<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
BROOKTREE 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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/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:
------------------------------------------------------------------------
<PAGE>
[LOGO]
BROOKTREE CORPORATION
AUGUST 26, 1996
TO THE SHAREHOLDERS:
A Special Meeting of Shareholders of BROOKTREE CORPORATION, a California
corporation (the "Company"), will be held at the Company's principal executive
offices located at 9868 Scranton Road, San Diego, California 92121, on September
24, 1996, commencing at 10:00 a.m., Pacific Time (the "Special Meeting").
At the Special Meeting, you will be asked to consider and vote on the
approval and adoption of the Agreement and Plan of Merger (the "Merger
Agreement") dated as of July 1, 1996 among Rockwell International Corporation, a
Delaware corporation ("Rockwell"), ROK II Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of Rockwell ("Sub"), and the Company,
and the approval of the merger of Sub with and into the Company pursuant to the
Merger Agreement (the "Merger"). As a result of the proposed Merger, each
outstanding share of the Company's Common Stock, no par value (other than shares
held by the Company or any of its subsidiaries or by Rockwell or any of its
wholly-owned subsidiaries, and other than dissenters' shares), would be
converted into the right to receive $15.00 in cash, without interest thereon,
subject to any applicable withholding tax.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND HAS DETERMINED THAT THE MERGER AGREEMENT AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE MERGER.
Accompanying this letter, you will find a Notice of Special Meeting of
Shareholders, a Proxy Statement relating to the actions to be taken by the
Company's shareholders at the Special Meeting and a proxy card. The Proxy
Statement more fully describes the Merger Agreement and the proposed Merger.
All shareholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting, please
complete, sign, date and return your proxy card in the enclosed return envelope.
If you attend the Special Meeting, you may vote in person if you wish, even
though you have previously returned your proxy card. It is important that your
shares be represented and voted at the Special Meeting.
Sincerely,
James A. Bixby
CHAIRMAN OF THE BOARD, CEO AND
PRESIDENT
<PAGE>
[LOGO]
BROOKTREE CORPORATION
9868 SCRANTON ROAD
SAN DIEGO, CALIFORNIA 92121
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 1996
---------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of BROOKTREE
CORPORATION, a California corporation (the "Company"), will be held at the
Company's principal executive offices located at 9868 Scranton Road, San Diego,
California 92121, on September 24, 1996, commencing at 10:00 a.m., Pacific Time
(the "Special Meeting"), for the following purposes:
(1) To consider and vote on the approval and adoption of the Agreement
and Plan of Merger (the "Merger Agreement") dated as of July 1, 1996 among
Rockwell International Corporation, a Delaware corporation ("Rockwell"), ROK
II Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Rockwell ("Sub"), and the Company and the approval of the
merger of Sub with and into the Company pursuant to the Merger Agreement
(the "Merger"). As a result of the proposed Merger, each outstanding share
of the Company's Common Stock ("Brooktree Common Stock"), no par value
(other than shares held by the Company or any of its subsidiaries or by
Rockwell or any of its wholly-owned subsidiaries, and other than dissenters'
shares), would be converted into the right to receive $15.00 in cash,
without interest thereon, subject to any applicable withholding tax. A copy
of the Merger Agreement is attached as Annex I to the accompanying Proxy
Statement.
(2) To transact such other business as may properly come before the
Special Meeting or any postponement or adjournment thereof.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and the Merger and has determined that the Merger Agreement and the
Merger are fair to and in the best interests of the Company and its
shareholders. After careful consideration, the Board of Directors unanimously
recommends that the shareholders vote "FOR" approval and adoption of the Merger
Agreement and approval of the Merger.
Only holders of record of shares of Brooktree Common Stock at the close of
business on August 5, 1996 (the "Record Date") are entitled to notice of and to
vote at the Special Meeting and any adjournment or postponement thereof. The
affirmative vote of the holders of a majority of the outstanding shares of
Brooktree Common Stock outstanding on the Record Date is necessary to approve
and adopt the Merger Agreement and to approve the Merger.
Please complete, sign, date and return the enclosed proxy card promptly
whether or not you expect to attend the Special Meeting. Your proxy will be
revocable, either in writing or by voting in person at the Special Meeting, at
any time prior to its exercise at the meeting. A return envelope is enclosed for
your convenience. Shareholders should not send stock certificates with the
enclosed proxy card.
By Order of the Board of Directors
Noreen E. Burns
SECRETARY
San Diego, California
August 26, 1996
YOUR VOTE IS IMPORTANT.
EVEN IF YOU HAVE SOLD SHARES SINCE THE RECORD DATE, ONLY YOU ARE ENTITLED TO
VOTE SUCH SHARES. IF YOUR BROOKTREE SHARES WERE HELD BY YOUR BROKER ON THE
RECORD DATE, YOU MUST INSTRUCT YOUR BROKER HOW TO VOTE THE SHARES. PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
<PAGE>
BROOKTREE CORPORATION
----------------
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 24, 1996
------------------------
This Proxy Statement is furnished by Brooktree Corporation, a California
corporation (the "Company" and, following the Merger (as defined below), the
"Surviving Corporation"), to solicit proxies from holders of Common Stock, no
par value, of the Company ("Brooktree Common Stock") in connection with a
special meeting of the shareholders of the Company (the "Special Meeting") to be
held at the Company's principal executive offices located at 9868 Scranton Road,
San Diego, California 92121, on September 24, 1996, commencing at 10:00 a.m.,
Pacific Time, and any postponement or adjournment thereof.
At the Special Meeting, the Company's shareholders will be asked to consider
and vote on the approval and adoption of an Agreement and Plan of Merger (the
"Merger Agreement") dated as of July 1, 1996 among Rockwell International
Corporation, a Delaware corporation ("Rockwell"), ROK II Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Rockwell
("Sub"), and the Company and the approval of the merger of Sub with and into the
Company pursuant to the Merger Agreement (the "Merger"). As a result of the
proposed Merger, each outstanding share of Brooktree Common Stock (other than
shares held by the Company or any of its subsidiaries or by Rockwell or any of
its wholly-owned subsidiaries, and other than dissenters' shares) will be
converted into the right to receive $15.00 in cash, without interest thereon,
subject to any applicable withholding tax (the "Merger Consideration").
------------------------
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement or in the documents
incorporated herein by reference in connection with the solicitation made
hereby, and, if given or made, such information or representation should not be
relied upon as having been authorized by the Company. This Proxy Statement does
not constitute the solicitation of a proxy in any jurisdiction in which, or from
any person from whom in any jurisdiction, it is unlawful to make such proxy
solicitation. The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that the information contained herein or
in any document incorporated herein by reference, is correct as of any time
subsequent to the date hereof or the date of such document, as the case may be,
or that there has been no change in the affairs of the Company or any of its
subsidiaries since the date of this Proxy Statement or the date of such
document, as the case may be.
------------------------
This Proxy Statement and the accompanying form of proxy are first being
mailed to shareholders of the Company on or about August 26, 1996.
Proposals from shareholders that are intended to be presented by such
shareholders at the Company's 1997 Annual Meeting of Shareholders must be
received by the Company no later than September 16, 1996, in order that they may
be included in the Proxy Statement and form of proxy relating to that meeting.
THE DATE OF THIS PROXY STATEMENT IS AUGUST 26, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 1
Parties to the Merger Agreement......................................... 1
Brooktree Corporation................................................. 1
Rockwell International Corporation.................................... 1
ROK II Acquisition Corporation........................................ 1
Recent Developments..................................................... 1
Brooktree Corporation Special Meeting................................... 2
Date, Time and Place of the Meeting................................... 2
Purposes of the Meeting............................................... 2
Record Date; Shares Entitled to Vote; Quorum.......................... 2
Vote Required......................................................... 2
Market Price of Brooktree Common Stock Prior to Announcement of
Merger............................................................... 2
Dissenters' Rights.................................................... 2
The Merger.............................................................. 3
Description of the Merger; Merger Consideration....................... 3
Reasons for the Merger................................................ 3
Recommendation of the Board; Opinion of the Company's Financial
Advisor.............................................................. 3
Interests of Certain Persons in the Merger............................ 4
Exchange of Brooktree Common Stock Certificates....................... 4
Conditions to the Merger.............................................. 4
Conduct of Business of the Company Prior to the Effective Time........ 4
Effect of the Merger on Company Stock Options......................... 4
No Solicitation....................................................... 5
Termination........................................................... 5
Fees and Expenses..................................................... 5
Governmental and Regulatory Approvals................................. 5
Accounting Treatment.................................................. 5
Certain Federal Income Tax Consequences............................... 6
No Dividends.......................................................... 6
SELECTED FINANCIAL INFORMATION............................................ 7
RECENT DEVELOPMENTS....................................................... 8
THE BROOKTREE CORPORATION SPECIAL MEETING................................. 9
Record Date; Quorum; Proxies............................................ 9
Vote Required........................................................... 10
Solicitation............................................................ 10
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS............... 10
APPROVAL OF THE MERGER.................................................... 11
Description of the Merger............................................... 11
Background.............................................................. 12
Reasons for the Merger.................................................. 14
Recommendation of the Board............................................. 15
Opinion of the Company's Financial Advisor.............................. 15
Interests of Certain Persons to the Merger.............................. 20
Vote Required to Approve the Merger..................................... 23
Exchange of Certificates Representing Brooktree Common Stock............ 23
Conditions to the Merger................................................ 23
Conduct of Business of the Company Prior to the Effective Time.......... 25
Representations and Warranties.......................................... 26
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Effect of the Merger on Certain Company Employee Benefit Plans.......... 27
No Solicitation......................................................... 28
Indemnification; Officers' and Directors' Insurance..................... 30
Further Action.......................................................... 30
Termination............................................................. 30
Fees and Expenses....................................................... 31
Approval of Shareholders................................................ 32
Deregistration of Brooktree Common Stock After the Merger............... 32
Antitrust Matters....................................................... 32
Certain Federal Income Tax Consequences................................. 33
Dissenters' Rights...................................................... 33
ACCOUNTANTS............................................................... 35
AVAILABLE INFORMATION..................................................... 35
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 36
ANNEXES
Annex I -- Agreement and Plan of Merger dated as of July 1, 1996 among
Rockwell International Corporation, ROK II Acquisition
Corporation and Brooktree Corporation (without exhibits)
Annex II -- Opinion of Lehman Brothers, Inc.
Annex III -- California Dissenters' Rights Provisions
</TABLE>
ii
<PAGE>
SUMMARY
THE FOLLOWING IS, IN PART, A SUMMARY OF CERTAIN INFORMATION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT. REFERENCE IS MADE TO, AND THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT, IN THE ANNEXES ATTACHED HERETO AND THE DOCUMENTS
REFERRED TO AND INCORPORATED BY REFERENCE HEREIN. SHAREHOLDERS ARE URGED TO READ
THIS PROXY STATEMENT AND THE ANNEXES HERETO IN THEIR ENTIRETY. THIS SECTION
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FOLLOWING SUMMARY
AND ELSEWHERE HEREIN.
PARTIES TO THE MERGER AGREEMENT
BROOKTREE CORPORATION
The Company designs, develops and markets high-performance digital and
mixed-signal integrated circuits for computer graphics, imaging, multimedia and
communications applications. The mailing address and telephone number of the
principal executive offices of the Company are 9868 Scranton Road, San Diego,
California 92121 and (619) 452-7580. The Company was incorporated in California
in August 1981. For more information relating to the business and operations of
the Company, reference is made to the documents of the Company which are
incorporated by reference in this Proxy Statement. See "Incorporation of Certain
Documents by Reference."
ROCKWELL INTERNATIONAL CORPORATION
Rockwell is a diversified, high technology corporation engaged in the
research, design, development and manufacture of many products in automation,
avionics, semiconductor systems, aerospace, defense electronics and automotive
component systems for commercial and government markets. The mailing address and
telephone number of the principal executive offices of Rockwell are 2201 Seal
Beach Boulevard, Seal Beach, California 90740-8250 and (412) 565-4090 (Office of
the Secretary). Rockwell was incorporated in Delaware in 1928.
ROK II ACQUISITION CORPORATION
Sub is a corporation recently organized by Rockwell for the purpose of
effecting the Merger. It has no material assets and has not engaged in any
material activities except in connection with the Merger. The mailing address
and telephone number of the principal executive offices of Sub are 2201 Seal
Beach Boulevard, Seal Beach, California 90740-8250 and (412) 565-4090 (Office of
the Secretary). Sub is a wholly-owned subsidiary of Rockwell and was
incorporated in Delaware in June 1996.
RECENT DEVELOPMENTS
For the Company's third fiscal quarter ended June 29, 1996 (the "June
Quarter"), the Company reported an operating loss of $11.3 million and a net
loss of $4.9 million, or $0.29 per share, including a write-down of a portion of
its multimedia inventory of approximately $8.4 million. The Company's revenues
decreased 4.7% to $30.7 million in the June Quarter compared to revenues of
$32.2 million in the third quarter of fiscal 1995. For the first nine months of
fiscal 1996, the Company reported an operating loss of $7.3 million and net
income of $2.8 million, or $0.16 per share. For the first nine months of fiscal
1996, revenues increased 9.8% to $104.5 million from $95.2 million for the first
nine months of fiscal 1995. See "Recent Developments."
On August 7, 1996, the Company announced that it reached an out-of-court
settlement with S3 Inc. ("S3") of Santa Clara, California regarding a lawsuit
Brooktree filed against S3 in the U.S. District Court for the Southern District
of California on October 2, 1995, for infringement of a patent that relates to a
multimedia processing and display architecture. Under the terms of the
settlement, S3 will pay Brooktree an initial $2.0 million license fee, plus
royalties of up to $2.0 million per year over the next five years on sales of
video graphics controller products. Both companies have agreed to settle all
claims and counterclaims in connection with the litigation between them and have
agreed not to sue each other on patents related to video graphics processing
technology for the same five year period.
1
<PAGE>
BROOKTREE CORPORATION SPECIAL MEETING
DATE, TIME AND PLACE OF THE MEETING
The Special Meeting will be held on September 24, 1996, commencing at 10:00
a.m., Pacific Time, at the Company's principal executive offices located at 9868
Scranton Road, San Diego, California 92121.
PURPOSES OF THE MEETING
The purposes of the Special Meeting are (i) to consider and vote on the
approval and adoption of the Merger Agreement and the approval of the Merger
(the "Merger Proposal") and (ii) to transact such other business as may properly
come before the Special Meeting. As of the date of this Proxy Statement, the
Board of Directors of the Company (the "Board") does not know of any business to
be presented at the Special Meeting other than as set forth in the notice
accompanying this Proxy Statement. If any other matters should properly come
before the Special Meeting, it is intended that the shares of Brooktree Common
Stock represented by proxies will be voted with respect to such matters in the
discretion of the persons named as proxies. A copy of the Merger Agreement is
attached to this Proxy Statement as Annex I and incorporated herein by
reference. See "The Brooktree Corporation Special Meeting -- Record Date;
Quorum; Proxies."
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of shares of Brooktree Common Stock at the close of
business on August 5, 1996 (the "Record Date") will be entitled to notice of and
to vote at the Special Meeting. At the close of business on August 5, 1996,
there were 17,004,270 shares of Brooktree Common Stock issued and outstanding,
held by approximately 291 holders of record.
The presence at the Special Meeting, either in person or by proxy, of the
holders of a majority of the outstanding shares of Brooktree Common Stock
entitled to vote at the Special Meeting shall constitute a quorum for the
transaction of business. Abstentions will be included in determining the number
of shares present for purposes of determining the presence of a quorum.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Brooktree
Common Stock outstanding on the Record Date is required to approve and adopt the
Merger Agreement and to approve the Merger.
As of August 5, 1996, the Company's executive officers and directors owned
an aggregate of 700,301 shares of Brooktree Common Stock (excluding 1,508,093
shares that executive officers and directors have the right to acquire upon
exercise of outstanding options granted under the Company's 1985 Stock Option
Plan, 1991 Non-Employee Director Stock Option Plan and 1992 Stock Plan (the
"Stock Option Plans") and granted pursuant to Nonqualified Options to outside
directors of the Company).
MARKET PRICE OF BROOKTREE COMMON STOCK PRIOR TO ANNOUNCEMENT OF MERGER
Brooktree Common Stock is traded on The Nasdaq National Market System under
the symbol "BTRE." On June 28, 1996, the last full trading day prior to the
joint public announcement by the Company and Rockwell of the execution of the
Merger Agreement, the last reported sales price for shares of Brooktree Common
Stock was $10.50 per share. Following the Merger, Brooktree Common Stock will no
longer be traded on The Nasdaq National Market System. See "Approval of the
Merger -- Deregistration of Brooktree Common Stock After the Merger."
DISSENTERS' RIGHTS
Shareholders of the Company who vote against the Merger may be entitled to
certain dissenters' rights under California law. See "Approval of the Merger --
Dissenters' Rights" and Annex III.
2
<PAGE>
THE MERGER
DESCRIPTION OF THE MERGER; MERGER CONSIDERATION
The Merger Agreement provides that, if the Merger Proposal is approved by
the shareholders of the Company and all other conditions to the consummation of
the Merger have been satisfied or waived, (i) Sub will be merged with and into
the Company and (ii) each share of Brooktree Common Stock then outstanding
(other than shares of Brooktree Common Stock held by the Company or its
subsidiaries or by Rockwell or any direct or indirect wholly-owned subsidiary of
Rockwell, all of which will be canceled without the payment of any consideration
therefor, and other than dissenters' shares) will be converted without any
action on the part of the holder thereof into the right to receive an amount in
cash equal to the Merger Consideration. The total value of the Merger (including
payment for options canceled in connection therewith) is approximately $275
million.
The Merger will be effective upon the filing of the Merger Agreement
(together with the requisite officer's certificates of the Company and Sub), a
certificate of merger or other appropriate documents with the Secretaries of
State of Delaware and California in accordance with the General Corporation Law
of Delaware (the "DGCL") and the California Corporations Code (the "CCC") or at
such other date and time as specified in the filing (the effective time of the
Merger is hereinafter referred to as the "Effective Time"), which filing will be
made as soon as practicable after the Merger Agreement and the Merger have been
approved by the shareholders of the Company and after all other conditions to
the consummation of the Merger have been satisfied or waived. See "Approval of
the Merger -- Conditions to the Merger."
REASONS FOR THE MERGER
The Board considered many factors in reaching its decision to approve the
Merger Agreement and the Merger. The principal reason for its decision was the
opportunity to secure a premium for shareholders over the existing market price
of Brooktree Common Stock prior to the execution of the Merger Agreement. In
comparing such premium to the return on shareholder investment believed to be
achievable through future appreciation in the stock of the Company operating as
an independent company, the Board considered various factors affecting the
Company's future financial performance and prospects, including its ability to
improve significantly revenues and operating results. A primary consideration
was the potential risks and rewards to the Company's shareholders from
continuing to operate the Company as an independent entity compared to the
opportunity presented by the Merger. After a careful analysis, the Board
concluded that the Merger was the best alternative for the Company's
shareholders. See "Approval of the Merger -- Reasons for the Merger."
RECOMMENDATION OF THE BOARD; OPINION OF THE COMPANY'S FINANCIAL ADVISOR
THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND
HAS DETERMINED THAT THE MERGER AGREEMENT AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. AFTER CAREFUL CONSIDERATION,
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND APPROVAL OF THE MERGER. See "Approval of the Merger --
Recommendation of the Board."
The Company has retained Lehman Brothers Inc. ("Lehman Brothers") to act as
its financial advisor in connection with the Merger. Lehman Brothers has
delivered to the Board its written opinions dated July 1, 1996 and August 26,
1996, each to the effect that, as of the date of such opinion and based upon the
matters described therein, the consideration to be offered to shareholders of
the Company in the Merger is fair to such shareholders from a financial point of
view. The opinions of Lehman Brothers are directed to the fairness of the
consideration offered in the Merger and do not constitute a recommendation to
any shareholder as to how to vote at the Special Meeting. Reference is made to
the full text of the Lehman Brothers opinion dated August 26, 1996, a copy of
which is attached hereto as Annex II, for the specific assumptions made and
matters considered by Lehman Brothers. This opinion should be read in its
entirety by the Company's shareholders. See "Approval of the Merger --
Background" and "-- Opinion of the Company's Financial Advisor."
3
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board with respect to the Merger
Agreement and the Merger, shareholders should be aware that certain directors
and officers of the Company have interests in the Merger that present them with
potential conflicts of interest. In addition to the Merger Agreement and the
proposed Merger, there are certain other transactions between Rockwell and the
Company. See "Approval of the Merger -- Interests of Certain Persons in the
Merger."
EXCHANGE OF BROOKTREE COMMON STOCK CERTIFICATES
As soon as reasonably practicable after consummation of the Merger, a paying
agent appointed by Rockwell (the "Exchange Agent") will mail a letter of
transmittal with instructions to all holders of record of Brooktree Common Stock
immediately prior to the Effective Time for use in exchanging their Company
stock certificates formerly representing Brooktree Common Stock for the Merger
Consideration. STOCK CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL IS RECEIVED. See "Approval of the Merger -- Exchange of Certificates
Representing Brooktree Common Stock."
CONDITIONS TO THE MERGER
In addition to approval by the shareholders of the Company, consummation of
the Merger is subject to Rockwell having entered into agreements with certain
specified employees of the Company, the holders of shares of Brooktree Common
Stock purchased pursuant to the Company's 1984 Stock Purchase Plan or 1988 Stock
Purchase Plan (the "Stock Purchase Plans") containing restrictions on transfer
having paid to the Company certain amounts as are required in respect of the
removal of restrictions on transfer applicable to such shares and the
fulfillment of a number of conditions customary in transactions similar to the
Merger. See "Approval of the Merger -- Conditions to the Merger."
CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE EFFECTIVE TIME
Pursuant to the Merger Agreement, the Company has agreed that, among other
things, prior to the Effective Time, it will, and will cause each of its
subsidiaries to, conduct its business in the ordinary course consistent with
past practice, use its best efforts, among other things, to preserve intact its
business organization, and use commercially reasonable efforts to retain the
services of its present officers, employees and agents and to maintain
satisfactory relationships with customers, suppliers and others having business
relationships with it. In addition, the Company has agreed that prior to the
Effective Time, neither it nor any of its subsidiaries will (without the prior
written approval of Rockwell), among other things, amend its organizational
documents; issue, sell or purchase any shares of its capital stock or options to
purchase its capital stock; incur any debt or other obligation to pay money
borrowed or enter into any guarantee of such an obligation of another; mortgage
or pledge its assets, property or business; make any loans, advances or capital
contributions to, or investments in any other person or entity; sell or
otherwise dispose of or lease any part of its properties or assets or purchase
or otherwise acquire or lease properties or assets, except sales or purchases of
inventory in the ordinary course of business consistent with past practice;
declare, set aside or pay any dividends on, or make any distributions of any
nature in respect of its outstanding capital stock; or grant any general
increase in wage or salary rates or in employee benefits. See "Approval of the
Merger -- Conduct of Business of the Company Prior to the Effective Time."
EFFECT OF THE MERGER ON COMPANY STOCK OPTIONS
Pursuant to the Merger Agreement, the Company has agreed to take all action
(satisfactory to Rockwell in its reasonable discretion) necessary to provide
that immediately prior to the Effective Time, each then outstanding option to
purchase shares of Brooktree Common Stock granted under the Stock Option Plans
or granted pursuant to Nonqualified Stock Options to outside directors of the
Company will have become fully exercisable and vested and, if not exercised,
will be canceled in exchange for an amount (subject to applicable withholding
tax) in cash from the Company (or at Rockwell's option, from Rockwell or Sub)
for each share subject to such option equal to the excess, if any, of $15.00
over the per share exercise price of such option. See "Approval of the Merger --
Effect of the Merger on Certain Company Employee Benefit Plans."
4
<PAGE>
NO SOLICITATION
Pursuant to the Merger Agreement, from and after July 1, 1996, and prior to
the Effective Time, the Company has agreed that it will not, nor will it
authorize or permit any of its subsidiaries or any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of the subsidiaries) (collectively, the "Company's
Representatives") to, directly or indirectly, (a) solicit, initiate or encourage
(including by way of furnishing or disclosing non-public information), or cause
to be solicited, initiated or encouraged, any Acquisition Proposal (as defined
under "Approval of the Merger -- No Solicitation") or (b) other than certain
limited actions specified in the Merger Agreement, participate in any discussion
or negotiations with, or explore or otherwise communicate in any way with, any
third party (other than Rockwell or Sub) with respect to any Acquisition
Proposal or (c) enter into any agreement, arrangement or understanding requiring
the Company to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by the Merger Agreement, provided that the Company may
furnish information concerning its business, properties or assets to, and
participate in any discussion or negotiations with, or explore or otherwise
communicate with, any financially capable third party that makes after July 1,
1996 a written bona fide unsolicited offer or proposal concerning any
Acquisition Proposal, if (i) the Board, under certain specified circumstances
specified in the Merger Agreement, determines by a majority vote that taking
such action is reasonably likely to lead to an Acquisition Proposal that is more
favorable to the shareholders of the Company than the Merger and that taking
such action is necessary to comply with the directors' fiduciary duties and (ii)
prior to taking such action, the Company complies with certain notice and
confidentiality requirements of the Merger Agreement. See "Approval of the
Merger -- No Solicitation."
TERMINATION
The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time by mutual agreement of
Rockwell and the Company or by either Rockwell or the Company, in each case
under certain specified circumstances. See "Approval of the Merger --
Termination."
FEES AND EXPENSES
Pursuant to the Merger Agreement, the Company has agreed that (a) if the
Merger Agreement is terminated under certain circumstances specified in the
Merger Agreement; or (b) if after July 1, 1996 and during the term of the Merger
Agreement any person, corporation, partnership, other entity or "group" (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), other than Rockwell
or Sub or any of their respective subsidiaries or affiliates, acquires
beneficial ownership or the right to acquire beneficial ownership of 40% or more
of the then outstanding shares of capital stock of the Company, then the Company
has agreed to pay to Rockwell $10 million, a portion of which is intended to
reimburse Rockwell and Sub for their fees and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby. See
"Approval of the Merger -- Fees and Expenses."
GOVERNMENTAL AND REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules and regulations promulgated thereunder, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Justice Department (the "Antitrust
Division"), and specified waiting period requirements have been satisfied. The
Company and Rockwell each filed with the FTC and the Antitrust Division a
Notification and Report Form with respect to the Merger on July 12, 1996 and
such waiting period requirements have been satisfied. See "Approval of the
Merger -- Antitrust Matters."
ACCOUNTING TREATMENT
The Merger will be accounted for by Rockwell as a "purchase" for financial
accounting purposes in accordance with generally accepted accounting principles.
5
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The exchange of shares of Brooktree Common Stock by the Company's
shareholders in the Merger for cash will be a taxable transaction to such
shareholders for federal income tax purposes and gain or loss will be recognized
by such shareholders measured by the difference between the amount of cash
received in the Merger and the tax basis of the shares of Brooktree Common Stock
surrendered in exchange therefor. See "Approval of the Merger -- Certain Federal
Income Tax Consequences."
NO DIVIDENDS
The Company has never paid cash dividends on Brooktree Common Stock. The
Company currently intends to retain earnings for use in its business and does
not anticipate paying any cash dividends for the foreseeable future.
6
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table summarizes certain selected financial data, which should
be read in conjunction with the Company's consolidated financial statements and
notes thereto and unaudited consolidated interim financial statements and notes
thereto, both of which are contained in documents incorporated by reference
herein. The selected consolidated financial data as of September 30, 1995 and
1994 and for the years ended September 30, 1995, 1994 and 1993 are derived from
the consolidated financial statements of the Company which have been audited by
Ernst & Young LLP and are contained in documents incorporated by reference
herein. The selected consolidated financial data of the Company as of September
30, 1993, 1992 and 1991 and for the years ended September 30, 1992 and 1991 are
derived from the consolidated financial statements of the Company which have
been audited by Ernst & Young LLP but are not included in this Proxy Statement.
The selected consolidated financial data of the Company for the nine month
periods ended June 29, 1996 and June 24, 1995, and as of June 29, 1996 and June
24, 1995 are derived from the unaudited consolidated interim financial
statements of the Company contained in documents incorporated by reference
herein and, in the opinion of the Company, include all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the information
set forth therein. The results for the nine months ended June 29, 1996 are not
necessarily indicative of the results to be expected for the full year ending
September 28, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------- YEAR ENDED ON OR ABOUT SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER JUNE 29, JUNE 24, ----------------------------------------------------------------------
SHARE DATA) 1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues...................... $ 104,496 $ 95,209 $ 137,662 $ 108,964 $ 111,342 $ 92,006 $ 83,417
Gross margin.................. 47,995 46,767 66,340 50,160 63,446 53,843 50,413
Research and development
expense...................... 21,998 20,695 28,332 26,131 22,948 19,043 17,691
Operating income (loss)....... (7,301)(2) 4,775 8,174 (1,692)(4) 16,945 13,762 11,712
Gain on sale of
investment(1)................ 11,080 10,013 12,911 3,125 1,605 -- --
Net income.................... $ 2,777 $ 8,289 $ 12,544(3) $ 2,027 $ 28,371(5) $ 12,481(6) $ 9,503
---------- ---------- ---------- ----------- ---------- ----------- ----------
Earnings per share:
Primary..................... $ 0.16 $ 0.48 $ 0.72 $ 0.12 $ 1.73 $ 0.76 $ 0.64
Fully diluted............... $ 0.16 $ 0.46 $ 0.69 $ 0.12 $ 1.72 $ 0.76 $ 0.64
---------- ---------- ---------- ----------- ---------- ----------- ----------
Weighted average common and
common equivalent shares:
Primary..................... 17,576 17,116 17,418 16,432 16,439 16,410 14,817
Fully diluted............... 17,598 18,017 18,181 16,539 16,528 16,446 14,817
---------- ---------- ---------- ----------- ---------- ----------- ----------
Cash dividends................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
ON OR ABOUT SEPTEMBER 30,
JUNE 29, JUNE 24, -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital..................... $ 58,742 $ 59,453 $ 67,038 $ 60,704 $ 66,746 $ 58,409 $ 53,408
Total assets........................ 190,629 170,569 188,042 142,413 143,841 102,008 83,047
Long-term obligations............... 9,671 7,034 5,605 1,752 2,666 225 1,334
Shareholders' equity................ 144,998 136,937 143,974 122,935 120,450 85,564 70,438
Book value per share:
Primary........................... $ 8.25 $ 8.00 $ 8.27 $ 7.48 $ 7.33 $ 5.21 $ 4.75
Fully Diluted..................... $ 8.24 $ 7.60 $ 7.92 $ 7.43 $ 7.29 $ 5.20 $ 4.75
</TABLE>
- ------------------------------
(1) Represents a gain from the sale of a portion of a minority interest
investment in a telecommunications company.
(2) Includes a charge for inventory valuation write-down of $8,355 ($0.33 per
fully diluted share).
(3) Includes a charge for litigation settlement of $1,952 ($0.11 per fully
diluted share).
(4) Includes a charge for restructuring of $2,815.
(5) Includes a gain of $15,258 ($0.92 per fully diluted share) from the
settlement of litigation.
(6) Includes a gain of $865 ($0.05 per fully diluted share) from the sale of a
development center.
7
<PAGE>
RECENT DEVELOPMENTS
THIS SECTION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN
THE FOLLOWING SECTION AND ELSEWHERE HEREIN.
For the June Quarter, the Company reported an operating loss of $11.3
million and a net loss of $4.9 million, or $0.29 per share. The Company's
revenues decreased 4.7% to $30.7 million in the June Quarter compared to
revenues of $32.2 million in the third quarter of fiscal 1995. For the first
nine months of fiscal 1996, the Company reported an operating loss of $7.3
million and net income of $2.8 million, or $0.16 per share. For the first nine
months of fiscal 1996, revenues increased 9.8% to $104.5 million from $95.2
million for the first nine months of fiscal 1995. The decrease in revenues in
the June Quarter reflected a decline in graphics product revenues, and to a
lesser extent, a decline in automated test equipment ("ATE") product revenues,
which more than offset increases in the remaining product lines of the Company.
The increase in revenues in the first nine months of fiscal 1996 was primarily
due to sales of the Company's multimedia products, of which there were
essentially none in the first nine months of fiscal 1995, and increased sales of
imaging, communications and ATE products, partially offset by a decrease in
graphics product revenues. The Company believes the greater than expected
decrease in graphics product revenues is related to the current, overall
slowdown in the PC and workstation marketplaces.
In the June Quarter, the Company recognized a write-down of a portion of its
multimedia inventory of approximately $8.4 million. The write-down represented
excess multimedia product inventory over estimated requirements to meet
projected multimedia product sales and a lower of cost or market adjustment to
revalue a portion of the remaining multimedia inventory due to a decline in
forecasted selling prices.
For further information, reference is made to the Company's Quarterly Report
on Form 10-Q, as amended, for the quarter ended June 29, 1996, which is
incorporated herein by reference.
On August 7, 1996, the Company announced that it reached an out-of-court
settlement with S3 regarding a lawsuit Brooktree filed against S3 in the U.S.
District Court for the Southern District of California on October 2, 1995 for
infringement of a patent that relates to a multimedia processing and display
architecture. Under the terms of the settlement, S3 will pay Brooktree an
initial $2.0 million license fee, plus royalties of up to $2.0 million per year
over the next five years on sales of video graphics controller products. Both
companies have agreed to settle all claims and counterclaims in connection with
the litigation between them and have agreed not to sue each other on patents
related to video graphics processing technology for the same five year period.
8
<PAGE>
THE BROOKTREE CORPORATION SPECIAL MEETING
This Proxy Statement and the accompanying letter, notice and proxy card are
being furnished to the shareholders of the Company in connection with the
solicitation of proxies by the Company from holders of outstanding shares of
Brooktree Common Stock to be voted at the Special Meeting to be held on
September 24, 1996, commencing at 10:00 a.m., Pacific Time, and at any
postponement or adjournment thereof.
At the Special Meeting, the holders of outstanding shares of Brooktree
Common Stock will be asked to consider and vote upon the approval and adoption
of the Merger Agreement and approval of the Merger. As of the date of this Proxy
Statement, the Board does not know of any other matters to be presented for
consideration at the Special Meeting.
This Proxy Statement summarizes the material terms of the Merger Agreement
attached hereto as Annex I. The Merger Agreement is by necessity more complete
than the summary set forth herein, and contains additional information not
described herein. Therefore, the summary of the Merger Agreement set forth
herein is qualified by reference to such agreement. The Merger Agreement is
incorporated herein by reference and should be read carefully by each Company
shareholder in formulating his or her voting decision with respect to the
proposal to approve and adopt the Merger Agreement and approve the Merger.
The Board has unanimously approved the Merger Agreement and the Merger and
has determined that the Merger Agreement and the Merger are fair to and in the
best interests of the Company and its shareholders. After careful consideration,
the Board unanimously recommends that shareholders of the Company vote FOR
approval and adoption of the Merger Agreement and approval of the Merger.
RECORD DATE; QUORUM; PROXIES
Only holders of record of shares of Brooktree Common Stock at the close of
business on the Record Date will be entitled to notice of and to vote at the
Special Meeting. At the close of business on August 5, 1996, there were
17,004,270 shares of Brooktree Common Stock issued and outstanding, held by
approximately 291 holders of record.
The presence at the Special Meeting, either in person or by proxy, of the
holders of a majority of the outstanding shares of Brooktree Common Stock
entitled to vote at the Special Meeting shall constitute a quorum for the
transaction of business. Abstentions will be included in determining the number
of shares present for purposes of determining the presence of a quorum. However,
as abstentions will not be counted as votes for approval and adoption of the
Merger Agreement and approval of the Merger at the Special Meeting, they will
have the practical effect of a vote against approval and adoption of the Merger
Agreement and approval of the Merger. Holders of record of shares of Brooktree
Common Stock on the Record Date are entitled to one vote per share on the
proposal to approve and adopt the Merger Agreement and to approve the Merger and
on any other matters that properly come before the Special Meeting.
Shares of Brooktree Common Stock represented by properly executed proxies
will, unless such proxies have been revoked, be voted at the Special Meeting in
accordance with the instructions indicated on such proxies. If no contrary
instructions are indicated, such shares will be voted FOR approval and adoption
of the Merger Agreement and approval of the Merger. Such shares will also be
voted in the discretion of the persons named as proxies as to any other matter
which properly comes before the Special Meeting. As of the date of this Proxy
Statement, the Board is not aware of any other business to be transacted at the
Special Meeting. A shareholder who has given a proxy may revoke it at any time
prior to its exercise at the Special Meeting by filing with the Secretary of the
Company a written notice of revocation bearing a later date than the proxy, duly
executing a later-dated proxy relating to the same shares of Brooktree Common
Stock and delivering it to the Secretary of the Company, or by voting in person
at the Special Meeting.
9
<PAGE>
VOTE REQUIRED
The affirmative vote of a majority of the shares of Brooktree Common Stock
outstanding on the Record Date is required to approve and adopt the Merger
Agreement and to approve the Merger.
As of August 5, 1996, the Company's executive officers and directors owned
an aggregate of 700,301 shares of Brooktree Common Stock (excluding 1,508,093
shares that executive officers and directors have the right to acquire upon
exercise of outstanding options granted under the Stock Option Plans and granted
pursuant to Nonqualified Options to outside directors of the Company) and, to
the knowledge of the Company, all of the Company's executive officers and
directors intend to vote all of their 700,301 shares of Brooktree Common Stock
for approval and adoption of the Merger Agreement and approval of the Merger.
SOLICITATION
The cost of preparing, assembling, printing and mailing this Proxy
Statement, the Notice of Special Meeting of Shareholders and the enclosed form
of proxy, as well as the cost of soliciting proxies relating to the Special
Meeting, will be borne by the Company. The Company will request banks, brokers,
dealers and voting trustees or other nominees to solicit their customers who are
owners of shares listed of record, and will reimburse them for reasonable
out-of-pocket expenses of such solicitations. The original solicitation of
proxies by mail may be supplemented by telephone, telegram, facsimile and
personal solicitation by officers and other regular employees of the Company. In
addition, the Company has retained Corporate Investor Communications, Inc. to
assist in the solicitation of proxies at an estimated fee of $10,000, plus
reimbursement of reasonable expenses.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of August 5, 1996, certain information
with respect to the beneficial ownership (within the meaning of Rule 13d-3(d)(1)
under the Exchange Act) of Brooktree Common Stock (i) by each person known by
the Company to own beneficially more than five percent of the outstanding shares
of Brooktree Common Stock, (ii) by each director of the Company, (iii) by each
of the Chief Executive Officer and four other most highly paid executive
officers of the Company who earned over $100,000 in fiscal 1995 (the "Named
Executive Officers") and (iv) by all directors and executive officers as a
group. Except as otherwise noted below, the Company knows of no agreements among
its shareholders which relate to voting or investment of their shares of
Brooktree Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
----------------------------
DIRECTORS, EXECUTIVE OFFICERS AND PERCENTAGE
FIVE PERCENT SHAREHOLDERS NUMBER OWNERSHIP
- ----------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
State Farm Mutual Automobile Insurance Company .................................... 1,500,508 9%
Attn: John Gordon
1 State Farm Plaza
Bloomington, Illinois 61701
Kopp Investment Advisors, Inc. (1) ................................................ 1,174,020 7%
Attn: Don Cornelius
6600 France Avenue South
Suite 672
Edina, Minnesota 55435
James A. Bixby (2)................................................................. 693,873 4%
Ellsworth R. Roston (3)............................................................ 343,013 2%
Jack W. Savidge (4)................................................................ 43,733 *
Daniel J. Warmenhoven (5).......................................................... 20,342 *
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
----------------------------
DIRECTORS, EXECUTIVE OFFICERS AND PERCENTAGE
FIVE PERCENT SHAREHOLDERS NUMBER OWNERSHIP
- ----------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Michael S. Wishart (6)............................................................. 21,117 *
Anthony C. D'Augustine (7)......................................................... 28,890 *
Pete R. Fowler (8)................................................................. 51,491 *
Phillip L. DenAdel (9)............................................................. 45,930 *
Robert W. Zabaronick (10).......................................................... 97,938 1%
All Directors and Officers as a Group (16 persons) (11)............................ 1,678,307 10%
</TABLE>
- ------------------------
* Less than 1%
(1) Represents shares held by Kopp Investment Advisors, Inc. acting as
investment adviser for various entities and individuals. Holds shared
dispositive power and no voting power.
(2) Includes 405,639 shares subject to options exercisable within sixty days of
August 5, 1996, 8,000 shares held jointly with spouse, and 13,334 shares
held by Nancy Bixby as Custodian for Scott Bixby and John Bixby under CTMA.
(3) Includes 20,000 shares subject to options exercisable within sixty days of
August 5, 1996; 79,379 shares registered in the name of The Roston Family
Trust; 208,333 shares registered in the name of Roston Enterprises; and
34,287 shares registered in the name of Roston & Schwartz APC Profit Sharing
Plan, as to which Mr. Roston shares voting and investment power.
(4) Includes 20,000 shares subject to options exercisable within sixty days of
August 5, 1996, and 23,333 shares registered in the name of The Savidge
Family Trust.
(5) Includes 15,342 shares subject to options exercisable within sixty days of
August 5, 1996.
(6) Represents shares subject to options exercisable within sixty days of August
5, 1996.
(7) Includes 27,043 shares subject to options exercisable within sixty days of
August 5, 1996.
(8) Includes 46,300 shares subject to options exercisable within sixty days of
August 5, 1996.
(9) Includes 44,676 shares subject to options exercisable within sixty days of
August 5, 1996.
(10) Includes 94,605 shares subject to options exercisable within sixty days of
August 5, 1996.
(11) Includes 978,006 shares subject to options exercisable within sixty days of
August 5, 1996.
APPROVAL OF THE MERGER
DESCRIPTION OF THE MERGER
The Merger Agreement provides that, if the Merger Proposal is approved by
the shareholders of the Company and all other conditions to the consummation of
the Merger have been satisfied or waived, (i) Sub will be merged with and into
the Company and (ii) each share of Brooktree Common Stock then outstanding
(other than shares of Brooktree Common Stock held by the Company or its
subsidiaries or by Rockwell or any direct or indirect wholly-owned subsidiary of
Rockwell, and other than dissenters' shares) will be converted without any
action on the part of the holder thereof into the right to receive an amount in
cash equal to the Merger Consideration upon the surrender of the certificate
representing such share in accordance with the terms of the Merger Agreement. In
addition, each share of Brooktree Common Stock issued and outstanding owned by
Rockwell or Sub or any other direct or indirect wholly-owned subsidiary of
Rockwell, held in the treasury of the Company or owned by any subsidiary of the
Company will be canceled at the Effective Time without payment of any
consideration therefor and will cease to exist. Any shares of Brooktree Common
Stock held by
11
<PAGE>
shareholders who have voted against the Merger Proposal and demanded and
perfected their demand for the Company to purchase their shares, in accordance
with Sections 1300-1312 ("Chapter 13") of the CCC, will not be converted into
the right to receive the Merger Consideration but instead will be entitled to
only such rights as are provided by the CCC, unless such holder fails to perfect
his or her dissenters' rights or withdraws such demand for purchase thereof or
payment therefor or loses his or her right to such payment under the CCC, in
which case, such shares will be deemed converted into and represent only the
right to receive the Merger Consideration. See "-- Dissenters' Rights." At the
Effective Time, each share of Common Stock, par value $1.00 per share, of Sub
issued and outstanding will be converted into one newly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
Following the Merger, the separate corporate existence of Sub will cease,
and the Company, as the surviving corporation in the Merger and a wholly-owned
subsidiary of Rockwell, will continue its corporate existence under the name
"Brooktree Corporation." The Articles of Incorporation of the Company, as
amended and restated pursuant to the Merger Agreement, and the Bylaws of the
Company shall become the Articles of Incorporation and Bylaws of the Surviving
Corporation, and the directors and officers of Sub will become the directors and
officers of the Surviving Corporation.
The Merger will be effective upon the filing of the Merger Agreement
(together with the requisite officer's certificates of the Company and Sub), a
certificate of merger or other appropriate documents with the Secretaries of
State of Delaware and California in accordance with the DGCL and the CCC or at
such other date and time as specified in the filings, which filing will be made
as soon as practicable after the Merger Agreement and the Merger have been
approved by the shareholders of the Company and after all other conditions to
the consummation of the Merger have been satisfied or waived.
BACKGROUND
The terms of the Merger Agreement and Merger were agreed to and approved by
the Board after a lengthy process. The following is a summary of certain key
events leading up to the approval of the Merger Agreement and the Merger by the
Board.
In February 1992 Rockwell sold assets of its T1/E1 digital communications
business (including devices, wafers, technical information and intellectual
property rights) to the Company for $6 million. Rockwell is the Company's sole
supplier of certain T1/E1 devices and wafers pursuant to an arrangement which
extends through December 31, 1997. As early as 1993, the Company and Rockwell
had informal discussions regarding the possibility of the two companies creating
a mutually beneficial relationship. In 1995, the Company and Rockwell conducted
a collaborative marketing effort for their respective complementary products.
In 1994, the Company began to explore strategic alternatives including
corporate partnering and acquisition possibilities. From 1994 to June 1996, the
Company engaged in discussions with a number of corporations regarding the
possibility of establishing a corporate partnership relationship. None of those
discussions resulted in a material relationship.
In the fall of 1995, the Board directed management to continue its search
for a strategic partner to augment the Company's multimedia business. In early
1996, James A. Bixby, Chairman, President and Chief Executive Officer of the
Company, contacted several companies regarding corporate partnering and in March
1996, Mr. Bixby contacted Rockwell to discuss the possibility of creating a
strategic relationship. Thereafter, Mr. Bixby had further discussions with
Dwight W. Decker, President of Rockwell Semiconductor Systems. Mr. Decker
indicated that Rockwell may be interested in acquiring the entire Company. In
connection with the possibility of a potential business relationship, Rockwell
and the Company entered into a confidentiality agreement dated as of April 18,
1996.
In May 1996, the Board authorized management to engage Lehman Brothers to
assist the Company in evaluating various financing and strategic alternatives.
The Board was particularly interested in determining the viability of the
Company as a stand-alone entity compared with the Company's prospects in
securing a strategic partner or being acquired. During the same month,
12
<PAGE>
Mr. Bixby and Mr. Decker had several meetings and telephone conversations where
they further explored the potential acquisition of the Company by Rockwell. Mr.
Bixby and Mr. Decker decided to expand the discussions to include senior
management of both companies and other key decision makers, including a meeting
on May 7, 1996, where members of management of Rockwell and the Company met to
engage in a preliminary review of the Company's product lines. The discussions
at this meeting focused on the profitability and nature of the Company's product
lines, and the Company's balance sheet, cash flow, manufacturing capabilities
and general organization.
In May 1996, Rockwell began a due diligence investigation of the Company.
From June 10, 1996 through June 13, 1996, senior management of the two companies
and their various representatives met in La Jolla, California for due diligence
meetings on a variety of matters, including products, technology, human
resources, marketing and finance. Following these meetings, the Company and
Rockwell mutually agreed to continue discussions regarding the possibility of an
acquisition.
On June 18, 1996 and June 20, 1996, the Board held meetings, with legal and
financial advisors present, to review the status of discussions with Rockwell,
as well as to discuss the appropriate price parameters for any acquisition of
the Company. The Board also discussed other alternatives available to the
Company as Mr. Bixby reviewed with the Board his previous contacts with Rockwell
and other corporations. Lehman Brothers presented its financial analysis of the
Company to assist the Board in evaluating the Company as an independent entity.
Following discussion regarding the merits of remaining as a stand-alone
corporation compared with being acquired, the Board authorized management to
continue its discussions with Rockwell. At this time, there was still no
agreement with Rockwell on price or structure.
On June 24, 1996, Rockwell contacted the Company and made an all cash offer
for the outstanding shares of Brooktree Common Stock. On that same day, the
Board, with legal and financial advisors present, held a meeting to discuss the
process of negotiating a per share price with Rockwell as well as other aspects
of the acquisition. After lengthy deliberation, the Board determined that if
mutually agreeable price and structure terms could be reached, an acquisition by
Rockwell was the best alternative for the Company.
On June 26, 1996 and June 27, 1996, negotiations were held between the two
companies and their respective financial advisors regarding the per share price
for an all cash acquisition of the outstanding shares of Brooktree Common Stock,
during which Rockwell raised the amount of its original offer. On June 28, 1996,
Rockwell delivered a draft merger agreement to the Company and the Board met in
Palo Alto, California, with legal and financial advisors present to discuss the
status of the transaction. Concurrently with this meeting, the Company's
management and financial advisors continued negotiations with Rockwell and
tentatively agreed to a per share price of $15.00 for each outstanding share of
Brooktree Common Stock. At the Board meeting, representatives from Lehman
Brothers indicated that at the $15.00 per share price, Lehman Brothers, as
financial advisor to the Company, would be able to deliver an opinion to the
effect that the proposed Merger was fair from a financial point of view to the
Company and its shareholders. The Company's legal advisors reviewed the terms of
the draft merger agreement and following the Board's review thereof, the Board
members gave comments on the draft agreement to the Company's management and
legal advisors. Following a lengthy discussion, the Board unanimously agreed to
accept the $15.00 per share offer, subject to satisfactory negotiation of terms
to be set forth in a definitive agreement.
On June 29, 1996 and June 30, 1996, the terms of a definitive agreement were
negotiated in Los Angeles, California. With counsel and financial advisors
present at all meetings, the Board met once on June 29, 1996 and twice on June
30, 1996 to discuss the status of negotiations as well as to direct management
and counsel regarding acceptable terms of a definitive agreement. On June 30,
1996, the Board approved the terms of the Merger Agreement and instructed
management to finalize and execute the agreement. At 1:30 A.M., July 1, 1996,
the definitive agreement was executed by Rockwell, Sub and the Company. The
execution of the Merger Agreement was announced promptly thereafter by the
issuance of a press release by Rockwell and the Company.
13
<PAGE>
REASONS FOR THE MERGER
In making its determination to approve the Merger Agreement and Merger, the
Board considered the opportunity the Merger would provide to secure a premium
for shareholders over the existing market price of Brooktree Common Stock prior
to the execution of the Merger Agreement compared with the Company's ability to
improve its financial performance without the Merger. In comparing such premium
to the return on shareholder investment believed to be achievable through future
appreciation in the stock of the Company operating as an independent company or
with a corporate partner, the Board considered various factors affecting the
Company's future financial performance and prospects. In order of importance,
the Board considered (i) the Company's ability to fund development of future
products at a comparable rate to its competitors (in particular, the Board
considered the fact that most of the Company's competitors are larger
corporations with substantially greater resources to fund new product
development), (ii) the Company's ability to solicit and secure a viable
corporate partner as an alternative to operating as an independent entity, (iii)
the Company's ability to obtain the capital necessary to acquire imaging and
multimedia technology required to expand its product offerings and (iv) the
Company's ability to continue to attract experienced and qualified engineers in
a highly competitive marketplace (the Board noted that such engineers would be
critical to the Company's future success). In its deliberations, the Board
ultimately concluded that the Company had three alternatives: (i) continue to
operate as an independent entity and focus on improving future financial
performance; (ii) secure a corporate partner or a similar relationship to assist
in funding development of products and improvement of financial performance; or
(iii) negotiate and enter into a merger agreement with Rockwell to secure a
premium for shares of Brooktree Common Stock. The Board also took into account
that the Company had contact with several alternative parties to discuss the
possible acquisition of the Company and that none of such contacts resulted in
an offer. After a careful analysis, the Board concluded that the Merger was the
best alternative for the Company's shareholders. The Board concluded that it was
unlikely that the Company would be able to secure a viable corporate partner or
be able to improve its financial performance in the foreseeable future such that
the value of the Brooktree Common Stock would equal or exceed the Merger
Consideration.
In the course of its deliberations, the Board reviewed with Company
management the following additional factors relevant to the Merger: (i)
historical information concerning the Company's business, prospects, financial
performance and condition, operations, technology, management and competitive
position; (ii) current financial market conditions and historical market prices,
volatility and trading information with respect to Brooktree Common Stock; (iii)
the consideration to be received by the Company's shareholders in the Merger and
a comparison of comparable merger transactions; (iv) the terms of the proposed
Merger Agreement, including the parties' representations, warranties and
covenants, the conditions to their respective obligations, and the terms of the
proposed Merger Agreement regarding the Company's ability to consider and
negotiate other acquisition proposals in certain circumstances, as well as the
possible effects of the provisions regarding termination fees; (v) the Company's
management's view as to the prospects of the Company as an independent company,
and consideration of the estimated financial results of the Company for the
quarter ended June 29, 1996; (vi) the Company's management's view as to the
prospects for other third parties to enter into strategic relationships with or
acquire the Company; (vii) detailed financial analysis and pro forma and other
information with respect to the Company presented by Lehman Brothers in Board
presentations, including Lehman Brothers' opinion that the consideration to be
offered to shareholders of the Company in the Merger is fair to such
shareholders from a financial point of view (See "-- Opinion of the Company's
Financial Advisor"); and (viii) the belief that the Merger represents the most
favorable economic alternative currently available to the shareholders of the
Company. In considering the Company's estimated financial results for the
quarter ended June 29, 1996, the Board particularly considered the fact that
revenues in the third quarter were likely to decline. In fact, third quarter
revenues did decline to $30.7 million compared to $35.6 million reported in the
second quarter of fiscal 1996. The decrease resulted in a pre-tax operating loss
of approximately $3.0 million, exclusive of an inventory write-down, which
increased the total pre-tax operating loss of the Company to
14
<PAGE>
approximately $11.3 million. The Board considered the fact that the Company's
Graphics and ATE businesses were declining and concluded that it was uncertain
whether the Company's imaging and communications product lines sales would
increase in sufficient amounts to return the Company to profitability in the
near future.
The Board also identified and considered a variety of potentially negative
factors in its deliberations concerning the Merger, including, but not limited
to (i) the potential disruption of the Company's business that might result from
employee uncertainty and lack of focus following announcement of the Merger and
(ii) the possibility that the Merger might not be consummated and the effect of
public announcement of the Merger on the Company's sales and operating results
and its ability to attract and retain key management, marketing and technical
personnel. The Board concluded that the benefits of the Merger outweigh any such
potentially negative factors.
RECOMMENDATION OF THE BOARD
The Board carefully considered the Merger Agreement and the Merger,
including a review of financial, legal and market considerations with the
assistance of outside financial and legal advisors, and determined that the
terms of the acquisition of the Company by Rockwell pursuant to the Merger
Agreement are fair to and in the best interests of the Company and its
shareholders. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER AND, AFTER CAREFUL CONSIDERATION, THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
MERGER.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
The Company engaged Lehman Brothers to act as its financial advisor in
connection with the Merger and to render its opinion as to the fairness, from a
financial point of view, to the Company's shareholders of the consideration to
be offered to such shareholders in the Merger.
On June 30, 1996, in connection with the evaluation of the Merger Agreement
and the transactions contemplated thereby by the Board, Lehman Brothers
delivered its oral opinion, which opinion was subsequently confirmed in writing
on July 1, 1996 and August 26, 1996, that, subject to assumptions, factors and
limitations described below, from a financial point of view, the consideration
to be offered to the Company's shareholders in the Merger was fair from a
financial point of view to such shareholders. An updated opinion of Lehman
Brothers was delivered to the Board on August 26 , 1996 and the full text of
such updated opinion, dated August 26, 1996, which sets forth assumptions made,
procedures followed, matters considered, and limitations on the scope of the
review by Lehman Brothers in rendering its opinion, is attached as Annex II and
is incorporated herein by reference.
No limitations were imposed by the Company on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion, except as described below. Lehman Brothers was not requested to and
did not make any recommendation to the Board as to the form or amount of the
consideration to be offered to the Company's shareholders in the Merger, which
was determined through arm's-length negotiations between the Company and
Rockwell. In arriving at its opinion, Lehman Brothers did not ascribe a specific
range of values to the Company, but made its determination as to the fairness,
from a financial point of view, of the consideration to be offered to the
shareholders of the Company on the basis of the financial and comparative
analyses described below. Lehman Brothers' opinion is for the use and benefit of
the Board and was rendered to the Board in connection with its consideration of
the Merger. Lehman Brothers' opinion is not intended to be and does not
constitute a recommendation to any Company shareholder as to how such
shareholder should vote with respect to the Merger at the Special Meeting.
Lehman Brothers was not requested to opine as to, and its opinion does not in
any manner address, the Company's underlying business decision to proceed with
or effect the Merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
Merger Agreement and the specific terms of the proposed Merger, (2) such
publicly available information concerning the Company and Rockwell that Lehman
Brothers believed to be relevant to its inquiry, (3) financial and
15
<PAGE>
operating information with respect to the business, operations and prospects of
the Company furnished to Lehman Brothers by the Company, including without
limitation the estimated financial results of the Company for the quarter ended
June 29, 1996 which were publicly disclosed concurrently with the announcement
of the execution of the Merger Agreement, (4) a trading history of the Brooktree
Common Stock from its initial public offering to the present and a comparison of
that trading history with those of other companies that Lehman Brothers deemed
relevant, (5) research analyst reports regarding the Company and its estimated
financial performance, (6) a comparison of the historical financial results and
present financial condition of the Company with those of other companies that
Lehman Brothers deemed relevant, and (7) a comparison of the financial terms of
the proposed Merger with the financial terms of certain other recent
transactions that Lehman Brothers deemed relevant. In addition, Lehman Brothers
had discussions with the management of the Company concerning its business,
operations, assets, financial condition and prospects and undertook such other
studies, analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of management of the Company
that they were not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company, upon advice of the Company, Lehman Brothers assumed that such
projections had been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company, and Lehman Brothers relied
on such projections in arriving at its opinion. In arriving at its opinion,
Lehman Brothers did not conduct a physical inspection of the properties and
facilities of the Company and did not make or obtain any evaluations or
appraisals of the assets or liabilities of the Company. In addition, although
Lehman Brothers had certain preliminary discussions with third parties, the
Company did not authorize Lehman Brothers to, and Lehman Brothers did not,
formally solicit any proposals or offers from any third party with respect to
the purchase of all or a part of the Company's business. Lehman Brothers'
opinion necessarily was based upon market, economic and other conditions as they
existed on, and could be evaluated as of, the date of its opinion letter.
In connection with its opinions of July 1, 1996 and August 26, 1996, Lehman
Brothers performed a variety of financial and comparative analyses, as described
below. The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Furthermore,
in arriving at its fairness opinion, Lehman Brothers did not attribute any
particular weight to any analysis and factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Lehman Brothers believes that its analyses must be
considered as a whole and that considering any portion of such analyses and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying its opinion. In
its analysis, Lehman Brothers assumed stable business and economic conditions
and a stable competitive environment in the markets in which the Company
operates, which conditions and environment are beyond the control of the
Company. Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which businesses actually may be sold.
HISTORICAL STOCK PRICE ANALYSIS. Lehman Brothers considered various
historical data concerning the history of the trading prices of Brooktree Common
Stock for the period from the Company's initial public offering through June 28,
1996. Specifically, Lehman Brothers compared the relationship of the price
movements of Brooktree Common Stock during the five year period ended June 28,
1996 relative to composite indices consisting of the Comparable Communications
Semiconductor Company Group,
16
<PAGE>
the Comparable Graphics/Multimedia Semiconductor Company Group and the
Comparable Imaging/ Video Compression Semiconductor Company Group (each as
defined below). During this period the closing stock price of Brooktree Common
Stock ranged from $5.75 to $21.75, and the stock price of Brooktree Common Stock
performed below the indices of comparable company groups.
Based on the closing price of Brooktree Common Stock of $10.50 on June 28,
1996 (the last trading day prior to the announcement of the execution of the
Merger Agreement), the $15.00 per share offer represents a 42.9% premium. The
$15.00 per share offer represents a premium of 64.4% over the stock price of
Brooktree Common Stock one week before June 28, 1996, a premium of 25.0% over
the stock price of Brooktree Common Stock four weeks before June 28, 1996 and a
premium of 54.1% over the average stock price of Brooktree Common Stock for the
ninety days ended June 28, 1996.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPARABLE COMPANIES. Using publicly
available information, Lehman Brothers compared selected financial data of the
Company with similar data of selected publicly-traded semiconductor companies
focused on specific markets considered by Lehman Brothers to be comparable to
those of the Company. Specifically, Lehman Brothers included in its review three
separate groups of publicly-traded semiconductor companies: selected
communications companies including ANADIGICS, Inc., Level One Communications,
Inc., Sierra Semiconductor Corporation, TranSwitch Corporation, TriQuint
Semiconductor, Inc. and Vitesse Semiconductor Corporation (the "Comparable
Communications Semiconductor Company Group"); selected graphics/multimedia
companies including ESS Technology, Inc., Chips & Technologies, Inc., Cirrus
Logic, Inc., S3 Incorporated, Trident Microsystems, Inc., and Tseng Labs, Inc.
(the "Comparable Graphics/Multimedia Semiconductor Company Group"); and selected
imaging/video compression companies including C-Cube Microsystems, Inc. and
Zoran Corporation (the "Comparable Imaging/Video Compression Semiconductor
Company Group"). Lehman Brothers calculated, among other things, current equity
market value ("Market Value") as a multiple of each of latest twelve months
("LTM") net income, projected calendar year 1996 and 1997 net income and LTM
book value for the Company and these groups. Lehman Brothers also calculated
equity market value plus total debt less cash and cash equivalents (the "Market
Capitalization") as a multiple of each of LTM sales and LTM earnings before
interest and taxes ("EBIT"). Projected results for the selected comparable
companies were taken from Institutional Brokers Estimate System (I/B/E/S)
estimates.
Of these three semiconductor groups, Lehman Brothers concentrated primarily
on the Comparable Graphics/Multimedia Semiconductor Company Group as well as
Level One Communications, Inc. and Sierra Semiconductor Corporation from the
Comparable Communications Semiconductor Company Group for analyzing the
Company's valuation on a consolidated basis, since these companies are most
similar to the traditional core business of the Company. An analysis of the
Comparable Graphics/ Multimedia Semiconductor Company Group as well as Level One
Communications, Inc. and Sierra Semiconductor Corporation yielded the following:
(i) a median value of 12.1x for the ratio of Market Value to LTM net income;
(ii) a median value of 11.8x for the ratio of Market Value to calendar year 1996
projected net income; (iii) a median value of 8.9x for the ratio of Market Value
to calendar year 1997 projected net income; (iv) a median value of 2.84x for the
ratio of Market Value to book value; (v) a median value of 1.41x for the ratio
of Market Capitalization to LTM sales; and (vi) a median value of 9.6x for the
ratio of Market Capitalization to LTM EBIT. The above multiples were applied to
the corresponding consolidated results of the Company. Based on these median
multiples, the following per share valuations for the Company were implied: (i)
a value of $4.37 per share based on the ratio of Market Value to LTM net income,
(ii) a value of $7.40 per share based on the ratio of Market Value to calendar
year 1996 projected net income, (iii) a value of $3.79 per share based on the
ratio of Market Value to calendar year 1997 projected net income, (iv) a value
of $25.48 per share based on the ratio of Market Value to book value, (v) a
value of $13.35 per share based on the ratio of Market Capitalization to LTM
sales and (vi) a value of $5.74 per share based on the ratio of Market
Capitalization to LTM EBIT.
17
<PAGE>
However, because of the inherent differences between the businesses,
operations and prospects of the Company and the businesses, operations and
prospects of the companies in the Comparable Communications Semiconductor
Company Group, the Comparable Graphics/Multimedia Semiconductor Company Group
and the Comparable Imaging/Video Compression Semiconductor Company Group, Lehman
Brothers believed that it was inappropriate to, and therefore did not, rely
solely on the quantitative results of the analysis, and accordingly also made
qualitative judgments concerning differences between the financial and operating
characteristics and prospects of the Company and the companies in the Comparable
Communications Semiconductor Company Group, the Comparable Graphics/Multimedia
Semiconductor Company Group and the Comparable Imaging/Video Compression
Semiconductor Company Group which would affect the public trading values of the
Company and such companies. These qualitative judgements do not lead to specific
conclusions or adjustments regarding the public trading values of the stock of
the Company and such companies, but rather were part of Lehman Brothers'
evaluation of the relevance of this comparative analysis under the particular
circumstances of the Merger. In particular, Lehman Brothers studied the
Company's results and current forecasts for future quarters and compared those
numbers with research analyst estimates of the Company's current and future
financial performance. In addition, Lehman Brothers took into consideration the
fact that the Company competes in a variety of highly competitive markets and
often competes against corporations that specialize in only one market.
DISCOUNTED CASH FLOW ANALYSIS. Lehman Brothers calculated the present value
of the future streams of unleveraged after-tax cash flow that the Company could
be expected to produce over a four year period. This analysis utilized only
projections provided by management of the Company, with the assumption that the
Company's Multimedia business division would be discontinued following the
second calendar quarter of 1996. Lehman Brothers calculated terminal values of
the Company based on a multiple ("Terminal Value Multiple") of projected fiscal
year 1999 EBIT. Lehman Brothers used a Terminal Value Multiple of 9.0x and
annual discount rates of 17.5% to 20.0% that were determined on the basis of
factors such as, the inherent business risks of the Company and the Company's
cost of capital. Based on this analysis a per share range of values for
Brooktree Common Stock of $17.54 to $18.78 was implied. However, Lehman Brothers
noted that any adjustments to the projections provided by management of the
Company would affect the values implied by this analysis.
BREAK-UP VALUATION ANALYSIS. Lehman Brothers calculated the break-up value
of the Company based on historical and projected business divisions financial
information provided by the management of the Company. Lehman Brothers analyzed
the individual and combined values of the Company's Communications, Imaging,
Graphics and ATE business divisions. In this analysis, based upon advice of the
management of the Company, Lehman Brothers assumed the Company's Multimedia
business division would be discontinued following the second calendar quarter of
1996 and therefore ascribed no value to this business division.
Using publicly available information for the groups of comparable companies,
Lehman Brothers compared selected financial data of the Company's Communications
and Imaging business divisions with similar data of the Comparable
Communications Semiconductor Company Group and the Comparable Imaging/Video
Compression Semiconductor Company Group, respectively. An analysis of the
Comparable Communications Semiconductor Company Group yielded the following: (i)
a median value of 28.6x for the ratio of Market Value to LTM net income; (ii) a
median value of 27.7x for the ratio of Market Value to calendar year 1996
projected net income; (iii) a median value of 21.8x for the ratio of Market
Value to calendar year 1997 projected net income; (iv) a median value of 3.20x
for the ratio of Market Capitalization to LTM sales; and (v) a median value of
24.3x for the ratio of Market Capitalization to LTM EBIT. An analysis of the
Comparable Imaging/Video Compression Semiconductor Company Group yielded the
following: (i) a median value of 31.0x for the ratio of Market Value to LTM net
income; (ii) a median value of 28.2x for the ratio of Market Value to calendar
year 1996 projected net income; (iii) a median value of 19.6x for the ratio of
Market Value to calendar year 1997 projected net income; (iv) a median value of
5.49x for the ratio of Market Capitalization to LTM sales; and (v) a median
value of 47.0x for the ratio of Market Capitalization to LTM EBIT. The above
multiples were applied to the corresponding results of the Company's
Communications and Imaging business divisions on a stand-alone basis to
determine a range
18
<PAGE>
of valuations for these two business divisions. Lehman Brothers determined the
valuations of the Company's Graphics and ATE business divisions by calculating
the present value of the future streams of unleveraged after-tax cash flow that
the Graphics and ATE business divisions could be expected to produce over a
three year period. Lehman Brothers used annual discount rates of 17.5% to 20%
that were determined on the basis of factors such as the inherent business risks
of the Company and the Company's cost of capital. Lehman Brothers' break-up
valuation analysis implied a combined valuation for the Company's business
divisions as follows: (i) a value of $8.39 per share based on the ratio of
Market Value to LTM net income, (ii) a value of $9.66 per share based on the
ratio of Market Value to calendar year 1996 projected net income, (iii) a value
of $15.16 per share based on the ratio of Market Value to calendar year 1997
projected net income, (iv) a value of $20.35 per share based on the ratio of
Market Capitalization to LTM sales and (v) a value of $13.56 per share based on
the ratio of Market Capitalization to LTM EBIT.
However, because of the inherent differences between the businesses,
operations and prospects of the Company's Communications and Imaging business
divisions and the businesses, operations and prospects of the companies in the
Comparable Communications Semiconductor Company Group and the Comparable
Imaging/Video Compression Semiconductor Company Group, Lehman Brothers believed
that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, and accordingly also made qualitative
judgments concerning differences between the financial and operating
characteristics and prospects of the Company's Communications and Imaging
business divisions and the companies in the Comparable Communications
Semiconductor Company Group and the Comparable Imaging/Video Compression
Semiconductor Company Group which would affect the public trading values of the
Company's Communications and Imaging business divisions and such companies.
These qualitative judgements do not lead to specific conclusions or adjustments
regarding the public trading values of the Company's Communications and Imaging
business divisions and such companies, but rather were part of Lehman Brothers'
evaluation of the relevance of this comparative analysis under the particular
circumstances of the Merger. In particular, Lehman Brothers studied the
Company's results and current forecasts for future quarters and compared those
numbers with research analyst estimates of the Company's current and future
financial performance. In addition, Lehman Brothers took into consideration the
fact that the Company competes in a variety of highly competitive markets and
often competes against corporations that specialize in only one market.
ANALYSIS OF SELECTED COMPARABLE TRANSACTION PREMIUMS. Lehman Brothers
reviewed the prices paid, to the extent publicly available, of a broad range of
selected acquisition transactions involving technology companies greater than
$100 million in size since 1989 (the "Comparable Technology Transactions").
Lehman Brothers also analyzed a selected group of semiconductor company
acquisition transactions within the Comparable Technology Transactions
("Comparable Semiconductor Transactions"). Using both the broad Comparable
Technology Transactions and the selected Comparable Semiconductor Transactions,
Lehman Brothers reviewed the premiums paid over the acquired companies' stock
prices one day, one week and four weeks prior to the public announcement of the
transaction. For the Comparable Technology Transactions, median premiums paid
over the acquired companies' stock price one day, one week and four weeks prior
to announcement of the proposed transaction were 37.4%, 39.2% and 47.1%,
respectively. For the Comparable Semiconductor Transactions, median premiums
paid over the acquired company's stock price one day, one week and four weeks
prior to announcement of the transaction were 41.2%, 40.9% and 48.8%,
respectively. The above premiums were compared to the implied premium
represented by Rockwell's $15.00 per share offer which represented a premium of
42.9%, 64.4% and 25.0% over the one day, one week and four week stock prices,
respectively, of the Brooktree Common Stock. In Lehman Brothers' analysis of the
implied premium represented by Rockwell's $15.00 per share offer, Lehman
Brothers also took into consideration Brooktree's planned announcement of its
estimated financial results for the quarter ended June 29, 1996 concurrently
with the announcement of the execution of the Merger Agreement and based upon
research analyst estimates of the Company's financial results for the quarter
ended June 29, 1996 and subsequent quarters, the potential negative impact such
an announcement could have had on the price of Brooktree Common Stock.
19
<PAGE>
However, because the reasons for and the circumstances surrounding each of
the transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of the
Company and the businesses, operations and prospects of the selected acquired
companies analyzed, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis, and
accordingly also made qualitative judgments concerning differences between the
characteristics of these transactions and the Merger that would affect the
acquisition values of the Company and such acquired companies. These qualitative
judgements do not lead to specific conclusions or adjustments regarding the
acquisition value of the Company and such acquired companies, but rather were
part of Lehman Brothers' evaluation of the relevance of this comparative
analysis under the particular circumstances of the Merger.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Board selected Lehman Brothers
because of its expertise, reputation and familiarity with the Company in
particular and the semiconductor industry in general.
As compensation for its services in connection with the Merger, the Company
has agreed to pay Lehman Brothers a fee upon consummation of the Merger based on
the aggregate value of the consideration received by the Company's shareholders
as determined at the time plus the aggregate principal amount of any
indebtedness for money borrowed assumed by Rockwell in connection with a sale of
the Company. Based on a price for Brooktree Common Stock of $15.00 per share,
the fee payable upon consummation of the Merger would total approximately $3
million. In addition, the Company has agreed to reimburse Lehman Brothers for
reasonable out-of-pocket expenses incurred in connection with the Merger and to
indemnify Lehman Brothers for certain liabilities that may arise out of its
engagement by the Company and the rendering of its opinion.
Lehman Brothers is acting as financial advisor to the Company in connection
with the proposed Merger. Lehman Brothers has performed various investment
banking services for the Company in the past (including advising the Company on
the sale of a development center to Pioneer Electronic Corporation and the
acquisition of Base2 Systems, Inc.) and has received customary fees for such
services. In addition, Michael Wishart, a Managing Director of Lehman Brothers,
is a director of the Company. Lehman Brothers also has performed various
investment banking services for Rockwell in the past and has received customary
fees for such services. In the ordinary course of its business, Lehman Brothers
actively trades in the equity securities of the Company and Rockwell for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS TO THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that certain of the Company's directors
and executive officers have certain interests in the transaction, which may
present them with conflicts of interest in connection with the Merger. The Board
was aware of these conflicts and considered them among the other matters
described under "-- Reasons for the Merger," above.
MICHAEL S. WISHART, a director of the Company, is a Managing Director of
Lehman Brothers, which has performed various investment banking services for the
Company since 1991 and is acting as the Company's financial advisor in
connection with the Merger. In connection with its role as financial advisor to
the Company and the delivery of its opinions as to the fairness of the
consideration to be offered to the shareholders of the Company in the Merger,
Lehman Brothers will receive a fee of approximately $3 million upon consummation
of the Merger. In addition, Lehman Brothers has ongoing contact with Rockwell,
including acting as co-manager of a $300 million debt offering issued by
Rockwell on June 13, 1995. See "-- Opinion of the Company's Financial Advisor."
20
<PAGE>
STOCK AND OPTION OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS. As of
August 5, 1996, the executive officers and directors of the Company as a group
beneficially owned an aggregate of 700,301 shares of Brooktree Common Stock
(excluding 1,508,093 shares that executive officers and directors have the right
to acquire upon exercise of outstanding options granted under the Stock Option
Plans and granted pursuant to Nonqualified Options to outside directors of the
Company), representing approximately 4% of the total voting power of the
Company. All such shares will be treated in the Merger in the same manner as the
shares of Brooktree Common Stock held by the other shareholders of the Company.
See "Stock Ownership of Management and Certain Beneficial Owners" and "--
Description of the Merger."
Pursuant to the Merger Agreement, the Company has agreed to take all action
(satisfactory to Rockwell in its reasonable discretion) necessary to provide
that immediately prior to the Effective Time, each then outstanding option to
purchase shares of Brooktree Common Stock granted under the Stock Option Plans
or granted pursuant to Nonqualified Stock Options to outside directors of the
Company will have become fully exercisable and vested and, if not exercised,
will be canceled in exchange for an amount (subject to applicable withholding
tax) in cash from the Company (or at Rockwell's option, from Rockwell or Sub)
for each share subject to such option equal to the excess, if any, of $15.00
over the per share exercise price of such option. All such options will be
treated in the Merger in the same manner as the options to purchase shares of
Brooktree Common Stock held by the other option holders of the Company. See "--
Effect of the Merger on Certain Company Employee Benefit Plans."
The following table sets forth the total number of unexercised options held
as of August 5, 1996 by (i) each director of the Company, (ii) each of the Named
Executive Officers and (iii) all directors and executive officers as a group,
separately identifying the exercisable and unexercisable options, and the
average exercise price of such options. All of the options listed below will
become fully vested and exercisable immediately prior to the Effective Time.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
UNEXERCISED OPTIONS
AS OF AUGUST 5, 1996 AVERAGE
-------------------------- EXERCISE
NAME EXERCISABLE UNEXERCISABLE PRICE
- ------------------------------------------------------------------ ----------- ------------- ---------
<S> <C> <C> <C>
James A. Bixby.................................................... 402,152 73,431 $ 9.30
Ellsworth R. Roston............................................... 20,000 4,000 $ 11.67
Jack W. Savidge................................................... 20,000 4,000 $ 11.67
Daniel J. Warmenhoven............................................. 15,342 4,000 $ 8.02
Michael S. Wishart................................................ 21,117 4,000 $ 9.05
Anthony C. D'Augustine............................................ 24,730 71,270 $ 9.76
Pete R. Fowler.................................................... 42,957 52,255 $ 7.31
Phillip L. DenAdel................................................ 41,339 53,729 $ 8.48
Robert W. Zabaronick.............................................. 92,315 33,185 $ 9.68
All Directors and Officers as a Group (16 persons)................ 950,261 557,832 $ 9.38
</TABLE>
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that, after
the Effective Time, Rockwell will, and will cause the Surviving Corporation to,
provide certain indemnification to each person who at any time prior to the
Effective Time has been an officer, director or employee of the Company in
connection with acts or omissions occurring at or prior to the Effective Time,
and that for a period of six years after the Effective Time, Rockwell will cause
the Surviving Corporation to use its best efforts to maintain in effect certain
directors' and officers' liability insurance coverage. See "-- Indemnification;
Officers' and Directors' Insurance."
AGREEMENTS WITH EMPLOYEES. In connection with the Merger, Rockwell will
enter into agreements with certain employees of the Company, including each of
the executive officers of the Company. The agreements to be entered into with
such employees will provide for the payment by Rockwell of a sign-on bonus
during either the first calendar week of 1997 or the first week of active
employment on Rockwell's payroll, provided that such payment will be repaid if
such employee voluntarily terminates employment prior to completion of six
months of active employment with Rockwell. In addition, the
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agreements will provide for payment by Rockwell of a retention bonus (a) upon
completion of two years of active employment with Rockwell or upon involuntary
termination due to layoff prior to completion of two years of active employment
with Rockwell and (b) upon completion of three years of active employment with
Rockwell or upon involuntary termination due to layoff after completion of two
years but prior to completion of three years of active employment with Rockwell.
The agreements will further provide (a) upon involuntary termination due to
layoff on or prior to completion of two years of active employment with
Rockwell, for continued receipt by the employee of salary and benefits at the
rate of base pay existing at the time of termination until the earlier of 26
weeks or the commencement of other employment by such terminated employee and
for certain outplacement services and (b) upon involuntary termination due to
layoff after completion of two years of active employment with Rockwell, for
continued receipt by the employee of salary and benefits in accordance with
Rockwell's policies existing at the time of termination and for certain
outplacement services.
In addition, the agreements will provide that upon termination of employment
for any reason prior to completion of three years of active employment with
Rockwell, the employee agrees not to compete with Rockwell's semiconductor
business for a period of one year after such termination. The agreements will
provide that following successful completion of such non-compete period,
Rockwell will pay a non-compete bonus equal to 50% of the retention bonus for
completion of three years of active employment with Rockwell described above.
The following table sets forth the salaries, sign-on bonuses and retention
bonuses for each of the Named Executive Officers under the agreements described
above.
<TABLE>
<CAPTION>
RETENTION BONUS
ANNUAL SIGN-ON ------------------------
EXECUTIVE OFFICER SALARY BONUS 2 YEARS 3 YEARS
- --------------------------------------------------------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
James A. Bixby................................................. $ 240,000 $ -- $ 800,000 $ 400,000
Anthony C. D'Augustine......................................... $ 174,000 $ 50,000 $ 200,000 $ 100,000
Pete R. Fowler................................................. $ 165,000 $ 50,000 $ 200,000 $ 100,000
Phillip L. DenAdel............................................. $ 165,000 $ 25,000 $ 50,000 $ 25,000
Robert W. Zabaronick........................................... $ 159,996 $ 50,000 $ -- $ --
</TABLE>
The agreements will also provide for the waiver by the employee of any
rights he or she may have with respect to any options granted under the
Company's 1985 Stock Option Plan or 1992 Stock Plan upon payment of the amounts
payable in connection with the cancellation of such options pursuant to the
Merger Agreement. See "-- Effect of the Merger on Certain Company Employee
Benefit Plans."
AGREEMENTS WITH ROCKWELL. Pursuant to the Agreement, Assignment and Bill of
Sale dated February 20, 1992 between Rockwell and the Company (the "T1/E1
Agreement"), Rockwell sold assets of its T1/E1 digital communications business
(including devices, wafers, technical information and intellectual property
rights) to the Company for $6 million. Concurrent with the T1/E1 Agreement,
Rockwell and the Company entered into a Supply Agreement pursuant to which
Rockwell, as the Company's sole supplier, agreed to supply, and the Company
agreed to buy, certain T1/E1 devices and wafers for a period of three years. The
term of the Supply Agreement has since been extended through December 31, 1997.
During the 1995 fiscal year, Rockwell sold to the Company approximately $5
million worth of the T1/E1 devices and wafers which were manufactured, in part,
by a third party foundry, as permitted by the Supply Agreement.
In connection with the proposed Merger, Rockwell and the Company have
entered into a letter agreement dated July 12, 1996 pursuant to which the
parties have agreed that if the Merger is not consummated (other than by reason
of a termination of the Merger Agreement by Rockwell as discussed in
subparagraphs (e) and (f) under "-- Termination") and on or before December 31,
1996, the Company terminates any engineers and marketing personnel hired in
support of certain of the Company's businesses between July 12, 1996 and
September 30, 1996, or such later date as the parties may agree (the "New
Hires"), due to the non-occurrence of the Merger, Rockwell will pay the Company
for each such terminated New Hire, the lesser of (i) the costs incurred by the
Company in
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<PAGE>
hiring and terminating such New Hire or (ii) $25,000, provided that Rockwell's
obligation will not exceed $1,000,000 in the aggregate and Rockwell will have no
other obligation whatsoever with respect to New Hires. In addition, in the event
the Merger is not consummated, the Company has granted Rockwell an irrevocable,
royalty free, worldwide license to make, have made, use and sell products
incorporating certain technology of the Company relating to enabling audio
soundblaster compatibility with a PCI bus.
VOTE REQUIRED TO APPROVE THE MERGER
The affirmative vote of the holders of a majority of the shares of Brooktree
Common Stock outstanding on the Record Date is required to approve and adopt the
Merger Agreement and to approve the Merger. Abstentions will be counted for
purposes of establishing a quorum but cannot be counted toward achieving the
requisite majority vote for approval and adoption of the Merger Agreement and
approval of the Merger.
EXCHANGE OF CERTIFICATES REPRESENTING BROOKTREE COMMON STOCK
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each holder of record of outstanding shares of Brooktree
Common Stock immediately prior to the Effective Time a letter of transmittal for
return to the Exchange Agent (which will contain instructions for the use
thereof in effecting the surrender of the certificates that immediately prior to
the Effective Time represented shares of Brooktree Common Stock (the
"Certificates") in exchange for the Merger Consideration and will specify that
delivery will be effected and risk of loss and title to the Certificates will
pass only upon delivery of the Certificates to the Exchange Agent). SHAREHOLDERS
OF THE COMPANY SHOULD NOT SEND THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL THEY
HAVE RECEIVED A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal (duly executed and completed in accordance with the instructions
thereto), and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate will be entitled to receive in exchange
therefor the cash such holder is entitled to receive pursuant to the Merger
Agreement.
After the Effective Time, the stock transfer books of the Company will be
closed and there will be no further registration of transfers on the stock
transfer books of the Company of the shares of Brooktree Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Exchange Agent or the Surviving
Corporation for any reason, they will be canceled and exchanged for the Merger
Consideration, except as otherwise provided by law with respect to dissenter's
shares.
CONDITIONS TO THE MERGER
The Merger Agreement provides that the Merger is subject to the satisfaction
of certain conditions, including the following:
(a) the Merger Agreement and the Merger having been approved and adopted
by the affirmative vote of the shareholders of the Company to the extent
required by the CCC;
(b) the expiration or early termination of the applicable waiting period
under the HSR Act;
(c) the making of all filings required to be made prior to the Effective
Time by the Company, any of the Company's subsidiaries, Rockwell or Sub with
any Governmental Entity (as defined below) and the obtaining of all
consents, approvals and authorizations required to be obtained prior to the
Effective Time by the Company, any of the Company's subsidiaries, Rockwell
or Sub from any Governmental Entity in connection with the execution,
delivery and performance of the Merger Agreement, except where the failure
to make such filings or obtain such consents, approvals or authorizations
(i) would not have (A) a material adverse effect on the business, condition
(financial or otherwise), assets, liabilities, properties, operations or
results of operations of the Company and the Company's subsidiaries, taken
as a whole, or on the ability of the Company to consummate the transactions
contemplated by the Merger Agreement (a "Material Adverse Effect") or (B) a
material adverse effect on the ability of Rockwell and Sub to consummate the
transactions contemplated by the Merger Agreement and (ii) could not
reasonably be
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<PAGE>
expected to subject the Company, any of the Company's subsidiaries, Rockwell
or Sub or any of their respective affiliates or any directors or officers of
any of the foregoing to the risk of criminal liability (for purposes of this
Proxy Statement, "Governmental Entity" means any federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign); and
(d) no statute, law, rule, regulation, decree, judgment, temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other Governmental Entity or other
legal restraint or prohibition preventing the consummation of the Merger
being in effect, provided, however, that each of the Company, Rockwell and
Sub have used reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
In addition, the Merger Agreement provides that the obligations of Rockwell
and Sub to effect the Merger are subject to certain other conditions, including
the following:
(a) the representations and warranties of the Company set forth in the
Merger Agreement being true and correct in all respects as of the date of
the Merger Agreement and true and correct in all material respects at the
Effective Time;
(b) all covenants and agreements of the Company in the Merger Agreement
to be performed or complied with prior to the Effective Time having been
fully performed and complied with in all material respects;
(c) Rockwell having received evidence satisfactory to it in its
reasonable discretion that the Company has taken all necessary action to
effect the cancellation of options granted under the Stock Option Plans or
granted pursuant to Nonqualified Stock Options to outside directors of the
Company as described below under "-- Effect of the Merger on Certain Company
Employee Benefit Plans;"
(d) there not existing or having been instituted or pending any suit,
action or proceeding by or before any court of competent jurisdiction or
other Governmental Entity (i) which is reasonably likely to make illegal, or
to delay or otherwise directly or indirectly restrain or prohibit the
consummation of the Merger, or which is reasonably likely to result in
material damages in connection with the Merger, (ii) which is reasonably
likely to result in (A) the prohibition of ownership or the operation by
Rockwell or Sub of all or a material portion of the business or assets of
the Company and the Company's subsidiaries or of Rockwell and its
subsidiaries or (B) the compelling of Rockwell or Sub to dispose of or to
hold separately all or a material portion of the business or assets of
Rockwell or any of its subsidiaries or of the Company or any of the
Company's subsidiaries as a result of the Merger, (iii) which is reasonably
likely to result in the imposition of material limitations on the ability of
Rockwell or Sub effectively to exercise full rights of ownership of any
shares of Brooktree Common Stock, including, without limitation, the right
to vote any shares of Brooktree Common Stock acquired by Rockwell or Sub on
all matters properly presented to the Company's shareholders, (iv) which is
reasonably likely to result in the divestiture by Rockwell or Sub of any
shares of Brooktree Common Stock, (v) which is reasonably likely to result
in any material diminution in the benefits expected to be derived by
Rockwell or Sub as a result of the transactions contemplated by the Merger
or (vi) which otherwise has had or may reasonably be expected to have a
Material Adverse Effect or a material adverse effect on Rockwell or its
affiliates taken as a whole;
(e) there not existing or having been enacted, entered, enforced,
promulgated or deemed applicable to the Merger, any statute, law, rule,
regulation, judgment, order or injunction or any other action taken by any
court or other Governmental Entity, other than the application to the Merger
of applicable waiting periods under the HSR Act, that has resulted, or may
reasonably be expected to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (vi) of subparagraph (d)
above;
24
<PAGE>
(f) except as set forth in a specified section of the disclosure
schedule delivered by the Company to Rockwell and Sub, there not having
occurred (or reasonably be expected to occur) any event, change or
development which has had or may reasonably be expected to have a Material
Adverse Effect;
(g) (i) the Board or any committee thereof not having (A) withdrawn or
modified in a manner adverse to Rockwell or Sub its approval or
recommendation of the Merger or the Merger Agreement, (B) approved or
recommended a Superior Transaction (as defined under "-- No Solicitation")
or (C) failed to reaffirm its approval or recommendation of the Merger or
the Merger Agreement in accordance with a request by Rockwell or Sub
pursuant to the Merger Agreement and (ii) the Company not having entered
into any Acquisition Agreement (as defined under "-- No Solicitation") with
respect to a Superior Transaction;
(h) all consents or approvals of all persons and entities (other than
Governmental Entities) required to be obtained prior to the Effective Time
in connection with the execution, delivery and performance of the Merger
Agreement (i) by the Company and the Company's subsidiaries having been
obtained and being in full force and effect, except for those the absence of
which would not have a Material Adverse Effect and (ii) by Rockwell and Sub
having been obtained and being in full force and effect, except for those
the absence of which would not have a material adverse effect on the ability
of Rockwell and Sub to consummate the transactions contemplated by the
Merger Agreement;
(i) Rockwell having entered into agreements in substantially the form
previously agreed to by Rockwell, Sub and the Company with (i) 90% of
certain specified employees of the Company, (ii) 85% of certain specified
employees of the Company (including those described in clause (i)) and (iii)
80% of certain specified employees of the Company (including those described
in clauses (i) and (ii)); and
(j) each holder of shares of Brooktree Common Stock purchased pursuant
to the Stock Purchase Plans having paid to the Company such amounts as are
required to be paid to the Company pursuant to the Stock Purchase Plans, the
related Subscription Agreements and the resolutions of the Board related
thereto in respect of the removal of restrictions on transfer applicable to
shares of Brooktree Common Stock purchased under the Stock Purchase Plans
(I.E., an amount equal to the product of the Delta (as defined in the Stock
Purchase Plans) times the number of such shares owned by such holder).
The Merger Agreement provides further that the obligation of the Company to
effect the Merger is subject to certain other conditions, including the
following: (a) the representations and warranties of Rockwell and Sub set forth
in the Merger Agreement being true and correct in all respects as of the date of
the Merger Agreement and true and correct in all material respects at the
Effective Time and (b) all covenants and agreements of Rockwell and Sub in the
Merger Agreement to be performed or complied with prior to the Effective Time
having been fully performed and complied with in all material respects.
CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE EFFECTIVE TIME
The Merger Agreement provides that prior to the Effective Time, the Company
(a) shall conduct, and shall cause each of the Company's subsidiaries to
conduct, their respective businesses in the ordinary course consistent with past
practice (including, without limitation, spending and investments related to
research and development and new product development in current lines of
business), (b) shall use, and shall cause each of the Company's subsidiaries to
use, its best efforts to maintain in effect all existing qualifications,
licenses, permits, approvals and other authorizations referred to in the Merger
Agreement and to preserve their respective business organizations intact and (c)
shall use, and shall cause each of the Company's subsidiaries to use,
commercially reasonable efforts to retain the services of their respective
present officers, employees and agents and to maintain satisfactory
relationships with customers, suppliers and others having business relationships
with it.
25
<PAGE>
The Merger Agreement provides further that prior to the Effective Time, the
Company will not, nor will it permit any of the Company's subsidiaries (except
with the prior written approval of Rockwell) to: (a) amend their respective
charter documents, by-laws or other organizational documents (except as
otherwise contemplated by the Merger Agreement); (b) issue or sell, or
authorize, propose or agree to the issuance or sale of (except pursuant to the
exercise of options granted under the Stock Option Plans or granted pursuant to
Nonqualified Stock Options to outside directors of the Company outstanding on
the date of the Merger Agreement or pursuant to the Company's 1992 Stock
Purchase Plan in accordance with the terms of the Merger Agreement), or
purchase, redeem or otherwise acquire, any shares of its capital stock or any of
its other securities or issue any securities or obligations convertible into or
exchangeable for, or options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or enter into any contract,
understanding or arrangement with respect to the issuance or sale of, any shares
of its capital stock or any of its other securities, or enter into any
arrangement or contract with respect to the purchase, repurchase, sale,
redemption, conversion, exchange registration, transfer or voting of shares of
its capital stock, or adjust, split, reacquire, redeem, combine or reclassify
any of its securities, or make any other changes in its capital structure; (c)
(i) incur (contingently or otherwise) any debt or other obligation to pay money
borrowed or enter into any guarantee of any such obligation of another person or
mortgage, pledge or subject to any restriction on voting or transfer, pledge,
claim, lien, charge, encumbrance or security interest of any kind, their assets,
properties or business, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person or entity; (d) sell or
otherwise dispose of or lease any part of their respective properties or assets
or purchase or otherwise acquire or lease properties or assets, except sales or
purchases of inventory in the ordinary course of business consistent with past
practice, or acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association or other
business organization or division thereof; (e) declare, set aside or pay any
dividends on, or make any distributions of any nature in respect of, their
respective shares of outstanding capital stock; (f) (i) grant any general
increase in wage or salary rates or in employee benefits, (ii) grant any
increase in salary or in employment, retirement, severance or termination or
other benefits or pay any bonus to any officer or director (except as required
by existing agreements, plans or arrangements), (iii) enter into any employment
contract with any person which the Company or the relevant subsidiary of the
Company does not have the unconditional right to terminate without liability,
(iv) take any action to cause to be exercisable any otherwise unexercisable
option under the Stock Option Plans, except as contemplated by the Merger
Agreement, or (v) adopt (or amend in any manner which would, individually or in
the aggregate, materially increase the benefits under) any bonus, profit
sharing, compensation, stock option, employment or other employee benefit plan,
agreement, trust, plan fund or other arrangement for the benefit or welfare of
any employee of the Company or any of the Company's subsidiaries; (g) make any
change in their accounting methods, principles or procedures, except as may be
required by a change in generally accepted accounting principles; or (h) issue
any press release or make any other public announcements without providing
Rockwell with a reasonable opportunity to review such release or announcement
and comment thereon prior to its dissemination.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties made by the Company to Rockwell and Sub, including, but not limited
to, representations and warranties relating to the Company's organization, its
capitalization, its authority to enter into Merger Agreement and to consummate
the transactions contemplated thereby, the absence of conflicts with its
Articles of Incorporation and Bylaws, applicable laws and existing obligations
of the Company, the Company's subsidiaries, financial statements of the Company,
tax matters, insurance, material contracts of the Company and its subsidiaries,
employees and labor matters, proprietary rights, property, employee benefit
plans and employment, termination and severance agreements, litigation,
environmental matters, governmental approvals, compliance with applicable law,
licenses and permits, filings made
26
<PAGE>
by the Company with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
this Proxy Statement, state takeover statutes and the opinion of the Company's
financial advisor.
The Merger Agreement also contains various customary representations and
warranties made by Rockwell and Sub to the Company, including, but not limited
to, representations and warranties relating to Rockwell's and Sub's organization
and share ownership, their authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, the sufficiency of Rockwell's
resources to satisfy its obligations thereunder, the absence of conflicts with
their respective certificates of incorporation and bylaws, applicable laws and
existing obligations of Rockwell and Sub, governmental approvals and certain
information provided to the Company by Rockwell for inclusion in this Proxy
Statement.
EFFECT OF THE MERGER ON CERTAIN COMPANY EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that the Company will take all action
(satisfactory to Rockwell in its reasonable discretion) necessary to provide
that immediately prior to the Effective Time, (a) each then outstanding option
to purchase shares of Brooktree Common Stock (i) granted under the Stock Option
Plans or (ii) granted pursuant to a Nonqualified Stock Option to outside
directors of the Company, in each case, to the extent not exercised, whether or
not then exercisable or vested, will have become fully exercisable and vested,
(b) each then outstanding option, if not exercised, will be canceled and (c) in
consideration of such cancellation, and except to the extent that Rockwell and
the holder of any such option will otherwise agree, the holder of such option
shall receive from the Company (or at Rockwell's option, from Rockwell or Sub)
for each share subject to such option an amount (subject to any applicable
withholding tax) in cash equal to the excess, if any, of the Merger
Consideration over the per share exercise price of such option. The surrender of
an option to the Company in exchange for such consideration will be deemed a
release of any and all rights the holder had or may have had in respect of such
option, and the payment of such consideration with respect to all such options
held by such holder for which such consideration is payable shall be conditioned
on such holder acknowledging such release and the cancellation of such options
as well as any options held by such holder as to which the exercise price equals
or exceeds the Merger Consideration. Prior to the Effective Time, the Company
will seek to obtain all necessary consents or releases from holders of such
options (including releases from holders who hold options with exercise prices
greater than or equal to the Merger Consideration) and take all such other
lawful action as may be necessary to give effect to the transactions described
above.
The Merger Agreement provides further that except as otherwise agreed to by
the Company and Rockwell (a) the Stock Option Plans and each Nonqualified Stock
Option issued to outside directors of the Company will terminate as of the
Effective Time and the provisions in any other plan, program, agreement or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary of the Company will be
terminated and canceled as of the Effective Time, and (b) the Company will take
all action (satisfactory to Rockwell in its reasonable discretion) necessary to
ensure that following the Effective Time no participant in the Stock Option
Plans, any Nonqualified Stock Option to outside directors or such other plans,
programs, agreements or arrangements will have any right thereunder to acquire
equity securities of the Company, Rockwell, the Surviving Corporation or any
subsidiary thereof and to terminate all such plans, programs, agreements and
arrangements.
The Merger Agreement also provides that the Company will take such actions
as are necessary to cause the Exercise Date (as defined in the Company's 1992
Employee Stock Purchase Plan) applicable to the then current Offering Period (as
defined in the Company's 1992 Stock Purchase Plan) to be a date not later than
July 15, 1996 (the "Final Exercise Date"). The Company has selected July 12,
1996 as the Final Exercise Date. On the Final Exercise Date, the Company applied
the funds credited as of such date under the Company's 1992 Stock Purchase Plan
within each participant's payroll withholdings account to the purchase of whole
shares of Brooktree Common Stock in accordance with the
27
<PAGE>
terms of the Company's 1992 Stock Purchase Plan. No further amounts will be
withheld or deposited, and no shares of Brooktree Common Stock will be issued or
sold, pursuant to the Company's 1992 Stock Purchase Plan after the Final
Exercise Date. The Merger Agreement provides further that except as otherwise
agreed to by Rockwell, Sub and the Company (a) the Company's 1992 Stock Purchase
Plan and the Stock Purchase Plans will terminate as of the Effective Time and
the provisions in any other plan, program, agreement or arrangement providing
for the purchase of the capital stock of the Company or any subsidiary of the
Company (other than the California Solution Networks Corporation 1995 Stock
Option Plan), shall be terminated and canceled as of the Effective Time, and (b)
the Company shall take all action necessary to ensure that following the
Effective Time no participant in the 1992 Stock Purchase Plan, the Stock
Purchase Plans or other plans, programs, agreements or arrangements shall have
any right thereunder to acquire equity securities of the Company, Rockwell, the
Surviving Corporation or any subsidiary of the Company (other than the
California Solution Networks Corporation 1995 Stock Option Plan) and to
terminate all such plans, programs, agreements and arrangements.
NO SOLICITATION
Pursuant to the Merger Agreement, the Company has agreed that the Company,
its subsidiaries and the Company's Representatives will immediately cease any
discussions or negotiations with any party that may be ongoing with respect to
an Acquisition Proposal (as defined below). Prior to the Effective Time, the
Company has agreed that it will not, nor will it authorize or permit any of its
subsidiaries or any of the Company's Representatives to, directly or indirectly,
(a) solicit, initiate or encourage (including by way of furnishing or disclosing
non-public information), or cause to be solicited, initiated or encouraged, any
Acquisition Proposal or (b) other than (i) acknowledging receipt of a written
bona fide unsolicited offer or proposal concerning an Acquisition Proposal, (ii)
requesting the maker of an oral bona fide unsolicited offer or proposal
concerning any Acquisition Proposal to put the same in writing and (iii)
requesting information with respect to the financial capability of the maker of
a written bona fide unsolicited offer or proposal concerning any Acquisition
Proposal (provided that Rockwell is fully informed as to the status and details
of such communications (and responses thereto) described in the foregoing
clauses (i), (ii) and (iii)), participate in any discussion or negotiations
with, or explore or otherwise communicate in any way with, any third party
(other than Rockwell or Sub) with respect to any Acquisition Proposal or (c)
enter into any agreement, arrangement or understanding requiring the Company to
abandon, terminate or fail to consummate the Merger or any other transaction
contemplated by the Merger Agreement. Notwithstanding the foregoing, the Company
is permitted under the Merger Agreement to furnish information concerning its
business, properties or assets to, and participate in any discussion or
negotiations with, or explore or otherwise communicate with, any financially
capable third party that makes after July 1, 1996 a written bona fide
unsolicited offer or proposal concerning any Acquisition Proposal, if (i) the
Board of Directors of the Company, after consultation with its legal and
financial advisors and upon written advice of its outside legal counsel that
taking such action is necessary to comply with the directors' fiduciary duties
to the shareholders of the Company under applicable law, determines by a
majority vote that taking such action is reasonably likely to lead to an
Acquisition Proposal that is more favorable to the shareholders of the Company
than the Merger and that taking such action is necessary to comply with the
directors' fiduciary duties and (ii) prior to taking such action, the Company
(A) provides reasonable notice to Rockwell, orally and in writing, to the effect
that it is taking such action, which notice shall describe the material terms
and conditions of the proposal, and the identity of the third party making it,
and (B) receives from such third party an executed confidentiality agreement in
a form substantially the same as the confidentiality agreement executed by
Rockwell and the Company in connection with the Merger. The Company has agreed
to keep Rockwell fully informed of the status and details (including amendments
and proposed amendments) of any such proposal and has agreed to provide Rockwell
with a copy of any such written proposal (including amendments and proposed
amendments) within two business days of receipt thereof by the Company or any of
the Company's Representatives.
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<PAGE>
The Merger Agreement provides that nothing contained therein will be
construed to prohibit the Company from taking and disclosing to the shareholders
of the Company a position as contemplated by Rule 14e-2 under the Exchange Act,
or from making such other disclosure to shareholders if, in the good faith
judgment of the Board, on written advice of its outside legal counsel, such
disclosure is necessary to comply with its fiduciary duties to the Company's
shareholders under applicable law; provided that the Company will not, except
under specified circumstances, withdraw or modify, or propose to withdraw or
modify, its position with respect to the Merger or approve or recommend, or
propose to approve or recommend, an Acquisition Proposal.
The Company has agreed that, except as set forth in this paragraph, neither
the Board nor any committee thereof will (a) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Rockwell or Sub, the approval or
recommendation by the Board or any such committee, of the Merger Agreement or
the Merger, (b) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (c) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(each an "Acquisition Agreement") with respect to any Acquisition Proposal.
Notwithstanding the foregoing, the Merger Agreement provides that, if the Board,
after consultation with and upon written advice of its outside legal counsel,
determines in good faith that it is necessary to do so in order to comply with
the directors' fiduciary duties to the shareholders of the Company under
applicable law, the Board may (a) withdraw or modify its approval or
recommendation of the Merger Agreement or the Merger, (b) approve or recommend a
Superior Transaction (as defined below) or (c) cause the Company to enter into
any Acquisition Agreement with respect to a Superior Transaction, but in any
such case only after providing reasonable written notice to Rockwell and Sub
advising Rockwell and Sub that the Board has received such other offer,
specifying the material terms and conditions of such offer and identifying the
person making such offer.
For purposes of the Merger Agreement, "Acquisition Proposal" means any
indication of interest, inquiry, proposal or offer with respect to any of the
following transactions (other than the transactions between the Company,
Rockwell and Sub contemplated by the Merger Agreement) involving the Company or
its subsidiaries: (a) any merger, consolidation, business combination, share
exchange, recapitalization, liquidation, dissolution or other similar
transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of a substantial amount of the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions; (c) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; (d) any
person having acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 10% or
more of the then outstanding shares of capital stock of the Company; (e) any
other transaction, the consummation of which could reasonably be expected to
impede, interfere with, prevent or delay the Merger or which would dilute the
benefits to Rockwell and Sub of the transactions contemplated by the Merger
Agreement; (f) any proxy solicitation (other than by the Company in connection
with the Special Meeting); or (g) any public announcement of an offer, proposal,
plan or intention to do any of the foregoing or any agreement to engage in any
of the foregoing.
For purposes of the Merger Agreement, "Superior Transaction" means any bona
fide offer by a third party to acquire, directly or indirectly, the Company
(whether by merger, acquisition, consolidation, business combination, share
exchange, tender or exchange offer or other similar transaction, or purchase of
all or substantially all of the assets or equity securities thereof) and
otherwise on terms which the Board determines in its good faith judgment (based
on the advice of a financial advisor of nationally recognized reputation) to be
more favorable to the Company's shareholders than the Merger and the other
transactions contemplated by the Merger Agreement and for which financing, to
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the extent required, is then committed or which, in the good faith judgment of
the Board (based on the advice of a financial advisor of nationally recognized
reputation), is reasonably capable of being financed by such third party.
INDEMNIFICATION; OFFICERS' AND DIRECTORS' INSURANCE
Rockwell has agreed in the Merger Agreement that after the Effective Time,
it will, and will cause the Surviving Corporation to, indemnify and hold
harmless each person who has at any time prior to the Effective Time been an
officer, director or employee of the Company in connection with acts or
omissions occurring at or prior to the Effective Time to the same extent and on
the same terms and conditions as provided in the Company's Articles of
Incorporation, Bylaws and written indemnification agreements in effect on the
date of the Merger Agreement (to the extent consistent with applicable law).
The Merger Agreement provides further that for a period of six years after
the Effective Time, Rockwell will cause the Surviving Corporation to use its
best efforts to maintain in effect, if available, directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy with respect to
claims arising from acts or events which occurred before the Effective Time on
terms comparable to those contained in the Company's directors' and officers'
liability insurance in effect on the date of the Merger Agreement; provided,
however, that neither Rockwell nor the Surviving Corporation will be obligated
to make annual premium payments for such insurance in excess of 150% of the
annual premiums paid as of the date of the Merger Agreement by the Company for
such insurance.
FURTHER ACTION
The Merger Agreement provides that, subject to the terms and conditions of
the Merger Agreement, each of the parties to the Merger Agreement will use its
reasonable best efforts to take promptly all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the Merger
Agreement, including using its reasonable best efforts to obtain all necessary
waivers, consents and approvals, effecting all necessary registrations and
filings, and defending any lawsuits or other proceedings, whether judicial or
administrative, challenging the Merger Agreement or the consummation of any of
the transactions contemplated by the Merger Agreement, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, provided that none of the Company,
Rockwell or Sub will be required to divest any business or assets. In connection
with and without limiting the foregoing, the Company and the Board will (a) take
all action reasonably necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement
and (b) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, the Merger Agreement or any other transaction
contemplated by the Merger Agreement, take all action reasonably necessary to
ensure that the Merger and the other transactions contemplated by the Merger
Agreement may be consummated as promptly as practicable on the terms
contemplated by the Merger Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger, the Merger Agreement and the other
transactions contemplated by the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by the mutual written agreement of Rockwell and the Company;
(b) by either Rockwell or the Company, if the Effective Time has not
occurred on or before October 30, 1996, except that neither Rockwell, on the
one hand, nor the Company, on the other hand, may so terminate the Merger
Agreement if the absence of such occurrence is due to the
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failure of Rockwell or Sub, on the one hand, or the Company, on the other
hand, to perform in all material respects each of their or its obligations
required to be performed prior to the Effective Time;
(c) by either Rockwell or the Company, if there is any statute, law,
rule or regulation that makes consummation of the Merger illegal or
otherwise prohibited, or if any court of competent jurisdiction or other
Governmental Entity has issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger, and such order, decree, ruling or other action
is not subject to appeal or has become final and unappealable;
(d) by either Rockwell or the Company, if the Merger Agreement and the
Merger have failed to receive the requisite vote for approval and adoption
by the shareholders of the Company under the CCC at the Special Meeting;
(e) by Rockwell, if (i) the Board has (A) withdrawn or modified its
approval or recommendation of the Merger Agreement or the Merger in a manner
adverse to Rockwell, (B) approved or recommended a Superior Transaction or
(C) failed to reaffirm its approval or recommendation of the Merger or the
Merger Agreement in accordance with a request by Rockwell or Sub pursuant to
the Merger Agreement or (ii) the Company has entered into an Acquisition
Agreement with respect to a Superior Transaction;
(f) by Rockwell, if there has been a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in the
Merger Agreement, or if any representation or warranty of the Company set
forth in the Merger Agreement has become untrue, in any such case such that
the conditions to the obligations of Rockwell and Sub to effect the Merger
described in clauses (a) and (b) of the second paragraph under "--
Conditions to the Merger" would not be satisfied as of such time, provided
that if such breach is curable by the Company prior to the scheduled date of
the Special Meeting through the exercise of its reasonable best efforts and
for so long as the Company continues to exercise such reasonable best
efforts to cure such breach, Rockwell may not terminate the Merger Agreement
as described in this subparagraph (f);
(g) by the Company, in connection with entering into a definitive
agreement for a Superior Transaction in accordance with the Merger
Agreement, provided that the Company has complied with all the provisions of
the Merger Agreement with respect to a Superior Transaction, including the
notice provisions; or
(h) by the Company, if there has been a breach of any representation,
warranty, covenant or agreement on the part of Rockwell or Sub set forth in
the Merger Agreement, or if any representation or warranty of Rockwell or
Sub set forth in the Merger Agreement has become untrue, in any such case
such that the conditions to the obligation of the Company to effect the
Merger described in clauses (a) and (b) of the third paragraph under "--
Conditions to the Merger" would not be satisfied as of such time, provided
that if such breach is curable by Rockwell or Sub prior to the scheduled
date of the Special Meeting through the exercise of their reasonable best
efforts and for so long as Rockwell or Sub continues to exercise such
reasonable best efforts to cure such breach, the Company may not terminate
the Merger Agreement as described in this subparagraph (h).
FEES AND EXPENSES
Except as described below, the Merger Agreement provides that each of the
parties thereto agrees to pay, without right of reimbursement from the other,
the costs incurred by it incident to the performance of its obligations
thereunder, including, without limitation, the fees and disbursements of
counsel, accountants, financial advisors, experts and consultants employed by
the respective parties in connection with the transactions contemplated thereby,
whether or not the Merger is consummated.
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The Merger Agreement further provides that if (a) the Merger Agreement is
terminated (i) as described in subparagraph (b) under "-- Termination" (other
than a termination by Rockwell solely as a result of the failure of the
conditions described in clauses (b), (c) or (d) of the first paragraph under "--
Conditions to the Merger" or clauses (d) or (e) of the second paragraph under
"-- Conditions to the Merger" to be satisfied where the Company has performed in
all material respects each of its obligations required to be performed pursuant
to the Merger Agreement) or as described in subparagraph (d) under "--
Termination", an Acquisition Proposal existed at or prior to such termination
and within nine months following such termination, the Company approves,
recommends, enters into an agreement with respect to or consummates a
transaction with respect to an Acquisition Proposal; (ii) as described in
subparagraph (e) under "-- Termination"; (iii) as described in subparagraph (f)
under "-- Termination", there has been a breach by the Company or the Board of
any of its covenants or agreements set forth in the Merger Agreement and within
nine months following such termination, the Company approves, recommends, enters
into an agreement with respect to or consummates a transaction with respect to
an Acquisition Proposal (regardless of whether an Acquisition Proposal existed
at or prior to such termination); or (iv) as described in subparagraph (g) under
"-- Termination"; or (b) during the term of the Merger Agreement any person,
corporation, partnership, other entity or "group" (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder),
other than Rockwell or Sub or any of their respective subsidiaries or
affiliates, acquires beneficial ownership or the right to acquire beneficial
ownership of 40% or more of the then outstanding shares of capital stock of the
Company, then the Company shall pay to Rockwell an amount equal to $10 million.
The parties to the Merger Agreement have acknowledged that a portion of such
payment is intended to reimburse Rockwell and Sub for their fees and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby and the Merger Agreement provides that the right of
Rockwell thereunder to receive such payment shall be in addition to any other
rights or remedies available to Rockwell or Sub in law or in equity.
APPROVAL OF SHAREHOLDERS
The Merger Agreement provides that, as soon as practicable after the
execution thereof, the Company will take all action necessary to convene and
hold a special meeting of its shareholders to be held not later than September
13, 1996, or such other date as shall be mutually agreed upon in writing by
Rockwell and the Company, to consider and vote upon the Merger and the Merger
Agreement. Rockwell and the Company have agreed that the Special Meeting may be
held on September 24, 1996. The Merger Agreement provides that, subject to the
terms thereof, the Company shall use its best efforts to obtain at such meeting
a favorable vote of its shareholders on the approval and adoption of the Merger
Agreement and approval of the Merger.
DEREGISTRATION OF BROOKTREE COMMON STOCK AFTER THE MERGER
If the Merger is consummated, Brooktree Common Stock will cease to be quoted
on The Nasdaq National Market System. Upon consummation of the Merger, the
Company intends to make an appropriate filing with the SEC so that it will no
longer be subject to the periodic reporting requirements of the Exchange Act,
and the registration of the Brooktree Common Stock under the Exchange Act will
terminate.
ANTITRUST MATTERS
Under the HSR Act, the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division (together, the "Agencies") and the expiration of a
30-calendar-day waiting period following such filing, unless such waiting period
is earlier terminated by the Agencies. The Company and Rockwell each filed with
the Agencies a Notification and Report Form with respect to the Merger on July
12, 1996 and the required waiting period with respect to the Merger expired on
August 11, 1996. In addition, private parties as well as state attorneys general
may bring legal actions under applicable antitrust laws under certain
circumstances. See "-- Conditions to the Merger."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain federal income tax consequences
under the Internal Revenue Code of 1986, as amended (the "Code"), of the Merger
to the holders of Brooktree Common Stock who are citizens or residents of the
United States. It is not based upon an opinion of counsel and does not discuss
all the tax consequences that may be relevant to Company shareholders entitled
to special tax treatment under the Code (such as insurance companies, dealers in
securities, tax exempt organizations or foreign persons) or to Company
shareholders who acquired their shares of Brooktree Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation.
For federal income tax purposes: (a) the exchange of Brooktree Common Stock
in the Merger by the Company's shareholders for cash will be a taxable
transaction to the Company's shareholders; (b) gain or loss will be recognized
by a Company shareholder measured by the difference between the Merger
Consideration received by such shareholder and the tax basis of the shares of
Brooktree Common Stock exchanged therefor (however, a Company shareholder may be
required to compute gain or loss separately with respect to each block of
shares); and (c) such gain or loss will be capital gain or loss if such shares
of Brooktree Common Stock are held as capital assets at the Effective Time.
THE DISCUSSION SET FORTH ABOVE PROVIDES GENERAL INFORMATION AS TO THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO HOLDERS OF BROOKTREE COMMON
STOCK WHO ARE CITIZENS OR RESIDENTS OF THE UNITED STATES BUT DOES NOT DISCUSS
THE TAX CONSEQUENCES, IF ANY, OF THE MERGER UNDER APPLICABLE FOREIGN, STATE AND
LOCAL LAWS OR WITH RESPECT TO TAXPAYERS WHO QUALIFY FOR SPECIAL TAX TREATMENT
UNDER THE CODE. THE COMPANY'S SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER.
DISSENTERS' RIGHTS
If the Merger is consummated, holders of Brooktree Common Stock who have
properly exercised dissenters' rights in connection with the Merger under
Chapter 13 of the CCC will have the right to require the Company to purchase
such shareholders' Dissenting Shares (as defined below) and receive payment in
cash for the fair market value of such Dissenting Shares pursuant to the laws of
the State of California, so long as demands for such purchase and payment are
properly filed not later than the date of the Special Meeting with respect to 5%
or more of the outstanding shares of Brooktree Common Stock.
The following summary of the provisions of Chapter 13 of the CCC is not
intended to be a complete statement of such provisions, and the Company's
shareholders are urged to read the full text of Chapter 13 of the CCC, a copy of
which is attached to this Proxy Statement as Annex III.
If the Merger is approved by the required vote of the holders of Brooktree
Common Stock and is not abandoned or terminated, each holder of shares of
Brooktree Common Stock who votes against the Merger and who follows the
procedures set forth in Chapter 13 of the CCC will be entitled to have his or
her shares of Brooktree Common Stock purchased by the Company for cash at their
fair market value, so long as demands for such purchase and payment are properly
filed not later than the date of the Special Meeting with respect to 5% or more
of the outstanding shares of Brooktree Common Stock. The fair market value of
shares of Brooktree Common Stock will be determined as of the day before the
first announcement of the terms of the Merger, excluding any appreciation or
depreciation in consequence of the Merger, but adjusted for any stock split,
reverse stock split or share dividend that becomes effective thereafter. The
value so determined may be more or less than the Merger Consideration. The
shares of Brooktree Common Stock with respect to which holders have perfected
their purchase demand in accordance with Chapter 13 of the CCC and have not
effectively withdrawn or lost such rights are referred to as the "Dissenting
Shares."
A shareholder of the Company electing to exercise dissenters' rights must,
not later than the date of the Special Meeting as provided in Section 1301(b) of
the CCC, demand in writing from the
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Company the purchase of his or her shares of Brooktree Common Stock and payment
to the shareholder at their fair market value. A holder who elects to exercise
dissenters' rights should mail or deliver his or her written demand to the
Company at 9868 Scranton Road, San Diego, California 92121, Attention:
Secretary. The demand should specify the holder's name and mailing address and
the number of shares of Brooktree Common Stock held of record by such
shareholder and state that such holder is demanding purchase of his or her
shares and payment of their fair market value, and must also contain a statement
as to what the shareholder claims to be the fair market value of such shares as
of the day before the first announcement of the terms of the proposed Merger.
Such statement of the fair market value of the shares of Brooktree Common Stock
constitutes an offer by the shareholder to sell to the Company the Dissenting
Shares held by such shareholder at that price.
Within 10 days after approval of the Merger by the Company's shareholders,
the Company must, if demands for purchase have been properly filed not later
than the date of the Special Meeting with respect to 5% or more of the
outstanding shares of Brooktree Common Stock, mail a notice of such approval
(the "Approval Notice") to all shareholders who have voted against the approval
of the Merger and followed the procedures set forth in Chapter 13 of the CCC,
together with a statement of the price determined by the Company to represent
the fair market value of the applicable Dissenting Shares (determined in
accordance with the immediately preceding paragraph), a brief description of the
procedures to be followed in order for the shareholder to pursue his or her
dissenters' rights and a copy of Sections 1300-1304 of the CCC. The statement of
price by the Company constitutes an offer by the Company to purchase all
Dissenting Shares at the stated amount.
Within 30 days after the Approval Notice is mailed to a shareholder as
provided in Section 1302 of the CCC, the shareholder must submit the
certificates representing the Dissenting Shares to the Company for endorsement
as Dissenting Shares.
If the Company and the shareholder agree that the shares are Dissenting
Shares and agree upon the purchase price of such shares, the dissenting
shareholder is entitled to the agreed-upon price with interest thereon at the
legal rate on judgments from the date of such agreement. Payment for the
Dissenting Shares must be made within 30 days after the later of the date of
such agreement or the date on which all statutory and contractual conditions to
the Merger are satisfied, and is subject to surrender to the Company of the
certificates representing the Dissenting Shares.
If the Company denies that the shares are Dissenting Shares or if the
Company and the shareholder fail to agree upon the fair market value of the
Dissenting Shares, then within six months after the date on which the Approval
Notice is sent to the shareholder, but not thereafter, as provided in Section
1304(a) of the CCC, any shareholder who has made a valid written purchase demand
and who has voted against approval and adoption of the Merger Agreement and
approval of the Merger may file a complaint in the Superior Court of San Diego
County requesting a determination as to whether the shares are Dissenting Shares
or as to the fair market value of such holder's Dissenting Shares or both, or
may intervene in any pending action on such a complaint brought by any other
Company shareholder with request to dissenters' rights. If the fair market value
of the Dissenting Shares is at issue, the court may appoint one or more
impartial appraisers to determine the fair market value of such Dissenting
Shares.
Except as expressly limited by Chapter 13 of the CCC, holders of Dissenting
Shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
holder of Dissenting Shares may not withdraw a demand for payment unless the
Company consents thereto.
Dissenting Shares lose their status as Dissenting Shares, and dissenting
shareholders cease to be entitled to require the Company to purchase their
shares, if: (a) the Merger is abandoned; (b) the shares are transferred prior to
their submission to the Company for the required endorsement; (c) the dissenting
shareholder and the Company do not agree upon the status of the shares as
Dissenting Shares or do not agree on the purchase price, and neither the Company
nor the shareholder files a
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complaint or intervenes in a pending action with respect to dissenters' rights
within six months after mailing of the Approval Notice; or (d) with the
Company's consent, the holder delivers to the Company a written withdrawal of
such holder's demand for purchase of his or her shares.
THE COMPANY'S SHAREHOLDERS WILL HAVE NO DISSENTERS' RIGHTS UNLESS DEMANDS
FOR PURCHASE AND PAYMENT ARE RECEIVED NOT LATER THAN THE DATE OF THE SPECIAL
MEETING WITH RESPECT TO 5% OR MORE OF THE OUTSTANDING SHARES OF BROOKTREE COMMON
STOCK.
ACCOUNTANTS
Representatives of Ernst & Young LLP, independent accountants who have
audited the Company's financial statements since 1991, will be present at the
Special Meeting, will be given the opportunity to make a statement and will be
available to respond to appropriate questions.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy and information statements
and other information with the SEC relating to its business, financial
statements and other matters.
The reports, proxy and information statements and other information filed
with the SEC by the Company pursuant to the Exchange Act may be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Citicorp Center, 500 Madison Street,
Suite 1400, Chicago, Illinois 60661, and at Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can also be obtained at
prescribed rates by addressing written requests for such copies to the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. Brooktree Common Stock is quoted for trading on The Nasdaq National
Market and reports, proxy or information statements and other information
concerning the Company may be inspected at the offices of the National
Association of Securities Dealers, Inc., 9513 Key West Avenue, Rockville,
Maryland 20850.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC are incorporated
herein by reference:
1. the Company's Annual Report on Form 10-K, as amended, for the fiscal
year ended September 30, 1995;
2. the Company's Quarterly Reports on Form 10-Q for the quarters ended
December 30, 1995 and March 30, 1996 and the Company's Quarterly Report on
Form 10-Q, as amended, for the quarter ended June 29, 1996;
3. the Company's Current Report on Form 8-K dated October 31, 1995; and
4. the Company's Proxy Statement for its Annual Meeting of Shareholders
held on March 15, 1996.
All reports and definitive proxy or information statements filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Proxy Statement and prior to the date of the Special Meeting
shall be deemed to be incorporated by reference into this Proxy Statement and to
be part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which is also incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement.
The documents incorporated into this Proxy Statement by reference (without
exhibits, unless such exhibits are specifically incorporated by reference into
the information that this Proxy Statement incorporates by reference herein) are
available without charge to each person, including each beneficial owner, to
whom a copy of this Proxy Statement is delivered, upon written or oral request
addressed to Brooktree Corporation, 9868 Scranton Road, San Diego, California
92121, Attention: Investor Relations. The Company's telephone number is (619)
452-7580.
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ANNEX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
ROCKWELL INTERNATIONAL CORPORATION,
ROK II ACQUISITION CORPORATION
AND
BROOKTREE CORPORATION
------------------------
DATED AS OF JULY 1, 1996
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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ARTICLE I -- THE MERGER.................................................................................... 1
Section 1.1. The Merger............................................................................ 1
Section 1.2. Effective Time of the Merger.......................................................... 1
Section 1.3. Articles of Incorporation............................................................. 2
Section 1.4. By-laws............................................................................... 2
Section 1.5. Board of Directors and Officers....................................................... 2
ARTICLE II -- EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES................................................................................. 2
Section 2.1. Effect on Capital Stock............................................................... 2
Section 2.2. Exchange of Certificates.............................................................. 3
Section 2.3. Settlement of Stock Options........................................................... 4
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 5
Section 3.1. Organization; Capitalization.......................................................... 5
Section 3.2. Authority............................................................................. 6
Section 3.3. No Breach............................................................................. 6
Section 3.4. Subsidiaries.......................................................................... 7
Section 3.5. Financial Statements.................................................................. 8
Section 3.6. Taxes................................................................................. 8
Section 3.7. Insurance............................................................................. 9
Section 3.8. Material Contracts.................................................................... 10
Section 3.9. Employees; Labor Matters.............................................................. 11
Section 3.10. Proprietary Rights.................................................................... 11
Section 3.11. Property.............................................................................. 12
Section 3.12. Employee Benefit Plans; Employment, Termination and Severance Agreements.............. 13
Section 3.13. Litigation............................................................................ 14
Section 3.14. Environmental Matters................................................................. 14
Section 3.15. Governmental Approvals................................................................ 15
Section 3.16. Compliance With Applicable Law........................................................ 15
Section 3.17. Licenses; Permits..................................................................... 16
Section 3.18. SEC Filings........................................................................... 16
Section 3.19. Proxy Statement....................................................................... 16
Section 3.20. State Takeover Statutes............................................................... 17
Section 3.21. Opinion of Financial Advisor.......................................................... 17
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................................. 17
Section 4.1. Organization and Standing; Share Ownership............................................ 17
Section 4.2. Authority; Resources.................................................................. 17
Section 4.3. No Breach............................................................................. 17
Section 4.4. Government Approvals.................................................................. 18
Section 4.5. Information........................................................................... 18
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ARTICLE V -- COVENANTS..................................................................................... 18
Section 5.1. Covenants of the Company.............................................................. 18
Section 5.2. Hart-Scott-Rodino Act Filings......................................................... 22
Section 5.3. Public Announcements.................................................................. 23
Section 5.4. Access to Information................................................................. 23
Section 5.5. Further Action........................................................................ 23
Section 5.6. Transfer Taxes........................................................................ 24
Section 5.7. Indemnification....................................................................... 24
ARTICLE VI -- CONDITIONS................................................................................... 24
Section 6.1. Conditions to Each Party's Obligations to Effect the Merger........................... 24
Section 6.2. Conditions to Obligations of Parent and Sub to Effect the Merger...................... 25
Section 6.3. Conditions to Obligation of the Company to Effect the Merger.......................... 27
ARTICLE VII -- TERMINATION................................................................................. 27
Section 7.1. Termination........................................................................... 27
ARTICLE VIII -- SURVIVAL................................................................................... 28
Section 8.1. Survival.............................................................................. 28
ARTICLE IX -- ASSIGNMENT; PARTIES IN INTEREST; AMENDMENT; WAIVER........................................... 28
Section 9.1. Assignment............................................................................ 28
Section 9.2. Parties in Interest................................................................... 28
Section 9.3. Amendment............................................................................. 29
Section 9.4. Waiver................................................................................ 29
ARTICLE X -- GENERAL PROVISIONS............................................................................ 29
Section 10.1. Effect of Investigation............................................................... 29
Section 10.2. Fees and Expenses..................................................................... 29
Section 10.3. Notices............................................................................... 30
Section 10.4. Brokers; Fee Schedule................................................................. 31
Section 10.5. Captions; Currency.................................................................... 31
Section 10.6. Entire Agreement...................................................................... 31
Section 10.7. Specific Performance.................................................................. 31
Section 10.8. Severability.......................................................................... 32
Section 10.9. Exhibits and Schedules................................................................ 32
Section 10.10. Governing Law......................................................................... 32
Section 10.11. Counterparts.......................................................................... 32
EXHIBITS
Exhibit A Certificate of Incorporation of Surviving Corporation
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED IN
DEFINED TERMS SECTION
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
1992 Stock Purchase Plan....................................................................... 3.1(b)
Acquisition Agreement.......................................................................... 5.1(e)(iv)
Acquisition Proposal........................................................................... 5.1(e)(iii)
CERCLA......................................................................................... 3.14
Certificates................................................................................... 2.2(b)
CGCL........................................................................................... preamble
Code........................................................................................... 2.1(e)
Common Stock................................................................................... preamble
Company........................................................................................ preamble
Company's Representatives...................................................................... 5.1(e)(i)
Confidentiality Agreement...................................................................... 5.4
Contract....................................................................................... 3.3
CSNC........................................................................................... 3.4
Current SEC Documents.......................................................................... 3.4
DGCL........................................................................................... preamble
Disclosure Schedule............................................................................ 3.1(a)
Dissenting Shares.............................................................................. 2.1(d)
Effective Time................................................................................. 1.2
Environmental Laws............................................................................. 3.14
ERISA.......................................................................................... 3.12(a)(ii)
ERISA Affiliate................................................................................ 3.12(a)(iv)
ERISA Pension Plans............................................................................ 3.12(a)(vii)
ERISA Plans.................................................................................... 3.12(a)(iii)
ERISA Welfare Plan............................................................................. 3.12(a)(xvi)
Exchange Act................................................................................... 3.15
Final Exercise Date............................................................................ 5.1(j)(i)
Governmental Entity............................................................................ 3.15
Hazardous Materials............................................................................ 3.14
HSR Act........................................................................................ 3.15
Intellectual Property.......................................................................... 3.10
IRS............................................................................................ 3.12(a)(viii)
Lien........................................................................................... 3.3
March 30 Balance Sheet......................................................................... 3.5
Material Adverse Effect........................................................................ 3.1(a)
Merger......................................................................................... 1.1
Merger Documents............................................................................... 1.2
Option Consideration........................................................................... 2.3
Options........................................................................................ 2.3
Out-of-the-Money Options....................................................................... 2.3
Parent......................................................................................... preamble
Paying Agent................................................................................... 2.2(a)
Per Share Amount............................................................................... 2.1(b)
Permitted Liens................................................................................ 3.11
Plan........................................................................................... 3.12(a)(i)
Proxy Statement................................................................................ 5.1(c)
Release........................................................................................ 3.14
SEC............................................................................................ 3.18
SEC Filings.................................................................................... 3.18
Securities Act................................................................................. 3.18
Special Meeting................................................................................ 5.1(b)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
DEFINED IN
DEFINED TERMS SECTION
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Stock Option Plan.............................................................................. 2.3
Stock Purchase Plans........................................................................... 6.2(k)
Stock Purchase Plan Shares..................................................................... 6.2(k)
Sub............................................................................................ preamble
Sub Stock...................................................................................... preamble
Subsidiary..................................................................................... 3.4
Superior Transaction........................................................................... 5.1(e)(iv)
Surviving Corporation.......................................................................... 1.1
Tax............................................................................................ 3.6
Tax Return..................................................................................... 3.6
Transfer Taxes................................................................................. 5.6
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of July 1, 1996 among ROCKWELL
INTERNATIONAL CORPORATION, a Delaware corporation ("Parent"), ROK II ACQUISITION
CORPORATION, a Delaware corporation ("Sub") and a wholly-owned subsidiary of
Parent, and BROOKTREE CORPORATION, a California corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Sub is a corporation duly organized and existing under the laws of
the State of Delaware, having been incorporated under the General Corporation
Law of the State of Delaware (the "DGCL"), and has authorized capital stock
consisting of 1,000 shares of Common Stock, par value $1.00 per share ("Sub
Stock"), all of which are issued and outstanding and owned by Parent;
WHEREAS, the Company is a corporation duly organized and existing under the
laws of the State of California, having been incorporated under the General
Corporation Law of the State of California (the "CGCL"), and has authorized
capital stock consisting of 57,680,555 shares, divided into (i) 12,680,555
shares of Preferred Stock, none of which are issued and outstanding, and (ii)
45,000,000 shares of Common Stock, no par value per share ("Common Stock"), of
which 16,872,553 shares are issued and outstanding; and
WHEREAS, the respective Boards of Directors of each of Sub and the Company,
and Parent as the sole stockholder of Sub, deem the merger of Sub with and into
the Company, upon the terms and subject to the conditions set forth herein,
desirable and in the best interests of the respective corporations and their
respective shareholders, and the respective Boards of Directors of each of Sub
and the Company, and Parent as the sole stockholder of Sub, have approved this
Agreement by resolutions duly adopted thereby, and the Board of Directors of the
Company has directed that this Agreement be submitted to its shareholders;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter contained, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER.
Upon the terms and subject to the conditions hereof, at the Effective Time
(as defined in Section 1.2), Sub shall be merged with and into the Company (the
"Merger") in accordance with the applicable provisions of the CGCL and the DGCL
and the separate corporate existence of Sub shall thereupon cease. The Company,
as the surviving corporation in the Merger (the "Surviving Corporation") and a
wholly-owned subsidiary of Parent, shall continue its corporate existence under
the name "Brooktree Corporation" and shall continue to be governed by the CGCL.
The Merger shall have the effects set forth in Section 1107 of the CGCL and
Section 259 of the DGCL.
SECTION 1.2. EFFECTIVE TIME OF THE MERGER.
Subject to the provisions of this Agreement, as soon as practicable on or
after satisfaction or waiver of the conditions set forth in Article VI, Parent
and the Company shall cause this Agreement (together with the requisite
officer's certificates of the Company and Sub), a certificate of merger or other
appropriate documents (in any such case, the "Merger Documents"), executed in
accordance with the relevant provisions of the CGCL and the DGCL, to be filed
and recorded as required by the CGCL and the DGCL. The Merger shall become
effective when the Merger Documents are duly filed with the Secretary of State
of the State of California and the Secretary of State of the State of Delaware,
or at such other time as Sub and the Company shall agree and as shall be
specified in the Merger Documents. When used in this Agreement, the term
"Effective Time" shall mean the time and date at which the Merger becomes
effective.
<PAGE>
SECTION 1.3. ARTICLES OF INCORPORATION.
At the Effective Time, in accordance with the CGCL, the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be amended to delete in their entirety the provisions thereof and to
incorporate in their entirety the provisions set forth on Exhibit A (which shall
be provided by Parent to the Company within fifteen days of the date of this
Agreement), and as so amended, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
SECTION 1.4. BY-LAWS.
The By-laws of the Company as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.5. BOARD OF DIRECTORS AND OFFICERS.
The members of the Board of Directors of Sub immediately prior to the
Effective Time shall be the members of the Board of Directors of the Surviving
Corporation, and the officers of Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, in each case 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
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. EFFECT ON CAPITAL STOCK.
(a) CANCELLATION OF TREASURY STOCK AND PARENT OWNED COMMON STOCK. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, each share of Common Stock issued and outstanding
immediately prior to the Effective Time and (i) owned by Parent or Sub or any
other direct or indirect wholly-owned subsidiary of Parent, (ii) held in the
treasury of the Company or (iii) owned by any Subsidiary (as defined in Section
3.4) shall cease to be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
(b) CONVERSION OF COMMON STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof, each share of
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Common Stock being canceled pursuant to Section 2.1(a) and
any Dissenting Shares (as defined in Section 2.1(d))), shall be converted into
the right to receive $15.00 per share, without interest thereon (the "Per Share
Amount"), in cash, subject to Section 2.1(e), upon the surrender of the
certificate which immediately prior to the Effective Time represented such share
in accordance with Section 2.2; each share so converted shall at the Effective
Time be canceled and retired and shall cease to exist, and each certificate
which theretofore represented shares so converted and canceled shall thereafter
cease to have any rights with respect to such shares except the right to receive
the Per Share Amount in cash multiplied by the number of such shares formerly
represented by such certificate, without interest thereon and subject to Section
2.1(e).
(c) SUB STOCK. At the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, each share of Sub Stock issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one newly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
(d) DISSENTING SHARES. At the Effective Time, any shares of Common Stock
held by sharehold-
ers, if any, who shall have demanded and perfected their demand for the Company
to purchase their shares of Common Stock and shall have voted against this
Agreement and the Merger in accordance with Section 1300 ET SEQ. of the CGCL
("Dissenting Shares") shall not be converted into the right to
2
<PAGE>
receive the Per Share Amount in cash pursuant to the Merger, but instead shall
be entitled to only such rights as are provided by the CGCL, except that any
Dissenting Shares held by a shareholder who shall, after proper exercise of
dissenter's rights, effectively withdraw his or her demand for purchase thereof
and payment therefor, or lose his or her right to such payment as provided in
Section 1300 ET SEQ. of the CGCL shall cease to be Dissenting Shares hereunder
and shall be deemed converted into and represent only the right to receive the
amount of cash, subject to Section 2.1(e), such holder otherwise would have been
entitled to receive as a result of the Merger as provided in Section 2.1(b),
without interest thereon, upon surrender of the certificate or certificates
formerly representing such shares in accordance with Section 2.2. The Company
shall give Parent and Sub (i) prompt written notice of any written demands for
the purchase of shares of Common Stock pursuant to Section 1300 ET SEQ. of the
CGCL, any withdrawals of such demands and any other instruments served pursuant
to the CGCL received by the Company and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to any such demands.
The Company shall not, without the prior written consent of Parent, make any
payment with respect to, or settle, offer to settle or otherwise negotiate, any
such demands.
(e) WITHHOLDING TAX. Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
shares of Common Stock outstanding immediately prior to the Effective Time such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Common
Stock outstanding immediately prior to the Effective Time in respect of which
such deduction and withholding was made.
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT; INTEREST. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as paying agent in respect of the
Merger (the "Paying Agent"), and, from time to time at, prior to or after the
Effective Time, Parent shall make available, or cause the Surviving Corporation
to make available, subject to Section 2.2(e), to the Paying Agent funds in
amounts and at the times necessary for the payment of the Per Share Amount upon
surrender of certificates formerly representing shares of Common Stock pursuant
to Section 2.2(b), it being understood that any and all interest earned on funds
made available to the Paying Agent pursuant to this Agreement shall be turned
over to Parent on demand.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Paying Agent to mail to each holder of
record (other than Parent or Sub or any other direct or indirect wholly-owned
subsidiary of Parent or the Company or any Subsidiary) of a certificate or
certificates which immediately prior to the Effective Time represented shares of
Common Stock (the "Certificates"), a letter of transmittal (which shall contain
instructions for use in effecting the surrender of the Certificates in exchange
for the Per Share Amount, shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify). Upon surrender of a Certificate
for cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Paying Agent or such other agent or agents,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Per Share Amount payable, subject to Section 2.1(e), in respect of the
shares of Common Stock formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Common Stock that is not registered in the
transfer records 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
3
<PAGE>
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 Parent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2(b), each Certificate
(other than Certificates canceled pursuant to Section 2.1(a) or representing any
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Per Share Amount
payable, subject to Section 2.1(e), in respect of the shares of Common Stock
theretofore represented by such Certificate. No interest will be paid or will
accrue on the cash payable upon the surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All cash paid upon the
surrender of Certificates 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 Common Stock theretofore represented by such Certificates. At the
Effective Time, 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 of Common Stock 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
any reason, they shall be canceled and exchanged as provided in this Article II,
except as otherwise provided by law with respect to Dissenting Shares.
(d) NO LIABILITY. Notwithstanding anything to the contrary contained
herein, none of Parent, Sub, the Surviving Corporation or the Paying Agent shall
be liable to any holder of a Certificate or any other person or entity in
respect of any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) RETURN OF FUNDS. Any portion of the funds made available to the Paying
Agent pursuant to Section 2.2(a) which remains undistributed to the former
holders of Common Stock six months after the Effective Time shall be promptly
delivered to Parent (it being understood that prior thereto Parent is only
required to make funds available to the Paying Agent at the times necessary for
the payment of the Per Share Amount upon surrender of Certificates pursuant to
Section 2.2(b)), and any former holders of Common Stock who have not theretofore
complied with this Article II and the instructions set forth in the letter of
transmittal mailed to such holder after the Effective Time shall thereafter look
exclusively to Parent and only as a general creditor thereof for payment of the
Per Share Amount to which they become entitled upon exchange of their
Certificates pursuant to Section 2.2(b). Any portion of the Per Share Amount
made available to the Paying Agent pursuant to Section 2.2(a) with respect to
Common Stock for which dissenter's rights have been perfected shall be returned
to Parent on demand.
SECTION 2.3. SETTLEMENT OF STOCK OPTIONS.
The Company shall take all action (satisfactory to Parent in its reasonable
discretion) necessary to provide that immediately prior to the Effective Time,
(i) each then outstanding option to purchase shares of Common Stock (a) granted
under the Brooktree Corporation 1985 Stock Option Plan, the Brooktree
Corporation 1991 Non-Employee Director Stock Option Plan and the Brooktree
Corporation 1992 Stock Plan (each, as amended from time to time prior to the
date hereof, a "Stock Option Plan" and, collectively, the "Stock Option Plans")
or (b) granted pursuant to a Nonqualified Stock Option to Outside Directors of
the Company, in each case, to the extent not exercised (collectively, the
"Options"), whether or not then exercisable or vested, shall have become fully
exercisable and vested, (ii) each then outstanding Option shall be canceled and
(iii) in consideration of such cancellation, and except to the extent that
Parent and the holder of any Option shall otherwise agree, the holder of such
Option shall receive from the Company (or at Parent's option, from Parent or
Sub) for each share subject to such Option an amount (subject to any applicable
withholding tax) in cash equal to the excess, if any, of the Per Share Amount
over the per share exercise price of such Option (such amount being hereinafter
referred to as the "Option Consideration"). The surrender of an Option to the
Company in exchange for the Option Consideration shall be deemed a release of
any and all rights the holder had or may have had in respect of such Option, and
the payment of the Option Consideration
4
<PAGE>
with respect to all Options held by such holder for which the Option
Consideration is payable shall be conditioned on such holder acknowledging such
release and the cancellation of such Options as well as any Options held by such
holder as to which the exercise price equals or exceeds the Per Share Amount
(the "Out-of-the-Money Options"). Prior to the Effective Time, the Company shall
obtain all necessary consents or releases from holders of Options (including
releases from holders who hold Out-of-the Money Options) and shall take all such
other lawful action as may be necessary to give effect to the transactions
contemplated by this Section 2.3. Except as otherwise agreed to by the Company
and Parent, (i) the Stock Option Plans and each Nonqualified Stock Option to
Outside Directors shall terminate as of the Effective Time and the provisions in
any other plan, program, agreement or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the Company or
any Subsidiary shall be terminated and canceled as of the Effective Time, and
(ii) the Company shall take all action (satisfactory to Parent in its reasonable
discretion) necessary to ensure that following the Effective Time no participant
in the Stock Option Plans, any Nonqualified Stock Option to Outside Directors or
such other plans, programs, agreements or arrangements shall have any right
thereunder to acquire equity securities of the Company, Parent, the Surviving
Corporation or any subsidiary thereof and to terminate all such plans, programs,
agreements and arrangements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub as follows:
SECTION 3.1. ORGANIZATION; CAPITALIZATION.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California with all requisite
corporate power and authority to own its properties and to carry on its business
as presently conducted. The Company is duly qualified and in good standing to
transact business as a foreign corporation in each jurisdiction in which the
conduct or nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except where the failure to be so
qualified would not have, individually or in the aggregate, a Material Adverse
Effect (as defined below). For purposes of this Agreement, "Material Adverse
Effect" shall mean a material adverse effect on the business, condition
(financial or otherwise), assets, liabilities, properties, operations or results
of operations of the Company and the Subsidiaries, taken as a whole, or on the
ability of the Company to consummate the transactions contemplated by this
Agreement. A list of the jurisdictions in which the Company is so qualified is
set forth in Section 3.1(a) of the Disclosure Schedule (the "Disclosure
Schedule") delivered to Parent prior to the execution of this Agreement. The
Company has previously delivered to Parent and Sub true, accurate and complete
copies of its Articles of Incorporation and By-laws, each as in effect on the
date hereof, and minute books containing minutes of all meetings of the Board of
Directors of the Company (including any committees thereof) and shareholders of
the Company for the period from January 1, 1990 to and including the date
hereof.
(b) The authorized capital stock of the Company consists of 57,680,555
shares, divided into (i) 12,680,555 shares of Preferred Stock, none of which are
issued and outstanding or held in the treasury of the Company, and (ii)
45,000,000 shares of Common Stock, no par value per share, of which 16,872,553
shares are issued and outstanding, 3,360,227 shares are reserved for issuance
upon exercise of outstanding employee stock options granted pursuant to the
Company's Stock Option Plans and non-employee director stock options granted
pursuant to Nonqualified Stock Options to Outside Directors, 81,297 shares are
reserved for issuance pursuant to the Brooktree Corporation 1992 Employee Stock
Purchase Plan (the "1992 Stock Purchase Plan") and the remainder are unissued
and not reserved. All the outstanding shares of Common Stock are, and all shares
which may be issued will be, when issued, duly authorized, validly issued, fully
paid and nonassessable. Options granted by the Company to purchase 3,360,227
shares of Common Stock are outstanding on the date hereof, of which Options
granted by the Company to purchase 1,694,870 shares of Common Stock are
5
<PAGE>
exercisable on the date hereof. Except for such Options, the obligation to issue
up to approximately 81,297 shares of Common Stock pursuant to the 1992 Stock
Purchase Plan (approximately 74,706 shares for the Offering Period (as defined
in the 1992 Stock Purchase Plan) ended June 28, 1996 and approximately 6,591
shares for the Offering Period ended pursuant to Section 5.1(j)) in
consideration of funds on deposit thereunder and restrictions on transfer
imposed by the Company on 290,001 Stock Purchase Plan Shares (as defined in
Section 6.2(k)), there are no outstanding securities or obligations convertible
into or exchangeable for, or options, warrants, scrip, rights to subscribe for
or acquire, calls or commitments of any character whatsoever relating to, or
contracts, understandings or arrangements with respect to the issuance or sale
of, any shares of the capital stock of the Company or any other securities of
the Company, or arrangements or contracts with respect to the purchase,
repurchase, sale, redemption, acquisition, conversion, exchange, registration,
transfer or voting of shares of its capital stock (including any restrictions on
transfer imposed by the Company or any law or regulation within the meaning of
Section 1300(b)(1) of the CGCL). Except as set forth above, the Company is not
obligated, now or in the future, contingently or otherwise, to issue Common
Stock or any other of its securities to any person or entity. The Company has
outstanding no bonds, debentures, notes or other obligations the holders of
which have the right to vote (or are convertible or exchangeable into or
exercisable for securities having the right to vote) with the shareholders of
the Company on any matter.
SECTION 3.2. AUTHORITY.
The Company has all requisite corporate power and authority to execute and
deliver this Agreement and, subject to approval of this Agreement by the holders
of a majority of the outstanding shares of Common Stock, to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company subject to approval of this Agreement by the holders
of a majority of the outstanding shares of Common Stock. This Agreement has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights in general and by general principles of equity.
SECTION 3.3. NO BREACH.
The execution, delivery and performance of this Agreement by the Company do
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, with or without the giving of notice or the
lapse of time, or both, conflict with, or result in a breach or violation of or
a default under, or give rise to a right of amendment, termination, cancellation
or acceleration of any obligation or to a loss of a benefit under (i) the
Articles of Incorporation or By-laws of the Company or the certificates of
incorporation or the by-laws (or the equivalent thereof) of any of the
Subsidiaries, or (ii) except as set forth in Section 3.3 of the Disclosure
Schedule, any contract, agreement, note, bond, mortgage, indenture, lease,
license, franchise, permit, concession, instrument, obligation, commitment,
covenant, understanding or arrangement to which the Company or any of the
Subsidiaries is a party or by which any of its assets may be affected (a
"Contract"), or (iii) any order, ruling, decree, judgment, arbitration award,
statute, law, ordinance, rule, regulation or stipulation to which the Company or
any of the Subsidiaries or their respective properties or assets is subject, or
result in the creation of any restriction on voting or transfer, pledge, claim,
lien, charge, encumbrance or security interest of any kind (a "Lien") upon any
of the properties or assets of the Company or any of the Subsidiaries, except,
in the case of items (ii) and (iii) above, for those which would not have,
individually or in the aggregate, a Material Adverse Effect.
6
<PAGE>
SECTION 3.4. SUBSIDIARIES.
Except as set forth on Section 3.4 of the Disclosure Schedule, the only
companies, partnerships, joint ventures or other entities or organizations in
which the Company directly or indirectly owns any equity or debt securities or
has any other ownership interest are the following entities (each a "Subsidiary"
and collectively, the "Subsidiaries"):
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
SUBSIDIARY ORGANIZATION
- ------------------------------------------------- ----------------------
<S> <C>
Brooktree Foreign Sales Corporation U.S. Virgin Islands
Brooktree International Ltd. Cayman Islands
Brooktree Ltd. United Kingdom
Brooktree Pte. Singapore
Brooktree Technologies Ltd. Cayman Islands
Brooktree Worldwide Sales Corporation California
California Solution Networks Corporation California
</TABLE>
Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization set forth above with all requisite corporate power and authority to
own and operate its business and properties and to carry on its business as
presently conducted. Each Subsidiary is duly qualified and in good standing to
transact business as a foreign corporation in each jurisdiction in which the
conduct or nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except where the failure to be so
qualified would not have, individually or in the aggregate, a Material Adverse
Effect. A list of the jurisdictions in which each Subsidiary is so qualified is
set forth in Section 3.4 of the Disclosure Schedule. The Company has previously
delivered to Parent and Sub true, accurate and complete copies of the
certificates of incorporation, by-laws or other organizational documents, each
as in effect on the date hereof, and minute books of each of the Subsidiaries
containing minutes of all meetings of the Board of Directors (including any
committees thereof) and shareholders of each of the Subsidiaries for the period
from January 1, 1990 to and including the date hereof. The outstanding shares of
capital stock of each of the Subsidiaries are validly issued and fully paid and
nonassessable and, except for 400,000 shares of common stock of California
Solution Networks Corporation ("CSNC") held by the President of CSNC and one
ordinary share of Brooktree Ltd. held by a nominee of the Company, are owned
beneficially and of record by the Company or a wholly-owned Subsidiary free and
clear of all Liens. Except for options to purchase 8,000 shares of common stock
of CSNC granted under the CSNC 1995 Stock Option Plan, there are no outstanding
securities or obligations convertible into or exchangeable for, or options,
warrants, scrip, rights to subscribe for or acquire, calls or commitments of any
character whatsoever relating to, or contracts, understandings or arrangements
with respect to the issuance or sale of, any shares of the capital stock of any
class or any other securities of any of the Subsidiaries, or arrangements or
contracts with respect to the purchase, repurchase, sale, redemption,
acquisition, conversion, exchange, registration, transfer or voting of shares of
capital stock of any of the Subsidiaries. Except as set forth above, neither the
Company nor any of the Subsidiaries is obligated, now or in the future,
contingently or otherwise, to issue stock of any class or any other securities
of any Subsidiary to any person or entity. Except as identified in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1995
(including certain portions of the Company's 1995 Annual Report to Shareholders
and the Company's Proxy Statement with respect to its 1996 Annual Meeting of
Shareholders held on March 15, 1996 incorporated by reference therein) or the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ended
December 30, 1995 and March 30, 1996, other than forward looking information
disclosed therein (such documents, without giving effect to the forward looking
information contained therein, are referred to herein collectively as the
"Current SEC Documents"), neither the Company nor any Subsidiary is subject to
any obligation, contingent or otherwise, to provide funds or make an investment
in any entity.
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SECTION 3.5. FINANCIAL STATEMENTS.
The audited consolidated financial statements of the Company and its
subsidiaries at September 30, 1995, September 30, 1994, September 30, 1993,
September 30, 1992 and September 30, 1991 and for the respective fiscal years
then ended, and the notes thereto, reported on by Ernst & Young LLP, and the
unaudited consolidated financial statements of the Company and its subsidiaries
at December 30, 1995 and March 30, 1996 and for the three month and six month
periods then ended, and the notes thereto which the Company has delivered to
Parent and Sub and which are contained in the SEC Filings (as defined in Section
3.18), have been prepared in accordance with generally accepted accounting
principles applied (except as set forth therein) on a consistent basis, and
present fairly the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for each of the fiscal years or three month
or six month periods then ended (subject, in the case of unaudited interim
financial statements, to the absence of notes and to normal year-end
adjustments). Except as and to the extent reflected or reserved against in the
consolidated balance sheet of the Company and its subsidiaries at March 30, 1996
(the "March 30 Balance Sheet"), at March 30, 1996, neither the Company nor any
of the Subsidiaries had any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be reflected on a balance sheet or in the notes
thereto. Since March 30, 1996, neither the Company nor any of the Subsidiaries
has incurred any liabilities or obligations other than those arising from
operations in the ordinary course of business consistent with past practice.
Since September 30, 1995 the Company and the Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past practice
and, except as identified in the Current SEC Documents or as set forth in
Section 3.5 of the Disclosure Schedule, there has been no change in or
development with respect to the business, condition (financial or otherwise),
assets, liabilities, properties, operations or results of operations of the
Company and the Subsidiaries except changes and developments in the ordinary
course of business consistent with past practice which have not had or may not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect and changes relating to the economy in general or changes
resulting from industry-wide developments affecting other companies in similar
businesses. Specifically, and without limiting the generality of the foregoing,
since September 30, 1995 (except as otherwise contemplated by this Agreement or
as identified in the Current SEC Documents, neither the Company nor any of the
Subsidiaries has taken any action described in Section 5.1.
SECTION 3.6. TAXES.
Except as set forth in Section 3.6 of the Disclosure Schedule:
(a) All Tax Returns (as defined below) of the Company and each of the
Subsidiaries and all predecessor corporations have been duly and timely
filed and are correct and complete in all material respects. Each of the
Company and the Subsidiaries and any predecessor corporation has withheld
proper and accurate amounts from their employees, customers, depositors,
shareholders, and others from whom they are required to withhold Taxes (as
defined below) in compliance with all applicable federal, state, local and
foreign laws and have timely paid all such withheld amounts to the
appropriate taxing authorities. All Taxes or estimates thereof of the
Company and each of the Subsidiaries and any predecessor corporations that
are due have been timely and appropriately paid and to the extent the
liabilities for Taxes have not been fully discharged, adequate reserves have
been established, in accordance with generally accepted accounting
principles. No Liens for Taxes exist with respect to any assets of the
Company or any of the Subsidiaries or any predecessor corporation, except
for Liens for Taxes not yet due;
(b) No assessment, audit, examination or other proceeding by any taxing
authority or other Governmental Entity (as defined in Section 3.15) is
proposed, pending, or, to the knowledge of the Company or any of the
Subsidiaries, threatened with respect to the Taxes or Tax Returns of the
Company or the Subsidiaries or any predecessor corporation. Each deficiency
resulting from any
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audit or examination relating to Taxes by any taxing authority has been
paid. No issues relating to Taxes were raised in writing by the relevant
taxing authority in any completed audit or examination that can reasonably
be expected to recur in a later taxable period;
(c) There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitations applicable to any claim for or
the period for the collection or assessment of Taxes of the Company or any
of the Subsidiaries or any predecessor corporation due for any taxable
period;
(d) None of the Company or any of the Subsidiaries is a party to or is
bound by any Tax sharing agreement 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) or has any liability for the Taxes of any person or entity (other
than the Company and any of the Subsidiaries that is currently a member of
the Company's affiliated group filing a consolidated federal income tax
return) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, provincial, local, or foreign law), as a transferee or successor,
by contract or otherwise, and, in the case of any item disclosed on Section
3.6 of the Disclosure Schedule, are in material compliance with any such
agreement;
(e) Neither the Company nor any of the Subsidiaries is a party to any
agreement, plan, understanding or arrangement that, and none of the
transactions contemplated by this Agreement, would result, individually or
in the aggregate, in the payment of any amount (whether in cash or property)
that would not be deductible pursuant to the terms of Sections 162(a)(1),
162(m) or 280G of the Code; and
(f) Neither the Company nor any Subsidiary is a "United States real
property holding corporation" as defined in Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code and none of Brooktree Foreign Sales Corporation, Brooktree
International Ltd., Brooktree Ltd., Brooktree Pte. and Brooktree
Technologies Ltd. (i) is engaged in a U.S. trade or business for federal
income Tax purposes, (ii) is a foreign investment company within the meaning
of the Code, or (iii) is a passive foreign investment company within the
meaning of the Code or has participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code or has
been requested to do so in connection with any transaction or proposed
transaction.
As used in this Agreement, (i) "Tax" or "Taxes" means all taxes, charges,
duties, fees, levies or other assessments, including but not limited to, income,
excise, property, sales, value added, profits, license, withholding (with
respect to compensation or otherwise), payroll, employment, net worth, capital
gains, transfer, stamp, social security, environmental, occupation and franchise
taxes, imposed by any Governmental Entity, and including any interest, penalties
and additions attributable thereto; and (ii) "Tax Return" or "Tax Returns" means
any return, report, declaration, information return, statement or other document
filed or required to be filed with any Governmental Entity in connection with
the determination, assessment or collection of any Tax or the administration of
any laws, regulations or administrative requirements relating to any Tax.
SECTION 3.7. INSURANCE.
All material casualty, directors' and officers' liability, general liability
(including product liability) and all other material types of insurance
maintained by the Company or any of the Subsidiaries are duly in force and no
notice has been received by the Company or any of the Subsidiaries from any
insurance carrier purporting to cancel or reduce coverage under any such policy.
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SECTION 3.8. MATERIAL CONTRACTS.
Section 3.8 of the Disclosure Schedule sets forth each Contract which is:
(a) other than the employment agreements to be entered into with certain
employees of the Company described in Section 6.2, a Contract with any
director, officer, subsidiary or affiliate of the Company or any Subsidiary;
(b) other than such of the following as are identified in the Current
SEC Documents, a Contract relating to the borrowing of money by the Company
or any Subsidiary or to the direct or indirect guarantee or assumption by
the Company or any Subsidiary of the obligations of any other person or
entity for borrowed money, including any arrangement which has the economic
effect although not the legal form of such a guarantee;
(c) or contains a covenant not to compete (other than those of which the
Company or any Subsidiary is the beneficiary of the covenant in employee
related agreements and those identified in the Current SEC Documents);
(d) other than such of the following as is entered into in the ordinary
course of business consistent with past practice between the date of this
Agreement and the Effective Time, a lease or similar agreement under which
(i) the Company or any Subsidiary is a lessee of, or holds or operates, any
real property owned by any third person for an annual rent in excess of
$300,000 or (ii) the Company or any Subsidiary is a lessor of, or makes
available for use by any third person, any real property owned or held as
lessee by the Company or any Subsidiary for an annual rent in excess of
$300,000;
(e) other than such of the following as is entered into in the ordinary
course of business consistent with past practice between the date of this
Agreement and the Effective Time, a lease or similar agreement under which
(i) the Company or any Subsidiary is a lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned by
any third person for an annual rent in excess of $300,000 or (ii) the
Company or any Subsidiary is a lessor of, or makes available for use by any
third person, any tangible personal property owned (including ownership for
tax purposes) by the Company or any Subsidiary having a fair market value in
excess of $300,000;
(f) other than such of the following as is entered into in the ordinary
course of business consistent with past practice between the date of this
Agreement and the Effective Time, a Contract involving the obligation of the
Company or any Subsidiary to purchase products or services or the legal
right to make or vend products or deliver services for payment by the
Company or any Subsidiary of more than $300,000 either as a lump sum or
reasonably contemplated periodic payments over the term of the Contract
(unless terminable by the Company or any Subsidiary without payment or
penalty upon no more than 30 days' notice);
(g) other than such of the following as is entered into in the ordinary
course of business consistent with past practice between the date of this
Agreement and the Effective Time, a Contract involving the obligation of the
Company or any Subsidiary to deliver products or services with an unfilled
order balance of more than $300,000 (unless terminable by the Company or any
Subsidiary without payment or penalty upon no more than 30 days' notice);
(h) other than such of the following as are identified in the Current
SEC Documents, a mortgage, pledge, security agreement, deed of trust or
other document granting a material Lien (including Liens upon properties
acquired under conditional sales, capital lease or other title retention or
security devices);
(i) a Contract providing for the formation of a joint venture, teaming
agreement or other similar arrangement;
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(j) a power of attorney or similar authorization (including, without
limitation, with respect to Taxes) given by the Company or any of the
Subsidiaries; or
(k) other than such of the following as are identified in the Current
SEC Documents, any other Contract material to the business, condition
(financial or otherwise), assets, liabilities, properties, operations or
results of operations of the Company and the Subsidiaries taken as a whole.
All of the Contracts are valid and enforceable, and neither the Company nor
any of the Subsidiaries, nor to the knowledge of the Company and the
Subsidiaries any other party thereto, is in default in any material respect
under any thereof. Customer Contracts which are unperformed, considered as a
whole, by which the Company or any of the Subsidiaries is currently bound will
not result in a loss having, in the aggregate, a Material Adverse Effect. The
transactions contemplated hereby may be consummated without the consent or
approval of any person or party under any Contract and without being a breach
thereof, except where the failure to obtain such consents or approvals or such
breach would not have, individually or in the aggregate, a Material Adverse
Effect.
SECTION 3.9. EMPLOYEES; LABOR MATTERS.
(a) Except as set forth in Section 3.9 of the Disclosure Schedule or
identified in the Current SEC Documents, no employee of the Company or any of
the Subsidiaries has a salary rate in excess of $100,000 per annum.
(b) Neither the Company nor any of the Subsidiaries is a party to any
collective bargaining agreement or other contract with or commitment to any
labor union or association representing any employee of the Company or any of
the Subsidiaries, nor does any labor union or collective bargaining agent
represent any employees of the Company or any of the Subsidiaries. No such
agreement, contract or other commitment has been requested by, or is under
discussion by management of the Company or any of the Subsidiaries (or any
management group or association of which the Company or any of the Subsidiaries
is a member or otherwise a participant) with, any group of employees or others,
nor are there any representation proceedings or petitions seeking a
representation proceeding presently pending against the Company or any of the
Subsidiaries with the National Labor Relations Board or any labor relations
tribunal, nor are there any other current activities known to the Company or any
of the Subsidiaries to organize any employees of the Company or any of the
Subsidiaries into a collective bargaining unit. Except as set forth in Section
3.9 of the Disclosure Schedule, there is no unfair labor practice charge or
complaint pending or, to the knowledge of the Company and the Subsidiaries,
threatened against the Company or any of the Subsidiaries. During the past five
years, there has been no labor strike, slow-down, work stoppage, arbitration or
other work-related dispute involving the Company or any of the Subsidiaries and
no such dispute is now pending or, to the knowledge of the Company and the
Subsidiaries, threatened against the Company or any of the Subsidiaries.
SECTION 3.10. PROPRIETARY RIGHTS.
(a) Section 3.10 of the Disclosure Schedule sets forth a complete and
correct list of all foreign and domestic: (i) patents and patent applications;
(ii) written records of inventions; and (iii) registered and unregistered
trademarks, service marks, trade names, logos, other forms of trade identity and
registrations and applications thereof.
(b) Except as set forth in Section 3.10 of the Disclosure Schedule or
identified in the Current SEC Documents, (1) the Company and the Subsidiaries
own all of the Intellectual Property (as defined below), free from any Liens and
free from any requirement of any past, present or future payments (other than
maintenance and similar payments), charges or fees or conditions, rights or
restrictions; (2) to the knowledge of the Company and the Subsidiaries, no
Intellectual Property or any service rendered by the Company or any Subsidiary,
or any product, process or material used in the business of the Company or any
Subsidiary, infringes upon any rights owned or held by any other person or
entity; (3) there is neither pending nor (to the knowledge of the Company and
the Subsidiaries)
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threatened any claim or litigation against the Company or the Subsidiaries
contesting the rights of Company or the Subsidiaries to any Intellectual
Property or the ownership, enforceability or validity of the Intellectual
Property or use by the Company or any Subsidiary of any Intellectual Property;
(4) no Intellectual Property is subject to any outstanding order, ruling,
decree, judgment or stipulation by any arbitrator, court or other Governmental
Entity, nor is there any pending (or to the knowledge of the Company and the
Subsidiaries, threatened) proceeding relating thereto; (5) to the knowledge of
the Company and the Subsidiaries, there is no infringement or misappropriation
of the Intellectual Property by any other person or entity; (6) there are no
agreements or licenses between the Company or any of the Subsidiaries, on the
one hand, and any other person or entity, on the other hand, which may have been
terminated or expired prior to the date hereof and under which the Company or
any of the Subsidiaries has granted rights or licenses in the Intellectual
Property to such other persons or entities or granted an option to acquire such
rights or licenses, which rights or licenses or the option to acquire the same
survived such termination or expiration; and (7) no person or entity has any
licenses under any of the Intellectual Property, except in each of cases (1)-(7)
above such as would not have a Material Adverse Effect. The Company and the
Subsidiaries have taken reasonable steps (including measures to protect secrecy
and confidentiality) to protect its right, title and interest in and to the
Intellectual Property. All employees, agents, consultants and other
representatives of the Company and the Subsidiaries who have access to
confidential or proprietary information of the Company and the Subsidiaries
incorporated in the Intellectual Property have a legal obligation of
confidentiality to the Company and the Subsidiaries with respect to such
information.
(c) For purposes of this Agreement, "Intellectual Property" shall mean all
of the following owned or controlled by the Company and the Subsidiaries: (1)
all inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents (including utility and
design patents, industrial designs and utility models), patent applications, and
patent or invention disclosures, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions and re-examinations
thereof; (2) all copyrightable works, and all applications, registrations and
renewals in connection therewith; (3) all mask works and semiconductor chip
rights and all applications, registrations and renewals in connection therewith;
(4) all trade secrets and confidential business and technical information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, engineering notebooks, industrial models, software and
specifications); (5) all computer software, both source code and object code
(including data and related documentation, flow charts, diagrams, descriptive
texts and programs, computer print-outs, underlying tapes, computer databases
and similar items); (6) all trademarks, service marks, trade names, trade dress,
logos, business and product names, slogans, and registrations and applications
for registration thereof; (7) all rights to sue for and remedies against past,
present and future infringements of any or all of the foregoing and rights of
priority and protection of interests therein under the laws of any jurisdiction
worldwide; (8) all copies and tangible embodiments of any or all of the
foregoing (in whatever form or medium, including without limitation electronic
media); and (9) all other proprietary, intellectual property and other rights
relating to any or all of the foregoing.
SECTION 3.11. PROPERTY.
Section 3.11 of the Disclosure Schedule accurately identifies all real
property, plants, warehouses, distribution centers, structures and other
buildings of the Company and the Subsidiaries. All properties and assets of the
Company and the Subsidiaries, real and personal, material to the conduct of
their respective businesses are, except for changes in the ordinary course of
business consistent with past practice since March 30, 1996, reflected on the
March 30 Balance Sheet, and the Company and the Subsidiaries have good and
marketable title to their respective real and personal property, free and clear
of all Liens, except for Permitted Liens (as defined below). For purposes of
this Agreement "Permitted Liens" shall mean those Liens (A) identified in the
March 30 Balance Sheet or the notes thereto or in the Current SEC Documents, (B)
set forth in Section 3.11 of the Disclosure Schedule, (C) for Taxes not yet due
or payable or being contested in good faith (and for which adequate reserves
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in accordance with generally accepted accounting principles have been
established) or (D) which would not have, individually or in the aggregate, a
Material Adverse Effect. All plants, warehouses, distribution centers,
structures and other buildings and material equipment of each of the Company and
the Subsidiaries are currently used in the operation of the business of such
company, are adequately maintained and are in satisfactory operating condition
and repair for the requirements of the business as presently conducted by such
company.
SECTION 3.12. EMPLOYEE BENEFIT PLANS; EMPLOYMENT, TERMINATION AND SEVERANCE
AGREEMENTS.
(a) (i) Section 3.12(a) of the Disclosure Schedule sets forth a true,
accurate and complete list of each pension, retirement, savings, profit sharing,
deferred compensation, medical, vision, dental and other health plan,
disability, accident and life insurance plan, bonus, stock option, incentive and
special compensation and other plan and each other employee benefit plan
program, contract, arrangement, agreement and understanding (whether written or
oral) (hereinafter referred to individually as a "Plan" and collectively as the
"Plans") to which the Company or any of the Subsidiaries contributes or is
required to contribute, or which the Company or any of the Subsidiaries
sponsors, maintains or administers or which is otherwise applicable to employees
or retirees or categories of employees or retirees of the Company or any of the
Subsidiaries generally; (ii) no "prohibited transaction" within the meaning of
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code that is not exempt under Section 408 of
ERISA or Section 4975 of the Code has occurred with respect to any Plan
sponsored, maintained or administered by the Company or any of the Subsidiaries;
(iii) all "employee benefit plans" as defined in Section 3(3) of ERISA ("ERISA
Plans") sponsored, maintained or administered by the Company or any of the
Subsidiaries comply currently and have complied in the past in all material
respects, in form and in operation, with the provisions of ERISA, the Code, the
rules and regulations promulgated under these statutes, all other applicable
federal, state or common law and with the terms of their respective documents
and funding instruments; (iv) there are no actions, suits or claims pending
(other than routine claims for benefits) or any actions, suits or claims (other
than routine claims for benefits) which could reasonably be expected to be
asserted, against any Plan or the assets or fiduciaries of any Plan sponsored,
maintained or administered by the Company or any of the Subsidiaries or any
ERISA Plan established or maintained by an entity or arrangement which is a
member of a controlled group of corporations with the Company or any of the
Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code
(each such entity or arrangement is referred to as an "ERISA Affiliate"), which
would have a Material Adverse Effect; (v) no civil or criminal action under
Title I, Subtitle B, Part 5 of ERISA is pending or, to the knowledge of the
Company and the Subsidiaries, threatened against the Company or any Subsidiary
or any fiduciary of any Plan sponsored or maintained by the Company or any of
the Subsidiaries; (vi) no Plan nor any fiduciary of a Plan sponsored, maintained
or administered by the Company or any of the Subsidiaries has been the direct or
indirect subject of an audit, investigation or examination by any Governmental
Entity or quasi-governmental agency; (vii) all Plans which are "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("ERISA Pension Plans") and
their respective trusts sponsored or maintained by the Company and each of the
Subsidiaries are qualified plans and trusts under the Code and any applicable
regulations; (viii) the Company and each of the Subsidiaries has received a
determination letter from the Internal Revenue Service (the "IRS") indicating
that each of the ERISA Pension Plans it sponsors, maintains or administers is
qualified, and nothing has occurred since the date of each determination letter
that would affect adversely the qualified status of any ERISA Pension Plan and
the IRS has not taken or, to the knowledge of the Company and the Subsidiaries,
proposed to take any action to revoke any favorable determination with respect
to the qualified status of any ERISA Pension Plan; (ix) neither the Company, any
Subsidiary nor any ERISA Affiliate has, or during the six year period ended
immediately preceding the date of this Agreement had, sponsored, maintained or
administered or contributed to or incurred any obligation under or liability to,
any ERISA Pension Plan subject to the provisions of Title IV of ERISA or Section
412 of the Code; (x) all contributions to each Plan have been timely made and
there are no contributions to any Plan that are past due and owing other than
those which, if not made, would not have a Material Adverse Effect; (xi) no
ERISA Pension Plan of the
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Company or any of the Subsidiaries or any ERISA Affiliate has been terminated
during the six years immediately before the date of this Agreement; (xii) no
ERISA Pension Plan of the Company or any of the Subsidiaries or any ERISA
Affiliate has been merged during the six years immediately before the date of
this Agreement; (xiii) neither the Company, any Subsidiary nor any ERISA
Affiliate has, or during the six year period immediately preceding the date of
this Agreement had, contributed to or an obligation to contribute to any
"multiemployer plan" as defined in Sections 3(37) or 4001(a) of ERISA; (xiv)
each Plan which is an "employee welfare benefit plan" as defined in Section 3(1)
of ERISA ("ERISA Welfare Plan") of the Company, any Subsidiary or any ERISA
Affiliate that is a "group health plan" within the meaning of Section
4980B(g)(2) of the Code has been administered in accordance with Title I,
Subtitle B, Part 6 of ERISA and has met the requirements of Section 4980B of the
Code; and (xv) neither the Company nor any of the Subsidiaries has any
obligation to provide benefits under any Plan except to its active employees.
(b) Section 3.12(b) of the Disclosure Schedule sets forth a true, accurate
and complete list of each employment, termination and severance agreement,
contract, arrangement and understanding (whether written or oral) with employees
of the Company and each Subsidiary. All such agreements, contracts, arrangements
or understandings are valid and enforceable, and neither the Company nor any of
the Subsidiaries nor, to the knowledge of the Company and the Subsidiaries, any
employee is in default in any material respect under any thereof. Except as
separately set forth in Section 3.12(b) of the Disclosure Schedule, neither the
Company nor any of the Subsidiaries is a party to any employment, termination or
severance agreement, contract, arrangement or understanding with any employee or
former employee of the Company or any of the Subsidiaries that is not terminable
by its terms at will by the applicable employer without liability. Except as set
forth on Section 3.12(b) of the Disclosure Schedule, this Agreement and the
transactions contemplated hereby will not result in any obligation to pay any
employee of the Company or any of the Subsidiaries severance pay or termination
benefits.
SECTION 3.13. LITIGATION.
Except as set forth in Section 3.13 of the Disclosure Schedule or identified
in the Current SEC Documents, there are no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of the Company and the
Subsidiaries, threatened against the Company or any of the Subsidiaries, or any
properties or rights owned or leased by the Company or any of the Subsidiaries
(including any such claims, actions, suits, proceedings or investigations
relating to environmental matters), before any court, administrative,
governmental or regulatory authority or body, arbitration panel or other
Governmental Entity, which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect (whether or not covered
by insurance), and neither the Company nor any of the Subsidiaries knows of any
basis for any such claim, action, suit, proceeding or investigation. Neither the
Company nor any of the Subsidiaries nor any property owned or leased by them is
subject to any order, judgment, injunction or decree which, individually or in
the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.14. ENVIRONMENTAL MATTERS.
None of the real property of the Company or any of the Subsidiaries and none
of the premises demised under real property leases to the Company or any of the
Subsidiaries and no real property previously owned or leased by the Company or
any of the Subsidiaries or any predecessor of any of them, have, to the
knowledge of the Company and the Subsidiaries, been used at any time: (i) as a
site for the storage, except as authorized under applicable Environmental Laws
(as defined below), or disposal of any Hazardous Material (as defined below); or
(ii) so as to cause a violation of or to give rise to a removal, restoration or
reimbursement liability under any Environmental Law, including as a result of
(A) the handling or removal by or at the request of the Company or any of the
Subsidiaries or any predecessor of any of them, of any Hazardous Material at or
from such real property or such leased or previously owned or leased properties,
(B) the disposition of such removed Hazardous Materials at any other locations,
(C) the Release (as defined below) or presence of Hazardous Materials or (D) the
discontinuance, sale or transfer of operations of any business conducted at such
real property or the
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premises demised under such real property leases or the previously owned or
leased properties. The Company and the Subsidiaries have complied in all
material respects with all, and have not violated in any material respect any,
Environmental Laws in connection with their business or operations, including
the acquisition, storage, handling, transportation, processing, use or disposal
of any goods or materials, whether as raw materials, work-in-process or finished
goods.
As used in this Agreement, the term "Environmental Laws" means any and all
applicable treaties, laws, common law, regulations, enforceable requirements,
binding determinations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations, licenses, variances, permissions, notices or binding
agreements issued, promulgated or entered into by any Governmental Entity,
relating to the environment, protection or preservation of human health or
safety, including the health and safety of employees, preservation or
reclamation of natural resources, or the management, Release or threatened
Release of Hazardous Materials in each case as in effect on the date hereof. As
used in this Agreement, the term "Hazardous Materials" means those materials,
substances or wastes that are regulated by, or from the basis of liability
under, any Environmental Law, including PCBs, pollutants, solid wastes,
explosive or regulated radioactive materials or substances, hazardous or toxic
materials, substances, wastes or chemicals, petroleum (including crude oil or
any fraction thereof) or petroleum distillates, asbestos or asbestos containing
materials, materials listed in 49 C.F.R. Section 172.101 and materials defined
as hazardous substances pursuant to Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended to
the date hereof ("CERCLA"). As used in this agreement, the term "Release" shall
have the meaning set forth in Section 101(22) of CERCLA.
SECTION 3.15. GOVERNMENTAL APPROVALS.
Except (a) for applicable requirements of the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations thereunder,
(b) for the filings and recordation of appropriate merger documents required by
the CGCL and the DGCL, (c) for the filings required under and compliance with
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act") and (d) where the
failure to obtain such consent, approval, order, authorization or allowance, or
to make any such filing, registration or notification, would not have,
individually or in the aggregate, a Material Adverse Effect, no approval, order
or authorization of, or filing or registration with, allowance by, or consent of
or notification to any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is required
to be obtained or made by the Company or any of the Subsidiaries in connection
with the execution and delivery by the Company of this Agreement, the
performance of obligations of the Company hereunder or the consummation by the
Company of the transactions contemplated hereby or for the continuation of the
business and operations of the Company after the Merger or for preventing the
termination of any material right, privilege or contract of the Company or any
of the Subsidiaries.
SECTION 3.16. COMPLIANCE WITH APPLICABLE LAW.
Except as set forth in Section 3.16 of the Disclosure Schedule, (i) the
Company and the Subsidiaries are in compliance with all applicable laws,
ordinances and regulations of any Governmental Entity, including those relating
to occupational health and safety, fair employment and equal opportunity, (ii)
no claims or complaints from any Governmental Entities or other parties have
been asserted or received by the Company or any of the Subsidiaries during the
past five years, and, to the knowledge of the Company and the Subsidiaries, no
claims or complaints are threatened, alleging that the Company or any of the
Subsidiaries is in violation of any such law, ordinance or regulation, and (iii)
neither the Company nor any of the Subsidiaries has received notice from any
Governmental Entity of any pending proceedings to take all or any part of the
properties of the Company or any of the Subsidiaries (whether leased or owned)
by condemnation or right of eminent domain and, to the knowledge of the Company
and the Subsidiaries, no such proceedings are threatened, except, in each such
case, for such
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noncompliance, claims, complaints or proceedings which would not have,
individually or in the aggregate, a Material Adverse Effect. This Section 3.16
does not relate to environmental matters, which are the subject of Section 3.14.
SECTION 3.17. LICENSES; PERMITS.
The Company has all material licenses, permits, approvals and other
authorizations from all Governmental Entities as are necessary for the conduct
of the business and operations of the Company and the Subsidiaries, in a manner
consistent with good business practice and in compliance with all laws
applicable to such business operations (including Environmental Laws). All such
licenses, permits, approvals and other authorizations are validly held by the
Company or the relevant Subsidiary, are in full force and effect and the same
will not be subject to suspension, modification, revocation or nonrenewal as a
result of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except where such failure
to hold such licenses, permits, approvals and authorizations would not have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.18. SEC FILINGS.
The Company has delivered to Parent and Sub true, accurate and complete
copies of (a) its Annual Reports on Form 10-K for the fiscal years ended
September 30, 1995 and September 30, 1994 as filed with the Securities and
Exchange Commission (the "SEC"), (b) its Quarterly Reports on Form 10-Q filed
with the SEC for each quarter or quarterly period since September 30, 1994, (c)
all definitive proxy statements filed with the SEC relating to the Company's
meetings of shareholders (whether annual or special) during 1996, 1995 and 1994,
(d) all other forms, reports, statements, documents and other filings required
to be filed by the Company with the SEC in connection with and since its initial
public offering and (e) all exhibits, schedules, documents incorporated by
reference, amendments and supplements to the foregoing (collectively, the "SEC
Filings"). The SEC Filings (i) when filed complied in all material respects with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act, as the case may be, and the rules and regulations
thereunder, and (ii) did not, at the time they were filed (and at the effective
date thereof in the case of registration statements), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except to the extent
any information in an SEC Filing has been revised, corrected or superseded by a
later-filed SEC Filing filed and publicly available prior to the date of this
Agreement, none of the SEC Filings contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Any filings made by
the Company with the SEC between the date hereof and the Effective Time (other
than the Proxy Statement (as defined in Section 5.1(c)) which shall meet the
standards set forth in Section 3.19) will meet the standards set forth in the
preceding sentence.
SECTION 3.19. PROXY STATEMENT.
The Proxy Statement and any supplements or amendments thereto will, when
filed (a) comply in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder and (b) contain no untrue statement
of any material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading, except that no
representation and warranty is made by the Company pursuant to this Section 3.19
with respect to information furnished in writing by Parent or Sub specifically
for inclusion in the Proxy Statement, and the Company will advise Parent and Sub
in writing if prior to the Effective Time it shall obtain knowledge of any facts
(including facts with respect to itself or any of the Subsidiaries) that would
make it necessary to supplement or amend the Proxy Statement in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading or to comply with applicable laws, rules and regulations,
and will promptly amend or supplement the Proxy Statement as required and
distribute the same to its shareholders. In the event Parent or Sub shall advise
the Company as to its obtaining
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knowledge of any facts that would make it necessary to supplement or amend the
Proxy Statement as provided in Section 4.5, the Company shall promptly amend or
supplement the Proxy Statement as required and distribute the same to its
shareholders.
SECTION 3.20. STATE TAKEOVER STATUTES.
Other than Section 1101(e) of the CGCL, no "fair price", "moratorium",
"control share acquisition", or other anti-takeover statute or regulation
applies or purports to apply to this Agreement, the Merger and the other
transactions contemplated hereby.
SECTION 3.21. OPINION OF FINANCIAL ADVISOR.
The Company has received the Opinion of Lehman Brothers dated on or about
June 30, 1996, to the effect that, as of such date, the consideration to be
received in the Merger by the Company's shareholders is fair to such
shareholders from a financial point of view. The Company has been authorized by
Lehman Brothers, subject to prior review by such financial advisor, to permit
such fairness opinion (or references thereto) to be included in the Proxy
Statement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company as follows:
SECTION 4.1. ORGANIZATION AND STANDING; SHARE OWNERSHIP.
Each of Parent and Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The only issued and
outstanding shares of capital stock of Sub are owned by Parent.
SECTION 4.2. AUTHORITY; RESOURCES.
Parent and Sub have all 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 of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub, as applicable. This Agreement has been duly executed and
delivered by Parent and Sub and constitutes the valid and binding obligation of
Parent and Sub, enforceable against Parent and Sub in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights in general and by general principles of equity.
Parent has sufficient resources to satisfy its obligations contained in Article
II.
SECTION 4.3. NO BREACH.
The execution, delivery and performance of this Agreement by Parent and Sub
do not, and consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, with or without the giving of notice or the
lapse of time, or both, conflict with or result in a breach or violation of or a
default under, or give rise to a right of amendment, termination, cancellation
or acceleration of any obligation or to a loss of a material benefit under, (i)
the Certificate of Incorporation or By-laws of Parent or Sub, or (ii) any
material contract, agreement, note, bond, mortgage, indenture, lease, license,
franchise, permit, concession, instrument, obligation, commitment, covenant,
understanding or arrangement to which it is a party or by which any of its
assets may be affected, or (iii) any order, ruling, decree, judgment,
arbitration award, statute, law, ordinance, rule, regulation or stipulation to
which Parent or Sub or their respective properties or assets is subject, or
result in the creation of any Lien upon any of their respective properties or
assets, except, in the case of items (ii) and (iii) above, for those, which
would not have, individually or in the aggregate, a material adverse effect on
the ability of Parent or Sub to consummate the transactions contemplated by this
Agreement.
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SECTION 4.4. GOVERNMENTAL APPROVALS.
Except (a) for the applicable requirements of the Exchange Act, (b) for the
filings and recordation of appropriate merger documents required by the CGCL and
the DGCL, (c) for the filings required under and compliance with the HSR Act,
(d) for the filings or approvals required under the laws and regulations of
various foreign jurisdictions in respect of the Merger and (e) where the failure
to obtain such consent, approval, order, authorization or allowance, or to make
any such filing, registration or notification, would not have, individually or
in the aggregate, a material adverse effect on the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement, no approval, order
or authorization of, or filing or registration with, allowance by, or consent of
or notification to any Governmental Entity is required to be obtained or made by
Parent or Sub in connection with the execution and delivery by Parent and Sub of
this Agreement, the performance of obligations of Parent and Sub hereunder or
the consummation by Parent and Sub of the transactions contemplated hereby.
SECTION 4.5. INFORMATION.
The Proxy Statement and any supplements or amendments thereto, insofar as
they contain information relating to Parent and Sub that has been furnished in
writing by Parent or Sub specifically for inclusion therein, will comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, and Parent or Sub will advise the Company in writing if
prior to the Effective Time it shall obtain knowledge of any facts with respect
to Parent or Sub or any affiliate of either of them that would make it necessary
to supplement or amend the Proxy Statement in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading or to comply with applicable laws, rules and regulations. No
representation or warranty is made by Parent or Sub pursuant to this Section 4.5
other than with respect to information in the Proxy Statement relating solely to
Parent and Sub. Neither Parent nor Sub shall have any obligation to supply or
furnish any information other than information in the Proxy Statement relating
solely to Parent and Sub.
ARTICLE V
COVENANTS
SECTION 5.1. COVENANTS OF THE COMPANY.
(a) ORDINARY COURSE. Prior to the Effective Time, the Company (i) shall
conduct, and shall cause each of the Subsidiaries to conduct, their respective
businesses in the ordinary course consistent with past practice (including,
without limitation, spending and investments related to research and development
and new product development in current lines of business), (ii) shall use, and
shall cause each of the Subsidiaries to use, its best efforts to maintain in
effect all existing qualifications, licenses, permits, approvals and other
authorizations referred to in Sections 3.1, 3.4 and 3.17 and to preserve their
respective business organizations intact and (iii) shall use, and shall cause
each of the Subsidiaries to use, commercially reasonable efforts to retain the
services of their respective present officers, employees and agents and to
maintain satisfactory relationships with customers, suppliers and others having
business relationships with it.
(b) MEETING OF THE COMPANY'S SHAREHOLDERS. The Company will, as soon as
practicable after the execution of this Agreement, take all action necessary
under applicable law and its Articles of Incorporation and By-laws to convene
and hold a special meeting of its shareholders to be held not later than
September 13, 1996, or such other date as shall be mutually agreed upon in
writing by Parent and the Company, to consider and vote upon the Merger and this
Agreement (the "Special Meeting"). Subject to Section 5.1(e)(iv), the Company
shall use its best efforts to obtain at the Special Meeting a favorable vote of
its shareholders on the approval and adoption of the Merger and this Agreement.
(c) PROXY STATEMENT. As soon as practicable after the execution of this
Agreement, the Company will prepare and file with the SEC under the Exchange Act
and the rules and regulations
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thereunder, and will use its best efforts to have cleared by the SEC, and as
soon as possible thereafter will disseminate to its shareholders, a proxy
statement (the "Proxy Statement") with respect to the Special Meeting. The
Company will obtain an opinion of Lehman Brothers, dated the date of the Proxy
Statement, to the effect that, as of such date, the consideration to be received
in the Merger by the Company's shareholders is fair to such shareholders from a
financial point of view and will, subject to prior review by such financial
advisor, include a copy of such fairness opinion in the Proxy Statement. Parent
and Sub will provide such assistance, information and cooperation to the Company
as is reasonably required to describe Parent or Sub for purposes of the Proxy
Statement. The Company will provide Parent, Sub and their counsel with a copy of
any written comments or telephonic notification of any oral comments the Company
may receive from the SEC or its staff with respect to the Proxy Statement
promptly after the receipt thereof and will provide Parent, Sub and their
counsel with a copy of any written responses and telephonic notification of any
oral responses of the Company or its counsel. Parent, Sub and their counsel
shall be given an opportunity to review and comment on the Proxy Statement and
any amendments or supplements thereto at reasonable times prior to the filing
thereof with the SEC. The Company will not mail any Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably objects.
(d) NEGATIVE COVENANTS. Prior to the Effective Time, the Company will not,
nor will it permit any of the Subsidiaries (except with the prior written
approval of Parent) to:
(i) amend their respective charter documents, by-laws or other
organizational documents (except as otherwise contemplated by Article I of
this Agreement);
(ii) issue or sell, or authorize, propose or agree to the issuance or
sale of (except pursuant to the exercise of Options outstanding on the date
hereof or pursuant to the 1992 Stock Purchase Plan in accordance with
Section 6.2(k)), or purchase, redeem or otherwise acquire, any shares of its
capital stock or any of its other securities or issue any securities or
obligations convertible into or exchangeable for, or options, warrants,
scrip, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or enter into any contract, understanding or
arrangement with respect to the issuance or sale of, any shares of its
capital stock or any of its other securities, or enter into any arrangement
or contract with respect to the purchase, repurchase, sale, redemption,
conversion, exchange registration, transfer or voting of shares of its
capital stock, or adjust, split, reacquire, redeem, combine or reclassify
any of its securities, or make any other changes in its capital structure;
(iii) (1) incur (contingently or otherwise) any debt or other obligation
to pay money borrowed or enter into any guarantee of any such obligation of
another person or mortgage, pledge or subject to any Lien their assets,
properties or business, or (2) make any loans, advances or capital
contributions to, or investments in, any other person or entity;
(iv) sell or otherwise dispose of or lease any part of their respective
properties or assets or purchase or otherwise acquire or lease properties or
assets, except sales or purchases of inventory in the ordinary course of
business consistent with past practice, or acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof;
(v) declare, set aside or pay any dividends on, or make any
distributions of any nature in respect of, their respective shares of
outstanding capital stock;
(vi) (1) grant any general increase in wage or salary rates or in
employee benefits, or (2) grant any increase in salary or in employment,
retirement, severance or termination or other benefits or pay any bonus to
any officer or director (except as required by existing agreements, plans or
arrangements), or (3) enter into any employment contract with any person
which the Company or the relevant Subsidiary does not have the unconditional
right to terminate without liability, or (4) take any action to cause to be
exercisable any otherwise unexercisable option under
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the Stock Option Plans, except as contemplated by this Agreement, or (5)
adopt (or amend in any manner which would, individually or in the aggregate,
materially increase the benefits under) any bonus, profit sharing,
compensation, stock option, employment or other employee benefit plan,
agreement, trust, plan fund or other arrangement for the benefit or welfare
of any employee of the Company or any of the Subsidiaries;
(vii) make any change in their accounting methods, principles or
procedures, except as may be required by a change in generally accepted
accounting principles; or
(viii) issue any press release or make any other public announcements
without providing Parent with a reasonable opportunity to review such
release or announcement and comment thereon prior to its dissemination.
(e) NO SOLICITATION; BOARD RECOMMENDATION.
(i) The Company, the Subsidiaries and their respective officers, directors,
employees, representatives, agents or affiliates (including, without limitation,
any investment banker, attorney or accountant retained by the Company or any of
the Subsidiaries) (collectively, the "Company's Representatives") shall
immediately cease any discussions or negotiations with any party that may be
ongoing with respect to an Acquisition Proposal (as defined below). From and
after the date hereof and prior to the Effective Time, the Company shall not,
nor shall it authorize or permit any of the Subsidiaries or any of the Company's
Representatives to, directly or indirectly, (A) solicit, initiate or encourage
(including by way of furnishing or disclosing non-public information), or cause
to be solicited, initiated or encouraged, any Acquisition Proposal or (B) other
than (x) acknowledging receipt of a written bona fide unsolicited offer or
proposal concerning an Acquisition Proposal, (y) requesting the maker of an oral
bona fide unsolicited offer or proposal concerning any Acquisition Proposal to
put the same in writing and (z) requesting information with respect to the
financial capability of the maker of a written bona fide unsolicited offer or
proposal concerning any Acquisition Proposal (provided that Parent is fully
informed as to the status and details of the Company's communications (and
responses thereto) described in such clauses (x), (y) and (z)), participate in
any discussion or negotiations with, or explore or otherwise communicate in any
way with, any third party (other than Parent or Sub) with respect to any
Acquisition Proposal or (C) enter into any agreement, arrangement or
understanding requiring the Company to abandon, terminate or fail to consummate
the Merger or any other transaction contemplated by this Agreement.
Notwithstanding the foregoing, the Company may furnish information concerning
its business, properties or assets to, and participate in any discussion or
negotiations with, or explore or otherwise communicate with, any financially
capable third party that makes after the date hereof a written bona fide
unsolicited offer or proposal concerning any Acquisition Proposal, if (x) the
Board of Directors of the Company, after consultation with its legal and
financial advisors and upon written advice of its outside legal counsel that
taking such action is necessary to comply with the directors' fiduciary duties
to the shareholders of the Company under applicable law, determines by a
majority vote that taking such action is reasonably likely to lead to an
Acquisition Proposal that is more favorable to the shareholders of the Company
than the Merger and that taking such action is necessary to comply with the
directors' fiduciary duties and (y) prior to taking such action, the Company (1)
provides reasonable notice to Parent, orally and in writing, to the effect that
it is taking such action, which notice shall describe the material terms and
conditions of the proposal, and the identity of the third party making it, and
(2) receives from such third party an executed confidentiality agreement in a
form substantially the same as the Confidentiality Agreement (as defined in
Section 5.4). The Company will keep Parent fully informed of the status and
details (including amendments and proposed amendments) of any such proposal and
will provide Parent with a copy of any such written proposal (including
amendments and proposed amendments) within two business days of receipt thereof
by the Company or any of the Company's Representatives.
(ii) Nothing contained herein shall be construed to prohibit the Company
from taking and disclosing to the shareholders of the Company a position as
contemplated by Rule 14e-2 under the Exchange Act, or from making such other
disclosure to shareholders if, in the good faith judgment of
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the Board of Directors of the Company, on written advice of its outside legal
counsel, such disclosure is necessary to comply with its fiduciary duties to the
Company's shareholders under applicable law; provided that the Company will not,
except as permitted by Section 5.1(e)(iv), withdraw or modify, or propose to
withdraw or modify, its position with respect to the Merger or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
(iii) For purposes of this Agreement, "Acquisition Proposal" shall mean any
indication of interest, inquiry, proposal or offer with respect to any of the
following transactions (other than the transactions between the Company, Parent
and Sub contemplated hereunder) involving the Company or the Subsidiaries: (A)
any merger, consolidation, business combination, share exchange,
recapitalization, liquidation, dissolution or other similar transaction; (B) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of a
substantial amount of the assets of the Company and the Subsidiaries, taken as a
whole, in a single transaction or series of transactions; (C) any tender offer
or exchange offer for 10% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (D) any person having acquired beneficial ownership or
the right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) having been formed which beneficially owns or has the right to
acquire beneficial ownership of, 10% or more of the then outstanding shares of
capital stock of the Company; (E) any other transaction, the consummation of
which could reasonably be expected to impede, interfere with, prevent or delay
the Merger or which would dilute the benefits to Parent and Sub of the
transactions contemplated hereby; (F) any proxy solicitation (other than as
contemplated by Section 5.1(b)); or (G) any public announcement of an offer,
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(iv) Except as set forth in this Section 5.1(e)(iv), neither the Board of
Directors of the Company nor any committee thereof shall (A) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by the Board of Directors of the Company or any such
committee, of this Agreement or the Merger, (B) approve or recommend, or propose
to approve or recommend, any Acquisition Proposal or (C) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each an "Acquisition Agreement") with respect to any
Acquisition Proposal. Notwithstanding the foregoing, but without limiting the
provisions of Section 5.1(e)(i), if the Board of Directors of the Company, after
consultation with and upon written advice of its outside legal counsel,
determines in good faith that it is necessary to do so in order to comply with
the directors' fiduciary duties to the shareholders of the Company under
applicable law, the Board of Directors of the Company may (x) withdraw or modify
its approval or recommendation of this Agreement or the Merger, (y) approve or
recommend a Superior Transaction (as defined below) or (z) cause the Company to
enter into any Acquisition Agreement with respect to a Superior Transaction, but
in any such case only after providing reasonable written notice to Parent and
Sub advising Parent and Sub that the Board of Directors of the Company has
received such other offer, specifying the material terms and conditions of such
offer and identifying the person making such offer. For purposes of this
Agreement, "Superior Transaction" shall mean any bona fide offer by a third
party to acquire, directly or indirectly, the Company (whether by merger,
acquisition, consolidation, business combination, share exchange, tender or
exchange offer or other similar transaction, or purchase of all or substantially
all of the assets or equity securities thereof) and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment (based
on the advice of a financial advisor of nationally recognized reputation,
including Lehman Brothers) to be more favorable to the Company's shareholders
than the Merger and the other transactions contemplated hereby and for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of the Company (based on the advice of a
financial advisor of nationally recognized reputation, including Lehman
Brothers), is reasonably capable of being financed by such third party.
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(v) Unless the Board of Directors of the Company shall have exercised its
rights pursuant to the provisions of the second sentence of Section 5.1(e)(iv),
upon the written request of Parent or Sub, the Board of Directors of the Company
shall promptly reaffirm in writing its approval or recommendation of the Merger
and this Agreement.
(f) ADVICE OF CHANGES. The Company shall promptly give notice to Parent
and Sub upon becoming aware of (i) any representation or warranty of the Company
contained in this Agreement becoming untrue or inaccurate, or (ii) the failure
by the Company to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, and, shall use its
best efforts to prevent or promptly remedy the same.
(g) ACCOUNTING. Prior to the Effective Time, the Company shall maintain,
and cause the Subsidiaries to maintain, their respective books of account and
financial records in the usual, regular and ordinary manner consistent with past
practice, which, in reasonable detail, shall accurately and fairly reflect
transactions and dispositions of assets.
(h) OTHER ACTIONS. Except as contemplated by this Agreement, the Company
will not nor will it permit any of the Subsidiaries to take or to agree or
commit to take any action that would result in any of the Company's
representations or warranties hereunder being untrue such that the condition in
Section 6.2(a) will not be satisfied.
(i) TAX MATTERS. The Company will not make any material tax election
(unless required by law) or settle or compromise any material income tax
liability of the Company or any of the Subsidiaries except if such action is
taken in the ordinary course of business consistent with past practice and
Parent and Sub shall have been provided reasonable prior notice thereof.
(j) STOCK PURCHASE PLANS.
(i) The Company shall take such actions as are necessary to cause the
Exercise Date (as defined in the Company's 1992 Stock Purchase Plan)
applicable to the then current Offering Period (as defined in the 1992 Stock
Purchase Plan) to be a date not later than July 15, 1996 (the "Final
Exercise Date"). On the Final Exercise Date, the Company shall apply the
funds credited as of such date under the 1992 Stock Purchase Plan within
each participant's payroll withholdings account to the purchase of whole
shares of Common Stock in accordance with the terms of the 1992 Stock
Purchase Plan. The cost to each participant in the 1992 Stock Purchase Plan
for shares of Common Stock shall be the lower of 85% of the closing sale
price of Common Stock on the Nasdaq National Market on (1) the first day of
the then current Offering Period or (2) the Final Exercise Date. No further
amounts shall be withheld or deposited, and no shares of Common Stock will
be issued or sold, pursuant to the 1992 Stock Purchase Plan after the Final
Exercise Date.
(ii) Except as otherwise agreed to by the parties, (x) the 1992 Stock
Purchase Plan and the Stock Purchase Plans shall terminate as of the
Effective Time and the provisions in any other plan, program, agreement or
arrangement providing for the purchase of the capital stock of the Company
or any Subsidiary (other than the CSNC 1995 Stock Option Plan), shall be
terminated and canceled as of the Effective Time, and (y) the Company shall
take all action necessary to ensure that following the Effective Time no
participant in the 1992 Stock Purchase Plan, the Stock Purchase Plans or
other plans, programs, agreements or arrangements shall have any right
thereunder to acquire equity securities of the Company, Parent, the
Surviving Corporation or any Subsidiary (other than the CSNC 1995 Stock
Option Plan) and to terminate all such plans, programs, agreements and
arrangements.
SECTION 5.2. HART-SCOTT-RODINO ACT FILINGS.
(a) Each of Parent and the Company will promptly, and in any event within
ten days after execution of this Agreement, make all filings or submissions as
are required under the HSR Act. Each
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of Parent and the Company will promptly furnish to the other party hereto such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission which is necessary
under the HSR Act in connection with the Agreement and the Merger. Without
limiting the generality of the foregoing, each of Parent and the Company will
promptly notify the other of the receipt and content of any inquiries or
requests for additional information made by any Governmental Entity in
connection therewith and will promptly (i) comply with any such inquiry or
request and (ii) provide the other with a description of the information
provided to any Governmental Entity with respect to any such inquiry or request.
In addition, each of Parent and the Company will keep the other hereto apprised
of the status of any such inquiry or request.
(b) Each of Parent and the Company agrees to cooperate with the other and,
subject to the terms and conditions set forth in this Agreement, use its
reasonable best efforts promptly to prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to obtain as promptly as practicable all necessary
permits, consents, orders, approvals and authorizations of, or any exemption by,
all third parties and Governmental Entities necessary or advisable to consummate
the transactions contemplated by this Agreement. Each of Parent and the Company
agrees that it will consult with the other with respect to the obtaining of all
permits, consents, orders, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each of Parent and the Company will keep the
other reasonably apprised of the status of matters relating to completion of the
transactions contemplated hereby.
SECTION 5.3. PUBLIC ANNOUNCEMENTS.
Subject to applicable legal requirements, each of Parent and the Company
agrees that any press release or other public announcement regarding the
transactions contemplated by this Agreement will be made only after consultation
with the other.
SECTION 5.4. ACCESS TO INFORMATION.
The Company shall, on and after the date of this Agreement, give, and shall
cause each of the Subsidiaries to give, to Parent, Sub and the attorneys,
accountants or other representatives of Parent and Sub, upon reasonable notice,
full access during normal business hours to make or cause to be made such
investigation of the properties and business of the Company and each of the
Subsidiaries and of its and their financial and legal condition as Parent and
Sub deem necessary or advisable to familiarize themselves with such properties,
business and other matters and to investigate the representations, warranties,
covenants and agreements of the Company set forth herein, provided that such
investigation shall not interfere unreasonably with normal operations, and the
Company shall furnish, and shall cause each of the Subsidiaries to furnish, such
financial and operating data and other information (including, without
limitation, Tax Returns of the Company and its subsidiaries and lists of the
Company's then current record and beneficial shareholders and optionholders)
with respect to the business, properties and condition of the Company and the
Subsidiaries as Parent and Sub shall from time to time reasonably request. The
Confidentiality Agreement, dated as of April 18, 1996, between Parent and the
Company (the "Confidentiality Agreement") shall apply with respect to the
information furnished thereunder or hereunder.
SECTION 5.5. FURTHER ACTION.
Subject to the terms and conditions herein provided (including, without
limitation, Section 5.1(e)(iv)), each of the parties hereto agrees to use its
reasonable best efforts to take promptly all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using its reasonable best efforts to obtain all necessary
waivers, consents and approvals, effecting all necessary registrations and
filings, and defending any lawsuits or other proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated hereby,
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including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, provided that none of
the Company, Parent or Sub shall be required to divest any business or assets.
In connection with and without limiting the foregoing, the Company and the Board
of Directors of the Company shall (i) take all action reasonably necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement, or any of the other
transactions contemplated by this Agreement and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger, this
Agreement, or any other transaction contemplated by this Agreement, take all
action reasonably necessary to ensure that the Merger and the other transactions
contemplated by this Agreement 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 the Merger, this Agreement, and the other
transactions contemplated by this Agreement.
SECTION 5.6. TRANSFER TAXES.
The Company and Parent shall cooperate in the preparation, execution and
filing of all returns, questionnaires, applications or other documents regarding
any real property transfer or gains, sales, use, transfer, value added, stock
transfer, stamp, recording and any similar taxes ("Transfer Taxes"). Parent
shall pay or cause to be paid, without withholding from the amounts payable to
any holder of any shares of Common Stock, all Transfer Taxes.
SECTION 5.7. INDEMNIFICATION.
(a) After the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, indemnify and hold harmless each person who has at any time
prior to the Effective Time been an officer, director or employee or of the
Company in connection with acts or omissions occurring at or prior to the
Effective Time to the same extent and on the same terms and conditions as
provided in the Company's Articles of Incorporation, By-laws and written
indemnification agreements in effect on the date hereof (to the extent
consistent with applicable law).
(b) For a period of six years after the Effective Time, Parent shall cause
the Surviving Corporation to use its best efforts to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered to Parent) with
respect to claims arising from acts or events which occurred before the
Effective Time on terms comparable to those contained in the Company's
directors' and officers' liability insurance in effect on the date hereof;
provided, however, that Parent or the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance in excess of 150%
of the annual premiums paid as of the date hereof by the Company for such
insurance.
(c) This Section 5.7 shall survive the consummation of the Merger and is
intended to benefit the indemnified parties.
ARTICLE VI
CONDITIONS
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger is subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) COMPANY SHAREHOLDER APPROVAL. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the shareholders
of the Company to the extent required by the CGCL;
(b) HSR ACT. The applicable waiting period under the HSR Act shall
have expired or been earlier terminated;
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(c) GOVERNMENTAL APPROVALS. All filings required to be made prior to
the Effective Time by the Company, any of the Subsidiaries, Parent or Sub
with, and all consents, approvals and authorizations required to be obtained
prior to the Effective Time by the Company, any of the Subsidiaries, Parent
or Sub from, any Governmental Entity in connection with the execution,
delivery and performance of this Agreement shall have been made or obtained,
except where the failure to make or obtain the same would not have a
Material Adverse Effect or a material adverse effect on the ability of
Parent and Sub to consummate the transactions contemplated by this Agreement
and could not reasonably be expected to subject the Company, any of the
Subsidiaries, Parent or Sub or any of their respective affiliates or any
directors or officers of any of the foregoing to the risk of criminal
liability; and
(d) NO INJUNCTIONS OR RESTRAINTS. No statute, law, rule, regulation,
decree, judgment, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other Governmental Entity or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
each of the parties shall have used reasonable best efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER.
The obligations of Parent and Sub to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and, except for the effect of any
activities or transactions which are specifically contemplated by this
Agreement, shall be true and correct in all material respects at the
Effective Time with the same effect as though all such representations and
warranties had been made at such time, and the Company shall have delivered
to Parent and Sub a certificate signed by an authorized executive officer of
the Company confirming the foregoing as of the Effective Time;
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. Each and all of the
covenants and agreements of the Company to be performed or complied with
pursuant to this Agreement prior to the Effective Time shall have been fully
performed and complied with in all material respects, and the Company shall
have delivered to Parent and Sub a certificate signed by an authorized
executive officer of the Company confirming the foregoing as of the
Effective Time;
(c) OPTIONS. Immediately prior to the Effective Time, Parent shall
have received evidence satisfactory to it in its reasonable discretion that
(i) the Company shall have taken all necessary action to effect the
cancellation of Options pursuant to Section 2.3 and (ii) there shall not be
outstanding any options which shall be exercisable for stock of the
Surviving Corporation at or after the Effective Time;
(d) LITIGATION, ETC. On or after the date hereof, there shall not
exist or have been instituted or pending any suit, action or proceeding by
or before any court of competent jurisdiction or other Governmental Entity
(i) which is reasonably likely to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit the consummation of the Merger,
or which is reasonably likely to result in material damages in connection
with the Merger, (ii) which is reasonably likely to result in (x) the
prohibition of ownership or the operation by Parent or Sub of all or a
material portion of the business or assets of the Company and the
Subsidiaries or of Parent and its subsidiaries or (y) the compelling of
Parent or Sub to dispose of or to hold separately all or a material portion
of the business or assets of Parent or any of its subsidiaries or of the
Company or any of the Subsidiaries, as a result of the Merger, (iii) which
is reasonably likely to result in the imposition of material limitations on
the ability of Parent or Sub effectively to exercise full rights of
ownership of any shares of Common Stock, including, without limitation, the
right to vote any
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shares of Common Stock acquired by Parent or Sub on all matters properly
presented to the Company's shareholders, (iv) which is reasonably likely to
result in the divestiture by Parent or Sub of any shares of Common Stock,
(v) which is reasonably likely to result in any material diminution in the
benefits expected to be derived by Parent or Sub as a result of the
transactions contemplated by the Merger or (vi) which otherwise has had or
may reasonably be expected to have a Material Adverse Effect or a material
adverse effect on Parent or its affiliates taken as a whole;
(e) LAWS, ETC. On or after the date of this Agreement, there shall not
exist or have been enacted, entered, enforced, promulgated or deemed
applicable to the Merger, any statute, law, rule, regulation, judgment,
order or injunction or any other action taken by any court or other
Governmental Entity, other than the application to the Merger of applicable
waiting periods under the HSR Act, that has resulted, or may reasonably be
expected to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (vi) of paragraph (d) above;
(f) NO MATERIAL ADVERSE CHANGE. Except as set forth in Section 6.2(f)
of the Disclosure Schedule, on or after the date of this Agreement, there
shall not have occurred (or reasonably be expected to occur) any event,
change or development which has had or may reasonably be expected to have a
Material Adverse Effect;
(g) COMPETING TRANSACTION. On or after the date of this Agreement, (i)
the Board of Directors of the Company or any committee thereof shall not
have (A) withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Merger or this Agreement, (B) approved or
recommended a Superior Transaction or (C) failed to reaffirm its approval or
recommendation of the Merger or this Agreement in accordance with a request
by Parent or Sub pursuant to Section 5.1(e)(v) and (ii) the Company shall
not have entered into any Acquisition Agreement with respect to a Superior
Transaction;
(h) THIRD PARTY CONSENTS. All consents or approvals of all persons and
entities (other than Governmental Entities) required to be obtained prior to
the Effective Time in connection with the execution, delivery and
performance of this Agreement (i) by the Company and the Subsidiaries shall
have been obtained and shall be in full force and effect, except for those
the absence of which would not have a Material Adverse Effect and (ii) by
Parent and Sub shall have been obtained and shall be in full force and
effect, except for those the absence of which would not have a material
adverse effect on the ability of Parent and Sub to consummate the
transactions contemplated by this Agreement;
(i) AGREEMENTS WITH EMPLOYEES. Parent shall have entered into
agreements in substantially the form previously agreed to by the parties
with (i) 90% of the employees of the Company set forth in subsection A of
Section 6.2(i) of the Disclosure Schedule, (ii) 85% of the employees of the
Company set forth in subsections A and B of Section 6.2(i) of the Disclosure
Schedule and (iii) 80% of the employees of the Company set forth in
subsections A, B and C of Section 6.2(i) of the Disclosure Schedule;
(j) OPINION OF COMPANY'S COUNSEL. Parent and Sub shall have received
the opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for the Company,
in a form reasonably agreeable to the parties; and
(k) STOCK PURCHASE PLAN SHARES. Each holder of shares of Common Stock
purchased pursuant to the Company's 1984 Stock Purchase Plan or the
Company's 1988 Stock Purchase Plan (such shares referred to as "Stock
Purchase Plan Shares" and such plans referred to collectively as the "Stock
Purchase Plans") shall have paid to the Company such amounts as are required
to be paid to the Company pursuant to the Stock Purchase Plans, the related
Subscription Agreements and the resolutions of the Board of Directors of the
Company related thereto in respect of the removal of restrictions on
transfer applicable to the Stock Purchase Plan Shares (I.E., an amount equal
to the product of the Delta (as defined in the Stock Purchase Plans) times
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the number of Stock Purchase Plan Shares owned by such holder). Section
6.2(k) of the Disclosure Schedule sets forth a list of each holder of Stock
Purchase Plan Shares, the number of Stock Purchase Plan Shares owned by such
holder and the corresponding Delta for such Stock Purchase Plan Shares.
SECTION 6.3. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Sub set forth in this Agreement shall be true and correct in
all respects as of the date of this Agreement and, except for the effect of
any activities or transactions which are specifically contemplated by this
Agreement, shall be true and correct in all material respects at the
Effective Time with the same effect as though all such representations and
warranties had been made at such time, and Parent shall have delivered to
the Company a certificate signed by an authorized executive officer of
Parent confirming the foregoing as of the Effective Time;
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Each and all of the
covenants and agreements of Parent and Sub to be performed or complied with
pursuant to this Agreement prior to the Effective Time shall have been fully
performed and complied with in all material respects, and Parent shall have
delivered to the Company a certificate signed by an authorized executive
officer of Parent confirming the foregoing as of the Effective Time; and
(c) OPINION OF COUNSEL TO PARENT AND SUB. The Company shall have
received the opinion of Messrs. Chadbourne & Parke LLP, counsel for Parent
and Sub, in a form reasonably agreeable to the parties.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION.
This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time:
(a) by the mutual written agreement of Parent and the Company;
(b) by either Parent or the Company, if the Effective Time shall not
have occurred on or before October 30, 1996, except that neither Parent, on
the one hand, nor the Company, on the other hand, may so terminate this
Agreement if the absence of such occurrence is due to the failure of Parent
or Sub, on the one hand, or the Company, on the other hand, to perform in
all material respects each of their or its obligations required to be
performed prior to the Effective Time;
(c) by either Parent or the Company, if there shall be any statute, law,
rule or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting
the consummation of the Merger, and such order, decree, ruling or other
action shall not be subject to appeal or shall have become final and
unappealable;
(d) by either Parent or the Company, if this Agreement and the Merger
shall fail to receive the requisite vote for approval and adoption by the
shareholders of the Company under the CGCL at the Special Meeting;
(e) by Parent, if (i) the Board of Directors of the Company shall have
(A) withdrawn or modified its approval or recommendation of this Agreement
or the Merger in a manner adverse to
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Parent, (B) approved or recommended a Superior Transaction or (C) failed to
reaffirm its approval or recommendation of the Merger or this Agreement in
accordance with a request by Parent or Sub pursuant to Section 5.1(e)(v) or
(ii) the Company shall have entered into an Acquisition Agreement with
respect to a Superior Transaction;
(f) by Parent, if there shall have been a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company set forth in
this Agreement shall have become untrue, in any such case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may
be, would not be satisfied as of such time, provided that if such breach is
curable by the Company prior to the scheduled date of the Special Meeting
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts to cure the same,
Parent may not terminate this Agreement pursuant to this Section 7.1(f);
(g) by the Company, in connection with entering into a definitive
agreement for a Superior Transaction in accordance with Section 5.1(e)(iv),
provided that the Company has complied with all the provisions thereof,
including the notice provisions therein; or
(h) by the Company, if there shall have been a breach of any
representation, warranty, covenant or agreement on the part of Parent or Sub
set forth in this Agreement, or if any representation or warranty of Parent
or Sub set forth in this Agreement shall have become untrue, in any such
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b),
as the case may be, would not be satisfied as of such time, provided that if
such breach is curable by Parent or Sub, as the case may be, prior to the
scheduled date of the Special Meeting through the exercise of its reasonable
best efforts and for so long as Parent or Sub, as the case may be, continues
to exercise such reasonable best efforts to cure the same, the Company may
not terminate this Agreement pursuant to this Section 7.1(h).
ARTICLE VIII
SURVIVAL
SECTION 8.1. SURVIVAL.
The representations and warranties in this Agreement or in any instrument or
certificate delivered pursuant to this Agreement shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement which by its
terms contemplates performance after the Effective Time.
ARTICLE IX
ASSIGNMENT; PARTIES IN INTEREST; AMENDMENT; WAIVER
SECTION 9.1. ASSIGNMENT.
The parties to this Agreement shall not convey, assign or otherwise transfer
any of their rights or obligations under this Agreement without the express
written consent of Parent and Sub or the Company, as the case may be, except
that Parent or Sub may (without obtaining any consent) assign its rights,
interests or obligations to any direct or indirect wholly-owned subsidiary of
Parent. Any conveyance, assignment or transfer requiring the express written
consent of the other party which is made without such consent shall be void ab
initio. No assignment of this Agreement shall relieve the assigning party of its
obligations hereunder.
SECTION 9.2. PARTIES IN INTEREST.
This Agreement is binding upon and is for the benefit of the parties hereto
and their respective successors and permitted assigns. This Agreement is not
made for the benefit of any person, firm, corporation or other entity not a
party hereto, except for those officers, directors and employees of the
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Company to the extent provided for in Section 5.7, and no person, firm,
corporation or other entity other than the parties hereto or their respective
successors and permitted assigns shall acquire or have any right, remedy or
claim under or by virtue of this Agreement.
SECTION 9.3. AMENDMENT.
This Agreement cannot be amended or modified except by a written agreement
executed by the parties hereto; provided, however, that subsequent to the
adoption of this Agreement by the shareholders of the Company, this Agreement
may be so amended only as may be permitted by the CGCL and the DGCL.
SECTION 9.4. WAIVER.
At any time prior to the Effective Time, Parent or Sub may extend the time
for the performance of or waive compliance with any of the obligations or other
acts of the Company contained herein or waive any inaccuracies in the
representations and warranties of the Company contained herein or in any
document delivered pursuant hereto, and the Company may extend the time for the
performance of or waive compliance with any of the obligations or other acts of
Parent or Sub contained herein or waive any inaccuracies in the representations
and warranties of Parent or Sub contained herein or in any document delivered
pursuant hereto. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of those rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. EFFECT OF INVESTIGATION.
All representations, warranties, covenants and agreements made by the
Company in this Agreement or in any certificates, statements or other
instruments delivered pursuant to this Agreement shall be unaffected by any
investigation made by or on behalf of Parent or Sub or knowledge obtained as a
result thereof or otherwise.
SECTION 10.2. FEES AND EXPENSES.
(a) Except as otherwise provided in this Section 10.2, each of the parties
hereto agrees to pay, without right of reimbursement from the other, the costs
incurred by it incident to the performance of its obligations hereunder,
including, without limitation, the fees and disbursements of counsel,
accountants, financial advisors, experts and consultants employed by the
respective parties in connection with the transactions contemplated hereby,
whether or not the Merger is consummated.
(b) The Company agrees that:
(1) if this Agreement shall be terminated pursuant to:
(i) Section 7.1(b) (other than a termination by Parent solely as a
result of the failure of the conditions set forth in Sections 6.1(b),
6.1(c), 6.1(d), 6.2(d) or 6.2(e) to be satisfied where the Company has
performed in all material respects each of its obligations required to be
performed pursuant to this Agreement) or 7.1(d), an Acquisition Proposal
existed at or prior to such termination and within nine months following
such termination, the Company approves, recommends, enters into an
agreement with respect to or consummates a transaction with respect to an
Acquisition Proposal;
(ii) Section 7.1(e);
(iii) Section 7.1(f), there has been a breach by the Company or its
Board of Directors of any of its covenants or agreements set forth in
this Agreement and within nine months
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following such termination, the Company approves, recommends, enters into
an agreement with respect to or consummates a transaction with respect to
an Acquisition Proposal (regardless of whether an Acquisition Proposal
existed at or prior to such termination); or
(iv) Section 7.1(g); or
(2) if after the date hereof and during the term of this Agreement any
person, corporation, partnership, other entity or "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder), other than Parent or Sub or any of their respective
subsidiaries or affiliates, acquires beneficial ownership or the right to
acquire beneficial ownership of 40% or more of the then outstanding shares
of capital stock of the Company,
then the Company shall pay to Parent an amount equal to $10,000,000. The parties
acknowledge that a portion of such payment is intended to reimburse Parent and
Sub for their fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. The right of Parent hereunder to receive
such payment shall be in addition to any other rights or remedies available to
Parent or Sub in law or in equity.
(c) Any payment required to be made pursuant to Section 10.2(b) shall be
made as promptly as practicable but not later than five business days after the
occurrence of the event giving rise to such payment and shall be made by wire
transfer of immediately available funds to an account designated by Parent,
except that any payment to be made pursuant to Section 10.2(b)(1)(iv) shall be
made not later than the termination of this Agreement by the Company pursuant to
Section 7.1(g).
SECTION 10.3. NOTICES.
Any notice, request, instruction or other communication to be given
hereunder by any party to the others shall be in writing and shall be deemed to
have been duly given (i) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other nationally reputable next-day courier service, or (iii) on the third
business day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice.
(a) If to Parent or Sub:
Rockwell International Corporation
World Headquarters
2201 Seal Beach Boulevard
Seal Beach, California 90740-8250
Attention: William J. Calise, Jr., Esq.
Senior Vice President, General
Counsel and Secretary
Telecopy: (310) 797-5687
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Peter R. Kolyer, Esq.
Telecopy: (212) 541-5369
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(b) If to the Company:
Brooktree Corporation
9868 Scranton Road
San Diego, California 92121-3707
Attention: Mr. James A. Bixby
Chairman, Chief Executive
Officer and President
Telecopy: (619) 452-6265
with a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Steven E. Bochner, Esq.
Telecopy: (415) 496-4084
SECTION 10.4. BROKERS; FEE SCHEDULE.
The Company represents and warrants that there are no claims (or any basis
for any claims) for brokerage commissions, finder's fees or like payments in
connection with this Agreement or the transactions contemplated hereby resulting
from any action taken by or on behalf of the Company, except for fees payable by
the Company to Lehman Brothers. The estimated fees and expenses incurred and to
be incurred by the Company in connection with this Agreement and the
transactions contemplated hereby (including the fees of the Company's legal
counsel) are set forth separately in Section 10.4 of the Disclosure Schedule.
The Company has provided Parent full and complete copies of all agreements (i)
between Lehman Brothers and the Company and (ii) between the Company's legal
counsel and the Company. Each of Parent and Sub represents and warrants that
there are no claims (or any basis for any claims) for brokerage commissions,
finder's fees or like payments in connection with this Agreement or the
transactions contemplated hereby or thereby resulting from any action taken by
or on behalf of it, except for fees payable by Parent to Dillon, Read & Co.
Incorporated.
SECTION 10.5. CAPTIONS; CURRENCY.
The Article, Section and paragraph captions herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof. Unless otherwise
specified, all references contained in this Agreement, in any Exhibit or
Schedule referred to herein or in any instrument or document delivered pursuant
hereto to dollars shall mean United States Dollars. Unless otherwise specified,
all references herein to numbered sections and articles are to sections and
articles of this Agreement and all references herein to Exhibits are to Exhibits
to this Agreement.
SECTION 10.6. ENTIRE AGREEMENT.
This Agreement and the Confidentiality Agreement together constitute the
entire agreement between the parties with respect to the subject matter hereof
and this Agreement and the Confidentiality Agreement supersede all prior
agreements or understandings of the parties relating thereto.
SECTION 10.7. SPECIFIC PERFORMANCE.
In the event of any actual or threatened default in, or breach of, any of
the terms, conditions and provisions of this Agreement, the party or parties who
are or are to be thereby aggrieved shall have the right to seek specific
performance and injunctive relief giving effect to its or their rights under
this Agreement, in addition to any and all other rights and remedies at law or
in equity, and all such rights and remedies shall be cumulative. The parties
agree that the remedies at law for any breach or threatened breach, including
monetary damages, are inadequate compensation for any loss and that any defense
in any action for specific performance that a remedy at law would be adequate is
waived.
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SECTION 10.8. SEVERABILITY.
If any provision of this Agreement or the application thereof to any person
or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions thereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated thereby is
not affected in any manner adverse to any party. Upon any such determination,
the parties shall negotiate in good faith in an effort to agree upon a suitable
and equitable substitute provision to effect the original intent of the parties.
SECTION 10.9. EXHIBITS AND SCHEDULES.
All Exhibits attached hereto and the Disclosure Schedule are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Capitalized terms used in the Disclosure Schedule but not otherwise
defined therein shall have the respective meanings assigned to such terms in
this Agreement.
SECTION 10.10. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware applicable to contracts made and to be
performed entirely within such State, without regard to the conflicts of law
principles of such State, except that the Merger shall be governed by the CGCL
and the DGCL.
SECTION 10.11. COUNTERPARTS.
For the convenience of the parties, this Agreement may be executed in any
number of separate counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together constitute the
same agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first hereinabove
written.
ROCKWELL INTERNATIONAL
CORPORATION
By /s/ WILLIAM J. CALISE, JR.
-----------------------------------
Name: William J. Calise, Jr.
Title: Senior Vice President,
General Counsel
and Secretary
By /s/ JOHN R. STOCKER
-----------------------------------
Name: John R. Stocker
Title: Vice President -- Law
32
<PAGE>
ROK II ACQUISITION CORPORATION
By /s/ DWIGHT W. DECKER
-----------------------------------
Name: Dwight W. Decker
Title: President
By /s/ WILLIAM J. CALISE, JR.
-----------------------------------
Name: William J. Calise, Jr.
Title: Secretary
BROOKTREE CORPORATION
By /s/ JAMES A. BIXBY
-----------------------------------
Name: James A. Bixby
Title: Chairman, Chief Executive
Officer
and President
By /s/ NOREEN E. BURNS
-----------------------------------
Name: Noreen E. Burns
Title: Secretary
33
<PAGE>
ANNEX II
LEHMAN BROTHERS
August 26, 1996
Board of Directors
Brooktree Corporation
9868 Scranton Road
San Diego, California 92121-3701
Attention: James A. Bixby
President and Chief Executive Officer
Members of the Board:
We understand that Brooktree Corporation ("Brooktree" or the "Company")
intends to enter into a transaction with Rockwell International Corporation
("Rockwell") pursuant to which Brooktree shall merge with a wholly-owned
subsidiary of Rockwell and each outstanding share of common stock of the Company
will be exchanged for $15.00 in cash (the "Proposed Transaction"). The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger among Rockwell, ROK Acquisition Corporation and
Brooktree dated as of July 1, 1996 (the "Agreement").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's shareholders of the consideration to be offered to such shareholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) such publicly available
information concerning the Company and Rockwell that we believe to be relevant
to our inquiry, including without limitation, the Brooktree Proxy Statement
pursuant to Section 14(a) of the Securities Exchange Act of 1934, (3) financial
and operating information with respect to the business, operations and prospects
of the Company furnished to us by the Company, including without limitation the
financial results of the Company for the quarter ended June 30, 1996 which were
publicly disclosed concurrently with the announcement of the Proposed
Transaction, (4) a trading history of the Company's common stock from its
initial public offering to the present and a comparison of that trading history
with those of other companies that we deemed relevant, (5) research analyst
reports regarding the Company and its estimated financial performance and a
comparison of such estimates with the financial results for the quarter ended
June 30, 1996 and subsequent quarters estimated by the Company, (6) a comparison
of the historical financial results and present financial condition of the
Company with those of other companies that we deemed relevant, and (7) a
comparison of the financial terms of the Proposed Transaction with the financial
terms of certain other recent transactions that we deemed relevant. In addition,
we have had discussions with the management of the Company concerning its
business, operations, assets, financial condition and prospects and undertook
such other studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of management of the Company that they are
not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of the Company, upon
advice of the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company and we have relied on such projections in arriving at
our opinion. In arriving at our opinion, we have not conducted a physical
inspection of the properties and
1
<PAGE>
Brooktree Corporation
August 26, 1996
Page 2
facilities of the Company and have not made or obtained any evaluations or
appraisals of the assets or liabilities of the Company. In addition, although we
have had certain preliminary discussions with third parties, you have not
authorized us to, and we have not, formally solicited any proposals or offers
from any third party with respect to the purchase of all or a part of the
Company's business. Our opinion necessarily is based upon market, economic and
other conditions as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the shareholders of the Company in the Proposed Transaction is fair
to such shareholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past (including advising the Company on the sale
of a division to Pioneer Electronic Corporation and the acquisition of Base2
Systems, Inc.) and have received customary fees for such services. In addition,
Michael Wishart, a managing director of Lehman Brothers, is on the Board of
Directors of the Company. We have performed various investment banking services
for Rockwell in the past and have received customary fees for such services. In
the ordinary course of our business, we actively trade in the equity securities
of the Company and Rockwell for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any shareholder of the Company as to
how such shareholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
2
<PAGE>
ANNEX III
CHAPTER 13
DISSENTERS' RIGHTS
SECTION 1300. RIGHT TO REQUIRE PURCHASE -- "DISSENTING SHARES" AND "DISSENTING
SHAREHOLDER" DEFINED.
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to vote
on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this section and Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described
in subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
SECTION 1301. DEMAND FOR PURCHASE.
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires
<PAGE>
to exercise the shareholder's right under such sections. The statement of price
constitutes an offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in subparagraph (A) or (B) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. ENDORSEMENT OF SHARES.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION 1303. AGREED PRICE -- TIME FOR PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION 1304. DISSENTER'S ACTION TO ENFORCE PAYMENT.
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint
2
<PAGE>
in the superior court of the proper county praying the court to determine
whether the shares are dissenting shares or the fair market value of the
dissenting shares or both or may intervene in any action pending on such a
complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. APPRAISERS' REPORT -- PAYMENT COSTS.
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION 1306. DISSENTING SHAREHOLDER'S STATUS AS CREDITOR.
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS PAID AS CREDIT AGAINST PAYMENT.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
3
<PAGE>
SECTION 1308. CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING SHAREHOLDERS.
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
SECTION 1309. TERMINATION OF DISSENTING SHAREHOLDER STATUS.
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF PROCEEDINGS FOR PAYMENT PENDING LITIGATION.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES.
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
SECTION 1312. ATTACKING VALIDITY OF REORGANIZATION OR MERGER.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except for an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to a shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter, but if the shareholder
institutes any action to
4
<PAGE>
attack the validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, the shareholder
shall not thereafter have any right to demand payment of cash for the
shareholder's shares pursuant to this chapter. The court in any action attacking
the validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded shall not restrain or
enjoin the consummation of the transaction except upon 10 days' prior notice to
the corporation and upon a determination by the court that clearly no other
remedy will adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with another party
to the reorganization or short-form merger, in any action to attack the validity
of the reorganization or short-form merger or to have the reorganization or
short-form merger set aside or rescinded, (1) a party to a reorganization or
short-form merger which controls another party to the reorganization or
short-form merger shall have the burden of proving that the transaction is just
and reasonable as to shareholders of the controlled party, and (2) a person who
controls two or more parties to a reorganization shall have the burden of
proving that the transaction is just and reasonable as to the shareholders of
any party so controlled.
5
<PAGE>
BROOKTREE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER ____, 1996
James A. Bixby and Noreen E. Burns, or either of them, each with the power of
substitution and revocation, are hereby authorized to represent the undersigned,
with all powers which the undersigned would possess if personally present, to
vote the Common Stock of the undersigned at the special meeting of shareholders
of BROOKTREE CORPORATION (the "Company") to be held at the Company's principal
executive offices located at 9868 Scranton Road, San Diego, California 92121, at
10:00 a.m. on _______________, September _____, 1996, and at any postponements
or adjournments of that meeting, as set forth below, and in their discretion
upon any other business that may properly come before the meeting.
This proxy will be voted as specified or, if no choice is specified, will be
voted FOR each of the proposals specified herein.
BROOKTREE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER ____, 1996
James A. Bixby and Noreen E. Burns, or either of them, each with the power of
substitution and revocation, are hereby authorized to represent the undersigned,
with all powers which the undersigned would possess if personally present, to
vote the Common Stock of the undersigned at the special meeting of shareholders
of BROOKTREE CORPORATION (the "Company") to be held at the Company's principal
executive offices located at 9868 Scranton Road, San Diego, California 92121, at
10:00 a.m. on _______________, September _____, 1996, and at any postponements
or adjournments of that meeting, as set forth below, and in their discretion
upon any other business that may properly come before the meeting.
This proxy will be voted as specified or, if no choice is specified, will be
voted FOR each of the proposals specified herein.
BROOKTREE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER ____, 1996
James A. Bixby and Noreen E. Burns, or either of them, each with the power of
substitution and revocation, are hereby authorized to represent the undersigned,
with all powers which the undersigned would possess if personally present, to
vote the Common Stock of the undersigned at the special meeting of shareholders
of BROOKTREE CORPORATION (the "Company") to be held at the Company's principal
executive offices located at 9868 Scranton Road, San Diego, California 92121, at
10:00 a.m. on _______________, September _____, 1996, and at any postponements
or adjournments of that meeting, as set forth below, and in their discretion
upon any other business that may properly come before the meeting.
This proxy will be voted as specified or, if no choice is specified, will be
voted FOR each of the proposals specified herein.
<PAGE>
BROOKTREE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. To approve and adopt the Agreement and Plan of Merger dated as of July 1,
1996 among Rockwell International Corporation, a Delaware corporation
("Rockwell"), ROK II Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Rockwell ("Sub"), and the Company and to approve
the merger of Sub with and into the Company pursuant to such agreement.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS ATTORNEY, EXECUTOR,
TRUSTEE, OR IN REPRESENTATIVE CAPACITY, SIGN NAME AND INDICATE TITLE. IF SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
Check here for address change. / /
New Address:
---------------------------
- ---------------------------------------
- ---------------------------------------
Check here if you plan to attend the meeting. / /
Dated , 1996
---------------------------
Signature
------------------------------
Signature
------------------------------
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
BROOKTREE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. To approve and adopt the Agreement and Plan of Merger dated as of July 1,
1996 among Rockwell International Corporation, a Delaware corporation
("Rockwell"), ROK II Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Rockwell ("Sub"), and the Company and to approve
the merger of Sub with and into the Company pursuant to such agreement.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS ATTORNEY, EXECUTOR,
TRUSTEE, OR IN REPRESENTATIVE CAPACITY, SIGN NAME AND INDICATE TITLE. IF SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
Check here for address change. / /
New Address:
---------------------------
- ---------------------------------------
- ---------------------------------------
Check here if you plan to attend the meeting. / /
Dated , 1996
---------------------------
Signature
------------------------------
Signature
------------------------------
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
BROOKTREE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. To approve and adopt the Agreement and Plan of Merger dated as of July 1,
1996 among Rockwell International Corporation, a Delaware corporation
("Rockwell"), ROK II Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Rockwell ("Sub"), and the Company and to approve
the merger of Sub with and into the Company pursuant to such agreement.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS ATTORNEY, EXECUTOR,
TRUSTEE, OR IN REPRESENTATIVE CAPACITY, SIGN NAME AND INDICATE TITLE. IF SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
Check here for address change. / /
New Address:
---------------------------
- ---------------------------------------
- ---------------------------------------
Check here if you plan to attend the meeting. / /
Dated , 1996
---------------------------
Signature
------------------------------
Signature
------------------------------
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
