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SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14D-9
WASHINGTON, D.C. 20549
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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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by Intel Corporation, a Delaware
corporation ("Intel"), through its wholly owned subsidiary Intel Enterprise
Corporation, a Delaware corporation ("Purchaser"), to purchase all of the Shares
(as defined below) of Chips and Technologies, Inc., a Delaware corporation.
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Chips and Technologies, Inc., a Delaware
corporation (the "Company"). The address of the principal executive office of
the Company is 2950 Zanker Road, San Jose, California 95134. The title of the
class of equity securities to which this Schedule 14D-9 relates is the Common
Stock of the Company, par value $0.01 per share, and all associated rights,
including Common Stock Purchase Rights (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
the Schedule 14D-1, dated August 1, 1997 (as amended or supplemented, the
"Schedule 14D-1"), filed with the Securities and Exchange Commission (the
"Commission") by Intel and Purchaser, relating to an offer by the Purchaser on
behalf of Intel, to purchase all outstanding Shares at a price of $17.50 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth therein. The principal
executive offices of each of Intel and Purchaser are located at 2200 Mission
College Boulevard, Santa Clara, California 95052.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of July 27, 1997 (the "Merger Agreement") by and among the Company, Intel and
Purchaser. A copy of the Merger Agreement is filed as Exhibit (c)(1) to this
Schedule 14D-9 and is hereby incorporated by reference. The Merger Agreement
provides that, among other things, as soon as practicable after the purchase of
Shares pursuant to the Offer and the satisfaction of the other conditions set
forth in the Merger Agreement and in accordance with the relevant provisions of
the General Corporation Law of the State of Delaware ("Delaware Law" or the
"DGCL"), Purchaser will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Intel. At the effective time of the Merger (the "Effective Time"),
each Share issued and outstanding immediately prior to the Effective Time (other
than Shares held by the Company or by any subsidiary of the Company, or owned by
Purchaser, by Intel, or any other subsidiary of Intel or Shares held by
stockholders who shall have demanded and perfected appraisal rights, if any,
under Delaware Law) will be canceled and converted automatically into the right
to receive the price per Share paid pursuant to the Offer in cash, without
interest (the "Merger Consideration"). The Merger Agreement is summarized in
Item 3 of this Schedule 14D-9. Purchaser is acting with the consent of the
Company on behalf of Intel in making the Offer. The making of the Offer is the
responsibility of Intel under the Merger Agreement and the making of the Offer
by Purchaser is not intended to and does not in any way reduce Intel's
obligations, duties and liabilities under the Merger Agreement or otherwise.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Schedule 14D-9 are to the
Company and its subsidiaries, viewed as a single entity.
(b) Certain contracts, agreements, arrangements or understandings known to
the Company between the Company or its affiliates and (i) certain of the
Company's executive officers, directors or affiliates or (ii) certain of Intel's
executive officers, directors or affiliates are described in the Information
Statement of the Company attached to this Schedule 14D-9 as Annex A (the
"Information Statement"). Other such contracts, arrangements and understandings
known to the Company are described below. The Information Statement is being
furnished to the Company's stockholders pursuant to Section 14(f) of the
Securities Exchange Act of
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1934, as amended (the "Exchange Act"), and Rule 14f-1 issued under the Exchange
Act in connection with the Intel's right (upon the acquisition by Purchaser of
Shares pursuant to the Offer) to designate persons to be appointed to the Board
of Directors of the Company without a meeting of the stockholders of the
Company. The Information Statement is hereby incorporated by reference.
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INDEMNIFICATION AGREEMENTS
The Company is party to indemnification agreements with each person who, as
of July 27, 1997, was either a director or an executive officer of the Company.
The indemnification agreements generally provide for indemnification against all
costs and expenses (including attorneys' fees) actually and reasonably incurred
by the indemnitee if the indemnitee is or was a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that such indemnitee is or was serving the Company (or a subsidiary of the
Company) as a director, officer, employee or agent, or by reason of any action
or inaction on the part of indemnitee while serving in such capacity, and any
and all judgments, fines and amounts paid in settlement of any claim, provided
that indemnitee acted in good faith and in a manner indemnitee reasonably
believed to be in or not opposed to the best interests of the Company and its
stockholders, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe indemnitee's conduct was unlawful, or unless it is
determined that such indemnification is not permitted under applicable law. The
indemnification agreements also provide for the prompt advancement of expenses
to an indemnitee as well as the reimbursement by such indemnitee of any such
advances to the Company if it is determined that the indemnitee is not entitled
to such indemnification. Indemnitees' rights under the indemnification
agreements are not exclusive of any other rights they may have under Delaware
Law, the Company's Certificate of Incorporation, the Company's Bylaws or
otherwise. The form of indemnification agreement has been filed as Exhibit
(c)(2) to this Schedule 14D-9 and is hereby incorporated by reference.
The Certificate of Incorporation of the Company, as amended to date (the
"Certificate of Incorporation"), provides that, to the fullest extent permitted
by Delaware Law, no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director. The Certificate of Incorporation of the Company has been filed as
Exhibit (c)(3) to this Schedule 14D-9 and is hereby incorporated by reference.
Article VIII of the Bylaws of the Company also provides for indemnification of
officers and directors of the Company. The Bylaws of the Company have been filed
as Exhibit (c)(4) to this Schedule 14D-9 and are hereby incorporated by
reference.
THE MERGER AGREEMENT
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached hereto as Annex B.
The Offer. The Merger Agreement provides for the making of the Offer.
Purchaser is acting with the consent of the Company on behalf of Intel in making
the Offer. The making of the Offer is Intel's responsibility under the terms of
the Merger Agreement and the making of the Offer by Purchaser does not in any
way reduce Intel's obligations, duties and liabilities under the Merger
Agreement. Intel's obligation to accept for payment or pay for Shares is subject
to the satisfaction of the conditions that are described in Annex A to the
Merger Agreement. Pursuant to the Merger Agreement, Intel expressly reserves the
right to waive any of the conditions to the Offer, to the extent permitted by
applicable law, and to make any change in the terms or conditions of the Offer;
provided that, without the written consent of the Company, Intel may not
decrease the Offer Price, modify the condition that Purchaser must receive a
majority of the outstanding Shares on a fully-diluted basis ("the Minimum
Condition"), change the form of consideration payable, decrease the number of
Shares sought, amend the conditions to the Offer to broaden the scope of such
conditions, amend any other term of the Offer in a manner adverse to the holders
of Shares or extend the Offer (except as permitted by the Merger Agreement) in
any manner that is materially adverse to the holders of Shares. Notwithstanding
the foregoing, Intel may (i) extend the expiration date from time to time if at
the date of the Offer all conditions to the Offer have not been satisfied or
waived, (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission applicable to the Offer, and (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 as described in clauses (i) or (ii) of this
sentence if on such expiration date there shall not have been tendered at least
90% of the outstanding Shares. If all conditions to the Offer are not satisfied
but are reasonably capable of being satisfied, Intel shall extend the Offer
until the waiver or the satisfaction of such conditions; provided that Intel
shall not be required to extend the Offer beyond October 31, 1997.
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The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Purchaser will be merged with and into the Company, as
a result of which the separate corporate existence of Purchaser will cease and
the Company will continue as the Surviving Corporation. The Effective Time will
occur at the date and time that a certificate of merger in such form as is
required by, and executed in accordance with, the relevant provisions of
Delaware Law (the "Certificate of Merger") is filed with the Secretary of State
of the State of Delaware. The Surviving Corporation shall continue its corporate
existence under the laws of the State of Delaware. In the Merger, each
outstanding Share (other than Shares held by Intel, Purchaser or any other
subsidiary of Intel or held in the treasury of the Company or by any subsidiary
of the Company, which will be canceled and retired without any payment with
respect thereto, or Shares with respect to which the holder properly exercises
such holder's dissenters' rights under the DGCL) will be converted into the
right to receive the Offer Price, without interest thereon (the "Merger
Consideration"). Each share of common stock of Purchaser issued and outstanding
immediately prior to the Effective Time will be converted into one share of
common stock of the Surviving Corporation. The Certificate of Incorporation of
the Company at the Effective Time will be the Certificate of Incorporation of
the Surviving Corporation until modified in accordance with applicable law. The
Bylaws of Purchaser in effect at the Effective Time shall be the Bylaws of the
Surviving Corporation. The directors of Purchaser at the Effective Time will be
the directors of the Surviving Corporation until their successors are duly
elected and qualified, and the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation until replaced in accordance
with the Bylaws of the Surviving Corporation.
Stockholders' Meeting. The Merger Agreement provides that, if required by
applicable law, the Company, acting through the Board, will call a meeting of
its stockholders to be held as promptly as practicable following the acceptance
for payment of Shares pursuant to the Offer for the purpose of considering and
voting on the approval of the Merger and adoption of the Merger Agreement. Under
the Merger Agreement, Intel has agreed to vote, or cause to be voted, at any
such meeting all Shares owned by it, Purchaser or any other subsidiary of Intel
in favor of the Merger.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to corporate
existence and power, capitalization, subsidiaries, corporate authorization
relative to the Merger Agreement, governmental consents and approvals,
Commission reports, financial statements, intellectual property rights,
litigation mattters, documents relating to the Offer and the Merger, the Rights
Agreement and other matters. Intel and Purchaser have also made certain
representations and warranties with respect to corporate existence and power,
corporate authorization relative to the Merger Agreement, governmental consents
and approvals, documents relating to the Offer and the Merger, financing of the
Offer and the Merger, and other matters.
Conduct of Business Pending the Merger. The Company has agreed that, prior
to the acceptance for payment and purchase of Shares pursuant to the Offer,
unless Intel shall otherwise agree, or as otherwise contemplated in the Merger
Agreement, (i) the business of the Company and its subsidiaries will be
conducted only in the ordinary and usual course, (ii) the Company will not,
among other things, (a) sell or pledge or agree to sell or pledge any stock
owned by it or any of its subsidiaries, (b) amend its Certificate of
Incorporation or Bylaws, or (c) split, combine or reclassify the outstanding
Shares or (d) declare, set aside or pay any dividend payable in cash, stock or
property with respect to the Shares, and (iii) neither the Company nor any of
its subsidiaries will, except under certain circumstances as set forth in the
Merger Agreement, (a) issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class
other than Shares issuable pursuant to presently outstanding Options, (b)
transfer property or assets, (c) assume the obligations of any other person, (d)
make any loans to any other person, (e) make any capital expenditures in excess
of certain limits, (f) enter into employment agreements except for agreements
with certain employees, (g) enter into or amend any compensation or benefit
plan, (h) change any accounting principles or practices, (j) compromise any
material claims; (k) make a tax election, (l) take any action which would cause
the representations and warranties contained in the Merger Agreement to become
untrue, or (m) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing.
Conditions to the Merger. The obligation of each of the Company, Intel and
Purchaser to consummate the Merger is subject to the satisfaction or waiver of
each of the following conditions: (i) the Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the requisite vote
of the stockholders, if such vote is required by applicable law, (ii) any
governmental consents or
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approvals required to consummate the Merger shall have been obtained (except
where the failure to obtain such consents or approvals would not have a material
adverse effect on (a) the Company and its subsidiaries, taken as a whole, or (b)
Intel's ability to consummate the transactions contemplated by the Merger
Agreement), and (iii) no statute, rule, regulation, decree, order or injunction
shall have been promulgated, enacted, entered or enforced by any United States
governmental agency or authority or court which remains in effect and prohibits,
restrains, enjoins or restricts the consummation of the Merger or makes the
acquisition or holding by Intel, its subsidiaries or affiliates of the Shares or
the shares of common stock of the Surviving Corporation illegal. The obligations
of Intel and Purchaser to effect the Merger are also subject to (i) the
representations and warranties of the Company being true as of the closing date
of the Merger, and (ii) the Company having complied with the obligations to be
performed by it under the Merger Agreement. The obligations of the Company to
complete the Merger is also subject to (i) the representations and warranties of
Intel and Purchaser being true as of the closing date of the Merger, and (ii)
each of Intel and Purchaser having performed its obligations to be performed by
it under the Merger Agreement.
Third Party Acquisition. Pursuant to the Merger Agreement, the Company has
agreed it will not initiate, solicit or otherwise encourage or facilitate any
proposal for a Third Party Acquisition (as defined) of the Company. The Company
also agreed not to provide confidential information or engage in discussion with
any person regarding a Third Party Acquisition unless required to do so in order
to comply with the fiduciary duties of the Board of Directors of the Company.
The Company agreed to promptly notify Intel regarding any proposals,
negotiations or inquiries regarding a Third Party Acquisition. The Company may
only accept a proposal regarding a Third Party Acquisition if (i) the Board of
Directors of the Company determines in good faith that it is necessary to do so
in order to comply with its fiduciary duties, (ii) such proposal, among other
things, is reasonably capable of being completed and is more favorable to the
Company's shareholders than the Merger, (iii) the Company has provided written
notice to Intel regarding the material terms of such proposed Third Party
Acquisition, (iv) Intel has not, within five business days of receiving such
notice, made an offer which is as favorable to the Company's stockholders as
such proposal, and (v) the Company has made the first payment to Intel described
in the last sentence of the following paragraph.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after stockholder approval thereof, (i) by
the mutual consent of Intel and the Company; (ii) by either Intel or the Company
if any non-appealable order has been entered permanently restraining the Merger;
(iii) by the Company if, (a) prior to the purchase of Shares pursuant to the
Offer, the Company enters into a definitive agreement providing for an
acquisition of the Company by a third party on terms superior to the Offer and
the Company makes the first payment described in the last sentence of this
paragraph, (b) Intel breaches or fails in any material respect to perform or
comply with any of the material covenants and agreements in the Merger Agreement
or breaches its representations and warranties in any material respect and such
failure is not cured prior to the earlier of twenty days after notice of such
breach is given or two days before the Offer expires, or (c) after October 31,
1997, Intel fails to purchase any Shares pursuant to the Offer, provided that
the Company is not in material breach of the Merger Agreement; or (iv) by Intel
if, (a) prior to the purchase of Shares pursuant to the Offer, the Board of
Directors of the Company shall have withdrawn, or modified or changed in a
manner adverse to Intel, its approval or recommendation of the Offer, the Merger
Agreement or the Merger, (b) it shall have terminated the Offer without
purchasing any Shares thereunder, provided that Intel has not failed to purchase
the Shares in the Offer in breach of the terms thereof, (c) there has been a
material breach by the Company of any representation, warranty, covenant or
agreement that is not cured within twenty days after notice of such breach is
given, and (d) after January 15, 1998, the Merger has not been consummated and
no material breach of the Merger Agreement by Intel is the proximate cause of
such failure to consummate the Merger. Upon the termination of the Merger
Agreement under certain circumstances where a proposal for a Third Party
Acquisition has been made, the Company shall pay to Intel $5,000,000 and, if a
Third Party Acquisition is consummated, an additional $8,000,000.
Amendment and Waiver. The Merger Agreement can only be amended by a
written agreement executed by the parties.
Expenses. Except as described below, each party will bear its own expenses
in connection with the Offer and the Merger. Upon termination of the Merger
Agreement, under certain circumstances the Company has agreed to pay Intel
$2,000,000 to reimburse Intel for its costs and expenses in connection with the
Offer and the Merger.
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Rights Agreement. The Board of Directors of the Company has made a
determination that the Merger Agreement and the transactions contemplated
thereby are at a price and on terms which are adequate and are otherwise in the
best interests of the Company and its stockholders. Therefore, the Offer is a
Permitted Offer (as defined in the Rights Agreement) and the Rights shall expire
upon the consummation of the Merger.
Interests of Certain Persons in the Merger
Except as described below, each outstanding stock option (an "Option")
granted under the Company's Amended and Restated 1994 Stock Option Plan will be
assumed and automatically converted in accordance with the terms of the Merger
Agreement and the Amended and Restated 1994 Stock Option Plan into options to
purchase shares of common stock of Intel (an "Intel Option"). Each Option to
purchase a share will be converted into an Intel Option to purchase 0.197656
shares of Intel's common stock and the Option's exercise price will be adjusted
so that the exercise price per share of an Intel Option will equal the current
Option's per share exercise price divided by 0.197656. Unvested Options to
purchase 4,922 Shares held by one Director of the Company will not be assumed
because the vesting of such Options will be accelerated in connection with the
Merger.
It is anticipated that ten of the Company's executive officers and senior
staff members will enter into employment agreements with Intel. Under these
agreements unvested Options (and possibly vested Options) granted under the
Amended and Restated 1994 Stock Option Plan held by such employees will not be
converted into Intel Options. Instead they will be terminated voluntarily by the
holders thereof at the effective time of the Merger in exchange for the
establishment of non-qualified deferred compensation accounts which will vest on
a schedule corresponding to the vesting schedule of their terminated Options.
The employment agreements will provide for the immediate vesting of such
non-qualified deferred compensation accounts upon the termination for any reason
of such executive's employment. The deferred compensation accounts will be in
amounts in each case equal to the difference between $17.50 and the exercise
price of the executive's Options multiplied by the number of Shares covered by
the executive's Options. The value of the deferred compensation accounts (based
solely upon the value of unvested Options) for the five most highly compensated
executive officers of the Company will be approximately as follows: Mr. Stafford
($1,287,000); Mr. Angelo ($497,023); Mr. Christopher ($452,909); Mr. Jones
($452,917); and Mr. Roffelsen ($497,023).
The Merger Agreement does not provide for the assumption of any options
issued under the Company's Amended and Restated Employee Stock Purchase Plan or
the Company's First Amended 1988 Non-Qualified Stock Option Plan for Outside
Directors. The vesting of unvested options issued under the Company's First
Amended 1988 Non-Qualified Stock Option Plan for Outside Directors will be
accelerated prior to the merger. All options issued and outstanding under the
Company's Amended and Restated Employee Stock Purchase Plan have already vested
according to the terms of such plan. All options issued under the Company's
First Amended 1988 Non-Qualified Stock Option Plan for Outside Directors and the
Company's Amended and Restated Employee Stock Purchase Plan will terminate
unless exercised prior to the Merger.
As noted above, it is anticipated that the Company's executive officers and
senior staff will enter into employment agreements relating to the period
following the Merger. Although these agreements have not yet been finalized, it
is anticipated that they will generally have terms of from six months to two
years, provide for transition bonuses and will contain severance provisions
providing for payments of up to one year's salary in connection with certain
terminations of employment. Because the compensation packages historically
offered by the Company and the compensation packages offered by Intel differ in
a number of material respects, comparisons between the compensation paid by the
Company and the compensation paid by Intel are difficult. However, it is
anticipated that the salary components of such packages will be roughly
comparable and the bonuses in the Intel compensation package may, depending on
the performance of Intel, result in increased compensation to such employees.
Pursuant to the Merger Agreement, the Surviving Corporation (or any
successor) will indemnify, defend and hold harmless the present and former
officers and directors of the Company and its subsidiaries against all losses,
claims, damages, liabilities, fees, costs and expenses arising out of actions or
omissions to the full extent permitted under Delaware law, subject to the
Company's Certificate of Incorporation, Bylaws and indemnification agreements,
all as in effect on the date of the Merger Agreement. In addition, for not less
than six years after the Effective Time, Intel or the Surviving Corporation
shall maintain the Company's existing officers'
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and directors' liability insurance (subject to certain maximum premium payments)
or the Company, subject to certain limitations, may purchase such insurance
prior to the consummation of the Merger.
Rights Of Stockholders In The Merger
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, stockholders of the Company who have not sold
their Shares will have certain rights under the DGCL to dissent and demand
appraisal of, and to receive payment in cash of the fair value of, their Shares.
Stockholders who perfect such rights by complying with the procedures set forth
in Section 262 of the DGCL ("Section 262") will have the fair value of their
Shares (exclusive of any element of value arising from the accomplishment or
expectation of the Merger) determined by the Delaware Court of Chancery and will
be entitled to receive a cash payment equal to such fair value from the
Surviving Corporation. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. The Weinberger court also noted that under Section 262,
fair value is to be determined "exclusive of any element of value arising from
the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor,
Inc., however, the Delaware Supreme Court stated that, in the context of a
two-step cash merger, "to the extent that value has been added following a
change in majority control before cash-out, it is still value attributable to
the going concern," to be included in the appraisal process. As a consequence of
the foregoing, the fair value determined in any appraisal proceeding could be
the same as or more or less than the Merger Consideration.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262 INCLUDED
HEREWITH IN ANNEX D. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE
CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
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 CIRCUM-
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STANCES, 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.
The Offer is scheduled to expire at Midnight, New York City time, on
Thursday August 28, 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 October 31, 1997, Purchaser has agreed to extend the expiration date, but in
no event is Purchaser required to extend the expiration date beyond October 31,
1997. A copy of the press release issued by Intel on July 27, 1997 announcing
the Merger and the Offer is filed as Exhibit (a)(1) to this Schedule 14D-9 and
is incorporated herein by reference in its entirety.
BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION
Background of the Offer. 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.
Intel's representatives asked Mr. Stafford if the Company would be willing to
explore the possibility of an acquisition. Mr. Stafford stated that he would
discuss it 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 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.
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 the some of the potential
general terms and conditions that might apply to such a transaction.
7
<PAGE> 9
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.
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.
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. 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. On July 15, Mr. Stafford met with Messrs. Tinsley, Vadasz and Sodhani to
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. 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.
8
<PAGE> 10
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;
(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;
(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
9
<PAGE> 11
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. 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.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement dated July 23, 1996 between the Company and
H&Q, the Company has agreed to pay H&Q, upon any sale of the Company (as defined
therein), 1.2% of the aggregate transaction value. The Company has agreed to
reimburse H&Q for its reasonable out-of-pocket expenses incurred in connection
with rendering financial advisory services, including fees and disbursements to
its legal counsel. The Company has also agreed to indemnify H&Q and its
directors, officers, agents, employees and controlling persons for certain
costs, expenses and liabilities, including certain liabilities under the federal
securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer, except that such solicitations or
recommendations may be made by directors, officers or employees of the Company,
for which services no additional compensation will be paid.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
During the past 60 days, no transactions in Shares have been effected by
the Company or, to the Company's knowledge, by any of its executive officers,
directors, affiliates or subsidiaries.
To the Company's knowledge, all of the Company's executive officers and
directors who own Shares currently intend to tender all of their Shares (other
than Shares, if any, held by such person that, if tendered, could cause such
person to incur liability under the provisions of Section 16(b) of the Exchange
Act) pursuant to the Offer.
10
<PAGE> 12
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer or a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition or securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to or would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
A complaint has been filed in Delaware Chancery Court by a stockholder of
the Company, New York Apple Sales Inc., Profit Sharing Plan, on its own behalf
and on behalf of the other stockholders of the Company, against the Company and
its directors alleging a breach of fiduciary duty by the directors in approving
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger. The claim seeks either to enjoin or rescind the Offer and
the Merger. The Company and its directors believe the claim is without merit and
intend to vigorously defend against it.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
(a)(1) Press release issued by Intel on July 28, 1997.
(a)(2) Opinion of H&Q dated July 27, 1997.(1)
(a)(4) Letter to Stockholders dated August 1, 1997 from James F. Stafford,
President and Chief Executive Officer of the Company.*
(a)(5) Text of Section 262 of the Delaware General Corporation Law.(2)
(c)(1) Agreement and Plan of Merger, dated as of July 27, 1997, among Intel, the
Purchaser and the Company.(3)
(c)(2) Form of Indemnity Agreement between the Company and each of its Directors
and Executive Officers. (4)
(c)(3) Certificate of Incorporation of the Company, as amended to date.(4)
(c)(4) Restated Bylaws of the Company.(5)
(c)(5) The Company's Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder.(6)
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex C.
(2) Attached hereto as Annex D.
(3) Attached hereto as Annex B.
(4) Incorporated by reference to an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990.
(5) Incorporated by reference to an exhibit to the Company's Registration
Statement No. 33-8005, effective October 8, 1986.
(6) Attached hereto as Annex A.
11
<PAGE> 13
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.
CHIPS AND TECHNOLOGIES, INC.
By: /s/ JEFFERY ANNE TATUM
------------------------------------
Jeffery Anne Tatum
Secretary, Vice President and
General Counsel
12
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- --------------------------------------------------------------------
<S> <C> <C>
(a)(1) Press release issued by Intel on July 28, 1997.
(a)(2) Opinion of H&Q dated July 27, 1997.(1)
(a)(4) Letter to Stockholders dated August 1, 1997 from James F. Stafford,
President and Chief Executive Officer of the Company.*
(a)(5) Text of Section 262 of the Delaware General Corporation Law.(2)
(c)(1) Agreement and Plan of Merger, dated as of July 27, 1997, among
Intel, the Purchaser and the Company.(3)
(c)(2) Form of Indemnity Agreement between the Company and each of its
Directors and Executive Officers.(4)
(c)(3) Certificate of Incorporation of the Company, as amended to date.(4)
(c)(4) Restated Bylaws of the Company.(5)
(c)(5) The Company's Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder.(6)
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex C.
(2) Attached hereto as Annex D.
(3) Attached hereto as Annex B.
(4) Incorporated by reference to an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990.
(5) Incorporated by reference to an exhibit to the Company's Registration
Statement No. 33-8005, effective October 8, 1986.
(6) Attached hereto as Annex A.
<PAGE> 1
<TABLE>
<S> <C>
CONTACT: Tom Waldrop (Intel) Bruce LeBoss
(408) 765-8478 (Chips and Technologies)
(408) 541-8744
</TABLE>
INTEL TO ACQUIRE CHIPS AND TECHNOLOGIES, INC.
INVESTS IN ADVANCED GRAPHICS TO
ACCELERATE VISUAL COMPUTING IN MOBILE PCS
SANTA CLARA, Calif., July 28, 1997--Intel Corporation today announced it has
entered into a definitive agreement to acquire Chips and Technologies, Inc.,
based in San Jose, California. The acquisition is aimed at advancing
capabilities for graphics and visual computing in mobile personal computers.
The terms of the agreement provide for Intel to commence a cash tender
offer in the near future for all outstanding shares of Chips and Technologies at
a price of $17.50 per share. The terms further provide for a merger of Chips and
Technologies with a subsidiary of Intel in which all remaining outstanding
shares of Chips and Technologies will be converted into the right to receive
$17.50 per share. The transaction is subject to regulatory approval and other
conditions.
"As we aggressively drive improved visual computing capabilities to the
personal computer, graphics solutions are an increasingly important part of
mobile PC platforms," noted Craig R. Barrett, Intel's president and chief
operating officer. "Intel and Chips and Technologies already share an excellent
working relationship based on our joint efforts in graphics accelerators.
Intel's acquisition of Chips and Technologies will provide us with the ability
to bring strong graphics solutions to the mobile marketplace."
"The need for advanced graphics in mobile systems is significant," stated
Jim Stafford, Chips and Technologies president and chief executive officer. "We
look forward to being a part of Intel and to working together to accelerate the
establishment of advanced graphics technologies and standards for the mobile
industry."
INNOVATORS IN ADVANCED DISPLAY CAPABILITIES FOR MOBILE COMPUTERS
Chips and Technologies is currently the market segment leader for notebook
graphics accelerator chips. The company has industry-leading technology, such as
HiQColor in graphics accelerators for the mobile computing market segment and
flat panel displays. Chips and Technologies is currently sampling graphics
accelerators with integrated memory.
Chips and Technologies will become a wholly owned subsidiary of Intel
Corporation and part of Intel's Graphics Components Division. Jim Stafford,
Chips and Technologies president and chief executive officer, will join Intel as
a vice president of the Company's Desktop Products Group. He will team with
Avtar Saini, vice president and general manager of the Platform Components
Division, to co-manage Intel's Graphics Component Division in Folsom and San
Jose, California.
Current Chips and Technologies employees will become employees of Intel.
Intel does not anticipate any immediate changes to Chips and Technologies
product line, and Chips and Technologies will continue to manufacture and
provide its products to customers under existing arrangements for the
foreseeable future.
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.
<PAGE> 1
ANNEX C
[HAMBRECHT & QUIST LLC LETTERHEAD]
July 27, 1997
CONFIDENTIAL
The Board of Directors
Chips and Technologies, Inc.
2950 Zanker Road
San Jose, CA 95134
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.01
per share (the "Common Stock"), of Chips and Technologies, Inc. ("Chips" or the
"Company") of the consideration to be received by such holders in connection
with a proposed transaction as set forth below.
We understand that Chips, Intel Corporation ("Intel") and Intel Enterprise
Corporation (the "Purchaser") propose to enter into an Agreement and Plan of
Merger (the "Agreement") dated as of July 27, 1997. The terms of the Agreement
provide, among other things, that (i) the Purchaser will promptly commence a
tender offer (the "Offer") to purchase for cash all of the outstanding shares of
Common Stock at a purchase price of $17.50 per share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Agreement and
certain ancillary documents to be filed with the Securities and Exchange
Commission; and (ii) the Purchaser will subsequently be merged (the "Merger")
with and into the Company in a transaction which will provide all remaining
holders of shares of Common Stock (other than Chips, Intel, the Purchaser or
their respective subsidiaries, and holders who have perfected their appraisal
rights, if any, under Delaware law) with $17.50 per share in cash. The Offer and
the Merger constitute the "Proposed Transaction."
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the board of
Directors of Chips in connection with the Proposed Transaction, and we will
receive a fee for our services, which include the rendering of this opinion.
In the past, we have provided investment banking and other financial
advisory services to Chips and have received fees for rendering these services.
In particular, Hambrecht & Quist acted as financial advisor in the Company's
private placement of convertible promissory notes in 1992. In the ordinary
course of business, Hambrecht & Quist acts as a market maker and broker in the
publicly traded securities of Chips and receives customary compensation in
connection therewith, and also provides research coverage for the Company. In
the ordinary course of business, Hambrecht & Quist actively trades in the equity
and derivative securities of Chips 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.
C-1
<PAGE> 2
The Board of Directors
Chips and Technologies, Inc.
Page 2
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements of
Intel for recent years and interim periods to date and certain other
relevant financial and operating data of Intel made available to us
from published sources;
(ii) reviewed the publicly available consolidated financial statements of
Chips for recent years and interim periods to date and certain other
relevant financial and operating data of Chips made available to us
from published sources and from the internal records of Chips;
(iii) reviewed certain internal financial and operating information
relating to Chips, including certain financial projections, prepared
by the management of Chips;
(iv) discussed the business, financial condition and prospects of Chips
with certain of its officers;
(v) reviewed the recent reported prices and trading activity for the
common stock of Chips and compared such information and certain
financial information for Chips with similar information for certain
other companies engaged in businesses we consider comparable;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(vii) reviewed the Agreement; and
(viii) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations
and financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Chips or Intel considered in
connection with our review of the Proposed Transaction, and we have not assumed
any responsibility for independent verification of such information. We have not
undertaken any independent valuation or appraisal of any of the assets or
liabilities of Chips or Intel; nor have we conducted a physical inspection of
the properties and facilities of either company. With respect to the financial
forecasts and projections used in our analysis, we have assumed that they
reflect the best currently available estimates and judgments of the expected
future financial performance of Chips. For purposes of this Opinion, we have
assumed that neither Intel or Chips is a party to any pending transactions,
including external financings, recapitalizations or material merger discussions,
other than the Proposed Transaction and those activities undertaken in the
ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion.
It is understood that this letter is addressed to and for the information
of the Board of Directors in connection with their evaluation of the Proposed
Transaction and may not be used for any other purpose without our prior written
consent; provided, however, that this letter may be reproduced in full in any
filing with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934. This letter does not constitute a recommendation to any
Chips stockholder as to whether such stockholder should accept the Offer.
C-2
<PAGE> 3
The Board of Directors
Chips and Technologies, Inc.
Page 3
Based upon and subject to the foregoing and after considering such matters
as we deem relevant, we are of the opinion that as of the date hereof the
consideration to be received by the holders of Chips Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view. We
express no opinion, however, as to the adequacy or financial fairness of any
consideration received in the Proposed Transaction by Intel or any of its
affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By: /s/ JAMES A. DAVIDSON
------------------------------------
James A. Davidson
Managing Director
C-3
<PAGE> 1
LOGO
August 1, 1997
TO THE STOCKHOLDERS OF CHIPS AND TECHNOLOGIES, INC.
Dear Stockholder:
I am pleased to report that on July 27, 1997, Chips and Technologies, Inc.
("Chips") entered into a merger agreement with Intel Corporation, a Delaware
corporation ("Intel"), and its wholly-owned subsidiary, Intel Enterprise
Corporation, a Delaware corporation ("Purchaser"), that provides for the
acquisition of all of the Common Stock, par value $0.01 per share, together with
all associated Common Stock Purchase Rights (the "Shares"), of Chips by
Purchaser at a price of $17.50 per Share in cash, net to the seller, without
interest. Under the terms of the proposed transaction, Purchaser has commenced a
tender offer (the "Tender Offer") for all outstanding shares of Chips Common
Stock at $17.50 per Share. The Tender Offer is currently scheduled to expire at
Midnight, New York City time, on Thursday, August 28, 1997.
Following the successful completion of the Tender Offer, upon approval by
stockholder vote, if required, Purchaser will be merged with and into Chips (the
"Merger"), and all Shares not purchased in the Tender Offer will be converted
into the right to receive $17.50 per Share in cash, net to the seller, without
interest.
THE BOARD OF DIRECTORS OF CHIPS 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 CHIPS, 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.
The recommendation of the Board of Directors is described in the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
filed by Chips with the Securities and Exchange Commission and enclosed with
this letter. In arriving at its recommendation, the Board of Directors gave
careful consideration to a number of factors. These factors included the opinion
of Hambrecht & Quist LLC, financial advisor to Chips, a copy of which is
attached as an annex to the Schedule 14D-9. We urge you to read carefully the
Schedule 14D-9 in its entirety so that you will be more informed as to the
Board's recommendation.
Also accompanying this letter is a copy of the Offer to Purchase and
related materials, including a Letter of Transmittal for use in tendering
Shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your Shares. We urge you to read each
of the enclosed materials carefully.
The management and directors of Chips thank you for the support you have
given the company.
On behalf of the Board of Directors,
Sincerely,
LOGO
James F. Stafford
President and Chief Executive Officer
Enclosures
<PAGE> 1
ANNEX D
TEXT OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to (sec.) 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in-a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (sec.) 251 (other than a merger effected pursuant to (sec.)
251(g) of this title), (sec.) 252, (sec.) 254, (sec.) 257, (sec.) 258, (sec.)
263 or (sec.) 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (sec.) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(sec.)(sec.) 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts in respect thereof at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under (sec.) 253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
D-1
<PAGE> 2
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise
D-2
<PAGE> 3
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an-appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may-be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
D-3
<PAGE> 4
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
<PAGE> 1
ANNEX B
AGREEMENT AND PLAN OF MERGER
AMONG
CHIPS AND TECHNOLOGIES, INC.,
INTEL CORPORATION
AND
INTEL ENTERPRISE CORPORATION
DATED AS OF JULY 27, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
THE OFFER
1.1. The Offer........................................................................ 1
1.2 Company Actions.................................................................. 2
1.3. Boards of Directors and Committees; Section 14(f)................................ 4
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1. The Merger....................................................................... 4
2.2. Closing.......................................................................... 5
2.3. Effective Time................................................................... 5
2.4. Options.......................................................................... 5
ARTICLE III
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION; OFFICERS AND DIRECTORS OF THE
SURVIVING CORPORATION
3.1. Certificate of Incorporation..................................................... 5
3.2. By-Laws.......................................................................... 5
3.3. Directors........................................................................ 5
3.4. Officers......................................................................... 6
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES FOR MERGER CONSIDERATION
4.1. Effect on Capital Stock.......................................................... 6
(a) Merger Consideration......................................................... 6
(b) Cancellation of Excluded Shares.............................................. 6
(c) Merger Sub................................................................... 6
4.2. Exchange of Certificates for Payment............................................. 6
(a) Exchange Agent............................................................... 6
(b) Exchange Procedures.......................................................... 6
(c) Transfers.................................................................... 7
(d) Termination of Merger Fund................................................... 7
(e) Return of Consideration...................................................... 7
(f) Lost, Stolen or Destroyed Certificates....................................... 7
4.3. Dissenters' Shares............................................................... 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company.................................... 7
(a) Organization, Good Standing, Corporate Power and Qualification; Subsidiaries
and Other Interests.............................................................. 7
(b) Capital Structure............................................................ 8
(c) Corporate Authority; Approval and Fairness................................... 9
(d) Governmental Filings; No Violations.......................................... 9
(e) Company Reports; Financial Statements........................................ 9
(f) Absence of Certain Changes................................................... 10
</TABLE>
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<PAGE> 3
<TABLE>
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(g) Litigation and Liabilities................................................... 11
(h) Employee Benefits............................................................ 11
(i) Compliance with Laws......................................................... 12
(j) Takeover Statutes............................................................ 13
(k) Environmental Matters........................................................ 13
(l) Intellectual Property........................................................ 13
(m) Taxes........................................................................ 14
(n) Labor Matters................................................................ 15
(o) Insurance.................................................................... 15
(p) Rights Agreement............................................................. 15
(q) Brokers and Finders.......................................................... 15
(r) Certain Business Practices................................................... 15
(s) Product Warranties........................................................... 15
(t) Suppliers and Customers...................................................... 15
(u) Backlog Information.......................................................... 15
5.2. Representations and Warranties of Parent and Merger Sub.......................... 16
(a) Organization, Good Standing and Qualification................................ 16
(b) Ownership of Merger Sub...................................................... 16
(c) Corporate Authority.......................................................... 16
(d) Governmental Filings; No Violations.......................................... 16
(e) Brokers and Finders.......................................................... 17
(f) Financing.................................................................... 17
ARTICLE VI
COVENANTS
6.1. Interim Operations............................................................... 17
6.2. Third Party Acquisitions......................................................... 18
6.3. Filings; Other Actions; Notification............................................. 20
6.4. Information Supplied............................................................. 21
6.5. Stockholders Meeting............................................................. 21
6.6. Access........................................................................... 21
6.7. Publicity........................................................................ 21
6.8. Status of Company Employees; Company Stock Options; Employee Benefits............ 22
6.9. Expenses......................................................................... 22
6.10. Indemnification; Directors' and Officers' Insurance.............................. 22
6.11. Other Actions by the Company and Parent.......................................... 24
(a) Rights Agreement............................................................. 24
(b) Takeover Statutes............................................................ 24
6.12. Parent Stock Option; Exercise; Adjustments....................................... 24
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect Merger........................... 25
(a) Stockholder Approval......................................................... 25
(b) Regulatory Consents.......................................................... 25
(c) Litigation................................................................... 25
</TABLE>
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<TABLE>
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7.2. Conditions to Obligations of Parent and Merger Sub............................... 25
(a) Representations and Warranties............................................... 25
(b) Performance of Obligations of the Company.................................... 25
7.3. Conditions to Obligations of the Company......................................... 25
(a) Representations and Warranties............................................... 25
(b) Performance of Obligations of Parent and Merger Sub.......................... 26
ARTICLE VIII
TERMINATION
8.1. Termination Mutual Consent....................................................... 26
8.2. Termination by Either Parent or the Company...................................... 26
8.3. Termination by the Company....................................................... 26
8.4. Termination by Parent and Merger Sub............................................. 26
8.5. Effect of Termination and Abandonment............................................ 27
8.6. Procedure for Termination........................................................ 27
ARTICLE IX
MISCELLANEOUS
9.1. Survival......................................................................... 28
9.2. Certain Definitions.............................................................. 28
9.3. No Personal Liability............................................................ 29
9.4. Modification or Amendment........................................................ 29
9.5. Waiver of Conditions............................................................. 29
9.6. Counterparts..................................................................... 29
9.7. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.................................... 29
9.8. Notices.......................................................................... 30
9.9. Entire Agreement................................................................. 31
9.10. No Third Party Beneficiaries..................................................... 31
9.11. Obligations of the Company and Surviving Corporation............................. 31
9.12. Severability..................................................................... 31
9.13. Interpretation................................................................... 31
9.14. Assignment....................................................................... 31
</TABLE>
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<PAGE> 5
SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE
DESCRIPTION
- -------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
Schedule 5.1(a) Company Subsidiaries and Other Interests
Schedule 5.1(d) Consents
Schedule 5.1(f) Certain Changes
Schedule 5.1(g) Litigation and Liabilities
Schedule 5.1(h) Outstanding Company Options and Other Benefit Plan Matters
Schedule 5.1(k) Environmental Matters
Schedule 5.1(l)(ii) Outstanding Orders and Judgments on Intellectual Property Rights
Schedule
5.1(l)(iii) Intellectual Property Material Contracts
Schedule 5.1(m) Certain Tax Matters
Schedule 5.1(s) Product Warranties
</TABLE>
v
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of July 27, 1997, 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 respective Boards of Directors of each of Parent, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "Merger") and approved the Merger upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, in furtherance thereof, it is proposed that Parent shall, within
five (5) Business Days after the public announcement hereof, commence a tender
offer (the "Offer") to acquire all of the outstanding shares of common stock,
par value $.01 per share, of the Company (the "Shares"), together with the
associated Rights (as defined in Section 4.1(a)), at a price of $17.50 per
Share, net to the seller in cash, less any required withholding taxes (such
amount, or any greater amount per share paid pursuant to the Offer, being
hereinafter referred to as the "Offer Price"), in accordance with the terms and
subject to the conditions provided herein; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER
1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated and
subject to the terms hereof, as promptly as practicable, but in no event
later than five (5) Business Days after the public announcement of the
execution hereof by the parties, Parent shall commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) ,the Offer for any and all of the Shares, at the Offer
Price. The obligation of Parent to accept for payment and to pay for any
Shares tendered shall be subject only to (i) the condition that at least a
majority of Shares on a fully-diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested and unvested
stock options) be validly tendered (the "Minimum Condition"), and (ii) the
other conditions set forth in Annex A. Parent expressly reserves the right
to increase the Offer Price or to make any other changes in the terms and
conditions of the Offer (provided that, unless previously approved by the
Company in writing, no change may be made which (i) decreases the Offer
Price, (ii) changes the form of consideration to be paid in the Offer,
(iii) reduces the maximum number of Shares to be purchased in the Offer,
(iv) imposes conditions to the Offer in addition to those set forth in
Annex A, (v) amends the conditions set forth in Annex A to broaden the
scope of such conditions, (vi) amends any other term of the Offer in a
manner adverse to the holders of the Shares, (vii) extends the Offer except
as provided in Section 1.1(b)), or (viii) amends the Minimum Condition. It
is agreed that the conditions set forth in Annex A are for the sole benefit
of Parent and may be waived by Parent, in whole or in part at any time and
from time to time, in its sole discretion other than the Minimum Condition,
as to which prior written Company approval is required. The failure by
Parent at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time. The
Company agrees that no Shares held by the Company or any of its
Subsidiaries (as defined in Section 9.2) will be tendered in the Offer.
(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,
<PAGE> 7
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 October 31,
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 October 31, 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.
(c) As soon as practicable on the date the Offer is commenced, Parent
shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, and including all
exhibits thereto, the "Schedule 14D-1") with respect to the Offer. The
Schedule 14D-1 shall contain as an exhibit or incorporate by reference the
Offer to Purchase (or portions thereof) and forms of the related letter of
transmittal and summary advertisement. Parent and Merger Sub agree that the
Schedule 14D-1, the Offer to Purchase and all amendments or supplements
thereto (which together constitute the "Offer Documents") shall comply in
all material respects with the Exchange Act and the rules and regulations
thereunder and other applicable Laws (as defined in Section 5.1(i)). Parent
and Merger Sub further agree that the Offer Documents, on the date first
published, sent or given to the Company's stockholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by Parent or
Merger Sub with respect to information supplied by the Company or any of
its stockholders specifically for inclusion or incorporation by reference
in the Offer Documents. The Company agrees that the information provided by
the Company for inclusion or incorporation by reference in the Offer
Documents shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of Parent, Merger Sub and the
Company agrees promptly to correct any information provided by it for use
in the Offer Documents if and to the extent that such information shall
have become false or misleading in any material respect, and Parent and
Merger Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to the Company's stockholders,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given reasonable opportunity to
review and comment on the Offer Documents prior to the filing thereof with
the SEC. Parent agrees to provide the Company and its counsel in writing
with any comments Parent or its counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after receipt of such
comments.
1.2. Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that its Board of Directors, at a meeting duly called and held,
has, subject to the terms and conditions set forth herein, (i) after
evaluating the Merger in accordance with all of the provisions of Article
Ninth of the Company's certificate of incorporation, determined that this
Agreement and the transactions contemplated hereby, including the Offer and
the Merger, taken together, are at a price and on terms which are adequate
and are otherwise in the best interests of the Company and its stockholders
(other than Parent and its Affiliates), (ii) approved this Agreement and
the transactions contemplated hereby, including the Offer and the Merger,
in all respects and such approval constitutes approval of the Offer, this
Agreement and the Merger for purposes of (x) Section 203 of the Delaware
General Corporation Law (the "DGCL"), (y) similar provisions of any other
similar state statutes that might be deemed applicable to the transactions
contemplated hereby and (z) the Rights Agreement (as defined in Section
5.1(b)),
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(iii) resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares thereunder to Parent and approve and adopt this
Agreement and the Merger, and (iv) in accordance with the applicable
provisions of the Assumed Stock Option Plan (as defined in Section 2.4),
approved the assumption of the Assumed Stock Option Plan by Parent as
contemplated by Section 6.8(c) and the conversion of the options under the
Assumed Stock Option Plan outstanding at the Effective Time of the Merger.
The Company consents to the inclusion of such recommendation and approval
in the Offer Documents. The Company also represents that its Board of
Directors has reviewed the opinion of Hambrecht & Quist LLC, financial
advisor to the Board of Directors (the "Financial Advisor"), that, as of
July 27, 1997, the consideration to be received pursuant to this Agreement
is fair to the stockholders of the Company (other than Parent and its
Affiliates) from a financial point of view (the "Fairness Opinion"). The
Company has been authorized by the Financial Advisor to permit, subject to
the prior review and consent by the Financial Advisor (such consent not to
be unreasonably withheld), the inclusion of the fairness opinion (or a
reference thereto) in the Offer Documents, the Schedule 14D-9 and the Proxy
Statement.
(b) The Company shall file with the SEC, concurrently with the filing
of the Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto, and including
all exhibits thereto, the "Schedule 14D-9") containing the recommendations
described in Section 1.2(a) and shall mail the Schedule 14D-9 to the
stockholders of the Company promptly after the commencement of the Offer.
The Company agrees that the Schedule 14D-9 shall comply in all material
respects with the Exchange Act and the rules and regulations thereunder and
other applicable Laws. The Company further agrees that Schedule 14D-9, on
the date first published, sent or given to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is
made by the Company with respect to information supplied by the Parent or
Merger Sub specifically for inclusion or incorporation by reference in
Schedule 14D-9. Each of the Company, Parent and Merger Sub agrees promptly
to correct any information provided by it for use in the Schedule 14D-9 or
the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given reasonable
opportunity to review and comment on the Schedule 14D-9 prior to the filing
thereof with the SEC.
(c) In connection with the Offer, the Company shall, or shall cause
its transfer agent to, promptly furnish Parent with such information,
including updated lists of the stockholders of the Company, mailing labels
and updated lists of security positions, and such assistance as Parent or
its agents may reasonably request in communicating the Offer to the record
and beneficial holders of Shares. Subject to the requirements of applicable
law, and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Merger,
Parent and Sub and their agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information
only in connection with the Offer and the Merger and, if this Agreement
shall be terminated, will deliver, and will use their reasonable efforts to
cause their agents to deliver, to the Company all copies and any extracts
or summaries from such information then in their possession or control.
(d) Solely in connection with the tender and purchase of Shares
pursuant to the Offer and the consummation of the Merger, the Company
hereby waives any and all rights of first refusal it may have with respect
to Shares owned by, or issuable to, any Person, other than rights to
repurchase unvested shares, if any, that may be held by Persons following
exercise of employee stock options.
1.3. Boards of Directors and Committees; Section 14(f).
(a) Promptly upon the purchase by Parent of Shares pursuant to the
Offer and from time to time thereafter, if the Minimum Condition has been
met, and subject to the second to last sentence of this Section 1.3(a),
Parent shall be entitled to designate up to such number of directors,
rounded up to the next whole number, on the Board of Directors of the
Company as will give Parent representation on such Board equal to the
product of the number of directors on such Board (giving effect to any
increase in the
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number of directors pursuant to this Section 1.3) and the percentage that
such number of Shares so purchased bears to the total number of outstanding
Shares on a fully-diluted basis, and the Company shall use its best efforts
to, upon request by Parent, promptly, at the Company's election, either
increase the size of its Board of Directors (subject to the provisions of
Article Sixth of the Company's certificate of incorporation) or secure the
resignation of such number of directors as is necessary to enable Parent's
designees to be elected to such Board and to cause Parent's designees to be
so elected. At such times, and subject to the second to last sentence of
this Section 1.3(a), the Company will use its best efforts to cause persons
designated by Parent to constitute the same percentage as is on the
Company's Board of Directors of (i) each committee of such Board (other
than any committee of such Board established to take action under this
Agreement), (ii) each Board of Directors of each Subsidiary of the Company
and (iii) each committee of each such Board. Notwithstanding the foregoing,
the Company shall use its best efforts to ensure that three of the members
of its Board of Directors as of the date hereof ("Continuing Directors")
shall remain members of such Board until the Effective Time (as defined in
Section 2.3). In the event a Continuing Director resigns from the Company's
Board of Directors, Parent, Merger Sub and the Company shall permit the
remaining Continuing Director or Directors to appoint the resigning
director's successor who shall be deemed to be a Continuing Director.
(b) The Company's obligation to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all action
required pursuant to such Section and Rule in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9
such information with respect to the Company and its officers and directors
as is required under such Section and Rule in order to fulfill its
obligations under this Section 1.3. Parent will supply to the Company in
writing and be solely responsible for any information with respect to
itself and its nominees, officers, directors and Affiliates required by
such Section and Rule.
(c) Following the election or appointment of Parent's designees
pursuant to this Section 1.3 and prior to the Effective Time, if there
shall be any Continuing Directors, any amendment of this Agreement, any
termination of this Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligations or other acts of
Parent or any waiver of any of the Company's rights hereunder, will require
the concurrence of a majority of such Continuing Directors.
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 2.3) Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Article III. At the election of Parent, to
the extent that such action would not cause a failure of a condition to the
Offer of the Merger, the Merger may be structured so that the Company shall be
merged with and into Merger Sub with the result that Merger Sub shall become the
"Surviving Corporation." The Merger shall have the effects specified in the
DGCL. Parent, as the sole stockholder of Merger Sub, hereby approves the Merger
and this Agreement.
2.2. Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Gibson, Dunn & Crutcher LLP, One Montgomery Street, San
Francisco, California at 9:00 am., Pacific time, on the first Business Day after
the day on which the last to be fulfilled or waived of the conditions set forth
in Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other place and time and/or on such other date as the Company and
Parent may agree in writing (the "Closing Date").
2.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger (the "Delaware Certificate
of Merger") to be executed, acknowledged and filed with the Secretary of State
of Delaware as provided in Section 251 of the DGCL. The Merger shall become
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effective at the time when the Delaware Certificate of Merger has been duly
filed with the Secretary of State of Delaware (the "Effective Time").
2.4. Options. At the Effective Time, options under the Company's Amended
and Restated 1994 Stock Option Plan (the "Assumed Stock Option Plan") to
purchase Shares (each, a "Company Option"), which are then outstanding and
unexercised, shall cease to represent a right to acquire Shares and shall be
converted automatically into options to purchase shares of common stock, par
value $.001 per share, of Parent ("Parent Common Stock"), and Parent shall
assume each such Company Option subject to the terms of the Assumed Stock Option
Plan, in each case as heretofore amended or restated, as the case may be, and
the agreements evidencing grants thereunder; provided, however, that from and
after the Effective Time, (i) the number of shares of Parent Common Stock
purchasable upon exercise of such Company Option shall be equal to the number of
Shares that were purchasable under such Company Option immediately prior to the
Effective Time multiplied by the Exchange Ratio (as hereinafter defined), and
rounding to the nearest whole share, and (ii) the per share exercise price under
each such Company Option shall be adjusted by dividing the per share exercise
price of each such Company Option by the Exchange Ratio, and rounding down to
the nearest cent. The terms of each Company Option shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction with
respect to Parent Common Stock on or subsequent to the Effective Date.
Notwithstanding the foregoing, each Company Option which is intended to be an
"incentive stock option": (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended, (the "Code")) shall be adjusted in accordance with the
requirements of Section 424 of the Code. Accordingly, with respect to any
incentive stock options, fractional shares shall be rounded down to the nearest
whole number of shares and the per share exercise price shall be rounded down to
the nearest cent. The Exchange Ratio is 0.197656.
ARTICLE III
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION; OFFICERS AND
DIRECTORS OF THE SURVIVING CORPORATION
3.1. Certificate of Incorporation. The certificate of incorporation of
the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"), until
duly amended as provided therein or by applicable Law, except that Article
Fourth of the Charter shall be amended to read in its entirety as follows: "The
aggregate number of shares that the Corporation shall have the authority to
issue is 1,000 shares of Common Stock, par value $.01 per share."
3.2. By-Laws. The by-laws of Merger Sub in effect at the Effective Time
shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable Law.
3.3. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and By-Laws.
3.4. Officers. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and By-Laws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES FOR MERGER CONSIDERATION
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any Capital Stock (as
defined in Section 9.2) of the Company:
(a) Merger Consideration. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent,
Merger Sub or any other direct or indirect Subsidiary of Parent or Shares
that are owned by the Company or any direct or indirect Subsidiary of the
Company (collectively, the "Excluded Shares")) shall be converted into, and
become exchangeable for the Offer Price, without interest (the "Merger
Consideration"). Unless the context otherwise clearly requires, each
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reference in this Agreement to the Shares shall include the associated
"Rights" as defined in and issued pursuant to the Rights Agreement (the
"Rights"). At the Effective Time, all Shares shall no longer be outstanding
and shall be canceled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of such Shares
(other than Excluded Shares) shall thereinafter represent only the right to
receive the Merger Consideration.
(b) Cancellation of Excluded Shares. Each Excluded Share issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of Common Stock,
par value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of Common
Stock of the Surviving Corporation.
4.2. Exchange of Certificates for Payment.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit,
or shall cause to be deposited, with an exchange agent selected by Parent
(the "Exchange Agent"), for the benefit of the holders of Shares, cash in
U.S. dollars in an amount equal to the Merger Consideration multiplied by
the aggregate outstanding Shares (other than Excluded Shares) to be paid
pursuant to Section 4.1(a) in exchange for outstanding Shares upon due
surrender of the Certificates (or affidavits of loss in lieu thereof)
pursuant to the provisions of this Article IV (such aggregate cash amount
when paid to the Exchange Agent being hereinafter referred to as the
"Merger Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record of Shares (other than holders of Excluded Shares) (i) a letter of
transmittal (which shall, among other matters, specify that delivery of the
Certificates shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual receipt of the Certificates (or
affidavits of loss in lieu thereof) by the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration due and payable to such holder. Upon
surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a check in
the amount (after giving effect to any required tax withholdings) of the
Merger Consideration due and payable in respect of such holder's Shares and
the Certificate so surrendered shall forthwith be canceled. No interest
will be paid or accrued on any amount payable upon due surrender of the
Certificates. All Merger Consideration paid upon surrender for exchange of
Shares in accordance with the terms of this Agreement shall be deemed to
have been paid in full satisfaction of all rights pertaining to such
Shares. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, a check for the amount
of cash to be paid upon due surrender of the Certificate may be delivered
to such a transferee if the Certificate formerly representing such Shares
is presented to the Exchange Agent, accompanied by all documents required
by the Exchange Agent to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
(c) Transfers. After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the Shares that were
outstanding immediately prior to the Effective Time.
(d) Termination of Merger Fund. Any portion of the Merger Fund
(including the proceeds of any investments thereof) that remains unclaimed
by the stockholders of the Company for 180 days after the Effective Time
shall be paid to Parent. Any stockholders of the Company who have not
theretofore complied with this Article IV shall thereafter look only to
Parent for payment of their Merger Consideration payable pursuant to
Section 4.1 upon due surrender of their Certificates (or affidavits of loss
in lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, neither Parent, the Surviving Corporation,
the Exchange Agent nor any other Person shall be liable to any former
holder of Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws. Any
amounts remaining unclaimed by holders of Shares on the two (2) year
anniversary of the Effective Time (or such earlier date immediately prior
to such time as such amounts would otherwise escheat to or become property
of any Governmental Entity (as defined in Section 5.1(d)) shall, to the
extent permitted by applicable Law, become the property of Parent, free and
clear of any claims or interest of any Person previously entitled thereto.
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(e) Return of Consideration. Any portion of the Merger Fund
representing Merger Consideration payable in respect of Dissenters' Shares
(as defined in Section 4.3) for which appraisal rights have been perfected
shall be returned to Parent, upon demand.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Certificate to be
lost, stolen or destroyed and, if required by Parent, the posting by such
Person of a bond in an amount determined by Parent as indemnity against any
claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration payable pursuant to Section 4.1 upon
due surrender of the Certificate representing such Shares pursuant to this
Agreement.
4.3. Dissenters' Shares. Notwithstanding Section 4.1, Shares outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such Shares in accordance with the DGCL ("Dissenters' Shares")
shall not be converted into a right to receive the Merger Consideration, unless
such holder fails to perfect or withdraws or otherwise loses such holder's right
to appraisal. If after the Effective Time such holder fails to perfect or
withdraws or loses such holder's right to appraisal, such Dissenters' Shares
shall be treated as if they had been converted as of the Effective Time into a
right to receive the Merger Consideration. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of Dissenters'
Shares, and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub as follows:
(a) Organization, Good Standing, Corporate Power and Qualification;
Subsidiaries and Other Interests.
(i) Each of the Company and its Subsidiaries (x) is a corporation
duly organized, validly existing and in good standing under the laws of
its respective jurisdiction of organization, (y) has all requisite
corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently
conducted and (z) is qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the ownership or
operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good
standing, individually or in the aggregate, has not had and is not
reasonably likely to have a Company Material Adverse Effect (as defined
in Section 9.2). The Company has made available to Parent a complete and
correct copy of the Company's and its Subsidiaries' certificates of
incorporation and by-laws (or comparable governing documents), each as
amended to the date hereof. The Company's and its Subsidiaries'
certificates of incorporation and by-laws (or comparable governing
documents) made available are in full force and effect.
(ii) Schedule 5.1(a) contains a correct and complete list of each
of the Company's Subsidiaries, the jurisdiction where each of such
Subsidiaries is organized and the percentage of outstanding Capital
Stock of such Subsidiaries that is directly or indirectly owned by the
Company. The Company or another Subsidiary of the Company owns its
shares of the Capital Stock of each Subsidiary of the Company free and
clear of all Liens except Permitted Liens (as defined in Section 9.2).
Schedule 5.1(a) sets forth a true and complete list of each equity
investment in an amount of $2,000,000 or more or which represents a 5%
or greater ownership interest in the subject of such investment made by
the Company or any of its Subsidiaries in any other Person other than
the Company's Subsidiaries ("Other Interests"). The Other Interests are
owned by the Company, by one or more of the Company's Subsidiaries or by
the Company and one or more of its Subsidiaries, in each case free and
clear of all Liens, except for Permitted Liens and Liens that may be
created by any partnership or joint venture agreements for Other
Interests.
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(b) Capital Structure. The authorized Capital Stock of the Company
consists of (i) one hundred million (100,000,000) Shares, of which
22,003,195 were outstanding as of the close of business on July 27, 1997,
and (ii) five million (5,000,000) shares of Preferred Stock, par value $.01
per share (the "Preferred Shares"), none of which is outstanding. All of
the outstanding Shares have been duly authorized and are validly issued,
fully paid and nonassessable. The Company has no Preferred Shares reserved
for issuance. Schedule 5.1(h) contains a correct and complete list as of
July 27, 1997 of each outstanding purchase right or option (each a "Company
Option") to purchase Shares, including all Company Options issued under the
Company's Amended and Restated Employee Stock Purchase Plan, the Company's
Amended and Restated 1994 Stock Option Plan and the Company's First Amended
1988 Nonqualified Stock Option Plan for Outside Directors, in each case as
amended to the date hereof (collectively, the "Stock Option Plans"),
including the holder, date of grant, exercise price and number of Shares
subject thereto. The Stock Option Plans are the only plans under which any
Company Options are outstanding. As of July 27, 1997, other than (1) the
3,983,598 Shares reserved for issuance upon exercise of outstanding Company
Options and (2) Shares reserved for issuance pursuant to the Rights
Agreement, dated as of August 23, 1989, between the Company and Bank of
America, NT & SA, as Rights Agent (the "Rights Agreement"), there are no
Shares reserved for issuance or any commitments for the Company to issue
Shares. Each of the outstanding shares of Capital Stock or other securities
of each of the Company's Subsidiaries directly or indirectly owned by the
Company is duly authorized, validly issued, fully paid and nonassessable
and owned by the Company or by a direct or indirect Subsidiary of the
Company, free and clear of any limitation or restriction (including any
restriction on the right to vote or sell the same except as may be provided
as a matter of Law). Except for Company Options, there are no preemptive or
other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements or
commitments to issue or sell any shares of Capital Stock or other
securities of the Company or any of its Subsidiaries or any securities or
obligations convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire, any shares of Capital Stock
or other securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. The Company does not have outstanding any bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote)
with the stockholders of the Company on any matter ("Voting Debt"). If
Parent takes the actions provided for in Section 6.8(c) hereof, after the
Effective Time, the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of Capital Stock or other securities of the
Surviving Corporation pursuant to the Stock Option Plans. The Shares
constitute the only class of securities of the Company or any of its
Subsidiaries registered or required to be registered under the Exchange
Act.
(c) Corporate Authority; Approval and Fairness.
(i) The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute, deliver
and perform its obligations under this Agreement and to consummate,
subject (if required by law) only to approval of this Agreement by the
holders of a majority of the outstanding Shares (the "Company Requisite
Vote"), the Merger. Assuming due execution and delivery by Parent and
Merger Sub, this Agreement is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy
laws or creditors' rights generally or by general principles of equity.
(ii) The Board of Directors of the Company has unanimously approved
this Agreement and the Merger and the other transactions contemplated
hereby including, without limitation, the Offer and the assumption
referred to in Section 6.8(c), has received and reviewed the Fairness
Opinion and duly taken all other actions described in Sections 1.2(a),
5.1(j) and 5.1(p).
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section
1.2, (B) with the Delaware Secretary of State, (C) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and the Exchange Act, (D) to comply with state securities or
"blue sky" laws and (E) with the National Association of Securities
Dealers (the "NASD"), no notices, reports or other filings are required
to be made nor are any consents, registrations, approvals, permits or
authorizations (collectively, "Government Consents") required to be
obtained by the Company from
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any court or other governmental or regulatory authority, agency,
commission, body or other governmental entity (a "Governmental Entity"),
in connection with the execution and delivery of this Agreement by the
Company and the consummation by the Company of the Merger and the other
transactions contemplated hereby, except those that the failure to make
or obtain are not, individually or in the aggregate, reasonably likely
to have a Company Material Adverse Effect or prevent, materially delay
or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
the Company does not, and the consummation by the Company of the Merger
and the other transactions contemplated hereby will not, constitute or
result in (A) a breach or violation of or a default under, the
certificate of incorporation or by-laws of the Company or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or
violation of, or a default under, the acceleration of any obligations or
the creation of any Lien on the assets of the Company or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any agreement, lease, contract, note, mortgage, indenture or other
obligation (a "Contract") binding upon the Company or any of its
Subsidiaries or any order, writ, injunction, decree of any court or any
Law or governmental or non-governmental permit or license to which the
Company or any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any Contract, except, in the
case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate,
is not reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
Except as set forth on Schedule 5.1(d), there are no Contracts of the
Company or its Subsidiaries which are material to the Company and its
Subsidiaries, taken as a whole, pursuant to which consents or waivers
are or may be required prior to consummation of the Offer or the Merger
and the other transactions contemplated by this Agreement.
(e) Company Reports; Financial Statements. The Company has made
available to Parent each registration statement, report, proxy statement or
information statement filed with the SEC by it since June 30, 1996 (the
"Audit Date"), including the Company's Annual Report on Form 10-K for the
year ended June 30, 1996 (the "Company 10-K") in the form (including
exhibits, annexes and any amendments thereto) filed with the SEC
(collectively, including any such reports filed subsequent to the date
hereof, the "Company Reports"). As of their respective dates, the Company
Reports complied, and any Company Reports filed with the SEC after the date
hereof will comply, as to form in all material respects with the applicable
requirements of the Exchange Act and the Securities Act of 1933, as amended
(the "Securities Act"), and the Company Reports did not, and any Company
Reports filed with the SEC after the date hereof will not, at the time of
their filing, 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 made therein, in light of the circumstances in which they
were made, not misleading. Each of the consolidated balance sheets included
in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly presents, or will fairly present, the
consolidated financial position of the Company and its Subsidiaries as of
its date and each of the consolidated statements of income and of changes
in financial position included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly
presents, or will fairly present, the results of operations, retained
earnings and changes in financial position, as the case may be, of the
Company and its Subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in each case in
accordance with United States generally accepted accounting principles
("GAAP") consistently applied during the periods involved, except as may be
noted therein. The Company has heretofore made available or promptly will
make available to Parent a complete and correct copy of all amendments or
modifications which are required to be filed with the SEC but have not yet
been filed with the SEC to the Company Reports, agreements, documents or
other instruments which previously had been filed by the Company with the
SEC pursuant to the Exchange Act. For purposes of this Agreement, "Balance
Sheet" means the consolidated balance sheet of the Company as of June 30,
1996 set forth in the Company 10-K. Except as set forth in Company Reports
filed with the SEC prior to the date hereof or as incurred in the ordinary
course of business since the date of the most recent financial statements
included in the Company Reports, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would
9
<PAGE> 15
be required under GAAP to be set forth on a consolidated balance sheet of
the Company and its subsidiaries taken as a whole and which individually or
in the aggregate would have a Company Material Adverse Effect.
(f) Absence of Certain Changes. Except as disclosed in Schedule 5.1(f)
or in the Company Reports filed prior to the date hereof, since the Audit
Date, the Company and its Subsidiaries have conducted their respective
businesses in all material respects only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course
of such businesses consistent with past practices, and there has not been
any (i) change in the financial condition, properties, business or results
of operations of the Company and its Subsidiaries, except for those changes
that, individually or in the aggregate, have not had and are not reasonably
likely to have a Company Material Adverse Effect; (ii) material damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company or any of its
Subsidiaries, not covered by insurance; (iii) declaration, setting aside or
payment of any dividend or other distribution in respect of the Capital
Stock of the Company or any of its Subsidiaries (other than wholly-owned
Subsidiaries) or any repurchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any outstanding shares of Capital
Stock or other securities of, or other ownership interests in, the Company
or any of its Subsidiaries; (iv) amendment of any material term of any
outstanding security of the Company or any of its Subsidiaries; (v)
incurrence, assumption or guarantee by the Company or any of its
Subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with
past practices; (vi) creation or assumption by the Company or any of its
Subsidiaries of any Lien (other than Permitted Liens) on any material asset
other than in the ordinary course of business consistent with past
practices; (vii) making of any loan, advance or capital contributions by
the Company or any of its Subsidiaries to, or investment in, any Person
other than (x) loans or advances to employees in connection with
business-related travel (y) loans made to employees consistent with past
practices which are not in the aggregate in excess of $250,000, and (z)
loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries, and in each case made in the ordinary course of business
consistent with past practices; (viii) transaction or commitment made, or
any contract or agreement entered into, by the Company or any of its
Subsidiaries relating to its assets or business (including the acquisition
or disposition of any assets) or any relinquishment by the Company or any
of its Subsidiaries of any Contract or other right, in either case,
material to the Company and its Subsidiaries, taken as a whole, other than
transactions and commitments in the ordinary course of business consistent
with past practices and those contemplated by this Agreement; (ix) labor
dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any
employees of the Company or any of its Subsidiaries, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to
such employees; or (x) change by the Company or any of its Subsidiaries in
accounting principles, practices or methods. Since the Audit Date, except
as disclosed in the Company Reports filed prior to the date hereof or
increases in the ordinary course of business consistent with past
practices, there has not been any increase in the compensation payable or
that could become payable by the Company or any of its Subsidiaries to (a)
officers of the Company or any of its Subsidiaries or (b) any employee of
the Company or any of its Subsidiaries whose annual cash compensation is
$150,000 or more, or any amendment of any of the Compensation and Benefit
Plans (as defined in Section 5.1(h)).
(g) Litigation and Liabilities. Except as disclosed in Schedule
5.1(g) or in the Company Reports filed prior to the date hereof, and except
for matters which, individually or in the aggregate, have not had and are
not reasonably likely to have a Company Material Adverse Effect or prevent,
delay or impair the ability of the Company to consummate the transactions
contemplated by this Agreement, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or (ii) obligations or liabilities,
whether or not accrued, contingent or otherwise and whether or not required
to be disclosed, including those relating to matters involving any
Environmental Law (as defined in Section 5.1(k)) or any other facts or
circumstances of which the Company has knowledge that are reasonably likely
to result in any claims against, or material obligations or liabilities of,
the Company or any of its Subsidiaries.
(h) Employee Benefits.
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<PAGE> 16
(i) For purposes of this Agreement, "Compensation and Benefit
Plans" means, collectively, each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, employment,
termination, severance, compensation, medical, health, or other plan,
agreement, policy or arrangement, whether written or oral, that covers
employees or directors of the Company or any of its Subsidiaries, or
pursuant to which former employees or directors of the Company or any of
its Subsidiaries are entitled to current or future benefits. The Company
has made available to Parent copies of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to
herein as "Pension Plans"), "employee welfare benefit plans" (as defined
in Section 3(1) of ERISA) and all other Compensation and Benefit Plans
maintained, or contributed to, by the Company or of its subsidiaries or
any person or entity that, together with the Company and its
subsidiaries, is treated as a single employer under Section 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code")
(the Company and each such other person or entity, a "Commonly
Controlled Entity") for the benefit of any current employees, officers
or directors of the Company or any of its subsidiaries. The Company has
also made available to Parent true, complete and correct copies of (1)
the most recent annual report on Form 5500 filed with the Internal
Revenue Service with respect to each Compensation and Benefit Plan (if
any such report was required), (2) the most recent summary plan
description for each Compensation and Benefit Plan for which such
summary plan description is required and (3) each trust agreement and
group annuity contract related to any Compensation and Benefit Plan.
Except as would not have a material adverse effect on the Company, each
Compensation and Benefit Plan has been administered in accordance with
its terms. Except as would not have a Company Material Adverse Effect,
each of its subsidiaries and all the Compensation and Benefit Plans are
all in compliance with applicable provisions of ERISA and the Code.
(ii) Except as would not have a Company Material Adverse Effect,
all Pension Plans have been the subject of determination letters from
the Internal Revenue Service to the effect that such Pension Plans are
qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter has
been revoked nor has any event occurred since the date of its most
recent determination letter or application therefor that would adversely
affect its qualification or materially increase its costs.
(iii) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity has maintained, contributed or been obligated
to contribute to any Benefit Plan that is subject to Title IV of ERISA.
(iv) Schedule 5.1(h) lists all outstanding Stock Options as of July
27, 1997, showing for each such option: (1) the number of shares
issuable, (2) the number of vested shares, (3) the date of expiration
and (4) the exercise price.
(v) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely
made.
(vi) Except as provided by this Agreement or in Schedule 5.1(h), no
employee of the Company or any of its Subsidiaries will be entitled to
any additional compensation or benefits or any acceleration of the time
of payment or vesting of any compensation or benefits under any Benefit
Plan as a result of the transactions contemplated by this Agreement.
(vii) All Compensation and Benefit Plans covering current or former
non-U.S. employees of the Company or any of its Subsidiaries comply in
all material respects with applicable local Laws. The Company and its
Subsidiaries have no unfunded liabilities with respect to any Pension
Plan that covers such non-U.S. employees.
(viii) Each Compensation and Benefit Plan complies in all material
respects with all applicable requirements of (i) the Age Discrimination
in Employment Act of 1967, as amended, and the regulations thereunder
and (ii) Title VII of the Civil Rights Act of 1964, as amended, and the
regulations thereunder and all other applicable laws. All amendments and
actions required to bring each of the Employee Benefit Plans into
conformity with all of the applicable provisions of ERISA and other
applicable laws have been made or taken except to the extent that such
amendments or
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<PAGE> 17
actions are not required by law to be made or taken until a date after
the Closing Date and are disclosed on Schedule 5.1(h).
(ix) Each group medical plan sponsored by the Company materially
complies with the health care continuation provisions of COBRA and (ii)
the Medicare Secondary Payor Provisions of Section 1826 (b) of the
Social Security Act, and the regulations promulgated thereunder.
(i) Compliance with Laws. Except as set forth in the Company Reports
filed prior to the date hereof, the businesses of each of the Company and
its Subsidiaries have not been, and are not being, conducted in violation
of any law, ordinance, regulation, judgment, order, injunction, decree,
arbitration award, license or permit of any Governmental Entity
(collectively, "Laws"), except for violations or possible violations that,
individually or in the aggregate, have not had and are not reasonably
likely to have a Company Material Adverse Effect or prevent, materially
delay or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement. Except as set forth in the
Company Reports filed prior to the date hereof, no investigation or review
by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the Company, threatened,
nor has any Governmental Entity indicated an intention to conduct the same,
except for those the outcome of which are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement.
(j) Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (each a
"Takeover Statute") is applicable to the Company, the Shares, the Offer,
the Merger or any of the other transactions contemplated by this Agreement.
The Board of Directors of the Company has approved the Offer, the Merger
and this Agreement, and such approval is sufficient to render inapplicable
to the Offer, the Merger, this Agreement, and the transactions contemplated
by this Agreement the provisions of Section 203 of DGCL to the extent, if
any, such Section is applicable to the Offer, the Merger, this Agreement
and the transactions contemplated by this Agreement.
(k) Environmental Matters.
(i) The term "Environmental Laws" means any Federal, state, local
or foreign statute, treaty, ordinance, rule, regulation, policy, permit,
consent, approval, license, judgment, order, decree or injunction
relating to: (A) Releases (as defined in 42 U.S.C. sec. 9601(22) and
California Health and Safety Code sec. 25501(r)) or threatened Releases
of Hazardous Material (as hereinafter defined) into the environment, (B)
the generation, treatment, storage, presence disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Material, (C) the
health or safety of employees in the workplace environment, (D) natural
resources, or (E) the environment, and includes all "Environmental Laws"
as they are defined in any indemnification provision in any contract,
lease, or agreement to which Company is a party. The term "Hazardous
Material" means (1) hazardous substances (as defined in 42 U.S.C. sec.
9601(14)) and California Health and Safety Code sec. 25501(o), including
"hazardous waste" as defined in California Health and Safety Code sec.
25501(p), (2) petroleum, including crude oil and any fractions thereof,
(3) natural gas, synthetic gas and any mixtures thereof, (4) asbestos
and/or asbestos containing materials, (5) PCBs or materials containing
PCBs and (6) any material regulated as a medical waste or infectious
waste but excludes commonly available office and janitorial supplies,
(7) lead containing paint, (8) radioactive materials, and (9) "Hazardous
Substance" or "Hazardous Material" as those terms are defined in any
indemnification provision in any contract, lease, or agreement to which
the Company is a party.
(ii) During the period of ownership or operation by the Company and
its Subsidiaries of any of their current or previously owned or leased
properties, there have been no Releases of Hazardous Material by the
Company or any of its Subsidiaries in, on, under or affecting such
properties or any surrounding site, and neither the Company nor any of
its Subsidiaries has disposed of any Hazardous Material in a manner that
has led, or could reasonably be anticipated to lead to a Release, except
in each case for those which individually or in the aggregate would not
have a Company Material Adverse Effect, and except as disclosed in the
Company Reports. Except as set forth on Schedule 5.1(k), to the
Company's knowledge there have been no Releases of Hazardous Material by
the Company or any of its Subsidiaries in, on, under or affecting such
properties or any surrounding site at times outside of such periods of
ownership, operation, or lease or by any other party except in each
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<PAGE> 18
case for those which individually on in the aggregate would not have a
Company Material Adverse Effect. The Company and its Subsidiaries have
not received any written notice of, or entered into any order,
settlement or decree relating to: (A) any violation of any Environmental
Laws or the institution or pendency of any suit, action, claim,
proceeding or investigation by any Governmental Entity or any third
party in connection with any alleged violation of Environmental Laws,
(B) the response to or remediation of Hazardous Material at or arising
from any of the Company's properties or any Subsidiary's properties. To
the Company's knowledge there have been no violations of any
Environmental Laws which violations individually or in the aggregate
would have a Company Material Adverse Effect.
(l) Intellectual Property.
(i) The Company and its subsidiaries own, or are validly licensed
or otherwise have the right to use all (i) foreign and United States
federal and state patents, trademarks, trade names, service marks and
copyright registrations, (ii) foreign and United States federal and
state patent, trademark, trade name, service mark and copyright
applications for registration, (iii) common law claims to trademarks,
service marks and trade names, (iv) claims of copyright which exist
although no registrations have been issued with respect thereto, (v)
fictitious business name filings with any state or local Governmental
Entity and (vi) inventions, concepts, designs, improvements, original
works of authorship, computer programs, know-how, research and
development, techniques, modifications to existing copyrightable works
of authorship, data and other proprietary and intellectual property
rights (whether or not patentable or subject to copyright, mask work or
trade secret protection), in each case which are material to the conduct
of the business of the Company and its Subsidiaries (collectively, the
"Intellectual Property Rights"). There are no Liens other than Permitted
Liens on the Intellectual Property Rights. There are no outstanding and,
to the Company's knowledge, no threatened disputes or disagreements with
respect to any Contract in respect of the Intellectual Property Rights.
(ii) Neither the Company nor any of its Subsidiaries is, nor has it
during the three (3) years preceding the date of this Agreement been, a
party to any litigation or arbitral or other proceeding, nor, to the
knowledge of the Company, is any such proceeding threatened as to which
there is a reasonable possibility of a determination adverse to the
Company or one of its Subsidiaries, that involved a claim of
infringement by the Company or one of its Subsidiaries or any other
Person (including any Governmental Entity) of any Intellectual Property
Right. No Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use
thereof by the Company or any of its Subsidiaries or, in the case of any
Intellectual Property Right owned by the Company or its Subsidiaries
licensed to others, restricting the sale, transfer, assignment or
licensing thereof by the Company or any of its Subsidiaries to any other
Person. Except as set forth on Schedule 5.1(ii), the Company has no
knowledge that would cause it to believe that its or any Subsidiary's
use of any Intellectual Property Right conflicts with, infringes upon or
violates any patent, patent license, trademark, tradename, copyright,
service mark, brand mark or brand name, or any trade secret of any
Person.
(iii) Schedule 5.1(l) (iii) sets forth a complete list of (a) any
material contracts related to the Intellectual Property Rights and (b)
all documents which license or otherwise convey any of the Intellectual
Property Rights owned by the Company or any of its Subsidiaries to a
third party.
(iv) All employees and independent contractors of the Company or
any of its Subsidiaries involved with the development of graphics and
video controllers for portable computers, desktop PC motherboard
products and other products and computer software in connection
therewith (collectively, "Products") for the Company or any of its
Subsidiaries have executed written agreements with the Company or
applicable Subsidiary that assign to the Company or such Subsidiary all
rights to any Intellectual Property Rights and that otherwise
appropriately protect the Intellectual Property Assets.
(m) Taxes. Except as set forth on Schedule 5.1(m), (i) the Company and
its Subsidiaries have timely filed or will timely file all returns and
reports required to be filed by them with any taxing authority with respect
to Taxes for any period ending on or before the date hereof, taking into
account any extension of time to file granted to or obtained on behalf of
the Company or any of its Subsidiaries; (ii) all Taxes shown to be payable
on such returns or reports that are due prior to the date hereof have been
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<PAGE> 19
timely paid; (iii) as of the date hereof, no deficiency for any amount of
Tax has been asserted or assessed or, to the Company's knowledge, has been
threatened or is likely to be assessed by a taxing authority against the
Company or any of its Subsidiaries other than deficiencies as to which
adequate reserves have been provided for in the Company's consolidated
financial statements; and (iv) the Company has provided in accordance with
GAAP adequate reserves in its consolidated financial statements for any
Taxes that have not been paid, whether or not shown as being due on any
returns. For purposes of this Agreement, "Taxes" means any and all taxes,
fees, levies, duties, tariffs, imposts and other charges of any kind
(together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any
Governmental Entity or other taxing authority, including taxes or other
charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, Capital Stock, payroll,
employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added or gains taxes;
license, registration and documentation fees; and customers' duties,
tariffs and similar charges. Neither the Company nor any of its
Subsidiaries is subject to any Tax sharing agreement. No payments to be
made to any of the employees of the Company or any of its Subsidiaries
will, as a direct or indirect result of the Offer or the consummation of
the Merger, be subject to the deduction limitations of Section 280G of the
Code.
(n) Labor Matters. Neither the Company nor any of its Subsidiaries is
a party to or otherwise bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its Subsidiaries the subject of
any proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization, nor is there pending or, to the
knowledge of the Company, threatened, any labor strike, dispute, walkout,
work stoppage, slow-down or lockout involving the Company or any of its
Subsidiaries.
(o) Insurance. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts
as are usually insured against by similarly situated companies in the same
or similar businesses. Each Insurance Policy is in full force and effect
and is valid, outstanding and enforceable, and all premiums due thereon
have been paid in full. None of the Insurance Policies will terminate or
lapse (or be affected in any other materially adverse manner) by reason of
the transactions contemplated by this Agreement. The Company and its
Subsidiaries have complied in all material respects with the provisions of
each Insurance Policy under which it is the insured party. No insurer under
any Insurance Policy has canceled or generally disclaimed liability under
any such policy or, to the Company's knowledge, indicated any intent to do
so or not to renew any such policy. All material claims under the Insurance
Policies have been filed in a timely fashion.
(p) Rights Agreement. The Company has taken all necessary action to
ensure that neither the entering into of this Agreement, the making of the
Offer nor the consummation of the Offer or the Merger will cause the Rights
to become exercisable, cause Parent or Merger Sub to become an "Acquiring
Person" (as defined in the Rights Agreement), or cause there to occur a
"Distribution Date" or a "Section 11(a)(ii) Event" (each as defined in the
Rights Agreement).
(q) Brokers and Finders. Neither the Company nor any of its
Subsidiaries, officers, directors, or employees or other Affiliates has
employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the Offer, the Merger
or the other transactions contemplated by this Agreement, except that the
Company has employed the Financial Advisor, the arrangements with which
have been disclosed to Parent prior to the date hereof.
(r) Certain Business Practices. Neither the Company, any of its
Subsidiaries nor any directors, officers, agents or employees of the
Company or any of its Subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iii) made any other payment
prohibited by applicable Law.
(s) Product Warranties. Schedule 5.1(s) sets forth complete and
accurate copies of the written, and descriptions of all oral, warranties
and guaranties by the Company or any of its Subsidiaries currently in
effect with respect to the Products. There have not been any material
deviations from such warranties and guaranties, and none of the Company's
or any of its Subsidiaries' salesmen, employees, distributors
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<PAGE> 20
and agents is authorized to undertake obligations to any customer or to
other third parties in excess of such warranties or guaranties.
(t) Suppliers and Customers. The documents and information supplied
by the Company to Parent, Merger Sub or any of their representatives in
connection with this Agreement with respect to relationships and volumes of
business done with significant suppliers and customers was accurate in all
material respects.
(u) Backlog Information. None of the documents or information
delivered to Parent, Merger Sub or any of their respective counsel,
accountants and other agents and representatives in connection with backlog
and billing contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading.
5.2. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub each hereby represents and warrants to the Company as follows:
(a) Organization, Good Standing and Qualification. Each of Parent and
Merger Sub (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, (ii) has all
requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted
and (iii) is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except
where the failure to be so qualified or in such good standing, when taken
together with all other such failures, has not had and is not reasonably
likely to have a Parent Material Adverse Effect (as defined in Section
9.2). Parent has made available to the Company a complete and correct copy
of Parent's certificate or incorporation and by-laws, as amended to the
date hereof. Parent's certificate of incorporation and by-laws so delivered
are in full force and effect.
(b) Ownership of Merger Sub. All of the issued and outstanding
Capital Stock of Merger Sub is, and at the Effective Time will be, owned by
Parent, and there are no (i) other outstanding shares of Capital Stock or
other voting securities of Merger Sub, (ii) securities of Merger Sub
convertible into or exchangeable for shares of Capital Stock or other
voting securities of Merger Sub or (iii) options or other rights to acquire
from Merger Sub, and no obligations of Merger Sub to issue, any Capital
Stock, other voting securities or securities convertible into or
exchangeable for Capital Stock or other voting securities of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
(c) Corporate Authority. Each of Parent and Merger Sub has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Offer and the Merger. Assuming due
execution and delivery by the Company, this Agreement is a valid and
binding agreement of Parent and Merger Sub, enforceable against each of
them in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy laws or creditors' rights generally or by
general principles of equity.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section
1.2, (B) under the HSR Act and the Exchange Act, (C) to comply with
state securities or "blue sky" laws, and (D) required to be made with
the NASD, no notices, reports or other filings are required to be made
by Parent or Merger Sub with, nor are any Government Consents required
to be obtained by Parent or Merger Sub from, any Governmental Entity, in
connection with the execution and delivery of this Agreement by Parent
and Merger Sub, the Offer and the consummation by Parent and Merger Sub
of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Parent Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Parent
or Merger Sub to consummate the transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default
under, the certificate or by-laws of Parent or Merger Sub, (B) a breach
or violation of, or a default under,
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<PAGE> 21
the acceleration of or the creation of a Lien, on the assets of Parent
or any of its Subsidiaries (with or without notice, lapse of time or
both) pursuant to, any Contract binding upon Parent or any of its
Subsidiaries or any Law to which Parent or any of its Subsidiaries is
subject or (C) any change in the rights or obligations of any party
under any such Contract, except, in the case of clause (B) or (C) above,
for any breach, violation, default, acceleration, creation or change
that, individually or in the aggregate, is not reasonably likely to have
a Parent Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Parent or Merger Sub to consummate
the transactions contemplated by this Agreement.
(e) Brokers and Finders. Neither Parent nor Merger Sub, nor any of
their respective officers, directors, employees or other Affiliates, has
employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the Offer, the Merger
or the other transactions contemplated by this Agreement.
(f) Financing. At the expiration of the Offer and at the Effective
Time, Parent and Merger Sub will have available all the funds necessary for
the acquisition of all Shares pursuant to the Offer and to perform their
respective obligations under this Agreement, including without limitation
payment in full for all Shares validly tendered or outstanding as of the
Effective Time.
ARTICLE VI
COVENANTS
6.1. Interim Operations. The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, which approval shall not be
unreasonably withheld, and except as otherwise expressly contemplated by this
Agreement):
(a) the business of it and its Subsidiaries shall be conducted in the
ordinary and usual course consistent with past practices and, to the extent
consistent therewith, it and its Subsidiaries shall use commercially
reasonable efforts to preserve its business organization intact and
maintain its existing relations and goodwill with customers, suppliers,
distributors, creditors, lessors, employees and business associates;
(b) it shall not, (i) issue, sell otherwise dispose of or subject to
Lien (other than Permitted Liens) any of its Subsidiaries' Capital Stock
owned by it; (ii) amend its charter, by-laws or, except for any amendment
which will not hinder, delay or make more costly to Parent the Offer or the
Merger; the Rights Agreement; (iii) split, combine or reclassify its
outstanding shares of Capital Stock; (iv) declare, set aside or pay any
dividend payable in cash, stock or property in respect of any Capital Stock
other than the issuance of Rights in connection with the issuance of
Capital Stock upon the exercise of Company Options; (v) repurchase, redeem
or otherwise acquire or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its Capital Stock; or any securities
convertible into or exchangeable or exercisable for any shares of its
Capital Stock; or (vi) adopt a plan of complete or partial liquidation or
dissolution, merger or otherwise restructure or recapitalize or consolidate
with any Person other than Merger Sub or another wholly-owned Subsidiary of
Parent;
(c) neither it nor any of its Subsidiaries shall (i) authorize for
issuance or issue, sell or otherwise dispose of or subject to any Lien
(other than Permitted Liens) any shares of, or securities convertible into
or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its Capital
Stock of any class or any Voting Debt (other than Shares issuable pursuant
to Company Options outstanding on the date hereof, the grant of Company
Options to newly hired employees in accordance with a benefit matrix
previously provided to Parent and after notification of Parent and
automatic grants of director stock options as mandated by the Company's
First Amended 1988 Nonqualified Stock Option Plan for Outside Directors);
(ii) other than in the ordinary and usual course of business consistent
with past practices, transfer, lease, license, guarantee, sell or otherwise
dispose of or subject to any Lien (other than Permitted Liens) any other
property or assets or incur or modify any material indebtedness or other
liability (except for additional borrowings in the ordinary course under
lines of credit in existence on the date hereof); (iii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except
in the ordinary course of business consistent with past practices and
except for obligations
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of Subsidiaries of the Company incurred in the ordinary course of business;
(iv) make any loans to any other Person (other than to Subsidiaries of the
Company or, customary loans or advances to employees in connection with
business-related travel in the ordinary course of business consistent with
past practices); or (v) make any commitments for, make or authorize any
capital expenditures other than in amounts less than $150,000 individually
and $3,000,000 in the aggregate or, by any means, make any acquisition of,
or investment in, assets or stock of any other Person;
(d) except as may be required to comply with applicable law or by
existing contractual commitments, neither it nor any of its Subsidiaries
shall (i) enter into any new agreements or commitments for any severance or
termination pay to, or enter into any employment or severance agreement
with, any of its directors, officers or employees or consultants except for
(a) specific arrangements with ten of the Company's employees and one of
its directors which have been previously disclosed to Parent and (b)
reasonable severance payments made to employees in the ordinary course of
business and consistent with past practices, or (ii) terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plan or increase or accelerate the
salary, wage, bonus or other compensation of any employees or directors
(except for increases occurring in the ordinary and usual course of
business, which shall include normal periodic performance reviews and
related compensation and benefit increases, but not any general
across-the-board increases) or consultants or pay or agree to pay any
pension, retirement allowance or other employee benefit not required by any
existing Compensation and Benefit Plan;
(e) neither it nor any of its Subsidiaries shall, except as may be
required as a result of a change in law or in GAAP, change any of the
accounting principles or practices used by it;
(f) neither it nor any of its Subsidiaries shall revalue in any
respect any of its material assets, including writing down the value of
inventory or writing-off notes or accounts receivable, other than in the
ordinary course of business consistent with past practices;
(g) neither it nor any of its Subsidiaries shall settle or compromise
any material claims or litigation or terminate or materially amend or
modify any of its material Contracts or waive, release or assign any
material rights or claims;
(h) neither it nor any of its Subsidiaries shall make any Tax election
or permit any insurance policy naming it as a beneficiary or loss-payable
payee to be canceled or terminated;
(i) neither it nor any of its Subsidiaries shall take any action or
omit to take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(j) neither it nor any of its Subsidiaries will authorize or enter
into any agreement to do any of the foregoing.
6.2. Third Party Acquisitions.
(a) The Company agrees that neither it nor any of its Subsidiaries nor
any of its or its Subsidiaries' employees or directors shall, and it shall
direct and use its best efforts to cause its and its Subsidiaries' agents
and representatives (including the Financial Advisor or any other
investment banker and any attorney or accountant retained by it or any of
its Subsidiaries (collectively, "Company Advisors")) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries in respect of, or the making of any proposal for, a Third Party
Acquisition (as defined in Section 6.2(b)). The Company further agrees that
neither it nor any of its Subsidiaries nor any of its or its Subsidiaries'
employees or directors shall, and it shall direct and use its best efforts
to cause all Company Advisors not to, directly or indirectly, engage in any
negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any Third Party (as defined in Section
6.2(b)) relating to the proposal of a Third Party Acquisition, or otherwise
facilitate any effort or attempt to make or implement a Third Party
Acquisition; provided, however, that if at any time prior to the acceptance
for payment of Shares pursuant to the Offer, the Board of Directors of the
Company determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties
to the Company's stockholders under applicable law, the Company may, in
response to an inquiry, proposal or offer for a Third Party Acquisition
which was not solicited subsequent to the date hereof, (x) furnish only
such information with respect to the Company to any such person pursuant to
a customary confidentiality agreement as was delivered to Parent prior to
the execution of this Agreement and (y) participate in the
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discussions and negotiations regarding such inquiry, proposal or offer; and
further provided, that nothing contained in this Agreement shall prevent
the Company or its Board of Directors from complying with Rules 14d-9 and
14e-2 promulgated under the Exchange Act with regard to any proposed Third
Party Acquisition. The Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Third Parties conducted heretofore with respect to any of the foregoing.
The Company shall take the necessary steps to promptly inform all Company
Advisors of the obligations undertaken in this Section 6.2(a). The Company
agrees to notify Parent promptly if (i) any inquiries relating to or
proposals for a Third Party Acquisition are received by the Company, any of
its Subsidiaries or any of the Company Advisors, (ii) any confidential or
other non-public information about the Company or any of its Subsidiaries
is requested from the Company, any of its Subsidiaries or any of the
Company Advisors, or (iii) any negotiations or discussions in connection
with a possible Third Party Acquisition are sought to be initiated or
continued with the Company, any of its Subsidiaries or any of the Company
Advisors indicating, in connection with such notice, the principal terms
and conditions of any proposals or offers, and thereafter shall keep Parent
informed in writing, on a reasonably current basis, on the status and terms
of any such proposals or offers and the status of any such negotiations or
discussions. The Company also agrees promptly to request each Person that
has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any of its Subsidiaries, if any,
to return all confidential information heretofore furnished to such Person
by or on half of the Company or any of its Subsidiaries.
(b) Except as permitted by this Section 6.2(b), the Board of Directors
of the Company shall not withdraw its recommendation of the Offer or the
Merger and other transactions contemplated hereby or approve or recommend,
or cause the Company to enter into any agreement with respect to, any Third
Party Acquisition. Notwithstanding the preceding sentence, if the Board of
Directors of the Company determines in its good faith judgment, after
consultation with legal counsel, that it is necessary to do so in order to
comply with its fiduciary duties, the Board of Directors may withdraw its
recommendation of the Offer or the Merger and the other transactions
contemplated hereby, or approve or recommend or cause the Company to enter
into an agreement with respect to a Superior Proposal (as defined below),
but in each case only (i) after providing written notice to Parent (a
"Notice of Superior Proposal") advising Parent that the Board of Directors
has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the Person making such
Superior Proposal and (ii) if Parent does not, within five (5) Business
Days (or within two (2) Business Days with respect to any amendment to any
Superior Proposal which was noticed at least five (5) Business Days prior
to such amendment) after Parent's receipt of the Notice of Superior
Proposal, make an offer which the Board of Directors of the Company
determines in its good faith judgment (based on the advice of the Financial
Advisor or another financial adviser of nationally recognized reputation)
to be as favorable to the Company's stockholders as such Superior Proposal;
provided, however, that the Company shall not be entitled to enter into any
agreement with respect to a Superior Proposal unless this Agreement is
concurrently terminated by its terms pursuant to Section 8.3(b). For
purposes of this Agreement, "Third Party Acquisition" means the occurrence
of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any Person (which includes a "person" as such term
is defined in Section 13(d)(3) of the Exchange Act) other than Parent,
Merger Sub or any Affiliate thereof (a "Third Party"); (ii) the acquisition
by a Third Party of 20% or more of the total assets of the Company and its
Subsidiaries, taken as a whole (other than the purchase of the Company's
products in the ordinary course of business); (iii) the acquisition by a
Third Party of 20% or more of the outstanding Shares; (iv) the adoption by
the Company of a plan of partial or complete liquidation or the declaration
or payment of an extraordinary dividend; (v) the repurchase by the Company
or any of its Subsidiaries of 20% or more of the outstanding Shares; or
(vi) the acquisition by the Company or any of its Subsidiaries by merger,
purchase of stock or assets, joint venture or otherwise of a direct or
indirect ownership interest or investment in any business whose annual
revenues, net income or assets is equal to or greater than 20% of the
annual revenues, net income or assets of the Company and its Subsidiaries,
taken as a whole. For purposes of this Agreement, a "Superior Proposal"
means any bona fide proposal to acquire directly or indirectly for
consideration consisting of cash and/or securities more than 50% of the
Shares then outstanding or all or substantially all the assets of the
Company and its Subsidiaries, taken as a whole, and otherwise on terms
which the Board of Directors of the Company by a majority vote determines
in its good faith judgment (based on consultation with the Financial
Advisor or another financial adviser of nationally recognized reputation)
to be reasonably capable of being completed (taking into account all
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legal, financial, regulatory and other aspects of the proposal and the
Person making the proposal, including the availability of financing
therefor) and more favorable to the Company's stockholders than the Merger.
6.3. Filings; Other Actions; Notification.
(a) If a vote of the Company's stockholders is required by law, the
Company shall promptly, following the acceptance for payment of Shares by
Parent, pursuant to the Offer, prepare and file with the SEC the Proxy
Statement, which shall include the recommendation of the Board of Directors
of the Company that stockholders of the Company vote in favor of the
approval and adoption of this Agreement and the written opinion of the
Financial Advisor that the cash consideration to be received by the
stockholders of the Company pursuant to the Merger is fair to such
stockholders from a financial point of view. The Company shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC as
promptly as practicable after such filing, and promptly thereafter mail the
Proxy Statement to the stockholders of the Company. The Company shall also
use its best efforts to obtain all necessary state securities law or "blue
sky" permits and approvals required in connection with the Merger and to
consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) Upon and subject to the terms and conditions set forth in this
Agreement, the Company and Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) all reasonable
efforts to take or cause to be taken all actions, and do or cause to be
done all things, necessary, proper or advisable under this Agreement and
applicable Laws to consummate and make effective the Offer, the Merger and
the other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions,
filings and other documents and to obtain as promptly as practicable all
permits, consents, approvals and authorizations necessary or advisable to
be obtained from any third party and/or any Governmental Entity in order to
consummate the Offer, the Merger or any of the other transactions
contemplated by this Agreement; provided, however, that nothing in this
Section 6.3 shall require, or be construed to require, Parent to proffer
to, or agree to, sell or hold separate and agree to sell, before or after
the Effective Time, any material assets, businesses or any interest in any
material assets or businesses of Parent, the Company or any of their
respective Affiliates (or to consent to any sale, or agreement to sell, by
the Company of any of its material assets or businesses) or to agree to any
material change in or restriction on the operations of any such assets or
businesses; provided further, that nothing in this Section 6.3 shall
require, or be construed to require, a proffer or agreement that would, in
the good faith judgment of Parent, be likely to have a significant adverse
effect on the benefits to Parent of the transactions contemplated by this
Agreement. Subject to applicable Laws relating to the exchange of
information, Parent and the Company shall have the right to review in
advance, and to the extent practicable each will consult the other on, all
the information relating to Parent or the Company, as the case may be, and
any of their respective Subsidiaries, that appears in any filing made with,
or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Offer, the Merger and the other transactions
contemplated by this Agreement, including the Proxy Statement. In
exercising the foregoing right, the Company and Parent shall act reasonably
and as promptly as practicable.
(c) Each of the Company and Parent shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Statement or
any other statement, filing, notice or application made by or on behalf of
Parent, the Company or any of their respective Subsidiaries to any
Governmental Entity or other Person (including the NASD) in connection with
the Offer, the Merger and the other transactions contemplated by this
Agreement.
(d) Each of the Company and Parent shall keep the other apprised of
the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with copies of
notices or other communications received by Parent or the Company, as the
case may be, or any of their respective Subsidiaries, from any third party
and/or any Governmental Entity with respect to the Offer, the Merger and
the other transactions contemplated by this Agreement. Each of the Company
and Parent shall give prompt notice to the other of any change that is
reasonably likely to have a Company Material Adverse Effect or a Parent
Material Adverse Effect, respectively.
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6.4. Information Supplied. Each of Parent and the Company agrees, as to
information provided by itself and its Subsidiaries, that none of the
information included or incorporated by reference in the proxy statement
delivered by the Company to its stockholders in connection with the Merger and
any amendment or supplement thereto (the "Proxy Statement") will, at the time
the Proxy Statement is cleared by the SEC, at the date of mailing to
stockholders of the Company, and at the time of the Stockholders Meeting (as
defined in Section 6.5),contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
6.5. Stockholders Meeting.
(a) If a vote of the Company's stockholders is required by law, the
Company will, following the acceptance for payment of Shares by Parent
pursuant to the Offer, take, in accordance with applicable Law and its
certificate of incorporation and by-laws, all action necessary to convene a
meeting of holders of Shares (the "Stockholders Meeting") as promptly as
practicable after the Proxy Statement is cleared by the SEC to consider and
vote upon the approval of this Agreement. The Proxy Statement shall,
include a statement that the Board approved this Agreement and recommended
that Stockholders vote in favor of this Merger, and the Company shall use
all reasonable and customary efforts to solicit such approval.
Notwithstanding the foregoing, if Parent, Merger Sub and/or any other
Subsidiary of Parent shall acquire at least 90% of the outstanding Shares,
the parties shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the expiration of
the Offer without a Stockholders Meeting in accordance with Section 253 of
the DGCL.
(b) Parent agrees to cause all Shares purchased pursuant to the Offer
and all other Shares owned by Parent or any Subsidiary of Parent to be
voted in favor of the Merger.
6.6. Access. Upon reasonable notice, and except as may otherwise be
required by applicable law or relevant contractual provisions contained in such
agreements, the Company shall (and shall cause its Subsidiaries to) (i) afford
Parent's officers, employees, counsel, accountants and other authorized
representatives (collectively, "Representatives") access, during normal business
hours throughout the period prior to the Effective Time, to its properties,
books, contracts and records and, during such period, (ii) furnish promptly to
Parent all information concerning its business, properties and personnel as may
reasonably be requested; provided, however, that no investigation pursuant to
this Section 6.6 shall affect or be deemed to modify any representation or
warranty made by the Company. All requests for information made pursuant to this
Section 6.6 shall be directed to an executive officer of the Company or such
Person as may be designated by its officers. Notwithstanding the foregoing, the
parties shall comply with, and shall cause their respective Representatives to
comply with, all their respective obligations under the Confidentiality
Agreement, dated July 22, 1997, between the Company and Parent.
6.7. Publicity. The initial press release concerning the Merger has been
approved by Parent and the Company and thereafter the Company and its
Subsidiaries, on the one hand, and Parent and Merger Sub, on the other hand,
shall consult with each other prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any Governmental Entity or other Person (including the NASD) with respect
hereto, except as may be required by law or by obligations pursuant to any
listing agreement with the National Market.
6.8. Status of Company Employees; Company Stock Options; Employee
Benefits.
(a) Except as contemplated by this Agreement, Parent agrees that, for
a period of twelve (12) months following the Effective Time, the Surviving
Corporation shall maintain employee benefits plans and arrangements
(directly or in conjunction with Parent) which, in the aggregate, will
provide a level of benefits to Continuing Employees of the Surviving
Corporation and its Subsidiaries similar to those provided under the
Compensation and Benefit Plans as in effect immediately prior to the
Effective Time (other than discretionary benefits); provided, however, that
Parent may cause modifications to be made to such employee benefit plans
and arrangements to the extent necessary to comply with applicable Law or
to reflect widespread adjustments in benefits (or costs thereof) provided
to employees under compensation and benefit plans of Parent and its
Subsidiaries, and no specific Compensation and Benefit Plans need be
provided. Parent shall use Continuing Employee's hire date with Company as
the basis for determining eligibility and vesting of Parent's defined
benefit and Supplemental Employee Retirement
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Medical Account (SERMA) plans. Parent shall use Effective Time as the basis
for determining eligibility under the Parent's sabbatical plan and for
determining benefit accruals under Parent's defined benefit and SERMA
plans. For purposes of determining eligibility and vesting with respect to
all other benefits maintained by Parent, Parent shall use Continuing
Employee's hire date with the Company. Nothing in this Section 6.8(a) shall
be construed or applied to restrict the ability of the Surviving
Corporation and its Subsidiaries to establish such types and levels of
compensation and benefits as they determine to be appropriate.
(b) From and after the date hereof, the Company agrees that, except
with respect to grants in connection with offers of employment outstanding
on July 22, 1997, it will not grant additional stock options under the
Assumed Stock Option Plan and its Board of Directors will take all actions
necessary to provide that all options outstanding under the Assumed Stock
Option Plan can be assumed by Parent.
(c) The Board of Directors of Parent will adopt a resolution assuming
on behalf of Parent the obligations and rights of the Company under all
options outstanding under the Assumed Stock Option Plan.
6.9. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV. Except as otherwise provided in
Sections 8.5, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense.
6.10. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date of this Agreement or who becomes prior to the
Effective Time a director or officer of the Company or any of its
Subsidiaries (when acting in such capacity) (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, demands, liabilities, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative arising out of matters existing or occurring prior to or
after the Effective Time, whether asserted or claimed prior to, at or after
the Effective Time, which is based in whole or in part on, or arising in
whole or in part out of the fact that such person is or was a director or
officer of the Company or any of its Subsidiaries including, without
limitation, all losses, claims, damages, costs, expenses, liabilities,
judgments or settlement amounts based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby to the fullest extent that the Company
would have been permitted under the DGCL and its certificate of
incorporation, by-laws and other agreements in effect on the date hereof to
indemnify such individual.
(b) Any Indemnified Party wishing to claim indemnification under
subsection (a) of this Section 6.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent and
the Surviving Corporation thereof (but the failure so to notify the
Surviving Corporation shall not relieve it from any liability which it may
have under this Section 6.10 except to the extent such failure materially
prejudices such party). In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall have the right to assume the
defense thereof and the Surviving Corporation shall not be liable to any
such Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Party in connection with
the defense thereof, (ii) the Indemnified Party will cooperate in all
respects as requested by the Surviving Corporation in the defense of any
such matter and (iii) the Surviving Corporation shall not be liable for any
settlement effected without its prior written consent which consent shall
not be unreasonably withheld; provided, however, that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified
Party if and when a court shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by Law.
(c) Parent and the Surviving Corporation shall maintain the Company's
and its Subsidiaries' existing officers' and directors' liability insurance
("D&O Insurance") for a period of six (6) years after the Effective Time so
long as the annual premium therefor is not in excess of 150% of the last
annual premium paid prior to the date hereof (the "Current Premium");
provided, however, that if the existing
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D&O Insurance expires, is terminated or canceled during such six-year
period, the Surviving Corporation will use its commercially reasonable
efforts to obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized
basis) of 150% of the Current Premium; provided further, that, in lieu of
maintaining such existing D&O Insurance as provided above, Parent may cause
coverage to be provided under any policy maintained for the benefit of
Parent or any of its Subsidiaries, so long as the terms are no less
advantageous to the intended beneficiaries thereof than the existing D&O
Insurance. In lieu of the purchase of such insurance by Parent or the
Surviving Corporation, the Company may purchase a six-year extended
reporting period endorsement ("reporting tail coverage") under its existing
directors' and liability insurance coverage, provided that the total cost
of the reporting tail coverage shall not exceed $350,000, and provided that
such reporting tail coverage shall extend the director and officer
liability coverage in force as of the date hereof for a period of six (6)
years from the Effective Time for any claims based upon, arising out of,
directly or indirectly resulting from, in consequence of, or in any way
involving wrongful acts or omissions occurring on or prior to the Effective
Time, including without limitation all claims based upon, arising out of,
directly or indirectly resulting from, in consequence of, or in any way
involving the Offer, the Merger and any and all related transactions or
related events.
(d) The provisions of this Section 6.10 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties
and their respective heirs and estates. Nothing in this Section 6.10 shall
limit in any way any other rights to indemnification that any current or
former director or officer of the Company may have by contract or
otherwise.
(e) From and after the Effective Time, the Surviving Corporation shall
fulfill, assume and honor in all respects the obligations of the Company
pursuant to the Company's Certificate of Incorporation, Bylaws and any
indemnification agreement between the Company and any of the Company's
directors and officers existing and in force as of the Effective Time. The
Company agrees that the indemnification obligations set forth in the
Company's Certificate of Incorporation and Bylaws, in each case as of the
date of this Agreement, shall survive the Merger (and, as of or prior to
the Effective Time, Parent shall cause the Bylaws of Sub to reflect such
previsions) and shall not be amended, repealed or otherwise modified for a
period of six (6) years after the Effective Time in any manner that would
adversely affect the rights thereunder of the Indemnified Parties.
(f) If the Surviving Corporation or any of its successors or assigns
(i) shall consolidate with or merge into any other Person and shall not be
the continuing or surviving corporation or Person of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties
and assets to any Person, then and in each such case, proper provisions
shall be made so that the successors and assigns of the Surviving
Corporation shall assume all of the obligations set forth in this Section
6.10.
6.11. Other Actions by the Company and Parent.
(a) Rights Agreement. Prior to the Effective Time, the Board of
Directors of the Company shall take all necessary action to ensure that the
representation and warranty in Section 5.1(p) is true and correct.
(b) Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement or by the Merger
and otherwise act to eliminate or minimize the effects of such statute, and
any regulations promulgated thereunder, on such transactions.
6.12. Parent Stock Option; Exercise; Adjustments.
(a) Subject to the terms and conditions set forth herein, the Company
hereby grants to Parent an irrevocable option (the "Parent Option") to
purchase that number of authorized and unissued shares of Common Stock
equal to 19.99% of the outstanding Shares immediately prior to the exercise
of the Parent Option (the "Option Shares") at a purchase price of $17.50
per Option Share (the "Option Price"). Subject to the conditions set forth
in Subsection (c) below, the Parent Option may be exercised by Parent, in
whole or in part, at any time or from time to time after the date on which
Parent has accepted for payment the Shares tendered pursuant to the Offer
and prior to the termination of this Agreement pursuant to Article VIII. If
Parent wishes to exercise the Parent Option, Parent shall send a written
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<PAGE> 28
notice to the Company (the "Exercise Notice") specifying a date (not
earlier than the next Business Day following the date such notice is given)
for the closing of such purchase and containing a representation by Parent
that upon the issuance and delivery of the Option Shares, there will be no
further conditions precedent that need to be satisfied for Parent and
Merger Sub to effect the Merger, and that Parent and Merger Sub will take
all actions required on their respective parts to effect the Merger.
(b) In the event of any change in the number of issued and outstanding
Shares by reason of any stock dividend, stock split, split-up,
recapitalization, merger or other change in the corporate or capital
structure of the Company, the number of Option Shares and the Option Price
shall be appropriately adjusted to restore Parent to its rights hereunder.
(c) The Company's obligation to issue and deliver the Option Shares
upon exercise of the Parent Option is subject only to the following
conditions:
(i) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the Option Shares shall be in effect;
(ii) Any applicable waiting periods under the HSR Act, or other
applicable United States or foreign Laws shall have expired or been
terminated; and
(iii) The number of Option Shares plus the number of Shares
accepted for payment by Parent pursuant to the Offer will, upon issuance
of the Option Shares, constitute at least ninety percent (90%) of the
Company's issued and outstanding shares of Common Stock.
(d) Any closing hereunder shall take place on the date specified by
Parent in its Exercise Notice delivered pursuant to subsection (a) above at
9:00 a.m., California time, or the first day thereafter on which all of the
conditions in subsection (c) above are met, at the offices of Parent's
counsel, or at such other time and place as the parties may agree (the
"Option Closing Date"). On the Option Closing Date, the Company will
deliver to Parent a certificate or certificates representing the Option
Shares in the denominations designated by Parent in its Exercise Notice and
Parent will purchase such Option Shares from the Company at a price per
Option Share equal to the Option Price. Any payment made by Parent to the
Company pursuant to this subsection (d) shall be made by certified,
cashier's or bank check or by wire transfer of immediately available funds
to an account designated by the Company. The certificates representing the
Option Shares may bear an appropriate legend relating to the fact that such
Option Shares have not been registered under the Securities Act.
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) Stockholder Approval. If required by applicable law this
Agreement shall have been duly approved by holders of the number of Shares
constituting at least the Company Requisite Vote.
(b) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than filing the Delaware Certificate of Merger, all
filings with any Governmental Entity required to be made prior to the
Effective Time by the Company or Parent or any of their respective
Subsidiaries, with, and all Government Consents required to be obtained
prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
by the Company, Parent and Merger Sub shall have been made or obtained (as
the case may be), except where the failure to so make or obtain will not
result in either a Company Material Adverse Effect or a Parent Material
Adverse Effect.
(c) Litigation. No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement
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<PAGE> 29
(collectively, an "Order"), and no Governmental Entity shall have
instituted any proceeding or formally threatened to institute any
proceeding seeking any such Order and such proceeding or threat remains
unresolved.
7.2. Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent prior to the Effective Time 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 material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date it being understood that representations and warranties shall
be deemed to be true and correct unless the respects in which the
representations and warranties (without giving effect to any "materiality"
limitations or references to "material adverse effect" set forth therein)
are untrue or incorrect in the aggregate is likely to have a Company
Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
7.3. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement
and (except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the
Closing Date it being understood that representations and warranties shall
be deemed to be true and correct unless the respects in which the
representations and warranties (without giving effect to any "materiality"
limitations or references to "material adverse effect" set forth therein)
are untrue or incorrect in the aggregate is likely to have a Parent
Material Adverse Effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date.
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after its approval by the Company Requisite Vote, by mutual written
consent of the Company (through the Continuing Directors or their designated
successors), Parent and Merger Sub.
8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by either Parent or the Company if any Order permanently restraining,
enjoining or otherwise prohibiting the Merger shall be entered (whether before
or after the approval by the stockholders of the Company) and such Order is or
shall have become nonappealable.
8.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after its approval by the Company Requisite Vote, by the Company if:
(a) after October 31, 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 referenced in this clause (a);
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<PAGE> 30
(b) prior to Parent's purchase of Shares pursuant to the Offer, (i)
the Company enters into a binding written agreement concerning a Superior
Proposal after fully complying with the procedures set forth in Section 6.2
and (ii) the Company concurrently with such termination pays to Parent in
immediately available funds all expense reimbursements due Parent pursuant
to Section 8.5(a) and the first installment of the Termination Fee pursuant
to Section 8.5(b); or
(c) there has been a material breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement
that is not curable or, if curable, is not cured prior to the earlier of
(i) twenty (20) days after written notice of such breach is given by the
Company to Parent and (ii) two (2) Business Days before the date on which
the Offer expires.
8.4. Termination by Parent and Merger Sub. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after its approval by the Company Requisite Vote, by
Parent and Merger Sub if:
(a) the Merger shall not have been consummated by January 15, 1998;
provided, however, that the right to terminate this Agreement pursuant to
this subsection (a) shall not be available to Parent and Merger Sub if
either of them has breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in this subsection;
(b) the Board of Directors of the Company shall have withdrawn or
adversely modified its approval or recommendation of this Agreement;
(c) there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement
that is not curable or, if curable, is not cured within twenty (20) days
after written notice of such breach is given by Parent to the Company and
which is likely to have a Company Material Adverse Effect; or
(d) Parent shall have terminated the Offer in accordance with the
provisions of Annex A; provided, however, that the right to terminate this
Agreement pursuant to this subsection (d) shall not be available to Parent
and Merger Sub if either of them has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the termination of the Offer.
8.5. Effect of Termination and Abandonment.
(a) If this Agreement is terminated and the Merger abandoned pursuant
to this Article VIII, this Agreement (other than as set forth in Section
9.1) shall become void and of no further effect with no liability of any
party hereto (or any of its directors, officers, employees, agents,
stockholders, legal, accounting and financial advisors or other
representatives); provided, however, that, except as otherwise provided
herein, no such termination shall relieve any party hereto of any liability
or damages resulting from any breach of this Agreement; provided further,
that the Company shall reimburse Parent in the amount of $2,000,000 as
reimbursement for all of its costs and expenses in connection with this
Agreement, the Offer and the Merger unless: (i) the Agreement has been
terminated by the parties pursuant to Section 8.1 or by either party
pursuant to Section 8.2; (ii) the Company has terminated this Agreement
pursuant to Sections 8.3(a) or 8.3(c); or (iii) the Parent has terminated
this Agreement pursuant to Section 8.4(a) or Section 8.4(d) and, further,
the Company has not breached in any material respect its obligations under
this Agreement in any manner which proximately contributed to the failure
to close the Merger or Parent's termination of the Offer, respectively.
(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
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 $5,000,000 and (ii) an additional $8,000,000 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.
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<PAGE> 31
(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 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 $5,000,000 and (ii) an additional
$8,000,000 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".)
(c) The Company acknowledges that the agreements contained in Section
8.5 are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, Parent and Merger Sub would not enter
into this Agreement; accordingly, if the Company fails promptly to pay the
amounts required pursuant to Section 8.5 and, in order to obtain such
payment Parent or Merger Sub commences a suit which results in a final
nonappealable judgment against the Company for such amounts, the Company
shall pay to Parent or Merger Sub (i) its costs and expenses (including
attorneys' fees) in connection with such suit and (ii) if (and only if)
this Agreement has been terminated pursuant to Section 8.3(b) or 8.4(c),
interest on the amount at the rate announced by Bank of America, NT & SA as
its "reference rate" in effect on the date such payment was required to be
made.
8.6. Procedure for Termination. A termination of this Agreement pursuant
to this Article VIII shall, in order to be effective, require in the case of
Parent, Merger Sub or the Company, action by its Board of Directors.
ARTICLE IX
MISCELLANEOUS
9.1. Survival. This Article IX and the agreements of the Company, Parent
and Merger Sub contained in Sections 6.8 (Benefits), 6.9 (Expenses) and 6.10
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Section 6.9 (Expenses) and Section 8.5
(Effect of Termination and Abandonment) shall survive the termination of this
Agreement. All other representations, warranties, agreements and covenants in
this Agreement and in any certificate or schedule delivered pursuant hereto
shall not survive the consummation of the Merger or the termination of this
Agreement.
9.2. Certain Definitions. For the purposes of this Agreement each of the
following terms shall have the meanings set forth below:
(a) "Affiliate" means a Person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned Person.
(b) "Business Day" means any day other than a day on which banks in
the State of California are authorized to close or the NASDAQ National
Market is closed.
(c) "Capital Stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
(d) "Company Material Adverse Effect" means a material adverse effect
on the financial condition, properties, business or results of operations
of the Company and its Subsidiaries, taken as a whole it being understood
that none of the following shall be deemed by itself or by themselves,
either alone or in combination, to constitute a Company Material Adverse
Effect: (a) a change in the market price or trading volume of the Company
Common Stock, (b) a failure by the Company to meet internal earnings or
revenue projections or the revenue or earnings predictions of equity
analysts as reflected in the First Call consensus estimate, or any other
revenue or earnings predictions or expectations, for any period ending (or
for which earnings are released) on or after the date of this Agreement and
prior to the Effective Date, (c) conditions affecting the semi-conductor
industry as a whole or the U.S. economy as a whole, (d) any disruption of
customer or supplier relationships arising primarily out of or resulting
primarily from actions contemplated by the parties in connection with, or
which is primarily attributable
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<PAGE> 32
to, the announcement of this Agreement and the transactions contemplated
hereby, to the extent so attributable.
(e) "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, encumbrance, hypothecation, title defect
or adverse claim of any kind in respect of such asset.
(f) "Parent Material Adverse Effect" means a material adverse effect
on the ability of Parent or Merger Sub to conduct the Offer or consummate
the Merger or any of the other material transactions contemplated by this
Agreement
(g) "Permitted Liens" means (i) Liens for Taxes or other governmental
assessments, charges or claims the payment of which is not yet due; (ii)
statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other similar Persons and other liens imposed by
applicable Law incurred in the ordinary course of business for sums not yet
delinquent or immaterial in amount and being contested in good faith; (iii)
liens specifically identified as such in the Balance Sheet or the notes
thereto; (iv) liens constituting or securing executory obligations under
any lease that constitutes an "operating lease" under GAAP; and (v) any
other Lien arising in the ordinary course of business, the imposition of
which would not constitute a Company Material Adverse Effect; provided,
however, that, with respect to each of the foregoing clauses (i) through
(iv), to the extent that any such lien arose prior to the Audit Date and
relates to, or secures the payment of, a liability that is required to be
accrued on the Balance Sheet under GAAP, such lien shall not be a Permitted
lien unless accruals for such liability have been established therefor on
the Balance Sheet in conformity with GAAP. Notwithstanding the foregoing,
no lien arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Compensation and Benefit Plan
sponsored by, maintained by or contributed to by the Company or any of its
ERISA Affiliates or arising in connection with any excise tax or penalty
tax with respect to such Compensation and Benefit Plan shall be a Permitted
lien.
(h) "Person" means an individual, corporation (including
not-for-profit), partnership, limited liability company, association,
trust, unincorporated organization, joint venture, estate, Governmental
Entity or other legal entity.
(i) "Subsidiary" or "Subsidiaries" of the Company, Parent, the
Surviving Corporation or any other Person means any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, Parent, the
Surviving Corporation or any such other Person, as the case may be, either
alone or through or together with any other Subsidiary, owns, directly or
indirectly, 50% or more of the Capital Stock, the holders of which are
generally entitled to vote for the election of the Board of Directors or
other governing body of such corporation or other legal entity.
9.3. No Personal Liability. This Agreement shall not create or be deemed
to create any personal liability or obligation on the part of any direct or
indirect stockholder of the Company, Merger Sub or Parent, or any of their
respective officers, directors, employees, agents or representatives.
9.4. Modification or Amendment. Subject to the provisions of applicable
Law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.5. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law. The failure of any party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon strict compliance by any other party hereto
with its obligations hereunder, and any custom or practice of the parties at
variance with the terms hereof, shall not constitute a waiver by such party of
its rights to exercise any such or other right, power or remedy or to demand
such compliance.
9.6. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.7. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCOR-
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<PAGE> 33
DANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of Delaware and the Federal courts
of the United States of America located in the State of Delaware solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard
and determined in such a Delaware State or Federal court. The parties
hereby consent to and grant any such court jurisdiction over the person of
such parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.8 or in such other manner as
may be permitted by applicable Law, shall be valid and sufficient service
thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of
the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms
and provisions of this Agreement in any Federal court located in the State
of Delaware or in Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE INITIAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.7.
9.8. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be deemed given if in writing
and delivered personally or sent by registered or certified mail (return receipt
requested) or overnight courier (providing proof of delivery), postage prepaid,
or by facsimile (which is confirmed):
If to Parent or Merger Sub:
Intel Corporation.
2200 Mission College Blvd.
Santa Clara, CA 95052-8119
Attention: General Counsel
Fax: (408) 765-7636
with a copy to:
Richard A. Strong, Esq.
Gibson, Dunn & Crutcher LLP
333 So. Grand Avenue
Los Angeles, CA 90071
Fax: (213) 229-6205
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If to the Company:
Chips and Technologies, Inc.
2950 Zanker Road
San Jose, CA 95134
Attention: Jeffery Anne Tatum
Fax: (408) 894-2088
with a copy to:
Bradley J. Rock, Esq.
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, CA 94301
Fax: (415) 327-3699
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.9. Entire Agreement. This Agreement (including any schedules, exhibits
or annexes hereto) and the Confidentiality Agreement hereto constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.10. No Third Party Beneficiaries. Except as provided in Section 6.10
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.11. Obligations of the Company and Surviving Corporation. Whenever this
Agreement requires a Subsidiary of the Company to take any action, such
requirement shall be deemed to include and undertaking on the part of the
Company to cause such Subsidiary to take such action and, after the Effective
Time, on the part of the Surviving Corporation to cause such Subsidiary to take
such action.
9.12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is illegal, invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.13. Interpretation. The table of contents and Article, Section and
subsection headings herein are for convenience of reference only, do not
constitute a part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Schedule, Annex or Exhibit, such reference shall
be to a Section of, or Schedule, Annex or Exhibit to, this Agreement, unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns and, in
the case of an individual, to his or her heirs and estate, as applicable.
9.14. Assignment. This Agreement shall not be assignable by operation of
Law or otherwise and any attempted assignment of this Agreement in violation of
this sentence shall be void; provided, however, that
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<PAGE> 35
Parent may designate, by written notice to the Company, another wholly-owned,
direct subsidiary to be a Constituent Corporation in lieu of Merger Sub, in the
event of which, all references herein to Merger Sub shall be deemed references
to such other Subsidiary except that all representations and warranties made
herein with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other Subsidiary
as of the date of such designation.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties hereto as of the date hereof.
CHIPS AND TECHNOLOGIES, INC.
By:
Name:
Title:
INTEL CORPORATION
By:
Name:
Title:
INTEL ENTERPRISE CORPORATION
By:
Name:
Title:
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<PAGE> 36
ANNEX A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) relating to Parent's obligation to pay for or return tendered shares
after termination of the Offer, Parent shall not be required to accept for
payment or pay for any Shares tendered pursuant to the Offer, shall delay the
acceptance for payment of any Shares and if required by Section 1.1(b) of this
Agreement, shall extend the Offer by one or more extensions until October 31,
1997, and may terminate the Offer at any time after October 31, 1997 if (i) less
than a majority of the outstanding Shares on a fully-diluted basis (including
for purposes of such calculation all Shares issuable upon exercise of all vested
and unvested options) has been tendered pursuant to the Offer by the expiration
of the Offer and not withdrawn; (ii) any applicable waiting period under the HSR
Act has not expired or terminated; (iii) all necessary Government Consents shall
not have been obtained on terms and conditions reasonably satisfactory to
Parent; or (iv) at any time after the date of this Agreement, and before
acceptance for payment of any Shares, any of the following events shall occur
and be continuing on or after October 31, 1997:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any
domestic or foreign court or other Governmental Entity which directly or
indirectly (i) prohibits, or imposes any material limitations on, Parent's
ownership or operation (or that of any of its Subsidiaries or other
Affiliates) of all or a material portion of their or the Company's
businesses or assets, or compels Parent or any of its Subsidiaries or other
Affiliates to dispose of or hold separate any material portion of the
business or assets of the Company or Parent and its respective
Subsidiaries, in each case taken as a whole, (ii) prohibits, or makes
illegal, the acceptance for payment, payment for or purchase of Shares or
the consummation of the Offer, the Merger or the other transactions
contemplated by this Agreement, (iii) results in the delay in or restricts
the ability of Parent, or renders Parent unable, to accept for payment, pay
for or purchase some or all of the Shares, (iv) imposes material
limitations on the ability of Parent effectively to exercise full rights of
ownership of the Shares, including the right to vote the Shares purchased
by it on all matters properly presented to the Company's stockholders, or
(v) otherwise has a Company Material Adverse Effect;
(b) (i) the representations and warranties of the Company set forth in
this Agreement shall not be true and correct in any material respect as of
the date of this Agreement and as of consummation of the Offer as though
made on or as of such date (except for representations and warranties made
as of a specified date) but only if the respects in which the
representations and warranties made by the Company (without giving effect
to any "materiality" limitations or references to "material adverse effect"
set forth therein) are inaccurate would in the aggregate have a Company
Material Adverse Effect, (ii) the Company shall have failed to comply with
its covenants and agreements contained in this Agreement in all material
respects, or (iii) there shall have occurred any events or changes which
have had or which are likely to have a Company Material Adverse Effect;
(c) it shall have been publicly disclosed or Parent shall have
otherwise learned that (i) any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have acquired or entered into a
definitive agreement or agreement in principle to acquire beneficial
ownership of more than 20% of the Shares or any other class of Capital
Stock of the Company, through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 20% of the Shares and (ii) such Person or group shall not have
tendered such Shares pursuant to the Offer;
(d) the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent (including by amendment
of the Schedule 14D-9), its recommendation of the Offer, this Agreement or
the Merger, or recommended another proposal or offer, or the Board of
Directors of the Company, shall have resolved to do any of the foregoing;
or
(e) this Agreement shall have terminated in accordance with its terms;
which in the good faith judgment of Parent, in any such case, and regardless of
the circumstances (including any action or inaction by Parent) giving rise to
such condition makes it inadvisable to proceed with the Offer or the acceptance
for payment of or payment for the Shares.
31
<PAGE> 37
The foregoing conditions, other than condition (i) above are for the sole
benefit of Parent and may be waived by Parent, in whole or in part at any time
and from time to time, in the sole discretion of Parent. The failure by Parent
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
32
<PAGE> 1
ANNEX A
CHIPS AND TECHNOLOGIES, INC.
2950 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about August 1, 1997 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Chips and Technologies, Inc. (the "Company") to the holders
of record of shares of Common Stock, par value $0.01 per share, of the Company
(the "Shares") at the close of business on or about July 25, 1997. You are
receiving this Information Statement in connection with the possible appointment
of persons designated by the Purchaser (as defined below) to a majority of the
seats on the Board of Directors of the Company.
On July 27, 1997, the Company, Intel Corporation, a Delaware corporation
("Intel") and Intel Enterprise Corporation, a Delaware corporation and wholly
owned subsidiary of Intel (the "Purchaser"), entered into an Agreement and Plan
of Merger (the "Merger Agreement") in accordance with the terms and subject to
the conditions of which (i) Intel will cause the Purchaser, on Intel's behalf,
to commence a tender offer (the "Offer") for all outstanding Shares at a price
of $17.50 per Share, net to the seller in cash and without interest thereon, and
(ii) the Purchaser will be merged with and into the Company (the "Merger"). As a
result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Intel.
The Merger Agreement requires the Company to cause the directors designated
by Intel to be elected to Board of Directors under the circumstances described
therein. See "Board of Directors and Executive Officers of the Company."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time. Capitalized terms used
herein and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
August 1, 1997. The Offer is scheduled to expire at Midnight, New York City
time, on August 28, 1997, unless the Offer is extended.
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of June 30, 1997, there were 22,043,501
Shares outstanding. The Company's Board of Directors currently consists of three
classes with a total of four (4) members. At each annual meeting of
stockholders, a class of directors is elected for three-year terms. The officers
of the Company serve at the discretion of the Board.
Pursuant to the Merger Agreement, if the Minimum Condition has been met
upon payment for the Shares by Purchaser pursuant to the Offer, Intel shall be
entitled to designate such number of directors on the Board of Directors of the
Company (the "Intel Designees"), as will give Intel, subject to compliance with
Section 14(f) of the Exchange Act, representation on such Board equal to the
product of the number of directors on such Board (giving effect to the increase
of directors pursuant to the Merger Agreement) and the percentage of the number
of shares so purchased bears to the total number of outstanding Shares on a
fully diluted basis, and the Company shall, at such time, cause the Intel
Designees to be so elected by its existing Board of Directors; provided,
however, that in the event that the Intel Designees are elected to the Board of
Directors of the Company, until the Effective Time the Company shall use its
best efforts to cause the Board of Directors to have at least three directors
who are directors of the Company on the Date of the Merger Agreement (the
"Continuing Directors") and provided, further that, in such event, if the number
of Continuing Directors shall be reduced below three for any reason whatsoever,
the remaining Continuing
A-1
<PAGE> 2
Directors shall designate a person to fill such vacancy. Intel has informed the
Company that it will choose the Intel Designees from the persons listed below.
Intel has informed the Company that each of the Intel Designees has consented to
act as a director, if so designated. Biographical information concerning each of
the Intel Designees is presented below. The following biographical information
provided herein has been furnished by Intel, and the Company assumes no
responsibility for the accuracy or completeness of such information.
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND PRESENT OCCUPATION OR MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS EMPLOYMENT DURING THE PAST FIVE YEARS
------------------------------ ---------------------------- ----------------------------
<S> <C> <C>
Leslie L. Vadasz.............. Senior Vice President, N/A
Corporate Business
Development since 1991;
Director -- Intel since 1989
Arvind Sodhani................ Vice President and Treasurer
Cary I. Klafter............... Director of Corporate Partner, Morrison & Foerster
Affairs since 1966; from prior to 1992 to 1996.
President Intel Enterprise
Corporation since 1997;
Director -- Intel Enterprise
Corporation
Suzan A. Miller............... Senior Attorney since 1991; N/A
Vice President -- Intel
Enterprise Corporation since
1997; Director -- Intel
Enterprise Corporation
Patrice C. Scatena............ Senior Attorney and Associate -- Gibson, Dunn &
Assistant Secretary since Crutcher LLP from 1989 to
1994; Secretary -- Intel 1994
Enterprise Corporation since
1997; Director -- Intel
Enterprise Corporation
</TABLE>
None of the Intel Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any of the
directors or executive officers of the Company or (iii) to Intel's knowledge,
beneficially owns any securities (or rights to acquire any securities) of the
Company. The Company has been advised by Intel that, to Intel's knowledge, none
of the Intel Designees has been involved in any transaction with the Company or
any of its directors, executive officers or affiliates which is required to be
disclosed pursuant to the rules and regulations of the Commission, except as may
be disclosed herein or in the Schedule 14D-9.
Biographical information concerning each of the Company's current directors
and executive officers as of June 30, 1997 is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- -------------------------- --- -------------------------------------------------------
<S> <C> <C>
Gene P. Carter 63 Director
Henri A. Jarrat 59 Director
Bernard Vonderschmitt 74 Director
James F. Stafford 53 President and Chief Executive Officer, Director
Keith A. Angelo 41 Vice President, Marketing
Lee J. Barker 52 Vice President, Operations
Timothy R. Christoffersen 55 Vice President, Finance and Chief Financial Officer
Richard E. Christopher 51 Vice President, Sales
Morris E. Jones, Jr. 45 Senior Vice President and Chief Technical Officer
Lawrence A. Roffelsen 52 Vice President, Engineering
Jeffery Anne Tatum 47 Secretary, Vice President and General Counsel
</TABLE>
Mr. Carter has served as a director of the Company since March 1988. From
August 1977 to September 1984, Mr. Carter served as Vice President of Sales for
Apple Computer, Inc. He has been self-employed as a private investor since 1984.
Mr. Carter also serves as a director of Adobe Systems, Inc. and of Portable
Energy Products.
A-2
<PAGE> 3
Mr. Jarrat was appointed to the Board of Directors in August 1994. He is
currently President of Jarrat Global Enterprises, Inc. From 1983 to 1987, he
served as President and Chief Operating Officer of VLSI Technology, Inc., and
for seven years prior to 1983, he served at Motorola, Inc. as a Corporate Vice
President and General Manager.
Mr. Vonderschmitt has served as a director of the Company since August
1992. He is a co-founder of Xilinx, Inc. and served as its President and/or
Chief Executive Officer from February 1984 until January 1996. He became
Chairman of the Board of Xilinx on February 1, 1996. Prior to founding Xilinx,
he spent two and one-half years at Zilog, Inc., then a subsidiary of Exxon, as
Vice President and General Manager of the Microprocessor Division. Prior to
joining Zilog, he was with RCA for more than twenty years in mostly technical
management positions. During his last seven years at RCA, Mr. Vonderschmitt
served as Vice President and General Manager of the Solid State Division. Mr.
Vonderschmitt also serves as a director on the boards of Xilinx, Inc., IMP,
Inc., Sanmina, Inc., and Credence Systems Corporation.
Mr. Stafford was named President and Chief Executive Officer in July 1993
and was elected a director in August 1993. Mr. Stafford has been employed by the
Company since January 1985 and has served in a variety of positions including
Acting Chief Financial Officer from April 1993 until December 31, 1993, Senior
Vice President and Chief Operating Officer from January 1992 to July 1993 and
Senior Vice President, Product Line Operations from February 1990 to January
1992.
Mr. Angelo was promoted to Vice President, Marketing in November 1992.
Previously, Mr. Angelo had served as Director/General Manager, Media Group, from
June 1992 to November 1992, as Director of Marketing from January 1991 to June
1992, as Senior Product Marketing Manager, Product Marketing Manager and Product
Marketing Engineer from October 1987 to December 1991. Prior to joining the
Company, Mr. Angelo spent four years at Intel Corporation in various marketing
positions in the Peripheral Component Group.
Mr. Barker has served as Vice President, Operations since July 1992. Prior
to joining the Company, he was self employed for twelve years as a manufacturer
of electronic scoreboards and a supplier of raw materials to the sign industry.
Mr. Christoffersen has served as Chief Financial Officer since January
1994. Prior to joining the Company, Mr. Christoffersen spent two years with
Resonex Inc., as Executive Vice President, Director, Chief Financial Officer,
and later Chief Operating Officer. Prior to joining Resonex, he spent 9 years
with several subsidiaries of Ford Motor Company in various managerial and
financial positions.
Mr. Christopher has served as Vice President, Sales, since July 1992. Prior
to joining the Company, Mr. Christopher spent twelve years at Fujitsu
Microelectronics where he became Senior Vice President and General Manager.
Mr. Jones, Jr. is a founder of the Company and has served as Senior Vice
President and Chief Technical Officer since February 1990. Prior to that time,
he served in a variety of senior level management positions since the Company's
inception.
Mr. Roffelsen has served as Vice President, Engineering since November
1992. Prior to joining the Company, he spent seven years at Fujitsu
Microelectronics, Inc., where he served most recently as Vice President, ASIC
Operations.
Ms. Tatum has served as Secretary, Vice President and General Counsel since
July 1994. She previously served as Secretary and General Counsel from August
1993 to July 1994, and as Assistant General Counsel from February 1992 to August
1993. Prior to joining the Company, she was a partner of the law firms of
Seyfarth, Shaw, Fairweather and Geraldson from 1990 to 1992, and of Adams, Duque
and Hazeltine from 1985 through 1989.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1997, the Board of Directors held ten
(10) meetings. No director attended fewer than 75% of such meetings of the Board
of Directors and the committees on which he serves.
There are two (2) standing committees of the Board Directors: the Audit
Committee and the Compensation Committee. The Board does not have a standing
Nominating Committee.
A-3
<PAGE> 4
The Audit Committee's function is to review with the independent
accountants and management the annual financial statements and independent
accountants' opinion, review the scope and results of the examination of the
Company's financial statements by the independent accountants, approve all
professional services performed by the independent accountants and related fees,
recommend the retention of the independent accountants to the Board, subject to
ratification by the stockholders, and periodically review the Company's
accounting policies and internal accounting and financial controls. The members
of the Audit Committee are Bernard Vonderschmitt and Gene Carter. During the
fiscal year ended June 30, 1997, the Audit Committee held one (1) meeting.
The Compensation Committee is responsible for setting and administering the
policies governing the annual compensation of the Company's executive officers,
including cash compensation and stock option programs, and approving the grants
of options for employees. The members of the Compensation Committee are Bernard
Vonderschmitt and Gene Carter. During the fiscal year ended June 30, 1997, the
Compensation Committee held nine (9) meetings.
COMPENSATION OF DIRECTORS
The Company's outside directors each receive $1,500 for each Board of
Directors meeting which the director attends. In addition, each receives $1,000
for each committee meeting of the Board of Directors he attends that is held
separately from a Board meeting and $500 for each committee meeting he attends
that is held consecutively with a Board meeting (excluding Compensation
Committee meetings held solely for the purpose of approving routine stock option
grants).
The Company's Outside Directors Plan (as defined below) currently provides
that upon his or her initial election to the Board of Directors, each
non-employee director (an "Outside Director") will receive a one-time grant of
an option to purchase 20,000 shares of the Company's Common Stock and an
additional grant of an option to purchase 10,000 shares of the Company's Common
Stock on each anniversary of his or her tenure as an Outside Director. In
addition, an Outside Director who serves as the Chairman of the Board receives a
stock option to purchase 5,000 shares of the Company's Common Stock upon
appointment and on each anniversary of his tenure as Chairman, and each director
receives a stock option to purchase 2,500 shares of the Company's Common Stock
each year for each committee of the Board of Directors on which a director
serves.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation of
the Chief Executive Officer and the four other most highly compensated executive
officers of the Company as of June 30, 1997, during the fiscal years ended June
30, 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
FISCAL OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SHARES
- ----------------------------------------------- ------- -------- -------- ------------
<S> <C> <C> <C> <C>
James F. Stafford 1997 $288,761 $175,000 -0-
President, Chief Executive 1996 $277,510 $200,000 100,000
Officer 1995 $236,259 $118,797 125,000
Keith A. Angelo 1997 $172,364 $ 89,010 -0-
Vice President, Marketing 1996 $164,821 $100,149 50,000
1995 $155,297 $ 74,750 25,000
Richard E. Christopher 1997 $175,994 $ 89,010 -0-
Vice President, Sales 1996 $171,981 $104,121 50,000
1995 $164,306 $ 78,232 25,000
Morris E. Jones, Jr. 1997 $193,719 $115,000 -0-
Senior Vice President, Advanced Products 1996 $187,432 $112,578 50,000
and Chief Technical Officer 1995 $180,566 $ 84,448 25,000
Lawrence A. Roffelsen 1997 $172,956 $ 89,010 -0-
Vice President, Engineering 1996 $165,906 $100,797 50,000
1995 $155,297 $ 74,750 25,000
</TABLE>
A-4
<PAGE> 5
STOCK OPTION PLANS.
1994 Stock Option Plan. In November 1994, the Company amended and restated
its 1985 Stock Option Plan (the "1994 Stock Option Plan"). The 1994 Stock Option
Plan provides for the granting of incentive stock options and non-qualified
stock options to employees (including officers), directors and consultants of
the Company. Stock options are granted at an exercise price not less than fair
market value at the date of the grant. In each of November 1995 and November
1996, the Plan was amended to increase the share reserve by 1,000,000 shares.
Options generally vest over four years. Option terms may not exceed ten years
from the date of grant and unexercised options granted under the amended plan
expire thirty days following termination of employment.
Outside Directors Option Plan. In March 1988, the Company adopted the 1988
Non-qualified Stock Option Plan for Outside Directors (the "Outside Directors
Plan"), which provides for the granting of non-qualified stock options to
directors of the Company who are not employees of the Company. The Outside
Directors Plan was amended in November 1993 to increase the share reserve,
extend option grant terms and modify grant provisions. Options must have an
exercise price equal to the fair market value of the common stock on the date of
grant, vest over a four year period and expire ten years after the date of
grant. In November 1995, the Plan was amended to increase the share reserve.
Employee Stock Purchase Plan. The Company reserved 1,500,000 shares of
common stock for issuance pursuant to an Employee Stock Purchase Plan adopted in
1986 and amended in 1996 (the "Purchase Plan"). The 1996 amendment permits the
granting of options under the Purchase Plan. The Purchase Plan allows qualified
employees to purchase shares of Common stock at a price equal to the lower of
the fair market value at the beginning or ending of each 6 month purchase period
for each two year offering period. Purchases are limited to 10% of an employee's
annual compensation and may not exceed 500 shares per purchase period.
STOCK OPTIONS GRANTED IN FISCAL 1997
The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the fiscal year ended
June 30, 1997, to the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN FISCAL 1997 POTENTIAL
-------------------------------------------------- REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL
OPTIONS RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION
EMPLOYEES OR BASE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------
NAME GRANTED YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------------------- ------- ---------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
James F. Stafford -0- -- -- -- -- --
Keith A. Angelo -0- -- -- -- -- --
Richard E. Christopher -0- -- -- -- -- --
Morris E. Jones, Jr. -0- -- -- -- -- --
Lawrence A. Roffelsen -0- -- -- -- -- --
</TABLE>
- ---------------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission's rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Company, overall market conditions and the option holders' continued
employment through the vesting period. The amounts reflected in this table
may not necessarily be achieved.
A-5
<PAGE> 6
OPTION EXERCISES AND FISCAL 1997 YEAR-END VALUES
The following table provides the specified information concerning exercise
of options to purchase the Company's Common Stock in the fiscal year ended June
30, 1997, and unexercised options held as of June 30, 1997, by the persons named
in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT 6/30/97 AT 6/30/97(1)(2)
ON VALUE ------------------------------ -----------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Stafford.......... 278,500 $4,049,545.60 58,997 162,504 $ 159,416.96 $297,639.14
Keith A. Angelo............ 80,000 $1,304,750.00 56,164 58,336 $ 142,264.14 $115,048.36
Richard E. Christopher..... 71,000 $1,056,170.28 19,102 54,898 $ 45,461.69 $ 95,279.86
Morris E. Jones, Jr........ 40,000 $ 637,500.00 215,102 54,899 $1,027,470.14 $ 95,283.46
Lawrence A. Roffelsen...... 100,000 $1,768,523.13 71,664 58,336 $ 268,300.64 $115,048.36
</TABLE>
- ---------------
(1) Generally, for executive officers and newly hired employees of the Company,
stock options granted are immediately exercisable at the date of grant, but
vest over a four year period commencing six months after the date of grant.
At the end of six months, 6/48ths of the option shares vest; thereafter they
vest at the rate of 1/48th per month for each full month of the optionee's
continuous employment with the Company. For non-executive officer employees
who receive discretionary option grants during their employment, stock
options are immediately exercisable at the date of grant and vest over a
four year period commencing one month after the date of grant at the rate of
1/48th per month for each full month of the optionee's continuous employment
with the Company. Unvested options are listed in the above table under the
heading "Unexercisable."
(2) Based on a value of $10.375 per share which was the closing price of the
Company's Common Stock on June 30, 1997. The value shown is for all
outstanding options which have an exercise price below the closing price on
June 30, 1997 of the Company's Common Stock regardless of vesting
restrictions.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS. Options granted
under the Company's 1994 Stock Option Plan and the Outside Directors Plan and
the Purchase Plan contain provisions pursuant to which, under certain
circumstances, all outstanding options granted under such plans shall become
fully vested and immediately exercisable upon a "transfer of control" as defined
in such plans except as set forth below. No acceleration of vesting or
exercisability of options will occur under the 1994 Stock Option Plan in
connection with the Offer or the Merger. In accordance with the Merger
Agreement, in lieu of such acceleration, upon the happening of the Merger, each
outstanding stock option granted under the 1994 Stock Option Plan will be
automatically converted into options to purchase shares of Intel's Common Stock.
For a description of the treatment of outstanding options under the
Company's 1994 Stock Option Plan, Outside Directors Plan and the Purchase Plan,
and a description of anticipated employment agreements to be entered into
between Intel and certain executive officers of the Company, see "Item 3.
Identity and Background -- The Merger Agreement -- Interest of Certain Persons
in the Merger" in the Schedule 14D-9.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Compensation Committee during fiscal 1997 was composed of two
independent, non-employee directors of the Company, Gene P. Carter and Bernard
V. Vonderschmitt.
A-6
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership as of June 30, 1997 of the Company's Common Stock as to (i) each
director, (ii) each of the executive officers listed in the Summary Compensation
Table below, (iii) all executive officers and directors as a group and (iv) each
person known by the Company to be the beneficial owner of five percent or more
of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OWNED(1)
----------------------
NUMBER PERCENTAGE
NAME BENEFICIAL OWNERS OF SHARES OF CLASS
---------------------------------------------------------------- --------- ----------
<S> <C> <C>
Gene P. Carter(2)............................................... 100,179 *
Henri A. Jarrat(3).............................................. 85,000 *
James F. Stafford(4)............................................ 221,501 *
Bernard V. Vonderschmitt(5)..................................... 81,300 *
Keith A. Angelo(6).............................................. 119,003 *
Richard E. Christopher(7)....................................... 74,000 *
Morris E. Jones, Jr.(8)......................................... 490,637 2.20
Lawrence A. Roffelsen(9)........................................ 130,000 *
All directors and executive officers as a group (12 1,544,807 6.6401
persons)(10)..................................................
</TABLE>
- ---------------
(1) Unless otherwise indicated below, the persons and entities named in the
above table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable.
(2) Includes 60,000 shares subject to immediately exercisable options. Includes
35,213 unvested shares. Includes 40,179 shares held by the Carter Family
Trust, of which Mr. Carter is a Trustee.
(3) Includes 65,000 shares subject to immediately exercisable options. Includes
24,442 unvested shares.
(4) Includes 221,500 shares subject to immediately exercisable options.
Includes 162,504 unvested shares.
(5) Includes 46,000 shares subject to immediately exercisable options. Includes
25,839 unvested shares.
(6) Includes 118,000 shares subject to immediately exercisable options.
Includes 58,336 unvested shares.
(7) All shares are subject to an immediately exercisable option. Includes
54,898 unvested shares.
(8) Includes 270,000 shares subject to immediately exercisable options.
Includes 54,899 unvested shares.
(9) All shares are subject to an immediately exercisable option. Includes
58,336 unvested shares.
(10) Includes 1,261,586 shares subject to immediately exercisable options.
Includes 615,202 unvested shares.
As of June 30, 1997, the per share market value of the Company's Common
Stock was $10.375, based on the closing price on that date on The Nasdaq
National Market.
CERTAIN TRANSACTIONS
In August 1994, the Company loaned $100,000 at an interest rate of 7% per
annum to Keith A. Angelo, an executive officer of the Company. The outstanding
balance of the loan is forgiven at a rate of 25% per year as Mr. Angelo
continues his employment with the Company. If he voluntarily leaves his
employment with the Company or if Mr. Angelo's employment is terminated for
cause before August 1, 1998, the outstanding balance must be repaid in full at
that time.
In August 1994, the Company entered into an independent contractor
agreement with Jarrat Global Enterprises, Inc. ("JGE"), a corporation whose
principal shareholder is Henri A. Jarrat, a director of the Company. Pursuant to
the agreement, Henri Jarrat received options to purchase 125,000 shares of
Company stock and JGE received $8,000 per month as compensation for providing
the Company with requested business advice, including management consulting in
specific areas, until November 1996.
In July 1993, Gordon A. Campbell terminated his employment as President and
Chief Executive Officer of the Company. In connection with his termination, Mr.
Campbell and the Company agreed that, in exchange for the provision by Mr.
Campbell of certain consulting services to the Company and a release of any
A-7
<PAGE> 8
claims against the Company, the Company would make certain payments to Mr.
Campbell, extend his medical benefits, and accelerate the vesting on certain
stock options held by him. In May 1994, the Board of Directors extended to
August 31, 1995 the exercise date of 550,000 shares of Company stock under stock
options previously granted Mr. Campbell, all of which were subsequently
exercised by Mr. Campbell, and of which options to purchase 200,000 shares were
exercised in July, 1995.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the copies of such forms received by it to
date, or written representations from certain reporting persons that Forms 5
have been filed for such persons as required, the Company believes that, during
the year ended June 30, 1997, all reporting persons complied with Section 16(a)
filing requirements applicable to them.
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