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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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OCTEL COMMUNICATIONS CORPORATION
(NAME OF SUBJECT COMPANY)
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OCTEL COMMUNICATIONS CORPORATION
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, $0.001 PAR VALUE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
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675724108
(CUSIP NUMBER OF CLASS OF SECURITIES)
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ROBERT COHN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
OCTEL COMMUNICATIONS CORPORATION
1001 MURPHY RANCH ROAD
MILPITAS, CA 95035-7912
(408) 321-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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Copies to:
LARRY W. SONSINI, ESQ.
BARRY E. TAYLOR, ESQ.
MARTY KORMAN, ESQ.
MARK E. BONHAM, ESQ.
WILSON SONSINI GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(415) 493-9300
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by Memo Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Lucent Technologies Inc., a
Delaware corporation, to purchase all of the Shares (as defined below) of Octel
Communications Corporation, a Delaware corporation.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Octel Communications Corporation, a
Delaware corporation (the "Company"). The address of the principal executive
office of the Company is 1001 Murphy Ranch Road, Milpitas, California 95035. The
title of the class of equity securities to which this Schedule 14D-9 relates is
the Common Stock of the Company, par value $0.001 per share, and all associated
rights, including Preferred Share Purchase Rights (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
the Schedule 14D-1 dated July 23, 1997 (as amended or supplemented, the
"Schedule 14D-1") filed with the Securities and Exchange Commission (the
"Commission") by Lucent Technologies Inc., a Delaware corporation ("Parent"),
and Memo Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent (the "Purchaser"), relating to an offer by the Purchaser to purchase
all outstanding Shares at a price of $31 per Share, net to the seller in cash,
without interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth therein. The principal executive offices of each of Parent
and the Purchaser are located at 600 Mountain Avenue, Murray Hill, New Jersey
07974.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of July 17, 1997 (the "Merger Agreement") among the Company, Parent and the
Purchaser. A copy of the Merger Agreement is filed as Exhibit (c)(1) to this
Schedule 14D-9 and is hereby incorporated by reference. The Merger Agreement
provides that, among other things, as soon as practicable after the purchase of
Shares pursuant to the Offer and the satisfaction of the other conditions set
forth in the Merger Agreement and in accordance with the relevant provisions of
the General Corporation Law of the State of Delaware ("Delaware Law" or the
"DGCL"), Purchaser will be merged with the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held by the Company or by any subsidiary of the Company,
or owned by the Purchaser, by Parent, or any other subsidiary of Parent or
Shares held by stockholders who shall have demanded and perfected appraisal
rights, if any, under Delaware Law) will be canceled and converted automatically
into the right to receive the price per Share paid pursuant to the Offer in
cash, without interest (the "Merger Consideration"). The Merger Agreement is
summarized in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Schedule 14D-9 are to the
Company and its subsidiaries, viewed as a single entity.
(b) Certain contracts, agreements, arrangements or understandings known to
the Company between the Company or its affiliates and (i) certain of the
Company's executive officers, directors or affiliates or (ii) certain of
Parent's executive officers, directors or affiliates are described in the
Information Statement of the Company attached to this Schedule 14D-9 as Annex A
(the "Information Statement"). Other such contracts, arrangements and
understandings known to the Company are described below. The Information
Statement is being furnished to the Company's stockholders pursuant to Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 14f-1 issued under the Exchange Act in connection with the Purchaser's
right (after consummation of the Offer) to designate persons to be appointed
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to the Board of Directors of the Company other than at a meeting of the
stockholders of the Company. The Information Statement is hereby incorporated by
reference.
INDEMNIFICATION AGREEMENTS
The Company is party to indemnification agreements with each person who, as
of July 17, 1997, was either a director or an executive officer of the Company.
The indemnification agreements generally provide (i) for indemnification against
all costs and expenses (including attorneys' fees) actually and reasonably
incurred by the indemnitee if the indemnitee is or was a party or is threatened
to be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that such indemnitee is or was serving the Company (or a subsidiary of the
Company) as a director, officer, employee or agent, or by reason of any action
or inaction on the part of indemnitee while serving in such capacity and any and
all judgments, fines and amounts paid in settlement of any claim, provided that
indemnitee acted in good faith and in a manner indemnitee reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
indemnitee's conduct was unlawful, or unless it is determined that such
indemnification is not permitted under applicable law and (ii) for the prompt
advancement of expenses to an indemnitee as well as the reimbursement by such
indemnitee of any such advances to the Company if it is determined that the
indemnitee is not entitled to such indemnification. Indemnitees' rights under
the indemnification agreements are not exclusive of any other rights they may
have under Delaware Law, the Company's Certificate of Incorporation, the
Company's Bylaws or otherwise. The form of indemnification agreement has been
filed as Exhibit (c)(2) to this Schedule 14D-9 and is hereby incorporated by
reference.
The Certificate of Incorporation of the Company, as amended to date (the
"Certificate of Incorporation"), provides that, to the fullest extent permitted
by Delaware Law, no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director. The Certificate of Incorporation of the Company has been filed as
Exhibit (c)(3) to this Schedule 14D-9 and is hereby incorporated by reference.
Article VI of the Bylaws of the Company also provides for indemnification of
officers and directors of the Company. The Bylaws of the Company has been filed
as Exhibit (c)(4) to this Schedule 14D-9 and is hereby incorporated by
reference.
ACCELERATION OF DIRECTOR OPTIONS
In July 1997, the Board of Directors amended the Company's 1988 Directors'
Stock Option Plan (the "DSOP") to provide that in the event of consummation of
the Offer, all outstanding options under the DSOP shall be deemed, immediately
prior to consummation of the Offer, to have vested and become fully exercisable
as to all shares subject to such options.
THE MERGER AGREEMENT
VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other
things, that the adoption of any plan of merger or consolidation of the
Company must be approved by the Board of Directors of the Company and, if
the "short form" merger procedure described below is not available, by the
holders of a majority of the Company's outstanding Shares. The Board of
Directors of the Company has approved the Offer, the Merger and the Merger
Agreement; consequently, the only additional action of the Company that may
be necessary to effect the Merger is approval by such stockholders if the
"short-form" merger procedure described below is not available. Under the
DGCL, the affirmative vote of holders of a majority of the outstanding
Shares (including any Shares owned by the Purchaser), is generally required
to approve the Merger. If the Purchaser acquires, through the Offer or
otherwise, voting power with respect to at least a majority of the
outstanding Shares (which would be the case if the Minimum Condition (as
defined below) were satisfied and the Purchaser were to accept for payment
Shares tendered pursuant to the Offer), it would have sufficient voting
power to effect the Merger without the vote of any other stockholder of the
Company. However, the DGCL also provides that if a parent company owns at
least 90% of each class of stock of a subsidiary, the parent company can
effect a short-form merger with that subsidiary without the action of the
other stockholders of the subsidiary.
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Accordingly, if, as a result of the Offer or otherwise, the Purchaser
acquires or controls the voting power of at least 90% of the outstanding
Shares, the Purchaser could (and, under the Merger Agreement, is required
to) effect the Merger using the "short-form" merger procedures without
prior notice to, or any action by, any other stockholder of the Company.
For purposes of the Merger Agreement, the Minimum Condition shall be
satisfied if such number of Shares that would constitute at least a
majority of the outstanding Shares (determined on a fully diluted basis for
all outstanding stock options and any other rights to acquire Shares that
are or would be vested prior to December 31, 1997) are validly tendered and
not withdrawn prior to the Expiration Date.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the
Merger is subject to the satisfaction of certain conditions, including the
following: (1) if required by applicable law, the Merger Agreement having
been approved and adopted by the affirmative vote of holders of a majority
of the outstanding Shares, (2) no statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other Federal, state or local government or any court, administrative
agency or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), or other legal restraint or prohibition
preventing the consummation of the Merger being in effect; provided,
however, that each of the parties shall have used reasonable efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered and
(3) the Purchaser shall have previously accepted for payment and paid for
the Shares pursuant to the Offer.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval by the stockholders of the Company (provided, however, that if
Shares are purchased pursuant to the Offer, neither Parent nor Purchaser
may in any event terminate the Merger Agreement), (1) by mutual written
consent of Parent and the Company, (2) by either Parent or the Company (a)
if the Purchaser has not accepted for payment any Shares pursuant to the
Offer prior to December 31, 1997, provided, however, that the right to
terminate the Merger Agreement pursuant to this sentence will not be
available to (i) Parent, if Purchaser has breached its obligations under
the Merger Agreement or (ii) any party whose failure to perform any of its
obligations under the Merger Agreement results in the failure of any such
condition or if the failure of such condition results from facts or
circumstances that constitute a willful breach of a representation or
warranty under the Merger Agreement by such party, or (b) if any
Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares pursuant
to the Offer or the Merger and such order, decree or ruling or other action
has become final and nonappealable, (3) by Parent or the Purchaser prior to
the purchase of Shares pursuant to the Offer in the event of a breach or
failure to perform by the Company of any representation, warranty, covenant
or other agreement contained in the Merger Agreement which (i) would give
rise to the failure of a condition set forth in paragraph (e) or (f) under
"Certain Conditions of the Offer" and (ii) cannot be or has not been cured
within 30 days after the giving of written notice to the Company, (4) by
Parent or the Purchaser if either Parent or the Purchaser is entitled to
terminate the Offer as a result of the occurrence of any event set forth in
paragraph (d) under "Certain Conditions of the Offer," (5) by the Company
in accordance with the terms of the Merger Agreement described below in
"Takeover Proposals," provided that it has complied with all provisions
thereof, including the notice provisions therein, and that it complies with
applicable requirements relating to the payment (including the timing of
any payment) of the Termination Fee (as defined below) as provided in the
terms of the Merger Agreement described below in "Fees and Expenses" (it
being understood that as provided in the terms of the Merger Agreement
described below in the second paragraph of "Takeover Proposals" the Company
will be required to terminate the Merger Agreement) or (6) by the Company
in the event of a material breach or failure to perform in any material
respect by Parent or the Purchaser of any representation, warranty,
covenant or other agreement contained in the Merger Agreement which cannot
be or has not been cured within 30 days after the giving of written notice
to Parent and the Purchaser.
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TAKEOVER PROPOSALS. The Merger Agreement provides that the Company
will not, nor will it permit any of it subsidiaries to, nor will it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any subsidiary to, directly or indirectly,
(1) solicit, initiate or knowingly encourage the submission of any Takeover
Proposal (as defined below) or (2) participate in any discussions or
negotiations regarding, or furnish to any person any nonpublic information
with respect to, or take any other action designed or reasonably likely to
facilitate any inquiries or the making of any proposal that constitutes any
Takeover Proposal; provided, however, that if, at any time prior to the
acceptance for payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is reasonably advisable to do so in order to
comply with its fiduciary duties to the Company's stockholders under
applicable law, the Company may, in response to a Takeover Proposal which
was not solicited subsequent to the date of the Merger Agreement, and
subject to compliance with the notification provisions discussed below, (a)
furnish information with respect to the Company to any person pursuant to a
customary confidentiality agreement and (b) participate in discussions and
negotiations regarding such Takeover Proposal. The Merger Agreement
provides that any violation of the restrictions set forth in the preceding
sentence by any director, officer or employee of the Company or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative or agent of the Company or any of its
subsidiaries will be deemed to be a breach of the Company's obligations
under the Merger Agreement. The Merger Agreement defines "Takeover
Proposal" as any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a substantial amount of
assets of the Company and its subsidiaries, taken as a whole (other than
the purchase of the Company's products in the ordinary course of business),
or more than a 20% interest in the total voting securities of the Company
or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of
any class of equity securities of the Company or any of its subsidiaries or
any merger, consolidation, business combination, sale of substantially all
the assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its subsidiaries, other than
the transactions contemplated by the Merger Agreement.
The Merger Agreement provides further that unless the Board of
Directors of the Company has terminated the Merger Agreement as described
above, neither the Board of Directors of the Company nor any committee
thereof may (1) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by such Board of
Directors or such committee of the Offer, the Merger or the Merger
Agreement, (2) approve or recommend, or propose publicly to approve or
recommend, any Takeover Proposal or (3) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any
Takeover Proposal. Notwithstanding the foregoing, in the event that prior
to the acceptance for payment of Shares pursuant to the Offer the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is reasonably advisable to do so in order to
comply with its fiduciary duties to the Company's stockholders under
applicable law, the Board of Directors of the Company may, in response to
an unsolicited Superior Proposal (as defined below) (subject to the
following proviso), (a) withdraw or modify its approval or recommendation
of the Offer, the Merger or the Merger Agreement or (b) approve or
recommend any such Superior Proposal if concurrently with such approval or
recommendation the Company terminates the Merger Agreement and enters into
an Acquisition Agreement with respect to a Superior Proposal; provided,
that in the case of this clause (b), only at a time that is after the later
of (i) the third business day following Parent's receipt of written notice
advising Parent that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms of such Superior Proposal
and identifying the person making such Superior Proposal and (ii) in the
event of an amendment to the price or any material term of a Superior
Proposal, one business day following Parent's receipt of written notice
containing the material terms of such amendment, including any change in
price (it being understood that each further amendment to the price or any
material terms of a Superior Proposal will necessitate an additional
written notice to Parent and an additional one business day period prior to
which the Company can take the actions set forth in
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clause (b) above). The Merger Agreement defines a "Superior Proposal" as
any bona fide Takeover Proposal made by a third party (1) that is on terms
which the Board of Directors of the Company determines in its good faith
judgment (based on consultation with the Company's financial advisor) to be
more favorable to the Company's stockholders than the Offer and the Merger
and (2) for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of the Company,
is capable of being obtained by such third party.
In addition to the obligations of the Company set forth in the
preceding paragraphs, the Merger Agreement provides that the Company must
promptly advise Parent orally and in writing of any request for nonpublic
information (except in the ordinary course of business and not in
connection with a possible Takeover Proposal) or of any Takeover Proposal
known to it, the material terms and conditions of such request or Takeover
Proposal and the identity of the person making such request or Takeover
Proposal. The Company must promptly inform Parent of any material change in
the details (including amendments or proposed amendments) of any such
request or Takeover Proposal.
The Merger Agreement provides that nothing contained therein will
prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's stockholders
if, in the good faith judgment of the Board of Directors of the Company,
after consultation with outside counsel, failure to so disclose would be
inconsistent with applicable law; provided, however, that neither the
Company nor its Board of Directors nor any committee thereof may, except as
permitted by the Merger Agreement, withdraw or modify, or propose to
withdraw or modify, its position with respect to the Offer, the Merger or
the Merger Agreement or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
FEES AND EXPENSES. The Merger Agreement provides that except as
provided below, all fees and expenses incurred in connection with the
Offer, the Merger, the Merger Agreement and the transactions contemplated
by the Merger Agreement will be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated. The Merger
Agreement further provides that the Company will pay, or cause to be paid,
in same day funds to Parent the amount of $50 million (the "Termination
Fee") under the circumstances and at the times set forth as follows: (1) if
the Company terminates the Merger Agreement in accordance with the
provisions described above in clause 5 of "Termination of the Merger
Agreement," the Company must pay 50% of the Termination Fee simultaneously
with such termination, and 50% of the Termination Fee upon consummation of
the transactions contemplated by the Superior Proposal giving rise to the
Company's right to terminate the Merger Agreement in accordance with the
provisions described above in clause 5 of "Termination of the Merger
Agreement," or upon the earlier consummation of another Company Acquisition
(as defined below); provided that such other Company Acquisition is
consummated within twelve months following termination of the Merger
Agreement, (2) if Parent or the Purchaser terminates the Merger Agreement
in accordance with the provisions described above in clause 4 of
"Termination of the Merger Agreement" and in addition, if within twelve
months after such termination the Company enters into an Acquisition
Agreement providing for a Company Acquisition or the Company recommends to
its stockholders that they accept a Company Acquisition of the type
referred to in clause 3 of the definition of Company Acquisition described
below, the Company must pay (a) 50% of the Termination Fee simultaneously
with the entering into of such Acquisition Agreement or making of such
recommendation and (b) 50% of the Termination Fee upon consummation of the
Company Acquisition which was the subject of such Acquisition Agreement or
recommendation, or upon the consummation, prior to the expiration of such
twelve month period, of any other Company Acquisition (it being understood
that if any Company Acquisition is consummated within such twelve month
period and the Company shall not have paid any amount pursuant to clause
(a) above, that upon consummation of such Company Acquisition the Company
must pay 100% of the Termination Fee) and (3) if, at the time of any
termination of the Merger Agreement in accordance with the provisions
described above in clause 2(a) of "Termination of the Merger Agreement" (as
a result of a failure to obtain the Minimum Condition) or in accordance
with the provisions described above in clause 3 of "Termination of the
Merger Agreement," any person shall
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have publicly announced a proposal to effect a Company Acquisition and if,
within twelve months after such termination, the Company shall enter into
an Acquisition Agreement providing for a Company Acquisition or the Company
shall recommend to its stockholders that they accept a Company Acquisition
of the type referred to in clause 3 of the definition of Company
Acquisition described below, the Company must pay (a) 50% of the
Termination Fee simultaneously with the entering into of such Acquisition
Agreement or making of such recommendation and (b) 50% of the Termination
Fee upon consummation of the Company Acquisition which was the subject of
such Acquisition Agreement or recommendation, or upon the consummation,
prior to the expiration of such twelve month period, of any other Company
Acquisition (it being understood that if any Company Acquisition is
consummated within such twelve month period and the Company shall not have
paid any amount pursuant to clause (a) above, that upon consummation of
such Company Acquisition the Company must pay 100% of the Termination Fee).
The Merger Agreement defines a "Company Acquisition" as any of the
following transactions: (1) a merger, consolidation, business combination
or a recapitalization pursuant to which the stockholders of the Company
immediately preceding such transaction hold less than 60% of the equity
interests in the surviving or resulting entity of such transaction (other
than the transactions contemplated by the Merger Agreement); (2) a sale by
the Company of assets (excluding the sale of the Company's products in the
ordinary course of business) representing in excess of 40% of the fair
market value of the Company immediately prior to such sale or the issuance
by the Company to any person or group of shares representing in excess of
40% of the then outstanding shares of capital stock of the Company (other
than in connection with an underwritten public offering); or (3) the
acquisition by any person or group, by way of a tender offer, exchange
offer, or by way of open market purchases, of beneficial ownership of 40%
or more of the then outstanding shares of capital stock of the Company.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides
that until the earlier of termination of the Merger Agreement and
consummation of the Offer, the Company will, and will cause its
subsidiaries to, carry on their respective businesses in the ordinary
course consistent with the manner conducted prior to the execution of the
Merger Agreement and, to the extent consistent therewith, use commercially
reasonable efforts to preserve intact their current business organization,
keep available the services of their current officers and employees and
preserve their relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them.
Without limiting the generality of the foregoing, during the period from
the date of the Merger Agreement until the earlier termination of the
Merger Agreement and consummation of the Offer, except as otherwise
contemplated by the Merger Agreement (or for certain matters disclosed in
connection therewith), the Company will not, and will not permit any of its
subsidiaries to, without Parent's prior written consent (which will not be
unreasonably withheld): (1) other than dividends and distributions by a
direct or indirect wholly owned subsidiary of the Company to its parent or
pursuant to the Company's Second Amended and Restated Agreement dated May
13, 1997 (as amended, the "Rights Agreement") (a) declare, set aside or pay
any dividends on, or make any other distributions (whether in cash, stock
or property), in respect of, any of its capital stock, (b) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock (other than the issuance of shares of Company
Common Stock upon the exercise of Stock Options (as defined below)
outstanding on the date of the Merger Agreement and in accordance with
their present terms) or (c) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any
such shares or other securities; (2) issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities (other than (a) pursuant to the Rights Agreement or (b) the
issuance of shares of Company Common Stock upon the exercise of Stock
Options outstanding on the date of the Merger Agreement and in accordance
with their present terms); (3) amend its Certificate of Incorporation,
By-Laws or other comparable charter or organizational documents; (4)
acquire or agree to acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any business, including
through the acquisition of any interest in any corporation, partnership,
joint venture, association or other business organization or division
thereof;
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(5) sell, lease, license, mortgage or otherwise encumber or otherwise
dispose of any of its properties or assets, other than in the ordinary
course of business consistent with past practice; (6) (a) incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
subsidiaries, or guarantee any debt securities of another person, other
than short-term bank financing in the ordinary course of business
consistent with past practice or (b) make any loans, advances or capital
contributions to, or investments in, any other person, other than in the
ordinary course of business consistent with past practice; (7) make or
agree to make any new capital expenditure or expenditures; (8) except as
required to comply with applicable law or agreements, plans or arrangements
existing on the date of the Merger Agreement, (a) adopt, enter into,
terminate or amend in any material respect any employment contract,
collective bargaining agreement or Benefit Plan (as defined in the Merger
Agreement), (b) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any director, officer or employee (except for
normal increases of cash compensation or cash bonuses in the ordinary
course of business consistent with past practice), (c) pay any benefit not
provided for under any Benefit Plan or any other benefit plan or
arrangement of the Company or its subsidiaries, (d) increase in any manner
the severance or termination pay of any officer or employee, (e) except as
permitted in clause (b), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Benefit Plan
(including the grant of stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock or the
removal of existing restrictions in any Benefit Plans or agreements or
awards made thereunder), (f) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan or (g) take any action
to accelerate the vesting of, or cash out rights associated with, any Stock
Options; (9) enter into any agreement of a nature that would be required to
be filed as an exhibit to Form 10-K under the Exchange Act, other than
contracts for the sale of the Company's products in the ordinary course of
business; (10) except as required by GAAP, make any material change in
accounting methods, principles or practices; (11) make any material tax
election or enter into any settlement or compromise with respect to any
material income tax liability; or (12) authorize any of, or commit or agree
to take any of, the foregoing actions.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon
the acceptance for payment of, and payment for, Shares by the Purchaser
pursuant to the Offer, the Purchaser will be entitled to designate such
number of directors on the Board of Directors of the Company as will give
the Purchaser, subject to compliance with Section 14(f) of the Exchange
Act, a majority of such directors, and the Company will, at such time,
cause the Purchaser's designees to be so elected by its existing Board of
Directors. Subject to applicable law, the Company has agreed to take all
action requested by Parent necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, which Information Statement is attached as Appendix
A to the Schedule 14D-9. The Merger Agreement further provides that in the
event that the Purchaser's designees are elected to the Board of Directors
of the Company, until the effective time of the Merger the Board of
Directors of the Company will have at least two directors who are directors
on the date of Merger Agreement and who are not officers of the Company or
any of its Subsidiaries.
STOCK OPTIONS. The Merger Agreement provides that as soon as
practicable following the date of the Merger Agreement, the Board of
Directors of the Company (or, if appropriate, any committee administering
the Company Stock Plans, as defined below) will adopt such resolutions or
take such other actions if any, as may be reasonably required to: (1)
adjust the terms of all outstanding options to purchase Company Common
Stock (the "Stock Options") granted under any plan or arrangement providing
for the grant of options to purchase Company Common Stock to current or
former directors, officers, employees or consultants of the Company or its
subsidiaries (the "Company Stock Plans"), whether vested or unvested, as
necessary to provide that, at the Effective Time, each Stock Option
outstanding immediately prior to the Effective Time will be amended and
converted into an option to acquire, on the same terms and conditions as
were applicable under the Stock Option, the number of shares of common
stock of Parent ("Parent Common Stock") determined by multiplying the
number of
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<PAGE> 9
shares of Company Common Stock subject to such Stock Option by a fraction,
the numerator of which is $31 and the denominator of which is the average
closing price of Parent Common Stock on the New York Stock Exchange for
three trading days immediately preceding (but not including) the date of
the Effective Time, rounded down to the nearest whole share, at a price per
share of Parent Common Stock equal to (a) the aggregate exercise price for
the shares of Company Common Stock otherwise purchasable pursuant to such
Stock Option divided by (b) the aggregate number of shares of Parent Common
Stock deemed purchasable pursuant to such Stock Option, rounded up to the
nearest whole cent, (2) adjust the terms of each Stock Option granted under
the Company's 1988 Directors' Stock Option Plan (each a "Director Stock
Option") so that if, following consummation of the Offer, the holder of
such Director Stock Option is terminated from his or her position as a
director of the Company, each such Director Stock Option will vest and
become exercisable in full and (3) make such other changes to the Company
Stock Plans as Parent and the Company may agree to are appropriate to give
effect to the Merger.
The Merger Agreement further provides that the Company will terminate
the Company's 1987 Employee Stock Purchase Plan (the "ESPP") by having its
Board of Directors amend the ESPP as necessary to provide that (1) any
Shares to be purchased under the ESPP on a new "Exercise Date" (as such
term is defined in the ESPP) set by the Board of Directors, which Exercise
Date will be on the last trading day immediately prior to consummation of
the Offer, or such earlier time as the Board may specify and (2)
immediately following such purchase of Shares, the ESPP will terminate.
INDEMNIFICATION. From and after the consummation of the Offer, Parent
will, and will cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company pursuant to (1) each
indemnification agreement in effect at such time between the Company and
each person who is or was a director or officer of the Company at or prior
to the Effective Time and (2) any indemnification provisions under the
Company's Restated Certificate of Incorporation or By-laws as each was in
effect on the date of the Merger Agreement (the persons to be indemnified
pursuant to the agreements or provisions referred to in clauses (1) and (2)
of this sentence are referred to as, collectively, the "Indemnified
Parties"). Pursuant to the Merger Agreement, the Certificate of
Incorporation and By-laws of the Surviving Corporation will contain the
provisions with respect to indemnification and exculpation from liability
set forth in the Company's Certificate of Incorporation and By-laws on the
date of the Merger Agreement, which provisions will not be amended,
repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights
thereunder of any Indemnified Party. The Merger Agreement also provides
that, from and after the date of the Merger Agreement, the Company may
enter into indemnification agreements, or amend existing indemnification
agreements, with current directors and officers of the Company providing
for customary provisions under Delaware law.
REASONABLE EFFORTS. Upon and subject to the terms and subject to the
conditions set forth in the Merger Agreement, Parent, the Purchaser and the
Company have each agreed to use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with each other in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other transactions contemplated
by the Merger Agreement, including using reasonable efforts to take the
following actions: (1) the taking of all reasonable acts necessary to cause
the conditions of the Offer to be satisfied, (2) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities, if any) and the
taking of all reasonable steps as may be necessary to avoid an action or
proceeding by any Governmental Entity, (3) the obtaining of all necessary
consents, approvals or waivers from third parties, (4) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging the Merger Agreement or the consummation of the transactions
contemplated thereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated
or reversed, and (5) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and
to fully carry out the
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<PAGE> 10
purposes of, the Merger Agreement. In connection with and without limiting
the foregoing, but subject to the terms and conditions of the Merger
Agreement, the Company and its Board of Directors will, if any state
takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, the Merger Agreement or any other transactions
contemplated by the Merger Agreement, use all reasonable efforts to ensure
that the Offer, the Merger and the other transactions contemplated by the
Merger Agreement may be consummated as promptly as practicable on the terms
contemplated by the Merger Agreement and the otherwise to minimize the
effect of such statute or regulation on the Offer, the Merger, the Merger
Agreement and the other transactions contemplated by the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties.
PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger
Agreement provides that in the event the Purchaser's designees are
appointed or elected to the Board of Directors of the Company as described
above under "Board of Directors," after the acceptance for payment of
Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of the directors of the Company not designated by the
Purchaser or Parent is required for the Company to (1) amend or terminate
the Merger Agreement, (2) exercise or waive any of its rights or remedies
under the Merger Agreement, (3) extend the time for performance of Parent
and the Purchaser's respective obligations under the Merger Agreement and
(4) take any action to amend or otherwise modify the Company's Certificate
of Incorporation or By-laws (or similar governing instruments of the
Company's subsidiaries) in violation of the provisions of the Merger
Agreement described above under "Indemnification."
RIGHTS AGREEMENT. The Rights Agreement has been amended to (1) render
the Rights Agreement inapplicable to the Offer, the Merger, the Merger
Agreement, the acquisition of Shares by Purchaser pursuant to the Offer and
the other transactions contemplated by the Merger Agreement and (2) ensure
that (a) none of Parent, the Purchaser or any of their respective
affiliates is an Acquiring Person (as defined in the Rights Agreement)
pursuant to the Rights Agreement solely by virtue of the execution of the
Merger Agreement, commencement and consummation of the Offer, the
acquisition of Shares by the Purchaser pursuant to the Offer and the
consummation of the Merger and (b) a Distribution Date or a Shares
Acquisition Date (as defined in the Rights Agreement) does not occur by
reason of the Offer, the Merger, the execution of the Merger Agreement, the
acquisition of Shares by Purchaser pursuant to the Offer or the other
transactions contemplated by the Merger Agreement and (c) provide that the
Final Expiration Date (as defined in the Rights Agreement) will occur
immediately prior to the Effective Time, and such amendment will not be
further amended by the Company without the prior consent of Parent in its
sole discretion.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer or the Merger Agreement, the Purchaser will not be required to
accept for payment or, subject to any applicable rules and regulations of
the Commission, including Rule 14e-1(c) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless (1) the Minimum Condition shall have been
satisfied and (2) any waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder (the
"HSR Act") applicable to the purchase of Shares pursuant to the Offer shall
have expired or been terminated. Furthermore, Purchaser will not be
required to accept for payment or, subject as aforesaid, to pay for any
Shares not theretofore accepted for payment or paid for, and may, in
accordance with the provisions of the Merger Agreement described in the
subsection entitled "Termination of the Merger Agreement", terminate the
Merger Agreement or amend the Offer with the consent of the Company, if,
upon the scheduled expiration date of the Offer and before the acceptance
of such Shares for payment or the payment therefor, any of the following
conditions exists and is continuing and does not result principally from
the breach by Parent or the Purchaser of any of their obligations under the
Merger Agreement:
(a) there shall be instituted or pending by any Governmental Entity
any suit, action or proceeding (i) challenging the acquisition by Parent
or the Purchaser of any Shares under the Offer,
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<PAGE> 11
seeking to restrain or prohibit the making or consummation of the Offer
or the Merger, (ii) seeking to prohibit or materially limit the
ownership or operation by the Company, Parent or any of Parent's
subsidiaries of a material portion of the business or assets of the
Company or Parent and its subsidiaries, taken as a whole, or to compel
the Company or Parent to dispose of or hold separate any material
portion of the business or assets of the Company or Parent and its
subsidiaries, taken as a whole, in each case as a result of the Offer or
the Merger or (iii) seeking to impose material limitations on the
ability of Parent or the Purchaser to acquire or hold, or exercise full
rights of ownership of, any Shares to be accepted for payment pursuant
to the Offer including, without limitation, the right to vote such
Shares on all matters properly presented to the stockholders of the
Company or (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect any material
portion of the business or operations of the Company;
(b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, by any Governmental Entity or
court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that would result in any
of the consequences referred to in clauses (i) through (iv) of paragraph
(a) above;
(c) there shall have occurred any material adverse change with
respect to the Company since the date of the Merger Agreement;
(d) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer or the Merger or
its adoption of the Merger Agreement, or approved or recommended any
Takeover Proposal;
(e) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality shall
not be true and correct or any such representations and warranties that
are not so qualified shall not be true and correct in any material
respect, in each case at the date of the Merger Agreement and at the
scheduled or extended expiration of the Offer;
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it under the Merger Agreement, which
failure to perform or comply has not been cured within 30 business days
after the giving of written notice to the Company; or
(g) the Merger Agreement shall have been terminated in accordance
with its terms;
which, in the good faith judgment of Parent or the Purchaser, in its sole
discretion, make it inadvisable to proceed with such acceptance of Shares
for payment or the payment therefor.
The Merger Agreement provides that the condition set forth in clause
(e) above (except as it relates to the representation and warranty in the
Merger Agreement as to the Company not being subject to any non-competition
agreements) will be deemed not fulfilled only if the respects in which the
representations and warranties made by the Company in the Merger Agreement
(without giving effect to any "materiality" limitations or references to
"material adverse effect" set forth therein) are inaccurate would have a
material adverse effect on the Company.
The Merger Agreement provides that the foregoing conditions are for
the sole benefit of Parent and the Purchaser and (except for the Minimum
Condition) may, subject to the terms of the Merger Agreement, be waived by
Parent and the Purchaser in whole or in part at any time and from time to
time in their sole discretion. The failure by Parent or the Purchaser at
any time to exercise any of the foregoing rights will not be deemed a
waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances will not be deemed a waiver with respect
to any other facts and
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<PAGE> 12
circumstances and each such right will be deemed an ongoing right that may
be asserted at any time and from time to time.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit (c)(1)
to this Schedule 14D-9. The Merger Agreement should be read in its entirety for
a more complete description of the matters summarized above.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company (the "Board") has unanimously
approved the Offer and the Merger and determined that the terms of the Offer and
the Merger are fair to, and in the best interests of, the stockholders of the
Company and unanimously recommends that stockholders of the Company accept the
Offer and tender their Shares to Purchaser.
As set forth in the Merger Agreement, the Purchaser will purchase Shares
tendered prior to the close of the Offer if the conditions to the Offer have
been satisfied (or waived).
STOCKHOLDERS CONSIDERING NOT TENDERING THEIR SHARES IN ORDER TO WAIT FOR
THE MERGER SHOULD NOTE THAT IF THE MINIMUM CONDITION IS NOT SATISFIED OR ANY OF
THE OTHER CONDITIONS TO THE OFFER ARE NOT SATISFIED, THE PURCHASER IS NOT
OBLIGATED TO PURCHASE ANY SHARES, AND CAN TERMINATE THE OFFER AND THE MERGER
AGREEMENT AND NOT PROCEED WITH THE MERGER.
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares (unless at least 90% of the
outstanding Shares are held by the Purchaser) are required to approve the
Merger. Accordingly, if the conditions to the Offer are satisfied, the Purchaser
will have sufficient voting power to cause the approval of the Merger without
the affirmative vote of any other stockholder. Under Delaware Law, if Purchaser
acquires, pursuant to the Offer or otherwise, at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the Merger, without a vote of the Company's stockholders. Parent,
Purchaser and the Company have agreed to use their reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other transactions contemplated by
the Merger Agreement. If Purchaser does not acquire at least 90% of the then
outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's stockholders is required under Delaware Law, a longer period of time
will be required to effect the Merger.
The Offer is scheduled to expire at 5:00 p.m., New York City time, on
August 29, 1997, unless the Purchaser extends the period of time for which the
Offer is open. A copy of the press release issued jointly by the Company and
Parent on July 17, 1997 announcing the Merger and the Offer is filed as Exhibit
(a)(1) to this Schedule 14D-9 and is incorporated herein by reference in its
entirety.
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<PAGE> 13
(b) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION.
Background of the Offer.
On March 3, 1997, the Company's Chairman and Chief Executive Officer,
Robert Cohn, met with Parent's President and Chief Operating Officer, Richard A.
McGinn, and expressed an interest in exploring some form of business arrangement
involving Parent's messaging business. On April 3, 1997, Mr. Cohn met with the
President of Parent's Business Communications Systems Business Unit, William T.
O'Shea, to discuss possible approaches to partner with or combine the operations
of the Company's and Parent's messaging business, including various joint
venture alternatives or an acquisition of Parent's messaging business by the
Company. During the month of April 1997, representatives of the two companies
had discussions on a number of occasions.
On April 22, 1997, Parent communicated to the Company that it was
interested in exploring in more detail the possibility of a strategic business
arrangement. On April 29, 1997, the two companies entered into a confidentiality
agreement for the exchange of non-public information between them.
On May 1, 1997, representatives of Parent and representatives of the
Company met to discuss overall approaches and to initiate the exchange of
information. During this meeting, representatives of Parent stated that they had
tentatively decided that an acquisition of the Company was a possible
alternative. Representatives of the Company responded that the Company was not
for sale. On May 8, 1997, Mr. Cohn called Mr. O'Shea and told him that while the
Company's position had not changed, the Company was willing to consider the
possibility of a sale. During the rest of the month of May, representatives of
each of the companies met on numerous occasions to exchange information.
On June 2, 1997, Mr. O'Shea and another Parent representative had a
telephone conversation with Mr. Cohn and told him that Parent was seriously
interested in pursuing an acquisition but needed additional information on the
Company's operations and products to determine if the combined businesses would
be able to operate effectively together. Mr. Cohn responded that it would only
be appropriate to proceed further once it appeared that there was a significant
possibility that an agreement on an acquisition could be reached.
In June 1997, the Company engaged Goldman Sachs and H&Q to act as its
financial advisors in connection with the possible sale of the Company.
On June 17, 1997, Mr. Cohn, Mr. O'Shea, and other representatives of the
two companies met to discuss the valuation of the Company and how to proceed
with a possible acquisition of the Company by Parent. No agreement as to value
was reached. On June 20, 1997, Mr. Cohn called Mr. O'Shea and suggested that the
Company's financial advisors get together with representatives of Parent the
following week to attempt to resolve the valuation differences. Mr. O'Shea
agreed, and the Company's financial advisors and certain representatives of
Parent met on June 24, and 25, 1997. Price negotiations continued throughout the
following week. On July 2, 1997, the parties discussed exploring a transaction
at $31 per Share, subject to completion of due diligence and negotiation of a
definitive Merger Agreement.
From July 6, 1997, through the evening of July 16, 1997, Parent conducted
additional due diligence, and there were additional meetings between
representatives of the companies during that time. In addition, ongoing
discussions were held concerning, among other things, post-acquisition
organizational structure and the terms of the Merger Agreement. The issues under
the Merger Agreement were resolved during the night of July 16.
On July 16, 1997, the Board of Directors of the Company approved the
transaction. On July 16, 1997, the Board of Directors of Parent, after being
briefed on the transaction and the remaining open issues, delegated authority to
take further action regarding the transaction to a sub-committee of the Board.
The sub-committee approved the transaction Thursday morning, July 17, after
which the Merger Agreement was executed and delivered and the transaction was
publicly announced.
The Board of Directors of the Company met again on July 22, 1997 and
unanimously reconfirmed its approval of the Offer and the Merger and unanimously
resolved to recommend that stockholders of the Company accept the offer and
tender their shares to Purchaser.
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<PAGE> 14
Reasons for the Recommendation. In reaching its determination described in
paragraph (a) above, the Board considered a number of factors, including,
without limitation, the following:
(i) historical information concerning the Company's business,
prospects, financial performance and condition, operations, technology,
management and competitive position;
(ii) the financial condition, results of operations, business and
strategic objectives of the Company as well as the risks involved in
achieving those objectives;
(iii) current financial market conditions and historical market
prices, volatility and trading information with respect to the Common Stock
of the Company;
(iv) the consideration to be received by the Company stockholders in
the Merger and a comparison of comparable merger transactions;
(v) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations;
(vi) the performance of the Company on a historical basis and the
prospects of the Company going forward as an independent company;
(vii) the potential for other third parties to acquire the Company;
(viii) a review of the possible alternatives to the Offer and the
Merger (including the possibility of continuing to operate the Company as
an independent entity), the range of possible benefits to the Company's
stockholders of such alternatives and the timing and the likelihood of
actually accomplishing any of such alternatives;
(ix) the presentations to the Board by each of Goldman, Sachs & Co.
("Goldman Sachs") and Hambrecht & Quist LLC ("H&Q") at the July 16, 1997
Board meeting;
(x) the written opinions of each of Goldman Sachs and H&Q to the
effect that, as of the date of such opinions, the $31 per Share in cash to
be received by the holders of Shares in the Offer and the Merger is fair to
such holders (in the case of H&Q, from a financial point of view). The full
text of the written opinions of each of Goldman Sachs and H&Q dated July
17, 1997, which set forth assumptions made, matters considered and
limitations on the review undertaken in connection with each opinion, are
attached hereto as Annex B and Annex C, respectively. STOCKHOLDERS ARE
URGED TO, AND SHOULD, READ SUCH OPINIONS CAREFULLY IN THEIR ENTIRETIES;
(xi) the fact that pursuant to the Merger Agreement, the Company is
not prohibited from responding to any unsolicited Superior Proposal (as
defined in the Merger Agreement) to acquire the Company, and the Company
may terminate the Merger Agreement and accept such Superior Proposal
subject to the Company's obligation to pay the termination fee in the
amount and in the manner described in the Merger Agreement;
(xii) the relationship of the Offer price to historical market prices
of the Company's Common Stock and to the Company's book value and
liquidation value per share;
(xiii) the likelihood that the proposed acquisition would be
consummated, including the experience, reputation and financial condition
of Parent, and the risks to the Company if the acquisition were not
consummated, including a potential negative effect on (a) the Company's
sales and operating results, (b) progress of certain development projects
and (c) the Company's stock price; and
(xiv) the availability of appraisal rights in the Merger under
applicable law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determinations.
THE FULL TEXT OF THE WRITTEN FAIRNESS OPINIONS OF EACH OF GOLDMAN SACHS AND
H&Q ARE FILED AS EXHIBITS (a)(2) AND (a)(3) TO THIS SCHEDULE 14d-9 AND ARE ALSO
ATTACHED HERETO AS ANNEX B AND ANNEX C,
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<PAGE> 15
RESPECTIVELY. STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINIONS IN THEIR
RESPECTIVE ENTIRETIES. SUCH OPINIONS WERE PRESENTED FOR THE INFORMATION OF THE
BOARD IN CONNECTION WITH THEIR CONSIDERATION OF THE MERGER AGREEMENT AND ARE
DIRECTED ONLY TO THE FAIRNESS (IN THE CASE OF H&Q, FROM A FINANCIAL POINT OF
VIEW) OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES (OTHER THAN
PARENT) PURSUANT TO THE OFFER AND THE MERGER. SUCH OPINIONS DO NOT CONSTITUTE
RECOMMENDATIONS TO ANY STOCKHOLDER AS TO WHETHER TO TENDER SHARES IN THE OFFER
OR TO VOTE WITH RESPECT TO THE MERGER.
IN LIGHT OF ALL THE FACTORS SET FORTH ABOVE, THE BOARD RESOLVED UNANIMOUSLY
TO APPROVE THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF
THE COMPANY AND RESOLVED UNANIMOUSLY TO RECOMMEND THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES TO PURCHASER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained each of Goldman Sachs and H&Q to provide financial
advisory services in connection with a possible business transaction for the
Company. Pursuant to a letter agreement dated June 13, 1997 between the Company
and Goldman Sachs, the Company, as compensation for such services, has agreed to
pay Goldman Sachs, upon any "sale of the Company" (defined as one or a series of
related transactions, including, but not limited to, transactions of the type
contemplated by the Merger Agreement) a transaction fee equal to a percentage
(in this case, 0.49%) of the aggregate consideration received by the
stockholders of the Company in the Offer and the Merger. The Company has agreed
to reimburse Goldman Sachs for its reasonable out-of-pocket expenses incurred in
connection with rendering financial advisory services, including fees and
disbursements of its legal counsel. The Company has also agreed to indemnify
Goldman Sachs and its directors, officers, agents, employees and controlling
persons for certain costs, expenses and liabilities, including certain
liabilities under the federal securities laws.
Pursuant to a letter agreement dated June 30, 1997 between the Company and
H&Q, the Company, as compensation for financial advisory services, has agreed to
pay H&Q, upon any "sale of the Company" (defined as one or a series of related
transactions, including, but not limited to, transactions of the type
contemplated by the Merger Agreement) a transaction fee equal to a percentage
(in this case, 0.12%) of the aggregate consideration received by the
stockholders of the Company in the Offer and the Merger, up to a maximum fee of
$2,000,000. The Company has agreed to reimburse H&Q for its reasonable
out-of-pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursements of its legal counsel. The Company has
also agreed to indemnify H&Q and its directors, officers, agents, employees and
controlling persons for certain costs, expenses and liabilities, including
certain liabilities under the federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer, except that such solicitations or
recommendations may be made by directors, officers or employees of the Company,
for which services no additional compensation will be paid.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the Company's knowledge, by any of its executive officers,
directors, affiliates or subsidiaries, except as follows:
1. The Company has granted stock options to, and sold stock upon
exercise of stock options held by, employees and consultants under
its stock plans.
2. Robert Cohn made gifts of 25 Shares on each of June 5, 1997 and
June 17, 1997.
3. David Ladd made a gift of 900 Shares on June 26, 1997.
4. On May 29, 1997, Alexander Gray exercised an option to purchase
1,250 Shares at an exercise price of $10.625 per Share and sold
such Shares in the public market at a price of $18.875 per Share.
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<PAGE> 16
5. Deborah Coleman intends to make a gift of 12,000 Shares to a
charitable trust.
6. On May 29, 1997 and May 30, 1997, the Company repurchased 25,000
Shares and 20,000 Shares, respectively, in the public market at
prices of $19.00 and $18.875, respectively, per Share, pursuant to
the Company's share repurchase program.
7. The following executive officers of the Company were granted
options to purchase Shares on the dates and at the per share
exercise prices set forth below:
<TABLE>
<CAPTION>
NAME GRANT DATE SHARES EXERCISE PRICE
--------------------------------------------- ---------- ------ --------------
<S> <C> <C> <C>
Bisson, Jody 6/13/97 1,500 $22.0000
Bisson, Jody 6/12/97 3,616 $21.9380
Bisson, Jody 6/12/97 23,384 $21.9380
Bisson, Jody 7/14/97 1,500 $23.8125
Daley, Derek S. 6/12/97 7,000 $21.9380
Daley, Derek S. 6/12/97 7,000 $21.9380
Gray, Alexander J. 6/12/97 26,000 $21.9380
Lyon, Robert E. 6/12/97 15,000 $21.9380
Norton, Margaret 6/12/97 14,269 $21.9380
Norton, Margaret 6/12/97 33,731 $21.9380
Scott, Paul 6/12/97 4,558 $21.9380
Scott, Paul 6/12/97 50,942 $21.9380
Simpson, Bruce D. 6/12/97 18,232 $21.9380
Simpson, Bruce D. 6/12/97 21,768 $21.9380
</TABLE>
(b) To the Company's knowledge, all of the Company's executive officers and
directors who own Shares currently intend to tender all of their Shares (other
than Shares, if any, held by such person that, if tendered, could cause such
person to incur liability under the provisions of Section 16(b) of the Exchange
Act) pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to or would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Not Applicable
15
<PAGE> 17
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Press release issued by the Company and Parent on July 17, 1997.
(a)(2)(1) Opinion of Goldman Sachs dated July 17, 1997.*
(a)(3)(2) Opinion of H&Q dated July 17, 1997.*
(a)(4) Letter to Stockholders dated July 23, 1997 from Robert Cohn, Chairman of
the Board of Directors and Chief Executive Officer of the Company.*
(c)(1) Agreement and Plan of Merger, dated as of July 17, 1997, among Parent, the
Purchaser and the Company.
(c)(2)(3) Form of Indemnification Agreement.
(c)(3)(4) Certificate of Incorporation of the Company, as amended to date.
(c)(4)(4) Bylaws of the Company.
(c)(5) Employment Agreement dated as March 1, 1997 by and between the Company and
David J. Ladd.
(c)(6)(5) The Company's Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Attached hereto as Annex C.
(3) Incorporated by reference to an exhibit of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990.
(4) Incorporated by reference to an exhibit of the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996.
(5) Attached hereto as Annex A.
16
<PAGE> 18
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
OCTEL COMMUNICATIONS CORPORATION
By: /s/ ROBERT COHN
------------------------------------
Robert Cohn
Chairman and Chief Executive Officer
Dated: July 23, 1997
17
<PAGE> 19
ANNEX A
[LOGO]
OCTEL COMMUNICATIONS CORPORATION
1001 MURPHY RANCH ROAD
MILPITAS, CALIFORNIA 95035
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about July 23, 1997 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Octel Communications Corporation (the "Company") to the
holders of record of shares of Common Stock, par value $0.001 per share, of the
Company (the "Shares") at the close of business on or about July 18, 1997. You
are receiving this Information Statement in connection with the possible
appointment of persons designated by the Purchaser (as defined below) to a
majority of the seats on the Board of Directors of the Company.
On July 17, 1997, the Company, Lucent Technologies Inc., a Delaware
corporation ("Parent") and Memo Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of Parent (the "Purchaser"), entered into an Agreement
and Plan of Merger (the "Merger Agreement") in accordance with the terms and
subject to the conditions of which (i) Parent will cause the Purchaser to
commence a tender offer (the "Offer") for all outstanding Shares at a price of
$31.00 per Share, net to the seller in cash and without interest thereon, and
(ii) the Purchaser will be merged with and into the Company (the "Merger"). As a
result of the Offer and the Merger, the Company will become a wholly owned
subsidiary of Parent.
The Merger Agreement requires the Company to use cause the directors
designated by Parent to be elected to the Board of Directors under the
circumstances described therein. See "Board of Directors and Executive Officers
of the Company."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time. Capitalized terms used
herein and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on July
23, 1997. The Offer is scheduled to expire at 5:00 p.m., New York City time, on
August 29, 1997, unless the Offer is extended.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of June 30, 1997, there were 52,076,198
Shares outstanding. The Company's Board of Directors currently consists of one
class with seven (7) members. At each annual meeting of stockholders, all of the
directors are elected for one-year terms. The officers of the Company serve at
the discretion of the Board.
Pursuant to the Merger Agreement, upon the acceptance for payment of, and
payment for, Shares by Purchaser pursuant to the Offer, Purchaser shall be
entitled to designate such number of directors on the Board of Directors of the
Company (the "Parent Designees"), as will give Purchaser, subject to compliance
with Section 14(f) of the Exchange Act, a majority of such directors, and the
Company shall, at such time, cause the Parent Designees to be so elected by its
existing Board of Directors; provided, however, that in the event that the
Parent Designees are elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least two directors who are
directors of the Company on the date of
A-1
<PAGE> 20
the Merger Agreement and who are not officers of the Company or any of its
subsidiaries (the "Independent Directors") and; provided, further that, in such
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of the Merger Agreement or, if no Independent Directors then remain,
the other directors of the Company shall designate two persons to fill such
vacancies who shall not be officers or affiliates of the Company or any of its
subsidiaries, or officers or affiliates of Parent or any of its subsidiaries,
and such persons shall be deemed to be Independent Directors for purposes of the
Merger Agreement.
Parent has informed the Company that it will choose the Parent Designees
from persons listed below. Parent has informed the Company that each of the
Parent Designees has consented to act as a director, if so designated.
Biographical information concerning each of the Parent Designees is presented
below. The following biographical information provided herein regarding Parent,
the Purchaser, and any Parent Designees has been furnished by Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
- ------------------------------------- ------------------------------------------------------
<S> <C>
Richard A. McGinn.................... President and Chief Operating Officer of Parent since
February 1996 and Director since April 1996. Executive
Vice President of AT&T and Chief Executive Officer of
the AT&T Network Systems Group (1994-1996), President
and Chief Operating Officer of the AT&T Network
Systems Group (1993-1994), Senior Vice President of
AT&T Network Systems Group (1991-1993). Director of
Oracle Corporation. Age: 50.
William T. O'Shea.................... President, Business Communications Systems business
unit of Parent since January 1997 and President,
International, Network Systems of Parent from February
1996 through January 1997. President, International
Regions and Professional Services of the AT&T Network
Systems Group (1995-1996). Acting Chief Executive
Officer of AT&T Global Information Solutions Company
(now NCR Corporation) (1995). Prior thereto, held
various senior positions at AT&T Global Information
Solutions Company. Age: 49.
Donald K. Peterson................... Executive Vice President and Chief Financial Officer
of Parent since February 1996. Joined AT&T in 1995 as
Vice President and Chief Financial Officer of AT&T's
Communications Services Group. Joined Northern
Telecom, Inc. in 1976 and served in various executive
positions there including President of Nortel
Communications Systems, Inc. (1993-1995). Age: 47.
Richard J. Rawson.................... Senior Vice President, General Counsel and Secretary
of Parent since February 1996. Joined AT&T Law
Division in 1984 and was appointed Vice President,
Law -- AT&T Network Systems Group in 1992. Age: 44.
</TABLE>
None of the Parent Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any of the
directors or executive officers of the Company or (iii) to Parent's knowledge,
beneficially owns any securities (or rights to acquire any securities) of the
Company. The Company has been advised by Parent that, to Parent's knowledge,
none of the Parent Designees has been involved in any transaction with the
Company or any of its directors, executive officers or affiliates which is
required to be disclosed pursuant to the rules and regulations of the
Commission, except as may be disclosed herein or in the Schedule 14D-9.
A-2
<PAGE> 21
Biographical information concerning each of the Company's current directors
and executive officers as of June 30, 1997 is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------ --- ------------------------------------------------------
<S> <C> <C>
Robert Cohn................... 48 Chairman of the Board and Chief Executive Officer
W. Michael West............... 47 President, Chief Operating Officer and Director
Anson M. Beard, Jr............ 61 Director
Leo J. Chamberlain............ 67 Director
Deborah A. Coleman............ 44 Director
James A. McDivitt............. 68 Director
Nathaniel de Rothschild....... 51 Director
David J. Ladd................. 50 Executive Vice President and Chief Technology Officer
Margaret Norton............... 43 Senior Vice President
Paul Scott.................... 44 Senior Vice President
Alexander J. Gray............. 40 Senior Vice President
Jody Bisson................... 40 Vice President, Corporate Controller and Acting Chief
Financial Officer
Donald L. Campodonico......... 51 Vice President
Derek S. Daley................ 42 Vice President, General Counsel and Secretary
Robert E. Lyon................ 55 Vice President
Bruce D. Simpson.............. 39 Vice President
</TABLE>
MR. COHN, a founder of the Company, served as its President and Chief
Executive Officer from the Company's inception in 1982 until October 1990 and
then resumed those positions in November 1993. During fiscal 1996, he moved that
the Board appoint Mr. West as President. Mr. Cohn now serves as Chairman of the
Board and Chief Executive Officer. Mr. Cohn has served as a director from the
Company's inception and, in June 1990, the Board of Directors appointed Mr. Cohn
Chairman of the Board. Mr. Cohn holds a B.S. in Mathematics and Computer Science
from the University of Florida and an M.B.A. from Stanford University. Mr. Cohn
is also a director of Spectralink Corporation, a manufacturer of wireless phones
for business applications.
MR. WEST was named President and Chief Operating Officer of the Company
during fiscal 1996. From January 1995 to December 1995, Mr. West served as Vice
Chairman of the Company. Mr. West joined the Company in September 1986 as
Executive Vice President and was responsible for sales and customer service.
From 1979 to September 1986, Mr. West was employed by ROLM, serving for three
years during this period as President of an operating subsidiary of ROLM and
then as General Manager of its National Sales Division. Mr. West attended
Southern Illinois University.
MR. BEARD has served as a director of the Company since June 1994. He
joined Morgan Stanley & Co. Incorporated in May 1977 and, from 1980 until his
retirement in February 1994, served as Managing Director of its Worldwide Equity
Division. In 1986, he was appointed as a director of Morgan Stanley Group, the
holding company for Morgan Stanley & Co. Incorporated. He retains the position
of Advisory Director of Morgan Stanley & Co. Incorporated. Mr. Beard is also a
member of the Wheaton College Board of Trustees and, from 1990 to 1992, was a
director of the National Association of Securities Dealers, Inc. (the "NASD"),
serving as Vice Chairman of the NASD in 1992.
MR. CHAMBERLAIN has served as a director of the Company since March 1989.
Until ROLM's acquisition by IBM in 1984, Mr. Chamberlain served on the Board of
Directors of ROLM, where he had been employed as Executive Vice President until
his retirement in 1982. Mr. Chamberlain is also a director of KLA Instruments
Corporation, a manufacturer of semiconductor inspection equipment.
MS. COLEMAN has served as a director of the Company since March 1994. Since
June 1994, Ms. Coleman has been Chairman and Chief Executive Officer of Merix
Corporation, a manufacturer of technologically advanced components for
sophisticated electronic equipment. From November 1992 to
A-3
<PAGE> 22
June 1994, Ms. Coleman served as Vice President of Materials Operations for
Tektronix, Inc., a worldwide high technology equipment design and manufacturing
firm. From June 1985 to October 1992, she held officer-level positions with
Apple Computer, Inc., including Vice President -- World Wide Operations and Vice
President -- Chief Financial Officer. Ms. Coleman is also a director of
Synopsys, Inc. and Applied Materials, Inc.
MR. MCDIVITT has served as a director of the Company since November 1996.
Mr. McDivitt was Senior Vice President, Government Operations and International,
of Rockwell International Corporation until his retirement in April 1995. He is
currently a director of Silicon Graphics, Inc.
MR. DE ROTHSCHILD has served as a director of the Company since June 1994.
He is President of Nathaniel de Rothschild Holdings Ltd., a private investment
company that he founded in 1988. Mr. de Rothschild is also Chairman of the Board
of Global Asset Management (USA) Inc., the U.S. subsidiary of Global Asset
Management Ltd., a worldwide money management firm. Mr. de Rothschild is a
director of Value Realisation Trust, Plc., and DSP Group, Inc.
MR. LADD joined the Company in March 1994 as Executive Vice President
following the Company's merger with VMX, Inc. and, as Chief Technology Officer,
is responsible for coordinating the Company's long-term technology direction
across all lines of business. At VMX, Mr. Ladd served as Executive Vice
President and a director from July 1988 until March 1994. Prior to joining VMX,
Mr. Ladd served as President and Executive Vice President of OPCOM, a
manufacturer of call processing systems that was merged into a wholly owned
subsidiary of VMX in July 1988. Mr. Ladd holds a B.A. in Engineering Physics
from the University of California-Berkeley and an M.A. in Mathematics from the
Stevens Institute of Technology.
MS. NORTON joined the Company in February 1988 as a Group Product Manager
in Customer Premise Equipment (now GBS) Marketing and was subsequently promoted
to Director of CPE Marketing, Vice President of Marketing, to Vice President and
General Manager of VIS and Senior Vice President and General Manager, VIS, the
position she now holds. She holds a B.A. in Economics from the University of
Arizona and an M.B.A. from the University of Connecticut.
MR. SCOTT joined the Company in 1984 as Markets Manager of the then OEM and
RBOC business. In 1991, Mr. Scott became General Manager for the Eastern region
of the GBS market. Mr. Scott was named Vice President in 1994 and then General
Manager and Vice President for U.S. Field Operations in February 1995, which
included all VIS/GBS sales and customer service responsibilities. In June 1996,
he was named as Senior Vice President of Worldwide Field Operations. Prior to
joining Octel, he spent seven years with AT&T in various sales and management
positions. Mr. Scott holds a B.A. and an M.A. in Political Science from
Northwestern University.
MR. GRAY joined the Company in December 1992 as Director -- Information
Services. In June 1995, he was named as Vice President and Chief Information
Officer. In February 1996, Mr. Gray was named as Vice President Corporate
Operations. He is responsible for manufacturing, customer order administration,
information services and corporate quality. Prior to joining Octel, Mr. Gray
held positions as Director of Information Services for American President Lines
from September 1991 to November 1992 and NEXT Computer from July 1988 to August
1991. He also spent four years as a research and development engineer for
Hewlett-Packard. Mr. Gray holds a B.S. and an M.A. in Electrical Engineering
from Washington University in St. Louis, Missouri.
MS. BISSON joined the Company in October 1996 as a Vice President and
Corporate Controller. Ms. Bisson was appointed Acting Chief Financial Officer in
February 1997. Prior to joining the Company, Ms. Bisson served as the Director
of Corporate Planning and Reporting at Silicon Graphics Inc. from October 1994
to October 1996. Prior to this, Ms. Bisson served at Apple Computer as U.S.
Marketing Controller,from May 1993 to September 1994, and Controller of Customer
Service, from May 1992 to May 1993. Ms. Bisson holds a B.S. in Accounting from
Bemidji State University. Ms. Bisson is also a Certified Public Accountant.
A-4
<PAGE> 23
MR. CAMPODONICO joined the Company in July 1987 as its Director of
Manufacturing and is now Vice President of Organizational Development and
Training. Prior to joining the Company, he was employed by ROLM, serving for two
years as Vice President of Operations. Mr. Campodonico holds a B.S. in Business
Administration and an M.B.A. from San Francisco State University.
MR. DALEY joined the Company in August 1988 as its General Counsel, was
elected Vice President in September 1989 and became Secretary of the Company in
October 1990. He is responsible for internal legal matters, legal compliance and
supervision of outside law firms employed by the Company. Prior to joining the
Company, Mr. Daley was an associate and then a partner in the law firm of Wilson
Sonsini Goodrich & Rosati from September 1985 to September 1988 and an associate
with the law firm of Brobeck, Phleger & Harrison from September 1980 to
September 1985. Mr. Daley holds a B.S. in History and a J.D. from Stanford
University.
MR. LYON joined the Company in March 1997 as a Vice President. From August
1996 to March 1997, Mr. Lyon served as Vice President, Human Resources with
Network Peripherals. From January 1995 to August 1996, he served as Vice
President, Human Resources, at Syquest Technologies. From January 1993 to
January 1995, Mr. Lyon served as Vice President, Human Resources, at Anthem
Electronics. Prior to this, he was an independent consultant. Mr. Lyon holds a
B.S. in Personnel Management and a J.D. from Indiana University.
MR. SIMPSON joined the Company in conjunction with the October 1992
acquisition of Tigon Corporation (now ONS). Mr. Simpson now serves as President
of ONS. Previously, Mr. Simpson was named President of Tigon in 1991 after
serving eighteen months as Vice President of Finance and Administration. Before
joining Tigon, he was Controller for Ameritech Development Corporation in
Chicago, Illinois. Mr. Simpson holds an M.B.A. and a B.S. in Accounting from
Northern Illinois University and is a Certified Public Accountant.
All officers serve at the discretion of the Board of Directors. There are
no family relationships between directors or executive officers of the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of ten meetings during
the fiscal year ended June 30, 1997. The Audit Committee held three meetings,
the Compensation Committee held three meetings and the Board Affairs Committee
held three meetings during the fiscal year ended June 30, 1997. Each director
attended at least 75% of Board and, where applicable, committee meetings held
during fiscal 1997.
Messrs. Beard and McDivitt and Ms. Coleman currently serve on the Audit
Committee of the Board of Directors. Mr. Beard and Ms. Coleman served on the
Audit Committee throughout fiscal 1997. Mr. McDivitt joined the Compensation
Committee in April 1997. Dag Tellefsen, a former director, served on the Audit
Committee until his resignation from the Board of Directors in January 1997. The
purpose of the Audit Committee is to review with the Company's management and
independent auditors the financial statements and internal financial reporting
system and controls of the Company, recommend resolutions for any dispute
between the Company's management and its auditors and review other matters
relating to the relationship of the Company with its auditors.
Messrs. Beard, de Rothschild and McDivitt and Ms. Coleman currently serve
on the Compensation Committee. Messrs. Beard and de Rothschild and Ms. Coleman
served on the Compensation Committee throughout fiscal 1997. Mr. McDivitt joined
the Compensation Committee in April 1997. Mr. Tellefsen served on the
Compensation Committee until his resignation from the Board of Directors in
January 1997. The purpose of the Compensation Committee is to review and approve
the compensation of the Company's executive officers and certain highly
compensated executives for each fiscal year. The compensation of the President
and Chief Executive Officer of the Company remains subject to approval by the
full Board of Directors.
Messrs. Beard, Chamberlain, McDivitt and de Rothschild and Ms. Coleman
currently serve on the Board Affairs (formerly Nominating) Committee. Messrs.
Beard, Chamberlain, McDivitt and de Rothschild and
A-5
<PAGE> 24
Ms. Coleman served on the Board Affairs Committee throughout fiscal 1997. Mr.
McDivitt joined the Board Affairs Committee in January 1997. Mr. Tellefsen
served on the Board Affairs Committee until his resignation from the Board of
Directors in January 1997. Through the Board Affairs Committee, the outside
directors of the Company oversee operational aspects of the Board of Directors,
monitor trends in corporate governance and review the Company's relationship
with its management. The Board Affairs Committee develops criteria for
nominating new members of the Board, identifies potential candidates for such
nomination, coordinates board procedures and governance, sets evaluation
criteria for the Company's Chief Executive Officer and Chief Operating Officer,
ensures that Board committee assignments reflect broad participation by members
of the Board, reviews Board compensation and provides ongoing information and
recommendations regarding board-related issues. The Board Affairs Committee will
consider stockholder recommendations for new directors. However, the final
determination of whether a candidate will be nominated to become a member of the
Company's Board of Directors is reserved for the Board Affairs Committee. Any
suggestions may be submitted in writing, attention "Board Affairs Committee of
the Board of Directors," at the Company's principal offices.
COMPENSATION OF DIRECTORS
During fiscal 1997, each of the directors was compensated for participating
in Board and committee meetings as follows: $10,000 annual fee, provided that
the director attended at least three of the four non-telephonic meetings of the
Board during the fiscal year; $1,500 for each meeting of the Board which the
director attended in person; $750 for each meeting of the Board which the
director attended via telephone; $500 for each meeting of a committee of the
Board (except the Stock Option Committee) which the director attended in person;
and $500 per year for each member of the Stock Option Committee. In addition,
the Company reimburses all directors for travel and other business expenses
incurred in fulfilling their duties as directors. Directors also receive stock
options granted pursuant to the 1988 Directors' Stock Option Plan. See "1988
Directors' Stock Option Plan" below.
A-6
<PAGE> 25
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth, for the three fiscal years ended June 30,
1997, certain compensation information with respect to the Company's Chief
Executive Officer during fiscal 1997 and each of the four other most highly
compensated executive officers other than the Chief Executive Officer who were
serving as executive officers as of June 30, 1997 (collectively, the "Named
Executive Officers"), based upon salary and bonus earned by such executive
officers and individuals in fiscal 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------ UNDERLYING
OTHER ANNUAL OPTIONS/ ALL OTHER
BONUS COMPENSATION SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($) (#)(2) ($)
- -------------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert Cohn..................... 1997 $ 375,000 $216,300 -- -- 6,368(4)
Chairman of the Board 1996 310,577 216,351 $ 3,375(3) -- 9,597(4)
and Chief Executive Officer 1995 257,933 -- 6,167(3) -- 7,005(4)
W. Michael West................. 1997 300,000 604,861 -- -- 7,667(4)
President and Chief 1996 258,230 147,562 -- 200,000 10,397(4)
Operating Officer 1995 231,888 92,400 -- -- 5,595(4)
Derek S. Daley.................. 1997 205,000 143,075 -- 14,000 4,680(4)
Vice President, General 1996 193,692 77,300 -- 30,000 7,697(4)
Counsel and Secretary 1995 178,183 306,800(5) -- -- 7,499(4)
David Ladd...................... 1997 225,000 90,200 -- -- 6,023(4)
Executive Vice President 1996 141,853 121,001 -- -- 7,937(4)
and Chief Technical Officer 1995 190,435 82,000 -- -- 7,364(4)
Margaret Norton................. 1997 212,019 93,100 -- 48,000 6,193(4)
Senior Vice President 1996 197,500 182,926 -- 60,000 1,509(4)
1995 166,700 59,872 -- 35,000 720(4)
</TABLE>
- ---------------
(1) Includes bonuses earned in the applicable fiscal year but paid or to be paid
in the following fiscal year.
(2) Represents stock options granted in the years shown with exercise prices
equal to fair market value on the date of grant. No SARs were granted in
such years.
(3) Comprised of Mr. Cohn's portion of the profit-sharing payments made to most
employees of the Company.
(4) Comprised of premiums for insurance policies where the officers are the
beneficiaries.
(5) Includes a one-time bonus in the amount of $250,000 in recognition of
reduced outside legal fees and successful results in Octel v. Theis, a
patent lawsuit decided in favor of the Company
ANNUAL INCENTIVE PLAN
The annual incentive portion of the fiscal year 1997 executive compensation
program was designed to provide cash rewards based on achievement of corporate
financial goals and corporate strategic business objectives. In 1997, the
incentive target per individual was defined as a percentage of his or her base
compensation. The annual incentive was based on the achievement by the Company
and/or the executive's Strategic Business Unit of financial goals (revenue and
operating profit) and certain Board-approved business objectives. The amount of
compensation actually paid under this plan is variable or "at risk," because it
is tied directly to achievement of specific corporate performance goals.
The 1997 plan had a minimum threshold tied to corporate profit goals. As
actual performance for the year was below this minimum threshold, no payment was
made under the plan for fiscal year 1997.
A-7
<PAGE> 26
EMPLOYEE STOCK PLANS
The following is a brief summary of the Company's employee stock plans in
effect during the fiscal year ended June 30, 1997 under which executive officers
and directors of the Company received benefits. The closing sale price of the
Company's Common Stock on June 30, 1997, as reported by The Nasdaq National
Market, was $23.4375 per share.
1995 INCENTIVE STOCK PLAN
The Company's 1995 Incentive Stock Plan (the "Option Plan"), under which
19,200,000 shares are currently reserved for issuance, was originally adopted by
the Board of Directors in 1985 and approved by the Company's stockholders in
1985. The Option Plan was subsequently amended on a number of occasions, which
amendments were approved by the Board of Directors and stockholders as required
by law and the Option Plan. In 1995, the Option Plan was renewed for a term of
ten years and renamed. The Option Plan permits the direct sale of shares and the
grant of both "incentive stock options" (within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Tax Code")) and nonstatutory
stock options to employees and officers of, and consultants to, the Company.
The following table summarizes activity under the Option Plan as of June
30, 1997:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
----------
<S> <C>
Reserved Under the Option Plan................................... 19,200,000
Outstanding Options at a Weighted Average Exercise Price of
$14.74 per share............................................... 7,733,740
Shares Issued Directly or Options Exercised Since 1985........... 10,846,842
Available for Grant of Future Options............................ 619,418
</TABLE>
The Option Plan is administered by the Board of Directors or a committee
appointed by the Board. The Board or committee determines the terms of options
granted, including the exercise price, number of shares subject to the option
and the exercisability thereof. The exercise price of all options to purchase
shares of Common Stock under the Option Plan must be at least equal to the fair
market value of such shares on the date of grant, and the maximum term of each
incentive stock option is ten years, although the Board of Directors typically
grants options with a term of five years and six months. Options granted to
officers and certain key employees under the Option Plan provide for full
acceleration of exercisability in the event that, following a change in control
of the Company, the optionee's employment is terminated or the optionee's
compensation and benefits are reduced.
A-8
<PAGE> 27
OPTION/SAR GRANTS IN FISCAL 1997
The following table sets forth certain information regarding options for
the purchase of the Company's Common Stock that were awarded to the Named
Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
----------------------------------------------------------- STOCK PRICE
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS/ FOR
UNDERLYING SARS GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANT(#)(1) FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)
- ------------------------- ------------ ----------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert Cohn.............. -0- -- -- -- -- --
W. Michael West.......... -0- -- -- -- -- --
Derek S. Daley........... 14,000 0.7% $21.938 12/12/02 $ 94,535 $211,650
David J. Ladd............ -0- -- -- -- -- --
Margaret Norton.......... 48,000 2.4% $21.938 12/12/02 $324,212 $725,889
</TABLE>
- ---------------
(1) Options granted under the Option Plan generally become exercisable at a rate
of 1/4 of the shares subject to the option at the end of the first year and
1/4 of the shares subject to the option at the end of each year thereafter,
so long as the individual is employed by the Company.
(2) The Company granted options to purchase 2,000,342 shares of Common Stock
during fiscal year 1997.
(3) Potential realizable value is based on the assumption that the price of the
Common Stock appreciates at the annual rate shown, compounded annually, from
the date of grant until the end of the option term. The values are
calculated in accordance with rules promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price appreciation.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1997
AND OPTION/SAR VALUES AS OF JUNE 30, 1997
The following table sets forth certain information regarding options for
the purchase of the Company's Common Stock that were exercised or held by the
Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS/SARS AT OPTIONS/SARS
EXERCISE VALUE REALIZED JUNE 30, 1997 AT JUNE 30, 1997($)(2)
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert Cohn................. 320,000 $1,037,500 480,000/600,000 $ 1,425,120/$4,012,720
W. Michael West............. 100,000 512,500 163,000/212,000 1,647,483/ 1,748,467
Derek S. Daley.............. 17,000 87,125 65,300/ 68,700 714,834/ 569,139
David J. Ladd............... 18,200 237,510 45,000/ 75,000 579,210/ 971,100
Margaret Norton............. 20,600 377,455 56,500/126,500 653,175/ 885,871
</TABLE>
- ---------------
(1) This column represents the difference between the fair market value of the
Common Stock on the date of exercise of the stock option by the identified
executive officer and the price paid for the shares by the officer (the
"Exercise Price").
(2) This column represents the difference between the fair market value of the
Common Stock and the Exercise Price, for in-the-money options, on June 30,
1997.
1987 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1987 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in October 1987 and approved by the
stockholders in November 1987. The Purchase Plan was subsequently amended on a
number of occasions, which amendments were approved by the Board of Directors
and stockholders as required by law and the Purchase Plan. A total of 4,250,000
shares of Common Stock is
A-9
<PAGE> 28
currently reserved for issuance under the Purchase Plan. The Purchase Plan,
which is intended to qualify under Section 423 of the Tax Code, is implemented
by one offering during each six-month period. Offering periods commence on or
about May 1 and November 1 of each year. The Purchase Plan is administered by
the Board of Directors of the Company or by a committee appointed by the Board.
Employees are eligible to participate if they are employed by the Company for at
least 20 hours per week and more than five months per year. The Purchase Plan
permits eligible employees to purchase Common Stock through payroll deductions,
which may not exceed 10% of an employee's compensation, at 85% of the lower of
the fair market value of the Common Stock at the beginning or at the end of each
offering period. In July 1997 the Board of Directors amended the Company's 1987
Employee Stock Purchase Plan (the "ESPP") to provide that in the event of
consummation of the Offer, the current Purchase Period under the ESPP will be
deemed to have terminated immediately prior to consummation of the Offer, and
such shares as have been designated by the beneficial owners thereof shall be
deemed to have been tendered in the Offer.
As of June 30, 1997, 4,331,321 shares had been sold (since 1988) under the
Purchase Plan at a weighted average purchase price per share of $9.0045 and
1,418,679 remained available for future issuance.
1988 DIRECTORS' STOCK OPTION PLAN
The Company's 1988 Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors in November 1988, was amended in 1989 and was
approved by the Company's stockholders in 1989. The Directors' Plan was
subsequently amended on a number of occasions through June 30, 1997, which
amendments were approved by the Board of Directors and stockholders as required
by law and the Directors' Plan. The Directors' Plan was most recently amended by
the Board of Directors in July 1997. A total of 700,000 shares of Common Stock
is reserved for issuance under the Directors' Plan. The Directors' Plan is
administered by the Board of Directors. Only non-employee directors are eligible
to participate in the Directors' Plan. Eligible directors are automatically
granted an option to purchase 50,000 shares of the Company's Common Stock on the
date they are first elected a director, such option becoming exercisable
cumulatively with respect to 10,000 shares on each of the first five
anniversaries of the date of grant, unless accelerated because of a director's
death or disability. Options under the Directors' Plan become fully exercisable
immediately upon the occurrence of certain merger or acquisition events,
including consummation of the Offer. On the date of the Annual Meeting of
Stockholders each year, all non-employee directors who have served since the
previous Annual Meeting of Stockholders and are reelected receive an immediately
exercisable option for 6,000 shares. The exercise price of an option granted
under the Directors' Plan is the fair market value (based on The Nasdaq National
Market closing price) of the stock on the date the option is granted.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into an employment agreement with David J. Ladd, a
Named Executive Officer, which provides for Mr. Ladd to serve, at a base salary
of $225,000 per year, as Executive Vice President and Acting Vice President, GBS
Engineering, of the Company through at least September 1, 1997 and as a
part-time employee for the four months thereafter for three days per week.
Thereafter, until May 31, 1998, Mr. Ladd will serve as a part-time employee at a
salary of $10,000 per month, in the event that Mr. Ladd works at least 20 hours
per week, or $5,000 per month, in the event that Ladd works less than 20 hours
per week but at least five hours per week. Mr. Ladd has also agreed to certain
noncompetition and non-solicitation provisions.
The option agreements relating to the stock options issued to Robert Cohn
in 1994, as described in the Company's most recent proxy statement, provide that
the vesting of such options shall accelerate so that the options are immediately
exercisable in full upon a "change in control." Consummation of the Offer as
contemplated would constitute such a change in control.
The option agreements relating to all stock options issued to certain
officers and key employees of the Company provide that the vesting of such
options shall accelerate so that the options are immediately exercisable in full
if at any time after a "change in control," but before the expiration of the
term of the option,
A-10
<PAGE> 29
either (A) the Optionee's employment with the Company (or any successor of the
Company) is terminated by the Company (or such successor entity), with or
without cause, or (B) the Optionee's compensation and benefits as in effect
immediately before the change in control are reduced by the Company (or such
successor entity). Consummation of the Offer as contemplated would constitute
such a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Beard, de Rothschild and McDivitt and Ms. Coleman currently serve
on the Compensation Committee. Messrs. Beard and de Rothschild and Ms. Coleman
served on the Compensation Committee throughout fiscal 1997. Mr. McDivitt joined
the Compensation Committee in April 1997. Mr. Tellefsen served on the
Compensation Committee until his resignation from the Board of Directors in
January 1997. Robert Cohn, the Chairman of the Board and Chief Executive Officer
of the Company and W. Michael West, the President and Chief Operating Officer of
the Company, currently attend meetings of the Compensation Committee but do not
vote. The Compensation Committee frequently holds executive sessions at which
neither Mr. Cohn nor Mr. West are in attendance. There are no interlocks between
the Company's Board of Directors or Compensation Committee and boards of
directors or compensation committees of other companies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership as of June 30, 1997 of the Company's Common Stock as to (i) each
director, (ii) each of the executive officers listed in the Summary Compensation
Table below, (iii) all executive officers and directors as a group and (iv) each
person known by the Company to be the beneficial owner of five percent or more
of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT NO. OF SHARES
STOCKHOLDERS(1) BENEFICIALLY OWNED PERCENTAGE
--------------------------------------------------- ------------------ ----------
<S> <C> <C>
Jurika & Voyles.................................... 3,435,000 6.6 %
1999 Harrison, Suite 700
Oakland, CA 94612
PRIMECAP Management Company........................ 2,650,000 5.1 %
225 So. Lake Ave., #400
Pasadena, CA 91101
Anson M. Beard, Jr.(2)............................. 101,000 *
Leo J. Chamberlain(3).............................. 73,206 *
Robert Cohn(4)..................................... 1,565,457 3.0 %
Deborah A. Coleman(5).............................. 54,000 *
Derek S. Daley(6).................................. 175,691 *
David J. Ladd(7)................................... 103,614 *
James A. McDivitt(8)............................... 15,000 *
Margaret Norton(9)................................. 65,838 *
Nathaniel de Rothschild(10)........................ 153,025 *
W. Michael West(11)................................ 510,442 1.0 %
All directors and executive officers as a group (16
persons)(12)..................................... 3,009,299 5.6 %
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) The persons named in the table, to the Company's knowledge, have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes hereunder.
(2) Includes 42,000 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997. Also includes 9,000 shares
held of record by trusts for the benefit of Mr. Beard's family for which
Mr. Beard serves as a trustee. Does not include 20,000 shares of Common
Stock issuable upon exercise
A-11
<PAGE> 30
of options that are not currently exercisable within 60 days of June 30,
1997, the vesting of which options will accelerate immediately prior to
consummation of the Offer.
(3) Includes 30,000 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997.
(4) Includes shares held of record by a trust for the benefit of Mr. Cohn and
his family. Also includes 480,000 shares issuable upon exercise of options
which are exercisable within 60 days of June 30, 1997. Does not include
600,000 shares of Common Stock issuable upon exercise of options that are
not currently exercisable within 60 days of June 30, 1997, the vesting of
which options will accelerate immediately prior to consummation of the
Offer.
(5) Includes 42,000 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997. Does not include 20,000 shares
of Common Stock issuable upon exercise of options that are not currently
exercisable within 60 days of June 30, 1997, the vesting of which options
will accelerate immediately prior to consummation of the Offer.
(6) Includes 69,500 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997.
(7) Includes 45,000 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997.
(8) Does not include 50,000 shares of Common Stock issuable upon exercise of
options that are not currently exercisable within 60 days of June 30, 1997,
the vesting of which options will accelerate immediately prior to
consummation of the Offer.
(9) Includes 62,250 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997.
(10) Includes 42,000 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997. Also includes an aggregate of
102,600 shares outstanding or issuable upon exercise of options held by
foundations or trusts for which Mr. de Rothschild serves as trustee, as to
which shares Mr. de Rothschild disclaims beneficial ownership. Does not
include 20,000 shares of Common Stock issuable upon exercise of options
that are not currently exercisable within 60 days of June 30, 1997, the
vesting of which options will accelerate immediately prior to consummation
of the Offer.
(11) Includes 177,200 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997.
(12) Includes 1,259,500 shares issuable upon exercise of options that are
exercisable within 60 days of June 30, 1997.
As of June 30, 1997, the per share market value of the Company's Common
Stock was $23.4375, based on the closing price on that date on The Nasdaq
National Market.
CERTAIN TRANSACTIONS
The matters set forth elsewhere in this Information Statement and in Item 3
of the Schedule 14D-9 are hereby incorporated by reference.
The Option Plan allows all participants to pay the exercise price of an
option with a promissory note. Accordingly, the Company has made loans to a
number of employees over the years, including the following executive officers.
In December 1994, the Company loaned $1,019,027 to Robert Cohn, an executive
officer and director of the Company, in connection with the exercise of and
payment of taxes regarding an incentive stock option to purchase 150,000 shares
of Common Stock at $5.563 per share, with interest payable at a rate of 6.66%,
compounded semi-annually, and a term of three years. The loan is secured by
50,952 shares of the Company's Common Stock having a market value of $1,194,188
at June 30, 1997. From October 1995 to December 1995, the Company loaned an
aggregate of $1,523,443 to Mr. Cohn in connection with the exercise of and
payment of taxes regarding stock options to purchase an aggregate of 152,660
shares of Common Stock at $5.563 per share, with interest payable at rates
between 5.65% and 5.90%, compounded annually, and terms of three years. The
loans are secured by an aggregate of 152,660 shares of the Company's Common
Stock
A-12
<PAGE> 31
having a market value of $3,577,969 at June 30, 1997. In November 1996, the
Company loaned an aggregate of $4,554,544 to Mr. Cohn in connection with the
exercise of and payment of taxes regarding stock options to purchase an
aggregate of 320,000 shares of Common Stock at $12.50 per share, with interest
payable at a rate of 5.96% compounded annually, and a term of three years. The
loans are secured by an aggregate of 320,000 shares of the Company's Common
Stock having a market value of $7,500,000 at June 30, 1997.
In February 1995, the Company loaned $267,000 to Derek S. Daley, an
executive officer of the Company, in connection with the exercise of an
incentive stock option to purchase 48,000 shares of Common Stock at $5.563 per
share, with interest payable at a rate of 7.43% compounded annually, and a term
of three years. The loan is secured by 24,840 shares of the Company's Common
Stock having a market value of $582,188 at June 30, 1997. In January 1996, the
Company loaned an aggregate of $379,526 to Mr. Daley in connection with the
exercise of and payment of taxes regarding stock options to purchase an
aggregate of 48,010 shares of Common Stock at $5.563 per share, with interest
payable at a rate of 5.50% compounded annually, and terms of three years. The
loans are secured by an aggregate of 48,010 shares of the Company's Common Stock
having a market value of $1,125,234 at June 30, 1997. In January 1997, the
Company loaned $242,114 to Mr. Daley in connection with the exercise of and
payment of taxes regarding stock options to purchase 17,000 shares of Common
Stock at $12.25 per share, with interest payable at a rate of 5.63% compounded
annually, and a term of three years. The loans are secured by an aggregate of
17,000 shares of the Company's Common Stock having a market value of $398,446 at
June 30, 1997.
In February 1996, the Company loaned $450,173 to W. Michael West, an
executive officer and director of the Company, in connection with the exercise
of an incentive stock option to purchase 80,930 shares of Common Stock at $5.563
per share, with interest payable at 5.32%, compounded annually, and a term of
three years. The loan is secured by 80,930 shares of the Company's Common stock
having a market value of $1,896,797 at June 30, 1997. In January 1997, the
Company loaned an aggregate of $1,401,901 to Mr. West in connection with the
exercise of and payment of taxes regarding stock options to purchase an
aggregate of 100,000 shares of Common Stock at $12.25 per share, with interest
payable at a rate of 5.63% compounded annually, and a term of three years. The
loans are secured by an aggregate of 100,000 shares of the Company's Common
Stock having a market value of $2,343,800 at June 30, 1997.
In August 1996, the Company loaned $99,981 to Paul Scott, an executive
officer of the Company, in connection with the exercise of and payment of taxes
regarding stock options to purchase an aggregate of 12,400 shares of Common
Stock at $8.063 per share, with interest payable at a rate of 6.15% compounded
annually, and a term of three years. The loans are secured by an aggregate of
12,400 shares of the Company's Common Stock having a market value of $290,631 at
June 30, 1997. In March 1997, the Company loaned Mr. Scott an additional $25,000
in connection with AMT taxes due on the above exercise, at an interest rate of
5.83% compounded annually. This loan is secured by the above-mentioned 12,400
shares.
In January 1997, the Company loaned $269,507 to Don Campodonico, an
executive officer of the Company, in connection with the exercise of stock
options to purchase an aggregate of 20,000 shares of Common Stock, with interest
payable at a rate of 5.63% compounded annually, and a term of three years. The
loan, including interest in the amount of $1,788, was repaid in full in March
1997.
As of June 30, 1997, the total amount outstanding on Mr. Cohn's notes was
$7,602,557.65; on Mr. Daley's notes was $983,870.63; on Mr. West's notes was
$1,922,847.24, and on Mr. Scott's notes was $130,873.23.
See "Employment Agreements and Change-in-Control Arrangements" and "1988
Director's Stock Option Plan" for a description of certain "change in control"
provisions applicable to stock options held by Robert Cohn, certain other
officers and key employees and non-employee directors.
The Company has entered into indemnification agreements with each of its
directors and officers. Such agreements require the Company to indemnify such
individuals to the full extent permitted by Delaware law if certain claims are
brought against them in their capacities with the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of
A-13
<PAGE> 32
the Company's equity securities to file reports of ownership on Form 3 and
changes in ownership on Form 4 or Form 5 with the Securities and Exchange
Commission (the "SEC"). Such officers, directors and ten percent stockholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) reports they file.
Based solely on its review of the copies of such forms received by it to
date, or written representations from certain reporting persons that Forms 5
have been filed for such persons as required, the Company believes that, during
the year ended June 30, 1997, all reporting persons complied with Section 16(a)
filing requirements applicable to them.
A-14
<PAGE> 33
ANNEX B
[Goldman, Sachs & Co. Letterhead]
July 17, 1997
Board of Directors
Octel Communications Corporation
1001 Murphy Ranch Road
Milpitas, CA 95035
Ladies and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.001 per share (the "Shares"),
of Octel Communications Corporation (the "Company") of the $31.00 per Share in
cash proposed to be paid by Purchaser (as defined below) in the Offer and the
Merger (each as defined below) pursuant to the Agreement and Plan of Merger
dated as of July 17, 1997, among Lucent Technologies Inc. ("Parent"), Memo
Acquisition Corp., a wholly-owned subsidiary of Parent (the "Purchaser"), and
the Company (the "Agreement"). The Agreement provides for a tender offer for all
the Shares (the "Offer") pursuant to which Purchaser will pay $31.00 per Share
in cash for each Share accepted. The Agreement further provides that following
the completion of the Offer, Purchaser will be merged with the Company (the
"Merger") and each outstanding Share (other than Shares which are already owned
by Purchaser or Parent and Shares the holders of which shall have perfected
their appraisal rights under Delaware law) will be converted into the right to
receive $31.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We have
provided certain investment banking and financial advisory services to Parent
from time to time, including acting as a managing underwriter of the initial
public offering of Common Stock, no par value of Parent ("Parent Shares") in
September 1996, lead manager of two public debt offerings of Parent in July 1996
and April 1997, financial advisor to Parent in the pending formation of a joint
venture of the consumer products businesses of Parent and Philips Electronics
N.V. in June 1997, and may provide investment banking services to Parent in the
future. As of July 17, 1997, Goldman Sachs had a long position of 1,159 Shares,
and a net long position of 89,555 shares of Parent Shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended June 30, 1996; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q; certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects.
In addition, we have reviewed the reported price and trading activity for the
Shares, compared certain financial and stock market information for the Company
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the technology industry specifically and in other industries
generally, and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the Company
or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Agreement and such
B-1
<PAGE> 34
opinion does not constitute a recommendation to any holder of Shares as to
whether such holder should accept the Offer or vote with respect to such
transaction.
Based upon the foregoing and such other matters as we consider relevant, it
is our opinion that as of the date hereof the $31.00 per Share in cash to be
received by the holders of Shares in the Offer and the Merger is fair to such
holders.
Very truly yours,
/s/ Authorized Signatory
- --------------------------------------
Goldman, Sachs & Co.
B-2
<PAGE> 35
ANNEX C
[Hambrecht & Quist LLC Letterhead]
July 17, 1997
Confidential
The Board of Directors
Octel Communications Corporation
1001 Murphy Ranch Road
Milpitas, California 95035
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.001
per share (the "Common Stock"), of Octel Communications Corporation ("Octel" or
the "Company") of the consideration to be received by such holders in connection
with a proposed transaction as set forth below.
We understand that Octel, Lucent Technologies Inc. ("Lucent") and Memo
Acquisition Corp. (the "Purchaser") propose to enter into an Agreement and Plan
of Merger (the "Agreement") dated as of July 17, 1997. The terms of the
Agreement provide, among other things, that (i) the Purchaser will promptly
commence a tender offer (the "Offer") to purchase for cash all of the
outstanding shares of Common Stock at a purchase price of $31.00 per share, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Agreement and certain ancillary documents to be filed with the Securities
and Exchange Commission; and (ii) the Purchaser will subsequently be merged (the
"Merger") with and into the Company in a transaction which will provide all
remaining holders of shares of Common Stock (other than Octel, Lucent, the
Purchaser or their respective subsidiaries, and holders who have perfected their
appraisal rights under Delaware law) with $31.00 per share in cash. The Offer
and the Merger constitute the "Proposed Transaction."
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of Octel in connection with the Proposed Transaction, and we will
receive a fee for our services, which include the rendering of this opinion.
In the past, we have provided investment banking and other financial
advisory services to Octel and have received fees for rendering these services.
In particular, Hambrecht & Quist acted as a managing underwriter in the
Company's initial public offering in 1988 and follow-on offering in 1989, as
financial advisor in the Company's private placement of common stock in 1988,
and as a financial advisor in connection with the Company's acquisition of VMX,
Inc. in 1994. In the ordinary course of business, Hambrecht & Quist acts as a
market maker and broker in the publicly traded securities of Octel and receives
customary compensation in connection therewith, and also provides research
coverage for Octel. In the ordinary course of business, Hambrecht & Quist
actively trades in the equity and derivative securities of Octel 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.
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements
of Lucent for recent years and interim periods to date and
certain other relevant financial and operating data of Lucent
made available to us from published sources;
(iv) reviewed the financial statements of Octel for recent years and
interim periods to date and certain other relevant financial and
operating data of Octel made available to us from published
sources and from the internal records of Octel;
C-1
<PAGE> 36
(v) reviewed certain internal financial and operating information
relating to Octel, including certain financial projections,
prepared by the management of Octel;
(vi) discussed the business, financial condition and prospects of
Octel with certain of its officers;
(vii) reviewed the recent reported prices and trading activity for the
common stock of Octel and compared such information and certain
financial information for Octel with similar information for
certain other companies engaged in businesses we consider
comparable;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable merger and acquisition transactions;
(ix) reviewed the Agreement; and
(x) performed such other analyses and examinations and considered
such other information, financial studies, analyses and
investigations and financial, economic and market data as we
deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Octel or Lucent considered in
connection with our review of the Proposed Transaction, and we have not assumed
any responsibility for independent verification of such information. We have not
undertaken any independent valuation or appraisal of any of the assets or
liabilities of Octel or Lucent; nor have we conducted a physical inspection of
the properties and facilities of either company. With respect to the financial
forecasts and projections used in our analysis, we have assumed that they
reflect the best currently available estimates and judgments of the expected
future financial performance of Octel. For purposes of this Opinion, we have
assumed that neither Lucent nor Octel is a party to any pending transactions,
including external financings, recapitalizations or material merger discussions,
other than the Proposed Transaction and those activities undertaken in the
ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion.
It is understood that this letter is addressed to and for the information
of the Board of Directors in connection with their evaluation of the Proposed
Transaction and may not be used for any other purpose without our prior written
consent; provided, however, that this letter may be reproduced in full in any
filing with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934. This letter does not constitute a recommendation to any
Octel stockholder as to whether such stockholder should accept the Offer.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of Octel Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view. We
express no opinion, however, as to the adequacy or financial fairness of any
consideration received in the Proposed Transaction by Lucent or any of its
affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ DANIEL H. CASE III
-------------------------------
Daniel H. Case III
President and Chief Executive
Officer
C-2
<PAGE> 1
Exhibit (a)(1)
NEWS RELEASE LUCENT TECHNOLOGIES
BELL LABS INNOVATIONS
Jane Moulton
Lucent Technologies
908-582-7658 office
973-763-7017 home
Email:[email protected]
John Callahan
Lucent Technologies
908-582-3060 (7/17/97 only)
202-530-7045 (after 7/18/97)
Email:[email protected]
Gregory Klaben
Octel
408-324-6571 office
408-255-2126 home
Email:[email protected]
LUCENT TECHNOLOGIES TO PURCHASE OCTEL
COMMUNICATIONS FOR $1.8 BILLION
COMBINATION WILL DELIVER INNOVATIVE VOICE, FAX, AND
ELECTRONIC MESSAGING CAPABILITIES TO BUSINESS, SERVICE
PROVIDER AND RESIDENTIAL CUSTOMERS
FOR IMMEDIATE RELEASE: Thursday, July 17, 1997
MURRAY HILL, N.J.-To expand the growth of its core business, Lucent
Technologies today said it is purchasing Octel Communications, a leader in
voice, fax and electronic messaging technologies, for $31 a share, or about $1.8
billion in an all-cash tender offer. Combining Octel with Lucent's messaging
unit will create a business with more than $1 billion in revenues serving an
industry growing at more than 20 percent a year.
The transaction is expected to be completed by the end of August. The
purchase is expected to be neutral to earnings in the first full year of
operation and additive to earnings thereafter.
"With this move, we can take advantage of the tremendous growth we're
already seeing in our core
<PAGE> 2
2
business," said Rich McGinn, president, Lucent Technologies. "We will be able to
immediately address the rapidly-growing global demand for the technologies that
support products like voice mail for wireless service providers and telephone
companies and networked messaging systems for large corporations."
"And it provides a fresh opportunity to deliver exciting new
capabilities to customers around the world, who are demanding easy,
'round-the-clock' access to their phone, fax and e-mail messages," McGinn said.
Robert Cohn, Octel's founder, chairman and CEO, will join Lucent's
senior executive team as president of the new messaging unit. He will report to
Bill O'Shea, President of Lucent's Business Communications Systems unit.
"Cohn has helped define and lead the messaging industry with the
delivery of advanced voice mail products and services and with his vision of
unified messaging, the next generation in messaging services," O'Shea said.
"We are very excited to become part of Lucent," said Cohn. "The
Lucent/Octel combination will allow us to do many more things for our customers.
And Lucent's commitment to messaging means that we will be an important part of
its future-and that is a strong opportunity for Octel employees."
"We're delighted to have Octel employees joining us," McGinn said.
"They have a well-deserved reputation for delivering innovative solutions to
customers around the world and that position will only get better in partnership
with Lucent."
Messaging, including voice, fax and electronic mail, has become a major
growth area in recent years among business and personal users. According to
market research estimates, the total messaging market is currently worth more
than $5 billion annually and is expected to double to $10 billion by 2000.
"Lucent and Octel have complementary strengths in messaging," Cohn
said. "Octel's technologies enable its enterprise voice mail products, for
instance, to work behind almost all types and models of PBX, central office and
wireless switches and excel at being networked together. And Octel has a
comprehensive offer for wireless and
<PAGE> 3
3
telephone company customers as messaging services demand increases."
"Lucent, on the other hand, has unparalleled relationships with those
network service operators and has delivered a complete portfolio of advanced
messaging products globally, including the IntuityTM Multimedia Messaging
System," he added. "Equally important, Lucent brings technological know-how that
will support the delivery of the next generation of advanced messaging
products."
"Providing outsourcing and professional services is an increasingly
important element of being successful in the messaging industry, O'Shea noted.
"Octel has a rapidly-growing professional services and outstanding
business-expanding at more than 25 percent a year-and the is a great fit with
Lucent's recently announced NetCare Services strategy," O'Shea said. NetCare is
a professional and network support services business that helps customers better
manage their increasingly sophisticated communications networks.
Cohn said both companies' can be assured of ongoing support and
service. "Investments in existing systems will be preserved as we introduce new
messaging capabilities to deliver compelling new applications and services."
Lucent said the acquisition would result in a significant one-time,
non-cash charge against its earnings. The charge involves an accounting writeoff
assigned to in-process research and development and will be taken in the fourth
fiscal quarter of 1997. The amount of the charge cannot be specifically
determined at this time, but Lucent expects it will have a significant effect on
net earnings for the fourth fiscal quarter of 1997 as well as the company's net
earnings for the fiscal year ending September 30, 1997.
O'Shea said there will be some efficiency and cost reduction
opportunities in corporate general and administrative functions and in other
parts of the business.
Founded in 1982, Octel sells voice mail systems in more than 70
countries. The company holds numerous patents in voice mail, automated attendant
and unified messaging. Octel's products are bought and used by businesses of all
sizes, governments, educational institutions, telephone
<PAGE> 4
4
companies and cellular service providers. It is one of the world's leading
outsourcers of voice mail, providing a wide range of outsourcing services to
phone companies and businesses. The company is headquartered in Milpitas, CA.,
and has development centers in California, Texas, the United Kingdom, France,
Israel and major operations centers in Texas and California. More information
about Octel is available on the company's Web sit at http://www.octel.com.
Lucent Technologies designs, builds and delivers a wide range of pubic
and private networks, communications systems and software, consumer and business
telephone systems and microelectronics components. Bell Labs is the research and
development arm for the company. More information about Lucent Technologies,
headquartered in Murray Hill, NJ, is available on its Web sire at
http://www.lucent.com.
Under the terms of the definitive agreement, Lucent will begin a cash
tender offer for all outstanding shares of Octel common stock for $31 per share.
The offer is expected to commence on July 23 and will be scheduled to close on
August 29. Any shares not purchased in the offer will be acquired for the same
price in cash, in a second-step merger.
The boards of directors of both companies have approved the
acquisition. The offer and merger are subject to the purchase of a majority of
the outstanding shares of Octel common stock, as well as other customary legal
requirements.
<PAGE> 1
EXHIBIT (a)(4)
LOGO
JULY 23, 1997
TO THE STOCKHOLDERS OF OCTEL COMMUNICATIONS CORPORATION
Dear Stockholder:
I am pleased to report that on July 17, 1997, Octel Communications
Corporation ("Octel") entered into a merger agreement with Lucent Technologies
Inc., a Delaware corporation ("Lucent"), and its wholly owned subsidiary, Memo
Acquisition Corp., a Delaware corporation ("Purchaser"), that provides for the
acquisition of all of the Common Stock, par value $.001 per share, together with
all associated Preferred Share Purchase Rights (the "Shares"), of Octel by
Purchaser at a price of $31 per Share in cash, net to the seller, without
interest. Under the terms of the proposed transaction, Purchaser has commenced a
tender offer (the "Tender Offer") for all outstanding shares of Octel Common
Stock at $31 per Share. The Tender Offer is currently scheduled to expire at
5:00 p.m., New York City time, on Friday, August 29, 1997.
Following the successful completion of the Tender Offer, upon approval by
stockholder vote, if required, Purchaser will be merged with and into Octel (the
"Merger"), and all Shares not purchased in the Tender Offer will be converted
into the right to receive $31 per Share in cash, net to the seller, without
interest.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE TENDER OFFER AND
DETERMINED THAT THE TERMS OF THE TENDER OFFER AND THE MERGER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, OCTEL STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALL OCTEL STOCKHOLDERS ACCEPT THE TENDER OFFER AND
TENDER THEIR SHARES.
The recommendation of the Board of Directors is described in the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
filed by Octel with the Securities and Exchange Commission and enclosed with
this letter. In arriving at its recommendation, the Board of Directors gave
careful consideration to a number of factors. These factors included the
opinions of each of Goldman, Sachs & Co. and Hambrecht & Quist LLC, financial
advisors to Octel, copies of which are attached as annexes to the Schedule
14D-9. We urge you to read carefully the Schedule 14D-9 in its entirety so that
you will be more informed as to the Board's recommendation.
Also accompanying this letter is a copy of the Offer to Purchase and
related materials, including a Letter of Transmittal for use in tendering
Shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your Shares. We urge you to read each
of the enclosed materials carefully.
The management and directors of Octel thank you for the support you have
given the Company.
On behalf of the Board of Directors,
Sincerely,
LOGO
Robert Cohn
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT (C)(1)
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
LUCENT TECHNOLOGIES INC.,
MEMO ACQUISITION CORP.
and
OCTEL COMMUNICATIONS CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
The Offer
SECTION 1.01. The Offer......................................................... 2
SECTION 1.02. Company Actions .................................................. 4
ARTICLE II
The Merger
SECTION 2.01. The Merger ....................................................... 5
SECTION 2.02. Closing .......................................................... 6
SECTION 2.03. Effective Time ................................................... 6
SECTION 2.04. Effects of the Merger ............................................ 6
SECTION 2.05. Certificate of Incorporation
and Bylaws................................................... 6
SECTION 2.06. Directors ........................................................ 7
SECTION 2.07. Officers.......................................................... 7
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock........................................... 7
SECTION 3.02. Exchange of Certificates ......................................... 8
ARTICLE IV
Representations and Warranties of the Company
SECTION 4.01. Organization, Standing and Corporation
Power.............................................................10
SECTION 4.02. Subsidiaries .....................................................11
SECTION 4.03. Capital Structure ................................................11
SECTION 4.04. Authority; Noncontravention.......................................12
SECTION 4.05. SEC Documents; Financial
Statements ..................................................14
SECTION 4.06. Information Supplied .............................................14
SECTION 4.07. Absence of Certain Changes
or Events ...................................................15
SECTION 4.08. Litigation .......................................................16
SECTION 4.09. Contracts ........................................................16
</TABLE>
<PAGE> 3
Contents, p. 2
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 4.10. Compliance with laws .............................................17
SECTION 4.11. Absence of Changes in Benefit
Plans; Labor Relations.......................................18
SECTION 4.12. ERISA Compliance .................................................19
SECTION 4.13. Taxes ............................................................20
SECTION 4.14. No Excess Parachute Payments .....................................21
SECTION 4.15. Intellectual Property ............................................21
SECTION 4.16. State Takeover Statutes ..........................................21
SECTION 4.17. Rights Agreement .................................................22
SECTION 4.18. Brokers; Schedule of Fees
and Expenses.................................................22
SECTION 4.19. Opinion of Financial Advisor .....................................22
ARTICLE V
Representations and Warranties
of Parent and Sub
SECTION 5.01. Organization, Standing and
Corporate Power .............................................23
SECTION 5.02. Authority; Noncontravention.......................................23
SECTION 5.03. Information Supplied..............................................24
SECTION 5.04. Interim Operations of Sub ........................................25
SECTION 5.05. Brokers ..........................................................25
SECTION 5.06. Financing ........................................................25
ARTICLE VI
Covenants
SECTION 6.01. Covenants of the Company..........................................25
SECTION 6.02. No Solicitation ..................................................28
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation
of Proxy Statement...........................................31
SECTION 7.02. Access to Information.............................................31
SECTION 7.03. Reasonable Efforts................................................32
SECTION 7.04. Company Stock Options.............................................33
SECTION 7.05. Directors.........................................................35
SECTION 7.06. Fees and Expenses.................................................36
SECTION 7.07. Indemnification...................................................38
SECTION 7.08. Certain Litigation................................................39
SECTION 7.09. Rights Agreement..................................................39
</TABLE>
<PAGE> 4
Contents, p. 3
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE VIII
Conditions
SECTION 8.01. Conditions to Each Party's Obligation
To Effect The Merger.........................................39
ARTICLE IX
Termination and Amendment
SECTION 9.01. Termination.......................................................40
SECTION 9.02. Effect of Termination.............................................41
SECTION 9.03. Amendment.........................................................42
SECTION 9.04. Extension; Waiver.................................................42
ARTICLE X
Miscellaneous
SECTION 10.01. Nonsurvival of Representations,
Warranties and Agreements....................................42
SECTION 10.02. Notices..........................................................43
SECTION 10.03. Interpretation...................................................44
SECTION 10.04. Counterparts.....................................................45
SECTION 10.05. Entire Agreement; Third Party
Beneficiaries..................................................45
SECTION 10.06. Governing Law....................................................45
SECTION 10.07. Publicity........................................................45
SECTION 10.08. Assignment.......................................................45
SECTION 10.09. Enforcement......................................................46
SECTION 10.10. Severability.....................................................46
Exhibit A Conditions of the Offer
</TABLE>
<PAGE> 5
Exhibit C
AGREEMENT AND PLAN OF MERGER dated as of
July 17, 1997, among LUCENT TECHNOLOGIES INC., a
Delaware corporation ("Parent"), MEMO ACQUISITION
CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and OCTEL
COMMUNICATIONS CORPORATION, a Delaware corporation
(the "Company").
WHEREAS, in furtherance of the acquisition of the Company by
Parent on the terms and subject to the conditions set forth in this Agreement,
Parent proposes to cause Sub to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, the "Offer") to purchase all the
outstanding shares of Common Stock, par value $.001 per share, of the Company
(together with any associated Rights (as defined in the Rights Agreement (as
defined)), the "Company Common Stock"; the shares of Company Common Stock being
hereinafter collectively referred to as the "Shares"), at a purchase price (the
"Offer Price") of $31.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved the Offer and the merger of Sub with the Company (the
"Merger") upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding Share, other than Shares owned
directly or indirectly by Parent or the Company and Dissenting Shares (as
defined in Section 3.01(d)), will be converted into the right to receive the
price per Share paid in the Offer; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained,
<PAGE> 6
2
and intending to be legally bound hereby, Parent, Sub and the Company hereby
agree as follows:
ARTICLE I
The Offer
SECTION 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of this
Agreement, Sub shall, and Parent shall cause Sub to, commence the Offer. The
initial expiration date for the Offer shall be August 29, 1997. The obligation
of Sub to, and of Parent to cause Sub to, accept for payment, and pay for, any
Shares tendered pursuant to the Offer shall be subject only to the conditions
set forth in Exhibit A (the "Offer Conditions") (any of which may be waived in
whole or in part by Sub in its sole discretion, provided that, without the
consent of the Company, Sub shall not waive the Minimum Condition (as defined in
Exhibit A)) and to the terms and conditions of this Agreement. Sub expressly
reserves the right to modify the terms of the Offer, except that, without the
consent of the Company, Sub shall not (i) reduce the number of Shares subject to
the Offer, (ii) reduce the Offer Price, (iii) amend or add to the Offer
Conditions, (iv) except as provided in the next sentence, extend the Offer, (v)
change the form of consideration payable in the Offer or (vi) amend any other
term of the Offer in any manner adverse to the holders of the Shares.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (A)
extend the Offer, if at the scheduled or extended expiration date of the Offer
any of the Offer Conditions shall not be satisfied or waived, until such time as
such conditions are satisfied or waived, (B) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (C) extend the Offer on one or more occasions for an aggregate period of not
more than 10 business days beyond the latest expiration date that would
otherwise be permitted under clause (A) or (B) of this sentence, if on such
expiration date there shall not have been tendered at least 90% of the
outstanding Shares. Parent and Sub agree that if all of the Offer Conditions are
not satisfied on any scheduled expiration date of the Offer then, provided that
all such conditions are reasonably capable of being satisfied, Sub shall extend
the Offer from time to time until such conditions are satisfied or waived,
provided that Sub shall not be required to extend the Offer beyond
<PAGE> 7
3
December 31, 1997. Subject to the terms and conditions of the Offer and this
Agreement, Sub shall, and Parent shall cause Sub to, accept for payment, and pay
for, all Shares validly tendered and not withdrawn pursuant to the Offer that
Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer
as promptly as practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents included therein pursuant to which the Offer
will be made, together with any supplements or amendments thereto, the "Offer
Documents"). Parent and Sub agree that the Offer Documents shall comply as to
form in all material respects with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder and the Offer Documents, on the date first published, sent or given
to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made by Parent or Sub with respect to information
supplied by the Company or any of its stockholders specifically for inclusion or
incorporation by reference in the Offer Documents. Each of Parent, Sub and the
Company agree promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Parent and Sub further agree to
take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed
with the SEC and the other Offer Documents as so corrected to be disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be given
reasonable opportunity to review and comment upon the Offer Documents prior to
their filing with the SEC or dissemination to the stockholders of the Company.
Parent and Sub agree to provide the Company and its counsel any comments Parent,
Sub or their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to accept for
<PAGE> 8
4
payment, and pay for, any Shares that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves
of and consents to the Offer and represents that the Board of Directors of the
Company, at a meeting duly called and held, duly and unanimously adopted
resolutions adopting this Agreement, approving the Offer and the Merger,
determining, as of the date of such resolutions, that the terms of the Offer and
the Merger are fair to, and in the best interests of, the Company's
stockholders, recommending that the Company's stockholders accept the Offer,
tender their shares pursuant to the Offer and approve this Agreement (if
required) and approving the acquisition of Shares by Sub pursuant to the Offer
and the other transactions contemplated by this Agreement. The Company has been
advised by each of its directors and executive officers that each such person
currently intends to tender all Shares (other than Shares, if any, held by such
person that, if tendered, could cause such person to incur liability under the
provisions of Section 16(b) of the Exchange Act) owned by such person pursuant
to the Offer.
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as supplemented
or amended from time to time, the "Schedule 14D-9") containing, subject to the
terms of this Agreement, the recommendation described in paragraph (a) and shall
mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9
shall comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation or
warranty is made by the Company with respect to information supplied by Parent
or Sub specifically for inclusion in the Schedule 14D-9. Each of the Company,
Parent and Sub agrees promptly to correct any information provided by it for use
in the Schedule 14D-9 if and to the extent that such information shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and
to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to
<PAGE> 9
5
the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given
reasonable opportunity to review and comment upon the Schedule 14D-9 prior to
its filing with the SEC or dissemination to stockholders of the Company. The
Company agrees to provide Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, the Company
shall cause its transfer agent to furnish Sub promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Sub and their agents shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, will deliver, and will use their
reasonable efforts to cause their agents to deliver, to the Company all copies
and any extracts or summaries from such information then in their possession or
control.
ARTICLE II
The Merger
SECTION 2.01. The Merger. Subject to the last two sentences of
this Section 2.01, upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at the Effective Time (as
defined in Section 2.03). Following the Effective Time, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL. At the election
of Parent, to the
<PAGE> 10
6
extent that any such action would not cause a failure of a condition to the
Offer or the Merger, (i) any direct or indirect wholly owned subsidiary (as
defined in Section 10.03) of Parent may be substituted for and assume all of the
rights and obligations of Sub as a constituent corporation in the Merger or (ii)
the Company may be merged with and into Sub with Sub continuing as the Surviving
Corporation with the effects set forth above and in Section 2.04. In either such
event, the parties agree to execute an appropriate amendment to this Agreement
in order to reflect the foregoing.
SECTION 2.02. Closing. The closing of the Merger will take
place at 10:00 a.m. (New York City time) on a date to be specified by Parent or
Sub, which shall be no later than the second business day after satisfaction or
waiver of the conditions set forth in Article VIII (the "Closing Date"), at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York 10019, unless another date, time or place is agreed to in writing
by the parties hereto.
SECTION 2.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State, or at
such other time as Sub and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 2.05. Certificate of Incorporation and Bylaws. (a) The
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be amended as of the Effective Time so that Article
Fourth thereof shall read in its entirety as follows:
"FOURTH: Section 1. The total number of shares which
the Corporation shall have authority to issue
is 1,000 shares of common stock, par value
$1.00 per share."
<PAGE> 11
7
As so amended, such certificate of incorporation shall be the certificate of
incorporation of the Surviving Corporation, until thereafter changed or amended,
subject to Section 7.07, as provided therein or by applicable law.
(b) The Bylaws of the Company as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation, until
thereafter changed or amended, subject to Section 7.07, as provided therein or
by applicable law.
SECTION 2.06. Directors. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or their respective successors
are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or their
respective successors are duly elected and qualified, as the case may be.
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Shares or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, par value $1.00 per share, of
the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent Owned Stock. Each
Share that is owned by the Company or by any subsidiary of the Company
and each Share that is owned by Parent, Sub or any other subsidiary of
Parent shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 3.01(d), each
issued and outstanding Share
<PAGE> 12
8
(other than Shares to be canceled in accordance with Section 3.01(b))
shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, the price per share paid in the
Offer (the "Merger Consideration"). As of the Effective Time, all such
Shares shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding
Shares held by a person (a "Dissenting Stockholder") who objects to the
Merger and complies with all the provisions of Delaware law concerning
the right of holders of Shares to dissent from the Merger and require
appraisal of their Shares ("Dissenting Shares") shall not be converted
as described in Section 3.01(c), but shall be converted into the right
to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to Delaware law. If, after the
Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right to
appraisal, in any case pursuant to the DGCL, his Shares shall be deemed
to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i) prompt notice
of any demands for appraisal of Shares received by the Company and (ii)
the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not,
without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
SECTION 3.02. Exchange of Certificates. (a) Paying Agent.
Prior to the Effective Time, Parent shall designate a bank or trust company to
act as paying agent in the Merger (the "Paying Agent"), and, from time to time
on, prior to or after the Effective Time, Parent shall make available, or cause
the Surviving Corporation to make available, to the Paying Agent cash in amounts
and at the times necessary for the prompt payment of the Merger Consideration
upon surrender of certificates representing Shares as part of the Merger
pursuant to Section 3.01 (it being understood that any and all interest earned
on funds
<PAGE> 13
9
made available to the Paying Agent pursuant to this Agreement shall be turned
over to Parent).
(b) Exchange Procedure. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates that immediately prior to the Effective Time
represented Shares (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 Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancelation to the Paying Agent or to such other agent or agents
as may be appointed by Parent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Paying
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor the amount of cash into which the Shares theretofore represented by
such Certificate shall have been converted pursuant to Section 3.01, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01. No interest will
be paid or will accrue on the cash payable upon the surrender of any
Certificate.
(c) No Further Ownership Rights in Shares. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Shares theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration
<PAGE> 14
10
of transfers on the stock transfer books of the Surviving Corporation of the
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be canceled and exchanged as
provided in this Article III.
(d) No Liability. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered immediately
prior to such date on which any payment pursuant to this Article III would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 4.04), the cash payment in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto.
(e) Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing Shares shall have been lost, stolen or destroyed, the
Paying Agent shall pay to such holder the Merger Consideration required pursuant
to Section 3.01, in exchange for such lost, stolen or destroyed certificates,
upon the making of an affidavit of that fact by the holder thereof with such
assurances as the Paying Agent, in its discretion and as a condition precedent
to the payment of the Merger Consideration, may reasonably require of the holder
of such lost, stolen or destroyed certificates.
ARTICLE IV
Representations and Warranties of the Company
Except as set forth on the disclosure schedule delivered by
the Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), the Company represents and warrants to Parent and Sub as
follows:
SECTION 4.01. Organization, Standing and Corporate Power. Each
of the Company and its subsidiaries (as defined in Section 10.03) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has all requisite corporate
power and authority to carry on its business as now being conducted. Each of the
Company and
<PAGE> 15
11
its subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate would not have a material
adverse effect (as defined in Section 10.03) on the Company. The Company has
delivered or made available to Parent complete and correct copies of its Amended
and Restated Certificate of Incorporation and By-Laws, in each case as amended
to the date hereof.
SECTION 4.02. Subsidiaries. Exhibit 21 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, includes all the
subsidiaries of the Company which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC).
All the outstanding shares of capital stock of, or other equity interests in,
each such Significant Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and free of
any other restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests).
SECTION 4.03. Capital Structure. The authorized capital stock
of the Company consists of 200,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, par value $.001 per share ("Preferred
Stock"). At the close of business on July 15, 1997, (i) 52,120,585 shares of
Company Common Stock and no shares of Preferred Stock were issued and
outstanding, (ii) no shares of Company Common Stock were held by the Company in
its treasury, (iii) 9,101,953 shares of Company Common Stock were reserved for
issuance pursuant to outstanding Stock Options under Stock Option Plans (as
defined in Section 7.04), (iv) shares of Company Common Stock were reserved for
issuance pursuant to the Company's 1987 Employee Stock Purchase Plan (the
"ESPP") and (v) shares of Series A Junior Participating Preferred Stock, par
value $.001 per share (the "Series A Preferred Stock") were reserved for
issuance in connection with the Company's Second Amended and Restated Rights
Agreement dated May 13, 1997 (the "Rights Agreement"). Except as set forth
above, at the close of business on July 15, 1997, no shares of capital stock or
other voting securities of the Company were issued, reserved for issuance or
outstanding. All
<PAGE> 16
12
outstanding shares of capital stock of the Company are, and all shares which may
be issued pursuant to the Stock Option Plans and the ESPP will be, when issued
in accordance with the terms thereof, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth above, there are
no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party, or by which the Company or any of its subsidiaries is
bound, obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. The Company is not a party to any voting
agreement with respect to the voting of any of its securities. There are not any
outstanding contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries.
SECTION 4.04. Authority; Noncontravention. The Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to, if required by law, approval of the Merger by an affirmative vote of
the holders of a majority of the Shares (the "Company Stockholder Approval"), to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
this Agreement, to the Company Stockholder Approval if such approval is required
by law. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation
<PAGE> 17
13
or to loss of a material benefit under, or result in the creation of any Liens
in or upon any of the properties or assets of the Company or any of its
subsidiaries under any provision of (i) the Amended and Restated Certificate of
Incorporation or By laws of the Company or the comparable organizational
documents of any of its subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
subsidiaries or any of their respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation or (B) judgment,
order or decree applicable to the Company or any of its subsidiaries or any of
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
the Company, (y) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court, administrative
agency or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), is required by or with respect to the Company
or any of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the Merger or the
transactions contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and filings under similar laws of certain foreign jurisdictions as may be
required ("Foreign Filings"), (2) the filing with the SEC and the Nasdaq Stock
Market, Inc. of (A) the Schedule 14D-9, (B) a proxy statement relating to the
Company Stockholder Approval, if such approval is required by law (as amended or
supplemented from time to time, the "Proxy Statement") and (C) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (3) the
filing of the Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business and (4) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained
<PAGE> 18
14
or made would not, individually or in the aggregate, have a material adverse
effect on the Company or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
SECTION 4.05. SEC Documents; Financial Statements. The Company
has filed all required reports, schedules, forms, statements and other documents
with the SEC since July 1, 1996 (the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents at the time they
were filed contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented the financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments and the absence of footnotes). Except as
set forth in the Filed SEC Documents (as defined in Section 4.07) or as incurred
in the ordinary course of business since the date of the most recent financial
statements included in the Filed SEC Documents, neither the Company nor any of
its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would be required under GAAP
to be set forth on a consolidated balance sheet of the Company and its
subsidiaries taken as a whole and which, individually or in the aggregate, would
have a material adverse effect on the Company.
SECTION 4.06. Information Supplied. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9
or (iii) the information to be filed by the Company in connection with the Offer
pursuant to Rule 14f-1 promulgated
<PAGE> 19
15
under the Exchange Act (the "Information Statement"), will, in the case of the
Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Schedule 14D-9 and the Information Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference therein based on information supplied by Parent or Sub specifically
for inclusion or incorporation by reference therein.
SECTION 4.07. Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed and publicly available prior to the date of
this Agreement (the "Filed SEC Documents"), since the date of the most recent
financial statements included in the Filed SEC Documents and, in the case of the
following clause and clauses (ii), (iii), (iv), (vi) and (vii) until the date
hereof, the Company and its subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice, and there
has not been (i) any material adverse change (as defined in Section 10.03) in
the Company, (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock (other than the Rights issued or to be issued
pursuant to the Rights Agreement), (iii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) (w) any granting by the
Company or any of its subsidiaries to any director or officer of the Company or
its subsidiaries of any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent financial statements
included in the Filed SEC Documents, (x) any granting by the Company or any of
its subsidiaries to any director or officer of any stock options, except as was
required under employment agreements in effect as of the date of the most recent
financial statements included in the Filed SEC Documents, (y) any granting by
the Company or any of its subsidiaries to any officer of any increase in
<PAGE> 20
16
severance or termination pay, except as was required under any employment,
severance or termination agreements, plans or arrangements in effect as of the
date of the most recent financial statements included in the Filed SEC Documents
or (z) any entry by the Company or any of its subsidiaries into any employment,
severance or termination agreement with any officer, (v) any damage, destruction
or loss, whether or not covered by insurance, that individually or in the
aggregate would have a material adverse effect on the Company, (vi) any change
in accounting methods, principles or practices having a material adverse effect
on the Company, except insofar as may have been required by a change in GAAP or
(vii) any tax election that individually or in the aggregate would have a
material adverse effect on the Company.
SECTION 4.08. Litigation. There is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries as to which there is a
reasonable likelihood of an adverse determination that individually or in the
aggregate would have a material adverse effect on the Company, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against, or, to the knowledge of the Company,
investigation by any Governmental Entity involving, the Company or any of its
subsidiaries that individually or in the aggregate would have a material adverse
effect on the Company.
SECTION 4.09. Contracts. Except as disclosed in the Filed SEC
Documents, as of the date hereof, there are no contracts or agreements that are
of a nature required to be filed as an exhibit under the Exchange Act and the
rules and regulations promulgated thereunder. Neither the Company nor any of its
subsidiaries is in violation of nor in default under (nor does there exist any
condition which upon the passage of time or the giving of notice or both would
cause such a violation of or default under) any lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that individually or in the
aggregate would not have a material adverse effect on the Company. As of the
date hereof, the Company is not bound by any contract, agreement, arrangement or
understanding with any affiliate of the Company that is currently in effect
other than (i) agreements that are disclosed in the Filed SEC Documents or (ii)
not of a nature required to be disclosed in the SEC Documents. The Company is
not a party to or otherwise bound by any agreement or
<PAGE> 21
17
covenant not to compete or by any agreement or covenant restricting in any
material respect the development, marketing or distribution of the Company's
products and services.
SECTION 4.10. Compliance with Laws. (i) Each of the Company
and its subsidiaries are in compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any
Governmental Entity (collectively, "Legal Provisions") applicable to their
business or operations, except for instances of possible noncompliance that
individually or in the aggregate would not have a material adverse effect on the
Company or prevent or materially delay the consummation of the Merger or the
transactions contemplated by this Agreement. Each of the Company and its
subsidiaries has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights, including all authorizations under Environmental Laws (as
hereinafter defined) ("Permits"), necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
has occurred no default under, or violation of, any such Permit, except for the
lack of Permits and for defaults under, or violations of, Permits, which lack,
default or violation individually or in the aggregate would not have a material
adverse effect on the Company.
(ii) The term "Environmental Laws" means any Federal, state or
local statute, ordinance, rule, regulation, policy, permit, consent,
approval, license, judgment, order, decree or injunction relating to:
(A) Releases (as defined in 42 U.S.C. Section 9601(22)) or threatened
Releases of Hazardous Material (as hereinafter defined) into the
environment, (B) the generation, treatment, storage, disposal, use,
handling, manufacturing, transportation or shipment of Hazardous
Material or (C) the health or safety of employees in the workplace
environment. The term "Hazardous Material" means (1) hazardous
substances (as defined in 42 U.S.C. Section9601(14)), (2) petroleum,
including crude oil and any fractions thereof, (3) natural gas,
synthetic gas and any mixtures thereof, (4) asbestos and/or asbestos
containing material, (5) PCBs or materials containing PCBs and (6) any
material regulated as a medical waste or infectious waste.
(iii) During the period of ownership or operation by the
Company and its subsidiaries of any of their
<PAGE> 22
18
current or previously owned or leased properties, there have been no
Releases of Hazardous Material by the Company or any of its
subsidiaries in, on, under or affecting such properties or any
surrounding site, and neither the Company nor any of its subsidiaries
has disposed of any Hazardous Material in a manner that has led, or
could reasonably be anticipated to lead to a Release, except in each
case for those which individually or in the aggregate would not have a
material adverse effect on the Company, and except as disclosed in the
Filed SEC Documents. The Company and its subsidiaries have not received
any written notice of, or entered into any order, settlement or decree
relating to: (A) any violation of any Environmental Laws or the
institution or pendency of any suit, action, claim, proceeding or
investigation by any Governmental Entity or any third party in
connection with any alleged violation of Environmental Laws, (B) the
response to or remediation of Hazardous Material at or arising from any
of the Company's properties or any subsidiary's properties or (C)
payment for, response to or remediation of Hazardous Material at or
arising from any of the Company's properties or any subsidiary's
properties, except in each case for any such notices, orders,
settlements or decrees which individually or in the aggregate would not
have a material adverse effect on the Company.
SECTION 4.11. Absence of Changes in Benefit Plans; Labor
Relations. Except as disclosed in the Filed SEC Documents, since the date of the
most recent financial statements included in the Filed SEC Documents, until the
date hereof, there has not been any adoption or amendment (or any agreement to
adopt or amend) in any material respect by the Company or any of its
subsidiaries of any material employment contract, material collective bargaining
agreement or any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other material plan, arrangement or understanding
(whether or not legally binding) providing material benefits to any current
employee, officer or director of the Company or any subsidiary (collectively,
"Benefit Plans"). Except as disclosed in the Filed SEC Documents, there exist,
as of the date hereof, no material employment, consulting, severance,
termination or indemnification agreements, arrangements or understandings
between the Company or any of its subsidiaries, and any current employee,
officer or director of the Company. There
<PAGE> 23
19
are no collective bargaining or other labor union agreements to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound. Since July 1, 1995, neither the Company nor any of
its subsidiaries has encountered any labor union organizing activity, nor had
any actual or threatened employee strikes, work stoppages, slowdowns or
lockouts.
SECTION 4.12. ERISA Compliance. (i) Schedule 4.12(i) to the
Company Disclosure Schedule contains a list and brief description of all
material "employee pension benefit plans" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), material "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) and all other Benefit Plans
maintained, or contributed to, by the Company or any of its subsidiaries or any
person or entity that, together with the Company and its subsidiaries, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") (the Company and each
such other person or entity, a "Commonly Controlled Entity") for the benefit of
any current employees, officers or directors of the Company or any of its
subsidiaries. The Company has made available to Parent true, complete and
correct copies of (1) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (2) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Benefit Plan
(if any such report was required), (3) the most recent summary plan description
for each Benefit Plan for which such summary plan description is required and
(4) each trust agreement and group annuity contract relating to any Benefit
Plan. Except as would not have a material adverse effect on the Company, each
Benefit Plan has been administered in accordance with its terms. Except as would
not have a material adverse effect on the Company, the Company, each of its
subsidiaries and all the Benefit Plans are all in compliance with applicable
provisions of ERISA and the Code.
(ii) Except as would not have a material adverse effect on the
Company, all Pension Plans have been the subject of determination
letters from the Internal Revenue Service to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor has any event occurred since
the date of its most recent determination letter or application
therefor
<PAGE> 24
20
that would adversely affect its qualification or materially increase
its costs.
(iii) Neither the Company, nor any of its subsidiaries, nor
any Commonly Controlled Entity has maintained, contributed or been
obligated to contribute to any Benefit Plan that is subject to Title IV
of ERISA.
(iv) Schedule 4.12(iv) to the Company Disclosure Schedule
lists all outstanding Stock Options as of July 11, 1997, showing for
each such option: (1) the number of shares issuable, (2) the number of
vested shares, (3) the date of expiration and (4) the exercise price.
(v) Except as provided by this Agreement, no employee of the
Company or any of its subsidiaries will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or
vesting of any compensation or benefits under any Benefit Plan as a
result of the transactions contemplated by this Agreement.
(vi) The deduction of any amount payable pursuant to the terms
of the Benefit Plans will not be subject to disallowance under Section
162(m) of the Code.
SECTION 4.13. Taxes. Except to the extent that failure to do
so would not have a material adverse effect on the Company, each of the Company
and its subsidiaries has filed all tax returns and reports required to be filed
by it and has paid, or established adequate reserves for, all taxes required to
be paid by it. Except as would not have a material adverse effect on the
Company, no deficiencies for any taxes have been proposed, asserted or assessed
against the Company, and no requests for waivers of the time to assess any such
taxes are pending. The Federal income tax returns of the Company and each of its
subsidiaries consolidated in such returns have been examined by and settled with
the United States Internal Revenue Service for all years through the fiscal year
ended June 30, 1992. The statute of limitations on assessment or collection of
any Federal income taxes due from the Company or any of its subsidiaries has
expired for all taxable years of the Company or such subsidiaries through the
fiscal year ended June 30, 1991. As used in this Agreement, "taxes" shall
include all Federal, state, local and foreign income, property, sales, excise
and other taxes, tariffs or governmental charges of any nature whatsoever.
<PAGE> 25
21
SECTION 4.14. No Excess Parachute Payments. No amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its subsidiaries who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.28OG-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would be an "excess parachute payment" (as such term is defined in Section
28OG(b)(1) of the Code). No such person is entitled to receive any additional
payment from the Company or any of its subsidiaries, the Surviving Corporation
or any other person (a "Parachute Gross-Up Payment") in the event that the
excise tax of Section 4999(a) of the Code is imposed on such person. The Board
of Directors of the Company has not granted to any officer, director or employee
of the Company any right to receive any Parachute Gross-Up Payment.
SECTION 4.15. Intellectual Property. The Company and its
subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trade secrets, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights and computer programs which are
material to the conduct of the business of the Company taken as a whole
(collectively, "Intellectual Property Rights"). Except as would not have a
material adverse effect on the Company, the Company will continue to own or be
licensed to the Intellectual Property Rights after consummation of the Offer and
the Merger. Except as would not have a material adverse effect on the Company,
no claim of any infringement of any Intellectual Property Rights of any third
party has been made or asserted against the Company or any of its subsidiaries
in respect of the operation of the Company's or any subsidiary's business. To
the knowledge of the Company, no person is infringing the rights of the Company
or any subsidiary with respect to any Intellectual Property Right that
individually or in the aggregate would have a material adverse effect on the
Company. Neither the Company nor any subsidiary has licensed, or otherwise
granted, to any third party, any material rights in or to any Intellectual
Property Rights.
SECTION 4.16. State Takeover Statutes. The Board of Directors
of the Company has approved the Offer, the Merger and this Agreement, and such
approval is sufficient to render inapplicable to the Offer, the Merger, this
Agreement and the transactions contemplated by this
<PAGE> 26
22
Agreement the provisions of Section 203 of the DGCL to the extent, if any, such
Section is applicable to the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement.
SECTION 4.17. Rights Agreement. The Board of Directors of the
Company has adopted resolutions providing that the Rights Agreement shall be
amended, and the Rights Agreement shall be so amended, within two business days
following the date hereof, to (i) render the Rights Agreement inapplicable to
the Offer, the Merger, this Agreement and the acquisition of Shares by Sub
pursuant to the Offer, (ii) ensure that (y) none of Parent, Sub or any of their
respective affiliates is an Acquiring Person (as defined in the Rights
Agreement) pursuant to the Rights Agreement solely by virtue of the execution of
this Agreement, commencement and consummation of the Offer, the acquisition of
Shares by Sub pursuant to the Offer and the consummation of the Merger and (z) a
Distribution Date or a Shares Acquisition Date (as such terms are defined in the
Rights Agreement) does not occur by reason of the Offer, the Merger, the
execution of this Agreement, the acquisition of the Shares by Sub pursuant to
the Offer, or the consummation of the Merger and (iii) provide that the Final
Expiration Date (as defined in the Rights Agreement) shall occur immediately
prior to the Effective Time, and such amendment will not be further amended by
the Company without the prior consent of Parent in its sole discretion.
SECTION 4.18. Brokers; Schedule of Fees and Expenses. No
broker, investment banker, financial advisor or other person, other than
Goldman, Sachs & Co. and Hambrecht & Quist LLC, the fees and expenses of which
will be paid by the Company, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has furnished to Parent true and complete copies of all
agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the persons to
whom such fees are payable.
SECTION 4.19. Opinion of Financial Advisor. The Company has
received the opinions of Goldman, Sachs & Co. and Hambrecht & Quist LLC, dated
the date hereof, to the effect that, as of such date, the consideration to be
received in the Offer and the Merger by the Company's stockholders is fair to
the Company's stockholders (in the case of Hambrecht & Quist, from a financial
point of view),
<PAGE> 27
23
a signed copy of which opinion will be promptly delivered to Parent.
ARTICLE V
Representations and Warranties
of Parent and Sub
Parent and Sub represent and warrant to the Company as
follows:
SECTION 5.01. Organization, Standing and Corporate Power. Each
of Parent and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
all requisite corporate power and authority to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed individually or in the aggregate would
not have a material adverse effect on Parent. Parent has delivered to the
Company complete and correct copies of its Certificate of Incorporation and
By-Laws and the Certificate of Incorporation and By-Laws of Sub, in each case as
amended to the date hereof.
SECTION 5.02. Authority; Noncontravention. Parent and Sub have
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate action on
the part of Parent and Sub. This Agreement has been duly executed and delivered
by Parent and Sub, and constitutes a valid and binding obligation of each such
party, enforceable against each such party in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancelation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Parent or Sub under, any provision of (i) the
Certificate of Incorporation or By-Laws
<PAGE> 28
24
of Parent or Sub, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or Sub or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any (A) statute, law, ordinance, rule or regulation or
(B) judgment, order or decree applicable to Parent or Sub or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights or Liens that individually or in
the aggregate would not (x) have a material adverse effect on Parent, (y) impair
in any material respect the ability of each of Parent and Sub to perform its
obligations under this Agreement, as the case may be, or (z) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or Sub in connection with the execution and delivery
of this Agreement by Parent and Sub or the consummation by Parent and Sub of the
transactions contemplated by this Agreement, except for (1) Foreign Filings and
the filing of a premerger notification and report form under the HSR Act, (2)
the filing with the SEC of (A) the Offer Documents and (B) such reports under
Sections 13(a), 13(d) and 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement (3) the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business and (4) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the "blue sky" laws of various states, the
failure of which to be obtained or made would not, individually or in the
aggregate, have a material adverse effect on Parent or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement.
SECTION 5.03. Information Supplied. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the Information Statement or (iv) the Proxy Statement will, in the case of
the Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or, in the case of the Proxy
<PAGE> 29
25
Statement, at the time the Proxy Statement is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that (other than
with respect to the Proxy Statement) no representation or warranty is made by
Parent or Sub with respect to statements made or incorporated by reference
therein based on information supplied by the Company specifically for inclusion
or incorporation by reference therein.
SECTION 5.04. Interim Operations of Sub. Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
SECTION 5.05. Brokers. No broker, investment banker, financial
advisor or other person, other than Deutsche Morgan Grenfell Inc., the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
SECTION 5.06. Financing. At the expiration of the Offer and
the Effective Time, Parent and Sub will have available all the funds necessary
for the acquisition of all Shares pursuant to the Offer and to perform their
respective obligations under this Agreement, including without limitation
payment in full for all shares of Company Common Stock validly tendered into the
Offer or outstanding at the Effective Time.
ARTICLE VI
Covenants
SECTION 6.01. Covenants of the Company. (a) Conduct of the
Business by the Company. Until the earlier of termination of this Agreement and
consummation of the Offer, the Company shall, and shall cause its subsidiaries
to, carry on their respective businesses in the ordinary course consistent with
the manner as heretofore conducted
<PAGE> 30
26
and, to the extent consistent therewith, use commercially reasonable efforts to
(x) preserve intact their current business organization, (y) keep available the
services of their current officers and employees and (z) preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them. Without limiting the generality of
the foregoing, during the period from the date of this Agreement until the
earlier termination of this Agreement and consummation of the Offer, other than
as set forth in Section 4.01 of the Company Disclosure Schedule or as otherwise
contemplated by this Agreement, the Company shall not, and shall not permit any
of its subsidiaries to, without Parent's prior written consent (which shall not
be unreasonably withheld):
(i) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its parent or
pursuant to the Rights Agreement, (x) declare, set aside or pay any
dividends on, or make any other distributions (whether in cash, stock
or property), in respect of, any of its capital stock, (y) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than the issuance
of shares of Company Common Stock upon the exercise of Stock Options
outstanding on the date of this Agreement and in accordance with their
present terms) or (z) purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than (y) pursuant to the Rights Agreement or (z) the issuance of
shares of Company Common Stock upon the exercise of Stock Options
outstanding on the date of this Agreement and in accordance with their
present terms);
(iii) amend its Amended and Restated Certificate of
Incorporation, By-Laws or other comparable charter or organizational
documents;
<PAGE> 31
27
(iv) acquire or agree to acquire (including, without
limitation, by merger, consolidation or acquisition of stock or assets)
any business, including through the acquisition of any interest in any
corporation, partnership, joint venture, association or other business
organization or division thereof;
(v) sell, lease, license, mortgage or otherwise encumber or
otherwise dispose of any of its properties or assets, other than in the
ordinary course of business consistent with past practice;
(vi) (y) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its subsidiaries, or guarantee any
debt securities of another person, other than short-term bank financing
in the ordinary course of business consistent with past practice or (z)
make any loans, advances or capital contributions to, or investments
in, any other person, other than in the ordinary course of business
consistent with past practice;
(vii) except as disclosed on Schedule 6.01(a)(vii) to the
Company Disclosure Schedule, make or agree to make any new capital
expenditure or expenditures;
(viii) except as required to comply with applicable law or
agreements, plans or arrangements existing on the date hereof, (A)
adopt, enter into, terminate or amend in any material respect any
employment contract, collective bargaining agreement or Benefit Plan,
(B) increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any director, officer or employee (except for normal
increases of cash compensation or cash bonuses in the ordinary course
of business consistent with past practice), (C) pay any benefit not
provided for under any Benefit Plan or any other benefit plan or
arrangement of the Company or its subsidiaries, (D) increase in any
manner the severance or termination pay of any officer or employee, (E)
except as permitted in clause (B), grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or
Benefit Plan (including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock or the removal of existing restrictions in any Benefit
Plans or agreements or awards made thereunder), (F) take any action to
fund or in any other way secure the payment
<PAGE> 32
28
of compensation or benefits under any employee plan, agreement,
contract or arrangement or Benefit Plan or (G) take any action to
accelerate the vesting of, or cash out rights associated with, any
Stock Options;
(ix) enter into any agreement of a nature that would be
required to be filed as an exhibit to Form 10-K under the Exchange Act,
other than contracts for the sale of the Company's products in the
ordinary course of business;
(x) except as required by GAAP, make any material change in
accounting methods, principles or practices;
(xi) make any material tax election or enter into any
settlement or compromise with respect to any material income tax
liability; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 6.02. No Solicitation. (a) The Company shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative or agent retained by it or
any subsidiary to, directly or indirectly, (i) solicit, initiate or knowingly
encourage the submission of any Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any nonpublic information with respect to, or take any other action
designed or reasonably likely to facilitate any inquiries or the making of any
proposal that constitutes any Takeover Proposal; provided, however, that if, at
any time prior to the acceptance for payment of Shares pursuant to the Offer,
the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that it is reasonably advisable to do so in
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, the Company may, in response to a Takeover Proposal which was
not solicited subsequent to the date hereof, and subject to compliance with
Section 6.02(c), (x) furnish information with respect to the Company to any
person pursuant to a customary confidentiality agreement and (y) participate in
discussions and negotiations regarding such Takeover Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any director, officer or employee of the Company or
any of its subsidiaries or any investment banker, financial advisor, attorney,
accountant
<PAGE> 33
29
or other representative or agent of the Company or any of its subsidiaries shall
be deemed to be a breach of this Section 6.02(a) by the Company. For purposes of
this Agreement, "Takeover Proposal" means any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company and its subsidiaries, taken as a
whole (other than the purchase of the Company's products in the ordinary course
of business), or more than a 20% interest in the total voting securities of the
Company or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of its subsidiaries or any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
this Agreement.
(b) Except as set forth in this Section 6.02, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors or such committee of the
Offer, the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Takeover Proposal or (iii) cause the
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement") related
to any Takeover Proposal. Notwithstanding the foregoing, in the event that prior
to the acceptance for payment of Shares pursuant to the Offer the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is reasonably advisable to do so in order to comply
with its fiduciary duties to the Company's stockholders under applicable law,
the Board of Directors of the Company may, in response to an unsolicited
Superior Proposal (as defined below) (subject to the following proviso), (x)
withdraw or modify its approval or recommendation of the Offer, the Merger or
this Agreement or (y) approve or recommend any such Superior Proposal if
concurrently with such approval or recommendation the Company terminates this
Agreement and enters into an Acquisition Agreement with respect to a Superior
Proposal; provided, that in the case of this clause (y), only at a time that is
after the later of (i) the third business day following Parent's receipt of
written notice advising Parent that the Board of Directors of the Company has
received a Superior Proposal, specifying
<PAGE> 34
30
the material terms of such Superior Proposal and identifying the person making
such Superior Proposal and (ii) in the event of any amendment to the price or
any material term of a Superior Proposal, one business day following Parent's
receipt of written notice containing the material terms of such amendment,
including any change in price (it being understood that each further amendment
to the price or any material terms of a Superior Proposal shall necessitate an
additional written notice to Parent and an additional one business day period
prior to which the Company can take the actions set forth in clause (y) above).
For purposes of this Agreement, a "Superior Proposal" means any bona fide
Takeover Proposal made by a third party (i) that is on terms which the Board of
Directors of the Company determines in its good faith judgment (based on
consultation with the Company's financial advisor) to be more favorable to the
Company's stockholders than the Offer and the Merger and (ii) for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of the Company, is capable of being obtained
by such third party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.02, the Company shall promptly advise
Parent orally and in writing of any request for nonpublic information (except in
the ordinary course of business and not in connection with a possible Takeover
Proposal) or of any Takeover Proposal known to it, the material terms and
conditions of such request or Takeover Proposal and the identity of the person
making such request or Takeover Proposal. The Company will promptly inform
Parent of any material change in the details (including amendments or proposed
amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Agreement shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with applicable law; provided,
however, neither the Company nor its Board of Directors nor any committee
thereof shall, except as permitted by Section 6.02(b), withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer, the
Merger or this Agreement or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
<PAGE> 35
31
ARTICLE VII
Additional Agreements
SECTION 7.01. Stockholder Approval; Preparation of Proxy
Statement. (a) If the Company Stockholder Approval is required by law, the
Company shall, as soon as practicable following the expiration of the Offer,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Stockholders Meeting") for the purpose of obtaining the Company Stockholder
Approval. The Company shall, through its Board of Directors, recommend to its
stockholders that the Company Stockholder Approval be given. Notwithstanding the
foregoing, if Sub or any other subsidiary of Parent shall acquire at least 90%
of the outstanding Shares, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Stockholders Meeting in accordance with
Section 253 of the DGCL.
(b) If the Company Stockholder Approval is required by law,
the Company shall, as soon as practicable following the expiration of the Offer,
prepare and file a preliminary Proxy Statement with the SEC and shall use its
best efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the satisfaction of the
staff. The Company shall notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement or the Merger. If at any time
prior to the Stockholders Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its stockholders such an amendment or supplement.
(c) Parent agrees to cause all Shares purchased pursuant to
the Offer and all other Shares owned by Parent or any subsidiary of Parent to be
voted in favor of the Company Stockholder Approval.
SECTION 7.02. Access to Information. The Company shall, and
shall cause each of its subsidiaries to, afford to Parent and to the officers,
employees, accountants,
<PAGE> 36
32
counsel and other representatives of Parent reasonable access, during normal
business hours during the period prior to the Effective Time, to all their
properties, books, contracts, commitments and records and, during such period,
the Company shall, and shall cause each of its subsidiaries to, make available
promptly to Parent upon request (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of the federal or state securities laws or
the federal tax laws, or state, local or foreign tax laws and (b) all other
information concerning its business, properties and personnel as Parent may
reasonably request (including the Company's outside accountants' work papers).
Except as otherwise agreed to by the Company, and notwithstanding termination of
this Agreement, the terms of the Confidentiality Agreement dated April 29, 1997,
between Parent and the Company (the "Confidentiality Agreement") shall apply to
all information about the Company which has been furnished under this Agreement
by the Company to Parent or Sub.
SECTION 7.03. Reasonable Efforts. Upon and subject to the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Offer, the
Merger and the other transactions contemplated by this Agreement, including
using reasonable efforts to take the following actions: (i) the taking of all
reasonable acts necessary to cause the Offer Conditions to be satisfied, (ii)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Govern mental Entities, if
any) and the taking of all reasonable steps as may be necessary to avoid an
action or proceeding by any Governmental Entity, (iii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iv) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (v)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In
<PAGE> 37
33
connection with and without limiting the foregoing, but subject to the terms and
conditions hereof, the Company and its Board of Directors shall, if any state
takeover statute or similar statute or regulation is or becomes applicable to
the Offer, the Merger, this Agreement or any other transactions contemplated by
this Agreement, use all reasonable efforts to ensure that the Offer, the Merger
and the other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Offer, the
Merger, this Agreement and the other transactions contemplated by this
Agreement.
(b) The Company shall give prompt notice to Parent, and Parent
shall give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
SECTION 7.04. Company Stock Options. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering the Company Stock
Plans, as defined below) shall adopt such resolutions or take such other
actions, if any, as may reasonably be required to effect the following:
(i) adjust the terms of all outstanding options to purchase
Company Common Stock (the "Stock Options") granted under any plan or
arrangement providing for the grant of options to purchase Company
Common Stock to current or former directors, officers, employees or
consultants of the Company or its subsidiaries (the "Company Stock
Plans"), whether vested or unvested, as necessary to provide that, at
the Effective Time, each Stock Option outstanding immediately prior to
the Effective Time shall be amended and converted into an option to
acquire, on the same terms and conditions as were applicable under the
Stock Option, the number of
<PAGE> 38
34
shares of common stock of Parent ("Parent Common Stock") determined by
multiplying the number of shares of Company Common Stock subject to
such Stock Option by a fraction, the numerator of which is $31.00 and
the denominator of which is the average closing price of Parent Common
Stock listed on the New York Stock Exchange for three (3) trading days
immediately preceding (but not including) the date of the Effective
Time, rounded down to the nearest whole share, at a price per share of
Parent Common Stock equal to (A) the aggregate exercise price for the
shares of Company Common Stock otherwise purchasable pursuant to such
Stock Option divided by (B) the aggregate number of shares of Parent
Common Stock deemed purchasable pursuant to such Stock Option (each, as
so adjusted, an "Adjusted Option"), rounded up to the nearest whole
cent;
(ii) adjust the terms of each Stock Option granted under the
Company's 1988 Directors' Stock Option Plan (each a "Director Stock
Option") so that if, following consummation of the Offer, the holder of
such Director Stock Option is terminated from his or her position as a
director of the Company, each such Director Stock Option shall vest and
become exercisable in full and shall remain exercisable through the
Effective Time; and
(iii) make such other changes to the Company Stock Plans as
Parent and the Company may agree to are appropriate to give effect to
the Merger,
(b) The adjustments provided herein with respect to any Stock
Options that are "incentive stock options" as defined in Section 422 of the Code
shall be and are intended to be effected in a manner which is consistent with
Section 424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without
the need of any further corporate action, Parent shall assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Stock Options outstanding at the
Effective Time shall be obligations of Parent following the Effective Time.
(d) No later than the Effective Time, Parent shall prepare and
file with the SEC a registration statement on Form S-8 (or another appropriate
form) registering a number of shares of Parent Common Stock equal to the number
of shares subject to the Adjusted Options. Such
<PAGE> 39
35
registration statement shall be kept effective (and the current status of the
prospectus or prospectuses required thereby shall be maintained) at least for so
long as any Adjusted Options may remain outstanding.
(e) As soon as practicable after the Effective Time, Parent
shall deliver to the holders of Stock Options appropriate notices setting forth
such holders' rights pursuant to the respective Company Stock Plans and the
agreements evidencing the grants of such Stock Options and that such Stock
Options and agreements shall be assumed by Parent and shall continue in effect
on the same terms and conditions (subject to the adjustments required by this
Section 7.04).
(f) A holder of an Adjusted Option may exercise such Adjusted
Options in whole or in part in accordance with its terms by delivering a
properly executed notice of exercise to Parent, together with the consideration
therefor and the Federal withholding tax information, if any, required in
accordance with the related Company Stock Plan.
(g) The Company shall terminate the ESPP by having its Board
of Directors amend the ESPP as necessary to provide that: (i) any shares of
Company Common Stock to be purchased under the ESPP on a new "Exercise Date" (as
such term is defined in the ESPP) set by the Board of Directors, which Exercise
Date shall be on the last trading day immediately prior to consummation of the
Offer, or such earlier time as the Board shall specify, and (ii) immediately
following such purchase of shares of Company Common Stock, the ESPP shall
terminate.
(h) Except as otherwise contemplated by this Section 7.04 and
except to the extent required under the respective terms of the Stock Options,
all restrictions or limitations on transfer and vesting with respect to Stock
Options awarded under the Company Stock Plans or any other plan, program or
arrangement of the Company or any of its subsidiaries, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by Parent as set forth above.
SECTION 7.05. Directors. Promptly upon the acceptance for
payment of, and payment for, Shares by Sub pursuant to the Offer, Sub shall be
entitled to designate such number of directors on the Board of Directors of the
Company as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, a majority of such
<PAGE> 40
36
directors, and the Company shall, at such time, cause Sub's designees to be so
elected by its existing Board of Directors; provided, however, that in the event
that Sub's designees are elected to the Board of Directors of the Company, until
the Effective Time such Board of Directors shall have at least two directors who
are directors of the Company on the date of this Agreement and who are not
officers of the Company or any of its subsidiaries (the "Independent Directors")
and; provided further that, in such event, if the number of Independent
Directors shall be reduced below two for any reason whatsoever, the remaining
Independent Director shall designate a person to fill such vacancy who shall be
deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors of the Company on the
date hereof shall designate two persons to fill such vacancies who shall not be
officers or affiliates of the Company or any of its subsidiaries, or officers or
affiliates of Parent or any of its subsidiaries, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement. Subject to
applicable law, the Company shall take all action requested by Parent necessary
to effect any such election, including mailing to its stockholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees
to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub
shall have provided to the Company on a timely basis all information required to
be included in the Information Statement with respect to Sub's designees). In
connection with the foregoing, the Company will promptly, at the option of
Parent, either increase the size of the Company's Board of Directors and/or
obtain the resignation of such number of its current directors as is necessary
to enable Sub's designees to be elected or appointed to, and to constitute a
majority of the Company's Board of Directors as provided above.
SECTION 7.06. Fees and Expenses. (a) Except as provided below
in this Section 7.06, all fees and expenses incurred in connection with the
Offer, the Merger, this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Offer or the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day
funds to Parent the amount of $50 million (the "Termination Fee") under the
circumstances and at the times set forth as follows:
<PAGE> 41
37
(i) if the Company terminates this Agreement under Section
9.01(e), the Company shall pay 50% of the Termination Fee
simultaneously with such termination, and 50% of the Termination Fee
upon consummation of the transactions contemplated by the Superior
Proposal giving rise to the Company's right to terminate this Agreement
under Section 9.01(e), or upon the earlier consummation of another
Company Acquisition (as defined in paragraph 7.06(c) below) provided
that such other Company Acquisition is consummated within twelve months
following termination of this Agreement;
(ii) if Parent or Sub terminates this Agreement under Section
9.01(d) and in addition, if within twelve months after such termination
the Company shall enter into an Acquisition Agreement providing for a
Company Acquisition or the Company shall recommend to its stockholders
that they accept a Company Acquisition of the type referred to in
Section 7.06(c)(iii), the Company shall pay (A) 50% of the Termination
Fee simultaneously with the entering into of such Acquisition Agreement
or making of such recommendation and (B) 50% of the Termination Fee
upon consummation of the Company Acquisition which was the subject of
such Acquisition Agreement or recommendation, or upon the consummation,
prior to the expiration of such twelve month period, of any other
Company Acquisition (it being understood that if any Company
Acquisition shall be consummated within such twelve month period and
the Company shall not have paid any amount pursuant to clause (A)
above, that upon consummation of such Company Acquisition the Company
shall pay 100% of the Termination Fee); and
(iii) If, at the time of any termination of this Agreement
pursuant to Section 9.01(b)(i) (as a result of a failure to obtain the
Minimum Condition) or Section 9.01(c), any person shall have publicly
announced a proposal to effect a Company Acquisition and if, within
twelve months after such termination, the Company shall enter into an
Acquisition Agreement providing for a Company Acquisition or the
Company shall recommend to its stockholders that they accept a Company
Acquisition of the type referred to in Section 7.06(c)(iii), the
Company shall pay (A) 50% of the Termination Fee simultaneously with
the entering into of such Acquisition Agreement or making of such
recommendation and (B) 50% of the Termination Fee upon consummation of
the Company Acquisition which was the subject of such Acquisition
Agreement or recommendation, or upon the consummation, prior to the
<PAGE> 42
38
expiration of such twelve month period, of any other Company
Acquisition (it being understood that if any Company Acquisition shall
be consummated within such twelve month period and the Company shall
not have paid any amount pursuant to clause (A) above, that upon
consummation of such Company Acquisition the Company shall pay 100% of
the Termination Fee).
(c) For purposes of this Agreement a "Company Acquisition"
shall mean any of the following transactions (i) a merger, consolidation,
business combination or a recapitalization pursuant to which the stockholders of
the Company immediately preceding such transaction hold less than 60% of the
equity interests in the surviving or resulting entity of such transaction (other
than the transactions contemplated by this Agreement); (ii) a sale by the
Company of assets (excluding the sale of the Company's products in the ordinary
course of business) representing in excess of 40% of the fair market value of
the Company immediately prior to such sale or the issuance by the Company to any
person or group of shares representing in excess of 40% of the then outstanding
shares of capital stock of the Company (other than in connection with an
underwritten public offering); or (iii) the acquisition by any person or group,
by way of a tender offer, exchange offer, or by way of open market purchases of
beneficial ownership of 40% or more of the then outstanding shares of capital
stock of the Company.
SECTION 7.07. Indemnification. (a) From and after the
consummation of the Offer, Parent will, and will cause the Surviving Corporation
to, fulfill and honor in all respects the obligations of the Company pursuant to
(i) each indemnification agreement in effect at such time between the Company
and each person who is or was a director or officer of the Company at or prior
to the Effective Time and (ii) any indemnification provisions under the
Company's Restated Certificate of Incorporation or By-laws as each is in effect
on the date hereof (the persons to be indemnified pursuant to the agreements or
provisions referred to in clauses (i) and (ii) of this Section 7.07(a) shall be
referred to as, collectively, the "Indemnified Parties"). The Certificate of
Incorporation and By-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Certificate of Incorporation and By-laws on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of any Indemnified Party.
<PAGE> 43
39
(b) This Section 7.07 shall survive the consummation of the
Merger at the Effective Time, is intended to be for the benefit of, and
enforceable by, the Company, Parent, the Surviving Corporation and each
Indemnified Party and such Indemnified Party's heirs and representatives, and
shall be binding on all successors and assigns of Parent and the Surviving
Corporation.
(c) Notwithstanding anything to the contrary contained in this
Agreement, from and after the date hereof, the Company may enter into
indemnification agreements, or amend existing indemnification agreements, with
current directors and officers of the Company providing for customary provisions
under Delaware law.
SECTION 7.08. Certain Litigation. The Company agrees that it
shall not settle any litigation commenced after the date hereof against the
Company or any of its directors by any stockholder of the Company relating to
the Offer, the Merger or this Agreement without the prior written consent of
Parent (not to be unreasonably withheld). In addition, subject to Section 6.02
hereof, the Company shall not voluntarily cooperate with any third party that
may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the
Merger and shall cooperate with Parent and Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Offer or the Merger.
SECTION 7.09. Rights Agreement. Except as provided above or as
requested in writing by Parent, the Board of Directors of the Company shall not
(a) amend the Rights Agreement or (b) take any action with respect to, or make
any determination under, the Rights Agreement, including a redemption of the
Rights or any action to facilitate a Takeover Proposal.
ARTICLE VIII
Conditions
SECTION 8.01. Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction or waiver prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. If required by applicable
law, the Company Stockholder Approval shall have been obtained.
<PAGE> 44
40
(b) No Injunctions or Restraints. No statute, rule,
regulation, executive order, decree, temporary restraining order,
preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger
shall be in effect; provided, however, that each of the parties shall
have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
ARTICLE IX
Termination and Amendment
SECTION 9.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of the
terms of this Agreement by the stockholders of the Company (provided, however,
that if Shares are purchased pursuant to the Offer, neither Parent nor Sub may
in any event terminate this Agreement):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if Sub shall not have accepted for payment any
Shares pursuant to the Offer prior to December 31, 1997;
provided, however, that the right to terminate this Agreement
pursuant to this Section 9.01(b)(i) shall not be available to
(1) Parent, if Sub shall have breached its obligations under
the second to the last sentence of Section 1.01(a) or (2) any
party whose failure to perform any of its obligations under
this Agreement results in the failure of any such condition or
if the failure of such condition results from facts or
circumstances that constitute a willful breach of
representation or warranty under this Agreement by such party;
or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any
<PAGE> 45
41
other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for,
Shares pursuant to the Offer or the Merger and such order,
decree or ruling or other action shall have become final and
nonappealable;
(c) by Parent or Sub prior to the purchase of Shares pursuant
to the Offer in the event of a breach or failure to perform by the
Company of any representation, warranty, covenant or other agreement
contained in this Agreement which (i) would give rise to the failure of
a condition set forth in paragraph (e) or (f) of Exhibit A and (ii)
cannot be or has not been cured within 30 days after the giving of
written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is entitled to
terminate the Offer as a result of the occurrence of any event set
forth in paragraph (d) of Exhibit A to this Agreement;
(e) by the Company in accordance with Section 6.02(b),
provided that it has complied with all provisions thereof, including
the notice provisions therein, and that it complies with applicable
requirements relating to the payment (including the timing of any
payment) of the Termination Fee as provided in Section 7.06 (it being
understood that as provided in Section 6.02(b) the Company shall be
required to terminate this Agreement); or
(f) by the Company in the event of a material breach or
failure to perform in any material respect by Parent or Sub of any
representation, warranty, covenant or other agreement contained in this
Agreement which cannot be or has not been cured within 30 days after
the giving of written notice to Parent and Sub.
SECTION 9.02. Effect of Termination. In the event of a
termination of this Agreement by either the Company or Parent or Sub as provided
in Section 9.01, this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of Parent, Sub or the Company or their
respective officers or directors, except with respect to the last sentence of
Section 1.02(c), Section 4.18, Section 5.05, the last sentence of Section 7.02,
Section 7.06, this Section 9.02 and Article X; provided, however, that nothing
herein shall relieve any party for liability for any wilful breach hereof.
<PAGE> 46
42
SECTION 9.03. Amendment. This Agreement may be amended by the
parties hereto, by duly authorized action taken, at any time before or after
obtaining the Company Stockholder Approval, but, after the purchase of Shares
pursuant to the Offer, no amendment shall be made which decreases the Merger
Consideration and, after the Company Stockholder Approval, no amendment shall be
made which by law requires further approval by such stockholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Following
the election or appointment of Sub's designees pursuant to Section 7.05 and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to (i)
amend or terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights or remedies under this Agreement, (iii) extend the time for
performance of Parent and Sub's respective obligations under this Agreement or
(iv) take any action to amend or otherwise modify the Company's Certificate of
Incorporation or By-laws (or similar governing instruments of the Company's
subsidiaries) in violation of Section 7.07 hereof.
SECTION 9.04. Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, subject to
Section 9.03, (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 contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the agreements or
conditions 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 a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE X
Miscellaneous
SECTION 10.01. Nonsurvival of Representations, Warranties and
Agreements. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time or, in the case of the Company, shall survive the acceptance
<PAGE> 47
43
for payment of, and payment for, Shares by Sub pursuant to the Offer. This
Section 10.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time, including Section
7.07.
SECTION 10.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to
Lucent Technologies Inc.
600 Mountain Avenue
Room 3A 530
Murray Hill, NJ 07974
Attention: Pamela F. Craven
Telecopy No.: Separately supplied
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Robert A. Kindler, Esq.
Telecopy No.: Separately supplied
and
(b) if to the Company, to
Octel Communications Corporation
1001 Murphy Ranch Road
Milpitas, CA 95035-7912
Attention: Robert Cohn
Telecopy No.: Separately supplied
<PAGE> 48
44
with a copy to:
Octel Communications Corporation
1001 Murphy Ranch Road
Milpitas, CA 95035-7912
Attention: Derek S. Daley
Telecopy No.: Separately supplied; and
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Larry Sonsini, Esq.
Martin Korman, Esq.
Telecopy No.: Separately supplied
SECTION 10.03. Interpretation. When a reference is made in
this Agreement to an Article or a Section, such reference shall be to an Article
or a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
As used in this Agreement, "material adverse change" or "material adverse
effect" means, when used in connection with the Company or Parent, as the case
may be, any change or effect that is materially adverse to the business,
properties, assets, liabilities, financial condition or results of operations of
such entity and its subsidiaries taken as a whole other than changes or effects
to (i) occurrences relating to the economy in general or such entity's industry
in general and not specifically relating
<PAGE> 49
45
to such entity, (ii) the delay or cancelation of orders for the Company's
products directly attributable to the announcement of this Agreement or (iii) in
the case of the Company, stockholder litigation brought or threatened against
the Company or any member of its Board of Directors in respect of this
Agreement, the Offer or the Merger.
SECTION 10.04. Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 10.05. Entire Agreement; No Third Party Beneficiaries.
This Agreement and the Confidentiality Agreement (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Sections 7.04 and 7.07 hereof, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
SECTION 10.06. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware without
regard to any applicable conflicts of law.
SECTION 10.07. Publicity. Except as otherwise required by law
(including Rule 14d-9 promulgated under the Exchange Act), court process or the
rules of the NYSE or the Nasdaq National Market or as contemplated or provided
elsewhere herein, for so long as this Agreement is in effect, neither the
Company nor Parent shall, or shall permit any of its subsidiaries to, issue or
cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld.
SECTION 10.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence but without relieving any party hereof of any
obligation hereunder, this Agreement
<PAGE> 50
46
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 10.09. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the partes shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in any Delaware state court,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any court of the United States located in the
State of Delaware or of any Delaware state court in the event any dispute arises
out of this Agreement or the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or the transactions
contemplated by this Agreement in any court other than a court of the United
States located in the State of Delaware or a Delaware state court.
SECTION 10.10. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
<PAGE> 51
47
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
LUCENT TECHNOLOGIES INC.,
by /s/ William T. O'Shea
------------------------------------
Name: William T. O'Shea
Title: President, Business
Communications Systems
MEMO ACQUISITION CORP.,
by /s/ William T. O'Shea
------------------------------------
Name: William T. O'Shea
Title: President
OCTEL COMMUNICATIONS CORPORATION,
by /s/ Robert Cohn
------------------------------------
Name: Robert Cohn
Title: Chairman and Chief
Executive Officer
<PAGE> 52
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares that would constitute
at least a majority of the outstanding Shares (determined on a fully diluted
basis for all outstanding stock options and any other rights to acquire Shares
that are or would be vested prior to December 31, 1997) (the "Minimum
Condition") and (ii) any waiting period under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall have expired or been terminated.
Furthermore, Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may, in accordance with Section 9.01, terminate this Agreement or amend
the Offer with the consent of the Company, if, upon the scheduled expiration
date of the Offer (as extended, if required, pursuant to the second to the last
sentence of Section 1.01(a)) and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions exists and is
continuing and does not result principally from the breach by Parent or Sub of
any of their obligations under this Agreement:
(a) there shall be instituted or pending by any Governmental
Entity any suit, action or proceeding (i) challenging the acquisition
by Parent or Sub of any Shares under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger, (ii)
seeking to prohibit or materially limit the ownership or operation by
the Company, Parent or any of Parent's subsidiaries of a material
portion of the business or assets of the Company or Parent and its
subsidiaries, taken as a whole, or to compel the Company or Parent to
dispose of or hold separate any material portion of the business or
assets of the Company or Parent and its subsidiaries, taken as a whole,
in each case as a result of the Offer or the Merger or (iii) seeking to
impose material limitations on the ability of Parent or Sub to acquire
or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer including,
<PAGE> 53
2
without limitation, the right to vote such Shares on all matters
properly presented to the stockholders of the Company or (iv) seeking
to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the
business or operations of the Company;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, by any Governmental Entity or
court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that would result in any
of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
(c) there shall have occurred any material adverse change with
respect to the Company since the date of this Agreement;
(d) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or Sub its approval or recommendation of the Offer or the Merger or its
adoption of this Agreement, or approved or recommended any Takeover
Proposal;
(e) any of the representations and warranties of the Company
set forth in this Agreement that are qualified as to materiality shall
not be true and correct or any such representations and warranties that
are not so qualified shall not be true and correct in any material
respect, in each case at the date of this Agreement and at the
scheduled or extended expiration of the Offer;
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it under this Agreement, which failure to
perform or comply has not been cured within 30 business days after the
giving of written notice to the Company; or
(g) this Agreement shall have been terminated in accordance
with its terms;
which, in the good faith judgment of Parent or Sub, in its sole discretion, make
it inadvisable to proceed with such acceptance of Shares for payment or the
payment therefor.
<PAGE> 54
3
Notwithstanding anything contained herein, the condition set
forth in clause (e) above shall be deemed not fulfilled only if the respects in
which the representations and warranties made by the Company (without giving
effect to any "materiality" limitations or references to "material adverse
effect" set forth therein) are inaccurate would have a material adverse effect
on the Company; provided, that the foregoing shall not be applicable to the last
sentence of Section 4.09.
The foregoing conditions are for the sole benefit of Parent
and Sub and (except for the Minimum Condition) may, subject to the terms of this
Agreement, be waived by Parent and Sub in whole or in part at any time and from
time to time in their sole discretion. The failure by Parent or Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time. Terms used but not defined herein
shall have the meanings assigned to such terms in the Agreement to which this
Exhibit A is a part.
<PAGE> 1
EXHIBIT(C)(5)
OCTEL COMMUNICATIONS CORPORATION
EMPLOYMENT AGREEMENT
This Agreement dated as of March 1, 1997 (the "Effective Date") is
made by and between Octel Communications Corporation, a Delaware corporation
("Octel"), and David J. Ladd ("Ladd").
1. DUTIES AND SCOPE OF EMPLOYMENT RELATIONSHIP.
(a) Stage One Duties. During Stage One, Octel agrees to
employ Ladd, and Ladd agrees to be employed, full time as Executive Vice
President and Acting Vice President, GBS Engineering, of Octel. Ladd shall
assume and discharge such duties during Stage One as are consistent with the
goals described on EXHIBIT A attached hereto. During the term of Stage One,
Ladd shall devote his full time, skill and attention to his duties and
responsibilities, which Ladd shall perform faithfully, diligently and
competently, and Ladd shall use his best efforts to further the business of
Octel and its affiliated entities.
(b) Stage Two Duties. During Stage Two, Octel agrees to
employ Ladd, and Ladd agrees to be employed, in a part-time capacity for three
days per week with Octel. Ladd shall assume and discharge such duties during
Stage Two as are consistent with the goals described on EXHIBIT B attached
hereto. During the term of Stage Two, Ladd shall perform his duties and
responsibilities faithfully, diligently and competently, and Ladd shall use his
best efforts to further the business of Octel and its affiliated entities.
(c) Stage Three Duties. During Stage Three, Octel agrees
to employ Ladd, and Ladd agrees to be employed, in a part-time capacity
off-site advising the Company with respect to intellectual property or other
issues.
2. SALARY. During Stage One and Stage Two, Octel shall pay Ladd
as compensation for his services a salary at the annualized rate of $225,000.
Such salary shall be paid periodically in accordance with normal Octel payroll
practices. During Stage Three, Octel shall pay Ladd as compensation for his
services a salary of $10,000 per month, in the event that Ladd works at least
20 hours per week, and $5,000 per month, in the event that Ladd works less than
20 hours per week but at least five hours per week.
3. EMPLOYEE BENEFITS. During Stage One and Stage Two, Ladd shall
be eligible to participate in employee benefit plans and compensation programs
maintained by Octel applicable to other similarly situated employees of Octel,
subject, in each case, to the generally applicable terms and conditions of the
applicable plan or program in question and to the determination of any
committee or employee administering such plan or program. In addition, during
Stage One and Stage Two, Octel shall reimburse Ladd the reasonable cost of
round trip, coach airfare between San Jose or San Francisco and Phoenix each
weekend; provided, however, that the amount to be
<PAGE> 2
reimbursed shall not exceed the cost of an equivalent ticket booked one week in
advance with a Saturday stayover.
4. STOCK OPTIONS. Octel and Ladd acknowledge that, in accordance
with the terms of the option agreements governing such options, the option to
purchase 30,000 shares of Common Stock granted on August 9, 1990, the option to
purchase 23,600 shares of Common Stock granted on November 11, 1993 and the
option to purchase 36,400 shares of Common Stock granted on November 11, 1993
(collectively, the "VMX Options") will continue to vest throughout the term of
this Agreement, and Ladd will have three months within which to exercise the
VMX Options following the expiration of this Agreement. Octel and Ladd
acknowledge that, in accordance with the terms of the option agreement
governing such option, the option to purchase 150,000 shares of Common Stock
granted on April 28, 1994 will continue to vest throughout the term of this
Agreement (but, during Stage Three, only in the event that Ladd works at least
20 hours per week), and Ladd will have 30 days within which to exercise such
option following the expiration of this Agreement.
5. SERVICE ON OUTSIDE BOARDS. During Stage One, Ladd shall not
serve as a member of the board of directors of any company; provided, however,
that if the duration of Stage One exceeds four months, Ladd may join the board
of directors of one company with the consent of the Board of Directors of Octel
in its sole discretion. During Stage Two and Stage Three, Ladd may serve as a
director of any company, so long as such service does not result in any
conflict with Ladd's obligations hereunder, including the non-competition
provisions of Section 6. The determination of whether service as a director
results in a conflict shall be made by Octel's Chief Executive Officer in his
sole reasonable judgment.
6. NON-COMPETITION AND NON-SOLICITATION AGREEMENT.
(a) During the term of this Agreement, Ladd shall not,
other than on behalf of Octel, directly or indirectly, without the prior
written consent of Octel, engage anywhere in the world in (whether as an
employee, agent, consultant, advisor, independent contractor, proprietor,
partner, officer, director or otherwise), or have any ownership interest in
(except for passive ownership of one percent (1%) or less of any entity whose
securities have been registered under the Securities Act of 1933 or Section 12
of the Securities Exchange Act of 1934), or participate in the financing,
operation, management or control of, any firm, partnership, corporation, entity
or business that engages or participates in a "competing business purpose."
The term "competing business purpose" shall mean offering, providing or selling
products or services in the voice information processing industry. The
determination of whether a firm, partnership, corporation, entity or brusiness
engages or participates in a "competing business purpose" shall be made by
Octel's Chief Executive Officer in his sole reasonable judgment.
(b) During the term of this Agreement, Ladd shall not,
directly or indirectly, without the prior written consent of Octel, solicit,
encourage, hire or take any other action which is intended to induce or
encourage, or has the effect of inducing or encouraging, any employee of
<PAGE> 3
Octel, any subsidiary of Octel to terminate his or her employment with Octel or
any subsidiary of Octel.
(c) Ladd acknowledges that the business of Octel is
national and international in nature. Ladd also acknowledges that this scope
of business and geographic extent are reasonably necessary to protect the
legitimate business interests of Octel.
7. DEFINITIONS.
(a) Stage One. "Stage One" shall mean the period
beginning on the Effective Date and ending on the earlier of (i) the day prior
to the date Octel hires a Vice President, GBS Engineering and (ii) six months
from the Effective Date, unless extended upon mutual agreement of the parties
hereto.
(b) Stage Two. "Stage Two" shall mean the period
beginning on the day following the date Stage One ends and ending on the date
four months thereafter.
(c) Stage Three. "Stage Three" shall mean the period
beginning on the day following the date Stage Two ends and ending on May 31,
1998, unless extended pursuant to Section 11.
8. EXPENSES. Octel will pay or reimburse Ladd for reasonable
travel, entertainment or other expenses incurred by Ladd in the furtherance of
or in connection with the performance of Ladd's duties hereunder in accordance
with Octel's established policies. Ladd shall furnish Octel with written
evidence of the incurrence of such expenses within a reasonable period of time
from the date that they were incurred.
9. ARBITRATION.
(a) Ladd and Octel each agrees that any dispute or
controversy arising out of, relating to, or in connection with this Agreement,
or the interpretation, validity, construction, performance, breach, or
termination thereof, shall be settled by binding arbitration to be held in
Santa Clara County, California, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect (the "Rules").
The arbitrator may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator shall be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) shall apply California law to the
merits of any dispute or claim, without reference to rules of conflicts of law.
The arbitration proceedings shall be governed by federal arbitration law and by
the Rules, without reference to state arbitration law.
(c) Octel and Ladd shall each pay one-half of the costs
and expenses of such arbitration, and each shall separately pay its counsel
fees and expenses.
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<PAGE> 4
10. CONFIDENTIALITY AND INVENTION ASSIGNMENT. Octel and Ladd
agree to enter into the Confidentiality and Non-Disclosure Agreement in the
form attached hereto as EXHIBIT C.
11. TERM. The term of this Agreement shall begin on the Effective
Date and end on May 31, 1998; provided, however, that the parties may extend
this Agreement on a month-by-month basis with mutual consent.
12. GENERAL PROVISIONS.
(a) Entire Agreement. This Agreement represents the
entire agreement and understanding between the parties as to the subject matter
hereof, and supersedes all prior or contemporaneous agreements, whether written
or oral. No waiver, alteration, or modification, if any, of the provisions of
this Agreement shall be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
(b) Severability. If one or more of the provisions in
this Agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.
(c) Successors. Any successor to Octel (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of Octel's business and/or assets
shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as Octel would be required to perform such obligations in the absence of
a succession. For all purposes under this Agreement, the term "Octel" shall
include any successor to Octel's business and/or assets which executes and
delivers the assumption agreement described in this subsection (i) or which
becomes bound by the terms of this Agreement by operation of law.
(d) Conflicting Obligations. Ladd represents that he has
not entered into, and will not enter into, any oral or written agreement in
conflict herewith.
(e) Counterparts. This Agreement may be executed by
either of the parties hereto in counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
(f) Governing Law; Consent to Personal Jurisdiction.
This Agreement shall be governed by and construed in accordance with the
internal substantive laws, and not the choice of law rules, of California.
Ladd hereby consents to the personal jurisdiction of the state and federal
courts located in California for any action or proceeding arising from or
relating to this Agreement or relating to any arbitration in which the parties
are participants.
(g) Notice. Any notice, demand, offer or request
required or permitted to be given by either Octel or Ladd pursuant to the terms
of this Agreement shall be in writing and shall be deemed effectively given the
earlier of (i) when received, (ii) when delivered personally, (iii) one (1)
business day after being delivered by facsimile, (iv) one (1) business day
after being deposited with
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<PAGE> 5
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the parties at
the addresses provided to Octel (which Octel agrees to disclose to the other
parties upon request) or such other address as a party may request by notifying
the other in writing.
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<PAGE> 6
IN WITNESS WHEREOF, Ladd and Octel have caused this Agreement to be
executed as of the date first above written.
DAVID J. LADD
/s/ David J. Ladd
________________________________
Signature
OCTEL COMMUNICATIONS CORPORATION
/s/ Authorized Signatory
________________________________
Signature of Authorized Signatory
_________________________________
Print Name and Title
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