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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 1)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
CHIPS AND TECHNOLOGIES, INC.
(NAME OF SUBJECT COMPANY)
CHIPS AND TECHNOLOGIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK $0.01 PAR VALUE AND
COMMON STOCK PURCHASE RIGHTS
(TITLE OF CLASSES OF SECURITIES)
170021109
(CUSIP NUMBER OF CLASS OF SECURITIES)
JEFFERY ANNE TATUM
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CHIPS AND TECHNOLOGIES, INC.
2950 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134
(408) 434-0600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF PERSON(S) FILING STATEMENT)
COPY TO:
BRADLEY J. ROCK, ESQ.
GRAY CARY WARE & FREIDENRICH
A PROFESSIONAL CORPORATION
400 HAMILTON AVENUE
PALO ALTO, CA 94301
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This Amendment No. 1 supplements and amends the Solicitation/Recommendation
Statement on Schedule 14D-9, originally filed on August 1, 1997 (the
"Statement"), by Chips and Technologies, Inc., a Delaware corporation (the
"Company"), with respect to the tender offer by Intel Enterprise Corporation, a
Delaware corporation (the "Purchaser") and a direct, wholly owned subsidiary of
Intel Corporation, a Delaware corporation, ("Intel"), to purchase all
outstanding Shares at $17.50 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
August 1, 1997 (the "Offer to Purchase") and in the related Letter of
Transmittal (the "Letter of Transmittal"; and together with the Offer to
Purchase, the "Intel Offer"). The Offer to Purchase is made pursuant to an
Agreement and Plan of Merger, dated as of July 27, 1997, and amended by an
Amendment to Merger Agreement, dated October 2, 1997 (as amended, the "Merger
Agreement"). All capitalized terms used but not defined herein shall have the
meanings set forth in the Statement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4 is hereby amended and restated in its entirety to provide as
follows:
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously determined that the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, taken together, are fair to and in the best interests of the
stockholders of the Company, has approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, and
recommends that the stockholders accept the Offer and tender their Shares.
As set forth in the Merger Agreement, Purchaser will purchase all Shares
tendered prior to the expiration of the Offer if the conditions to the Offer
have been satisfied (or waived).
STOCKHOLDERS CONSIDERING NOT TENDERING THEIR SHARES IN ORDER TO WAIT FOR
THE MERGER SHOULD NOTE THAT IF THE MINIMUM CONDITION IS NOT SATISFIED OR ANY OF
THE OTHER CONDITIONS TO THE OFFER ARE NOT SATISFIED, THE PURCHASER IS NOT
OBLIGATED TO PURCHASE ANY SHARES AND, SUBJECT TO CERTAIN LIMITATIONS, CAN
TERMINATE THE OFFER AND THE MERGER AGREEMENT AND NOT PROCEED WITH THE MERGER. IN
ADDITION, STOCKHOLDERS WHO DO NOT TENDER THEIR SHARES SHOULD NOTE THAT, EVEN IF
THE MINIMUM CONDITION IS SATISFIED AND SHARES ARE PURCHASED IN ACCORDANCE WITH
THE OFFER, THERE ARE ADDITIONAL CONDITIONS TO THE OBLIGATION OF PURCHASER TO
EFFECT THE MERGER. IF THESE CONDITIONS ARE NOT SATISFIED OR WAIVED, THE MERGER
MAY NOT BE COMPLETED, AND ANY SHARES NOT TENDERED WOULD REMAIN OUTSTANDING AND
WOULD NOT RECEIVE THE MERGER CONSIDERATION. IN SUCH CIRCUMSTANCES, STOCKHOLDERS
MIGHT BE UNABLE TO SELL THEIR SHARES OR TO DO SO AT A PRICE AS FAVORABLE AS THE
MERGER CONSIDERATION.
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares are generally required to
approve the Merger. Accordingly, if Purchaser acquires a majority of the
outstanding Shares in the Offer, the Purchaser will have sufficient voting power
to cause the approval of the Merger without the affirmative vote of any other
stockholder. Under Delaware law, if Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the then outstanding Shares, Purchaser will be able
to approve and adopt the Merger Agreement and effective the Merger without a
vote of the Company's stockholders. Intel and the Company have agreed to use
their reasonable efforts to take, or to cause to be taken, all actions, and to
do, or to cause to be done, and to cooperate with each other in doing, all
things necessary, proper or advisable to consummate and make effective, as soon
as practicable, the Offer, the Merger and the other transactions contemplated by
the Merger Agreement. If Purchaser does not acquire at least 90% of the then
outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's stockholders is required under Delaware Law, a longer period of time
will be required to effect the Merger.
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The Offer is scheduled to expire at 8:00 p.m., New York City time, on
October 17, 1997, unless the Purchaser extends the period of time for which the
Offer is open. If at the scheduled expiration date any conditions to the Offer
are unsatisfied which are reasonably capable of being satisfied prior to
November 30, 1997, Purchaser has agreed to extend the expiration date, but in no
event is Purchaser required to extend the expiration date beyond November 30,
1997.
BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION
Background of the Offer. Since late 1994, the Company has from time to time
engaged in efforts to find a strategic partner in the semiconductor industry.
The goal of this activity potentially was to link the Company with a larger and
stronger industry participant, either through a technology sharing relationship,
other strategic arrangement, merger or outright sale of the Company. In
connection with such efforts, by mid-1997, the Company had contacted more than a
dozen industry participants, both in the United States and abroad, about
partnering with the Company, but none of these contacts resulted in a
transaction or agreement. Such participants included many of the larger
companies in the semiconductor industry. During this period, the Company did not
contact Intel in light of, among other reasons, the fact that the Company knew
that Intel had never before acquired a public company.
Intel has been developing a 2D/3D graphics component for the desktop PC
market segment. Lockheed-Martin Corporation is providing certain 2D/3D
technology for that project. The Company is the subcontractor to Lockheed-Martin
Corporation for providing 2D and video engineering elements. As consideration
for the 3D, 2D and video technology being licensed to Intel, Intel has agreed to
pay a royalty to Lockheed-Martin Corporation for the products sold under the
agreement. As a subcontractor to Lockheed-Martin, the Company has the
contractual right with Lockheed-Martin to receive a portion of those royalty
payments for the use of the Company's 2D and video technology. During the course
of development of the component, the Company and Intel have had various
discussions about other possible strategic ties between them.
On May 8, 1997, Jim Stafford, the Company's President and CEO, met with
representatives of Intel, including Leslie L. Vadasz, Senior Vice President of
Corporate Development, Arvind Sodhani, Vice President and Treasurer and Steve
Nachtsheim, Vice President, and Larry Palley, Director of Business Development,
Platform Components Division, to discuss the relationship between the companies.
Following a discussion of a possible minority investment in the Company by Intel
along with a technology sharing arrangement, the parties discussed the
possibility that both Intel and Chips would be willing to explore the
possibility of an acquisition of the Company by Intel. Mr. Stafford stated that
he would discuss a possible acquisition with the Company's Board of Directors.
On May 15, 1997, at a regular meeting of the Board of Directors of the
Company, Mr. Stafford described to the Board the discussions he had with Intel's
representatives. The Board authorized Mr. Stafford to engage in further
discussions with Intel regarding the possibility of a merger. On May 16, 1997,
the Company formally asked the investment banking firm of Hambrecht & Quist LLC
("H&Q") to begin providing advice to the Company in connection with its
discussions with Intel. At that time, H&Q was already under retainer to the
Company to assist it in finding strategic or merger partners and had worked with
the Company in connection with the process of assessing and contacting
prospective partners in recent years.
On June 5, 1997, representatives of Intel, including Pat Gelsinger, Vice
President, Mr. Nachtsheim, Randy Tinsley, Assistant Treasurer responsible for
Mergers & Acquisitions, and Mr. Palley met with representatives of the Company,
including Mr. Stafford, Morris Jones, Chief Technical Officer, Tim
Christofferson, Chief Financial Officer, Jeffery Anne Tatum, Vice President and
General Counsel, and Larry Roffelson, Vice President of Engineering, at the
Company's headquarters in San Jose, California to learn more about the Company's
business. Following this meeting, Messrs. Gelsinger, Tinsley and Palley met with
Messrs. Stafford and Jones to discuss generally the goals and objectives of a
possible acquisition of the Company by Intel and some of the potential general
terms and conditions that might apply to such a transaction. During the course
of that discussion, it is the recollection of the Chips representatives that
Intel representatives indicated informally that Intel was considering offering a
premium of 15 - 20% over the then market price for the shares of the Company,
which Mr. Stafford and the Chips team understood to be an
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indication of a potential bid of approximately $12 per share, as the then
current market price for the Company's stock was in the low $10 range.
During the next several weeks, discussions among management representatives
of the two companies were held. During these meetings, non-public information
about the companies' strategic plans and products was exchanged. During this
time, information was also provided by the Company to H&Q to assist it in its
preparation of a negotiation strategy and valuation arguments for the Company.
On June 16, 1997, representatives of H&Q, the management of the Company,
and the Company's outside legal counsel met with the Company's Board of
Directors to discuss the Company's negotiation strategy and valuation arguments.
At that meeting, H&Q made a presentation to the Board of a draft of the
presentation it intended to make to Intel in order to justify the highest
possible valuation for the Company. The members of the Chips Board of Directors
commented on the draft H&Q presentation materials, and suggested various
changes. The Board and its advisers also discussed the Company's alternatives,
Intel's alternatives and information concerning pricing in other recent merger
and acquisition transactions. After H&Q left the meeting, the Company's outside
legal counsel advised the Board with respect to its fiduciary duties in
considering an acquisition proposal.
On June 17, 1997, Mr. Tinsley visited Mr. Stafford at the Company's
headquarters and, with Mr. Gelsinger participating by telephone, discussed in
more detail some of the potential terms and conditions of an acquisition of the
Company by Intel.
On June 25, 1997, Mr. Stafford, Ms. Tatum, and representatives of H&Q met
with Messrs. Tinsley and Gelsinger of Intel to discuss valuation issues. At this
meeting, representatives of Intel indicated informally that Intel was
considering offering a premium of 15 - 20% over the then market price for the
shares of the Company. H&Q also made a formal presentation to Intel's
representatives in an attempt to convince Intel that it should pay a price for
the Company which was far in excess of the range of values Intel had previously
indicated it was considering. Based upon various valuation arguments, the H&Q
representatives argued that Intel should pay from $21 - 29 per share. This range
did not represent a "valuation" by H&Q, but instead represented an argument to
support a price range which H&Q believed it could justify in the context of
acquisition negotiations. The Intel representatives expressed their disagreement
with various assumptions and conclusions in the H&Q presentation.
On June 26, 1997, at the regular meeting of the Board of Directors of the
Company, representatives of H&Q and the Company's outside legal counsel met with
the Board. The H&Q representatives reviewed in detail the presentation they had
made to Intel and the comments they had received from Intel's representatives,
and discussed negotiating strategy and valuation issues with the Board.
Following the departure of the representatives of H&Q from the meeting, the
Company's outside legal counsel discussed with the Board its fiduciary duties in
connection with the potential transaction.
Between June 26 and July 10, 1997, Mr. Stafford held a number of telephone
conversations with representatives of Intel. On July 10, 1997, Mr. Stafford met
with Mr. Tinsley and Mr. Vadasz, who told Mr. Stafford that they were
considering presenting to Intel's Board on July 16, 1997, a request for
authority to make a $400 million purchase proposal. Intel's representatives did
not indicate to Mr. Stafford how the potentially forthcoming proposal would deal
with the Company's outstanding option plans. In light of the number of options
outstanding, the Company calculated that a proposal to pay $400 million for the
Company could be a proposal to pay anywhere from approximately $15 per share to
approximately $18 per share, depending upon whether some or all of the
outstanding options were assumed by Intel or accelerated. Accordingly, both at
the July 10 meeting and afterwards, Mr. Stafford and representatives of H&Q
attempted to ascertain from Intel how it proposed to deal with the Company's
outstanding options, so as to ascertain the per share price which Intel was
contemplating offering. On July 14, 1997 the Board of Directors of the Company
met with outside legal counsel and representatives of H&Q to review the status
of the discussions between the parties and to consider strategy. During the
meeting, an outline was drafted to clarify the Company's expectations concerning
the proposal of Intel management to Intel's Board. That outline proposed that
Intel pay a price of $18.50 per share for all of the outstanding shares of the
Company, and assume all
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employee stock options outstanding under the Company's various option plans. On
July 15, Mr. Stafford met with Messrs. Tinsley, Vadasz and Sodhani to present
and review the outline.
On July 16, 1997, Mr. Tinsley called Mr. Stafford following Intel's Board
meeting and communicated to Mr. Stafford that Intel was prepared to propose an
acquisition of the Company at a price of $16.00 per Share. That evening, the
Company's Board met with outside legal counsel and representatives of H&Q to
consider Intel's proposal. The Board instructed Mr. Stafford to reject the
proposal and he did so.
On July 17 and 18, 1997, representatives of H&Q held discussions with
representatives of the Company and separately with representatives of Intel. On
July 18, 1997, at a regular meeting of the Company's Board of Directors, the
Board reviewed management's stand alone operations plan for fiscal 1998 and 1999
which contemplated, among other things, the commencement of new research and
development projects intended to diversify the Company's products by targeting
applications outside the graphics business, and the expenditure of comparatively
increasing amounts on research and development, both in the Company's core area
and in new product development. The Board and management of the Company
discussed the status of the negotiations with Intel, including the fact that
Intel and the Company were not in agreement concerning the valuation of the
Company.
On July 19 and 20, 1997, Mr. Stafford and Mr. Vadasz had several telephone
conversations about Intel's proposal and why it was unacceptable to the Company.
On July 21, 1997, the Company's Board met to discuss the status of
negotiations. Subsequently, Mr. Stafford and Ms. Tatum met with Messrs. Tinsley,
Vadasz and Sodhani to discuss the difference between the two companies' views of
valuation. The meeting ended without a resolution.
Late in the evening of July 21, 1997, Mr. Stafford and Mr. Vadasz spoke by
telephone and concluded that if an acquisition were to occur, it would be at a
price of $17.50 per Share, provided that the results of due diligence were
satisfactory and agreement on other outstanding issues and conditions could be
reached, and provided that both companies' Boards approved. On July 22, 1997,
Mr. Stafford spoke with each of the Company's Board members by telephone and was
authorized to commence negotiations of a definitive agreement, subject to Board
approval.
Between July 22, 1997 and July 27, 1997, Intel conducted due diligence and
representatives of the parties negotiated the terms and conditions of the
definitive merger agreement. Mr. Stafford kept the Board apprised of the status
of the negotiations.
On July 27, 1997, the Board of Directors of the Company met with legal
counsel and representatives of H&Q. The Board reviewed the terms and conditions
of the Offer and the Merger Agreement. In addition, H&Q delivered a presentation
to the Board on the financial aspects of the Offer and the Merger, and delivered
its opinion that, as of the date thereof, the consideration to be received by
the holders of the Company's Common Stock in the Offer and the Merger was fair
to such holders from a financial point of view. In addition, the Company's
outside legal counsel reviewed the principal legal terms and conditions of the
Offer and the Merger Agreement. Following discussion of the proposed Offer and
Merger, the Board unanimously approved the Offer and the Merger and unanimously
resolved to recommend that the stockholders of the Company accept the Offer and
tender their Shares in the Offer.
Reasons for the Recommendation. In reaching its recommendation set forth
above, the Board considered a number of factors, including, but not limited to
the following:
(i) historical information concerning the Company's business prospects,
financial performance and condition, operations, technology,
management and competitive position;
(ii) the financial condition, results of operations, business and
strategic objectives of the Company as well as the risks involved in
achieving those objectives;
(iii) current financial market conditions and historical market prices,
volatility and trading information with respect to the Common Stock
of the Company;
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(iv) the consideration to be received by the Company stockholders in the
Offer and the Merger and a comparison of merger and acquisition
transactions deemed to be comparable to the Offer and the Merger or
otherwise relevant to the Board's deliberations;
(v) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations;
(vi) the performance of the Company on a historical basis and the
prospects and risks of the Company going forward as an independent
company;
(vii) the potential for other third parties, particularly those with
sufficient resources and complementary technology, to acquire the
Company including the fact that the Company had actively canvassed
the market for strategic partners since late 1994;
(viii) a review of the possible alternatives to the Offer and the Merger
(including the possibility of continuing to operate the Company as
an independent entity), the range of possible benefits and risks to
the Company's stockholders of such alternative and the timing and
the likelihood of actually accomplishing any of such alternatives;
(ix) the presentation to the Board by H&Q at the July 27, 1997 Board
meeting;
(x) the written opinion of H&Q to the effect that, as of the date of the
opinion, the $17.50 in cash to be received by holders of Shares in the
Offer and the Merger is fair to such holders from a financial point of
view. The full text of this written opinion, which sets forth
assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex C.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION IN ITS
ENTIRETY;
(xi) the fact that pursuant to the Merger Agreement, the Company is not
prohibited from responding to any unsolicited Superior Proposal (as
defined in the Merger Agreement) to acquire the Company, and the
Company may terminate the Merger Agreement and accept any such
Superior Proposal subject to the Company's obligation to pay the
termination fee as described in the Merger Agreement;
(xii) the relationship of the Offer price to historical market prices of
the Company's Common Stock and to the Company's book value and
liquidation value per share, and the fact that the Offer price of
$17.50 represented a premium of 25% over the last sale price of the
Company's Common Stock on July 25, 1997 (the last trading day before
the announcement of the Merger Agreement), a premium of approximately
30% over the average last sale price of the Company's Common Stock
during the preceding week, a premium of approximately 46% over the
average last sale price of the Company's Common Stock during the
preceding month, a premium of approximately 28% over the average last
sale price of the Company's Common Stock during the preceding 12
months, and a premium of approximately 65% over the average last sale
price of the Company's Common Stock during the preceding 36 months;
(xiii) the likelihood that the proposed acquisition would be consummated,
including the experience, reputation and financial condition of
Intel and the risks to the Company if the acquisition were not
consummated, including (a) the Company's sales and operating
results, (b) progress of certain development projects and products,
and (c) the Company's stock price; and
(xiv) the availability of appraisal rights in the Merger under applicable
law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable,
and did not, quantity or otherwise attempt to assign relative weights to the
factors it considered.
THE FULL TEXT OF THE WRITTEN FAIRNESS OPINION OF H&Q IS FILED AS EXHIBIT
(a)(2) TO THIS SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX C.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
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SUCH OPINION WAS PRESENTED FOR THE INFORMATION OF THE BOARD IN CONNECTION WITH
ITS CONSIDERATION OF THE MERGER AGREEMENT AND IS DIRECTED ONLY TO THE FAIRNESS
FROM A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF
SHARES (OTHER THAN INTEL) PURSUANT TO THE OFFER AND THE MERGER. SUCH OPINION
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER
SHARES IN THE OFFER OR HOW TO VOTE WITH RESPECT TO THE MERGER.
IN LIGHT OF ALL THE FACTORS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY DETERMINED THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, TAKEN
TOGETHER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES HEREUNDER.
OPINION OF THE FINANCIAL ADVISOR
As noted above, on July 27, 1997, H&Q presented its fairness opinion to the
Chips Board of Directors. H&Q's opinion was based upon various analyses
performed by H&Q, which included: an analysis of Chips' historical and projected
income statement; a comparison of Chips' earnings per share estimates to
analysts' earnings per share estimates; a review of Chips' transition to new
products; a review of Chips' historical and projected income statement and
balance sheet; a review of Chips' common stock price trading volume and history;
an analysis of potential future share prices for Chips; an analysis of implied
value based on publicly traded companies; an analysis of implied value based on
merger and acquisition transactions which H&Q deemed comparable; a comparison of
premia paid in comparable transactions and those offered by Intel; and a
discounted cash flow analysis.
In performing its analysis of the implied value of Chips based on publicly
traded companies, H&Q derived per share implied values based upon historical
information in a range from $15.62 to $17.03.
In performing its analysis of implied value of Chips based on merger and
acquisition transactions, H&Q derived per share implied values in a range from
$17.03 per share to $32.47 per share. In its analysis of premia paid in recent
technology transactions, H&Q determined that the mean premium one trading day
prior to the announcement of such transactions was 26%, and compared this to the
mean premium one trading day prior to announcement of Intel's proposed
acquisition of Chips of 25%, and that the mean premium 20 trading days prior to
the announcement of comparable technology transactions was 38% which compared to
the mean premium 20 trading days prior to the announcement of Intel's proposed
acquisition of Chips of 65%.
Finally, in performing its discounted cash flow analysis, H&Q utilized
discount rates of 17% to 21% and derived a present value for Chips in a range of
between $13.24 per share and $19.93 per share.
In arriving at its opinion as to the fairness of Intel's offer, H&Q did not
rely exclusively upon any of the foregoing analyses, but instead carefully
considered each and applied its judgment based upon, among other things, the
data presented above, as well as its representation of Chips in connection with
its attempt to locate strategic or merger partners for the Company over the past
several years.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 is hereby amended and supplemented to add the following:
<TABLE>
<S> <C>
(a)(6) Press release issued by the Company and Intel on October 2, 1997.(1)
(a)(7) Letter to Stockholders, dated October 3, 1997, from James F. Stafford,
President and Chief Executive Officer of the Company.*
(c)(6) Amendment to Agreement and Plan of Merger, dated as of October 2, 1997
between the Company, Intel and the Purchaser.(2)
</TABLE>
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* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Attached hereto as Annex A.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
<TABLE>
<S> <C> <C>
CHIPS AND TECHNOLOGIES, INC.
Dated: October 3, 1997 By: /s/ JEFFERY ANNE TATUM
--------------------------------------------
Jeffery Anne Tatum
Secretary, Vice President and General
Counsel
</TABLE>
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ANNEX A
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger (this "Amendment") is made
and entered into as of the 2nd day of October 1997, by and among Chips and
Technologies, Inc., a Delaware corporation (the "Company"), Intel Corporation, a
Delaware corporation ("Parent") and Intel Enterprise Corporation, a Delaware
corporation and a direct, wholly owned subsidiary of Parent ("Merger Sub"; the
Company and Merger Sub sometimes being hereinafter together referred to as the
"Constituent Corporations").
RECITALS
WHEREAS, the Company, Parent and Merger Sub have entered into an agreement,
dated as of July 27, 1997 (the "Original Agreement"), pursuant to which Merger
Sub has commenced a tender offer (the "Tender Offer") for any and all shares of
the Company at $17.50 per share, which Tender Offer will be followed by a merger
(the "Merger") at the same price; and
WHEREAS, the parties to the Original Agreement now desire to amend the
Original Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto amend the
Original Agreement as follows:
AGREEMENT
1. Amendment of (Section 1.1(b) (The Offer) of the Original
Agreement. Section 1.1(b) of the Original Agreement is deleted in its entirety
and replaced with the following provision:
(b) Subject to the terms and conditions thereof, the Offer shall
expire at midnight, New York City time, on the date that is twenty (20)
Business Days after the date the Offer is commenced; provided, however,
that without the consent of the Company's Board of Directors, Parent may
(i) from time to time extend the Offer, if at the scheduled expiration date
of the Offer any of the conditions to the Offer shall not have been
satisfied or waived, until such time as such conditions are satisfied or
waived; (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC ") or the staff thereof applicable to the Offer; or
(iii) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than twenty (20) Business Days beyond the
latest expiration date that would otherwise be permitted under clause (i)
or (ii) of this sentence if on such expiration date there shall not have
been tendered at least 90% of the outstanding Shares. Parent agrees that if
all of the conditions to the Offer set forth on Annex A are not satisfied
on any scheduled expiration date of the Offer then, provided that all such
conditions are reasonably capable of being satisfied prior to November 30,
1997, Parent shall extend the Offer from time to time until such conditions
are satisfied or waived, provided that Parent shall not be required to
extend the Offer beyond November 30, 1997. Subject to the terms and
conditions of the Offer and this Agreement, Parent shall accept for
payment, and pay for, all Shares validly tendered and not withdrawn
pursuant to the Offer that Parent becomes obligated to accept for payment
and pay for pursuant to the Offer, as promptly as practicable after the
expiration of the Offer.
2. Amendment of Section 8.3(a) (Termination by the Company) of the Original
Agreement. Section 8.3(a) of the Original Agreement is deleted in its entirety
and replaced with the following provision:
(a) after November 30, 1997, Parent shall have failed to pay for
Shares pursuant to the Offer; provided, however, that the right to
terminate this Agreement pursuant to this subsection (a) shall not be
available to the Company if it has breached in any material respects its
obligations under this Agreement that in any manner shall have proximately
contributed to the failure references in this clause (a);
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3. Amendment of Section 8.5(b) (Effect of Termination and Abandonment) of
the Original Agreement. Section 8.5(b) of the Original Agreement is deleted in
its entirety and replaced with the following provision:
(b)(i) In lieu of any liability or obligation to pay damages (other
than the obligation to reimburse Parent for expenses pursuant to Section
8.5(a)), if (A) there shall be a proposal by a Third Party for a Third
Party Acquisition existing at the time of termination of the Agreement by
the Parent and Merger Sub, and (B) Parent and Merger Sub shall have
terminated this Agreement pursuant to Section 8.4(b) or (c) or (d) and,
with respect to a termination pursuant to Section 8.4(d) the Company has
breached in any material respect its obligations under this Agreement in
any manner which proximately contributed to Parent and Merger Sub's
termination of the Offer, the Company shall pay to Parent (i) within two
(2) business days after such termination $2,000,000 and (ii) an additional
$3,500,000 upon consummation, if any, of any Third Party Acquisition with a
Person who had proposed a Third Party Acquisition prior to the time of the
termination of this Agreement by the Parent and Merger Sub.
(b)(ii) In lieu of any liability or obligation to pay damages (other
than the obligation to reimburse Parent for expenses pursuant to Section
8.5(a)), (A) if there shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of the Parent
or Merger Sub and (B) the Company shall have terminated this Agreement
pursuant to Section 8.3(b), the Company shall pay to Parent (i)
concurrently with such termination $2,000,000 and (ii) an additional
$3,500,000 upon consummation, if any, of either the Superior Proposal
giving right to terminate this Agreement under Section 8.3(b) or any Third
Party Acquisition with a Person who had proposed a Third Party Acquisition
prior to the termination of this Agreement under section 8.3(b). (Such
amounts payable pursuant to Section 8.5(b)(i) or this Section 8.5(b)(ii)
are referred to in the aggregate in this Agreement as the "Termination
Fee.")
4. Other Provisions. Except as expressly provided herein, the Original
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by
duly authorized officers of the parties hereto as of the date hereof.
CHIPS AND TECHNOLOGIES, INC.
by: /s/ JAMES F. STAFFORD
------------------------------------
Name: James F. Stafford
Title: President and CEO
INTEL CORPORATION
by: /s/ LESLIE L. VADASZ
------------------------------------
Name: Leslie L. Vadasz
Title: Sr. Vice President
INTEL ENTERPRISE CORPORATION
by: /s/ CARY KLAFTER
------------------------------------
Name: Cary Klafter
Title: President
A-2
<PAGE> 11
ANNEX B
CONTACT:
Chuck Malloy
Intel Corporation
(408) 765-3684
chuck [email protected]
Tim Christofferson
Chips & Technologies
(408) 434-0601, ext. 2310
INTEL AND CHIPS AND TECHNOLOGIES ANNOUNCE AGREEMENT IN PRINCIPLE TO SETTLE
DELAWARE LITIGATION
Santa Clara, Calif., October 2, 1997 -- Intel Corporation and Chips and
Technologies, Inc. jointly announced today that they have reached an agreement
in principle to settle shareholder class action litigation brought in the
Delaware Court of Chancery. The Delaware litigation was filed against Chips and
Technologies on July 31, 1997, and was amended by the plaintiffs to include
Intel and a subsidiary on Sept. 19, 1997. The suit sought to halt the
consummation of the previously proposed acquisition of Chips and Technologies by
Intel.
The terms of the settlement agreement, which must still be presented to and
approved by the Delaware Court of Chancery at a settlement hearing, call for
Chips and Technologies to make additional disclosure in a Securities and
Exchange Commission Filing which will then be mailed to Chips shareholders. The
settlement also calls for Chips and Technologies and Intel to amend their
current Merger Agreement to extend to Nov. 30, 1997, the date after which either
Intel or Chips and Technologies may unilaterally terminate the transaction if
the tender offer has not been consummated. The settlement also provides that, in
the event that Chips seeks to terminate the Merger Agreement due to an
unsolicited higher offer meeting the standards set forth in the Merger
Agreement, the maximum fee payable to Intel would be reduced from $15 million to
$7.5 million.
The settlement contains no agreement to pay plaintiffs' attorneys fees. The
plaintiffs have reserved the right to apply to the Delaware Court of Chancery
for a fee and expense award, and defendants have reserved the right to oppose
any such application.
The Merger Agreement between the parties provides that Chips may not
solicit other offers, but may, under certain conditions, entertain negotiations
with parties who make unsolicited superior proposals to purchase Chips and
Technologies.
Chips and Technologies is the world's number one supplier of flat panel
video graphics controllers and accelerators to the portable computer market.
Chips and Technologies can be reached on the worldwide web at
http:/www.chips.com.
Intel, the world's largest chip maker, is also a leading manufacturer of
personal computer, networking and communications products. Additional
information is available at www.intel.com/pressroom.
B-1
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- --------------------------------------------------------------------
<S> <C> <C>
(a)(6) Press release issued by the Company and Intel on October 2, 1997.(1)
(a)(7) Letter to Stockholders, dated October 3, 1997, from James F.
Stafford, President and Chief Executive Officer of the Company.*
(c)(6) Amendment to Agreement and Plan of Merger, dated as of October
2, 1997 between the Company, Intel and the Purchaser.(2)
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Attached hereto as Annex A.
<PAGE> 1
LOGO
October 3, 1997
TO THE STOCKHOLDERS OF
CHIPS & TECHNOLOGIES, INC.
Dear Stockholder:
As you may be aware, Chips is a party to three consolidated lawsuits,
brought on behalf of Chips' stockholders, which are currently pending in the
Court of Chancery of the State of Delaware. These lawsuits challenge, among
other things, the merger agreement between Chips, Intel Corporation and Intel
Enterprise Corporation dated July 27, 1997, pursuant to which Intel has
commenced a tender offer for all shares of Chips at $17.50 per share.
In order to settle the lawsuits, Chips and Intel have entered into an
agreement in principle with the plaintiffs under which they agreed to amend the
merger agreement (i) to extend to November 30, 1997 the date after which either
Chips or Intel may unilaterally terminate the transaction if the tender offer
has not been consummated, and (ii) to provide that if Chips seeks to terminate
the merger agreement due to the unsolicited receipt of a higher offer, the
maximum fee payable to Intel would be reduced from $15 million to $7.5 million.
Chips has also agreed to amend its Schedule 14D-9 filed in connection with the
tender offer to provide certain additional disclosure regarding the
circumstances leading up to Chips' decision to enter into the merger agreement,
and to issue a press release describing the settlement and the changes to the
merger agreement.
Enclosed is a copy of Amendment No. 1 to the Chips Schedule 14D-9.
Amendment Number One to the Merger Agreement is included as Annex A.
This mailing is being made under the agreement to settle the lawsuits. You
will receive a more detailed Notice of Settlement at a future date. This mailing
is being made on October 3, 1997. The tender offer is currently scheduled to
close on October 17, 1997.
Nominees are requested promptly to forward copies of this letter and its
enclosure to any beneficial holder for whom they act as nominee.
LOGO
James F. Stafford
President and Chief Executive Officer
