<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MYLEX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
Dear Fellow Stockholder:
The Board of Directors of Mylex Corporation is pleased to invite you to
attend a special meeting of stockholders on September 28, 1999, at 9:00 A.M.,
local time, at Omni Berkshire Place, 21 East 52(nd) Street, New York, New York.
At the meeting, we will vote on a proposal to adopt a merger agreement,
dated as of July 27, 1999, that Mylex entered into with International Business
Machines Corporation and S2 Acquisition Corp., a wholly-owned subsidiary of IBM.
Under the merger agreement, S2 Acquisition Corp. will merge with and into Mylex,
and Mylex will become a wholly-owned subsidiary of IBM. If the merger is
completed, Mylex stockholders will receive $12 in cash, without interest, in
exchange for each share of Mylex common stock. After careful consideration, the
Mylex Board of Directors has unanimously approved the merger agreement and
unanimously recommends that you vote in favor of its adoption.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Mylex common stock vote to adopt the merger agreement at
the special meeting. Your vote is very important regardless of the number of
shares that you own, and I urge you to submit your proxy as soon as possible.
Please complete, sign and date the enclosed proxy card and return it, at your
earliest convenience, in the enclosed return envelope. Returning your proxy card
will not prevent you from voting in person, but will ensure that we count your
vote if you are unable to attend the special meeting.
/s/ AL MONTROSS
Al Montross
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THIS PROXY STATEMENT IS DATED AUGUST 24, 1999, AND WAS FIRST MAILED
TO STOCKHOLDERS ON OR ABOUT AUGUST 27, 1999.
<PAGE>
MYLEX CORPORATION
34551 ARDENWOOD BOULEVARD
FREMONT, CALIFORNIA 94555
------------------------
NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 28, 1999
---------------------
To the Stockholders of Mylex:
A special meeting of stockholders of Mylex will be held on September 28,
1999, at 9:00 A.M., local time, at Omni Berkshire Place, 21 East 52(nd) Street,
New York, New York, for the following purpose:
To consider and vote on a proposal to adopt the merger agreement dated
as of July 27, 1999 among IBM, S2 Acquisition Corp., a wholly-owned
subsidiary of IBM, and Mylex. Under the terms of the merger agreement, each
share of common stock of Mylex outstanding immediately before the merger
will be converted into the right to receive $12 in cash, and Mylex will
become a wholly-owned subsidiary of IBM.
A proxy card and a proxy statement containing more detailed information
about the special meeting and the merger, including a copy of the merger
agreement, accompany this notice. Only stockholders of record at the close of
business on August 23, 1999 may vote at the special meeting. A list of Mylex
stockholders entitled to vote at the special meeting will be available for
examination by any stockholder, for any purpose germane to the special meeting,
during normal business hours at the offices of Gibson, Dunn & Crutcher LLP, 200
Park Avenue, New York, New York 10166-0193, during the ten-day period before the
special meeting.
All stockholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, however, please complete, sign and
date the enclosed proxy card and return it as promptly as possible in the
enclosed return envelope. Any stockholder attending the meeting may vote in
person even if he or she previously submitted a proxy card.
By Order of the Board of Directors,
/s/ ISMAEL DUDHIA
Ismael Dudhia
CHAIRMAN OF THE BOARD
Fremont, California
August 24, 1999
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE COMPLETE, SIGN, DATE
AND MAIL THE ENCLOSED PROXY CARD PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
SUMMARY.................................................................................................... 2
The companies............................................................................................ 2
The merger............................................................................................... 2
The special meeting...................................................................................... 5
Fairness opinion......................................................................................... 5
MYLEX SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION............................................... 6
MARKET PRICES AND DIVIDENDS................................................................................ 7
THE SPECIAL MEETING........................................................................................ 8
Recommendation of the board.............................................................................. 8
Votes required for adoption of the merger agreement...................................................... 8
Submission of proxies.................................................................................... 8
How to revoke a proxy.................................................................................... 9
Solicitation of proxies.................................................................................. 9
THE COMPANIES.............................................................................................. 10
Mylex.................................................................................................... 10
IBM...................................................................................................... 10
IBM merger subsidiary.................................................................................... 10
THE MERGER................................................................................................. 11
Background of the merger................................................................................. 11
Reasons for the merger................................................................................... 13
Opinion of Mylex's financial advisor..................................................................... 14
Interests of members of the Mylex board of directors and management in the merger........................ 21
Accounting treatment..................................................................................... 23
U.S. federal income tax consequences..................................................................... 23
Regulatory matters....................................................................................... 24
Appraisal rights......................................................................................... 25
THE MERGER AGREEMENT....................................................................................... 29
The merger............................................................................................... 29
What you will receive.................................................................................... 29
Effective time of the merger............................................................................. 29
Treatment of stock options............................................................................... 29
Payment for shares....................................................................................... 29
Representations and warranties........................................................................... 30
Covenants................................................................................................ 31
No solicitation of transactions.......................................................................... 33
Efforts to complete the merger........................................................................... 35
Benefit plans............................................................................................ 35
Common stock rights agreement............................................................................ 35
Conditions to the parties' obligations to complete the merger............................................ 36
Additional conditions to obligation of IBM............................................................... 36
Termination.............................................................................................. 36
Termination fees......................................................................................... 37
Amendment and waiver..................................................................................... 38
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT..................................................... 39
INDEPENDENT ACCOUNTANTS.................................................................................... 40
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 40
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION................................................. 42
APPENDIX A--Agreement and Plan of Merger................................................................... A-1
APPENDIX B--Opinion of Broadview International LLC......................................................... B-1
APPENDIX C--Section 262 of the General Corporation Law of the State of Delaware............................ C-1
</TABLE>
i
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL MYLEX STOCKHOLDERS RECEIVE FOR THEIR MYLEX SHARES IN THE MERGER?
A: If we complete the merger, Mylex stockholders will receive the merger
consideration of $12 in cash, without interest, in exchange for each share of
Mylex common stock.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering this proxy statement, please
complete, sign and date your proxy card. Then mail the proxy card in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting and voted as you wish. If you sign and mail
your proxy card but do not indicate how you want your shares to be voted, your
shares will be voted in favor of adopting the merger agreement. If you do not
vote or if you abstain, it will have the effect of a vote against adopting the
merger agreement.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote your shares. You should follow the directions provided by your
broker regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, which will have the effect of a
vote against adopting the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new proxy card. If you choose either of these two methods,
you must deliver your notice of revocation or your new proxy card to the
Secretary of Mylex at the address on page 9 before the vote at the special
meeting. Third, you can attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After the merger is completed, IBM will send you written
instructions explaining how to exchange your stock certificates for the merger
consideration.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the merger as quickly as possible. In
addition to obtaining stockholder approval, we must satisfy all other closing
conditions, including the expiration or termination of applicable regulatory
waiting periods. We presently expect to complete the merger in the fall of 1999.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT MYLEX?
A: You may obtain additional information about Mylex as described under
"Where You Can Find More Information" on page 40.
Q: WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT THE SPECIAL MEETING OR THE
MERGER?
A: If you have questions about the special meeting or the merger or if you
need additional copies of this proxy statement or the enclosed proxy card, you
should contact our proxy solicitor:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072
(201) 896-5680
1
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY STATEMENT AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THE MERGER AND RELATED MATTERS FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE
LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE PROXY STATEMENT
AND THE DOCUMENTS TO WHICH WE HAVE REFERRED YOU, INCLUDING THE COPY OF THE
MERGER AGREEMENT ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A. SEE "WHERE YOU
CAN FIND MORE INFORMATION" ON PAGE 40. EACH ITEM IN THIS SUMMARY INCLUDES A PAGE
REFERENCE DIRECTING YOU TO A MORE COMPLETE DESCRIPTION OF THAT ITEM.
THE COMPANIES (SEE PAGE 10)
MYLEX CORPORATION
Mylex develops and produces high-performance hardware and software for
moving, storing, protecting and managing data in network and desktop
environments, including Redundant Array of Independent or Inexpensive Disks
("RAID") controller subsystems, Small Computer Systems Interface ("SCSI")
adapters and complementary computer products for network servers, mass storage
systems, workstations and system motherboards. Mylex products are sold globally
through a network of original equipment manufacturers ("OEMs"), major
distributors, value added resellers and system integrators. Mylex's principal
executive offices are located at 34551 Ardenwood Boulevard, Fremont, California
94555, and its telephone number is (510) 796-6100.
INTERNATIONAL BUSINESS MACHINES CORPORATION
IBM develops and manufactures advanced information technologies, including
computer systems, software, networking systems, storage drives and
microelectronics. IBM translates these advanced technologies into value for its
customers through its professional solutions and services worldwide. IBM's
principal executive offices are located at New Orchard Road, Armonk, New York
10504, and its telephone number is (914) 499-1900.
S2 ACQUISITION CORP.
S2 Acquisition Corp. is a wholly-owned subsidiary of IBM. S2 Acquisition
Corp. was organized solely for the purpose of entering into the merger agreement
with Mylex and completing the merger and has not conducted any business
operations.
THE MERGER
WHAT YOU WILL RECEIVE (SEE PAGE 29)
In the merger you will receive, for each share of Mylex common stock you
own, the merger consideration of $12 in cash, without interest.
After the merger is completed, you will have the right to receive the merger
consideration, but you will no longer have any rights as a Mylex stockholder.
Mylex stockholders will receive the merger consideration after turning in their
Mylex stock certificates in accordance with the instructions contained in the
letter of transmittal to be sent by IBM to Mylex stockholders shortly after
completion of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 23)
The receipt of cash by Mylex stockholders in the merger will be a taxable
transaction for federal income tax purposes. You should consult your own tax
advisor for a full understanding of the tax consequences of the merger to you.
APPRAISAL RIGHTS (SEE PAGE 25)
You have the right under Delaware law to exercise appraisal rights and to
receive payment in cash for the fair value of your shares of Mylex common stock
determined by the Delaware Chancery Court. If you wish to exercise appraisal
rights, you must not vote in favor of adopting the merger agreement and must
follow specific procedures to preserve your appraisal rights. These procedures
are described in this proxy statement, and the provision of Delaware law that
grants appraisal rights and governs these procedures is attached as Appendix C.
2
<PAGE>
INTERESTS OF MEMBERS OF MYLEX'S BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER (SEE PAGE 21)
When you consider the recommendation of the Mylex board of directors that
you vote in favor of adopting the merger agreement, you should be aware that a
number of Mylex directors and executive officers may have interests in the
merger that are different from, or in addition to, yours. For example,
- The vesting period of options to purchase Mylex common stock held by
non-employee directors of Mylex will accelerate as a result of the merger,
and each of these options, whether vested or unvested, will be converted
into the right to receive a cash payment as described under "The Merger
Agreement-- Treatment of stock options,"
- Under a retention plan and retention agreements entered into with IBM to
take effect upon completion of the merger, all Mylex executive officers
other than Al Montross, the president and chief executive officer of
Mylex, who remain with Mylex after the merger will become eligible to
receive retention bonus payments within two weeks after the merger is
completed and, under certain circumstances, additional retention bonuses
at later times,
- Three Mylex employees, including one of its executive officers, who have
not been offered or have not entered into retention agreements with IBM
will become eligible to receive severance payments and an acceleration of
all their unvested stock options under existing severance agreements with
Mylex if, either in connection with or within a specified time after the
merger, their employment terminates under specified circumstances.
- Under an amendment to his employment agreement to take effect upon
completion of the merger, Mr. Montross will become eligible to receive a
bonus payment for the 1999 calendar year when the merger is completed and
an additional annual bonus payment in January 2001. In addition, if Mr.
Montross' employment is terminated without cause or he resigns for
specified reasons, Mr. Montross will be entitled to receive all salary due
under the employment agreement through January 31, 2003, an acceleration
of all his unvested stock options and a continuation of certain benefits
for a specified period of time.
REGULATORY REQUIREMENTS WITH RESPECT TO THE MERGER (SEE PAGE 24)
The merger cannot be completed until after: (a) IBM and Mylex have given
specified information and materials to the Department of Justice and the Federal
Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and (b) IBM has given specified information and materials to the Federal Cartel
Office in Germany and, in each case, a required waiting period has expired or
been terminated. The companies have submitted the required pre-merger
notification and report forms. Unless additional information is requested by the
regulatory authorities or IBM and Mylex withdraw and subsequently refile the
notification and report forms, the waiting period under the Hart-Scott-Rodino
Act will expire on September 9, 1999 and the waiting period in Germany will
expire on September 13, 1999.
CONDITIONS TO THE MERGER (SEE PAGE 36)
Completion of the merger depends upon satisfying a number of conditions,
including:
- adoption of the merger agreement by the holders of a majority of the
outstanding shares of Mylex common stock,
- expiration of the waiting periods under the Hart-Scott-Rodino Act and any
other applicable competition, merger control, antitrust or similar law,
- absence of any (1) law or ruling that would or (2) pending proceeding that
seeks to:
- prevent or restrain the completion of the merger,
3
<PAGE>
- limit in any material respect the ownership or operation by Mylex or
IBM of a material portion of its businesses or assets or
- prohibit IBM from controlling in any material respect a substantial
portion of Mylex's business,
- receipt of all required and specified governmental and third party
waivers, consents and other approvals and authorizations and
- accuracy of the representations and warranties, and performance of the
obligations of, IBM and Mylex in all material respects.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 36)
1. Mylex and IBM may agree to terminate the merger agreement without
completing the merger, even after the stockholders of Mylex have approved the
merger.
2. IBM or Mylex may terminate the merger agreement if:
- the merger is not completed by February 29, 2000,
- any law or ruling prohibiting the completion of the merger has become
final and cannot be appealed,
- the holders of a majority of the outstanding shares of Mylex common stock
do not adopt the merger agreement at the special meeting of the
stockholders or
- the other party materially breaches its representations, warranties,
covenants or agreements under the merger agreement and does not or cannot
timely cure the breach.
3. IBM may terminate the merger agreement if:
- IBM receives a notice from Mylex that Mylex has received an unsolicited
superior proposal from a third party. A superior proposal is defined as a
proposal to acquire more than 50% of Mylex's common stock or all or
substantially all of Mylex's assets for consideration that is determined
by the Mylex board of directors to have a higher value than the
consideration to be received in the merger and which proposal is
determined by the Mylex board of directors to be more favorable to the
Mylex stockholders than the merger, in each case taking into account any
changes to the merger agreement made by IBM in response to the proposal,
- the Mylex board of directors fails to reconfirm its recommendation that
the Mylex stockholders vote to adopt the merger agreement upon a request
by IBM to do so, which request IBM may make only after Mylex receives a
proposal from a third party regarding a merger or similar transaction
involving Mylex or the acquisition of 15% or more of Mylex's common stock
or a business that constitutes 15% or more of the combined revenue,
operating income or assets of Mylex and its subsidiaries or
- a law or ruling that has any of the effects set forth under the third
condition described above under "--Conditions to the merger" has become
final and cannot be appealed.
4. Before the Mylex stockholders adopt the merger agreement, Mylex may
terminate the merger agreement if:
- Mylex receives an unsolicited superior proposal from a third party,
- the Mylex board of directors determines in good faith that terminating the
merger agreement in response to the superior proposal is necessary to
satisfy its fiduciary duties to the Mylex stockholders,
- Mylex gives IBM written notice of the superior proposal within the time
prescribed by the merger agreement,
- prior to termination, Mylex pays IBM a $10 million termination fee and
4
<PAGE>
- at the time of termination Mylex enters into a definitive agreement
relating to the superior proposal.
FEE PAYABLE IF THE MERGER IS NOT COMPLETED (SEE PAGE 37)
The merger agreement requires Mylex to pay IBM a termination fee of $10
million if:
- (a) Mylex or its stockholders receives or becomes aware of a takeover
proposal from a third party, (b) thereafter IBM or Mylex terminates the
merger agreement for the first or third reason described in paragraph 2
above under "--Termination of the merger agreement" and (c) within 12
months of the termination Mylex enters into any agreement, or completes a
transaction, relating to a takeover proposal,
- IBM terminates the merger agreement for the first or second reason
described in paragraph 3 above under "--Termination of the merger
agreement" or
- Mylex terminates the merger agreement for the reason described in
paragraph 4 above under "--Termination of the merger agreement."
REASONS FOR THE MERGER (SEE PAGE 13)
The Mylex board of directors believes, as a result of various factors
relating to, among other things, Mylex and the computer industry generally, the
value of Mylex's common stock will be maximized by converting shares of Mylex
common stock into the right to receive the merger consideration.
THE SPECIAL MEETING
RECORD DATE AND STOCKHOLDER VOTE REQUIRED TO ADOPT THE MERGER AGREEMENT (SEE
PAGE 8)
You are entitled to vote at the special meeting if you owned Mylex common
stock at the close of business on August 23, 1999, which is the record date set
by the Mylex board of directors for purposes of determining which stockholders
are entitled to vote at the special meeting. The affirmative vote of the holders
of a majority of the shares of Mylex common stock outstanding as of the close of
business on the record date is required to adopt the merger agreement.
IF YOU DO NOT VOTE YOUR SHARES, IT WILL HAVE THE EFFECT OF A VOTE AGAINST
ADOPTING THE MERGER AGREEMENT.
On the record date, there were 19,882,526 shares of Mylex common stock
entitled to vote at the special meeting. You will have one vote for each share
of Mylex common stock that you owned as of the close of business on the record
date.
RECOMMENDATION TO STOCKHOLDERS (SEE PAGE 8)
All the members of the Mylex board of directors recommend that you vote
"FOR" the proposal to adopt the merger agreement.
FAIRNESS OPINION (SEE PAGE 14)
In deciding to approve the merger agreement, the Mylex board of directors
considered the opinion of Broadview International LLC, its financial advisor,
that the consideration to be paid in the merger is fair to the Mylex
stockholders from a financial point of view. This opinion is attached as
Appendix B to this proxy statement. We encourage you to read this opinion
carefully.
5
<PAGE>
MYLEX SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The table below shows selected historical financial information about Mylex.
This summary of financial information for Mylex for the fiscal years 1994 to
1998 was taken from, and should be read along with the audited financial
statements contained in, Mylex's most recent Annual Report on Form 10-K.
Information for the six months ended June 27, 1998 and June 26, 1999 was taken
from financial statements of Mylex that have not been audited but which, we
believe, fairly present Mylex's financial position and results of operations and
cash flows for the periods, and should be read along with Mylex's most recently
filed Quarterly Report on Form 10-Q. See "Where You Can Find More Information"
on page 40.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
--------------------- ---------------------------------------------------------
JUNE 26, JUNE 27, DEC. 26, DEC. 27, DEC. 31, DEC. 31, DEC. 31,
1999 1998 1998 1997 1996 1995 1994
---------- --------- ---------- ---------- ---------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales....................... $ 70,739 $ 60,478 $ 135,726 $ 123,550 $ 173,123 $ 127,455 $ 92,589
Income (loss) before income
taxes......................... $ (3,308) $ (6,401) $ (11,310) $ (9,427) $ 27,380 $ 20,473 $ 11,978
Net income (loss)............... $ (2,084) $ (4,033) $ (7,125) $ (5,939) $ 17,250 $ 13,308 $ 8,813
Net income (loss) per
share--basic.................. $ (0.10) $ (0.20) $ (0.36) $ (0.29) $ 0.85 $ 0.74 $ 0.53
Net income (loss) per
share--diluted................ $ (0.10) $ (0.20) $ (0.36) $ (0.29) $ 0.81 $ 0.68 $ 0.48
BALANCE SHEET DATA
Working capital................. $ 67,587 $ 76,856 $ 70,160 $ 83,759 $ 97,931 $ 72,967 $ 26,551
Total assets.................... $ 106,257 $ 98,159 $ 111,143 $ 104,483 $ 116,586 $ 94,620 $ 42,871
Long-term obligations........... $ -- $ -- $ -- $ -- $ 66 $ 203 $ 493
Stockholders' equity............ $ 82,409 $ 85,174 $ 82,244 $ 92,295 $ 104,172 $ 75,897 $ 25,943
</TABLE>
6
<PAGE>
MARKET PRICES AND DIVIDENDS
Mylex's common stock is listed on The Nasdaq National Market under the
symbol "MYLX." The following table shows, for the calendar quarters indicated,
the high and low sale prices of Mylex common stock, as reported on the Nasdaq
National Market, based on published financial sources. We have not paid any cash
dividends on our common stock for the periods shown.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Calendar Year 1997
First Quarter......................................................... $ 13.750 $ 10.000
Second Quarter........................................................ $ 11.375 $ 7.875
Third Quarter......................................................... $ 10.625 $ 6.500
Fourth Quarter........................................................ $ 11.500 $ 7.000
Calendar Year 1998
First Quarter......................................................... $ 11.375 $ 6.750
Second Quarter........................................................ $ 9.500 $ 5.000
Third Quarter......................................................... $ 8.000 $ 3.500
Fourth Quarter........................................................ $ 12.312 $ 4.125
Calendar Year 1999
First Quarter......................................................... $ 13.125 $ 4.938
Second Quarter........................................................ $ 6.750 $ 4.250
Third Quarter (through August 23, 1999)............................... $ 11.750 $ 5.625
</TABLE>
The following table shows the closing sale price of the Mylex common stock,
as reported on the Nasdaq National Market, based on published financial sources,
for the dates indicated.
<TABLE>
<S> <C>
Average closing price for the 30 trading days
before the announcement of the merger............................ $ 7.763
Closing price on July 27, 1999, the last trading
day before the announcement of the merger........................ $ 10.250
Closing price on August 23, 1999, the last
trading day before the date of this proxy statement.............. $ 11.500
</TABLE>
7
<PAGE>
THE SPECIAL MEETING
This proxy statement is being furnished to stockholders of Mylex as part of
the solicitation of proxies by the Mylex board of directors for use at a special
meeting of Mylex stockholders to be held on September 28, 1999, at 9:00 a.m.,
local time, at Omni Berkshire Place, 21 East 52(nd) Street, New York, New York.
This proxy statement and the enclosed proxy card are first being mailed to the
stockholders of Mylex on or about August 27, 1999.
The purpose of the special meeting is to consider and vote on a proposal to
adopt the merger agreement, in accordance with which S2 Acquisition Corp., a
wholly-owned subsidiary of IBM, will merge with and into Mylex and Mylex will
become a wholly-owned subsidiary of IBM.
A proxy card for use at the special meeting accompanies each copy of this
proxy statement mailed to holders of Mylex common stock.
As of August 9, 1999, directors and executive officers of Mylex and their
affiliates beneficially owned approximately 2,252,546 shares of Mylex common
stock, or approximately 11.4% of the shares of Mylex common stock outstanding on
that date.
RECOMMENDATION OF THE BOARD
The Mylex board of directors has unanimously approved the merger agreement
and declared its advisability. The Mylex board of directors believes that the
consummation of the merger is in the best interests of the stockholders of
Mylex. Accordingly, the Mylex board of directors unanimously recommends that the
stockholders of Mylex vote "FOR" adoption of the merger agreement. In making its
determination to approve the merger agreement, the Mylex board of directors
considered, among other things, the opinion of Broadview that as of the date of
the merger agreement the merger consideration was fair from a financial point of
view to Mylex stockholders. See "The Merger--Reasons for the merger" and
"--Opinion of Mylex's financial advisor."
VOTES REQUIRED FOR ADOPTION OF THE MERGER AGREEMENT
The affirmative vote of the holders of a majority of the shares of Mylex
common stock outstanding on August 23, 1999, the record date for the special
meeting, is required to adopt the merger agreement. Each holder of Mylex common
stock on the record date is entitled to one vote per share on the proposal to
adopt the merger agreement.
Only holders of record of Mylex common stock at the close of business on the
record date will be entitled to receive notice of and vote at the special
meeting. As of the record date, there were 19,882,526 shares of Mylex common
stock outstanding. Holders of a majority of the outstanding shares of Mylex
common stock entitled to vote, present in person or represented by proxy, will
constitute a quorum for the transaction of business at the special meeting.
A list of Mylex stockholders entitled to vote at the special meeting will be
available for examination by any stockholder, for any purpose germane to the
special meeting, during normal business hours at the offices of Gibson, Dunn &
Crutcher LLP, 200 Park Avenue, New York, New York 10166-0193 during the ten-day
period before the special meeting.
SUBMISSION OF PROXIES
To submit a proxy, holders of shares of Mylex common stock should complete,
sign, date and mail the enclosed proxy card in accordance with the instructions
set forth on the card.
All shares of Mylex common stock represented at the special meeting by
properly executed proxy cards received prior to or at the special meeting,
unless those proxy cards previously have been
8
<PAGE>
revoked, will be voted at the special meeting in the manner specified on the
proxy card. Signed proxy cards that do not contain voting instructions will be
voted "FOR" adoption of the merger agreement.
If a signed proxy card is returned and the stockholder has explicitly
abstained from voting on the proposal to adopt the merger agreement, the shares
represented by the proxy will be considered present at the special meeting for
purposes of determining whether a quorum exists, but will not count as votes
cast in favor of adoption of the merger agreement and, therefore, will have the
same effect as a vote against adoption of the merger agreement. Likewise, broker
non-votes will be counted for purposes of determining whether a quorum exists at
the special meeting and will not count as votes cast in favor of adoption of the
merger agreement, and therefore will have the same effect as a vote against
adoption of the merger agreement.
If the special meeting is adjourned for any reason, the adoption of the
merger agreement may be considered and voted upon by Mylex stockholders at the
subsequent reconvened meeting. All proxies will be voted in the same manner as
they would have been voted at the original meeting, except for any proxies that
have been properly withdrawn or revoked.
HOW TO REVOKE A PROXY
A proxy may be revoked by
- delivering to the Secretary of Mylex, before the vote at the special
meeting, a written notice of revocation dated after the date of the proxy
card,
- signing a later dated proxy card relating to the same shares and
delivering it to the Secretary of Mylex before the vote at the special
meeting or
- attending the special meeting and voting in person.
Merely attending the special meeting, however, will not revoke your proxy. All
written notices of revocation and other communications about revocation of
proxies should be addressed to Mylex Corporation, 34551 Ardenwood Boulevard,
Fremont, California 94555, Attention: Secretary, or hand delivered to the
Secretary before the vote at the special meeting.
SOLICITATION OF PROXIES
Mylex will bear the cost of soliciting proxies. In addition to solicitation
by mail, our directors, officers and employees may solicit proxies from holders
of Mylex common stock by telephone, in person or through other means. We will
not compensate these people for this solicitation, but we will reimburse them
for reasonable out-of-pocket expenses they may incur in connection with this
solicitation. We will also arrange for brokerage firms, fiduciaries and other
custodians to send solicitation materials to the beneficial owners of shares
held of record by those persons. We will reimburse these brokerage firms,
fiduciaries and other custodians for reasonable out-of-pocket expenses they
incur in that connection. Corporate Investor Communications, Inc., our proxy
solicitor, will assist in the solicitation of proxies for an estimated fee of
approximately $10,000, plus reimbursement of reasonable out-of-pocket expenses.
We will indemnify our proxy solicitor against specific liabilities and expenses,
including liabilities and expenses under federal securities laws.
9
<PAGE>
THE COMPANIES
MYLEX
Mylex develops and produces high-performance hardware and software for
moving, storing, protecting and managing data in network and desktop
environments, including RAID controller subsystems, SCSI adapters and
complementary computer products for network servers, mass storage systems,
workstations and system motherboards. Mylex products are sold globally through a
network of OEMs, major distributors, value added resellers and system
integrators. Mylex's principal executive offices are located at 34551 Ardenwood
Boulevard, Fremont, California 94555, and its telephone number is (510)
796-6100.
IBM
IBM, a New York corporation, develops and manufactures advanced information
technologies, including computer systems, software, networking systems, storage
drives and microelectronics. IBM translates these advanced technologies into
value for its customers through its professional solutions and services
worldwide. IBM's principal executive offices are located at New Orchard Road,
Armonk, New York 10504, and its telephone number is (914) 499-1900.
IBM MERGER SUBSIDIARY
S2 Acquisition Corp. is a Delaware corporation and a wholly-owned subsidiary
of IBM. S2 Acquisition Corp. was organized solely for the purpose of entering
into the merger agreement with Mylex and completing the merger and has not
conducted any business operations.
10
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
From 1993 through the first quarter of 1996, IBM purchased Mylex's RAID
controllers at levels that made IBM a significant customer of Mylex. In early
1996, IBM decided not to continue to procure RAID controllers from Mylex. After
losing IBM as a customer in 1996, Mylex continued, from time to time, to discuss
with IBM its interest in purchasing Mylex's introduced and proposed product
offerings, as well as other possible commercial relations between the parties.
Early in the second quarter of 1999, discussions between Mylex and IBM with
respect to a new Mylex external RAID controller resulted in the parties entering
into a development agreement under which Mylex would provide the engineering
services necessary to customize this new product for use with IBM servers. After
the development agreement became effective, the parties began to negotiate a
production agreement under which Mylex was to sell to IBM, or license IBM to
manufacture, the customized external RAID controller (which was code named
"Meteor"). During the negotiation of the development agreement, Bill Prosenik,
vice president sales-Americas of Mylex, asked Bill Branson, director OEM
components/subsystems of IBM, whether, in light of its professed interest in
acquiring substantial quantities of the Meteor product, IBM would be interested
in making an equity investment in Mylex. Mr. Prosenik made the inquiry at the
direction of Al Montross, president and chief executive officer of Mylex.
On May 19, 1999, representatives of Mylex and IBM, including Mr. Montross
and Brian Truskowski, the vice president-development for the Storage Systems
Division of IBM, met to discuss Mylex's ability to manufacture the quantities of
the Meteor product for which IBM had forecasted purchases in 2000. Mr. Montross
and Mr. Truskowski met privately immediately after the meeting ended. In the
private meeting, Mr. Truskowski indicated that IBM might be interested in
acquiring Mylex. After some discussion, Mr. Montross accepted Mr. Truskowski's
offer to have Lee Dayton, vice president-corporate development and real estate
of IBM, call Mr. Montross to discuss the possibility of such an acquisition.
On May 25, 1999, Mr. Dayton met with Mr. Montross at Mylex's headquarters to
discuss IBM's interest in acquiring Mylex. In the meeting, Mr. Montross
generally discussed with Mr. Dayton various non-proprietary information
concerning Mylex and its plans. At the end of the meeting, it was agreed that
Mr. Dayton and IBM's corporate development group would further consider IBM's
interest in Mylex and, if appropriate, that Mr. Dayton would discuss a possible
acquisition of IBM with his superiors, all for the purpose of indicating to
Mylex a price at which IBM might be interested in purchasing Mylex, subject,
among other things, to due diligence.
That same week, Mr. Montross first spoke with Robert Abbe of Broadview,
Mylex's financial advisor, concerning Mr. Montross' discussion with Mr. Dayton.
Mylex had retained Broadview in 1997 to represent Mylex in considering possible
acquisitions by Mylex and corporate partnering arrangements involving Mylex.
During June 1999 and early July 1999, Mr. Montross had various discussions,
by telephone and in person, with Mr. Dayton and Mr. Truskowski concerning the
possible acquisition of Mylex. In addition, Mr. Abbe had several discussions, by
telephone and in person, on the same subject with Mr. Dayton and other
representatives of IBM's corporate development group from mid-June 1999 through
early July 1999.
The first of Mr. Abbe's discussions with IBM occurred by telephone on June
16, 1999, with Archie Colburn, Paul Sterne and John Gianukakis of IBM's
corporate development group. Richard Dalton and Steve Smith of Broadview also
participated in the telephone call. The discussion centered on IBM's efforts to
come to a decision with respect to a price at which it would be interested in
acquiring Mylex and issues affecting that decision.
11
<PAGE>
On June 21, 1999, Mr. Abbe spoke with Mr. Dayton and Mr. Colburn. The IBM
representatives indicated they were continuing to analyze the possible
acquisition with a view to whether IBM should acquire Mylex and the price at
which it would propose to do so.
On June 28, 1999, Messrs. Dayton, Sterne and Gianukakis called Mr. Abbe with
a proposal containing a general outline of the terms of an acquisition of Mylex
by IBM. The outline included a proposed purchase price and a cash merger
structure. The participants discussed the timing for due diligence and the
negotiation and execution of a definitive agreement. Separately, both Mr. Abbe
and Mr. Dayton discussed IBM's proposal with Mr. Montross that same day.
On June 29, 1999, Mr. Montross and Mr. Abbe met in person with Mr. Dayton,
Mr. Truskowski, Mr. Gianukakis and Jim McNicholas, vice president finance of
IBM's Storage Systems Division, on July 1, 1999. Most of the discussion involved
Mylex's external RAID products, both existing and planned, and other business
efforts by Mylex. The participants also discussed plans for the due diligence
process, which would commence if, and promptly after, IBM suggested a price that
the Mylex board felt it could consider. The Mylex participants noted that other
companies had indicated an interest in discussing an acquisition of Mylex and
that the Mylex board would discuss the IBM proposal and the interests of others
at a meeting scheduled for July 7, 1999.
On July 7, 1999, the Mylex board had a meeting by telephone conference. Mr.
Abbe and Jason Spivak of Broadview, and Colleen Gray and Doug Neilsson, the vice
president-finance and the general counsel of Mylex, respectively, also attended
the meeting. The Broadview representatives discussed the IBM proposal and the
expressions of interest from two other companies, neither of which involved a
price as high as the price proposed by IBM. The Broadview representatives also
discussed, in general, the terms of comparable acquisitions and the "fairness"
of the proposal. After substantial discussion, the Mylex board directed Mr.
Montross and Broadview to respond to the proposal by expressing a general
willingness to further consider the proposal if the proposed purchase price was
increased. The Mylex board also directed Broadview to request a formal proposal
from each of the other companies expressing interest in acquiring Mylex, but
determined that it would not consider an offer involving consideration other
than cash unless the offer was in excess of any increased cash price proposed by
IBM.
In response to the Mylex board's directive, Messrs. Abbe and Spivak and Mr.
Montross spoke, by telephone, with Mr. Dayton, on July 8, 1999 and discussed the
response of the Mylex board to IBM's proposal, particularly its concern about
the proposed price.
On July 9, 1999, Mr. Dayton called Mr. Abbe to propose an increase in the
price initially proposed. On the same day, Mr. Abbe conveyed the proposed price
increase to Mr. Montross and then called Messrs. Dayton and Gianukakis to
indicate that IBM's increased purchase price was not likely to be acceptable to
the Mylex board. Later that day, Mr. Dayton called Mr. Abbe to propose a new
slightly higher price of $12 per share. Based on the discussion at the meeting
of the Mylex board on July 7, 1999, Mr. Abbe informed Mr. Dayton that the
proposed price was at a level sufficient to allow IBM to commence its due
diligence investigation.
On July 9, 1999, investment bankers representing one of the other companies
that had expressed interest in acquiring Mylex, a publicly traded company
providing products to computer system and storage vendors, delivered a proposal
to acquire Mylex to Broadview. Broadview was informed that the proposal was the
company's best offer. The proposal included a purchase price of $12 per share
but, unlike IBM's proposal, the consideration consisted of the company's stock
rather than cash. On the same day and during the immediately following weekend,
Messrs. Montross, Abbe and Neilsson and members of the Mylex board held
discussions to evaluate the two proposals, including the consideration proposed
for the Mylex stockholders, the structure of each proposed transaction and the
ability of IBM and the other company making a proposal to complete a transaction
in a timely fashion.
12
<PAGE>
On July 12, 1999, Mylex and IBM entered into a nondisclosure agreement, and
on July 14, 1999, several IBM representatives met several Mylex representatives
to commence the due diligence process, most of which occurred at the office of
Brown & Bain, outside counsel to Mylex, in Palo Alto, California, during the
period of July 14 through July 20, 1999. Immediately after the completion of the
due diligence process, Messrs. Dayton and Colburn confirmed to Messrs. Montross
and Abbe that IBM desired to go forward with the acquisition on the terms
discussed.
On July 12, 1999, representatives of Cravath, Swaine & Moore, IBM's outside
counsel, sent a draft merger agreement to Brown & Bain. From July 13 through
July 27, Cravath, Brown & Bain and representatives of IBM and Mylex had frequent
telephone negotiations regarding the conditions to the proposed merger, the
circumstances under which the merger agreement could be terminated, restrictions
on Mylex's ability to solicit or negotiate an alternative transaction, the
representations and warranties to be made by IBM and Mylex and the restrictions
on the conduct of Mylex's business during the pendency of the merger. The
negotiations also dealt with the terms of retention agreements for officers and
other key employees of Mylex, as well as modifications to Mr. Montross'
employment agreement.
On July 23, 1999, the Mylex board met to discuss the merger agreement and
the merger. At the meeting, the board received a presentation from Mr. Neilsson
and from Charles Van Cott of Brown & Bain regarding the proposed merger
agreement. The Mylex board also received a presentation from Broadview regarding
the merger and regarding Broadview's draft fairness opinion in connection with
the merger. After a discussion that included a consideration of the expressions
of interest and the alternative proposal previously received from parties other
than IBM, the Mylex board approved the proposed merger agreement and instructed
management to finalize and execute the merger agreement. On July 26, the Mylex
board convened again by telephone conference, reconfirmed its approval of the
merger agreement and again instructed management to finalize and execute the
merger agreement.
On July 27, 1999, the Mylex board received the opinion of Broadview that, as
of July 27, 1999, subject to the assumptions made, and matters and limitations
described, in its opinion, the consideration to be received by the Mylex
stockholders under the proposed merger agreement was fair, from a financial
point of view, to those stockholders. That afternoon, the merger agreement was
executed, and IBM and Mylex issued a press release announcing the merger.
REASONS FOR THE MERGER
In arriving at its determination to approve the merger, the Mylex board of
directors considered the opportunity the merger would provide to secure a
premium for stockholders over recent market prices of Mylex common stock. In
comparing this premium with the return on stockholder investment believed to be
achievable in the foreseeable future through appreciation of Mylex common stock
if Mylex remained an independent company, the Mylex board considered various
factors affecting Mylex's future financial performance and prospects. These
factors included:
- increasing consolidation in the RAID controller area of the market for
computer products,
- Mylex's ability to compete with larger companies, with substantially
greater resources and name recognition than Mylex, that have entered the
RAID controller area of the computer products market through acquisition
or internal development efforts,
- Mylex's ability to continue to attract and retain experienced and
qualified engineers and other personnel in a highly competitive market and
- the need for Mylex to have timely availability of semiconductors used in
its products at cost levels that are similar to the cost levels for
semiconductors experienced by its major competitors.
13
<PAGE>
In the course of its deliberations, the Mylex board of directors considered,
among other things:
- information concerning Mylex's business, prospects, financial performance
and condition, operations, technology, management and competitive
position,
- current financial market conditions and historical market prices,
volatility and trading information with respect to the Mylex common stock,
- the merger consideration to be received by Mylex stockholders in
connection with the merger and a comparison of comparable merger
transactions,
- the strong reputation and financial condition of IBM,
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations, are reasonable,
- provisions in the merger agreement that permit the Mylex board to furnish
information to, and engage in negotiations with, third parties and to
terminate the merger agreement, in each case only in response to an
unsolicited superior proposal in accordance with the terms described below
under "The Merger Agreement--No solicitation of transactions," and the
belief of the Mylex board that Mylex's payment of a termination fee of $10
million to IBM in the event of such a termination would not unreasonably
discourage third parties from making a superior proposal,
- the business and financial prospects of Mylex as an independent company,
- the potential for other third parties to enter into strategic
relationships with or to acquire Mylex if Mylex did not enter into the
merger agreement,
- Mylex's contact with several alternative parties to discuss a possible
acquisition, and which only yielded suggested potential prices involving
less consideration or different consideration per share than IBM's offer,
- the possibility that the merger may not be consummated and the effect of
public announcement of the merger on Mylex's sales, operating results and
stock price and on its ability to attract and retain key management,
marketing and technical personnel,
- the financial effect of the merger and
- the opinion of Broadview that, as of July 27, 1999, subject to the
assumptions made, and matters and limitations described, in its opinion,
the consideration to be received by the Mylex stockholders under the
proposed merger agreement was fair, from a financial point of view, to
those stockholders.
The Mylex board of directors concluded that the benefits of the merger
outweighed any of the potentially negative factors it considered.
The discussion above sets forth the material information and factors
considered by the Mylex board of directors in its consideration of the merger
agreement. In view of the wide variety of factors considered, the Mylex board
did not find it practicable to, and did not, make specific assessments of,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in reaching its determination. The determination was made after
consideration of all the factors as a whole. In addition, individual members of
the Mylex board may have given different weights to different factors.
OPINION OF MYLEX'S FINANCIAL ADVISOR
Pursuant to a letter dated as of June 27, 1997, Mylex engaged Broadview
International LLC to act as financial advisor to the Mylex board of directors
and to render an opinion to the Mylex board of
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<PAGE>
directors regarding the fairness of the consideration to be paid by IBM in the
merger, from a financial point of view, to Mylex stockholders. Mylex's board of
directors selected Broadview to act as financial advisor based on Broadview's
reputation and experience in the information technology, communication and media
industries. On July 27, 1999, Broadview delivered its opinion to the Mylex board
that, as of July 27, 1999, subject to the assumptions made, and matters and
limitations described, in its opinion, the consideration to be received by the
Mylex stockholders under the proposed merger agreement was fair, from a
financial point of view, to those stockholders.
BROADVIEW'S OPINION, WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY BROADVIEW, IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT. MYLEX STOCKHOLDERS ARE URGED TO, AND SHOULD,
READ THE BROADVIEW OPINION CAREFULLY AND IN ITS ENTIRETY. THE BROADVIEW OPINION
IS DIRECTED TO MYLEX'S BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS OF THE
CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF SHARES OF MYLEX
COMMON STOCK AS OF THE DATE OF THE OPINION. THE BROADVIEW OPINION DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY HOLDER OF MYLEX COMMON STOCK AS TO HOW TO VOTE AT THE MYLEX SPECIAL
MEETING. THE SUMMARY OF THE BROADVIEW OPINION SET FORTH IN THIS PROXY STATEMENT,
ALTHOUGH MATERIALLY COMPLETE, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.
In rendering its opinion, Broadview, among other things:
- reviewed the terms of the draft merger agreement dated July 21, 1999
furnished to Broadview by Mylex management, which, for the purposes of the
opinion, Broadview assumed, with the permission of Mylex's board of
directors, to be identical in all material respects to the merger
agreement that was executed,
- reviewed certain publicly available financial statements and other
information of Mylex and IBM,
- reviewed certain financial projections for Mylex prepared and furnished to
Broadview by Mylex management,
- participated in discussions with Mylex management concerning the
operations, business strategy, current financial performance and prospects
for Mylex,
- discussed with Mylex management its view of the strategic rationale for
the merger,
- reviewed the recent reported closing prices and trading activity for Mylex
common stock,
- compared certain aspects of the financial performance of Mylex with other
comparable public companies,
- analyzed available information, both public and private, concerning other
comparable mergers and acquisitions,
- reviewed recent equity research analyst reports covering Mylex,
- assisted in negotiations and discussions related to the merger between
Mylex and IBM and
- conducted other financial studies, analyses and investigations as
Broadview deemed appropriate for purposes of its opinion.
In rendering its opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information, including, without limitation, the representations and warranties
contained in the merger agreement, that was publicly available or furnished to
Broadview by Mylex or IBM. With respect to the financial projections examined by
Broadview, Broadview assumed that they were reasonably prepared and reflected
the best available estimates and good faith judgments of the management of Mylex
as to the future performance of Mylex. Broadview also assumed that neither Mylex
nor IBM was, as of the date of Broadview's opinion,
15
<PAGE>
involved in any material transaction other than the merger and those activities
undertaken in the ordinary course of conducting their respective businesses.
Broadview's opinion is based upon market, economic, financial and other
conditions as they existed and could be evaluated as of July 27, 1999, and any
change in those conditions after that date may impact Broadview's opinion.
Broadview's opinion did not express any opinion as to the price at which Mylex
common stock will trade at any time.
The following is a brief summary of some of the information and valuation
methodologies that Broadview employed in rendering its opinion. These analyses
were presented to Mylex's board of directors at its meeting on July 23, 1999.
This summary includes all financial analyses used by Broadview which are deemed
to be material, but does not purport to be a complete description of analyses
performed by Broadview in arriving at its opinion. Broadview did not explicitly
assign any relative weights to the various factors or analyses considered. The
summary of financial analyses includes information presented in tabular format.
In order to fully understand the financial analyses used by Broadview, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
PUBLIC COMPANY COMPARABLES ANALYSIS - Broadview considered ratios of share price
and equity market capitalization, adjusted for cash and debt when appropriate,
to selected historical and projected operating metrics to derive multiples
placed on a company in a particular market segment. For this analysis, as well
as other analyses, Broadview examined publicly available information, a range of
estimates based on securities research analyst reports and financial projections
prepared by Mylex management.
In order to perform this analysis, Broadview compared financial information
of Mylex with publicly available information for the companies comprising the
Mylex Comparable Index. The Mylex Comparable Index consists of the following
companies: Radisys Corp.; MTI Technology Corp.; Interphase Corp.; SBS
Technologies, Inc.; Brooktrout Technology, Inc.; Dataram Corp.; Box Hill Systems
Corp.; and Splash Technology Holdings, Inc.
The following table presents, as of July 26, 1999, the median multiples and
the range of multiples for the Mylex Comparable Index of total market
capitalization (defined as equity market capitalization plus total debt minus
cash and cash equivalents) and the share price divided by specified operating
metrics:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE RANGE OF MULTIPLES
--------------- ------------------
<S> <C> <C>
Total Market Capitalization to Last
Reported Twelve Months Revenue........ 1.46 x 0.34 x-2.62 x
Total Market Capitalization to Last
Reported Twelve Months Gross Profit... 2.46 x 0.62 x-7.89 x
Total Market Capitalization to Projected
Calendar Year 1999 Revenue............ 1.24 x 0.34 x-2.40 x
Total Market Capitalization to Projected
Calendar Year 1999 Gross Profit....... 2.10 x 0.68 x-7.01 x
Total Market Capitalization to Projected
Calendar Year 2000 Revenue............ 0.99 x 0.28 x-1.91 x
Total Market Capitalization to Projected
Calendar Year 2000 Earnings Before
Interest and Taxes.................... 8.72 x 1.69 x-26.53 x
Stock Price to Projected Calendar Year
2000 Earnings Per Share............... 16.05 x 10.48 x-28.74x
</TABLE>
16
<PAGE>
The following table presents, as of July 26, 1999, a median per share value
and ranges of per share values of Mylex's stock, derived in each instance by
using the multiples shown above and the appropriate Mylex operating metric:
<TABLE>
<CAPTION>
DERIVED RANGE OF DERIVED
MEDIAN VALUE VALUES
------------- ----------------
<S> <C> <C>
Total Market Capitalization to Last Reported Twelve Months Revenue............... $ 11.61 $4.11 - $19.37
Total Market Capitalization to Last Reported Twelve Months Gross Profit.......... $ 7.49 $3.26 - $19.98
Total Market Capitalization to Projected Calendar Year 1999 Revenue.............. $ 10.10 $4.08 - $17.80
Total Market Capitalization to Projected Calendar Year 1999 Gross Profit......... $ 6.12 $3.22 - $16.12
Total Market Capitalization to Projected Calendar Year 2000 Revenue.............. $ 10.61 $4.31 - $18.72
Total Market Capitalization to Projected Calendar Year 2000 Earnings Before
Interest and Taxes............................................................. $ 4.35 $2.32 - $9.50
Stock Price to Projected Calendar Year 2000 Earnings Per Share................... $ 3.61 $2.36 - $6.46
</TABLE>
No company utilized in the public company comparables analysis is identical
to Mylex. In evaluating the comparables, Broadview made numerous assumptions
with respect to board-level computing industry performance and general economic
conditions, many of which are beyond the control of Mylex. Mathematical
analysis, such as determining the median, average or range, is not in itself a
meaningful method of using comparable company data.
TRANSACTION COMPARABLES ANALYSIS - Broadview considered ratios of equity
purchase price, adjusted for the seller's cash and debt when appropriate, to
selected historical operating results in order to indicate multiples strategic
and financial acquirers have been willing to pay for companies in a particular
market segment. In order to perform this analysis, Broadview reviewed a number
of transactions that it considered similar to the merger. Broadview selected
these transactions by choosing recent transactions involving sellers in the OEM
board-level products and RAID storage systems market with revenues greater than
$10 million in the last reported twelve months before their acquisition. For
this analysis, as well as other analyses, Broadview examined publicly available
information, as well as information from Broadview's proprietary database of
published and confidential merger and acquisition transactions in the
information technology, communication and media industries. These transactions
consisted of the acquisition of:
- Meridian Data, Inc. by Quantum Corp.,
- Bit 3 Computer Corp. by SBS Technologies, Inc.,
- Force Computers, Inc. by Solectron Corp.,
- Texas Micro, Inc. by Radisys Corp.,
- Hyundai Electronics Industries Co. Ltd (Hyundai Electronics
America--Symbios, Inc.) by LSI Logic Corp.,
- Artecon, Inc. by Box Hill Systems Corp.,
- Micronet Technology, Inc. by Ampex Corp.,
- Storage Dimensions, Inc. by Artecon, Inc. and
- Diamond Multimedia Systems, Inc. by S3, Inc.
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<PAGE>
The following table presents, as of July 26, 1999, the median multiple and
the range of multiples of adjusted price (defined as equity price plus total
debt minus cash and cash equivalents) divided by the seller's revenue in the
last reported twelve months prior to acquisition for the transactions listed
above:
<TABLE>
<CAPTION>
RANGE OF
MEDIAN MULTIPLE MULTIPLES
----------------- -----------------
<S> <C> <C>
Adjusted Price to Last Reported Twelve Months Revenue........................ 1.23 x 0.34 x - 3.35 x
</TABLE>
The following table presents, as of July 26, 1999, a median per share value
and a range of per share values of Mylex common stock, derived in each instance
by multiplying the multiples shown above by Mylex's revenue for the twelve
months ended March 31, 1999:
<TABLE>
<CAPTION>
RANGE OF DERIVED
MEDIAN DERIVED VALUE VALUES
--------------------- ----------------------
<S> <C> <C>
Adjusted Price to Revenue for Twelve Months Ended March 31, 1999.... $ 10.04 $4.11 - $24.23
</TABLE>
No transaction utilized as a comparable in the transaction comparables
analysis is identical to the merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to the board-level computing and
enclosure products industries performance and general economic conditions, many
of which are beyond the control of Mylex. Mathematical analysis, such as
determining the average, median or range, is not in itself a meaningful method
of using comparable transaction data.
TRANSACTION PREMIUMS PAID ANALYSIS - Broadview considered the premiums paid
above a seller's share price in order to determine the additional value
strategic and financial acquirers, when compared to public stockholders, are
willing to pay for companies in a particular market segment. In order to perform
this analysis, Broadview reviewed a number of transactions involving
publicly-held computer hardware companies. Broadview selected these transactions
from its proprietary database by choosing recent transactions with an equity
purchase price between $100 million and $500 million. These transactions
consisted of the acquisition of:
- Summa Four, Inc. by Cisco Systems, Inc.,
- SEEQ Technology, Inc. by LSI Logic Corp.,
- ILC Technology, Inc. by BEC Group, Inc.,
- Norand Corp. by Western Atlas, Inc.,
- ATL Products, Inc. by Quantum Corp.,
- Control Devices, Inc. by First Technology plc,
- STB Systems, Inc. by 3Dfx Interactive, Inc.,
- Trident International, Inc. by Illinois Tool Works, Inc.,
- BENCHMARQ Microelectronics, Inc. by Unitrode Corp.,
- Chips and Technologies, Inc. by Intel Corp.,
- AFC Cable Systems, Inc. by Thomas & Betts Corp.,
- Brite Voice Systems, Inc. by InterVoice, Inc.,
- Continental Circuits Corp. by Hadco Corp.,
- Computational Systems, Inc. by Emerson Electric Co.,
- Positron Fiber Systems Corp. by Reltec Corp.,
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<PAGE>
- DH Technology, Inc. by Axiohm SA,
- Eltron International, Inc. by Zebra Technologies Corp.,
- Powerhouse Technologies, Inc. by Anchor Gaming,
- Shiva Corp. by Intel Corp.,
- Texas Micro, Inc. by RadiSys Corp.,
- Microcom, Inc. by Compaq Computer Corp.,
- Advanced Logic Research, Inc. by Gateway 2000, Inc.,
- Integrated Circuit Systems by Bain Capital, Inc. and Bear, Stearns & Co.,
Inc.,
- Exide Electronics Group, Inc. by BTR plc,
- NetVantage, Inc. by Cabletron Systems, Inc.,
- Fusion Systems Corp. by Eaton Corp.,
- Zero Corp. by Applied Power, Inc.,
- Banctec, Inc. by Welsh, Carson, Anderson & Stowe,
- Integrated Process Equipment Corp. by SpeedFam International, Inc.,
- NACT Telecommunications, Inc. by World Access, Inc.,
- Amati Communications Corp. by Texas Instruments, Inc.,
- OnTrak Systems, Inc. by Lam Research Corp. and
- Diamond Multimedia Systems, Inc. by S3, Inc.
The following table presents, as of July 26, 1999, the median premium and
the range of premiums for these transactions calculated by dividing:
(1) the offer price per share minus the closing share price of the seller's
common stock twenty (20) trading days or one (1) trading day prior to the
public announcement of the transaction, by
(2) the closing share price of the seller's common stock twenty (20) trading
days or one (1) trading day prior to the public announcement of the
transaction:
<TABLE>
<CAPTION>
MEDIAN PREMIUM RANGE OF PREMIUMS
------------------- --------------------
<S> <C> <C>
Premium Paid to Seller's Share Price 20 Trading Days Prior to
Announcement............................................................ 54.4% (2.5%) - 138.0%
Premium Paid to Seller's Share Price 1 Trading Day Prior to
Announcement............................................................ 39.5% (13.7%) - 108.7%
</TABLE>
The following table presents a median value and range of values of Mylex
common stock, derived in each instance using the premiums shown above and the
closing share price of Mylex common stock twenty (20) trading days and one (1)
trading day, prior to July 26, 1999:
<TABLE>
<CAPTION>
RANGE OF DERIVED
MEDIAN DERIVED VALUE VALUES
--------------------- ----------------------
<S> <C> <C>
Share Price 20 Trading Days Prior to July 26, 1999.................. $ 8.25 $5.21 - $12.72
Share Price 1 Trading Day Prior to July 26, 1999.................... $ 13.95 $8.63 - $20.87
</TABLE>
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<PAGE>
No transaction utilized as a comparable in the transaction premiums paid
analysis is identical to the merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to computer hardware industry performance
and general economic conditions, many of which are beyond the control of Mylex.
Mathematical analysis, such as determining the average, median or range, is not
in itself a meaningful method of using comparable transaction data.
MYLEX COMMON STOCK PERFORMANCE ANALYSIS - For comparative purposes, Broadview
examined the following:
1) Mylex common stock weekly historical volume and trading prices from July
31, 1998 through July 23, 1999; and
2) weekly relative closing prices for an index of the public company
comparables vs. Mylex and the S&P 500 from July 31, 1998 through July 23,
1999.
CONSIDERATION OF THE DISCOUNTED CASH FLOW VALUATION METHODOLOGY - Although
discounted cash flow is a commonly used valuation methodology, Broadview did not
employ such an analysis for the purposes of its opinion. Discounted cash flow
analysis is most appropriate for companies that exhibit relatively steady or
somewhat predictable streams of future cash flow. For a company such as Mylex, a
preponderance of the value in a valuation based on discounted cash flow will be
in the terminal value of the entity, which is extremely sensitive to assumptions
about the sustainable long-term growth rate of the company. Given the
uncertainty in estimating both the future cash flows and a sustainable long-term
growth rate for Mylex, Broadview considered a discounted cash flow analysis
inappropriate for valuing Mylex.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Broadview considered the results of all of its analyses as a
whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Broadview believes that selecting any portion of
its analyses, without considering all analyses, would create an incomplete view
of the process underlying its opinion.
In performing its analyses, Broadview made numerous assumptions with respect
to industry performance and general business and economic conditions and other
matters, many of which are beyond the control of Mylex or IBM. The analyses
performed by Broadview are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. The consideration to be paid in connection with the merger and
other terms of the merger agreement were determined through arm's length
negotiations between Mylex and IBM, and were approved by the Mylex board.
Broadview provided advice to the Mylex board during these negotiations; however,
Broadview did not recommend any specific consideration to the Mylex board or
that any specific consideration constituted the only appropriate consideration
for the merger. In addition, Broadview's opinion and presentation to the Mylex
board was one of many factors taken into consideration by the Mylex board in
making its decision to approve the merger agreement. Consequently, the Broadview
analyses as described above should not be viewed as determinative of the opinion
of the Mylex board with respect to the value of Mylex or of whether the Mylex
board would have been willing to agree to a different consideration.
Upon completion of the merger, Mylex will be obligated to pay Broadview a
transaction fee of approximately $2,877,000. Mylex has already paid Broadview
monthly retainer fees totaling $71,250 and a fairness opinion fee of $500,000. A
portion of the monthly retainer fees and the entire fairness opinion fee will be
credited against the transaction fee payable by Mylex upon completion of the
merger. In addition, Mylex has agreed to reimburse Broadview for its reasonable
expenses, including fees and expenses of its counsel, and to indemnify Broadview
and its affiliates against certain liabilities and expenses related to their
engagement, including liabilities under the federal securities laws. The terms
of the fee arrangement with Broadview, which Mylex and Broadview believe are
customary in
20
<PAGE>
transactions of this nature, were negotiated at arm's length between Mylex and
Broadview, and the Mylex board of directors was aware of the nature of the fee
arrangement, including the fact that a significant portion of the fees payable
to Broadview is contingent upon completion of the merger.
INTERESTS OF MEMBERS OF THE MYLEX BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER
When you consider the recommendation of the Mylex board, you should be aware
that the executive officers and directors of Mylex may have interests in the
merger that are different from your interests. These interests may create
potential conflicts of interest. The Mylex board of directors was aware of these
interests when it approved the merger agreement.
ACCELERATION OF UNVESTED OPTIONS - Each outstanding option to purchase shares of
Mylex common stock held by directors who are not also employees of Mylex will,
to the extent not already vested, become fully vested immediately before the
completion of the merger. Upon completion of the merger, each outstanding option
held by a non-employee director, whether vested or unvested, will be canceled
and converted into the right to receive an amount of cash equal to (1) the
number of shares of Mylex common stock subject to the option multiplied by $12,
minus (2) the number of shares of Mylex common stock subject to the option
multiplied by the per share option exercise price.
The following table indicates unvested options held by non-employee
directors that will accelerate and be converted to cash as a result of the
merger:
<TABLE>
<CAPTION>
NUMBER OF
SHARES SUBJECT
TO UNVESTED SPREAD VALUE OF
OPTIONS TO BE ACCELERATED
NAME ACCELERATED OPTIONS(1)
- ------------------------------------------------------- -------------- ---------------------
<S> <C> <C>
Mr. Ismael Dudhia...................................... 34,679 $ 156,055
Dr. M. Yaqub Mirza..................................... 34,679 $ 156,055
Dr. Inder M. Singh..................................... 34,679 $ 156,055
Mr. Stephen McKenzie................................... 12,497 $ 39,834
Mr. Walt Wilson........................................ 32,778 $ 54,287
Non-employee Directors as a group...................... 149,312 $ 562,286
</TABLE>
- ------------------------
(1) The amounts in this column have been determined by multiplying (1) the
number of shares of Mylex common stock subject to the unvested options,
assuming a merger closing date of September 30, 1999, with exercise prices
below $12 by (2) the amount by which $12 exceeds the exercise price of each
option.
RETENTION PLAN AND AGREEMENTS - IBM has adopted a retention plan for key senior
Mylex employees and entered into related retention agreements providing certain
benefits to eight employees, including two executive officers, of Mylex. The
retention agreements, which will take effect upon completion of the merger,
provide for cash payments to the employees involved, within two weeks after the
completion of the merger, that total $338,100 in the aggregate for the two
executive officers and $1,067,310 in the aggregate for the eight employees as a
group. The retention agreements also provide for a potential additional
retention bonus payment on March 31, 2002, if the business conducted by the
company surviving the merger achieves certain revenue and profit objectives in
the 2000 and 2001 calendar years, and a further potential retention bonus
payment on March 31, 2003 based on the cumulative financial results achieved for
calendar years 2000 through 2002. If the surviving company meets the financial
objectives prescribed by the retention plan, the first retention payment will
total $507,150 in the aggregate, and the second retention payment will total
$840,000 in the aggregate, for the two executive officers; and the first
retention payment will total $1,600,966 in the aggregate, and the second
retention payment will total $2,439,000 in the aggregate, for the eight
employees as a group. The retention plan calls for a reduction of both retention
payments if the surviving company falls short
21
<PAGE>
of the financial objectives prescribed by the plan and an increase in both
payments if the surviving company exceeds those objectives. Under the plan, both
payments could increase to as much as 150% of the amounts indicated above. The
retention agreements entitle each employee to receive the first additional
retention payment in full, without regard to the surviving company's financial
performance in 2000 and 2001, if the company terminates his or her employment
without cause before the employee receives the first retention payment. There is
no similar provision respecting the second additional retention payment. Al
Montross, the president and chief executive officer of Mylex, is not covered by
any of the foregoing provisions of the retention plan or agreements.
In addition to retention payments, the retention agreements call for the
conversion, in accordance with the merger agreement, of all vested and unvested
options to purchase shares of Mylex common stock held by the employees subject
to the retention agreements into options to purchase shares of IBM common stock.
See "The Merger Agreement--Treatment of stock options."
SEVERANCE AGREEMENTS - The eight employees who signed the retention agreements
have waived all their respective rights under severance agreements previously
entered into with Mylex. These prior severance agreements remain in effect,
however, with respect to three Mylex employees, including one of its executive
officers, who were not offered or have not entered into retention agreements.
These prior severance agreements provide for various payments and other benefits
if Mylex terminates the employee's employment, or if the employee leaves his or
her employment for a "good reason," as defined in the severance agreement, in
connection with, or within two years after, any change in control of Mylex.
Those payments and benefits include: (a) payment of a pro-rata bonus with
respect to the year in which the termination occurs; (b) payment of severance
pay equal to between one and two times (based on years of service to Mylex as an
officer) the aggregate of the employee's annual salary and the higher of (i) the
employee's last annual bonus and (ii) the average of the employee's annual bonus
for the then last three years; (c) accelerated vesting of all outstanding stock
options; and (d) continuation of insurance benefits, at Mylex's expense, for two
years after the termination of employment.
AMENDMENT TO CHIEF EXECUTIVE OFFICER'S EMPLOYMENT AGREEMENT - Mylex and Mr.
Montross have entered into an amendment to Mr. Montross' employment agreement
that will take effect if and when Mylex and IBM complete the merger. Under the
amendment, Mylex would pay Mr. Montross an annual bonus of $200,000 for the 1999
calendar year immediately upon completion of the merger. In January 2001, Mylex
would pay Mr. Montross an annual bonus of $200,000 for the 2000 calendar year if
he remains in continuous employment with Mylex through the date on which the
bonus becomes due. Mylex would pay both bonuses instead of the annual operating
income bonus (a bonus equal to a percentage, ranging between zero and 2 1/2%, of
Mylex's operating income calculated on the basis of Mylex's operating income as
a percentage of net sales) currently contemplated by Mr. Montross' employment
agreement.
If the company surviving the merger terminates Mr. Montross' employment
without cause, as defined in Mr. Montross' employment agreement, the amendment
also provides for (a) continued payment of all salary due under the employment
agreement until the employment period contemplated by the agreement ends on
January 31, 2003, (b) payment of a pro rata portion of the $200,000 bonus due in
January 2001 if Mr. Montross' employment is terminated before Mr. Montross
receives that bonus, (c) acceleration of all unvested options to purchase Mylex
common stock that are converted to options to purchase IBM common stock as
described in "The Merger Agreement--Treatment of stock options" and (d)
continuation of life and health insurance and other similar benefits that Mr.
Montross is receiving on the date of termination through the end of the
employment period or for one year after termination, whichever period is longer.
Finally, the amendment gives Mr. Montross the right to resign from his
employment if, by February 1, 2001, the company surviving the merger and Mr.
Montross have not reached a mutually
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<PAGE>
satisfactory written agreement setting forth the key terms and conditions of his
employment beyond that date. If Mr. Montross resigns from his employment under
such circumstances, he will receive the salary continuation and acceleration of
stock options described in clauses (a) and (c) above, and Mylex will continue to
provide all benefits described in clause (d) above through the end of the
employment period or until Mr. Montross starts work for a new employer,
whichever period is shorter.
INDEMNIFICATION OF DIRECTORS AND OFFICERS - Following the merger, the surviving
corporation will continue to indemnify each present and former director and
officer of Mylex or any of its subsidiaries from liabilities for acts or
omissions occurring at or before the completion of the merger to the fullest
extent provided under that corporation's existing charter documents, bylaws and
indemnification agreements.
DIRECTORS' AND OFFICERS' INSURANCE - For six years after the completion of the
merger, IBM will maintain a policy of directors' and officers' liability
insurance for acts and omissions occurring before the merger with coverage no
less favorable than Mylex's existing directors' and officers' liability
insurance coverage. If the existing directors' and officers' liability insurance
expires or terminates, or if the annual premium increases to more than 150% of
the annualized premium paid in 1998, IBM must obtain directors' and officers'
liability insurance in an amount and scope as it can obtain for the remainder of
the six-year period for an annual premium not in excess of 150% of the 1998
premium.
ACCOUNTING TREATMENT
The merger will be treated as a purchase for accounting purposes.
U.S. FEDERAL INCOME TAX CONSEQUENCES
This section discusses the material United States federal income tax
consequences of the merger to Mylex stockholders whose shares of Mylex common
stock are surrendered in the merger in exchange for the right to receive cash
consideration of $12 per share. The discussion below applies only to Mylex
stockholders that hold Mylex common stock as capital assets at the time of the
merger, and the discussion may not apply to stockholders that are subject to
special tax rules, such as financial institutions, insurance companies, dealers
in securities, persons that mark-to-market their securities, persons that hold
common stock as part of a "straddle," "hedge" or "synthetic security
transaction" (including a "conversion" transaction), persons with a "functional
currency" other than the U.S. dollar, retirement plans and tax-exempt
organizations, stockholders who acquired Mylex common stock pursuant to the
exercise of stock options, pursuant to participation in an employee stock
purchase plan or otherwise as compensation, or stockholders that are nonresident
alien individuals, foreign corporations, foreign partnerships, foreign trusts or
foreign estates. The discussion below is based upon federal income tax laws as
now in effect and interpreted and does not take into account possible changes in
these tax laws or interpretations, any of which may be applied retroactively.
The discussion does not include any description of the tax laws of any state,
local or foreign government that may apply to Mylex stockholders.
THIS SECTION DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR MYLEX STOCKHOLDER IN LIGHT OF THE STOCKHOLDER'S
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH STOCKHOLDER SHOULD
CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND CHANGES TO THOSE LAWS.
For federal income tax purposes, a Mylex stockholder generally will
recognize capital gain or capital loss equal to the difference between the cash
received by the stockholder pursuant to the merger and the stockholder's
adjusted tax basis in the shares of Mylex common stock surrendered pursuant to
the merger. If at the time of the merger, a noncorporate stockholder has held
his or her shares of Mylex common stock for more than one year, any gain
recognized generally will be subject to
23
<PAGE>
federal income tax at a maximum rate of 20%. If a stockholder has held shares of
common stock for one year or less at the time of the merger, any gain will be
subject to federal income tax at the same rate as ordinary income, unless offset
by other losses. Any capital loss generally will be applied to offset the
stockholder's capital gains, if any, from other transactions. For noncorporate
stockholders, any amount of capital loss in excess of capital gain in any year
generally is deductible against ordinary income only to the extent of $3,000,
but any net capital loss in excess of $3,000 may be carried forward to
subsequent taxable years.
For corporations, capital gain is taxed at the same rate as ordinary income,
and capital loss in excess of capital gain is not deductible. Corporations,
however, generally may carry back capital losses up to three taxable years and
carry forward capital losses up to five taxable years.
Cash consideration received by Mylex stockholders in the merger may be
subject to backup withholding at a 31% rate. Backup withholding generally will
apply only if the stockholder fails to furnish a correct social security number
or other taxpayer identification number, or otherwise fails to comply with
applicable backup withholding rules and certification requirements. Corporations
generally are exempt from backup withholding. Any amounts withheld under the
backup withholding rules will be allowed as a credit against the stockholder's
federal income tax liability and may entitle the stockholder to a refund,
provided the stockholder furnishes specified required information to the
Internal Revenue Service.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Act, the Antitrust Division of the U.S.
Department of Justice and the U.S. Federal Trade Commission must review
transactions such as the merger. The merger may also be reviewed by state
antitrust authorities. The government agencies conducting these reviews
determine whether the merger complies with antitrust laws. The Hart-Scott-Rodino
Act requires Mylex and IBM to notify the Antitrust Division and the Federal
Trade Commission of the merger. We must wait for at least 30 days after we file
these notifications before we can complete the merger. Mylex and IBM have both
filed the notification reports with the Antitrust Division and the Federal Trade
Commission, and we expect the waiting period with respect to these filings to
expire on September 9, 1999. If a request from the Antitrust Division or the
Federal Trade Commission for additional information and documentary material is
received on or before that date, however, the waiting period will not terminate
until 20 days after Mylex and IBM have "substantially complied" (as this term is
defined under the Hart-Scott-Rodino Act) with each such request, unless the
Antitrust Division or Federal Trade Commission terminates the waiting period
earlier. Consequently, completion of the merger may be delayed by reason of the
Hart-Scott-Rodino Act.
Under Germany's Law Against Restraints of Competition, the German Federal
Cartel Office, a federal agency attached to the Federal Ministry of Economic
Affairs, administers Germany's merger rules. Germany's merger rules apply to
mergers taking place inside and/or outside Germany and involving domestic and/or
foreign companies, provided that the mergers have a specified effect in Germany.
IBM is required under the Law Against Restraints of Competition to notify the
German Federal Cartel Office of the merger. We must wait for at least one month
after IBM files the notification before we can complete the merger. IBM has
filed the notification report with the German Federal Cartel Office, and we
expect the waiting period with respect to this filing to expire, upon receipt of
an informal letter, on September 13, 1999. If the German Federal Cartel Office
decides to make a more in-depth investigation of the merger, a second stage of
review lasting three months will ensue. The second stage terminates upon receipt
of a formal decision from the German Federal Cartel Office. The German Federal
Cartel Office may attach conditions and obligations, such as divestiture
undertakings, to its clearance decision.
24
<PAGE>
At any time before or after the merger becomes effective, the Antitrust
Division, the Federal Trade Commission, state antitrust authorities, the German
Federal Cartel Office or a private person or entity could seek to enjoin the
merger or to cause Mylex or IBM to divest various assets. Under the merger
agreement, the obligation of Mylex and IBM to complete the merger is conditioned
on
- the termination or expiration of the waiting periods described above and
- the absence of any injunction or other order or decree against the merger
on antitrust or other grounds.
A challenge to the merger could be made and, if such a challenge is made, Mylex
and IBM may not prevail.
Under the terms of the merger agreement, neither Mylex nor IBM is bound to
- agree or offer to divest or hold separate any assets or any portion of any
business of Mylex or IBM or
- litigate any proceeding that
- challenges or seeks to restrain the completion of the merger,
- seeks to prohibit or limit in any material respect the ownership or
operation by Mylex or IBM of a material portion of the business or
assets of Mylex or IBM or to require Mylex or IBM to dispose of or hold
separate any material portion of the business or assets of Mylex or IBM
as a result of the merger or
- seeks to prohibit IBM from effectively controlling in any material
respect a substantial portion of the business or operations of Mylex.
Other than the matters described in this document, we are not aware of any
significant government or regulatory approvals that we need to obtain, or
waiting periods with which we must comply, to complete the merger. If we
discover that other approvals or waiting periods are required, we will seek to
obtain or comply with them. If any approval or action is needed, however, we may
not be able to obtain it. Even if we could obtain the approval, conditions may
be placed on it that would cause Mylex or IBM to abandon the merger.
APPRAISAL RIGHTS
Holders of shares of Mylex common stock who do not vote in favor of the
adoption of the merger agreement and who properly demand appraisal of their
shares will be entitled to appraisal rights in connection with the merger under
Section 262 of the General Corporation Law of the State of Delaware.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DELAWARE CORPORATION LAW AND IS QUALIFIED IN ITS
ENTIRETY BY THE FULL TEXT OF SECTION 262, WHICH IS ATTACHED TO THIS PROXY
STATEMENT AS APPENDIX C. YOU SHOULD READ APPENDIX C IN ITS ENTIRETY. EXCEPT
WHERE THE CONTEXT REQUIRES OTHERWISE, ALL REFERENCES IN SECTION 262 AND IN THIS
SUMMARY TO A "STOCKHOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF MYLEX
COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED. A PERSON HAVING A
BENEFICIAL INTEREST IN SHARES OF MYLEX COMMON STOCK HELD OF RECORD IN THE NAME
OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE
RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY
MANNER TO PERFECT APPRAISAL RIGHTS.
Under the Delaware Corporation Law, persons who hold shares of Mylex common
stock who follow the procedures set forth in Section 262 will be entitled to
have their shares of Mylex common stock appraised by the Delaware Court of
Chancery and to receive payment of the "fair value" of such
25
<PAGE>
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, as determined
by such court.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the adoption of the merger agreement
by Mylex's stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders entitled to appraisal rights that
such appraisal rights are available and include in such notice a copy of Section
262. THIS PROXY STATEMENT CONSTITUTES SUCH NOTICE, AND THE APPLICABLE STATUTORY
PROVISIONS ARE ATTACHED TO THIS PROXY STATEMENT AS APPENDIX C.
A holder of shares of Mylex common stock wishing to exercise appraisal
rights:
- must deliver to Mylex, before the vote on the adoption of the merger
agreement at the special meeting, a written demand for the appraisal of
his or her shares and
- must not vote in favor of the adoption of the merger agreement.
In order not to vote in favor of the adoption of the merger agreement, a
stockholder must either:
- not return a proxy card and not vote in person in favor of the adoption of
the merger agreement,
- return a proxy card with the "Against" or "Abstain" box checked,
- vote in person against the adoption of the merger agreement or
- register in person an abstention from the proposal to adopt the merger
agreement.
A holder of shares of Mylex common stock wishing to exercise appraisal
rights must hold such shares of record on the date the written demand for
appraisal is made and must continue to hold such shares of record through the
completion of the merger. A vote against the adoption of the merger agreement,
whether made by proxy or in person, will not in and of itself constitute a
written demand for appraisal satisfying the requirements of Section 262. The
demand must reasonably inform Mylex of the identity of the holder as well as the
intention of the holder to demand an appraisal of the "fair value" of the shares
held by such holder.
Only a holder of record of shares of Mylex common stock is entitled to
assert appraisal rights for the shares of Mylex common stock registered in that
holder's name. A demand for appraisal in respect of shares of Mylex common stock
should be executed by or on behalf of the holder of record, fully and correctly,
as that holder's name appears on that holder's stock certificates, and must
state that such person intends thereby to demand appraisal of its shares of
Mylex common stock in connection with the merger. If the shares of Mylex common
stock are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity,
and if the shares of Mylex common stock are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including two
or more joint owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is agent
for the owner or owners. A record holder such as a broker who holds shares of
Mylex common stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Mylex common stock held for one
or more beneficial owners while not exercising such rights with respect to the
shares of Mylex common stock held for other beneficial owners; in such case,
however, the written demand should set forth the number of shares of Mylex
common stock as to which appraisal is sought and where no number of shares of
Mylex common stock is expressly mentioned the demand will be presumed to cover
all shares of Mylex common stock held in the name of the record owner.
Stockholders who hold their shares of Mylex common stock in brokerage accounts
or other nominee forms and who wish to exercise appraisal
26
<PAGE>
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL PURSUANT TO SECTION 262 SHOULD BE SENT OR
DELIVERED TO MYLEX CORPORATION, 34551 ARDENWOOD BOULEVARD, FREMONT, CALIFORNIA
94555, ATTENTION: SECRETARY.
Within ten days after the completion of the merger, the surviving
corporation must notify each holder of Mylex common stock who has complied with
Section 262, and who has not voted in favor of the adoption of the merger
agreement, of the date that the merger has been completed. Within 120 days after
the completion of the merger, the surviving corporation or any holder of Mylex
common stock who has complied with Section 262 and is entitled to appraisal
rights under Section 262 may file a petition in the Delaware Court of Chancery
demanding a determination of the "fair value" of such holder's shares of Mylex
common stock. The surviving corporation is under no obligation, and has no
present intention, to file such a petition. Accordingly, it is the obligation of
the holders of Mylex common stock to initiate all necessary action to perfect
their appraisal rights in respect of their shares of Mylex common stock within
the time prescribed in Section 262.
Within 120 days after the completion of the merger, any holder of Mylex
common stock who has complied with the requirements for exercise of appraisal
rights will be entitled, upon written request, to receive from the surviving
corporation a statement setting forth the aggregate number of shares not voted
in favor of the adoption of the merger agreement and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such statement must be mailed within ten days after a written
request for the statement has been received by the surviving corporation or
within ten days after the expiration of the period for delivery of demands for
appraisal, whichever is later.
If a petition for an appraisal is timely filed by a holder of shares of
Mylex common stock and a copy of the petition is served upon the surviving
corporation, the surviving corporation will then be obligated within 20 days
after the service of the petition to file with the Delaware Register in Chancery
a duly verified list containing the names and addresses of all stockholders who
have demanded an appraisal of their shares and with whom agreements as to the
value of their shares have not been reached. After notice to such stockholders
as required by the court, the Delaware Court of Chancery is empowered to conduct
a hearing on such petition to determine those stockholders who have complied
with Section 262 and who have become entitled to appraisal rights under Section
262. The Delaware Court of Chancery may require the holders of shares of Mylex
common stock who demanded payment for their shares to submit their stock
certificates to the Register in Chancery for notation on the certificates of the
pendency of the appraisal proceeding; and if any stockholder fails to comply
with such direction, the Delaware Court of Chancery may dismiss the proceedings
as to such stockholder.
After determining the holders of Mylex common stock entitled to appraisal,
the Delaware Court of Chancery will appraise the "fair value" of their shares of
Mylex common stock, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the "fair value."
Holders of Mylex common stock considering seeking appraisal should be aware that
the "fair value" of their shares of Mylex common stock as so determined could be
more than, the same as or less than the consideration they would receive in the
merger if they did not seek appraisal of their shares of Mylex common stock and
that investment banking opinions as to fairness from a financial point of view
are not necessarily opinions as to "fair value" under Section 262. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The court will also determine the amount of interest, if any, to be paid
upon the amounts to be received by persons whose
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shares of Mylex common stock have been appraised. The costs of the action may be
determined by the court and taxed upon the parties as the court deems equitable.
Upon application of a stockholder, the court may also order that all or a
portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and fees
and expenses of experts utilized in the appraisal proceedings, be charged PRO
RATA against the value of all the shares entitled to be appraised.
Any holder of shares of Mylex common stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the completion of the
merger, be entitled to vote the shares of Mylex common stock subject to such
demand for any purpose or be entitled to the payment of dividends or other
distributions on those shares of Mylex common stock, except dividends or other
distributions payable to holders of record of Mylex common stock as of a record
date prior to the completion of the merger.
If any stockholder who demands appraisal under Section 262 fails to perfect,
or effectively withdraws or loses, such stockholder's right to appraisal, the
shares of Mylex common stock of such stockholder will be converted into the
right to receive the merger consideration. A stockholder will fail to perfect,
or effectively lose or withdraw, such stockholder's right to appraisal if no
petition for appraisal is filed within 120 days after the completion of the
merger, or if the stockholder delivers to the surviving corporation a written
withdrawal of such stockholder's demand for appraisal and an acceptance of the
merger consideration within 60 days after completion of the merger. Any attempt
to withdraw more than 60 days after completion of the merger will require the
written approval of the surviving corporation. Once a petition for appraisal is
filed, the appraisal proceeding may not be dismissed as to any holder, absent
court approval.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE
CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF
APPRAISAL RIGHTS.
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THE MERGER AGREEMENT
THIS IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER AGREEMENT, A COPY
OF WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT. YOU SHOULD REFER TO
THE FULL TEXT OF THE MERGER AGREEMENT FOR DETAILS OF THE MERGER AND THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENT.
THE MERGER
When the merger occurs, S2 Acquisition Corp., a wholly-owned subsidiary of
IBM, will be merged with and into Mylex. Mylex will survive the merger as a
wholly-owned subsidiary of IBM.
WHAT YOU WILL RECEIVE
In the merger, each share of Mylex common stock outstanding immediately
before the merger, other than shares held by holders of Mylex common stock that
exercise and perfect appraisal rights pursuant to Section 262 of the Delaware
Corporation Law, will be converted into the right to receive $12 in cash,
without interest. At that time, all such shares of Mylex common stock will be
canceled and cease to exist. Each holder of a certificate representing any such
shares of Mylex common stock will no longer have any rights with respect to such
shares of Mylex common stock, except for the right to receive the merger
consideration. Each share of Mylex common stock held by Mylex, as treasury
stock, IBM or S2 Acquisition Corp. at the time of the merger will be canceled
without any payment.
EFFECTIVE TIME OF THE MERGER
The completion of the merger will take place on the second business day
following the date when the last of the conditions to the merger is satisfied or
waived, or at any other time and date that Mylex and IBM agree upon in writing.
On the closing date of the merger, Mylex and IBM will file a certificate of
merger with the Secretary of State of the State of Delaware. At that time, or at
any later time set forth in the certificate of merger, the merger will become
effective.
TREATMENT OF STOCK OPTIONS
The merger agreement provides that upon completion of the merger, each
option to purchase Mylex common stock, other than options held by non-employee
directors, will be converted into an option to acquire shares of IBM common
stock on the terms applicable to the Mylex option immediately before the
conversion, except that (1) the number of shares of IBM common stock subject to
the option will equal the number of shares of Mylex common stock subject to the
option multiplied by a fraction, the numerator of which is $12 and the
denominator of which is the average closing price of IBM common stock on the New
York Stock Exchange Composite Transactions Tape for the ten trading days
immediately preceding the date on which the merger is completed and (2) the
option exercise price will equal the option exercise price for shares of Mylex
common stock divided by the fraction described in clause (1) above.
The merger agreement provides that, upon completion of the merger, each
option to purchase Mylex common stock, whether vested or unvested, held by a
non-employee director of Mylex will be canceled and converted into the right to
receive an amount of cash equal to (1) the number of shares of Mylex common
stock subject to the option multiplied by $12, minus (2) the number of shares of
Mylex common stock subject to the option multiplied by the per share option
exercise price.
PAYMENT FOR SHARES
Before the merger, IBM will appoint a bank or trust company that is
reasonably acceptable to Mylex to act as paying agent for the payment of the
merger consideration. From time to time after
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completion of the merger, IBM will make available to the paying agent funds
necessary to make such payments.
After the merger, IBM or the paying agent will mail a letter of transmittal,
which will include instructions for the delivery of Mylex stock certificates to
the paying agent, to each person who held shares of Mylex common stock at the
time of the merger. Holders of Mylex common stock at the time of the merger
should use this letter of transmittal in sending Mylex stock certificates to the
paying agent. After surrendering Mylex stock certificates to the paying agent
for cancellation, together with a properly completed letter of transmittal,
holders of these surrendered Mylex stock certificates will be entitled to
receive a cash payment in an amount equal to the number of shares formerly
represented by the stock certificate or certificates they surrendered multiplied
by the merger consideration of $12. Each surrendered share will be canceled.
MYLEX STOCKHOLDERS SHOULD NOT SEND IN THEIR MYLEX STOCK CERTIFICATES UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL.
If a transfer of ownership of Mylex common stock is not registered in
Mylex's stock transfer books, payment of the merger consideration may be made to
a person other than the person in whose name the certificate surrendered is
registered if:
- the certificate is properly endorsed or otherwise in proper form for
transfer and
- the person requesting the payment pays any transfer or other taxes
resulting from the payment of the merger consideration to a person other
than the registered holder of that certificate or establishes to the
satisfaction of the surviving corporation that the taxes have been paid or
are not applicable.
All cash paid upon the surrender of certificates of Mylex common stock in
accordance with the merger agreement will be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Mylex common stock so
surrendered. After the completion of the merger, no transfers of shares of Mylex
common stock that were outstanding immediately before completion of the merger
will be made on the transfer books of Mylex.
If your Mylex stock certificate has been lost, stolen or destroyed, you will
be entitled to obtain payment only by signing an affidavit and, if required by
IBM, posting a bond in an amount sufficient to protect IBM against claims by any
other party related to your Mylex stock certificate.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties by us
relating to:
- our corporate organization and similar corporate matters,
- our subsidiaries,
- our capital structure,
- the authorization, execution, delivery, performance and enforceability of,
and any required consents, approvals and authorizations relating to, the
merger agreement and related matters,
- the absence of conflict with, violation or breach of, or default under our
charter, by-laws, debt instruments, other contracts and applicable laws in
connection with the merger agreement and related matters,
- the accuracy of our reports and financial statements filed with the SEC,
- the accuracy of the information we have supplied for this proxy statement,
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- the absence of material changes to our business or material events since
the end of our most recent fiscal year,
- any material litigation in which we are involved,
- our contracts,
- our compliance with applicable laws,
- the absence of changes in our employee benefit plans, employment
agreements and labor relations,
- environmental matters,
- our year 2000 compliance,
- our compliance with the Employment Retirement Income Security Act of 1974,
- tax matters,
- title to properties that we own or lease,
- intellectual property that we own or license,
- board approval of the merger agreement and satisfaction of state takeover
statutes,
- stockholder voting requirements,
- fees payable in connection with the merger,
- the delivery of a fairness opinion by our financial advisor and
- the inapplicability of our common stock rights agreement to the merger.
The merger agreement also contains customary representations and warranties
by IBM relating to:
- IBM's corporate organization and similar corporate matters,
- the authorization, execution, delivery, performance and enforceability of,
and any required consents, approvals and authorizations relating to, the
merger agreement and related matters,
- the absence of conflict with, violation or breach of, or default under
IBM's or any of its subsidiaries' charter, by-laws, debt instruments,
other contracts and applicable laws in connection with the merger
agreement and related matters,
- the accuracy of the information IBM supplied for this proxy statement,
- the operations of S2 Acquisition Corp. since its formation and
- the sufficiency of IBM's resources to pay the total merger consideration.
COVENANTS
We have agreed that during the period from the date of the merger agreement
until the completion of the merger, we will, and will cause our subsidiaries to:
- carry on our respective businesses in the ordinary course of business
consistent with past practice,
- use commercially reasonable efforts to comply with all applicable laws,
rules and regulations,
- maintain our respective assets and our respective relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with us,
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- continue to file all tax returns and reports, timely pay all taxes due and
payable under those returns and reports and accrue appropriate tax-related
reserves in our financial statements in accordance with our past
practices,
- provide IBM and its advisors reasonable access to our properties, records
and advisors as well as all information about our business that IBM
reasonably requests, including copies of each report or other document
that we may file or receive under any applicable federal, state, local or
foreign law and
- confer with IBM regarding operational and other matters and promptly
notify IBM of any material adverse change or material adverse effect on or
respecting Mylex.
We have also agreed that during the period from the date of the merger
agreement until the completion of the merger, we will not, and will not allow
our subsidiaries to, take any of the following actions without IBM's approval:
- take or omit to take any action that would cause any of our
representations and warranties in the merger agreement to become untrue in
any material respect or cause any condition to the completion of the
merger not to be satisfied,
- sell, lease, license, dispose of or encumber any of our assets, except for
sales of inventory or used equipment and related licenses in the ordinary
course of our business consistent with past practice,
- purchase, redeem or otherwise acquire any of our capital stock or other
securities,
- declare or pay any dividend or other distribution, except for dividends
paid by our wholly-owned subsidiaries,
- issue or sell any of our capital stock or rights to acquire our capital
stock, other than (a) issuances of stock options, representing up to
154,000 shares of Mylex common stock in the aggregate, in connection with
the hiring or promotion of employees, each in the ordinary course of our
business consistent with past practice, (b) the granting of rights arising
under our employee stock purchase plans or (c) issuances of common stock
upon the exercise of outstanding stock options and warrants and under the
employee stock purchase plans,
- amend our certificate of incorporation or by-laws,
- repurchase, prepay, incur or guarantee additional debt, except for
short-term borrowings in the ordinary course of our business consistent
with past practice, or make any loans, capital contributions or other
investments in any person other than our wholly-owned subsidiaries,
- enter into any contract material to us and our subsidiaries, taken as a
whole, other than those specified in the merger agreement,
- make or change any material tax election,
- modify, amend or terminate any contract, or waive, release or assign any
rights or claims under any contract, in each case in a manner materially
adverse to us and our subsidiaries, taken as a whole,
- split, combine or reclassify our outstanding common stock or change our
authorized capitalization,
- authorize material capital expenditures inconsistent with our capital
expenditure budget for fiscal 1999,
- pay, discharge, settle or satisfy any tax liabilities, other than taxes
paid under timely filed tax returns, or pay, discharge, settle or satisfy,
by payment of more than $100,000, any material
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claims, other liabilities or obligations, other than the payment,
discharge, settlement or satisfaction in the ordinary course of our
business consistent with past practice of claims, liabilities or
obligations (a) reserved against in our most recent audited financial
statements or incurred since the date of our most recent financial
statements in the ordinary course of our business consistent with past
practice or (b) as required by the terms of any applicable contract,
- waive, release or transfer any right of material value other than in the
ordinary course of our business consistent with past practice, or waive
any material benefits of, agree to modify in any adverse respect or fail
to enforce any confidentiality, standstill or similar agreement,
- acquire any business or material assets other than inventory, components
or raw materials in the ordinary course of our business consistent with
past practice,
- except as required by law or the terms of any contract or Mylex benefit
plan as in existence on the date of the merger agreement, and except as
authorized by the merger agreement, (a) pay any benefit, (b) grant any
awards under any benefit plan, (c) fund or in any other way secure the
payment of compensation or benefits or (d) accelerate the vesting or
payment of any compensation or benefit or
- form any subsidiary.
IBM has agreed, on behalf of it and its subsidiaries, to take no action that
would cause any of its representations or warranties in the merger agreement to
become untrue in any material respect or cause any condition to the completion
of the merger not to be satisfied.
NO SOLICITATION OF TRANSACTIONS
We have agreed not to, and not to permit or authorize any of our
subsidiaries or any of our or our subsidiaries' directors, officers or employees
or representatives to, solicit, initiate or encourage, or take any other action
to knowingly facilitate, any takeover proposal (as defined below) or participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate in any way with, any
takeover proposal. We may, however, prior to the date of the special meeting:
- provide information to anyone who has made an unsolicited superior
proposal (as defined below) pursuant to a customary confidentiality
agreement that contains terms no less favorable to us than the terms of
the confidentiality agreement between Mylex and IBM and
- participate in discussions or negotiations with anyone who has made an
unsolicited superior proposal regarding that proposal,
in each case only if the Mylex board of directors determines in good faith,
after consultation with outside counsel, that it is necessary to do so in order
to comply with its fiduciary duties to Mylex stockholders under applicable law.
In addition, we have agreed that neither the Mylex board of directors nor
any of its committees will:
- withdraw or modify, in a manner adverse to IBM, its approval of or
recommendation with respect to the merger agreement or publicly propose to
do so,
- approve or recommend any takeover proposal or publicly propose to do so or
- cause or agree to cause Mylex to enter into any letter of intent or other
agreement constituting or related to, or that is intended to or could
reasonably be expected to lead to, any takeover proposal.
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The Mylex board of directors may, however, terminate the merger agreement
prior to the date of the special meeting in response to an unsolicited superior
proposal if:
- it determines in good faith, after consultation with outside counsel, that
termination is required in order to comply with its fiduciary duties to
Mylex stockholders under applicable law,
- it delivers written notice to IBM, within the time required by the merger
agreement, advising IBM that it has received an unsolicited superior
proposal, including the terms and conditions of, and the identity of the
person making, the superior proposal, and that, subject to any action IBM
may take to match the superior proposal, it intends to accept the superior
proposal,
- prior to the termination, Mylex pays to IBM the $10 million termination
fee and
- simultaneously with the termination, Mylex enters into a definitive
agreement containing the terms of the superior proposal.
Nothing described above limits our ability to take actions to comply with
specified rules under the Securities Exchange Act of 1934 or make any disclosure
to Mylex stockholders if, in the good faith judgment of a majority of the
members of the Mylex board of directors, after consultation with outside
counsel, failure so to disclose would be inconsistent with applicable laws.
We have agreed to promptly notify IBM of any request for information or
other inquiry we receive that we reasonably believe could lead to a takeover
proposal or of any takeover proposal, and to keep IBM informed of all
developments relating to any such request, inquiry or takeover proposal.
The merger agreement defines the term "takeover proposal" to mean any
inquiry, proposal or offer that relates to or could reasonably be expected to
lead to:
- any direct or indirect acquisition of a business that constitutes 15% or
more of the combined revenue, operating income or assets of Mylex and its
subsidiaries, taken as a whole, or of 15% or more of the outstanding
shares of Mylex common stock or of any class of capital stock or other
equity or voting interests in any of Mylex's subsidiaries,
- any tender or exchange offer that, if successful, would result in any
person beneficially owning 15% or more of the voting power of the Mylex
common stock,
- any merger, consolidation, recapitalization, liquidation or similar
transaction involving Mylex or any of its subsidiaries or
- any other transaction the completion of which could reasonably be expected
to prevent or materially interfere with the completion of the merger or to
dilute in any material respect the benefits to IBM of the merger.
The merger agreement defines the term "superior proposal" to mean any good
faith, unsolicited proposal by a third party that would result in the third
party, or its stockholders, acquiring more than 50% of the voting power of
Mylex's common stock or all or substantially all of the combined assets of Mylex
and its subsidiaries
- for consideration in cash and/or securities that the Mylex board of
directors determines in its good faith judgment (after consultation with a
nationally recognized financial advisor) to have a higher value than the
consideration payable in the merger, and
- which proposal the Mylex board of directors determines in good faith to be
more favorable to Mylex stockholders than the merger.
In concluding that a proposal is a superior proposal, the Mylex board of
directors must consider any counterproposals that IBM may make in response to a
superior proposal or otherwise.
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EFFORTS TO COMPLETE THE MERGER
Upon the terms and subject to the conditions set forth in the merger
agreement, Mylex and IBM has each agreed to use its reasonable best efforts to
take, or cause to be taken, all actions necessary, proper or advisable to
complete the merger, including using its reasonable best efforts to accomplish
the following:
- satisfying the conditions to the completion of the merger and
- obtaining all necessary government and third party waivers, consents and
other approvals or authorizations and making all necessary governmental
registrations, declarations and filings.
Nothing described above or contained in any other provision of the merger
agreement requires Mylex or IBM to:
- agree or offer to divest or hold separate, or enter into any licensing or
similar arrangement with respect to, any assets or any portion of any
business of Mylex or IBM or
- litigate any proceeding that
- challenges or seeks to restrain the completion of the merger,
- seeks to prohibit or limit in any material respect the ownership or
operation by Mylex or IBM of a material portion of the business or
assets of Mylex or IBM, or to require Mylex or IBM to dispose of or
hold separate any material portion of the business or assets of Mylex
or IBM as a result of the merger or
- seeks to prohibit IBM from effectively controlling in any material
respect a substantial portion of the business or operations of Mylex.
BENEFIT PLANS
Following the completion of the merger, the surviving corporation will honor
all obligations under Mylex employment agreements and benefit plans in
accordance with their terms. The surviving corporation is not prohibited from
amending or terminating these agreements and benefit plans in accordance with
their terms and with applicable law or from terminating the employment of any
employee of Mylex.
We have amended our employee stock purchase plans in accordance with the
merger agreement as follows:
- we limited participation in the plans to those employees who were
participants on July 18, 1999,
- participants will not be able to increase their payroll deductions or
purchase elections from those in effect on July 18, 1999,
- no new offering periods under the plans will commence after July 27, 1999,
- one final purchase date using accumulated funds under the plans will occur
on the trading day immediately before the completion of the merger and
- after the final purchase occurs, the plans will terminate.
COMMON STOCK RIGHTS AGREEMENT
As required by the merger agreement, we amended our common stock rights
agreement with BankBoston, N.A. on July 23, 1999 to ensure that (a) the rights
agreement does not apply to IBM or its "affiliates" or "associates," as those
terms are defined in the rights agreement, (b) no "distribution
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<PAGE>
date" or "share acquisition date," as those terms are defined in the rights
agreement, has occurred or will occur and (c) all rights will expire immediately
before Mylex and IBM complete the merger.
CONDITIONS TO THE PARTIES' OBLIGATIONS TO COMPLETE THE MERGER
Mylex's and IBM's respective obligations to complete the merger are subject
to the satisfaction or waiver of the following conditions:
- adoption of the merger agreement by the holders of a majority of the
outstanding shares of Mylex common stock,
- termination or expiration of the waiting period, including any extensions,
under the Hart-Scott-Rodino Act and any other applicable competition,
merger control, antitrust or similar law,
- no law or ruling exists that prevents the completion of the merger,
- the representations and warranties of the other party are true and
correct, in all material respects, as of the date of the merger agreement
and as of the date on which the merger is completed, except that the
accuracy of representations and warranties that by their terms speak as of
a specified date will be determined as of that date,
- the other party has performed in all material respects all obligations
required to be performed by it at or prior to the date on which the merger
is completed and
- each party has received a certificate signed by specified officers of the
other party certifying to the satisfaction, by his or her company, of the
two conditions set forth immediately above.
ADDITIONAL CONDITIONS TO OBLIGATION OF IBM
IBM's obligation to complete the merger is subject to the satisfaction or
waiver of the following additional conditions:
- receipt of all governmental and third party waivers, consents and other
approvals and authorizations required in connection with the merger
agreement and
- no law or ruling, and no threatened or pending suit, action or proceeding,
exist that
- challenge or seek to restrain or prohibit the completion of the merger,
- seek to prohibit or limit in any material respect the ownership or
operation by Mylex or IBM of a material portion of the business or
assets of Mylex or IBM or to require Mylex or IBM to dispose of or hold
separate any material portion of the business or assets of Mylex or IBM
as a result of the merger or
- seek to prohibit IBM from effectively controlling in any material
respect a substantial portion of the business or operations of Mylex.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time:
1. by mutual consent of Mylex, IBM and S2 Acquisition Corp.,
2. by either Mylex or IBM if
- the merger is not completed by February 29, 2000,
- the holders of a majority of the outstanding shares of Mylex common
stock do not adopt the merger agreement at the special meeting or
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- any injunction, ruling or other legal restraint or prohibition
preventing the completion of the merger is in effect and has become
final and cannot be appealed,
3. by Mylex if
- IBM has breached in any material respect any of its representations,
warranties, covenants or other agreements, which breach or failure to
perform (a) would give rise to the failure of any of the last three
conditions set forth under "--Conditions to the parties' obligations to
complete the merger" and (b) is not cured, or is incapable of being
cured, within 15 days after notice from Mylex or
- before the special meeting
- in response to a superior proposal, the Mylex board of directors
determines in good faith, after consultation with outside counsel,
that termination is necessary in order to comply with its fiduciary
duties,
- Mylex gives IBM notice of its intention to accept a superior
proposal at least three business days before its acceptance of the
proposal and, after taking into account any counterproposal from
IBM in response to such proposal, such proposal continues to be a
superior proposal at the end of the three day period,
- prior to the termination, Mylex pays to IBM the $10 million
termination fee and
- simultaneously with the termination, Mylex enters into a definitive
agreement containing the terms of the superior proposal,
4. by IBM if
- Mylex has breached in any material respect any of its representations,
warranties, covenants or other agreements, which breach or failure to
perform (a) would give rise to the failure of any of the last three
conditions set forth under "--Conditions to the parties' obligations to
complete the merger" and (b) is not cured, or is incapable of being
cured, within 15 days after notice from IBM,
- IBM has received from Mylex a notice of Mylex's intention to accept a
superior proposal,
- the Mylex board of directors or any committee of the board fails to
reconfirm its initial recommendation to Mylex stockholders in favor of
the adoption of the merger agreement within ten days after a written
request from IBM to do so, which request IBM may make only after Mylex
receives a takeover proposal, or
- any law or ruling having any of the effects described in the second
condition under "--Additional conditions to the obligation of IBM" is
in effect and has become final and cannot be appealed.
TERMINATION FEES
Mylex has agreed to pay IBM a termination fee of $10 million if the merger
agreement is terminated under any of the following circumstances:
- before the special meeting
- a takeover proposal has been made known to Mylex or its stockholders or
any person has announced an intention to make a takeover proposal,
- IBM or Mylex then terminates the merger agreement for the first or
second reason described in paragraph 2 above under "--Termination" and
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- within 12 months of the termination Mylex enters into any letter of
intent or other agreement with respect to, or completes, any takeover
proposal, except that for purposes of this clause, the references to
15% in the definition of "takeover proposal" are deemed to be
references to 50%, and any references to Mylex's subsidiaries in the
same definition are disregarded,
- Mylex terminates the merger agreement for the second reason described in
paragraph 3 above under "--Termination" or
- IBM terminates the merger agreement for the second or third reason
described in paragraph 4 above under "--Termination".
AMENDMENT AND WAIVER
The merger agreement may be amended only by written agreement of the
parties. A party may waive its rights under the merger agreement only in
writing. Any amendment or waiver may be made at any time before the completion
of the merger. After the Mylex stockholders adopt the merger agreement, however,
no amendment or waiver that requires further approval of the Mylex stockholders
may be made without the further approval of the Mylex stockholders.
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SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table shows common stock ownership on August 9, 1999 by (i)
each person who, to our knowledge, beneficially owns more than 5% of Mylex's
common stock, (ii) our Chief Executive Officer, (iii) our other four most highly
compensated executive officers at the end of our last fiscal year whose salary
and bonuses exceeded $100,000 for that year and (iv) all of our directors and
executive officers as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS(1) SHARES(2) PERCENT(3)
- ------------------------------------------------------- ------------- ----------
<S> <C> <C>
The Crabbe Huson Group Inc............................. 3,590,200(4) 18.1%
121 S.W. Morrison, Suite 1400
Portland, OR 97204
Becker Capital Management, Inc......................... 1,757,300(5) 8.9%
1211 S.W. Fifth Ave., Suite 2185
Portland, OR 97204
Thomson Horstmann & Bryant Inc......................... 1,317,600(6) 6.6%
Park 80 West, Plaza Two
Saddle Brook, NJ 07663
Al Montross............................................ 713,675(7) 3.6%
Colleen Gray........................................... 87,790(8) *
KK Rao................................................. 89,314(9) *
Bal Singh.............................................. 55,654(10) *
Ten directors and executive officers as a group........ 2,252,456(11) 11.4%
</TABLE>
- ------------------------
* Less than 1%
(1) Other than for 5% beneficial owners, all addresses are at Mylex, 34551
Ardenwood Boulevard, Fremont, California 94555.
(2) Shares are held directly with sole voting and dispositive power except as
otherwise indicated. Shares issuable pursuant to outstanding stock options
that are exercisable or become exercisable within 60 days of the date of
this table are considered outstanding for the purpose of calculating the
percentage of common stock owned by each listed person, but not for the
purpose of calculating the percentage of common stock owned by any other
person.
(3) Based on 19,844,793 shares of Mylex common stock outstanding as of August
9, 1999.
(4) Based solely on information provided as of February 12, 1999 in a Schedule
13G filed by the stockholder.
(5) Based solely on information provided as of February 10, 1999 in a Schedule
13G filed by the stockholder.
(6) Based solely on information provided as of January 25, 1999 in a Schedule
13G filed by the stockholder.
(7) Includes 82,837 shares owned and options for 630,838 shares.
(8) Includes 8,243 shares owned and options for 79,547 shares.
(9) Options for 89,314 shares.
(10) Includes 1,596 shares and options for 54,058 shares.
(11) Includes 1,246,635 shares and options for 1,005,821 shares
39
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INDEPENDENT ACCOUNTANTS
Representatives of KPMG LLP, Mylex's independent accountants, are expected
to be present at the special meeting, where they will be available to respond to
appropriate questions and have the opportunity to make a statement if they so
desire.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC under
the Securities Exchange Act of 1934. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office 7 Chicago Regional Office
450 Fifth Street, N.W. World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, including Mylex, who file electronically with the SEC. The address of
that site is http://www.sec.gov. You can also inspect reports, proxy statements
and other information about us at the offices of the Nasdaq National Market,
1735 K Street, N.W., Washington, D.C. 20549.
The SEC allows us to "incorporate by reference" information into this
document. This means that Mylex and IBM can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that have
been previously filed with the SEC. They contain important information about
Mylex and its financial condition. Some of these filings have been amended by
later filings, which are also listed.
<TABLE>
<CAPTION>
MYLEX SEC FILINGS (FILE NO. 0-15627) PERIOD/AS OF DATE
- ------------------------------------ --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.......... Year ended December 26, 1998
Quarterly Reports on Form 10-Q...... Quarters ended March 27, 1999 and June 26, 1999
</TABLE>
We incorporate by reference additional documents that Mylex may file with
the SEC between the date of this document and the date of the special meeting.
These documents include periodic reports, including Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
You can obtain any of the documents incorporated by reference in this
document through Mylex or from the SEC through the SEC's web site at the address
provided above. Documents incorporated by reference are available from Mylex
without charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference in this document. You can obtain
documents
40
<PAGE>
incorporated by reference in this document by requesting them in writing or by
telephone at the following address:
Mylex Corporation
34551 Ardenwood Boulevard
Fremont, CA 94555
Attention: Chief Financial Officer
(510) 796-6100
If you would like to request documents, please do so by September 13, 1999
to receive them before the special meeting. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or Mylex that differs from, or adds to, the
information in this document or in our documents that are publicly filed with
the SEC. Therefore, if anyone does give you different or additional information,
you should not rely on it.
The information contained in this document speaks only as of its date unless
the information specifically indicates that another date applies.
41
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This proxy statement includes "forward-looking statements" within the
meaning of various provisions of the Securities Act of 1933 and the Exchange
Act. All statements, other than statements of historical facts, included in this
proxy statement that address activities, events or developments that Mylex
expects or anticipates will or may occur in the future, including such things as
business strategy, competitive strengths, references to future success and other
such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by Mylex in light of its experience and
its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual future results and developments will
conform with Mylex's expectations and predictions is subject to a number of
risks and uncertainties that could cause expected and actual results to differ
materially, including the significant considerations discussed in this proxy
statement; general economic, market or business conditions; the opportunities,
or lack thereof, that may be presented to and pursued by Mylex and its
subsidiaries; competitive actions by other companies in Mylex's industry;
changes in laws or regulations and other factors, many of which are beyond the
control of Mylex and its subsidiaries. Consequently, all of the forward-looking
statements made in this proxy statement are qualified by these cautionary
statements and there can be no assurance that the actual results or developments
anticipated by Mylex will be realized or, even if substantially realized, that
they will have the expected consequences to or effects on Mylex and its
subsidiaries or their business or operations.
The cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that may be issued by Mylex or persons acting on its behalf. Mylex
does not undertake any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
42
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
INTERNATIONAL BUSINESS MACHINES CORPORATION,
S2 ACQUISITION CORP.
AND
MYLEX CORPORATION
DATED AS OF JULY 27, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger.......................................................... A-1
SECTION 1.02. Closing............................................................................... A-1
SECTION 1.03. Effect of the Merger.................................................................. A-1
SECTION 1.04. Certificate of Incorporation and By-laws.............................................. A-1
SECTION 1.05. Directors............................................................................. A-2
SECTION 1.06. Officers.............................................................................. A-2
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock........................................................... A-2
SECTION 2.02. Exchange of Certificates.............................................................. A-3
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company......................................... A-4
SECTION 3.02. Representations and Warranties of Parent and Sub...................................... A-17
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business................................................................... A-18
SECTION 4.02. No Solicitation....................................................................... A-21
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement; Stockholders Meeting.............................. A-23
SECTION 5.02. Access to Information; Confidentiality................................................ A-23
SECTION 5.03. Reasonable Best Efforts; Notification................................................. A-24
SECTION 5.04. Stock Plans........................................................................... A-24
SECTION 5.05. Indemnification, Exculpation and Insurance............................................ A-26
SECTION 5.06. Fees and Expenses..................................................................... A-26
SECTION 5.07. Employee Matters...................................................................... A-27
SECTION 5.08. Public Announcements.................................................................. A-27
SECTION 5.09. Rights Agreement...................................................................... A-27
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation to Effect the Merger............................ A-28
SECTION 6.02. Conditions to Obligations of Parent and Sub........................................... A-28
SECTION 6.03. Conditions to Obligation of the Company............................................... A-29
SECTION 6.04. Frustration of Closing Conditions..................................................... A-29
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination........................................................................... A-29
SECTION 7.02. Effect of Termination................................................................. A-30
SECTION 7.03. Amendment............................................................................. A-30
SECTION 7.04. Extension; Waiver..................................................................... A-30
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties......................................... A-31
SECTION 8.02. Notices............................................................................... A-31
SECTION 8.03. Definitions........................................................................... A-31
SECTION 8.04. Interpretation........................................................................ A-32
SECTION 8.05. Counterparts.......................................................................... A-32
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries........................................ A-32
SECTION 8.07. Governing Law......................................................................... A-32
SECTION 8.08. Assignment............................................................................ A-32
SECTION 8.09. Enforcement........................................................................... A-32
</TABLE>
A-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of July 27, 1999 (this "AGREEMENT"),
by and among INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation
("PARENT"), S2 ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("SUB"), and MYLEX CORPORATION, a Delaware corporation (the
"COMPANY").
WHEREAS the Board of Directors of each of the Company and Sub deems it in
the best interests of their respective stockholders to consummate the merger
(the "MERGER"), on the terms and subject to the conditions set forth in this
Agreement, of Sub with and into the Company in which the Company would become a
wholly owned subsidiary of Parent, and such Boards of Directors have approved
this Agreement and declared its advisability (and, in the case of the Board of
Directors of the Company, recommended that this Agreement be adopted by the
Company's stockholders);
WHEREAS Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. EFFECTIVE TIME OF THE MERGER. As soon as practicable on or
after the Closing Date (as defined in Section 1.02), the parties shall (i) file
a certificate of merger (the "CERTIFICATE OF MERGER") in such form as is
required by, and executed and acknowledged in accordance with, the relevant
provisions of the General Corporation Law of the State of Delaware (the "DGCL")
and (ii) make all other filings or recordings required under the DGCL to effect
the Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State or at such subsequent
time as Parent and the Company shall agree and be specified in the Certificate
of Merger (the date and time the Merger becomes effective being the "EFFECTIVE
TIME").
SECTION 1.02. CLOSING. The closing of the Merger (the "CLOSING") will take
place at 11:00 a.m., New York time, on a date to be specified by the parties,
which shall be not later than the second business day after satisfaction or
waiver of the conditions set forth in Article VI that by their terms are not to
be satisfied or waived at the Closing (the "CLOSING DATE"), at the offices of
Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019, unless
another time, date or place is agreed to in writing by Parent and the Company.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, Sub shall be
merged with and into the Company, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION"). The Merger shall have the effects set forth in Section
259 of the DGCL.
SECTION 1.04. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The
Certificate of Incorporation of the Company shall be amended in the Merger to
read in its entirety as set forth on Exhibit A hereto and, as so amended, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
A-1
<PAGE>
SECTION 1.05. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.06. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. CONVERSION OF CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, par value $0.01 per share, of the Company (the "COMPANY
COMMON STOCK"), or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of common
stock of Sub shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) CANCELATION OF TREASURY STOCK AND PARENT-OWNED STOCK. All shares of
Company Common Stock that are owned by the Company, as treasury stock, Parent or
Sub immediately prior to the Effective Time shall automatically be canceled and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.01(b) and other than any
Dissenting Shares (as defined in Section 2.01(d)) unless the holder thereof
fails to perfect or otherwise loses such holder's rights under Section 262 of
the DGCL) shall be converted into the right to receive $12 in cash, without
interest (the "MERGER CONSIDERATION"). At the Effective Time all such shares
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist, and each holder of a certificate that immediately prior to the
Effective Time represented any such shares (a "CERTIFICATE") shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration. The right of any holder of any share of Company Common Stock to
receive the Merger Consideration shall be subject to and reduced by the amount
of any withholding that is required under applicable tax law.
(d) DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time held by a holder (if any) who shall not have voted
to adopt this Agreement or consented thereto in writing and who properly demands
appraisal for such shares in accordance with Section 262 of the DGCL (or any
successor provision) ("DISSENTING SHARES") shall not be converted into a right
to receive the Merger Consideration (but shall have the rights set forth in
Section 262 of the DGCL (or any successor provision)) unless such holder fails
to perfect or otherwise loses such holder's right to such payment or appraisal,
if any. If, after the Effective Time, such holder fails to perfect or loses any
such right to appraisal, each such share of such holder shall be treated as a
share of Company Common Stock that had been converted at the Effective Time into
the right to receive the Merger Consideration in accordance with Section
2.01(c). The Company shall give prompt notice to Parent of any demands received
by the Company for appraisal of shares of Company Common Stock, withdrawals of
such demands and any other instruments served pursuant to the DGCL received by
the Company, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands or agree to do or
commit to do any of the foregoing.
A-2
<PAGE>
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the
Effective Time, Parent shall designate a bank or trust company reasonably
acceptable to the Company to act as agent, on customary terms and conditions,
for the payment of the Merger Consideration upon surrender of Certificates (the
"PAYING AGENT"), and, from time to time after the Effective Time, Parent shall
make available, or cause the Surviving Corporation to make available, to the
Paying Agent funds in amounts and at the times necessary for the payment of the
Merger Consideration pursuant to Section 2.01(c) and paragraph (b) of this
Section 2.02 upon surrender of Certificates, it being understood that any and
all interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be paid to Parent.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a customary form of letter of transmittal that is consistent
with this Agreement (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates held by such person shall pass, only
upon proper delivery of the Certificates to the Paying Agent and shall be in a
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancelation to
the Paying Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly completed and validly executed,
and such other customary documents, consistent with this Agreement, as may
reasonably be required by the Paying Agent, the holder of such Certificate shall
be entitled to receive from the Paying Agent, on behalf of Parent, as promptly
as practicable in accordance with the customary procedures of the Paying Agent,
in exchange therefor the amount of cash to which the holder thereof is entitled
pursuant to Section 2.01(c), and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of shares that is not
registered in the stock transfer books of the Company, payment may be made 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 payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash paid
upon the surrender of a Certificate in accordance with the terms of this Article
II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock formerly represented by such
Certificate. At the close of business on the day on which the Effective Time
occurs the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Paying Agent for transfer or any other reason,
they shall be canceled and exchanged as provided in this Article II.
(d) NO LIABILITY. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) LOST 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 the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration with respect to the shares of Company Common Stock formerly
represented thereby pursuant to this Agreement.
A-3
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth on the disclosure schedule (with specific reference to the section of this
Agreement to which the information stated in such disclosure relates) delivered
by the Company to Parent prior to the execution of this Agreement (the "COMPANY
DISCLOSURE SCHEDULE"), the Company represents and warrants to Parent and Sub as
follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company
and its subsidiaries (as defined in Section 8.03) (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite corporate, company
or partnership power and authority to carry on its business as now being
conducted and (iii) is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or
the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, other than where the failure to be so
organized, existing, qualified or licensed or in good standing (except in
the case of clause (i) above with respect to the Company) individually or in
the aggregate could not reasonably be expected to have a material adverse
effect (as defined in Section 8.03) on the Company. The Company has
delivered to Parent complete and correct copies of its Certificate of
Incorporation and By-laws and the certificate of incorporation and by-laws
(or similar organizational documents) of each of its subsidiaries, in each
case as amended to the date hereof. The Company has made available to Parent
and its representatives true and complete copies of the minutes of all
meetings of the stockholders, the Board of Directors and each committee of
the Board of Directors of the Company and each of its subsidiaries held
since January 1, 1997.
(b) SUBSIDIARIES. Section 3.01(b) of the Company Disclosure Schedule
lists each subsidiary of the Company. All the outstanding shares of capital
stock or other equity or voting interests of each such subsidiary are owned
by the Company, by another wholly owned subsidiary of the Company or by the
Company and another wholly owned subsidiary of the Company, free and clear
of all pledges, claims, liens, charges, encumbrances and security interests
of any kind or nature whatsoever (collectively, "LIENS"), and are duly
authorized, validly issued, fully paid and nonassessable. Except for the
capital stock or other equity or voting interests of its subsidiaries, the
Company does not own, directly or indirectly, any capital stock or other
equity or voting interests in any corporation, partnership, joint venture,
association or other entity.
(c) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 120,000,000 shares of Company Common Stock. At the close of
business on June 26, 1999, (i) 19,719,896 shares of Company Common Stock
(excluding treasury shares) were issued and outstanding, (ii) 1,810,400
shares of Company Common Stock were held by the Company in its treasury,
(iii) no shares of Company Common Stock were reserved for issuance in
connection with the rights (the "RIGHTS") to purchase shares of Company
Common Stock issued pursuant to the Amended and Restated Rights Agreement
dated as of July 23, 1999 (the "RIGHTS AGREEMENT") between the Company and
BankBoston, N.A., (iv) warrants to acquire 400,000 shares of Company Common
Stock from the Company pursuant to the warrant agreements set forth on
Schedule 3.01(c) of the Company Disclosure Schedule (the "WARRANTS") were
outstanding and (v) options to acquire 4,752,685 shares of Company Common
Stock from the Company pursuant to the 1990 BusLogic Equity Incentive Plan,
the 1983 Incentive Stock Option Plan, as amended and restated, the 1993
Stock Option Plan and the 1998 Stock Option and Incentive Plan (such plans
and arrangements, collectively, the "COMPANY STOCK PLANS") were issued and
outstanding and 411,249 shares of Company Common Stock were reserved and
available for issuance pursuant to the 1995 Employee Stock Purchase Plan and
the 1998 Employee Stock Purchase Plan (such plans, collectively, the "STOCK
PURCHASE PLANS"). No shares of Company Common Stock are owned by any
subsidiary of
A-4
<PAGE>
the Company. The Company has delivered to Parent a complete and correct
list, as of the close of business on June 26, 1999, of all outstanding stock
options or other rights to purchase or receive Company Common Stock granted
under the Company Stock Plans (collectively, the "STOCK OPTIONS") and the
Warrants, the number of shares subject to each such Stock Option and
Warrant, the grant dates and exercise prices of each such Stock Option and
Warrant and the names of the holders thereof. At the Effective Time, each
Warrant shall no longer be exercisable for Company Common Stock, and the
holder thereof shall only be entitled to receive, upon exercise, an amount
in cash equal to the product of (x) the number of shares of Company Common
Stock issuable upon exercise of such Warrant immediately prior to the
Effective Time and (y) the Merger Consideration minus the Warrant Price (as
defined in the warrant agreements set forth on Schedule 3.01(c) of the
Company Disclosure Schedule). During the biweekly period ending July 18,
1999, the aggregate amount credited to the accounts of the participants in
the Stock Purchase Plans was $170,228 and in each payroll period thereafter
the aggregate amount credited to such accounts did not exceed such amount.
Except as set forth above, at the close of business on June 26, 1999, no
shares of capital stock or other voting securities of the Company, or
options, warrants or other rights to acquire any such stock or securities
were issued, reserved for issuance or outstanding. Since June 26, 1999 until
the date hereof, (x) there have been no issuances by the Company of shares
of capital stock or other voting securities of the Company other than
issuances of shares of Company Common Stock pursuant to the exercise of
Stock Options outstanding on such date as required by their terms as in
effect on the date hereof and (y) there have been no issuances by the
Company of options, warrants or other rights to acquire shares of capital
stock or other voting securities from the Company (other than (i) the
issuance of Stock Options representing in the aggregate 71,700 shares of
Company Common Stock, in the ordinary course of business consistent with
past practice and with an exercise price per share at least equal to the
market value of the Company Common Stock on the date of issuance (and with
other material terms no more favorable than (A) with respect to Stock
Options granted under the 1993 Stock Option Plan, the material terms of the
Stock Option agreements governing the grant of Stock Options under such
Company Stock Plan on or prior to June 26, 1999, and (B) with respect to
Stock Options granted under the 1998 Stock Option and Incentive Plan, the
material terms of the Stock Option agreements governing the grant of Stock
Options under such Company Stock Plan on or prior to June 26, 1999), to
employees in connection with the hiring or promotion of such employees or
(ii) for rights that may have arisen under the Stock Purchase Plans). The
Company has delivered to Parent a complete and correct list of all Stock
Options granted between June 26, 1999 and the date hereof, the number of
shares of Company Common Stock subject to each such Stock Option, the grant
dates and exercise prices of each such Stock Option and the names of the
holders thereof. All outstanding shares of capital stock of the Company are,
and all shares that may be issued pursuant to the Company Stock Plans, the
Warrants and the Stock Purchase Plans will be, when issued in accordance
with the terms thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company or any of it
subsidiaries, and no securities or other instruments or obligations of the
Company or any of its Subsidiaries the value of which is in any way based
upon or derived from any capital or voting stock of the Company, having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may
vote. Except as set forth above and except as expressly permitted under
Section 4.01(a), there are no securities, options, warrants, calls, rights,
contracts, commitments, agreements, instruments, arrangements,
understandings, obligations or undertakings of any kind to which the Company
or any of its subsidiaries is a party, or by which the Company or any of its
subsidiaries is bound, obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of, or securities
convertible into, or exchangeable or exercisable for, shares of capital
stock or other voting securities of, the Company or any of its subsidiaries
or obligating the
A-5
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Company or any of its subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, contract, commitment,
agreement, instrument, arrangement, understanding, obligation or
undertaking. There are not any outstanding contractual obligations of the
Company or any of its subsidiaries to (i) repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
subsidiaries or (ii) vote or dispose of any shares of the capital stock of
any of its subsidiaries. To the knowledge of the Company, at the date
hereof, there are no irrevocable proxies and no voting agreements with
respect to any shares of the capital stock or other voting securities of the
Company or any of its subsidiaries.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement, subject, in the
case of the Merger, to obtaining the Stockholder Approval (as defined in
Section 3.01(s)). The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement,
subject, in the case of the Merger, to obtaining the Stockholder Approval.
This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting the enforcement of
creditors' rights and by rules of law governing specific performance,
injunctive relief and other equitable remedies. The execution and delivery
of this Agreement and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement do not
and will not conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of, or result in, termination, cancelation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any Lien in or upon any of the properties or assets of the
Company or any of its subsidiaries under, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, any
provision of (i) the Certificate of Incorporation or By-laws of the Company
or the certificate of incorporation or by-laws (or similar organizational
documents) of any of its subsidiaries, (ii) any loan or credit agreement,
bond, debenture, note, mortgage, indenture, lease or other contract,
commitment, agreement, instrument, arrangement, understanding, obligation,
undertaking, permit, concession, franchise or license (each, a "CONTRACT")
to which the Company or any of its subsidiaries is a party or any of their
respective properties or assets is subject or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case, applicable to the Company or any of
its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate
could not reasonably be expected to (x) have a material adverse effect on
the Company, (y) impair in any material respect the ability of the Company
to perform its obligations under this Agreement or (z) prevent or materially
impede, interfere with, hinder or delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state or local, domestic or foreign, government or any court, administrative
agency or commission or other governmental or regulatory authority or
agency, domestic or foreign (a "GOVERNMENTAL ENTITY"), is required by or
with respect to the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement, except for (1) the filing of a premerger notification and report
form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT") or
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any other applicable competition, merger control, antitrust or similar law,
(2) the filing with the Securities and Exchange Commission (the "SEC") of a
proxy statement relating to the adoption of this Agreement by the Company's
stockholders (as amended or supplemented from time to time, the "PROXY
STATEMENT") and such reports under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (3) the
filing of the Certificate of Merger with the office of the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its subsidiaries
is qualified to do business, (4) any filings required under the rules and
regulations of the Nasdaq National Market and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made individually or in the aggregate
could not reasonably be expected to (x) have a material adverse effect on
the Company, (y) impair in any material respect the ability of the Company
to perform its obligations under this Agreement or (z) prevent or materially
impede, interfere with, hinder or delay the consummation of any of the
transactions contemplated by this Agreement.
(e) SEC DOCUMENTS. The Company has filed with the SEC, and has
heretofore made available to Parent true and complete copies of, all
reports, schedules, forms, statements and other documents required to be
filed with the SEC by the Company since December 31, 1996 (together with all
information incorporated therein by reference, the "SEC DOCUMENTS"). No
subsidiary of the Company is required to file any form, report or other
document with the SEC. At their respective dates, each of the SEC Documents
complied in all material respects with the requirements of the Securities
Act of 1933 (the "SECURITIES ACT") or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents at the time they were
filed contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements (including the related notes)
of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries at the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal and recurring year-end audit
adjustments and the absence of footnotes). Except as set forth in any SEC
Document filed and publicly available prior to the date hereof (a "FILED SEC
DOCUMENT"), the Company and its subsidiaries have no liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) that individually or in the aggregate could reasonably be
expected to have a material adverse effect on the Company.
(f) INFORMATION SUPPLIED. None of the information included or
incorporated by reference in the Proxy Statement will, at the date it is
first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 5.01) or at the time of any
amendment or supplement thereof, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent or
Sub specifically for inclusion or incorporation by reference in the Proxy
Statement. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
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(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the most
recent audited financial statements included in the Filed SEC Documents, and
except as expressly set forth in the Filed SEC Documents, the Company and
its subsidiaries have conducted their respective businesses only in the
ordinary course consistent with past practice, and there has not been (i)
any material adverse change (as defined in Section 8.03) with respect to the
Company, (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property) in respect of,
any of the Company's or any of its subsidiaries' capital stock, except for
dividends by a wholly owned subsidiary of the Company to its parent, (iii)
any split, combination or reclassification of any of the Company's or any of
its subsidiaries' capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock or other securities of the Company
or any of its subsidiaries, (iv) (x) any granting by the Company or any of
its subsidiaries of any increase in compensation or fringe benefits, except
for normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by the Company or any of its
subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, in each case to any current or
former director, officer, employee or consultant, (y) any granting by the
Company or any of its subsidiaries to any current or former director,
officer or employee of any increase in severance or termination pay or (z)
any entry by the Company or any of its subsidiaries into, or any amendment
of, (A) any currently effective employment, severance, termination or
indemnification agreement or consulting agreement (other than in the
ordinary course of business consistent with past practice), with any current
or former director, officer, employee or consultant or (B) any agreement
with any current or former director, officer, employee or consultant the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature contemplated by this Agreement, (v) any damage, destruction or loss,
whether or not covered by insurance, that individually or in the aggregate
could reasonably be expected to have a material adverse effect on the
Company, (vi) any change in financial or tax accounting methods, principles
or practices by the Company, except insofar as may have been required by a
change in GAAP or applicable law, (vii) any tax election that individually
or in the aggregate could reasonably be expected to have a material adverse
effect on the Company or any of its tax attributes or any settlement or
compromise of any material income tax liability, (viii) any revaluation by
the Company of any of its material assets or (ix) any licensing agreement or
any agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 3.01(q)).
(h) LITIGATION. There is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries that individually or in
the aggregate could reasonably be expected to have a material adverse effect
on the Company, nor is there any statute, law, ordinance, rule, regulation,
judgment, order or decree, of any Governmental Entity or arbitrator
outstanding against, or, to the knowledge of the Company, investigation by
any Governmental Entity involving, the Company or any of its subsidiaries
that individually or in the aggregate could reasonably be expected to have a
material adverse effect on the Company.
(i) CONTRACTS. Except for Contracts filed as exhibits to the Filed SEC
Documents, none of the Company or any of its subsidiaries is a party to
(except for any Contracts not in effect) or bound by, and none of their
properties or assets are bound by or subject to, any written or oral:
(i) Contract not made in the ordinary course of business entered
into prior to the date of this Agreement;
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(ii) Contract pursuant to which the Company or any of its
subsidiaries has agreed not to compete with any person or to engage in
any activity or business, or pursuant to which any benefit is required to
be given or lost as a result of so competing or engaging;
(iii) Contract pursuant to which the Company or any of its
subsidiaries is restricted in any material respect in the development,
marketing or distribution of their respective products or services;
(iv) Contract with (A) any affiliate of the Company or any of its
subsidiaries or (B) any current or former director or officer of the
Company or any of its subsidiaries or of any affiliate of the Company or
any of its subsidiaries or any of the 25 most highly compensated
employees of the Company and its subsidiaries, taken as a whole, or (C)
any affiliate of any such person (other than (v) contracts on
arm's-length terms with companies whose common stock is publicly traded,
(w) employment agreements referred to in Section 3.01(k), (x) offer
letters providing solely for "at will" employment, (y) invention
assignment and confidentiality agreements relating to the assignment of
inventions to the Company or any of its subsidiaries not involving the
payment of money and (z) Benefit Plans referred to in Section 3.01(n));
(v) license or franchise granted by the Company or any of its
subsidiaries pursuant to which the Company or any of its subsidiaries has
agreed to refrain from granting license or franchise rights to any other
person;
(vi) Contract under which the Company or any of its subsidiaries has
(i) incurred any indebtedness that is currently owing or (ii) given any
guarantee in respect of indebtedness, in each case having an aggregate
principal amount in excess of $5,000,000;
(vii) material Contract that requires consent, approval or waiver of
or notice to a third party in the event of or with respect to the Merger,
including in order to avoid termination of or a loss of material benefit
under any such Contract;
(viii) Contract providing for payments of royalties to third parties;
(ix) Contract granting a third party any license to Intellectual
Property that is not limited to the internal use of such third party;
(x) Contract providing confidential treatment by the Company or any
of its subsidiaries of third party information other than non-disclosure
agreements and provisions entered into by the Company in the ordinary
course of business consistent with past practice;
(xi) Contract granting the other party to such Contract or a third
party "most favored nation" status that, following the Merger, would in
any way apply to Parent or any of its subsidiaries (other than the
Company and its subsidiaries and their products or services (other than
any similar products or services produced or offered by Parent or its
subsidiaries (other than the Company and its subsidiaries)));
(xii) Contract that guarantees or warrants that any of the products
or services of the Company are fit for any particular purpose or that
expressly guarantees or warrants that the products and/or services of the
Company or any of its subsidiaries or licensed by the Company or any of
its subsidiaries will be Year 2000 Ready (as defined in Section 3.01(m));
and
(xiii) Contract which (i) has aggregate future sums due from the
Company or any of its subsidiaries in excess of $200,000 and is not
terminable by the Company or any such subsidiary for a cost of less than
$100,000 or (ii) is otherwise material to the business of the Company and
its subsidiaries, taken as a whole, as presently conducted or as proposed
to be conducted.
Each Contract of the Company and its subsidiaries is in full force and
effect and is a legal, valid and binding agreement of the Company or such
subsidiary and, to the knowledge of the Company
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or such subsidiary, of each other party thereto, enforceable against the
Company or any of its subsidiaries, as the case may be, and, to the
knowledge of the Company, against the other party or parties thereto, in
each case, in accordance with its terms, except for such failures to be in
full force and effect or enforceable that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company. Each of the Company and its subsidiaries has performed or is
performing all material obligations required to be performed by it under its
Contracts and is not (with or without notice or lapse of time or both) in
breach or default in any material respect thereunder, and, to the knowledge
of the Company or such subsidiary, no other party to any of its Contracts is
(with or without notice or lapse of time or both) in breach or default in
any material respect thereunder except, in each case, for such breaches that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company.
(j) COMPLIANCE WITH LAWS. The Company and its subsidiaries are, and
since December 31, 1998 have been, in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Entity applicable to their businesses or operations, except for
instances of possible noncompliance that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company, impair in any material respect the ability of the Company to
perform its obligations under this Agreement or prevent or materially
impede, interfere with, hinder or delay the consummation of any of the
transactions contemplated by this Agreement. None of the Company or any of
its subsidiaries has received, since December 31, 1996, a notice or other
written communication alleging a possible violation of any statute, law,
ordinance, rule, regulation, judgment, order or decree of any Governmental
Entity applicable to its businesses or operations, except for such
violations that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company. The Company and
its subsidiaries have in effect all Federal, state and local, domestic and
foreign, governmental consents, approvals, orders, authorizations,
certificates, filings, notices, permits, concessions, franchises, licenses
and rights (collectively "PERMITS") necessary for them to own, lease or
operate their properties and assets and to carry on their businesses as now
conducted and there has occurred no violation of, or default under, any such
Permit, except for the lack of Permits and for violations of, or defaults
under, Permits, which lack of Permits, violations or defaults individually
or in the aggregate could not reasonably be expected to have a material
adverse effect on the Company. The Merger, in and of itself, could not
reasonably be expected to cause the revocation or cancelation of any such
Permit, which revocation or cancelation could reasonably be expected to have
a material adverse effect on the Company.
(k) ABSENCE OF CHANGES IN BENEFIT PLANS; EMPLOYMENT AGREEMENTS; LABOR
RELATIONS. Except as disclosed in the Filed SEC Documents, since the date
of the most recent audited financial statements included in the Filed SEC
Documents, none of the Company or any of its subsidiaries has terminated,
adopted, amended or agreed to amend in any material respect any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
appreciation, restricted stock, stock option, phantom stock, performance,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other material plan, arrangement or understanding providing
benefits to any of its current or former directors, officers or employees
(collectively, "BENEFIT PLANS"). Except as disclosed in the Filed SEC
Documents, there exist no (i) employment, severance, termination or
indemnification agreements or material consulting agreements between the
Company or any of its subsidiaries, on the one hand, and any current or
former director, officer, employee or consultant of the Company or any of
its subsidiaries, on the other hand, or (ii) agreements between the Company
or any of its subsidiaries, on the one hand, and any current or former
director, officer, employee or consultant of the Company or any of its
subsidiaries, on the other hand, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
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transaction involving the Company of the nature contemplated by this
Agreement. There are no collective bargaining or other labor union
agreements to which the Company or any of its subsidiaries is a party or by
which it is bound. Since December 31, 1996, neither the Company nor any of
its subsidiaries has encountered any labor union organizing activity, or had
any actual or threatened employee strikes, work stoppages, slowdowns or
lockouts.
(l) ENVIRONMENTAL MATTERS. Except to the extent that the inaccuracy of
any of the following could not reasonably be expected to have a material
adverse effect on the Company: (i) the Company and each of its subsidiaries
are in compliance with all applicable Environmental Laws (as defined below);
(ii) the Company and each of its subsidiaries have all Permits required
under applicable Environmental Laws and are in compliance with their
respective requirements; (iii) there are no pending, or to the knowledge of
the Company or any of its subsidiaries, threatened claims, proceedings or
investigations against the Company or any of its subsidiaries alleging any
noncompliance with, or liability under, Environmental Law; (iv) neither the
Company nor any of its subsidiaries have received notice that the Company or
any of its subsidiaries is subject to potential liability under any
Environmental Law, including potential liability for the costs of
investigating or remediating contaminated property pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, or
analogous state law; and (v) (A) there have been no Releases (as defined
below) or threatened Releases of Hazardous Substances (as defined below) on,
at, under, from or about any properties currently owned, leased or operated
by the Company or any of its subsidiaries, (B) to the knowledge of the
Company, there have been no Releases or threatened Releases of Hazardous
Substances on, at, under, from or about any properties formerly owned,
leased or operated by the Company or any of its subsidiaries, or any of
their respective predecessors, and (C) neither the Company nor any of its
subsidiaries has Released, disposed of or arranged for the disposal of
Hazardous Substances or, to the knowledge of the Company, Released any
Hazardous Substances at any off-site location. For purposes of this
Agreement, the term "ENVIRONMENTAL LAWS" shall mean any applicable Federal,
state or local, domestic or foreign, statutes, laws, regulations,
ordinances, rules, codes, enforceable requirements, agreements, orders,
decrees, judgments or injunctions issued, promulgated or entered into by any
Governmental Entity relating to protection of the environment, natural
resources or human health and safety, or to the use, management, disposal,
Release or threatened Release of Hazardous Substances. For purposes of this
Agreement, the term "HAZARDOUS SUBSTANCES" shall mean any explosive or
radioactive substances or materials, any toxic or hazardous substances or
materials, including asbestos or asbestos-containing materials,
polychlorinated biphenyls, petroleum and petroleum products, and any other
substances or materials defined as, or included in the definition of,
"HAZARDOUS SUBSTANCES", "HAZARDOUS WASTES", "HAZARDOUS MATERIALS" or "TOXIC
SUBSTANCES", or is otherwise regulated, under any Environmental Law. For
purposes of this Agreement, the term "RELEASE" shall mean any spilling,
leaking, pumping, pouring, discharging, emitting, emptying, injecting,
leaching, dumping, disposing or migrating into the environment.
(m) YEAR 2000 COMPLIANCE. All computer and other systems, software,
hardware and other products (other than motherboards) (i) licensed or sold,
or offered for licensing or sale (including products under development), by
the Company or any of its subsidiaries since January 1, 1996 under any
trademark, service mark, brand name, certification mark, assumed name or
trade name owned or licensed for use by the Company or any of its
subsidiaries, whether produced by the Company or any of its subsidiaries or
supplied thereto by any third party, (ii) produced by any third party that
are licensed to the customers of the Company or any of its subsidiaries by
the Company or any of its subsidiaries since January 1, 1996 under a license
that does not explicitly disclaim liability with respect to failures of such
products to be Year 2000 Ready and (iii) produced by the Company or any of
its subsidiaries since January 1, 1996, in each case have been written,
manufactured and tested to be Year 2000 Ready. All internal data processing
systems, equipment
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and facilities used by the Company or any of its subsidiaries, including all
information technology applications running in the Company or any of its
subsidiaries and all tools used to develop the Company's or any of its
subsidiaries' products, are Year 2000 Ready. For purposes of this Agreement,
"YEAR 2000 READY" shall mean, with respect to any system, product, equipment
or facility, that such system, product, equipment or facility is capable of
correctly processing, providing, receiving and manipulating date data within
and between the twentieth and twenty-first centuries, and its operation and
functionality has not been adversely affected and will not be adversely
affected in any material respect as a result of the advent of the Year 2000.
(n) ERISA COMPLIANCE. (i) Section 3.01(n)(i) of the Company Disclosure
Schedule contains a list of all "EMPLOYEE WELFARE BENEFIT PLANS" (as defined
in Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), "EMPLOYEE PENSION BENEFIT PLANS" (as defined in Section
3(2) of ERISA) and all other Benefit Plans maintained or contributed to by
the Company or any of its subsidiaries or any person or entity that,
together with the Company or any of its subsidiaries, is treated as a single
employer (a "COMMONLY CONTROLLED ENTITY") under Section 414(b), (c), (m) or
(o) of the Internal Revenue Code of 1986, as amended (the "CODE") for the
benefit of any current or former directors, officers or employees of the
Company or any of its subsidiaries. The Company has provided to Parent true,
complete and correct copies of (1) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (2) the most recent annual
report on Form 5500 required to be filed with the Internal Revenue Service
(the "IRS") with respect to each Benefit Plan (if any such report was
required), (3) the most recent summary plan description for each Benefit
Plan for which such summary plan description is required, (4) each trust
agreement and group annuity contract relating to any Benefit Plan and (5)
the most recent IRS determination letter for each Benefit Plan intended to
be tax-qualified under Section 401(a) of the Code. Each Benefit Plan has
been administered in accordance with its terms, except where the failure so
to be administered, individually or in the aggregate, could not reasonably
be expected to have a material adverse effect on the Company. The Company
and its subsidiaries and all the Benefit Plans are in compliance with all
applicable provisions of law, including ERISA and the Code, except for
instances of possible noncompliance that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on the
Company.
(ii) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to maintain or contribute to,
or has any actual or contingent liability under, any Benefit Plan that is
subject to Title IV of ERISA.
(iii) With respect to any Benefit Plan that is an employee welfare
benefit plan (each, a "WELFARE PLAN"), there are no understandings,
agreements or undertakings, written or oral, that would prevent any such
plan (including any such plan covering retirees or other former employees)
from being amended or terminated without material liability to the Company
or any of its subsidiaries on or at any time after the Effective Time. No
Welfare Plan provides benefits after termination of employment except where
the cost thereof is borne entirely by the former employee (or his eligible
dependents or beneficiaries) or as required by Section 4980B(f) of the Code.
(iv) No current or former director, officer or employee of the Company
or any of its subsidiaries will be entitled to any additional compensation
or benefits or any acceleration of the time of payment or vesting of any
compensation or benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement or any benefits under any
Benefits Plan the value of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(v) The deduction of any amount payable pursuant to the terms of the
Benefit Plans or any other employment contracts or arrangements will not be
subject to disallowance under Section 162(m) of the Code.
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(o) TAXES. (i) Each of the Company and its subsidiaries and each
Company Affiliated Group (as defined in clause (ix) below) has timely filed
all Federal, state and local, domestic and foreign, income and franchise tax
(as defined in clause (ix) below) returns and reports and all other tax
returns and reports required to be filed by it and all such returns and
reports are complete and correct. Each of the Company and its subsidiaries
and each Company Affiliated Group has timely paid all taxes due with respect
to the taxable periods covered by such returns and reports and all other
material taxes, and the most recent financial statements contained in the
Company Filed SEC Documents reflect an adequate reserve for all taxes
payable by the Company and its subsidiaries for all taxable periods and
portions thereof through the date of such financial statements.
(ii) No Federal, state or local, domestic or foreign, income or
franchise tax return or report or any other material tax return or report of
the Company or any of its subsidiaries or any Company Affiliated Group with
respect to taxable years after 1992 is or has ever been under audit or
examination by any taxing authority, and no written or, to the knowledge of
the Company, unwritten notice of such an audit or examination has been
received by the Company or any of its subsidiaries. There is no deficiency,
refund litigation, proposed adjustment or matter in controversy with respect
to any taxes due and owing by the Company, any of its subsidiaries or any
Company Affiliated Group. Each deficiency of the Company, any of its
subsidiaries or any Company Affiliated Group resulting from any audit or
examination relating to taxes by any taxing authority or any concluded
litigation related to taxes has been timely paid. No issues relating to
taxes were raised by the relevant taxing authority during any presently
pending audit or examination, and no issues relating to taxes were raised by
the relevant taxing authority in any completed audit or examination that
could reasonably be expected to recur in a later taxable period. The
relevant statute of limitations is closed with respect to the Federal tax
returns of the Company and its subsidiaries for all years through 1995.
(iii) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any taxes and no power of attorney with respect to any taxes
has been executed or filed with any taxing authority.
(iv) No Liens for taxes exist with respect to any assets or properties
of the Company or any of its subsidiaries, except for statutory Liens for
taxes not yet due.
(v) None of the Company or any of its subsidiaries is a party to or
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any
advance pricing agreement, closing agreement or other agreement relating to
taxes with any taxing authority).
(vi) None of the Company or any of its subsidiaries will be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method
of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481
of the Code or comparable provisions of state or local tax law, domestic or
foreign, or for any other reason.
(vii) No amount or other entitlement that could be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any director, officer or
employee of the Company or any of its affiliates who is a "DISQUALIFIED
INDIVIDUAL" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Benefit Plan or other compensation arrangement currently
in effect would be characterized as an "EXCESS PARACHUTE PAYMENT" or a
"PARACHUTE PAYMENT" (as such terms are defined in Section 280G(b)(1) of the
Code).
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(viii) The Company and its subsidiaries have complied with all applicable
statutes, laws, ordinances, rules and regulations relating to the payment
and withholding of taxes (including withholding of taxes pursuant to
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under
any Federal, state or local laws, domestic and foreign) and have, within the
time and the manner prescribed by law, withheld from and paid over to the
proper governmental authorities all amounts required to be so withheld and
paid over under applicable laws.
(ix) Neither the Company nor any of its subsidiaries has constituted
either a "DISTRIBUTING CORPORATION" or a "CONTROLLED CORPORATION" (within
the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement or (ii) in a distribution that
could otherwise constitute part of a "PLAN" or "SERIES OF RELATED
TRANSACTIONS" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(x) As used in this Agreement, "TAXES" shall include all Federal, state
and local, domestic and foreign, income, franchise, property, sales, excise,
employment, payroll, social security, value-added, ad valorem, transfer,
withholding and other taxes, including taxes based on or measured by gross
receipts, profits, sales, use or occupation, tariffs, levies, impositions,
assessments or governmental charges of any nature whatsoever imposed by any
Governmental Entity or taxing authority whether domestic or foreign,
including any interest penalties or additions with respect thereto, and any
obligations under any agreements or arrangements with any other person with
respect to such amounts. As used in this Agreement, "COMPANY AFFILIATED
GROUP" shall mean each affiliated, combined, consolidated or unitary group
of which the Company or any of its subsidiaries is or has been a member.
(p) TITLE TO PROPERTIES. (i) The Company and each of its subsidiaries
has good and marketable title to, or valid leasehold interests in, all of
its material properties and assets except for such as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances that individually or in the
aggregate could not reasonably be expected to have a material adverse effect
on the Company. All such material assets and properties, other than assets
and properties in which the Company or any of its subsidiaries has a
leasehold interest, are free and clear of all Liens, except for Liens that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company.
(ii) Each of the Company and its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full
force and effect, except for such noncompliance or failures to be in full
force and effect that individually or in the aggregate could not reasonably
be expected to have a material adverse effect on the Company. The Company
and its subsidiaries enjoy peaceful and undisturbed possession under all
such material leases, except for failures to do so that individually or in
the aggregate could not reasonably be expected to have a material adverse
effect on the Company.
(q) INTELLECTUAL PROPERTY. (i) Section 3.01(q) of the Company
Disclosure Schedule lists all material patents, patent applications,
trademarks, tradenames, service marks and registered copyrights and
applications therefor, if any, owned by or licensed to the Company or any of
its subsidiaries as of the date of this Agreement. The Company has made
available to Parent true and correct copies of all material license
agreements relating to Intellectual Property to which the Company or any of
its subsidiaries is a party as of the date of this Agreement.
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(ii) Except to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy) could not reasonably
be expected to have a material adverse effect on the Company:
(A) the Company and each of its subsidiaries owns, or is licensed or
otherwise has the right to use (in each case, free and clear of any
Liens), all Intellectual Property used in or necessary for the conduct of
its business as currently conducted;
(B) to the knowledge of the Company, none of the Company or any of
its subsidiaries is infringing on or otherwise violating the rights of
any person with regard to any Intellectual Property owned by, licensed to
or otherwise used by the Company or any of its subsidiaries;
(C) there is no suit, claim, action, investigation or proceeding
pending or, to the knowledge of the Company, threatened with respect to
any possible infringement by the Company or any of its subsidiaries on or
other violation of the rights of any person with regard to any
Intellectual Property owned by, licensed to or otherwise used by the
Company or any of its subsidiaries;
(D) to the knowledge of the Company, no person is infringing on or
otherwise violating any right of the Company or any of its subsidiaries
with respect to any Intellectual Property owned by, licensed to and/or
otherwise used by the Company or any of its subsidiaries;
(E) to the knowledge of the Company, none of the former or current
members of management or key personnel of the Company or any of its
subsidiaries, including all former and current employees, agents,
consultants and contractors who have contributed to or participated in
the conception and development of Intellectual Property of the Company or
any of its subsidiaries, have a valid claim against the Company or any of
its subsidiaries in connection with the involvement of such persons in
the conception and development of any computer software or other
Intellectual Property of the Company or any of its subsidiaries, and, to
the knowledge of the Company, no such claim has been asserted or
threatened;
(F) the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to any right, license or
encumbrance relating to, Intellectual Property owned by the Company or
any of its subsidiaries or with respect to which the Company or any of
its subsidiaries now has or has had any agreement with any third party,
or any right of termination, cancelation or acceleration of any material
Intellectual Property right or obligation set forth in any agreement to
which the Company or any of its subsidiaries is a party, or the loss or
encumbrance of any Intellectual Property or benefit related thereto, or
result in the creation of any Lien in or upon any Intellectual Property
or right, other than under certain contracts and agreements, the material
ones of which are set forth on Section 3.01(q) of the Company Disclosure
Schedule, that provide for their termination upon a change of control of
the Company;
(G) except in the ordinary course of business consistent with past
practice, no licenses or rights have been granted to distribute the
source code of, or to use the source code to create Derivative Works (as
defined below) of, any product currently marketed by, commercially
available from or under development by the Company or any of its
subsidiaries for which the Company possesses the source code; and
(H) to the knowledge of the Company, none of its rights or those of
any of its subsidiaries to any of their Intellectual Property have been
lost or are in jeopardy of being lost through failure to act by the
Company or any of its subsidiaries.
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As used in this Agreement, "DERIVATIVE WORK" shall mean a work that is
based upon one or more preexisting works, such as a revision, enhancement,
modification, abridgement, condensation, expansion or any other form in
which such preexisting works may be recast, transformed or adapted, and
which, if prepared without authorization of the owner of the copyright in
such preexisting work, would constitute a copyright infringement. For
purposes hereof, a Derivative Work shall also include any compilation that
incorporates such a preexisting work as well as translation from one human
language to another and from one type of code to another.
(iii) As used in this Agreement, "INTELLECTUAL PROPERTY" shall mean
trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction
to register, the foregoing, including any extension, modification or renewal
of any such registration or application; inventions, discoveries and ideas,
whether patented, patentable or not in any jurisdiction; computer programs
and software (including source code, object code and data), know-how and any
other technology; trade secrets and confidential information and rights in
any jurisdiction to limit the use or disclosure thereof by any person;
writings and other works, whether copyrighted, copyrightable or not in any
jurisdiction; registration or applications for registration of copyrights in
any jurisdiction, and any renewals or extensions thereof; any intellectual
property or proprietary rights similar to any of the foregoing; licenses,
immunities, covenants not to sue and the like relating to any of the
foregoing; and any claims or causes of action arising out of or related to
any infringement, misuse or misappropriation of any of the foregoing.
(r) BOARD APPROVAL; STATE TAKEOVER STATUTES. The Board of Directors of
the Company, by resolutions duly adopted at a meeting duly called and held
and not subsequently rescinded or modified in any way (the "BOARD
APPROVAL"), has duly (i) declared that this Agreement, the Merger and the
other transactions contemplated hereby are advisable and in the best
interests of the Company and its stockholders, (ii) approved this Agreement
and the transactions contemplated hereby and (iii) recommended that the
stockholders of the Company adopt this Agreement. The Board Approval
constitutes approval of this Agreement, the Merger and the other
transactions contemplated hereby for purposes of Section 203 of the DGCL and
represents all the action necessary to ensure that the restrictions on
"BUSINESS COMBINATIONS" (as defined in Section 203 of the DGCL) set forth in
such Section 203 do not apply to Parent or any of its affiliates in
connection with this Agreement, the Merger and the other transactions
contemplated hereby. To the knowledge of the Company, no other state
takeover or similar statute or regulation is applicable to this Agreement or
the transactions contemplated hereby.
(s) VOTING REQUIREMENTS. The affirmative vote at the Stockholders
Meeting or any adjournment or postponement thereof of the holders of a
majority of the outstanding shares of Company Common Stock in favor of
adopting this Agreement (the "STOCKHOLDER APPROVAL") is the only vote of the
holders of any class or series of the Company's capital stock necessary to
adopt or approve this Agreement or the consummation of the transactions
contemplated hereby.
(t) BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person, other than Broadview
International LLC, the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission, or the reimbursement of expenses, in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has delivered to Parent
true and complete copies of all agreements under which any such fees or
expenses are payable and all indemnification and other agreements related to
the engagement of the persons to whom such fees are payable. The fees and
expenses of any accountant, broker, financial advisor, consultant, legal
counsel or other person retained by the Company in connection with this
Agreement or the transactions contemplated hereby incurred or to be incurred
by the
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Company in connection with this Agreement and the transactions contemplated
by this Agreement will not exceed the fees and expenses set forth in Section
3.01(t) of the Company Disclosure Schedule.
(u) OPINION OF FINANCIAL ADVISOR. The Company has received the written
opinion of Broadview International LLC, in customary form to the effect
that, at the date hereof, the consideration to be received in the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, a copy of which opinion has been delivered to
Parent.
(v) RIGHTS AGREEMENT. In connection with this Agreement and the
transactions contemplated hereby, the Company has amended the Rights
Agreement to ensure that (i) the Rights Agreement and the Rights are and
will be inapplicable to Parent and its "AFFILIATES" and "ASSOCIATES" (in
each case, as defined in the Rights Agreement); (ii) neither Parent nor any
of its "AFFILIATES" or "ASSOCIATES" (in each case, as defined in the Rights
Agreement) are or will be deemed to be an Acquiring Person (as defined in
the Rights Agreement); (iii) neither a Distribution Date nor a Shares
Acquisition Date (each as defined in the Rights Agreement) has occurred or
will occur and the Rights have not and will not become separable,
distributable, unredeemable or exercisable; and (iv) the Rights will expire
immediately prior to the Effective Time.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and
Sub represent and warrant to the Company as follows:
(a) ORGANIZATION. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has all requisite corporate
power and authority to carry on its business as now being conducted.
(b) AUTHORITY; NONCONTRAVENTION. Parent and Sub have the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub and no other corporate proceedings on the part of
Parent or Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by Parent and Sub, as applicable, and constitutes a
valid and binding obligation of Parent and Sub, as applicable, enforceable
against Parent and Sub, as applicable, in accordance with its terms. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement do not and will not conflict with, or result in
any violation or breach of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of, or result in, termination,
cancelation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent under, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, any
provision of (i) the certificate of incorporation or by-laws of Parent or
similar organizational documents of any subsidiary of Parent, (ii) any
Contract applicable to Parent or Sub or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any (A) statute, law, ordinance, rule
or regulation or (B) judgment, order or decree, in each case, applicable to
Parent or Sub or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not
impair in any material respect the ability of each of Parent and Sub to
perform its obligations under this Agreement or prevent or materially
impede, interfere with, hinder or delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by
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or with respect to Parent or Sub in connection with the execution and
delivery of this Agreement by Parent and Sub or the consummation by Parent
and Sub of the transactions contemplated by this Agreement, except for (1)
the filing of a premerger notification and report form under the HSR Act or
any other applicable competition, merger control, antitrust or similar law,
(2) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business
and (3) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained
or made individually or in the aggregate would not impair in any material
respect the ability of Parent or Sub to perform its obligations under this
Agreement or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(c) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Proxy Statement will (except to the extent revised or
superseded by amendments or supplements contemplated hereby), at the date
the Proxy Statement is first mailed to the Company's stockholders or at the
time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(d) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, and Sub has
engaged in no business other than in connection with the transactions
contemplated by this Agreement.
(e) CAPITAL RESOURCES. Parent has sufficient cash or access to cash to
pay the aggregate Merger Consideration.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY THE
COMPANY. During the period from the date of this Agreement to the Effective
Time, except as consented to in writing by Parent or as specifically
contemplated by this Agreement, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and use their reasonable best efforts to comply
with all applicable laws, rules and regulations and, to the extent consistent
therewith, use their reasonable best efforts to preserve their assets and
technology and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them. Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, except as consented to in
writing by Parent or as specifically contemplated by this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock except for dividends by a direct or indirect wholly owned
subsidiary of the Company to its parent, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any shares of
capital stock or any other securities of the Company or its subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or exchangeable for, or any options, warrants, calls or rights to
acquire, any such shares, voting securities or convertible securities (other
than
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(x) the issuance of Stock Options representing in the aggregate up to
154,000 shares of Company Common Stock during the term of this Agreement, in
the ordinary course of business consistent with past practice and with an
exercise price per share at least equal to the market value of the Company
Common Stock on the date of issuance (and with other material terms no more
favorable than (A) with respect to Stock Options granted under the 1993
Stock Option Plan, the material terms of the Stock Option agreements
governing the grant of Stock Options under such Company Stock Plan on or
prior to June 26, 1999, and (B) with respect to Stock Options granted under
the 1998 Stock Option and Incentive Plan, the material terms of the Stock
Option agreements governing the grant of Stock Options under such Company
Stock Plan on or prior to June 26, 1999), to any employee of the Company
(other than directors and officers of the Company) in connection with the
hiring or promotion of such employee, (y) the granting of rights that may
arise under the Stock Purchase Plans, as the Stock Purchase Plans are in
effect on the date hereof (except to the extent provided in Section
5.07(b)), or (z) the issuance of shares of Company Common Stock (A) upon the
exercise of Stock Options outstanding on the date of this Agreement and in
accordance with their present terms or issued as permitted by this clause
(ii), (B) upon the exercise of Warrants in accordance with their terms in
effect on the date hereof or (C) pursuant to the Stock Purchase Plans, as
the Stock Purchase Plans are in effect on the date hereof (except to the
extent provided in Section 5.07(b)));
(iii) amend its certificate of incorporation or by-laws (or similar
organizational documents);
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by purchasing
all of or a substantial equity interest in, or by any other manner, any
business or any corporation, partnership, joint venture, association or
other entity or division thereof or (y) any material assets other than
inventory, components or raw materials in the ordinary course of business
consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its material properties or assets
(including any shares of capital stock, voting securities or other rights,
instruments or securities), except sales of inventory or used equipment and
related licenses in the ordinary course of business consistent with past
practice;
(vi) (x) repurchase, prepay or incur any indebtedness or guarantee any
indebtedness of another person or issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice or (y) make any loans, advances or capital contributions
to, or investments in, any other person, other than the Company or any
direct or indirect wholly owned subsidiary of the Company;
(vii) incur or commit to any material capital expenditures, or any
obligations or liabilities in connection therewith, in any manner
inconsistent with the Company's current capital budget, a true and complete
copy of which (including all back-up materials) has been provided to Parent
prior to the date hereof;
(viii) (x) pay, discharge, settle or satisfy any tax liabilities, except
as permitted by Section 4.01(b), or pay, discharge, settle or satisfy, by
payment of more than $100,000, any material claims (including claims of
stockholders), other liabilities or obligations (whether absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice of claims, liabilities or obligations (A) reflected or
reserved against in the most recent audited financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents (for
amounts not in excess of such
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reserves) or incurred since the date of such financial statements in the
ordinary course of business consistent with past practice or (B) as required
by the terms of any Contract giving rise to any such claim, liability or
obligation, (y) waive, release, grant or transfer any right of material
value other than in the ordinary course of business consistent with past
practice, or (z) waive any material benefits of, or agree to modify in any
adverse respect, or fail to enforce, any confidentiality, standstill or
similar agreement to which the Company or any of its subsidiaries is a
party;
(ix) modify, amend or terminate any Contract to which the Company or
such subsidiary is a party, including any arrangements involving material
Intellectual Property, or waive, release or assign any rights or claims
thereunder, in each case in a manner materially adverse to the Company and
its subsidiaries, taken as a whole;
(x) enter into any Contract material to the Company and its
subsidiaries, taken as a whole, not otherwise prohibited by any other
provision of this Agreement, including any arrangements involving material
Intellectual Property;
(xi) except as required to comply with applicable law or any Contract or
Benefit Plan as in existence on the date hereof or except as otherwise
specifically contemplated by this Agreement, (A) pay any benefit not
provided for under any Benefit Plan, (B) grant any awards under any Benefit
Plan (including the grant of stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock or the
removal of existing restrictions in any Contract or Benefit Plan or awards
made thereunder), (C) take any action to fund or in any other way secure the
payment of compensation or benefits under any Contract or Benefit Plan or
(D) take any action to accelerate the vesting or payment of any compensation
or benefit under any Benefit Plan;
(xii) form any subsidiary of the Company;
(xiii) take any action that would or could reasonably be expected to
result in (A) any representation and warranty of the Company set forth in
this Agreement that is qualified as to materiality or material adverse
effect becoming untrue (as so qualified), (B) any such representation and
warranty that is not so qualified becoming untrue in any material respect or
(C) any condition to the Merger set forth in Article VI not being satisfied;
or
(xiv) authorize any of, or commit, resolve or agree to take any of, the
foregoing prohibited actions.
(b) CERTAIN TAX MATTERS. During the period from the date of this Agreement
to the Effective Time, (i) the Company and each of its subsidiaries shall timely
file all Federal, state and local, domestic and foreign, income and franchise
tax returns and reports and all other material tax returns and reports
("POST-SIGNING RETURNS") required to be filed by each such entity (after taking
into account any extensions); (ii) the Company and each of its subsidiaries will
timely pay all taxes due and payable in respect of such Post-Signing Returns
that are so filed; (iii) the Company will accrue a reserve in its books and
records and financial statements in accordance with past practice for all taxes
payable by the Company or any of its subsidiaries for which no Post-Signing
Return is due prior to the Effective Time; (iv) the Company and each of its
subsidiaries will promptly notify Parent of any suit, claim, action,
investigation, proceeding or audit (collectively, "ACTIONS") pending against or
with respect to the Company or any of its subsidiaries in respect of any tax
where there is a reasonable possibility of a determination or decision that
could reasonably be expected to have a material adverse effect on the Company's
or any of its subsidiaries' tax liabilities or tax attributes and will not
settle or compromise any such Action without Parent's consent; and (v) none of
the Company or any of its subsidiaries will make or change any material tax
election without Parent's consent, which consent shall not be unreasonably
withheld or delayed.
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(c) ADVICE OF CHANGES; FILINGS. The Company and each of its subsidiaries
shall (i) confer on a regular and frequent basis with Parent to report on
operational matters and other matters reasonably requested by Parent and (ii)
promptly advise Parent orally and in writing of any material adverse change or
material adverse effect on or with respect to the Company. The Company and
Parent shall each promptly provide the other copies of all filings made by such
party with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby, other than the portions of such filings that
include confidential information not directly related to the transactions
contemplated by this Agreement.
SECTION 4.02. NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, or authorize or permit any director, officer
or employee of the Company or any of its subsidiaries or any investment banker,
attorney, accountant or other advisor or representative of the Company or any of
its subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage,
or take any other action knowingly to facilitate, any inquiries or the making of
any proposal that constitutes or could reasonably be expected to lead to a
Takeover Proposal (as defined below) or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way with,
any Takeover Proposal; PROVIDED, HOWEVER, that if, at any time prior to
obtaining the Stockholder Approval, the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Company and its representatives may, in
response to a Superior Proposal (as defined in Section 4.02(b)) that was
unsolicited and that did not otherwise result from a breach of this Section
4.02(a), and subject to compliance with Section 4.02(c), (x) furnish information
with respect to the Company and its subsidiaries to any person making such
Superior Proposal (and its representatives) pursuant to a customary
confidentiality agreement (which confidentiality agreement contains terms that
are equivalent to, and in no respect less favorable to the Company than, the
terms of the Confidentiality Agreement dated July 12, 1999, between Parent and
the Company (as it may be amended from time to time, the "CONFIDENTIALITY
AGREEMENT")) and (y) participate in discussions or negotiations with the person
making such Superior Proposal (and its representatives) regarding such Superior
Proposal.
For purposes of this Agreement, "TAKEOVER PROPOSAL" means any inquiry,
proposal or offer from any person relating to, or that could reasonably be
expected to lead to, (i) any direct or indirect acquisition or purchase of a
business that constitutes 15% or more of the total revenue, operating income or
assets of the Company and its subsidiaries, taken as a whole, or 15% or more of
the outstanding shares of Company Common Stock or of any class of capital stock
or other equity or voting interests in any of its subsidiaries, (ii) any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of the voting power of Company Common Stock,
(iii) any merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution, joint venture or similar transaction
involving the Company or any of its subsidiaries, or (iv) any other transaction
the consummation of which could reasonably be expected to prevent or materially
impede, interfere with, hinder or delay the consummation of the Merger or to
dilute in any material respect the benefits to Parent of the Merger, other than
the transactions contemplated by this Agreement.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent or Sub, the adoption, approval or recommendation by
such Board of Directors or any such committee of this Agreement or the Merger,
(ii) adopt, approve or recommend, or publicly propose to adopt, approve or
recommend, any Takeover Proposal or (iii) cause or agree to cause the Company to
enter into any letter of intent, memorandum of understanding, agreement in
principle, acquisition agreement, merger agreement, joint venture agreement,
partnership agreement or other agreement (each, an "ACQUISITION
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AGREEMENT") constituting or related to, or which is intended to or could
reasonably be expected to lead to, any Takeover Proposal (other than a
confidentiality agreement referred to in Section 4.02(a) entered into under the
circumstances referred to in such Section 4.02(a)). Notwithstanding the
foregoing, if, at any time prior to obtaining the Stockholder Approval, the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Board
of Directors of the Company may, in response to a Superior Proposal that was
unsolicited and that did not otherwise result from a breach of Section 4.02(a),
cause the Company to terminate this Agreement if, and only if, the Company shall
concurrently with such termination enter into a definitive Acquisition Agreement
containing the terms of a Superior Proposal; PROVIDED, HOWEVER, that the Company
shall not terminate this Agreement pursuant to this Section 4.02(b), and any
purported termination pursuant to this Section 4.02(b) shall be void and of no
force or effect, unless the Company shall have complied with all the provisions
of this Section 4.02, including the notification provisions in this Section
4.02, and with all applicable requirements of Section 5.06(b), including the
payment of the Termination Fee (as defined in Section 5.06(b)) prior to such
termination; and PROVIDED FURTHER, HOWEVER, that the Company shall not exercise
its right to terminate this Agreement pursuant to this Section 4.02(b) until
after the third business day following Parent's receipt of written notice (a
"NOTICE OF SUPERIOR PROPOSAL") advising Parent that the Board of Directors of
the Company has received a Superior Proposal and that such Board of Directors
will, subject to any action taken by Parent pursuant to this sentence, cause the
Company to accept such Superior Proposal, specifying the material terms and
conditions of the Superior Proposal and identifying the person making such
Superior Proposal (it being understood and agreed that any amendment to the
price or any other material term of a Superior Proposal shall require an
additional Notice of Superior Proposal and an additional two business day
period).
For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any bona fide
proposal not solicited by or on behalf of the Company or any of its subsidiaries
made by a third party which would result in such third party (or in the case of
a direct merger between such third party and the Company, the stockholders of
such third party) acquiring, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, share exchange, business
combination, share purchase, asset purchase, recapitalization, liquidation,
dissolution, joint venture or similar transaction, more than 50% of the voting
power of the Company Common Stock or all or substantially all the assets of the
Company and its subsidiaries, taken as a whole, for consideration consisting of
cash and/or securities that the Board of Directors of the Company determines in
its good faith judgment (after consultation with a financial advisor of
nationally recognized reputation) to have a higher value than the consideration
payable in the Merger and which proposal is determined in good faith by the
Board of Directors of the Company to be more favorable to the Company's
stockholders than the Merger, in each case taking into account any changes to
the terms of this Agreement proposed by Parent in response to such Superior
Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.02, the Company promptly shall advise Parent
orally and in writing of any request for information that the Company reasonably
believes could lead to a Takeover Proposal or of any Takeover Proposal, or any
inquiry the Company reasonably believes could lead to any Takeover Proposal, the
terms and conditions of such request, Takeover Proposal or inquiry, including
any subsequent amendment or other modification to such terms and conditions, and
the identity of the person making any such request, Takeover Proposal or
inquiry. The Company will keep Parent informed in all material respects of the
status and details (including material amendments or proposed amendments) of any
such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.02 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
(ii) making any disclosure to the Company's
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stockholders if, in the good faith judgment of a majority of the members of the
Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with applicable laws; provided that
none of the Company nor its Board of Directors nor any committee thereof shall
withdraw or modify, or publicly propose to withdraw or modify, its position with
respect to this Agreement or the Merger or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE PROXY STATEMENT; STOCKHOLDERS
MEETING. (a) As promptly as practicable following the date of this Agreement,
the Company shall prepare and file with the SEC the Proxy Statement and the
Company shall use its reasonable best efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable following the date of this Agreement. Parent shall furnish to the
Company all information concerning itself as may be reasonably requested in
connection with the preparation, filing and distribution of the Proxy Statement.
The Company shall promptly notify Parent upon the receipt of any comments from
the SEC or its staff or any request from the SEC or its staff for amendments or
supplements to the Proxy Statement and shall provide Parent with copies of all
correspondence between the Company and its representatives, on the one hand, and
the SEC and its staff, on the other hand. Notwithstanding anything to the
contrary stated above, prior to filing or mailing the Proxy Statement (or any
amendment or supplement thereto) or responding to any comments of the SEC with
respect thereto, the Company (i) shall provide Parent an opportunity to review,
comment on and approve such document or response, (ii) shall include in such
document or response all comments reasonably proposed by Parent and (iii) shall
not file or mail such document or respond to the SEC prior to receiving Parent's
approval, which approval shall not be unreasonably withheld or delayed.
(b) The Company shall, as promptly as practicable following the date of this
Agreement, establish a record date (which will be as promptly as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "STOCKHOLDERS MEETING") for the
purpose of obtaining the Stockholder Approval. The Company shall, through its
Board of Directors, recommend to its stockholders that they adopt this
Agreement, and shall include such recommendation in the Proxy Statement. Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to this Section 5.01(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
or any other person of any Takeover Proposal.
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall,
and shall cause each of its subsidiaries to, afford to Parent, and to Parent's
officers, employees, investment bankers, attorneys, accountants and other
advisors and representatives, reasonable access during normal business hours
during the period prior to the Effective Time or the termination of this
Agreement to all their respective properties, books, contracts, commitments,
directors, officers, attorneys, accountants, auditors (and, to the extent within
the Company's control, former auditors), other advisors and representatives and
records and, during such period, the Company shall, and shall cause each of its
subsidiaries to, make available to Parent (a) a copy of each report, schedule,
form, statement and other document filed or received by it during such period
pursuant to the requirements of Federal, state, local or foreign laws and (b)
all other information concerning its business, properties and personnel as
Parent may reasonably request (including the work papers of KPMG LLC). Except as
required by law, Parent will hold, and will direct its officers, employees,
investment bankers, attorneys, accountants and other advisors and
representatives to hold, any and all information received from the Company,
directly or indirectly, in confidence in accordance with the Confidentiality
Agreement.
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SECTION 5.03. REASONABLE BEST EFFORTS; NOTIFICATION. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions, that are necessary, proper or advisable to consummate and make
effective the Merger and the other transactions contemplated by this Agreement,
including using its reasonable best efforts to accomplish the following: (i) the
taking of all reasonable acts necessary to cause the conditions precedent set
forth in Article VI to be satisfied; (ii) the obtaining of all necessary actions
or nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any); and (iii) the obtaining of all necessary
consents, approvals or waivers from third parties. In connection with and
without limiting the foregoing, the Company and its Board of Directors shall, if
any state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Merger or any other transaction contemplated
hereby, use their reasonable best efforts to ensure that the Merger and the
other transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated by this Agreement, and otherwise to
minimize the effect of such statute or regulation on this Agreement, the Merger
and the other transactions contemplated hereby. Notwithstanding the foregoing or
any other provision of this Agreement to the contrary, in no event shall any
party hereto be obligated to (A) agree to, or proffer to, divest or hold
separate, or enter into any licensing or similar arrangement with respect to,
any assets (whether tangible or intangible) or any portion of any business of
Parent, the Company or any of their respective subsidiaries or (B) litigate any
suit, claim, action, investigation or proceeding, whether judicial or
administrative, (1) challenging or seeking to restrain or prohibit the
consummation of the Merger; (2) seeking to prohibit or limit in any material
respect the ownership or operation by the Company, Parent or any of their
respective affiliates of a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries,
taken as a whole, or to require any such person to dispose of or hold separate
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Merger; or (3) seeking to prohibit Parent or any of
its affiliates from effectively controlling in any material respect a
substantial portion of the business or operations of the Company or its
subsidiaries.
(b) The Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate
such that the condition set forth in Section 6.02(a) would not be satisfied;
PROVIDED, HOWEVER, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to the Company of any representation or
warranty made by it or Sub contained in this Agreement becoming untrue or
inaccurate such that the condition set forth in Section 6.03(a) would not be
satisfied; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(d) Without limiting the generality of the foregoing, the Company shall give
Parent the opportunity to participate at its expense in the defense of any
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement.
SECTION 5.04. STOCK PLANS. (a) As soon as practicable following the date
of this Agreement, the Board of Directors of the Company (or, if appropriate,
any committee administering the Company Stock Plans) shall adopt such
resolutions or take such other actions (if any) as may be required to effect the
following:
(i) adjust the terms of all outstanding Stock Options (other than
Non-Employee Options (as defined below)) granted under the Company Stock
Plans, whether vested or unvested, as necessary
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to provide that, at the Effective Time, each such Stock Option outstanding
immediately prior to the Effective Time shall be converted into an option to
acquire, on the same terms and conditions as were applicable under such
Stock Option (including with respect to vesting), the number of shares of
Parent common stock, par value $0.50 per share ("PARENT COMMON STOCK")
(rounded down to the nearest whole share), determined by multiplying the
number of shares of Company Common Stock subject to such Stock Option by a
fraction (the "OPTION EXCHANGE RATIO"), the numerator of which is the Merger
Consideration and the denominator of which is the average closing price of
Parent Common Stock on the New York Stock Exchange Composite Transactions
Tape on the ten trading days immediately preceding the date on which the
Effective Time occurs at an exercise price per share of Parent Common Stock
equal to (1) the per share exercise price for the shares of Company Common
Stock otherwise purchasable pursuant to such Stock Option divided by (2) the
Option Exchange Ratio (each, as so adjusted, an "ADJUSTED OPTION"), PROVIDED
that such exercise price shall be rounded up to the nearest whole cent;
(ii) adjust the terms of all outstanding Stock Options granted under the
Company Stock Plans and held by current or former non-employee directors of
the Company ("NON-EMPLOYEE OPTIONS"), whether vested or unvested, as
necessary to provide that, at the Effective Time, each Non-Employee Option
outstanding immediately prior to the Effective Time shall be canceled and
converted into the right to receive an amount of cash equal to (1) the
product of (x) the number of shares of Company Common Stock subject to such
Non-Employee Option and (y) the Merger Consideration, minus (2) the product
of (x) the number of shares of Company Common Stock subject to such
Non-Employee Option and (y) the per share exercise price of such
Non-Employee Option; and
(iii) make such other changes to the Company Stock Plans as Parent and
the Company may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any Stock Options that
are "INCENTIVE STOCK OPTIONS" as defined in Section 422 of the Code shall be and
are intended to be effected in a manner which is consistent with Section 424(a)
of the Code.
(c) At the Effective Time, by virtue of the Merger and without the need of
any further corporate action, Parent shall assume the Company Stock Plans, with
the result that all obligations of the Company under the Company Stock Plans,
including with respect to Stock Options outstanding at the Effective Time, shall
be obligations of Parent following the Effective Time.
(d) Prior to the Effective Time, Parent shall prepare and file with the SEC
a registration statement on Form S-8 (or another appropriate form) registering a
number of shares of Parent Common Stock equal to the number of shares subject to
the Adjusted Options. Such registration statement shall be kept effective (and
the current status of the prospectus or prospectuses required thereby shall be
maintained) as long as any Adjusted Options may remain outstanding.
(e) As soon as practicable after the Effective Time, Parent shall deliver to
the holders of Stock Options (other than Non-Employee Options) appropriate
notices setting forth such holders' rights pursuant to the respective Company
Stock Plans and the agreements evidencing the grants of such Stock Options and
that such Stock Options and agreements shall be assumed by Parent and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 5.04 after giving effect to the Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by delivering a properly executed
notice of exercise to Parent, together with the consideration therefor and the
Federal withholding tax information, if any, required in accordance with the
related Company Stock Plan.
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(g) Except as otherwise contemplated by this Section 5.04 and except to the
extent required under the respective terms of the Stock Options or Company Stock
Plans, all restrictions or limitations on transfer with respect to Stock Options
awarded under the Company Stock Plans or any other plan, program or arrangement
of the Company, to the extent that such restrictions or limitations shall not
have already lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by Parent as set
forth above.
SECTION 5.05. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a) Parent and
Sub agree that all rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time (and rights
for advancement of expenses) now existing in favor of the current or former
directors or officers of the Company and its subsidiaries as provided in their
respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification or other agreements of the
Company as in effect on the date hereof shall be assumed by the Surviving
Corporation in the Merger, without further action, at the Effective Time and
shall survive the Merger and shall continue in full force and effect in
accordance with their terms.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all its properties and assets to
any person, then, and in each such case, Parent shall cause proper provision to
be made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain in effect
the Company's current directors' and officers' liability insurance covering each
person currently covered by the Company's directors' and officers' liability
insurance policy for acts or omissions occurring prior to the Effective Time on
terms with respect to such coverage and amounts no less favorable than those of
such policy in effect on the date hereof; PROVIDED that Parent may substitute
therefor policies of a reputable insurance company the material terms of which,
including coverage and amount, are no less favorable to such directors and
officers than the insurance coverage otherwise required under this Section
5.05(c); PROVIDED, HOWEVER, that in no event shall Parent be required to pay
aggregate premiums for insurance under this Section 5.05(c) in excess of 150% of
the amount of the aggregate premiums paid by the Company in 1998 on an
annualized basis for such purpose (which premiums for the two year period ending
June 28, 2000 are hereby represented and warranted by the Company to be
$365,000), PROVIDED that Parent shall nevertheless be obligated to provide such
coverage as may be obtained for such 150% amount.
(d) The provisions of this Section 5.05 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.06. FEES AND EXPENSES. (a) All fees and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated hereby shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.
(b) In the event that (i) (A) a Takeover Proposal shall have been made known
to the Company or has been made directly to its stockholders or any person has
announced an intention (whether or not conditional) to make a Takeover Proposal
or a Takeover Proposal otherwise becomes known to the stockholders of the
Company, (B) thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 7.01(b)(i) (but only if the Stockholders Meeting has
not been held by the date that is five business days prior to the date of such
termination) or 7.01(b)(iii) and (C) within 12 months after such termination,
the Company or any of its subsidiaries enters into any Acquisition Agreement
with respect to, or consummates, any Takeover Proposal (solely for purposes of
this
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Section 5.06(b)(i)(C), the term "TAKEOVER PROPOSAL" shall have the meaning set
forth in Section 4.02(a) except that (I) all references to 15% shall be deemed
references to 50% and (II) clause (iv) of such definition and the reference in
such definition to capital stock or other voting or equity interests of the
subsidiaries of the Company shall be disregarded), (ii) this Agreement is
terminated by the Company pursuant to Section 4.02(b) or (iii) this Agreement is
terminated by Parent pursuant to Section 7.01(c), then the Company shall pay
Parent a fee equal to $10.0 million (the "TERMINATION FEE") by wire transfer of
same day funds (1) in the case of a termination pursuant to Section 4.02(b),
prior to such termination, (2) in the case of a termination pursuant to Section
7.01(c), within two days after such termination and (3) in the case of a payment
as a result of any event referred to in clause (i)(C) of this Section 5.06(b),
within two days after the first to occur of such events. The Company
acknowledges that the agreements contained in this Section 5.06(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay the amounts due pursuant to
this Section 5.06(b), and, in order to obtain such payment, Parent commences a
suit that results in a judgment against the Company for the amounts set forth in
this Section 5.06(b), the Company shall pay to Parent its reasonable costs and
expenses (including attorneys' fees and expenses) in connection with such suit
and any appeal relating thereto, together with interest on the amounts set forth
in this Section 5.06(b) at the prime rate of Citibank, N.A. in effect on the
date such payment was required to be made.
SECTION 5.07. EMPLOYEE MATTERS. (a) Following the Effective Time, the
Surviving Corporation shall honor, or cause to be honored, all obligations under
employment agreements and Benefit Plans of the Company in accordance with the
terms thereof. Nothing herein shall be construed to prohibit the Surviving
Corporation from amending or terminating such agreements and Benefit Plans in
accordance with the terms thereof and with applicable law or from terminating
the employment of any employee of the Company or its subsidiaries at any time
following the Closing.
(b) The Company shall amend the Stock Purchase Plans on the date hereof to
provide that (i) participation in the Stock Purchase Plans shall be limited to
those employees who were participants on July 18, 1999, (ii) such participants
may not increase their payroll deductions or purchase elections from those in
effect on July 18, 1999, (iii) no offering periods shall be commenced after the
date hereof, (iv) an additional exercise date shall be set by the Board of
Directors of the Company, which additional exercise date shall be the trading
day immediately prior to the day on which the Effective Time shall occur (the
"FINAL EXERCISE DATE") and (v) immediately following the purchase of Company
Common Stock on the Final Exercise Date, the Stock Purchase Plans shall
terminate.
(c) The Company shall, effective prior to the Effective Time, terminate the
employment of the individuals set forth on Schedule 5.07(c) of the Company
Disclosure Schedule.
SECTION 5.08. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and
the Company, on the other hand, will, to the extent reasonably practicable,
consult with each other before issuing, and give each other a reasonable
opportunity to review and comment upon, any press release or other public
statements with respect to this Agreement, the Merger and the other transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system. The parties agree that the initial press release to be issued
with respect to the transactions contemplated by this Agreement shall be in the
form heretofore agreed to by the parties.
SECTION 5.09. RIGHTS AGREEMENT. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
3.01(v)) reasonably requested in writing by Parent in order to render the Rights
inapplicable to this Agreement, the Merger and the other transactions
contemplated hereby to the extent provided herein. Except as provided above and
in
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Section 3.01(v) with respect to this Agreement, the Merger and the other
transactions contemplated hereby, the Board of Directors of the Company shall
not, without the written consent of Parent (a) amend the Rights Agreement or (b)
take any action with respect to, or make any determination under, the Rights
Agreement, including a redemption of the rights or any action to facilitate a
Takeover Proposal.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Stockholder Approval shall have been
obtained.
(b) ANTITRUST. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act or any other applicable
competition, merger control, antitrust or similar law shall have been
terminated or shall have expired.
(c) NO INJUNCTIONS OR LEGAL RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other order or decree issued
by any court of competent jurisdiction or other legal restraint or
prohibition (collectively, "LEGAL RESTRAINTS") which has the effect of
preventing the consummation of the Merger shall be in effect.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained herein that are qualified as to materiality shall
be true and correct, and the representations and warranties of the Company
contained herein that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of
the Closing Date with the same effect as though made as of the Closing Date
except that the accuracy of representations and warranties that by their
terms speak as of a specified date will be determined as of such date.
Parent shall have received a certificate signed on behalf of the Company by
the chief executive officer and chief financial officer of the Company to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.
(c) NO LITIGATION. There shall not be threatened or pending any suit,
action or proceeding brought by any Governmental Entity or any other third
party: (i) challenging or seeking to restrain or prohibit the consummation
of the Merger; or (ii) seeking to prohibit or limit in any material respect
the ownership or operation by the Company, Parent or any of their respective
affiliates of a material portion of the business or assets of the Company
and its subsidiaries, taken as a whole, or Parent and its subsidiaries,
taken as a whole, or to require any such person to dispose of or hold
separate any material portion of the business or assets of the Company and
its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as
a whole, as a result of the Merger; or (iii) seeking to prohibit Parent or
any of its affiliates from effectively controlling in any material respect a
substantial portion of the business or operations of the Company or its
subsidiaries.
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(d) LEGAL RESTRAINT. No Legal Restraint that could reasonably be
expected to result, directly or indirectly, in any of the effects referred
to in clauses (i) through (iii) of paragraph (c) of this Section 6.02 shall
be in effect.
(e) CONSENTS. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that Parent or the Company shall
have obtained (i) all material consents, approvals, authorizations,
qualifications and orders of all Governmental Entities legally required to
effect the transactions contemplated by this Agreement and (ii) all other
consents, approvals, authorizations, qualifications and orders of
Governmental Entities or third parties required in connection with this
Agreement and the transactions contemplated by this Agreement, except, in
the case of this clause (ii), for those the failure of which to be obtained
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company.
SECTION 6.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Sub contained herein that are qualified as to materiality
shall be true and correct, and the representations and warranties of Parent
and Sub contained herein that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and
as of the Closing Date with the same effect as though made as of the Closing
Date except that the accuracy of representations and warranties that by
their terms speak as of a specified date will be determined as of such date.
The Company shall have received a certificate signed on behalf of Parent by
an authorized signatory of Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
an authorized signatory of Parent to such effect.
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable best efforts to consummate the
Merger and the other transactions contemplated by this Agreement, as required by
and subject to Section 5.03.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or (subject to the provisions hereof) after the Stockholder
Approval has been obtained:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by February 29,
2000 for any reason; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 7.01(b)(i) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(ii) if any Legal Restraint having the effect set forth in Section
6.01(c) shall be in effect and shall have become final and nonappealable;
or
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(iii) if the Stockholder Approval shall not have been obtained at the
Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof or by written consent; or
(c) by Parent if the Company shall have delivered to Parent a notice of
Superior Proposal pursuant to Section 4.02 or if the Board of Directors of
the Company or any committee thereof shall have failed to reconfirm its
recommendation referred to in Section 5.01(b) within ten business days after
a written request to do so, PROVIDED that such request is made following the
making of a Takeover Proposal with respect to the Company;
(d) by Parent (i) if the Company shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(A) would give rise to the failure of a condition set forth in Section
6.02(a) or 6.02(b), and (B) has not been or is incapable of being cured by
the Company within 15 business days after its receipt of written notice
thereof from Parent; or (ii) if any Legal Restraint having any of the
effects referred to in clauses (i) through (iii) of Section 6.02(c) shall be
in effect and shall have become final and nonappealable;
(e) by the Company, if Parent shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(i) would give rise to the failure of a condition set forth in Section
6.03(a) or 6.03(b), and (ii) has not been or is incapable of being cured by
Parent within 15 business days after its receipt of written notice thereof
from the Company; or
(f) by the Company, in accordance with, and subject to the terms and
conditions of, Section 4.02(b).
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(t), the last sentence of Section 5.02, Section 5.06,
this Section 7.02 and Article VIII and except to the extent that such
termination results from a material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties
hereto at any time, whether before or after the Stockholder Approval has been
obtained; PROVIDED, HOWEVER, that after the Stockholder Approval has been
obtained, there shall be made no amendment that by law requires further approval
by stockholders of the parties without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein; PROVIDED, HOWEVER, that after the Stockholder Approval has
been obtained, there shall be made no waiver that by law requires further
approval by stockholders of the parties without the further approval of such
stockholders. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure or delay by any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights nor shall any single or partial exercise by any party to
this Agreement of any of its rights under this Agreement preclude any other or
further exercise of such rights or any other rights under this Agreement.
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<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
International Business Machines Corporation
New Orchard Road
Armonk, NY 10504
Attention: Mr. Lee A. Dayton
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Allen Finkelson, Esq.
Scott A. Barshay, Esq.
if to the Company, to:
Mylex Corporation
34551 Ardenwood Blvd.
Fremont, CA 94555-3607
Attention: President, Chief Financial Officer and General Counsel
with a copy to:
Brown & Bain, P.A.
2901 North Central Avenue
Phoenix, AZ 85012-2788
Attention: Charles Van Cott, Esq.
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) as it relates to the Company, "KNOWLEDGE" means, with respect to any
matter in question, that any of the chief executive officer or chief
financial officer of the Company or any of the individuals set forth on
Schedule 8.03(b) of the Company Disclosure Schedule has actual knowledge of
such matter;
(c) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" on or with
respect to the Company means any state of facts, change, development, effect
or occurrence that is, or could reasonably be expected to be, materially
adverse to the business, assets, condition (financial or
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otherwise) or results of operations of the Company and its subsidiaries,
taken as a whole, other than any state of facts, change, effect or
occurrence principally attributable to (i) the economy in general or the
Company's industry in general and not specifically relating to the Company
or any of its subsidiaries, (ii) any securities class action litigation
against the Company arising out of the transactions contemplated hereby or
(iii) a shortfall in the revenues of the Company and its subsidiaries, taken
as a whole, that results from delays of customer orders attributable to the
announcement of the Merger;
(d) "PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(e) a "SUBSIDIARY" of any person means another person of which more than
50% of any class of capital stock, voting securities or other equity
interests are owned or controlled, directly or indirectly, by such first
person.
SECTION 8.04. INTERPRETATION. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in
this Agreement, they shall be deemed to be followed by the words "WITHOUT
LIMITATION".
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (a) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Section 5.05, is not intended to confer upon any person other than
the parties hereto any rights or remedies.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.09. ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to
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this Agreement or the transactions contemplated by this Agreement in any court
other than a court of the United States located in the State of Delaware or a
Delaware state court.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
<TABLE>
<S> <C> <C>
INTERNATIONAL BUSINESS
MACHINES CORPORATION
by /s/ LEE A. DAYTON
------------------------------------------
Name: Lee A. Dayton
Title:Vice President-Corporate Development
and Real Estate
S2 ACQUISITION CORP.
by /s/ LEE A. DAYTON
------------------------------------------
Name: Lee A. Dayton
Title:President
MYLEX CORPORATION
by /s/ AL MONTROSS
------------------------------------------
Name: Al Montross
Title: President and Chief Executive
Officer
</TABLE>
A-33
<PAGE>
APPENDIX B
July 27, 1999
CONFIDENTIAL
Board of Directors
Mylex Corporation
34551 Ardenwood Blvd.
Fremont, CA 94555
Dear Members of the Board:
We understand that Mylex Corporation ("Mylex" or the "Company"), International
Business Machines Corporation ("IBM" or the "Parent"), and S2 Acquisition
Corporation, a wholly owned subsidiary of IBM (the "Merger Sub"), propose to
enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which
Merger Sub will be merged with and into the Company (the "Merger"). Pursuant to
the Merger each share of Mylex common stock ("Mylex Common Stock") will be
converted into the right to receive $12.00 in cash (the "Merger Consideration").
The terms and conditions of the Merger are more fully detailed in the Agreement.
You have requested our opinion as to whether the Merger Consideration is fair,
from a financial point of view, to Mylex shareholders.
Broadview International LLC ("Broadview") focuses on providing merger and
acquisition advisory services to information technology ("IT") companies. In
this capacity, we are continually engaged in valuing such businesses, and we
maintain an extensive database of IT mergers and acquisitions for comparative
purposes. We are currently acting as financial advisor to Mylex's Board of
Directors and will receive a fee from Mylex upon the successful conclusion of
the Merger.
In rendering our opinion, we have, among other things:
1.) reviewed the terms of a draft of the Agreement dated July 21, 1999
furnished to us by Mylex management on July 21, 1999 (which, for the
purposes of this opinion, we have assumed, with your permission, to be
identical in all material respects to the agreement to be executed);
2.) reviewed Mylex's annual report on Form 10-K for its fiscal year ended
December 31, 1998, including the audited financial statements included
therein, and Mylex's quarterly report on Form 10-Q for the period ended
March 31, 1999, including the unaudited financial statements included
therein;
3.) reviewed certain internal financial and operating information relating
to Mylex, including preliminary results for its fiscal quarter ending
June 30, 1999 and certain quarterly projections through December 31,
2000, prepared and furnished to us by Mylex management;
4.) participated in discussions with Mylex management concerning the
operations, business strategy, current financial performance and
prospects for Mylex;
5.) discussed with Mylex management its view of the strategic rationale for
the Merger;
6.) reviewed the recent reported closing prices and trading activity for
Mylex Common Stock;
7.) compared certain aspects of the financial performance of Mylex with
public companies we deemed comparable;
B-1
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Board of Directors
July 27, 1999
Page 2
8.) analyzed available information, both public and private, concerning
other mergers and acquisitions we believe to be comparable in whole or
in part to the Merger;
9.) reviewed recent equity research analyst reports covering Mylex;
10.) assisted in negotiations and discussions related to the Merger among
Mylex, IBM, and their respective financial and legal advisors; and
11.) conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification, on
the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Mylex. With
respect to the financial projections examined by us, we have assumed that they
were reasonably prepared and reflected the best available estimates and good
faith judgments of the management of Mylex as to the future performance of
Mylex. We have neither made nor obtained an independent appraisal or valuation
of any of Mylex's assets.
Based upon and subject to the foregoing, we are of the opinion that the Merger
Consideration is fair, from a financial point of view, to Mylex shareholders.
For purposes of this opinion, except as disclosed to us by Mylex or as disclosed
in the documents we have reviewed, we have assumed that Mylex is not currently
involved in any material transaction other than the Merger and those activities
undertaken in the ordinary course of conducting its business. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated only as of the date of this opinion, and any change
in such conditions may impact this opinion.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Mylex in connection
with its consideration of the Merger and does not constitute a recommendation to
any Mylex shareholder as to how such shareholder should vote on the Merger. This
opinion may not be published or referred to, in whole or part, without our prior
written permission, which shall not be unreasonably withheld. Broadview hereby
consents to references to, and the inclusion of, this opinion in its entirety in
the Proxy Statement to be distributed to Mylex shareholders in connection with
the Merger.
Sincerely,
/s/ BROADVIEW INTERNATIONAL LLC
------------------------------------------
Broadview International LLC
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<PAGE>
APPENDIX C
DELAWARE GENERAL CORPORATION LAW
Section 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depositary receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided, that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent
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corporation that are entitled to appraisal rights of the effective date of
the merger or consolidation or (ii) the surviving or resulting corporation
shall send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such
second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
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(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceedings, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation; provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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4760SMPS99
<PAGE>
- --------------------------------------------------------------------------------
MYLEX CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 28, 1999
The undersigned stockholder of Mylex Corporation ("Mylex"), revoking all
prior proxies, hereby appoints Al Montross and Colleen Gray, or either of
them acting singly, proxies, with full power of substitution, to vote all
shares of common stock of Mylex which the undersigned is entitled to vote at
the special meeting of stockholders to be held on September 28, 1999, at 9:00
a.m., local time, at Omni Berkshire Place, 21 East 52nd Street, New York, New
York, upon matters set forth in the Notice of Special Meeting of Stockholders
dated August 24, 1999 and the related proxy statement, copies of which have
been received by the undersigned, and in their discretion upon any
adjournment of the meeting or upon any other business that may properly be
brought before the meeting. Attendance of the undersigned at the meeting or
any adjourned session thereof will not be deemed to revoke this proxy unless
the undersigned shall affirmatively indicate the intention of the undersigned
to vote the shares represented hereby in person prior to the exercise of this
proxy.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MYLEX
CORPORATION. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
(See Reverse Side) (See Reverse Side)
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<PAGE>
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(CONTINUED FROM OTHER SIDE)
MYLEX CORPORATION
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR,
IF NO DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSAL SET FORTH BELOW,
WILL BE VOTED FOR THE PROPOSAL AND WILL BE VOTED IN THE
DISCRETION OF THE PROXIES WITH RESPECT TO ANY OTHER MATTER
PROPERLY BROUGHT BEFORE THE MEETING.
1. To adopt the Agreement and Plan of Merger dated as of
July 27, 1999, among International Business Machines
Corporation, S2 Acquisition Corp. and Mylex Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
Mark here if you plan to attend the meeting / /
Please promptly complete, date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No postage need
be affixed if mailed in the United States. PLEASE SIGN EXACTLY AS NAME(S)
APPEAR ON THE STOCK CERTIFICATE.
If stockholder is a corporation, please sign full corporate name by
president or other authorized officer and, if a partnership, please sign full
partnership name by an authorized partner or other persons.
Signature: Date:
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Signature: Date:
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