knowledge, any of its employees has directly or indirectly paid or delivered
any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official or other party in the
United States or any other country, that was or is in violation of any
federal, state, or local statute or law or of any statute or law of any other
country having jurisdiction. Starfish has not participated directly or
indirectly in any boycotts or other similar practices affecting any of its
customers. Starfish has complied in all material respects at all times with
any and all applicable federal, state and foreign laws, rules, regulations,
proclamations and orders relating to the importation or exportation of its
products. All licenses, franchises, permits and other governmental
authorizations held by Starfish which are material to its business are valid
and sufficient in all respects for the business presently carried on by
Starfish.
3.14 Labor Difficulties; No Discrimination.
(a) Starfish is not engaged in any unfair labor practice and is not in
violation of any applicable laws relating to employment and employment
practices, terms and conditions of employment, and wages and hours.
(b) There is no unfair labor practice complaint against Starfish actually
pending or, to Starfish's knowledge, threatened before the National Labor
Relations Board or any comparable foreign governmental or quasi-governmental
authority.
(c) There is no strike, labor dispute, slowdown, or stoppage actually
pending or, to Starfish's knowledge, threatened against Starfish.
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(d) No union representation question exists with respect to the employees of
Starfish and, to Starfish's knowledge, no union organizing activities are
taking place.
(e) No grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is pending and, to Starfish's knowledge, no
claims therefor exist.
(f) No collective bargaining agreement that is binding on Starfish restricts
it from relocating or closing any of its operations.
(g) Starfish has not experienced any work stoppage or other labor
difficulty.
(h) There is not presently, and there has not been within the previous three
(3) years, any claim against Starfish based on actual or alleged wrongful
termination or on actual or alleged race, age, sex, disability or other
harassment or discrimination, or similar tortious conduct, nor to Starfish's
knowledge, is there any reasonable basis for any such claim.
(i) Starfish is not aware of any key Starfish employee who intends to
terminate his or her employment with Starfish.
3.15 Trade Regulation. Starfish has not terminated its relationship with or
refused to ship Starfish Products to any dealer, distributor, OEM, third party
marketing entity or customer which had theretofore paid or been obligated to
pay Starfish in excess of Fifty Thousand Dollars ($50,000) over any
consecutive twelve (12) month period. The prices charged by Starfish in
connection with the marketing or sale of any products or services have been in
compliance in all material respects with all applicable laws and regulations.
No claims against Starfish have been communicated or threatened in writing to
Starfish with respect to wrongful termination of any dealer, distributor or
any other marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other violation of any laws or
regulations relating to anti-competitive practices or unfair trade practices
of any kind and, to Starfish's knowledge, no specific situation, set of facts,
or occurrence provides a reasonable basis for any such claim.
3.16 Insider Transactions. No Affiliate of Starfish has any interest in (i)
any equipment or other material property, real or personal, tangible or
intangible, including, without limitation, any proprietary asset, used in
connection with or pertaining to the business of Starfish or (ii) to
Starfish's knowledge, any creditor, supplier, customer, manufacturer, agent,
representative, or distributor of products of Starfish; provided, however,
that no such Affiliate or other person shall be deemed to have such an
interest solely by virtue of (a) the ownership of less than one percent (1%)
of the outstanding stock or debt securities of any publicly-held company whose
stock or debt securities are traded on a recognized stock exchange or quoted
on Nasdaq, or (b) such person's status as a general or limited partner of a
venture capital or similar fund, which fund is also a holder of the securities
of such creditor, supplier, customer, manufacturer, agent, representative or
distributor.
3.17 Employees, Independent Contractors and Consultants. The Starfish
Disclosure Schedule lists all currently effective written or, to Starfish's
knowledge, oral consulting, independent contractor and/or employment
agreements and other material agreements concluded with individual employees,
independent contractors or consultants to which Starfish is a party other than
those terminable at will or within thirty (30) days. If oral, Part 3.17 of the
Starfish Disclosure Schedule also contains a brief summary of such agreements.
True and correct copies of all such written agreements have been provided to
Motorola or its representatives. All salaries and wages paid by Starfish are
in material compliance, both individually and in the aggregate, with
applicable foreign, federal, state and local laws. Part 3.17 of the Starfish
Disclosure Schedule lists (i) the names of all persons currently employed by
Starfish and the salaries and other compensation arrangements (bonus, deferred
compensation, etc.) for each such person. Starfish's aggregate consolidated
accrued vacation and severance pay as of March 31, 1998 was approximately Two
Hundred and Fifty Thousand Dollars ($250,000).
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3.18 Insurance. Part 3.18 of the Starfish Disclosure Schedule contains a
list of the principal policies of fire, liability and other forms of insurance
held by Starfish. Each such policy is in full force and effect. Starfish is
not in default with respect to its obligations under any insurance policy
maintained by it, and Starfish has not been denied insurance coverage. To
Starfish's knowledge, the insurance coverage of Starfish is customary for
corporations of similar size engaged in similar lines of business. Except as
set forth on Part 3.18 of the Starfish Disclosure Schedule, Starfish does not
have any self-insurance or co-insurance programs, and the reserves set forth
on the balance sheet included in the Starfish unaudited financial statements
are adequate to cover all anticipated liabilities with respect to any such
self-insurance or co-insurance programs.
3.19 Litigation. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Starfish's knowledge,
threatened against Starfish (or to the best of Starfish's knowledge, pending
or threatened against or affecting any of the officers, directors or employees
of Starfish with respect to Starfish businesses or proposed business
activities), or pending or threatened by Starfish against any third party, at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality (including, without limitation, any
actions, suit, proceedings or investigations with respect to the transactions
contemplated by this Agreement); nor has there been any such actions, suits,
proceedings, orders, investigations or claims pending against or affecting
Starfish during the past three years; Starfish is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise
or, to the best of Starfish's knowledge, any governmental investigations or
inquiries; and, to the best of Starfish's knowledge, there is no basis for any
of the foregoing. Starfish is not subject to any judgment, order or decree of
any court or other governmental agency, and Starfish has not received any
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed, from a legal standpoint, to any liability or disadvantage which
may have a material adverse effect on the financial condition or operations of
Starfish taken as a whole.
3.20 Section 341(f)(2). Starfish has not, with regard to any property or
assets held, acquired or to be acquired by it, at any time, filed a consent to
the application of Section 341(f)(2) of the Code nor will any such consent be
filed before the Closing.
3.21 Compliance with Environmental Requirements. For purposes of this
Agreement, the term "Environmental, Safety and Health Requirements" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law, in each case concerning public health and safety, worker health
and safety and pollution or protection of the environment (including, without
limitation, all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, Release, threatened Release, control or
cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation); "Release" shall have the meaning set forth in
CERCLA (as defined below); and "Environmental Lien" shall mean any Lien,
whether recorded or unrecorded, in favor of any governmental entity, relating
to any liability of Starfish or any Subsidiary arising under any Environmental
and Safety Requirements.
(a) Except as set forth in Part 3.21 of the Starfish Disclosure Schedule:
(i) Starfish has complied with and is currently in compliance with all
Environmental and Safety Requirements, and Starfish has not received any
oral or written notice, report or information regarding any liabilities or
threatened liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise) or any corrective, investigatory or remedial obligations
arising under Environmental and Safety Requirements which relate to
Starfish or any of its properties or facilities.
(ii) Without limiting the generality of the foregoing, Starfish has
obtained and complied with, and is currently in compliance with, all
permits, licenses and other authorizations or notice or warning
requirements, including but not limited to the requirements under
Proposition 65 that apply to its California Operations that may be required
pursuant to any Environmental and Safety Requirements for the occupancy of
its properties or facilities or the operation of its businesses,
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(b) Neither this Agreement nor the consummation of the transactions
contemplated by this Agreement shall impose any obligations on Starfish or
otherwise for site investigation or cleanup, or notification to or consent of
any government agencies or third parties under any Environmental and Safety
Requirements (including, without limitation, any so called "transaction-
triggered" or "responsible property transfer" laws and regulations).
(c) None of the following exists at any property or facility owned, occupied
or operated by Starfish:
(i) underground storage tanks or surface impoundments;
(ii) asbestos-containing materials in any form or condition; or
(iii) materials or equipment containing polychlorinated biphenyls.
(d) Starfish has not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled or Released any substance (including,
without limitation, any hazardous chemical or substance) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of
Starfish or its Subsidiaries for response costs, natural resource damages or
attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any other
Environmental and Safety Requirements.
(e) Without limiting the generality of the foregoing, no facts, events or
conditions relating to the past or present properties, facilities, leased
space or operations of Starfish shall prevent, hinder or limit continued
compliance with Environmental and Safety Requirements, give rise to any
corrective, investigatory or remedial obligations pursuant to Environmental
and Safety Requirements or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements (including, without limitation, those
liabilities, including but not limited to third party liabilities, relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage .
(f) Starfish has not, either expressly or by operation of law, assumed or
undertaken any liability or corrective, investigatory or remedial obligation
of any other Person relating to any Environmental and Safety Requirements.
(g) No Environmental Lien has attached to any property owned, leased or
operated by Starfish.
3.22 Corporate Documents. Starfish has furnished to Motorola for its
examination: (i) copies of its articles of incorporation and bylaws, (ii) its
minute book containing all records required to be set forth of all
proceedings, consents, actions, and meetings of the shareholders, the board of
directors and any committees thereof, (iii) all material permits, orders, and
consents issued by any regulatory agency with respect to Starfish, or any
securities of Starfish, and all applications for such permits, orders, and
consents, and (iv) the stock transfer books of Starfish setting forth all
transfers of any capital stock. The corporate minute books, stock certificate
books, stock registers and other corporate records of Starfish are complete
and accurate in all respects, and the signatures appearing on all documents
contained therein are the true signatures of the persons purporting to have
signed the same. All actions reflected in such books and records were duly and
validly taken in compliance in all material respects with the laws of the
applicable jurisdiction.
3.23 No Brokers. Neither Starfish nor, to Starfish's knowledge, any Starfish
shareholder is obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
3.24 Disclosure. The statements by Starfish contained in this Agreement, the
exhibits and schedules thereto, and the certificates or documents required to
be delivered by Starfish to Motorola or Sub under this Agreement, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were
made.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MOTOROLA AND SUB.
Motorola and Sub jointly and severally represent and warrant to Starfish
that:
4.1 Organization and Good Standing. Motorola and Sub are corporations duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation, and have full power and authority to carry
on their businesses as now conducted.
4.2 Capital Structure. As of the date hereof the authorized capital stock of
Motorola consists of one billion, four hundred million (1,400,000,000) shares
of Motorola Common Stock, Three Dollars ($3.00) par value per share, and five
hundred thousand (500,000) shares of Motorola Preferred Stock, One Hundred
Dollars ($100) par value per share. At the close of business on January 31,
1998, 597,503,874 shares of Motorola Common Stock were outstanding and no
shares of Motorola Preferred Stock were outstanding. The shares of Motorola
Common Stock issuable in connection with the Merger are duly authorized and
reserved for issuance and, when issued in accordance with the terms of this
Agreement and Agreement of Merger, will be validly issued, fully paid,
nonassessable and free of preemptive rights. As of the date hereof, the
authorized capital stock of Sub consists of one thousand (1,000) shares of
Common Stock, no par value, all of which are validly issued, fully paid and
nonassessable and owned by Motorola.
4.3 Power, Authorization and Validity. Motorola and Sub have the right,
power, legal capacity and authority to enter into and perform their respective
obligations under this Agreement and the other Transaction Documents to which
they are a party. The execution and delivery of this Agreement and the other
Transaction Documents have been duly and validly approved and authorized by
the respective boards of directors of Motorola and Sub and by Motorola as the
sole shareholder of Sub. No authorization or approval, governmental or
otherwise, is necessary in order to enable Motorola and Sub to enter into and
to perform the terms of this Agreement or the other Transaction Documents on
their parts to be performed, except for (i) the filing of the Merger Agreement
and all required officers' certificates with the Secretary of State of the
State of California and appropriate documents with the relevant authorities of
other states in which Motorola is qualified to do business, (ii) filings under
applicable securities laws, (iii) the termination of the waiting period under
the HSR Act and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country in which Motorola or any of Motorola's subsidiaries
conducts any business or owns any property or assets. This Agreement is, and
the other Transaction Documents when executed and delivered by Motorola and/or
Sub shall be, the valid and binding obligations of Motorola and Sub
enforceable in accordance with their respective terms, subject to (i) laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
4.4 No Violation of Existing Agreements. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated herein
will conflict with, or result in a material breach or violation of, any
provision of Motorola's and or Sub's respective articles of incorporation, and
bylaws as currently in effect, any instrument or contract to which Motorola or
Sub is a party or by which any such party is bound, or any federal, state or
local judgment, writ, decree, order, statute, rule or regulation applicable to
any such party. Neither the execution and delivery of this Agreement, nor any
Agreement attached hereto as an Exhibit, nor the consummation of the
transactions contemplated herein or therein will have a Material Adverse
Effect on the operations, assets, or financial condition of Motorola.
4.5 SEC Documents. Motorola has made available to Starfish true, accurate
and complete copies of Motorola's most recent Proxy Statement and reports on
Forms 10-K, 10-Q and any report on Form 8-K filed since the most recent 10-Q
(collectively, the "SEC Documents"). As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, and taken together, the SEC Documents
contain no untrue statement of a material fact and did not omit to state a
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material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent corrected or superseded by a
subsequently filed SEC Document. The financial statements of Motorola included
in the Motorola SEC Documents (the "Motorola Financial Statements") comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and fairly present the consolidated financial position of Motorola
and its consolidated subsidiaries at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended (subject, in the case of unaudited statements, to normal, recurring
audit adjustments, provided that the notes and accounts receivable are
collectible in the amounts shown thereon and inventories are not subject to
write-down, except in either case in an amount not material or for which
Motorola has provided adequate reserves). There has been no change in
Motorola's accounting policies or estimates except as described in the notes
to the Motorola Financial Statements.
4.6 Compliance with Other Instruments and Laws. Motorola is not in violation
of any provisions of its certificate of incorporation or bylaws as currently
in effect or any federal, state or local judgment, writ, decree, or order
applicable to Motorola.
4.7 Litigation. There is no suit, action, proceeding, claim or investigation
pending or, to Motorola's knowledge, threatened against Motorola and Sub
before any court or administrative agency or which questions or challenges the
validity of this Agreement and which is not set forth in the SEC Documents (as
defined below) which could have a Material Adverse Effect on the operations,
assets or financial condition of Motorola or Sub.
4.8 Disclosure. The statements by Motorola and Sub contained in this
Agreement, the exhibits thereto, and the certificates and documents required
to be delivered by Motorola or Sub to Starfish under this Agreement, taken as
a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
herein and therein not misleading in light of the circumstances under which
such statements were made.
ARTICLE V
PRECLOSING COVENANTS OF STARFISH
5.1 Material Consents. Starfish shall, to the extent requested by Motorola,
use reasonable commercial efforts to obtain any and all consents necessary for
the assumption by the Surviving Corporation of the Material Contracts.
5.2 Advice of Changes. Starfish shall promptly advise Motorola in writing
(i) of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Starfish contained in this
Agreement, if made on or as of the date of such event, untrue or inaccurate in
any material and adverse respect and (ii) of any Material Adverse Change in
Starfish's business or financial condition, taken as a whole.
5.3 Conduct Of Business. Until the Closing, Starfish will continue to
conduct its business and maintain its business relationships in the ordinary
and usual course and will not, except as set forth in the Starfish Disclosure
Schedule or with the prior written consent of Motorola, which consent will not
be unreasonably withheld,
(a) borrow any additional money which borrowings exceed in the aggregate
One Hundred Thousand Dollars ($100,000);
(b) incur any liability other than in the ordinary and usual course of
business or in connection with the performance or consummation of this
Agreement;
(c) incur or commit to incur any capital expenditures in excess of Two
Hundred Thousand Dollars ($200,000) in the aggregate or as to any
individual matter in excess of Fifty Thousand Dollars ($50,000) other than
capital expenditures and commitments made in the usual and ordinary course
of its business, consistent in amount with past practice;
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(d) lease, license, sell, transfer, encumber or permit to be encumbered
any asset, intellectual property right or other property associated with
the business of Starfish (including sales or transfers to Affiliates of
Starfish), except for licenses granted and products sold in the usual and
ordinary course of business and except for cash applied in payment of
Starfish's liabilities in the usual and ordinary course of its business;
(e) dispose of any of its assets, except inventory in the regular and
ordinary course of business;
(f) enter into any lease or contract for the purchase or sale of any
property, real or personal, except in the ordinary course of business;
(g) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained up to the
date of this Agreement, subject only to ordinary wear and tear;
(h) pay any bonus or special remuneration (excluding sales commissions
and bonuses paid pursuant to existing arrangements in the ordinary course
of business) to any officer or employee, including any amounts for accrued
but unpaid bonuses, or increase the salary of any officer or employee;
(i) change its accounting methods;
(j) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital, or redeem or otherwise acquire any of
its capital stock other than repurchases of Starfish Capital Stock at
original prices from former employees or consultants pursuant to written
agreements providing for their repurchase in the event of termination of
employment or consultancy;
(k) amend or terminate any Material Contract, agreement or license to
which it is a party except in the ordinary course of business;
(l) enter into any material contract except in the ordinary course of
business and consistent with past practice;
(m) loan any amount to any person or entity, or guaranty or act as a
surety for any obligation;
(n) waive or release any right or claim, except in the ordinary course of
business;
(o) issue or sell any shares of its capital stock of any class or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options (other than options granted to new employees hired
in the ordinary course of business not to exceed options to purchase an
aggregate of 200,000 shares of Starfish Common Stock), convertible
securities, or other commitments to issue shares of capital stock, except
in connection with the exercise of rights existing prior to the date
hereof;
(p) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other
of its securities;
(q) merge, consolidate or reorganize with any entity;
(r) amend its articles of incorporation or bylaws;
(s) make or change any election, change any annual accounting period,
adopt or change any accounting method, file any amended tax return, enter
into any closing agreement, settle any tax claim or assessment relating to
Starfish, surrender any right to claim refund of taxes, consent to any
extension or waiver of the limitation period applicable to any tax claim or
assessment relating to Starfish, or take any other action or omit to take
any action, if any such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action or omission would have the
effect of increasing the tax liability of Starfish or Motorola;
(t) Adopt, amend, modify, or terminate any plan, program, policy or
arrangement subject to Section 3.9, including the Plan or any Welfare Plan,
other than as required under Section 12.3 of this Agreement.
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(u) do anything that is not contemplated in this Agreement or would cause
there to be a Material Adverse Change in the Starfish Financial Statements
(with such Starfish Financial Statements analyzed as if they had been
prepared according to GAAP, and including but not limited to cash
distributions or material decreases in the net assets of Starfish), except
as would occur in the ordinary course of Starfish's business, between the
date of the Starfish Financial Statements and the Closing Date; or
(v) agree to do any of the things described in the preceding clauses
Section 5.3(a) through (u).
5.4 Risk Of Loss. Except as otherwise provided in this Agreement or to the
extent caused by Motorola or Sub, until the Closing, all risk of loss, damage
or destruction to Starfish's assets shall be borne by Starfish.
5.5 Access To Information. Until the Closing, Starfish shall allow Motorola
and its agents free access upon reasonable notice and during normal working
hours to its files, books, records, and offices, including, without
limitation, any and all information relating to taxes, commitments, contracts,
leases, licenses, and personal property and financial condition. Until the
Closing, Starfish shall cause its accountants to cooperate with Motorola and
its agents in making available all financial information requested, including
without limitation the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
5.6 Satisfaction of Conditions Precedent. Starfish will use its Best Efforts
to satisfy or cause to be satisfied all the conditions precedent which are set
forth in Section 9, and Starfish will use its Best Efforts to cause the
transactions contemplated in this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings (including the HSR
application) with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the
transactions contemplated herein.
5.7 Other Negotiations. Between the date hereof and the date this Agreement
is terminated pursuant to Section 10 hereof (the "Expiration Date"), Starfish
will not (and it will use its Best Efforts to assure that its officers,
directors, employees, agents and affiliates do not on its behalf) take any
action to solicit, initiate, seek, encourage or support any inquiry, proposal
or offer from, furnish any information to, or participate in any negotiations
with, any corporation, partnership, person or other entity or group (other
than discussions with Motorola) regarding any acquisition of Starfish, any
merger or consolidation with or involving Starfish, or any acquisition of any
material portion of the stock or assets of Starfish. Starfish agrees that any
such negotiations in progress as of the date hereof will be terminated or
suspended during such period. In no event will Starfish accept or enter into
an agreement concerning any such third party transaction. Starfish represents
and warrants that it has the legal right to terminate or suspend any such
pending negotiations and agrees to indemnify Motorola, its representatives and
agents from and against any claims by any party to such negotiations based
upon or arising out of the discussion or any consummation of the Acquisition
as contemplated in this Agreement.
5.8 Registration Statement; Proxy Statement; Prospectus. The information
supplied by Starfish for inclusion in the registration statement on Form S-4
pursuant to which the shares of Motorola Common Stock issued in the Merger
will be registered with the SEC (the "Registration Statement") shall not at
the time the Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the
circumstances in which such statements were made, not misleading. The
information supplied by Starfish for inclusion in the proxy
statement/prospectus (the "Proxy Statement") to be sent to the Starfish
shareholders in connection with the meeting of Starfish's shareholders to
consider approval of this Agreement and the Merger (the "Starfish
Shareholders' Meeting") shall not, on the date the Proxy Statement is first
mailed to shareholders of Starfish, at the time of the Starfish Shareholder's
Meeting and on the Effective Date, contain any statement which, at such time
and in light of the circumstances under which it was 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 made in the Proxy Statement not
false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Starfish Shareholders' Meeting which has become false or
misleading. If, at any time prior to the Effective Date, Starfish should
discover any event or fact relating to Starfish or any of its Affiliates,
officers or directors which would be required to be set forth in an amendment
to the Registration Statement or a supplement to the Proxy Statement, Starfish
shall promptly inform Motorola of such event or fact.
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ARTICLE VI
PRECLOSING AND OTHER COVENANTS OF MOTOROLA AND SUB
6.1 Material Consents. Motorola shall provide reasonable assistance and
cooperation to Starfish in obtaining the Material Consents.
6.2 Advice of Changes. Motorola and Sub will promptly advise Starfish in
writing of (i) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of Motorola or Sub contained
in this Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect and (ii) any Material
Adverse Change in Motorola's or Sub's business or financial condition, taken
as a whole.
6.3 Reservation of Motorola Common Stock. Motorola shall reserve for
issuance, out of its authorized but unissued capital stock, that number of
shares of Motorola Common Stock (as adjusted for any reclassification, split-
up, stock dividend or stock combination occurring between the date of this
Agreement and the Effective Date) as are issuable upon or after consummation
of the Merger.
6.4 Satisfaction of Conditions Precedent. Motorola and Sub will use their
respective Best Efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and Motorola and Sub will use
their respective Best Efforts to cause the transactions contemplated herein to
be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all
filings (including the HSR Act application) with, and give all notices to,
third parties which may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
6.5 Registration Statement; Proxy Statement; Prospectus. The information
supplied by Motorola for inclusion in the Registration Statement shall not at
the time the Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Motorola for inclusion in the Proxy Statement shall not, at the
time of the Starfish Shareholders Meeting and on the Effective Date, contain
any statement which, at such time and in light of the circumstances under
which it was 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
made in the Proxy Statement not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Starfish Shareholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Date Motorola should discover any event or fact relating to Motorola
or any of its Affiliates, officers or directors which would be required to be
set forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement, Motorola shall promptly inform Starfish of such event or
fact.
6.6 S-8 Registration. Motorola shall use its Best Efforts to cause the
shares of Motorola Common Stock issuable upon the exercise of the Starfish
Options to be subject to Motorola's existing Form S-8 (or if not, file a new
Form S-8 within thirty days of the Effective Time), and Motorola shall use its
Best Efforts to maintain the effectiveness of such registration statement (and
maintain the current status of the prospectus contained therein) for so long
as such Exchanged Options remain outstanding.
6.7 NYSE Listing. Motorola shall use its Best Efforts to cause the Motorola
Common Stock to be issued in the Merger to be approved for listing on the New
York Stock Exchange, subject to official notice of issuance, prior to the
Closing Date.
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ARTICLE VII
MUTUAL COVENANTS
7.1 Confidentiality. Each party acknowledges that in the course of the
performance of this Agreement, it may obtain the Confidential Information of
the other party. The party receiving such Confidential Information (the
"Receiving Party") from the party disclosing such confidential information
(the "Disclosing Party") shall, at all times, both during the term of this
Agreement and thereafter, keep in confidence and trust all of the Disclosing
Party's Confidential Information received by it. The Receiving Party shall not
use the Confidential Information of the Disclosing Party other than as
expressly permitted under the terms of this Agreement or by a separate written
agreement. The Receiving Party shall take all reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party shall not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers or employees (or outside legal, financial or accounting
advisors) who need access to such Confidential Information in order to effect
the intent of this Agreement and who have entered into confidentiality
agreements with such person's employer or who are subject to ethical
restrictions on disclosure which protects the Confidential Information of the
Disclosing Party. The Receiving Party shall immediately give notice to the
Disclosing Party of any unauthorized use or disclosure of Disclosing Party's
Confidential Information. The Receiving Party agrees to assist the Disclosing
Party to remedy such unauthorized use or disclosure of its Confidential
Information. These obligations shall not apply to the extent that Confidential
Information includes information which:
(a) is already known to the Receiving Party at the time of disclosure,
which knowledge the Receiving Party shall have the burden of proving by
reference to written or electronic records in existence at the time of
disclosure;
(b) is, or through no act or failure to act of the Receiving Party
becomes, publicly known;
(c) is received by the Receiving Party from a third party without
restriction on disclosure (although this exception shall not apply if such
third party is itself violating a confidentiality obligation by making such
disclosure);
(d) is independently developed by the Receiving Party without reference
to the Confidential Information of the Disclosing Party, which independent
development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of the Disclosing
Party; or
(f) is required to be disclosed by a Government Body to further the
objectives of this Agreement or by a proper order of a court of competent
jurisdiction; provided, however, that the Receiving Party will use its best
efforts to minimize such disclosure and will consult with and assist the
Disclosing Party in obtaining a protective order prior to such disclosure.
7.2 No Public Announcement. The parties shall make no public announcement
concerning this Agreement, their discussions or any other memos, letters or
agreements between the parties relating to the Merger until such time as they
agree in writing to the contents of a mutually satisfactory press release.
Either of the parties, but only after reasonable consultation with the other,
may make disclosure if required under applicable law.
7.3 Regulatory Filings; Consents; Best Efforts. Subject to the terms and
conditions of this Agreement, Starfish and Motorola shall use their respective
Best Efforts to (i) make all necessary filings with respect to the Merger and
this Agreement under the Securities Act, the Exchange Act and applicable blue
sky or similar securities laws and obtain required approvals and clearances
with respect thereto and supply all additional information requested in
connection therewith (ii) make other appropriate filings with federal, state
or local governmental bodies or applicable foreign governmental agencies and
obtain required approvals and clearances with respect thereto and supply all
additional information requested in connection therewith (iii) obtain all
consents, waivers, approvals, authorizations and orders required in connection
with the authorization, execution
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and delivery of this Agreement and the consummation of the Merger and (iv)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, with the objective of completing the Closing no later than August
30, 1998.
7.4 HSR Act Application. As soon as practicable after the public
announcement of this Agreement, each of Motorola and Starfish shall make or
cause to be made any and all required filings pursuant to the HSR Act, with
respect to the transactions contemplated herein and in the Transaction
Documents. Each of Motorola and Starfish shall use its respective best efforts
to respond as promptly as practicable to all inquiries received from the
applicable governmental agencies or committees for additional information or
documentation. Each of Motorola and Starfish shall notify the other of all
correspondence, filings, request or communications between such party or its
representatives on the one hand, and the applicable Governmental Body on the
other hand, with respect to the transactions contemplated herein and in the
Transaction Documents. Each of Motorola and Starfish shall furnish the other
with such necessary information and reasonable assistance as such other
parties may request in connection with its preparation of all required filings
under the HSR Act.
7.5 Proxy Statement; Prospectus; Registration Statement
(a) As promptly as practicable after the execution of this Agreement,
Motorola and Starfish shall prepare and file with the SEC the Proxy Statement,
and Motorola shall prepare and file with the SEC the Registration Statement,
in which the Proxy Statement will be included. Each of Motorola and Starfish
shall use its respective Best Efforts to cause the Registration Statement to
become effective as soon after such filing as practicable.
(b) Motorola and Starfish shall make all necessary filings with respect to
the Merger under the Securities Act and the Exchange Act and applicable state
blue sky laws and the rules and regulations thereunder.
7.6 Tax Matters. All parties intend the Merger to be a tax-free
reorganization within the meaning of Section 368(a) of the Code, and agree to
use their respective Best Efforts to take all action required or appropriate
to facilitate such tax treatment.
7.7 Further Assurances. Prior to and following the Closing, each party
agrees to cooperate fully with the other parties and to execute such further
instruments, documents and agreements, and to give such further written
assurances, as may be reasonably requested by any other party to evidence and
reflect better the transactions described and contemplated herein and to carry
into effect the intents and purposes of this Agreement.
ARTICLE VIII
CONDITIONS OF STARFISH'S OBLIGATIONS
The obligations of Starfish to close the transactions contemplated in this
Agreement are subject to the fulfillment or satisfaction on and as of the
Closing of each of the following conditions (any one or more of which may be
waived by Starfish, but only in a writing signed by Starfish):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Motorola and Sub set forth in Section 4 and in any certificate
delivered at the Closing by Motorola or Sub in connection with this Agreement
shall be true and correct in all material respects when made and on and as of
the Closing with the same force and effect as if such representations and
warranties had been made at the Closing, and Starfish shall receive a
certificate to such effect signed by an officer of Motorola and Sub,
respectively.
8.2 Covenants. Motorola and Sub shall have performed and complied in all
material respects with all of their covenants contained in Article VI and
Article VII on or before the Closing, and Starfish shall receive a certificate
from Motorola and Sub to such effect signed by an officer of Motorola and Sub,
respectively.
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8.3 Authorizations. Starfish shall have received from Motorola and Sub
written evidence that the execution, delivery and performance of Motorola and
Sub's obligations under this Agreement have been duly and validly approved and
authorized by the Board of Directors of Motorola and Sub, respectively, and
the shareholder of Sub.
8.4 Opinion of Motorola's Counsel. Starfish shall receive from Motorola in-
house counsel an opinion in form and substance reasonably satisfactory to
counsel to Starfish ("Opinion of Counsel to Motorola").
8.5 Government Consents. There shall have been obtained at or prior to the
date of Closing such permits or authorizations, and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken.
8.6 Termination of HSR Waiting Period. The waiting period under the HSR Act
shall have terminated.
8.7 Listing of Motorola Common. The shares of Motorola Common Stock to be
issued in the Merger pursuant to this Agreement shall have been approved for
listing (subject to notice of issuance) on the New York Stock Exchange.
8.8 Tax Opinion. Except as contemplated by Section 2.7 of this Agreement,
Starfish shall have received a written opinion of Starfish's legal counsel in
form and substance reasonably satisfactory to it, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code, and such opinion shall not have been withdrawn. In rendering such
opinion, counsel shall be entitled to rely upon, among other things,
reasonable assumptions as well as representations of Motorola, Sub and
Starfish and certain shareholders of Starfish and each of Motorola, Sub and
Starfish shall provide counsel such reasonable representations.
8.9 Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
8.10 Blue Sky Laws. Motorola shall have received all permits and other
authorizations required under applicable state blue sky laws for the issuance
of Motorola Common Stock pursuant to the Merger.
ARTICLE IX
CONDITIONS TO MOTOROLA'S AND SUB'S OBLIGATIONS
The obligations of Motorola and Sub are subject to the fulfillment or
satisfaction on and as of the Closing of each of the following conditions (any
one or more of which may be waived by Motorola, but only in a writing signed
by Motorola):
9.1 Accuracy of Representations and Warranties. The representations and
warranties made by Starfish contained in Article III and in any certificate
delivered by Starfish in connection with this Agreement shall be true and
correct when made except where (i) the failure of such representation or
warranty to be true and correct would not have a Material Adverse Effect; (ii)
the failure of such representation or warranty to be true and correct has been
remedied prior to the Closing Date; or (iii) the failure of such
representation or warranty is the result of the announcement of the
acquisition of Starfish by Motorola; and Motorola shall receive a certificate
to such effect signed by the President or Chief Financial Officer of Starfish.
9.2 Covenants. Starfish shall have performed and complied in all material
respects with all of its covenants and obligations contained in this Agreement
on or before the Closing except to the extent any non-performance does not
have a Material Adverse Effect.
9.3 No Litigation. On and as of the Closing, no litigation or proceeding
shall be threatened or pending against Motorola or Starfish with the probable
effect (in the reasonable opinion of Motorola's counsel) of enjoining or
preventing the consummation of the Merger or the enforcement of any of the
Noncompetition Agreements, or requiring Motorola to divest or hold separate
any business in connection with the Merger, and
no judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator shall be
outstanding against Starfish that would otherwise have a Material Adverse
Effect on Motorola (exclusive of the business of Starfish).
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9.4 Authorizations. Motorola shall have received from Starfish written
evidence that (i) the execution, delivery and performance of this Agreement
have been duly and validly approved and authorized by Starfish's board of
directors and by the shareholders of Starfish, and (ii) shareholders of
Starfish holding no more than ten percent (10%) of the outstanding shares of
Starfish capital stock have, or might be able to perfect, dissenters' rights
in connection with the Merger.
9.5 Voting Agreements and Non-Competition and Non Solicitation Agreements.
Each of the Voting Agreements and the Non-Competition and Non-Solicitation
Agreements referred to in Section 12.1 shall be in full force and effect and
shall not been amended without Motorola's consent.
9.6 Intentionally omitted.
9.7 Opinion of Starfish's Counsel. Motorola shall have received from counsel
to Starfish, an opinion in substantially the form attached hereto as Exhibit D
("Opinion of Counsel to Starfish").
9.8 Termination of HSR Waiting Period. The waiting period under the HSR Act
shall have been terminated.
9.9 Listing of Motorola Stock. The shares of Motorola Stock to be issued in
the Merger pursuant to this Agreement shall have been approved for listing
(subject to notice of issuance) on the New York Stock Exchange.
9.10 Receipt Of Certificate. Motorola shall have received at Closing a
certificate signed by the President and Chief Financial Officer of Starfish
certifying the accuracy of the matters set forth in Section 9.1, 9.2, 9.3, and
9.4.
9.11 Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
9.12 Blue Sky Laws. Motorola shall have received all permits and other
authorizations required under applicable state blue sky laws for the issuance
of shares of Motorola Common Stock pursuant to the Merger.
9.13 Employees. None of the Key Employees (as defined in Section 12.1), and
no more than twenty percent (20%), of Starfish's other employees shall have:
(a) voluntarily terminated their employment with Starfish on or prior to the
Closing Date or (b) refused to accept employment with, or given notice that
they do not intend to continue employment with, the Surviving Corporation.
9.14. Exercise of Warrants. The Warrant(s) shall have been exercised in
full.
9.15 Exchange Agent Agreement. Starfish, the Exchange Agent and the
Shareholder Representative shall have entered into the Exchange Agent
Agreement in form and substance satisfactory to Motorola.
9.16 Tax Opinion. Except as contemplated by Section 2.7 of this Agreement,
Motorola shall have received a written opinion of Motorola's outside legal
counsel in form and substance reasonably satisfactory to it, to the effect
that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and such opinion shall not have been withdrawn. In
rendering such opinion, counsel shall be entitled to rely upon, among other
things, reasonable assumptions as well as representations of Motorola, Sub and
Starfish and certain shareholders of Starfish and each of Motorola, Sub and
Starfish shall provide counsel such reasonable representations.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) By mutual consent, or
(b) By either Motorola or Starfish for any reason if the Closing has not
occurred by October 31, 1998, unless otherwise mutually agreed in writing
by the parties, or such later date as the parties may agree in writing,
provided that a party cannot terminate under this provision if the failure
to occur of the Closing is
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the result of the failure on the part of such party to perform any of its
obligations hereunder (except the failure on the part of such party to
satisfy a closing condition over which such party has no control). Any
termination of this Agreement under this Section 10.1 shall be effective by
the delivery of written notice of the terminating party to the other
parties hereto, or
(c) By either Motorola or Starfish if any Governmental Entity shall have
issued an order, injunction, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and
such order, injunction, decree, ruling or other action shall have become
final and nonappealable.
10.2 Effect of Termination. Any termination of this Agreement pursuant to
this Article X shall be without further obligation or liability upon any party
in favor of any other party hereto; provided, however, that if such
termination by one party shall result from the willful failure of the other
party to carry out its obligations under this Agreement, then such party shall
be liable for Damages incurred by the other party, and such termination shall
not be deemed or construed as limiting or denying any legal or equitable right
or remedy of said party, and said party shall be entitled to recover its costs
and expenses which are incurred in pursuing its rights and remedies (including
reasonable attorneys' fees).
10.3 Certain Effects Of Termination. In the event of the termination of this
Agreement by either Starfish or Motorola as provided in Section 10.1 hereof:
(a) each party, if so requested by the other party, will (i) return
promptly every document (other than documents publicly available and other
than one copy thereof to be retained by outside counsel for such party)
furnished to it by the other party (or any subsidiary, division, associate
or affiliate of such other party) in connection with the transactions
contemplated hereby, whether so obtained before or after the execution of
this Agreement, and any copies thereof which may have been made, and will
cause its representatives and any representatives of financial institutions
and investors and others to whom such documents were furnished promptly to
return such documents and any copies thereof any of them may have made, or
(ii) destroy such documents and cause its representatives and such other
representatives to destroy such documents, and such party shall deliver a
certificate executed by its president or vice president stating to such
effect; and
(b) Starfish and Motorola shall continue to abide by the provisions of
the Mutual Non-Disclosure and Non-Solicitation Agreement dated as of
January 16, 1998 between Motorola and Starfish (the "Nondisclosure
Agreement"). This Section 10.3 shall survive any termination of this
Agreement.
ARTICLE XI
INDEMNIFICATION AND ESCROW
11.1 Survival of Representations.
(a) The representations and warranties made by Starfish (including the
representations and warranties set forth in Article III hereof and the
representations and warranties set forth in any certificate delivered by
Starfish in connection with this Agreement) shall survive the Closing and
shall remain in full force and effect and shall survive until the end of the
Indemnification Period and shall survive thereafter only with respect to any
claims made prior to the end of the Indemnification Period; provided, however,
that the termination hereunder of the representations and warranties made by
Starfish shall not terminate or limit in any manner whatsoever any rights
Motorola has or may have for knowing and intentional misrepresentation. The
representations and warranties made by Motorola and Sub shall survive the
Closing, shall remain in full force and effect and shall survive until the end
of the Indemnification Period, and the holders of Starfish Securities shall be
expressly permitted to rely on such representations and warranties as third
party beneficiaries; provided, however, that the termination hereunder of the
representations and warranties made by Motorola and Sub shall not terminate or
limit in any manner whatsoever any rights which Starfish or the Starfish
Shareholders or holders of Starfish Options have or may have for knowing and
intentional misrepresentation.
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(b) As used in this Agreement, Indemnification Period shall mean a period of
two (2) years from the Closing Date; provided, however, that the
Indemnification Period with respect to claims arising under Section 11.2(iii)
shall be three (3) years; provided, further, that the expiration of any
Indemnification Period shall not limit the rights any Indemnitees with respect
to indemnification under this Article XI in respect of any claim commenced
with the applicable Indemnification Period.
(c) The representations, warranties, covenants and obligations of Starfish,
and the rights and remedies that may be exercised by the Indemnitees, shall
not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, any of the
Indemnitees or any of their Representatives.
11.2 Indemnification by Shareholders.
(a) From and after the Closing Date (but subject to Section 11.1(a)), the
Shareholders of Starfish shall hold harmless and indemnify each of the
Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages which are suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim)
and which arise from or as a result of:
(i) any inaccuracy in or breach of any representation or warranty set
forth in Article III hereunder or in any certificate delivered by Starfish
in connection with this Agreement;
(ii) any breach of any covenant or obligation of Starfish hereunder;
(iii) any claim relating to Intellectual Property for damages above the
license fees paid or payable under the agreement of November 15, 1996
between Starfish and Day-Timers, the agreement of May 12, 1997 between
Starfish and General Magic, the agreement of March 4, 1998 between Starfish
and Open-Text Inc., the agreement of June 6, 1995 between Starfish and
Franklin Electronic Publishers, the agreement of August 8, 1996 between
Starfish and Franklin Electronic Publishers, the agreement of October
29,1997 between Starfish and Hewlett-Packard, the agreement of March 1,
1997 between Starfish and Acer America, the agreement of September 30, 1997
between Starfish and Sony, the agreement of February 3, 1997 between
Starfish and The Media Farm, or the agreement of March 28, 1997 between
Starfish and The Media Farm;
(iv) any claim under the agreement between Starfish and Intuit arising as
a result of the agreement between Starfish and Day-Timers or as a result of
any modification of that latter agreement entered into before the Closing
Date;
(v) any claim with respect to the fees or expenses of a broker or finder
payable by the Starfish Shareholders in accordance with Section 13.8 of
this Agreement;
(vi) any Legal Proceeding relating to any inaccuracy, breach or expense
of the type referred to in clause "(i)" "(ii)" "(iii)" or "(iv)" above
(including any Legal Proceeding commenced by any Indemnitee for the purpose
of enforcing any of its rights under this Article XI if such Indemnitee is
the prevailing party in any such Legal Proceeding); or
(vii) any obligation or duty agreed to or assumed by Starfish in any
contract, license or agreement not listed in Part 3.8(k) of the Starfish
Disclosure Statement, entered into between Starfish and any other Person,
to indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement by Starfish or such other Person
of the Intellectual Property Rights of any other Person.
(b) If the Surviving Corporation suffers, incurs or otherwise becomes
subject to any Damages as a result of or in connection with any inaccuracy in
or breach of any representation, warranty, covenant or obligation of Starfish
hereunder, then (without limiting any of the rights of the Surviving
Corporation as an Indemnitee) Motorola shall also be deemed, by virtue of its
ownership of the stock of the Surviving Corporation, to have incurred Damages
as a result of and in connection with such inaccuracy or breach.
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11.3 Threshold; Ceiling; Exclusivity; Claims Process.
(a) The Shareholders shall not be required to make any indemnification
payment pursuant to Section 11.2(a) or for any other reason or on account of
any other provision for any inaccuracy in or breach of any of the
representations and warranties set forth in Article III hereof or in any
certificate delivered by Starfish in connection with this Agreement until such
time as and only to the extent that the total amount of all Damages (including
the Damages arising from such inaccuracy or breach and all other Damages
arising from any other inaccuracies in or breaches of any representations or
warranties) that have been suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds Five Hundred Thousand Dollars ($500,000) in
the aggregate; provided, however, that the foregoing shall not apply to
Damages arising under Section 11.2(a)(v);
(b) Except with respect to claims based on knowing and intentional
misrepresentations of representations and warranties, Motorola and Sub agree
on behalf of the Indemnitees that, after the Closing, the sole recourse of the
Indemnitees with respect to Damages shall be against the Holdback Amount and
the Escrowed Non-Cash Merger Consideration in the manner set forth in Section
2.6 of this Agreement.
(c) In the event that an Indemnitee shall have incurred any Damages for
which Indemnitee wishes to seek adjustment to the Holdback Amount pursuant to
Section 11.1, Indemnitee shall deliver to the Shareholder Representative an
Officer's Certificate: (i) stating that Indemnitee has paid or properly
accrued or reasonably anticipates that it will have to pay or accrue Damages,
(ii) specifying in reasonable detail the individual items of Damages included
in the amount so stated, the date each such item was paid or properly accrued
or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant or other adjustment to the
Holdback Amount to which such item is related and (iii) indicating that
Indemnitee is seeking adjustment to the Holdback Amount under this Article XI.
(d) In the event that an Indemnitee has elected to pursue adjustment to the
Holdback Amount under this Article XI, the Holdback Amount shall be reduced by
the amount stated in the Officer's Certificate, unless the Shareholder
Representative contests such claim in writing within thirty (30) days of such
election. In such event, the parties will follow the procedures set forth in
Section 13.2 below (in which case the Holdback Amount shall be reduced by the
amount of Loss as determined pursuant to Section 13.2 with respect to such
Damages).
(e) In the event that an Indemnitee shall have incurred any Damages for
which Indemnitee wishes to claim pursuant to Section 11.1 against the Escrowed
Non-Cash Merger Consideration in accordance with Section 2.6 of this
Agreement, Indemnitee shall deliver to the Shareholder Representative and the
Exchange Agent an Officer's Certificate: (i) stating that Indemnitee has paid
or properly accrued or reasonably anticipates that it will have to pay or
accrue Damages, (ii) specifying in reasonable detail the individual items of
Damages included in the amount so stated, the date each such item was paid or
properly accrued or the basis for such anticipated liability, and the nature
of the misrepresentation, breach of warranty or covenant or other adjustment
to the Holdback Amount to which such item is related and (iii) indicating that
Indemnitee is seeking the release of all or a portion of the Escrowed Non-Cash
Merger Consideration under this Article XI.
(f) In the event that an Indemnitee has elected to pursue the release of all
or a portion of the Escrowed Non-Cash Merger Consideration under this Article
XI, the Exchange Agent shall, in accordance with the terms of the Exchange
Agreement, release to such Indemnitee a number of shares of Motorola Common
Stock having a value equal to the amount stated in the Officer's Certificate,
unless the Shareholder Representative contests such claim in writing within
thirty (30) days of such election. In such event, the parties will follow the
procedures set forth in Section 13.2 below (in which case the Exchange Agent
shall, in accordance with the terms of the Exchange Agreement, release to such
Indemnitee a number of shares of Motorola Common Stock having a value equal to
the amount of Loss as determined pursuant to Section 13.2 with respect to such
Damages). For the purposes of this Agreement and the Exchange Agreement, the
value of each share of Motorola Common Stock constituting the Escrowed Non-
Cash Merger Consideration shall be the Valuation Period Stock Price.
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11.4 No Contribution. The Shareholders acknowledge and agree that they shall
not have and shall not exercise or assert (or attempt to exercise or assert),
any right of contribution, right of indemnity or other right or remedy against
the Surviving Corporation in connection with any indemnification obligation or
any other liability to which it may become subject under or in connection with
this Agreement or any certificate delivered by Starfish in connection with
this Agreement.
11.5 Defense Of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Motorola or against any other Person) with
respect to which the Shareholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 11,
the procedure set forth in Sections 11.6 and 11.7 below shall be followed.
11.6 Notice. Motorola shall give prompt written notice to the Shareholder
Representative pursuant to Section 11.9 of the commencement of any such Legal
Proceeding against Motorola or the Surviving Corporation for which indemnity
may be sought under Article XI together with a description of such Legal
Proceeding and the specific bases upon which such indemnity may be sought
consistent with the provisions of this Agreement; provided, however, that any
failure on the part of Motorola to so notify the Shareholder Representative
shall not limit any of the obligations of the Shareholders under this Article
XI (except to the extent such failure materially prejudices the defense of
such Legal Proceeding). The Indemnification Period shall be tolled solely with
respect to a particular claim for the period beginning on the date the
Indemnifying Party receives written notice of that claim until the final
resolution of such claim so long as such claim is made within the
Indemnification Period.
11.7 Defense of Claim. The Indemnitee shall have the right to be represented
by counsel of its choice and to defend or otherwise control the handling of
any third party claim or Legal Proceeding for which indemnity is sought.
Notwithstanding the foregoing, the Shareholder Representative may elect on
behalf of the Shareholders (by written notice by the Shareholder
Representative to Motorola within thirty (30) days after receipt of written
notice under Section 11.8(a)) to assume the defense of or otherwise control
the handling of any such third party claim or Legal Proceeding (other than for
matters relating to the intellectual property rights of Motorola (including
Starfish), or claims by customers of Motorola) for which indemnity is sought
so long as, and only in the event that, the maximum amount reasonably expected
to be payable with respect to any such Legal Proceeding by Starfish or
Motorola would not exceed the Holdback Amount in Motorola's reasonable
determination, subject to the further limitations provided herein.
(a) If the Shareholder Representative so elects to assume the defense of any
such claim or Legal Proceeding:
(i) the Shareholders shall proceed to defend such claim or Legal
Proceeding in a diligent manner with counsel reasonably satisfactory to the
Indemnitee;
(ii) the Indemnitee shall make available to the Shareholder
Representative any documents and materials in the possession of the
Indemnitee that may be necessary to the defense of such claim or Legal
Proceeding;
(iii) the Shareholder Representative shall keep the Indemnitee informed
of all material developments and events relating to such claim or Legal
Proceeding;
(iv) the Indemnitee shall have the right to participate in the defense of
such claim or Legal Proceeding at the Indemnitee's expense; and
(v) the Shareholder Representative shall have the right to settle, adjust
or compromise such claim or Legal Proceeding only with the consent of
Motorola; provided, however, that Motorola shall not unreasonably withhold
such consent.
(b) If the Shareholder Representative does not (or cannot) elect to assume
the defense of any such third party claim or Legal Proceeding, the Indemnitee
may proceed with the defense of such claim or Legal Proceeding on its own. If
the Indemnitee so proceeds with the defense of any such claim or Legal
Proceeding on its own:
(i) all expenses relating to the defense of such claim or Legal
Proceeding (whether or not incurred by the Indemnitee) shall be borne and
paid exclusively by the Shareholders out of the Holdback Amount,
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provided, however, that the Shareholders shall not be liable for the costs
of more than one counsel on behalf of the Indemnities collectively;
(ii) the Shareholders shall make available to the Indemnitee any
documents and materials in the possession or control of the Shareholders
that may be necessary to the defense of such claim or Legal Proceeding
except for documents or materials which are sealed by a court order or are
subject to a nondisclosure agreement prohibiting disclosure by the
Shareholders;
(iii) the Indemnitee shall keep the Shareholder Representative informed
of all material developments and events relating to such claim or Legal
Proceeding; and
(iv) the Indemnitee shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Shareholder
Representative; provided, however, that the Shareholders shall not
unreasonably withhold such consent.
11.8 Exercise of Remedies by Indemnitees Other than Motorola. No Indemnitee
(other than Motorola or any successor thereto or assignee thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy
under this Agreement unless Motorola (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim
or the exercise of such other remedy.
11.9 Shareholder Representative; Approval of Shareholders.
(a) Philippe Kahn shall be constituted and appointed as agent ("Shareholder
Representative") for and on behalf of the Shareholders to give and receive
notices and communications, to authorize delivery to Motorola of the Holdback
Amount in satisfaction of claims by Motorola, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Shareholder Representative for the accomplishment of the
foregoing. Such agency may be changed by the holders of a majority in interest
of the Holdback Amount from time to time upon not less than ten (10) business
days' prior written notice to Motorola. No bond shall be required of the
Shareholder Representative, and the Shareholder Representative shall receive
no compensation for his/her services. Notices or communications to or from the
Shareholder Representative shall constitute notice to or from each of the
Shareholders.
(b) The Shareholder Representative shall not be liable for any act done or
omitted hereunder as Shareholder Representative while acting in good faith and
not in a manner constituting gross negligence, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Shareholders shall severally indemnify the Shareholder
Representative and hold him/her harmless against any loss, liability or
expense incurred without gross negligence or bad faith on the part of the
Shareholder Representative and arising out of or in connection with the
acceptance or administration of his/her duties hereunder. Subject to the prior
right of Motorola to make claims for damages, the Shareholder Representative,
with the consent of a majority in interest in the Holdback Amount, may recover
from the Holdback Amount prior to any payment to the Shareholders reasonable
costs and expenses incurred by the Shareholder Representative in connection
with acting as same.
(c) The approval by the Shareholders of the Merger shall be deemed to be
approval of the terms of the provisions of this Article XI, including the
appointment of the Shareholder Representative.
(d) A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of all Starfish Shareholders and
shall be final, binding and conclusive upon each such Starfish Shareholder,
and Motorola may rely upon any such decision, act, consent or instruction of
the Shareholder Representative as being the decision, act, consent or
instruction of each every such Starfish Shareholder. Motorola is hereby
relieved from any liability to any person for any acts done by it in
accordance with such decision, act, consent or instruction of the Shareholder
Representative.
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ARTICLE XII
EMPLOYEE ARRANGEMENTS
12.1 Non-Competition and Non-Solicitation Agreements. Motorola and Starfish
acknowledge that each of Philippe Kahn, Sonia Lee, John Hansen, S. Suresh,
Eric Bodnar and Perry Tobin (each a "Key Employee" and collectively the "Key
Employees") have executed and delivered non-competition and non-solicitation
agreements with Motorola containing, among other things, a three-year non-
competition/non-solicitation term with respect to Mr. Kahn and Ms. Lee, and a
two-year non-competition/non-solicitation term for the other Key Employees.
12.2 Bonus Pool. In connection with the Merger, Motorola agrees to establish
a bonus pool for employees of Starfish following the Effective Date (the
"Bonus Pool"). The Bonus Pool shall be in the amount of $19 million and shall
be allocated in three equal installments for the 12-month periods ending on
(or at Motorola's discretion before) the first (1st), second (2nd) and third
(3rd) anniversaries of the Closing Date. The Bonus Pool shall be paid out for
each period from time to time as may be approved by the Board of Directors of
the Surviving Corporation (the "Board"), but in any event the full amount of
the Bonus Pool for each period shall be paid within forty-five (45) days after
the end of each such period. The Shareholders Representative shall participate
with the Board in determining the awards of bonuses, but will not be eligible
for any such bonus. It is expressly understood that the principal purpose of
the Bonus Pool is to provide additional incentives for the current employees
of Starfish. Starfish will establish individual and group business plan
objectives for the purposes of such bonuses. Notwithstanding the foregoing,
with the approval of the Shareholders Representative, current or future
employees of other Motorola divisions who join Starfish and other future
employees of Starfish may be eligible to participate in the Bonus Pool.
12.3 Employee Benefit Plans.
(a) Motorola covenants and agrees that Starfish shall maintain all existing
welfare and retirement benefit plans and arrangements provided to its
employees as of the Closing Date until such time as Starfish and Motorola
agree to terminate or merge such plans with the existing welfare and
retirement benefit plans and arrangements provided by Motorola.
(b) Motorola agrees that to the extent the existing welfare and retirement
benefit plans and arrangements provided by Starfish to its employees are
terminated or merged with existing Motorola plans after the Closing Date, such
employees shall be entitled to participate in all benefit plans and
arrangements which are available and subsequently become available to
Motorola's employees of similar position on the same basis as Motorola's
employees. For purposes of eligibility to participate and vesting requirements
in the Motorola welfare and retirement plans for which any such employee may
be eligible after the termination or merger of Starfish's existing welfare and
retirement plans, such plans provide that service by such employee with
Starfish shall be deemed to have been service with Motorola; provided,
however, that Motorola shall not be required to treat service with Starfish as
service with Motorola for purposes of benefit accrual under the Motorola, Inc.
Pension Plan. To the extent that any Starfish medical plan under section 213
(d) of the Code is terminated, Motorola shall offer continued group health
coverage pursuant to COBRA to those individuals receiving COBRA coverage
through the Starfish medical plan immediately prior to such termination.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Laws. It is the intention of the parties hereto that the
internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of
its terms, and the interpretation and enforcement of the rights and duties of
the parties hereto.
13.2 Amicable Resolution. Motorola and Starfish mutually desire that
friendly collaboration will develop between themselves. Accordingly, they
shall try to resolve in a friendly manner all disagreements and
misunderstandings connected with their respective rights and obligations under
this Agreement, including any amendments hereof.
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Excluding Intellectual Property disputes which must be brought before a
court of competent jurisdiction, to the extent that any misunderstanding or
dispute which arises after the Effective Date cannot be resolved agreeably in
a friendly manner, the dispute will be mediated by a mutually-acceptable
mediator to be chosen by Motorola and Starfish within forty-five (45) days
after written notice by one of the parties demanding mediation. Neither party
may unreasonably withhold consent to the selection of a mediator, however, by
mutual agreement Motorola and Starfish may postpone mediation until each has
completed specified but limited discovery with respect to a dispute. The
parties may also agree to attempt some other form of alternative dispute
resolution ("ADR") in lieu of mediation, including by way of example and
without limitation neutral fact-finding or a mini-trial.
Any dispute that the parties cannot resolve through negotiation, mediation
or other form of ADR within six months of the date of the initial demand for
it by one of the parties may then be submitted to the courts for resolution.
The use of any ADR procedures will not be construed under the doctrines of
laches, waiver or estoppel to affect adversely the rights of either party.
Nothing in this Section 13.2 will prevent either party from resorting to
judicial proceedings if (i) good faith efforts to resolve the dispute under
these procedures have been unsuccessful or (ii) interim relief from a court is
necessary to prevent serious and irreparable injury to one party or to others.
13.3 Limitation on Liability. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL,
INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH ANY
CLAIMS, LOSSES, DAMAGES, OR INJURIES ARISING OUT OF THE CONDUCT OF THE PARTIES
PURSUANT TO THIS AGREEMENT.
13.4 Binding Upon Successors and Assigns. Subject to, and unless otherwise
provided in, this Agreement, each and all of the covenants, terms, provisions,
and agreements contained herein shall be binding upon, and inure to the
benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
13.5 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances shall be interpreted so as best to effect reasonably
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent possible, the economic, business
and other purposes of the void or unenforceable provision.
13.6 Entire Agreement; Assignment. This Agreement, the Exhibits hereto and
the Starfish Disclosure Schedule, and the documents and instruments and other
agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person (including, without limitation, any
employee of Starfish or any such employee's spouse, dependents or
beneficiaries) except the Shareholder Representative any rights or remedies
hereunder; (c) shall not be assigned by Starfish whether by operation of law
or otherwise without the prior written consent of Motorola; and (d) shall not
be assigned by Motorola whether by operation of law or otherwise prior to the
Effective Date or after the Effective Date unless Motorola remains liable for
the obligations of the assignee.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, including counterparts transmitted by telecopier or telefax,
each of which shall be an original as against any party whose signature
appears thereon and all of which together shall constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of
the parties reflected hereon as signatories.
A1-38
<PAGE>
13.8 Expenses. Whether or not the transactions herein contemplated shall be
consummated, Motorola will pay the fees, expenses and disbursements of
Motorola and Sub and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto. Whether or not the transactions herein contemplated shall
be consummated, Starfish will pay the fees, expenses and disbursements of
Starfish and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments
thereto and all other costs and expenses incurred in the performance and
compliance with all conditions to be performed by Starfish under this
Agreement. Notwithstanding the foregoing, neither Motorola nor Starfish shall
be liable for any fees or expenses payable to any broker or finder
contemplated by Section 3.23 of this Agreement, which fees or expenses will be
paid by the Starfish Shareholders through a reduction in the Holdback Amount.
13.9 Amendment and Waivers. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount
due hereunder or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
13.10 No Waiver. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
13.11 Notices. Any notice provided for or permitted under this Agreement
will be treated as having been given when (a) delivered personally, (b) sent
by confirmed telecopy, (c) sent by commercial overnight courier with written
verification of receipt, or (d) mailed postage prepaid by certified or
registered mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other party has
been notified in accordance with the provisions of this Section 13.11.
If to Starfish: Starfish Software, Inc. 1700 Green Hills Road
Scotts Valley, CA 95066 Facsimile:(408) 461-5955
Attention: President
With copy to: Gray Cary Ware Freidenrich, LLP 400 Hamilton Avenue
Palo Alto, CA 94301 Facsimile:(650) 327-3699
Attention: Peter M. Astiz, Esq.
If to Motorola: Motorola, Inc.50 Commerce DriveSchaumburg, IL
60173Facsimile: (847) 538-0852Attention: Jerry
Upton
With copy to: Motorola, Inc. 1303 East Algonquin Road Schaumburg,
IL 60196 Facsimile:(847) 576-3628
Attention: General Counsel
If to Shareholder'sRepresentative:
Philippe Kahn 333 Spreading Oaks Scotts Valley, CA
95066 Facsimile:(408) 439-0958
Such notice will be treated as having been received upon actual receipt.
A1-39
<PAGE>
13.12 Construction of Agreement. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. The titles and headings herein are
for reference purposes only and shall not in any manner limit the construction
of this Agreement which shall be considered as a whole.
13.13 No Joint Venture. Nothing contained in this Agreement shall be deemed
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall
have the power to control the activities and operations of any other and their
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any power or
authority to bind or commit any other. No party shall hold itself out as
having any authority or relationship in contravention of this Section 13.11.
13.14 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
13.15 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the
parties to this Agreement.
[This space intentionally left blank]
A1-40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
Motorola, Inc., Starfish Software, Inc.,
a Delaware corporation a California corporation
By: /s/ Theodore W. Shaffner By: /s/ Philippe Kahn
---------------------------------- --------------------------------
Name: Theodore W. Shaffner Name: Philippe Kahn
--------------------------------- -------------------------------
Title: Corporate Vice President and Title: President and Chief Executive
-------------------------------- ------------------------------
Corporate Director of Business Officer
-------------------------------- ------------------------------
Development_
--------------------------------
SS Acquisition Corporation, a
California corporation
By: /s/ Garth L. Milne
--------------------------------
Name: Garth L. Milne
--------------------------------
Title: Treasurer
--------------------------------
A1-41
<PAGE>
EXHIBIT A TO
AGREEMENT AND PLAN OF MERGER
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"ADR" shall have the meaning set forth in Section 13.2.
"Affiliate" shall have the meaning set forth in the rules and regulations
promulgated by the Commission pursuant to the Securities Act.
"Best Efforts" shall mean the efforts that a prudent person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the
person subject to that obligation to take actions that would result in a
Material Adverse Change in the benefits to such person of this Agreement and
the transactions contemplated herein.
"Board" shall have the meaning set forth in Section 12.2.
"Bonus Pool" shall have the meaning set forth in Section 12.2.
"California Code" shall have the meaning set forth in Section 1.1.
"CERCLA" shall have the meaning set forth in Section 3.21(d).
"Closing" shall have the meaning set forth in Section 1.2.
"Closing Date" shall have the meaning set forth in Section 1.2.
"Code" shall have the meaning set forth in the Recitals.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Confidential Information" shall mean confidential information of a party
("Disclosing Party") which is disclosed to another party ("Receiving Party").
Confidential Information shall include, but not be limited to, trade secrets,
know-how, inventions, techniques, processes, algorithms, software programs,
blueprints, engineering drawings, schematics, designs, theories of operation,
contracts, customer lists, financial information, sales and marketing plans
and business information.
"Damages" shall include any loss, damage, injury, liability, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee (including reasonable
attorneys' fees), charge, costs (including reasonable costs of investigation)
or reasonable expenses of any nature.
"Disclosing Party" shall have the meaning set forth in Section 7.1.
"Dissenting Shareholder" shall have the meaning set forth in Section 2.4.
"Dissenting Share(s)" shall have the meaning set forth in Section 2.1(c).
"Effective Time" shall have the meaning set forth in Section 1.2.
"Excluded Licenses" shall have the meaning set forth in Section 3.8(d).
"Entity" shall mean any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
A1-42
<PAGE>
"Environmental Lien" shall have the meaning set forth in Section 3.21.
"ERISA" shall have the meaning set forth in Section 3.9.
"Escrowed Non-Cash Merger Consideration" shall have the meaning set forth in
Section 2.1(a)(iv).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any substituted federal statute and the rules and regulations thereunder,
all as the same shall be in effect at the time.
"Exchange Agent" shall have the meaning set forth in Section 2.2(a).
"Exchange Agreement" shall have the meaning set forth in Section 2.2(a).
"Exchange Fund" shall have the meaning set forth in Section 2.2(a).
"Exchanged Option" shall have the meaning set forth in Section 2.3(a).
"Expiration Date" shall have the meaning set forth in Section 5.7.
"GAAP" shall have the meaning set forth in Section 3.4(b).
"Governmental Body" shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of
any nature; (b) federal, state, local, municipal, foreign or other government;
or (c) governmental or quasi-governmental authority of any nature (including
any governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"Holdback Amount" shall have the meaning set forth in Section 2.(i) (but
shall not include any interest paid on the Holdback Amount).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnitees" shall mean the following Persons: (a) Motorola; (b) Motorola's
current and future affiliates (including, but not limited to, the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors of the
Persons referred to in clauses "(a)" and "(b)" and "(c)" above; provided,
however, that any Person receiving Motorola Common Stock pursuant to this
Agreement shall not be deemed to be an "Indemnitee."
"Initial Cash Merger Consideration" shall have the meaning set forth in
Section 2.1(a)(i).
"Initial Non-Cash Merger Consideration" shall have the meaning set forth in
Section 2.1(a)(ii).
"Intellectual Property" shall have the meaning set forth in Section 3.8(a).
"Issued Registered Intellectual Property" shall have the meaning set forth
in Section 3.8(c).
"Key Employee" shall have the meaning set forth in Section 12.1.
"Key Employees" shall have the meaning set forth in Section 12.1.
The terms "knowledge" and "known" when not capitalized shall be construed,
except as specifically otherwise provided, to qualify the matter referred to
as being to the actual knowledge after diligent inquiry of, with respect to
Starfish, Philippe Kahn, Sonia Lee, John Hansen, Norman Cheung and Gregg
Armstrong and, with respect to Motorola, the appropriate executive officer.
A1-43
<PAGE>
"Legal Proceeding" shall mean any action, suit, litigation, arbitration
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving
any court or other Governmental Body or any arbitrator or arbitration panel.
"Letter of Transmittal" shall have the meaning set forth in Section 2.2(b).
"Material Adverse Change" shall mean a change which would have a Material
Adverse Effect.
A violation or other matter will be deemed to have a "Material Adverse
Effect" on Starfish or Motorola or Sub, as applicable, if such violation or
other matter would be material in impact or amount to Starfish's or Motorola's
or Sub's, as applicable, (and in the case of Motorola, together with its
subsidiaries), business, intellectual property rights or condition, or, taken
as a whole, its assets, liabilities, operations, or financial performance. The
definition of "material" for purposes of Article III shall have no bearing
upon the interpretation of the term "material" for purposes of this
definition.
"Material Consents" shall have the meaning set forth in Section 5.1.
"Material Contract" shall have the meaning set forth in Section 3.11(a).
"Merger" shall have the meaning set forth in Recitals.
"Merger Articles" shall have the meaning set forth in Section 1.2.
"Merger Consideration" shall have the meaning set forth in Section 2.1(d).
"Motorola Common Stock" shall have the meaning set forth in Section
2.1(a)(ii).
"Motorola Financial Statements" shall have the meaning set forth in Section
4.5.
"Nondisclosure Agreement" shall have the meaning set forth in Section
10.3(b).
"Person" shall mean any individual, Entity or Governmental Body.
"Proprietary Asset" shall mean: (a) any patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service mark (whether registered or
unregistered), service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, logo, technical data, customer list, industrial design or
registration, know-how, customer list, franchise, system, computer software
(including any source code, object code, firmware, development tools, files,
records and data and all media on which any of the foregoing are recorded),
computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; and (b) any right to use or exploit any of
the foregoing and all extensions, renewals and revisions of any of the
foregoing and any and all documents relating to the foregoing.
"Proxy Statement" shall have the meaning set forth in Section 5.8.
"Receiving Party" shall have the meaning set forth in Section 7.1.
"Registered Intellectual Property" shall have the meaning set forth in
Section 3.8(b).
"Registration Statement" shall have the meaning set forth in Section 5.8.
"Release" shall have the meaning set forth in Section 3.21.
"SEC" shall mean the Securities and Exchange Commission.
A1-44
<PAGE>
"SEC Documents" shall have the meaning set forth in Section 4.5.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
substituted federal statute and the rules and regulations thereunder, all as
the same shall be in effect at the time.
"Shareholder Representative" shall have the meaning set forth in Section
11.9(a).
"Shareholders" shall mean the record holders of shares of capital stock of
Starfish.
"Software" shall have the meaning set forth in Section 3.8(a).
"Software Authors" shall have the meaning set forth in Section 3.8(a).
"Starfish Audited Financial Statements" shall have the meaning set forth in
Section 3.4(a).
"Starfish Capital Stock" shall have the meaning set forth in the Recitals.
"Starfish Common Stock" shall mean the common stock, no par value per share,
of Starfish.
"Starfish Disclosure Schedule" shall have the meaning set forth in Article
3.
"Starfish Financial Statements" shall have the meaning set forth in Section
3.4(a).
"Starfish Intellectual Property" shall have the meaning set forth in Section
3.8(a).
"Starfish Option" shall have the meaning set forth in Section 2.3(a).
"Starfish Preferred Stock" shall mean Starfish Class A Preferred Stock and
Starfish Class B Preferred Stock.
"Starfish Products" shall mean all versions and implementations of any
product which has been or is being marketed by Starfish or currently is under
development, and all patents, patent applications, trade secrets, copyrights,
trademarks, trade names and other proprietary rights related thereto.
"Starfish Series A Preferred Stock" shall mean the Class A Preferred Stock,
no par value per share, of Starfish.
"Starfish Series B Preferred Stock" shall mean the Class B Preferred Stock,
no par value per share, of Starfish.
"Starfish Shareholders Meeting" shall have the meaning set forth in Section
5.8.
"Starfish Shares" shall mean the shares of Starfish capital stock issued and
outstanding at the Effective Date of the Merger, other than the Dissenting
Shares.
"Starfish Stock Plans" shall have the meaning set forth in Section 2.3(a).
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general
partner of such limited liability company, partnership, association or other
business entity. Unless otherwise indicated or required by the context, the
term Subsidiary or Subsidiaries shall be deemed to refer to a Subsidiary or
the Subsidiaries of Starfish.
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<PAGE>
"Surviving Corporation" shall have the meaning set forth in Section 1.1.
"Surviving Corporation Board" shall have the meaning set forth in Section
1.5.
"Transaction Documents" shall mean this Agreement (including the Starfish
Disclosure Schedule delivered pursuant to Article III hereof) and the
following documents or agreements required to be delivered hereunder: the
Merger Articles, the Exchange Agreement and the Shareholder Non-Compete
Agreements.
"Valuation Period Stock Price" shall have the meaning set forth in Section
2.1(c)
"Voting Agreements" shall have the meaning set forth in the Recitals.
A1-46
<PAGE>
ANNEX A2
AMENDMENT NO. 1
This Agreement (the "Agreement") is entered into as of July 24, 1998 by and
between Motorola, Inc., a Delaware corporation ("Motorola"), SS Acquisition
Corporation, a California corporation ("Sub"), Starfish Software, Inc., a
California corporation and Philippe Kahn and Sonia Lee Kahn (collectively the
"Shareholders").
RECITALS
A. Motorola, Sub and Starfish have entered into an Agreement and Plan of
Merger dated as of July 1, 1998 ("Merger Agreement"), which provides (subject
to the conditions set forth therein) for the merger (the "Merger") of Starfish
into Sub. Unless otherwise defined herein, capitalized terms used herein shall
have the meaning assigned in the Merger Agreement.
B. The Shareholders own or control a majority of the outstanding shares of
Starfish.
C. Pursuant to the Merger Agreement, Motorola has agreed to fund a bonus
pool (the "Bonus Pool") of $19 million as additional compensation to employees
of Starfish other than the Shareholders. The Bonus Pool is to be paid over a
three year period following the Effective Time.
D. The Shareholders are prepared to contribute additional sums to the Bonus
Pool on the terms and conditions provided herein.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree to amend the Merger Agreement as follows:
1. Motorola agrees that the amount of the Bonus Pool shall be increased to
$24.11 million. The Bonus Pool shall be distributable $8.036 million per year
in accordance with Section 12.2 of the Merger Agreement and the provisions set
forth herein.
2. Subject to Section 4 hereof, the Shareholders agree that they shall
collectively contribute $5.11 million to the Bonus Pool. Such contribution
shall be made at the end of the third year following the Effective Time. The
Shareholders' contribution shall be made first by the withholding amounts
payable to the Shareholders from the Holdback Amount and second from canceling
shares issuable to the Shareholders from the Escrowed Non-Cash Merger
Consideration. For the purposes hereof, the Escrowed Non-Cash Merger
Consideration shall be valued at $52.97 (as adjusted for stock splits, stock
dividends and similar events).
3. In the event that the amounts remaining in the Holdback Amount and the
Escrowed Non-Cash Consideration are less than $5.11 million, the Shareholders
shall within 30 days of written request from Motorola, pay to Motorola the
difference between $5.11 million and the Holdback Amount and Escrowed Non-Cash
Merger Consideration payable to them.
4. Motorola agrees that unless otherwise agreed by Philippe Kahn as
Shareholder Representative pursuant to the Merger Agreement, the allocation of
the Bonus Pool as set forth in list delivered to Motorola concurrent with the
execution hereof, shall be the target bonuses for the persons specified
therein. Such allocation shall be payable to each employee each year on a pro
rata basis over the three year Bonus Pool period provided that such employee
remains in the employ of Starfish through the relevant period for which
payment is made. In the event that the full amount of such Bonus Pool is not
payable because Starfish employees leave the employment of Starfish before
earning all or a part of the Bonus Pool allocated to them, the amount of the
Shareholder contribution shall be reduced for each dollar of the Bonus Pool
which is not payable. If the amount of the Bonus
A2-1
<PAGE>
Pool otherwise payable would be reduced below $19 million because of
terminations of employment, the amount of such reduction up to the $19 million
shall be distributed to other Starfish employees as determined by the Board of
Directors of Starfish and subject to the approval of the Shareholder
Representative as contemplated by Section 12.2 of the Merger Agreement.
5. No provisions of this Agreement are intended, nor will be interpreted, to
provide or create any third party beneficiary rights or any other rights of
any kind in any employee, client, customer, affiliate, stockholder, partner or
any party hereto or any other person or entity unless specifically provided
otherwise herein, and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
6. Except as otherwise provided herein, the terms and conditions of the
Merger Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MOTOROLA, INC., Philippe Kahn
a Delaware corporation
By: /s/ Jerry D. Upton /s/ Philippe Kahn
--------------------------------- -------------------------------------
Address: 333 Spreading Oaks
Name: Jerry D. Upton Scotts Valley, CA 95066
-------------------------------
Title: Vice President Sonia Lee Kahn
------------------------------
SS ACQUISITION CORPORATION,
a California corporation
/s/ Sonia Lee Kahn
-------------------------------------
By: /s/ Garth L. Milne Address: 333 Spreading Oaks
--------------------------------- Scotts Valley, CA 95066
Name: Garth L. Milne
-------------------------------
STARFISH SOFTWARE, INC.,
Title: Treasurer a California corporation
------------------------------
By: /s/ Philippe Kahn
---------------------------------
Name: Philippe Kahn
-------------------------------
Title: President and Chief Executive
Officer
------------------------------
A2-2
<PAGE>
ANNEX B
FORM OF
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT ("Exchange Agreement") is made as of , 1998,
by and among Motorola, Inc., a Delaware corporation ("Motorola"), SS
Acquisition Corporation, a California corporation and a wholly-owned
subsidiary of Motorola ("Sub"), Starfish Software, Inc., a California
corporation ("Starfish"), Philippe Kahn ("Shareholder Representative"), and
("Exchange Agent").
RECITALS
A. Pursuant to that certain Agreement and Plan of Merger (the "Merger
Agreement") dated as of July 1, 1998, by and among Motorola, Sub and Starfish,
Starfish will be merged with and into Sub and Sub will continue to be the
surviving corporation and a wholly-owned subsidiary of Motorola (the
"Merger"). Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Merger Agreement.
B. This Exchange Agreement is being entered into pursuant to Section 2.2 of
the Merger Agreement. Execution and delivery of this Exchange Agreement is a
condition to the obligations of the parties to the Merger Agreement to
consummate the Merger.
C. As set forth in Section 11.9 of the Merger Agreement, by their approval
of the Merger Agreement and the Merger, the holders of shares of the capital
stock of Starfish (the "Former Holders") have authorized the Shareholder
Representative to act as their representative under this Exchange Agreement
and the Merger Agreement with the powers and authority provided herein and
therein.
D. Pursuant to the Merger, all of the issued and outstanding shares of the
capital stock of Starfish (assuming conversion or exercise of the outstanding
warrants to purchase shares of Starfish common stock) ("Starfish Capital
Stock"), other than shares owned directly by Motorola and Dissenting Shares
(as defined in Section 2.1 of the Merger Agreement), shall, by virtue of the
Merger and without any action on the part of Sub, Starfish, or the Former
Holders be canceled and converted into the right to receive the Merger
Consideration (as defined in Section 2.1 of the Merger Agreement).
E. Section 2.2 of the Merger Agreement provides that Motorola shall deposit
with the Exchange Agent, (i) certificates representing the shares of Motorola
Common Stock issuable pursuant to Section 2.1 of the Merger Agreement in
exchange for outstanding shares of Starfish Capital Stock and (ii) cash in the
amount sufficient to pay the cash portion of the Merger Consideration.
NOW, THEREFORE, in consideration of the entering into the Merger Agreement,
and for other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. Exchange Services.
(a) Merger Consideration Schedule. On or about the Effective Time (as
defined in Section 1.2 of the Merger Agreement), Starfish will furnish the
Exchange Agent with a copy of a schedule (the "Merger Consideration
Schedule"), substantially in the form attached hereto as Exhibit 1(a),
showing (i) the name and address of each of the Former Holders (other than
Motorola and holders of Dissenting Shares), (ii) the number of shares of
Starfish Capital Stock held by each Former Holder (other than Motorola and
holders of Dissenting Shares) as of the Effective Time, (iii) the
percentage interest of the total Starfish Capital Stock of each Former
Holder (other than Motorola and holders of Dissenting Shares) as of the
Effective Time (with respect to each Former Holder, its "Percentage
Interest"), (iv) the amount of cash payable to each Former Holder (other
than Motorola and holders of Dissenting Shares) as the Effective Time (the
"Initial Cash Merger Consideration"), (v) the number of shares of Motorola
Common Stock to be distributed to
B-1
<PAGE>
each Former Holder (other than Motorola and holders of Dissenting Shares)
(the "Initial Non-Cash Merger Consideration"), (vi) the amount of cash
payable to certain Former Holders (other than Motorola and holders of
Dissenting Shares) in lieu of the aforementioned Motorola Common Stock (the
"Fractional-Share Cash Amount"), (vii) the amount of cash payable to each
Former Holder (other than Motorola and holders of Dissenting Shares) over
the three year period following the Effective Time (the "Holdback Amount")
and (viii) the number of shares of Motorola Common Stock to be distributed
to each Former Holder (other than Motorola and holders of Dissenting
Shares) over the three year period following the Effective Time (the
"Escrowed Non-Cash Merger Consideration Shares").
(b) Initial Deposits by Motorola. At the Effective Time, Motorola shall
deposit with the Exchange Agent (i) the Initial Cash Merger Consideration,
(ii) the Initial Non-Cash Merger Consideration, (iii) the Fractional-Share
Cash Amount and (iv) the Escrowed Non-Cash Merger Consideration. Deposits
of the Holdback Amount shall be made as provided in Section 2 of the Merger
Agreement. In addition, Motorola shall deposit with the Exchange Agent
(less the amount of any applicable withholding taxes) all dividends and
other distributions with respect to the Initial Non-Cash Merger
Consideration and the Escrowed Non-Cash Merger Consideration with a record
date on or after the Effective Time. The account into which each of the
items referred to in this Section 1(b) is to be deposited shall be referred
to hereinafter as the "Exchange Fund."
(c) Distribution of Transmittal Letters. No later than three (3) business
days after the Effective Time, the Exchange Agent will mail by first class
mail, postage prepaid, to each Former Holder (i) a letter of transmittal in
form and substance reasonably satisfactory to the Shareholder
Representative (the "Letter of Transmittal") and (ii) instructions for use
in effecting the surrender of a certificate or certificates which
immediately prior to the Effective Time represented a share or shares of
Starfish Capital Stock (the "Certificates") in exchange for payments of
Merger Consideration.
(d) Telephone Requests. The Exchange Agent will accept and comply with
all telephone requests for information relative to the exchange of
Certificates in connection with the Merger.
(e) Payments to Former Holders. The Exchange Agent will make the
following payments out of the Exchange Fund to the Former Holders (other
than to Motorola and holders of Dissenting Shares):
(i) Upon receipt by the Exchange Agent from a Former Holder of (i)
the Certificate(s) or affidavits for lost certificate(s) (the
"Securities Documentation"), together with a properly completed and
executed Letter of Transmittal, (ii) a Form W-9 properly completed and
signed by such Former Holder, and (iii) such other documents as may be
reasonably required by the Exchange Agent (each, a "Documented Former
Holder"), the Exchange Agent will pay to such Former Holder (A) the
amount of cash set forth in the "Initial Cash Merger Consideration"
column, plus the amount of cash set forth in the "Fractional-Share Cash
Amount" column under such Former Holder's name on the Merger
Consideration Schedule, (B) a certificate representing the number of
shares of Motorola Common Stock set forth in the "Initial Non-Cash
Merger Consideration" column under such Former Holder's name on the
Merger Consideration Schedule, and (C) any dividends or other
distributions deposited by Motorola pursuant to Section 1(b) above with
respect to the Initial Non-Cash Merger Consideration. The Exchange
Agent shall reserve for future payment to each Former Holder who has
not submitted completed Securities Documentation and a Letter of
Transmittal (each, an "Undocumented Former Holder") that Former
Holder's share of the Initial Cash Merger Consideration, the Former
Holder's Fractional-Share Amount and the certificate representing such
Former Holder's share of the Initial Non-Cash Merger Consideration. In
addition, the Exchange Agent shall reserve for future payment to each
Undocumented Former Holder the amount of dividends or other
distributions deposited by Motorola pursuant to Section 1(b) above with
respect to the Initial Non-Cash Merger Consideration.
(ii) Subject to the provisions of Section 2.6 and Article XI of the
Merger Agreement, as soon as practicable (but in any event within five
(5) business days) after receipt of such funds from Motorola on the
six-month anniversary of the Closing Date, the Exchange Agent will pay
to each of the Documented Former Holders, for each share of Starfish
Capital Stock held by such holders, (A) an amount of cash equal to (x)
Five Million Dollars ($5,000,000), plus interest thereon for the period
from
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the Closing Date until paid at the Prime Rate as quoted by the Wall
Street Journal on the Closing Date, divided by (y) [THE NUMBER OF
SHARES OF STARFISH CAPITAL STOCK (OTHER THAN MOTOROLA SHARES)
OUTSTANDING ON THE CLOSING DATE], and (B) a number of shares of
Motorola Common Stock comprised in the Escrowed Non-Cash Merger
Consideration having a value equal to (x) Five Million Dollars
($5,000,000), divided by (y) [THE NUMBER OF SHARES OF STARFISH CAPITAL
STOCK (OTHER THAN MOTOROLA SHARES) OUTSTANDING ON THE CLOSING DATE].
The Exchange Agent shall also reserve for each Undocumented Former
Holder his or her share of the amount referred to in this Section
2(f)(ii) (for payment upon becoming a Documented Former Holder).
(iii) Subject to the provisions of Section 2.6 and Article XI of the
Merger Agreement, as soon as practicable (but in any event within five
(5) days) after receipt of such funds from Motorola on the one-year
anniversary of the Closing Date, the Exchange Agent will pay to each of
the Documented Former Holders, for each share of Starfish Capital Stock
held by such holders, (A) an amount of cash equal to (x) Five Million
Dollars ($5,000,000), plus interest thereon from the Closing Date until
paid at the Prime Rate as quoted by the Wall Street Journal on the
Closing Date, divided by (y) [THE NUMBER OF SHARES OF STARFISH CAPITAL
STOCK (OTHER THAN MOTOROLA SHARES) OUTSTANDING ON THE CLOSING DATE],
and (B) a number of shares of Motorola Common Stock comprised in the
Escrowed Non-Cash Merger Consideration having a value equal to (x) Five
Million Dollars ($5,000,000), divided by (y) [THE NUMBER OF SHARES OF
STARFISH CAPITAL STOCK (OTHER THAN MOTOROLA SHARES) OUTSTANDING ON THE
CLOSING DATE]. The Exchange Agent shall also reserve for each
Undocumented Former Holder his or her share of the amount referred to
in this Section 2(f)(iii) (for payment upon becoming a Documented
Former Holder).
(iv) Subject to the provisions of Section 2.6 and Article XI of the
Merger Agreement, as soon as practicable (but in any event within five
(5) business days) after receipt of such funds from Motorola on the
two-year anniversary of the Closing Date, the Exchange Agent will pay
to each of the Documented Former Holders, for each share of Starfish
Capital Stock held by such holders, (A) an amount of cash equal to (x)
Two Million Five Hundred Thousand Dollars ($2,500,000), plus interest
thereon from the Closing Date until paid at the Prime Rate as quoted by
the Wall Street Journal on the Closing Date, divided by (y) [THE NUMBER
OF SHARES OF STARFISH CAPITAL STOCK (OTHER THAN MOTOROLA SHARES)
OUTSTANDING ON THE CLOSING DATE], and (B) a number of shares of
Motorola Common Stock comprised in the Escrowed Non-Cash Merger
Consideration having a value equal to (x) Two Million Five Hundred
Thousand Dollars ($2,500,000), divided by (y) [THE NUMBER OF SHARES OF
STARFISH CAPITAL STOCK OUTSTANDING ON THE CLOSING DATE]. The Exchange
Agent shall also reserve for each Undocumented Former Holder his or her
share of the amount referred to in this Section 2(f)(iv) (for payment
upon becoming a Documented Former Holder).
(v) Subject to the provisions of Section 2.6 and Article XI of the
Merger Agreement, as soon as practicable (but in any event within five
(5) business days) after receipt of such funds from Motorola on the
three-year anniversary of the Closing Date, the Exchange Agent will pay
to each of the Documented Former Holders, for each share of Starfish
Capital Stock held by such holders, (A) an amount of cash equal to (x)
the balance of the Holdback Amount, plus interest thereon for the
period from the Closing Date until paid at the Prime Rate as quoted by
the Wall Street Journal on the Closing Date, divided by (y) [THE NUMBER
OF SHARES OF STARFISH CAPITAL STOCK (OTHER THAN MOTOROLA SHARES)
OUTSTANDING ON THE CLOSING DATE], and (B) a number of shares of
Motorola Common Stock equal to (x) the balance of the Escrowed Non-Cash
Merger Consideration divided by (y) [THE NUMBER OF SHARES OF STARFISH
CAPITAL STOCK (OTHER THAN MOTOROLA SHARES) OUTSTANDING ON THE CLOSING
DATE]. The Exchange Agent shall also reserve for each Undocumented
Former Holder his or her share of the amount referred to in this
Section 2(f)(v) (for payment upon becoming a Documented Former Holder).
Notwithstanding anything contained in this Section 1(e) to the contrary,
the Exchange Agent shall not issue checks to Former Holders for amounts
less than $100.00, except that the final payment under this Agreement to
any Former Holder shall have no minimum amount. Amounts less than $100.00
allocable to any Former Holder on any scheduled payment date shall be
retained in the Exchange Fund and cumulate
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for the benefit of such Former Holder until the earlier of (i) the first
scheduled payment for which the funds in the Exchange Fund allocable to
such Former Holder exceed $100.00 or (ii) the final payment to such Former
Holder. As used in this Exchange Agreement the value of a share of Motorola
Common Stock shall be $52.97.
(f) Discrepancies. The Exchange Agent will follow its regular procedures
to reconcile any discrepancies between the number of shares of Starfish
Capital Stock any Letter of Transmittal may indicate are owned by a
surrendering Former Holder and the number that the Merger Consideration
Schedule indicates was owned by the Former Holder immediately prior to the
Effective Time. In any instance where the Exchange Agent cannot reconcile
such discrepancies by following such procedures, the Exchange Agent will
consult with Motorola for instructions as to the number of shares of
Starfish Capital Stock, if any, the Exchange Agent is authorized to accept
for payment. In the absence of such instructions, the Exchange Agent is
instructed not to make any payment.
(g) Processing Letters of Transmittal. The Exchange Agent will examine
the Letters of Transmittal and Securities Documentation delivered or mailed
to the Exchange Agent to ascertain whether they have been completed and
executed in accordance with the instructions set forth in the Letter of
Transmittal and are in proper form for surrender. In the event any Letter
of Transmittal has not been properly completed or executed, or the
Securities Documentation is not in proper form for surrender or there is
some other irregularity in connection with the surrender, the Exchange
Agent will follow its regular procedures to cause such irregularity to be
corrected. In instances where any such irregularity is neither corrected
nor waived, as soon as practicable, the Exchange Agent will return to the
surrendering Former Holder (by first class mail under a blanket surety bond
or insurance protecting the Exchange Agent and Shareholder Representative
or by registered mail insured separately for replacement value, as the
Exchange Agent in its sole discretion determines) any Securities
Documentation in connection therewith, together with the Letters of
Transmittal and any other documents relating thereto and a letter of notice
explaining the reasons for the return of the Securities Documentation and
other documents.
(h) Date and Time Stamp. Each document received by the Exchange Agent
relating to the Exchange Agent's duties under this Agreement will be date
and time stamped when received.
(i) Payment to Person Other than Registered Holder. If payment is to be
made by the Exchange Agent to a person other than the person in whose name
the Securities Documentation is registered, the Exchange Agent will make no
payment until the Letter of Transmittal accompanying the Securities
Documentation has been properly endorsed (or otherwise put in proper form
for transfer), with a proper form of signature guaranty, and the person
requesting such payment has established to the Exchange Agent's
satisfaction either (i) that any transfer and other taxes or governmental
charges required by reason of such payment in a name other than that of the
registered holder of the Securities Documentation have been paid or (ii)
that no such tax or charge is payable.
(j) Lost, Stolen or Destroyed Certificates. If any Former Holder reports
to the Exchange Agent that his, her or its failure to surrender the
Certificate(s) registered in his, her or its name immediately prior to the
Effective Time according to the Merger Consideration Schedule is due to the
loss, theft or destruction of the Certificate(s), the Exchange Agent will
require such Former Holder to furnish an affidavit for such lost or
destroyed Certificate(s) in the form of Exhibit 1(j) hereto (and, if
required by Motorola, the posting by such Former Holder of a bond in such
reasonable amount as Motorola may direct as indemnity against any claim
that may be made against it with respect to such Certificate(s)). The
Exchange Agent will notify Motorola prior to making any payment under this
Section 1(j), and if Motorola does not require the posting of a bond within
five (5) business days of such notification, upon receipt of any such
affidavit, the Exchange Agent may effect payment to the Former Holder
pursuant to Section 1(e) above as though he, she or it had surrendered his,
her or its Certificate(s).
(k) Cancellation of Certificates. Upon the first payment to a Former
Holder by the Exchange Agent under Section 1(e)(i) above, the
Certificate(s) surrendered by such Former Holder will be physically
canceled by the Exchange Agent and delivered to Motorola for posting to the
stockholder records of the Starfish.
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(l) Exchange Reports. The Exchange Agent will forward to Motorola and the
Shareholder Representative a quarterly report of the Securities
Documentation surrendered and the aggregate amount of cash paid therefor.
If so instructed by the Shareholder Representative, the Exchange Agent will
prepare and forward such a report on a monthly basis.
(m) Tax Reporting. On or before January 31, 1999, 2000, 2001 and 2002,
the Exchange Agent will prepare and mail to each Former Holder, other than
Former Holders who demonstrate their status as nonresident aliens in
accordance with United States Treasury Regulations, a Form 1099-B and a
Form 1099-INT, in accordance with Treasury Regulations. The Exchange Agent
will also prepare and file copies of such Forms 1099-B and 1099-INT by
magnetic tape with the Internal Revenue Service, in accordance with
Treasury Regulations. If the Exchange Agent has not received notice from
the surrendering Former Holder of that Former Holder's certified Taxpayer
Identification Number, the Exchange Agent shall deduct and withhold backup
withholding tax from any cash payment pursuant to Treasury Regulations.
Should any issue arise regarding federal income tax reporting or
withholding, the Exchange Agent will take such action as Motorola and the
Shareholder Representative jointly instruct the Exchange Agent in writing.
The Shareholder Representative and Motorola jointly may modify or
supplement the federal tax reporting instructions to the Exchange Agent at
any time by notice in writing and the Exchange Agent shall comply with such
modified or supplemented instructions.
(n) Follow-up Letters. No later than six (6) months after the Effective
Time, the Exchange Agent will mail or cause to be mailed a follow-up letter
to all Former Holders who did not theretofore surrender their Certificates.
The follow up letter will be mailed with a Letter of Transmittal and return
envelope.
2. Escrow Services.
(a) Deposits by Motorola of the Holdback Amount. Subject to Section 2.6
and Article XI of the Merger Agreement Motorola shall deposit the Holdback
Amount into the Exchange Fund in accordance with Section 2 of the Merger
Agreement.
(b) Dividends; Voting and Rights of Ownership. Except for tax free
dividends paid in stock declared with respect to the Escrow Shares pursuant
to Section 305(a) of the Code ("Additional Shares"), any cash dividends,
dividends payable in securities or other distributions (each a "Dividend")
of any kind made in respect of the Shares comprising the Escrowed Non-Cash
Merger Consideration will be deposited by Motorola in the Exchange Fund.
Such Dividends will be distributed to the Former Holders by the Exchange
Agent as soon as practicable (but in no event later than five (5) days)
after receipt from Motorola. The Exchange Agent, on behalf of the Former
Holders, will have the right to vote, or not vote, the Shares comprising
the Escrowed Non-Cash Merger Consideration, or any portion thereof for the
account of the Former Holders so long as such Shares comprising the
Escrowed Non-Cash Merger Consideration are held in escrow, and Motorola
will take all steps necessary to allow the exercise of such rights and the
Exchange Agent shall promptly forward, or cause to be forwarded, copies of
any proxies, proxy statements and other soliciting materials to the
Shareholder Representative, and shall vote the Shares comprising the
Escrowed Non-Cash Merger Consideration in accordance with any written
instructions timely received by the Exchange Agent from the Shareholder
Representative. While the Shares comprising the Escrowed Non-Cash Merger
Consideration remain in the Exchange Agent's possession pursuant to this
Agreement, the Former Holders will retain and will be able to exercise all
other incidents of ownership of said Shares comprising the Escrowed Non-
Cash Merger Consideration that are not inconsistent with the terms and
conditions hereof.
(c) Release of Shares. The Shares comprising the Escrowed Non-Cash Merger
Consideration will be held by Exchange Agent until required to be released
pursuant to Section 1(f) above or Article XI of the Merger Agreement. The
delivery of the Shares comprising the Escrowed Non-Cash Merger
Consideration, or any portion thereof, will be in the form of stock
certificates issued in the name of such Holder. Motorola will take such
action as may be necessary to cause stock certificates to he issued in the
name of the Holder. Certificates representing Shares comprising the
Escrowed Non-Cash Merger Consideration held for the account of the
Documented Former Holders will bear a legend indicating that they are
subject to resale
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restrictions under Rule 145 promulgated under the Securities Act of 1933,
as amended. Cash will be paid in lieu of fractions of Shares comprising the
Escrowed Non-Cash Merger Consideration in an amount equal to the product
determined by multiplying such fraction by the Valuation Period Stock
Price.
(d) No Encumbrance. No Shares comprising the Escrowed Non-Cash Merger
Consideration or any beneficial interest therein may be pledged, sold,
assigned or transferred, including by operation of law, by the Holder or be
taken or reached by any legal or equitable process in satisfaction of any
debt or other liability of the Documented Former Holders, prior to the
delivery to such Holder of the Shares comprising the Escrowed Non-Cash
Merger Consideration by the Exchange Agent.
(e) Power to Transfer Shares comprising the Escrowed Non-Cash Merger
Consideration. The Exchange Agent is hereby granted the power to effect any
transfer of Shares comprising the Escrowed Non-Cash Merger Consideration
contemplated by this Agreement. Motorola will cooperate with the Exchange
Agent in promptly causing its transfer agent to issue stock certificates to
effect such transfers.
(f) Establishment and Investment of the Exchange Fund; Taxation of
Interest. The Exchange Agent agrees to establish the Exchange Fund and to
hold the funds deposited by Motorola into the Exchange Fund in escrow until
such time as it is required to disburse the funds in such Exchange Fund as
herein provided. The Exchange Agent agrees to invest and reinvest the funds
in the Exchange Fund in U.S. government securities, as directed by
Motorola, on a daily basis. Any interest and other earnings on the Exchange
Fund shall be paid to Motorola.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates more than six months
after the third anniversary of the Closing Date shall be delivered to
Motorola, upon demand, and any Former Holders who have not theretofore
complied with the requirements of Section 1(e)(i) above shall thereafter
look only to Motorola for payment of their claim for the Merger
Consideration and any cash in lieu of fractional shares or other dividends
or distributions payable to such Former Holders pursuant to Section 2.1 of
the Merger Agreement, in each case without interest thereon, except as may
apply with respect to the Holdback Amount.
3. Shareholder Representative.
(a) Authorization; Removal. From and after the Effective Time, the Former
Holders shall be represented hereunder by the Shareholder Representative.
The Shareholder Representative has been duly authorized to act on the
Former Holder's behalf by the affirmative vote of the holders of a majority
of the shares of the Company capital stock outstanding immediately prior to
the Effective Time. The Shareholder Representative has the power and
authority to bind all of the Former Holders with respect to the Shareholder
Representative's performance of this Agreement. A decision, act, consent or
instruction of the Shareholder Representative shall constitute a decision
of all Former Holders, and Motorola and the Exchange Agent may rely upon
any such decision, act, consent or instruction of the Shareholder
Representative as being the decision, act, consent or instruction of each
and every Former Holder. Notice or communications to or from the
Shareholder Representative shall constitute notice to or from each of the
Former Holders. The Shareholder Representative may be changed by the Former
Holders from time to time upon not less than ten (10) business days prior
written notice to Motorola; provided the Shareholder Representative may not
be removed unless a majority in interest of the Former Holders agree to
such removal and to the identity of the substituted Shareholder
Representative. In such event, the substitute Shareholder Representative
shall agree in writing to abide by the terms of this Agreement, and, upon
such written agreement, all parties hereto shall recognize the substitute
as the Shareholder Representative hereunder. No bond shall be required of
the Shareholder Representative, and the Shareholder Representative shall
receive no compensation for his or her services.
(b) Powers and Duties. The Shareholder Representative shall have the
following powers and duties: (A) to give and receive notices and
communications, (B) to employ accountants, attorneys, and other such agents
as the Shareholder Representative may deem available and to pay reasonable
compensation for their services, (C) to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to claims for
damages under Article XI
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of the Merger Agreement, and (D) to take all actions necessary or
appropriate in the judgment of the Shareholder Representative for the
accomplishment of the foregoing. The Shareholder Representative shall not
be liable for any act done or omitted hereunder as Shareholder
Representative while acting in good faith and in a manner not constituting
gross negligence, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith. The Former
Shareholders shall severally indemnify the Shareholder Representative and
hold him or her harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Shareholder
Representative and arising out of or in connection with the acceptance or
administration of the Shareholder Representative's duties hereunder. The
Shareholder Representative, with the consent of a majority in interest in
the Holdback Amount, may recover from the Holdback Amount the reasonable
costs and expenses incurred by the Shareholder Representative in connection
with acting as same.
4. Indemnification of the Exchange Agent. Motorola shall reimburse,
indemnify and hold harmless the Exchange Agent, its employees and agents
(referred to in this Section 5 severally and collectively as the "Exchange
Agent"), from and against any loss, damage, liability or claim suffered,
incurred by, or asserted against the Exchange Agent (including any amounts
paid in settlement of any action, suit, proceeding, or claim brought or
threatened to be brought and including expenses of legal counsel) arising out
of, in connection with or based upon any act or omission by the Exchange Agent
relating in any way to this Agreement or its services hereunder, so long as
the Exchange Agent has acted in good faith and in a manner not constituting
gross negligence. The right of the Exchange Agent to indemnification hereunder
shall survive its resignation or removal as the Exchange Agent and shall
survive the termination of this Agreement by lapse of time or otherwise. The
Exchange Agent shall have no right to indemnification from the Former Holders.
5. Fees. All fees and costs of the Exchange Agent shall be paid or
reimbursed from Motorola when and as incurred. A copy of the fee schedule of
the Exchange Agent is attached hereto as Exhibit 5 and incorporated herein by
this reference.
6. Limitations Upon the Exchange Agent's Duties. As the Exchange Agent under
this Agreement, the Exchange Agent:
(a) will have no duties or obligations other than those specifically set
forth in this Agreement or in a written supplement to this Agreement
delivered by the Shareholder Representative;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
any Securities Documentation surrendered to the Exchange Agent under this
Agreement and will not be required to and will make no representations as
to the validity, value or genuineness of the Merger;
(c) will not be obligated to take any legal action under this Agreement
which might, in the Exchange Agent's judgment, involve any expense or
liability unless the Exchange Agent has been furnished with indemnity
satisfactory to the Exchange Agent;
(d) may rely on and be fully protected in acting upon any certificate,
instrument, opinion, notice, letter, telegram or other document or security
delivered to the Exchange Agent and reasonably believed by the Exchange
Agent to be genuine and to have been signed by the proper party or parties
and may take the statements made therein as correct without any affirmative
duty of inquiry or investigation;
(e) will not be liable or responsible for any recital or statement
contained in the Letter of Transmittal or any other documents which are
prepared by persons other than the Exchange Agent or its counsel;
(f) will not be liable or responsible for any failure on the part of
Motorola, Starfish or the Shareholder Representative to comply with any of
their covenants and obligations contained in the Merger Agreement or any
other documents;
(g) may rely on and will be protected in acting upon the written or oral
instructions of the Company and its counsel prior to the Effective Time of
the Merger and the Shareholder Representative and its counsel after the
Effective Time of the Merger with respect to the Exchange Agent's duties
under this Agreement, and will not be liable for any action taken, suffered
or omitted by the Exchange Agent under this Agreement in accordance with
any such instructions; and
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(h) may consult with counsel satisfactory to the Exchange Agent, and the
opinion of such counsel will be full and complete authorization and
protection with respect to action taken, suffered or omitted by the
Exchange Agent under this Agreement in good faith and in accordance with
the opinion of such counsel.
In the event any question or dispute arises with respect to the proper
interpretation of the Merger Consideration Schedule, the Merger Agreement, the
Exchange Agent's duties under this Agreement or the rights of any party hereto
or of any Former Holder under the Merger Agreement, the Exchange Agent will
not be required to act and will not be held liable for refusal to act until
the question or dispute has been judicially settled (and the Exchange Agent
may, if the Exchange Agent in its sole discretion deems it advisable, but will
not be obligated to, file a suit in interpleader or for a declaratory judgment
for such purpose) by final judgment rendered by a court of competent
jurisdiction, binding upon Motorola, Starfish, the Shareholder Representative
and relevant Former Holders, which is no longer subject to review or appeal,
or settled by a written document in form and substance satisfactory to the
Exchange Agent and executed by each of such parties and Former Holders which,
in the Exchange Agent's opinion, is relevant to the matter. At the Exchange
Agent's option, the Exchange Agent may additionally require for such purpose,
but will not be obligated to require for such purpose, the execution of such
written settlement by the relevant Former Holders and any other parties that
may have an interest in the settlement.
7. Termination of Exchange Agreement. Motorola and the Shareholder
Representative may jointly terminate this Agreement at any time by so
notifying the Exchange Agent in writing. Unless so terminated, this Agreement
shall continue in effect until the date that the Exchange Fund has been
finally distributed pursuant to the terms of this Agreement. In the event of a
termination of this Agreement by Motorola prior to the time date that the
Exchange Fund has been finally distributed, Motorola shall appoint a successor
Exchange Agent that will be reasonably acceptable to the Shareholder
Representative and inform the Exchange Agent of the name and address of any
successor Exchange Agent, provided that no failure by Motorola to appoint such
a successor Exchange Agent shall affect the termination of this Agreement or
the discharge of the Exchange Agent as the Exchange Agent hereunder. Upon any
such termination, the Exchange Agent shall be relieved and discharged of any
further responsibilities with respect to its duties hereunder (other than the
Exchange Agent's responsibility to deliver the Former Holder's property to the
Shareholder Representative and to forward documents to Motorola pursuant to
the following sentence hereof). Upon payment of all of the Exchange Agent's
outstanding fees and expenses (other than fees and expenses of counsel of the
Exchange Agent arising from any dispute under this Agreement), the Exchange
Agent will, upon the Motorola's instruction, deliver to the Former Holders any
remaining funds which have been deposited with the Exchange Agent pursuant to
this Agreement, deliver to Motorola any records concerning prior payments to
and distributions from the Exchange Fund and exchanges of Certificates for
Merger Consideration and promptly forward, pursuant to Motorola's
instructions, any Certificates, Letters of Transmittal, or other documents
relating to its previous duties hereunder that the Exchange Agent may receive
after its appointment has so terminated. Sections 4, 5, 6, 7, 8, 9, 10, 11,
12, 13 and 14 of this Agreement shall survive for one year after the
termination of this Agreement. In the event of a termination of the Exchange
Agent or any successor of the Exchange Agent, the Exchange Agent will promptly
notify any Former Holders who have not been paid hereunder of such
termination, and, if a successor Exchange Agent has been appointed, of the
name and address of such successor.
8. Address for Notices. Any notice or other communication required or
permitted to be given to the parties hereunder shall be in writing and shall
be deemed to have been given if sent by registered or certified mail (return
receipt requested), by overnight courier or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address as the addressed party may have
substituted by notice pursuant to this Section):
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If to Motorola or Starfish: Motorola, Inc.
50 Commerce Drive
Schaumburg, IL 60173
Facsimile: (847) 538-0852
Attention: Jerry Upton
Copy to: Motorola, Inc.
Law Department
1303 E. Algonquin Road
Schaumburg, IL 60196
Facsimile: (847) 576-3628
Attention: General Counsel
If to the Former Holders or Shareholder Philippe Kahn
Representative: 333 Spreading Oaks
Scotts Valley, CA 95066
Facsimile: (408) 439-0958
Copy to: Gray Cary Ware & Freidenrich, LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Facsimile: (650) 327-3699
Attention: Peter M. Astiz, Esq.
If to the Exchange Agent:
-------------------------------------
-------------------------------------
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Facsimile: __________________________
Attention: __________________________
9. Successors and Assigns. This Agreement is binding upon and shall inure to
the benefit of the respective parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns; provided,
however, that any heirs, executors, administrators, successors and assigns
shall only be liable for any liabilities hereunder to the extent of the value
of the property or assets received from their respective predecessor in
interest. No party may assign its duties and responsibilities hereunder
without the written consent of the other parties thereto. Any company into
which the Exchange Agent may be merged or with which it may be consolidated,
or any company to whom the Exchange Agent may transfer a substantial amount of
its global escrow business, shall be the successor to the Exchange Agent
without the execution or filing of any paper or any further act on the part of
any party, anything herein to the contrary notwithstanding.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to
conflicts of laws principles.
11. Amicable Resolution.
(a) To the extent that any misunderstanding or dispute which arises among
the parties hereto cannot be resolved agreeably in a friendly manner, the
dispute will be mediated by a mutually-acceptable mediator to be chosen by
Motorola, the Shareholder Representative and the Exchange Agent within
forty-five (45) days after written notice by one of the parties demanding
mediation. No party may unreasonably withhold consent to the selection of a
mediator, however, by mutual agreement the parties may postpone mediation
until each has completed specified but limited discovery with respect to a
dispute. The parties may also agree to attempt some other form of
alternative dispute resolution ("ADR") in lieu of mediation, including by
way of example and without limitation neutral fact-finding or a mini-trial.
(b) Any dispute that the parties cannot resolve through negotiation,
mediation or other form of ADR within six (6) months of the date of the
initial demand for it by one of the parties may then be submitted to
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the courts for resolution. The use of any ADR procedures will not be
construed under the doctrines of laches, waiver or estoppel to affect
adversely the rights of either party. Nothing in this Section 11 will
prevent any party from resorting to judicial proceedings if (i) good faith
efforts to resolve the dispute under these procedures have been
unsuccessful or (ii) interim relief from a court is necessary to prevent
serious and irreparable injury to a party or to others.
12. Amendments. Any provision of this Agreement may be amended only by
agreement in writing signed by all of the signatories hereto.
13. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
14. Attorneys' Fees. In the event that any dispute arises with respect to
the subject matter of this Agreement, including a dispute resolved through
arbitration, the prevailing party(ies) shall be entitled to recover from the
losing party(ies) its or their reasonable attorneys' fees and legal costs and
expenses incurred in resolving or settling the dispute.
(This space intentionally left blank)
IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement
to be duly executed on the day and year first above written.
EXCHANGE AGENT MOTOROLA, INC.,
a Delaware corporation
- -------------------------------------
By: _________________________________
By: _________________________________ Name: _______________________________
Name: _______________________________ Title: ______________________________
Title: ______________________________
SS ACQUISITION CORPORATION,
STARFISH SOFTWARE, INC., a California corporation
a California corporation
By: _________________________________
By: _________________________________ Name: _______________________________
Name: _______________________________ Title: ______________________________
Title: ______________________________
SHAREHOLDER REPRESENTATIVE
- -------------------------------------
Philippe Kahn
B-10
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ANNEX C
CALIFORNIA CORPORATIONS CODE
CHAPTER 13
DISSENTERS' RIGHTS
(S) 1300 RIGHT TO REQUIRE PURCHASE--"DISSENTING SHARES" AND "DISSENTING
SHAREHOLDER" DEFINED
a. If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to
vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair
market value the shares owned by the shareholder which are dissenting shares
as defined in subdivision (b). The fair market value shall be determined as of
the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or
depreciation in consequence of the proposed action, but adjusted for any stock
split, reverse stock split or share dividend which becomes effective
thereafter.
b. As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
c. As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
(S) 1301 DEMAND FOR PURCHASE
a. If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined
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by the corporation to represent the fair market value of the dissenting
shares, and a brief description of the procedure to be followed if the
shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of
Section 1300, unless they lose their status as dissenting shares under Section
1309.
b. Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
c. The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such
price.
(S) 1302 ENDORSEMENT OF SHARES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
(S) 1303 AGREED PRICE--TIME FOR PAYMENT
a. If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
b. Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
(S) 1304 DISSENTER'S ACTION TO ENFORCE PAYMENT
a. If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152)
or notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
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b. Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
c. On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
(S) 1305 APPRAISER'S REPORT--PAYMENT--COSTS
a. If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of
any party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
b. If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time
as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
c. Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market
value of each dissenting share multiplied by the number of dissenting shares
which any dissenting shareholder who is a party, or who has intervened, is
entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
d. Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
e. The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than
125 percent of the price offered by the corporation under subdivision (a) of
Section 1301).
(S) 1306 DISSENTING SHAREHOLDER'S STATUS AS CREDITOR
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
(S) 1307 DIVIDENDS PAID AS CREDIT AGAINST PAYMENT
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
(S) 1308 CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING SHAREHOLDERS
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
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(S) 1309 TERMINATION OF DISSENTING SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
a. The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
b. The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
c. The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
d. The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(S) 1310 SUSPENSION OF PROCEEDINGS FOR PAYMENT PENDING LITIGATION
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
(S) 1311 EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect
to such shares in the event of a reorganization or merger.
(S) 1312 ATTACKING VALIDITY OF REORGANIZATION OR MERGER
a. No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set
aside or rescinded, except in an action to test whether the number of shares
required to authorize or approve the reorganization have been legally voted in
favor thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event
of a reorganization or short-form merger is entitled to payment in accordance
with those terms and provisions or, if the principal terms of the
reorganization are approved pursuant to subdivision (b) of Section 1202, is
entitled to payment in accordance with the terms and provisions of the
approved reorganization.
b. If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash
for such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
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c. If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable
as to the shareholders of any party so controlled.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Motorola is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any person who was, is or
is threatened to be made, part to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify any person who was, is or is
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
Article 7 of the Restated Certificate of Incorporation of Motorola provides
that no director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages arising from a breach of
fiduciary duty owed to the corporation or its shareholders to the fullest
extent permitted by the Delaware General Corporation Law.
Article 7 of the Restated Certificate of Incorporation further provides that
Motorola shall indemnify and hold harmless, to the fullest extent authorized
by the Delaware General Corporation Law, as the same exists or may be
hereafter amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights then said law permitted the corporation to provide prior to such
amendment), each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or
she, or a person of whom he or she is the legal representatives is or was a
director or officer of the corporation or is or was serving (at such time as
such person is or was a director or officer of the corporation) at the request
of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director or officer, employee or agent, against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall
continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators; provided, however, that, except as provided
below with respect to proceedings to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors. The
right to indemnification is a contract right and includes the right to be paid
by the corporation the expenses incurred in defending any
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such proceeding in advance of its final disposition; provided, however, that,
if and to the extent that the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the corporation of
an undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal than such indemnitee is not entitled
to be indemnified for such expenses.
Article 7 also provides that the corporation may, by action of the Board of
Directors or by action of any person to whom the Board of Directors has
delegated such authority, provide indemnification to employees and agents of
the corporation with the same scope and effect as the indemnification of
officers and directors.
The rights to indemnification and to the advancement of expenses conferred
in Article 7 shall not be exclusive of any other right which any person may
have or hereafter acquire under the Restated Certificate of Incorporation or
under any statute, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Article 7 of the Restated Certificate of Incorporation and further provides
that the corporation may maintain insurance, at its own expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
All of the directors and officers of Motorola are covered by insurance
policies maintained and held in effect by such corporation against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
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<C> <S> <C>
1 Underwriting Agreement dated October 7, 1997, by and
among Motorola, Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Goldman, Sachs & Co. and Morgan
Stanley & Co. Incorporated (incorporated by reference to
Exhibit 1 to Motorola's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 27, 1997).
2.1 Agreement and Plan of Merger, dated July 1, 1998, by and
among Motorola, Inc., SS Acquisition Corporation and
Starfish Software, Inc.
2.2 Amendment No. 1 to the Agreement and Plan of Merger,
dated July 24, 1998, by and among Motorola, Inc., SS Ac-
quisition Corporation, Phillippe Kahn, Sonia Lee Kahn
and Starfish Software, Inc.
3(i) Restated Certificate of Incorporation of Motorola, Inc.,
as amended, including Certificate of Designation, Pref-
erences and Rights for Junior Participating Preferred
Stock, Series A (incorporated by reference to Exhibit
3(i)(b) to Motorola's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 2, 1994).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
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<C> <S> <C>
3(ii) Bylaws of Motorola, Inc., as amended through July 16,
1997 (incorporated by reference to Exhibit 3(ii) to
Motorola's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 27, 1998).
4.1 Rights Agreement dated November 9, 1988 (incorporated by
reference to Exhibit (1) to Motorola's Registration
Statement on Form 8-A dated November 15, 1988).
4.2 Amendment to Rights Agreement dated August 7, 1990 (in-
corporated by reference to Exhibit 2 to Motorola's Form
8 dated August 9, 1990 amending Motorola's Registration
Statement on Form 8-A dated November 15, 1988).
4.3 Amendment No. 2 on Form 8 dated December 2, 1992, amend-
ing Motorola's Registration Statement on Form 8-A dated
November 15, 1988 (incorporated by reference to
Motorola's Form 8 dated December 2, 1992).
4.3(a) Amendment No. 3 on Form 8-A/A dated February 28, 1994,
amending Motorola's Registration Statement on Form 8-A
dated November 15, 1988 (incorporated by reference to
Motorola's Amendment No. 3 on Form 8-A/A dated February
28, 1994).
4.4 LYONs Indenture dated September 1, 1989 (incorporated by
reference to Exhibit 4(a) to Motorola's Registration
Statement on Form S-3, Registration No. 33-30662).
4.5 Indenture dated as of March 15, 1985, between Motorola,
Inc. and Harris Trust and Savings Bank, as Trustee, and
specimen of 8.40% Debentures due August 15, 2031 under
the Indenture (incorporated by reference to Exhibits
4(C) and 4(B), respectively, to Motorola's Current Re-
port on Form 8-K dated August 12, 1991).
4.6 Indenture dated as of October 1, 1991, between Motorola,
Inc. and Harris Trust and Savings Bank, as Trustee (in-
corporated by reference to Exhibit 4.5 to Motorola's An-
nual Report on Form 10-K for the fiscal year ended De-
cember 31, 1991).
4.7 Specimen of 7.60% Notes due January 1, 2007 (incorpo-
rated by reference to Exhibit 4.6 to Motorola's Annual
Report on Form 10-K for the fiscal year ended December
31, 1991).
4.8 Specimen of 6 1/2% Notes due March 1, 2008 (incorporated
by reference to Exhibit 4(B) to Motorola's Current Re-
port on Form 8-K dated March 1, 1993).
4.9 LYONs Indenture dated as of September 1, 1993 (incorpo-
rated by reference to Exhibit 4(v) to Motorola's Quar-
terly Report on Form 10-Q for the quarter ended October
2, 1993).
4.10 Indenture dated as of May 1, 1995, between Motorola,
Inc. and Harris Trust and Savings Bank, as Trustee (in-
corporated by reference to Exhibit 4(d) to Motorola's
Registration Statement on Form S-3, Registration No. 33-
56055).
4.11 Specimen of 7 1/2% Debentures due May 15, 2025 (incorpo-
rated by reference to Exhibit 4(B) to Motorola's Current
Report on Form 8-K dated May 15, 1995).
4.12 Specimen of 6 1/2% Debentures due September 1, 2025 (in-
corporated by reference to Exhibit 4.12 to Motorola's
Annual Report on Form 10-K for the fiscal year ended De-
cember 31, 1995).
4.13 Specimen of 5.22% Debentures due October 1, 2097 (incor-
porated by reference to Exhibit 4 to Motorola's Quar-
terly Report on Form 10-Q for the fiscal quarter ended
September 27, 1997).
5.1 Opinion of Carol H. Forsyte, Senior Counsel, Motorola
Corporate Law Department, regarding the legality of the
securities being registered.
8.1 Form of Opinion of Gray Cary Ware & Freidenrich LLP as
to tax matters.
8.2 Form of Opinion of Jackson Tufts Cole & Black, LLP as to
tax matters.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
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<C> <S> <C>
10.1 Motorola Executive Incentive Plan, as amended through
February 4, 1998 (incorporated by reference to Exhibit
3(ii) to Motorola's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 27, 1998).
10.2 Motorola Long Range Incentive Plan of 1994, as amended
through February 4, 1998 (incorporated by reference to
Exhibit 3(ii) to Motorola's Quarterly Report on Form
10-Q for the fiscal quarter ended June 27, 1998).
10.3 Share Option Plan of 1982, as amended through March 24,
1992 (incorporated by reference to Exhibit 10.3 to
Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, Exhibit 10.2(a) to
Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and Exhibit 10.3 to
Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992).
10.4 Share Option Plan of 1991, as amended through August 7,
1995 (incorporated by reference to Exhibit 10.4 to
Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 and Exhibit 10.4 to
Motorola's Report on Form 10-K for the fiscal year ended
December 31, 1995).
10.5 Resolutions Amending Sections 8 and 10(2) of the Share
Option Plan of 1982, and Resolutions Amending Sections 7
and 9(b) of the Share Option Plan of 1991, effective Au-
gust 15, 1996 (incorporated by reference to Exhibit 10.5
to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
10.6 Share Option Plan of 1996, as amended through May 7,
1997 (incorporated by reference to Exhibit 10 to
Motorola's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 28, 1997).
10.7 Motorola Elected Officers Supplementary Retirement Plan,
as amended through February 6, 1995 (incorporated by
reference to Exhibit 10.5 to Motorola's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994).
10.8 Executive Health Plan (incorporated by reference to Ex-
hibit 10.8 to Motorola's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996).
10.9 Accidental death and dismemberment insurance for MEIP
participants (incorporated by reference to Exhibit 10.7
to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990).
10.10 Arrangement for directors' fees and retirement plan for
non-employee directors (description incorporated by ref-
erence from pages 6 and 7 of Motorola's Proxy Statement
for the 1998 annual meeting of shareholders).
10.11 Deferred Fee Plan for Outside Directors, as amended Feb-
ruary 6, 1996 (incorporated by reference to Exhibit 10.9
to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.12 Motorola Non-Employee Directors Stock Plan, as amended
and restated on February 4, 1998. (incorporated by ref-
erence to Exhibit 3(ii) to Motorola's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 27,
1998).
10.13 Officers' Group Life Insurance Policy (incorporated by
reference to Exhibit 10.10 to Motorola's Annual Report
on Form 10-K for the fiscal year ended December 31,
1990).
10.14 Form of Termination Agreement in respect of a change in
control (incorporated by reference to Exhibit 10.15 to
Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S> <C>
10.15 Policy protecting salary and medical benefits of employ-
ees in the event of an unsolicited change in control
(incorporated by reference to Exhibit 10.16 to
Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990).
10.16 Insurance policy covering non-employee Directors (incor-
porated by reference to the description on page 7 of
Motorola's Proxy Statement for the 1998 annual meeting
of shareholders and to Exhibit 10.16 to Motorola's An-
nual Report on Form 10-K for the fiscal year ended De-
cember 31, 1989).
10.17 Iridium Space System Contract between Motorola, Inc. and
Iridium, Inc., as amended to date, and Iridium Communi-
cations Systems Operations and Maintenance Contract be-
tween Motorola, Inc. and Iridium, Inc., as amended to
date (incorporated by reference to Exhibits 99.2 and
99.3, respectively, to Motorola's Current Report on Form
8-K dated August 2, 1993 and Exhibits 99(a) and 99(b),
respectively, to Motorola's Quarterly Report on Form 10-
Q for the quarter ended October 1, 1994).
10.18 Motorola Incentive Plan of 1998 (incorporated by refer-
ence to Exhibit 10 to Motorola's Quarterly Report on
Form 10-Q for the quarter ended March 28, 1998).
11 Motorola, Inc. and Subsidiaries Basic and Diluted Earn-
ings Per Common Share.
21 Subsidiaries of Motorola (incorporated by reference to
Exhibit 21 of Motorola's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Carol H. Forsyte, Senior Counsel, Motorola
Corporate Law Department (included in Exhibit 5.1).
23.4 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 8.1).
23.5 Consent of Jackson Tufts Cole & Black, LLP (included in
Exhibit 8.2).
24 Powers of Attorney (included on Page II-7).
99.1 Starfish Software, Inc. Proxy Card.
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULE
The following schedule of Motorola for the three fiscal years ended December
31, 1997, 1996 and 1995 is incorporated by reference from Motorola's Annual
Report on Form 10-K for the year ended December 31, 1997 in this Registration
Statement on Form S-4. All other schedules have been omitted because they are
not applicable, or because the required information required is shown in the
consolidated financial statements or notes thereto.
Schedule II--Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS
(a) Motorola hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or event s arising after
the Effective Time of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
II-5
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Motorola hereby undertakes that, for purposes of determining any
liability under the securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Motorola hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), Motorola
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other Items of the applicable form.
(d) Motorola undertakes that every prospectus (i) that is filed pursuant to
paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) Motorola hereby undertakes to respond to requests for information that
is incorporated by reference into the Proxy Statement/Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the Effective Time of the Registration Statement through
the date of responding to the request.
(f) Motorola hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(g) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Motorola pursuant to the foregoing provisions, or otherwise, Motorola has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Motorola
of expenses incurred or paid by a director, officer or controlling person of
Motorola in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, Motorola will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
MOTOROLA HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE VILLAGE OF
SCHAUMBURG, ILLINOIS, AS OF JULY 24, 1998.
Motorola, Inc.
/s/ Christopher B. Galvin
By: _________________________________
Christopher B. Galvin
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Carl F. Koenemann and Kenneth J. Johnson and
each of them, as true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution for him and in his name, place and stead,
in any and all capacities to sign any and all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Christopher B. Galvin Chief Executive Officer and 7/21/98
____________________________________ Director (Principal
Christopher B. Galvin Executive Officer)
/s/ Carl F. Koenemann Executive Vice President and 7/21/98
____________________________________ Chief Financial Officer
Carl F. Koenemann (Principal Financial
Officer)
/s/ Kenneth J. Johnson Senior Vice President and 7/20/98
____________________________________ Controller (Principal
Kenneth J. Johnson Accounting Officer)
/s/ Ronnie C. Chan Director 7/22/98
____________________________________
Ronnie C. Chan
/s/ H. Laurance Fuller Director 7/23/98
____________________________________
H. Laurance Fuller
/s/ Robert W. Galvin Director 7/22/98
____________________________________
Robert W. Galvin
/s/ Robert L. Growney Director 7/20/98
____________________________________
Robert L. Growney
/s/ Anne P. Jones Director 7/20/98
____________________________________
Anne P. Jones
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald R. Jones Director 7/22/98
____________________________________
Donald R. Jones
/s/ Judy C. Lewent Director 7/21/98
____________________________________
Judy C. Lewent
/s/ Walter E. Massey Director 7/21/98
____________________________________
Walter E. Massey
/s/ Thomas J. Murrin Director 7/21/98
____________________________________
Thomas J. Murrin
/s/ Nicholas Negroponte Director 7/24/98
____________________________________
Nicholas Negroponte
/s/ John E. Pepper, Jr. Director 7/20/98
____________________________________
John E. Pepper, Jr.
/s/ Samuel C. Scott III Director 7/21/98
____________________________________
Samuel C. Scott III
/s/ Gary L. Tooker Director 7/20/98
____________________________________
Gary L. Tooker
/s/ B. Kenneth West Director 7/23/98
____________________________________
B. Kenneth West
/s/ John A. White Director 7/24/98
____________________________________
John A. White
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Underwriting Agreement dated October 7, 1997, by and among Motorola,
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman,
Sachs & Co. and Morgan Stanley & Co. Incorporated (incorporated by
reference to Exhibit 1 to Motorola's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 27, 1997).
2.1 Agreement and Plan of Merger, dated July 1, 1998, by and among
Motorola, Inc., SS Acquisition Corporation and Starfish Software, Inc.
2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated July 24,
1998, by and among Motorola, Inc., SS Acquisition Corporation,
Phillippe Kahn, Sonia Lee Kahn and Starfish Software, Inc.
3(i) Restated Certificate of Incorporation of Motorola, Inc., as amended,
including Certificate of Designation, Preferences and Rights for
Junior Participating Preferred Stock, Series A (incorporated by
reference to Exhibit 3(i)(b) to Motorola's Quarterly Report on Form
10-Q for the fiscal quarter ended April 2, 1994).
3(ii) Bylaws of Motorola, Inc., as amended through July 16, 1997
(incorporated by reference to Exhibit 3(ii) to Motorola's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 27, 1998).
4.1 Rights Agreement dated November 9, 1988 (incorporated by reference to
Exhibit (1) to Motorola's Registration Statement on Form 8-A dated
November 15, 1988).
4.2 Amendment to Rights Agreement dated August 7, 1990 (incorporated by
reference to Exhibit 2 to Motorola's Form 8 dated August 9, 1990
amending Motorola's Registration Statement on Form 8-A dated November
15, 1988).
4.3 Amendment No. 2 on Form 8 dated December 2, 1992, amending Motorola's
Registration Statement on Form 8-A dated November 15, 1988
(incorporated by reference to Motorola's Form 8 dated December 2,
1992).
4.3(a) Amendment No. 3 on Form 8-A/A dated February 28, 1994, amending
Motorola's Registration Statement on Form 8-A dated November 15,1988
(incorporated by reference to Motorola's Amendment No. 3 on Form 8-A/A
dated February 28, 1994).
4.4 LYONs Indenture dated September 1, 1989 (incorporated by reference to
Exhibit 4(a) to Motorola's Registration Statement on Form S-3,
Registration No. 33-30662).
4.5 Indenture dated as of March 15, 1985, between Motorola, Inc. and
Harris Trust and Savings Bank, as Trustee, and specimen of 8.40%
Debentures due August 15, 2031 under the Indenture (incorporated by
reference to Exhibits 4(C) and 4(B), respectively, to Motorola's
Current Report on Form 8-K dated August 12, 1991).
4.6 Indenture dated as of October 1, 1991, between Motorola, Inc. and
Harris Trust and Savings Bank, as Trustee (incorporated by reference
to Exhibit 4.5 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991).
4.7 Specimen of 7.60% Notes due January 1, 2007 (incorporated by reference
to Exhibit 4.6 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991).
4.8 Specimen of 6 1/2% Notes due March 1, 2008 (incorporated by reference
to Exhibit 4(B) to Motorola's Current Report on Form 8-K dated March
1, 1993).
4.9 LYONs Indenture dated as of September 1, 1993 (incorporated by
reference to Exhibit 4(v) to Motorola's Quarterly Report on Form 10-Q
for the quarter ended October 2, 1993).
4.10 Indenture dated as of May 1, 1995, between Motorola, Inc. and Harris
Trust and Savings Bank, as Trustee (incorporated by reference to
Exhibit 4(d) to Motorola's Registration Statement on Form S-3,
Registration No. 33-56055).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.11 Specimen of 7 1/2% Debentures due May 15, 2025 (incorporated by
reference to Exhibit 4(B) to Motorola's Current Report on Form 8-K
dated May 15, 1995).
4.12 Specimen of 6 1/2% Debentures due September 1, 2025 (incorporated by
reference to Exhibit 4.12 to Motorola's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
4.13 Specimen of 5.22% Debentures due October 1, 2097 (incorporated by
reference to Exhibit 4 to Motorola's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 27, 1997).
5.1 Opinion of Carol H. Forsyte, Senior Counsel, Motorola Corporate Law
Department, regarding the legality of the securities being registered.
8.1 Form of Opinion of Gray Cary Ware & Freidenrich LLP as to tax matters.
8.2 Form of Opinion of Jackson Tufts Cole & Black, LLP as to tax matters.
10.1 Motorola Executive Incentive Plan, as amended through February 4, 1998
(incorporated by reference to Exhibit 3(ii) to Motorola's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 27, 1998).
10.2 Motorola Long Range Incentive Plan of 1994, as amended through
February 4, 1998 (incorporated by reference to Exhibit 3(ii) to
Motorola's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 27, 1998).
10.3 Share Option Plan of 1982, as amended through March 24, 1992
(incorporated by reference to Exhibit 10.3 to Motorola's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990, Exhibit
10.2(a) to Motorola's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991 and Exhibit 10.3 to Motorola's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992).
10.4 Share Option Plan of 1991, as amended through August 7, 1995
(incorporated by reference to Exhibit 10.4 to Motorola's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 and Exhibit
10.4 to Motorola's Report on Form 10-K for the fiscal year ended
December 31, 1995).
10.5 Resolutions Amending Sections 8 and 10(2) of the Share Option Plan of
1982, and Resolutions Amending Sections 7 and 9(b) of the Share Option
Plan of 1991, effective August 15, 1996 (incorporated by reference to
Exhibit 10.5 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996).
10.6 Share Option Plan of 1996, as amended through May 7, 1997
(incorporated by reference to Exhibit 10 to Motorola's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 28, 1997).
10.7 Motorola Elected Officers Supplementary Retirement Plan, as amended
through February 6, 1995 (incorporated by reference to Exhibit 10.5 to
Motorola's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994).
10.8 Executive Health Plan (incorporated by reference to Exhibit 10.8 to
Motorola's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
10.9 Accidental death and dismemberment insurance for MEIP participants
(incorporated by reference to Exhibit 10.7 to Motorola's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990).
10.10 Arrangement for directors' fees and retirement plan for non-employee
directors (description incorporated by reference from pages 6 and 7 of
Motorola's Proxy Statement for the 1998 annual meeting of
shareholders).
10.11 Deferred Fee Plan for Outside Directors, as amended February 6, 1996
(incorporated by reference to Exhibit 10.9 to Motorola's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.12 Motorola Non-Employee Directors Stock Plan, as amended and restated on
February 4, 1998 (incorporated by reference to Exhibit 3(ii) to
Motorola's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 27, 1998).
10.13 Officers' Group Life Insurance Policy (incorporated by reference to
Exhibit 10.10 to Motorola's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990).
10.14 Form of Termination Agreement in respect of a change in control
(incorporated by reference to Exhibit 10.15 to Motorola's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989).
10.15 Policy protecting salary and medical benefits of employees in the
event of an unsolicited change in control (incorporated by reference
to Exhibit 10.16 to Motorola's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990).
10.16 Insurance policy covering non-employee Directors (incorporated by
reference to the description on page 7 of Motorola's Proxy Statement
for the 1998 annual meeting of shareholders and to Exhibit 10.16 to
Motorola's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
10.17 Iridium Space System Contract between Motorola, Inc. and Iridium,
Inc., as amended to date, and Iridium Communications Systems
Operations and Maintenance Contract between Motorola, Inc. and
Iridium, Inc., as amended to date (incorporated by reference to
Exhibits 99.2 and 99.3, respectively, to Motorola's Current Report on
Form 8-K dated August 2, 1993 and Exhibits 99(a) and 99(b),
respectively, to Motorola's Quarterly Report on Form 10-Q for the
quarter ended October 1, 1994).
10.18 Motorola Incentive Plan of 1998 (incorporated by reference to Exhibit
10 to Motorola's Quarterly Report on Form 10-Q for the quarter ended
March 28, 1998).
11 Motorola, Inc. and Subsidiaries Basic and Diluted Earnings Per Common
Share.
21 Subsidiaries of Motorola (incorporated by reference to Exhibit 21 of
Motorola's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Carol H. Forsyte, Senior Counsel, Motorola Corporate Law
Department (included in Exhibit 5.1).
23.4 Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 8.1).
23.5 Consent of Jackson Tufts Cole & Black, LLP (included in Exhibit 8.2).
24 Powers of Attorney (included on Page II-7).
99.1 Starfish Software, Inc. Proxy Card.
</TABLE>
<PAGE>
ANNEX A1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into this
1st day of July 1998, by and among MOTOROLA, INC., a Delaware corporation
("Motorola"), SS ACQUISITION CORPORATION, a California corporation and a
wholly-owned subsidiary of Motorola ("Sub"), and STARFISH SOFTWARE, INC., a
California corporation ("Starfish"). Certain other capitalized terms used in
this Agreement are defined in Exhibit A attached hereto.
RECITALS
WHEREAS, Starfish, Motorola and Sub believe it is in the best interests of
each company, the shareholders of Motorola and the shareholders of Starfish
that Motorola acquire Starfish through the statutory merger of Starfish with
and into Sub pursuant to which Sub shall continue as the surviving corporation
and as a wholly-owned subsidiary of Motorola (the "Merger");
WHEREAS, pursuant to the Merger, among other things, each issued and
outstanding share of capital stock of Starfish (assuming conversion or
exercise of the outstanding warrants to purchase shares of Starfish common
stock) ("Starfish Capital Stock"), other than shares owned directly by
Motorola and Dissenting Shares (as defined in Section 2.1 below), will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1(d));
WHEREAS, Starfish shareholders holding approximately 49% of the Starfish
Common Stock and approximately one percent (1%) of the Series B Preferred
Stock have entered into Voting Agreements substantially in the form attached
hereto as Exhibit B (the "Voting Agreements") pursuant to which such
shareholders, among other things, have agreed to vote their shares of Starfish
Capital Stock in favor of the Merger;
WHEREAS, for federal income tax purposes, it is intended that (i) the Merger
shall qualify as a reorganization, and (ii) this Agreement (and the other
agreements entered into in connection herewith) shall qualify as a plan of
reorganization within the meaning of the regulations issued pursuant to
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger.
NOW, THEREFORE, in reliance on the foregoing recitals and in and for the
consideration and mutual covenants set forth herein, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2 below) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California Corporations Code (the "California
Code"), Starfish shall be merged with and into Sub, the separate corporate
existence of Starfish shall cease and Sub shall continue as the surviving
corporation and as a wholly-owned subsidiary of Motorola. Sub, as the
surviving corporation after the Merger, is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Closing; Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 10.1 below, the closing of the Merger ("Closing") will
take place as promptly as practicable, but no later than five (5) business
days following satisfaction or waiver of the conditions set forth in Article
VIII and Article IX, at the offices of Jackson Tufts Cole & Black, LLP, 60
South Market Street, San Jose, California, unless another place or time is
agreed to in writing by Motorola and Starfish. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing an
agreement of merger in the form required by the California Code with the
Secretary of State of
A1-1
<PAGE>
California (the "Merger Articles"), in accordance with the relevant provisions
of applicable law (the later to occur of the time of acceptance by the
Secretary of State of California of such filing being referred to herein as
the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the California Code.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
Starfish and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Starfish and Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Sub shall be the
Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation.
(b) At the Effective Time, the Bylaws of Sub shall be the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. At the Effective Time, each member of the Board
of Directors of Sub immediately prior to the Effective Time shall become a
member of the Board of Directors of the Surviving Corporation (the "Surviving
Corporation Board"). Immediately following the Effective Time, each officer of
Sub immediately prior to the Effective Time shall become an officer of the
Surviving Corporation, each to hold office in accordance with the Bylaws of
the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Conversion of Capital Stock.
(a) As of the Effective Time, each share of Starfish Common Stock and each
share of Starfish Series A Preferred Stock (collectively, the "Starfish
Shares") that is issued and outstanding immediately prior to the Effective
Time of the Merger (except for those Starfish Shares held of record by
Motorola and Dissenting Shares) shall, by virtue of the Merger and without any
action on the part of Motorola, Sub, Starfish, or the shareholders of
Starfish, be canceled and extinguished and each Starfish Share then
outstanding shall be converted into the right to receive:
(i) an amount in cash equal to Two Dollars and Ninety-Five Cents ($2.95)
per share (together with the amount payable pursuant to Section 2.1(b)(i),
the "Initial Cash Merger Consideration");
(ii) a number of shares of Common Stock, $3.00 par value per share, of
Motorola and any rights attaching to such stock pursuant to that certain
Rights Agreement dated as of November 9, 1988 (as amended through the date
hereof), by and between Motorola and Harris Trust and Savings Bank
("Motorola Common Stock"), equal to the quotient (calculated to the nearest
0.0001) of (A) Two Dollars and Ninety-Five Cents ($2.95) (together with the
shares issuable pursuant to Section 2.1(b)(ii), the "Initial Non-Cash
Merger Consideration") divided by (B) the Valuation Period Stock Price;
(iii) a conditional amount of cash equal to Fifty-Five Cents ($0.55)
(together with the amount payable pursuant to Section 2.1(b)(iii), the
"Holdback Amount"); and
(iv) a conditional number of shares of Motorola Common Stock equal to the
quotient (calculated to the nearest 0.0001) of (A) Fifty-Five Cents ($0.55)
(together with the shares issuable pursuant to Section 2.1(b)(iv), the
"Escrowed Non-Cash Merger Consideration") divided by (B) the Valuation
Period Stock Price.
(b) As of the Effective Time, each share of Starfish Series B Preferred
Stock ("Starfish Series B Shares") that is issued and outstanding immediately
prior to the Effective Time of the Merger (except for those Starfish Series B
Shares of held of record by Motorola and Dissenting Shares) shall, by virtue
of the Merger and without
A1-2
<PAGE>
any action on the part of Motorola, Sub, Starfish, or the shareholders of
Starfish, be canceled and extinguished and each Starfish Series B Share then
outstanding shall be converted into the right to receive:
(i) an amount in cash equal to Twenty-Nine Dollars and Fifty Cents
($29.50) per share;
(ii) a number of shares of Motorola Common Stock, equal to the quotient
(calculated to the nearest 0.0001) of (A) Twenty-Nine Dollars and Fifty
Cents ($29.50) divided by (B) the Valuation Period Stock Price;
(iii) a conditional amount of cash equal to Five Dollars and Fifty Cents
($5.50); and
(iv) a conditional number of shares of Motorola Common Stock equal to the
quotient (calculated to the nearest 0.0001) of (A) Five Dollars and Fifty
Cents ($5.50) divided by (B) the Valuation Period Stock Price.
(c) If between the date of this Agreement and the Effective Time the
outstanding shares of Motorola Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares, the exchange ratios set forth in Sections 2.1(a)(ii)
and (iv) and 2.1(b)(ii) and (iv) above shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. The "Valuation Period Stock Price"
means $52.97.
(d) The Initial Merger Consideration, the Initial Non-Cash Merger
Consideration, the Holdback Amount and the Escrowed Non-Cash Merger
Consideration (as adjusted pursuant to this Agreement) shall constitute the
"Merger Consideration" which shall be payable per share in accordance with the
provisions of Section 2.2 below. All such Starfish Shares, when so converted,
and all the Starfish Shares held of record by Motorola, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate presenting any such shares shall cease
to have any rights with respect thereto, except the right to receive the
Merger Consideration represented by such certificate upon the surrender of
such certificate in accordance with Section 2.2, without interest. No
fractional shares of Motorola Common Stock shall be issued and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.2(e). "Dissenting
Share" means any Starfish Share in respect of which any Starfish Shareholder
has exercised his or its dissenters rights under the California Code.
2.2 Exchange of Certificates.
(a) Exchange Agent. Motorola shall deposit with such bank or trust company
as may be designated by Motorola (the "Exchange Agent") appointed pursuant to
the terms of the Exchange Agreement substantially in the form attached hereto
as Exhibit C (the "Exchange Agreement"), for the benefit of the holders of
shares of Starfish Capital Stock, for exchange in accordance with this Article
II, through the Exchange Agent, (i) as of the Effective Time certificates
representing the Initial Non-Cash Merger Consideration and the Escrowed Non-
Cash Merger Consideration and (ii) as of the Effective Time cash in the amount
sufficient to pay the Initial Cash Merger Consideration, and (iii) on each of
six (6) months following the Closing Date and the first (1st), second (2nd)
and third (3rd) anniversaries of the Closing Date and such time as all claims
by Motorola with respect to the Holdback Amount have been determined without
possibility of appeal, cash in the amount specified in Section 2.2(b) in
respect of the Holdback Amount (such shares and cash consideration, together
with any dividends or distributions with respect thereto with a record date on
or after the day on which the Effective Time occurs and any cash payable in
lieu of any fractional shares of Motorola Common Stock being hereinafter
referred to as the "Exchange Fund").
(b) Exchange Procedures. No later than three business days after the
Effective Time, the Exchange Agent shall, in accordance with the terms of the
Exchange Agreement, mail to each holder of record of a Certificate or
Certificates immediately prior to the Effective Time, whose shares were
converted into the right to receive the Merger Consideration pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Motorola may reasonably specify)
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and (ii) instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration (collectively, the "Letter of
Transmittal"). Upon the later of the Effective Time or the surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Motorola, together with such Letter of
Transmittal, duly executed, and such other documents as may be reasonably
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing the
number of whole shares of Motorola Common Stock constituting the Initial Non-
Cash Merger Consideration payable to such holder and (y) a certified or bank
cashier's check in the amount equal to the cash that such holder has the right
to receive pursuant to the provisions of this Article II in respect of the
Initial Cash Merger Consideration payable to such holder and fractional shares
(in each case, less the amount of any withholding taxes required under
applicable law), and the Certificate so surrendered shall forthwith be
canceled. Six (6) months following the Closing Date, Motorola shall deposit
Five Million Dollars ($5,000,000); on the first (1st) anniversary of the
Closing Date, Motorola shall deposit Five Million Dollars ($5,000,000); on the
second (2nd) anniversary of the Closing Date, Motorola shall deposit Two
Million Five Hundred Thousand Dollars ($2,500,000); and on the third (3rd)
anniversary of the Closing Date Motorola shall deposit the balance of the
Holdback Amount in each case as such amount may be adjusted in accordance with
Section 2.6 below, plus interest thereon as determined in the manner set forth
below, in the Exchange Fund, for distribution by the Exchange Agent in
accordance with the terms of the Exchange Agreement. The interest to be added
to the amount of the Holdback Amount paid on each anniversary of the Closing
Date (as provided for by the previous sentence) shall be calculated as
follows: (i) at the end of the sixth (6th) month following the Closing Date,
interest shall be paid for the six (6) month period from the Closing Date
until paid on Five Million Dollars ($5,000,000) as adjusted by any adjustments
to the Holdback Amount made since the Closing Date in accordance with Section
2.6, at the Prime Rate as quoted by the Wall Street Journal on the Closing
Date, (ii) on the first (1st) anniversary of the Closing Date, interest shall
be paid for the period from the Closing Date until paid on Five Million
Dollars ($5,000,000) as adjusted by any adjustments to the Holdback Amount
made since the Closing Date in accordance with Section 2.6, at the Prime Rate
as quoted by the Wall Street Journal on the Closing Date, (iii) on the second
(2nd) anniversary of the Closing Date, interest shall be paid for the period
from the Closing Date until paid on Two Million Five Hundred Thousand Dollars
($2,500,000) as adjusted by any adjustments to the Holdback Amount made since
the Closing Date in accordance with Section 2.6, at the Prime Rate as quoted
by the Wall Street Journal on the date of the preceding anniversary of the
Closing Date; and (iv) on the third (3rd) anniversary, interest shall be paid
for the period from the Closing Date until paid on the balance of the Holdback
Amount as adjusted by any adjustments to the Holdback Amount made since the
Closing Date in accordance with Section 2.6 and less any Holdback Amount
deposited with the Exchange Agent on or prior to the preceding anniversary, at
the Prime Rate as quoted by the Wall Street Journal on the date of the
preceding anniversary of the Closing Date. In the event of a transfer of
ownership of Starfish Capital Stock which is not registered in the transfer
records of Starfish, a certificate representing the proper number of shares of
Motorola Common Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required
by reason of the issuance of shares of Motorola Common Stock to a person other
than the registered holder of such Certificate or establish to the
satisfaction of Motorola that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2(b), each Certificate
(other than those representing Dissenting Shares) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration and any cash in lieu of a fractional share
of Motorola Common Stock which the holder thereof has the right to receive in
respect of such Certificate pursuant to this Article II. Except as set forth
with respect to the Holdback Amount, no interest will be paid or will accrue
on any cash payable to holders of Certificates pursuant to this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding any
other provisions of this Agreement, no dividends or other distributions with
respect to shares of Motorola Common Stock with a record date on or after the
day on which the Effective Time occurs shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Motorola Common Stock
represented thereby, and no cash in lieu of a fractional share of Motorola
Common Stock shall be paid to any such holder pursuant to this Article II, and
all
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such dividends, other distributions and cash in lieu of any fractional share
of Motorola Common Stock shall be paid by Motorola to the Exchange Agent (less
the amount of any required withholding taxes) and shall be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article II. Following surrender of any such Certificate,
there shall be issued or paid, as applicable, to the holder thereof (i) at the
time of such surrender, (x) a certificate representing whole shares of the
Initial Non-Cash Merger Consideration issued in exchange therefor, (y) the
portion of the Initial Cash Merger Consideration and any cash payable in lieu
of a fractional share of Motorola Common Stock to which such holder is
entitled pursuant to this Article II and (z) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Motorola Common Stock (in each case,
without interest and less the amount of any required withholding taxes); and
(ii) at the appropriate payment date, (x) the amount of any dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Motorola Common Stock and (y) the portion of
the Holdback Amount and the Escrowed Non-Cash Merger Consideration to which
such holder is entitled pursuant to this Article II and the Exchange
Agreement.
(d) No Further Ownership Rights in Starfish Capital Stock. All shares of
Motorola Common Stock issued and cash paid upon the surrender for exchange of
Certificates in accordance with this Article II shall be deemed to have been
issued (and paid) in full satisfaction of all rights pertaining to the shares
of Starfish Capital Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay (i) any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by Starfish on such shares
of Starfish Capital Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time and (ii) the Holdback Amount, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Starfish Capital Stock which were outstanding immediately prior to
the Effective Time. Subject to applicable law, Certificates presented after
the Effective Time to the Surviving Corporation or the Exchange Agent for any
reason shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Motorola
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Motorola shall relate to such
fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Motorola.
(ii) Notwithstanding any other provision of this Agreement, each holder
of record of shares of Starfish Capital Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a
share of Motorola Common Stock (after taking into account all shares and
Certificates delivered by such holder of record) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part
of a share of Motorola Common Stock multiplied by the Valuation Period
Stock Price.
(f) Termination of Exchange Fund. The Exchange Fund shall terminate in
accordance with the terms of the Exchange Agreement.
(g) No Liability. None of Motorola, Sub, Starfish and the Exchange Agent
shall be liable to any person in respect of any shares of Motorola Common
Stock (or any dividends or distributions with respect thereto or with respect
to any shares of Starfish Capital Stock theretofore represented by any
Certificate) or any cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificate shall not have been surrendered prior to the date on which any
Merger Consideration or any cash in lieu of a fractional share of Motorola
Common Stock or other dividends or distributions payable to the holder of such
Certificate pursuant to this Article II would otherwise escheat to or become
the property of any Governmental Body (as defined in Exhibit A), any such
Merger Consideration or cash or other dividends or distributions shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person
previously entitled thereto.
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(h) Lost, Stolen and Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or destroyed and,
if required by Motorola, the posting by such person of a bond in such
reasonable amount as Motorola may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration, cash in lieu of a fractional share of Motorola Common
Stock and unpaid dividends and distribution on shares of Motorola Common Stock
as provided in this Article II, deliverable in respect thereof pursuant to
this Agreement.
2.3 Stock Options.
(a) At the Effective Time and subject to Section 6.6 each option granted by
Starfish to purchase shares of Starfish Common Stock (each, a "Starfish
Option") which is outstanding immediately prior thereto shall cease to
represent a right to acquire shares of Starfish Common Stock and shall be
assumed automatically by Motorola and converted automatically into an option
(the "Exchanged Option") to purchase shares of Motorola Common Stock
exercisable until the current termination of the Starfish Option in an amount
and at an exercise price determined as provided below (and subject to the
terms of the 1995 Stock Option Plan and the 1997 Stock Option Plan of Starfish
(the "Starfish Stock Plans") and the agreements evidencing such grants:
(i) The number of shares of Motorola Common Stock to be subject to each
Exchanged Option shall be equal to the product of the number of shares of
Starfish Common stock subject immediately prior to the Effective Time to
the Starfish Option to be converted into such Exchanged Option and the
Option Exchange Ratio, provided that any fractional share of Motorola
Common Stock resulting from such multiplication shall be rounded down to
the nearest share; and
(ii) The exercise price per share of Motorola Common Stock under the
Exchanged Option shall be equal to the exercise price per share of Starfish
Common Stock under the Starfish Option to be converted into such Exchanged
Option divided by the Option Exchange Ratio, provided that such exercise
price shall be rounded up to the nearest one-tenth of a cent; and
(iii) provided further, however, that with respect to each Starfish
Option which, immediately prior to the Effective Time, is intended to
qualify as an "incentive stock option" within the meaning of Section 422(b)
of the Code, the number of shares of Motorola Common Stock subject to the
Exchanged Option into which such Starfish Option is converted and the
exercise price, terms and conditions of such Exchanged Option shall be
determined in compliance with the requirements of Section 424(a) of the
Code.
For purposes of this Agreement, the "Option Exchange Ratio" shall be
calculated as Seven Dollars ($7.00) divided by the Valuation Period Stock
Price.
(b) Motorola shall (i) reserve for issuance the number of shares of Motorola
Common Stock that will become issuable upon the exercise of the Exchanged
Options and (ii) promptly after the Effective Time, issue to each holder of an
Exchanged Option a document evidencing Motorola's assumption of Starfish's
obligations under the Starfish Options. The Exchanged Options shall have the
same terms and conditions as the Starfish Options.
2.4 Dissenting Shares. Any Dissenting Shares shall not be converted into a
right to receive Motorola Common Stock but shall be converted into the right
to receive such consideration as may be determined to be due with respect to
such Dissenting Shares pursuant to the California Code; provided, however,
that if the status of any such shares as Dissenting Shares shall not be
perfected, or if any such shares shall lose their status as Dissenting Shares,
then, as of the later of the Effective Date or the time of the failure to
perfect such status, such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the
Certificate or Certificates representing such shares) Motorola Common Stock in
accordance with Section 2.1 (and cash in lieu of fractional shares in
accordance with Section 2.2(e)). Starfish shall give Motorola prompt notice of
any demand received by Starfish for appraisal of Starfish Capital Stock, and
Motorola shall have the right to participate in all negotiations and
proceedings with respect to such demand. Starfish agrees that, except with the
prior written consent of Motorola or as required under Chapter 13 of the
California Code, it will not
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voluntarily make any payment with respect to, or settle or offer to settle,
any such demand for appraisal. Each holder of Dissenting Shares ("Dissenting
Shareholder") who, pursuant to the provisions of the California Code, becomes
entitled to payment of the value of shares of Starfish Capital Stock shall
receive payment therefor from the Surviving Corporation (but only after the
value therefor shall have been agreed upon or finally determined pursuant to
such provisions).
2.5 Tax Free Reorganization. The parties intend to adopt and hereby do adopt
this Agreement as a plan of reorganization within the meaning of the
regulations issued pursuant to Section 368 of the Code and intend to
consummate the Merger in accordance with the provisions of Sections
368(a)(1)(A) and (a)(2)(D) of the Code. Each party agrees that it will not
take or assert any position on any tax return, report, or otherwise which is
inconsistent with the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code and will take no action, either
prior or subsequent to the Merger, which would cause the Merger to fail to
qualify as a reorganization. The provisions and representations contained or
referred to in this Section 2.5 shall survive until the expiration of the
applicable statute of limitations.
2.6 Post-Closing Adjustment to Holdback Amount. The Holdback Amount may be
reduced from time to time in accordance with the provisions of Article XI of
this Agreement. Any reduction to the Holdback Amount pursuant to Article XI
shall be made (i) by first reducing the amount payable by Motorola pursuant to
Section 2.2 above at the end of the sixth (6th) month period, provided that if
the amount then payable is less than the amount of such reduction, or if such
six (6) month period has passed and the portion of the Holdback Amount then
payable has been paid, by then reducing the amount payable by Motorola by the
amount of such difference on the first (1st) anniversary of the Closing Date;
(ii) to the extent that the amount then payable is less than the amount of
such reduction, or if such first (1st) anniversary has passed and the portion
of the Holdback Amount then payable has been paid, by then reducing the amount
payable by Motorola by the amount of such difference on the second (2nd)
anniversary of the Closing Date; (iii) to the extent that the amount then
payable is less than the amount of such reduction, or if such second (2nd)
anniversary has passed and the portion of the Holdback Amount then payable has
been paid, by then reducing the amount payable by Motorola by the amount of
such difference on the third (3rd) anniversary of the Closing Date and (iv) to
the extent that the amount then payable is less than the amount of the
Holdback Amount then remaining, then by reducing the Escrowed Non-Cash Merger
Consideration by the amount of such shortfall in accordance with the terms of
the Exchange Agreement.
2.7 Discussion of Adjustment of Merger Consideration. If the value of the
total Initial Non-Cash Merger Consideration as of the Effective Time
(determined by the closing price of Motorola Common Stock on the Closing Date)
is not equal to or in excess of two-thirds of the total Initial Cash Merger
Consideration then Motorola and Starfish will discuss in good faith whether an
increase in the number of shares of Motorola Common Stock (and a corresponding
decrease in the cash component of the Merger Consideration) is in the best
interests of the parties. In the event that the parties are unable to agree on
such adjustment (within five (5) business days), then the conditions set forth
in Sections 8.8 and 9.16 of this Agreement shall be deemed waived by Starfish
and Motorola and Sub, respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STARFISH
Except as otherwise set forth in the "Starfish Disclosure Schedule" provided
to Motorola on the date hereof, Starfish represents and warrants to Motorola
as set forth below. No fact or circumstance disclosed to Motorola shall
constitute an exception to these representations and warranties unless such
fact or circumstance is set forth in the Starfish Disclosure Schedule.
3.1 Organization. Starfish is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has
corporate power and authority to carry on its business as it is now being
conducted and as it is proposed to be conducted. Starfish is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or properties makes such qualification or
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licensing necessary, except where the failure to qualify would not have a
Material Adverse Effect on Starfish's business. The Starfish Disclosure
Schedule contains a true and complete listing of the locations of all sales
offices, manufacturing facilities, and any other offices or facilities of
Starfish and a true and complete list of all states and countries in which
Starfish maintains any employees. The Starfish Disclosure Schedule contains a
true and complete list of all states in which Starfish is duly qualified to
transact business as a foreign corporation. True and complete copies of
Starfish's articles of incorporation and bylaws, as in effect on the date
hereof and as to be in effect immediately prior to the Closing, have been
provided to Motorola or its representatives. Starfish owns and on the Closing
Date will own no equity securities of any other corporation, limited
partnership or similar entity. Starfish does not have any ownership interest
in any joint venture, partnership or similar arrangement.
3.2 Capitalization. The authorized capital stock of Starfish, as of the date
of this Agreement, consists of: sixty million (60,000,000) shares of Common
Stock, 26,500,298 shares of which are issued and outstanding, 6,051,332 shares
of which are reserved for future issuance to employees upon the exercise of
Starfish Options, 4,746,832 of which are currently outstanding, and 375,796
shares of which are reserved for issuance upon exercise of the Warrant to
purchase 375,796 shares of Starfish Common Stock; and five million (5,000,000)
shares of Preferred Stock, of which 356,506 shares have been designated Series
A Preferred Stock, all of which are issued and outstanding, and of which
500,000 shares have been designated Series B Preferred Stock, 473,725 of which
are issued and outstanding. All issued and outstanding shares of Starfish
Common Stock and Starfish Preferred Stock (i) have been duly authorized and
validly issued, (ii) are fully paid and nonassessable, and (iii) were issued
in compliance with all applicable state and federal laws concerning the
issuance of securities. Except for Starfish Options and the Warrant, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholder agreements, or
agreements of any kind for the purchase or acquisition from Starfish of any of
its securities. Except as set forth in Part 3.2 of the Starfish Disclosure
Schedule, there are no voting or other agreements which restrict voting or
dividend rights on the Starfish Capital Stock. None of the outstanding shares
of Starfish Capital Stock was issued in consideration in whole or in part for
any contribution, transfer or assignment of the Starfish Products or
Proprietary Assets or any proprietary rights incorporated therein or otherwise
related thereto.
3.3 Power, Authority and Validity
(a) Starfish has the corporate power and authority to enter into this
Agreement and the other Transaction Documents to which it is a party and to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated herein and therein have been
duly authorized by the board of directors of Starfish, and no other corporate
proceedings, other than shareholder approval of the Merger, are necessary to
authorize this Agreement and the other Transaction Documents. Starfish is not
subject to or obligated under any charter, bylaw or contract provision or any
license, franchise or permit, or subject to any order or decree, which would
be breached or violated in a manner by or in conflict with its executing and
carrying out this Agreement and the transactions contemplated herein and under
the Transaction Documents. Except for (i) the filing of the Merger Articles
and any required officers' certificates with the Secretary of State of the
State of California and appropriate documents with the relevant authorities of
other states in which Starfish is qualified to do business, (ii) filings under
applicable securities laws, (iii) the termination of the waiting period under
the HSR Act and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country in which Starfish conducts any business or owns any
property or assets, no consent of any person who is a party to a contract
which is material to Starfish's business, nor consent of any governmental
body, is required to be obtained on the part of Starfish to permit the
transactions contemplated herein and continue the business activities of
Starfish as previously conducted by Starfish. This Agreement constitutes, and
the other Transaction Documents to which Starfish is a party when executed and
delivered by Starfish shall constitute, valid and binding obligations of
Starfish enforceable in accordance with their respective terms, subject to (i)
laws of general application relating to public policy, bankruptcy, insolvency,
and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
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(b) Except as set forth in Part 3.3(b) of the Starfish Disclosure Schedule,
all Starfish Options outstanding as of the Effective Date have been issued in
accordance with the terms of the Starfish Stock Plans and pursuant to the
forms of option agreement previously provided to legal counsel for Motorola.
Except for the changes resulting from the application of Section 2.3(a)
hereof, no Starfish Options will by its terms require an adjustment in
connection with the Merger. Neither the transactions contemplated in this
Agreement nor any action taken by Starfish will result in (i) any additional
benefits for any optionee under Starfish Options or (ii) the inability of
Motorola after the Effective Date to exercise any right or benefit held by
Starfish prior to the Effective Date with respect to a Starfish Option assumed
by Motorola, including, without limitation, the right to repurchase an
optionee's unvested shares on termination of such optionee's employment. The
assumption by Motorola of Starfish Options in accordance with Section 2.3
hereunder will not constitute a breach of the Starfish Stock Plans or any
material agreement entered into pursuant to the Starfish Stock Plans.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein will conflict with, or
result in a material breach or violation of, any provision of Starfish's
articles of incorporation, and bylaws as currently in effect, any instrument
or contract to which Starfish is a party or by which Starfish is bound, or any
federal, state or local judgment, writ, decree, order, statute, rule or
regulation applicable to Starfish. Neither the execution and delivery of this
Agreement, nor any Agreement attached hereto as an Exhibit, nor the
consummation of the transactions contemplated herein or therein will have a
Material Adverse Effect on the operations, assets, or financial condition of
Starfish.
3.4 Financial Statements.
(a) Starfish has delivered to Motorola copies of Starfish's audited balance
sheet as of December 31, 1997 and statements of operations, shareholders'
equity and cash flow for the twelve-month period then ended (the "Starfish
Audited Financial Statements") and the unaudited balance sheet as of April 30,
1998 and statements of operations, shareholder's equity and cash flow for the
four-month period then ended (collectively, the "Starfish Financial
Statements").
(b) The Starfish Financial Statements are complete and in accordance with
the books and records of Starfish and present fairly in all material respects
the financial position of Starfish as of the dates thereof. The Starfish
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, as to the Starfish unaudited financial
statements, for the absence of footnotes) applied on a basis consistent with
prior periods. Except and to the extent reflected or reserved against in such
balance sheets (including the notes thereto), Starfish does not have, as of
the dates of such balance sheets, any liabilities or obligations (absolute or
contingent) of a nature required to be or customarily reflected in a balance
sheet (or the notes thereto) prepared in accordance with GAAP. The reserves,
if any, reflected on the Starfish Financial Statements are adequate in light
of the contingencies with respect to which they are made. The statements of
operations, shareholders' equity and cash flow are complete and in accordance
with the books and records of Starfish and present fairly the results of
operations, equity transactions and changes of Starfish for the periods
indicated, subject, in the case of the Starfish unaudited Financial
Statements, to normal year end adjustments.
(c) Starfish has no debt, liability, or obligation of any nature, whether
known, unknown, accrued, absolute, contingent, or otherwise, and whether due
or to become due and which is required to be reflected in a financial
statement in accordance with GAAP except for those (i) that are reflected or
reserved against in the face of (as opposed to the notes to) the Starfish
Financial Statements and (ii) that may have been incurred after the date of
the Starfish Financial Statements in the ordinary course of business, all of
which are usual and normal in amount, both individually and in the aggregate.
3.5 Tax Matters.
(a) Starfish has fully and timely, properly and accurately filed all tax
returns and reports required to be filed by it, including all federal,
foreign, state and local tax returns and estimates for all years and periods
(and portions thereof) for which any such returns, reports or estimates were
due. All such returns, reports and
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estimates were prepared in the manner required by applicable law in all
material respects. All income, sales, use, occupation, property or other taxes
or assessments due from Starfish prior to the Closing Date have been paid or
will be paid on or before the Closing Date. There are no pending assessments,
asserted deficiencies or claims for additional taxes that have not been paid.
The reserves for taxes, if any, reflected on the Starfish Financial Statements
are adequate, and there are no tax liens on any property or assets of Starfish
(other than liens for taxes not yet due and payable). There have been no
audits or examinations of any tax returns or reports by any applicable
governmental agency. No state of facts exists or has existed which would
constitute grounds for the assessment of any penalty or any further tax
liability in a material amount, either individually or in the aggregate,
beyond that shown on the respective tax reports, returns or estimates or
accrued for or reserved on the Starfish Financial Statements. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, foreign state or local tax return or report for any
period.
(b) All taxes that Starfish has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper taxing authority.
(c) Starfish is not a party to any tax-sharing agreement or similar
arrangement with any other party.
(d) At no time has Starfish been included in the federal consolidated income
tax return of any affiliated group of corporations.
(e) No payment which Starfish is obliged to pay to any director, officer,
employee or independent contractor pursuant to the terms of an employment
agreement, severance agreement or otherwise will constitute an excess
parachute payment as defined in Section 280G of the Code.
(f) Starfish will not be required to include any adjustment in taxable
income for any tax period (or portion thereof) ending after the Closing Date
pursuant to Section 481(c) of the Code or any provision of the tax laws of any
jurisdiction requiring tax adjustments as a result of a change in method of
accounting implemented by Starfish prior to the Closing Date for any tax
period (or portion thereof) ending on or before the Closing Date or pursuant
to the provisions of any agreement entered into by Starfish prior to the
Closing Date with any taxing authority with regard to the tax liability of
Starfish for any tax period (or portion thereof) ending on or before the
Closing Date.
(g) Starfish is not currently under any contractual obligation to pay to any
Governmental Body any tax obligations of, or with respect to any transaction
relating to, any other person or to indemnify any other person with respect to
any tax, other than pursuant to this Agreement.
3.6 Absence of Certain Changes or Events. Except as set forth in Part 3.6 of
the Starfish Disclosure Statement, from April 30, 1998, to the date of this
Agreement, Starfish has not:
(a) suffered any Material Adverse Change in its financial condition or in
the operations of its business, nor any Material Adverse Change in its balance
sheet, and including but not limited to cash distributions or material
decreases in the net assets of Starfish;
(b) suffered any damage, destruction or loss, whether covered by insurance
in an amount in excess of Fifty Thousand Dollars ($50,000);
(c) granted or agreed to make any increase in the compensation payable or to
become payable by Starfish to its officers or employees, except those
occurring in the ordinary course of business;
(d) declared, set aside or paid any dividend or made any other distribution
on or in respect of the shares of Starfish Capital Stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition by
Starfish of such shares other than repurchases of Starfish Capital Stock at
original issue prices from former employees or consultants pursuant to written
agreements providing for their repurchase in the event of termination of
employment or consultancy;
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(e) issued any shares of capital stock of Starfish or any warrants, rights
or options or entered into any commitment relating to the shares of Starfish
except for the issuance of shares of Starfish Capital Stock pursuant to the
exercise of outstanding Starfish Options or upon conversion of outstanding
shares of Starfish Preferred Stock;
(f) made any change in the accounting methods or practices it follows,
whether for general financial or tax purposes, or any change in depreciation
or amortization policies or rates adopted therein other than changes required
by changes in GAAP;
(g) sold, leased, abandoned or otherwise disposed of any real property or
any machinery, equipment or other operating property other than in the
ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed of any
patent, trademark, trade name, brand name, copyright (or pending application
for any patent, trademark or copyright), invention, work of authorship,
process, know-how, formula or trade secret or interest thereunder or other
intangible asset except in the ordinary course of its business;
(i) suffered any dispute involving any employee that to Starfish's knowledge
may reasonably result in a material liability to Starfish;
(j) engaged in any activity or entered into any material commitment or
transaction (including without limitation any borrowing or capital
expenditure), in either case, other than in the ordinary course of business;
(k) incurred any liabilities, contingent or otherwise, either matured or
unmatured (whether or not required to be reflected in financial statements in
accordance with GAAP, and whether due or to become due), except for (i)
liabilities identified as such in the "liabilities" column of the Starfish
Financial Statements, and (ii) accounts payable or accrued salaries that have
been incurred by Starfish since April 30, 1998 in the ordinary course of
business and consistent with Starfish's past practices;
(l) permitted or allowed any of its material property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except those permitted under Section 3.7
hereof, other than any purchase money security interests incurred in the
ordinary course of business;
(m) made any capital expenditure or commitment for additions to property,
plant or equipment individually in excess of Fifty Thousand Dollars ($50,000),
or in the aggregate, in excess of Two Hundred Thousand Dollars ($200,000);
(n) paid, loaned or advanced any amount to, or sold, transferred or leased
any properties or assets to, or entered into any agreement or arrangement with
any of its Affiliates, officers, directors or shareholders or, to Starfish's
knowledge, any Affiliate or associate of any of the foregoing;
(o) made any amendment to or terminated any agreement which, if not so
amended or terminated, would be required to be disclosed on the Starfish
Disclosure Schedule; or
(p) agreed to take any action described in this Section 3.6 or outside of
its ordinary course of business or which would constitute a breach of any of
the representations contained in this Agreement.
3.7 Title and Related Matters. Starfish has good and marketable title to all
the properties, interests in properties and assets, real and personal,
reflected in the Starfish Financial Statements or acquired after the date of
the Starfish Financial Statements (except properties, interests in properties
and assets sold or otherwise disposed of since the date of the Starfish
Financial Statements in the ordinary course of business), free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except the lien of current taxes not yet due and payable and except
for liens which in the aggregate do not secure more than Fifty Thousand
Dollars ($50,000) in liabilities. The equipment of Starfish used in the
operation of its business is in good
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operating condition and repair, normal wear and tear excepted. All real or
personal property leases to which Starfish is a party are valid, binding,
enforceable and effective in accordance with their respective terms, subject
to (i) laws of general application relating to bankruptcy, insolvency, and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. There is not under any of such
leases any existing default by Starfish (or to the knowledge of Starfish, by
any other party thereto) or event of default or event which, with notice or
lapse of time or both, would constitute a material default. The Starfish
Disclosure Schedule contains a description of all real property and personal
property with a value in excess of $50,000 leased or owned by Starfish,
describing its interest in said property and with respect to owned real
property, a description of each parcel and a summary description of the
buildings, structures and improvements thereon. True and correct copies of the
leases of Starfish have been provided to Motorola or its representatives.
3.8 Intellectual Property
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisional, continuations and continuations in part
thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating
to any of the foregoing, (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all mask works, mask work registrations and applications
therefor, and all other rights corresponding thereto throughout the world; (v)
all industrial designs and any registrations and applications therefor
throughout the world; (vi) all trade names, logos, common law trademarks and
service marks; trademark and service mark registrations and applications
therefor throughout the world; (vii) all databases and data collections and
all rights therein throughout the world; and (viii) all computer software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded, and all
documentation related to any of the foregoing throughout the world.
"Software" shall mean all computer code and data in source code, object code
or other form incorporated in the Starfish Products or used by Starfish in the
preparation or support of the Starfish Products.
"Software Authors" shall mean all authors of the Software, or any other
Person or entity who participated in the development of the Software or any
portion thereof or performed any work related to the Software; provided,
however, that Software Authors shall not include any Persons who are not
involved in the development or modification of Software source code.
"Starfish Intellectual Property" shall mean any Intellectual Property that:
(i) is owned by or exclusively licensed to Starfish.
(b) Part 3.8(b) of the Starfish Disclosure Statement lists all of Starfish's
United States and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent to use applications or other registrations related
to trademarks; (iii) registered copyrights and applications for copyright
registration; (iv) mask work registrations and applications to register mask
works; and (v) any other Intellectual Property of Starfish that is the subject
of an application, certificate or registration filed with, issued by, or
recorded by, any state, government or other public legal authority (all of the
foregoing, the "Registered Intellectual Property") and Part 3.8(b) of the
Starfish Disclosure Statement identifies the principal Starfish Intellectual
Property comprised in such Registered Intellectual Property.
(c) Each patent, registered trademark, registered copyright and mask work
registration which is an item of Registered Intellectual Property
(collectively "Issued Registered Intellectual Property") is valid and
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Issued Registered Intellectual Property have been made
and all necessary documents and certificates in connection with such Issued
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Issued
Registered Intellectual Property.
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(d) The contracts, licenses and agreements listed on Part 3.8(d) of the
Starfish Disclosure Statement include all contracts, licenses and agreements
currently in effect relating to any Intellectual Property, to which Starfish
is a party, other than: (i) "shrink wrap" software; (ii) rights to use
Intellectual Property granted by Starfish in the ordinary course of Starfish's
business in connection with sales of products or services; (iii) third party
software generally available to the public at a cost of less than Ten Thousand
Dollars ($10,000); and (iv) contracts, licenses or agreements which Starfish
has no continuing obligations or for which liability is contractually limited
to less than $50,000 (collectively, such exceptions being referred to as
"Excluded Licenses").
(e) Except as disclosed in Part 3.8(e) of the Starfish Disclosure Statement,
the contracts, licenses and agreements listed on Part 3.8(d) of the Starfish
Disclosure Statement are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of the
contracts, licenses and agreements listed on Part 3.8(d) of the Starfish
Disclosure Statement. Except as disclosed in Part 3.8(e) of the Starfish
Disclosure Statement, Starfish is in compliance in all material respects with
and has not breached any material term of, the contracts, licenses and
agreements listed on Part 3.8(d) of the Starfish Disclosure Statement and, to
the knowledge of Starfish, all other parties to the contracts, licenses and
agreements listed on Part 3.8(d) of the Starfish Disclosure Statement are in
compliance with, and have not breached any term of the contracts, licenses and
agreements. Except as disclosed in Part 3.8(e) of the Starfish Disclosure
Statement, following the Closing Date, Starfish will be permitted to exercise
all of its rights under the contracts, licenses and agreements listed in Part
3.8(d) of the Starfish Disclosure Statement without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Starfish would otherwise be required to pay.
(f) Except as set forth in Part 3.8(f) of the Starfish Disclosure Statement
and other than Excluded Licenses or other agreements which are not currently
in effect: (i) no Person other than Starfish has any rights to use any
Starfish Intellectual Property other than immaterial rights granted from time
to time in the ordinary course of business which do not individually or in
aggregate materially affect the value of the Starfish Intellectual Property in
question; and (ii) Starfish has not granted to any Person, nor authorized any
Person to retain, any rights or interests of any nature in or with respect to
Starfish Intellectual Property.
(g) Except as set forth in Part 3.8(g) of the Starfish Disclosure Statement:
(i) Starfish owns and has good and exclusive title to each item of Starfish
Intellectual Property listed on Part 3.8(b) of the Starfish Disclosure
Statement, free and clear of any encumbrance; and (ii) Starfish owns, or has
the right, pursuant to a valid contract to use or operate under, all other
Starfish Intellectual Property.
(h) Except as set forth on Part 3.8(h) of the Starfish Disclosure Statement,
the operation of the business of Starfish, to Starfish's knowledge, including
the design, development, manufacture and sale of its products (including with
respect to products currently under development) and provision of services,
does not infringe or misappropriate the Intellectual Property of any other
Person, violate the rights of any Person (including rights to privacy or
publicity), or constitute unfair competition. Notwithstanding the foregoing,
it is expressly understood that the foregoing does not limit the
indemnification provided by the Starfish Shareholders pursuant to Section
11.2(a)(iii) of this Agreement.
(i) In the last five years, except as set forth on Part 3.8(i) of the
Starfish Disclosure Statement, Starfish has not received notice from any
Person that the operation of the business of Starfish or the Business,
including its design, development, manufacture and sale of its products
(including with respect to products currently under development) and provision
of its services, infringes or misappropriates the Intellectual Property of any
Person, violates the rights of any Person (including rights to privacy or
publicity), or constitutes unfair competition.
(j) Except as disclosed in Part 3.8(j) of the Starfish Disclosure Statement,
Starfish owns or has the right to all Intellectual Property necessary to the
conduct of the business of Starfish as it currently is conducted, including
its design, development, manufacture and sale of its products (including with
respect to products currently under development and provision of services).
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(k) Part 3.8(k) of the Starfish Disclosure Statement lists all contracts,
licenses and agreements between Starfish and any other Person wherein or
whereby Starfish has agreed to, or assumed, any obligation or duty to
indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement by Starfish or such other Person of
the Intellectual Property rights of any other Person; provided that the
foregoing only applies to agreements for which Starfish's obligations are
continuing as of the date of this Agreement and does not apply to contracts,
licenses or agreements for which liability of Starfish is contractually
limited to less than $50,000.
(l) Except as listed on Part 3.8(l) of the Starfish Disclosure Statement,
there are no contracts, licenses and agreements between Starfish and any other
Person with respect to Starfish Intellectual Property with respect to which
Starfish has received notice of any dispute which could be reasonably
considered to be a material dispute regarding the scope of such agreement, or
performance under such agreement including with respect to any payments to be
made or received by Starfish thereunder.
(m) Except as listed on Part 3.8(m) of the Starfish Disclosure Statement, to
the knowledge of Starfish, no Person is infringing or misappropriating any
Starfish Intellectual Property.
(n) Except as listed on Part 3.8(n) of the Starfish Disclosure Statement,
there are no claims asserted against Starfish, or to Starfish's knowledge,
against any customer of Starfish, related to any product or service of
Starfish.
(o) No Starfish Intellectual Property or product or service of Starfish, is
subject to any outstanding decree, order, judgment, or stipulation restricting
in any manner the use or licensing thereof by Starfish.
(p) Except as disclosed in Part 3.8(p) of the Starfish Disclosure Statement,
Starfish has, and enforces, a policy requiring each employee and contractor to
execute proprietary information and confidentiality agreements substantially
identical to the form of the Employee Agreement previously delivered to
Motorola, and all current and former employees and contractors of Starfish
have executed such an agreement.
(q) To Starfish's knowledge, no (i) product, service or publication of
Starfish, (ii) material published or distributed by Starfish or (iii) conduct
or statement of Starfish, constitutes obscene material, a defamatory statement
or material, or violates any rights, including rights of publicity or privacy,
of any Person.
(r) Part 3.8(r) of the Starfish Disclosure Statement lists all the Software
Authors who were not employees of Starfish. Each Software Author made his
contribution to the Software within the scope of employment with Starfish as
an employee or independent contractor, as a "work made for hire," and was
directed by Starfish to work on the Software.
(s) Except for technology supplied by third party vendors disclosed in Part
3.8(s) of the Starfish Disclosure Statement, the Software and every portion
thereof are an original creation of the Software Authors and do not contain
any source code or portions of source code (including any "canned program")
created by any parties other than the Software Authors. To Starfish's
knowledge, Starfish has not, by any of its acts or omissions, or by acts or
omissions of its directors, officers, employees, agents, or representatives
caused any of its proprietary rights in the Software, including copyrights,
trademarks, and trade secrets to be diminished, or adversely affected to any
material extent.
(t) Except as set forth in Part 3.8(t) of the Starfish Disclosure Statement:
(i) to the best of Starfish's knowledge, there are no defects in the
Software, and there are no errors in any accompanying design documentation,
which defects or errors would in any material respect affect Motorola's or
its licensee's use of the Software or the functioning of the Software in
accordance with the specifications for the Software published by Starfish;
the Software has all the material features described in the user manuals
made available to Starfish's customers;
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(ii) the Software does not contain any "back door," "time bomb," "Trojan
horse," "worm," "drop dead device," "virus" (as these terms are commonly
used in the computer software industry), or other software routines or
hardware components designed to permit unauthorized access, to disable or
erase software, hardware, or data, or to perform any other similar type of
functions;
(iii) the Software (A) shall not fail to perform any function specified
in the product specifications therefor or otherwise be adversely affected
in any material respect as a result of the date change from December 31,
1999 to January 1, 2000; and (B) to ensure Year 2000 compatibility
includes, without limitation, date data century recognition, calculations
which accommodate same century and multi-century formulas and date values,
and date data interface values which reflect the correct century.
(iv) no government funding or university or college facilities were used
in the development of the Software, and the Software was not developed
pursuant to a contract with any Person or entity, and no situation, matter,
or agreement exists that would preclude Motorola from making any change to
the Software or combining it with other software in any lawful manner; and
(v) all copies of the Software contain appropriate copyright legends; no
third party has any interest in, or right to compensation from Starfish by
reason of, the use, exploitation, or sale of the Software; there are no
restrictions on the ability of Starfish (or any successor or assignee of
Starfish) to use or otherwise exploit the Software, and such use or
exploitation does not and will not obligate Starfish (or any successor or
assign of Starfish) to pay any royalty, fee, or other compensation to any
Person or entity; and Starfish has not received any notice and do not have
any knowledge of any complaint, assertion, threat, or allegation
inconsistent with the preceding statements in this paragraph.
(u) Starfish has made available to Motorola complete and accurate records of
Starfish with respect to Software fixes (including fixes currently in
progress), problem lists and maintenance of the Software, and customer
complaints. All warranty claims (including any pending claims) of any material
nature related to the Software are described in the Starfish Disclosure
Statement. Except as set forth in Part 3.8(u) of the Starfish Disclosure
Statement, Starfish has made no written representations and warranties with
respect to the Software as to which Starfish has surviving obligations or
liabilities.
3.9 Employee Benefit Plans. (a) Starfish does not maintain, nor is it
obligated to contribute to, any defined benefit pension plan or any employee
benefit plan that is subject to either Title IV of the Employee Retirement
Income Security Act of 1974 ("ERISA") or the minimum funding standards of
ERISA or the Internal Revenue Code. Each bonus, deferred compensation,
pension, profit-sharing, retirement, stock purchase, stock option, and other
employee benefit or fringe benefit plans, whether formal or informal,
maintained by Starfish conforms in all material respects, to the applicable
requirements, if any, of ERISA. The Starfish Disclosure Schedule lists any
formal or informal (i) stock purchase or stock option, nonqualified deferred
compensation or retirement plans, programs or arrangements which may be
"employee pension benefit plans" as defined in Section 3(2) of ERISA, (ii)
qualified defined contribution plans or arrangements, and defined benefit
plans or arrangements which are "employee pension benefit plans" as defined in
Section 3(2) of ERISA, (iii) employee welfare benefit plans, as defined in
Section 3(1) of ERISA or material fringe benefit plans or programs (the
"Welfare Plans"), including any bonus, incentive, or vacation arrangement,
program or policy maintained by or to which Starfish contributes on behalf of
current or former employees of Starfish. If no plan or other written document
for the plans, policies, programs or arrangements listed on the Starfish
Disclosure Schedule has been provided to Motorola, the Starfish Disclosure
Schedule shall briefly summarize the principal features of such plans,
policies, programs or arrangements.
(b) Starfish maintains an Employee Pension Benefit Plan (as defined in
Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) which is a defined contribution plan (as defined in Section
3(34) of ERISA) named the Starfish Software, Inc. 401(k) Savings Plan (the
"Plan").
(c) The Plan is the only Employee Pension Benefit Plan, whether a defined
contribution plan or a defined benefit plan (as defined in Section 3(35) of
ERISA), ever maintained or participated in by Starfish.
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(d) The Plan (and its related trust) has received a favorable determination
letter on its qualified status under Section 401(a) and 501(b) of the Internal
Revenue Code of 1986, as amended (the "Code") from the Internal Revenue
Service dated February 10, 1997, and has been operated and administered in all
material respects in compliance with the applicable requirements of ERISA, the
Code and all other applicable laws, rules and regulations, and, to the
knowledge of Starfish or any of the employees with responsibility for employee
benefits matters, no event has occurred which will or could cause the Plan to
fail to comply with such requirements. Neither Starfish nor any of the
employees with responsibility for employee benefits matters has any knowledge,
of any fact, situation, circumstance, condition or occurrence that would or
could adversely affect the qualified status of the Plan.
(e) All contributions (including all employer and employee contributions)
which are due have been paid to the Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
the Plan or properly accrued and reflected on the financial statements of
Starfish.
(f) The fair market value of the assets of the Plan equals or exceeds the
present value of all vested and nonvested liabilities thereunder.
(g) Starfish has delivered to Motorola correct and complete copies of the
Plan documents and Summary Plan Description, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report and all related trust agreements, insurance contracts and other
funding agreements which implement the Plan.
(h) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports and Summary Plan Descriptions) have been
timely filed and/or distributed appropriately with respect to the Plan.
(i) The Plan has not been partially or completely terminated.
(j) There have been no prohibited transactions (as defined in Section 406 of
ERISA and Section 4975 of the Code) with respect to the Plan, and, to the
knowledge of Starfish or any of the employees with responsibility for employee
benefits matters, no fiduciary (as defined in Section 3(21) of ERISA) has any
liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration, or investment of the assets, of the
Plan.
(k) No claim, action, suit, proceeding, hearing or investigation with
respect to the Plan, the administration of the Plan or the investment of the
assets of the Plan (other than routine claims for benefits) is pending or, to
the knowledge of Starfish or any of the employees with responsibility for
employees benefits matters, is threatened, and neither Starfish nor any of the
employees with responsibility for employees benefits matter has any knowledge
of any basis for any such claim, action, suit, proceeding, hearing or
investigation.
(l) Starfish has not incurred, and neither Starfish nor any of the employees
with responsibility for employee benefits matters has any reason to expect
that Starfish will incur, any liability, fine, penalties, taxes or charges
under ERISA, the Code or other applicable laws or regulations with respect to
the Plan.
(m) The Plan is not a Multi-employer Plan (as defined in Section 3(37) of
ERISA, and neither Starfish nor any member of the controlled group of
corporations (as defined in Section 1563 of the Code) that includes Starfish
contributes to, ever has contributed to, or ever has been required to
contribute to, any Multi-employer Plan or has any liability (including
withdrawal liability) under any Multi-employer Plan.
(n) Except as set forth on Schedule 3.9(n) of the Starfish Disclosure
Statement, the Welfare Plans (and any related trusts, insurance contracts, any
funding agreements that implement the Welfare Plans, any provider agreements
and any other agreements relating to the Welfare Plans) meet the requirements
of ERISA and the Code, if applicable, and neither Starfish nor any of the
employees with responsibility for employee benefits matters has no knowledge,
of any fact, situation, circumstance, condition or occurrence that the Welfare
Plans do not meet the requirements of ERISA or the Code.
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(o) All contributions or premiums (including all employer and employee
contributions or premiums) which are due have been paid to the Welfare Plans
and all contributions or premiums for any period ending on or before the
Closing Date which are not yet due have been paid to the Welfare Plans or
properly accrued and reflected on the financial statements of Starfish.
(p) Starfish has delivered to Motorola correct and complete copies of the
plan documents, summary plan descriptions, summary of material modifications,
a copy of the most recent Form 5500 Annual Report relating to the Welfare
Plans, and all related trust agreements, insurance contracts, provider
agreements, any funding agreements which implement the Welfare Plans and any
other agreements relating to the Welfare Plans.
(q) All required reports and descriptions (including Form 5500 Annual
Reports, summary Annual Reports, and Summary Plan Descriptions) have been
timely filed and/or distributed appropriately as required under ERISA and the
Code with respect to the Welfare Plans.
(r) Except as set forth on Schedule 3.9(r) of the Starfish Disclosure
Statement, with respect to the Welfare Plans, Starfish has complied with the
requirements of Section 4980B of the Code and Sections 601 through 609 of
ERISA, Sections 701 though 734 of ERISA and the applicable regulations and all
other applicable federal and state laws.
(s) There have been no prohibited transactions (as defined in Section 406 of
ERISA and Section 4975 of the Code) with respect to the Welfare Plans, and, to
the knowledge of Starfish and the employees with responsibility for employee
benefits matters, no fiduciary (as defined in Section 3(21) of ERISA) has any
liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the assets of the
Welfare Plans.
(t) No claim, action, suit, proceeding, hearing or investigation with
respect to the Welfare Plans, the administration of the Welfare Plans or the
investment of the assets of the Welfare Plans (other than routine claims for
benefits) is pending, and neither Starfish nor any of the employees with
responsibility for employee benefits matters has knowledge of any basis for
any such claim, action suit, proceeding, hearing or investigation.
(u) Starfish has not incurred, and neither Starfish nor any of the employees
with responsibility for employee benefits matters has any reason to expect
that Starfish will incur, any liability, fines, penalties, taxes or charges
under ERISA, the Code or other applicable laws or regulations with respect to
the Welfare Plans.
(v) Starfish does not maintain or have an obligation to contribute to a
Welfare Plan that provides health, accident or life insurance benefits to
former employees, their spouses or dependents, other than in accordance with
Sections 601-609 of ERISA and Section 4980B of the Code.
(w) Starfish does not maintain or have an obligation to contribute to a
plan, program, policy or arrangement that provides severance benefits and the
transaction contemplated by this Agreement shall not result in any liability
to provide severance pay or severance benefits.
3.10 Bank Accounts and Receivables. Part 3.10 of the Starfish Disclosure
Schedule sets forth the names and locations of all banks, trusts, companies,
savings and loan associations, and other financial institutions at which
Starfish maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom. The Starfish
Disclosure Schedule sets forth an accurate and complete breakdown and aging of
all accounts receivable, notes receivable, and other receivables of Starfish
as of March 31, 1998. Except as set forth on the Starfish Disclosure Schedule
all existing accounts receivable of Starfish (including those accounts
receivable reflected on the Starfish unaudited financial statements that have
not yet been collected and those accounts receivable that have arisen since
March 31, 1998 and have not yet been collected) represent valid obligations of
customers of Starfish arising from bona fide transactions entered into in the
ordinary course of business.
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3.11 Contracts.
(a) Part 3.11(a) of the Starfish Disclosure Schedule identifies each
material agreement (including without limitation each employment agreement and
each material license agreement, development agreement, manufacturing
agreement, distribution agreement, and OEM agreement) to which Starfish is a
party ("Material Contract").
(b) Except as set forth in Part 3.11(b) of the Starfish Disclosure Schedule,
(i) Starfish has no agreements, contracts or commitments that call for
prospective fixed and/or contingent payments or expenditures by or to
Starfish of more than Twenty-five Thousand Dollars ($25,000) other than
those entered into in the ordinary course of business concerning the sale
of products of Starfish;
(ii) Starfish has no purchase agreement, contract or commitment that
calls for fixed and/or contingent payments by Starfish that are in excess
of the normal, ordinary and usual requirements of the business of Starfish;
(iii) There is no outstanding sales contract, commitment or proposal
(including, without limitation, development projects) of Starfish that
Starfish currently expects to result either individually or in the
aggregate in any material loss to Starfish on a consolidated basis upon
completion or performance thereof;
(iv) Starfish has no outstanding agreements, contracts or commitments
with officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by it on
notice of not longer than ninety (90) days and without liability, penalty
or premium exceeding Five Thousand Dollars ($5,000) in any single instance
or Twenty Five Thousand Dollars ($25,000) in the aggregate;
(v) Starfish has no currently effective collective bargaining or union
agreements, contracts or commitments;
(vi) Starfish is not restricted by agreement from competing with any
person or from carrying on its business anywhere in the world;
(vii) Starfish is under no liability or obligation, and no such
outstanding claim has been made, with respect to the return to Starfish of
inventory or merchandise in the possession of wholesalers, distributors,
retailers, or other customers, except such liabilities, obligations and
claims as, in the aggregate, do not exceed the reserves therefor set forth
in the Starfish Financial Statements;
(viii) Starfish has not guaranteed any obligations of other persons or
made any agreements to acquire or guarantee any obligations of other
Persons;
(ix) Starfish has no outstanding loan or advance to any Person; nor is it
party to any line of credit, standby financing, revolving credit or other
similar financing arrangement of any sort which would permit the borrowing
by Starfish of any sum not reflected in the Starfish Financial Statements;
and
(x) All material contracts, agreements and instruments to which Starfish
is a party are valid, binding, in full force and effect, and enforceable by
Starfish in accordance with their respective terms, subject to (i) laws of
general application relating to public policy, bankruptcy, insolvency and
the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. No such contract, agreement
or instrument contains any liquidated damages, penalty or similar
provision. To Starfish's knowledge, no party to any such contract,
agreement or instrument intends to cancel, withdraw, modify or amend such
contract, agreement or instrument.
(c) Part 3.11(c) of the Starfish Disclosure Schedule describes all
agreements pursuant to which Starfish has agreed to manufacture for or supply
to any third party any Starfish Products or components thereto requiring, or
expected to require, payments of Fifty Thousand Dollars ($50,000) or more over
the life of any such agreement. Part 3.11(c) of the Starfish Disclosure
Schedule also lists each vendor which is the sole source for any product or
component included in the Starfish Products which Starfish believes is not
readily available from other sources.
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(d) Starfish has delivered to Motorola accurate and complete copies of all
Material Contracts, including all amendments thereto. Starfish has not entered
into any material oral contracts. Each Material Contract is valid and in full
force and effect, and, to the best of the knowledge of Starfish, is
enforceable by Starfish in accordance with its terms, subject to (i) laws of
general application relating to public policy, bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(e) Except as set forth in Part 3.11(e) of the Disclosure Schedule:
(i) Starfish has not violated or breached, or committed any default
under, any Material Contract, and, to Starfish's knowledge, no other Person
has violated or breached, or committed any default under, any Material
Contract except as in any such case where such default would not have a
Material Adverse Effect; and
(ii) to Starfish's knowledge, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) will,
or could reasonably be expected to, (A) result in a violation or breach of
any of the provisions of any Material Contract, (B) give any Person the
right to declare default or exercise any remedy under any Material
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Material Contract or (D) give any Person the right to
cancel, terminate or modify any Material Contract except to the extent that
any of the foregoing would not have a Material Adverse Effect.
(f) Except as set forth in Part 3.11(f) of the Starfish Disclosure
Statement, none of the Material Contracts contains any provision which would
require the consent of third parties to the Merger or which would be altered
in any material respect as a result of the Merger.
3.12 Orders, Commitments and Returns. All accepted and unfilled orders
entered into by Starfish for the sale, license, or lease or other disposition
by Starfish of the Starfish Products, and all agreements, contracts, or
commitments for the purchase of supplies by Starfish, were made in the
ordinary course of business. To Starfish's knowledge, no outstanding material
purchase or outstanding lease commitment of Starfish is in excess of the
normal, ordinary and usual requirements of its business or was made at a price
(on both a per unit and aggregate basis) in excess of the current market price
at the time made, or contains terms and conditions materially more onerous to
Starfish than those usual and customary in the industry.
3.13 Compliance with Law. Starfish is in compliance with all applicable laws
and regulations in all material respects. Neither Starfish, nor to Starfish's
knowledge, any of its employees has directly or indirectly paid or delivered
any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official or other party in the
United States or any other country, that was or is in violation of any
federal, state, or local statute or law or of any statute or law of any other
country having jurisdiction. Starfish has not participated directly or
indirectly in any boycotts or other similar practices affecting any of its
customers. Starfish has complied in all material respects at all times with
any and all applicable federal, state and foreign laws, rules, regulations,
proclamations and orders relating to the importation or exportation of its
products. All licenses, franchises, permits and other governmental
authorizations held by Starfish which are material to its business are valid
and sufficient in all respects for the business presently carried on by
Starfish.
3.14 Labor Difficulties; No Discrimination.
(a) Starfish is not engaged in any unfair labor practice and is not in
violation of any applicable laws relating to employment and employment
practices, terms and conditions of employment, and wages and hours.
(b) There is no unfair labor practice complaint against Starfish actually
pending or, to Starfish's knowledge, threatened before the National Labor
Relations Board or any comparable foreign governmental or quasi-governmental
authority.
(c) There is no strike, labor dispute, slowdown, or stoppage actually
pending or, to Starfish's knowledge, threatened against Starfish.
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(d) No union representation question exists with respect to the employees of
Starfish and, to Starfish's knowledge, no union organizing activities are
taking place.
(e) No grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is pending and, to Starfish's knowledge, no
claims therefor exist.
(f) No collective bargaining agreement that is binding on Starfish restricts
it from relocating or closing any of its operations.
(g) Starfish has not experienced any work stoppage or other labor
difficulty.
(h) There is not presently, and there has not been within the previous three
(3) years, any claim against Starfish based on actual or alleged wrongful
termination or on actual or alleged race, age, sex, disability or other
harassment or discrimination, or similar tortious conduct, nor to Starfish's
knowledge, is there any reasonable basis for any such claim.
(i) Starfish is not aware of any key Starfish employee who intends to
terminate his or her employment with Starfish.
3.15 Trade Regulation. Starfish has not terminated its relationship with or
refused to ship Starfish Products to any dealer, distributor, OEM, third party
marketing entity or customer which had theretofore paid or been obligated to
pay Starfish in excess of Fifty Thousand Dollars ($50,000) over any
consecutive twelve (12) month period. The prices charged by Starfish in
connection with the marketing or sale of any products or services have been in
compliance in all material respects with all applicable laws and regulations.
No claims against Starfish have been communicated or threatened in writing to
Starfish with respect to wrongful termination of any dealer, distributor or
any other marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other violation of any laws or
regulations relating to anti-competitive practices or unfair trade practices
of any kind and, to Starfish's knowledge, no specific situation, set of facts,
or occurrence provides a reasonable basis for any such claim.
3.16 Insider Transactions. No Affiliate of Starfish has any interest in (i)
any equipment or other material property, real or personal, tangible or
intangible, including, without limitation, any proprietary asset, used in
connection with or pertaining to the business of Starfish or (ii) to
Starfish's knowledge, any creditor, supplier, customer, manufacturer, agent,
representative, or distributor of products of Starfish; provided, however,
that no such Affiliate or other person shall be deemed to have such an
interest solely by virtue of (a) the ownership of less than one percent (1%)
of the outstanding stock or debt securities of any publicly-held company whose
stock or debt securities are traded on a recognized stock exchange or quoted
on Nasdaq, or (b) such person's status as a general or limited partner of a
venture capital or similar fund, which fund is also a holder of the securities
of such creditor, supplier, customer, manufacturer, agent, representative or
distributor.
3.17 Employees, Independent Contractors and Consultants. The Starfish
Disclosure Schedule lists all currently effective written or, to Starfish's
knowledge, oral consulting, independent contractor and/or employment
agreements and other material agreements concluded with individual employees,
independent contractors or consultants to which Starfish is a party other than
those terminable at will or within thirty (30) days. If oral, Part 3.17 of the
Starfish Disclosure Schedule also contains a brief summary of such agreements.
True and correct copies of all such written agreements have been provided to
Motorola or its representatives. All salaries and wages paid by Starfish are
in material compliance, both individually and in the aggregate, with
applicable foreign, federal, state and local laws. Part 3.17 of the Starfish
Disclosure Schedule lists (i) the names of all persons currently employed by
Starfish and the salaries and other compensation arrangements (bonus, deferred
compensation, etc.) for each such person. Starfish's aggregate consolidated
accrued vacation and severance pay as of March 31, 1998 was approximately Two
Hundred and Fifty Thousand Dollars ($250,000).
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3.18 Insurance. Part 3.18 of the Starfish Disclosure Schedule contains a
list of the principal policies of fire, liability and other forms of insurance
held by Starfish. Each such policy is in full force and effect. Starfish is
not in default with respect to its obligations under any insurance policy
maintained by it, and Starfish has not been denied insurance coverage. To
Starfish's knowledge, the insurance coverage of Starfish is customary for
corporations of similar size engaged in similar lines of business. Except as
set forth on Part 3.18 of the Starfish Disclosure Schedule, Starfish does not
have any self-insurance or co-insurance programs, and the reserves set forth
on the balance sheet included in the Starfish unaudited financial statements
are adequate to cover all anticipated liabilities with respect to any such
self-insurance or co-insurance programs.
3.19 Litigation. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Starfish's knowledge,
threatened against Starfish (or to the best of Starfish's knowledge, pending
or threatened against or affecting any of the officers, directors or employees
of Starfish with respect to Starfish businesses or proposed business
activities), or pending or threatened by Starfish against any third party, at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality (including, without limitation, any
actions, suit, proceedings or investigations with respect to the transactions
contemplated by this Agreement); nor has there been any such actions, suits,
proceedings, orders, investigations or claims pending against or affecting
Starfish during the past three years; Starfish is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise
or, to the best of Starfish's knowledge, any governmental investigations or
inquiries; and, to the best of Starfish's knowledge, there is no basis for any
of the foregoing. Starfish is not subject to any judgment, order or decree of
any court or other governmental agency, and Starfish has not received any
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed, from a legal standpoint, to any liability or disadvantage which
may have a material adverse effect on the financial condition or operations of
Starfish taken as a whole.
3.20 Section 341(f)(2). Starfish has not, with regard to any property or
assets held, acquired or to be acquired by it, at any time, filed a consent to
the application of Section 341(f)(2) of the Code nor will any such consent be
filed before the Closing.
3.21 Compliance with Environmental Requirements. For purposes of this
Agreement, the term "Environmental, Safety and Health Requirements" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law, in each case concerning public health and safety, worker health
and safety and pollution or protection of the environment (including, without
limitation, all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, Release, threatened Release, control or
cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation); "Release" shall have the meaning set forth in
CERCLA (as defined below); and "Environmental Lien" shall mean any Lien,
whether recorded or unrecorded, in favor of any governmental entity, relating
to any liability of Starfish or any Subsidiary arising under any Environmental
and Safety Requirements.
(a) Except as set forth in Part 3.21 of the Starfish Disclosure Schedule:
(i) Starfish has complied with and is currently in compliance with all
Environmental and Safety Requirements, and Starfish has not received any
oral or written notice, report or information regarding any liabilities or
threatened liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise) or any corrective, investigatory or remedial obligations
arising under Environmental and Safety Requirements which relate to
Starfish or any of its properties or facilities.
(ii) Without limiting the generality of the foregoing, Starfish has
obtained and complied with, and is currently in compliance with, all
permits, licenses and other authorizations or notice or warning
requirements, including but not limited to the requirements under
Proposition 65 that apply to its California Operations that may be required
pursuant to any Environmental and Safety Requirements for the occupancy of
its properties or facilities or the operation of its businesses,
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(b) Neither this Agreement nor the consummation of the transactions
contemplated by this Agreement shall impose any obligations on Starfish or
otherwise for site investigation or cleanup, or notification to or consent of
any government agencies or third parties under any Environmental and Safety
Requirements (including, without limitation, any so called "transaction-
triggered" or "responsible property transfer" laws and regulations).
(c) None of the following exists at any property or facility owned, occupied
or operated by Starfish:
(i) underground storage tanks or surface impoundments;
(ii) asbestos-containing materials in any form or condition; or
(iii) materials or equipment containing polychlorinated biphenyls.
(d) Starfish has not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled or Released any substance (including,
without limitation, any hazardous chemical or substance) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of
Starfish or its Subsidiaries for response costs, natural resource damages or
attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any other
Environmental and Safety Requirements.
(e) Without limiting the generality of the foregoing, no facts, events or
conditions relating to the past or present properties, facilities, leased
space or operations of Starfish shall prevent, hinder or limit continued
compliance with Environmental and Safety Requirements, give rise to any
corrective, investigatory or remedial obligations pursuant to Environmental
and Safety Requirements or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements (including, without limitation, those
liabilities, including but not limited to third party liabilities, relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage .
(f) Starfish has not, either expressly or by operation of law, assumed or
undertaken any liability or corrective, investigatory or remedial obligation
of any other Person relating to any Environmental and Safety Requirements.
(g) No Environmental Lien has attached to any property owned, leased or
operated by Starfish.
3.22 Corporate Documents. Starfish has furnished to Motorola for its
examination: (i) copies of its articles of incorporation and bylaws, (ii) its
minute book containing all records required to be set forth of all
proceedings, consents, actions, and meetings of the shareholders, the board of
directors and any committees thereof, (iii) all material permits, orders, and
consents issued by any regulatory agency with respect to Starfish, or any
securities of Starfish, and all applications for such permits, orders, and
consents, and (iv) the stock transfer books of Starfish setting forth all
transfers of any capital stock. The corporate minute books, stock certificate
books, stock registers and other corporate records of Starfish are complete
and accurate in all respects, and the signatures appearing on all documents
contained therein are the true signatures of the persons purporting to have
signed the same. All actions reflected in such books and records were duly and
validly taken in compliance in all material respects with the laws of the
applicable jurisdiction.
3.23 No Brokers. Neither Starfish nor, to Starfish's knowledge, any Starfish
shareholder is obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
3.24 Disclosure. The statements by Starfish contained in this Agreement, the
exhibits and schedules thereto, and the certificates or documents required to
be delivered by Starfish to Motorola or Sub under this Agreement, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were
made.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MOTOROLA AND SUB.
Motorola and Sub jointly and severally represent and warrant to Starfish
that:
4.1 Organization and Good Standing. Motorola and Sub are corporations duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation, and have full power and authority to carry
on their businesses as now conducted.
4.2 Capital Structure. As of the date hereof the authorized capital stock of
Motorola consists of one billion, four hundred million (1,400,000,000) shares
of Motorola Common Stock, Three Dollars ($3.00) par value per share, and five
hundred thousand (500,000) shares of Motorola Preferred Stock, One Hundred
Dollars ($100) par value per share. At the close of business on January 31,
1998, 597,503,874 shares of Motorola Common Stock were outstanding and no
shares of Motorola Preferred Stock were outstanding. The shares of Motorola
Common Stock issuable in connection with the Merger are duly authorized and
reserved for issuance and, when issued in accordance with the terms of this
Agreement and Agreement of Merger, will be validly issued, fully paid,
nonassessable and free of preemptive rights. As of the date hereof, the
authorized capital stock of Sub consists of one thousand (1,000) shares of
Common Stock, no par value, all of which are validly issued, fully paid and
nonassessable and owned by Motorola.
4.3 Power, Authorization and Validity. Motorola and Sub have the right,
power, legal capacity and authority to enter into and perform their respective
obligations under this Agreement and the other Transaction Documents to which
they are a party. The execution and delivery of this Agreement and the other
Transaction Documents have been duly and validly approved and authorized by
the respective boards of directors of Motorola and Sub and by Motorola as the
sole shareholder of Sub. No authorization or approval, governmental or
otherwise, is necessary in order to enable Motorola and Sub to enter into and
to perform the terms of this Agreement or the other Transaction Documents on
their parts to be performed, except for (i) the filing of the Merger Agreement
and all required officers' certificates with the Secretary of State of the
State of California and appropriate documents with the relevant authorities of
other states in which Motorola is qualified to do business, (ii) filings under
applicable securities laws, (iii) the termination of the waiting period under
the HSR Act and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country in which Motorola or any of Motorola's subsidiaries
conducts any business or owns any property or assets. This Agreement is, and
the other Transaction Documents when executed and delivered by Motorola and/or
Sub shall be, the valid and binding obligations of Motorola and Sub
enforceable in accordance with their respective terms, subject to (i) laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
4.4 No Violation of Existing Agreements. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated herein
will conflict with, or result in a material breach or violation of, any
provision of Motorola's and or Sub's respective articles of incorporation, and
bylaws as currently in effect, any instrument or contract to which Motorola or
Sub is a party or by which any such party is bound, or any federal, state or
local judgment, writ, decree, order, statute, rule or regulation applicable to
any such party. Neither the execution and delivery of this Agreement, nor any
Agreement attached hereto as an Exhibit, nor the consummation of the
transactions contemplated herein or therein will have a Material Adverse
Effect on the operations, assets, or financial condition of Motorola.
4.5 SEC Documents. Motorola has made available to Starfish true, accurate
and complete copies of Motorola's most recent Proxy Statement and reports on
Forms 10-K, 10-Q and any report on Form 8-K filed since the most recent 10-Q
(collectively, the "SEC Documents"). As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, and taken together, the SEC Documents
contain no untrue statement of a material fact and did not omit to state a
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material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent corrected or superseded by a
subsequently filed SEC Document. The financial statements of Motorola included
in the Motorola SEC Documents (the "Motorola Financial Statements") comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and fairly present the consolidated financial position of Motorola
and its consolidated subsidiaries at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended (subject, in the case of unaudited statements, to normal, recurring
audit adjustments, provided that the notes and accounts receivable are
collectible in the amounts shown thereon and inventories are not subject to
write-down, except in either case in an amount not material or for which
Motorola has provided adequate reserves). There has been no change in
Motorola's accounting policies or estimates except as described in the notes
to the Motorola Financial Statements.
4.6 Compliance with Other Instruments and Laws. Motorola is not in violation
of any provisions of its certificate of incorporation or bylaws as currently
in effect or any federal, state or local judgment, writ, decree, or order
applicable to Motorola.
4.7 Litigation. There is no suit, action, proceeding, claim or investigation
pending or, to Motorola's knowledge, threatened against Motorola and Sub
before any court or administrative agency or which questions or challenges the
validity of this Agreement and which is not set forth in the SEC Documents (as
defined below) which could have a Material Adverse Effect on the operations,
assets or financial condition of Motorola or Sub.
4.8 Disclosure. The statements by Motorola and Sub contained in this
Agreement, the exhibits thereto, and the certificates and documents required
to be delivered by Motorola or Sub to Starfish under this Agreement, taken as
a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
herein and therein not misleading in light of the circumstances under which
such statements were made.
ARTICLE V
PRECLOSING COVENANTS OF STARFISH
5.1 Material Consents. Starfish shall, to the extent requested by Motorola,
use reasonable commercial efforts to obtain any and all consents necessary for
the assumption by the Surviving Corporation of the Material Contracts.
5.2 Advice of Changes. Starfish shall promptly advise Motorola in writing
(i) of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Starfish contained in this
Agreement, if made on or as of the date of such event, untrue or inaccurate in
any material and adverse respect and (ii) of any Material Adverse Change in
Starfish's business or financial condition, taken as a whole.
5.3 Conduct Of Business. Until the Closing, Starfish will continue to
conduct its business and maintain its business relationships in the ordinary
and usual course and will not, except as set forth in the Starfish Disclosure
Schedule or with the prior written consent of Motorola, which consent will not
be unreasonably withheld,
(a) borrow any additional money which borrowings exceed in the aggregate
One Hundred Thousand Dollars ($100,000);
(b) incur any liability other than in the ordinary and usual course of
business or in connection with the performance or consummation of this
Agreement;
(c) incur or commit to incur any capital expenditures in excess of Two
Hundred Thousand Dollars ($200,000) in the aggregate or as to any
individual matter in excess of Fifty Thousand Dollars ($50,000) other than
capital expenditures and commitments made in the usual and ordinary course
of its business, consistent in amount with past practice;
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(d) lease, license, sell, transfer, encumber or permit to be encumbered
any asset, intellectual property right or other property associated with
the business of Starfish (including sales or transfers to Affiliates of
Starfish), except for licenses granted and products sold in the usual and
ordinary course of business and except for cash applied in payment of
Starfish's liabilities in the usual and ordinary course of its business;
(e) dispose of any of its assets, except inventory in the regular and
ordinary course of business;
(f) enter into any lease or contract for the purchase or sale of any
property, real or personal, except in the ordinary course of business;
(g) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained up to the
date of this Agreement, subject only to ordinary wear and tear;
(h) pay any bonus or special remuneration (excluding sales commissions
and bonuses paid pursuant to existing arrangements in the ordinary course
of business) to any officer or employee, including any amounts for accrued
but unpaid bonuses, or increase the salary of any officer or employee;
(i) change its accounting methods;
(j) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital, or redeem or otherwise acquire any of
its capital stock other than repurchases of Starfish Capital Stock at
original prices from former employees or consultants pursuant to written
agreements providing for their repurchase in the event of termination of
employment or consultancy;
(k) amend or terminate any Material Contract, agreement or license to
which it is a party except in the ordinary course of business;
(l) enter into any material contract except in the ordinary course of
business and consistent with past practice;
(m) loan any amount to any person or entity, or guaranty or act as a
surety for any obligation;
(n) waive or release any right or claim, except in the ordinary course of
business;
(o) issue or sell any shares of its capital stock of any class or any
other of its securities, or issue or create any warrants, obligations,
subscriptions, options (other than options granted to new employees hired
in the ordinary course of business not to exceed options to purchase an
aggregate of 200,000 shares of Starfish Common Stock), convertible
securities, or other commitments to issue shares of capital stock, except
in connection with the exercise of rights existing prior to the date
hereof;
(p) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other
of its securities;
(q) merge, consolidate or reorganize with any entity;
(r) amend its articles of incorporation or bylaws;
(s) make or change any election, change any annual accounting period,
adopt or change any accounting method, file any amended tax return, enter
into any closing agreement, settle any tax claim or assessment relating to
Starfish, surrender any right to claim refund of taxes, consent to any
extension or waiver of the limitation period applicable to any tax claim or
assessment relating to Starfish, or take any other action or omit to take
any action, if any such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action or omission would have the
effect of increasing the tax liability of Starfish or Motorola;
(t) Adopt, amend, modify, or terminate any plan, program, policy or
arrangement subject to Section 3.9, including the Plan or any Welfare Plan,
other than as required under Section 12.3 of this Agreement.
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(u) do anything that is not contemplated in this Agreement or would cause
there to be a Material Adverse Change in the Starfish Financial Statements
(with such Starfish Financial Statements analyzed as if they had been
prepared according to GAAP, and including but not limited to cash
distributions or material decreases in the net assets of Starfish), except
as would occur in the ordinary course of Starfish's business, between the
date of the Starfish Financial Statements and the Closing Date; or
(v) agree to do any of the things described in the preceding clauses
Section 5.3(a) through (u).
5.4 Risk Of Loss. Except as otherwise provided in this Agreement or to the
extent caused by Motorola or Sub, until the Closing, all risk of loss, damage
or destruction to Starfish's assets shall be borne by Starfish.
5.5 Access To Information. Until the Closing, Starfish shall allow Motorola
and its agents free access upon reasonable notice and during normal working
hours to its files, books, records, and offices, including, without
limitation, any and all information relating to taxes, commitments, contracts,
leases, licenses, and personal property and financial condition. Until the
Closing, Starfish shall cause its accountants to cooperate with Motorola and
its agents in making available all financial information requested, including
without limitation the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
5.6 Satisfaction of Conditions Precedent. Starfish will use its Best Efforts
to satisfy or cause to be satisfied all the conditions precedent which are set
forth in Section 9, and Starfish will use its Best Efforts to cause the
transactions contemplated in this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings (including the HSR
application) with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the
transactions contemplated herein.
5.7 Other Negotiations. Between the date hereof and the date this Agreement
is terminated pursuant to Section 10 hereof (the "Expiration Date"), Starfish
will not (and it will use its Best Efforts to assure that its officers,
directors, employees, agents and affiliates do not on its behalf) take any
action to solicit, initiate, seek, encourage or support any inquiry, proposal
or offer from, furnish any information to, or participate in any negotiations
with, any corporation, partnership, person or other entity or group (other
than discussions with Motorola) regarding any acquisition of Starfish, any
merger or consolidation with or involving Starfish, or any acquisition of any
material portion of the stock or assets of Starfish. Starfish agrees that any
such negotiations in progress as of the date hereof will be terminated or
suspended during such period. In no event will Starfish accept or enter into
an agreement concerning any such third party transaction. Starfish represents
and warrants that it has the legal right to terminate or suspend any such
pending negotiations and agrees to indemnify Motorola, its representatives and
agents from and against any claims by any party to such negotiations based
upon or arising out of the discussion or any consummation of the Acquisition
as contemplated in this Agreement.
5.8 Registration Statement; Proxy Statement; Prospectus. The information
supplied by Starfish for inclusion in the registration statement on Form S-4
pursuant to which the shares of Motorola Common Stock issued in the Merger
will be registered with the SEC (the "Registration Statement") shall not at
the time the Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the
circumstances in which such statements were made, not misleading. The
information supplied by Starfish for inclusion in the proxy
statement/prospectus (the "Proxy Statement") to be sent to the Starfish
shareholders in connection with the meeting of Starfish's shareholders to
consider approval of this Agreement and the Merger (the "Starfish
Shareholders' Meeting") shall not, on the date the Proxy Statement is first
mailed to shareholders of Starfish, at the time of the Starfish Shareholder's
Meeting and on the Effective Date, contain any statement which, at such time
and in light of the circumstances under which it was 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 made in the Proxy Statement not
false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Starfish Shareholders' Meeting which has become false or
misleading. If, at any time prior to the Effective Date, Starfish should
discover any event or fact relating to Starfish or any of its Affiliates,
officers or directors which would be required to be set forth in an amendment
to the Registration Statement or a supplement to the Proxy Statement, Starfish
shall promptly inform Motorola of such event or fact.
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ARTICLE VI
PRECLOSING AND OTHER COVENANTS OF MOTOROLA AND SUB
6.1 Material Consents. Motorola shall provide reasonable assistance and
cooperation to Starfish in obtaining the Material Consents.
6.2 Advice of Changes. Motorola and Sub will promptly advise Starfish in
writing of (i) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of Motorola or Sub contained
in this Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect and (ii) any Material
Adverse Change in Motorola's or Sub's business or financial condition, taken
as a whole.
6.3 Reservation of Motorola Common Stock. Motorola shall reserve for
issuance, out of its authorized but unissued capital stock, that number of
shares of Motorola Common Stock (as adjusted for any reclassification, split-
up, stock dividend or stock combination occurring between the date of this
Agreement and the Effective Date) as are issuable upon or after consummation
of the Merger.
6.4 Satisfaction of Conditions Precedent. Motorola and Sub will use their
respective Best Efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and Motorola and Sub will use
their respective Best Efforts to cause the transactions contemplated herein to
be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all
filings (including the HSR Act application) with, and give all notices to,
third parties which may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
6.5 Registration Statement; Proxy Statement; Prospectus. The information
supplied by Motorola for inclusion in the Registration Statement shall not at
the time the Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Motorola for inclusion in the Proxy Statement shall not, at the
time of the Starfish Shareholders Meeting and on the Effective Date, contain
any statement which, at such time and in light of the circumstances under
which it was 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
made in the Proxy Statement not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Starfish Shareholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Date Motorola should discover any event or fact relating to Motorola
or any of its Affiliates, officers or directors which would be required to be
set forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement, Motorola shall promptly inform Starfish of such event or
fact.
6.6 S-8 Registration. Motorola shall use its Best Efforts to cause the
shares of Motorola Common Stock issuable upon the exercise of the Starfish
Options to be subject to Motorola's existing Form S-8 (or if not, file a new
Form S-8 within thirty days of the Effective Time), and Motorola shall use its
Best Efforts to maintain the effectiveness of such registration statement (and
maintain the current status of the prospectus contained therein) for so long
as such Exchanged Options remain outstanding.
6.7 NYSE Listing. Motorola shall use its Best Efforts to cause the Motorola
Common Stock to be issued in the Merger to be approved for listing on the New
York Stock Exchange, subject to official notice of issuance, prior to the
Closing Date.
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ARTICLE VII
MUTUAL COVENANTS
7.1 Confidentiality. Each party acknowledges that in the course of the
performance of this Agreement, it may obtain the Confidential Information of
the other party. The party receiving such Confidential Information (the
"Receiving Party") from the party disclosing such confidential information
(the "Disclosing Party") shall, at all times, both during the term of this
Agreement and thereafter, keep in confidence and trust all of the Disclosing
Party's Confidential Information received by it. The Receiving Party shall not
use the Confidential Information of the Disclosing Party other than as
expressly permitted under the terms of this Agreement or by a separate written
agreement. The Receiving Party shall take all reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party shall not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers or employees (or outside legal, financial or accounting
advisors) who need access to such Confidential Information in order to effect
the intent of this Agreement and who have entered into confidentiality
agreements with such person's employer or who are subject to ethical
restrictions on disclosure which protects the Confidential Information of the
Disclosing Party. The Receiving Party shall immediately give notice to the
Disclosing Party of any unauthorized use or disclosure of Disclosing Party's
Confidential Information. The Receiving Party agrees to assist the Disclosing
Party to remedy such unauthorized use or disclosure of its Confidential
Information. These obligations shall not apply to the extent that Confidential
Information includes information which:
(a) is already known to the Receiving Party at the time of disclosure,
which knowledge the Receiving Party shall have the burden of proving by
reference to written or electronic records in existence at the time of
disclosure;
(b) is, or through no act or failure to act of the Receiving Party
becomes, publicly known;
(c) is received by the Receiving Party from a third party without
restriction on disclosure (although this exception shall not apply if such
third party is itself violating a confidentiality obligation by making such
disclosure);
(d) is independently developed by the Receiving Party without reference
to the Confidential Information of the Disclosing Party, which independent
development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of the Disclosing
Party; or
(f) is required to be disclosed by a Government Body to further the
objectives of this Agreement or by a proper order of a court of competent
jurisdiction; provided, however, that the Receiving Party will use its best
efforts to minimize such disclosure and will consult with and assist the
Disclosing Party in obtaining a protective order prior to such disclosure.
7.2 No Public Announcement. The parties shall make no public announcement
concerning this Agreement, their discussions or any other memos, letters or
agreements between the parties relating to the Merger until such time as they
agree in writing to the contents of a mutually satisfactory press release.
Either of the parties, but only after reasonable consultation with the other,
may make disclosure if required under applicable law.
7.3 Regulatory Filings; Consents; Best Efforts. Subject to the terms and
conditions of this Agreement, Starfish and Motorola shall use their respective
Best Efforts to (i) make all necessary filings with respect to the Merger and
this Agreement under the Securities Act, the Exchange Act and applicable blue
sky or similar securities laws and obtain required approvals and clearances
with respect thereto and supply all additional information requested in
connection therewith (ii) make other appropriate filings with federal, state
or local governmental bodies or applicable foreign governmental agencies and
obtain required approvals and clearances with respect thereto and supply all
additional information requested in connection therewith (iii) obtain all
consents, waivers, approvals, authorizations and orders required in connection
with the authorization, execution
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and delivery of this Agreement and the consummation of the Merger and (iv)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, with the objective of completing the Closing no later than August
30, 1998.
7.4 HSR Act Application. As soon as practicable after the public
announcement of this Agreement, each of Motorola and Starfish shall make or
cause to be made any and all required filings pursuant to the HSR Act, with
respect to the transactions contemplated herein and in the Transaction
Documents. Each of Motorola and Starfish shall use its respective best efforts
to respond as promptly as practicable to all inquiries received from the
applicable governmental agencies or committees for additional information or
documentation. Each of Motorola and Starfish shall notify the other of all
correspondence, filings, request or communications between such party or its
representatives on the one hand, and the applicable Governmental Body on the
other hand, with respect to the transactions contemplated herein and in the
Transaction Documents. Each of Motorola and Starfish shall furnish the other
with such necessary information and reasonable assistance as such other
parties may request in connection with its preparation of all required filings
under the HSR Act.
7.5 Proxy Statement; Prospectus; Registration Statement
(a) As promptly as practicable after the execution of this Agreement,
Motorola and Starfish shall prepare and file with the SEC the Proxy Statement,
and Motorola shall prepare and file with the SEC the Registration Statement,
in which the Proxy Statement will be included. Each of Motorola and Starfish
shall use its respective Best Efforts to cause the Registration Statement to
become effective as soon after such filing as practicable.
(b) Motorola and Starfish shall make all necessary filings with respect to
the Merger under the Securities Act and the Exchange Act and applicable state
blue sky laws and the rules and regulations thereunder.
7.6 Tax Matters. All parties intend the Merger to be a tax-free
reorganization within the meaning of Section 368(a) of the Code, and agree to
use their respective Best Efforts to take all action required or appropriate
to facilitate such tax treatment.
7.7 Further Assurances. Prior to and following the Closing, each party
agrees to cooperate fully with the other parties and to execute such further
instruments, documents and agreements, and to give such further written
assurances, as may be reasonably requested by any other party to evidence and
reflect better the transactions described and contemplated herein and to carry
into effect the intents and purposes of this Agreement.
ARTICLE VIII
CONDITIONS OF STARFISH'S OBLIGATIONS
The obligations of Starfish to close the transactions contemplated in this
Agreement are subject to the fulfillment or satisfaction on and as of the
Closing of each of the following conditions (any one or more of which may be
waived by Starfish, but only in a writing signed by Starfish):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Motorola and Sub set forth in Section 4 and in any certificate
delivered at the Closing by Motorola or Sub in connection with this Agreement
shall be true and correct in all material respects when made and on and as of
the Closing with the same force and effect as if such representations and
warranties had been made at the Closing, and Starfish shall receive a
certificate to such effect signed by an officer of Motorola and Sub,
respectively.
8.2 Covenants. Motorola and Sub shall have performed and complied in all
material respects with all of their covenants contained in Article VI and
Article VII on or before the Closing, and Starfish shall receive a certificate
from Motorola and Sub to such effect signed by an officer of Motorola and Sub,
respectively.
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8.3 Authorizations. Starfish shall have received from Motorola and Sub
written evidence that the execution, delivery and performance of Motorola and
Sub's obligations under this Agreement have been duly and validly approved and
authorized by the Board of Directors of Motorola and Sub, respectively, and
the shareholder of Sub.
8.4 Opinion of Motorola's Counsel. Starfish shall receive from Motorola in-
house counsel an opinion in form and substance reasonably satisfactory to
counsel to Starfish ("Opinion of Counsel to Motorola").
8.5 Government Consents. There shall have been obtained at or prior to the
date of Closing such permits or authorizations, and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken.
8.6 Termination of HSR Waiting Period. The waiting period under the HSR Act
shall have terminated.
8.7 Listing of Motorola Common. The shares of Motorola Common Stock to be
issued in the Merger pursuant to this Agreement shall have been approved for
listing (subject to notice of issuance) on the New York Stock Exchange.
8.8 Tax Opinion. Except as contemplated by Section 2.7 of this Agreement,
Starfish shall have received a written opinion of Starfish's legal counsel in
form and substance reasonably satisfactory to it, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code, and such opinion shall not have been withdrawn. In rendering such
opinion, counsel shall be entitled to rely upon, among other things,
reasonable assumptions as well as representations of Motorola, Sub and
Starfish and certain shareholders of Starfish and each of Motorola, Sub and
Starfish shall provide counsel such reasonable representations.
8.9 Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
8.10 Blue Sky Laws. Motorola shall have received all permits and other
authorizations required under applicable state blue sky laws for the issuance
of Motorola Common Stock pursuant to the Merger.
ARTICLE IX
CONDITIONS TO MOTOROLA'S AND SUB'S OBLIGATIONS
The obligations of Motorola and Sub are subject to the fulfillment or
satisfaction on and as of the Closing of each of the following conditions (any
one or more of which may be waived by Motorola, but only in a writing signed
by Motorola):
9.1 Accuracy of Representations and Warranties. The representations and
warranties made by Starfish contained in Article III and in any certificate
delivered by Starfish in connection with this Agreement shall be true and
correct when made except where (i) the failure of such representation or
warranty to be true and correct would not have a Material Adverse Effect; (ii)
the failure of such representation or warranty to be true and correct has been
remedied prior to the Closing Date; or (iii) the failure of such
representation or warranty is the result of the announcement of the
acquisition of Starfish by Motorola; and Motorola shall receive a certificate
to such effect signed by the President or Chief Financial Officer of Starfish.
9.2 Covenants. Starfish shall have performed and complied in all material
respects with all of its covenants and obligations contained in this Agreement
on or before the Closing except to the extent any non-performance does not
have a Material Adverse Effect.
9.3 No Litigation. On and as of the Closing, no litigation or proceeding
shall be threatened or pending against Motorola or Starfish with the probable
effect (in the reasonable opinion of Motorola's counsel) of enjoining or
preventing the consummation of the Merger or the enforcement of any of the
Noncompetition Agreements, or requiring Motorola to divest or hold separate
any business in connection with the Merger, and
no judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator shall be
outstanding against Starfish that would otherwise have a Material Adverse
Effect on Motorola (exclusive of the business of Starfish).
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9.4 Authorizations. Motorola shall have received from Starfish written
evidence that (i) the execution, delivery and performance of this Agreement
have been duly and validly approved and authorized by Starfish's board of
directors and by the shareholders of Starfish, and (ii) shareholders of
Starfish holding no more than ten percent (10%) of the outstanding shares of
Starfish capital stock have, or might be able to perfect, dissenters' rights
in connection with the Merger.
9.5 Voting Agreements and Non-Competition and Non Solicitation Agreements.
Each of the Voting Agreements and the Non-Competition and Non-Solicitation
Agreements referred to in Section 12.1 shall be in full force and effect and
shall not been amended without Motorola's consent.
9.6 Intentionally omitted.
9.7 Opinion of Starfish's Counsel. Motorola shall have received from counsel
to Starfish, an opinion in substantially the form attached hereto as Exhibit D
("Opinion of Counsel to Starfish").
9.8 Termination of HSR Waiting Period. The waiting period under the HSR Act
shall have been terminated.
9.9 Listing of Motorola Stock. The shares of Motorola Stock to be issued in
the Merger pursuant to this Agreement shall have been approved for listing
(subject to notice of issuance) on the New York Stock Exchange.
9.10 Receipt Of Certificate. Motorola shall have received at Closing a
certificate signed by the President and Chief Financial Officer of Starfish
certifying the accuracy of the matters set forth in Section 9.1, 9.2, 9.3, and
9.4.
9.11 Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
9.12 Blue Sky Laws. Motorola shall have received all permits and other
authorizations required under applicable state blue sky laws for the issuance
of shares of Motorola Common Stock pursuant to the Merger.
9.13 Employees. None of the Key Employees (as defined in Section 12.1), and
no more than twenty percent (20%), of Starfish's other employees shall have:
(a) voluntarily terminated their employment with Starfish on or prior to the
Closing Date or (b) refused to accept employment with, or given notice that
they do not intend to continue employment with, the Surviving Corporation.
9.14. Exercise of Warrants. The Warrant(s) shall have been exercised in
full.
9.15 Exchange Agent Agreement. Starfish, the Exchange Agent and the
Shareholder Representative shall have entered into the Exchange Agent
Agreement in form and substance satisfactory to Motorola.
9.16 Tax Opinion. Except as contemplated by Section 2.7 of this Agreement,
Motorola shall have received a written opinion of Motorola's outside legal
counsel in form and substance reasonably satisfactory to it, to the effect
that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and such opinion shall not have been withdrawn. In
rendering such opinion, counsel shall be entitled to rely upon, among other
things, reasonable assumptions as well as representations of Motorola, Sub and
Starfish and certain shareholders of Starfish and each of Motorola, Sub and
Starfish shall provide counsel such reasonable representations.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) By mutual consent, or
(b) By either Motorola or Starfish for any reason if the Closing has not
occurred by October 31, 1998, unless otherwise mutually agreed in writing
by the parties, or such later date as the parties may agree in writing,
provided that a party cannot terminate under this provision if the failure
to occur of the Closing is
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the result of the failure on the part of such party to perform any of its
obligations hereunder (except the failure on the part of such party to
satisfy a closing condition over which such party has no control). Any
termination of this Agreement under this Section 10.1 shall be effective by
the delivery of written notice of the terminating party to the other
parties hereto, or
(c) By either Motorola or Starfish if any Governmental Entity shall have
issued an order, injunction, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and
such order, injunction, decree, ruling or other action shall have become
final and nonappealable.
10.2 Effect of Termination. Any termination of this Agreement pursuant to
this Article X shall be without further obligation or liability upon any party
in favor of any other party hereto; provided, however, that if such
termination by one party shall result from the willful failure of the other
party to carry out its obligations under this Agreement, then such party shall
be liable for Damages incurred by the other party, and such termination shall
not be deemed or construed as limiting or denying any legal or equitable right
or remedy of said party, and said party shall be entitled to recover its costs
and expenses which are incurred in pursuing its rights and remedies (including
reasonable attorneys' fees).
10.3 Certain Effects Of Termination. In the event of the termination of this
Agreement by either Starfish or Motorola as provided in Section 10.1 hereof:
(a) each party, if so requested by the other party, will (i) return
promptly every document (other than documents publicly available and other
than one copy thereof to be retained by outside counsel for such party)
furnished to it by the other party (or any subsidiary, division, associate
or affiliate of such other party) in connection with the transactions
contemplated hereby, whether so obtained before or after the execution of
this Agreement, and any copies thereof which may have been made, and will
cause its representatives and any representatives of financial institutions
and investors and others to whom such documents were furnished promptly to
return such documents and any copies thereof any of them may have made, or
(ii) destroy such documents and cause its representatives and such other
representatives to destroy such documents, and such party shall deliver a
certificate executed by its president or vice president stating to such
effect; and
(b) Starfish and Motorola shall continue to abide by the provisions of
the Mutual Non-Disclosure and Non-Solicitation Agreement dated as of
January 16, 1998 between Motorola and Starfish (the "Nondisclosure
Agreement"). This Section 10.3 shall survive any termination of this
Agreement.
ARTICLE XI
INDEMNIFICATION AND ESCROW
11.1 Survival of Representations.
(a) The representations and warranties made by Starfish (including the
representations and warranties set forth in Article III hereof and the
representations and warranties set forth in any certificate delivered by
Starfish in connection with this Agreement) shall survive the Closing and
shall remain in full force and effect and shall survive until the end of the
Indemnification Period and shall survive thereafter only with respect to any
claims made prior to the end of the Indemnification Period; provided, however,
that the termination hereunder of the representations and warranties made by
Starfish shall not terminate or limit in any manner whatsoever any rights
Motorola has or may have for knowing and intentional misrepresentation. The
representations and warranties made by Motorola and Sub shall survive the
Closing, shall remain in full force and effect and shall survive until the end
of the Indemnification Period, and the holders of Starfish Securities shall be
expressly permitted to rely on such representations and warranties as third
party beneficiaries; provided, however, that the termination hereunder of the
representations and warranties made by Motorola and Sub shall not terminate or
limit in any manner whatsoever any rights which Starfish or the Starfish
Shareholders or holders of Starfish Options have or may have for knowing and
intentional misrepresentation.
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(b) As used in this Agreement, Indemnification Period shall mean a period of
two (2) years from the Closing Date; provided, however, that the
Indemnification Period with respect to claims arising under Section 11.2(iii)
shall be three (3) years; provided, further, that the expiration of any
Indemnification Period shall not limit the rights any Indemnitees with respect
to indemnification under this Article XI in respect of any claim commenced
with the applicable Indemnification Period.
(c) The representations, warranties, covenants and obligations of Starfish,
and the rights and remedies that may be exercised by the Indemnitees, shall
not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, any of the
Indemnitees or any of their Representatives.
11.2 Indemnification by Shareholders.
(a) From and after the Closing Date (but subject to Section 11.1(a)), the
Shareholders of Starfish shall hold harmless and indemnify each of the
Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages which are suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim)
and which arise from or as a result of:
(i) any inaccuracy in or breach of any representation or warranty set
forth in Article III hereunder or in any certificate delivered by Starfish
in connection with this Agreement;
(ii) any breach of any covenant or obligation of Starfish hereunder;
(iii) any claim relating to Intellectual Property for damages above the
license fees paid or payable under the agreement of November 15, 1996
between Starfish and Day-Timers, the agreement of May 12, 1997 between
Starfish and General Magic, the agreement of March 4, 1998 between Starfish
and Open-Text Inc., the agreement of June 6, 1995 between Starfish and
Franklin Electronic Publishers, the agreement of August 8, 1996 between
Starfish and Franklin Electronic Publishers, the agreement of October
29,1997 between Starfish and Hewlett-Packard, the agreement of March 1,
1997 between Starfish and Acer America, the agreement of September 30, 1997
between Starfish and Sony, the agreement of February 3, 1997 between
Starfish and The Media Farm, or the agreement of March 28, 1997 between
Starfish and The Media Farm;
(iv) any claim under the agreement between Starfish and Intuit arising as
a result of the agreement between Starfish and Day-Timers or as a result of
any modification of that latter agreement entered into before the Closing
Date;
(v) any claim with respect to the fees or expenses of a broker or finder
payable by the Starfish Shareholders in accordance with Section 13.8 of
this Agreement;
(vi) any Legal Proceeding relating to any inaccuracy, breach or expense
of the type referred to in clause "(i)" "(ii)" "(iii)" or "(iv)" above
(including any Legal Proceeding commenced by any Indemnitee for the purpose
of enforcing any of its rights under this Article XI if such Indemnitee is
the prevailing party in any such Legal Proceeding); or
(vii) any obligation or duty agreed to or assumed by Starfish in any
contract, license or agreement not listed in Part 3.8(k) of the Starfish
Disclosure Statement, entered into between Starfish and any other Person,
to indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement by Starfish or such other Person
of the Intellectual Property Rights of any other Person.
(b) If the Surviving Corporation suffers, incurs or otherwise becomes
subject to any Damages as a result of or in connection with any inaccuracy in
or breach of any representation, warranty, covenant or obligation of Starfish
hereunder, then (without limiting any of the rights of the Surviving
Corporation as an Indemnitee) Motorola shall also be deemed, by virtue of its
ownership of the stock of the Surviving Corporation, to have incurred Damages
as a result of and in connection with such inaccuracy or breach.
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11.3 Threshold; Ceiling; Exclusivity; Claims Process.
(a) The Shareholders shall not be required to make any indemnification
payment pursuant to Section 11.2(a) or for any other reason or on account of
any other provision for any inaccuracy in or breach of any of the
representations and warranties set forth in Article III hereof or in any
certificate delivered by Starfish in connection with this Agreement until such
time as and only to the extent that the total amount of all Damages (including
the Damages arising from such inaccuracy or breach and all other Damages
arising from any other inaccuracies in or breaches of any representations or
warranties) that have been suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds Five Hundred Thousand Dollars ($500,000) in
the aggregate; provided, however, that the foregoing shall not apply to
Damages arising under Section 11.2(a)(v);
(b) Except with respect to claims based on knowing and intentional
misrepresentations of representations and warranties, Motorola and Sub agree
on behalf of the Indemnitees that, after the Closing, the sole recourse of the
Indemnitees with respect to Damages shall be against the Holdback Amount and
the Escrowed Non-Cash Merger Consideration in the manner set forth in Section
2.6 of this Agreement.
(c) In the event that an Indemnitee shall have incurred any Damages for
which Indemnitee wishes to seek adjustment to the Holdback Amount pursuant to
Section 11.1, Indemnitee shall deliver to the Shareholder Representative an
Officer's Certificate: (i) stating that Indemnitee has paid or properly
accrued or reasonably anticipates that it will have to pay or accrue Damages,
(ii) specifying in reasonable detail the individual items of Damages included
in the amount so stated, the date each such item was paid or properly accrued
or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant or other adjustment to the
Holdback Amount to which such item is related and (iii) indicating that
Indemnitee is seeking adjustment to the Holdback Amount under this Article XI.
(d) In the event that an Indemnitee has elected to pursue adjustment to the
Holdback Amount under this Article XI, the Holdback Amount shall be reduced by
the amount stated in the Officer's Certificate, unless the Shareholder
Representative contests such claim in writing within thirty (30) days of such
election. In such event, the parties will follow the procedures set forth in
Section 13.2 below (in which case the Holdback Amount shall be reduced by the
amount of Loss as determined pursuant to Section 13.2 with respect to such
Damages).
(e) In the event that an Indemnitee shall have incurred any Damages for
which Indemnitee wishes to claim pursuant to Section 11.1 against the Escrowed
Non-Cash Merger Consideration in accordance with Section 2.6 of this
Agreement, Indemnitee shall deliver to the Shareholder Representative and the
Exchange Agent an Officer's Certificate: (i) stating that Indemnitee has paid
or properly accrued or reasonably anticipates that it will have to pay or
accrue Damages, (ii) specifying in reasonable detail the individual items of
Damages included in the amount so stated, the date each such item was paid or
properly accrued or the basis for such anticipated liability, and the nature
of the misrepresentation, breach of warranty or covenant or other adjustment
to the Holdback Amount to which such item is related and (iii) indicating that
Indemnitee is seeking the release of all or a portion of the Escrowed Non-Cash
Merger Consideration under this Article XI.
(f) In the event that an Indemnitee has elected to pursue the release of all
or a portion of the Escrowed Non-Cash Merger Consideration under this Article
XI, the Exchange Agent shall, in accordance with the terms of the Exchange
Agreement, release to such Indemnitee a number of shares of Motorola Common
Stock having a value equal to the amount stated in the Officer's Certificate,
unless the Shareholder Representative contests such claim in writing within
thirty (30) days of such election. In such event, the parties will follow the
procedures set forth in Section 13.2 below (in which case the Exchange Agent
shall, in accordance with the terms of the Exchange Agreement, release to such
Indemnitee a number of shares of Motorola Common Stock having a value equal to
the amount of Loss as determined pursuant to Section 13.2 with respect to such
Damages). For the purposes of this Agreement and the Exchange Agreement, the
value of each share of Motorola Common Stock constituting the Escrowed Non-
Cash Merger Consideration shall be the Valuation Period Stock Price.
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11.4 No Contribution. The Shareholders acknowledge and agree that they shall
not have and shall not exercise or assert (or attempt to exercise or assert),
any right of contribution, right of indemnity or other right or remedy against
the Surviving Corporation in connection with any indemnification obligation or
any other liability to which it may become subject under or in connection with
this Agreement or any certificate delivered by Starfish in connection with
this Agreement.
11.5 Defense Of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
the Surviving Corporation, against Motorola or against any other Person) with
respect to which the Shareholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 11,
the procedure set forth in Sections 11.6 and 11.7 below shall be followed.
11.6 Notice. Motorola shall give prompt written notice to the Shareholder
Representative pursuant to Section 11.9 of the commencement of any such Legal
Proceeding against Motorola or the Surviving Corporation for which indemnity
may be sought under Article XI together with a description of such Legal
Proceeding and the specific bases upon which such indemnity may be sought
consistent with the provisions of this Agreement; provided, however, that any
failure on the part of Motorola to so notify the Shareholder Representative
shall not limit any of the obligations of the Shareholders under this Article
XI (except to the extent such failure materially prejudices the defense of
such Legal Proceeding). The Indemnification Period shall be tolled solely with
respect to a particular claim for the period beginning on the date the
Indemnifying Party receives written notice of that claim until the final
resolution of such claim so long as such claim is made within the
Indemnification Period.
11.7 Defense of Claim. The Indemnitee shall have the right to be represented
by counsel of its choice and to defend or otherwise control the handling of
any third party claim or Legal Proceeding for which indemnity is sought.
Notwithstanding the foregoing, the Shareholder Representative may elect on
behalf of the Shareholders (by written notice by the Shareholder
Representative to Motorola within thirty (30) days after receipt of written
notice under Section 11.8(a)) to assume the defense of or otherwise control
the handling of any such third party claim or Legal Proceeding (other than for
matters relating to the intellectual property rights of Motorola (including
Starfish), or claims by customers of Motorola) for which indemnity is sought
so long as, and only in the event that, the maximum amount reasonably expected
to be payable with respect to any such Legal Proceeding by Starfish or
Motorola would not exceed the Holdback Amount in Motorola's reasonable
determination, subject to the further limitations provided herein.
(a) If the Shareholder Representative so elects to assume the defense of any
such claim or Legal Proceeding:
(i) the Shareholders shall proceed to defend such claim or Legal
Proceeding in a diligent manner with counsel reasonably satisfactory to the
Indemnitee;
(ii) the Indemnitee shall make available to the Shareholder
Representative any documents and materials in the possession of the
Indemnitee that may be necessary to the defense of such claim or Legal
Proceeding;
(iii) the Shareholder Representative shall keep the Indemnitee informed
of all material developments and events relating to such claim or Legal
Proceeding;
(iv) the Indemnitee shall have the right to participate in the defense of
such claim or Legal Proceeding at the Indemnitee's expense; and
(v) the Shareholder Representative shall have the right to settle, adjust
or compromise such claim or Legal Proceeding only with the consent of
Motorola; provided, however, that Motorola shall not unreasonably withhold
such consent.
(b) If the Shareholder Representative does not (or cannot) elect to assume
the defense of any such third party claim or Legal Proceeding, the Indemnitee
may proceed with the defense of such claim or Legal Proceeding on its own. If
the Indemnitee so proceeds with the defense of any such claim or Legal
Proceeding on its own:
(i) all expenses relating to the defense of such claim or Legal
Proceeding (whether or not incurred by the Indemnitee) shall be borne and
paid exclusively by the Shareholders out of the Holdback Amount,
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provided, however, that the Shareholders shall not be liable for the costs
of more than one counsel on behalf of the Indemnities collectively;
(ii) the Shareholders shall make available to the Indemnitee any
documents and materials in the possession or control of the Shareholders
that may be necessary to the defense of such claim or Legal Proceeding
except for documents or materials which are sealed by a court order or are
subject to a nondisclosure agreement prohibiting disclosure by the
Shareholders;
(iii) the Indemnitee shall keep the Shareholder Representative informed
of all material developments and events relating to such claim or Legal
Proceeding; and
(iv) the Indemnitee shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Shareholder
Representative; provided, however, that the Shareholders shall not
unreasonably withhold such consent.
11.8 Exercise of Remedies by Indemnitees Other than Motorola. No Indemnitee
(other than Motorola or any successor thereto or assignee thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy
under this Agreement unless Motorola (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim
or the exercise of such other remedy.
11.9 Shareholder Representative; Approval of Shareholders.
(a) Philippe Kahn shall be constituted and appointed as agent ("Shareholder
Representative") for and on behalf of the Shareholders to give and receive
notices and communications, to authorize delivery to Motorola of the Holdback
Amount in satisfaction of claims by Motorola, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Shareholder Representative for the accomplishment of the
foregoing. Such agency may be changed by the holders of a majority in interest
of the Holdback Amount from time to time upon not less than ten (10) business
days' prior written notice to Motorola. No bond shall be required of the
Shareholder Representative, and the Shareholder Representative shall receive
no compensation for his/her services. Notices or communications to or from the
Shareholder Representative shall constitute notice to or from each of the
Shareholders.
(b) The Shareholder Representative shall not be liable for any act done or
omitted hereunder as Shareholder Representative while acting in good faith and
not in a manner constituting gross negligence, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Shareholders shall severally indemnify the Shareholder
Representative and hold him/her harmless against any loss, liability or
expense incurred without gross negligence or bad faith on the part of the
Shareholder Representative and arising out of or in connection with the
acceptance or administration of his/her duties hereunder. Subject to the prior
right of Motorola to make claims for damages, the Shareholder Representative,
with the consent of a majority in interest in the Holdback Amount, may recover
from the Holdback Amount prior to any payment to the Shareholders reasonable
costs and expenses incurred by the Shareholder Representative in connection
with acting as same.
(c) The approval by the Shareholders of the Merger shall be deemed to be
approval of the terms of the provisions of this Article XI, including the
appointment of the Shareholder Representative.
(d) A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of all Starfish Shareholders and
shall be final, binding and conclusive upon each such Starfish Shareholder,
and Motorola may rely upon any such decision, act, consent or instruction of
the Shareholder Representative as being the decision, act, consent or
instruction of each every such Starfish Shareholder. Motorola is hereby
relieved from any liability to any person for any acts done by it in
accordance with such decision, act, consent or instruction of the Shareholder
Representative.
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ARTICLE XII
EMPLOYEE ARRANGEMENTS
12.1 Non-Competition and Non-Solicitation Agreements. Motorola and Starfish
acknowledge that each of Philippe Kahn, Sonia Lee, John Hansen, S. Suresh,
Eric Bodnar and Perry Tobin (each a "Key Employee" and collectively the "Key
Employees") have executed and delivered non-competition and non-solicitation
agreements with Motorola containing, among other things, a three-year non-
competition/non-solicitation term with respect to Mr. Kahn and Ms. Lee, and a
two-year non-competition/non-solicitation term for the other Key Employees.
12.2 Bonus Pool. In connection with the Merger, Motorola agrees to establish
a bonus pool for employees of Starfish following the Effective Date (the
"Bonus Pool"). The Bonus Pool shall be in the amount of $19 million and shall
be allocated in three equal installments for the 12-month periods ending on
(or at Motorola's discretion before) the first (1st), second (2nd) and third
(3rd) anniversaries of the Closing Date. The Bonus Pool shall be paid out for
each period from time to time as may be approved by the Board of Directors of
the Surviving Corporation (the "Board"), but in any event the full amount of
the Bonus Pool for each period shall be paid within forty-five (45) days after
the end of each such period. The Shareholders Representative shall participate
with the Board in determining the awards of bonuses, but will not be eligible
for any such bonus. It is expressly understood that the principal purpose of
the Bonus Pool is to provide additional incentives for the current employees
of Starfish. Starfish will establish individual and group business plan
objectives for the purposes of such bonuses. Notwithstanding the foregoing,
with the approval of the Shareholders Representative, current or future
employees of other Motorola divisions who join Starfish and other future
employees of Starfish may be eligible to participate in the Bonus Pool.
12.3 Employee Benefit Plans.
(a) Motorola covenants and agrees that Starfish shall maintain all existing
welfare and retirement benefit plans and arrangements provided to its
employees as of the Closing Date until such time as Starfish and Motorola
agree to terminate or merge such plans with the existing welfare and
retirement benefit plans and arrangements provided by Motorola.
(b) Motorola agrees that to the extent the existing welfare and retirement
benefit plans and arrangements provided by Starfish to its employees are
terminated or merged with existing Motorola plans after the Closing Date, such
employees shall be entitled to participate in all benefit plans and
arrangements which are available and subsequently become available to
Motorola's employees of similar position on the same basis as Motorola's
employees. For purposes of eligibility to participate and vesting requirements
in the Motorola welfare and retirement plans for which any such employee may
be eligible after the termination or merger of Starfish's existing welfare and
retirement plans, such plans provide that service by such employee with
Starfish shall be deemed to have been service with Motorola; provided,
however, that Motorola shall not be required to treat service with Starfish as
service with Motorola for purposes of benefit accrual under the Motorola, Inc.
Pension Plan. To the extent that any Starfish medical plan under section 213
(d) of the Code is terminated, Motorola shall offer continued group health
coverage pursuant to COBRA to those individuals receiving COBRA coverage
through the Starfish medical plan immediately prior to such termination.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Laws. It is the intention of the parties hereto that the
internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of
its terms, and the interpretation and enforcement of the rights and duties of
the parties hereto.
13.2 Amicable Resolution. Motorola and Starfish mutually desire that
friendly collaboration will develop between themselves. Accordingly, they
shall try to resolve in a friendly manner all disagreements and
misunderstandings connected with their respective rights and obligations under
this Agreement, including any amendments hereof.
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<PAGE>
Excluding Intellectual Property disputes which must be brought before a
court of competent jurisdiction, to the extent that any misunderstanding or
dispute which arises after the Effective Date cannot be resolved agreeably in
a friendly manner, the dispute will be mediated by a mutually-acceptable
mediator to be chosen by Motorola and Starfish within forty-five (45) days
after written notice by one of the parties demanding mediation. Neither party
may unreasonably withhold consent to the selection of a mediator, however, by
mutual agreement Motorola and Starfish may postpone mediation until each has
completed specified but limited discovery with respect to a dispute. The
parties may also agree to attempt some other form of alternative dispute
resolution ("ADR") in lieu of mediation, including by way of example and
without limitation neutral fact-finding or a mini-trial.
Any dispute that the parties cannot resolve through negotiation, mediation
or other form of ADR within six months of the date of the initial demand for
it by one of the parties may then be submitted to the courts for resolution.
The use of any ADR procedures will not be construed under the doctrines of
laches, waiver or estoppel to affect adversely the rights of either party.
Nothing in this Section 13.2 will prevent either party from resorting to
judicial proceedings if (i) good faith efforts to resolve the dispute under
these procedures have been unsuccessful or (ii) interim relief from a court is
necessary to prevent serious and irreparable injury to one party or to others.
13.3 Limitation on Liability. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL,
INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH ANY
CLAIMS, LOSSES, DAMAGES, OR INJURIES ARISING OUT OF THE CONDUCT OF THE PARTIES
PURSUANT TO THIS AGREEMENT.
13.4 Binding Upon Successors and Assigns. Subject to, and unless otherwise
provided in, this Agreement, each and all of the covenants, terms, provisions,
and agreements contained herein shall be binding upon, and inure to the
benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
13.5 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances shall be interpreted so as best to effect reasonably
the intent of the parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent possible, the economic, business
and other purposes of the void or unenforceable provision.
13.6 Entire Agreement; Assignment. This Agreement, the Exhibits hereto and
the Starfish Disclosure Schedule, and the documents and instruments and other
agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person (including, without limitation, any
employee of Starfish or any such employee's spouse, dependents or
beneficiaries) except the Shareholder Representative any rights or remedies
hereunder; (c) shall not be assigned by Starfish whether by operation of law
or otherwise without the prior written consent of Motorola; and (d) shall not
be assigned by Motorola whether by operation of law or otherwise prior to the
Effective Date or after the Effective Date unless Motorola remains liable for
the obligations of the assignee.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, including counterparts transmitted by telecopier or telefax,
each of which shall be an original as against any party whose signature
appears thereon and all of which together shall constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of
the parties reflected hereon as signatories.
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13.8 Expenses. Whether or not the transactions herein contemplated shall be
consummated, Motorola will pay the fees, expenses and disbursements of
Motorola and Sub and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto. Whether or not the transactions herein contemplated shall
be consummated, Starfish will pay the fees, expenses and disbursements of
Starfish and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments
thereto and all other costs and expenses incurred in the performance and
compliance with all conditions to be performed by Starfish under this
Agreement. Notwithstanding the foregoing, neither Motorola nor Starfish shall
be liable for any fees or expenses payable to any broker or finder
contemplated by Section 3.23 of this Agreement, which fees or expenses will be
paid by the Starfish Shareholders through a reduction in the Holdback Amount.
13.9 Amendment and Waivers. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount
due hereunder or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
13.10 No Waiver. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
13.11 Notices. Any notice provided for or permitted under this Agreement
will be treated as having been given when (a) delivered personally, (b) sent
by confirmed telecopy, (c) sent by commercial overnight courier with written
verification of receipt, or (d) mailed postage prepaid by certified or
registered mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other party has
been notified in accordance with the provisions of this Section 13.11.
If to Starfish: Starfish Software, Inc. 1700 Green Hills Road
Scotts Valley, CA 95066 Facsimile:(408) 461-5955
Attention: President
With copy to: Gray Cary Ware Freidenrich, LLP 400 Hamilton Avenue
Palo Alto, CA 94301 Facsimile:(650) 327-3699
Attention: Peter M. Astiz, Esq.
If to Motorola: Motorola, Inc.50 Commerce DriveSchaumburg, IL
60173Facsimile: (847) 538-0852Attention: Jerry
Upton
With copy to: Motorola, Inc. 1303 East Algonquin Road Schaumburg,
IL 60196 Facsimile:(847) 576-3628
Attention: General Counsel
If to Shareholder'sRepresentative:
Philippe Kahn 333 Spreading Oaks Scotts Valley, CA
95066 Facsimile:(408) 439-0958
Such notice will be treated as having been received upon actual receipt.
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<PAGE>
13.12 Construction of Agreement. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof shall
not be construed for or against any party. The titles and headings herein are
for reference purposes only and shall not in any manner limit the construction
of this Agreement which shall be considered as a whole.
13.13 No Joint Venture. Nothing contained in this Agreement shall be deemed
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall
have the power to control the activities and operations of any other and their
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any power or
authority to bind or commit any other. No party shall hold itself out as
having any authority or relationship in contravention of this Section 13.11.
13.14 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
13.15 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the
parties to this Agreement.
[This space intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
Motorola, Inc., Starfish Software, Inc.,
a Delaware corporation a California corporation
By: /s/ Theodore W. Shaffner By: /s/ Philippe Kahn
---------------------------------- --------------------------------
Name: Theodore W. Shaffner Name: Philippe Kahn
--------------------------------- -------------------------------
Title: Corporate Vice President and Title: President and Chief Executive
-------------------------------- ------------------------------
Corporate Director of Business Officer
-------------------------------- ------------------------------
Development_
--------------------------------
SS Acquisition Corporation, a
California corporation
By: /s/ Garth L. Milne
--------------------------------
Name: Garth L. Milne
--------------------------------
Title: Treasurer
--------------------------------
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EXHIBIT A TO
AGREEMENT AND PLAN OF MERGER
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"ADR" shall have the meaning set forth in Section 13.2.
"Affiliate" shall have the meaning set forth in the rules and regulations
promulgated by the Commission pursuant to the Securities Act.
"Best Efforts" shall mean the efforts that a prudent person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the
person subject to that obligation to take actions that would result in a
Material Adverse Change in the benefits to such person of this Agreement and
the transactions contemplated herein.
"Board" shall have the meaning set forth in Section 12.2.
"Bonus Pool" shall have the meaning set forth in Section 12.2.
"California Code" shall have the meaning set forth in Section 1.1.
"CERCLA" shall have the meaning set forth in Section 3.21(d).
"Closing" shall have the meaning set forth in Section 1.2.
"Closing Date" shall have the meaning set forth in Section 1.2.
"Code" shall have the meaning set forth in the Recitals.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Confidential Information" shall mean confidential information of a party
("Disclosing Party") which is disclosed to another party ("Receiving Party").
Confidential Information shall include, but not be limited to, trade secrets,
know-how, inventions, techniques, processes, algorithms, software programs,
blueprints, engineering drawings, schematics, designs, theories of operation,
contracts, customer lists, financial information, sales and marketing plans
and business information.
"Damages" shall include any loss, damage, injury, liability, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee (including reasonable
attorneys' fees), charge, costs (including reasonable costs of investigation)
or reasonable expenses of any nature.
"Disclosing Party" shall have the meaning set forth in Section 7.1.
"Dissenting Shareholder" shall have the meaning set forth in Section 2.4.
"Dissenting Share(s)" shall have the meaning set forth in Section 2.1(c).
"Effective Time" shall have the meaning set forth in Section 1.2.
"Excluded Licenses" shall have the meaning set forth in Section 3.8(d).
"Entity" shall mean any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
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"Environmental Lien" shall have the meaning set forth in Section 3.21.
"ERISA" shall have the meaning set forth in Section 3.9.
"Escrowed Non-Cash Merger Consideration" shall have the meaning set forth in
Section 2.1(a)(iv).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any substituted federal statute and the rules and regulations thereunder,
all as the same shall be in effect at the time.
"Exchange Agent" shall have the meaning set forth in Section 2.2(a).
"Exchange Agreement" shall have the meaning set forth in Section 2.2(a).
"Exchange Fund" shall have the meaning set forth in Section 2.2(a).
"Exchanged Option" shall have the meaning set forth in Section 2.3(a).
"Expiration Date" shall have the meaning set forth in Section 5.7.
"GAAP" shall have the meaning set forth in Section 3.4(b).
"Governmental Body" shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of
any nature; (b) federal, state, local, municipal, foreign or other government;
or (c) governmental or quasi-governmental authority of any nature (including
any governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"Holdback Amount" shall have the meaning set forth in Section 2.(i) (but
shall not include any interest paid on the Holdback Amount).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnitees" shall mean the following Persons: (a) Motorola; (b) Motorola's
current and future affiliates (including, but not limited to, the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors of the
Persons referred to in clauses "(a)" and "(b)" and "(c)" above; provided,
however, that any Person receiving Motorola Common Stock pursuant to this
Agreement shall not be deemed to be an "Indemnitee."
"Initial Cash Merger Consideration" shall have the meaning set forth in
Section 2.1(a)(i).
"Initial Non-Cash Merger Consideration" shall have the meaning set forth in
Section 2.1(a)(ii).
"Intellectual Property" shall have the meaning set forth in Section 3.8(a).
"Issued Registered Intellectual Property" shall have the meaning set forth
in Section 3.8(c).
"Key Employee" shall have the meaning set forth in Section 12.1.
"Key Employees" shall have the meaning set forth in Section 12.1.
The terms "knowledge" and "known" when not capitalized shall be construed,
except as specifically otherwise provided, to qualify the matter referred to
as being to the actual knowledge after diligent inquiry of, with respect to
Starfish, Philippe Kahn, Sonia Lee, John Hansen, Norman Cheung and Gregg
Armstrong and, with respect to Motorola, the appropriate executive officer.
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<PAGE>
"Legal Proceeding" shall mean any action, suit, litigation, arbitration
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving
any court or other Governmental Body or any arbitrator or arbitration panel.
"Letter of Transmittal" shall have the meaning set forth in Section 2.2(b).
"Material Adverse Change" shall mean a change which would have a Material
Adverse Effect.
A violation or other matter will be deemed to have a "Material Adverse
Effect" on Starfish or Motorola or Sub, as applicable, if such violation or
other matter would be material in impact or amount to Starfish's or Motorola's
or Sub's, as applicable, (and in the case of Motorola, together with its
subsidiaries), business, intellectual property rights or condition, or, taken
as a whole, its assets, liabilities, operations, or financial performance. The
definition of "material" for purposes of Article III shall have no bearing
upon the interpretation of the term "material" for purposes of this
definition.
"Material Consents" shall have the meaning set forth in Section 5.1.
"Material Contract" shall have the meaning set forth in Section 3.11(a).
"Merger" shall have the meaning set forth in Recitals.
"Merger Articles" shall have the meaning set forth in Section 1.2.
"Merger Consideration" shall have the meaning set forth in Section 2.1(d).
"Motorola Common Stock" shall have the meaning set forth in Section
2.1(a)(ii).
"Motorola Financial Statements" shall have the meaning set forth in Section
4.5.
"Nondisclosure Agreement" shall have the meaning set forth in Section
10.3(b).
"Person" shall mean any individual, Entity or Governmental Body.
"Proprietary Asset" shall mean: (a) any patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service mark (whether registered or
unregistered), service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, logo, technical data, customer list, industrial design or
registration, know-how, customer list, franchise, system, computer software
(including any source code, object code, firmware, development tools, files,
records and data and all media on which any of the foregoing are recorded),
computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; and (b) any right to use or exploit any of
the foregoing and all extensions, renewals and revisions of any of the
foregoing and any and all documents relating to the foregoing.
"Proxy Statement" shall have the meaning set forth in Section 5.8.
"Receiving Party" shall have the meaning set forth in Section 7.1.
"Registered Intellectual Property" shall have the meaning set forth in
Section 3.8(b).
"Registration Statement" shall have the meaning set forth in Section 5.8.
"Release" shall have the meaning set forth in Section 3.21.
"SEC" shall mean the Securities and Exchange Commission.
A1-44
<PAGE>
"SEC Documents" shall have the meaning set forth in Section 4.5.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
substituted federal statute and the rules and regulations thereunder, all as
the same shall be in effect at the time.
"Shareholder Representative" shall have the meaning set forth in Section
11.9(a).
"Shareholders" shall mean the record holders of shares of capital stock of
Starfish.
"Software" shall have the meaning set forth in Section 3.8(a).
"Software Authors" shall have the meaning set forth in Section 3.8(a).
"Starfish Audited Financial Statements" shall have the meaning set forth in
Section 3.4(a).
"Starfish Capital Stock" shall have the meaning set forth in the Recitals.
"Starfish Common Stock" shall mean the common stock, no par value per share,
of Starfish.
"Starfish Disclosure Schedule" shall have the meaning set forth in Article
3.
"Starfish Financial Statements" shall have the meaning set forth in Section
3.4(a).
"Starfish Intellectual Property" shall have the meaning set forth in Section
3.8(a).
"Starfish Option" shall have the meaning set forth in Section 2.3(a).
"Starfish Preferred Stock" shall mean Starfish Class A Preferred Stock and
Starfish Class B Preferred Stock.
"Starfish Products" shall mean all versions and implementations of any
product which has been or is being marketed by Starfish or currently is under
development, and all patents, patent applications, trade secrets, copyrights,
trademarks, trade names and other proprietary rights related thereto.
"Starfish Series A Preferred Stock" shall mean the Class A Preferred Stock,
no par value per share, of Starfish.
"Starfish Series B Preferred Stock" shall mean the Class B Preferred Stock,
no par value per share, of Starfish.
"Starfish Shareholders Meeting" shall have the meaning set forth in Section
5.8.
"Starfish Shares" shall mean the shares of Starfish capital stock issued and
outstanding at the Effective Date of the Merger, other than the Dissenting
Shares.
"Starfish Stock Plans" shall have the meaning set forth in Section 2.3(a).
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general
partner of such limited liability company, partnership, association or other
business entity. Unless otherwise indicated or required by the context, the
term Subsidiary or Subsidiaries shall be deemed to refer to a Subsidiary or
the Subsidiaries of Starfish.
A1-45
<PAGE>
"Surviving Corporation" shall have the meaning set forth in Section 1.1.
"Surviving Corporation Board" shall have the meaning set forth in Section
1.5.
"Transaction Documents" shall mean this Agreement (including the Starfish
Disclosure Schedule delivered pursuant to Article III hereof) and the
following documents or agreements required to be delivered hereunder: the
Merger Articles, the Exchange Agreement and the Shareholder Non-Compete
Agreements.
"Valuation Period Stock Price" shall have the meaning set forth in Section
2.1(c)
"Voting Agreements" shall have the meaning set forth in the Recitals.
A1-46
<PAGE>
ANNEX A2
AMENDMENT NO. 1
This Agreement (the "Agreement") is entered into as of July 24, 1998 by and
between Motorola, Inc., a Delaware corporation ("Motorola"), SS Acquisition
Corporation, a California corporation ("Sub"), Starfish Software, Inc., a
California corporation and Philippe Kahn and Sonia Lee Kahn (collectively the
"Shareholders").
RECITALS
A. Motorola, Sub and Starfish have entered into an Agreement and Plan of
Merger dated as of July 1, 1998 ("Merger Agreement"), which provides (subject
to the conditions set forth therein) for the merger (the "Merger") of Starfish
into Sub. Unless otherwise defined herein, capitalized terms used herein shall
have the meaning assigned in the Merger Agreement.
B. The Shareholders own or control a majority of the outstanding shares of
Starfish.
C. Pursuant to the Merger Agreement, Motorola has agreed to fund a bonus
pool (the "Bonus Pool") of $19 million as additional compensation to employees
of Starfish other than the Shareholders. The Bonus Pool is to be paid over a
three year period following the Effective Time.
D. The Shareholders are prepared to contribute additional sums to the Bonus
Pool on the terms and conditions provided herein.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree to amend the Merger Agreement as follows:
1. Motorola agrees that the amount of the Bonus Pool shall be increased to
$24.11 million. The Bonus Pool shall be distributable $8.036 million per year
in accordance with Section 12.2 of the Merger Agreement and the provisions set
forth herein.
2. Subject to Section 4 hereof, the Shareholders agree that they shall
collectively contribute $5.11 million to the Bonus Pool. Such contribution
shall be made at the end of the third year following the Effective Time. The
Shareholders' contribution shall be made first by the withholding amounts
payable to the Shareholders from the Holdback Amount and second from canceling
shares issuable to the Shareholders from the Escrowed Non-Cash Merger
Consideration. For the purposes hereof, the Escrowed Non-Cash Merger
Consideration shall be valued at $52.97 (as adjusted for stock splits, stock
dividends and similar events).
3. In the event that the amounts remaining in the Holdback Amount and the
Escrowed Non-Cash Consideration are less than $5.11 million, the Shareholders
shall within 30 days of written request from Motorola, pay to Motorola the
difference between $5.11 million and the Holdback Amount and Escrowed Non-Cash
Merger Consideration payable to them.
4. Motorola agrees that unless otherwise agreed by Philippe Kahn as
Shareholder Representative pursuant to the Merger Agreement, the allocation of
the Bonus Pool as set forth in list delivered to Motorola concurrent with the
execution hereof, shall be the target bonuses for the persons specified
therein. Such allocation shall be payable to each employee each year on a pro
rata basis over the three year Bonus Pool period provided that such employee
remains in the employ of Starfish through the relevant period for which
payment is made. In the event that the full amount of such Bonus Pool is not
payable because Starfish employees leave the employment of Starfish before
earning all or a part of the Bonus Pool allocated to them, the amount of the
Shareholder contribution shall be reduced for each dollar of the Bonus Pool
which is not payable. If the amount of the Bonus
A2-1
<PAGE>
Pool otherwise payable would be reduced below $19 million because of
terminations of employment, the amount of such reduction up to the $19 million
shall be distributed to other Starfish employees as determined by the Board of
Directors of Starfish and subject to the approval of the Shareholder
Representative as contemplated by Section 12.2 of the Merger Agreement.
5. No provisions of this Agreement are intended, nor will be interpreted, to
provide or create any third party beneficiary rights or any other rights of
any kind in any employee, client, customer, affiliate, stockholder, partner or
any party hereto or any other person or entity unless specifically provided
otherwise herein, and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
6. Except as otherwise provided herein, the terms and conditions of the
Merger Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MOTOROLA, INC., Philippe Kahn
a Delaware corporation
By: /s/ Jerry D. Upton /s/ Philippe Kahn
--------------------------------- -------------------------------------
Address: 333 Spreading Oaks
Name: Jerry D. Upton Scotts Valley, CA 95066
-------------------------------
Title: Vice President Sonia Lee Kahn
------------------------------
SS ACQUISITION CORPORATION,
a California corporation
/s/ Sonia Lee Kahn
-------------------------------------
By: /s/ Garth L. Milne Address: 333 Spreading Oaks
--------------------------------- Scotts Valley, CA 95066
Name: Garth L. Milne
-------------------------------
STARFISH SOFTWARE, INC.,
Title: Treasurer a California corporation
------------------------------
By: /s/ Philippe Kahn
---------------------------------
Name: Philippe Kahn
-------------------------------
Title: President and Chief Executive
Officer
------------------------------
A2-2
<PAGE>
EXHIBIT 5.1
Opinion of Carol H. Forsyte
August 6, 1998
Motorola, Inc.
1303 E. Algonquin Road
Schaumburg, IL 60196
Ladies and Gentlemen:
I refer to the Registration Statement on Form S-4 (the "Registration Statement")
of Motorola, Inc. (the "Company") to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. The Registration
Statement relates to the sale of up to 1,979,098 shares of the Company's Common
Stock, $3 par value (the "Shares"), which are to be issued in connection with
the merger of Starfish Software, Inc. ("Starfish"), with and into SS Acquisition
Corporation, a wholly-owned subsidiary of the Company pursuant to the Agreement
and Plan of Merger dated as of July 1, 1998, as amended, by and among Starfish,
the Company and SS Acquisition Corporation.
I have examined and am familiar with (i) the Company's Restated Certificate of
Incorporation, as amended, (ii) its By-Laws, as amended, and (iii) the corporate
proceedings relating to the Registration Statement. Upon the basis of the
foregoing, and having satisfied myself as to such other matters of law and fact
as I consider relevant for the purposes of this opinion, I advise you that, in
my opinion, the Shares have been validly and legally issued and are fully paid
and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters." In giving
this consent, I do not admit that I am within the category of persons whose
consent is required by Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Carol Forsyte
Carol H. Forsyte
Senior Counsel,
Motorola, Inc.
<PAGE>
Exhibit 8.1
Form of Opinion of Gray Cary Ware & Freidenrich LLP
____________, 1998
Starfish Software, Inc.
1700 Green Hills Road
Scotts Valley, CA 95066
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of a
registration statement on Form S-4 of a Proxy Statement/Prospectus pursuant to
the Agreement and Plan of Merger dated July 1, 1998, as amended by Amendment No.
1 dated as of July 24, 1998 (the "Merger Agreement") by and among Motorola,
Inc., a Delaware corporation ("Motorola"), SS Acquisition Corporation, a
California corporation and a wholly-owned subsidiary of Motorola ("Sub") and
Starfish Software, Inc., a California corporation ("Starfish"). Pursuant to the
Merger Agreement, Starfish will merge with and into Sub (the "Merger"). Unless
otherwise defined, capitalized terms referred to herein have the meanings set
forth in the Merger Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as legal counsel to Starfish in connection with the
preparation and execution of the Merger Agreement. As such, and for the purpose
of rendering this opinion, we have examined and are relying upon (without any
independent investigation or review thereof) the truth and accuracy, at all
relevant times, of the statements, covenants, representations and warranties
contained in the following documents (including all schedules and exhibits
thereto): (1) the Merger Agreement; (2) representations and warranties made to
us by Motorola, Sub and Starfish (the "Officers' Certificates"); (3) the
registration statement on Form S-4 of a Proxy Statement/Prospectus of Motorola
and Starfish (the "Registration Statement"); and (4) such other instruments and
documents related to the formation, organization and operation of Motorola, Sub
and Starfish or to the consummation of the Merger and the transactions
contemplated thereby as we have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relaying thereon, without any independent investigation
or review thereof) that:
<PAGE>
GRAY CARY WARE & FREIDENRICH LLP
Starfish Software, Inc.
_____________, 1998
Page Two
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to
effectiveness thereof;
2. Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification. As to all matters in
which a person or entity making a representation referred to above has
represented that such person or entity either is not a party to, does not have,
or is not aware of, any plan or intention, understanding or agreement, there is
in fact no such plan, intention, understanding or agreement;
3. All statements, descriptions and representations contained in any of the
documents referred to herein or otherwise made to us (including, but not limited
to the Officers' Certificates) are true and correct as of the date hereof, at
the effective date of the Registration Statement and at the Effective Time, and
no actions have been (or will be) taken which are inconsistent with such
statements, descriptions and representations;
4. The Merger will be consummated in accordance with the Merger Agreement
(and without any waiver, breach or amendment of any of the material provisions
thereof), will be effective under the applicable state law, and will be reported
by Motorola and the Sub on their respective federal income tax returns in a
manner consistent with the opinion set forth below; and
5. An opinion of Jackson, Tufts, Cole & Black, LLP, counsel to Motorola,
substantially identical in substance to this opinion has been delivered and not
withdrawn.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that the Merger will be treated for United States federal income
tax purposes as a reorganization qualifying under the provisions of Section
368(a) of the Code. In addition to the assumptions set forth above, this opinion
is subject to the exceptions, limitations and qualifications set forth below.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, existing judicial
decisions, administrative regulations and published rulings and procedures. Our
opinion is not binding upon the Internal Revenue Service or the courts, and the
Internal Revenue Service is not precluded from successfully asserting a contrary
position. Furthermore, no assurance can be given that future legislative,
judicial or administrative changes, on either a prospective or retroactive
basis, would not adversely affect the accuracy of the conclusions stated herein.
Nevertheless, we undertake no responsibility to advise you of any new
developments in the application or interpretation of the federal income tax
laws.
<PAGE>
GRAY CARY WARE & FREIDENRICH LLP
Starfish Software, Inc.
_____________, 1998
Page Three
This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code. No opinion is expressed as to
any other matter, including any other tax consequences of the Merger or any
other transaction (including any transaction undertaken in connection with the
Merger) under any foreign, federal, state, or local tax law.
No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreement are not
consummated in accordance with the terms of such Merger Agreement and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
This opinion has been delivered to you only for the purposes stated. It may
not be relied upon for any other purpose or by any other person or entity, and
may not be made available to any other person or entity without our prior
written consent. We hereby consent, however, to the use of this opinion as an
exhibit to the Registration Statement and further consent to the use of our name
wherever appearing in the Registration Statement, including the Proxy
Statement/Prospectus constituting a part hereof, and any amendments thereto.
Very truly yours,
GRAY CARY WARE & FREIDENRICH LLP
<PAGE>
Exhibit 8.2
Form of Opinion of Jackson Tufts Cole & Black, LLP
Motorola, Inc.
Schaumburg, IL 60196
Re: Forward Triangular Merger of Starfish Software, Inc. into SS Acquisition
Corporation in Exchange for Motorola Common Stock and Cash
This opinion is being delivered to you pursuant to Section 9.16 of the
Agreement and Plan of Merger (the "Agreement") dated as of July 1, 1998, by and
among Motorola, Inc., a Delaware corporation ("Motorola"), SS Acquisition Corp.,
a California corporation and wholly-owned subsidiary of Motorola ("Sub"), and
Starfish Software, Inc., a California corporation ("Starfish"), as amended by
Amendment No. 1 dated as of July __, 1998 (the "Agreement") and in
connection with the filing of a registration statement on Form S-4 of a
Proxy Statement/Prospectus pursuant to the Agreement (the "Registration
Statement"). Pursuant to the Agreement, Starfish will merge with and into Sub
(the "Merger"). Except as otherwise noted, capitalized terms used herein have
the same meaning given to such terms in the Agreement.
We have acted as special counsel to Motorola in connection with the
preparation and execution of the Agreement, and have examined the Agreement and
the exhibits and schedules thereto. In addition, we have received written
representations pertaining to the Merger from Motorola, Starfish and certain
shareholders of Starfish. Our opinion is based upon the understanding that such
written representations are accurate, that the material facts are as described
in the Agreement and appurtenant documents and that the Merger will be effected
in accordance with the terms set forth in the Agreement. In rendering our
opinion we have relied upon such documents and the foregoing representations
without independently verifying the accuracy and completeness of the matters
covered thereby.
Based upon the foregoing and subject to the assumptions, exceptions,
limitations and qualifications set forth herein, it is our opinion that the
Merger will constitute a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code") for United States
federal income tax purposes.
Our opinion is limited to the classification of the Merger as a
"reorganization" under Section 368(a) of the Code, and no opinion is expressed
as to any other matter, including the tax consequences of the Merger under the
Code, under the laws of the various state and local governments or under the
laws of any other jurisdiction. We express no opinion regarding any tax aspect
or ramification of the Merger apart from the opinion specifically set forth
above.
An opinion of counsel does not bind the Internal Revenue Service or
preclude it or a court from taking a position contrary to the opinion. The
Merger does not comply with the guidelines published by the Internal Revenue
Service for the issuance of advance rulings; these guidelines are, however, for
ruling purposes only and do not purport to state substantive law. This opinion
is rendered in connection with the Agreement. This opinion is based upon our
best judgment regarding the application of the Code, the Treasury Regulations
issued thereunder, and judicial and administrative interpretations thereof, all
as in effect on the date of this opinion. All of such authority is subject to
change, including retroactive change. We disclaim any obligation to advise of
any developments in areas covered by this opinion that occur after the date of
this opinion.
This opinion may not be relied upon for any other purpose without our
written consent. We hereby consent, however, to the use of this opinion as an
exhibit to the Registration Statement and further consent to the use of our name
wherever appearing in the Registration Statement, including the Proxy
Statement/Prospectus constituting a part thereof, and any amendments thereto.
JACKSON TUFTS COLE & BLACK, LLP
______ __, 1998
<PAGE>
Exhibit 11
The following table presents a reconciliation of the numerators and denominators
of basic and diluted earnings(loss) per share for the periods indicated.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Basic earnings (loss) per share
Net earnings $1,180 $1,154 $2,048 $1,560 $1,022 $(1,148) $ 593
Weighted average common shares outstanding 595.5 592.5 589.7 565.0 548.8 597.6 594.3
--------------------------------------------------------------
Per share amount $ 1.98 $ 1.95 $ 3.47 $ 2.76 $ 1.86 $ (1.92) $ 1.00
==============================================================
Diluted earnings (loss) per share
Net earnings $1,180 $1,154 $2,048 $1,560 $1,022 $(1,148) $ 593
Add: Interest on zero coupon notes, net of
taxes, and effect of executive incentive
and employee profit sharing plans 5 4 7 12 15 -- 3
--------------------------------------------------------------
Net earnings, as adjusted $1,185 $1,158 $2,055 $1,572 $1,037 $(1,148) $ 596
--------------------------------------------------------------
Weighted average common shares outstanding 595.5 592.5 589.7 565.0 548.8 597.6 594.3
Add: Effect of dilutive securities
Stock options 10.4 9.9 12.8 13.3 12.9 -- 10.8
Zero coupon notes 6.3 6.6 7.2 13.4 20.9 -- 6.3
--------------------------------------------------------------
Diluted wtd. average common shares outstanding 612.2 609.0 609.7 591.7 582.6 597.6 611.4
--------------------------------------------------------------
--------------------------------------------------------------
Per share amount $ 1.94 $ 1.90 $ 3.37 $ 2.66 $ 1.78 $ (1.92) $ 0.97
==============================================================
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Motorola, Inc.:
We consent to incorporation by reference in the Registration Statement on
Form S-4 of Motorola, Inc. of our reports dated January 12, 1998, relating to
the consolidated balance sheets of Motorola, Inc. and subsidiaries as of
December 31, 1996 and 1997, and the related consolidated statements of earnings,
stockholders' equity, and cash flows and related financial statement schedule
for each of the years in the three-year period ended December 31, 1997, which
reports appear in or are incorporated by reference in the annual report on Form
10-K of Motorola, Inc. for the year ended December 31, 1997.
KPMG Peat Marwick LLP
Chicago, Illinois
August 5, 1998
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
We hereby consent to the use in this Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
March 11, 1998, except for the third paragraph of Note 2, which is as of July 1,
1998, relating to the financial statements of Starfish Software, Inc., which
appears in such Proxy Statement/Prospectus. We also consent to the references to
us under the headings "Selected Summary Historical Financial Information" and
"Experts" in such Proxy Statement/Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected Summary
Historical Financial Information."
PricewaterhouseCoopers LLP
San Jose, California
August 5, 1998
<PAGE>
Exhibit 99.1
STARFISH SOFTWARE, INC.
1700 Green Hills Road
Scotts Valley, CA 95066
This Proxy is being solicited on behalf of the Board of Directors for the
Special Meeting of Shareholders of Starfish Software, Inc., a California
corporation ("Starfish"), to be held on ___________, 1998 (the "Special
Meeting"). Philippe Kahn and Sonia Lee Kahn, or either of them, each with the
power to appoint a substitute, are hereby appointed true and lawful agents and
proxies of the undersigned and are authorized to vote, as hereinafter specified,
all shares of Common Stock, no par value, and Preferred Stock, no par value,
that the undersigned is entitled to vote at the Special Meeting to be held at
_______ a.m., local time, on ___________, 1998, at the offices of Gray Cary Ware
& Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California 94301, or at any
and all adjournments and postponements thereof.
THIS PROXY, IF SIGNED AND RETURNED, WILL BE VOTED AS SPECIFIED BELOW. IF NO
SPECIFICATION IS MADE, YOUR SHARES WILL BE VOTED FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE APPROVAL OF THE MERGER.
IMPORTANT: PLEASE MARK, SIGN AND DATE THE FOLLOWING PAGE AND RETURN PROMPTLY IN
THE ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT
THE MERGER AGREEMENT AND TO APPROVE THE MERGER.
FOR AGAINST ABSTAIN
1. Approve and adopt the Agreement and Plan of [ ] [ ] [ ]
Merger dated July 1, 1998, as amended (the
"Merger Agreement"), among Starfish, Motorola,
Inc., a Delaware corporation ("Motorola") and SS
Acquisition Corp., a California corporation and
wholly owned subsidiary of Motorola ("Sub"), and
the transactions contemplated thereby, including
the merger (the "Merger") of Starfish with and
into Sub, with Sub surviving as a wholly-owned
subsidiary of Motorola.
The proxies named herein will have discretion to vote upon such other matters as
may properly come before the Special Meeting; provided, however, that the
proxies may not vote to adjourn the Special Meeting with respect to votes cast
against the Merger.
The undersigned acknowledges receipt of the Notice of the Special Meeting and
the related Proxy Statement/Prospectus. Capitalized terms used herein have the
same meaning assigned in the Proxy Statement unless otherwise defined herein.
PLEASE SIGN BELOW EXACTLY AS NAME APPEARS ON YOUR STOCK CERTIFICATE. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF SIGNING IN THE NAME OF A
CORPORATION OR PARTNERSHIP, PLEASE SIGN FULL CORPORATE OR PARTNERSHIP NAME AND
INDICATE TITLE OF AUTHORIZED SIGNATORY.
By: By:
-------------------------- --------------------------
Signature: Signature:
-------------------------- --------------------------
Print Name: Print Name:
-------------------------- --------------------------
Date: Date:
-------------------------- --------------------------
