SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A)
of the Securities Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement [_] Confidential, For Use of the
[x] Definitive proxy statement Commission only (as permitted
[_] Definitive additional materials by Rule 14a-6(e)(2))
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
EQUINOX SYSTEMS INC.
(Name of Registrant as Specified in Its Charter)
EQUINOX SYSTEMS INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share ("Common Stock"), of Equinox
Systems Inc.
(2) Aggregate number of securities to which transaction applies:
6,952,388 shares of Common Stock:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
$9.75 per share of Common Stock
(4) Proposed maximum aggregate value of transaction:
$67,785,783
(5) Total fee paid:
$13,578
[x] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date Filed:
<PAGE>
EQUINOX SYSTEMS INC.
One Equinox Way
Sunrise, Florida 33351
November 30, 2000
Dear Shareholders:
You are cordially invited to attend a special meeting of shareholders of
Equinox Systems Inc. ("Equinox") to be held on January 2, 2001 at 11:00 a.m.
local time, at Weston Hills Country Club, 2600 Country Club Drive, Weston,
Florida 33332.
At this special meeting, you will be asked to consider and vote to approve
a merger agreement pursuant to which Equinox will merge with a wholly-owned
subsidiary of Avocent Corporation. If the merger is approved, you will be
entitled to receive $9.75 in cash, without interest, for each of your shares of
Equinox common stock.
The merger has been unanimously approved by Equinox's Board of Directors.
In connection with their evaluation of the merger, the Board of Directors
engaged Raymond James & Associates, Inc. to act as financial advisor to the
Board. Raymond James has rendered a fairness opinion, dated November 3, 2000, to
the Board to the effect that, as of such date and based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the cash
consideration of $9.75 per share to be received by Equinox's shareholders in the
merger is fair from a financial point of view to such shareholders. Raymond
James' opinion is attached as Appendix B to the accompanying proxy statement. We
recommend that you read Raymond James' opinion in its entirety.
The Board of Directors believes that the merger is fair to and in the best
interests of Equinox's shareholders and unanimously recommends that the
shareholders vote "for" approval of the merger.
The accompanying proxy statement explains the merger agreement and the
proposed merger and provides specific information about the parties involved and
their interests. Please read this document carefully.
Please give all this information your careful attention. Whether or not you
plan to attend, it is important that your shares are represented at the special
meeting. A failure to vote will count as a vote against the merger. Accordingly,
you are requested to promptly complete, sign and date the enclosed proxy card
and return it in the envelope provided, whether or not you plan to attend the
special meeting. This will not prevent you from voting your shares in person if
you subsequently choose to attend the special meeting.
Sincerely,
William A. Dambrackas
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
EQUINOX SYSTEMS INC.
One Equinox Way
Sunrise, Florida 33351
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 2, 2001
A special meeting of shareholders of Equinox Systems Inc., a Florida
corporation ("Equinox"), will be held on January 2, 2001 at 11:00 a.m., local
time, at Weston Hills Country Club, 2600 Country Club Drive, Weston, Florida
33332, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan of
Merger dated November 3, 2000, as amended (the "Merger Agreement") pursuant to
which Equinox will merge with a wholly-owned subsidiary of Avocent Corporation.
If the merger is approved, the holders of Equinox's outstanding common stock
will receive $9.75 in cash, without interest, for each share of Equinox common
stock. A copy of the Merger Agreement is attached as Appendix A to and is
described in the accompanying proxy statement.
2. To consider and act upon such other matters as may properly come before
the special meeting or any adjournment or postponement thereof.
Shareholders of record of Equinox common stock at the close of business on
November 24, 2000, will be entitled to notice of, and to vote at, the special
meeting or any adjournment or postponement thereof. Approval of the Merger
Agreement and the merger will require the affirmative vote of the holders of a
majority of the shares of Equinox common stock outstanding on the record date. A
form of proxy and a proxy statement containing more detailed information about
the matters to be considered at the special meeting accompany and form a part of
this notice.
By order of the Board of Directors,
Robert F. Williamson, Jr.
Secretary
Sunrise, Florida
November 30, 2000
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy card and return it promptly in the enclosed
envelope, which requires no postage if mailed in the United States. Please do
not send in any certificates for your shares at this time.
<PAGE>
EQUINOX SYSTEMS INC.
One Equinox Way
Sunrise, Florida 33351
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 2, 2001
This proxy statement is furnished to shareholders of Equinox Systems Inc.,
a Florida corporation ("Equinox"), in connection with the solicitation of
proxies by the Board of Directors of Equinox for use at the special meeting of
shareholders to be held on January 2, 2001 at 11:00 a.m., local time, at Weston
Hills Country Club, 2600 Country Club Drive, Weston, Florida 33332, and at any
adjournment or postponement thereof. Proxies in the form enclosed will be voted
at the special meeting, if properly executed, returned to Equinox prior to the
meeting and not revoked. This proxy statement and the enclosed proxy card are
first being mailed to shareholders of Equinox on or about November 30, 2000.
At the special meeting, holders of Equinox common stock will be asked to
consider and vote upon a proposal to approve an Agreement and Plan of Merger
dated November 3, 2000, among Equinox, Avocent Corporation and a wholly owned
subsidiary of Avocent, as amended (the "Merger Agreement"). Pursuant to the
Merger Agreement, a wholly-owned subsidiary of Avocent Corporation will be
merged into Equinox (the "Merger"). If the Merger is approved, you will be
entitled to receive $9.75 in cash, without interest, for each of your shares of
Equinox common stock.
A copy of the Merger Agreement is attached as Appendix A to and is
described in this proxy statement.
The Merger cannot be completed unless the Merger Agreement is approved by
the holders of a majority of the outstanding shares of Equinox common stock.
Completion of the Merger is also subject to the satisfaction of several other
conditions. Accordingly, even if the shareholders approve and adopt the Merger
Agreement, there can be no assurance that the Merger will be completed.
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) for adoption and approval of the Merger Agreement and
(ii) at the discretion of the proxy holders on any other matter that may
properly come before the meeting or any adjournment or postponement thereof.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter or business is
properly brought before the special meeting, the proxy holders may vote the
proxies in their discretion. The Board of Directors does not know of any such
other matter or business.
No person has been authorized to give any information or make any
representation other than those contained in this proxy statement, and, if given
or made, such information or representation must not be relied upon as having
been authorized. This proxy statement
<PAGE>
does not constitute a solicitation of a proxy in any jurisdiction from any
person to whom it is unlawful to make such proxy solicitation in such
jurisdiction. The delivery of this proxy statement shall not, under any
circumstances, create any implication that there has been no change in the
affairs of Equinox since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
The Merger has not been approved or disapproved by the Securities and
Exchange Commission nor has the SEC passed upon the fairness or merits of the
Merger nor upon the accuracy or adequacy of the information contained in this
document. Any representation to the contrary is unlawful.
<PAGE>
TABLE OF CONTENTS
Page
Questions and Answers About the Merger.......................................1
Summary......................................................................3
The Companies............................................................3
Recommendations of the Board of Directors................................3
Opinion of Financial Advisor.............................................3
Conflicts of Interest....................................................4
The Special Meeting......................................................4
Record Date; Voting Power; Quorum........................................4
Vote Required; Security Ownership of Management..........................4
The Merger...............................................................5
Federal Income Tax Consequences..........................................5
Accounting Treatment.....................................................5
Dissenters' Appraisal Rights.............................................5
Regulatory Approvals.....................................................5
The Merger Agreement.....................................................6
Cautionary Statement Concerning Forward-Looking Information..................6
Market Prices for Common Stock and Dividends.................................7
Selected Financial Data......................................................8
Special Factors..............................................................9
Background of the Merger.................................................9
Recommendation of the Board of Directors................................12
Avocent's Reasons for the Merger........................................14
Opinion of Financial Advisor............................................15
Fairness Opinion Analyses...............................................17
Conflicts of Interest...................................................20
Stock Options...........................................................20
Employment Agreement....................................................21
The Special Meeting.........................................................21
Date, Time and Place....................................................21
Record Date; Voting Power; Quorum.......................................22
Vote Required; Security Ownership of Management.........................22
Proxies.................................................................22
Solicitation of Proxies.................................................22
The Merger..................................................................23
Federal Income Tax Consequences.........................................23
Accounting Treatment....................................................24
Dissenters' Appraisal Rights............................................24
Delisting and Deregistration of Common Stock............................24
Regulatory Approvals....................................................24
<PAGE>
The Merger Agreement........................................................25
Overview................................................................25
Exchange of Certificates Representing Common Stock......................25
Representations and Warranties..........................................26
Conduct of Business Pending the Merger..................................26
No Other Negotiations; No Solicitation..................................28
Registration on Form S-8................................................30
Indemnification; Directors' and Officers' Liability Insurance...........30
Conditions to the Merger................................................30
Termination of Merger Agreement.........................................31
Fees and Expenses.......................................................32
Beneficial Ownership of Common Stock........................................33
Available Information.......................................................34
APPENDIX A - Agreement and Plan of Merger, as amended
APPENDIX B - Opinion of Raymond James & Associates, Inc.
<PAGE>
QUESTIONS AND ANSWERS ABOUT
THE MERGER
Q: What will I receive in the Merger?
A: If the Merger is completed, all of your shares of common stock will be
automatically converted into the right to receive a cash payment of $9.75 per
share, without interest.
Q: How many votes are required to approve and adopt the Merger Agreement?
A: Approval of the Merger Agreement requires the affirmative vote of a majority
of the shares of Equinox common stock outstanding as of the record date.
Therefore, a failure to vote or a vote to abstain will have the same effect as a
vote against the Merger Agreement.
Q: When and where is the special meeting?
A: The special meeting will take place on January 2, 2001 at 11:00 a.m. local
time, at Weston Hills Country Club, 2600 Country Club Drive, Weston, Florida
33332.
Q: Why is the Board of Directors recommending that I vote to approve and adopt
the Merger Agreement?
A: In the opinion of the Board, the terms and provisions of the Merger Agreement
are fair to and in the best interest of Equinox's shareholders. To review the
background and reasons for the Merger in greater detail, see pages 12 through
13.
Q: When do you expect the Merger to be completed?
A: We are working to complete the Merger as soon as possible. In addition to
approval of our shareholders, we must also obtain certain regulatory approval
and meet certain conditions prior to the consummation of the Merger. We hope to
complete the Merger immediately after the special meeting.
Q: What are the tax consequences of the Merger to me?
A: The receipt of the cash merger consideration by you for your Equinox common
stock will be a taxable transaction for federal income tax purposes. To review
your potential tax consequences in greater detail, see pages 23 through 24.
The tax consequences of the Merger will depend on your personal situation.
You should consult your tax advisor for a full understanding of the tax
consequences of the Merger to you.
Q: What do I need to do now?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed envelope as soon as possible, so that your shares will be
represented at the special meeting. If you sign and send in your proxy card and
do not indicate how you want to vote, your
1
<PAGE>
proxy will be counted as a vote for the Merger Agreement. If you fail to return
your proxy card or to vote at the special meeting, the effect will be a vote
against the Merger Agreement.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares of Equinox common stock only if you provide
instructions on how to vote. You should instruct your broker how to vote your
shares, following the directions your broker provides to you. If you do not
provide instructions to your broker, your shares will not be voted and they will
not be counted as votes against the Merger Agreement. However, the effect of not
voting your shares will be the same as a vote against the Merger Agreement.
Q: Can I change my vote or revoke my proxy after I have mailed my signed proxy
card?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new proxy card. If you choose either of these methods, you
must timely submit your notice of revocation or your new proxy card to Equinox.
Third, you can attend the special meeting and vote in person. Simply attending
the special meeting, however, will not revoke your proxy. If you have instructed
a broker to vote your shares, you must follow directions received from your
broker to change your vote.
Q: Will I have appraisal or dissenters' rights as a result of the Merger?
A: No. Under the applicable provisions of Florida law, shareholders do not have
appraisal or dissenters' rights in connection with the Merger.
Q: Should I send in my stock certificates now?
A: No. After the Merger is completed, we will send you written instructions for
exchanging your common stock certificates for the cash merger consideration.
Q: Can I see a list of the shareholders entitled to vote on the Merger?
A: Yes. A list of shareholders will be available for inspection for ten days
preceding the special meeting at the office of the Secretary of Equinox, One
Equinox Way, Sunrise, Florida 33351, and will be available for inspection at the
meeting itself.
Q: Who can help answer my questions?
A: If you would like additional copies of this document, or if you would like to
ask any additional questions about the Merger, you should contact Equinox's
Chief Financial Officer: Robert F. Williamson, Jr. at (954) 377-7242 or at
Equinox Systems Inc., One Equinox Way, Sunrise, Florida 33351.
2
<PAGE>
SUMMARY
This summary highlights selected information from the proxy statement but
may not contain all of the information that is important to you. To understand
the Merger Agreement and the Merger fully, you should read this entire document
carefully, as well as the Merger Agreement (attached as Appendix A) and the
Fairness Opinion of Raymond James (attached as Appendix B). See "Available
Information" on page 34. We have included page references parenthetically, where
applicable, to direct you to a more complete description of the topics in this
summary.
The Companies
Equinox Systems Inc.
One Equinox Way
Sunrise, Florida 33351
(954) 746-9000
Equinox makes software and hardware products that provide communications
port management and remote control capabilities. The products are marketed to
end-users under the Equinox brand name through a worldwide, two-tier
distribution channel and network of value added resellers. Equinox also created
customized versions of its products for original equipment manufactures such as
Hewlett-Packard and IBM who sell and support the products under their own brand
names.
Avocent Corporation
4991 Corporate Drive
Huntsville, Alabama 35805
Avocent Corporation is the leading supplier of connectivity solutions for
enterprise data centers, service providers, and financial institutions
worldwide. Avocent's products include switching, extension, remote access and
video display solutions. Avocent was formed on July 1, 2000 by the merger of
Apex Inc. and Cybex Computer Products Corporation.
Recommendation of the Board of Directors (Page 12)
The Board has determined that the terms of the Merger Agreement, which were
established through arm's-length negotiations with Avocent, and the Merger are
fair to, and in the best interests of, Equinox and its shareholders.
Accordingly, the Board has unanimously approved the Merger Agreement and
unanimously recommends that Equinox's shareholders vote for approval and
adoption of the Merger Agreement.
Opinion of Financial Advisor (Page 15)
Raymond James has delivered its written opinion to the Board of Directors
to the effect that, as of November 3, 2000, the cash merger consideration is
fair, from a financial point of view, to Equinox's shareholders.
3
<PAGE>
A copy of Raymond James' opinion, setting forth the assumptions made,
procedures followed, matters considered, and limitations on and scope of the
review by Raymond James, is attached as Appendix B to this proxy statement. You
are encouraged to read such opinion in its entirety.
Conflicts of Interest (Page 20)
Stock Options
At the time of the Merger, each outstanding option to purchase shares of
Equinox's common stock will be assumed and converted by Avocent into an option
to purchase an adjusted number of shares of Avocent's common stock.
Employment Agreement
At the time of the Merger, Avocent will enter into an employment agreement
with William A. Dambrackas, the Chairman of the Board, President and Chief
Executive Officer of Equinox.
The Special Meeting (Page 21)
The special meeting will be held on January 2, 2001, at 11:00 a.m., local
time, at Weston Hills Country Club, 2600 Country Club Drive, Weston, Florida
33332. At the special meeting, the shareholders of Equinox will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement.
Record Date; Voting Power; Quorum (Page 22)
Shareholders of record of Equinox common stock at the close of business on
November 24, 2000 are entitled to notice of and to vote at the special meeting.
As of the record date, there were 5,581,154 shares of Equinox common stock
issued and outstanding held by approximately 55 holders of record.
Holders of record of Equinox common stock on the record date are entitled
to one vote per share on any matter that may properly come before the special
meeting.
The representation, in person or by proxy, of at least a majority of the
outstanding shares of Equinox common stock entitled to vote at the special
meeting is necessary to constitute a quorum for the transaction of business.
Vote Required; Security Ownership of Management (Page 22)
Under Florida law, the affirmative vote of the holders of a majority of the
shares of Equinox common stock outstanding on the record date for the special
meeting is required to approve the Merger Agreement. For purposes of determining
whether the Merger Agreement has received a majority vote, abstentions and
broker non-votes (shares held in "street name" through a broker or other nominee
as to which voting instructions with regards to the Merger Agreement have not
been received from the beneficial owners and such broker or other nominee
4
<PAGE>
is not permitted to exercise voting discretion with regards to the Merger
Agreement) will not be included in the vote total, although an abstention and a
broker non-vote will have the effect of a vote against the Merger Agreement.
Abstentions and broker non-votes will, however, be counted for determining
whether there is a quorum.
As of the record date for the special meeting, Equinox's executive officers
and directors owned, in the aggregate, 429,434 shares of Equinox common stock,
or 7.69% of the Equinox common stock then outstanding.
The Merger (Page 21)
A wholly-owned subsidiary of Avocent will be merged into Equinox and each
share of Equinox's common stock will be converted into the right to receive
$9.75 in cash, without interest.
Federal Income Tax Consequences (Page 23)
The receipt of cash by a shareholder in exchange for his or her shares of
Equinox common stock pursuant to the Merger will constitute a taxable
transaction to such shareholder for federal income tax purposes and may also be
a taxable transaction under applicable state, local and foreign tax laws. In
general, a shareholder will recognize gain or loss equal to the difference
between $9.75 per share and such shareholder's adjusted tax basis in the shares
exchanged.
All shareholders should read carefully the tax discussion in "The
Merger--Federal Income Tax Consequences" beginning on page 23. Shareholders are
urged to consult their own tax advisors as to the specific consequences to them
of the Merger under federal, state, local and any other applicable tax laws.
Accounting Treatment (Page 24)
Equinox expects that the Merger will be accounted for by Avocent under the
purchase method of accounting in accordance with generally accepted accounting
principles.
Dissenters' Appraisal Rights (Page 24)
Equinox shareholders are not entitled under Florida law or Equinox's
articles of incorporation to exercise dissenters' appraisal rights in connection
with the Merger.
Regulatory Approvals (Page 24)
Consents, approvals and filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, are required for consummation of the
Merger.
5
<PAGE>
The Merger Agreement (Page 25)
Conditions to the Merger (Page 30)
Each party's obligation to effect the Merger is subject to the satisfaction
of a number of conditions. The most significant conditions to consummating the
Merger are the approval and adoption of the Merger Agreement by the holders of a
majority of the shares of Equinox common stock and the expiration or early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
No Solicitation (Page 28)
Equinox has agreed, subject to certain exceptions, not to initiate or
engage in discussions with another party concerning a business combination while
the Merger is pending.
Termination (Page 31)
Under certain circumstances, the Merger Agreement may be terminated and the
Merger abandoned, at any time prior to the effective time of the Merger, whether
before or after approval by Equinox's shareholders.
Fees and Expenses (Page 32)
Equinox and Avocent will pay their own fees, costs and expenses incurred in
connection with the Merger Agreement, except that Equinox and Avocent will share
the expense associated with the pre-merger notification and report forms under
the Hart-Scot-Rodino Antitrust Improvement Act of 1976, as amended, and Equinox
will bear all expenses incurred in connection with this proxy statement.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT, THE DOCUMENTS APPENDED TO THIS PROXY STATEMENT OR
INCORPORATED INTO THIS PROXY STATEMENT BY REFERENCE AND OTHER STATEMENTS MADE
FROM TIME TO TIME BY EQUINOX CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS. THOSE
STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF, OR CURRENT
EXPECTATIONS OF EQUINOX, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE
BASED. SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE
AND INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
6
<PAGE>
MARKET PRICES FOR COMMON STOCK AND DIVIDENDS
Equinox's common stock is traded on Nasdaq National Market System under the
symbol "EQNX." The following table sets forth for the fiscal quarter indicated
the high and low closing sales prices per share of Equinox's common stock as
reported by the Nasdaq:
High Low
---- ---
1998
First Quarter $15.42 $10.42
Second Quarter 18.25 7.38
Third Quarter 10.00 7.50
Fourth Quarter 12.00 7.13
1999
First Quarter 14.31 9.38
Second Quarter 10.81 8.13
Third Quarter 14.06 9.88
Fourth Quarter 14.00 7.13
2000
First Quarter 10.00 7.56
Second Quarter 7.97 5.38
Third Quarter 6.47 5.34
Fourth Quarter (through November 3, 2000) 7.00 4.85
On November 3, 2000, the last trading day prior to the announcement of the
Board's approval of the Merger, the closing price per share of Equinox's common
stock as reported by Nasdaq was $7.00.
Equinox has not paid cash dividends on its common stock during the last
three fiscal years.
On the record date for the special meeting, there were approximately 55
holders of record of the 5,581,154 outstanding shares of Equinox's common stock.
Shareholders should obtain current market price quotations for Equinox's
common stock in connection with voting their shares of common stock.
7
<PAGE>
SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data of Equinox
as of, and for each of the years in the five-year period ended December 31, 1999
and for the nine months ended September 30, 1999 and September 30, 2000. This
information should be read in connection with Equinox's financial statements and
the notes thereto which have previously been filed with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales .................................... $ 20,222 $ 24,779 $ 28,373 $ 31,327 $ 31,735 $ 26,710 $ 12,661
Cost of sales ................................ 10,554 12,774 13,951 15,121 14,626 12,242 6,510
-------- -------- -------- -------- -------- -------- --------
Gross profit ................................. 9,668 12,005 14,422 16,206 17,109 14,468 6,151
-------- -------- -------- -------- -------- -------- --------
Research and development ..................... 2,149 2,640 2,857 3,117 3,473 2,662 2,695
Selling, general and administrative .......... 5,515 5,569 6,092 6,930 7,410 5,695 5,053
-------- -------- -------- -------- -------- -------- --------
Total operating expenses ..................... 7,664 8,209 8,949 10,047 10,883 8,357 7,748
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations ................ 2,004 3,796 5,473 6,159 6,226 6,111 (1,597)
Other income, net ............................ 639 486 555 639 555 613 787
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes ............ 2,643 4,282 6,028 6,798 6,781 6,724 (810)
(Benefit) provision for income taxes ......... (1,023) (1,527) (2,121) (2,241) (2,291) 2,286 374
-------- -------- -------- -------- -------- -------- --------
Net income ................................... $ 1,620 $ 2,755 $ 3,907 $ 4,557 $ 4,490 $ 4,438 $ (436)
======== ======== ======== ======== ======== ======== ========
Income per share:
Basic (1) .................................... $ 0.26 $ 0.48 $ 0.76 $ 0.88 $ 0.84 $ 0.83 $ (0.08)
======== ======== ======== ======== ======== ======== ========
Diluted (1) .................................. $ 0.26 $ 0.45 $ 0.72 $ 0.82 $ 0.79 $ 0.78 $ (0.08)
======== ======== ======== ======== ======== ======== ========
<CAPTION>
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital .............................. $ 17,849 $ 18,904 $ 18,810 $ 26,414 $ 30,978
Total assets ................................. 26,828 26,748 27,583 34,971 38,267
Long-term debt ............................... -- -- -- -- --
Shareholders' equity ......................... 21,285 22,291 21,935 29,805 34,254
</TABLE>
----------
(1) Amounts prior to 1997 have been restated to conform with Statement of
Financial Accounting Standards No. 128.
8
<PAGE>
SPECIAL FACTORS
Background of the Merger
On March 1, 2000, Bill Dambrackas, Equinox's Chief Executive Officer, and
Bob Williamson, Equinox's Chief Financial Officer, attended an analyst
conference in New York City. Equinox was an invited presenting company at the
conference, as were Apex Inc. and Cybex Computer Products Corporation,
predecessor corporations of Avocent. During a pre-conference cocktail party, Mr.
Williamson was introduced to Dusty Pritchett who at the time was Cybex's Senior
Vice President of Finance and Chief Financial Officer.
On March 2, 2000, Messrs. Dambrackas and Williamson attended Cybex's formal
conference presentation, which was given by Mr. Pritchett and Gary Johnson,
Cybex's Senior Vice President of Sales. Afterwards, they had lunch with Mr.
Pritchett and discussed each other's respective businesses. At the end of lunch,
Mr. Pritchett suggested that Vic Odryna, Cybex's Senior Vice President of
Corporate Strategic Marketing, visit Equinox within the next several weeks to
discuss the possibility either of Equinox supplying products to Cybex or a
business combination between the companies.
On March 3, 2000, Mr. Pritchett attended Equinox's formal conference
presentation as well as the individual analyst and investor meeting held by
Equinox immediately following the presentation. Later that day, Messrs.
Dambrackas and Williamson attended Apex's formal conference presentation.
On March 8, 2000 Apex and Cybex announced that they had entered into a
merger agreement pursuant to which the two companies would combine their
businesses under a common parent corporation.
On March 10, 2000, Mr. Odryna visited Mr. Dambrackas at Equinox's
headquarters in Sunrise, Florida. Equinox and Cybex entered into a mutual
non-disclosure agreement. Messrs. Dambrackas and Odryna discussed generally
their respective company's technology, products, markets and strategic
direction. Mr. Dambrackas also introduced Mr. Odryna to several other Equinox
personnel. The meeting ended with the mutual understanding that the companies
could benefit from working together, but no specific projects or transactions
were agreed upon.
On April 25, 2000, Messrs. Dambrackas and Williamson visited Cybex's
headquarters in Huntsville, Alabama at Cybex's invitation. They met with Messrs.
Pritchett, Johnson and Odryna, as well as Doyle Weeks, Cybex's Executive Vice
President of Business Development, and Charles Williams, Director of
Development, and discussed potential business opportunities as well as the
possibility of a business combination between the companies. The meeting ended
with the mutual understanding that the companies could benefit from working
together and should explore opportunities for Equinox to supply products to
Cybex.
During June 2000, Mr. Johnson invited Equinox to jointly propose supplying
products with Cybex to Harvardnet.com, a large Cybex customer. Equinox and Cybex
were both awarded orders and jointly installed their products at this customer's
facility during July 2000.
9
<PAGE>
On July 1, 2000, the combination of Apex and Cybex into Avocent Corporation
became effective.
During early August 2000, Mr. Pritchett contacted Mr. Dambrackas and
suggested that representatives of Equinox and Avocent meet to discuss a possible
business combination. On August 18, 2000, Messrs. Pritchett, Johnson and Weeks,
as well as Christopher L. Thomas, Avocent's Senior Vice President of
Engineering, visited Equinox for a full day meeting to conduct a preliminary due
diligence investigation of Equinox and discuss a possible business combination.
Following the meeting, Avocent requested further information to assist it in
valuation of Equinox.
On August 30, 2000, Equinox's Board of Directors met by telephone
conference call. The Board discussed the recent developments with Avocent, as
well as the potential interest of another company (Company B) in acquiring
Equinox. Equinox had previously executed a confidentiality agreement with
Company B, and representatives of Equinox had shared preliminary due diligence
information and had preliminary discussions concerning the possibility of
Company B acquiring Equinox. Representatives of Raymond James participated in
the meeting, and at the conclusion of the meeting the Board authorized Equinox
to retain Raymond James to assist it in evaluating and negotiating any potential
business combination proposals that resulted from the preliminary discussions
with Avocent and Company B.
During September 2000, Avocent conducted a due diligence review of Equinox,
and representatives of Avocent and Avocent's independent auditors met on several
occasions with representatives of Equinox to discuss various aspects of
Equinox's business. There were no negotiations during this period between
Equinox and Avocent concerning a possible business combination.
During the first week of October 2000, Equinox and Avocent entered into a
mutual non-disclosure agreement, and Mr. Pritchett visited Equinox's
headquarters and met with Messrs. Dambrackas and Williamson. During these
meetings, Mr. Pritchett indicated that Avocent was interested in acquiring
Equinox in either a cash merger for $8.25 per Equinox share or in a
stock-for-stock merger for Avocent shares having a value of $8.00 per Equinox
share. Messrs. Pritchett, Dambrackas and Williamson also discussed alternatives
for the treatment of existing Equinox stock options in the proposed transactions
and other general terms and conditions of the transactions.
Following these meetings, Messrs. Dambrackas and Williamson individually
briefed the members of Equinox's Board about Avocent's proposal. During the
latter part of the same week, Messrs. Dambrackas and Williamson conferred with
Raymond James on several occasions to determine Raymond James' view as to the
consideration offered by Avocent, as well as the prospects of receiving an offer
from Company B.
At the beginning of the following week, Mr. Dambrackas contacted the
president of Company B to determine whether they were still considering a
possible acquisition of Equinox. Mr. Dambrackas was informed that Company B was
planning to make an offer to acquire Equinox for Company B stock that, based on
the suggested exchange ratio and the closing stock price of Company B's shares
over the preceding few days, would have had a value at that time of
approximately $8.00 per share. There were no other discussions or negotiations
between Equinox and Company B of the terms of that potential acquisition
proposal.
10
<PAGE>
On October 11, 2000, Messrs. Dambrackas and Pritchett spoke further about
Avocent's offer. Mr. Dambrackas indicated that Equinox's Board had a regular
meeting scheduled for the following day, at which they would consider Avocent's
proposal. Mr. Dambrackas also informed Mr. Pritchett of Equinox's discussions
with Company B and the potential for a competing acquisition proposal. At the
conclusion of these discussions, Mr. Pritchett indicated that Avocent was
interested in concluding a deal with Equinox and offered to increase the
proposed cash merger consideration to $9.25 per Equinox share.
On October 12, 2000, Equinox's Board held its regularly scheduled meeting.
During the meeting, the Board discussed the Avocent proposal, as well as the
prospects of receiving a firm acquisition proposal from Company B.
Representatives of Raymond James participated in the meeting and discussed with
the Board their view of the financial terms of the Avocent proposal. The Board
generally agreed that Equinox should pursue Avocent's proposal to effect a cash
merger with Equinox. Based on their view of the amount Avocent would be willing
to pay to acquire Equinox, the Board authorized Mr. Dambrackas to make Avocent a
counteroffer at $9.75, which represented a 100% premium over the closing sales
price of the Equinox common stock on the day preceding the meeting. A
representative of Greenberg Traurig, Equinox's legal counsel was invited to join
the meeting and discussed with the members of the Board their legal duties in
connection with the consideration of Avocent's proposal.
On October 13, 2000, Mr. Dambrackas communicated Equinox's counteroffer to
Mr. Pritchett. Mr. Pritchett informed Mr. Dambrackas that Avocent was willing to
increase its cash merger proposal to $9.75 per Equinox share, and they agreed
that Equinox and Avocent should proceed to negotiate a definitive merger
agreement. Mr. Pritchett also indicated that Avocent would request from Equinox
any additional required legal and financial due diligence materials during the
following week.
At the beginning of the following week, Samuel F. Saracino, Avocent's
Senior Vice President of Legal and Corporate Affairs and General Counsel, and
representatives of Sirote Permut, Avocent's outside counsel, and Greenberg
Traurig discussed generally the terms of the proposed merger agreement and a
timetable for completing the transaction. Between October 20 and November 2,
2000, Equinox furnished Avocent additional legal due diligence materials and
permitted representatives of Avocent's independent accountants to conduct
additional financial due diligence. In addition, representatives of Equinox and
Avocent reviewed and negotiated the terms and conditions of a definitive merger
agreement for the transaction.
On October 27, 2000, Avocent's board of directors held a regularly
scheduled meeting, during which the Merger Agreement and Merger were approved.
Mr. Pritchett informed Mr. Dambrackas of such approval following the conclusion
of the Avocent board meeting.
On November 3, 2000, the Equinox Board, with representatives of Raymond
James and Greenberg Traurig participating, held a meeting to discuss the
definitive merger agreement. Greenberg Traurig summarized the material terms of
the agreement for the Board and discussed the Board's legal duties in connection
with the consideration of the agreement. Raymond James then presented the Board
with a summary of the analysis that it had performed to produce a range of
implied values for Equinox's common stock. Raymond James concluded its
presentation by
11
<PAGE>
delivering to the Equinox Board its oral opinion that the $9.75 cash merger
consideration was fair, from a financial point of view, to Equinox's
shareholders. Based on Raymond James' valuation analysis and opinion and other
factors considered during the meeting, the Board determined that the terms of
the Merger Agreement and the Merger were fair to, and in the best interests of,
Equinox and its shareholders, and unanimously adopted and approved the Merger
Agreement. The Board also unanimously resolved to recommend that Equinox's
shareholders vote for approval and adoption of the Merger Agreement.
A more complete description of the factors considered by the Board of
Directors is set forth under the caption "Recommendation of Board of Directors"
on pages 12 through 13.
Recommendation of the Board of Directors
On November 3, 2000, the Board unanimously determined that the Merger
Agreement and the Merger are fair to and in the best interests of Equinox's
shareholders, and unanimously recommended that the shareholders approve and
adopt the Merger Agreement. During its deliberations, the Board was assisted by
its financial advisor, Raymond James, and Equinox's legal counsel, Greenberg
Traurig.
Factors Considered. In connection with its recommendation, the Board
considered a number of factors, including, the following:
(1) the historical market prices and recent trading activity of Equinox's
common stock, in particular the fact that the Merger would enable the
shareholders to realize a substantial premium over the recent trading prices for
Equinox's common stock; the cash merger consideration of $9.75 per share
represented a premium of approximately 43% over the closing price of $6.8125 on
November 2, 2000, the day immediately preceding the Board meeting, a premium of
approximately 56% over the average closing prices during the week prior to the
Board meeting and a premium of approximately 59% over the average closing prices
during the four-week period prior to the Board meeting;
(2) the presentation of Raymond James to the Board at the November 3, 2000
meeting, as to the its analysis of the financial terms of the transaction, and
the oral opinion of Raymond James delivered to the Board at the same meeting and
later confirmed in writing, as to the fairness from a financial point of view of
the cash merger consideration to be received by Equinox's shareholders pursuant
to the Merger Agreement;
(3) information concerning Equinox's financial condition, recent results of
operations and prospects, as well as the risks involved in achieving such
prospects;
(4) the fact that the cash merger consideration and the terms and
conditions of the Merger Agreement were the result of arm's-length negotiations
between Equinox and Avocent;
(5) the likelihood of consummation of the Merger, including the fact that
the Merger is not subject to a financing condition and that, based on publicly
available information, Avocent had sufficient available funds to complete the
Merger;
12
<PAGE>
(6) the terms and conditions of the Merger Agreement, including the
provisions of the agreement that permit Equinox to receive unsolicited
acquisition proposals from, and negotiate and give information to, third parties
and also permit the Board, to the extent required by its fiduciary obligations
to Equinox's shareholders, to approve an acquisition transaction on terms more
favorable to Equinox's shareholders than those set forth in the Merger
Agreement, upon the payment to Avocent of a $2.5 million termination fee; and
(7) the advice of Greenberg Traurig, its legal advisor, with respect to the
terms of the Merger Agreement and the Merger.
The Board considered the foregoing factors to be positive factors
supporting its determination that the Merger is fair and in the best interest of
Equinox's shareholders. The Board did not believe that any of the factors it
considered concerning the Merger were negative, although it recognized that
Equinox's shareholders will receive cash in the Merger and will therefore not
have the opportunity to participate in the future growth, if any, of Equinox's
business.
The above discussion of the information and factors considered by the Board
is not intended to be exhaustive, but includes all material factors considered
by the Board. In view of the various types of information considered, the Board
did not consider it practicable to, nor did it attempt to, quantify, rank or
otherwise assign relative weights to the specific factors it considered in
making its determination, nor did it evaluate whether such factors were of equal
importance. In addition, the Board did not reach any specific conclusion with
respect to each of the factors. Rather, based upon its overall analysis of these
factors and its evaluation of all other relevant information provided or
available to them, including discussions with Equinox's management and financial
and legal advisors, the Board reached a general consensus that the Merger was
fair to and in the best interests of Equinox and its shareholders. In
considering the factors described above, individual members of the Board may
have given different weights to different factors.
The Board believes that the Merger was considered in a manner that was
procedurally fair to Equinox's shareholders because, among other things: (1) the
$9.75 per share cash consideration and the other terms and conditions of the
Merger Agreement resulted from active arm's-length negotiations between Equinox
and its representatives, on the one hand, and Avocent and its representatives,
on the other hand; (2) even though Mr. Dambrackas, Equinox's President and Chief
Executive Officer, who is a director of Equinox and participated in the Board
deliberations, may have interests in the Merger that differ from the interests
of other Equinox shareholders because of his stock options and future employment
with Avocent, three of the four members of the Board are non-management,
non-affiliated independent directors; and (3) the Board received advice from
Raymond James, its financial advisor, and Greenberg Traurig, Equinox's outside
legal counsel. The Board believed that such safeguards were sufficient to assure
that the Merger is fair to, and in the best interests of Equinox's shareholders.
Avocent's Reasons for the Merger
In reaching its determination to approve and adopt the Merger Agreement and
the Merger, the Avocent board of directors consulted with Avocent's management
and its financial and legal advisors, and considered a number of factors. The
Avocent board did not assign any
13
<PAGE>
relative or specific weights to the factors considered in reaching such
determination, and individual directors may have given differing weights to
different factors. In its decision to recommend and approve the Merger, the most
important benefits identified by the board of directors of Avocent were the
following:
o Avocent's management belief that, given the complementary nature of the
product lines of Avocent and Equinox, the Merger will enhance the
opportunity for the potential realization of Avocent's strategic
objectives.
o The combination of Equinox's products with Avocent's products will allow
Avocent to offer a more comprehensive product line to its customers.
o Equinox's technological resources may allow Avocent to compete more
effectively against increasing competition in some sectors by providing
Avocent with enhanced ability to develop and market serial switching and
other products.
o The potential strategic benefits of acquiring Equinox.
o Historical information concerning Equinox's business, prospects, financial
performance and condition, operations, technology, management and
competitive position, including public reports concerning results of
operations for Equinox filed with the SEC.
o Avocent's management's view of the financial condition, results of
operations and businesses of Equinox before and after giving effect to the
Merger.
o Current financial market conditions and historical market prices,
volatility and trading information with respect to Avocent's common stock
and Equinox's common stock.
o The belief that the terms of the Merger Agreement, including the price for
the Equinox shares and the parties' representations, warranties, and
covenants, and the conditions to their respective obligations, are
reasonable. The Avocent board of directors also considered the provisions
in the Merger Agreement that prohibited solicitation of third-party bids
and the acceptance, approval or recommendation of any unsolicited
third-party bids. The Avocent board of directors considered that the
provisions in the Merger Agreement for the benefit of Avocent reasonably
protected the interests of Avocent shareholders, and those for the benefit
of Equinox did not present any significant impediments to proceeding with
the transaction considering all of the circumstances.
o The potential for other third parties to enter into strategic relationships
with or to acquire Equinox.
o The expected impact of the Merger on Avocent's customers and employees.
o Reports from management and from legal and financial advisors as to the
results of the due diligence investigation of Equinox.
14
<PAGE>
Potential risks or other negative factors identified by the Avocent board
of directors include the following:
o The risk that the potential benefits of the Merger may not be realized.
o The challenges of integrating the Equinox management team, strategies,
culture and organization with Avocent, especially in light of the recent
merger between Apex Inc. and Cybex Computer Products Corporation that
resulted in the formation of Avocent.
o The risk that the Merger might not be consummated despite the parties'
efforts, even if approved by Equinox's shareholders.
o The potentially significant adverse impact to Avocent's net income that
will arise due to non-cash charges for the amortization of goodwill and
other intangibles in light of the impact of purchase accounting for the
Merger.
o The possibly substantial charges to be incurred in connection with the
Merger, including costs of integrating the businesses and transaction
expenses arising from the Merger.
o The risk that, despite the efforts of Avocent, key technical and management
personnel of Equinox might not remain employed by Avocent after the Merger.
The foregoing discussion of the information and factors considered by the
Avocent board of directors is not intended to be exhaustive but includes the
material factors considered by the Avocent board of directors. In view of the
complexity and wide variety of information and factors, both positive and
negative, considered by the Avocent board of directors, it did not find it
practical to quantify, rank or otherwise assign relative or specific weights to
the factors considered. In addition, the Avocent board did not reach any
specific conclusion with respect to each of the factors considered, or any
aspect of any particular factor. Instead, the Avocent board of directors
conducted an overall analysis of the factors described above, including
discussions with Avocent's management and legal, financial and accounting
advisors. In considering the factors described above, individual members of the
Avocent board of directors may have given different weight to different factors.
The Avocent board considered all these factors as a whole and believed the
factors supported its determination to approve the Merger. After taking into
consideration all of the factors set forth above, Avocent's board of directors
concluded that the Merger was fair to, and in the best interests of, Avocent and
its shareholders and approved the Merger and the Merger Agreement.
Opinion of Financial Advisor
Equinox retained Raymond James to render an opinion to Equinox's Board as
to the fairness, from a financial point of view, to Equinox's shareholders, of
the financial terms and conditions of the Merger. No limitations were imposed on
Raymond James by the Equinox Board or Equinox management with respect to the
investigations made or procedures followed by Raymond James in preparing and
rendering its opinion, and Equinox and its management cooperated fully with
Raymond James in connection therewith. Raymond James rendered its
15
<PAGE>
written Fairness Opinion that as of November 3, 2000, the consideration to be
received by the shareholders of Equinox in the Merger was fair, from a financial
point of view, to the holders of Equinox common stock.
The full text of the Fairness Opinion, dated November 3, 2000, which sets
forth assumptions made, matters considered and limits on the scope of review
undertaken, is attached as Appendix B to this proxy statement and is
incorporated by reference herein. Equinox's shareholders are urged to read the
Fairness Opinion in its entirety. Raymond James' Fairness Opinion, which is
addressed to Equinox Board, is directed only to the fairness of the
consideration to be received by the shareholders of Equinox in the Merger to
Equinox's shareholders from a financial point of view and does not constitute a
recommendation to any Equinox shareholder as to how such shareholder should vote
on the Merger and does not address any other aspect of the proposed Merger or
any related transaction. The vote on the Merger and other terms of the Merger
were determined pursuant to negotiations between Equinox and Avocent and not
pursuant to recommendations of Raymond James. Raymond James merely evaluated the
Merger from a financial point of view. Raymond James consents to the inclusion
of this summary of its opinion in, and attachment of its opinion to, this proxy
statement. The summary of the Fairness Opinion set forth in this proxy statement
is qualified in its entirety by reference to the full text of such opinion.
In connection with Raymond James' review of the proposed Merger and the
preparation of its opinion, Raymond James has, among other things:
(1) reviewed Equinox's annual report to shareholders on Form 10-K for the
fiscal years ended December 31, 1999, December 31, 1998, and December
31, 1997, its quarterly reports on Form 10-Q for the quarters ended
March 31, 2000 and June 30, 2000, and other publicly available
financial information of Equinox;
(2) reviewed certain non-public information prepared by the management of
Equinox, such as financial statements including unaudited financials
for the quarter ended September 30, 2000, financial projections and
other financial and operating data concerning Equinox;
(3) discussed the past and current operations and financial condition and
the prospects of Equinox with senior executives of Equinox;
(4) reviewed a draft of the Agreement and the financial terms and
conditions therein;
(5) reviewed publicly available financial and stock market data with
respect to certain other companies in lines of business Raymond James
believes to be generally comparable to those of Equinox; and
(6) compared the financial terms of the Merger with the financial terms of
certain other transactions which Raymond James believes to be
generally comparable to the Merger.
16
<PAGE>
In conducting its investigation and analyses and in arriving at its
opinion, Raymond James took into account such accepted financial and investment
banking procedures and considerations as it deemed relevant, including a review
of (i) historical and projected revenues, operating earnings, net income and
capitalization of Equinox and certain other publicly held companies in
businesses it believed to be comparable to Equinox; (ii) the current and
projected financial position and results of operations of Equinox; (iii)
historical market prices and trading activity of the common stock of Equinox;
and (iv) the general condition of the securities markets.
As described in its opinion, Raymond James assumed and relied upon the
accuracy and completeness of all information supplied or otherwise made
available to Raymond James by Equinox or any other party and did not attempt to
verify independently any such information. In addition, Raymond James did not
make or receive any independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of Equinox, nor has Raymond James been
furnished with any such evaluation or appraisal. Raymond James assumed that the
financial forecasts, estimates, projections, and other information with respect
to Equinox examined by Raymond James had been reasonably prepared in good faith
on bases reflecting the best currently available estimates and judgments of the
management of Equinox, and Raymond James relied upon each party to advise it
promptly if any such information previously provided to or discussed with
Raymond James had become inaccurate or had been required to be updated during
the period of its review. In addition, Raymond James assumed the Merger will be
consummated substantially in accordance with the terms set forth in the draft of
the Agreement it reviewed.
The Fairness Opinion was based on economic, market, and other conditions as
in effect on, and the information available to it as of, the date of its
opinion, and Raymond James has undertaken no obligation to update or reevaluate
its opinion.
Fairness Opinion Analyses
The following is a summary of the analyses performed by Raymond James in
connection with the preparation of the Fairness Opinion:
Presentation by Raymond James. The following summarizes the material
financial analyses presented by Raymond James to Equinox's Board at its meeting
on November 3, 2000, which were considered by Raymond James in rendering the
Fairness Opinion described below. This summary is not a complete description of
the analyses underlying the Fairness Opinion or of information presented at
meetings between Raymond James and representatives of Equinox held in advance of
the Equinox Board's consideration of the Merger.
Precedent Transaction Analysis. Raymond James presented to Equinox's Board
a summary of a precedent transaction analysis which compared four key financial
ratios for thirteen selected precedent LAN workbase, LAN attachment, and
networking company combinations announced during the three year period prior to
November 3, 2000 to the same four key financial ratios projected for the
proposed Merger. The precedent combination transactions consisted of: Centigram
Communications Corporation combining with ADC Telecommunications, Inc.; ACT
Networks, Inc. combining with Clarent Corporation; Cybex Computer Products
Corporation combining with Apex Inc; Premisys Communications, Inc. combining
with Zhone Technologies, Inc.; OpenROUTE Networks, Inc. combining with Netrix
17
<PAGE>
Corporation; Mylex Corporation combining with International Business Machines
Corporation; PulsePoint Communications combining with Unisys Corporation;
Dialogic Corporation combining with Intel Corporation; Voice Control Systems,
Inc. combining with Koninklijke Philips Electronics N.V.; Xylan Corporation
combining with Alcatel; Aydin Corporation combining with L-3 Communications
Holdings, Inc.; Reltec Corporation combining with The General Electric Company,
p.l.c.; and Summa Four, Inc. combining with Cisco Systems, Inc.
Raymond James examined the following four key financial ratios for these
thirteen selected precedent LAN workbase, LAN attachment, and networking company
combinations: target company enterprise value to target company sales; target
company enterprise value to target company earnings before interest, taxes,
depreciation and amortization ("EBITDA"); target company enterprise value to
target company earnings before interest and taxes ("EBIT"); and target company
equity value to target company net income. Sales, EBITDA, EBIT and net income
were calculated by utilizing the financial statistics for the trailing twelve
month period reported prior to the consummation of the precedent company
combinations.
Premium Analysis. Raymond James presented to Equinox's Board an analysis of
the premiums paid over the stock price of acquired companies in selected merger
transactions since the beginning of 1998, based on stock prices one day, one
week and four weeks prior to the announcement of the transaction. This analysis
demonstrated that, on average, the acquired company received a 29.1%, 35.6% and
48.9% premium over its stock price one day, one week and four weeks prior to the
announcement of the transaction, respectively. The $9.75 per share cash
consideration offered in the Merger represents a premium of 39.3%, 39.3% and
73.3% to Equinox's closing price one day, one week, and four weeks prior to the
date (November 6, 2000) that the Merger was publicly announced.
Comparable Companies Analysis. Raymond James also presented to Equinox's
Board a summary financial comparison of Equinox to five public LAN workbase, LAN
attachment, and networking companies Raymond James deemed to be reasonably
comparable to Equinox. The comparable companies consisted of: Digi International
Inc.; Lantronix, Inc.; Performance Technologies, Incorporated; Perle Systems
Limited; and SBE, Inc.
Raymond James then compared the following four key financial ratios for
these comparable companies to the same corresponding ratios for Equinox under
the proposed Merger: enterprise value to sales; enterprise value to EBITDA;
enterprise value to EBIT; and equity value to net income. Sales, EBITDA, EBIT
and net income were calculated for Equinox and the comparable companies by
utilizing the latest trailing twelve months financial statistics that have been
publicly reported.
Equinox Discounted Cash Flow Analysis. Raymond James presented to Equinox's
Board the results of a discounted cash flow analysis for fiscal years 2000 to
2004 to estimate the present value of the stand-alone unleveraged free cash
flows that Equinox is expected to generate if Equinox performs in accordance
with certain internal management forecasts. For purposes of this analysis,
unleveraged free cash flows were defined as unleveraged net income plus
depreciation plus amortization less capital expenditures less investment in
working capital. Raymond James performed its analyses based on financial
forecasts and assumptions provided to it by Equinox.
18
<PAGE>
Raymond James used the year 2004 as the terminal year for the analysis and
calculated terminal values for Equinox by applying a range of multiples of
EBITDA to the projected fiscal year 2004 EBITDA for Equinox. The unleveraged
projected free cash flows and terminal values were then discounted using a range
of discount rates.
Opinion of Raymond James. During the November 3, 2000 meeting of Equinox's
Board, Raymond James gave its oral and written opinion that, as of such date and
based upon and subject to various qualifications and assumptions described with
respect to its Fairness Opinion, the consideration to be received by Equinox's
shareholders in the Merger was fair from a financial point of view to Equinox's
shareholders.
The summary set forth above does not purport to be a complete description
of the analyses of data underlying Raymond James' opinion or its presentation to
Equinox's Board. The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to a partial analysis or summary description.
Raymond James believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in its opinion. In addition, Raymond James considered the results of
all such analyses and did not assign relative weights to any of the analyses, so
the ranges of valuations resulting from any particular analysis described above
should not be taken to be Raymond James' view of the actual value of Equinox.
In performing its analyses, Raymond James made numerous assumptions with
respect to industry performance, general business, economic and regulatory
conditions and other matters, many of which are beyond the control of Equinox.
The analyses performed by Raymond James are not necessarily indicative of actual
values, trading values or actual future results which might be achieved, all of
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of Raymond James' analysis
of the fairness of the consideration to be received by the shareholders of
Equinox in the Merger to Equinox's shareholders from a financial point of view
and were provided to Equinox's Board. The analyses do not purport to be
appraisals or to reflect the prices at which businesses or securities might be
sold. In addition, as described above, the opinion of Raymond James was one of
many factors taken into consideration by Equinox's Board in making its
determination to approve the Merger. Consequently, the analyses described above
should not be viewed as determinative of Equinox's Board or Equinox's
management's opinion with respect to the value of Equinox. Equinox placed no
limits of the scope of the analysis performed, or opinion expressed, by Raymond
James.
In connection with the Merger, Equinox contracted with Raymond James to
provide financial advisory and investment banking services, pursuant to which
Equinox requested Raymond James to provide the fairness opinion summarized
herein. Equinox's Board retained Raymond James because of Raymond James'
qualifications, expertise, and reputation, as well as its prior investment
banking relationship with Equinox. Raymond James is actively involved in the
investment banking business and regularly undertakes the valuation of investment
securities in connection with public offerings, private placements, business
combinations and similar transactions. Through negotiation, Equinox and Raymond
James determined that Equinox would pay Raymond James a fee upon the
consummation of the Merger, which fee is contingent upon
19
<PAGE>
the value of the Merger. In the ordinary course of business, Raymond James may
trade in the securities of Equinox 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.
Conflicts of Interest
When you consider the Board's recommendation to vote for the Merger, you
should be aware of interests which some of the directors and executive officers
have in the Merger that are different from your interests as shareholders. The
Board was aware of these and other interests and considered them before
approving and adopting the Merger Agreement.
Stock Options. Upon completion of the Merger, each outstanding stock option
issued by Equinox will be assumed by Avocent and become an option to purchase an
adjusted share amount of Avocent common stock. Each option will become an option
to purchase a number of shares of Avocent common stock determined by multiplying
the number of shares of Equinox common stock subject to such option at the
effective time of the Merger by a fraction, the numerator of which is 9.75 and
the denominator of which is the closing price of Avocent's common stock as
quoted on the Nasdaq Stock Market on the last trading date prior to the closing
date, at an exercise price per share of Avocent's common stock equal to the
exercise price per share of such option immediately prior to the effective time
of the Merger divided by 9.75. The number of shares of Avocent common stock
purchasable under the option will be rounded down to the nearest whole share,
without payment of any cash for fractional shares.
Assumption of Stock Options
The following directors and executive officers hold as of November 1, 2000
options to purchase a total of 1,074,860 shares of Equinox's common stock
granted under Equinox's stock option plans:
Name and Title No. of Options
----------------------------------------------------- -------------------
William A. Dambrackas 775,989
President, Chief Executive Officer and
Chairman of the Board
Robert F. Williamson, Jr. 51,500
Vice President, Finance and Chief Financial
Officer
Steve Geffin 45,000
Vice President, Development
Robert S. Sowell 77,500
Vice President, Operations
Thomas E. Garrett 64,871
Vice President, Sales
James J. Felcyn, Jr. 22,500
Director
Charles A. Reid 18,750
Director
20
<PAGE>
Name and Title No. of Options
----------------------------------------------------- -------------------
James W. Davidson 18,750
Director
The option holders who elect to exercise any of their vested options prior
to the effective time of the Merger will receive the merger consideration
payable to holders of Equinox common stock in exchange for the shares issued
upon exercise, less the exercise price of the vested option.
Acceleration of Stock Options
The completion of the Merger will cause the full vesting of the following
number of options to purchase shares of Equinox common stock held by the
following executive officers:
Name and Title No. of Options
----------------------------------------- --------------------
William A. Dambrackas 159,215
Robert F. Williamson, Jr. 15,000
Steve Geffin 16,250
Robert S. Sowell 22,243
Thomas E. Garrett 23,367
Employment Agreement
At the time of the Merger, Avocent will enter into an employment agreement
with William A. Dambrackas, Equinox's Chairman of the Board, President and Chief
Executive Officer, to serve as Senior Vice President of Network Technology of
Avocent. The agreement will be in effect until December 31, 2004 and provides
for an annual base salary of $220,000 (slightly less than his current salary of
$228,228 at Equinox), subject to cost-of-living increases, with bonuses at the
discretion of the board of directors of Avocent. Additionally, Mr. Dambrackas
shall receive options to purchase 120,000 shares of Avocent common stock with an
exercise price equal to the closing price of Avocent's common stock on the
effective date of the Merger, which options shall vest in stages over a four
year period. The employment agreement provides Mr. Dambrackas severance benefits
if his employment with the surviving corporation in the Merger is terminated
without cause or within specified time periods following a change in control of
Avocent. For a period of twelve months after his employment with Avocent, Mr.
Dambrackas may not work for a business that competes with Avocent.
THE SPECIAL MEETING
Date, Time and Place
The special meeting will be held on January 2, 2001, at 11:00 a.m., local
time, at Weston Hills Country Club, 2600 Country Club Drive, Weston, Florida
33332. At the special meeting, Equinox shareholders will be asked to consider
and vote upon a proposal to approve and adopt the Merger Agreement and the
Merger.
21
<PAGE>
Record Date; Voting Power; Quorum
Shareholders of record of Equinox common stock at the close of business on
November 24, 2000 are entitled to notice of and to vote at the special meeting.
As of the record date, there were 5,581,154 shares of Equinox common stock
issued and outstanding.
Holders of record of Equinox common stock on the record date are entitled
to one vote per share on any matter that may properly come before the special
meeting.
The representation, in person or by proxy, of at least a majority of the
outstanding shares of Equinox common stock entitled to vote at the special
meeting is necessary to constitute a quorum for the transaction of business.
Vote Required; Security Ownership of Management
Under Florida law, the affirmative vote of the holders of a majority of the
shares of Equinox common stock outstanding on the record date is required to
approve the Merger Agreement and the Merger. For purposes of determining whether
the Merger Agreement and the Merger have received the required majority vote,
abstentions and broker non-votes (shares held in "street name" through a broker
or other nominee as to which voting instructions with regards to the Merger
Agreement and the Merger have not been received from the beneficial owners and
such broker or other nominee is not permitted to exercise voting discretion with
regards to the Merger Agreement or the Merger) will not be included in the vote
total, although an abstention and a broker non-vote will have the effect of a
vote against the Merger Agreement and the Merger. Abstentions and broker
non-votes will, however, be counted for determining whether there is a quorum.
As of the record date for the special meeting, Equinox's executive officers
and directors owned, in the aggregate, 429,434 shares of Equinox common stock,
or 7.69% of the votes represented by the shares of Equinox common stock then
outstanding. See "Beneficial Ownership of Common Stock" on page 33.
Proxies
Shareholders are requested to complete, date and sign the accompanying form
of proxy and return it promptly in the enclosed postage-paid envelope.
Any shareholder giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted at the special meeting. A later
dated proxy or written notice of revocation given prior to the vote at the
special meeting to the Secretary of Equinox will serve to revoke such proxy.
Also, a shareholder who attends the special meeting in person may, if he or she
wishes, vote by ballot at the special meeting, thereby canceling any proxy
previously given. Mere presence at the special meeting will not serve to revoke
any proxy previously given.
22
<PAGE>
Solicitation of Proxies
In addition to the use of mails, proxies may be solicited by persons
regularly employed by Equinox, by personal interview, telephone and telegraph.
Such persons will receive no additional compensation for such services, but will
be reimbursed for any out-of-pocket expenses incurred by them in connection with
such services. Arrangements may also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares of common stock held of record by
such persons, and Equinox may reimburse such persons for reasonable
out-of-pocket expenses incurred by them in connection therewith.
Equinox will bear the costs of the special meeting and of soliciting
proxies therefor. Equinox may engage a proxy solicitor to assist in the
solicitation of proxies.
THE MERGER
In the Merger, a wholly-owned subsidiary of Avocent will be merged with and
into Equinox, and each share of Equinox's common stock will be converted into
the right to receive $9.75 in cash, without interest.
Federal Income Tax Consequences
The material tax consequences of the Merger are summarized in the following
discussion, which is based on the current provisions of the Internal Revenue
Code, existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any change, which may or may not be retroactive, could alter the tax
consequences to the holders of Equinox common stock described below. The
following discussion is addressed to a shareholder that holds Equinox common
stock as a capital asset and that, for federal income tax purposes, is a U.S.
citizen or resident or a domestic corporation, partnership, trust or estate.
This summary does not purport to deal with all aspects of taxation that may be
relevant to a particular shareholder in light of his, her or its particular
circumstances or to certain types of taxpayers subject to special treatment
under the federal income tax law, including financial institutions,
broker-dealers, foreign persons, persons holding Equinox common stock as part of
a straddle, "synthetic security" or other integrated investment (including a
"conversion transaction") or persons who acquired their Equinox common stock
through the exercise of an employee stock option or otherwise as compensation.
A holder of Equinox common stock will recognize capital gain or loss for
federal income tax purposes on each share of Equinox common stock exchanged for
the merger consideration pursuant to the Merger. The amount of gain or loss
recognized on a share will be equal to the difference between $9.75 and the
holder's basis in the share. The gain or loss will be long-term capital gain or
loss in the case of shares held for more than one year as of the date of the
Merger. In the case of individuals, trusts and estates, net capital gain for a
taxable year (that is, the excess of net long-term capital gain for the taxable
year over any net short-term capital loss for the year) is subject to a maximum
federal income tax rate of 20%. Receipt of the merger consideration in
23
<PAGE>
exchange for Equinox common stock pursuant to the Merger also may be a taxable
transaction under applicable state, local and foreign tax laws.
A holder of Equinox common stock may be subject to backup withholding at
the rate of 31% with respect to the merger consideration received pursuant to
the Merger, unless the holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates that fact or (b) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with the applicable requirements
of the backup withholdings rules. To prevent the possibility of backup
withholding on payments made to certain holders with respect to shares of
Equinox common stock pursuant to the Merger, each holder must provide the
exchange agent for the Merger with his, her or its correct taxpayer
identification number by completing a Form W-9 or Substitute Form W-9. A holder
of Equinox common stock that does not provide his, her or its correct taxpayer
identification number may be subject to penalties imposed by the Internal
Revenue Service, as well as to backup withholding. Any amount withheld under
these rules will be refundable or creditable against the holder's federal income
tax liability, provided the required information is furnished to the IRS.
Equinox (or its agent) will report to the holders of Equinox common stock and to
the IRS the amount of any "reportable payments," as defined in Section 3406 of
the Code, and the amount of tax, if any, withheld with respect thereto.
The federal income tax consequences set forth in this proxy statement are
for general information only. The tax consequences for a particular shareholder
will depend upon the facts and circumstances applicable to that shareholder.
Accordingly, each shareholder is urged to consult his, her or its own tax
adviser to determine the tax consequences of the Merger to the shareholder in
light of his, her or its particular circumstances, including the applicability
and effect of state, local, foreign and other tax laws and any possible changes
in those laws. The foregoing discussion may not apply to shares received
pursuant to the exercise of employee stock options or otherwise as compensation.
Accounting Treatment
Equinox expects that the Merger will be accounted for by Avocent under the
purchase method of accounting in accordance with generally accepted accounting
principles.
Dissenters' Appraisal Rights
Equinox's shareholders are not entitled under Florida law or Equinox's
articles of incorporation to exercise dissenters' appraisal rights in connection
with the Merger.
Delisting and Deregistration of Common Stock
Following the Merger, Equinox's common stock will be no longer traded on
The Nasdaq National Market System, price quotations will no longer be available
and the registration of Equinox's common stock under the Exchange Act will be
terminated. After such registration is terminated, Equinox will no longer be
required to file periodic reports with the Commission.
24
<PAGE>
Regulatory Approvals
The Merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, which prevents reportable transactions from
being completed until statutory waiting periods expire or are terminated. During
these waiting periods, the Antitrust Division of the Department of Justice or
the Federal Trade Commission may request the parties to provide, voluntarily or
otherwise, certain information relevant to their review. Avocent and Equinox
have made the required filings with the Department of Justice and the Federal
Trade Commission, and the applicable waiting periods have not yet expired or
terminated.
The requirements of Hart-Scott-Rodino will be satisfied if the Merger is
completed within one year from the expiration or termination of the waiting
period. During or after the statutory waiting periods, and even after completion
of the Merger, either the Antitrust Division of the Department of Justice or the
Federal Trade Commission could challenge or seek to block the Merger under the
antitrust laws, as it deems necessary or desirable in the public interest. A
competitor, customer or other third party could initiate a private action under
the antitrust laws challenging or seeking to enjoin the Merger. Equinox cannot
be sure that a challenge to the Merger will not be made or that, if a challenge
is made, Equinox will prevail. Equinox is not aware of any other material
governmental or regulatory approval required for completion of the Merger.
THE MERGER AGREEMENT
Overview
The terms and conditions of the Merger are set forth in the Merger
Agreement, the complete text of which is attached as Appendix A to this proxy
statement and is incorporated herein by reference. The summary of the Merger
Agreement contained in this proxy statement does not purport to be complete and
is subject to and qualified in its entirety by reference to the complete text of
such document.
In the Merger, a wholly-owned subsidiary of Avocent will be merged with and
into Equinox, and each share of Equinox's common stock will be converted into
the right to receive $9.75 in cash, without interest.
Exchange of Certificates Representing Common Stock
Instructions with regard to the surrender of stock certificates
representing Equinox common stock, together with a letter of transmittal to be
used for this purpose, will be mailed to Equinox's shareholders as soon as
reasonably practicable after the completion of the Merger. In order to receive
the cash merger consideration, shareholders will be required to surrender their
stock certificates, together with a duly completed and executed letter of
transmittal, to an exchange agent designated by Avocent and approved by Equinox.
As of the date of the Merger, Avocent will deposit the cash merger consideration
in trust with the exchange agent. Upon receipt of such stock certificates and
letter of transmittal, the exchange agent will deliver the cash merger
consideration to the registered holder or his transferee of the shares of
Equinox's
25
<PAGE>
common stock. No interest will be paid or accrued on the amounts payable upon
the surrender of stock certificates.
Shareholders should not submit their stock certificates for exchange until
the instructions and letter of transmittal are received.
After the effective time of the Merger, there will be no further transfers
on the stock transfer books of Equinox of the shares of Equinox's common stock
that were outstanding immediately prior to the Merger. If a certificate
representing such shares is presented for transfer, subject to compliance with
the requisite transmittal procedures, it will be canceled and exchanged for the
merger consideration.
Each certificate representing shares of Equinox's common stock immediately
prior to the effective time of the Merger will, at such time, be deemed for all
purposes to represent only the right to receive the merger consideration into
which the shares of Equinox's common stock represented by such certificate were
converted in the Merger.
Any cash merger consideration delivered or made available to the exchange
agent and not exchanged for stock certificates within six months after the
Merger will be returned by the exchange agent to Avocent, which will thereafter
act as exchange agent. If any certificates representing shares of Equinox common
stock are not surrendered within seven years after the Merger then the unclaimed
merger consideration payable in exchange for such certificates shall, to the
extent permitted under applicable abandoned property, escheat or similar law,
become the property of the surviving corporation in the Merger, free and clear
of all claims or interests of any person previously entitled thereto. None of
the parties to the Merger Agreement nor the exchange agent will be liable to any
person in respect of any consideration delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
Representations and Warranties
Equinox has made representations and warranties in the Merger Agreement
regarding, among other things its organization and good standing, authority to
enter into the transactions, its capitalization, the content and submission of
forms and reports required to be filed by Equinox with the SEC, requisite
governmental and other consents and approvals, and compliance with all
applicable laws.
Avocent has made representations and warranties in the Merger Agreement, on
its behalf and on behalf of its wholly-owned subsidiary, regarding, among other
things, its organization and good standing, authority to enter into the
transactions, the requisite governmental and other consents and approvals,
financing, and the accuracy of information supplied by it for submission on
forms and reports required to be filed by Equinox with the SEC.
Conduct of Business Pending the Merger
Equinox has agreed that during the period from the date of the Merger
Agreement to the effective time of the Merger or termination of the Merger,
unless consented to by Avocent, it will:
26
<PAGE>
o conduct its business diligently and in accordance with good commercial
practice in the ordinary course;
o pay its debts and taxes when due;
o pay or perform its material obligations when due;
o preserve intact its current business organizations;
o keep available the services of its present officers and employees; and
o preserve its relationships with customers, suppliers, distributors,
licensors and licensees and other persons with which it has business
relations.
Equinox has further agreed that it will, until the earlier of the
completion of the Merger or termination of the Merger Agreement, conduct its
business in compliance with certain specific restrictions relating to:
o restricted stock or stock options;
o entering into material partnership arrangements, joint development
agreements or strategic alliances;
o employee severance or termination payments or arrangements;
o the transfer or license of intellectual property;
o the issuance of dividends or other distributions;
o the issuance and redemption of securities;
o modification of its Articles of Incorporation or Bylaws;
o the merger or consolidation with another entity or acquisition of
assets or other entities;
o liquidation or reorganization;
o the sale, lease, license and disposition of assets;
o the incurrence or guaranteeing of indebtedness;
o adopting or amending any employee plans or agreements, increasing
employee benefits or paying special bonuses;
o making any payment outside the ordinary course of business in excess
of $50,000 individually or $100,000 in the aggregate;
o payment or settlement of liabilities;
o waiver, termination, amendment or modification of any material
contract;
o entrance into or modification of contracts relating to distribution,
sale, license or marketing by third parties of products;
o revaluing of assets or modifying accounting methods, principles or
practices;
27
<PAGE>
o incurrence of obligations or entering into any agreement to make
expeditious outside the ordinary course of business in excess of
$50,000 individually or $100,000 in the aggregate;
o hiring any employee with an annual compensation level in excess of
$100,000; and
o grant of exclusive rights to any third party.
No Other Negotiations; No Solicitation
Equinox has agreed to refrain from any activities, discussions or
negotiations with any third parties regarding transactions that would involve a
transfer of control of Equinox.
As used in this proxy statement, an "Acquisition Proposal" is any offer or
proposal relating to any Acquisition Transaction (as defined in the next
sentence), other than an offer or proposal from Avocent. An "Acquisition
Transaction" is any transaction or series of transactions, other than the
Merger, involving any of the following:
o The acquisition or purchase by a person or group of more than a 5%
interest in total outstanding voting securities of Equinox or any of
its subsidiaries
o Any tender offer or exchange offer that if consummated would result in
any person or group beneficially owning, more than a 5% interest in
total outstanding voting securities of Equinox or any of its
subsidiaries
o Any merger, consolidation, business combination or similar transaction
in which the shareholders of Equinox immediately preceding such
transaction hold less than 95% of the equity interests in the
surviving or resulting entity
o Any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, acquisition
or disposition of more than 5% of the assets of Equinox
o Any liquidation or dissolution of Equinox
Until the Merger is completed or the Merger Agreement is terminated,
Equinox has agreed, subject to limited exceptions, that it will not do the
following:
o Solicit or initiate an Acquisition Proposal;
o participate in discussions regarding an Acquisition Proposal;
o provide non-public information in connection with an Acquisition
Proposal;
o facilitate any inquiries or proposal, that lead to an Acquisition
Proposal;
o discuss an Acquisition Proposal with any person, except as to these
restrictive provisions;
28
<PAGE>
o approve, endorse or recommend an Acquisition Proposal, except in
limited circumstances; and
o enter into any letter of intent or agreement regarding Acquisition
Transaction.
Until the Merger is completed or the Merger Agreement is terminated, the
Board may withhold, withdraw, amend or modify its unanimous recommendation in
favor of the Merger if all of the following conditions are met:
o A Superior Offer is made;
o Equinox has not breached the non-solicitation provisions contained in
the Merger Agreement; and
o The Board determines in good faith, after consultation with its
outside legal counsel, that such action is required in order to act in
a manner consistent with its fiduciary obligations under applicable
law.
A "Superior Offer" is an unsolicited, bona fide written offer made by a
third party to consummate any of the following transactions:
o Merger, consolidation or similar transaction where the shareholders of
Equinox immediately preceding such transaction hold less than 50% of
the equity interest in the surviving entity; or
o Sale or other disposition of Equinox's assets representing in excess
of 50% of the fair market value of Equinox's business immediately
prior to the seller; or
o The acquisition by any person or group of the right to 30% of the
voting power of the outstanding shares of Equinox;
that the Board determines in its reasonable judgment (after consultation with
its financial advisor) to be more favorable to Equinox's shareholders from a
financial point of view than the terms of the Merger.
Until the Merger is completed or the Merger Agreement is terminated,
Equinox may furnish nonpublic information, enter into confidentiality agreements
with, or entering into discussions with a person or group in response to a
Superior Offer if:
o it has not breached the non-solicitation provisions contained in the
Merger Agreement;
o the Board of determines in good faith, after consultation with its
outside legal counsel, that such action is required in order to comply
with its fiduciary duties;
o it gives Avocent advance notice of such discussion and enters into a
confidentiality agreement with the third party; and
29
<PAGE>
o it furnishes any nonpublic information distributed to Avocent.
Equinox has agreed to keep Avocent informed of the status and details of
any Acquisition Proposal.
Board may withdraw its recommendation of the Merger Agreement and the
Merger if either Raymond James has withdrawn its fairness opinion or the Board
determines, in good faith, after consultation with outside counsel, that it is
required to withdraw such recommendation in order to act in a manner consistent
with its fiduciary obligations.
Regardless of whether the Board has received a Superior Offer or withdrawn
its recommendation of the Merger, Equinox is obligated under the Merger
Agreement to hold the special meeting of shareholders.
Registration on Form S-8
Avocent will file with the SEC a registration statement on Form S-8 for the
shares of Avocent common stock issuable with respect to Equinox stock options
assumed in the Merger.
Indemnification; Directors' and Officers' Liability Insurance
The Merger Agreement provides that Avocent generally will fulfill the
obligations of Equinox pursuant to obligations set forth in the Articles of
Incorporation, Bylaws, any Florida law and any obligations under agreements
between Equinox and its directors or officers, as in effect as of the date of
the Merger Agreement, from and against all liabilities, costs expenses and
claims arising out of actions taken prior to the effective time of the Merger in
performance of their duties as directors and officers of Equinox in connection
with the Merger Agreement.
The Merger Agreement further provides that, except as may be limited by
applicable law, for a period of six years from and after the effective time of
the Merger the indemnification obligations set forth in Equinox's Articles of
Incorporation, Bylaws and any agreements with its officers or directors shall
survive the Merger and shall not be amended or modified in a manner adverse to
the rights of former and current officers and directors of Equinox with respect
to matters occurring prior to the effective time of the Merger.
Avocent will maintain in effect, for six years or until the applicable
statute of limitations expires, directors' and officers' liability insurance
policies covering the persons who are currently covered in their capacities as
such directors and officers by Equinox's current directors' and officers'
policies and on terms not materially less favorable than the existing insurance
coverage with respect to matters occurring prior to the Merger. Avocent will be
required to expend an annual premium for such coverage (or such coverage as is
available for such annual premium) in excess of 200% of the last annual premium
paid immediately prior to the Merger by Equinox for such coverage.
30
<PAGE>
Conditions to the Merger
Each party's respective obligations to effect the Merger is subject to
satisfaction of the following conditions:
o the approval and adoption of the Merger Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of
Equinox's common stock in accordance with Florida law and Equinox's
Articles of Incorporation; and
o no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which
prohibits or materially and adversely restricts the consummation of
the Merger and all waiting periods under the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended have expired or
terminated.
The obligations of Avocent, on the one hand, and Equinox, on the other
hand, to consummate the Merger are subject to the satisfaction or waiver of
further conditions including:
o Performance of all of the obligations of the other party(ies) under
the Merger Agreement required to be performed prior to the effective
time of the Merger;
o the truthfulness and correctness of each of the representations and
warranties of the other party(ies) contained in the Merger Agreement
as of the Closing Date.
Termination of Merger Agreement
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the effective time of the Merger, whether before or after approval by
Equinox's shareholders:
o by the mutual written consent of Avocent and Equinox;
o by either Avocent or Equinox if the Merger has not been consummated by
January 31, 2001, except that this right to terminate the Merger
Agreement is not available to any party whose action or failure to act
causes the failure of the Merger to be consummated by January 31,
2001;
o by either Avocent or Equinox if there is an order by a governmental
entity permanently restraining, enjoining or otherwise prohibiting the
Merger which is final and nonappealable;
o by either Avocent or Equinox, if the shareholders of Equinox do not
approve the Merger Agreement at the special meeting, so long as such
failure was not caused by an action or failure to act by Equinox; and
o by either Equinox or Avocent if the other party breaches any of its
representations, warranties and agreements under the Merger Agreement
and such breach is not cured within 30 days of notice.
31
<PAGE>
In addition, the Merger Agreement may be terminated by Avocent or Equinox
if any of the following events shall have occurred:
o the Board withdraws, modifies or changes its unanimous recommendation
of the Merger Agreement;
o the Board fails to reaffirm its unanimous recommendation in favor of
adoption and approval of the Merger Agreement and the Merger within 10
business days after Avocent requests in writing that such
recommendation be affirmed at any time following the announcement of
an Acquisition Proposal, as that term is defined in the merger
agreement;
o the Board approves or recommends any Acquisition Proposal;
o Equinox enters into any letter of intent or similar document accepting
any Acquisition Proposal;
o a tender or exchange offer for Equinox's securities is commenced by a
person unaffiliated with Avocent, and Equinox has not sent to its
shareholders within 10 business days after such tender or exchange
offer a statement that Avocent recommends rejection of such tender or
exchange offer; or
o Equinox breaches the non-solicitation provisions of the Merger
Agreement.
Equinox will be required to pay a termination fee of $2,500,000 to Avocent
if the Merger Agreement is terminated by Avocent because one of the events
described above has occurred.
Additionally, Equinox is required to pay the termination fee if the Merger
Agreement is terminated because the Merger is not consummated by January 31,
2001 or because the shareholders do not approve the Merger and prior to the
termination of the Merger Agreement, a third party has announced an Acquisition
Proposal and within 12 months following the termination of the Merger Agreement,
either of the following occur: (1) a Target Acquisition (as defined below) is
consummated or (2) Equinox enters into an agreement or letter of intent
providing for a Target Acquisition.
A Target Acquisition is any one of the following: (1) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Equinox where the shareholders of Equinox prior
to such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (2) a sale or other
disposition by Equinox of assets representing in excess of 50% of the aggregate
fair market value of Equinox's business immediately prior to such sale or (3)
the acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Equinox), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares
32
<PAGE>
representing in excess of 50% of the voting power of the then outstanding shares
of capital stock of Equinox.
Avocent will be required to pay Equinox a termination fee of $2,500,000 if
(1) the Merger is not completed by January 31, 2001, (2) all of the conditions
in the Merger Agreement required to be performed or satisfied in order to
obligate Avocent to effect the Merger have been satisfied and (3) Avocent fails
or refuses to effect the Merger.
Fees and Expenses
Equinox and Avocent will pay their own fees, costs, and expenses incurred
in connection with the Merger Agreement, except that Avocent and Equinox will
share the expenses associated with the pre-merger notification and report from
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and
Equinox will bear all expenses incurred in connection with this proxy statement.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Equinox's common stock as of November 24, 2000 for (1) each person
who is known by Equinox to own beneficially more than 5% of the outstanding
shares of common stock, (2) the Chief Executive Officer and the five other most
highly compensated executive officers of Equinox, (3) each director of Equinox,
and (4) all of the directors and executive officers of Equinox as a group.
Except pursuant to applicable community property laws and except as otherwise
33
<PAGE>
indicated, each shareholder identified in the table possesses sole voting and
investment power with respect to its or his shares.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner (1) Common Stock Beneficially Owned
-------------------------------------------------------- --------------------------------
Directors and Executive Officers Shares Percent
-------------------------------------------------------- --------------------------------
<S> <C> <C>
William A. Dambrackas (2)(3) ........................... 1,094,684 17.5%
Robert F. Williamson, Jr. (2)(4) ....................... 27,750 *
Steve Geffin (2) ....................................... 20,000 *
Robert S. Sowell (2) ................................... 129,750 2.3%
Thomas E. Garrett (2) .................................. 54,871 1.0%
James J. Felcyn, Jr. (2) ............................... 7,500 *
James W. Davidson (2) .................................. 18,750 *
Charles A. Reid (2) .................................... 18,750 *
---------
All directors and executive officers as a group (8
persons)(2)(3)(4) ................................... 1,372,055 21.0%
=========
5% Beneficial Owners
--------------------------------------------------------
FMR Corp. .............................................. 535,000 9.6%
82 Devonshire Street
Boston, Massachusetts 02109 (5)
Wellington Management .................................. 427,300 7.7%
75 State Street
Boston, MA 02109(5)
Dimensional Fund Advisors .............................. 385,800 6.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 (5)
G. Kevin Doren ......................................... 284,556 5.1%
8202 Avalon Drive
Mercer Island, WA 98040 (6)
</TABLE>
----------
(*) less than 1%.
(1) Unless otherwise indicated, (i) the address of each of the beneficial
owners is c/o Equinox Systems Inc., One Equinox Way, Sunrise, FL 33351,
(ii) all shares are owned directly, (iii) each person has sole investment
and voting power, and (iv) the share ownership is as of November 24, 2000.
(2) Includes shares of Common Stock subject to stock options exercisable within
60 days of November 7, 2000 in the following amounts: Mr. Dambrackas
(677,500), Mr. Williamson (23,750), Mr. Geffin (20,000), Mr. Sowell
(121,500), Mr. Garrett (54,871), Mr. Felcyn (7,500), Mr. Davidson (18,750),
Mr. Reid (18,750), and all directors and executive officers as a group
(942,621). Does not include options which will be accelerated in connection
with the Merger. See "Conflicts of Interests-- Stock Options."
(3) Includes 30,000 shares held by Mr. Dambrackas as custodian for his
children.
(4) Includes 750 shares held by Mr. Williamson's spouse.
<PAGE>
(5) Based on information included on Schedule 13-F which reports share
ownership as of June 30, 2000.
(6) Based on information included on Schedule 13-G, which reports share
ownership as of December 31, 1999. Mr. Doren is a first cousin of Mr.
Dambrackas.
<PAGE>
AVAILABLE INFORMATION
Equinox is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the SEC.
Such reports, proxy statements and other information filed by Equinox, can
be inspected and copied at the SEC's public reference rooms located at 450 5th
Street, N.W., Washington, D.C. 20549, at Seven World Trade Center, 13th Floor,
New York, New York 11048 and at Northwest Atrium Center 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.
Equinox's SEC filings are also available to the public from commercial
document retrieval services and at the Internet web site maintained by the SEC
at http://www.sec.gov.
34
<PAGE>
APPENDIX A
----------
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER (this "Agreement"), is entered into as of
November 3, 2000, by and among Avocent Corporation, a Delaware corporation
("Parent"), Blue Marlin Acquisition Corporation, a Florida corporation and
wholly-owned subsidiary of Parent (the "Subsidiary"), Equinox Systems Inc., a
Florida corporation ("Target") (the Subsidiary and Target being sometimes
collectively referred to herein as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the respective Board of Directors of Parent, Subsidiary and Target
have approved the merger of the Subsidiary with and into Target (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby all of the issued and outstanding shares of Target common stock, par
value $0.01 per share (the "Target Common Stock") not owned directly or
indirectly by Target, will be converted into the Merger Consideration (as
hereinafter defined); and
WHEREAS, each of Parent and Target desires to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Section 607.1101 et seq. of the Florida
Business Corporation Act (the "Florida Law") and with the effect provided in
Section 607.1106 of the Florida Law, the Subsidiary shall be merged with and
into Target at the Effective Time (as defined in Section 1.3 hereof). Following
the Effective Time, the separate corporate existence of the Subsidiary shall
cease and Target shall continue as the surviving corporation (the "Surviving
Corporation") under the name "Equinox Systems Inc." and shall succeed to and
assume all the rights and obligations of the Subsidiary and Target in accordance
with the Florida Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time of the Merger, (a) the Surviving
Corporation shall possess all assets and property of every description, and
every interest therein, wherever located, and the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of each of the Constituent Corporations, (b) all obligations
belonging to or due to each of the Constituent Corporations shall be vested in,
and become the obligations of, the Surviving Corporation without further act or
deed, (c) title to any real estate or any interest therein vested in either of
the Constituent
A-1
<PAGE>
Corporations shall not revert or in any way be impaired by reason of the Merger,
(d) all rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, (e) the Surviving
Corporation shall be liable for all of the debts and obligations of each of the
Constituent Corporations, and any claim existing, or action or proceeding
pending, by or against either of the Constituent Corporations may be prosecuted
to judgment with right of appeal, as if the Merger had not taken place, and (f)
the Surviving Corporation shall become a wholly-owned subsidiary of Parent.
1.2 The Closing. The closing of the Merger (the "Closing") will take place
at such time and on such date as is agreed upon by the parties (the "Closing
Date"), which (subject to satisfaction or waiver of the conditions set forth in
Article VII of this Agreement) shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Article VII of this
Agreement at such location as the parties may agree, unless another date is
agreed to in writing by the parties hereto.
1.3 Effective Time. Subject to the provisions of this Agreement, the
parties shall file articles of merger (the "Articles of Merger") executed in
accordance with the relevant provisions of the Florida Law and shall make all
other filings required under the Florida Law as soon as practical on or after
the Closing Date. The Merger shall become effective at such time as the Articles
of Merger are accepted for filing by the Secretary of State of Florida, or at
such other time as Parent and Target shall agree as specified in the Articles of
Merger but not exceeding 30 days after the Articles of Merger are accepted for
filing by the Secretary of State of Florida (the "Effective Time").
1.4 Effects of Merger. The Merger shall have the following effects on the
Constituent Corporations:
(a) Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of the Subsidiary shall become the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time and
until thereafter amended as provided by law.
(b) Bylaws of the Surviving Corporation. The Bylaws of the Subsidiary
shall be the Bylaws of the Surviving Corporation from and after the Effective
Time and until thereafter altered, amended or repealed in accordance with the
Florida Law, the Articles of Incorporation of the Surviving Corporation and the
Bylaws.
(c) Directors. The directors of the Subsidiary 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 Surviving Corporation's Articles of Incorporation, Bylaws and
applicable law.
(d) Officers. The officers of Subsidiary at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have
A-2
<PAGE>
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and Bylaws.
(e) Assets, Liabilities. At the Effective Time, the assets,
liabilities, reserves and accounts of each of the Constituent Corporations shall
be taken upon the books of the Surviving Corporation at the amounts at which
they respectively shall be carried on the books of said corporations immediately
prior to the Effective Time, except as otherwise set forth in this Agreement and
subject to such adjustments, or elimination of intercompany items, as may be
appropriate in giving effect to the Merger in accordance with generally accepted
accounting principles.
(f) The Organization of Subsidiary. The Parent has formed Subsidiary
under the laws of the State of Florida for the purposes of the transactions
contemplated by this Agreement. Parent covenants and agrees that, until the
Effective Time, Subsidiary will conduct no business or operations, will have no
assets and will enter into no agreements or obligations except as required or
contemplated by this Agreement or necessary to perform its obligations
hereunder.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Stock. As of the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any stock of either of the
Constituent Corporations:
(a) Cancellation of Treasury Stock. Each share of Target Common Stock
that is owned by Target or by any direct or indirect wholly-owned subsidiary of
Target shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Conversion of Target Common Stock. Each issued and outstanding
share of Target Common Stock (other than shares to be canceled in accordance
with Section 2.1(a)) that is issued and outstanding immediately prior to the
Effective Time (collectively, the "Exchanging Target Shares") shall be converted
into the right to receive from Parent at the Effective Time an amount (the
"Merger Consideration") equal to $9.75 for each share of Target Common Stock
(the "Exchange Ratio"). On or prior to the Closing Date, Parent shall deliver by
wire transfer the Merger Consideration to the Exchange Agent (as defined in
Section 2.3(a) hereof) in accordance with Section 2.3 hereof. As of the
Effective Time, all such Exchanging Target Shares shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate evidencing any Exchanging Target Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor without interest upon surrender of such certificate in
accordance with Section 2.2.
A-3
<PAGE>
(c) Target Stock Options. At the Effective Time, each of the then
outstanding options to purchase Target Common Stock (collectively, the "Target
Options") (consisting of all outstanding options granted under Target's 1988
Non-qualified Stock Option Plan, 1992 Non-qualified Stock Option Plan, 1993
Stock Option Plan, Directors Stock Option Plan and 2000 Directors' Stock Option
Plan (collectively the "Target Plans"), and any individual non-Plan options)
will by virtue of the Merger, and without any further action on the part of any
holder thereof, be assumed and converted into an option to purchase that number
of shares of Common Stock, $0.001 par value of Parent ("Parent Common Stock")
determined by dividing the number of shares of Target Common Stock subject to
such Target Option at the Effective Time by seven (7), at an exercise price per
share of Parent Common Stock equal to the exercise price per share of such
Target Option immediately prior to the Effective Time (provided that the
exercise price per share of such Target Option immediately prior to the
Effective Time shall be deemed to be $9.75 with respect to any Target Option the
exercise price per share of which would otherwise have been greater than $9.75)
multiplied by seven (7). If the foregoing calculation results in an assumed
Target Option being exercisable for a fraction of a share of Parent Common
Stock, then the number of shares of Parent Common Stock subject to such option
will be rounded down to the nearest whole number of shares, with no cash being
payable for such fractional share. The term, exerciseability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all other terms and conditions of the Target Options will
otherwise be unchanged.
2.2 Adjustments for Capital Changes. If, prior to the Effective Time,
Target recapitalizes through a subdivision of its outstanding shares into a
greater number of shares, or a combination of its outstanding shares into a
lesser number of shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes, or declares a dividend on its outstanding shares payable in shares of
its capital stock or securities convertible into shares of its capital stock,
then the Exchange Ratio will be adjusted appropriately so as to maintain the
aggregate Merger Consideration at the same amount it would have been had such
recapitalization, reclassification, dividend or other change not occurred.
2.3 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall enter
into an agreement with ChaseMellon Shareholder Services, L.L.C. or such other
bank or trust company as may be designated by Parent and agreed to by Target
(the "Exchange Agent") providing that Parent shall deposit with the Exchange
Agent as of the Effective Time, for the benefit of the holders of Exchanging
Target Shares, for exchange in accordance with this Article II through the
Exchange Agent, cash in an amount sufficient to pay the Merger Consideration
required to be paid pursuant to Section 2.1 (such cash being hereinafter
referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable (and in any
event no later than ten days) after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
evidenced issued and outstanding shares of Target Stock
A-4
<PAGE>
(including persons who purchase Target Common Stock prior to the Effective Time
upon the exercise of Target Options), which shall be converted into the right to
receive the Merger Consideration pursuant to Section 2.1 (collectively, the
"Certificates"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass
only upon delivery of the Certificates, to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify), and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with a duly executed letter of transmittal and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash from the Exchange Fund, which such holder has the right to
receive pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Target Common Stock which is not registered in the transfer records
of Target, payment of the Merger Consideration may be made to a person other
than the person in whose name the Certificate so surrendered is registered, if
such Certificate shall be properly endorsed or otherwise in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment of the Merger Consideration to a person
other than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to evidence only the right to
receive upon such surrender the Merger Consideration which the holder thereof
has the right to receive in respect of such Certificate pursuant to this Article
II. No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger
Consideration payable to such holder pursuant to Section 2.2 hereof; provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
(d) No Further Ownership Rights in Exchanging Target Shares. All cash
paid upon the surrender for exchange of Certificates in accordance with the
terms of this Article II shall be deemed to have been paid in full satisfaction
of all rights pertaining to the Exchanging Target Shares theretofore evidenced
by such Certificates. After the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Target Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the
A-5
<PAGE>
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II, except as otherwise provided by law.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates six months after
the Effective Time shall be delivered to Parent, on demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for Merger
Consideration.
(f) No Liability. None of Parent, Target or the Exchange Agent shall
be liable to any person in respect of any cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the property
of any governmental entity under applicable law), any such Merger Consideration
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
2.4 Investment of Exchange Fund. The Exchange Agent shall invest the
Exchange Fund in deposit accounts or short-term money market instruments, as
directed by Parent, on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent.
2.5 Assumption of Options. Promptly after the Effective Time, Parent shall
notify in writing each holder of a Target Option of the assumption of such
Target Option by Parent, the number of shares of Target Common Stock that are
then subject to such and the exercise price of such Target Option, as determined
pursuant to Sections 2.1(c) hereof.
2.6 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target, the officers and directors of Target will take all
such lawful and necessary action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Subsidiary, the officers and directors of Subsidiary will take all such lawful
and necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Parent, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by Target to
Parent (the "Disclosure Schedules"), that
A-6
<PAGE>
the statements in this Article III are true. The Disclosure Schedules shall be
arranged in sections and paragraphs corresponding to the numbered sections and
paragraphs (and subparagraphs) contained in this Article III, and the disclosure
in any paragraph shall qualify only the corresponding Section or paragraph in
this Article III or other sections to which it is clearly apparent (from a plain
reading of the disclosure or by cross reference) that such disclosure relates.
3.1 Organization of Target.
(a) Target and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect (as
defined in Section 9.3) on Target.
(b) Target has delivered to Parent a true and complete list of all of
Target's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and Target's equity interest therein. All outstanding shares of
capital stock or other equity interests of the subsidiaries of Target are owned
by Target or a direct or indirect wholly-owned subsidiary of Target, free and
clear of all liens, pledges, charges, encumbrances, security interests, claims
and options of any nature (collectively, "Liens").
(c) Target has delivered or made available to Parent a true and
correct copy of the Articles of Incorporation and Bylaws of Target and similar
governing instruments of each of its material subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither Target nor
any of its subsidiaries is in violation of any of the provisions of its Articles
of Incorporation or Bylaws or equivalent governing instruments.
3.2 Target Capital Structure. The authorized capital stock of Target
consists of 15,000,000 shares of Common Stock, par value $0.01 per share, of
which there were 5,458,241 shares issued and outstanding as of November 3, 2000,
and 1,000,000 shares of Preferred Stock, par value $0.01 per share, of which no
shares are issued or outstanding. All outstanding shares of Target Common Stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of Target or any agreement or document to which Target is a party or
by which it is bound. As of November 3, 2000, Target had reserved an aggregate
of 2,515,000 shares of Target Common Stock, net of exercises, for issuance to
employees, consultants and non-employee directors pursuant to the Target Plans,
under which options are outstanding to purchase an aggregate of 1,731,634shares
and under which no (0) shares are available for grant as of November 3, 2000.
All shares of Target Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. Section 3.2 of the Disclosure Schedules list each outstanding
option to acquire shares of Target Common Stock at November 3, 2000, the
A-7
<PAGE>
name of the holder of such option, the number of shares subject to such option,
the exercise price of such option, the number of shares as to which such option
will have vested at such date, the vesting schedule for such option and whether
the exerciseability of such option will be accelerated in any way by the
transactions contemplated by this Agreement or for any other reason, and
indicate the extent of acceleration, if any.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2, there are no equity securities or similar ownership interests of
any class of Target capital stock, or any securities exchangeable or convertible
into or exercisable for such equity securities, partnership interests or similar
ownership interests issued, reserved for issuance or outstanding. Except for
securities Target owns, directly or indirectly through one or more subsidiaries,
there are no equity securities, partnership interests or similar ownership
interests of any class of any subsidiary of Target, or any security exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Target or any of its subsidiaries is a party or by which it is bound
obligating Target or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition, of any shares of capital stock
of Target or any of its subsidiaries or obligating Target or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security or similar ownership interest, call, right,
commitment or agreement. There are no registration rights and, to the knowledge
of Target, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of any class of Target or
with respect to any equity security or similar ownership interest of any class
of any of its subsidiaries. Target has no outstanding stock appreciation rights,
phantom stock or similar rights.
3.4 Authority.
(a) Target has all requisite corporate power and authority to enter
into this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Target, subject only to the
approval and adoption of this Agreement and the approval of the Merger by the
holders of the issued and outstanding Target Common Stock ("Target
Shareholders") and the filing and recordation of the Articles of Merger pursuant
to Florida Law. A vote of the holders of at least a majority of the outstanding
shares of the Target Common Stock is required for the Target Shareholders to
approve and adopt this Agreement and approve the Merger. This Agreement has been
duly executed and delivered by Target and, assuming the due authorization,
execution and delivery by Parent and Subsidiary, constitutes the valid and
binding obligation of Target, enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
Target does not, and the performance of this Agreement by Target will not (i)
conflict with or violate the Articles of Incorporation or Bylaws
A-8
<PAGE>
of Target or the equivalent organizational documents of any of its subsidiaries,
(ii) subject to obtaining the approval and adoption of this Agreement and the
approval of the Merger by the Target Shareholders as contemplated in Section 6.2
and compliance with the requirements set forth in Section 3.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment, injunction or decree
applicable to Target or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Target's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Target
or any of its subsidiaries pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, authorization, consent,
approval, franchise or other instrument or obligation to which Target or any of
its subsidiaries is a party or by which Target or any of its subsidiaries or its
or any of their respective properties are bound or affected, authorization,
consent, approval, except to the extent such conflict, violation, breach,
default, impairment or other effect could not, in the case of clause (ii) or
(iii), individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Target.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any federal, state or local government or any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign ("Governmental Entity") is required by or
with respect to Target in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Articles of Merger with the Secretary of State of
Florida, (ii) the filing of the Proxy Statement (as defined in Section 3.17)
with the SEC in accordance with the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (iii) such consents, approvals, orders, authorizations,
declarations and filings as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the laws of
any foreign country and (iv) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
material to Target or have a Material Adverse Effect on the ability of the
parties to consummate the Merger.
3.5 SEC Filings; Target Financial Statements.
(a) Target has filed all forms, reports and documents required to be
filed with the SEC since January 1, 1998, and has made available to Parent such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that Target may file subsequent to
the date hereof) are referred to herein as the "Target SEC Reports." As of their
respective dates, the Target SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act") or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Target SEC Reports, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to
A-9
<PAGE>
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Target's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Target SEC Reports (the
"Target Financials"), including any Target SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (iii) fairly presented in all material respects the consolidated financial
position of Target and its subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not, or are not expected to
be, material in amount. The balance sheet of Target contained in the Target SEC
Reports as of June 30, 2000 is hereinafter referred to as the "Target Balance
Sheet." Except as disclosed in the Target Financials, neither Target nor any of
its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Target and its subsidiaries
taken as a whole, except liabilities (i) provided for in the Target Balance
Sheet, or (ii) incurred since the date of the Target Balance Sheet in the
ordinary course of business consistent with past practices.
(c) Target has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Target with the SEC pursuant to
the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Since the date of the Target
Balance Sheet, the business of Target and its subsidiaries has been carried on
only in the ordinary and usual course. Since the date of the Target Balance
Sheet:
(a) there has not been any Material Adverse Effect on Target and no
event has occurred and no fact or set of circumstances has arisen which has
resulted in or could reasonably be expected to result in a Material Adverse
Effect on Target;
(b) there has not been any material change by Target in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP;
A-10
<PAGE>
(c) there has not been any revaluation by Target of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business;
(d) no material customer or supplier of Target or its subsidiaries has
threatened to alter materially and adversely its relationship with Target or its
subsidiaries;
(e) there has not been any agreement by Target or any of its
subsidiaries to waive or release of any material right or claim (including
without limitation to any write off or other compromise of any material account
receivable) outside of the ordinary course of business consistent with past
practice;
(f) Target has not paid or satisfied any material obligation or
liability (absolute, accrued, contingent or otherwise) other than (i)
liabilities shown in the Target Financials or (ii) liabilities incurred since
the date of the last-filed Target SEC Document in the ordinary course of
business, which payment or satisfaction would have a Material Adverse Effect on
Target;
(g) Target has not increased or established any reserve for taxes or
any other liability on its books or otherwise provided therefor which would have
a Material Adverse Effect on Target, except as may have been required due to
income or operations of Target since the date of the last-filed Target SEC
Report;
(h) Target has not sold, transferred, mortgaged, pledged or subjected
to any lien, charge or other encumbrance any of its assets which are material to
its business or financial condition, other than in the ordinary course of
business; and
(i) Target has not granted any material increase in salary payable or
to become payable by Target to any officer or employee, consultant or agent
(other than normal merit increases), or by means of any bonus or pension plan,
contract or other commitment, increased in any material respect the compensation
of any officer, employee, consultant or agent.
3.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
A-11
<PAGE>
(i) Target and each of its subsidiaries have timely filed all
federal, state, local and foreign returns, estimates, information statements and
reports ("Returns") relating to Taxes required to be filed by Target and each of
its subsidiaries with any Tax authority. Target and each of its subsidiaries
have paid all Taxes shown to be due on such Returns.
(ii) Target and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees all material federal and state
income taxes, Taxes pursuant to the Federal Insurance Contribution Act, Taxes
pursuant to the Federal Unemployment Tax Act and other Taxes required to be
withheld.
(iii) Neither Target nor any of its subsidiaries has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against Target or any of its subsidiaries, nor
has Target or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of Target or any
of its subsidiaries by any Tax authority is presently in progress, nor has
Target or any of its subsidiaries been notified of any request for such an audit
or other examination.
(v) No adjustment relating to any Returns filed by Target or any
of its subsidiaries has been proposed in writing formally or informally by any
Tax authority to Target or any of its subsidiaries or any representative
thereof.
(vi) Neither Target nor any of its subsidiaries has any liability
for any unpaid Taxes which has not been accrued for or reserved on the Target
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Target, other than any liability
for unpaid Taxes that may have accrued since the date of the Target Balance
Sheet in connection with the operation of the business of Target and its
subsidiaries in the ordinary course.
(vii) There is no contract, agreement, plan or arrangement to
which Target or any of its subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Target or any of its subsidiaries
that, individually or collectively, would reasonably be expected to give rise to
the payment of any amount as a result of the Merger that would not be deductible
pursuant to Sections 280G, 404 or 162(m) of the Code. There is no contract,
agreement, plan or arrangement to which Target is a party or by which it is
bound to compensate any individual for excise taxes paid pursuant to Section
4999 of the Code.
(viii) Neither Target nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the
A-12
<PAGE>
Code apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by Target or any of its subsidiaries.
(ix) Neither Target nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(x) None of Target's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(xi) Neither Target nor any of its subsidiaries was a
"distributing corporation" or a "controlling corporation" in a distribution of
stock to which Section 355 of the Code applied and that occurred within two
years before the date of this Agreement or as part of a plan or series of
transactions that includes the Merger.
3.8 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, common law trademarks
and service marks, trademark and service mark registrations and applications
therefor throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; (vii) all moral and economic rights of
authors and inventors, however denominated, throughout the world; and (viii) any
similar or equivalent rights to any of the foregoing anywhere in the world.
"Target Intellectual Property" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Target or any of its subsidiaries.
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued, filed
with, or recorded by any state, government or other public legal authority.
"Target Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Target or any of its
subsidiaries.
A-13
<PAGE>
(a) Set forth in Section 3.8(a) of the Disclosure Schedules is a
complete and accurate list of all Target Registered Intellectual Property and
specifies, where applicable, the jurisdictions in which each such item of Target
Registered Intellectual Property has been issued or registered.
(b) No Target Intellectual Property or product or service of Target or
any of its subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, contract, license, agreement, or stipulation restricting in any
manner the use, transfer, or licensing thereof by Target or any of its
subsidiaries, or which may affect the validity, use or enforceability of such
Target Intellectual Property.
(c) Target owns and has good and exclusive title to, or has license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted), each material item of Target Intellectual Property or
other Intellectual Property used by Target free and clear of any lien or
encumbrance (excluding licenses and related restrictions); and, except with
respect to products sold to Target's original equipment manufacturing customers,
Target is the exclusive owner of all trademarks and trade names used in
connection with the operation or conduct of the business of Target and its
subsidiaries, including the sale of any products or the provision of any
services by Target and its subsidiaries.
(d) Target owns exclusively, and has good title to, all copyrighted
works that are Target products or which Target or any of its subsidiaries
otherwise expressly purports to own.
(e) To the extent that any material Intellectual Property has been
developed or created by a third party for Target or any of its subsidiaries,
Target has a written agreement with such third party with respect thereto and
Target thereby either (i) has obtained ownership of, and is the exclusive owner
of, or (ii) has obtained a license (sufficient for the conduct of its business
as currently conducted and as proposed to be conducted) to all such third
party's Intellectual Property in such work, material or invention by operation
of law or by valid assignment, to the fullest extent it is legally possible to
do so.
(f) Neither Target nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Target Intellectual Property, to any third
party.
(g) To the knowledge of Target, the operation of the business of
Target and its subsidiaries as such business currently is conducted, including
Target's and its subsidiaries' design, development, manufacture, marketing and
sale of the products or services of Target and its subsidiaries (including
products currently under development) has not, does not and will not infringe or
misappropriate the Intellectual Property of any third party or, to its
knowledge, constitute unfair competition or trade practices under the laws of
any jurisdiction.
A-14
<PAGE>
(h) Except as set forth on Section 3.8(h) of the Disclosure Schedules,
since January 1, 1998, neither Target nor any of its subsidiaries has received
notice from any third party that the operation of the business of Target or any
of its subsidiaries or any act, product or service of Target or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(i) To the knowledge of Target, no person has or is infringing or
misappropriating any Target Intellectual Property.
(j) Target and each of its subsidiaries has taken reasonable steps to
protect Target's and its subsidiaries' rights in Target's confidential
information and trade secrets that it wishes to protect and any trade secrets or
confidential information of third parties provided to Target or any of its
subsidiaries, and, without limiting the foregoing, each of Target and its
subsidiaries has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Parent and all current and former employees and contractors of
Target and any of its subsidiaries have executed such an agreement, except where
the failure to do so is not reasonably expected to have a Material Adverse
Effect on Target.
(k) To Target's knowledge, all of Target's and its subsidiaries'
current products (including products currently under development) (i) will
record, store, process, calculate and present calendar dates falling on and
after (and if applicable, spans of time including) January 1, 2000, and will
calculate any information dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance, as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates (collectively, "Year 2000 Compliant") and (ii) will lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000. To Target's knowledge, all of Target's or
its subsidiaries' material Target Information Technology (as defined below) is
Year 2000 Compliant, and will not cause an interruption in the ongoing
operations of Target's or any of its subsidiaries' business on or after January
1, 2000. For purposes of the foregoing, the term "Target Information Technology"
shall mean and include all software, hardware, firmware, telecommunications
systems, network systems, embedded systems and other systems, components and/or
services (other than general utility services including gas, electric, telephone
and postal) that are currently used by Target or any of its subsidiaries in the
conduct of their business.
3.9 Compliance; Permits; Restrictions.
(a) Neither Target nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to Target or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (ii) any material note, bond, mortgage, indenture, contract,
agreement,
A-15
<PAGE>
lease, license, permit, franchise or other instrument or obligation to which
Target or any of its subsidiaries is a party or by which Target or any of its
subsidiaries or its or any of their respective properties is bound or affected.
To the knowledge of Target, no investigation or review by any Governmental
Entity is pending or threatened against Target or its subsidiaries, nor has any
Governmental Entity indicated an intention to conduct the same. There is no
material agreement, judgment, injunction, order or decree binding upon Target or
any of its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Target or
any of its subsidiaries, any acquisition of material property by Target or any
of its subsidiaries or the conduct of business by Target as currently conducted.
(b) Target and its subsidiaries have in effect all authorizations,
certificates, filings, franchises, notices, rights, permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which are
material to the operation of the business of Target including all authorizations
under Environmental Laws (as defined in Section 3.14) (collectively, the "Target
Permits"). Target and its subsidiaries are in compliance in all material
respects with the terms of the Target Permits.
3.10 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or as to which
Target or any of its subsidiaries has received any notice of assertion nor, to
Target's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against Target or any of its subsidiaries which, if
determined adversely to Target or any subsidiary of Target, reasonably would be
likely to have a Material Adverse Effect on Target, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
3.11 Brokers' and Finders' Fees. Except as set forth in Section 3.11 of the
Disclosure Schedules, Target has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.12 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Target
Affiliate" set forth in Section 3.12(a)(i) below (which definition shall apply
only to this Section 3.12), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Target Affiliate" shall mean any other person or entity
under common control with the Target within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
(ii) "Code" shall mean the Internal Revenue Code of 1986, as
amended;
A-16
<PAGE>
(iii) "Target Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by Target or any Target
Affiliate for the benefit of any Target Employee, or with respect to which
Target or any Target Affiliate has or may have any liability or obligation;
(iv) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(v) "DOL" shall mean the Department of Labor;
(vi) "Target Employee" shall mean any current or former employee,
consultant or director of Target or any Target Affiliate;
(vii) "Target Employment Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between Target
or any Target Affiliate and any Target Employee;
(viii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Target Multiemployer Plan" shall mean any "Target Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation;
and
(xiii) "Target Pension Plan" shall mean each Target Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 3.12(b) of the Disclosure Schedules contains an
accurate and complete list of each Target Employee Plan and each Target
Employment Agreement. Target does not have any plan or commitment to establish
any new Target Employee Plan, or Target Employment Agreement, to modify any
Target Employee Plan or Target Employment Agreement (except to the extent
required by law or to conform any such
A-17
<PAGE>
Target Employee Plan or Target Employment Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to adopt or enter into any Target Employee Plan
or Target Employment Agreement.
(c) Documents. Target has provided to Parent: (i) correct and complete
copies of all documents embodying each Target Employee Plan and each Target
Employment Agreement including (without limitation) all amendments thereto and
all related trust documents, administrative service agreements, group annuity
contracts, group insurance contracts, and policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Target Employee Plan;
(iii) the two (2) most recent annual reports (Form Series 5500 and all schedules
and financial statements attached thereto), if any, required under ERISA or the
Code in connection with each Target Employee Plan; (iv) if the Target Employee
Plan is funded, the most recent annual and periodic accounting of Target
Employee Plan assets; (v) the most recent summary plan description together with
the summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Target Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter; (vii)
all communications material to any Target Employee or Target Employees relating
to any Target Employee Plan and any proposed Target Employee Plans, in each
case, relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any material liability to Target; (viii) all
correspondence to or from any governmental agency relating to any Target
Employee Plan; (ix) all COBRA forms and related notices (or such forms and
notices as required under comparable law); (x) the three (3) most recent plan
years discrimination tests for each Target Employee Plan, if applicable; and
(xi) all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Target Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Section 3.12(d)
of the Disclosure Schedules, (i) Target has performed in all material respects
all obligations required to be performed by it under, is not in default or
violation of, and has no knowledge of any default or violation by any other
party to each Target Employee Plan, and each Target Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Target
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Target Employee Plan as to its qualified status under
the Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Target Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of
A-18
<PAGE>
ERISA (or any administrative class exemption issued thereunder), has occurred
with respect to any Target Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of Target, threatened or reasonably
anticipated (other than routine claims for benefits) against any Target Employee
Plan or against the assets of any Target Employee Plan; (v) each Target Employee
Plan (other than any stock option plan) can be amended, terminated or otherwise
discontinued after the Effective Time, without material liability to the Parent,
Target or any of its Target Affiliates (other than ordinary administration
expenses); (vi) there are no audits, inquiries or proceedings pending or, to the
knowledge of Target or any Target Affiliates, threatened by the IRS or DOL with
respect to any Target Employee Plan; and (vii) neither Target nor any Target
Affiliate is subject to any penalty or tax with respect to any Target Employee
Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plan. Neither Target nor any Target Affiliate has
previously maintained or currently maintains, sponsors, participates in or
contributes to a pension plan which is subject to Title IV of ERISA or Section
412 of the Code. As of the Effective Time: (i) no legal or administrative action
has been taken by the PBGC to terminate or to appoint a trustee to administer
the Target Pension Plan; (ii) no liability to the PBGC under Title IV of ERISA
has been incurred by Target or an Target Affiliate that has not been satisfied
in full; (iii) each Target Pension Plan was fully-funded on a termination basis;
(iv) each Target Pension Plan has been maintained in compliance with the minimum
funding standards of ERISA and the Code where applicable and has not incurred
any "accumulated funding deficiency," as defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived; and (v) no Target Pension Plan
has a reportable event within the meaning of Section 4043 of ERISA and the
regulations thereunder; and (vi) no Target Pension Plan has incurred any event
described in Section 4041 (other than the standard termination contemplated
herein), 4062 or 4063 of ERISA.
(f) Collectively Bargained, Multiemployer and Multiple Employer Plans.
At no time has Target or any Target Affiliate contributed to or been obligated
to contribute to any Target Multiemployer Plan. Neither Target, nor any Target
Affiliate has at any time ever maintained, established, sponsored, participated
in, or contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.
(g) No Post-Employment Obligations. Except as set forth in Section
3.12(g) of the Disclosure Schedules, no Target Employee Plan provides, or
reflects or represents any liability to provide retiree health benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and Target has never represented, promised or contracted (whether in
oral or written form) to any Target Employee (either individually or to Target
Employees as a group) or any other person that such Target Employee(s) or other
person would be provided with retiree health, except to the extent required by
statute.
(h) Health Care Compliance. Neither Target nor any Target Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of FMLA,
the requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's
A-19
<PAGE>
Health and Cancer Rights Act of 1998, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, or any amendment to each such act, or
any similar provisions of state law applicable to Target Employees.
(i) Effect of Transaction.
(1) Except as set forth on Section 3.12(i)(1) of the Disclosure
Schedules, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Target
Employee Plan, Target Employment Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Target Employee.
(2) Except as set forth on Section 3.12(i)(2) of the Disclosure
Schedules, no payment or benefit, which will or may be made by Target or its
Target Affiliates with respect to any Target Employee, will be characterized as
a "parachute payment," within the meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. Target: (i) is in compliance in all respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Target Employees,
except as would not have a Material Adverse Effect on Target; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Target Employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund governed by or maintained by or on behalf of
any governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Target Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, threatened or reasonably anticipated
claims or actions against Target under any worker's compensation policy or
long-term disability policy.
(k) Labor. No work stoppage or labor strike against Target is pending,
threatened or reasonably anticipated. Target does not know of any activities or
proceedings of any labor union to organize any Target Employees. Except as set
forth in Section 3.12(k) of the Disclosure Schedules, there are no actions,
suits, claims, labor disputes or grievances pending, or, to the knowledge of
Target, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Target Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate, result
in any material liability to Target. Neither Target nor any of its subsidiaries
has engaged in any unfair labor practices within the meaning of the National
Labor Relations Act. Except as set forth in Section 3.12(k) of the Disclosure
Schedules, Target is not presently, nor has it been in the past, a party to, or
bound by, any collective bargaining
A-20
<PAGE>
agreement or union contract with respect to Target Employees and no collective
bargaining agreement is being negotiated by Target.
3.13 Absence of Liens and Encumbrances. Target and each of its subsidiaries
has good and marketable title to, or valid leasehold interests in, all its
material properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the ordinary
course of business and except for defects in title, easements, restrictive
covenants and similar encumbrances that individually or in the aggregate would
not materially interfere with the ability of Target or any of its subsidiaries
to conduct its business as currently conducted. All such material assets and
properties, other than assets and properties in which Target or any of its
subsidiaries has a leasehold interest, are free and clear of all Liens except
for Liens that (a) are created, arise or exist under or in connection with any
of the contracts or other matters referred to in the Disclosure Schedules or in
the Target SEC Reports or the exhibits thereto, (b) relate to any taxes or other
governmental charges or levies that are not yet due and payable, (c) relate to,
or are created, arise or exist in connection with, any legal proceeding that is
being contested in good faith, or (d) individually or in the aggregate would not
materially interfere with the ability of Target and each of its subsidiaries to
conduct their business as currently conducted and would not materially and
adversely impact the transferability, financeability, ownership, leasing, use,
or occupancy of any such properties or assets ("Permitted Liens"). To the
knowledge of Target, there are no natural or artificial conditions upon any real
property owned by Target ("Owned Real Property"), or any other facts or
conditions which could, in the aggregate, have a material and adverse impact on
the transferability, financeability, ownership, leasing, use, occupancy or
operation of any such Owned Real Property. There are no parties in possession of
any portion of any Owned Real Property, whether as tenants, trespassers or
otherwise, except Target. There are no pending, or, to the knowledge of Target,
threatened assessments, improvements or activities of any public or quasi-public
body either planned, in the process of construction or completed which may give
rise to any assessment against any Owned Real Property. Target and each of its
subsidiaries has complied in all material respects with and is not in default
under the terms of all material leases to which it is a party, and all such
leases are in full force and effect. To the knowledge of Target, no party to any
material lease is in default of such lease and there exists no event or
circumstance with respect to such lease which with the giving of notice or the
passage of time, or both, would constitute a default by any party to such lease.
3.14 Environmental Matters.
(a) The term "Hazardous Material" means any material or substance that
is prohibited or regulated by any Environmental Law or that has been designated
by any Governmental Entity to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment. The term "Target Business
Facility" means any property including the land, the improvements thereon, the
groundwater thereunder and the surface water thereon, that is or at any time has
been owned, operated, occupied, controlled or leased by Target or any of its
subsidiaries in connection with the operation of its business. The term
"Disposal Site" means a landfill, disposal agent, waste hauler or recycler of
Hazardous Materials. The term
A-21
<PAGE>
"Environmental Laws" means all applicable laws, rules, regulations, orders,
treaties, statutes, and codes promulgated by any Governmental Entity which
prohibit, regulate or control any Hazardous Material or any Hazardous Material
Activity, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act, the Clean Air
Act, the Hazardous Materials Transportation Act, the Clean Water Act, comparable
laws, rules, regulations, orders, treaties, statutes, and codes of other
Governmental Entities, the regulations promulgated pursuant to any of the
foregoing, and all amendments and modifications of any of the foregoing, all as
amended to date. The term "Hazardous Materials Activity" means the
transportation, transfer, recycling, storage, use, treatment, manufacture,
removal, remediation, release, exposure of others to, sale, or distribution of
any Hazardous Material or any product containing a Hazardous Material. The term
"Target Environmental Permit" means any approval, permit, license, clearance,
registration or consent required to be obtained from any private person or any
Governmental Entity with respect to a Hazardous Materials Activity which is or
was conducted by Target or any of its subsidiaries.
(b) Except in compliance with Environmental Laws and in a manner that
could not reasonably be expected to subject Target or any of its subsidiaries to
material liability, no Hazardous Materials are present on any Target Business
Facility.
(c) Target and each of its subsidiaries have conducted all Hazardous
Material Activities in compliance in all material respects with all applicable
Environmental Laws. To the knowledge of Target the Hazardous Materials
Activities of Target and each of its subsidiaries have not resulted in the
exposure of any person to a Hazardous Material in a manner which has caused or
could reasonably be expected to cause an adverse health effect to said person.
(d) Section 3.14(d) of the Disclosure Schedules accurately describes
all of the Target Environmental Permits currently held by Target and each of its
subsidiaries. Such Target Environmental Permits are all of the Target
Environmental Permits necessary for the continued conduct of any Hazardous
Material Activity of Target and each of its subsidiaries as such activities are
currently being conducted, except for those permits the absence of which could
not reasonably be expected to result in a Material Adverse Effect on Target. All
such Target Environmental Permits are valid and in full force and effect. Target
and its subsidiaries have complied in all material respects with all covenants
and conditions of any Target Environmental Permit which is or has been in force
with respect to its Hazardous Materials Activities. To the knowledge of Target,
no circumstance exists which could cause any Target Environmental Permit to be
revoked, modified, or rendered non-renewable upon payment of the permit fee.
(e)No action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending, or to the knowledge of Target, threatened,
concerning or relating to any Target Environmental Permit or any Hazardous
Materials Activity of Target or any of its subsidiaries, or to any Target
Business Facility currently owned, operated, occupied, controlled or leased by
Target or any of its subsidiaries, or to the knowledge of Target, pending or
threatened with respect to any other Target Business Facility.
A-22
<PAGE>
(f) To the knowledge of Target, Target and each of its subsidiaries
have transferred or released Hazardous Materials only to those Disposal Sites
described on Section 3.14(f) of the Disclosure Schedules; and no action,
proceeding, liability or claim exists or is threatened against Target or any of
its subsidiaries with respect to any transfer or release of Hazardous Materials
to a Disposal Site which could reasonably be expected to subject Target or any
of its subsidiaries to liability.
(g) Target is not aware of any fact or circumstance which could result
in any environmental liability which could reasonably be expected to result in a
Material Adverse Effect on Target.
(h) Target has delivered to Parent or made available for inspection by
Parent and its agents and employees all records in Target's possession
concerning the Hazardous Materials Activities of Target and each of its
subsidiaries and all environmental audits and environmental assessments of any
Target Business Facility conducted at the request of, or otherwise in the
possession of, Target or any of its subsidiaries. Target has complied with all
environmental disclosure obligations imposed by applicable law upon Target and
any of its subsidiaries with respect to the Merger.
3.15 Labor Matters. (i) There are no disputes or claims pending or, to the
knowledge of each of Target and its respective subsidiaries, threatened, between
Target or any of its subsidiaries and any of their respective employees; (ii) as
of the date of this Agreement, neither Target nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by Target or its subsidiaries nor does Target or
its subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) as of the date of this Agreement, neither
Target nor any of its subsidiaries has any knowledge of any strikes, slowdowns,
work stoppages or lockouts, or threats thereof, by or with respect to any
employees of Target or any of its subsidiaries.
3.16 Agreements, Contracts and Commitments. Except as set forth on Section
3.16 to the Disclosure Schedules, neither Target nor any of its subsidiaries is
a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of Target's
Board of Directors, other than those that are terminable by Target or any of its
subsidiaries on no more than thirty (30) days' notice without liability or
financial obligation to Target;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
A-23
<PAGE>
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of computer or communications hardware products in the ordinary course of
business;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Target or any of its subsidiaries to engage
in any line of business, conduct business in any geographical area or to compete
with any person or granting any exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by Target or any of its subsidiaries after the
date of this Agreement of a material amount of assets not in the ordinary course
of business or pursuant to which Target has any material ownership interest in
any corporation, partnership, joint venture or other business enterprise other
than Target's subsidiaries;
(f) any dealer, distributor, joint marketing or development agreement
currently in force under which Target or any of its subsidiaries have continuing
material obligations to jointly market any product, technology or service and
which may not be canceled without penalty upon notice of ninety (90) days or
less, or any material agreement pursuant to which Target or any of its
subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Target or
any of its subsidiaries and which may not be canceled without penalty upon
notice of ninety (90) days or less;
(g) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to Target and its subsidiaries taken as a whole;
(h) any agreement, contract or commitment currently in force to
license any third party to manufacture or reproduce any Target product, service
or technology or any agreement, contract or commitment currently in force to
sell or distribute any Target products, service or technology except agreements
with distributors or sales representative in the normal course of business
cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit;
(j) any settlement agreement entered into within five (5) years prior
to the date of this Agreement; or
(k) any other agreement, contract or commitment that has a value of
$1,000,000 or more individually.
A-24
<PAGE>
Neither Target nor any of its subsidiaries, nor to Target's knowledge any
other party to a Target Contract (as defined below), is (or with nothing more
than notice and/or the passage of time will be) in breach, violation or default
under, and neither Target nor any of its subsidiaries has received written
notice that it has breached, violated or defaulted under, any of the material
terms or conditions of any of the agreements, contracts or commitments to which
Target or any of its subsidiaries is a party or by which it is bound that are
required to be disclosed in the Disclosure Schedules (any such agreement,
contract or commitment, a "Target Contract") in such a manner as would permit
any other party to cancel or terminate any such Target Contract, or would permit
any other party to seek material damages or other remedies (for any or all of
such breaches, violations or defaults, in the aggregate). Each Target Contract
is in full force and effect, and is a legal, valid and binding obligation of
Target or a subsidiary of Target and, to the knowledge of Target, each of the
other parties thereto, enforceable in accordance with its terms, except (a) that
the enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law) and (b) as would not, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Effect on Target.
3.17 Proxy Statement. None of the information supplied or to be supplied by
Target for inclusion or incorporation by reference in the definitive proxy
statement to be sent to the Target Shareholders in connection with the meeting
of the Target Shareholders to consider the approval and adoption of this
Agreement and the approval of the Merger (the "Shareholders' Meeting") (such
proxy statement as amended or supplemented is referred to herein as the "Proxy
Statement") shall not, on the date the Proxy Statement is first mailed to the
Target Shareholders, at the time of the Shareholders' Meeting and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Shareholders' Meeting has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time, any event relating to Target or any of its affiliates,
officers or directors should be discovered by Target which should be set forth
in a supplement to the Proxy Statement, Target shall promptly inform Parent.
Notwithstanding the foregoing, Target makes no representation or warranty with
respect to any information supplied by Parent which is contained in the Proxy
Statement.
3.18 Board Approval. The Board of Directors of Target has, as of the date
of this Agreement, determined (i) that the Merger is fair to, advisable and in
the best interests of Target and its shareholders, and (ii) to recommend that
the shareholders of Target approve and adopt this Agreement and approve the
Merger.
3.19 State Takeover Statutes. Other than the Florida Control Share Act
(Section 607.0902 of the Florida Law), no state takeover statute or similar
statute or regulation applies to
A-25
<PAGE>
or purports to apply to the Merger, this Agreement, or the transactions
contemplated hereby and thereby.
3.20 Fairness Opinion. Target has received a written opinion from
Raymond James & Associates, Inc., dated as of the date hereof, to the effect
that as of the date hereof, the Exchange Ratio is fair to the Target
Shareholders from a financial point of view and has delivered to Parent a copy
of such opinion.
3.21 Certain Indebtedness. Except as disclosed on Section 3.21 to the
Disclosure Schedules, neither Target nor any Target subsidiary is indebted for
money borrowed, either directly or indirectly, from any of its officers,
directors, or any Affiliate (as defined below), in any amount whatsoever (except
for expenses incurred in the ordinary course of business in amounts not
exceeding $5000 per person); nor are any of its officers, directors, or
Affiliates indebted for money borrowed from Target or any Target subsidiary, nor
are there any transactions of a continuing nature between Target or any Target
subsidiary and any of its officers, directors, or Affiliates (other than by or
through the regular employment thereof by Target) not subject to cancellation
which will continue beyond the Effective Time, including use of Target's or any
Target subsidiary's assets for personal benefit with or without adequate
compensation. As used herein, the term "Affiliate" shall mean any Person (as
defined below) that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, the Person
specified. As used in the foregoing definition, the term (i) "control" shall
mean the power through the ownership of voting securities, contract, or
otherwise to direct the affairs of another Person and (ii) "Person" shall mean
an individual, firm, trust, association, corporation, limited liability company,
partnership, government (whether federal, state, local or other political
subdivision, or any agency or bureau of any of them) or other entity.
3.22 Title Insurance. Target has delivered to Parent a true and
accurate copy of each owner's policy of title insurance for each Owned Real
Property which insures the fee simple or leasehold ownership interest of Target
or the appropriate Target subsidiary in each Owned Real Property subject only to
Permitted Liens.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent represents and warrants to Target that the statements in this
Article IV are true.
4.1 Organization of Parent. Each of Parent and the Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; has the corporate power and authority
to own, lease and operate its assets and property and to carry on its business
as now being conducted and as proposed to be conducted; and is duly qualified to
do business and in good standing as a foreign corporation in each
A-26
<PAGE>
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect (as defined in Section 9.3) on Parent.
4.2 Authority.
(a) Each of Parent and Subsidiary has all requisite corporate power
and authority to enter into this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent and
Subsidiary. This Agreement has been duly executed and delivered by Parent and
Subsidiary, and assuming the due authorization, execution and delivery by
Target, constitutes the valid and binding obligation of Parent and Subsidiary,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement by Parent and Subsidiary does not,
and the performance of this Agreement by Parent and Subsidiary will not (i)
conflict with or violate the certificate or articles of incorporation or bylaws
of Parent or Subsidiary; (ii) subject to obtaining the approval and adoption of
this Agreement and the approval of the Merger by the Target Shareholders as
contemplated in Section 6.2 and compliance with the requirements set forth in
Section 4.2(b) below, conflict with or violate any law, rule, regulation, order,
judgment, injunction or decree applicable to Parent or the Subsidiary or by
which its or any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or impair Parent's rights
or alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the properties or assets of
Parent or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, authorization,
consent, approval, franchise or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except to the extent such conflict, violation, breach, default, impairment or
other effect could not, in the case of clause (ii) or (iii), individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Articles of Merger with the Secretary of State of
Florida, (ii) such consents, approvals, orders, authorizations, declarations and
filings as may be required under the HSR Act, and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be material to Parent or Target or have a Material Adverse
Effect on the ability of the parties to consummate the Merger.
4.3 Parent Litigation. As of the date of this Agreement, there is no
action, suit, proceeding, claim, arbitration or investigation pending, or as to
which Parent or Subsidiary has received any notice of assertion, nor, to
Parent's knowledge, is there a threatened action, suit,
A-27
<PAGE>
proceeding, claim, arbitration or investigation against Parent or any of its
subsidiaries which in any manner challenges or seeks to prevent, enjoin, alter
or delay any of the transactions contemplated by this Agreement.
4.4 Information Supplied by Parent. None of the information supplied or to
be supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement or the Other Filings shall, on the date filed with the SEC, the date
the Proxy Statement is first mailed to the Target Shareholders, at the time of
the Shareholders' Meeting and at the Effective Time, 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 are made not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Shareholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Time, any event relating to Parent or any of its affiliates, officers
or directors should be discovered by Parent which should be set forth in a
supplement to the Proxy Statement or Other Filing, Parent shall promptly inform
Target.
4.5 Financing. Parent has, and will at all times prior to the earlier of
the Effective Time or the termination of this Agreement in accordance with its
terms maintain, sufficient funds or available credit to pay the Merger
Consideration.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Target (which for the purposes of this
Article V shall include Target and each of its subsidiaries) agrees, except (i)
as provided in Article V of the Disclosure Schedules, or (ii) to the extent that
Parent shall otherwise consent in writing, to carry on its business diligently
and in accordance with good commercial practice and to carry on its business in
the ordinary course, in substantially the same manner as heretofore conducted
and in compliance in all material respects with all applicable laws and
regulations, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees and
others with which it has business dealings. In furtherance of the foregoing and
subject to applicable law, Target agrees to confer with Parent, as promptly as
practicable, prior to taking any material actions or making any material
management decisions with respect to the conduct of business. In addition,
except as provided in Article V of the Disclosure Schedules, without the prior
written consent of Parent, Target shall not do any of the following, and Target
shall not permit its subsidiaries to do any of the following:
A-28
<PAGE>
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exerciseability of options or restricted stock, or re-price options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances;
(c) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on the
date hereof and as previously disclosed in the Disclosure Schedules, or adopt
any new severance plan or amend or modify or alter in any manner any severance
plan, agreement or arrangement existing on the date hereof;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Intellectual Property,
or enter into grants to transfer or license to any person future patent rights,
other than in the ordinary course of business;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(f) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Target or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(g) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than the issuance, delivery and/or sale of shares
of Target Common Stock pursuant to the exercise of stock options therefor
outstanding as of the date of this Agreement;
(h) Cause, permit or propose any amendments to its Articles of
Incorporation or Bylaw (or similar governing instruments of any subsidiaries);
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Target or enter into any joint ventures,
A-29
<PAGE>
strategic partnerships or alliances, other than in the ordinary course of
business consistent with past practice;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except (i) sales of inventory in the ordinary course of
business consistent with past practice and (ii) the sale, lease or disposition
(other than through licensing) of property or assets which are not material,
individually or in the aggregate, to the business of Target;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Target enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than (i) in connection with the financing of ordinary course
trade payables consistent with past practice or (ii) pursuant to existing credit
facilities in the ordinary course of business;
(l) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable "at will"), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $50,000 individually or $100,000 in the
aggregate (with a series of related payments being treated for this purpose as a
single payment).
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any material contract or agreement to which
Target or any of its subsidiaries is a party or waive, delay the exercise of,
release or assign any material rights or claims thereunder;
(o) Enter into or materially modify any contracts, agreements or
obligations relating to the distribution, sale, license or marketing by third
parties of Target's products, as the case may be, or products licensed by
Target;
(p) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
(q) Incur or enter into any agreement or commitment outside of the
ordinary course of business in excess of $50,000 individually or $100,000 in the
aggregate (with a series of related agreements and or commitments being treated
for this purpose as a single agreement or commitment);
A-30
<PAGE>
(r) Hire any employee with an annual compensation level in excess of
$100,000;
(s) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;
(t) Make any grant of exclusive rights to any third party; or
(u) Agree in writing or otherwise to take any of the actions described
in Section 5.1 (a) through (t) above.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Proxy Statement; Other Filings.
(a) As promptly as practicable after the execution of this Agreement,
Target will prepare and file with the SEC the preliminary Proxy Statement.
Target will respond promptly to any comments of the SEC, will use its best
efforts to complete the definitive Proxy Statement and will cause such
definitive Proxy Statement to be mailed to the Target Shareholders at the
earliest practicable time. As promptly as practicable after the date of this
Agreement, or the Effective Time, whichever is applicable, Target and Parent
will prepare and file any other filings required under the Exchange Act, the
Securities Act or the rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD") or NASDAQ relating to the Merger and the
transactions contemplated by this Agreement (the "Other Filings"). Target will
notify Parent promptly upon the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Proxy Statement or any Other
Filing made by Target or for additional information and will supply Parent with
copies of all correspondence between Target or any of its representatives, on
the one hand, and the SEC, or its staff or any other government officials, on
the other hand, with respect to the Proxy Statement, the Merger or any Other
Filing. The Proxy Statement and Other Filings made by Target or Parent will
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy Statement,
or any Other Filing, Target will promptly inform Parent of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to the Target Shareholders, such amendment or supplement.
(b) Subject to Section 6.2(c), the Proxy Statement will also include
the recommendation of the Board of Directors of Target in favor of adoption and
approval of this Agreement and approval of the Merger.
6.2 Meeting of Shareholders.
A-31
<PAGE>
(a) Promptly after the date hereof, Target will take all action
necessary in accordance with Florida Law and its Articles of Incorporation and
Bylaws to convene the Shareholders' Meeting to be held as promptly as
practicable, for the purpose of voting upon this Agreement and the Merger.
Subject to Section 6.2(c), Target will use its commercially reasonable best
efforts (as defined in Section 9.3) to solicit from the Target Shareholders,
proxies in favor of the adoption and approval of this Agreement and the approval
of the Merger. Subject to Section 6.2(c), Target will take all other action
necessary or advisable to secure the vote or consent of the Target Shareholders
required by Florida Law and all other applicable legal requirements to obtain
such approvals.
(b) Subject to Section 6.2(c): (i) the Board of Directors of Target
shall unanimously recommend that the Target Shareholders vote in favor of and
adopt and approve this Agreement and the Merger at the Shareholders' Meeting;
(ii) the Proxy Statement shall include a statement to the effect that the Board
of Directors of Target has unanimously recommended that the Target Shareholders
vote in favor of and adopt and approve this Agreement and approve the Merger at
the Shareholders' Meeting; and (iii) neither the Board of Directors of Target,
nor any committee thereof shall withdraw, amend or modify, or propose or resolve
to withdraw, amend or modify in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of Target that the Target Shareholders
vote in favor of and adopt and approve this Agreement and approve the Merger.
For purposes of this Agreement, said recommendation of the Board of Directors
shall be deemed to have been modified in a manner adverse to the Parent if said
recommendation shall no longer be unanimous.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Target from withholding, withdrawing, amending or modifying its unanimous
recommendation in favor of this Agreement and the Merger if (i) a Superior Offer
(as defined below) is made to Target and is not withdrawn, (ii) neither Target
nor any of its representatives shall have violated any of the restrictions set
forth in Section 6.4(a), and (iii) the Board of Directors of Target concludes in
good faith, after consultation with its outside counsel, that, in light of such
Superior Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of Target to
comply with its fiduciary obligations to the Target Shareholders under
applicable law. Nothing contained in this Section 6.2 shall limit Target's
obligation to hold and convene the Shareholders' Meeting (regardless of whether
the unanimous recommendation of the Board of Directors of Target shall have been
withdrawn, amended or modified). For purposes of this Agreement, a "Superior
Offer" shall mean an unsolicited, bona fide written offer made by a third party
to consummate any of the following transactions: (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Target, pursuant to which the shareholders of Target
immediately preceding such transaction hold less than 50% of the equity interest
in the surviving or resulting entity of such transaction; (ii) a sale or other
disposition by Target of assets (excluding inventory and used equipment sold in
the ordinary course of business) representing in excess of 50% of the fair
market value of Target's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Target), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership
A-32
<PAGE>
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of Target, in each case on terms that the
Board of Directors of Target determines, in its reasonable judgment (after
consultation with its financial advisor) to be more favorable to the Target
Shareholders from a financial point of view than the terms of the Merger;
provided, however, that any such offer shall not be deemed to be a "Superior
Offer" if any financing required to consummate the transaction contemplated by
such offer is not committed and is not likely in the judgment of Target's Board
of Directors to be obtained by such third party on a timely basis.
6.3 Access to Information; Confidentiality.
(a) Target will afford the Parent and its accountants, counsel and
other representatives reasonable access during normal business hours to the
properties, books, records and personnel of the Target during the period prior
to the Effective Time or until this Agreement is terminated in accordance with
its terms, to obtain all information concerning the business, properties,
results of operations and personnel of Target, as Parent may reasonably request.
No information or knowledge obtained in any investigation pursuant to this
Section 6.3 will affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Merger.
(b) The parties acknowledge that Target and Parent have previously
executed a Confidentiality Agreement, dated October 3, 2000 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
6.4 No Solicitation.
(a) Except as otherwise provided in this Section 6.4(a), from and
after the date of this Agreement until the Effective Time or termination of this
Agreement pursuant to Article VIII, Target and its subsidiaries will not, nor
will they authorize or permit any of their respective officers, directors,
affiliates or employees or any investment banker, attorney or other advisor or
representative retained by any of them to, directly or indirectly (A) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal (as defined below), (B) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (C) engage in discussions with any person with respect to
any Acquisition Proposal, except as to the existence of these provisions, (D)
subject to Section 6.2(c), approve, endorse or recommend any Acquisition
Proposal or (E) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction (as defined below); provided, however, until the date on
which this Agreement is approved by the required vote of the Target
Shareholders, this Section 6.4(a) shall not prohibit Target from furnishing
nonpublic information regarding Target and its subsidiaries to, entering into a
confidentiality agreement with or entering into discussions with, any person or
group in response to a Superior Offer submitted by such person or group (and not
withdrawn) if
A-33
<PAGE>
(1) neither Target nor any representative of Target and its subsidiaries shall
have violated any of the restrictions set forth in this Section 6.4(a), (2) the
Board of Directors of Target concludes in good faith, after consultation with
its outside legal counsel, that such action is required in order for the Board
of Directors of Target to comply with its fiduciary obligations to the Target
Shareholders under applicable law, (3) (x) at least three (3) days prior to
furnishing any such nonpublic information to, or entering into discussions or
negotiations with, such person or group, Target gives Parent written notice of
the identity of such person or group and of Target's intention to furnish
nonpublic information to, or enter into discussions or negotiations with, such
person or group and (y) Target receives from such person or group an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
person or group by or on behalf of Target and containing terms no less favorable
to the disclosing party than the terms of the Confidentiality Agreement, and (4)
contemporaneously with furnishing any such nonpublic information to such person
or group, Target furnishes such nonpublic information to Parent (to the extent
such nonpublic information has not been previously furnished by Target to
Parent). Target and its subsidiaries will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any officer or director of Target or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Target or any
of its subsidiaries shall be deemed to be a breach of this Section 6.4(a) by
Target. In addition to the foregoing, Target shall (i) provide Parent with at
least forty-eight (48) hours prior notice (or such lesser prior notice as
provided to the members of Target's Board of Directors but in no event less than
eight hours) of any meeting of Target's Board of Directors at which Target's
Board of Directors is reasonably expected to consider a Superior Offer and (ii)
provide Parent with at least three (3) business days prior written notice of a
meeting of Target's Board of Directors at which Target's Board of Directors is
reasonably expected to recommend a Superior Offer to its shareholders and
together with such notice a copy of the definitive documentation relating to
such Superior Offer.
(b) For purposes of this Agreement, an "Acquisition Proposal" shall
mean any offer or proposal (other than an offer or proposal by Parent) relating
to any Acquisition Transaction. For the purposes of this Agreement, an
"Acquisition Transaction" shall mean any transaction or series of related
transactions other than the transactions contemplated by this Agreement
involving: (A) any acquisition or purchase from Target by any person or "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 5% interest in the total outstanding
voting securities of Target or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 5% or more of the total outstanding voting
securities of Target or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Target pursuant to which
the shareholders of Target immediately preceding such transaction hold less than
95% of the equity interests in the surviving or resulting entity of such
transaction; (B) any sale, lease (other than in the ordinary course of
business), exchange,
A-34
<PAGE>
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 5% of the assets of Target; or (C) any liquidation
or dissolution of Target.
(c) In addition to the obligations of Target set forth in paragraph
(a) of this Section 6.4, Target as promptly as practicable, and in any event
within twenty-four (24) hours, shall advise Parent orally and in writing of any
request received by Target for non-public information which Target reasonably
believes would lead to an Acquisition Proposal or of any Acquisition Proposal,
the material terms and conditions of such request, Acquisition Proposal or
inquiry, and the identity of the person or group making any such request,
Acquisition Proposal or inquiry. Target will keep Parent informed in all
material respects of the status and details (including material amendments or
proposed amendments) of any such request, Acquisition Proposal or inquiry.
6.5 Public Disclosure. Parent and Target will consult with each other and
agree before issuing any press release or otherwise making any public statement
with respect to the Merger, this Agreement, or an Acquisition Proposal and will
not issue any such press release or make any such public statement prior to such
agreement, except as may be required by law or any listing agreement with a
national securities exchange or NASDAQ, in which case reasonable efforts to
consult with the other party will be made prior to such release or public
statement; provided, however, that no such consultation or agreement shall be
required if, prior to the date of such release or public statement, either party
shall have withheld, withdrawn, amended or modified its unanimous recommendation
in favor of the Merger.
6.6 Legal Requirements. Each of Parent and Target will take all reasonable
actions necessary or desirable to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement.
6.7 Third Party Consents. As soon as practicable following the date hereof,
Target will use its commercially reasonable best efforts to obtain all material
consents, waivers and approvals under any of its or its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
6.8 FIRPTA. At or prior to the Closing, Target, if requested by Parent,
shall deliver to the IRS a notice that the Target Common Stock is not a "U.S.
Real Property Interest" as defined and in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
6.9 Notification of Certain Matters. Parent and Target will give prompt
notice to the other of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty contained in this
A-35
<PAGE>
Agreement to be untrue or inaccurate at any time from the date of this Agreement
to the Effective Time, such that the conditions set forth in Section 7.2(a) or
7.3(a), as the case may be, would not be satisfied as a result thereof, or (b)
any material failure of Parent or Target, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this Section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
6.10 Commercially Reasonable Efforts and Further Assurances. Subject to the
respective rights and obligations of Parent and Target under this Agreement,
each of the parties to this Agreement will use its commercially reasonable best
efforts (as defined in Section 9.3) to effectuate the Merger and the other
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the reasonable
request of another party hereto, will execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or desirable
for effecting completely the consummation of the transactions contemplated
hereby.
6.11 Indemnification of Target Directors and Officers.
(a) From and after the Effective Time, Parent and the Surviving
Corporation will fulfill and honor in all respects the obligations of Target
pursuant to any indemnification obligations set forth in the Target's Articles
of Incorporation and Bylaws and any Florida Law, and any obligations under
agreements between Target and its directors and officers existing prior to the
date hereof. The Articles of Incorporation and Bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification and
elimination of liability for monetary damages set forth in the Articles of
Incorporation and Bylaws of Target, which provisions will not be amended,
repealed or otherwise modified for a period of six (6) years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who, at the Effective Time, were directors, officers, employees or
agents of Target, unless such modification is required by law.
(b) For a period of six (6) years after the Effective Time, Parent
will, or will cause the Surviving Corporation to, use its commercially
reasonable best efforts (as defined in Section 9.3) to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by Target's directors' and officers' liability
insurance policy on terms comparable to those applicable to the then current
directors and officers of Parent; provided, however, that in no event will
Parent or the Surviving Corporation be required to expend in an annual premium
for such coverage (or such coverage as is available for such annual premium) in
excess of 200% of the last annual premium paid immediately prior to the date
hereof by the Target for such coverage.
(c) This Section 6.11 will survive any termination of this Agreement
and the consummation of the Merger at the Effective Time and will be binding on
all successors and assigns of Parent and the Surviving Corporation. In the event
that Parent, the Surviving
A-36
<PAGE>
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person or entity and shall not be the continuing
or surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or a substantial portion of its properties or assets to
any person or entity, then, and in each such case, to the extent necessary to
effectuate the purposes of this Section 6.11, proper provision shall be made so
that the successors and the assigns of Parent and the Surviving Corporation
assume the obligations set forth in this Section 6.11.
6.12 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, Target and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Target and Parent each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
6.13 Registration on From S-8. Parent agrees to file a registration
statement on From S-8 for the shares of Parent Common Stock issuable with
respect to assumed Target Options as soon as is reasonably practicable after the
Effective time. Parent shall maintain the effectiveness of such registration
statement (or a successor or substitute registration) thereafter for so long as
any of such Target Options remain outstanding.
6.14 Amendment of Stock Option Agreements. Prior to Closing, Target shall
amend any stock option agreement granting Target Options the exercise price per
share of which is greater than $9.75 to reduce the exercise price per share to
$9.75, it being the intent of the parties hereto that at Closing there will be
no Target Options with an exercise price per share in excess of $9.75.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law by the shareholders of Target.
A-37
<PAGE>
(b) Proxy Statement. The definitive Proxy Statement shall have been
released for mailing to the Target Shareholders and no stop order suspending the
effectiveness of the Proxy Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or threatened in
writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early.
7.2 Additional Conditions to Obligations of Target. The obligation of
Target to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any of
which may be waived, in writing, exclusively by Target:
(a) Representations and Warranties. The representations and warranties
of Parent contained in this Agreement shall have been true and correct as of the
date of this Agreement, except where the failure to be so true and correct would
not, in the aggregate, have a Material Adverse Effect on Parent. In addition,
the representations and warranties of Parent contained in this Agreement shall
be true and correct on and as of the Effective Time except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, except in such cases where
the failure to be so true and correct would not, in the aggregate, have a
Material Adverse Effect on Parent. Target shall have received a certificate with
respect to the foregoing signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent; and
(b) Agreements and Covenants. Parent and Subsidiary shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and Target shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
7.3 Additional Conditions to the Obligations of Parent. The obligations of
Parent and the Subsidiary to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
of Target contained in this Agreement shall have been true and correct as of the
date of this Agreement, except where the failure to be so true and correct would
not, in the aggregate, have a
A-38
<PAGE>
Material Adverse Effect on Target. In addition, the representations and
warranties of Target contained in this Agreement shall be true and correct on
and as of the Effective Time except for changes contemplated by this Agreement
and except for those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such
particular date), with the same force and effect as if made on and as of the
Effective Time, except in such cases (other than the representations in Sections
3.2 and 3.3) where the failure to be so true and correct would not, in the
aggregate, have a Material Adverse Effect on Target. Parent shall have received
a certificate with respect to the foregoing signed on behalf of Target by the
President and the Chief Financial Officer of Target; and
(b) Agreements and Covenants. Target shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and the Parent shall have received a certificate to such effect signed on
behalf of Target by the President and the Chief Financial Officer of Target.
(c) Employment Agreement. An employment agreement, reasonably
acceptable to Parent and William Dambrackas, shall have been executed by each of
them.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of Target:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Target;
(b) by either Target or Parent if the Merger shall not have been
consummated by January 31, 2001; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either Target or Parent if a governmental entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree or ruling is final and nonappealable;
(d) by either Target or Parent if the required approvals of the
shareholders of Target contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a vote taken
at a meeting of shareholders duly convened therefor or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 8.1(d) shall not be available to Target where such failure to
obtain shareholder
A-39
<PAGE>
approval shall have been caused by the action or failure to act of Target in
breach of this Agreement;
(e) by Target, upon a breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 7.2(a) or Section 7.2(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
Parent's representations and warranties or breach by Parent is curable by Parent
through the exercise of its commercially reasonable best efforts, then Target
may not terminate this Agreement under this Section 8.1(e) for thirty (30) days
after delivery of written notice from Target to Parent of such breach, provided
Parent continues to exercise commercially reasonable best efforts to cure such
breach (it being understood that Target may not terminate this Agreement
pursuant to this paragraph (e) if such breach by Parent is cured during such
thirty (30)-day period);
(f) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of Target set forth in this Agreement, or if any
representation or warranty of Target shall have become untrue, in either case
such that the conditions set forth in Section 7.3(a) or Section 7.3(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
Target's representations and warranties or breach by Target is curable by Target
through the exercise of its commercially reasonable best efforts, then Parent
may not terminate this Agreement under this Section 8.1(f) for thirty (30) days
after delivery of written notice from Parent to Target of such breach, provided
Target continues to exercise commercially reasonable best efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (f) if such breach by Target is cured during such
thirty (30)-day period);
(g) by Parent or Target if a Triggering Event (as defined below) shall
have occurred.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) the Board of Directors of Target or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of the adoption
and approval of the Agreement or the approval of the Merger; (ii) Target shall
have failed to include in the Proxy Statement the unanimous recommendation of
the Board of Directors of Target in favor of the adoption and approval of the
Agreement and the approval of the Merger; (iii) the Board of Directors of Target
fails to reaffirm its unanimous recommendation in favor of the adoption and
approval of the Agreement and the approval of the Merger within ten (10)
business days after Parent requests in writing that such recommendation be
reaffirmed at any time following the announcement of an Acquisition Proposal;
(iv) the Board of Directors of Target or any committee thereof shall have
approved or recommended any Acquisition Proposal; (v) Target shall have entered
into any letter of intent or
A-40
<PAGE>
similar document or any agreement, contract or commitment accepting any
Acquisition Proposal; (vi) a tender or exchange offer relating to securities of
Target shall have been commenced by a person unaffiliated with Parent and Target
shall not have sent to its security holders pursuant to Rule 14e-2 promulgated
under the Securities Act, within ten (10) business days after such tender or
exchange offer is first published sent or given, a statement disclosing that
Target recommends rejection of such tender or exchange offer; or (vii) Target
shall have breached any of the provisions of Section 6.4(a) of this Agreement.
8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 8.2, Section 8.3 and Article X (General Provisions), each of
which shall survive the termination of this Agreement, and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
8.3 Fees and Expenses.
(a) General. Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that Parent and Target
shall share equally all filing fees incurred for the pre-merger notification and
report forms under the HSR Act.
(b) Certain Payments by Target.
(i) Target shall pay to Parent in immediately available funds,
within two (2) business days after demand by Parent, an amount equal to
$2,500,000 (the "Target Termination Fee") if this Agreement is terminated by
Parent or Target pursuant to Section 8.1(g).
(ii) Target shall pay Parent in immediately available funds,
within two (2) business days after demand by Parent, an amount equal to the
Target Termination Fee, if this Agreement is terminated by Parent or Target
pursuant to Section 8.1(b) or Section 8.1(d) as a result of Target's failure to
obtain the required approvals of the shareholders of Target and either of the
following shall occur:
(1) if following the date hereof and prior to the
termination of this Agreement, a third party has announced an Acquisition
Proposal and within twelve (12) months following the termination of this
Agreement a Target Acquisition (as defined below) is consummated; or
(2) if following the date hereof and prior to the
termination of this Agreement, a third party has announced an Acquisition
Proposal and within twelve (12) months
A-41
<PAGE>
following the termination of this Agreement Target enters into an agreement or
letter of intent providing for a Target Acquisition.
(iii) Target shall pay to Parent in immediately available funds,
within two (2) business days after demand by Parent, an amount equal to the
Target Termination Fee if all of the following occur: (A) this Agreement is
terminated by Parent pursuant to Section 8.1(b), (B) all of the conditions
precedent to Target's obligations to effect the Merger set forth in Article VII
have been satisfied or waived in writing by Target, and (C) Target has
nevertheless failed or refused to effect the Merger in accordance with the terms
of this Agreement.
(c) Certain Payments by Parent. Parent shall pay to Target in
immediately available funds, within two (2) business days after demand by
Target, an amount equal to $2,500,000 if all of the following occur: (1) this
Agreement is terminated by Target pursuant to to Section 8.1(b), (2) all of the
conditions precedent to Parent's obligations to effect the Merger set forth in
Article VII have been satisfied or waived in writing by Parent, and (3) Parent
has nevertheless failed or refused to effect the Merger in accordance with the
terms of this Agreement.
(d) The parties acknowledge that the agreements contained in Sections
8.3(b) and 8.3(c) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties would not enter into
this Agreement; accordingly, if Target or Parent, as applicable, fails to pay in
a timely manner the amounts due pursuant to Section 8.3(b) or 8.3(c) and, in
order to obtain such payment, the other party makes a claim that results in a
judgment for the amounts set forth in Section 8.3(b) or 8.3(c), the party
against whom the judgment is rendered shall pay the prevailing party its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in Section 8.3(b) or 8.3(c) at the prime rate of The Chase Manhattan
Bank in effect on the date such payment was required to be made. Payment of the
fees described in Section 8.3(b) or 8.3(c) shall not be in lieu of damages
incurred in the event of willful breach of this Agreement. For the purposes of
this Agreement, "Target Acquisition" shall mean any of the following
transactions (other than the transactions contemplated by this Agreement): (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Target pursuant to which the
shareholders of Target immediately preceding such transaction hold less than 50%
of the aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by Target of assets representing
in excess of 50% of the aggregate fair market value of Target's business
immediately prior to such sale or (iii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by Target),
directly or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 50% of the voting power of the
then outstanding shares of capital stock of Target.
8.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of Parent and Target.
A-42
<PAGE>
8.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations and Warranties. The representations and
warranties of Target and Parent contained in this Agreement shall terminate at
the Effective Time, and only the covenants that by their terms survive the
Effective Time shall survive the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via facsimile (receipt confirmed) to the parties at
the following addresses or facsimile numbers (or at such other address or
facsimile numbers for a party as shall be specified by like notice):
(a) if to Target, to:
Equinox Systems Inc.
One Equinox Way
Sunrise, Florida 33351
Attention: William Dambrackas
Fax No.: (954) -377-7198
with a copy to:
Ken Hoffman, Esq.
Greenberg Traurig
1211 Brickell Ave.
Miami, Florida 33131
Fax No.: (305) 579-0717
(b) if to Parent or Subsidiary, to:
A-43
<PAGE>
Avocent Corporation
4991 Corporate Drive
Huntsville, Alabama 35805
Attention: Mr. Stephen Thornton
Mr. Dusty Pritchett
Fax No.: (256) 430-4032
with a copy to:
John H. Cooper, Esq.
Sirote & Permutt
2311Highland Ave. South
Birmingham, Alabama 35205
Fax No.: (205) 930-5101
9.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be
deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means, with
respect to any matter in question, that the executive officers of Target or
Parent, as the case may be, have actual knowledge of such matter.
(c) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is materially adverse to the business,
assets (including intangible assets), capitalization, financial condition or
results of operations of such entity and its subsidiaries taken as a whole;
provided, however, that in no event shall (A) a decrease in such entity's stock
price or the failure to meet or exceed Wall Street research analysts' or such
entity's internal earnings or other estimates or projections in and of itself
constitute a Material Adverse Effect or (B) any change, event, violation,
inaccuracy, circumstance or effect that results from (x) the public announcement
or pendency of the transactions contemplated hereby, (y) changes affecting the
Parent's and Target's respective industry generally or (z) changes affecting the
United States economy generally, constitute a Material Adverse Effect.
A-44
<PAGE>
(d) For purposes of this Agreement, "commercially reasonable best
efforts" means the efforts that a prudent person or entity desirous of achieving
a result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; provided, however, that an obligation to
use commercially reasonable best efforts under this Agreement does not require
the person or entity subject to that obligation to take actions that would
result in a Material Adverse Effect on such person or entity or that would
materially reduce the benefits to such person or entity of this Agreement and
the Merger.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement. This Agreement, including the Disclosure Schedules,
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, it being understood that the Confidentiality Agreement shall continue in
full force and effect until the Closing and shall survive any termination of
this Agreement; and (b) are not intended to confer upon any other person any
rights or remedies hereunder, except as set forth herein.
9.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (except that the rights and
obligations of
A-45
<PAGE>
Target Shareholders with respect to the Merger shall be governed by Florida
Law), regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
9.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
9.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
9.11 WAIVER OF JURY TRIAL. EACH OF PARENT AND TARGET HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT AND TARGET IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[Signature Page Follows]
A-46
<PAGE>
IN WITNESS WHEREOF, Parent, Target, and Subsidiary have caused this
Agreement to be executed by their duly authorized respective officers as of the
date first written above.
EQUINOX SYSTEMS INC.
By: /s/ William A. Dambrackas
----------------------------------------------
Name: William A. Dambrackas
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
AVOCENT CORPORATION
By: /s/ Doyle C. Weeks
---------------------------------------------
Name: Doyle C. Weeks
---------------------------------------
Title: Executive Vice President
--------------------------------------
BLUE MARLIN ACQUISITION CORPORATION
By: /s/ Doyle C. Weeks
----------------------------------------------
Name: Doyle C. Weeks
---------------------------------------
Title: Incorporator
--------------------------------------
A-47
<PAGE>
AMENDMENT
TO
PLAN AND AGREEMENT OF MERGER
THIS AMENDMENT (the "Amendment") ("Amendment"), is entered into as of
November 22, 2000, by and among Avocent Corporation, a Delaware corporation
("Parent"), Blue Marlin Acquisition Corporation, a Florida corporation and
wholly-owned subsidiary of Parent (the "Subsidiary"), Equinox Systems Inc., a
Florida corporation ("Target") as follows:
WHEREAS Parent, Subsidiary, and Target entered into a Plan and Agreement of
Merger dated November 3, 2000 (the "Agreement"); and
WHEREAS Parent, Subsidiary, and Target desire to amend the Agreement as set
forth below:
NOW THEREFORE in consideration of the premises and the mutual promises and
covenants contained herein and in the Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties to this Amendment, Parent, Subsidiary, and Target agree as follows:
1. Section 2.1(c) of the Agreement shall be deleted in its entirety, and in
lieu thereof shall be inserted the following:
"(c) Target Stock Options. At the Effective Time, each of the then
outstanding options to purchase Target Common Stock (collectively, the
"Target Options") (consisting of all outstanding options granted under
Target's 1988 Non-qualified Stock Option Plan, 1992 Non-qualified Stock
Option Plan, 1993 Stock Option Plan, Directors Stock Option Plan and 2000
Directors' Stock Option Plan (collectively the "Target Plans"), and any
individual non-Plan options) will by virtue of the Merger, and without any
further action on the part of any holder thereof, be assumed and converted
into an option to purchase that number of shares of Common Stock, $0.001
par value of Parent ("Parent Common Stock") determined by multyplying the
number of shares of Target Common Stock subject to such Target Option at
the Effective Time by a fraction (the "Applicable Ratio"), the numerator of
which is the Exchange Ratio and the denominator of which is the closing
price of the Parent Common Stock, rounded to the fourth decimal place, as
quoted on the Nasdaq Stock Market on the last trading date prior to the
Closing Date ("Parent Stock Price"), at an exercise price per share of
Parent Common Stock equal to the exercise price per share of such Target
Option immediately prior to the Effective Time (provided that the exercise
price per share of such Target Option immediately prior to the Effective
Time shall be deemed to be $9.75 with respect to any Target Option the
exercise price per share of which would otherwise have been greater than
$9.75) divided by the Applicable Ratio
A-48
<PAGE>
rounded up to the nearest cent. If the foregoing calculation results in an
assumed Target Option being exercisable for a fraction of a share of Parent
Common Stock, then the number of shares of Parent Common Stock subject to
such option will be rounded down to the nearest whole number of shares,
with no cash being payable for such fractional share. The term,
exerciseability, vesting schedule, status as an "incentive stock option"
under Section 422 of the Code, if applicable, and all other terms and
conditions of the Target Options will otherwise be unchanged."
2. In all other respects, the Agreement shall remain in full force and
effect.
3. This Amendment may be executed in one or more counterparts, all of which
shall be considered one and the same Amendment and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign the same
counterpart.
[Signature Page Follows]
A-49
<PAGE>
IN WITNESS WHEREOF, Parent, Subsidiary, and Target have caused this
Amendment to be executed by their duly authorized respective officers as of the
date first written above.
EQUINOX SYSTEMS INC.
By: /s/ William A. Dambrackas
-------------------------------------
Name: William A. Dambrackas
-------------------------------
Title: President and Chief
-------------------------------
Executive Officer
AVOCENT CORPORATION
By: /s/ Samuel F. Saracino
-------------------------------------
Name: Samuel F. Saracino
-------------------------------
Title: Senior Vice President and
------------------------------
General Counsel
BLUE MARLIN ACQUISITION
CORPORATION
By: /s/ Samuel F. Saracino
-------------------------------------
Name: Samuel F. Saracino
-------------------------------
Title: Vice President and Secretary
------------------------------
A-50
<PAGE>
Appendix B
----------
November 3, 2000
Board of Directors
Equinox Systems Inc.
1 Equinox Way
Sunrise, FL 33351
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of the outstanding common stock, par value $.01
(the "Common Stock") of Equinox Systems Inc. (the "Company") of the
consideration to be received by such holders in connection with the proposed
cash merger (the "Merger") of Avocent Corporation ("Avocent") with the Company
pursuant and subject to the draft of the Agreement and Plan of Merger between
the Company and Avocent dated October, 2000 (the "Agreement"). The consideration
to be offered by Avocent in exchange for all the outstanding Common Stock of the
Company will be $56.8 million cash, or $9.75 cash per share.
In connection with our review of the proposed Merger and the preparation of
our opinion herein, we have, among other things:
1. reviewed the financial terms and conditions as stated in the October,
2000 draft of the Agreement;
2. reviewed the audited financial statements of the Company for the years
ended December 31, 1999, December 31, 1998, December 31, 1997, and the
unaudited financial statements for the nine months ended September 30,
2000;
3. reviewed the Company's Annual Report filed on Form 10-K for the year
ended December 31, 1999 and the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 2000 and June 30, 2000;
4. reviewed other non-public Company financial and operating information
requested from and/or provided by the Company, including, among other
things, financial projections;
5. reviewed certain other publicly available information on the Company;
and
B-1
<PAGE>
6. discussed with members of the senior management of the Company certain
information relating to the aforementioned and any other matters which
we have deemed relevant to our inquiry.
We have assumed and relied upon the accuracy and completeness of all
information supplied or otherwise made available to us by the Company, Avocent
or any other party and have not attempted to verify independently any of such
information. We have assumed that the final terms of the Agreement will not
differ materially from the October, 2000 draft we reviewed. We have not made or
obtained an independent appraisal of the assets or liabilities (contingent or
otherwise) of the Company. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have assumed that such forecasts and other information and data have been
reasonably prepared in good faith on bases reflecting the best currently
available estimates and judgments of management, and we have relied upon each
party to advise us promptly if any information previously provided became
inaccurate or was required to be updated during the period of our review.
Our opinion is based upon market, economic, financial and other
circumstances and conditions existing and disclosed to us as of November 3, 2000
and any material change in such circumstances and conditions would require a
reevaluation of this opinion, which we are under no obligation to undertake.
We express no opinion as to the underlying business decision to effect the
Merger, the structure or tax consequences of the Agreement or the availability
or advisability of any alternatives to the Merger. We did not structure the
Merger or negotiate the final terms of the Merger. Our opinion is limited to the
fairness, from a financial point of view, of the consideration to be received by
the Shareholders pursuant to the Merger. We express no opinion with respect to
any other reasons, legal, business, or otherwise, that may support the decision
of the Board of Directors to approve or consummate the Merger.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of the Company and certain other
publicly held companies in businesses we believe to be comparable to the
Company; (ii) the current and projected financial position and results of
operations of the Company; (iii) the historical market prices and trading
activity of the Common Stock of the Company; (iv) financial and operating
information concerning selected business combinations which we deemed comparable
in whole or in part; and (v) the general condition of the securities markets.
In arriving at this opinion, we did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and factor. Accordingly,
we believe that our analyses must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, would create an
incomplete view of the process underlying this opinion.
B-2
<PAGE>
Raymond James & Associates, Inc. ("Raymond James") is actively engaged in
the investment banking business and regularly undertakes the valuation of
investment securities in connection with public offerings, private placements,
business combinations and similar transactions. Raymond James has been engaged
to render financial advisory services to the Company in connection with the
proposed Merger and will receive a fee for such services, which fee is
contingent upon consummation of the Merger. Raymond James will also receive a
fee upon the delivery of this opinion. In addition, the Company has agreed to
indemnify us against certain liabilities arising out of our engagement.
In the ordinary course of our business, Raymond James may trade in the
securities of the Company for our own account or for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in evaluating the proposed Merger and does not
constitute a recommendation to any shareholder of the Company regarding how said
shareholder should vote on the proposed Merger. This opinion is not to be quoted
or referred to, in whole or in part, without our prior written consent, which
will not be unreasonably withheld. We have consented to the inclusion of this
letter in its entirety as an Appendix to the Proxy Statement of the Company
relating to the proposed Merger.
Based upon and subject to the foregoing, it is our opinion that, as of
November 3, 2000, the consideration to be received by the shareholders of the
Company pursuant to the Agreement is fair, from a financial point of view, to
the holders of the Company's outstanding Common Stock.
Very truly yours,
RAYMOND JAMES & ASSOCIATES, INC.
B-3
<PAGE>
EQUINOX SYSTEMS INC.
One Equinox Way
Sunrise, Florida 33351
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William A. Dambrackas and Robert F.
Williamson, Jr., and either of them, proxies (each with full power of
substitution) to vote, as indicated below and in their discretion upon such
other matters as may properly come before the meeting, all shares which the
undersigned would be entitled to vote at the special meeting of shareholders of
Equinox to be held on January 2, 2001, at 11:00 a.m., local time, at Weston
Hills Country Club, 2600 Country Club Drive, Weston, Florida 33332, and at any
adjournment or postponement thereof, as indicated on the reverse side.
1. A proposal to approve and adopt the Merger Agreement and the Merger
described in the accompanying proxy statement.
[_] FOR [_] AGAINST [_] ABSTAIN
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY
ALSO DELEGATES DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF
AND MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING DATED NOVEMBER 30, 2000 AND THE ACCOMPANYING PROXY STATEMENT.
PLEASE SIGN AND DATE THIS PROXY BELOW
Date: , 2000
-------------------------------------------
-------------------------------------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
LEFT. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, GUARDIAN OR CORPORATE
OFFICIAL, PLEASE GIVE FULL TITLE.
