<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
----------------
NETFRAME SYSTEMS INCORPORATED
(Name of subject company)
PAYETTE ACQUISITION CORPORATION
MICRON ELECTRONICS, INC.
(Bidders)
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COMMON STOCK, $0.001 PAR VALUE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
----------------
64-1106109
(CUSIP Number of Class of Securities)
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STEVEN P. ARNOLD, ESQ., VICE-PRESIDENT AND GENERAL COUNSEL
MICRON ELECTRONICS, INC.
900 E. KARCHER ROAD, NAMPA, IDAHO 83687
208-893-3434
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on behalf of Bidders)
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COPY TO:
DENNIS R. DEBROECK, ESQ.
DAVID W. HEALY, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE, PALO ALTO, CALIFORNIA 94036
415-494-0600
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$13,978,445 $2,895.69
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* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 13,978,445 shares of Common Stock, par value $.001 per
share (including the associated Preferred Share Purchase Rights), of
NetFRAME Systems Incorporated at $1.00 per share in cash. Such number of
shares represents all the shares outstanding as of June 6, 1997.
** The amount of the filing fee was calculated in accordance with Rule 0-11(d)
of the Securities Exchange Act of 1934, as amended, and includes a Schedule
13D filing fee of $100.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount previously paid: None Filing Party: Not Applicable
Form of Registration No.: Not Applicable Date Filed: Not Applicable
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 64-1106109 PAGE 2 OF 6 PAGES
Name of Reporting Person S.S. or I.R.S. Identification
No. of Above Person
1.
Payette Acquisition Corporation
Applied For
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Check the Appropriate Box if a Member of a Group
2. (a) [_]
(b) [_]
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SEC Use Only
3.
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Sources of Funds AF
4.
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Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
5. [_]
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Citizenship or Place of Organization
6.
Delaware
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Aggregate Amount Beneficially Owned by Each Reporting
Person
7.
3,472,797*
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Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
8.
N/A
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Percent of Class Represented by Amount in Row (7)
9.
19.9%
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Type of Reporting Person
10.
CO
* On June 10, 1997, NetFRAME Systems Incorporated, a Delaware corporation (the
"Company"), and Micron Electronics, Inc., a Minnesota corporation
("Micron"), entered into a Stock Option Agreement whereby the Company
granted to Micron an option to purchase shares of the Company's common stock
representing a 19.9% equity stake in the Company, an amount equivalent to
3,472,797 shares based upon the 13,978,445 shares of the Company's common
stock that were issued and outstanding on June 6, 1997. The Option is
exercisable by Micron upon the occurrence of certain circumstances as
described more fully in Section 10 of the Offer to Purchase dated June 16,
1997.
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 64-1106109 PAGE 3 OF 6 PAGES
Name of Reporting Person S.S. or I.R.S. Identification
No. of Above Person
1.
Micron Electronics, Inc.
41-1404301
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Check the Appropriate Box if a Member of a Group
2. (a) [_]
(b) [_]
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SEC Use Only
3.
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Sources of Funds WC
4.
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Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
5. [_]
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Citizenship or Place of Organization
6.
Minnesota
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Aggregate Amount Beneficially Owned by Each Reporting
Person
7.
3,472,797*
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Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
8.
N/A
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Percent of Class Represented by Amount in Row (7)
9.
19.9%
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Type of Reporting Person
10.
CO
* The footnote on page 2 is incorporated by reference herein.
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this "STATEMENT") relates to
the offer by Payette Acquisition Corporation ("PURCHASER"), a Delaware
corporation and a wholly owned subsidiary of Micron Electronics, Inc.
("MICRON"), a Minnesota corporation and a majority owned subsidiary of Micron
Technology, Inc. ("MTI"), a Delaware corporation, to purchase all outstanding
shares of Common Stock, par value $.001 per share (the "SHARES") of NetFRAME
Systems Incorporated (the "COMPANY"), a Delaware corporation, at a price of
$1.00 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in Purchaser's Offer to Purchase dated June 16, 1997 (the
"OFFER TO PURCHASE") and in the related Letter of Transmittal (which together
constitute the "OFFER"), copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively.
This Statement shall also constitute a Schedule 13D with respect to the
Stock Option Agreement, dated as of June 10, 1997 (the "STOCK OPTION
AGREEMENT"), entered into between the Company and Micron. Pursuant to the
Stock Option Agreement, the Company granted to Micron an option to purchase
shares of the Company's Common Stock representing a 19.9% equity stake in the
Company. A copy of the Stock Option Agreement is attached hereto as Exhibit
(c)(2).
The item number and responses thereto below are in accordance with the
requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is NetFRAME Systems Incorporated, a
Delaware corporation (the "COMPANY"), which has its principal executive
offices at 1545 Barber Lane, Milpitas, California 95035.
(b) The class of equity securities being sought is all the outstanding
shares of Common Stock, par value $0.001 per share, of the Company. The
information set forth in the Introduction and Section 1 ("Terms of the Offer;
Expiration Date") of the Offer to Purchase is incorporated herein by
reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in Section 6 ("Price Range of Shares; Dividends") of the
Offer to Purchase is incorporated herein by reference.
ITEM 2: IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by Purchaser and Micron. The
information concerning the name, state or other place of organization,
principal business and address of the principal office of each of Purchaser,
Micron and MTI, and the information concerning the name, business address,
present principal occupation or employment and the name, principal business
and address of any corporation or other organization in which such employment
or occupation is conducted, material occupations, positions, offices or
employments during the last five years and citizenship of each of the
executive officers and directors of Purchaser, Micron and MTI are set forth in
the Introduction, Section 8 ("Certain Information Concerning Purchaser, Micron
and MTI") and Schedule I of the Offer to Purchase and are incorporated herein
by reference.
(e) and (f) During the last five years, none of Purchaser, Micron nor MTI
and, to the best knowledge of Purchaser, Micron and MTI, none of the persons
listed in Schedule I of the Offer to Purchase has been (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
4
<PAGE>
ITEM 3: PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser, Micron and MTI"), Section 10 ("Background of the Offer; Contacts
with the Company; the Merger Agreement; the Stock Option Agreement; and the
Technology License Agreement") of the Offer to Purchase is incorporated herein
by reference.
(b) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information
Concerning Purchaser, Micron and MTI"), Section 10 ("Background of the Offer,
Contacts with the Company; the Merger Agreement; the Stock Option Agreement and
the Technology License Agreement") and Section 11 ("Purpose of the Offer; Plans
for the Company After the Offer and the Merger; Stockholder Approval and
Appraisal") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement; the
Stock Option Agreement and the Technology License Agreement") and Section 11
("Purpose of the Offer; Plans for the Company After the Offer and the Merger;
Stockholder Approval and Appraisal") of the Offer to Purchase is incorporated
herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer on
the Market for the Shares: Nasdaq Quotation and Exchange Act Registration") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction and Section 8
("Certain Information Concerning Purchaser, Micron and MTI") of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Section 8 ("Certain
Information Concerning Purchaser, Micron and MTI"), Section 10 ("Background of
the Offer, Contacts with the Company; the Merger Agreement; the Stock Option
Agreement; and the Technology License Agreement") and Section 11 ("Purpose of
the Offer; Plans for the Company After the Offer and the Merger; and
Stockholder Approval and Appraisal") of the Offer to Purchase is incorporated
herein by reference.
ITEM 8: PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser, Micron and MTI") of the Offer to Purchase is incorporated herein by
reference.
5
<PAGE>
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 17 ("Employment Agreements") of the
Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal Matters:
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
(e) The information set forth in Section 15 ("Certain Legal Matters:
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference
(f) The information set forth in the Offer to Purchase is incorporated herein
by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated June 16, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees.
(a)(5) Form of Letter to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Summary Advertisement as published in the Wall Street Journal on June
16, 1997.
(a)(8) Text of Press Release by Micron and the Company dated June 10, 1997.
(a)(9) Text of Press Release by Micron dated June 16, 1997.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of June 10, 1997, among Micron,
Purchaser and the Company.
(c)(2) Stock Option Agreement, dated as of June 10, 1997, between the Company
and Micron.
(c)(3) Technology License Agreement, dated June 10, 1997, between the Company
and Micron, and all of its subsidiaries and other affiliates.
(c)(4) Employment Term Sheets, dated June 9, 1997, between the Company and
each of Robert L. Puette, Bulent Erbilgin and Terry Hartsfield and dated June
10, 1997, between the Company and Steven Huey.
(d) None.
(e) Not applicable.
(f) None.
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
June 16, 1997
Payette Acquisition Corporation
By: /s/ T. Erik Oaas
----------------------------------
Name: T. Erik Oaas
Title: President
Micron Electronics, Inc.
By: /s/ Joseph M. Daltoso
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Name: Joseph M. Daltoso
Title: President, Chief Executive
Officer and Chairman
7
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
NETFRAME SYSTEMS INCORPORATED
AT
$1.00 NET PER SHARE
BY
PAYETTE ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MICRON ELECTRONICS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON MONDAY, JULY 14, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON (1) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (AS DEFINED HEREIN) AND (2) THE EXPIRATION OR TERMINATION OF ALL
WAITING PERIODS IMPOSED UPON CONSUMMATION OF THE OFFER BY THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE
REGULATIONS THEREUNDER, AS WELL AS THE OTHER CONDITIONS DESCRIBED HEREIN.
THE BOARD OF DIRECTORS OF NETFRAME SYSTEMS INCORPORATED UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER (AS DEFINED HEREIN) AND THE MERGER (AS
DEFINED HEREIN) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF
NETFRAME SYSTEMS INCORPORATED AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
----------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.001 per share, together with the
associated Preferred Share Purchase Rights (as defined herein) (collectively,
the "SHARES"), of NetFRAME Systems Incorporated should either: (1) complete
and sign the Letter of Transmittal (or a facsimile thereof) in accordance with
the instructions in the Letter of Transmittal and mail or deliver it together
with the certificate(s) evidencing tendered Shares, and any other required
documents, to the Depositary or tender such Shares pursuant to the procedure
for book-entry transfer set forth in Section 3, or (2) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such stockholder. Any stockholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such broker, dealer, commercial bank, trust
company or other nominee if such stockholder desires to tender such shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover of this
Offer to Purchase. Questions or requests for assistance may also be directed
to the Dealer Manager at their address on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent or from brokers, dealers, commercial banks or trust
companies.
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THE DEALER MANAGER FOR THE OFFER IS:
MONTGOMERY SECURITIES
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June 16, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION.............................................................. 1
1. Terms of the Offer; Expiration Date............................... 3
2. Acceptance for Payment and Payment for Shares..................... 4
3. Procedures for Accepting the Offer and Tendering Shares........... 5
4. Withdrawal Rights................................................. 7
5. Certain Federal Income Tax Consequences........................... 7
6. Price Range of Shares; Dividends.................................. 8
7. Certain Information Concerning the Company........................ 8
8. Certain Information Concerning Purchaser, Micron and MTI.......... 11
9. Source and Amount of Funds........................................ 12
10. Background of the Offer; Contacts with the Company; the Merger
Agreement; the Stock Option Agreement; the Technology License
Agreement........................................................ 13
11. Purpose of the Offer; Plans for the Company After the Offer and
the Merger; Stockholder Approval and Appraisal................... 23
12. Dividends and Distributions....................................... 25
13. Effect of the Offer on the Market for the Shares, Nasdaq Quotation
and Exchange Act Registration.................................... 25
14. Certain Conditions of the Offer................................... 26
15. Certain Legal Matters and Regulatory Approvals.................... 27
16. Fees and Expenses................................................. 29
17. Employment Agreements............................................. 29
18. Miscellaneous..................................................... 30
SCHEDULE I -- DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, MICRON AND
MTI .................................................................. I-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
NETFRAME SYSTEMS INCORPORATED
INTRODUCTION
Payette Acquisition Corporation ("PURCHASER"), a Delaware corporation and a
wholly owned subsidiary of Micron Electronics, Inc. ("MICRON"), a Minnesota
corporation and a subsidiary of Micron Technology, Inc. ("MTI"), a Delaware
corporation, hereby offers to purchase all outstanding shares of common stock,
par value $.001 per share, together with the associated Preferred Share
Purchase Rights (as defined herein) (collectively, the "SHARES"), of NetFRAME
Systems Incorporated (the "COMPANY"), a Delaware corporation, at a price of
$1.00 per Share, net to the seller in cash and without interest thereon (the
"OFFER PRICE"), subject to reduction for any applicable federal back up or
other withholding or stock transfer taxes, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "OFFER"). The Preferred Share
Purchase Rights represent rights to purchase shares of the Company's Preferred
Stock, which rights have been issued pursuant to the Preferred Share Rights
Agreement dated as of October 24, 1996 entered into between the Company and The
First National Bank of Boston, as rights agent.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
Montgomery Securities ("MONTGOMERY SECURITIES"), which is acting as Dealer
Manager for the Offer (in such capacity, the "DEALER MANAGER"), Norwest Bank
Minnesota, N.A. (the "DEPOSITARY") and MacKenzie Partners, Inc. (the
"INFORMATION AGENT") incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS
THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
Cowen & Company, the Company's financial advisor ("COWEN & COMPANY"), has
delivered to the Company Board its written opinion dated June 9, 1997 to the
effect that, as of the date of such opinion, the consideration to be received
by holders of Common Stock pursuant to the Offer and related merger was fair to
the stockholders of the Company (other than Micron) from a financial point of
view. Such opinion is set forth in full as an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to stockholders of the Company herewith.
THE OFFER IS CONDITIONED UPON: (1) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (AFTER GIVING EFFECT TO THE EXERCISE OR CONVERSION OF ALL
OPTIONS, RIGHTS AND SECURITIES EXERCISABLE OR CONVERTIBLE INTO VOTING
SECURITIES, BUT ONLY TO THE EXTENT THAT ANY SUCH OPTIONS, RIGHTS OR SECURITIES
ARE EXERCISABLE OR CONVERTIBLE INTO SUCH VOTING SECURITIES AT A PER SHARE PRICE
OF $1.50 OR LESS) (THE "MINIMUM CONDITION"), AND (2) THE EXPIRATION OR
TERMINATION OF ALL WAITING PERIODS IMPOSED UPON CONSUMMATION OF THE OFFER BY
THE HSR ACT, AS WELL AS THE OTHER CONDITIONS DESCRIBED HEREIN. SEE SECTION 14
WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as
of June 10, 1997 (the "MERGER AGREEMENT"), among Purchaser, Micron, and the
Company. 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"), Purchaser will be merged with and into the
Company (the "MERGER"). Following consummation of the Merger, the Company will
continue as the
<PAGE>
surviving corporation (the "SURVIVING CORPORATION") and will become a wholly
owned subsidiary of Micron. 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 in the treasury of the Company, shares
held by Purchaser, 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 $1.00 in cash, or any higher
price that may be paid per Share in the Offer, without interest (the "MERGER
CONSIDERATION"). Upon the Effective Time, each outstanding employee or
director stock option to purchase Shares granted pursuant to the Company's
1987 Stock Option Plan, as amended, 1992 Stock Option Plan, as amended or 1992
Director Stock Option Plan (collectively, the "COMPANY STOCK OPTION PLANS")
and each other right to acquire shares of Company capital stock (together, the
"OPTIONS") will become fully exercisable and vested, whether or not otherwise
exercisable and vested. All Options that are outstanding immediately prior to
the Effective Time will be canceled at the Effective Time and the holders will
be entitled to receive, for each share subject to such Option, an amount of
cash equal to the excess, if any, of the Offer Price over the exercise price
per Share of such Option subject to any required withholding taxes. The Merger
Agreement is more fully described in Section 10.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares satisfying the Minimum Condition, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
of the Board equal to the product of the total number of directors on the
Company Board multiplied by the percentage that the number of Shares so
accepted for payment bears to the total number of Shares then outstanding,
subject to compliance with Section 14(f) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"). In the Merger Agreement, the Company
has agreed to take all actions necessary to cause Purchaser's designees to be
elected as directors of the Company, including increasing the size of the
Company Board or securing the resignations of incumbent directors or both.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger by the
requisite vote of the stockholders of the Company, if such vote is required
under Delaware Law. See Section 10. Except as described below, under the
Company's Certificate of Incorporation and Delaware Law, the affirmative vote
of the holders of a majority of the outstanding Shares is required to approve
and adopt the Merger Agreement and the Merger. Consequently, if Purchaser
acquires (pursuant to the Offer or otherwise) at least a majority of the
outstanding Shares, Purchaser will have sufficient voting power to approve and
adopt the Merger Agreement and the Merger without the 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. Subject to satisfaction of the conditions to
the Merger, Purchaser, Micron and the Company have agreed to use their
reasonable best efforts to take, or cause to be taken, all actions necessary,
proper or advisable to consummate and make effective in the most expeditious
manner possible the Merger and the 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 significantly longer period of
time will be required to effect the Merger. See Section 10.
The Company has advised Purchaser that as of June 6, 1997, 13,978,445 Shares
were issued and outstanding. The Company has advised Purchaser that as of June
6, 1997, the Company has duly reserved a total of 3,101,722 Shares for
issuance upon exercise of outstanding employee stock options granted pursuant
to the Company's Stock Option Plans.
The Securities and Exchange Commission (the "COMMISSION") has adopted Rule
13e-3 under the Exchange Act, which is applicable to certain "going private"
transactions. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction. Purchaser believes that
Rule 13e-3 will not be applicable to the Offer or the Merger. However, no
assurances can be given that the Commission will not take the position that
Rule 13e-3 is applicable to the Offer or the Merger.
2
<PAGE>
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN ITS ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept
for payment and pay for all Shares validly tendered prior to the Expiration
Date (as hereinafter defined) and not withdrawn as permitted by Section 4. The
term "EXPIRATION DATE" means 12:00 Midnight, New York City time, on Monday,
July 14, 1997, unless the period during which the Offer is open shall have
been extended pursuant and subject to the terms and conditions of the Merger
Agreement, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended, shall expire.
Purchaser may without the Company's consent extend the Offer for a period or
periods not to exceed 22 days in the aggregate as necessary to provide time to
satisfy the conditions to the Offer and may extend the Offer for up to five
business days if, as of July 14, 1997, there shall not have been tendered at
least 90% of the outstanding Shares. In addition, Purchaser has agreed to
extend the Offer from time to time even if all of the conditions to the Offer
are not satisfied if all such conditions are reasonably capable of being
satisfied prior to August 5, 1997 and no takeover proposal has been publicly
announced or, if announced, has not been withdrawn at such time, until such
time as such conditions are satisfied or waived, but in no event later than
August 5, 1997. During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the rights of a
tendering stockholder to withdraw his, her or its Shares. See Section 4.
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right (subject to the terms and conditions of the
Merger Agreement), (i) to increase the price per share payable in the Offer,
(ii) to terminate or amend the Offer and not accept for payment any Shares if
the conditions to the Offer shall not be satisfied upon the scheduled
expiration date of the Offer (as it may be extended as described in the
preceeding paragraph) and (iii) to unilaterally waive any conditions of the
Offer (other than, without the Company's consent, the Minimum Condition), or
to make any other changes in the terms and conditions of the Offer (subject to
the limitations described below), by giving oral or written notice of such
delay, termination, waiver or amendment to the Depositary and by making a
public announcement thereof. However, the Merger Agreement provides that
Purchaser will not (i) decrease the price per Share payable pursuant to the
Offer, (ii) reduce the maximum number of Shares to be purchased in the Offer,
(iii) impose conditions to the Offer in addition to those set forth in Section
14, or (iv) amend any other material terms of the Offer in a manner materially
adverse to the Company's stockholders. Purchaser acknowledges that Rule 14e-
1(c) under the Exchange Act requires Purchaser to pay the consideration
offered or return the Shares tendered promptly after the termination or
withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-
4(c) and 14d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the consideration being offered in
the Offer, such increase in the consideration being offered will be applicable
to all stockholders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any such increase in the consideration
being offered is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
tenth business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 through 12:00 Midnight, New York
City time.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
the Company's stockholder list
3
<PAGE>
and will be furnished, for subsequent transmittal to beneficial owners of
Shares, to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list, or, if applicable, who are listed as participants in a clearing agency's
security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment, and will pay for, all Shares validly
tendered and not properly withdrawn as soon as practicable after the
Expiration Date.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "SHARES CERTIFICATES") or timely
confirmation (a "BOOK-ENTRY CONFIRMATION") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each, a "BOOK-ENTRY TRANSFER FACILITY"
and, collectively, the "BOOK-ENTRY TRANSFER FACILITIES") pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined below) in connection
with a book-entry transfer and (iii) any other documents required by the
Letter of Transmittal.
The term "AGENT'S MESSAGE" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
During the week of June 16, 1997, Micron intends to file with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "ANTITRUST DIVISION") a Pre-merger Notification and Report Form
under the HSR Act with respect to the Offer. Accordingly, it is anticipated
that the waiting period under the HSR Act applicable to the Offer will expire
at 11:59 P.M., New York City time on the date fifteen calendar days after the
date of such filing. Prior to the expiration or termination of such waiting
period, the FTC or the Antitrust Division may extend such waiting period by
requesting additional information from Micron with respect to the Offer. Upon
request, the waiting period under the HSR Act may be terminated prior to its
expiration by the FTC and the Antitrust Division. See Section 15.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent
for tendering stockholders for the purpose of receiving payments from
Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. Under no circumstances will interest on
the purchase price for Shares be paid, regardless of any delay in making such
payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the tending
stockholder (or, in the case of Shares tendered by book-entry transfer into
the Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 3, such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or in part, to
Micron or any direct or indirect wholly owned subsidiary of Micron, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer,
but any such assignment will not relieve Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant
to the Offer.
4
<PAGE>
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
either (i) the Share Certificates evidencing tendered Shares must be received
by the Depositary at such address or such Shares must be tendered pursuant to
the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after June 16, 1997. Any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make a
book-entry delivery of Shares by causing such Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at such Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other required documents, must,
in any case, be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date, or
the tendering stockholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in
the Securities Transfer Agents Medallion Program (an "ELIGIBLE INSTITUTION").
In all other cases, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter
of Transmittal. If Share Certificates are registered in the name of a person
other than the signer of the Letter of Transmittal, or if payment is to be
made or Share Certificates for Shares not tendered or not accepted for payment
are to be returned to a person other than the registered holder of the Share
Certificates surrendered, the tendered Share Certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders appear on the Share Certificates, with
the signatures on the Share Certificates or stock powers guaranteed as
described above. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered, provided that all the following conditions are
satisfied:
5
<PAGE>
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three National Association of Securities Dealers Automated Quotation--
National Market System ("NASDAQ") trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
the form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser, Micron, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by Purchaser (and with respect to any and all other
shares or other securities issued or issuable in respect of such Shares on or
after June 10, 1997). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares (and such other Shares
and securities) for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares (and such other Shares and
securities).
6
<PAGE>
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH
STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that tendered Shares may be withdrawn by the tendering
stockholder at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
by such stockholder at any time after August 14, 1997. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this Section 4. Any such delay
will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of shares to be withdrawn
and the name of the registered holder of such Shares, if different from that
of the person who tendered such Shares. If Share Certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer as set forth in Section 3, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Micron, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for
federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. In general, a stockholder will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash received in exchange for the Shares sold and such
stockholder's adjusted tax basis in such Shares. Assuming the Shares
constitute capital assets in the hands of the stockholder, such gain or loss
will be capital gain or loss. If, at the time of the Offer or the Merger, the
Shares then exchanged have been held for more than one year, such gain or loss
will be a long-term capital gain or loss. Under current law, long-term capital
gains of individuals are, under certain circumstances, taxed at lower rates
than items of ordinary income and short-term capital gains.
7
<PAGE>
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS
WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN
CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES
OF THE OFFER AND MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the Nasdaq National Market under the symbol "NETF". The following
table sets forth, for the quarters indicated, the high and low closing prices
per Share on the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal year ending December 28, 1995:
First Quarter................................................. $7.42 $5.46
Second Quarter................................................ 6.13 4.58
Third Quarter................................................. 7.08 5.50
Fourth Quarter................................................ 6.50 5.21
Fiscal year ending December 31, 1996:
First Quarter................................................. $5.71 $4.58
Second Quarter................................................ 5.79 5.12
Third Quarter................................................. 3.79 2.71
Fourth Quarter................................................ 3.79 2.47
Fiscal Year ending December 31, 1997:
First Quarter................................................. $3.25 $1.25
Second Quarter (through June 9, 1997)......................... 2.13 1.06
</TABLE>
The Company has never declared or paid cash dividends on its capital stock.
On June 9, 1997, the last full trading day prior to the announcement of the
execution of the Merger Agreement and of Purchaser's intention to commence the
Offer, the closing price per Share as reported on the Nasdaq National Market
was $1.31. On June 13, 1997, the last full trading day prior to the
commencement of the Offer, the reported closing price per Share on the Nasdaq
National Market System was $0.875. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company
or has been taken from or based upon publicly available documents and records
on file with the Commission and other public sources. Neither Purchaser,
Micron, nor any of their respective affiliates assumes any responsibility for
the accuracy or completeness of the information concerning the Company
furnished by the Company or contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to Purchaser, Micron or their respective affiliates.
8
<PAGE>
General. The Company is a Delaware corporation with its principal executive
offices located at 1545 Barber Lane, Milpitas, California 95035. The Company
develops, manufactures, markets and supports a broad line of high-
availability, clustered network servers for local and wide area networks. The
Company was one of the first companies to offer a high-availability, open-
systems server, which began shipping commercially in December 1989. The
Company's servers are characterized by high availability, scalability and
adherence to industry standards. The Company has a worldwide installed base of
over 5,500 servers and sells its products primarily through a number of
integrators and value added resellers worldwide.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial statements contained in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 (the "FORM 10-K") and the unaudited financial statements contained in
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 29,
1997, March 28, 1996 and April 1, 1995 (the "10-Q'S"). More comprehensive
financial information is included in the Form 10-K, the 10-Q's and other
documents filed by the Company with the Commission. The financial information
that follows is qualified in its entirety by reference to such reports and
other documents, including the financial statements and related notes
contained therein. Such reports and other documents may be examined and copies
may be obtained from the offices of the Commission in the manner set forth at
the end of this Section 7.
9
<PAGE>
NETFRAME SYSTEMS INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER
31,
----------------------------
1996 1995 1994
--------- --------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................... $ 74,349 $76,434 $89,135
Operating income (loss)......................... (29,034) (7,785) 4,988
Net income (loss)............................... (27,984) (8,052) 5,745
Average number of shares outstanding (as
adjusted to give effect to stock dividends or
stock splits).................................. 13,729 13,498 13,630
Net income (loss) per share..................... $ (2.04) $ (0.60) $ 0.42
BALANCE SHEET DATA:
Working capital................................. 20,226 47,687 56,639
Total assets.................................... 50,309 71,698 76,971
Notes payable and capital lease obligations..... -- -- 69
Stockholders' equity............................ 31,798 59,194 66,381
<CAPTION>
THREE MONTHS ENDED
----------------------------
APRIL
MARCH 29, MARCH 30, 1,
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................... $ 13,636 $20,069 $13,147
Gross profit.................................... 1,396 9,149 5,932
Operating income (loss)......................... (11,108) (3,101) (5,849)
Income (loss) before income taxes............... (11,100) (2,764) (5,542)
Net income (loss)............................... (11,100) (2,764) (5,265)
Average number of shares outstanding (as
adjusted to give effect to stock dividends or
stock splits).................................. 13,926 13,629 13,405
Net income per share............................ $ (0.80) $ (0.20) $ (0.39)
BALANCE SHEET DATA:
Current assets.................................. $ 25,240 $54,151 $61,872
Total assets.................................... 35,731 67,303 70,258
Current liabilities............................. 14,671 10,810 8,639
Stockholders' equity............................ 21,060 56,493 61,619
</TABLE>
10
<PAGE>
In connection with Purchaser's and Micron's review of the Company and in the
course of their negotiations with the Company described in Section 10, the
Company provided Micron and the Purchaser with certain business and financial
information which Micron and Purchaser believe is not publicly available.
Specifically, the Company provided the Purchaser and Micron with information
regarding its severe liquidity and cash needs, including the possibility that
the Company may be forced to liquidate absent an immediate and substantial cash
infusion or acquisition of the Company. The Company also shared certain
internal forecasts assuming consummation of the Offer and based upon receiving
funding from and operating as a subsidiary of Micron, achieving certain
manufacturing and purchasing synergies with Micron, as well as pursuing a
marketing and sales model synergistic with Micron, and thereby reducing its
operating costs. Projections as to the Company's financial results on a stand-
alone basis were not utilized by Purchaser or Micron, as any such stand-alone
projections were not viewed as meaningful given the serious questions as to the
Company's viability as a stand-alone entity and the possibility of immediate
liquidation of the Company absent an acquisition or substantial cash infusion.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons
in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities maintained by the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be
available for inspection at the Commission's regional offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may also be obtained (i) by mail, upon payment of the Commission's
customary fees, by writing to its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, or (ii) at the Commission's world-
wide web site at http://www.sec.gov.
8. CERTAIN INFORMATION CONCERNING PURCHASER, MICRON AND MTI. Purchaser is a
newly incorporated Delaware corporation organized in connection with the Offer
and the Merger and has not carried on any activities other than in connection
with the Offer and the Merger. The principal offices of Purchaser are located
at 900 E. Karcher Road, Nampa, Idaho 83687. Purchaser is a direct wholly owned
subsidiary of Micron.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
Micron is a Minnesota corporation, with its principal office at 900 E.
Karcher Road, Nampa, Idaho 83687. Micron is a provider of PC systems through
the direct sales channel worldwide. Micron's PC operations develop, market,
manufacture, sell and support a range of memory-intensive, high performance
desktop and notebook PC systems and network servers under the Micron brand
name. In addition to its PC operations, Micron has contract manufacturing and
component recovery operations. Micron's wholly-owned subsidiary, Micron Custom
Manufacturing Services, Inc. ("CMS"), is a contract manufacturer specializing
in the assembly of complex custom printed circuit boards, memory modules and
system level products. Micron's component recovery operations recover,
assemble, test, grade and market nonstandard random access memory components
not meeting full industry standard specifications.
MTI is a Delaware corporation, with its principal office at 8000 S. Federal
Way, P.O. Box 6, Boise, Idaho 83707. Micron is majority owned by MTI. As of May
31, 1997, MTI owned approximately 64% of the outstanding common stock of
Micron. Micron's Common Stock is traded on the Nasdaq National Market under
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the symbol "MUEI." MTI and its subsidiaries, including Micron and CMS,
principally design, develop, manufacture and market semiconductor memory
products, personal computers and complex custom printed circuit board, memory
module and system level assemblies.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser, Micron and MTI and certain other information are set
forth in Schedule I hereto.
To the best knowledge of Purchaser and Micron, neither Purchaser, Micron nor
MTI, nor any of the persons listed in Schedule I to this Offer to Purchase, nor
any associate or majority-owned subsidiary of Purchaser, Micron, MTI or any of
the persons so listed, beneficially owns or has any right to acquire, directly
or indirectly, any Shares and neither Purchaser, Micron nor MTI, nor any of the
persons or entities referred to above nor any director, executive officer or
subsidiary of Purchaser, Micron nor MTI has effected any transaction in the
Shares during the past 60 days.
Except as provided in the Merger Agreement and as otherwise described in this
Offer to Purchase, to the best of the knowledge of Purchaser and Micron, (i),
neither Purchaser, Micron nor MTI, nor any of their respective subsidiaries or
any of the persons listed in Schedule I to this Offer to Purchase, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
voting of such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss,
guarantees of profits, division of profits or loss or the giving or withholding
of proxies; and (ii) neither Purchaser, Micron nor MTI, nor any of the persons
listed on Schedule I hereto, has had any business relationship or transaction
with the Company or any of its executive officers, directors or affiliates that
is required to be reported under the rules and regulations of the Commission
applicable to the Offer. Set forth below in Section 10 of this Offer to
Purchase and elsewhere herein is a summary description of the mutual contacts,
negotiations and transactions between any of Purchaser, Micron and MTI, or any
of their respective subsidiaries or any of the persons listed in Schedule I to
this Offer to Purchase, on the one hand, and the Company or its affiliates, on
the other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of material assets.
Available Information. Micron is subject to the information filing
requirements of the Exchange Act and is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning Micron's
directors and officers, their remuneration, options granted to them, the
principal holders of Micron's securities and any material interest of such
persons in transactions with Micron is required to be described in proxy
statements distributed to Micron's stockholders and filed with the Commission.
Such reports, proxy statements and other information should be available for
inspection at the public reference facilities maintained by the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, and also should be available for
inspection at the Commission's regional offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may also be obtained (i) by mail, upon payment of the Commission's customary
fees, by writing to its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or (ii) at the Commission's world-wide web site
at http://www.sec.gov.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by
Purchaser to consummate the Offer and the Merger is estimated to be
approximately $15.6 million, including approximately $1.75 million to pay
related fees and Purchaser expenses but excluding amounts payable by the
Purchaser with respect to the cash out of Options. Purchaser will obtain all
such funds from Micron. Micron will provide such funds from its working
capital. In addition, from its working capital, Micron will provide the Company
(i) $1.5 million under the Technology License Agreement and (ii) up to $3.5
million in financing under the Merger Agreement. See Section 10.
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10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER
AGREEMENT; THE STOCK OPTION AGREEMENT; THE TECHNOLOGY LICENSE AGREEMENT.
BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
Micron's wholly owned subsidiary, CMS, has previously provided contract
assembly services for the Company. In 1994, sales to the Company were
approximately $8.4 million and in 1995 were approximately $10.7 million,
primarily for memory intensive custom boards. In 1996, sales were
approximately $9.5 million for customized circuit boards and double sided
memory modules. Year to date sales through May 31, 1997 were approximately
$1.4 million, primarily for double sided memory modules. As of June 16, 1997,
outstanding accounts receivable owed by the Company to CMS was approximately
$420,000. In addition, CMS currently maintains inventory of certain products
specifically used in products manufactured on behalf of the Company.
In late April 1997, David Averett, Manager of OEM Sales of the Company,
contacted Gene Thomas, Vice President of Business Development of Micron, to
discuss the possibility of Micron entering into a distribution agreement with
the Company with respect to the Company's products.
On May 6, 1997, Paul Petersen, Director of Engineering of Micron, and Dan
Burton, Platform Manager-Server, visited the booth of the Company at the
Networld+Interop convention in Las Vegas to view a demonstration of certain of
the Company's products. They met with Steven Huey, Vice President of Marketing
of the Company and Mr. Averett.
On May 8, 1997, Mr. Thomas informed Joseph Daltoso, Chairman, President and
Chief Executive Officer of Micron, of his conversations with the Company
concerning a possible OEM Agreement. Mr. Daltoso instructed George Minow,
Director of Strategic Planning of Micron, and Mr. Thomas to obtain additional
information concerning the Company and further explore the possibility of a
potential strategic relationship between the two companies. On that same day,
Mr. Minow contacted Mr. Averett of the Company while Mr. Thomas contacted
Randy Meyer, Vice President of Business Development of the Company, to discuss
such a relationship.
On May 15, 1997, Mr. Thomas and Mr. Minow met with Mr. Meyer and Robert
Puette, Chairman, President and Chief Executive Officer of the Company, at the
principal office of the Company to obtain additional information about the
Company's products and technology and to further discuss a possible strategic
relationship between the two companies.
On May 21 and 22, 1997, a number of senior management executives of Micron,
including Mr. Daltoso, Greg Stevenson, Executive Vice President, Operations
and Chief Operating Officer, Dean Klein, Chief Technology Officer, and Brian
Klene, Executive Vice President, Sales and Marketing, and Mr. Minow, Mr.
Burton and Mr. Thomas, met at the principal office of Micron with Mr. Puette,
Mr. Meyer, and a number of other senior executives of the Company, including
Bulent Erbilgin, Vice President of Engineering, to further discuss the
Company's products and operations and a possible strategic relationship,
including a possible business combination.
On May 23, 1997, Mr. Minow had a telephone conversation with James D.
McCammon, Vice President and Chief Financial Officer, and other finance
personnel from the Company to discuss financial and product information in
order to evaluate the possibility of Micron acquiring the Company.
During the week of May 26, 1997, several meetings of executives of Micron
were held to further consider a variety of possible strategic transactions
with the Company, including an OEM relationship with respect to sales of the
Company's new server products or a potential acquisition of the Company.
During that time, arrangements were made to ship certain of the Company's
products to Micron for engineering tests and reviews.
From May 28 to May 30, 1997, Micron performed extensive technical testing of
the Company's products. On May 28 and 29, 1997, Mr. Huey, Mr. Shah, and a
customer service engineer from the Company visited certain representatives of
Micron at Micron's principal offices to test certain of the Company's
products. On
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May 30, 1997, various sales personnel from the Company presented additional
sales information to Mr. Klene and Fred Waddell, Director of Corporate and
Channel Sales of Micron, at Micron's principal office. At the same time, Mr.
Daltoso had a further meeting with Mr. Puette, Mr. Erbilgin and Mr. McCammon at
the Company to further discuss the merits of a potential acquisition of the
Company by Micron and to tour the Company's facility.
On June 3, 1997, Steven Appleton, a director of Micron, met with certain
senior management executives of Micron at Micron's principal office to further
review the possible acquisition of the Company.
On June 3, 1997, T. Erik Oaas, Executive Vice President and Chief Financial
Officer of Micron, contacted Montgomery Securities to provide financial
services and Fenwick & West LLP, to serve as Micron's legal counsel, for the
purpose of engaging in a possible acquisition transaction with respect to the
Company.
On June 4, 1997, Mr. Puette traveled to Idaho to again met with Mr. Daltoso
and Mr. Appleton to discuss the possible acquisition transaction.
Between June 5 and June 8, 1997, representatives of Micron, their legal
counsel and financial advisors met with representatives of the Company, their
legal counsel and financial advisors at the offices of the Company's counsel to
continue their due diligence investigation of the Company, including
discussions of the business and financial condition of the Company, and to
discuss the possible terms of an acquisition transaction.
On June 8, 1997, Micron indicated that, subject to further due diligence, the
commitment of key executives of the Company to enter into employment agreements
with Micron (which were to include conditions tied to performance of the
Company) and approval of Micron's Board of Directors, Micron was prepared to
commence an all cash tender offer for the Company around or below the current
trading price of the Company's stock and to enter into technology licensing
and/or certain financing arrangements with the Company.
On June 8, 1997, the Company advised representatives of Micron that its Board
of Directors had approved a range of terms upon which the Board was prepared to
approve the transaction and had authorized Mr. Puette to continue negotiations
and conclude an agreement with Micron within such range of terms.
Between June 8 and June 9, 1997, representatives of Micron and the Company
met together with their respective legal and financial advisors to continue due
diligence and to negotiate the definitive agreement providing for the tender
offer. During this period, representatives of the Company made various
presentations to the Micron representatives with respect to the Company's
business plan and numerous conversations were held among Micron's senior
management, legal and financial advisors and individual directors of Micron
concerning the status of due diligence, negotiations and the definitive terms
of the acquisition.
On June 9, 1997, the Company entered into Employment Term Sheets with each of
Messrs. Puette, Erbilgin, Hartsfield and Huey, as described in Section 17
below.
The morning of June 10, 1997, the Board of Directors of Micron approved the
terms of the proposed Offer and Merger. Thereafter, Micron and the Company
executed the Merger Agreement and certain related agreements on such date and
issued a press release announcing the transaction.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE
14D-1") filed by Purchaser and Micron with the Commission in connection with
the Offer. Such summary is qualified in its entirety by reference to the Merger
Agreement. Capitalized terms not otherwise defined in the following description
of the Merger Agreement have the respective meanings ascribed to them in the
Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
within five business days after the initial public announcement of Purchaser's
intention to commence the Offer. The obligation of Purchaser to accept for
payment Shares tendered pursuant to the Offer is subject to the satisfaction of
the Minimum Condition and certain other conditions that are described in
Section 14 hereof. Purchaser and Micron
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have agreed that no change in the Offer may be made which decreases the price
per Share payable in the Offer, reduces the maximum number of Shares to be
purchased in the Offer, imposes conditions to the Offer in addition to those
set forth in Section 14 hereof, changes the form of consideration payable in
the Offer or amends any other material terms of the Offer in a manner
materially adverse to the Company's stockholders.
The Merger. The Merger Agreement provides that, following consummation of
the Offer and upon the terms and subject to the conditions in the Merger
Agreement and in accordance with Delaware Law, at the Effective Time,
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation (the "SURVIVING CORPORATION") and will
become a direct or indirect wholly owned subsidiary of Micron. Upon
consummation of the Merger, each issued and then outstanding Share (other than
any Shares held in the treasury of the Company, or owned by Purchaser, Micron
or any other subsidiary of Micron and any Shares which are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
Shares in accordance with Delaware Law) shall be automatically converted into,
and exchanged for, the right to receive the Merger Consideration.
Pursuant to the Merger Agreement, each share of common stock, par value
$.001 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one share of common
stock, par value $.001 per share, of the Surviving Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement further provides that the Certificate of Incorporation and
by-laws of Purchaser as in effect at the Effective Time shall be the
Certificate of Incorporation and by-laws of the Surviving Corporation.
Agreements of Micron, Purchaser and the Company. Pursuant to and subject to
the conditions in the Merger Agreement, the Company will, if required by
applicable law in order to consummate the Merger, duly call, give notice of,
convene and hold a meeting of its stockholders as soon as practicable
following expiration of the Offer for the purpose of approval of the Merger,
and any other actions contemplated by the Merger Agreement which require the
approval of the Company's stockholders (the "STOCKHOLDERS' MEETING"). If
Purchaser acquires a majority of the outstanding Shares pursuant to the Offer,
Purchaser will have sufficient voting power to approve the Merger, even if no
other stockholder votes in favor of the Merger.
The Merger Agreement provides that the Company will, if necessary, as soon
as practicable following expiration of the Offer, file with the Commission
under the Exchange Act, a proxy statement and related proxy materials (the
"PROXY STATEMENT") with respect to the Stockholders' Meeting and will use its
best efforts to respond to any comments of the Commission and to cause the
Proxy Statement to be mailed to stockholders of the Company as promptly as
practicable after responding to all such comments to the satisfaction of the
staff of the Commission. The Company has agreed, subject to certain fiduciary
duties under applicable law as described below, to include in the Proxy
Statement the recommendation of the Board of Directors that the stockholders
of the Company approve and adopt the Merger. The Merger Agreement provides
that, in the event that Purchaser or any other subsidiary of Micron acquires
at least 90 percent of the then outstanding Shares, Micron, Purchaser and the
Company agree, at the request of Micron, to take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after
expiration of the Offer, without a meeting of the Company's stockholders, in
accordance with Delaware Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed to
carry on the businesses of the Company and its subsidiaries in the ordinary
course and to use its reasonable efforts in light of its current financial
condition to preserve intact their current business organization, to keep
available the services of their current officers and employees and to preserve
relations with distributors, licensors, contractors, customers, suppliers,
lenders, employees and others having business dealings with any of them. The
Merger Agreement provides that, except as permitted by the terms of the Merger
Agreement, neither the Company nor any subsidiary will do any of the
following, without the prior written consent of Micron: (a) grant or provide
any
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severance or termination pay to any officer or employee except payments under
the WARN Act or similar law or regulation after first consulting with Micron,
or, after prior written notice to Micron, that are in amounts consistent with
the Company's policies and past practices, are pursuant to written plans or
agreements outstanding, or policies existing, on the date of the Merger
Agreement and are pursuant to arrangements previously disclosed in writing;
(b) declare or pay any dividends on or make any other distributions in respect
of any of its capital stock (other than by any wholly owned subsidiary of the
Company to its parent or, in the case of less than wholly owned subsidiaries
as required by agreements existing as of the Merger Agreement) or 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 any of its capital stock or purchase, redeem or otherwise acquire any
shares of its capital stock or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities; (c) 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 the issuance
of shares, pursuant to the exercise of Options outstanding as of the date of
the Merger Agreement and in accordance with their present terms and pursuant
to the Company's employee stock purchase plan; (d) amend its Certificate of
Incorporation, by-laws or other charter documents; (e) acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business
of the Company and its subsidiaries as a whole except purchases of inventory
in the ordinary course of business consistent with past practice; (f) sell,
lease, license, mortgage or otherwise encumber or subject to any pledge,
claim, charge, encumbrance, security interest or lien or otherwise dispose of
any of its properties or assets (including intellectual property) except in
the ordinary course of business consistent with past practice; (g) incur any
indebtedness for borrowed money or draw down on any credit facility or
arrangement or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or rights to acquire debt securities, or
guarantee any debt securities of others, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing
or make any loans, advances or capital contributions to, or investments in,
any other person, other than to the Company or any direct or indirect wholly
owned subsidiary of the Company; (h) except as otherwise contemplated by the
Merger Agreement, adopt or amend in any material respect any employee benefit
or employee stock purchase or employee option plan, or enter into any
employment contract, pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its officers
or employees other than in the ordinary course of business, consistent with
past practice, or change in any material respect any management policies or
procedures or otherwise alter or commit to any compensation, benefit or
severance or change of control arrangement for or with any officer or employee
of the Company or enter into any related or interested party transaction of a
nature that would be required to be disclosed in filings with the Commission;
(i) pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge, settlement or satisfaction (x) of liabilities or
obligations the failure of which to satisfy would have a Material Adverse
Effect (as described below) on the Company, (y) of liabilities and obligations
to employees and (z) in the ordinary course of business consistent with past
practice and in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or notes thereto) of the Company included in documents
filed with the Commission or incurred since the date of such financial
statements in the ordinary course of business consistent with past practice;
(j) make or agree to make any new capital expenditure(s) which individually is
in excess of $25,000 or which in the aggregate are in excess of $100,000; (k)
make any material tax election or settle or compromise any income or franchise
tax liability; (l) except as expressly contemplated by the Merger Agreement,
enter into, modify, amend or terminate any contract or agreement binding on
the Company or any subsidiary or waive, release or assign any rights or claims
thereunder other than contracts or agreements involving purchase of inventory
and supplies or sales of products in the ordinary course of business and other
than discounting of accounts receivable to obtain prompt collection; (m)
terminate or lay off any employees, other than for cause consistent with past
practice and Company policy; (n) voluntarily take actions to liquidate or
dissolve the Company or to take advantage of bankruptcy or other creditor
protection laws;
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(o) institute any litigation or other proceeding other than in connection with
the Merger Agreement or the transactions contemplated thereby; (p) take any
action that might cause or constitute a breach of any representation or
warranty made by the Company in the Agreement; or (q) authorize any of, or
commit or agree to take any of, the foregoing actions.
Further, the Company and Micron have agreed not to, and not to permit any of
their respective subsidiaries to, knowingly and willfully, take deliberate
action that would cause any of their representations and warranties set forth
in the Agreement to become untrue in such a manner, with respect to the
Company, as would have a Material Adverse Effect or, with respect to Micron,
in any material respect as of the date when made, or that would cause any of
the conditions to the Offer or to the Merger not being satisfied. "MATERIAL
ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" means, when used in connection
with the Company, any change or effect that is materially adverse to the
Company's business, properties, assets, financial condition or results of
operations, excluding those changes, effects and developments that result from
(i) the announcement or pendency of the Offer, (ii) general economic
conditions or (iii) conditions affecting the industry in which the Company
competes.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
pursuant to the Offer of such number of Shares which satisfies the Minimum
Condition, Micron will be entitled to designate such number of directors,
rounded up to the next whole number, so that the designees of Purchaser
constitute the same percentage (but no less than a majority) of the Company's
Board of Directors as the percentage of Shares acquired by Purchaser in
connection with the Offer. The Merger Agreement also provides that the Company
shall, upon request by Micron, promptly increase the size of the Board of
Directors to the extent permitted by its Certificate of Incorporation and/or
secure the resignations of such number of directors as is necessary to enable
Micron's designees to be elected to the Board of Directors and to cause
Micron's designees to be so elected.
The Merger Agreement provides that following the election or appointment of
Micron's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment or termination of the Merger
Agreement by the Company or any extension by the Company of the time for the
performance of or waiver of any of the obligations or other acts of Micron or
Purchaser or waiver of any of the Company's rights thereunder, will require
the concurrence of a majority of those directors of the Company then in office
who were directors as of the date of the Merger Agreement or designated by
such persons to fill a vacancy. Micron has agreed to take all actions required
to maintain at least one such director on the Company's Board of Directors at
all times after the consummation of the Offer and until the Effective Time.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, the Company will, and will cause its subsidiaries to
afford the officers, employees, accountants, counsel, financial advisors and
other representatives of Micron, reasonable access during normal business
hours to their properties, books, contracts, commitments, personnel and
records and shall furnish or promptly make available to Micron a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws,
and all other information concerning its business, properties and personnel as
Micron may reasonably request.
The Company has agreed that, until the earlier of the Effective Time or
termination of the Merger Agreement, neither it, its subsidiaries nor their
respective directors, officers, employees, representatives, investment
bankers, attorneys or advisors will, directly or indirectly, (i) solicit,
initiate or encourage submission of any "takeover proposals" (as defined
below), or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or enter into any
agreement with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any takeover proposal. Under the Merger Agreement, a
"TAKEOVER PROPOSAL" means any proposal for a merger or other business
combination involving the Company or any of its Significant Subsidiaries (as
defined in Regulation 1-02 of Regulation S-X) or any proposal, offer or tender
offer to acquire (including by license) in any manner, directly or indirectly,
an equity interest in, not less than 10% of the outstanding voting securities
of, or assets representing not less than 10% of the annual revenues of the
Company or any of its Significant Subsidiaries, other than the transactions
contemplated by the Merger Agreement. The Company has
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also agreed that it will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Pursuant to the Merger Agreement, the Company will
promptly advise Micron orally and in writing of any request for information or
of any takeover proposal, or any inquiry with respect to or which is expected
to lead to any takeover proposal, the material terms and conditions of such
request, takeover proposal or inquiry and the identity of the person making
any such takeover proposal or inquiry. The Company has also agreed to keep
Micron informed of the status and material terms of any such request, takeover
proposal or inquiry.
Notwithstanding the foregoing, the Merger Agreement provides that the
Company may, to the extent required by fiduciary obligations under applicable
law as advised by independent counsel, participate in discussions or
negotiations with, or furnish information to, any person in response to a
takeover proposal which was not solicited after the date of the Merger
Agreement, provided that such information is provided pursuant to a
confidentiality agreement in reasonably customary form. If, following receipt
of such an unsolicited takeover proposal, the Board of Directors determines in
good faith, based on the advice of its outside financial advisors, that such
takeover proposal is more favorable to the Company's stockholders than the
Offer and the Merger (a "SUPERIOR PROPOSAL"), then the Company may terminate
the Merger Agreement, subject to the payment of a break up fee, discussed
below. Thereafter, the Company's Board of Directors may accept and enter into
any agreement with respect to such Superior Proposal, and the Company's Board
of Directors may approve or recommend such Superior Proposal and, in
connection therewith, withdraw or modify its approval or recommendation of the
Offer, the Merger Agreement or the Merger. The provisions described in this
paragraph shall not prohibit the Company's Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a takeover
proposal pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act
or making any disclosure to the Company's stockholders that, in the judgment
of the Board of Directors of the Company is required under applicable law.
Pursuant to the Merger Agreement, upon the Effective Time, each of the
options then outstanding under the Company Stock Option Plans and each other
right to acquire shares of Company capital stock will become fully exercisable
and vested, whether or not otherwise exercisable and vested. All Options that
are outstanding immediately prior to the Effective Time will be canceled at
the Effective Time and the holders will be entitled to receive, for each share
subject to such Option, an amount of cash equal to the excess, if any, of the
Offer Price over the exercise price per Share of such Option, subject to any
required withholding taxes. The Company's 1992 Employee Stock Purchase Plan
will be terminated on the earlier of July 31, 1997 or the Effective Time. If
terminated at the Effective Time, the Company will take such actions as are
necessary to cause the exercise date thereunder to occur on the last trading
day immediately prior to the Merger. On such date, any funds credited as of
such date under the purchase plan within each participant's payroll
withholdings account will be deemed applied to the purchase of whole shares of
the Company's Common Stock in accordance with the terms of such purchase plan
and the shares of Company Common Stock issuable as a result thereof will be
deemed outstanding and converted to Merger Consideration in the Merger
pursuant to the terms of the Merger Agreement.
Micron has agreed to fulfill and honor and cause the Surviving Corporation
to fulfill and honor in all respects the obligations of the Company pursuant
to any indemnification agreements between the Company and any of its
subsidiaries and their respective directors and officers existing prior to the
Merger Agreement. From and after the Effective Time, such obligations will be
the joint and several obligations of Micron and the Surviving Corporation, and
Micron has assumed such obligations. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
indemnification and elimination of liability for monetary damages set forth in
the Certificate of Incorporation and Bylaws of the Company, which provisions
will not be amended, repealed or otherwise modified after the Effective Time
in any manner that would adversely affect the rights of the individuals who,
immediately prior to the Effective Time, were directors, officers, employees
or agents of the Company or its subsidiaries, unless required by law.
For at least two years from the Effective Time, Micron shall maintain in
effect the Company's current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time for those persons who are directors and
officers as of the date of the Merger
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Agreement, so long as the annual premium would not be in excess of 150% of the
last annual premium paid prior to the date of the Merger Agreement. If the
existing insurance expires, is terminated or is canceled during such two year
period, Micron will use all reasonable efforts to cause as much insurance to
be obtained as possible for the remainder of the period for an annualized
premium not in excess of the amount indicated above, on terms and conditions
no less advantageous than the existing insurance. In lieu of maintaining the
Company's current insurance, Micron may elect to add the directors and
officers of the Company as of the date of the Merger Agreement to its own
insurance policy, provided that such election does not diminish the rights
provided to such persons under the Company's existing insurance.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto agrees to use all reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to use
its reasonable best efforts 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 transactions
contemplated by the Merger Agreement (including consummation of the Offer and
the Merger). Among other things, the Merger Agreement specifies the following
actions: (i) obtaining all necessary waivers, consents and approvals from
third parties, (ii) obtaining all necessary consents, approvals, waivers,
actions and no actions from any federal, state or local government or any
court, administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "GOVERNMENTAL ENTITY"), and the
making of all necessary registrations and filings and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Entity, (iii) defending
any lawsuits or other legal proceedings challenging the Merger Agreement or
the consummation of the transactions contemplated thereby and (iv) the
execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by the Merger Agreement. In particular, the
Company has agreed to take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
the Offer, the Merger, the Merger Agreement or any other transaction
contemplated by the Merger Agreement. Further, the Company has agreed that if
any state takeover statute or similar statute or regulation becomes applicable
to such transactions, it will take all action necessary to ensure that such
transactions may be consummated as promptly as practicable on the terms
contemplated by the Merger Agreement and otherwise to minimize the effect of
such statute or regulation on such transactions.
The Company and Micron are obligated to give prompt notice to the other
party of any representation or warranty made by it in the Merger Agreement so
as, with respect to the Company, to have a Material Adverse Effect, or, with
respect to Micron, in any material respect. Further, such parties are
obligated to give prompt notice of the failure to comply with or satisfy in
any material respect any covenant, condition or agreement under the Merger
Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, taxes, litigation,
employee benefit plans, real property and leases, intellectual property,
environmental matters, and material contracts.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver on or prior to the Effective Time of the following conditions: (a)
if required by Delaware Law, the Merger shall have been approved and adopted
by the requisite vote of the stockholders of the Company; (b) any waiting
period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (c) Shares
shall have purchased pursuant to the Offer; and (d) no temporary restraining
order, preliminary or permanent injunction, judgment or other order, decree or
ruling nor any statute, rule, regulation or executive order shall be in effect
which would (i) make the acquisition or holding by Micron or its affiliates of
Shares or shares of Common Stock of the Surviving Corporation illegal or
otherwise prevent the consummation of the Merger, (ii) prohibit Micron's or
Purchaser's ownership or operation of, or compel Micron or Purchaser to
dispose of or hold separate, all or a material portion of the business or
assets of Purchaser, the Company or any subsidiary thereof, (iii) compel
Micron, Purchaser or the Company to dispose of or hold separate all or a
material portion of the business or assets of Micron or any
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of its subsidiaries or the Company or any of its subsidiaries, (iv) impose
material limitations on the ability of Micron or Purchaser or their affiliates
effectively to exercise full ownership and financial benefits of the Surviving
Corporation, or (v) impose any material condition to the Merger Agreement or
the Merger, which would be materially adverse to Micron.
In addition, the obligations of Micron and Purchaser to effect the Merger
are further subject to (i) the accuracy of the Company's representations and
warranties at the time of the Merger Agreement in all material respects,
except with respect to inaccuracies that have since been cured; (ii) the
performance in all material respects by the Company of all obligations under
the Merger Agreement, except to the extent that the aggregate effect of the
failure would not have a Material Adverse Effect or was attributable to
Micron; and (iii) the absence of a Material Adverse Change in the Company and
its subsidiaries as a whole or an event that is highly probable to result in a
Material Adverse Change, except for changes primarily due to employee
attrition, and disregarding operating losses incurred in the ordinary course.
Termination; Fees and Expenses. The Merger Agreement may be terminated, and
the Merger and other transactions contemplated thereby may be abandoned, at
any time prior to the Effective Time, notwithstanding any requisite approval
and adoption of the Merger Agreement and the transactions contemplated thereby
by the stockholders of the Company (provided, however, that if Shares are
purchased pursuant to the Offer, Micron may not terminate the Merger
Agreement): (a) by mutual written consent of Micron and the Company; (b) by
Micron or the Company if, as a result of the failure of any of the conditions
to the Offer, (i) the Purchaser fails to commence the Offer in the time
required by the Merger Agreement, or (ii) the Offer has terminated or expired
(as extended, if applicable) in accordance with its terms without the
Purchaser having accepted any Shares for payment pursuant to the Offer
(provided that the ability to terminate in the above circumstances is not
available to a party whose failure to perform under, or breach of the
representations or warranties of, the Merger Agreement results in a failure of
such conditions); (c) by Micron or the Company, if Purchaser shall not have
accepted any Shares for payment by August 5, 1997; (d) by Micron or the
Company, if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; (e) by the Company, if the
Company's Board of Directors determines that there is a Superior Proposal, as
described above; or (f) by Micron if (1) the Company's Board of Directors or a
committee thereof shall have failed to recommend the Offer, the Merger, or the
Merger Agreement, or shall have so resolved; (2) if the Company's Board of
Directors or a committee thereof shall have withdrawn or modified in a manner
adverse to Micron or Purchaser its approval, or recommendation, of the Offer,
the Merger Agreement and the Merger, shall have approved or recommended any
takeover proposal, shall have authorized the redemption or amendment of the
Rights Agreement after the Company has received a takeover proposal or shall
have so resolved to do any of the foregoing; (3) the Company shall have
entered into any letter of intent, acquisition agreement or similar agreement
with respect to any Superior Proposal or shall have resolved to do so; or (4)
the Company's Board of Directors or a committee thereof shall have failed to
reaffirm approval or recommendation of the Offer, the Merger or the Merger
Agreement, within two business days after receipt of a request from Micron or
Purchaser to do so or shall have so resolved (the events described in
subsections (f)(1), (2), (3) and (4) being referred to herein as a "BOARD
TERMINATION ACTION").
The Merger Agreement provides that the Company shall pay to Micron, in same
or next day funds an amount equal to $750,000 (the "BREAK-UP FEE") in the
event of any of the following: (i) the Merger Agreement is terminated as set
forth in subsections (b) or (c) in the prior paragraph, as a result of failure
of the following conditions to the Offer: (a) the occurrence of a Board
Termination Action, (b) any of the representations and warranties of the
Company in the Merger Agreement shall have failed to be true and correct in
all material respects as of the date of such agreement or shall have
thereafter ceased to be true and correct in any material respect, or (c)
breach or failure to perform in any material respect any obligation or to
comply in any material respect with any agreement or covenant of the Company;
(ii) the Merger Agreement is terminated because of the occurrence of a Board
of Termination Action or because the Company has entered into any letter of
intent, acquisition agreement or similar agreement with respect to any
Superior Proposal or the Board of Directors or
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any committee thereof shall have resolved to do so; (iii) (a) prior to
expiration of the Offer (or after expiration of the Offer but prior to
expiration of a takeover proposal that is made and not subsequently withdrawn
prior to the expiration of the Offer or earlier termination of the Merger
Agreement), a takeover proposal is made and publicly announced, (b) the Merger
Agreement is terminated because Purchaser did not commence the Offer in the
required time or the Offer was terminated or expired without Purchaser
accepting payment for the Shares, as a result of failure of one of the Offer
conditions, or because Purchaser did not accept the Shares for payment prior
to August 5, 1997, or because the events described in (i)(a) above have
occurred, and (c) within 12 months of the termination of the Merger Agreement,
a person acquires or enters into an agreement (the transaction contemplated by
which is subsequently consummated) related to acquisition of the Company,
assets representing more than 50% of the fair market value of the Company's
assets or more than 50% of the shares of the Company's Common Stock then
outstanding (together, a "TAKEOVER CLOSING"); or (iv) the Company enters into
an agreement with respect to a Superior Proposal.
Payments under (i), (ii) and (iii) above, are on demand following
satisfaction of the indicated conditions; payments under (iv) above, are
within two business days of execution of the agreement with respect to a
Superior Proposal. No payments are required, notwithstanding the foregoing, if
the Merger Agreement is terminated by the Company and either Micron or
Purchaser has failed to perform, in any manner that adversely affects the
Company or its stockholders, any of its obligations under the Merger
Agreement. Payments of the foregoing amounts are not in lieu of damages
incurred in the event of willful breach of the Merger Agreement.
Post Merger Employment Benefits. Employees of the Company who become
employed by Micron or any controlled subsidiary thereof after the Effective
Time will either, to the extent permitted under the terms of the Company's
employee benefit plans, continue to be eligible to participate in such plans,
if and for so long as continued, or become eligible to participate in the same
standard employee benefit plans as are generally available to Micron
employees.
Preferred Share Rights Agreement. The Company has covenanted and agreed to
effect an amendment to the Preferred Share Rights Agreement dated as of
October 24, 1996 (the "RIGHTS AGREEMENT") entered into between the Company and
The First National Bank of Boston (the "RIGHTS AGENT") to exclude Micron and
the Purchaser and their respective Affiliates and Associates (as such terms
are defined in the Rights Agreement) from the definition of "Acquiring Person"
therein, with respect to the beneficial ownership of the Shares which Micron,
the Purchaser and/or any of their respective Affiliates and Associates have
obtained the right to acquire, or will acquire, as a result of the
transactions contemplated by the Merger Agreement. Such amendment will be
effected by the execution of a formal amendment to the Rights Agreement by the
Company with the Rights Agent, and the filing with the SEC and declaration of
effectiveness of an amendment to the Company's Registration Statement on Form
8-A with respect to such Rights Agreement as soon as possible, and in no event
later than five days following the date of the Merger Agreement. The Company
has further covenanted and agreed that it will take any and all action
necessary to prevent Micron, the Purchaser and their respective Affiliates and
Associates from being considered an "Acquiring Person" under the Rights
Agreement, and to prevent the occurrence of a "Distribution Date," as defined
therein, as a result of the Purchaser's acquisition of Shares upon
consummation of the Offer or Micron's or the Purchaser's acquisition of
Shares, or rights to acquire same, in connection with the Merger or otherwise
pursuant to the Merger Agreement or any of the transactions or documents
contemplated thereby, including without limitation pursuant to the Offer, the
Merger or the Stock Option Agreement, or any other agreement involving Micron,
the Purchaser or any Affiliate or Associate thereof approved by the Board of
Directors of the Company.
Micron Financial Assistance to the Company. Provided that (i) the Company
has not breached the Merger Agreement, (ii) Micron is not entitled to
terminate the Merger Agreement as a result of the actions of the Company's
Board of Directors described under subsection (f) in the first paragraph of
"Termination; Fees and Expenses," above, and (iii) the Merger Agreement has
not been terminated, Micron has agreed to provide the Company with $3.5
million in the aggregate in financial assistance (in addition to any amounts
payable pursuant to the Technology License Agreement) in the form of either
secured loans or guarantees of secured loans, at such times as Micron and the
Company may determine. Such financial assistance will be provided pursuant to
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such funding schedule as is agreed upon by Micron and the Company based upon
the Company's financial needs as agreed to by Micron. At the request of
Micron, the Company has agreed to use its best efforts to assign or assist in
the assignment to Micron of all loans, contracts, agreements, security
interests UCC filings, and other rights of CIT Group/Business Credit, Inc.
("CIT") that relate to or are with the Company. In March 1997, the Company
obtained an asset based revolving credit facility with CIT to finance eligible
accounts receivable and production inventory, subject to certain net worth and
other financial covenants. Loans under the CIT credit facility are secured by
substantially all of the Company's assets. The CIT credit facility bears
interest in an amount equal to prime plus one-half percent. As of June 16,
1997, no amounts were outstanding and the Company has been unable to borrow
under this facility.
While the terms of Micron's financial assistance to the Company have not
been fully established, Micron is currently seeking to have the CIT credit
facility assigned to Micron to allow Micron to provide the Company with direct
secured loans under that facility for working capital purposes. If the CIT
credit facility is not assigned to Micron, Micron will consider either a
direct secured loan to the Company or a guarantee of a CIT or other financial
institution loan. In each case, Micron anticipates that the interest rate
under the loan will be at or about market rates, and the loans will come due
(or the guarantees will expire) on the earlier of (i) September 30, 1997, (ii)
a breach of the Merger Agreement by the Company, (iii) when Micron is entitled
to terminate the Merger Agreement as a result of the actions of the Company's
Board of Directors described under subsection (f) in the first paragraph of
"Termination; Fees and Expenses," or (iv) when the Merger Agreement has been
terminated. Accordingly, in any of such instances, which include Micron not
acquiring pursuant to the Offer a number of Shares that satisfies the Minimum
Condition, Micron could request immediate repayment on any loans it may have
extended to the Company and could seek to collect on such loans, which may
include foreclosing on any collateral, which foreclosure could have a Material
Adverse Effect on the Company. Until termination of the Merger Agreement,
Micron, as a creditor of the Company, has agreed not to institute bankruptcy
or insolvency proceedings against the Company. During the pendency of the
Offer, Micron and the Company may continue existing or enter into additional
commercial relationships. For example, Micron, through its CMS subsidiary, has
provided contract manufacturing services to the Company, as described above,
and was owed approximately $420,000 as of June 16, 1997, and CMS may continue
to provide contract manufacturing services and extend credit to the Company.
Micron, at its discretion, may also consider the provision of additional
services to the Company.
THE STOCK OPTION AGREEMENT
In connection with the execution of the Merger Agreement, Micron and the
Company have executed a Stock Option Agreement, whereby the Company has
granted to Micron an irrevocable option to purchase shares of the Company's
Common Stock as of the first date, if any, upon which an Exercise Event (as
defined below) occurs, representing a 19.9% equity stake in the Company at a
per share purchase price of $1.00 (the "Exercise Price") or at Micron's
election, by exchanging shares of Common Stock of Micron at a rate, for each
option share, of a number of shares of Micron equal to the Exercise Price
divided by the closing sale price of Micron shares on the Nasdaq National
Market for the trading day immediately preceding the date of closing of the
particular option exercise. An "Exercise Event" is considered to occur (i)
immediately prior to the earlier of the occurrence of a Board Termination
Action or the execution by the Company of an agreement (other than a
confidentiality agreement) with respect to any Superior Proposal or the
resolution of the Board of Directors to do so, or (ii) immediately prior to
the consummation of a tender or exchange offer by a person other than Micron
for 50% or more of any class of the Company's capital stock, or (iii)
immediately prior to a Takeover Closing as defined above. The Stock Option
Agreement terminates upon the earlier of (i) the consummation of the Offer
for, and purchase of shares representing, in excess of 50% of the Company's
stock, (ii) termination of the Merger Agreement if no Conditional Exercise
Event (as defined below) has occurred prior to such termination, or (iii) 12
months following termination of the Merger Agreement if a Conditional Exercise
Event (as defined below) has occurred on or prior to the date of such
termination. However, if the option is exercisable but cannot be exercised
because the HSR waiting period has not expired or been terminated, the option
will not terminate until the tenth business day after such impediment to
exercise has been removed. A "CONDITIONAL EXERCISE EVENT"
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occurs (a) at any time following the time the Company's Board of Directors has
taken any of the actions described in (i) of this paragraph, (b) upon the
commencement of a tender or exchange offer by a person other than Purchaser or
Micron for 50% or more of any class of the Company's capital stock (and/or
during any time which such a tender or exchange offer remains open or has been
consummated) or (c) at any time following occurrence of a Takeover Closing.
The Stock Option Agreement provides for registration rights with respect to
the shares issuable thereunder, as well as certain put rights for Micron and
call rights (in the event that a takeover proposal is not consummated (or an
agreement with respect thereto has not been executed) within one year of the
exercise of the option) in favor of the Company.
THE TECHNOLOGY LICENSE AGREEMENT
The Company has granted to Micron, and all of its subsidiaries and
affiliates, pursuant to a Technology License Agreement (the "LICENSE
AGREEMENT") entered into concurrently with the Merger Agreement, a
nonexclusive license to exploit all of the Company's technology associated
with the Company's 9000 series server products and any other Company products
under development on the effective date of the License Agreement. In
consideration of this grant, Micron has agreed to pay the Company a one-time
$1.5 million license fee, to be paid in two equal installments, with the first
installment to be paid upon execution of the License Agreement and the second
installment to be paid upon the Company's delivery of the technology to Micron
which is to take place no later than 30 days after the effective date of the
License Agreement. The term of the License Agreement is perpetual. However,
Micron may terminate the License Agreement for any reason after thirty days
from the effective date thereof. Micron may also terminate for breach by the
Company of any material obligation under the License Agreement after 30 days
notice and opportunity to cure. In the event that such a termination for
breach occurs within five years of the effective date of the License
Agreement, the license granted to Micron will terminate, and the Company will
refund the full license fee to Micron.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER; STOCKHOLDER APPROVAL AND APPRAISAL.
Purpose of the Offer. The purpose of the Offer and the Merger is for Micron
to acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for Micron to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Merger, the Company will
become a wholly owned subsidiary of Micron. The Offer is being made pursuant
to the Merger Agreement.
Micron is a provider of desktop and notebook systems to the small and mid-
range business markets as well as the consumer market. Micron regards the
acquisition as an opportunity to compete more effectively in the large
enterprise segment of the Fortune 1000 marketplace as Micron will gain
immediate access to the Company's advanced server technologies applicable to
many large enterprise class server/application environments such as high
availability, clustering and I/O scalability. The Company's enterprise servers
are used widely in industries that have mission critical needs. Micron
anticipates that the acquisition will provide a strategic opportunity to
complement Micron's existing line of desktop, notebook and server products.
Additionally, the Company has a highly experienced sales force, both
domestically and internationally, that can be utilized to introduce a full
line of Micron products into the corporate marketplace.
Plans for the Company. As discussed above in Section 10, and subject to more
detailed discussion therein, the Merger Agreement and related agreements
contemplate each of the following: (i) a license, pursuant to the License
Agreement, of technology related to the Company's products in exchange for a
one-time license fee of $1.5 million; (ii) that Micron will, subject to
certain conditions and requirements, provide up to $3.5 million in financial
assistance (in the form of secured loans or guarantees of secured loans) to
the Company; (iii) restructuring of the Company's Board of Directors following
consummation of the Offer by increasing the size of the board or resignation
of incumbent directors to cause Micron nominees to hold a majority or more of
the seats on the Company's Board, subject to retention of at least one
incumbent director until the Effective Time; and (iv) the consummation of the
Merger following satisfaction or waiver of the conditions precedent thereto
specified in the Merger Agreement (including obtaining any necessary
shareholder approvals). See
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Section 10. In addition to the foregoing, Micron intends as soon as
practicable to commence integrating certain manufacturing, marketing, sales
and purchasing functions of Micron and the Company in order to reduce expenses
and achieve other financial and operational synergies. Finally, as discussed
in Section 13, following consummation of the Merger, Micron intends to cause
the delisting of the Shares by the Nasdaq National Market and the termination
of registration of the Shares pursuant to Rule 12g-4 under the Exchange Act.
Except as indicated in this Offer to Purchase, Micron does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or its subsidiaries, a sale or transfer of a material
amount of assets of the Company or its subsidiaries or any material change in
the Company's capitalization or dividend policy or any other material changes
in the Company's corporate structure or (except as indicated above in this
"Plans for the Company" section) business, or the composition of the Board of
Directors or the Company's management.
Stockholder approval and appraisal. Under Delaware Law, the approval of the
Board of Directors and, except as described below, the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. The Board of Directors of the Company has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and, unless the Merger is consummated pursuant to the short-form
merger provisions under Delaware Law described below, the only remaining
required corporate action of the Company is the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. Accordingly, if the Minimum
Condition is satisfied, Purchaser will have sufficient voting power to cause
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholder.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
expiration of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby, if such action
is required. Micron and Purchaser have agreed that all Shares owned by them
and their subsidiaries will be voted in favor of the Merger Agreement and the
transactions contemplated thereby at any such meeting.
If Purchaser purchases Shares sufficient to satisfy the Minimum Condition to
the Offer, the Merger Agreement provides that Purchaser will be entitled to
designate representatives to serve on the Board in proportion to Purchaser's
ownership of Shares following such purchase. See Section 10. Purchaser expects
that such representation would permit Purchaser to exert control over the
Company's conduct of its business and operations.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, if any, constitutes at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's stockholders. Micron, Purchaser and the
Company have agreed to use their reasonable best efforts to take, or cause to
be taken, all actions necessary, proper or advisable to consummate and make
effective in the most expeditious manner possible the Merger and the
transactions contemplated by the Merger Agreement. If Purchaser does not
acquire such number of Shares which, when added to the Shares owned of record
by Purchaser on such date, constitutes 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 significantly longer period of
time will be required to effect the Merger.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders will have certain rights under
Delaware Law to dissent and demand appraisal of, and to receive payment in
cash of the fair value of, their Shares. Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares, as of the day prior to the date on which the
stockholders' vote was taken approving the Merger or similar business
combination (excluding any
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element of value arising from the accomplishment or expectation of the
Merger), required to be paid in cash to such dissenting holders for their
Shares. In addition, such dissenting stockholders would be entitled to receive
payment of a fair rate of interest from the date of consummation of the Merger
on the amount determined to be the fair value of their Shares. In determining
the fair value of the Shares, the court is required to take into account all
relevant factors.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions. Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction be
filed with the Commission and disclosed to stockholders prior to consummation
of the transaction. Purchaser believes that Rule 13e-3 will not be applicable
to the Offer or the Merger. However, no assurances can be given that the
Commission will not take the position that Rule 13e-3 is applicable to the
Offer or the Merger.
12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company will not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of Micron, declare or pay any
dividends on or make any other distributions in respect of any capital stock
or split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ QUOTATION AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and will
reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Depending upon the aggregate market value and per share price of any Shares
not purchased pursuant to the Offer, the Shares may no longer meet the
standards for continued inclusion in the Nasdaq National Market System, which
require, among other things, that an issuer have at least 200,000 publicly
held shares with a market value of $1 million held by at least 400
stockholders or 300 stockholders holding round lots. If these standards were
not met, quotations might continue to be published in the over-the-counter
"additional list" or in one of the "local lists," but if the number of holders
of Shares falls below 300, or if the number of publicly held Shares falls
below 100,000, or there is not at least two market makers for the Shares, the
National Association of Securities Dealers ("NASD") rules provide that the
securities would no longer be "authorized" for Nasdaq reporting and Nasdaq
would cease to provide any quotations. Shares held directly or indirectly by
an officer or director of the Company, or by any beneficial owner of more than
10 percent of the Shares, ordinarily will not be considered as being publicly
held for this purpose. In the event the Shares were no longer eligible for
Nasdaq quotation, quotations might still be available from other sources. The
extent of the public market for the Shares and availability of such quotations
would, however, depend upon the number of holders of Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration under the Exchange
Act, as described below, and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE
BOARD"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those descried above regarding listing and market quotations, following the
Offer it is possible that the Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for loans made by
brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are not listed on a national
securities exchange or Nasdaq and there are fewer than 300 record holders of
the Shares. Termination of registration of the Shares under the Exchange Act
would reduce substantially the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the
25
<PAGE>
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions no
longer applicable to the Company. Furthermore, if the Purchaser acquires a
substantial number of Shares or the registration of the Shares under the
Exchange Act were to be terminated, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 under the Securities Act of 1933 may be
impaired or eliminated. If registration of the Shares under the Exchange Act
were terminated prior to the consummation of the Merger, the Shares would no
longer be "margin securities" or be eligible for Nasdaq reporting.
Micron intends to cause the delisting of the Shares by the Nasdaq National
Market and the termination of registration of the Shares pursuant to Rule 12g-
4 under the Exchange Act following consummation of the Merger.
14. CERTAIN CONDITIONS OF THE OFFER. The Merger Agreement provides that,
notwithstanding any other provision of the Offer or the Merger Agreement, and
in addition to (and not in limitation of) Purchaser's rights to extend and
amend the Offer (subject to certain limitations), Purchaser shall not be
required to accept for payment, purchase or pay for, subject to Rule 14e-1(c)
under the Exchange Act, any Shares tendered pursuant to the Offer if (a) any
waiting period (and any extension thereof) under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated; (b) the Minimum Condition is not satisfied; or (c) if, upon the
scheduled expiration date of the Offer (as extended, if applicable), and
before acceptance of the Shares for payment or payment therefor, any of the
following occur which in the reasonable good faith judgement of Micron or
Purchaser, and regardless of the circumstances giving rise to any such
condition (other than action or inaction by Micron or any of its subsidiaries
which constitutes a breach of the Merger Agreement), makes it inadvisable to
proceed with or to accept the Shares for payment: (i)(1) there shall be
pending any suit, action or proceeding brought by or on behalf of any
Governmental Entity (or the staff of the Federal Trade Commission or the staff
of the Antitrust Division of the Department of Justice shall have recommended
the commencement of such), any shareholder of the Company or any other person
or party, directly or indirectly, challenging the acquisition by Micron or
Purchaser of any Shares of the Company's Common Stock, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, or alleging (on grounds that Purchaser reasonably and in good faith
determines are reasonably likely to result in financial exposure to the
Company in excess of available insurance coverage and/or proceeds) that any
such acquisition or other transaction relates to, involves or constitutes a
violation by the Company or its directors of federal securities law or
applicable corporate statutes or principles, (2) seeking to prohibit or limit
the ownership or operation by the Company, Micron or any of their respective
subsidiaries of a material portion of the business or assets of the Company
and its subsidiaries, taken as a whole, or Micron and its subsidiaries, taken
as a whole, or to compel the Company or Micron to dispose of or hold separate
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Micron and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other transactions contemplated
by the Merger Agreement, (3) seeking to impose material limitations on the
ability of Micron or Purchaser to acquire or hold, or to exercise full rights
of ownership of, any of the Shares accepted for payment pursuant to the Offer,
including the right to vote any such Shares on all matters properly presented
to the stockholders of the Company, (4) seeking to prohibit Micron or any of
its subsidiaries from effectively managing or controlling in any material
respect the business or operations of the Company and its subsidiaries taken
as a whole, (5) which is likely to result in a material diminution in the
value of the Company or (6) seeking to impose a material condition to the
Offer, the Merger Agreement or the Merger which would be materially adverse to
Micron; or (ii) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court (other than the applicable HSR waiting period
referred to above) that is reasonably likely to result (including amendment of
the Schedule 14D-9), in any of the consequences referred to in (c)(i)(1)
through (c)(i)(6) above; or (iii) the Company shall have breached, or failed
to perform, in any material respect, any obligation or to comply in any
material respect with any agreement or
26
<PAGE>
covenant of the Company to be performed or complied with or any representation
or warranty of the Company in the Merger Agreement shall have failed to be
true and correct, in any material respect, as of the date of the Merger
Agreement or shall have since ceased to be true and correct in any material
respect at any time thereafter, or (iv) the Board of Directors of the Company
or any committee thereof shall have (1) failed to recommend the Offer, Merger
or the Merger Agreement (including failure to include such recommendation in
the Schedule 14D-9) or so resolved, (2) withdrawn or modified (including the
amendment of the Schedule 14D-9) in a manner adverse to Micron or Purchaser
its approval or recommendation of the Offer, the Merger or the Merger
Agreement or so resolved, (3) approved or recommended any takeover proposal,
or so resolved, (4) authorized the redemption or amendment of the Rights
Agreement following receipt of any takeover proposal, or so resolved, (5) upon
a request to reaffirm the Company's approval or recommendation of the Offer,
the Merger Agreement or the Merger, failed to do so within two business days
after such request is made, or so resolved, or (v) the Company shall have
entered into any letter of intent, acquisition agreement or similar agreement
related to a Superior Proposal, or the Company's Board of Directors or
committee thereof shall have so resolved; or (vi) the Merger Agreement shall
have been terminated in accordance with its terms; or (vii) there shall have
occurred since the date of the Merger Agreement any Material Adverse Change in
the Company and its subsidiaries taken as a whole or any event that is
reasonably likely to result in a Material Adverse Change in the Company and
its subsidiaries taken as a whole; or (viii) any bankruptcy proceedings shall
have been instituted with respect to the Company and not dismissed. The Merger
Agreement provides that the foregoing conditions are for the sole benefit of
Micron, Purchaser and their affiliates and may be asserted by Micron or
Purchaser regardless of the circumstances giving rise to such condition (other
than any action or inaction by Micron or any of its subsidiaries which
constitutes a breach of the Merger Agreement). All the foregoing conditions
other than the Minimum Condition may be waived by Micron or Purchaser in whole
or in part at any time and from time to time in the sole discretion of Micron
or Purchaser. The failure by Micron or Purchaser at any time to exercise its
rights with respect to the foregoing conditions 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 of any such rights with
respect to other facts and circumstances; and each right shall be deemed an
ongoing right with respect to which Micron or Purchaser may assert its rights
at any time and from time to time prior to expiration of the Offer.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Micron and discussions of representatives of Micron with
representatives of the Company during Micron's investigation of the Company
(see Section 10), neither Purchaser nor Micron is aware of any governmental
permit that appears to be material to the business of the Company and the
subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set
forth below, of any approval or other action by any domestic (federal or
state) or foreign governmental, administrative or regulatory authority or
agency which would be required prior to the acquisition of Shares by Purchaser
pursuant to the Offer. Should any such approval or other action be required,
it is Purchaser's present intention to seek such approval or action. Purchaser
does not currently intend, however, to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such action or the receipt of
any such approval (subject to Purchaser's right to decline to purchase Shares
if any of the conditions in Section 14 shall have occurred). There can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result
to the business of the Company, Purchaser or Micron or that certain parts of
the businesses of the Company, Purchaser or Micron might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or other action or in the event that such
approval was not obtained or such other action was not taken. Purchaser's
obligation under the Offer to accept for payment and pay for Shares is subject
to certain conditions, including conditions relating to the legal matters
discussed in this Section 15. See Section 14.
State Takeover Laws. The Company is incorporated under the law of the State
of Delaware. In general, Section 203 of Delaware Law prevents an "interested
stockholder" (generally a person who owns or has the
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right to acquire 15% or more of a corporation's outstanding voting stock, or
an affiliate or associate thereof) from engaging in a "business combination"
(defined to include mergers and certain other transactions) with a Delaware
corporation for a period of three years following the date such person became
an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the
business combination or the transaction in which the interested stockholder
became an interested stockholder. Section 203 is inapplicable to the Offer and
the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However, in 1987
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining stockholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, Purchaser will take
such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
is applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment any Shares tendered pursuant
to the Offer, or be delayed in continuing or consummating the Offer, and the
Merger. In such case, Purchaser may not be obligated to accept for payment any
Shares tendered. See Section 14.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
until certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to such
requirements. See Section 2.
Pursuant to the HSR Act, during the week of June 16, 1997, Micron intends to
file a Pre-merger Notification and Report Form in connection with the purchase
of Shares pursuant to the Offer with the Antitrust Division and the FTC. Under
the provision of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by Micron. Accordingly, the
waiting period under the HSR Act applicable to the purchase of Shares pursuant
to the Offer will expire at 11:59 P.M., New York City time, fifteen calendar
days after such filing is made, unless such waiting period is terminated by
the FTC and the Antitrust Division or extended by a request from the FTC or
the Antitrust Division for additional information or documentary material
prior to the expiration of the waiting period. If either the FTC or the
Antitrust Division were to request additional information or documentary
material from Micron and/or the Company with respect to the Offer, the waiting
period with respect to the Offer would expire at 11:59 P.M., New York City
time, on the tenth calendar day after the date of substantial compliance by
Micron and the Company with such request. Thereafter, the waiting period could
be extended only by court order. If the acquisition of Shares is delayed
pursuant to a request by the FTC or the Antitrust Division for additional
information or documentary material pursuant to the HSR Act, the Offer may,
but need not, be extended and, in any event, the purchase of and payment for
Shares will be deferred until 10 days after the request is substantially
complied with, unless the extended period expires on or before the date when
the initial 15-day period would otherwise have expired, or unless the waiting
period is sooner terminated by the FTC and
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<PAGE>
the Antitrust Division. Only one extension of such waiting period pursuant to
a request for additional information is authorized by the HSR Act and the
rules promulgated thereunder, expect by court order. Any such extension of the
waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law.
See Section 4. It is a condition to the Offer that the waiting period
applicable under the HSR Act to the Offer expire or be terminated. See Section
2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Purchaser pursuant to the Offer. At any time before or after the purchase
of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase
of Shares pursuant to the Offer or seeking the divestiture of Shares purchased
by Purchaser or the divestiture of substantial assets of Micron, the Company
or their respective subsidiaries. Private parties and state attorneys general
may also bring legal action under federal or state antitrust laws under
certain circumstances. Based upon an examination of information available to
Micron relating to the businesses in which Micron, the Company and their
respective subsidiaries are engaged, Micron and Purchaser believe that the
Offer and the Merger will not violate the antitrust laws. Nevertheless, there
can be no assurance that a challenge to the Offer on antitrust grounds will
not be made or, if such a challenge is made, what the result would be. See
Section 14 for certain conditions to the Offer.
16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Montgomery Securities has been retained on an exclusive basis to render
financial advisory services in connection with the Offer and the Merger. In
addition, Montgomery Securities has been engaged to act as Dealer Manager in
connection with the Offer. Montgomery Securities will be paid $300,000 in
connection with such engagements upon successful completion of the
transactions contemplated by the Merger Agreement. Montgomery Securities will
also be reimbursed for its reasonable fees and expenses and has been granted
customary indemnity.
MacKenzie Partners, Inc. has been retained to serve as the Information Agent
in connection with the Offer. The Information Agent will be paid approximately
$6,000 in fees for its services, will be reimbursed for reasonable out-of-
pocket expenses and has been provided with customary indemnity. The
Information Agent may contact holders of Shares by mail, telephone, telex,
telecopy, telegraph or personal interview and may request banks, brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners.
Norwest Bank Minnesota, N.A. has been retained as the Depositary in
connection with the Offer. The Depositary will be paid reasonable and
customary compensation for its services in connection with the Offer, will be
reimbursed for its reasonable out-of-pocket expenses in connection therewith
and has been provided with customary indemnity for certain liabilities and
expenses in connection therewith. In addition, brokers, dealers, commercial
banks and trust companies will be reimburse for customary handling and mailing
expenses incurred by them in forwarding material to their customers.
17. EMPLOYMENT AGREEMENTS. A key consideration to the Purchaser and Micron
in connection with the Offer was to secure continuing employment arrangements
with key executives. Accordingly, the Company and each of Robert Puette,
Bulent Erbilgin, Terry Hartsfield and Steven Huey have executed an Employment
Term Sheet (each an "EMPLOYMENT TERM SHEET"), contemporaneously with execution
of the Merger Agreement. Messrs. Puette, Erbilgin, Hartsfield and Huey
currently serve as the Company's Chairman, President and Chief Executive
Officer, Vice President, Engineering, Vice President, Customer Satisfaction
and Chief Quality Officer, and Vice President, Marketing, respectively and the
Employment Term Sheets contemplate such persons holding similar positions with
the Surviving Corporation. The Employment Term Sheets provide for annual
salary ($330,000 for Mr. Puette, $192,000 for Mr. Erbilgin, $175,000 for Mr.
Hartsfield and $192,000 for Mr. Huey) and contemplate payment to such persons
of target bonuses (up to $600,000 for Mr. Puette, up to $192,000 for
29
<PAGE>
Mr. Erbilgin, up to $192,000 for Mr. Huey and up to $175,000 for Mr.
Hartsfield) based on the Company accomplishing certain financial and
technological milestones through June 30, 1998, including the achievement of a
significant improvement in the Company's financial performance. The Employment
Term Sheets further contemplate the grant of stock options to such persons to
purchase shares of Common Stock of Micron which will be subject to vesting
over a five year period (75,000 for Mr. Puette, 25,000 for Mr. Erbilgin,
25,000 for Mr. Huey and 25,000 for Mr. Hartsfield). Effectiveness of the
Employment Term Sheets are contingent upon (1) the acquisition by Micron of
more than 50% of the total voting control of the Company within 120 days of
June 8, 1997 and (2) the approval of the Board of Directors of Micron. This
description of the Employment Term Sheets is qualified in its entirety by
reference to the Employment Term Sheets which have been filed as an Exhibit to
the Schedule 14D-1.
The Company had previously entered into change of control agreements (the
"CHANGE OF CONTROL AGREEMENTS") with the following executive officers of the
Company: Robert Puette, Bulent Erbilgin, Steve Huey, Vivian Golub, Terry
Hartsfield, and Dan McCammon. A "Change of Control" is defined to occur if
another party becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities representing fifty
percent or more of the total voting power of the Company or, with certain
exceptions, upon the merger or consolidation of the Company with any other
company, or if the stockholders of the Company approve a plan of complete
liquidation of the Company, or upon an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets. In the
event of a change of control which results in the employee's involuntary
termination without cause or constructive termination within twelve months
following the change of control, the employee is entitled to receive the
following benefits: (i) a lump sum payment equal to (a) 12 months of pay at
the employee's gross base salary rate and (b) amounts payable under the
Company's Executive Bonus Plan; (ii) continued medical, dental and vision care
benefits including dependent coverage for a period of twelve months payable by
the Company; and (iii) the acceleration of one half of the employee's unvested
outstanding stock options (unless such acceleration would prevent the
Company's use of "pooling of interests" accounting treatment and the purchase
method of accounting for the change of control transaction is not acceptable
to the successor to the Company). The Company has also entered into change of
control agreements with certain non-executive officers providing for extended
health care benefits and a lump sum payment equal to six month severance upon
a change of control. The consummation of the transactions contemplated by the
Merger Agreement constitutes a change of control for purposes of the Change of
Control Agreements. However, Messrs. Puette, Erbilgin, Hartsfield, and Huey
have agreed in the Employment Term Sheets that the acceptance of the position
proposed to each therein would not constitute actual or constructive
termination of employment under the terms of such Change of Control Agreement
but that the Change of Control Agreement would otherwise remain in effect.
18. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statue prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
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<PAGE>
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Micron and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
Exhibits, may be inspected at, and copies may be obtained from, the same
places and in the same manner as set forth in Section 7 (except that they will
not be available at the regional offices of the Commission).
Payette Acquisition Corporation
June 16, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PURCHASER, MICRON AND MTI
The following tables set forth the name, present principal occupation or
employment and material occupation, positions, offices or employment for the
past five years of each director and executive officer of Purchaser, Micron
and MTI. The business address of each such person is 900 E. Karcher Road,
Nampa, Idaho 83687 with respect to the executive officers and directors of
Purchaser and Micron and 8000 S. Federal Way, P.O. Box 6, Boise, Idaho 83707
with respect to the executive officers and directors of MTI.
Unless otherwise indicated, each person listed below (i) has held his
principal occupation for the past five years, (ii) has not been convicted in a
criminal proceeding and has not been party to a proceeding related to U.S.
state and federal securities laws, and (iii) is a citizen of the United
States.
1. Directors and Executive Officers of Purchaser:
<TABLE>
<CAPTION>
NAME POSITION WITH PURCHASER
---- -----------------------
<C> <S>
T. Erik Oaas................ President, Treasurer, Secretary and Director
</TABLE>
2. Directors and Executive Officers of Micron:
<TABLE>
<CAPTION>
NAME POSITION WITH MICRON
---- --------------------
<C> <S>
Joseph M. Daltoso........... Chairman of the Board, President and Chief
Executive Officer
T. Erik Oaas................ Executive Vice President, Finance and Chief
Financial Officer; Director
Gregory D. Stevenson........ Executive Vice President, Operations and Chief
Operating Officer; Director
Robert F. Subia............. Chairman of the Board, President and Chief
Executive Officer of CMS; Director
Michael S. Adkins........... Vice President, SpecTek, a division of Micron
Steven P. Arnold............ Vice President, Legal and General Counsel
Jess Asla................... Vice President, Operations of CMS
George A. Haneke............ Senior Vice President, International Operations
Nelson L. Hanks............. Senior Vice President, Purchasing
Dean A. Klein............... Senior Vice President, Chief Technical Officer
Brian C. Klene.............. Executive Vice President, Sales and Marketing
Steven H. Laney............. Vice President, Corporate Communications
JoAnne S. Pfeifer........... Vice President, Administration and Corporate
Secretary
Gene P. Thomas, Jr.......... Vice President, Business Development
Steven R. Appleton.......... Director
Jerry M. Hess............... Director
Robert A. Lothrop........... Director
John R. Simplot............. Director
</TABLE>
Joseph M. Daltoso served as MTI's Memory Applications Group Manager from May
1990 until April 1992, when he was named President and a director of the
former Micron Custom Manufacturing Services, Inc., then a wholly-owned
subsidiary of MTI ("MCMS"). In July 1992, Mr. Daltoso was named Chairman of
the Board of Directors of MCMS and, in August 1994, was also named Chief
Executive Officer of MCMS. Mr. Daltoso was named Chairman of the Board,
President and Chief Executive Officer of Micron on April 17, 1995.
I-1
<PAGE>
T. Erik Oaas served as the Administration Manager of MTI's Memory
Applications Group from July 1988 to April 1992, and as the Administration
Manager of MCMS from April 1992 until July 1992, when he was named Vice
President, Finance and Treasurer, and a director of MCMS. On April 7, 1995,
Mr. Oaas was appointed Vice President, Finance and Chief Financial Officer,
and a director of Micron. On January 28, 1997, Mr. Oaas was appointed
Executive Vice President, Finance and Chief Financial Officer of Micron.
Gregory D. Stevenson served as MTI's Partials Business Unit Manager from
April 1990 until April 1992. Mr. Stevenson joined MCMS as Component Recovery
Business Unit Manager. In July 1992, he was appointed Vice President,
Component Recovery of MCMS, and in September 1992, was also appointed a
director of MCMS. In August 1993, Mr. Stevenson was appointed Vice President,
Operations of MCMS. On April 7, 1995, Mr. Stevenson was appointed Vice
President, Nampa Operations and served in that position until July 1995 when
he was appointed Executive Vice President, Operations and a director of
Micron. On January 28, 1997, Mr. Stevenson was appointed Executive Vice
President, Operations and Chief Operating Officer of Micron.
Robert F. Subia served as a Regional Sales Manager for MTI from 1989 until
February 1993. In February 1993, Mr. Subia joined MCMS as Director of Sales
and held this position until August 1994, when he was appointed Vice
President, Sales. On April 17, 1995, Mr. Subia was appointed Chairman,
President and Chief Executive Officer of CMS. Mr. Subia was appointed a
director of Micron in October 1995.
Michael S. Adkins served as MTI's Systems Integration Group Manager from
April 1990 until November 1993 when he was named President of Systems
Integration Group, Inc., a wholly-owned subsidiary of MTI. In November 1994,
Mr. Adkins was named General Manager of MTI's Systems Integration Group. In
July 1996, Mr. Adkins was named Executive Director of SpecTek, a division of
Micron, and became Vice President of SpecTek in January 1997.
Steven P. Arnold joined MTI in April 1995 as Associate General Counsel,
after serving seven years as an Associate with the law firm of Arnold White
and Durkee. In June 1996, Mr. Arnold was named Chief Counsel, Intellectual
Property of Micron, and was named Vice President, Legal and General Counsel of
Micron in January 1997.
Jess Asla served as the Process Engineer Manager for MTI's Memory
Applications Group from 1988 until July 1994, when he was named Director of
Engineering for MCMS. On April 17, 1995, Mr. Asla was appointed Vice
President, Operations of CMS.
George A. Haneke joined MTI in May 1988 and was named Accounting Manager in
1992. Mr. Haneke joined Micron Computer, Inc. as its Vice President, Finance,
Treasurer and Chief Financial Officer in September 1993. On April 7, 1995, Mr.
Haneke was appointed Vice President, Chief Information Officer of Micron. On
January 28, 1997, Mr. Haneke was appointed Senior Vice President,
International Operations of Micron.
Nelson L. Hanks served as a consultant for MTI from 1989 to 1991. In 1991,
Mr. Hanks was named Chief Executive Officer of Micron Europe Limited, a
wholly-owned subsidiary of MTI, and served in this position until 1993. From
1993, Mr. Hanks served as Special Projects Manager for MTI. On April 7, 1995,
Mr. Hanks was appointed Vice President, Purchasing. On January 28, 1997, Mr.
Hanks was appointed Senior Vice President, Purchasing of Micron.
Dean A. Klein was a co-founder of and also served as President of PC Tech,
Inc., a wholly-owned subsidiary of Micron, from its inception in 1984. After
the acquisition of PC Tech, Inc. by Micron in February 1992, Mr. Klein served
as Vice President, Research and Development of Micron and President of PC
Tech, Inc. In February 1996, Mr. Klein was named Vice President and Chief
Technical Officer of Micron. On January 28, 1997, Mr. Klein was appointed
Senior Vice President and Chief Technical Officer of Micron.
Brian C. Klene joined MTI in January 1989 as Director, Sales and Marketing
of the Memory Applications Group and served in that position until July 1990
when he was named Regional Sales Manager for MTI. He
I-2
<PAGE>
served in that position until January 1991 when he was named National Sales
Manager of MTI. In July 1995, Mr. Klene joined Micron as Executive Vice
President, Sales and Marketing.
Steven H. Laney joined Micron Semiconductor, Inc. ("MSI"), then a wholly-
owned subsidiary of MTI, as Product Manager in 1989, and was named Marketing
Manager in June 1991. In July 1992, Mr. Laney became Marketing Manager of
MCMS, and was named Director of Marketing of MCMS in May 1993. In April, 1995,
Mr. Laney was named Micron's Director of Investor Relations and was named
Micron's Vice President, Corporate Communications in October 1996.
JoAnne S. Pfeifer served as Accounting Manager for MTI from 1989 to 1992. In
August 1992, Ms. Pfeifer joined MCMS as Administration Projects Coordinator,
and was named Administration Manager in January 1995. In March 1995, Ms.
Pfeifer became Administration Manager for Micron, and was named Director of
Administration in March 1996. In July of 1996, Ms. Pfeifer was named Corporate
Secretary. On January 28, 1997, Ms. Pfeifer was appointed Vice President,
Administration of Micron.
Gene P. Thomas, Jr. served in sales managerial roles with Polaroid
Corporation and CompuAdd Computer Corp. and was appointed Director of
Marketing for CompuAdd in 1993. Mr. Thomas joined Micron Computer, Inc. as
Director of Sales in March 1993 and was appointed Vice President, Sales and
Marketing in December 1993. On April 7, 1995, Mr. Thomas was appointed Vice
President, Micron Computer Sales and Marketing, and on July 31, 1995, was
named Vice President, Marketing. On January 28, 1997, Mr. Thomas was appointed
Vice President, Business Development.
Steven R. Appleton joined MTI in February 1983 and has served in various
capacities with MTI and its subsidiaries, including overseeing MTI's
semiconductor operations as President and Chief Executive Officer of MSI from
July 1992 to November 1994. Except for a nine day period in January 1996,
since May 1994 Mr. Appleton has served as a member of MTI's Board of Directors
and since September 1994, Mr. Appleton has served as the Chief Executive
Officer, President and Chairman of the Board of Directors of MTI. Mr. Appleton
has served as a member of the Board of Directors of Micron since 1995.
Jerry M. Hess has served as Chairman and Chief Executive Officer of J.M.
Hess Construction Company, Inc. since 1959. Mr. Hess has served on MTI's Board
of Directors since 1994. On April 7, 1995, Mr. Hess was appointed a director
of Micron.
Robert A. Lothrop served as the Senior Vice President of the J.R. Simplot
Company, a food processing, fertilizer and agricultural chemicals
manufacturing company, from January 1986 until his retirement in January 1991.
Mr. Lothrop was elected to MTI's Board of Directors in 1986. In 1992, he was
elected to the Board of Directors of MSI and resigned as a director of MTI.
Mr. Lothrop was re-elected to MTI's Board of Directors in 1994. On April 7,
1995, Mr. Lothrop was appointed a director of Micron.
John R. Simplot founded and served as Chairman of the Board of Directors of
the J.R. Simplot Company prior to his retirement in April 1994. Mr. Simplot
currently serves as Chairman Emeritus of the J.R. Simplot Company. Mr. Simplot
has served on MTI's Board of Directors since 1980. On April 7, 1995, Mr.
Simplot was appointed a director of Micron.
I-3
<PAGE>
3. The Officers and Directors of MTI are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH MICRON
---- --------------------
<C> <S>
Steven R. Appleton.......... Chairman of the Board of Directors, Chief
Executive Officer and President
Donald D. Baldwin........... Vice President of Sales
Kipp A. Bedard.............. Vice President of Corporate Affairs
Eugene H. Cloud............. Vice President of Marketing
Robert M. Donnelly.......... Vice President of Memory Product
D. Mark Durcan.............. Vice President of Process Research & Development
Jay L. Hawkins.............. Vice President of Manufacturing
Roderic W. Lewis............ Vice President of Legal Affairs, General Counsel
and Corporate Secretary
Nancy M. Self............... Vice President of Administration
Steven L. Stout............. Vice President of Facilities
Wilbur G. Stover, Jr........ Vice President of Finance and Chief Financial
Officer
Jerry M. Hess............... Director
Robert A. Lothrop........... Director
Thomas T. Nicholson......... Director
Don J. Simplot.............. Director
John R. Simplot............. Director
Gordon C. Smith............. Director
</TABLE>
See descriptions above for information regarding Steven R. Appleton, Jerry
Hess, Robert Lothrop and John R. Simplot.
Donald D. Baldwin joined MTI in April 1984 and has served in various
capacities with the Company and its subsidiaries. Mr. Baldwin first became an
officer of MTI in May 1991 and has served in various officer positions,
including Vice President, Sales of MSI from July 1992 to November 1994. Mr.
Baldwin has served as Vice President of Sales for MTI since November 1994.
Kipp A. Bedard joined MTI in November 1983 and has served in various
manufacturing and sales positions with the Company and its subsidiaries. Mr.
Bedard first became an officer of MTI in April 1990 and has served in various
officer positions, including Vice President, Corporate Affairs of MSI from
July 1992 to January 1994. Mr. Bedard has served as Vice President of
Corporate Affairs for MTI since January 1994.
Eugene H. Cloud joined MTI in January 1985 and has served in various
capacities with the Company and its subsidiaries. Mr. Cloud first became an
officer of MTI in April 1990 and has served in various officer positions,
including Vice President, Marketing of MSI from July 1992 to November 1994.
Mr. Cloud has served as Vice President of Marketing for MTI since November
1994.
Robert M. Donnelly joined MTI in September 1988 and has served in various
technical positions with the Company and its subsidiaries. Mr. Donnelly first
became an officer of MTI in August 1989 and has served in various officer
positions, including Vice President, SRAM Products Group of MSI from July 1992
to November 1994. Mr. Donnelly was named Vice President, SRAM Products Group
for MTI in November 1994, as Vice President, SRAM Design and Product
Engineering for MTI in October 1995 and has served as Vice President of Memory
Products for MTI since November 1996.
D. Mark Durcan joined MTI in 1984 as a diffusion engineer. Since that time
he has held a series of positions of increasing responsibility with the
Company and its subsidiaries, including Manager of Process Research and
Development. Since June 1996, Mr. Durcan has served as Vice President of
Process Research and Development.
Jay L. Hawkins joined MTI in March 1984 and has served in various
manufacturing positions for the Company and its subsidiaries, including
Director of Manufacturing for MSI from July 1992 to November 1994, Director of
Manufacturing for MTI from November 1994 to February 1996 and as Vice
President of Manufacturing Administration and Back-end for MTI from February
1996 to November 1996. Since November 1996, Mr. Hawkins has served as Vice
President of Manufacturing for MTI.
I-4
<PAGE>
Roderic W. Lewis joined MTI in 1991 as Associate General Counsel. He became
Assistant General Counsel in 1993. From April 1995 to July 1996, Mr. Lewis
served as Vice President, General Counsel and Corporate Secretary for Micron.
In July 1996, Mr. Lewis was named as Vice President, General Counsel and
Corporate Secretary for MTI. Since November 1996, Mr. Lewis has served as Vice
President of Legal Affairs, General Counsel and Corporate Secretary for MTI.
Nancy M. Self joined MTI in February 1988 as a benefits specialist. In July
1988, she was named Benefits Manager and served in that position until July
1989, when she was named Risk Manager. Since March 1993, Ms. Self has served as
Vice President of Administration.
Steven L. Stout joined MTI in September 1983 and has served in various
positions for the Company and its subsidiaries, including Plant Operations
Manager for MSI from January 1993 to November 1994. Since February 1996, Mr.
Stout has served as Vice President of Facilities for MTI.
Wilbur G. Stover, Jr. joined MTI in June 1989 and has served in various
financial positions with the Company and its subsidiaries, including Controller
from February 1990 to July 1992 and Vice President, Finance and Chief Financial
Officer of MSI from August 1992 to September 1994. Since September 1994, Mr.
Stover has served as MTI's Chief Financial Office and Vice President of
Finance. From October 1994 through September 1996, Mr. Stover served as a
member of the MTI Board of Directors.
Thomas T. Nicholson serves as Vice President of Honda of Seattle. Mr.
Nicholson also serves as President of Mountain View Equipment, a farm equipment
dealership, and is a partner of CLT&T Land & Livestock. He has served on MTI's
Board of Directors since 1980.
Don J. Simplot served as the President of Simplot Financial Corporation, a
wholly-owned subsidiary of the J. R. Simplot Company, from February 1985 until
January 1992. In April 1994, Mr. Don J. Simplot was appointed as a member of
the Office of the Chairman of the J.R. Simplot Company. He has served on the
Board of Directors of MTI since 1982. Mr. Don Simplot is also a director of
AirSensors, Inc., an alternative fuel conversion equipment company.
Gordon C. Smith served in various management positions from July 1980 until
January 1992 for Simplot Financial Corporation, a wholly-owned subsidiary of
the J.R. Simplot Company. From May 1988 until his retirement in March 1994, Mr.
Smith served as the President and Chief Executive Officer of the J.R. Simplot
Company. He was elected to the Board of Directors of MTI in 1990.
I-5
<PAGE>
The Depositary for the Offer is:
NORWEST BANK MINNESOTA, N.A.
BY MAIL: BY FACSIMILE BY OVERNIGHT COURIER:
TRANSMISSION:
Norwest Shareowner Norwest Shareowner
Services (612) 450-4185 Services
P. O. Box 64858 Confirm by Telephone: 161 North Concord Exchange
St. Paul, MN 55164-0858 (612) 450-4163 Reorganization Department
South St. Paul, MN 55075
By Hand:
Norwest Shareowner Services The Depository Trust Company
161 North Concord Exchange 1st Floor
2nd Floor 55 Water Street
South St. Paul, MN 55075 New York, NY 10041
Questions or requests for assistance may be directed to the Information Agent
at its address and telephone numbers listed below or to the Dealer Manager at
its address and telephone numbers listed below. Additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent. A stockholder may also contact
brokers, dealers, commercial banks or trust companies for assistance concerning
the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Call: (800) 227-4786 (ext. 3076)
or
Collect (415) 627-2000
June 16, 1997
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
NETFRAME SYSTEMS INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 16, 1997
AT
$1.00 NET PER SHARE
BY
PAYETTE ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MICRON ELECTRONICS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 14, 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
NORWEST BANK MINNESOTA, N.A.
By Mail: By Facsimile By Overnight Courier:
Transmission:
Norwest Shareowner (612) 450-4163 Norwest Shareowner
Services Confirm by Telephone: Services
P.O. Box 64858 (612) 450-4158 161 North Concord
St. Paul, MN 55164-0858 Exchange Reorganization
Department
South St. Paul, MN 55075
By Hand:
Norwest Shareowner Services The Depository Trust Company
161 North Concord Exchange, 2nd Floor 1st Floor, 55 Water Street
South St. Paul, MN 55075 New York, NY 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE
ACCOMPANYING INSTRUCTIONS.
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER OF
SHARE SHARES EVIDENCED
CERTIFICATE BY SHARE NUMBER OF SHARES
NUMBER(S) CERTIFICATE(S)* TENDERED**
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PDTC") (each a "BOOK-ENTRY TRANSFER
FACILITY" and collectively, the "BOOK-ENTRY TRANSFER FACILITIES") pursuant to
the book-entry transfer procedure described in Section 3 of the Offer to
Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. See Instruction 2.
Stockholders whose certificates evidencing Shares ("SHARE CERTIFICATES") are
not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis and who
wish to tender their Shares must do so pursuant to the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase. See Instruction 2.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _________________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_] DTC [_] PDTC
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
[_] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) _______________________________________________
Window Ticket No. (if any) ____________________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________________
Name of Institution which Guaranteed Delivery _________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF
TRANSMITTAL CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Payette Acquisition Corporation
("PURCHASER"), a Delaware corporation and a wholly owned subsidiary of Micron
Electronics, Inc., a Minnesota corporation and a subsidiary of Micron
Technology, Inc., a Delaware corporation, the above-described shares of common
stock, par value $.001 per share (the "SHARES"), of NetFRAME Systems
Incorporated (the "COMPANY"), a Delaware corporation, pursuant to Purchaser's
offer to purchase all Shares at $1.00 per Share, net to the seller in cash,
without interest thereon, subject to reduction for any applicable federal back
up or other withholding or stock transfer taxes, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated June 16, 1997 (the
"OFFER TO PURCHASE"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "OFFER"). The undersigned
understands that Purchaser reserves the right to transfer or assign, in whole
or, from time to time, in part, to one or more of its affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed
in respect of such Shares on or after June 10, 1997 (collectively,
"DISTRIBUTIONS"), and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (i)
deliver Share Certificates evidencing such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with
all accompanying evidences of transfer and authenticity, to or upon the order
of Purchaser, (ii) present such Shares and all Distributions for transfer on
the books of the Company and (iii) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Distributions, all
in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Joseph M. Daltoso and T. Erik
Oaas, and each of them, as the attorneys and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or his or her substitute shall, in his or her sole discretion, deem
proper and otherwise act (by written consent or otherwise) with respect to all
the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned or postponed
meeting) or consent in lieu of any such meeting or otherwise. This proxy and
power of attorney is coupled with an interest in the Shares tendered hereby,
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with other
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned
understands that, in order for Shares to be deemed validly tendered,
immediately upon Purchaser's acceptance of such Shares for payment, Purchaser
must be able to exercise full voting and other rights with respect to such
Shares and all Distributions, including, without limitation, voting at any
meeting of the Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restriction,
charges and encumbrances, and that none of such Shares and Distributions will
be subject to any adverse claim. The undersigned, upon request, shall execute
and deliver all additional documents deemed to be necessary or advisable to
complete the sale, the assignment and transfer of the Shares tendered hereby
and all Distributions. In addition, the undersigned shall remit and transfer
promptly to the Depositary for the account of Purchaser all Distributions in
respect of the Shares tendered hereby, accompanied by appropriate
documentation of transfer, and pending such remittance and transfer or
appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
<PAGE>
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased
or not tendered in the name(s) of the registered holder(s) appearing above
under "Description of Shares Tendered". Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions", please mail the check for
the purchase price of all Shares purchased and all Share Certificates
evidencing Shares not tendered or not purchased (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares
purchased and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of, and mail such check and Share Certificates to,
the person(s) so indicated. Unless otherwise indicated herein in the box
entitled "Special Payment Instructions", please credit any Shares tendered
hereby and delivered by book-entry transfer, but which are not purchased, by
crediting the account at the Book-Entry Transfer Facility designated above.
The undersigned recognizes that Purchaser has no obligation, pursuant to the
Special Payment Instructions, to transfer any Shares from the name of the
registered holder(s) thereof if Purchaser does not purchase any of the Shares
tendered hereby.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7) (INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY If the check To be completed ONLY If the check
for the purchase price of Shares or for the purchase price of Shares
Share Certificates evidencing purchased or Share Certificates
Shares not tendered or not evidencing Shares not tendered or
purchased to be issued in the name not purchased are to be mailed to
of someone other than the someone other than the undersigned,
undersigned, or if Shares tendered or to the undersigned at an address
hereby and delivered by book-entry other than that shown under
transfer which are not purchased "Description of Shares Tendered."
are to be returned by credit to an
account at one of the Book-Entry
Transfer Facilities other than that
designated above.
Mail [_] Check [_] Share
Certificate(s) to:
Name: ______________________________
(PLEASE PRINT)
Issue [_] Check [_] Share Address: ___________________________
Certificate(s) to: (ZIP CODE)
Name: ______________________________ ____________________________________
(PLEASE PRINT) Taxpayer Identification or Social
Address: ___________________________ Security Number
(ZIP CODE) (see substitute Form W-9 on reverse
____________________________________ side)
Taxpayer Identification or Social
Security Number
(see substitute Form W-9 on reverse
side)
[_] Credit shares delivered by
book-entry transfer and not
purchased to the account set
forth below:
Check appropriate box:
[_] DTC [_] PDTC
Account Number: ____________________
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 FOLLOWING INSTRUCTIONS)
________________________________________
________________________________________
(SIGNATURE(S) OF HOLDER(S))
Dated: _________________________________________________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 5).
Name(s): _____________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _________________________________________________
Tax Identification or Social Security No.: ___________________________________
(SEE SUBSTITUTE FORM W-9 FOLLOWING INSTRUCTIONS)
GUARANTEE OF SIGNATURES(S)
(SEE INSTRUCTION 1 AND 5)
Authorized Signature: ________________________________________________________
Name: ________________________________________________________________________
(PLEASE PRINT)
Title: _______________________________________________________________________
Name of Firm: ________________________________________________________________
Address: _____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ______________________________________________
Date: ________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" above, or
(b) if such Shares are tendered for the account of a firm which is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of a recognized Medallion Signature Guarantee Program
(each of the foregoing being referred to as an "ELIGIBLE INSTITUTION"). In all
other cases, all signatures on this Letter of Transmittal must be guaranteed
by an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message is utilized, if Shares are to be
delivered by book-entry transfer pursuant to the procedure set forth in
Section 3 of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into
the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's message in the case of a book-entry
delivery, and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the reverse
hereof prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Stockholders whose Share Certificates are not
immediately available, who cannot delivery their Share Certificates and all
other required documents to the Depositary prior to the Expiration Date or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis may tender their Shares pursuant to the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase. Pursuant to such procedure:
(i) such tender must be made by or through an Eligible Institution; (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date; and (iii) the Share Certificates
evidencing all physically delivered Shares in proper form for transfer by
delivery, or a confirmation of a book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility of all Shares delivered by book-
entry transfer, in each case together with a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of book-entry delivery, an Agent's
Message), and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three National Association of Securities
Dealers Automated Quotation--National Market System trading days after the
date of execution of such Notice of Guaranteed Delivery, all as described in
Section 3 of the Offer to Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates and
all other required documents, including delivery through any Book-Entry
Transfer Facility, is at the option and risk of the tendering stockholder, and
the delivery will be deemed made only when actually received by the
Depositary. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this letter of
Transmittal (or a facsimile hereof), all tendering stockholders waive any
right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates
delivered to the Depositary herewith will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the box entitled
"Special Delivery Instructions" on the reverse hereof, as soon as practicable
after the expiration or termination of the Offer. All Shares evidenced by
Share Certificates delivered to the Depositary will be deemed to have been
tendered unless otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificates evidencing such Shares without
alteration, enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate
stock powers are required, unless payment is to be made to, or Share
Certificates evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), in which case,
the Share Certificate(s) evidencing the Shares tendered hereby must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on
such Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority so to act
must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this instruction 6,
Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or
Share Certificate(s) evidencing Shares not tendered or not purchased are to be
issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer
to such other person will be deducted from the purchase price of such Shares
purchased, unless evidence satisfactory to Purchaser of the payment of such
taxes, or exemption therefrom, is submitted. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed
to the Share Certificates evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such Share Certificate is to be sent to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the
appropriate boxes on the reverse of this Letter of Transmittal must be
completed. Stockholders delivering Shares tendered hereby by book-entry
transfer may request that Shares not purchased be credited to such account
maintained at a Book-Entry Transfer Facility as such stockholder may designate
in the box entitled "Special Payment Instructions" on the reverse hereof. If
no such instructions are given, all such Shares not purchased will be returned
by crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Information Agent at its
address or telephone numbers set forth below or to the Dealer Manager at its
address or telephone number set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
<PAGE>
9. SUBSTITUTE FORM W-9. Under the federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required by law to provide
the Depositary (as Payer) with such stockholder's correct TIN on Substitute
Form W-9 below. If such stockholder is an individual, the TIN is such
stockholder's social security number. If the Depositary is not provided with
the correct TIN, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service. In addition, payments that are made to such
stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding. If backup withholding applies, the Depositary
is required to withhold 31% of any payments made to the stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit an Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to such individual's exempt
status. A form W-8 can be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such
stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
See the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional instructions.
PAYER'S NAME:
- -------------------------------------------------------------------------------
PART I--Taxpayer
SUBSTITUTE Identification Number--For ________________________
all accounts, enter Social Security Number
taxpayer identification
number in the box at right.
(For most individuals, this
is your social security
number. If you do not have
a number, see Obtaining a
Number in the enclosed
Guidelines.) Certify by
signing and dating below.
FORM W-9 OR _____________________
DEPARTMENT OF THE TREASURY Employer Identification
INTERNAL REVENUE SERVICE Number
PAYER'S REQUEST FOR TAXPAYER (If awaiting TIN write
IDENTIFICATION NUMBER (TIN) "Applied For")
---------------------------------------------------------
- -------------------------------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding,
see the enclosed Guidelines and complete as instructed
therein.
CERTIFICATION--Under penalties of perjury, I certify that:
NOTE: If the account is in
more than one name, see the
chart in the enclosed
Guidelines to determine
which number to give the
payer.
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
SIGNATURE _________________________________________________________ DATE , 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
FOR ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY
DELIVERY (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, CA 94111
Call: (800) 227-4786 (ext. 3076)
or
Collect at (415) 627-2000
June 16, 1997
<PAGE>
EXHIBIT (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
NETFRAME SYSTEMS INCORPORATED
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates ("SHARE
CERTIFICATES") evidencing shares of common stock, par value $.001 per share
(the "SHARES"), of NetFRAME Systems Incorporated, a Delaware corporation (the
"COMPANY"), are not immediately available, (ii) if Share Certificates and all
other required documents cannot be delivered to Norwest Bank Minnesota, N.A. as
Depositary (the "DEPOSITARY"), prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase (as defined below)) or (iii) if the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary. See
Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
NORWEST BANK MINNESOTA, N.A.
By Mail: By Facsimile Transmission: By Overnight Courier:
Norwest Shareowner Services (612) 450-4163 Norwest Shareowner Services
P. O. Box 64858 Confirm by Telephone: 161 North Concord Exchange
St. Paul, MN 55164-0858 (612) 450-4185 Reorganization Department
South St. Paul, MN 55075
By Hand:
Norwest Shareowner Services The Depository Trust Company
161 North Concord Exchange 1st Floor
2nd Floor 55 Water Street
South St. Paul, MN 55075 New York, NY 10041
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Payette Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Micron Electronics,
Inc., a Minnesota corporation and a subsidiary of Micron Technology, Inc., a
Delaware corporation, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 16, 1997 (the "OFFER TO PURCHASE"), and
the related Letter of Transmittal (which together constitute the "OFFER"),
receipt of each of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure described in
Section 3 of the Offer to Purchase.
Number of Shares:
----------------------- -------------------------------------
Certificate Nos. -------------------------------------
(If Available) SIGNATURE(S) OF HOLDER(S)
- ------------------------------------- Dated:
-------------------------, 1997
- ------------------------------------- Name(s) of Holder(s):
Check one box if Shares will be -------------------------------------
delivered by book-entry transfer -------------------------------------
-------------------------------------
[_] The Depository Trust Company PLEASE TYPE OR PRINT
[_] Philadelphia Depository Trust Company
Account No.
---------------------------- -------------------------------------
ADDRESS
-------------------------------------
ZIP CODE
-------------------------------------
AREA CODE AND TELEPHONE NO.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or which is
a commercial bank or trust company having an office or correspondent in the
United States that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, guarantees to
deliver to the Depositary, at one of its addresses set forth above, Share
Certificates evidencing the Shares tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares, into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company, in each case with delivery of a Letter of Transmittal
(or facsimile thereof) properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery, and any other required
documents, all within three National Association of Securities Dealers
Automated Quotation--National Market System trading days of the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depository and must deliver the Letter of Transmittal and the
certificates for Shares to the Depository within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
- ------------------------------------- -------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ------------------------------------- Name:
ADDRESS --------------------------------
PLEASE TYPE OR PRINT
- ------------------------------------- -------------------------------------
ZIP CODE TITLE
- ------------------------------------- Dated:
AREA CODE AND TELEPHONE NO. --------------------------, 1997
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4)
MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, CA 94111
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
NETFRAME SYSTEMS INCORPORATED
AT
$1.00 NET PER SHARE
BY
PAYETTE ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MICRON ELECTRONICS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON MONDAY, JULY 14, 1997, UNLESS THE OFFER IS EXTENDED.
June 16, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Payette Acquisition Corporation ("PURCHASER"), a
Delaware corporation and a wholly owned subsidiary of Micron Electronics, Inc.
("MICRON"), a Minnesota corporation and a subsidiary of Micron Technology,
Inc., a Delaware corporation, to act as Dealer Manager in connection with
Purchaser's offer to purchase all outstanding shares of common stock, par
value $.001 per share (the "SHARES"), of NetFRAME Systems Incorporated (the
"COMPANY"), a Delaware corporation, at a price of $1.00 per Share, net to the
seller in cash without interest thereon and subject to reduction for any
applicable federal backup or other withholding or stock transfer taxes, upon
the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase, dated June 16, 1997 (the "OFFER TO PURCHASE"), and the related
Letter of Transmittal (which together constitute the "OFFER") enclosed
herewith. Please furnish copies of the enclosed materials to those of your
clients for whose accounts you hold Shares registered in your name or in the
name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT
NUMBER OF SHARES THAT, OWNED OF RECORD BY MICRON OR ANY OF ITS SUBSIDIARIES ON
THE DATE SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (AS DEFINED IN THE OFFER TO PURCHASE), AND (2) THE EXPIRATION OR
TERMINATION OF ALL WAITING PERIODS IMPOSED UPON CONSUMMATION OF THE OFFER BY
THE HART-SCOTT-RODINO ANTI-TRUST IMPROVEMENTS ACT OF 1976 AS AMENDED.
<PAGE>
Enclosed for your information and use are copies of the following documents:
1. Offer to Purchase, dated June 16, 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to Norwest Bank Minnesota, N.A. (the "DEPOSITARY") by
the Expiration Date (as defined in the Offer to Purchase) or if the
procedure for book-entry transfer cannot be completed by the Expiration
Date;
4. A letter to stockholders of the Company from Robert Puette, President
and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 14, 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), (ii) a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares and (iii) any other required documents.
If a holder of Shares wishes to tender, but cannot deliver such holder's
certificates or other required documents, or cannot comply with the procedure
for book-entry transfer, prior to the expiration of the Offer, a tender of
Shares may be effected by following the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the
Information Agent as described in the Offer to Purchase) in connection with
the solicitation of tenders of Shares pursuant to the Offer. However,
Purchaser will reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable with
respect to the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed material may be obtained by contacting
MacKenzie Partners, Inc. (the "INFORMATION AGENT") at its address and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Inquiries with respect to the Offer may also be addressed to Montgomery
Securities at the address and telephone numbers set forth on the back cover
page of the Offer to Purchase.
Very truly yours,
Montgomery Securities
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR
ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF MICRON, PURCHASER, THE
COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF
ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE>
EXHIBIT (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
NETFRAME SYSTEMS INCORPORATED
AT
$1.00 NET PER SHARE
BY
PAYETTE ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MICRON ELECTRONICS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON MONDAY, JULY 14, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase dated June 16, 1997
(the "OFFER TO PURCHASE") and a related Letter of Transmittal (which together
constitute the "OFFER") in connection with the offer by Payette Acquisition
Corporation ("PURCHASER"), a Delaware corporation and a wholly owned
subsidiary of Micron Electronics, Inc., a Minnesota corporation and a
subsidiary of Micron Technology, Inc., a Delaware Corporation, to purchase all
outstanding shares of common stock, par value $.001 per share (the "SHARES"),
of NetFRAME Systems Incorporated (the "COMPANY"), a Delaware corporation, at a
price of $1.00 per Share, net to the seller in cash and without interest
thereon, subject to reduction for any applicable federal back up or other
withholding or stock transfer taxes, upon the terms and subject to the
conditions set forth in the Offer. Also enclosed is the letter to stockholders
of the Company from Robert Puette, President and Chief Executive Officer of
the Company, together with a Solicitation/Recommendation Statement on Schedule
14D-9 filed with the Securities and Exchange Commission by the Company.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A tender of such Shares can be made only by us as the holder of
record and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms
and subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $1.00 per Share, net to the seller in cash without
interest thereon and subject to reduction for any applicable federal back
up or other withholding or stock transfer taxes.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company unanimously has determined that
each of the Offer and the Merger (as defined in the Offer to Purchase), is
fair to, and in the best interests of, the stockholders of the Company, and
recommends that stockholders accept the Offer and tender their Shares
pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, July 14, 1997, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer at
least that number of Shares that shall constitute a majority of the then
outstanding Shares on a fully diluted basis (including, without limitation,
all Shares issuable
<PAGE>
upon the exercise of any options, warrants or rights). The Offer is also
conditioned upon, among other things, the expiration or termination of all
waiting periods under the Hart-Scott-Rodino Anti-Trust Improvements Act of
1976, as amended. Stockholders are urged to read the Offer to Purchase in
its entirety for a description of all conditions to the Offer and the other
items set forth therein.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, stock transfer taxes with respect to the purchase of Shares
by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. Your instructions
should be forwarded to us in ample time to permit us to submit a tender on
your behalf prior to the expiration of the Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a
good faith effort to comply with any such state statute. If, after such good
faith effort, Purchaser cannot comply with any such state statute, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Purchaser by
Montgomery Securities, or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK OF NETFRAME SYSTEMS INCORPORATED BY PAYETTE ACQUISITION
CORPORATION.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated June 16, 1997 and the related Letter of Transmittal (which
together constitute the "OFFER"), in connection with the offer by Payette
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Micron Electronics, Inc., a Minnesota corporation and a subsidiary of
Micron Technology, Inc., a Delaware corporation, to purchase all outstanding
Shares of Common Stock, par value $.001 per Share (the "SHARES") of NetFRAME
Systems Incorporated, a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Number of Shares to be Tendered: Shares* Dated: , 1997
- -------------------------------------------------------------------------------
SIGN HERE
Signature(s): ________________________________________________________________
- -------------------------------------------------------------------------------
Please type or print name(s):_________________________________________________
- -------------------------------------------------------------------------------
Please type or print address: ________________________________________________
- -------------------------------------------------------------------------------
Area Code and Telephone Number: ______________________________________________
- -------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number: ___________________________
- -------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------------------------------
GIVE THE GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 6. A valid trust, estate, The legal entity
2. Two or more individuals The actual owner or pension trust (Do not furnish
(joint account) of the account the identifying
or, if combined number of the
funds, any one personal
of the representative
individuals(1) or trustee
3. Custodian account of a The minor(2) unless the legal
minor (Uniform Gift to entity itself is
Minors Act) not designated
4. a. The usual revocable The grantor- in the account
savings trust account trustee(1) title.)(4)
(grantor is also 7. Corporate account The corporation
trustee) 8. Religious, charitable, The organization
b. So-called trust account The actual or educational
that is not a legal or owner(1) organization account
valid trust under State 9. Partnership The partnership
law 10. Association, club, or The organization
5. Sole proprietorship The owner(3) other tax-exempt
account organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- --------------------------------------------- --------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVATE ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
2
<PAGE>
EXHIBIT (A)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
June 16, 1997 and the related Letter of Transmittal and is being made to all
holders of Shares. Purchaser is not aware of any State where the making of
the Offer is prohibited by administrative or judicial action pursuant to
any valid state statute. If Purchaser becomes aware of any valid state
statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with
such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such
state. In any jurisdiction where the securities, blue sky or other
laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Montgomery
Securities or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
NETFRAME SYSTEMS INCORPORATED
AT
$1.00 NET PER SHARE
BY
PAYETTE ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MICRON ELECTRONICS, INC.
Payette Acquisition Corporation, a Delaware corporation ("PURCHASER"), a
wholly owned subsidiary of Micron Electronics, Inc., a Minnesota corporation
("MICRON") and a subsidiary of Micron Technology, Inc., a Delaware
corporation, is offering to purchase all outstanding shares of Common Stock,
par value $.001 per share (the "SHARES"), of NetFRAME Systems Incorporated, a
Delaware corporation (the "COMPANY"), at a price of $1.00 per Share, net to
the seller in cash and without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated June 16, 1997 (the
"OFFER TO PURCHASE") and in the related Letter of Transmittal (which together
constitute the "OFFER"). Following the Offer, Purchaser intends to effect the
Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON MONDAY, JULY 14, 1997, UNLESS THE OFFER IS EXTENDED.
The offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least that
number of Shares that, when added to the Shares owned of record by Micron or
any of its subsidiaries on the date hereof, if any, shall constitute a
majority of the then outstanding Shares on a fully diluted basis (as defined
in the Offer to Purchase). The Offer is also conditioned upon, among other
things, the expiration or termination of all waiting periods imposed upon
consummation of the Offer by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations thereunder as well as the other
conditions described in the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 10, 1997 (the "MERGER AGREEMENT"), among Micron, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction
<PAGE>
of the other conditions set forth in the Merger Agreement and in accordance
with relevant provisions of the General Corporation law of the State of
Delaware ("DELAWARE LAW"), Purchaser will be merged with and into the Company
(the "MERGER"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "SURVIVING CORPORATION") and will
become a wholly owned subsidiary of Micron. 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 in the treasury of the
Company and any Shares owned by Purchaser, Micron or any direct or indirect
wholly owned subsidiary of Micron or of the Company, if any, and other than
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 $1.00 in cash, or any higher price
that may be paid per Share in the Offer, without interest.
The Board of Directors of the Company has determined that each of the Offer
and the Merger is fair to, and in the best interests of, the stockholders of
the Company, and recommends that stockholders accept the Offer and tender
their Shares pursuant to the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to Norwest
Bank Minnesota, N.A. (the "DEPOSITARY") of Purchaser's acceptance for payment
of such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from Purchaser and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid,
regardless of any delay in making such payment. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the certificates evidencing
such Shares (the "SHARE CERTIFICATES") or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in Section 2 of the Offer to Purchase)
pursuant to the procedure set forth in Section 3 of the Offer to Purchase,
(ii) the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case of
a book-entry transfer, an Agent's Message (as defined in the Offer to
Purchase)) and (iii) any other documents required under the Letter of
Transmittal.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from
time to time, to extend for any reason the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement thereof, such announcement to be made no later than 9:00
A.M., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer,
subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York
City time, on Monday, July 14, 1997 (or the latest time and date at which the
Offer, if extended by Purchaser, shall expire) and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
at any time after August 14, 1997. For the withdrawal to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover page of the Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
such Shares, if different from that of the person who tendered such Shares. If
Share Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution (as defined in
Section 3 of the Offer to Purchase), unless such Shares have been tendered for
the account of an Eligible Institution. If Shares have been
2
<PAGE>
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including the time of receipt) of any notice of withdrawal will be determined
by Purchaser, in its sole discretion, whose determination will be final and
binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain important
information which should be read before any decision is made with respect to
the Offer.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent for the Dealer Manager as
set forth below, and copies will be furnished promptly at Purchaser's expense.
No fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent and the Dealer Manager) for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Call: (800) 227-4786
or
Collect (415) 627-2000
June 16, 1997
3
<PAGE>
Exhibit (a)(8)
MICRON ELECTRONICS, INC. SIGNS DEFINITIVE AGREEMENT
TO ACQUIRE NETFRAME SYSTEMS INCORPORATED
To Create Industry's First High-End Enterprise Server to Desktop Solutions
Direct Business Model
Nampa, Idaho -- June 10, 1997 -- Micron Electronics, Inc. (Nasdaq: MUEI)
and NetFRAME Systems Incorporated (Nasdaq: NETF) announced today that Micron
Electronics has entered into a definitive agreement to acquire NetFRAME by means
of a cash Tender Offer. An offer will be made to the stockholders of NetFRAME
to acquire all outstanding shares of common stock for $1.00 net to the seller
per share in cash. The transaction, which is subject to certain conditions and
approvals, is valued at approximately $14 million. The agreement has been
approved by the Boards of Directors of both Micron Electronics and NetFRAME.
NetFRAME is a leader in enterprise-class multiprocessor servers. The
merger will create one of the industry's premier suppliers of standards-based
computer systems, including notebooks, desktops, department and enterprise-class
servers. NetFRAME would bring to Micron Electronics industry standard,
enterprise-class servers with high availability technology, a large installed
base of corporate users, and a highly skilled enterprise sales and marketing
organization.
"Micron Electronics and NetFRAME Systems are an excellent fit in terms of
products and market focus," said Joe Daltoso, Chairman and CEO of Micron
Electronics. "This acquisition would provide Micron Electronics with immediate
entry into the rapidly-growing high-end enterprise server market with leading
edge products. The union of Micron Electronics and NetFRAME would create the
first high-end enterprise server to desktop solutions direct business model in
the industry. By combining Micron Electronics' expertise in desktop and
notebook PCs and direct access to the consumer and the SOHO markets with
NetFRAME's high-end server technology and corporate focus, we would be able to
provide a single source to meet the computing needs of our customers."
Over the past 12 months, NetFRAME made the transition from a proprietary,
superserver vendor to an open, standards-based server company. NetFRAME's
Intel-based servers run Microsoft Windows NT and Novell IntranetWare, and
support accepted industry standards, including I\\2\\O and the PCI bus. The
company's flagship NF9000 series offers high availability through advanced
redundancy and throughput features.
Bob Puette, President and CEO of NetFRAME, said, "Combining NetFRAME's
highly available and scalable enterprise servers, Micron Electronics' cost-
effective server line and our sales and marketing expertise, we believe we can
successfully penetrate the server market, by combining NetFRAME's great
technology with Micron Electronics' financial resources."
NetFRAME Systems Incorporated, founded in 1987, is a leader in enterprise-
class multiprocessor servers offering continuous availability and scalability
while supporting industry standard software. NetFRAME's servers provide a
competitive price/performance alternative to
<PAGE>
networked server proliferation and are field upgradeable as customers' needs
grow. NetFRAME ClusterSystems are sold through resellers and system
integrators worldwide. For information, contact NetFRAME via the World Wide
Web at www.netframe.com, or call 408/ 474-1000.
Micron Electronics, Inc. and its subsidiaries manufacture electronic
products and provide services for a wide range of computing and digital
applications. The Company develops, markets, manufactures and supports PC
systems for consumer, business, government and educational use. In addition,
Micron Custom Manufacturing Services, Inc., a subsidiary of Micron Electronics,
Inc., provides custom contract manufacturing services to original equipment
manufacturers. SpecTek, a division of Micron Electronics, Inc., processes and
markets reduced specification memory components under the SpecTek brand name.
Micron Electronics, Inc. common stock trades on the Nasdaq Stock Market under
the symbol MUEI. The Company is majority owned by Micron Technology, Inc.
Product information is available by calling 1-800-776-4518 or via the Company's
home page on the Internet at http://www.micronpc.com.
***
This press release contains forward looking statements within the meaning
of the federal securities laws. Such forward looking statements are subject to
a number of risks and uncertainties which would cause actual results to differ
materially from those projected. Such risks and uncertainties include, without
limitation, industry competition, fluctuating market pricing for computer and
semiconductor memory products, fluctuating component costs, changes in product
mix, seasonal cycles common in the PC industry, the timing of new product
introductions by the Company and its competitors, seasonal government purchasing
cycles, inventory obsolescence, the effect of product reviews and industry
awards, critical component availability, manufacturing and production
constraints, and the timing of orders from and shipments to OEM customers.
Additional risks are detailed in the Company's filings with the Securities and
Exchange Commission, including its report on Form 10-Q for the quarter ended
February 27, 1997 and its prospectus supplement dated February 12, 1997. The
Company may, from time to time, make additional written and oral forward looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission in its report to shareholders. The Company
does not undertake to update any forward looking statement that may be made from
time to time by or on behalf of the Company. Readers should carefully review
the section entitled "Certain Factors" in the documents the Company files from
time to time with the Securities and Exchange Commission.
<PAGE>
Exhibit (a)(9)
MICRON ELECTRONICS, INC. ANNOUNCES
COMMENCEMENT OF ALL CASH TENDER OFFER TO ACQUIRE
NETFRAME SYSTEMS INCORPORATED
NAMPA, IDAHO -- JUNE 16, 1997. Micron Electronics, Inc. (Nasdaq:MUEI)
announced today that its wholly-owned subsidiary, Payette Acquisition
Corporation, has commenced an all-cash tender offer to purchase all
outstanding shares of Common Stock, par value $.001, of NetFRAME Systems
Incorporated (Nasdaq:NETF) at a price of $1.00 per share. The offer and
withdrawal rights will expire at 12:00 Midnight, New York City time, on
Monday, July 14, 1997, unless the offer is extended.
The offer is conditioned upon there being validly tendered and not withdrawn
prior to the expiration of the offer at least that number of shares that
constitute a majority of the then outstanding shares on a fully diluted basis
and upon the expiration or termination of all waiting periods imposed upon
consummation of the offer by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, as well as certain other conditions described in the
Offer to Purchase.
For additional information regarding the tender offer or for copies of the
Offer to Purchase and the related Letter of Transmittal and tender offer
materials, please contact MacKenzie Partners, Inc. (1-800-322-2885), the
Information Agent for the offer, or Montgomery Securities (1-800-227-4786
(ext. 3076)), the Dealer Manager for the offer.
Micron Electronics, Inc. and its subsidiaries manufacture electronic
products and provide services for a wide range of computing and digital
applications. The Company develops, markets, manufactures and supports PC
systems for consumer, business, government and educational use. In addition,
Micron Custom Manufacturing Services, Inc. provides custom contract
manufacturing services to original equipment manufacturers. SpecTek, a
division of Micron Electronics, Inc., processes and markets reduced
specifications memory components under the SpecTek brand name. Micron
Electronics, Inc. common stock trades on the Nasdaq National Market under the
symbol MUEI. Micron Electronics, Inc. is majority owned by Micron Technology,
Inc. Product information is available by calling 1-800-776-4518 or via the
Company's home page on the Internet at http://www.micronpc.com.
<PAGE>
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
MICRON ELECTRONICS, INC.
PAYETTE ACQUISITION CORPORATION
NETFRAME SYSTEMS INCORPORATED
Dated: June 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - THE OFFER..........................................................1
1.1 The Offer...........................................................1
1.2 Company Actions.....................................................3
ARTICLE II - THE MERGER........................................................4
2.1 The Merger..........................................................4
2.2 Closing.............................................................5
2.3 Effective Time......................................................5
2.4 Effects of the Merger...............................................5
2.5 Certificate of Incorporation and By-laws............................5
2.6 Directors...........................................................5
2.7 Officers............................................................5
ARTICLE III - EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES.........................................6
3.1 Effect on Capital Stock.............................................6
3.2 Exchange of Certificates............................................7
ARTICLE IV - REPRESENTATIONS AND WARRANTIES....................................9
4.1 Representations and Warranties of the Company.......................9
4.2 Representations and Warranties of Parent and Sub...................24
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS.........................26
5.1 Conduct of Business................................................26
5.2 No Solicitation....................................................28
ARTICLE VI - ADDITIONAL AGREEMENTS............................................30
6.1 Stockholder Approval; Preparation of Proxy Statement...............30
6.2 Access to Information; Confidentiality.............................31
6.3 Best Efforts; Notification.........................................31
6.4 Stock Plans........................................................32
6.5 Post Merger Employment Benefits; Severance.........................33
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
6.6 Indemnification, Exculpation and Insurance.........................33
6.7 Directors..........................................................34
6.8 Fees and Expenses..................................................35
6.9 Public Announcements...............................................36
6.10 Stock Option Agreement.............................................36
6.11 Preferred Share Rights Agreement...................................36
6.12 Parent Financial Assistance........................................36
6.13 Technology License Agreement.......................................36
ARTICLE VII - CONDITIONS PRECEDENT............................................37
7.1 Conditions to Each Party's Obligation to Effect the Merger.........37
7.2 Conditions to Parent's and Sub's Obligation to Effect the Merger...37
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER..............................38
8.1 Termination........................................................38
8.2 Effect of Termination..............................................39
8.3 Amendment..........................................................39
8.4 Extension; Waiver..................................................39
8.5 Procedure for Termination, Amendment, Extension or Waiver..........40
ARTICLE IX - GENERAL PROVISIONS...............................................40
9.1 Nonsurvival of Representations and Warranties......................40
9.2 Notices............................................................40
9.3 Definitions........................................................41
9.4 Interpretation.....................................................42
9.5 Counterparts.......................................................42
9.6 Entire Agreement; No Third-Party Beneficiaries.....................42
9.7 Governing Law......................................................42
9.8 Assignment.........................................................42
9.9 Enforcement........................................................43
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
EXHIBITS
Exhibit A: Offer
Exhibit B: Stock Option Agreement
Exhibit C: Parent Financial Assistance
Exhibit D: Technology License Agreement
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 10, 1997 among MICRON
ELECTRONICS, INC., a Minnesota corporation ("Parent"), PAYETTE ACQUISITION
------
CORPORATION, a Delaware corporation and a wholly owned subsidiary of Parent
("Sub"), and NETFRAME SYSTEMS INCORPORATED, 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 issued and
-----
outstanding shares of Common Stock, par value $0.001 per share, of the Company
and all associated rights (the "Company Common Stock"), at a price per share of
--------------------
the Company Common Stock of not less than $1.00 net to the seller in cash and
without interest thereon (such price, as may hereafter be increased, the "Offer
-----
Price"), subject to reduction for any applicable federal backup or other
- -----
applicable withholding or stock transfer taxes, upon the terms and subject to
the conditions set forth in this Agreement, and the Board of Directors of the
Company has approved the Offer and has resolved to recommend that the Company's
stockholders accept the Offer;
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the Offer and the merger of Sub into the Company, as set forth
below (the "Merger"), upon the terms and subject to the conditions set forth in
------
this Agreement, whereby each issued and outstanding share of the Company Common
Stock, other than shares owned directly or indirectly by Parent or the Company
and Dissenting Shares (as defined in Section 3.1(e)), will be converted into the
right to receive the Offer Price;
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; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE OFFER
---------
1.1 The Offer.
---------
(a) Subject to the provisions of this Agreement, Sub shall, and Parent
shall cause Sub to, within five business days after and including the public
announcement (on the date hereof or the following day) of the execution of this
Agreement, commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) the Offer. The
------------
obligation of Sub to, and of Parent to cause Sub to, commence the Offer and
accept for payment, and
<PAGE>
pay for, any shares of the Company Common Stock tendered pursuant to the Offer
shall be subject to the conditions set forth in Exhibit A and to the terms and
---------
conditions of this Agreement. Sub expressly reserves the right unilaterally to
waive any conditions to the Offer (other than (without the Company's prior
written consent) the Minimum Tender Condition, as defined on Exhibit A), to
increase the price per Share payable in the Offer, to extend the duration of
the Offer, or to make any other changes in the terms and conditions of the
Offer; provided, however, that no such change may be made which decreases the
price per Share payable in the Offer, reduces the maximum number of Shares to
be purchased in the Offer, imposes conditions to the Offer in addition to those
set forth in Exhibit A, changes the form of consideration payable in the Offer,
or amends any other material terms of the Offer in a manner materially adverse
to the Company's stockholders, and provided, further, that the Offer may not,
without the Company's prior written consent, be extended beyond July 14, 1997
except for a period or periods not to exceed 22 days in the aggregate beyond
July 14, 1997 as necessary to provide time to satisfy the conditions set forth
in Exhibit A, and except that Sub may extend the Offer for up to 5 business
days, if as of July 14, 1997, there shall not have been tendered at least
ninety percent (90%) of the outstanding Shares so that the Merger could be
effected without a meeting of the Company's stockholders in accordance with
applicable provisions of the Delaware General Corporation Law ("DGCL").
----
Subject to the terms and conditions of this Agreement and the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Sub shall, and Parent shall cause Sub to, accept for
payment, and pay for, all shares of the Company Common Stock 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 soon as practicable after
the expiration of the Offer. Sub agrees that if all of the conditions set
forth in Exhibit A are not satisfied on any scheduled expiration date of the
Offer then, provided that (i) all such conditions are reasonably capable of
being satisfied prior to August 5, 1997 and (ii) no takeover proposal shall
have been publicly announced and not withdrawn at such time, Sub shall extend
the Offer from time to time until all such conditions are satisfied or waived,
provided that Sub shall not be required to extend the Offer beyond August 5,
1997.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the Securities and Exchange Commission (the "SEC") a Tender Offer
---
Statement on 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 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 is made by Parent or Sub with respect to information
supplied by the Company specifically for inclusion in the Offer Documents. Each
of Parent, Sub and the Company agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
each of Parent and Sub further agrees to take all steps
-2-
<PAGE>
necessary to amend or supplement the Offer Documents and to cause the Offer
Documents as so amended or supplemented to be filed with the SEC and 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 a reasonable opportunity to review the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to 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 including a copy of such comments that are
made in writing.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any shares of the
Company Common Stock that Sub becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
1.2 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 approving this Agreement, the
Offer and the Merger, determining that the terms of the Offer and the Merger are
fair to, and in the best interests of, the Company's stockholders and
recommending that the Company's stockholders accept the Offer and tender their
shares pursuant to the Offer and approve and adopt this Agreement and the
Merger. The Company represents that its Board of Directors has received the
opinion of Cowen & Company that the proposed consideration to be received by the
holders of shares of the Company Common Stock pursuant to the Offer and the
Merger is fair to such holders from a financial point of view, and a complete
and correct signed copy of such opinion will be promptly delivered by the
Company to Parent. The Company hereby consents to the inclusion in the Offer
Documents of the recommendation of the Company's Board of Directors described in
the first sentence of this Section 1.2(a) and will use all reasonable efforts to
obtain the consent of Cowen & Company to the inclusion in the Schedule 14D-9 of
a copy of the written opinion referred to in the preceding sentence. The
Company has been advised by each of its directors and executive officers that
each such person intends to tender all shares (other than shares, if any, held
by such person which if tendered, could cause such person to incur liability
under the provisions of Section 16(b) of the Exchange Act) of the Company Common
Stock held 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 amended from
time to time, together with all exhibits, amendments and supplements thereto as
well as the Information Statement required pursuant to Section 14(f) under the
Exchange Act, collectively the "Schedule 14D-9") containing the recommendation
--------------
described in paragraph (a) and shall mail the Schedule 14D-9 to the stockholders
of the Company. The Company agrees that 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
-3-
<PAGE>
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 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 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 a reasonable opportunity to review the Schedule
14D-9 and all amendments and supplements thereto prior to their 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 including a copy of such comments that are
made in writing.
(c) In connection with the Offer, the Company shall cause its transfer
agent promptly to furnish Sub with mailing labels containing the names and
addresses of the record holders of the Company Common Stock as of a record date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and, to the
extent reasonably requested, computer files and other information in the
Company's possession or control regarding the beneficial owners of the Company
Common Stock, 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, upon request,
deliver, and will use their best efforts to cause their agents to deliver, to
the Company all copies of such information then in their possession or control.
ARTICLE II
THE MERGER
----------
2.1 The Merger. Upon the terms and subject to the conditions set forth
----------
in this Agreement, and in accordance with the DGCL, Sub shall be merged with and
into the Company at the Effective Time (as defined in Section 2.3). 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
-4-
<PAGE>
accordance with the DGCL. Notwithstanding the foregoing, Parent may elect at
any time prior to the Merger to merge the Company with and into Sub instead of
merging Sub into the Company as provided above; provided, however, that the
-------- -------
Company shall not be deemed to have breached any of its representations,
warranties, covenants or agreements set forth in this Agreement solely by
reason of such election. In such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing and,
where appropriate, to provide that Sub shall be the Surviving Corporation and
will continue under the name "NetFRAME Systems Incorporated". At the election
of Parent, any direct or indirect subsidiary (as defined in Section 9.3) of
Parent may be substituted for Sub as a constituent corporation in the Merger.
In such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
2.2 Closing. The closing of the Merger will take place at 10:00 a.m. on
-------
a date to be specified by the parties, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VII (the "Closing Date"), at the Palo Alto, California offices of Fenwick &
------------
West, counsel to Parent and Sub, unless another date of place is agreed to in
writing by the parties hereto. Parent agrees to close the Merger as soon as
practicable following consummation of the Offer subject to Sections 7.1 and 7.2
hereof.
2.3 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").
--------------
2.4 Effects of the Merger. The Merger shall have the effects set forth in
---------------------
Section 259 of the DGCL.
2.5 Certificate of Incorporation and By-laws. The certificate of
----------------------------------------
incorporation and by-laws of the Sub as in effect at the Effective Time shall
be the certificate of incorporation and by-laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
2.6 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 until their respective successors are duly
elected and qualified, as the case may be.
2.7 Officers. The officers of the Sub immediately prior to the Effective
--------
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
-5-
<PAGE>
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
------------------------------------------------------------
CORPORATIONS; EXCHANGE OF CERTIFICATES
--------------------------------------
3.1 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 of the
Company Common Stock 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 $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
-----------------------------------------------------
share of the Company Common Stock that is owned by the Company or by any
subsidiary of the Company and each share of the Company Common Stock 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 the Company Common Stock. Subject to Section
--------------------------------------
3.1(d), each issued and outstanding share of the Company Common Stock (other
than shares to be canceled in accordance with Section 3.1(b)) shall be
converted into the right to receive from the Surviving Corporation in cash,
without interest, the Offer Price (the "Merger Consideration"). As of the
--------------------
Effective Time, all such shares of the Company Common Stock 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 of the
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration, without interest.
(d) Treatment of Options. Options to purchase Company Common Stock
--------------------
will be treated as provided in Section 6.4 hereof.
(e) Shares of Dissenting Stockholders. Notwithstanding anything in
---------------------------------
this Agreement to the contrary, any issued and outstanding shares of the
Company Common Stock held by a person (a "Dissenting Stockholder") who objects
----------------------
to the Merger and complies with all the provisions of the DGCL concerning the
right of holders of the Company Common Stock to dissent from the Merger and
require appraisal of their shares of the Company Common Stock "Dissenting
----------
Shares") shall not be converted as described in Section 3.1(c) but shall become
- ------
the right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the laws of the State of Delaware. If,
after the Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right of appraisal, in any
case pursuant to the DGCL, his shares of the Company Common Stock 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 of the Company Common Stock
-6-
<PAGE>
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 enter into a binding settlement agreement or make a written
offer to settle, any such demands.
3.2 Exchange of Certificates.
------------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall select
------------
a bank or trust company to act as paying agent (the "Paying Agent") for the
------------
payment of the Merger Consideration upon surrender of certificates representing
the Company Common Stock.
(b) Parent To Provide Funds. Parent shall take all steps necessary
-----------------------
to enable and cause the Surviving Corporation to provide to the Paying Agent on
a timely basis, as and when needed after the Effective Time, funds necessary to
pay for the shares of the Company Common Stock as part of the Merger pursuant
to Section 3.1.
(c) 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 which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock (the "Certificates")
------------
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 3.1, (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 cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and 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 Merger Consideration, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of the
Company Common Stock which 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 3.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration. No interest will be paid or will accrue on the cash
payable upon the surrender of any Certificate.
(d) No Further Ownership Rights in the Company Common Stock. 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 of the Company Common
-7-
<PAGE>
Stock theretofore represented by such Certificates, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of the Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent for
any reason, they shall be canceled and exchanged as provided in this Article
III.
(e) Failure to Timely Surrender; No Liability. Promptly following
-----------------------------------------
the date that is one year after the Effective Date, the Paying Agent shall
return to the Surviving Corporation all Merger Consideration and other cash,
property and instruments in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration (without interest thereon). Notwithstanding
the foregoing, the Surviving Corporation shall be entitled to receive from time
to time all interest or other amounts earned with respect to any cash deposited
with the Paying Agent as such amounts accrue or become available. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any payment
pursuant to this Article III would otherwise escheat to or become the property
of any Governmental Entity (as defined in Section 4.1(d))), 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. 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.
(f) Withholding Taxes. The right of any person to receive any
-----------------
payment or consideration pursuant to this Agreement and the transactions
contemplated herein shall be subject to any applicable requirements with
respect to the withholding of Taxes.
(g) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificates evidencing shares of the Company Common Stock shall have been
lost, stolen or destroyed, the Paying Agent shall pay to such holder the Merger
Consideration required pursuant to Section 3.1, 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.
(h) Supplementary Action. If at any time after the Effective Time,
--------------------
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either the Company or Sub,
or otherwise to carry out the provision of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered, in
the name of and on behalf of the Company and Sub, to execute and deliver any
and all things necessary or proper to vest or to
-8-
<PAGE>
perfect or confirm title to such property or rights in the Surviving
Corporation, and otherwise to carry out the purposes and provisions of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 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:
(a) Organization, Standing and Corporate Power. The Company and
------------------------------------------
each of its subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate or partnership power and
authority to carry on its business as now being conducted. The Company and
each of 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 or leasing 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 the Company. The Company has made available to
Parent complete and correct copies of its certificate of incorporation and
bylaws and the certificates of incorporation and by-laws or other
organizational documents of its Significant Subsidiaries, in each case as
amended to the date of this Agreement. For purposes of this Agreement, a
"Significant Subsidiary" means any subsidiary of the Company that constitutes a
significant subsidiary within the meaning of Rule 1-02 of Regulation S-X of the
SEC.
(b) Subsidiaries. The Company Disclosure Schedule lists each
------------
subsidiary of the Company. All the outstanding shares of capital stock of each
such subsidiary have been validly issued and are fully paid and nonassessable
and (except as may be required by foreign jurisdictions) are owned by the
Company, by another subsidiary of the Company or by the Company and another
such subsidiary, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock of its subsidiaries, the
-----
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of 20,000,000 shares of the Company Common Stock par value $.001 per
share and 2,000,000 shares of preferred stock, par value $.001 per share
("Company Preferred Stock"). At the close of business on June 6, 1997, (i)
-----------------------
13,978,445 shares of the Company Common Stock and no shares of Company
Preferred Stock were issued and outstanding, (ii) no shares of the Company
Common Stock were held by the Company in its treasury, (iii) 3,101,722 shares
of the Company Common Stock were
-9-
<PAGE>
reserved for issuance upon exercise of outstanding Employee Stock Options (as
defined in Section 6.4). Except as set forth above, at the close of business
on June 6, 1997, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights which were not granted in tandem with a
related Employee Stock Option. All outstanding shares of capital stock of the
Company are, and all shares which may be issued will be, when issued, 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, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth above, as of the date of this
Agreement, there are no outstanding 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 any of them
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 of 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. As of the date of this Agreement, there
are no outstanding contractual obligations (i) 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 or (ii) of the Company to vote
or to dispose of any shares of the capital stock of any of its subsidiaries.
Except as set forth in the Company Disclosure Schedule, no employee is a party
to a change in control agreement with the Company and such Schedule identifies
those change in control agreements that provide for 12-month severance packages
and those that provide for 6-month severance packages.
(d) Authority; Noncontravention. The Company has all 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 outstanding shares of the Company Common Stock (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 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 (except
as enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors' rights or remedies in general as from time to
time in effect or (ii) the exercise by courts of equity powers). 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, cancellation 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 the Company or any of its subsidiaries under (i)
the certificate of incorporation or by-laws of the Company or the comparable
-10-
<PAGE>
charter or 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 Significant Subsidiaries or their respective properties or assets
or (iii) any governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Significant Subsidiaries
or their respective properties or assets, other than, in the case of clause
(ii) or (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 (provided however that for this purpose any breach of a covenant
not to compete or similar contractual restriction binding on Company shall be
deemed to have a Material Adverse Effect on the Company except to the extent
that the breach results from Parent or its affiliates being engaged in
activities other than development, marketing and manufacture of personal
computers or integrated circuits), (y) materially impair the ability of the
Company to perform its obligations under this Agreement, (z) prevent 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 or regulatory 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 transactions contemplated by this Agreement, except for
(1) the filing of a pre merger notification and report form by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
-------
(2) the filing with the SEC and the National Association of Securities Dealers,
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 as would not
individually or in the aggregate (A) have a Material Adverse Effect on the
Company, (B) materially impair the ability of the Company to perform its
obligations under this Agreement or (C) prevent or have a material adverse
effect on the ability of the parties to consummate any of the transactions
contemplated by this Agreement. Section 4.1(d) of the Company Disclosure
Schedule lists all material consents, waivers and approvals under any of the
Company's or any of its subsidiaries' agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
(e) SEC Documents; Financial Statements. The Company has filed in a
-----------------------------------
timely manner all required reports, schedules, forms, statements and other
documents with the SEC since September 30, 1994. All such required reports,
schedules, forms, statements and other documents filed by the Company with the
SEC (including those that the Company may file subsequent to the date hereof)
are referred to herein as 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, as
-11-
<PAGE>
amended (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 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. Except to the extent
that information contained in any SEC Document has been revised or superseded
by a later Filed SEC Document (as defined in Section 4.1(g)), none of the SEC
Documents contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents, including those filed after the date hereof until the Closing,
comply or will comply 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 or will be prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, as provided in the last sentence of this Section 4.1(e) and fairly
present or will fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except as set forth in the SEC
Documents or as contemplated by this Agreement, since the date of the most
recent consolidated balance sheet included in the SEC Documents until the date
hereof neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles ("GAAP") to be set forth
----
on a consolidated balance sheet of the Company and its consolidated
subsidiaries which are, individually or in the aggregate, material to the
business, results of operations or financial condition of the Company and its
subsidiaries taken as a whole, except liabilities (i) provided for in the most
recent consolidated balance sheet included in the SEC Documents, or (ii)
incurred since the date of such balance sheet in the ordinary course of
business consistent with past practices. Interim financial statements or
summaries and accounting books and records prior to the date of consummation of
the Offer are prepared on a basis consistent with those employed in the most
recent audited financial statement and, except with respect to footnote
disclosure, are prepared in accordance with GAAP.
(f) 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, (iii) the
information to be filed by the Company in connection with the offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (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 Statement, at the time the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting (as
defined in Section 6.1(a)), 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
-12-
<PAGE>
circumstances under which they are made, not misleading. The Schedule 14D-9,
the Information Statement and the Proxy 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.
(g) 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 recently
-------------------
audited financial statements included in the Filed SEC Documents, the Company
has conducted its business only in the ordinary course, and up to the date of
this Agreement there has not been (i) any Material Adverse Change affecting 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, (iii) any split, combination or reclassification
of any of its capital stock or any issuance or authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (x) any granting by the Company or any of its
subsidiaries to any executive officer of the Company or any of its subsidiaries
of any increase in compensation, except in the ordinary course of business
consistent with prior practice and except for the bonuses described in Schedule
4.1(g) or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Filed SEC
Documents, (y) any granting by the Company or any of its subsidiaries to any
such executive officer of any increase in severance or termination pay, except
as was required under any employment, severance or termination agreements in
effect as of the date of the most recent audited 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
such executive officer, (v) any damage, destruction or loss, whether or not
covered by insurance, that has or could reasonably be expected to have a
Material Adverse Effect on the Company, (vi) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change
in generally accepted accounting principles, or (vii) any material revaluation
of any of the Company's assets, including, without limitation, writing down the
value of capitalized inventory or writing off accounts receivable, other than
in the ordinary course consistent with past practice.
(h) Intellectual Property.
---------------------
(i) The Company and its subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
---------------------
are material to the business of the Company and its subsidiaries as currently
conducted or as proposed to be conducted by the Company and its subsidiaries.
-13-
<PAGE>
(ii) The Company Disclosure Schedule lists (i) all patents and
patent applications and all registered and unregistered trademarks, trade names
and service marks, registered copyrights, which the Company considers to be
material to its business and included in the Intellectual Property, including
the jurisdictions in which each such Intellectual Property right has been
issued or registered or in which any application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses, and other
agreements as to which the Company is a party and pursuant to which any person
other than the Company is authorized to use any Intellectual Property (other
than end-user licenses in the Company's current standard form provided or made
available to Parent's counsel), and (iii) all material licenses, sublicenses
and other agreements as to which the Company is a party and pursuant to which
the Company is authorized to use any third party patents, trademarks or
copyrights, including software ("Third Party Intellectual Property Rights")
----------------------------------------
which are incorporated in, are, or form a part of any Company product that is
material to its business.
(iii) To the Company's and its counsel's knowledge, there is no
material unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of the Company or any of its subsidiaries, any
trade secret material to the Company or any of its subsidiaries, or any
Intellectual Property right of any third party to the extent licensed by or
through the Company or any of its subsidiaries, by any third party, including
any employee or former employee of the Company or any of its subsidiaries. To
the Company's and its counsel's knowledge, no Company Intellectual Property or
product or service of the Company is subject to any proceeding or outstanding
decree, order, judgment, agreement, or stipulation restricting in any manner
the use, transfer, or licensing thereof by the Company, or which may affect the
validity, use or enforceability of such Company Intellectual Property. Neither
the Company nor any of its subsidiaries has entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business.
(iv) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in material breach of any license, sublicense or other
agreement relating to Company Intellectual Property or Third Party Intellectual
Property Rights or its ability to exploit its products.
(v) (i) Since January 1, 1995, the Company has not been sued in
any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party, (ii) since January 1, 1995, the
Company has not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party and (iii) no material action,
suit or proceeding involving any material Intellectual Property is currently
pending or overtly threatened, nor to the Company's knowledge is there any
reasonable basis therefor. The manufacture, marketing, licensing or sale of
the Company's products does not, to the Company's knowledge, infringe any
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party.
-14-
<PAGE>
(vi) The Company has not received notice from any third party
that the operation of the business of the Company or any act, product or
service of the Company, infringes or misappropriates any Third Party
Intellectual Property Rights or constitutes unfair competition or trade
practices under the laws of any jurisdiction, any of which would reasonably
likely result in a material liability to the Company.
(vii) Except as set forth in Section 4.1(h) of the Company
Disclosure Schedule, to the knowledge of the Company as of the date hereof, no
Person has previously infringed or misappropriated or is infringing or
misappropriating any Company Intellectual Property.
(viii) Except as set forth in Section 4.1(h) of the Company
Disclosure Schedule, there have been, and are, no claims asserted against the
Company or, to its knowledge as of the date hereof, against any customer of the
Company, related to any product or service of the Company.
(ix) All current and former employees and consultants of the
Company have signed a confidentiality/nondisclosure and invention assignment
agreement, in substantially the form(s) attached to the Company Disclosure
Schedule. To the Company's knowledge, no such current or former employees or
consultants of the Company have violated any such agreement or otherwise
misappropriated any trade secrets of the Company or of any third party. The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to
their employment by the Company, except for inventions, trade secrets or
proprietary information that have been assigned to the Company.
(x) The Company has taken all reasonable and appropriate steps
to protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, or patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
------------------------
Confidential Information owned by the Company by or to a third party has been
pursuant to the terms of a written agreement between the Company and such third
party. All use, disclosure or appropriation of the Company of Confidential
Information not owned by the Company has been pursuant to the terms of a
written agreement between the Company and the owner of such Confidential
Information, or is otherwise lawful, except where the failure to be lawful
would not have a Material Adverse Effect on the Company.
(i) Litigation. Except as disclosed in the Filed SEC Documents, as
----------
of the date of this Agreement, there is no suit, action or proceeding pending
or threatened against the Company or any of its subsidiaries, nor is their any
reasonable basis therefor, that individually or in the aggregate could
reasonably be expected to (i) have a Material Adverse Effect on the Company,
(ii) challenge or seek to enjoin or seek damages with respect to the Company's
entering into and performing this Agreement or that impair the ability of the
Company to perform its obligations under this Agreement or (iii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator
-15-
<PAGE>
outstanding against the Company or any of its subsidiaries having, or which is
reasonably likely to have, any effect referred to in the foregoing clause (i),
(ii) or (iii) above.
(j) Absence of Changes in Benefit Plans. Except as disclosed in the
-----------------------------------
Filed SEC Documents, since the date of the most recent audited financial
statements included in the Filed SEC Documents, there has not been any adoption
or amendment in any material respect by the Company or any of its subsidiaries
of any collective bargaining agreement or any 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 plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries.
Except as disclosed in the Filed SEC Documents, there exist no employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings between the Company or any of its subsidiaries and any
current or former employee, officer or director of the Company or any of its
subsidiaries as to which there is or could be aggregate liability on the part
of the Company or any of its subsidiaries in excess of $50,000.
(k) ERISA Compliance.
----------------
(i) With respect to each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained or contributed to by the
-----
Company or any trade or business (a "Company Affiliate") which is under common
-----------------
control with the Company within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended (the "Code") (such plans, programs,
----
arrangements and contracts being herein collectively referred to as the
"Company Employee Plans"), the Company has made available to Parent a true and
----------------------
complete copy of, to the extent applicable, (i) such Company Employee Plan,
(ii) the most recent annual report (Form 5500), (iii) each trust agreement
related to such Company Employee Plan, (iv) the most recent summary plan
description for each Company Employee Plan for which such a description is
required, (v) the most recent actuarial report relating to any Company Employee
Plan subject to Title IV of ERISA and (vi) the most recent United States
Internal Revenue Service ("IRS") determination letter issued with respect to
---
any Company Employee Plan.
(ii) Each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination from the IRS covering the provisions of the Tax Reform Act of
1986 stating that such Company Employee Plan is so qualified and nothing has
occurred since the date of such letter that could reasonably be expected to
affect the qualified status of such plan. Each Company Employee Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law. Neither the Company nor any Company Affiliate
has incurred or is reasonably expected to incur any material liability under
Title IV of ERISA in connection with any Company Employee Plan. All
contributions due from the Company or any Company Affiliate with respect to any
Company Employee Plan have
-16-
<PAGE>
been made or accrued on the Company's financial statements, and no further
contributions will be due or will have accrued thereunder as of the Effective
Date, except contributions that are consistent with the Employee Plans and past
practices of the Company. The group health plans, as defined in Section
4980B(g) of the Code, that benefit employees of the Company and Company
Affiliates are in material compliance with the continuation coverage
requirements of subsection 4980B of the Code. There are no outstanding
violations of Section 4980B of the Code with respect to any Company Employee
Plan, covered employees or qualified beneficiaries which would have a Material
Adverse Effect on the Company.
(iii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or employee
of the Company or any of its subsidiaries from the Company or any of its
subsidiaries, under any Company Employee Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Company Employee Plan or
otherwise or (iii) result in the acceleration of the time of payment or vesting
of any such benefits, except as provided in Section 6.4 hereof.
(iv) The Company has made available to Parent a list of all
employees of the Company and of any of its subsidiaries and their salaries as
of the date of this Agreement.
(l) Taxes.
-----
(i) The Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as such term is
defined below) purposes of which the Company or any of its subsidiaries is or
has been a member has timely filed all Returns (as such term is defined below)
required to be filed by it (other than those that are not, individually or in
the aggregate, material), has paid all Taxes shown thereon to be due and has
provided adequate accruals in all material respects in accordance with GAAP in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any returns. In addition, (i) no material claim for
unpaid Taxes has become a lien against the property of the Company or any of
its subsidiaries or is being asserted against the Company or any of its
subsidiaries, (ii) no audit of any Tax Return of the Company or any of its
subsidiaries is being conducted by a Tax authority (A) as of the date of this
Agreement and (B) which, through the Effective Date, has had and could
reasonably be expected to have a Material Adverse Effect on the Company and its
subsidiaries, (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by the Company or any of its
subsidiaries and is currently in effect (A) as of the date of this Agreement
and (B) which, through the Effective Date, has had and could reasonably be
expected to have a Material Adverse Effect on the Company and its subsidiaries.
As used herein "Taxes" shall mean all Taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties,
-17-
<PAGE>
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Return" shall mean any return, report or
statement required to be filed with any governmental authority with respect to
Taxes.
(m) No Excess Parachute Payments. Any 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 affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code). There is no agreement, contract or
arrangement to which the Company or any of its subsidiaries is a party that may
result in the payment of any amount that would not be deductible pursuant to
Sections 280G, or to the knowledge of the Company, 162(m) or 404 of the Code.
(n) Compliance with Applicable Laws.
-------------------------------
(i) The Company and each of its subsidiaries has in effect all
Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("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 any such Permit, except for the lack of Permits and for defaults
under Permits which individually or in the aggregate would not have a Material
Adverse Effect on the Company. Except as disclosed in the Filed SEC Documents,
the Company and its subsidiaries are in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Entity, except for noncompliance which individually or in the aggregate would
not have a Material Adverse Effect on the Company.
(ii) The Company and its subsidiaries are, and have been, and
each of the Company's former subsidiaries, while subsidiaries of the Company,
was in compliance with all applicable Environmental Laws except for
noncompliance which individually or in the aggregate would not have a Material
Adverse Effect on the Company. The term "Environmental Laws" means any
------------------
Federal, state or local statute, code, ordinance, rule, regulation, policy,
guideline, permit, consent, approval, license, judgment, order, writ, decree,
directive, injunction or other authorization, including the requirement to
register underground storage tanks, relating to: (A) Releases (as defined
below) or threatened Releases of Hazardous Material (as defined below) into the
environment, including into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, ground water,
publicly-owned treatment works, septic systems or land; or (B) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation or
shipment of Hazardous Material.
(iii) During the period of ownership or operation by the
Company and its subsidiaries of any of their respective current or previously
owned or leased properties, there have
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<PAGE>
been no Releases of Hazardous Material in violation of Environmental Laws in,
on, under or affecting such properties or, to the knowledge of the Company, any
surrounding site, and none of the Company or its subsidiaries have disposed of
any Hazardous Material or any other substance in a manner that could reasonably
be anticipated to lead to a Release in violation of Environmental Laws, except
in each case for those which individually or in the aggregate would not have a
Material Adverse Effect on the Company. Prior to the period of ownership or
operation by the Company and its subsidiaries of any of their respective
currently or previously owned or leased properties, to the knowledge of the
Company, there were no Releases of Hazardous Material in, on, under or
affecting any such property or any surrounding site, except in each case for
those which individually or in the aggregate would not have a Material Adverse
Effect on the Company. The term "Release" has the meaning set forth in 42
-------
U.S.C. (S) 9601(22). The term "Hazardous Material" means (1) hazardous
------------------
materials, pollutants, contaminants, constituents, medical or infectious
wastes, hazardous wastes and hazardous substances as those terms are defined in
the following statutes and their implementing regulations: the Hazardous
Materials Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource
------
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the Comprehensive
------
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the
------
Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Toxic Substances Control Act,
------
15 U.S.C. (S) 2601 et seq., and the Clean Air Act, 42 U.S.C. (S) 7401 et seq.,
------ ------
(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) radon and (6) PCBs, or materials or fluids containing PCBs.
(o) 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 and the transactions
contemplated by this Agreement the provisions of Section 203 of the DGCL. To
the Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Offer, the Merger, this
Agreement, or any of the transactions contemplated by this Agreement, except to
the extent California law applies by operation of Section 2115 of the
California General Corporation Law.
(p) Brokers; Schedule of Fees and Expenses. No broker, investment
--------------------------------------
banker, financial advisor or other person, other than Cowen & Company, 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, nor to any
fee that is contingent on closing of the transactions contemplated hereby or
that is based on a percentage of the transaction value, in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
(q) Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of Cowen & Company, dated the date of this Agreement, 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 from
a financial point of view, and a signed copy of such opinion will promptly be
delivered to Parent.
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<PAGE>
(r) Contracts, Debt Instruments.
---------------------------
(i) Set forth on the Company Disclosure Schedule is (x) a list of
all loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the Company or
any of its subsidiaries in an aggregate principal amount in excess of $250,000
is outstanding or may be incurred and (y) the respective principal amounts
currently outstanding thereunder. For purposes of this Agreement, "indebtedness"
shall mean, with respect to any person, without duplication, (A) all obligations
of such person for borrowed money, or with respect to deposits or advances of
any kind to such person, (B) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (C) all obligations of such person
upon which interest charges are customarily paid, (D) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (E) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such person's business), (F) all
capitalized lease obligations of such person, (G) all obligations of others
secured by any lien on property or assets owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or currency hedging transactions
(valued at the termination value thereof), (I) all letters of credit issued for
the account of such person (excluding letters of credit issued for the benefit
of suppliers to support accounts payable to suppliers incurred in the ordinary
course of business) and (J) all guarantees and arrangements having the economic
effect of a guarantee of such person of any indebtedness of any other person.
(ii) Neither the Company nor any of its subsidiaries is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice would cause such a violation of or
default under) (i) its charter or by-laws, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, 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, (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its subsidiaries, except for immaterial violations or defaults
pertaining to Intellectual Property related matters or other violations or
defaults that individually or in the aggregate would not have a Material Adverse
Effect on the Company.
(iii) Neither the Company nor any of its subsidiaries is a party
to or is bound by: (A) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification agreements
between the Company or any of its subsidiaries and any of its officers or
directors; (B) any agreement, contract or commitment currently in force relating
to the disposition or acquisition of assets not in the ordinary course of
business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or (C) any material joint marketing or
development agreement.
-20-
<PAGE>
(s) Certain Agreements. Except as set forth on the Company Disclosure
------------------
Schedule, the Company and its subsidiaries are not, as of the date hereof
(except as to (iii) below), parties to or subject to any agreement which falls
within any of the following classifications:
(i) any employment, deferred compensation, bonus or consulting
contract requiring payments in excess of $50,000 by the Company or any
subsidiary;
(ii) any distributorship, sales, marketing, advertising,
brokerage, licensing, dealership, representative or agency relationship
requiring payment by the Company or any subsidiary;
(iii) any contract or agreement that restricts or materially
impairs the Company or any subsidiary from carrying on its business as now
conducted or any part thereof or from competing in any line of business with any
person, corporation or other entity or that grants any exclusive license or
distribution rights;
(iv) any collective bargaining agreement or other such contract
or agreement with any labor organization;
(v) any lease of personal property requiring rental payments of
$250,000 or more throughout its term and having a term of one year or more,
whether as lessor or lessee;
(vi) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of the Company or any subsidiary in personal property;
(vii) any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, change in
control, welfare or employee plan or material agreement providing benefits to
any present or former employees, officers or directors of the Company or any of
its subsidiaries;
(viii) any agreement to acquire equipment or commitment to make
capital expenditures by the Company or any subsidiary of $150,000 or more;
(ix) any agreement for the sale of any properties or assets, or
for the grant of any preferential right to purchase any such properties or
assets or which requires the consent of any third party to the transfer and
assignment of any such properties or assets, other than in the ordinary course
of business in connection with the Company sale of properties or assets;
(x) any agreement for the borrowing of any money by the Company
or any subsidiary;
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<PAGE>
(xi) any agreement requiring the Company to indemnify any current
or former officer, director, employee or agent; or
(xii) except in the ordinary course of business, any other
agreement of any other kind which involves future payments or receipts or
performance of services or delivery of items, requiring payments of $25,000 or
more to or by the Company or any subsidiary.
(t) Title to Properties.
-------------------
(i) The Company and each of its subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive covenants and
similar encumbrances or impediments that individually or in the aggregate would
not materially interfere with its ability to conduct its business as currently
conducted. All such material properties and assets, other than properties and
assets in which the Company or any of its subsidiaries has leasehold interests,
are free and clear of all Liens, except for Liens that individually or in the
aggregate would not materially interfere with the ability of the Company and its
subsidiaries to conduct business as currently conducted.
(ii) The Company and each of its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a party
and under which it is in occupancy, and all such leases are in full force and
effect. The Company and each of its subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.
(u) Labor Matters. Except as set forth in the Company Disclosure
-------------
Schedule, or as would not have a Material Adverse Effect on the Company as of
the date hereof (a) the Company and its subsidiaries are operating and have
operated the business in compliance in all material respects with all applicable
laws relating to the business respecting employment and employment practices,
terms and conditions of employment and wages and hours, including the
Immigration Reform and Control Act ("IRCA"), the Worker Adjustment and
----
Retraining Notification Act of 1988 ("WARN Act"), any such applicable laws
--------
respecting employment discrimination, equal opportunity, affirmative action,
employee privacy, wrongful or unlawful termination, workers' compensation,
occupational safety and health requirements, labor/management relations and
unemployment insurance, the Family and Medical Leave Act or related matters, and
the Company and its subsidiaries are not engaged in and have not engaged in any
unlawful practice relating to the business under such applicable laws, or in any
unfair labor practice relating to the business; (b) no Governmental Entity has
given the Company or any of its subsidiaries written notice regarding any
pending charge, audit, claim, complaint, investigation or review by or before
any Governmental Entity concerning or requesting in writing to explain any
possible conflicts with or violations of any such laws relating to the business
by the Company or such subsidiary or in connection with the operation of the
business, nor, to the knowledge of the Company, is any such investigation
threatened or pending, nor, to the knowledge of the Company, has any such
investigation occurred
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<PAGE>
during the last two years; (c) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the knowledge of Company, threatened against or
affecting the business, and neither the Company nor any subsidiary has
experienced any work stoppage or other material labor difficulty relating to the
business in the last two years; (d) to the knowledge of the Company, no union
representation question or union organizational activity exists respecting
employees and, to the Company's knowledge, no one has petitioned within the last
two years, and no one is now petitioning, for union representation of any
employees; (e) there exists no collective bargaining agreement or other contract
or agreement relating to the business with any labor union or association
representing any employee, and no collective bargaining agreement affecting
employees is currently being negotiated; (f) the Company and its subsidiaries
are in material compliance with all obligations under all Company Employee Plans
and all employment contracts and are not delinquent in payments to any employees
for any wages, salaries, commissions, bonuses or other compensation for any
services performed by them relating to the business or amounts required to be
reimbursed to such employees. Except as set forth in the Company Disclosure
Schedule, as of the date hereof, there are no pending or, to the knowledge of
the Company, threatened proceedings, actions or suits of any nature nor to the
knowledge of the Company is there any basis therefor (i) under or alleging
violation of IRCA, WARN or any law respecting employment discrimination, equal
opportunity, affirmative action, employee privacy, wrongful or unlawful
termination or demotion, sexual and other harassment, workers' compensation,
occupational safety and health requirements, labor/management relations
(including any grievances or arbitration proceeding arising out of or under any
collective bargaining agreements) and unemployment insurance, or matters
involving any employee; (ii) relating to alleged unlawful employment practices
or unfair labor practices involving any employee (or the equivalent thereof
under any law); or (iii) relating to alleged breaches of any of the Company
Employee Plans. To Company's knowledge as of the date hereof, no employee of the
Company has in any material respect violated any employment contract,
confidentiality agreement, patent disclosure agreement or noncompetition
agreement between such employee and any former employer of such employee due to
such employee being employed by the Company or any of its subsidiaries or
disclosing to the Company or any of its subsidiaries trade secrets or
proprietary information of any such employer. As of the date hereof, no employee
of the Company or any of its subsidiaries has given notice to the Company or any
of its subsidiaries, nor do the executive officers of the Company otherwise have
knowledge as of the date hereof that any employee intends to terminate his or
her employment with the Company or any of its subsidiaries.
(v) Preferred Share Rights Agreement. The Company's Board of Directors
--------------------------------
has duly authorized and approved an amendment to that certain Preferred Share
Rights Agreement between the Company and The First National Bank of Boston (the
"Rights Agent") dated as of October 24, 1996 (the "Rights Agreement") to exclude
------------ ----------------
Parent and Sub and their respective Affiliates and Associates (as such terms are
defined under the Rights Agreement) from the definition of "Acquiring Person"
therein, with respect to the beneficial ownership of shares of the Company
Common Stock which Parent, Sub and/or any of their respective Affiliates and
Associates have hereby obtained the right to acquire, or will acquire, as a
result of the transactions contemplated by this Agreement, including but not
limited to the Offer, the Merger or the Stock Option Agreement (as defined in
Section 6.11 hereof), or any other agreement or transaction involving Parent,
Sub
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<PAGE>
and/or any of their respective Affiliates and Associates that has been approved
by the Board of Directors of the Company prior to such acquisition. Upon
execution of such amendment by the Rights Agent, such amendment will be in full
force and effect. The Company's Board of Directors has duly authorized and
approved the execution of this Agreement and the consummation of the
transactions contemplated by this Agreement, including but not limited to the
Offer, the Merger and the Stock Option Agreement, and has determined that the
terms of the Offer and of the Merger as well as the transactions contemplated
hereby and thereby are fair to and in the best interests of the Company and its
stockholders.
4.2 Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
represent and warrant to the Company as follows:
(a) 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 the 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 or leasing 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.
(b) 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 by Parent and Sub and the consummation by Parent and Sub 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 (except as enforcement hereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and similar laws, both state
and federal, affecting the enforcement of creditors' rights or remedies in
general as from time to time in effect or (ii) the exercise by courts of equity
powers). 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 or the consummation by Parent or Sub, as the case may be, of any of
the transactions contemplated by this Agreement, except for (1) the filing of a
pre-merger 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 would not
individually or in the aggregate (A) have a material adverse effect on Parent,
(B) impair the ability of
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<PAGE>
Parent and Sub to perform their respective obligations under this Agreement or
(C) prevent the consummation of any of the transactions contemplated by this
Agreement.
(c) Information Supplied. None of the information supplied or to be
--------------------
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the Information Statement
or 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 Statement, at the date 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
promulgated thereunder, except that 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.
(d) Brokers. No broker, investment banker, financial advisor or other
-------
person, other than Montgomery Securities, 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.
(e) Financing. Parent has funds sufficient to consummate the Offer and
---------
the Merger on the terms contemplated by this Agreement, and 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 of Common Stock pursuant to
the Offer and to perform their respective obligations under this Agreement,
including without limitation payment in full for all shares of Common Stock
validly tendered or outstanding at the Effective Time.
(f) Litigation. Except as disclosed in documents filed with the SEC by
----------
Parent, as of the date of this Agreement, there is no suit, action or proceeding
pending or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries that individually or in the aggregate could reasonably be expected
to (i) impair the ability of Parent or Sub to perform their obligations under
this Agreement or (ii) prevent the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Parent or any of its subsidiaries having, or which is reasonably likely to have,
any effect referred to in the foregoing clause (i) or (ii) above.
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<PAGE>
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
5.1 Conduct of Business.
-------------------
(a) Conduct of Business by the Company. The Company shall, and shall
----------------------------------
cause its subsidiaries to, carry on its and their respective businesses in the
ordinary course and use its reasonable efforts in light of its current financial
condition to preserve intact their current business organizations, to keep
available the services of their current officers and employees and to preserve
relationships with distributors, licensors, contractors, customers, suppliers,
lenders, employees and others having business dealings with any of them. Without
limiting the generality of the foregoing, except as may be expressly permitted
by other provisions of this Agreement, or as may be agreed to in writing by
Parent, the Company shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent, in the case of less than wholly owned subsidiaries,
as required by agreements existing on the date of this Agreement, (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 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 the issuance of
the Company Common Stock upon the exercise of Employee Stock Options and
Director Stock Options outstanding on the date of this Agreement and in
accordance with their present terms) and pursuant to the Company's Employee
Stock Purchase Plan;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (y) any assets that
individually or in the aggregate are material to the Company and its
subsidiaries taken as a whole, except purchases of inventory in the ordinary
course of business consistent with past practice;
-26-
<PAGE>
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
(including Intellectual Property), except for sales, leases, licenses, or
encumbrances of its properties or assets in the ordinary course of business
consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or draw down
on any credit facility or arrangement 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, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing or
(y) make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any direct or indirect wholly owned
subsidiary of the Company;
(vii) make or agree to make any new capital expenditure or
expenditures which individually is in excess of $25,000 or which in the
aggregate are in excess of $100,000;
(viii) make any material tax election or settle or compromise any
income or franchise tax liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction (x) of
liabilities or obligations the failure of which to satisfy would have a Material
Adverse Effect on the Company, (y) liabilities and obligations to employees and
(z) in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Filed SEC Documents or incurred since
the date of such financial statements in the ordinary course of business
consistent with past practice in accordance with the terms of this Section 5.1;
(x) except as expressly contemplated hereby, enter into, modify,
amend or terminate any contract or agreement binding on the Company or any
subsidiary or waive, release or assign any rights or claims thereunder other
than contracts or agreements involving purchase of inventory and supplies or
sales of products in the ordinary course of business and other than discounting
of accounts receivable to obtain prompt collection;
(xi) terminate or lay off any employees, other than for cause
consistent with past practice and Company policy.
(xii) except as otherwise contemplated by this Agreement adopt or
amend in any material respect any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the
-27-
<PAGE>
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures, or otherwise alter or
commit to any compensation, benefit or severance or change of control
arrangement for or with any officer or employee of the Company or enter into any
related or interested party transaction of a nature that would be required to be
disclosed in SEC filings.
(xiii) grant or provide any severance or termination pay to any
officer or employee except payments under the WARN Act or similar law or
regulation after first consulting with Parent, or that meet the following three
criteria: (A) the payments are in amounts consistent with the Company's policies
and past practices, (B) the payments are made pursuant to written plans or
agreements outstanding, or policies existing, on the date hereof and (C) the
payments are made pursuant to arrangements described in the Company Disclosure
Schedule and only after prior written notice to Parent;
(xiv) voluntarily take actions to liquidate or dissolve the
Company or to take advantage of bankruptcy or other creditor protection laws;
(xv) institute any litigation or other proceeding other than in
connection with this Agreement or any of the transactions contemplated hereby;
(xvi) take any action that might cause or constitute a breach of
any representation or warranty made by the Company in this Agreement; or
(xvii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not
-------------
permit any of their respective subsidiaries to, knowingly and willfully, take
deliberate action that would cause (i) any of the representations and warranties
of such party set forth in this Agreement to become untrue in (x) such a manner
as would have a Material Adverse Effect on the Company (in the case of the
Company) or (y) in any material respect (in the case of Parent) as of the date
when made or (ii) any of the conditions to the Offer set forth in Exhibit A or
---------
any of the conditions to the Merger not being satisfied (subject to the
Company's right to take action consistent with Section 5.2).
5.2 No Solicitation.
---------------
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement in accordance with its terms,
the Company shall not, nor shall it permit any of its subsidiaries to, nor shall
it authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or any of
its subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any takeover proposal or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any information with respect
to, or enter into any agreement with respect to, or take any other
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<PAGE>
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any takeover proposal;
provided, however, that to the extent required by fiduciary obligations under
- -------- -------
applicable law as advised by independent counsel, the Company may, in response
to a takeover proposal which was not solicited after the date of this Agreement,
participate in discussions or negotiations with, or furnish information with
respect to the Company pursuant to a confidentiality agreement in reasonably
customary form, to any person. The Company, its subsidiaries, officers,
directors, employees, investment bankers, attorneys and other agents and
representatives will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted previously regarding a
takeover proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer or director of the Company or any investment banker or attorney of the
Company or any of its subsidiaries, shall be deemed to be a breach of this
Section 5.2(a) by the Company. For purposes of this Agreement, "takeover
--------
proposal" means any proposal for a merger or other business combination
- --------
involving the Company or any of its Significant Subsidiaries or any proposal,
offer or tender offer to acquire (including without limitation by license) in
any manner, directly or indirectly, an equity interest in, not less than 10% of
the outstanding voting securities of, or assets representing not less than 10%
of the annual revenues of the Company or any of its Significant Subsidiaries,
other than the transactions contemplated by this Agreement.
(b) Following the receipt of an unsolicited takeover proposal which,
subject to the provisions of Section 5.2(a) hereof, the Company's Board of
Directors may respond to and if the Company's Board of Directors determines in
good faith, based on the advice of its outside financial advisors, that such
takeover proposal is more favorable to the Company's stockholders than the Offer
and the Merger (a "Superior Proposal"), then the Company may terminate this
-----------------
Agreement under Section 8.1(c) and shall pay the amounts payable under Section
6.8 within 2 business days and thereafter accept and enter into any Agreement
with respect to such Superior Proposal, and the Board of Directors of the
Company may approve or recommend (and, in connection therewith withdraw or
modify its approval or recommendation of the Offer, this Agreement or the
Merger). Nothing contained in this Section 5.2(b) shall prohibit the Company or
its Board of Directors from (i) taking, and disclosing to the Company's
stockholders, a position with respect to a takeover proposal pursuant to Rules
14d-9 and 14e-2(a) under the Exchange Act or (ii) making any disclosure to the
Company's stockholders that, in the judgment of the Board of Directors or the
Company is required under applicable law.
(c) In addition to the obligations of the Company set forth in
paragraph (b) above, the Company shall promptly advise Parent orally and in
writing of any request for information or of any takeover proposal, or any
inquiry with respect to or which is expected to lead to any takeover proposal,
the material terms and conditions of such request, takeover proposal or inquiry,
and the identity of the person making any such takeover proposal or inquiry. The
Company will keep Parent informed of the status and material terms of any such
request, takeover proposal or inquiry.
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<PAGE>
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
6.1 Stockholder Approval; Preparation of Proxy Statement.
----------------------------------------------------
(a) If Company Stockholder Approval is required by law, the Company
will, at Parent's request, 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. If able to do so, Parent shall cause the Company
to comply with its obligations under Section 6.1(a) and Section 6.1(b). Subject
to the provisions of Section 5.2(b), the Company will, 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 of the Company
Common Stock, the parties shall, at the request of Parent, 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. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 6.1(a) shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to the Company of any
takeover proposal or (ii) the withdrawal or modification by the Board of
Directors of the Company of its approval or recommendation of the Offer, this
Agreement or the Merger, except that such obligations shall terminate if this
Agreement is terminated.
(b) If the Company Stockholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary Proxy Statement with the
SEC and will 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 will 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 will promptly prepare and mail to its stockholders such
an amendment or supplement. The Company will not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all shares of the Company Common Stock
purchased pursuant to the Offer and all other shares of the Company Common Stock
owned by Sub or any other subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
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<PAGE>
6.2 Access to Information; Confidentiality. The Company shall, and shall
--------------------------------------
cause each of its subsidiaries to, afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisers and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its subsidiaries to, furnish or make available promptly
to Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required by
law, Parent will hold, and will cause its officers, employees, accountants,
counsel, financial advisers and other representatives and affiliates to hold,
any confidential information in accordance with the Confidentiality Agreement
between Parent and the Company (the "Confidentiality Agreement").
-------------------------
6.3 Best Efforts; Notification.
--------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
use its reasonable best efforts 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 (i) the
obtaining of all necessary actions or non actions, 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 obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, including but not limited to those set forth in Section 4.1(d) of the
Company Disclosure Schedule, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) 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 connection with and without limiting the foregoing, the Company
and its Board of Directors shall (A) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, this Agreement or any of the other transactions
contemplated by this Agreement and (B) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement, or any other transaction contemplated by this Agreement, take all
action within its power and authority necessary 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 and the other transactions contemplated by this Agreement.
Notwithstanding anything to the contrary set forth in this Section 6.3(a), the
Board of Directors of
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the Company shall not be prohibited from taking any action consistent with by
Section 5.2(a) or 5.2(b), subject to Parent's rights set forth in Section 5.2(b)
and in Section 5.2(c).
(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 (x) so as to have a Material Adverse Effect on
the Company (in the case of the Company) or (y) in any material respect (in the
case of Parent) 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.
6.4 Stock Plans.
-----------
(a) Stock Option Plans
------------------
(i) At the Effective Time each outstanding employee or director
stock option (each, an "Employee Stock Option") to purchase shares of Company
---------------------
Common Stock heretofore granted pursuant to the Company's 1987 Stock Option
Plan, as amended, 1992 Stock Option Plan, as amended or 1992 Director Stock
Option Plans and each other right to acquire shares of Company capital stock
(collectively, "Options") shall become fully exercisable and vested, whether or
-------
not otherwise exercisable and vested. All Options that are outstanding
immediately prior to the Effective Time shall be canceled at the Effective Time
and the holders thereof shall be entitled to receive, for each share subject to
such Option, an amount of cash equal to the excess, if any, of the Offer Price
over the exercise price per Share of such Option subject to any required
withholding taxes.
(ii) Each of the Options shall terminate as of the Effective
Time.
(b) 1992 Stock Purchase Plan. The Company's 1992 Employee Stock
------------------------
Purchase Plan (the "Company Stock Purchase Plan") shall be terminated on the
---------------------------
earlier of July 31, 1997 or the Effective Time. If terminated at the Effective
Time, the Company shall take such actions as are necessary to cause the
"Exercise Date" (as such term is used in the Company Stock Purchase Plan)
applicable to the then current Offering Period (as such term is used in the
Company Stock Purchase Plan) to be changed to the last trading day on which the
Company Common Stock is traded on the Nasdaq National Market immediately prior
to the Effective Time (the "Final Company Exercise Date"); provided that such
---------------------------
change in the Exercise Date shall be conditioned on the consummation of the
Merger. On the Final Company Exercise Date, the funds credited as of such date
under the Company Stock Purchase Plan within each participant's payroll
withholdings account shall be deemed applied to the purchase of whole shares of
the Company Common Stock in accordance with the terms of the Company Stock
Purchase Plan, and the shares of Company Common Stock issuable as a result
thereof shall be deemed outstanding and converted to Merger Consideration in the
Merger pursuant to the terms of this Agreement.
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<PAGE>
6.5 Post Merger Employment Benefits; Severance. Employees of the Company
------------------------------------------
who become employed by Parent or any controlled subsidiary thereof after the
Effective Time will either to extent permitted under the terms of such Employee
Benefit Plans continue to be eligible to participate in the Company's Employee
Benefit Plans, if and for so long as continued, or become eligible to
participate in the same standard employee benefit plans as are generally
available to similarly situated employees of Parent. The Company shall take all
commercially reasonable efforts in light of the Company's current financial
condition to induce its employees to remain employed by the Company at least
through the Effective Time.
6.6 Indemnification, Exculpation and Insurance.
------------------------------------------
(a) From and after the Effective Time, the Parent will fulfill and
honor and will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
agreements between the Company and any of its subsidiaries and their respective
directors and officers (the "Indemnified Parties") existing prior to the date
-------------------
hereof; Parent acknowledges that indemnity agreements are currently in force
with each of the Company's directors and officers and agrees not to challenge
the validity of such agreements. From and after the Effective Time, such
obligations shall be the joint and several obligations of Parent and the
Surviving Corporation and, by executing this Agreement, Parent hereby assumes
such obligations. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification and
elimination of liability for monetary damages set forth in the Certificate of
Incorporation and Bylaws of the Company, which provisions will not be amended,
repealed or otherwise modified from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of the Company
or its subsidiaries, unless such modification is required by law.
(b) Parent will to cause to be maintained for a period of not less
than two (2) years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O Insurance")
-------------
for all persons who are directors and officers of the Company on the date of
this Agreement, so long as the annual premium therefor would not be in excess of
150% of the last annual premium paid prior to the date of this Agreement (the
"Maximum Premium"). If the existing D&O Insurance expires, is terminated or
---------------
canceled during such two year period, Parent will use all reasonable efforts to
cause to be obtained as much D&O Insurance as can be obtained for the remainder
of such period for an annualized premium not in excess of the Maximum Premium,
on terms and conditions no less advantageous than the existing D&O insurance. In
lieu of maintaining the Company's current D&O insurance, Parent may elect to add
the directors and officers of the Company on the date of this Agreement to its
own insurance policy, provided that such election does not diminish the rights
provided to such persons under the Company's existing D&O Insurance.
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<PAGE>
(c) This Section 6.6 will survive any termination of this Agreement
and the consummation of the Merger at the Effective Time is intended to benefit
the Company, the Surviving Corporation and the persons who are or were
directors, officers, employees and agents of the Company or its subsidiaries on
or prior to the Effective Time, and will be binding on all successors and
assigns of the Parent or the Surviving Corporation.
(d) In the event that Parent or the Surviving Corporation or any of
their successors or assigns consolidates with or merges into any other person
and shall not be the continuing or surviving corporations or entities of such
consolidation or merger, then and in each such case, proper provisions shall be
made so that the successors and assigns of the Parent or the Surviving
Corporation shall assume the obligations of the Parent or the Surviving
Corporation, as the case may be, set forth in this Section 6.6.
(e) The provisions of this Section 6.6 are intended to be for the
benefit of, and shall be enforceable by, each indemnified party and such party's
heirs and representatives.
6.7 Directors. Promptly upon the acceptance for payment of, and payment
---------
for, any shares of the Company Common Stock by Sub pursuant to the Offer, and
provided that the Minimum Tender Condition has been satisfied, Sub shall be
entitled to designate for appointment or election to the Company's Board of
Directors, upon written notice to Company, such number of persons so that the
designees of Sub constitute the same percentage (but in no event less than a
majority) of the Company's Board of Directors (rounded up to the next whole
number) as the percentage of Shares acquired in connection with the Offer. The
Company shall, upon Sub's request, promptly increase the size of the Board of
Directors and/or secure the resignations of such number of directors as is
necessary to enable Sub's designees to be elected to the Board of Directors and
shall cause Sub's designees to be so elected. 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). Following the election
or appointment of Sub's designees pursuant to this Section 6.7, and prior to the
Effective Time, any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or Sub or
waiver of the Company's rights hereunder, shall require the concurrence of a
majority of the Company's directors (or the concurrence of the director, if
there is only one remaining) then in office who are directors of the Company on
the date hereof, or are directors (other than directors designated by Sub in
accordance with this Section 6.7) designated by such persons or person to fill
any vacancy (the "Continuing Directors"). Notwithstanding the foregoing, Parent
--------------------
will take all actions in its power required to maintain on the Company's Board
at least one Continuing Director at all times after the consummation of the
Offer and until the Effective Time.
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<PAGE>
6.8 Fees and Expenses.
-----------------
(a) Except as provided below in this Section 6.8, 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 or next day
funds to Parent, $750,000 (the "Expense Fee"):
-----------
(i) upon demand (unless this Agreement is terminated by the
Company and Parent or Sub shall have failed to perform, in any manner that
adversely affects the Company or its stockholders, any of its obligations under
this Agreement) if this Agreement is terminated pursuant to Section 8.1(b)(i) as
a result of the failure of any condition set forth in clause (i), (ii) or (iv)
of paragraph (d) of Exhibit A or in paragraph (e) or (f) of Exhibit A or
pursuant to Section 8.1(d)(i), (ii) or (iv);
(ii) upon demand, (unless this Agreement is terminated by the
Company and Parent or Sub shall have failed to perform, in any manner that
adversely affects the Company or its stockholders, any of its obligations under
this Agreement), if (x) at any time on or after the date of this Agreement until
twelve (12) months following the termination of this Agreement, any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) (other than
Parent or any of its affiliates) shall have acquired, or entered into an
agreement (the transaction contemplated by which is subsequently consummated)
related to acquisition of (including without limitation by license), directly or
indirectly, the Company, assets representing more than 50% of the fair market
value of the Company's assets or more than 50% of the shares of the Company
Common Stock then outstanding, and (y)(A) on or after the date of this
Agreement, and prior to expiration of the Offer (or after expiration of the
Offer but prior to expiration of a Concurrent Proposal) any person or group
shall have made a takeover proposal which shall have been publicly announced and
(B) this Agreement shall have been terminated pursuant to Section 8.1(b)(i) or
Section 8.1(d). For purposes of this Section 6.8(b)(ii), "Concurrent Proposal"
shall mean any takeover proposal that is made and not subsequently withdrawn
prior to the expiration of the Offer or earlier termination of this Agreement;
or
(iii) concurrently with the Company entering into any agreement
with respect to any superior proposal in accordance with Section 5.2(b), unless
this Agreement is terminated by the Company and Parent or Sub shall have failed
to perform in any manner that adversely affects the Company or its stockholders,
any of its obligations under this Agreement.
(c) Payment of the amounts described in this Section 6.8 shall not be
in lieu of damages incurred in the event of willful breach of this Agreement.
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<PAGE>
6.9 Public Announcements. Parent and Sub, on the one hand, and the
--------------------
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review, comment upon and concur with, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national market system.
The parties agree that the initial press release to be issued with respect to
the transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
6.10 Stock Option Agreement. Concurrently with the execution of this
----------------------
Agreement, the Company shall deliver to Parent an executed Stock Option
Agreement in the form of Exhibit B attached hereto (the "Stock Option
------------
Agreement"). The Company agrees to fully perform its obligations under the
- ---------
Stock Option Agreement.
6.11 Preferred Share Rights Agreement. The Company hereby covenants and
--------------------------------
agrees to effect the amendment of the Rights Agreement, described in Section
4.1(v) hereof, by executing a formal amendment thereto with the Rights Agent and
filing an amendment to the Company's Registration Statement on Form 8-A, and
having such amendment declared effective by the SEC with respect to such Rights
Agreement as soon as possible, and in no event later than five days, after the
date of this Agreement; and further covenants and agrees that it shall take any
and all action necessary to prevent Parent, Sub and their respective Affiliates
and Associates from being considered an "Acquiring Person" under the Rights
Agreement, and to prevent the occurrence of a "Distribution Date," as defined
therein, as a result of Sub's acquisition of Company Common Stock upon
consummation of the Offer or Parent's or Sub's acquisition of Company Common
Stock, or rights to acquire same, in connection with the Merger or otherwise
pursuant to this Agreement or any of the transactions or documents contemplated
hereby, including without limitation pursuant to the Offer, the Merger or the
Stock Option Agreement, or any other agreement involving Parent, Sub or any
Affiliate or Associate thereof approved by the Board of Directors of the
Company.
6.12 Parent Financial Assistance. Parent agrees to provide financial
---------------------------
assistance to the Company on and subject to the terms set forth in Exhibit C.
6.13 Technology License Agreement. Concurrently with the execution of
----------------------------
this Agreement, the Company and Parent shall enter into the Technology License
Agreement in the form of Exhibit D attached hereto (the "Technology License
--------- ------------------
Agreement").
- ---------
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<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Time of the following
conditions:
(a) Company Stockholder Approval. If required by applicable law,
----------------------------
the Company Stockholder Approval shall have been obtained.
(b) HSR. To the extent required under applicable law, any waiting
---
period (and any extension thereof) applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) Consummation of the Offer. Shares shall have been purchased
-------------------------
pursuant to the Offer.
(d) No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
executive order, decree, temporary restraining order, preliminary or permanent
injunction, judgment or other order or ruling issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition shall be in effect which would (i) make the acquisition or holding
by Parent or its affiliates of Company Common Stock or Common Stock of the
Surviving Corporation illegal or otherwise prevent the consummation of the
Merger, (ii) prohibit Parent's or Sub's ownership or operation of, or compel
Parent or Sub to dispose of or hold separate, all or a material portion of the
business or assets of Purchaser, the Company or any subsidiary thereof, (iii)
compel Parent, Sub or the Company to dispose of or hold separate all or a
material portion of the business or assets of Parent or any of its subsidiaries
or the Company or any of its subsidiaries, (iv) impose material limitations on
the ability of Parent or Sub or their affiliates effectively to exercise full
ownership and financial benefits of the Surviving Corporation, or impose any
material condition to this Agreement or the Merger which would be materially
adverse to Parent.
7.2 Conditions to Parent's and Sub's Obligation to Effect the Merger. The
----------------------------------------------------------------
respective obligations of Parent and Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company set forth in
this Agreement shall have been true and correct in all material respects as of
the date of the Agreement except for such inaccuracies as have been cured;
(b) (x) the Company shall have performed in all material respects each
of its obligations under this Agreement required to be performed by it prior to
expiration of the Offer; and (y) the Company shall have performed in all
material respects each of its obligations under this
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<PAGE>
Agreement, to the extent such performance is under the control of the officers
of the Company who were not appointed following the consummation of the Offer,
required to be performed by it following expiration of the Offer, except in
cases of clauses (x) and (y) to the extent that (i) the aggregate effect of the
failure of such performance does not result in a Material Adverse Effect with
respect to the Company, alter the terms of the Merger or materially adversely
affect Parent or (ii) the failure of such performance is attributable to any
action or inaction of Parent or Company directors appointed at Parent's request;
and
(c) there shall not have occurred since the date of this Agreement any
Material Adverse Change in the Company and its subsidiaries taken as a whole or
any event that is highly probable to result in a Material Adverse Change in the
Company and its subsidiaries taken as a whole, excluding for these purposes any
changes that consist primarily of or result primarily from employee attrition,
and disregarding for these purposes operating losses incurred in the ordinary
course.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company (provided,
however, that if Shares are purchased pursuant to the Offer, Parent may not 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 (w) as the result of the failure of any of the conditions
set forth in Exhibit A to this Agreement, Sub shall have failed to commence the
---------
Offer in the time required by this Agreement or (x) as a result of the failure
of any of the conditions set forth in Exhibit A to this Agreement the Offer
---------
shall have terminated or expired in accordance with its terms (as extended, if
required, pursuant to the last sentence of Section 1.1(a)) without Sub having
accepted for payment any shares of the Company Common Stock pursuant to the
Offer or (y) Sub shall not have accepted for payment any shares of the Company
Common Stock pursuant to the Offer on or prior to August 5, 1997; provided,
--------
however, that the right to terminate this Agreement pursuant to clauses (w) or
- -------
(x) above of this Section 8.1(b)(i) shall not be available to 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 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 other action permanently enjoining, restraining or
otherwise prohibiting the acceptance
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<PAGE>
for payment of, or payment for, shares of the Company Common Stock pursuant to
the Offer or the Merger and such order, decree or ruling or other action shall
have become final and nonappealable; or
(c) by the Company in accordance with the provisions of Section 5.2,
provided that the Company shall pay within 2 business days after termination to
the Parent the entire Expense Fee under Section 6.8;
(d) by the Parent in the event that (i) the Board of Directors of the
Company or any committee thereof shall have failed to recommend the Offer, the
Merger or this Agreement, including any failure to include such recommendation
in the Schedule 14D-9, or shall have so resolved; (ii) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified (including
without limitation by amendment of the Company's Schedule 14D-9) in a manner
adverse to Parent or Sub its approval or recommendation of the Offer, the Merger
or this Agreement, shall have approved or recommended any takeover proposal,
shall have authorized the redemption or amendment of the Rights Agreement after
the Company has received a takeover proposal or shall have resolved to do any of
the foregoing; (iii) the Company shall have entered into any letter of intent,
acquisition agreement or similar agreement with respect to any superior proposal
in accordance with Section 5.2(b) of this Agreement or the Board of Directors or
any committee thereof shall have resolved to do so; or (iv) the Board of
Directors of the Company or any committee thereof upon a request to reaffirm the
Company's approval or recommendation of the Offer, the Merger or this Agreement,
shall have failed to do so within two business days after such request is made
or shall have so resolved.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either the Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, other than the provisions of Section
5.2(b), the last sentence of Section 6.2, Section 6.8, this Section 8.2 and
Article IX, except to the extent that such termination results from the willful
and material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties at any time
---------
before or after obtaining the Company Stockholder Approval, if required by law;
provided, however, that after any such approval, there shall not be made any
- -------- -------
amendment that by law requires further approval by such stockholders without the
further approval of such stockholders; and provided further that any amendment
following the purchase of shares pursuant the Offer shall require the consent of
a majority of the Continuing Directors. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
8.3, waive
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<PAGE>
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing 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.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
---------------------------------------------------------
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors; provided, however, that in the event that Sub's designees
-------- -------
are appointed or elected to the Board of Directors of the Company as provided in
Section 6.7, after the acceptance for payment of shares of the Company Common
Stock pursuant to the Offer and prior to the Effective Time, the affirmative
vote of the Continuing Directors 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 or (iii) extend the time for
performance of Parent's and Sub's respective obligations under this Agreement.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Nonsurvival of Representations and Warranties. 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 for payment of, and payment for,
shares of the Company Common Stock by Sub pursuant to the Offer. This Section
9.1 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
9.2 Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) 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
Micron Electronics, Inc.
900 East Karcher Road
Nampa, ID 83687
Attention: Chief Financial Officer
with copies to: the General Counsel
at the same address
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<PAGE>
Fenwick & West LLP
Two Palo Alto Square
Suite 700
Palo Alto, CA 94306
Fax: (415) 494-1417
Attention: Dennis R. DeBroeck, Esq.
David W. Healy, Esq.
(b) if to the Company, to
NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, CA 95035
Attention: Chief Financial Officer
Wilson Sonsini Goodrich & Rosati
650 Page Mill Rd.
Palo Alto, CA 94304-1050
Telephone: 415-493-9300
Facsimile: 415-493-6811
Attention: Larry W. Sonsini, Esq.
Marty Korman, Esq.
9.3 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that directly
---------
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "Material Adverse Change" or "Material Adverse Effect" means,
----------------------- -----------------------
when used in connection with the Company, any change or effect that is
materially adverse to the Company's business, properties, assets, financial
condition or results of operations, excluding those changes, effects and
developments that result from (i) the announcement or pendency of the Offer,
(ii) general economic conditions or (iii) conditions affecting the industry in
which the Company competes.
(c) "person" means an individual, corporation, partnership, joint
------
venture, association, trust, unincorporated organization or other entity;
(d) a "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
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<PAGE>
interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first person;
(e) "superior proposal" has the meaning assigned thereto in Section
-----------------
5.2(b); and
(f) "takeover proposal" has the meaning assigned thereto in Section
-----------------
5.2(a).
9.4 Interpretation. When a reference is made in this Agreement to an
--------------
Article, a Section, Exhibit or Schedule, such reference shall be to an Article
or a Section of, or an Exhibit or Schedule to, 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 words "hereof," "herein" and "thereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined herein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. References to a person
are also to its permitted successors and assigns.
9.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the
----------------------------------------------
Confidentiality Agreement constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and except for the
provisions of Sections 6.4 and 6.6, are not intended to confer upon any person
other than the parties and the Company's stockholders any rights or remedies
hereunder.
9.7 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
9.8 Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub and Parent of any of its
obligations under this Agreement. This Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
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<PAGE>
9.9 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 parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of 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 any of the transactions contemplated by
this Agreement in any court other than a Federal or state court sitting in the
State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
PARENT: MICRON ELECTRONICS, INC.
By: /s/ T. Erik Oaas
-------------------------------
Name:
Title:
SUB: PAYETTE ACQUISITION CORPORATION
By: /s/ T. Erik Oaas
-------------------------------
Name:
Title:
THE COMPANY: NETFRAME SYSTEMS INCORPORATED
By: /s/ Robert L. Puette
-------------------------------
Name:
Title:
***AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE***
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EXHIBIT A
Offer
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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-l(c) under the Exchange Act (relating
to Sub's obligation to pay for or return tendered shares of the Company Common
Stock after the termination or withdrawal of the Offer), to pay for any shares
of the Company Common Stock tendered pursuant to the Offer unless (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of shares of the Company Common Stock which would, upon
consummation of the Offer, then represent at least a majority of the Fully
Diluted Shares (the "Minimum Tender Condition") and (ii) any waiting period
------------------------
under the HSR Act applicable to the purchase of shares of the Company Common
Stock pursuant to the Offer shall have expired or been terminated. The term
"Fully Diluted Shares" means all outstanding securities entitled generally to
--------------------
vote in the election of directors of the Company on a fully diluted basis, after
giving effect to the exercise or conversion of all options, rights and
securities exercisable or convertible into such voting securities, but only to
the extent that any such options, rights or securities are exercisable or
convertible into such voting securities at a per share price of $1.50 or less,
and specifically excluding any shares that are or may become issuable pursuant
to the Stock Option Agreement. Furthermore, notwithstanding any other term of
the Offer or this Agreement, Sub shall not be required to accept for payment or,
subject as aforesaid, to pay for any shares of the Company Common Stock not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer, if, upon the scheduled expiration date of the Offer (as extended, if
required, pursuant to the last sentence of Section 1.1(a)) and before the
acceptance of such shares for payment or the payment therefor, any of the
following conditions exists and is continuing:
(a) there shall be pending any suit, action or proceeding brought by
or on behalf of any Governmental Entity (or the staff of the Federal Trade
Commission or the staff of the Antitrust Division of the Department of Justice
shall have recommended the commencement of such), any shareholder of Company or
any other person or party directly or indirectly (i) challenging the acquisition
by Parent or Sub of any shares of the Company Common Stock, seeking to restrain
or prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by this Agreement, or
alleging, (on grounds that Sub reasonably and in good faith determines are
reasonably likely to result in financial exposure to the Company in excess of
available insurance coverage and/or proceeds), that any such acquisition or
other transaction relates to, involves or constitutes a violation by the Company
or its directors of federal securities law or applicable corporate statutes or
principles, (ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective subsidiaries of a material portion of
the business or assets of the Company and its subsidiaries, taken as a whole, 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 and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Offer or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose material
limitations on the
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<PAGE>
ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of the Company Common Stock accepted for payment
pursuant to the Offer including without limitation the right to vote the Company
Common Stock accepted for payment by it on all matters properly presented to the
stockholders of the Company, (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively managing or controlling in any material respect
the business or operations of the Company and its subsidiaries taken as a whole,
(v) which is likely to result in a material diminution in the value of the
Company or (vi) seeking to impose a material condition to the Offer, Merger or
Agreement which would be materially adverse to Parent;
(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, or any other action shall be taken 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 is reasonably likely to
result, in any of the consequences referred to in clauses (i) through (vi) of
paragraph (a) above;
(c) there shall have occurred since the date of this Agreement any
Material Adverse Change in the Company and its subsidiaries taken as a whole or
any event that is reasonably likely to result in a Material Adverse Change in
the Company and its subsidiaries taken as a whole;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have failed to recommend the Offer, the Merger or this Agreement,
including any failure to include such recommendation in the Schedule 14D-9, or
shall have so resolved; (ii) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified (including without limitation
by amendment of the Company's Schedule 14D-9) in a manner adverse to Parent or
Sub its approval or recommendation of the Offer, the Merger or this Agreement,
shall have approved or recommended any takeover proposal shall have authorized
the redemption or amendment of the Rights Agreement after the Company has
received any takeover proposal or shall have so resolved, (iii) the Company
shall have entered into any letter of intent, acquisition agreement or similar
agreement with respect to any superior proposal in accordance with Section
5.2(b) of this Agreement or the Board of Directors or any committee thereof
shall have resolved to do so, or (iv) the Board of Directors of the Company or
any committee thereof upon a request to reaffirm the Company's approval or
recommendation of the Offer, the Merger or this Agreement, shall have failed to
do so within two business days after such request is made or shall have so
resolved;
(e) any of the representations and warranties of the Company set forth
in this Agreement shall have failed to be true and correct in any material
respect as of the date of the Agreement or shall have ceased to be true and
correct in any material respect at any time thereafter;
(f) the Company shall have breached or failed to perform in any
material respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by it;
(g) this Agreement shall have been terminated in accordance with its
terms;
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(h) any bankruptcy proceedings shall have been instituted with respect
to the Company and not dismissed;
which, in the reasonable good faith judgment of Sub or Parent, in any such case,
and regardless of the circumstances giving rise to any such condition (other
than any action or inaction by Parent or any of its subsidiaries which
constitutes a breach of this Agreement), makes it inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and Parent and
their respective affiliates and may be asserted by Sub or Parent regardless of
the circumstances giving rise to such condition (other than any action or
inaction by Parent or any of its subsidiaries which constitutes a breach of this
Agreement) or may be waived (except for the Minimum Tender Condition) by Sub and
Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, Sub or any other affiliate of Parent 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 prior to the expiration of the Offer.
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<PAGE>
Exhibit B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of June 9, 1997 (the "Agreement") is
entered into by and between NetFRAME Systems Incorporated, a Delaware
corporation ("Target"), and Micron Electronics, Inc., a Minnesota corporation
("Acquiror"). Capitalized terms used in this Agreement but not defined herein,
and other terms defined in the Merger Agreement (as defined below) and used in
this Agreement but not defined herein, shall have the meanings ascribed thereto
in the Merger Agreement (as defined below).
RECITALS
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WHEREAS, concurrently with the execution and delivery of this Agreement,
Acquiror, Target and Payette Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Acquiror ("Merger Sub"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), which provides that,
among other things, upon the terms and subject to the conditions thereof,
Acquiror and Merger Sub will make a tender offer (the "Offer") for shares of
Common Stock of Target, and, following consummation of such Offer, Merger Sub
will be merged with and into Target (the "Merger"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the Merger
Agreement, Acquiror has requested that Target agree, and Target has so agreed,
to grant to Acquiror an option to acquire shares of Target's Common Stock,
$0.001 par value, upon the terms and subject to the conditions set forth herein;
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option. Target hereby grants to Acquiror an irrevocable
---------------
option (the "Option") to acquire up to a number of shares of the Common Stock,
$0.001 par value, of Target ("Target Shares") equal to 19.9% of the issued and
outstanding shares as of the first date, if any, upon which an Exercise Event
(as defined in Section 1(a) below) shall occur (the "Option Shares"), in the
manner set forth below (i) by paying cash at a price of $1.00 per share (the
"Exercise Price") and/or, at Acquiror's election, (ii) by exchanging therefor
shares of the Common Stock, par value $0.01 per share, of Acquiror ("Acquiror
Shares") at a rate (the "Exercise Ratio"), for each Option Share, of a number of
Acquiror Shares equal to the Exercise Price divided by the closing sale price of
Acquiror Shares on the Nasdaq National Market for the trading day immediately
preceding the date of the Closing (as defined below) of the particular Option
exercise.
2. Exercise of Option; Maximum Proceeds.
------------------------------------
(a) For all purposes of this Agreement, an "Exercise Event" shall have
occurred (i) immediately prior to the earlier of (A) the failure of the Board of
Directors of Target or any committee thereof to recommend the Offer, the Merger
or the Merger Agreement, including any
<PAGE>
failure to include such recommendation in the Schedule 14D-9, or its resolution
to that effect, (B) the withdrawal or modification by the Board of Directors of
Target or any committee thereof (including without limitation by amendment of
the Company's Schedule 14D-9), in a manner adverse to Acquiror or Merger Sub,
of the approval or recommendation by such Board or committee of the Offer, the
Merger or the Merger Agreement, or resolution to take such action, (C) the
approval or recommendation of any takeover proposal by the Board of Directors
of Target or any committee thereof, or resolution to take such action, (D) the
redemption or amendment of the Rights Agreement by the Board of Directors of
Target or any committee thereof after the Target has received a takeover
proposal, or resolution to take such action, (E) the execution by the Company
of an agreement (other than a Confidentiality Agreement) with respect to any
Superior Proposal in accordance with Section 5.2(b) of Merger Agreement or
resolution of the Board of Directors of Target or any committee thereof to do
so or (F) the failure, upon a request of Acquiror, to reaffirm Target's
approval or recommendation of the Offer, the Merger or the Merger Agreement,
within two business days after such request is made, or resolution to that
effect, (ii) immediately prior to the consummation of a tender or exchange
offer by a person other than Acquiror for 50% or more of any class of Target's
capital stock, or (iii) immediately prior to the time at which all of the
events specified in Section 6.8(b)(x) and (y) of the Merger Agreement shall
have occurred.
(b) Acquiror may deliver to Target a written notice (an "Exercise
Notice") specifying that it wishes to exercise and close a purchase of Option
Shares upon the occurrence of an Exercise Event and specifying the total number
of Option Shares it wishes to acquire and the form of consideration to be paid
(i) at any time following such time as the Board of Directors of Target shall
have taken any of the actions described in Section 2(a)(i) hereof, (ii) upon
the commencement of a tender or exchange offer by a person other than Acquiror
for 50% or more of any class of Target's capital stock (and/or during any time
which such a tender or exchange offer remains open or has been consummated) or
(iii) at any time following the occurrence of each of the events specified in
Section 6.8(b)(x) and (y) of the Merger Agreement (the events specified in
clauses (i), (ii) or (iii) of this sentence being referred to herein as a
"Conditional Exercise Event"). At any time after delivery of an Exercise
Notice, unless such Exercise Notice is withdrawn by Acquiror, the closing of a
purchase of Option Shares (a "Closing") specified in such Exercise Notice shall
take place at the principal offices of Target upon the occurrence of an
Exercise Event or at such later date prior to the termination of the Option as
may be designated by Acquiror in writing. In the event that no Exercise Event
shall occur prior to termination of the Option, such Exercise Notice shall be
void and of no further force and effect.
(c) The Option shall terminate upon the earliest of (i) the
consummation of the Offer for, and purchase of shares representing, in excess
of 50% of the outstanding Common Stock of Target, (ii) 12 months following the
termination of the Merger Agreement pursuant to Article VIII thereof if a
Conditional Exercise Event shall have occurred on or prior to the date of such
termination, and (iii) the date on which the Merger Agreement is terminated if
no Conditional Exercise Event shall have occurred on or prior to such date of
termination; provided, however, that if the Option is exercisable but cannot
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be exercised by reason of any applicable government order or because the
waiting period related to the issuance of the Option Shares under the HSR Act
shall not have expired or been terminated, then the Option shall not terminate
until the tenth business day after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal. Notwithstanding
the foregoing, the Option may not be exercised if (i) Acquiror
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shall have breached in any material respect any of its covenants or agreements
contained in the Merger Agreement or (ii) the representations and warranties of
Acquiror contained in the Merger Agreement shall not have been true and correct
in all material respects on and as of the date when made.
(d) If Acquiror receives in the aggregate pursuant to Section 6.8(b)
of the Merger Agreement together with proceeds in connection with any sales or
other dispositions of Option Shares or this Option (by virtue of Section 7
hereof or otherwise) and any dividends received by Acquiror declared on Option
Shares, more than the sum of (x) $1.5 million plus (y) the Exercise Price
multiplied by the number of Target Shares purchased by Acquiror pursuant to the
Option, then all proceeds to Acquiror in excess of such sum shall be remitted
by Acquiror to Target.
3. Conditions to Closing. The obligation of Target to issue Option Shares
---------------------
to Acquiror hereunder is subject to the conditions that (a) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
shall have expired or been terminated; (b) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with, any
Federal, state or local administrative agency or commission or other Federal,
state or local governmental authority or instrumentality, if any, required in
connection with the issuance of the Option Shares hereunder shall have been
obtained or made, as the case may be; and (c) no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such issuance shall be in effect. It is understood and
agreed that at any time during which Acquiror shall be entitled to deliver to
Target an Exercise Notice, the parties will use their respective best efforts to
satisfy all conditions to Closing, so that a Closing may take place as promptly
as practicable, and in any event, upon the occurrence of an Exercise Event.
4. Closing. At any Closing, (a) Target shall deliver to Acquiror a single
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certificate in definitive form representing the number of Target Shares
designated by Acquiror in its Exercise Notice, such certificate to be registered
in the name of Acquiror and to bear the legend set forth in Section 10 hereof,
against delivery of (b) payment by Acquiror to Target of the aggregate purchase
price for the Target Shares so designated and being purchased by delivery of (i)
a certified check or bank check and/or, at Acquiror's election, (ii) a single
certificate in definitive form representing the number of Acquiror Shares being
issued by Acquiror in consideration therefor (based on the Exercise Ratio), such
certificate to be registered in the name of Target and to bear the legend set
forth in Section 10 hereof.
5. Representations and Warranties of Target. Target represents and
----------------------------------------
warrants to Acquiror that (a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Target and consummation by Target of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Target and
no other corporate proceedings on the part of Target are necessary to authorize
this Agreement or any of the transactions contemplated hereby; (c) this
Agreement has been duly executed and delivered by Target and constitutes a
legal, valid and binding obligation of Target and, assuming this Agreement
constitutes a legal, valid and binding obligation of Acquiror, is enforceable
against Target in accordance with its terms, except as enforceability may be
limited by bankruptcy and
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other laws affecting the rights and remedies of creditors generally and general
principles of equity; (d) except for any filings required under the HSR Act,
Target has taken all necessary corporate and other action to authorize and
reserve for issuance and to permit it to issue upon exercise of the Option, and
at all times from the date hereof until the termination of the Option will have
reserved for issuance, a sufficient number of unissued Target Shares for
Acquiror to exercise the Option in full and will take all necessary corporate
or other action to authorize and reserve for issuance all additional Target
Shares or other securities which may be issuable pursuant to Section 9(a) upon
exercise of the Option, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable; (e) upon delivery of the Target Shares and any other
securities to Acquiror upon exercise of the Option, Acquiror will acquire such
Target Shares or other securities free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever,
excluding those imposed by Acquiror; (f) the execution and delivery of this
Agreement by Target do not, and the performance of this Agreement by Target
will not, (i) violate the Certificate of Incorporation or Bylaws of Target,
(ii) conflict with or violate any order applicable to Target or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any property or assets of Target or
any of its subsidiaries pursuant to, any contract or agreement to which Target
or any of its subsidiaries is a party or by which Target or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on Target; (g) the execution and delivery of this Agreement by
Target does not, and the performance of this Agreement by Target will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity except pursuant to the HSR Act; and
(h) any Acquiror Shares acquired pursuant to this Agreement will not be
acquired by Target with a view to the public distribution thereof and Target
will not sell or otherwise dispose of such shares in violation of applicable
law or this Agreement.
6. Representations and Warranties of Acquiror. Acquiror represents and
------------------------------------------
warrants to Target that (a) Acquiror is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Minnesota and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Acquiror and no other corporate proceedings on the part of Acquiror are
necessary to authorize this Agreement or any of the transactions contemplated
hereby; (c) this Agreement has been duly executed and delivered by Acquiror and
constitutes a legal, valid and binding obligation of Acquiror and, assuming this
Agreement constitutes a legal, valid and binding obligation of Target, is
enforceable against Acquiror in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings required under the HSR Act, Acquiror has taken (or will in a
timely manner take) all necessary corporate and other action in connection with
any exercise of the Option; (e) upon delivery of the Acquiror Shares to Target
in consideration of any acquisition of Target Shares pursuant hereto, Target
will acquire such Acquiror Shares free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or
4
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nature whatsoever, excluding those imposed by Target; (f) the execution and
delivery of this Agreement by Acquiror do not, and the performance of this
Agreement by Acquiror will not, (i) violate the Certificate of Incorporation or
Bylaws of Acquiror, (ii) conflict with or violate any order applicable to
Acquiror or any of its subsidiaries or by which they or any of their property
is bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Acquiror or any of its subsidiaries pursuant to, any
contract or agreement to which Acquiror or any of its subsidiaries is a party
or by which Acquiror or any of its subsidiaries or any of their property is
bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, conflicts, breaches, defaults, rights of termination, amendment,
acceleration or cancellation, liens or encumbrances which would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror;
(g) the execution and delivery of this Agreement by Acquiror does not, and the
performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity except pursuant to the HSR Act; and (h) any Target Shares
acquired upon exercise of the Option will not be acquired by Acquiror with a
view to the public distribution thereof and Acquiror will not sell or otherwise
dispose of such shares in violation of applicable law or this Agreement.
7. Certain Rights.
--------------
(a) Acquiror Put. Acquiror may deliver to Target a written notice (a
------------
"Put Notice") at any time during which Acquiror may deliver an Exercise Notice
specifying that it wishes to sell the Option, to the extent not previously
exercised, at the price set forth in subparagraph (i) below (as limited by
subparagraph (iii) below), and the Option Shares, if any, acquired by Acquiror
pursuant thereto, at the price set forth in subparagraph (ii) below (as limited
by subparagraph (iii) below) (the "Put"). At any time after delivery of a Put
Notice, unless such Put Notice is withdrawn by Acquiror, the closing of the Put
(the "Put Closing") shall take place at the principal offices of Target upon
the occurrence of an Exercise Event or at such later date prior to the
termination of the Option as may be designated by Acquiror in writing. In the
event that no Exercise Event shall occur prior to termination of the Option,
such Put Notice shall be void and of no further force and effect.
(i) The difference between the "Market/Tender Offer Price" for
Target Shares as of the date Acquiror gives notice of its intent to exercise
its rights under this Section 7(a) (defined as the higher of (A) the highest
price per share offered as of such date pursuant to any takeover proposal which
was made prior to such date and not terminated or withdrawn as of such date and
(B) the highest closing sale price of Target Shares on the Nasdaq National
Market during the 20 trading days ending on the trading day immediately
preceding such date) and the Exercise Price, multiplied by the number of Target
Shares purchasable pursuant to the Option, but only if the Market/Tender Offer
Price is greater than the Exercise Price. For purposes of determining the
highest price offered pursuant to any takeover proposal which involves
consideration other than cash, the value of such consideration shall be equal
to the higher of (x) if securities of the same class of the proponent as such
consideration are traded on any national securities exchange or by any
registered securities association, a value based on the closing sale price or
asked price for such securities on their principal trading market on such date
and (y) the value ascribed to such
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consideration by the proponent of such takeover proposal or if no such value is
ascribed, a value determined in good faith by the Board of Directors of Target.
(ii) The Exercise Price paid by Acquiror for Target Shares
acquired pursuant to the Option plus the difference between the Market/Tender
----
Offer Price and such Exercise Price (but only if the Market/Tender Offer Price
is greater than the Exercise Price) multiplied by the number of Target Shares
so purchased. If Acquiror issued Acquiror Shares in connection with any
exercise of the Option, the Exercise Price in connection with such exercise
shall be calculated as set forth in the last sentence of Section 1 as if
Acquiror had exercised its right to pay cash instead of issuing Acquiror
Shares.
(iii) Notwithstanding subparagraphs (i) and (ii) above,
pursuant to this Section 7 Target shall not be required to pay Acquiror in
excess of an aggregate of (x) $1.5 million plus (y) the Exercise Price paid by
----
Acquiror for Target shares acquired pursuant to the Option minus (z) any
-----
amounts paid to Acquiror by Target pursuant to Section 6.8(b) of the Merger
Agreement.
(b) Redelivery of Acquiror Shares. If Acquiror has acquired Target
-----------------------------
Shares pursuant to exercise of the Option by the issuance and delivery of
Acquiror Shares, then Target shall, if so requested by Acquiror, in fulfillment
of its obligation pursuant to the first clause of Section 7(a)(ii) with respect
to the Exercise Price paid in the form of Acquiror Shares only, redeliver the
certificate(s) for such Acquiror Shares to Acquiror, free and clear of all
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, other than those imposed by Acquiror.
(c) Payment and Redelivery of Option or Shares. At the Put Closing,
------------------------------------------
Target shall pay the required amount to Acquiror in immediately available funds
(and Acquiror Shares, if applicable) and Acquiror shall surrender to Target the
Option and the certificates evidencing the Target Shares purchased by Acquiror
pursuant thereto, and Acquiror shall represent and warrant that such shares are
then free and clear of all claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, other than those imposed by Target.
(d) Target Call. If Acquiror has acquired Option Shares pursuant to
-----------
exercise of the Option (the date of any Closing relating to any such exercise
herein referred to as an "Exercise Date") and no takeover proposal with respect
to Target has been consummated at any time after the date of this Agreement and
prior to the date one year following such Exercise Date (nor has Target entered
into a definitive agreement or letter of intent with respect to such a takeover
proposal which agreement or letter of intent remains in effect at the end of
such year), then, at any time after the date one year following such Exercise
Date and prior to the date 18 months following such Exercise Date, Target may
require Acquiror, upon delivery to Acquiror of written notice, to sell to Target
any Target Shares held by Acquiror as of the day that is ten business days after
the date of such notice, up to a number of shares equal to the number of Option
Shares acquired by Acquiror pursuant to exercise of the Option in connection
with such Exercise Date. The per share purchase price for such sale (the
"Target Call Price") shall be equal to the Exercise Price, plus an amount equal
to seven percent (7.0%) of the Exercise Price per annum, compounded annually,
since the applicable Exercise Date, less any dividends paid on the Target Shares
to be purchased by Target pursuant to this Section 7(d). The closing of any
sale of Target Shares pursuant to this Section 7(d) shall take place at the
principal offices of Target at a time and on a
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date designated by Target in the aforementioned notice to Acquiror, which date
shall be no more than 20 and no less than 12 business days from the date of
such notice. The Target Call Price shall be paid in immediately available
funds, provided that, in the event Acquiror has acquired Option Shares pursuant
--------
to exercise of the Option by issuance and delivery of Acquiror Shares, at the
option of Target, the Target Call Price for part or all of any purchase of
Target Shares pursuant to this Section 7(d), up to a number of such shares
equal to the number of Option Shares acquired by Acquiror by issuance and
delivery of Acquiror Shares, shall be paid by delivery of a number of Acquiror
Shares equal to the Target Call Price divided by the closing sale price of
Acquiror Shares on the Nasdaq National Market for the trading day immediately
preceding the date of the Exercise Date on which the Option Shares to be
purchased by Target pursuant to this Section 7(d) were originally issued to
Acquiror.
(e) Restrictions on Transfer. Until the termination of the Option,
------------------------
Target shall not sell, transfer or otherwise dispose of any Acquiror Shares
acquired by it pursuant to this Agreement.
8. Registration Rights.
-------------------
(a) Following the termination of the Merger Agreement, each party
hereto (a "Holder") may by written notice (a "Registration Notice") to the
other party (the "Registrant") request the Registrant to register under the
Securities Act all or any part of the shares acquired by such Holder pursuant
to this Agreement (the "Registrable Securities") in order to permit the sale or
other disposition of such shares by Holder; provided, however, that any such
-------- -------
Registration Notice must relate to at least 100,000 shares of Common Stock of
the Registrant (as adjusted for splits, etc.) and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act. The Registrant shall
have the option exercisable by written notice delivered to the Holder within
ten business days after the receipt of the Registration Notice, irrevocably to
agree to purchase all or any part of the Registrable Securities for cash at a
price (the "Option Price") equal to the product of (i) the number of
Registrable Securities so purchased and (ii) the per share average of the
closing sale prices of the Registrant's Common Stock on the Nasdaq National
Market for the 20 trading days immediately preceding the date of the
Registration Notice. Any such purchase of Registrable Securities by the
Registrant hereunder shall take place at a closing to be held at the principal
executive offices of the Registrant or its counsel at any reasonable date and
time designated by the Registrant in such notice within ten business days after
delivery of such notice. The payment for the shares to be purchased shall be
made by delivery at the time of such closing of the Option Price in immediately
available funds.
(b) If the Registrant does not elect to exercise its option to
purchase pursuant to Section 8(a) with respect to all Registrable Securities,
the Registrant shall use all reasonable efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) neither party shall be entitled to more than an
- -------- -------
aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after a Registration Notice in the
case of clause (A) below or 90 days after a Registration Notice in the case of
clauses (B) and (C) below) when (A) the Registrant is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the written opinion
7
<PAGE>
of counsel to such Registrant, such information would have to be disclosed if a
registration statement were filed at that time; (B) such Registrant is required
under the Securities Act to include audited financial statements for any period
in such registration statement and such financial statements are not yet
available for inclusion in such registration statement; or (C) such Registrant
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving the
Registrant. If consummation of the sale of any Registrable Securities pursuant
to a registration hereunder does not occur within 180 days after the filing
with the SEC of the initial registration statement therefor, the provisions of
this Section 8 shall again be applicable to any proposed registration, it being
understood that neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder. The Registrant shall use all
reasonable efforts to cause any Registrable Securities registered pursuant to
this Section 8 to be qualified for sale under the securities or blue sky laws
of such jurisdictions as the Holder may reasonably request and shall continue
such registration or qualification in effect in such jurisdictions; provided,
--------
however, that the Registrant shall not be required to qualify to do business in,
- -------
or consent to general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 8 are subject
to the condition that the Holder shall provide the Registrant with such
information with respect to such Holder's Registrable Securities, the plan for
distribution thereof, and such other information with respect to such Holder
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in a registration statement all material facts
required to be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 8 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall
provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings and as such underwriters may
reasonably require. In connection with any registrations, the Holder and the
Registrant agree to enter into an underwriting agreement reasonably acceptable
to each such party, in form and substance customary for transactions of this
type with the underwriters participating in such offering.
(e) Indemnification.
---------------
(i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, or any violation by the Registrant of any rule or
regulation promulgated under the
8
<PAGE>
Securities Act applicable to the Registrant in connection with any such
registration, qualification or compliance, and the Registrant will reimburse
the Holder and, each of its directors and officers and each person who controls
the Holder within the meaning of Section 15 of the Securities Act, and each
underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Registrant will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Registrant by such Holder or director
or officer or controlling person or underwriter seeking indemnification.
(ii) The Holder will indemnify the Registrant, each of its
directors and officers and each underwriter of the Registrant's securities
covered by such registration statement and each person who controls the
Registrant within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged statement) of a material fact contained in such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Holder of any rule or regulation promulgated under the Securities Act
applicable to the Holder in connection with any such registration,
qualification or compliance, and will reimburse the Registrant, such directors,
officers or control persons or underwriters for any legal or any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Registrant by the
Holder for use therein, provided that in no event shall any indemnity under
this Section 8(e) exceed the gross proceeds of the offering received by the
Holder.
(iii) Each party entitled to indemnification under this Section
8(e) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
- -------- -------
representation of the Indemnified Party by counsel retained by the Indemnifying
Party would be inappropriate due to actual or potential differing interests
between the Indemnified Party and any other party represented by such counsel
in such proceeding, and provided further that the failure of any Indemnified
-------- -------
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 8(e) unless the failure to give
such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
9
<PAGE>
litigation. No Indemnifying Party shall be required to indemnify any
Indemnified Party with respect to any settlement entered into without such
Indemnifying Party's prior consent (which shall not be unreasonably withheld).
9. Adjustment Upon Changes in Capitalization; Rights Plans.
-------------------------------------------------------
(a) In the event of any change in the Target Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option, the Exercise Ratio and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that Acquiror shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Acquiror would have received in respect of the
Target Shares if the Option had been exercised immediately prior to such event
or the record date therefor, as applicable.
(b) The Board of Directors of Target shall have duly authorized and
approved the amendment to Target's Rights Agreement to exclude Acquiror and its
Affiliates and Associates from the definition of "Acquiring Person" therein,
with respect to, among other things, the beneficial ownership of shares of
Target Common Stock which Acquiror, or its Affiliates and Associates, have
acquired or have the right to acquire pursuant to this Agreement. Target shall
take any and all action necessary to ensure that (i) such amendment is executed
by the Company and the Rights Agent and becomes effective within five days of
the date hereof, (ii) neither Acquiror, nor its Affiliates or Associates,
becomes an "Acquiring Person" as a result of Acquiror's rights or actions under
this Agreement and (iii) a "Distribution Date" as defined therein, does not
occur as a result of Acquiror's rights or actions under this Agreement.
10. Restrictive Legends. Each certificate representing Option Shares
-------------------
issued to Acquiror hereunder, and each certificate representing Acquiror Shares
delivered to Target at a Closing, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
11. Listing and HSR Filing. Target, upon the request of Acquiror, shall
----------------------
promptly file an application to list the Target Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq National Market and shall use
its best efforts to obtain approval of such listing as soon as practicable.
Acquiror, upon the request of Target, shall promptly file an application to list
the Acquiror Shares issued and delivered to Target pursuant to Section 1 for
quotation on the Nasdaq National Market and shall use its best efforts to obtain
approval of such listing as soon as practicable. Promptly after the date
hereof, each of the parties hereto shall promptly file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
all required premerger notification and report forms and other documents and
exhibits required to be filed under the HSR Act to permit the acquisition of the
Target Shares subject to the Option at the earliest possible date.
12. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this
10
<PAGE>
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective successors and permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
shares sold by a party in compliance with the provisions of Section 8 shall,
upon consummation of such sale, be free of the restrictions imposed with
respect to such shares by this Agreement and any transferee of such shares
shall not be entitled to the rights of such party. Certificates representing
shares sold in a registered public offering pursuant to Section 8 shall not be
required to bear the legend set forth in Section 10.
13. Specific Performance. The parties recognize and agree that if for any
--------------------
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
14. Entire Agreement. This Agreement and the Merger Agreement (including
----------------
the appendices thereto) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
15. Further Assurances. Each party will execute and deliver all such
------------------
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
16. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any Governmental Entity of competent jurisdiction holds any provision
of this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and shall execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.
17. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Target, to:
NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, CA 95035
Attn: President and Chief Executive Officer
Fax: (408) 474-4048
11
<PAGE>
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Larry W. Sonsini, Esq.
Marty Korman, Esq.
(b) if to Acquiror, to:
Micron Electronics, Inc.
900 East Karcher Road
Nampa, Idaho 83687
Attn: President and Chief Executive Officer
Fax: (208) 893-7411
with a copy to:
Fenwick & West LLP
Two Palo Alto Square, Suite 700
Palo Alto, California 94306
Attn: Dennis R. DeBroeck, Esq.
David W. Healy, Esq.
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
19. Counterparts. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed to be an original, but both of which, taken
together, shall constitute one and the same instrument.
20. Expenses. Except as otherwise expressly provided herein or in the
--------
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended by the parties
------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. Assignment. Neither of the parties hereto may sell, transfer, assign
----------
or otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express written
consent of the other party, except that the rights and obligations hereunder
shall inure to the benefit of and be binding upon any successor of a party
hereto.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
NetFRAME Systems Incorporated
By: /s/ ROBERT L. PUETTE
---------------------------------------------
Name: Robert L. Puette
Title: President and Chief Executive Officer
Micron Electronics, Inc.
By: /s/ T. ERIK OAAS
---------------------------------------------
Name: T.Erik Oaas
Title: Executive Vice President and
Chief Financial Officer
13
<PAGE>
EXHIBIT C
Parent Financial Assistance
---------------------------
Provided that (i) the Company has not breached this Agreement, (ii) Parent
is not entitled to terminate this Agreement pursuant to Section 8.1(d) hereof,
and (iii) this Agreement has not been terminated, Parent agrees to provide the
Company with $3.5 million in the aggregate in financial assistance (in addition
to any amounts payable pursuant to the Technology License Agreement) in the form
of either secured loans or guarantees of secured loans, at times as Parent and
the Company may determine. Subject to the foregoing such financial assistance
will be provided pursuant to such funding schedule as agreed upon by Parent and
the Company based upon the Company's financial needs as agreed to by the Parent.
At the request of Parent, the Company agrees to use its best efforts to assign
or assist in the assignment of all loans, contracts, agreements, security
interests, UCC filings and other rights of CIT Group/Business Credit, Inc. that
relate to or are with the Company. Until termination of this Agreement, Parent,
as a creditor of Parent shall not institute bankruptcy or insolvency proceedings
against the Company.
1
<PAGE>
EXHIBIT D
Technology License Agreement
This Technology License Agreement (the "Agreement"), dated June 10, 1997
(the "Effective Date"), is made between NetFRAME Systems Incorporated, a
Delaware corporation ("NetFRAME"), and Micron Electronics, Inc., a Minnesota
corporation, and all of its subsidiaries and other affiliates ("Micron").
RECITALS
Whereas, NetFRAME owns or has rights to certain computer hardware,
software, related documentation and other technology; and
Whereas, Micron wishes to have irrevocable nonexclusive rights to, among
other things, use, market and distribute such hardware, software, related
documentation and other technology worldwide, and NetFRAME wishes to grant such
irrevocable rights to Micron.
Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, NetFRAME and Micron agree as
follows:
1. DEFINITIONS.
1.1 Intellectual Property Rights. "Intellectual Property Rights" means
----------------------------
patent rights (including but not limited to rights in patent applications or
disclosures and rights of priority), copyright rights (including but not limited
to rights in audiovisual works and moral rights), trademark and trade dress
rights, trade secret rights, know-how, and any other intellectual property
rights recognized by the law of each applicable jurisdiction.
1.2 NetFRAME Technology. "NetFRAME Technology" means, as of the
-------------------
Effective Date, all of the following which are associated with or incorporated,
in any way and to any extent, in NetFRAME's 9000 series server products and any
other products under any phase of development, including without limitation,
hardware and software products (collectively, the "NetFRAME Products"), or is
otherwise necessary or required for Micron to exercise any and all of the rights
granted to it hereunder and to build working products substantially similar to
the NetFRAME Products without undue development time and expense: all computer
software (in object code and fully-commented or fully-annotated source code
versions), documentation, diagrams, schematics, functional specifications,
designs, know-how and other technology, including, without limitation, any works
in progress and the technology described by NetFRAME in Exhibit A, and all
---------
Intellectual Property Rights therein, and including any modifications, upgrades,
revisions or additions thereto as required pursuant to Section 5.1(b); provided,
however, that the term "NetFRAME Technology" shall not include any Intellectual
Property Rights of third parties which are licensed to NetFRAME but which
NetFRAME has no authority, after exercising its best efforts as provided in
Section 7.2, to transfer, sublicense or otherwise convey.
<PAGE>
2. LICENSE GRANT. NetFRAME hereby grants to Micron a nonexclusive,
worldwide, royalty-free, fully paid-up, irrevocable, non-executory license to
use, make, have made, copy, have copied, reproduce, modify, create derivative
works based upon, publish, publicly display and perform, distribute, transmit,
promote, market, sell products incorporating the NetFRAME Technology (or any
part thereof), and otherwise exploit in any manner subject to the terms and
conditions herein the NetFRAME Technology or any portion thereof, in any form.
3. DELIVERY. NetFRAME will deliver to Micron, within ten (10) business days
of Micron's request (and in any event, no later that thirty (30) days from the
Effective Date), a full set of all tangible items containing and/or comprised of
NetFRAME Technology, to the extent developed and existing, and in the manner
constituted, on the date of Delivery (the "Deliverables"), including, without
limitation, to the extent available, fully-commented or fully-annotated source
code versions of all software existing on the Effective Date (the "Delivery").
In addition, NetFRAME will deliver to Micron, on an ongoing basis: (i) updates,
upgrades, new versions, modifications and other enhancements to the NetFRAME
Technology as each phase of development is completed, pursuant to Section 5.1
below; and (ii) within ten (10) business days of Micron's request, any tangible
items containing and/or comprised of NetFRAME Technology which were
inadvertently or otherwise not delivered with the Delivery.
4. PAYMENTS.
4.1 License Fee. In consideration of the rights granted to Micron in
-----------
Section 2 hereof, Micron will pay to NetFRAME the one-time license fee of One
Million, Five Hundred Thousand Dollars ($1,500,000.00).
4.2 Payment Terms. Micron will pay the one-time license fee to NetFRAME
-------------
as follows: (a) Seven Hundred Fifty Thousand Dollars ($750,000.00) on the
Effective Date; and (b) Seven Hundred Fifty Thousand Dollars ($750,000.00)
within three (3) days of Delivery. Delivery shall be deemed to have been made
at such time, and on such date, as the Deliverables are deposited with a common
carrier at NetFRAME's headquarters in Milpitas, California for overnight
delivery to Micron.
4.3 Taxes. All amounts payable under this Agreement are exclusive of all
-----
sales, use, value-added, withholding, and other taxes and duties.
5. MAINTENANCE, SUPPORT, AND TRAINING.
5.1 Maintenance. For the period starting on the Effective Date and
-----------
continuing for a period no less that five (5) years from the Effective Date and
for so long thereafter as NetFRAME provides comparable services to any of its
customers, NetFRAME will provide to Micron, for no additional consideration, the
following maintenance services, which shall be delivered to Micron prior to
delivery to any NetFRAME customers:
(a) error corrections for the NetFRAME Technology in accordance with
NetFRAME's standard maintenance and support policies and procedures; and
(b) updates, upgrades, modifications, new versions and other
enhancements to the NetFRAME Technology. Provided however, that if NetFRAME
determines in good faith that a development project will be terminated and
products related to that project will not be provided to its customers, NetFRAME
shall not be obligated to provide Micron with updates,
2
<PAGE>
upgrades, modifications, new versions and other enhancements related to that
project.
5.2 Support and Training. For the period starting on the Effective Date
--------------------
and continuing for a period no less that five (5) years from the Effective Date
and for so long thereafter as NetFRAME provides comparable services to any of
its customers, NetFRAME will provide to Micron, for no additional consideration
(except for reimbursement of travel and lodging expenses, as necessary, and as
otherwise noted in this Section 5.2), the following maintenance:
(a) full-time access to NetFRAME's "hot-line" for inquiries from
Micron relating to the NetFRAME Technology;
(b) training in accordance with NetFRAME's standard training policies
and procedures (such training to be provided at NetFRAME's standard hourly rate
therefor to the extent the hours of training time so provided in any calendar
month exceed an aggregate of ten (10) hours); and;
(c) to the extent, and within five (5) days of each request therefor
by Micron, engineering support and any other technical support related to the
NetFRAME Technology (such support to be provided at NetFRAME's standard hourly
rate therefor to the extent the hours of support time so provided in any
calendar month exceed an aggregate of ten (10) hours).
6. CONFIDENTIALITY.
6.1 Obligations. Micron agrees that it will not disclose the NetFRAME
-----------
Technology or other confidential technical information disclosed to it by
NetFRAME (collectively, "Confidential Information") to any third party except as
reasonably required in the exercise of the rights granted hereunder or as
otherwise permitted in this Agreement; and that it will take all reasonable
measures to maintain the confidentiality of all Confidential Information in its
possession or control, which will in no event be less than the measures it uses
to maintain the confidentiality of its own information of similar importance.
However, Micron may disclose Confidential Information: (i) pursuant to the order
or requirement of, or in connection with proceedings before, a court,
administrative agency, or other governmental body; and (ii) on a confidential
basis to its legal and/or financial advisors. Micron acknowledges that NetFRAME
will suffer irreperable harm if Micron violates the provisions of this Section
6.1.
6.2 Exceptions. Notwithstanding the foregoing, "Confidential
----------
Information" shall not include information that: (i) is or becomes generally
known to the public through no breach of any confidentiality obligation; (ii) is
known to Micron at the time of disclosure by NetFRAME without violation of any
confidentiality restriction and without any restriction on Micron's further use
or disclosure; (iii) is independently developed by Micron without any use of
NetFRAME's Confidential Information, which can be demonstrated by Micron with
contemporaneous documentation; or (iv) is disclosed by NetFRAME to any third
party without restrictions of confidentiality.
6.3 Source Code. Notwithstanding Section 6.1 above, as to any of
-----------
NetFRAME's source code delivered to Micron hereunder ("Source Code"), Micron
shall not disclose such Source Code to any third party without the prior written
consent of NetFRAME (which NetFRAME shall not unreasonably withhold) and the
execution of an agreement between that third party and NetFRAME regarding
protection of the Source Code (which NetFRAME shall
3
<PAGE>
not unreasonably delay).
7. PROPRIETARY RIGHTS.
7.1 NetFRAME's Ownership. The NetFRAME Technology and all Intellectual
--------------------
Property Rights therein are and will remain the sole and exclusive property of
NetFRAME and its licensors, if any.
7.2 NetFRAME's Obligations Regarding Third-Party Technology. NetFRAME
-------------------------------------------------------
will use best efforts to obtain all required consents and all necessary property
rights from NetFRAME's third party licensors for Micron to exercise any and all
of the rights granted to it in this Agreement.
7.3 Micron's Duties. Micron will use commercially reasonable efforts to
---------------
protect NetFRAME's Intellectual Property Rights in the NetFRAME Technology, but
not less than the efforts that NetFRAME uses to protect its own confidential
information.
7.4 Trademarks. NetFRAME hereby grants to Micron the right to use the
----------
NetFRAME trademarks and trade names associated with the NetFRAME Products in
Micron's marketing, distribution and sale of server products substantially
similar to the NetFRAME Products. In so doing, Micron will comply with
NetFRAME's then-existing reasonable trademark usage policies and procedures.
7.5 Third Party Infringement. NetFRAME shall have the sole right to
------------------------
assert claims against third parties for infringement or misappropriation of
Intellectual Property Rights in the NetFRAME Technology; provided however, that
----------------
if NetFRAME does not pursue such claims within a reasonable period of time,
NetFRAME shall so notify Micron promptly, and Micron shall have the right to
assert claims against such third parties, and NetFRAME shall give Micron
reasonable assistance in connection therewith.
8. WARRANTY.
8.1 Power and Authority, Enforceability. NetFRAME warrants to Micron
-----------------------------------
that it has sufficient right and authority to enter into this Agreement and to
grant to Micron all licenses and rights that NetFRAME grants under this
Agreement, and, with respect to technology owned by third parties, either has
sufficient rights to sublicense such technology to Micron as of the Effective
Date, or will obtain such rights pursuant to Section 7.2. Upon execution by the
parties, this Agreement will constitute a legal, valid and binding obligation of
NetFRAME enforceable against NetFRAME in accordance with its terms.
8.2 Solvency; No Bankruptcy Proceedings. NetFRAME and each of NetFRAME's
-----------------------------------
subsidiaries and affiliates, taken both individually and together as a group,
are Solvent on the Effective Date (as defined below). No petition has been
filed by or against NetFRAME for relief under any applicable bankruptcy,
insolvency or similar law; no decree or order for relief has been entered in
respect of NetFRAME, voluntary or involuntary, under any such law; and, no
receiver liquidator, sequestrator, trustee, custodian or other officer has been
appointed with attachment, execution or similar process has been ordered,
executed or filed against NetFRAME or any of its assets or properties. NetFRAME
has not made any assignment for the benefit of creditors and does not reasonably
expect to take any such action. NetFRAME does not currently intend to file for
protection under any bankruptcy or insolvency law. As used herein, the term
"Solvent"
4
<PAGE>
means, with respect to any entity on a particular date, that on such date: (a)
the fair market value of the property of such entity is greater than the total
amount of liabilities, including contingent liabilities, of such entity; (b) the
present fair salable value of the assets of such entity is no less than the
amount that will be required to pay the probable liability of such entity on its
debts as they become absolute and matured; (c) such entity does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
entity's ability to pay as such debts and liabilities mature; and (d) such
entity is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such entity's property would constitute
an unreasonably small capital.
8.3 No Violations. The execution, delivery and performance of this
-------------
Agreement by NetFRAME do not and will not: (a) breach, violate, or conflict with
the certificate of incorporation or bylaws of NetFRAME, both as amended to date;
(b) to the best of NetFRAME's knowledge, conflict with or violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to NetFRAME or to the NetFRAME Technology; (c) to the best of
NetFRAME's knowledge, result in any material breach or violation of, or
constitute a default (or event which with the giving of notice or lapse or time,
or both, would become a breach, violation or default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument to which NetFRAME or any affiliate of
NetFRAME is a party or is bound or by which any part of NetFRAME Technology is
bound or affected, if any such event would result in a material adverse affect
on NetFRAME; or (d) to the best of NetFRAME's knowledge, result in the creation
of any encumbrance of the NetFRAME Technology, or any part thereof.
8.4 All Required Consents Obtained. All consents required by NetFRAME to
------------------------------
enter into and to fully perform all of its obligations under this Agreement,
including any consents required under any revolving credit or security
agreements with its lenders (including but not limited to agreements between
NetFRAME and CIT Group/Business Credit, Inc.) have been obtained by NetFRAME.
The execution of this Agreement by NetFRAME and the full performance of this
Agreement by NetFRAME will not require any unobtained consent, approval,
authorization or other action by, or filing with or notification to, any court
or governmental or regulatory authority.
8.5. Warranties True and Correct. NetFRAME warrants that all of the
---------------------------
warranties it makes in this Agreement are true and correct in all material
respects, and the parties agree and acknowledge that Micron has materially
relied on all such warranties in entering into this Agreement.
8.6 Warranty Disclaimer. The warranties set forth in this Section 8 are
-------------------
in lieu of any other warranties, express or implied, and NetFRAME hereby
disclaims the implied warranties of merchantability and fitness for a particular
purpose.
9. INDEMNITY.
9.1 Infringement Indemnity
----------------------
5
<PAGE>
(a) Duty to Indemnify and Defend.
----------------------------
(i) NetFRAME will indemnify Micron against, and will defend or settle
at NetFRAME's own expense, any action or other proceeding brought against Micron
to the extent that it is based on a claim that the use of the NetFRAME
Technology (other than technology provided by third parties which is unmodified
by NetFRAME) as licensed in this Agreement infringes any Intellectual Property
Right of any third party and/or that the NetFRAME Technology incorporates any
misappropriated trade secrets.
(ii) NetFRAME will pay any and all costs, damages, and expenses
(including but not limited to reasonable attorneys' fees) awarded against Micron
in any such action or proceeding attributable to any such claim.
(iii) NetFRAME will have the exclusive right to control the defense of
any such action or proceeding, and Micron shall give NetFRAME prompt notice of
any such action or proceeding and shall provide to NetFRAME reasonable
assistance in connection therewith.
(iv) NetFRAME shall be relieved of its obligations under this Section
9.1(a) to indemnify Micron against a claim of infringement is based on: (A)
modifications to the NetFRAME Technology made by any party other than NetFRAME
or its agents; or (B) combination of NetFRAME Technology with technology of any
party other than NetFRAME, the extent that such infringement would not have
occurred but for such modification or combination.
(b) Injunctions. If Micron's use of any NetFRAME Technology under the
-----------
terms of this Agreement is, or in NetFRAME's opinion is likely to be, enjoined
due to the type of infringement or misappropriation specified in subsection
(a)(i) above, then NetFRAME will either:
(i) procure for Micron the right to continue using such NetFRAME
Technology under the terms of this Agreement; or
(ii) replace or modify such NetFRAME Technology so that they are
noninfringing and substantially equivalent in function to the enjoined NetFRAME
Technology; or
(iii) if options (i) and (ii) above cannot be accomplished despite the
best efforts of NetFRAME, then NetFRAME will refund to Micron the license fee.
This Section 9.1 sets forth Micron's sole remedy for any claim relating to
Intellectual Property Rights of third parties.
9.2 General Indemnity. Each party (the "Indemnitor") will indemnify the
-----------------
other party (the "Indemnitee") against, and will defend or settle at
Indemnitor's own expense, any action or other proceeding brought against
Indemnitee to the extent that it is based on a claim arising out of or in
connection with this Agreement. Indemnitor will pay any and all costs, damages,
and expenses (including but not limited to reasonable attorneys' fees) awarded
against Indemnitee in any such action or proceeding attributable to any such
claim; provided however, that Indemnitor will have the exclusive right to
control the defense of any such action or proceeding, and Indemnitee shall give
Indemnitor prompt notice of any such action or proceeding and shall
6
<PAGE>
provide to Indemnitor reasonable assistance in connection therewith.
10. TERM AND TERMINATION.
10.1 Term. The term of this Agreement will begin on the Effective Date
----
and will continue in perpetuity, unless earlier terminated by Micron pursuant to
Section 10.
10.2 Termination for Convenience. Micron may terminate this Agreement,
---------------------------
at any time after thirty (30) days from the Effective Date have elapsed, for any
reason by written notice to NetFRAME.
10.3 Termination for Cause; Refund. Micron may terminate this Agreement at
-----------------------------
any time for cause in the event that NetFRAME breaches any material obligation
hereunder, and such breach remains uncured thirty (30) days after Micron's
notice to NetFRAME of the same, or such longer period of time approved by Micron
as reasonably necessary in consideration of the nature of the breach and
NetFRAME's attempts to cure (which approval shall not be unreasonably withheld).
In the event of a termination under this Section 10.3 within five (5) years of
the Effective Date: (a) the license granted in Section 2 herein shall terminate;
and (b) NetFRAME will refund to Micron the entire license fee of One Million
Five Hundred Thousand Dollars ($1,500,000) within ten (10) business days of such
termination.
10.4 Survival. The rights and obligations of the parties contained in
--------
Section 6 (Confidentiality), 9 (Indemnity), 10 (Term and Termination), 12
(Limitations of Liability) and 13 (General) will survive any termination of this
Agreement.
10.5 Effect of Termination. Upon the termination of this Agreement, the
---------------------
following provisions, as well as any other applicable provisions in this
Agreement, shall take effect: (a) the rights and licenses granted to Micron
under this Agreement shall automatically terminate; (b) all sublicenses granted
to end users shall continue in effect according to their terms and conditions;
(c) within ten (10) days after termination, Micron shall return to NetFRAME all
NetFRAME Technology, in whatever media and form, and shall destroy all copies of
the NetFRAME Technology in its possession.
11. COMPLIANCE WITH LAW.
Each party agrees to comply with all applicable laws, rules, and
regulations in connection with its activities under this Agreement, including
all relevant export laws and regulations of the United States.
12. LIMITATION OF LIABILITY.
In no event will either party's liability to the other for any any special,
incidental, or consequential damages, whether based on breach of contract, tort
(including negligence), product liability, or otherwise, exceed One Million Five
Hundred Thousand Dollars ($1,500,000).
7
<PAGE>
13. GENERAL.
13.1 Assignment. This Agreement will bind and inure to the benefit of
----------
each party's permitted successors and assigns. Neither party may assign this
Agreement, in whole or in part, without the other party's written consent, which
consent will not be unreasonably withheld; provided however, that Micron may
-------- -------
assign this Agreement in connection with a merger, corporate reorganization or
sale of all or substantially all of its assets (other than any such assignment
to a direct competitor of NetFRAME). Any attempt to assign this Agreement
without such consent will be null and void.
13.2 Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of California applicable to agreements
entered into, and to be performed entirely, within California between California
residents. Any suit hereunder will be brought solely in the federal or state
courts in the Northern District of California and the parties hereby submit to
the personal jurisdiction thereof.
13.3 Severability. If any provision of this Agreement is found invalid
------------
or unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
13.4 Notices. All notices under this Agreement will be deemed given when
-------
delivered personally, sent by confirmed facsimile transmission, or sent by
certified or registered U.S. mail or nationally-recognized express courier,
return receipt requested, to the address shown below or as may otherwise be
specified by either party to the other in accordance with this Section 13.4.
13.5 Independent Contractors. The parties to this Agreement are
-----------------------
independent contractors. There is no relationship of partnership, joint
venture, employment, franchise, or agency between the parties. Neither party
will have the power to bind the other or incur obligations on the other's behalf
without the other's prior written consent.
13.6 Waiver. No failure of either party to exercise or enforce any of
------
its rights under this Agreement will act as a waiver of those or any other
rights hereunder.
8
<PAGE>
13.7 Entire Agreement. This Agreement and its exhibits are the complete
----------------
and exclusive agreement between the parties with respect to the subject matter
hereof, superseding and replacing any and all prior agreements, communications,
and understandings (both written and oral) regarding such subject matter. This
Agreement may only be modified, or any rights under it waived, by a written
document executed by both parties.
The parties have caused this Agreement to be executed by their duly-
authorized representatives as of the Effective Date.
NetFRAME Systems Incorporated Micron Electronics, Inc.
By: /s/ Robert L. Puette By: /s/ T. Erik Oaas
-------------------------------------- --------------------------------
Robert L. Puette T. Erik Oaas
President and Chief Executive Officer Executive Vice President, Finance
Chief Financial Officer
Address for Notice: Address for Notice:
1545 Barber Lane 900 East Karcher Road
Milpitas, California 95305 Nampa, Idaho 83687
9
<PAGE>
EXHIBIT A
NetFRAME Technology
-------------------
The NF 9016 Product:
The NF 9016 is a 4-way SMP Pentium Pro based, 16 PCI slot, rack mount server
with continuous availability features. The 16 PCI slots are hot swapable in
groups of 4 PCI cards for both Intranetware 1.0 and NT 4.0. Those 16 PCI slots
are hot add capable for Intranetware 1.0.
The NF 9008 Product:
The NF 9008 is a 4-way SMP Pentium Pro based, 8 PCI slot, rack mount server with
continuous availability features. The 8 PCI slots are individually hot for both
Intranetware 1.0 and NT 4.0. Those 16 PCI slots are hot add capable for
Intranetware 1.0.
Multispan
Multispan is a networking software that allows for load sharing of network
traffic over 2 LAN adapters for FDDI, Ethernet, and Tokenring for both
Intranetware 1.0 and NT 4.0. The software also has a failover functionality by
recognizingfailure and automatically filing over the traffic on the remaining
network adapters.
ClusterData
Clusterdata is a NetWare (NDS based) volume failover product that utilizes dual-
ported SCSI disks. It relies on path replication and allows for load
distribution of a down server.
ClusterCache
ClusterCache is a distributed caching software that provides Coherent and
persistent caching on demand across a LAN or a WAN for NT 4.0.
10
<PAGE>
Exhibit (c)(2)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of June 10, 1997 (the "Agreement") is
entered into by and between NetFRAME Systems Incorporated, a Delaware
corporation ("Target"), and Micron Electronics, Inc., a Minnesota corporation
("Acquiror"). Capitalized terms used in this Agreement but not defined herein,
and other terms defined in the Merger Agreement (as defined below) and used in
this Agreement but not defined herein, shall have the meanings ascribed thereto
in the Merger Agreement (as defined below).
RECITALS
--------
WHEREAS, concurrently with the execution and delivery of this Agreement,
Acquiror, Target and Payette Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Acquiror ("Merger Sub"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), which provides that,
among other things, upon the terms and subject to the conditions thereof,
Acquiror and Merger Sub will make a tender offer (the "Offer") for shares of
Common Stock of Target, and, following consummation of such Offer, Merger Sub
will be merged with and into Target (the "Merger"); and
WHEREAS, as a condition to Acquiror's willingness to enter into the Merger
Agreement, Acquiror has requested that Target agree, and Target has so agreed,
to grant to Acquiror an option to acquire shares of Target's Common Stock,
$0.001 par value, upon the terms and subject to the conditions set forth herein;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option. Target hereby grants to Acquiror an irrevocable
---------------
option (the "Option") to acquire up to a number of shares of the Common Stock,
$0.001 par value, of Target ("Target Shares") equal to 19.9% of the issued and
outstanding shares as of the first date, if any, upon which an Exercise Event
(as defined in Section 1(a) below) shall occur (the "Option Shares"), in the
manner set forth below (i) by paying cash at a price of $1.00 per share (the
"Exercise Price") and/or, at Acquiror's election, (ii) by exchanging therefor
shares of the Common Stock, par value $0.01 per share, of Acquiror ("Acquiror
Shares") at a rate (the "Exercise Ratio"), for each Option Share, of a number of
Acquiror Shares equal to the Exercise Price divided by the closing sale price of
Acquiror Shares on the Nasdaq National Market for the trading day immediately
preceding the date of the Closing (as defined below) of the particular Option
exercise.
2. Exercise of Option; Maximum Proceeds.
------------------------------------
(a) For all purposes of this Agreement, an "Exercise Event" shall have
occurred (i) immediately prior to the earlier of (A) the failure of the Board of
Directors of Target or any committee thereof to recommend the Offer, the Merger
or the Merger Agreement, including any
<PAGE>
failure to include such recommendation in the Schedule 14D-9, or its resolution
to that effect, (B) the withdrawal or modification by the Board of Directors of
Target or any committee thereof (including without limitation by amendment of
the Company's Schedule 14D-9), in a manner adverse to Acquiror or Merger Sub,
of the approval or recommendation by such Board or committee of the Offer, the
Merger or the Merger Agreement, or resolution to take such action, (C) the
approval or recommendation of any takeover proposal by the Board of Directors
of Target or any committee thereof, or resolution to take such action, (D) the
redemption or amendment of the Rights Agreement by the Board of Directors of
Target or any committee thereof after the Target has received a takeover
proposal, or resolution to take such action, (E) the execution by the Company
of an agreement (other than a Confidentiality Agreement) with respect to any
Superior Proposal in accordance with Section 5.2(b) of Merger Agreement or
resolution of the Board of Directors of Target or any committee thereof to do
so or (F) the failure, upon a request of Acquiror, to reaffirm Target's
approval or recommendation of the Offer, the Merger or the Merger Agreement,
within two business days after such request is made, or resolution to that
effect, (ii) immediately prior to the consummation of a tender or exchange
offer by a person other than Acquiror for 50% or more of any class of Target's
capital stock, or (iii) immediately prior to the time at which all of the
events specified in Section 6.8(b)(x) and (y) of the Merger Agreement shall
have occurred.
(b) Acquiror may deliver to Target a written notice (an "Exercise
Notice") specifying that it wishes to exercise and close a purchase of Option
Shares upon the occurrence of an Exercise Event and specifying the total number
of Option Shares it wishes to acquire and the form of consideration to be paid
(i) at any time following such time as the Board of Directors of Target shall
have taken any of the actions described in Section 2(a)(i) hereof, (ii) upon
the commencement of a tender or exchange offer by a person other than Acquiror
for 50% or more of any class of Target's capital stock (and/or during any time
which such a tender or exchange offer remains open or has been consummated) or
(iii) at any time following the occurrence of each of the events specified in
Section 6.8(b)(x) and (y) of the Merger Agreement (the events specified in
clauses (i), (ii) or (iii) of this sentence being referred to herein as a
"Conditional Exercise Event"). At any time after delivery of an Exercise
Notice, unless such Exercise Notice is withdrawn by Acquiror, the closing of a
purchase of Option Shares (a "Closing") specified in such Exercise Notice shall
take place at the principal offices of Target upon the occurrence of an
Exercise Event or at such later date prior to the termination of the Option as
may be designated by Acquiror in writing. In the event that no Exercise Event
shall occur prior to termination of the Option, such Exercise Notice shall be
void and of no further force and effect.
(c) The Option shall terminate upon the earliest of (i) the
consummation of the Offer for, and purchase of shares representing, in excess
of 50% of the outstanding Common Stock of Target, (ii) 12 months following the
termination of the Merger Agreement pursuant to Article VIII thereof if a
Conditional Exercise Event shall have occurred on or prior to the date of such
termination, and (iii) the date on which the Merger Agreement is terminated if
no Conditional Exercise Event shall have occurred on or prior to such date of
termination; provided, however, that if the Option is exercisable but cannot
-------- -------
be exercised by reason of any applicable government order or because the
waiting period related to the issuance of the Option Shares under the HSR Act
shall not have expired or been terminated, then the Option shall not terminate
until the tenth business day after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal. Notwithstanding
the foregoing, the Option may not be exercised if (i) Acquiror
2
<PAGE>
shall have breached in any material respect any of its covenants or agreements
contained in the Merger Agreement or (ii) the representations and warranties of
Acquiror contained in the Merger Agreement shall not have been true and correct
in all material respects on and as of the date when made.
(d) If Acquiror receives in the aggregate pursuant to Section 6.8(b)
of the Merger Agreement together with proceeds in connection with any sales or
other dispositions of Option Shares or this Option (by virtue of Section 7
hereof or otherwise) and any dividends received by Acquiror declared on Option
Shares, more than the sum of (x) $1.5 million plus (y) the Exercise Price
multiplied by the number of Target Shares purchased by Acquiror pursuant to the
Option, then all proceeds to Acquiror in excess of such sum shall be remitted
by Acquiror to Target.
3. Conditions to Closing. The obligation of Target to issue Option Shares
---------------------
to Acquiror hereunder is subject to the conditions that (a) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
shall have expired or been terminated; (b) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with, any
Federal, state or local administrative agency or commission or other Federal,
state or local governmental authority or instrumentality, if any, required in
connection with the issuance of the Option Shares hereunder shall have been
obtained or made, as the case may be; and (c) no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such issuance shall be in effect. It is understood and
agreed that at any time during which Acquiror shall be entitled to deliver to
Target an Exercise Notice, the parties will use their respective best efforts to
satisfy all conditions to Closing, so that a Closing may take place as promptly
as practicable, and in any event, upon the occurrence of an Exercise Event.
4. Closing. At any Closing, (a) Target shall deliver to Acquiror a single
-------
certificate in definitive form representing the number of Target Shares
designated by Acquiror in its Exercise Notice, such certificate to be registered
in the name of Acquiror and to bear the legend set forth in Section 10 hereof,
against delivery of (b) payment by Acquiror to Target of the aggregate purchase
price for the Target Shares so designated and being purchased by delivery of (i)
a certified check or bank check and/or, at Acquiror's election, (ii) a single
certificate in definitive form representing the number of Acquiror Shares being
issued by Acquiror in consideration therefor (based on the Exercise Ratio), such
certificate to be registered in the name of Target and to bear the legend set
forth in Section 10 hereof.
5. Representations and Warranties of Target. Target represents and
----------------------------------------
warrants to Acquiror that (a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Target and consummation by Target of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Target and
no other corporate proceedings on the part of Target are necessary to authorize
this Agreement or any of the transactions contemplated hereby; (c) this
Agreement has been duly executed and delivered by Target and constitutes a
legal, valid and binding obligation of Target and, assuming this Agreement
constitutes a legal, valid and binding obligation of Acquiror, is enforceable
against Target in accordance with its terms, except as enforceability may be
limited by bankruptcy and
3
<PAGE>
other laws affecting the rights and remedies of creditors generally and general
principles of equity; (d) except for any filings required under the HSR Act,
Target has taken all necessary corporate and other action to authorize and
reserve for issuance and to permit it to issue upon exercise of the Option, and
at all times from the date hereof until the termination of the Option will have
reserved for issuance, a sufficient number of unissued Target Shares for
Acquiror to exercise the Option in full and will take all necessary corporate
or other action to authorize and reserve for issuance all additional Target
Shares or other securities which may be issuable pursuant to Section 9(a) upon
exercise of the Option, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable; (e) upon delivery of the Target Shares and any other
securities to Acquiror upon exercise of the Option, Acquiror will acquire such
Target Shares or other securities free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever,
excluding those imposed by Acquiror; (f) the execution and delivery of this
Agreement by Target do not, and the performance of this Agreement by Target
will not, (i) violate the Certificate of Incorporation or Bylaws of Target,
(ii) conflict with or violate any order applicable to Target or any of its
subsidiaries or by which they or any of their property is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any property or assets of Target or
any of its subsidiaries pursuant to, any contract or agreement to which Target
or any of its subsidiaries is a party or by which Target or any of its
subsidiaries or any of their property is bound or affected, except, in the case
of clauses (ii) and (iii) above, for violations, conflicts, breaches, defaults,
rights of termination, amendment, acceleration or cancellation, liens or
encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect on Target; (g) the execution and delivery of this Agreement by
Target does not, and the performance of this Agreement by Target will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity except pursuant to the HSR Act; and
(h) any Acquiror Shares acquired pursuant to this Agreement will not be
acquired by Target with a view to the public distribution thereof and Target
will not sell or otherwise dispose of such shares in violation of applicable
law or this Agreement.
6. Representations and Warranties of Acquiror. Acquiror represents and
------------------------------------------
warrants to Target that (a) Acquiror is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Minnesota and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Acquiror and no other corporate proceedings on the part of Acquiror are
necessary to authorize this Agreement or any of the transactions contemplated
hereby; (c) this Agreement has been duly executed and delivered by Acquiror and
constitutes a legal, valid and binding obligation of Acquiror and, assuming this
Agreement constitutes a legal, valid and binding obligation of Target, is
enforceable against Acquiror in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity; (d) except
for any filings required under the HSR Act, Acquiror has taken (or will in a
timely manner take) all necessary corporate and other action in connection with
any exercise of the Option; (e) upon delivery of the Acquiror Shares to Target
in consideration of any acquisition of Target Shares pursuant hereto, Target
will acquire such Acquiror Shares free and clear of all material claims, liens,
charges, encumbrances and security interests of any kind or
4
<PAGE>
nature whatsoever, excluding those imposed by Target; (f) the execution and
delivery of this Agreement by Acquiror do not, and the performance of this
Agreement by Acquiror will not, (i) violate the Certificate of Incorporation or
Bylaws of Acquiror, (ii) conflict with or violate any order applicable to
Acquiror or any of its subsidiaries or by which they or any of their property
is bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Acquiror or any of its subsidiaries pursuant to, any
contract or agreement to which Acquiror or any of its subsidiaries is a party
or by which Acquiror or any of its subsidiaries or any of their property is
bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, conflicts, breaches, defaults, rights of termination, amendment,
acceleration or cancellation, liens or encumbrances which would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror;
(g) the execution and delivery of this Agreement by Acquiror does not, and the
performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity except pursuant to the HSR Act; and (h) any Target Shares
acquired upon exercise of the Option will not be acquired by Acquiror with a
view to the public distribution thereof and Acquiror will not sell or otherwise
dispose of such shares in violation of applicable law or this Agreement.
7. Certain Rights.
--------------
(a) Acquiror Put. Acquiror may deliver to Target a written notice (a
------------
"Put Notice") at any time during which Acquiror may deliver an Exercise Notice
specifying that it wishes to sell the Option, to the extent not previously
exercised, at the price set forth in subparagraph (i) below (as limited by
subparagraph (iii) below), and the Option Shares, if any, acquired by Acquiror
pursuant thereto, at the price set forth in subparagraph (ii) below (as limited
by subparagraph (iii) below) (the "Put"). At any time after delivery of a Put
Notice, unless such Put Notice is withdrawn by Acquiror, the closing of the Put
(the "Put Closing") shall take place at the principal offices of Target upon
the occurrence of an Exercise Event or at such later date prior to the
termination of the Option as may be designated by Acquiror in writing. In the
event that no Exercise Event shall occur prior to termination of the Option,
such Put Notice shall be void and of no further force and effect.
(i) The difference between the "Market/Tender Offer Price" for
Target Shares as of the date Acquiror gives notice of its intent to exercise
its rights under this Section 7(a) (defined as the higher of (A) the highest
price per share offered as of such date pursuant to any takeover proposal which
was made prior to such date and not terminated or withdrawn as of such date and
(B) the highest closing sale price of Target Shares on the Nasdaq National
Market during the 20 trading days ending on the trading day immediately
preceding such date) and the Exercise Price, multiplied by the number of Target
Shares purchasable pursuant to the Option, but only if the Market/Tender Offer
Price is greater than the Exercise Price. For purposes of determining the
highest price offered pursuant to any takeover proposal which involves
consideration other than cash, the value of such consideration shall be equal
to the higher of (x) if securities of the same class of the proponent as such
consideration are traded on any national securities exchange or by any
registered securities association, a value based on the closing sale price or
asked price for such securities on their principal trading market on such date
and (y) the value ascribed to such
5
<PAGE>
consideration by the proponent of such takeover proposal or if no such value is
ascribed, a value determined in good faith by the Board of Directors of Target.
(ii) The Exercise Price paid by Acquiror for Target Shares
acquired pursuant to the Option plus the difference between the Market/Tender
----
Offer Price and such Exercise Price (but only if the Market/Tender Offer Price
is greater than the Exercise Price) multiplied by the number of Target Shares
so purchased. If Acquiror issued Acquiror Shares in connection with any
exercise of the Option, the Exercise Price in connection with such exercise
shall be calculated as set forth in the last sentence of Section 1 as if
Acquiror had exercised its right to pay cash instead of issuing Acquiror
Shares.
(iii) Notwithstanding subparagraphs (i) and (ii) above,
pursuant to this Section 7 Target shall not be required to pay Acquiror in
excess of an aggregate of (x) $1.5 million plus (y) the Exercise Price paid by
----
Acquiror for Target shares acquired pursuant to the Option minus (z) any
-----
amounts paid to Acquiror by Target pursuant to Section 6.8(b) of the Merger
Agreement.
(b) Redelivery of Acquiror Shares. If Acquiror has acquired Target
-----------------------------
Shares pursuant to exercise of the Option by the issuance and delivery of
Acquiror Shares, then Target shall, if so requested by Acquiror, in fulfillment
of its obligation pursuant to the first clause of Section 7(a)(ii) with respect
to the Exercise Price paid in the form of Acquiror Shares only, redeliver the
certificate(s) for such Acquiror Shares to Acquiror, free and clear of all
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever, other than those imposed by Acquiror.
(c) Payment and Redelivery of Option or Shares. At the Put Closing,
------------------------------------------
Target shall pay the required amount to Acquiror in immediately available funds
(and Acquiror Shares, if applicable) and Acquiror shall surrender to Target the
Option and the certificates evidencing the Target Shares purchased by Acquiror
pursuant thereto, and Acquiror shall represent and warrant that such shares are
then free and clear of all claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, other than those imposed by Target.
(d) Target Call. If Acquiror has acquired Option Shares pursuant to
-----------
exercise of the Option (the date of any Closing relating to any such exercise
herein referred to as an "Exercise Date") and no takeover proposal with respect
to Target has been consummated at any time after the date of this Agreement and
prior to the date one year following such Exercise Date (nor has Target entered
into a definitive agreement or letter of intent with respect to such a takeover
proposal which agreement or letter of intent remains in effect at the end of
such year), then, at any time after the date one year following such Exercise
Date and prior to the date 18 months following such Exercise Date, Target may
require Acquiror, upon delivery to Acquiror of written notice, to sell to Target
any Target Shares held by Acquiror as of the day that is ten business days after
the date of such notice, up to a number of shares equal to the number of Option
Shares acquired by Acquiror pursuant to exercise of the Option in connection
with such Exercise Date. The per share purchase price for such sale (the
"Target Call Price") shall be equal to the Exercise Price, plus an amount equal
to seven percent (7.0%) of the Exercise Price per annum, compounded annually,
since the applicable Exercise Date, less any dividends paid on the Target Shares
to be purchased by Target pursuant to this Section 7(d). The closing of any
sale of Target Shares pursuant to this Section 7(d) shall take place at the
principal offices of Target at a time and on a
6
<PAGE>
date designated by Target in the aforementioned notice to Acquiror, which date
shall be no more than 20 and no less than 12 business days from the date of
such notice. The Target Call Price shall be paid in immediately available
funds, provided that, in the event Acquiror has acquired Option Shares pursuant
--------
to exercise of the Option by issuance and delivery of Acquiror Shares, at the
option of Target, the Target Call Price for part or all of any purchase of
Target Shares pursuant to this Section 7(d), up to a number of such shares
equal to the number of Option Shares acquired by Acquiror by issuance and
delivery of Acquiror Shares, shall be paid by delivery of a number of Acquiror
Shares equal to the Target Call Price divided by the closing sale price of
Acquiror Shares on the Nasdaq National Market for the trading day immediately
preceding the date of the Exercise Date on which the Option Shares to be
purchased by Target pursuant to this Section 7(d) were originally issued to
Acquiror.
(e) Restrictions on Transfer. Until the termination of the Option,
------------------------
Target shall not sell, transfer or otherwise dispose of any Acquiror Shares
acquired by it pursuant to this Agreement.
8. Registration Rights.
-------------------
(a) Following the termination of the Merger Agreement, each party
hereto (a "Holder") may by written notice (a "Registration Notice") to the
other party (the "Registrant") request the Registrant to register under the
Securities Act all or any part of the shares acquired by such Holder pursuant
to this Agreement (the "Registrable Securities") in order to permit the sale or
other disposition of such shares by Holder; provided, however, that any such
-------- -------
Registration Notice must relate to at least 100,000 shares of Common Stock of
the Registrant (as adjusted for splits, etc.) and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act. The Registrant shall
have the option exercisable by written notice delivered to the Holder within
ten business days after the receipt of the Registration Notice, irrevocably to
agree to purchase all or any part of the Registrable Securities for cash at a
price (the "Option Price") equal to the product of (i) the number of
Registrable Securities so purchased and (ii) the per share average of the
closing sale prices of the Registrant's Common Stock on the Nasdaq National
Market for the 20 trading days immediately preceding the date of the
Registration Notice. Any such purchase of Registrable Securities by the
Registrant hereunder shall take place at a closing to be held at the principal
executive offices of the Registrant or its counsel at any reasonable date and
time designated by the Registrant in such notice within ten business days after
delivery of such notice. The payment for the shares to be purchased shall be
made by delivery at the time of such closing of the Option Price in immediately
available funds.
(b) If the Registrant does not elect to exercise its option to
purchase pursuant to Section 8(a) with respect to all Registrable Securities,
the Registrant shall use all reasonable efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) neither party shall be entitled to more than an
- -------- -------
aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after a Registration Notice in the
case of clause (A) below or 90 days after a Registration Notice in the case of
clauses (B) and (C) below) when (A) the Registrant is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the written opinion
7
<PAGE>
of counsel to such Registrant, such information would have to be disclosed if a
registration statement were filed at that time; (B) such Registrant is required
under the Securities Act to include audited financial statements for any period
in such registration statement and such financial statements are not yet
available for inclusion in such registration statement; or (C) such Registrant
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving the
Registrant. If consummation of the sale of any Registrable Securities pursuant
to a registration hereunder does not occur within 180 days after the filing
with the SEC of the initial registration statement therefor, the provisions of
this Section 8 shall again be applicable to any proposed registration, it being
understood that neither party shall be entitled to more than an aggregate of
two effective registration statements hereunder. The Registrant shall use all
reasonable efforts to cause any Registrable Securities registered pursuant to
this Section 8 to be qualified for sale under the securities or blue sky laws
of such jurisdictions as the Holder may reasonably request and shall continue
such registration or qualification in effect in such jurisdictions; provided,
--------
however, that the Registrant shall not be required to qualify to do business in,
- -------
or consent to general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 8 are subject
to the condition that the Holder shall provide the Registrant with such
information with respect to such Holder's Registrable Securities, the plan for
distribution thereof, and such other information with respect to such Holder
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in a registration statement all material facts
required to be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 8 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall
provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings and as such underwriters may
reasonably require. In connection with any registrations, the Holder and the
Registrant agree to enter into an underwriting agreement reasonably acceptable
to each such party, in form and substance customary for transactions of this
type with the underwriters participating in such offering.
(e) Indemnification.
---------------
(i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, or any violation by the Registrant of any rule or
regulation promulgated under the
8
<PAGE>
Securities Act applicable to the Registrant in connection with any such
registration, qualification or compliance, and the Registrant will reimburse
the Holder and, each of its directors and officers and each person who controls
the Holder within the meaning of Section 15 of the Securities Act, and each
underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Registrant will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Registrant by such Holder or director
or officer or controlling person or underwriter seeking indemnification.
(ii) The Holder will indemnify the Registrant, each of its
directors and officers and each underwriter of the Registrant's securities
covered by such registration statement and each person who controls the
Registrant within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged statement) of a material fact contained in such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Holder of any rule or regulation promulgated under the Securities Act
applicable to the Holder in connection with any such registration,
qualification or compliance, and will reimburse the Registrant, such directors,
officers or control persons or underwriters for any legal or any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Registrant by the
Holder for use therein, provided that in no event shall any indemnity under
this Section 8(e) exceed the gross proceeds of the offering received by the
Holder.
(iii) Each party entitled to indemnification under this Section
8(e) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
- -------- -------
representation of the Indemnified Party by counsel retained by the Indemnifying
Party would be inappropriate due to actual or potential differing interests
between the Indemnified Party and any other party represented by such counsel
in such proceeding, and provided further that the failure of any Indemnified
-------- -------
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 8(e) unless the failure to give
such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
9
<PAGE>
litigation. No Indemnifying Party shall be required to indemnify any
Indemnified Party with respect to any settlement entered into without such
Indemnifying Party's prior consent (which shall not be unreasonably withheld).
9. Adjustment Upon Changes in Capitalization; Rights Plans.
-------------------------------------------------------
(a) In the event of any change in the Target Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option, the Exercise Ratio and the
Exercise Price shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction so that Acquiror shall
receive, upon exercise of the Option, the number and class of shares or other
securities or property that Acquiror would have received in respect of the
Target Shares if the Option had been exercised immediately prior to such event
or the record date therefor, as applicable.
(b) The Board of Directors of Target shall have duly authorized and
approved the amendment to Target's Rights Agreement to exclude Acquiror and its
Affiliates and Associates from the definition of "Acquiring Person" therein,
with respect to, among other things, the beneficial ownership of shares of
Target Common Stock which Acquiror, or its Affiliates and Associates, have
acquired or have the right to acquire pursuant to this Agreement. Target shall
take any and all action necessary to ensure that (i) such amendment is executed
by the Company and the Rights Agent and becomes effective within five days of
the date hereof, (ii) neither Acquiror, nor its Affiliates or Associates,
becomes an "Acquiring Person" as a result of Acquiror's rights or actions under
this Agreement and (iii) a "Distribution Date" as defined therein, does not
occur as a result of Acquiror's rights or actions under this Agreement.
10. Restrictive Legends. Each certificate representing Option Shares
-------------------
issued to Acquiror hereunder, and each certificate representing Acquiror Shares
delivered to Target at a Closing, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
11. Listing and HSR Filing. Target, upon the request of Acquiror, shall
----------------------
promptly file an application to list the Target Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq National Market and shall use
its best efforts to obtain approval of such listing as soon as practicable.
Acquiror, upon the request of Target, shall promptly file an application to list
the Acquiror Shares issued and delivered to Target pursuant to Section 1 for
quotation on the Nasdaq National Market and shall use its best efforts to obtain
approval of such listing as soon as practicable. Promptly after the date
hereof, each of the parties hereto shall promptly file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
all required premerger notification and report forms and other documents and
exhibits required to be filed under the HSR Act to permit the acquisition of the
Target Shares subject to the Option at the earliest possible date.
12. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this
10
<PAGE>
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective successors and permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
shares sold by a party in compliance with the provisions of Section 8 shall,
upon consummation of such sale, be free of the restrictions imposed with
respect to such shares by this Agreement and any transferee of such shares
shall not be entitled to the rights of such party. Certificates representing
shares sold in a registered public offering pursuant to Section 8 shall not be
required to bear the legend set forth in Section 10.
13. Specific Performance. The parties recognize and agree that if for any
--------------------
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
14. Entire Agreement. This Agreement and the Merger Agreement (including
----------------
the appendices thereto) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
15. Further Assurances. Each party will execute and deliver all such
------------------
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
16. Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any Governmental Entity of competent jurisdiction holds any provision
of this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and shall execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.
17. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Target, to:
NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, CA 95035
Attn: President and Chief Executive Officer
Fax: (408) 474-4048
11
<PAGE>
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Larry W. Sonsini, Esq.
Marty Korman, Esq.
(b) if to Acquiror, to:
Micron Electronics, Inc.
900 East Karcher Road
Nampa, Idaho 83687
Attn: President and Chief Executive Officer
Fax: (208) 893-7411
with a copy to:
Fenwick & West LLP
Two Palo Alto Square, Suite 700
Palo Alto, California 94306
Attn: Dennis R. DeBroeck, Esq.
David W. Healy, Esq.
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
19. Counterparts. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed to be an original, but both of which, taken
together, shall constitute one and the same instrument.
20. Expenses. Except as otherwise expressly provided herein or in the
--------
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended by the parties
------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. Assignment. Neither of the parties hereto may sell, transfer, assign
----------
or otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express written
consent of the other party, except that the rights and obligations hereunder
shall inure to the benefit of and be binding upon any successor of a party
hereto.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
NetFRAME Systems Incorporated
By: /s/ ROBERT L. PUETTE
---------------------------------------------
Name: Robert L. Puette
Title: President and Chief Executive Officer
Micron Electronics, Inc.
By: /s/ T. ERIK OAAS
---------------------------------------------
Name: T.Erik Oaas
Title: Executive Vice President and
Chief Financial Officer
13
<PAGE>
EXHIBIT (c)(3)
Technology License Agreement
This Technology License Agreement (the "Agreement"), dated June 10, 1997
(the "Effective Date"), is made between NetFRAME Systems Incorporated, a
Delaware corporation ("NetFRAME"), and Micron Electronics, Inc., a Minnesota
corporation, and all of its subsidiaries and other affiliates ("Micron").
RECITALS
Whereas, NetFRAME owns or has rights to certain computer hardware,
software, related documentation and other technology; and
Whereas, Micron wishes to have irrevocable nonexclusive rights to, among
other things, use, market and distribute such hardware, software, related
documentation and other technology worldwide, and NetFRAME wishes to grant such
irrevocable rights to Micron.
Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, NetFRAME and Micron agree as
follows:
1. DEFINITIONS.
1.1 Intellectual Property Rights. "Intellectual Property Rights" means
----------------------------
patent rights (including but not limited to rights in patent applications or
disclosures and rights of priority), copyright rights (including but not limited
to rights in audiovisual works and moral rights), trademark and trade dress
rights, trade secret rights, know-how, and any other intellectual property
rights recognized by the law of each applicable jurisdiction.
1.2 NetFRAME Technology. "NetFRAME Technology" means, as of the
-------------------
Effective Date, all of the following which are associated with or incorporated,
in any way and to any extent, in NetFRAME's 9000 series server products and any
other products under any phase of development, including without limitation,
hardware and software products (collectively, the "NetFRAME Products"), or is
otherwise necessary or required for Micron to exercise any and all of the rights
granted to it hereunder and to build working products substantially similar to
the NetFRAME Products without undue development time and expense: all computer
software (in object code and fully-commented or fully-annotated source code
versions), documentation, diagrams, schematics, functional specifications,
designs, know-how and other technology, including, without limitation, any works
in progress and the technology described by NetFRAME in Exhibit A, and all
---------
Intellectual Property Rights therein, and including any modifications, upgrades,
revisions or additions thereto as required pursuant to Section 5.1(b); provided,
however, that the term "NetFRAME Technology" shall not include any Intellectual
Property Rights of third parties which are licensed to NetFRAME but which
NetFRAME has no authority, after exercising its best efforts as provided in
Section 7.2, to transfer, sublicense or otherwise convey.
<PAGE>
2. LICENSE GRANT. NetFRAME hereby grants to Micron a nonexclusive,
worldwide, royalty-free, fully paid-up, irrevocable, non-executory license to
use, make, have made, copy, have copied, reproduce, modify, create derivative
works based upon, publish, publicly display and perform, distribute, transmit,
promote, market, sell products incorporating the NetFRAME Technology (or any
part thereof), and otherwise exploit in any manner subject to the terms and
conditions herein the NetFRAME Technology or any portion thereof, in any form.
3. DELIVERY. NetFRAME will deliver to Micron, within ten (10) business days
of Micron's request (and in any event, no later that thirty (30) days from the
Effective Date), a full set of all tangible items containing and/or comprised of
NetFRAME Technology, to the extent developed and existing, and in the manner
constituted, on the date of Delivery (the "Deliverables"), including, without
limitation, to the extent available, fully-commented or fully-annotated source
code versions of all software existing on the Effective Date (the "Delivery").
In addition, NetFRAME will deliver to Micron, on an ongoing basis: (i) updates,
upgrades, new versions, modifications and other enhancements to the NetFRAME
Technology as each phase of development is completed, pursuant to Section 5.1
below; and (ii) within ten (10) business days of Micron's request, any tangible
items containing and/or comprised of NetFRAME Technology which were
inadvertently or otherwise not delivered with the Delivery.
4. PAYMENTS.
4.1 License Fee. In consideration of the rights granted to Micron in
-----------
Section 2 hereof, Micron will pay to NetFRAME the one-time license fee of One
Million, Five Hundred Thousand Dollars ($1,500,000.00).
4.2 Payment Terms. Micron will pay the one-time license fee to NetFRAME
-------------
as follows: (a) Seven Hundred Fifty Thousand Dollars ($750,000.00) on the
Effective Date; and (b) Seven Hundred Fifty Thousand Dollars ($750,000.00)
within three (3) days of Delivery. Delivery shall be deemed to have been made
at such time, and on such date, as the Deliverables are deposited with a common
carrier at NetFRAME's headquarters in Milpitas, California for overnight
delivery to Micron.
4.3 Taxes. All amounts payable under this Agreement are exclusive of all
-----
sales, use, value-added, withholding, and other taxes and duties.
5. MAINTENANCE, SUPPORT, AND TRAINING.
5.1 Maintenance. For the period starting on the Effective Date and
-----------
continuing for a period no less that five (5) years from the Effective Date and
for so long thereafter as NetFRAME provides comparable services to any of its
customers, NetFRAME will provide to Micron, for no additional consideration, the
following maintenance services, which shall be delivered to Micron prior to
delivery to any NetFRAME customers:
(a) error corrections for the NetFRAME Technology in accordance with
NetFRAME's standard maintenance and support policies and procedures; and
(b) updates, upgrades, modifications, new versions and other
enhancements to the NetFRAME Technology. Provided however, that if NetFRAME
determines in good faith that a development project will be terminated and
products related to that project will not be provided to its customers, NetFRAME
shall not be obligated to provide Micron with updates,
2
<PAGE>
upgrades, modifications, new versions and other enhancements related to that
project.
5.2 Support and Training. For the period starting on the Effective Date
--------------------
and continuing for a period no less that five (5) years from the Effective Date
and for so long thereafter as NetFRAME provides comparable services to any of
its customers, NetFRAME will provide to Micron, for no additional consideration
(except for reimbursement of travel and lodging expenses, as necessary, and as
otherwise noted in this Section 5.2), the following maintenance:
(a) full-time access to NetFRAME's "hot-line" for inquiries from
Micron relating to the NetFRAME Technology;
(b) training in accordance with NetFRAME's standard training policies
and procedures (such training to be provided at NetFRAME's standard hourly rate
therefor to the extent the hours of training time so provided in any calendar
month exceed an aggregate of ten (10) hours); and;
(c) to the extent, and within five (5) days of each request therefor
by Micron, engineering support and any other technical support related to the
NetFRAME Technology (such support to be provided at NetFRAME's standard hourly
rate therefor to the extent the hours of support time so provided in any
calendar month exceed an aggregate of ten (10) hours).
6. CONFIDENTIALITY.
6.1 Obligations. Micron agrees that it will not disclose the NetFRAME
-----------
Technology or other confidential technical information disclosed to it by
NetFRAME (collectively, "Confidential Information") to any third party except as
reasonably required in the exercise of the rights granted hereunder or as
otherwise permitted in this Agreement; and that it will take all reasonable
measures to maintain the confidentiality of all Confidential Information in its
possession or control, which will in no event be less than the measures it uses
to maintain the confidentiality of its own information of similar importance.
However, Micron may disclose Confidential Information: (i) pursuant to the order
or requirement of, or in connection with proceedings before, a court,
administrative agency, or other governmental body; and (ii) on a confidential
basis to its legal and/or financial advisors. Micron acknowledges that NetFRAME
will suffer irreperable harm if Micron violates the provisions of this Section
6.1.
6.2 Exceptions. Notwithstanding the foregoing, "Confidential
----------
Information" shall not include information that: (i) is or becomes generally
known to the public through no breach of any confidentiality obligation; (ii) is
known to Micron at the time of disclosure by NetFRAME without violation of any
confidentiality restriction and without any restriction on Micron's further use
or disclosure; (iii) is independently developed by Micron without any use of
NetFRAME's Confidential Information, which can be demonstrated by Micron with
contemporaneous documentation; or (iv) is disclosed by NetFRAME to any third
party without restrictions of confidentiality.
6.3 Source Code. Notwithstanding Section 6.1 above, as to any of
-----------
NetFRAME's source code delivered to Micron hereunder ("Source Code"), Micron
shall not disclose such Source Code to any third party without the prior written
consent of NetFRAME (which NetFRAME shall not unreasonably withhold) and the
execution of an agreement between that third party and NetFRAME regarding
protection of the Source Code (which NetFRAME shall
3
<PAGE>
not unreasonably delay).
7. PROPRIETARY RIGHTS.
7.1 NetFRAME's Ownership. The NetFRAME Technology and all Intellectual
--------------------
Property Rights therein are and will remain the sole and exclusive property of
NetFRAME and its licensors, if any.
7.2 NetFRAME's Obligations Regarding Third-Party Technology. NetFRAME
-------------------------------------------------------
will use best efforts to obtain all required consents and all necessary property
rights from NetFRAME's third party licensors for Micron to exercise any and all
of the rights granted to it in this Agreement.
7.3 Micron's Duties. Micron will use commercially reasonable efforts to
---------------
protect NetFRAME's Intellectual Property Rights in the NetFRAME Technology, but
not less than the efforts that NetFRAME uses to protect its own confidential
information.
7.4 Trademarks. NetFRAME hereby grants to Micron the right to use the
----------
NetFRAME trademarks and trade names associated with the NetFRAME Products in
Micron's marketing, distribution and sale of server products substantially
similar to the NetFRAME Products. In so doing, Micron will comply with
NetFRAME's then-existing reasonable trademark usage policies and procedures.
7.5 Third Party Infringement. NetFRAME shall have the sole right to
------------------------
assert claims against third parties for infringement or misappropriation of
Intellectual Property Rights in the NetFRAME Technology; provided however, that
----------------
if NetFRAME does not pursue such claims within a reasonable period of time,
NetFRAME shall so notify Micron promptly, and Micron shall have the right to
assert claims against such third parties, and NetFRAME shall give Micron
reasonable assistance in connection therewith.
8. WARRANTY.
8.1 Power and Authority, Enforceability. NetFRAME warrants to Micron
-----------------------------------
that it has sufficient right and authority to enter into this Agreement and to
grant to Micron all licenses and rights that NetFRAME grants under this
Agreement, and, with respect to technology owned by third parties, either has
sufficient rights to sublicense such technology to Micron as of the Effective
Date, or will obtain such rights pursuant to Section 7.2. Upon execution by the
parties, this Agreement will constitute a legal, valid and binding obligation of
NetFRAME enforceable against NetFRAME in accordance with its terms.
8.2 Solvency; No Bankruptcy Proceedings. NetFRAME and each of NetFRAME's
-----------------------------------
subsidiaries and affiliates, taken both individually and together as a group,
are Solvent on the Effective Date (as defined below). No petition has been
filed by or against NetFRAME for relief under any applicable bankruptcy,
insolvency or similar law; no decree or order for relief has been entered in
respect of NetFRAME, voluntary or involuntary, under any such law; and, no
receiver liquidator, sequestrator, trustee, custodian or other officer has been
appointed with attachment, execution or similar process has been ordered,
executed or filed against NetFRAME or any of its assets or properties. NetFRAME
has not made any assignment for the benefit of creditors and does not reasonably
expect to take any such action. NetFRAME does not currently intend to file for
protection under any bankruptcy or insolvency law. As used herein, the term
"Solvent"
4
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means, with respect to any entity on a particular date, that on such date: (a)
the fair market value of the property of such entity is greater than the total
amount of liabilities, including contingent liabilities, of such entity; (b) the
present fair salable value of the assets of such entity is no less than the
amount that will be required to pay the probable liability of such entity on its
debts as they become absolute and matured; (c) such entity does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
entity's ability to pay as such debts and liabilities mature; and (d) such
entity is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such entity's property would constitute
an unreasonably small capital.
8.3 No Violations. The execution, delivery and performance of this
-------------
Agreement by NetFRAME do not and will not: (a) breach, violate, or conflict with
the certificate of incorporation or bylaws of NetFRAME, both as amended to date;
(b) to the best of NetFRAME's knowledge, conflict with or violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to NetFRAME or to the NetFRAME Technology; (c) to the best of
NetFRAME's knowledge, result in any material breach or violation of, or
constitute a default (or event which with the giving of notice or lapse or time,
or both, would become a breach, violation or default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument to which NetFRAME or any affiliate of
NetFRAME is a party or is bound or by which any part of NetFRAME Technology is
bound or affected, if any such event would result in a material adverse affect
on NetFRAME; or (d) to the best of NetFRAME's knowledge, result in the creation
of any encumbrance of the NetFRAME Technology, or any part thereof.
8.4 All Required Consents Obtained. All consents required by NetFRAME to
------------------------------
enter into and to fully perform all of its obligations under this Agreement,
including any consents required under any revolving credit or security
agreements with its lenders (including but not limited to agreements between
NetFRAME and CIT Group/Business Credit, Inc.) have been obtained by NetFRAME.
The execution of this Agreement by NetFRAME and the full performance of this
Agreement by NetFRAME will not require any unobtained consent, approval,
authorization or other action by, or filing with or notification to, any court
or governmental or regulatory authority.
8.5. Warranties True and Correct. NetFRAME warrants that all of the
---------------------------
warranties it makes in this Agreement are true and correct in all material
respects, and the parties agree and acknowledge that Micron has materially
relied on all such warranties in entering into this Agreement.
8.6 Warranty Disclaimer. The warranties set forth in this Section 8 are
-------------------
in lieu of any other warranties, express or implied, and NetFRAME hereby
disclaims the implied warranties of merchantability and fitness for a particular
purpose.
9. INDEMNITY.
9.1 Infringement Indemnity
----------------------
5
<PAGE>
(a) Duty to Indemnify and Defend.
----------------------------
(i) NetFRAME will indemnify Micron against, and will defend or settle
at NetFRAME's own expense, any action or other proceeding brought against Micron
to the extent that it is based on a claim that the use of the NetFRAME
Technology (other than technology provided by third parties which is unmodified
by NetFRAME) as licensed in this Agreement infringes any Intellectual Property
Right of any third party and/or that the NetFRAME Technology incorporates any
misappropriated trade secrets.
(ii) NetFRAME will pay any and all costs, damages, and expenses
(including but not limited to reasonable attorneys' fees) awarded against Micron
in any such action or proceeding attributable to any such claim.
(iii) NetFRAME will have the exclusive right to control the defense of
any such action or proceeding, and Micron shall give NetFRAME prompt notice of
any such action or proceeding and shall provide to NetFRAME reasonable
assistance in connection therewith.
(iv) NetFRAME shall be relieved of its obligations under this Section
9.1(a) to indemnify Micron against a claim of infringement is based on: (A)
modifications to the NetFRAME Technology made by any party other than NetFRAME
or its agents; or (B) combination of NetFRAME Technology with technology of any
party other than NetFRAME, the extent that such infringement would not have
occurred but for such modification or combination.
(b) Injunctions. If Micron's use of any NetFRAME Technology under the
-----------
terms of this Agreement is, or in NetFRAME's opinion is likely to be, enjoined
due to the type of infringement or misappropriation specified in subsection
(a)(i) above, then NetFRAME will either:
(i) procure for Micron the right to continue using such NetFRAME
Technology under the terms of this Agreement; or
(ii) replace or modify such NetFRAME Technology so that they are
noninfringing and substantially equivalent in function to the enjoined NetFRAME
Technology; or
(iii) if options (i) and (ii) above cannot be accomplished despite the
best efforts of NetFRAME, then NetFRAME will refund to Micron the license fee.
This Section 9.1 sets forth Micron's sole remedy for any claim relating to
Intellectual Property Rights of third parties.
9.2 General Indemnity. Each party (the "Indemnitor") will indemnify the
-----------------
other party (the "Indemnitee") against, and will defend or settle at
Indemnitor's own expense, any action or other proceeding brought against
Indemnitee to the extent that it is based on a claim arising out of or in
connection with this Agreement. Indemnitor will pay any and all costs, damages,
and expenses (including but not limited to reasonable attorneys' fees) awarded
against Indemnitee in any such action or proceeding attributable to any such
claim; provided however, that Indemnitor will have the exclusive right to
control the defense of any such action or proceeding, and Indemnitee shall give
Indemnitor prompt notice of any such action or proceeding and shall
6
<PAGE>
provide to Indemnitor reasonable assistance in connection therewith.
10. TERM AND TERMINATION.
10.1 Term. The term of this Agreement will begin on the Effective Date
----
and will continue in perpetuity, unless earlier terminated by Micron pursuant to
Section 10.
10.2 Termination for Convenience. Micron may terminate this Agreement,
---------------------------
at any time after thirty (30) days from the Effective Date have elapsed, for any
reason by written notice to NetFRAME.
10.3 Termination for Cause; Refund. Micron may terminate this Agreement at
-----------------------------
any time for cause in the event that NetFRAME breaches any material obligation
hereunder, and such breach remains uncured thirty (30) days after Micron's
notice to NetFRAME of the same, or such longer period of time approved by Micron
as reasonably necessary in consideration of the nature of the breach and
NetFRAME's attempts to cure (which approval shall not be unreasonably withheld).
In the event of a termination under this Section 10.3 within five (5) years of
the Effective Date: (a) the license granted in Section 2 herein shall terminate;
and (b) NetFRAME will refund to Micron the entire license fee of One Million
Five Hundred Thousand Dollars ($1,500,000) within ten (10) business days of such
termination.
10.4 Survival. The rights and obligations of the parties contained in
--------
Section 6 (Confidentiality), 9 (Indemnity), 10 (Term and Termination), 12
(Limitations of Liability) and 13 (General) will survive any termination of this
Agreement.
10.5 Effect of Termination. Upon the termination of this Agreement, the
---------------------
following provisions, as well as any other applicable provisions in this
Agreement, shall take effect: (a) the rights and licenses granted to Micron
under this Agreement shall automatically terminate; (b) all sublicenses granted
to end users shall continue in effect according to their terms and conditions;
(c) within ten (10) days after termination, Micron shall return to NetFRAME all
NetFRAME Technology, in whatever media and form, and shall destroy all copies of
the NetFRAME Technology in its possession.
11. COMPLIANCE WITH LAW.
Each party agrees to comply with all applicable laws, rules, and
regulations in connection with its activities under this Agreement, including
all relevant export laws and regulations of the United States.
12. LIMITATION OF LIABILITY.
In no event will either party's liability to the other for any any special,
incidental, or consequential damages, whether based on breach of contract, tort
(including negligence), product liability, or otherwise, exceed One Million Five
Hundred Thousand Dollars ($1,500,000).
7
<PAGE>
13. GENERAL.
13.1 Assignment. This Agreement will bind and inure to the benefit of
----------
each party's permitted successors and assigns. Neither party may assign this
Agreement, in whole or in part, without the other party's written consent, which
consent will not be unreasonably withheld; provided however, that Micron may
-------- -------
assign this Agreement in connection with a merger, corporate reorganization or
sale of all or substantially all of its assets (other than any such assignment
to a direct competitor of NetFRAME). Any attempt to assign this Agreement
without such consent will be null and void.
13.2 Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of California applicable to agreements
entered into, and to be performed entirely, within California between California
residents. Any suit hereunder will be brought solely in the federal or state
courts in the Northern District of California and the parties hereby submit to
the personal jurisdiction thereof.
13.3 Severability. If any provision of this Agreement is found invalid
------------
or unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
13.4 Notices. All notices under this Agreement will be deemed given when
-------
delivered personally, sent by confirmed facsimile transmission, or sent by
certified or registered U.S. mail or nationally-recognized express courier,
return receipt requested, to the address shown below or as may otherwise be
specified by either party to the other in accordance with this Section 13.4.
13.5 Independent Contractors. The parties to this Agreement are
-----------------------
independent contractors. There is no relationship of partnership, joint
venture, employment, franchise, or agency between the parties. Neither party
will have the power to bind the other or incur obligations on the other's behalf
without the other's prior written consent.
13.6 Waiver. No failure of either party to exercise or enforce any of
------
its rights under this Agreement will act as a waiver of those or any other
rights hereunder.
8
<PAGE>
13.7 Entire Agreement. This Agreement and its exhibits are the complete
----------------
and exclusive agreement between the parties with respect to the subject matter
hereof, superseding and replacing any and all prior agreements, communications,
and understandings (both written and oral) regarding such subject matter. This
Agreement may only be modified, or any rights under it waived, by a written
document executed by both parties.
The parties have caused this Agreement to be executed by their duly-
authorized representatives as of the Effective Date.
NetFRAME Systems Incorporated Micron Electronics, Inc.
By: /s/ Robert L. Puette By: /s/ T. Erik Oaas
-------------------------------------- --------------------------------
Robert L. Puette T. Erik Oaas
President and Chief Executive Officer Executive Vice President, Finance
Chief Financial Officer
Address for Notice: Address for Notice:
1545 Barber Lane 900 East Karcher Road
Milpitas, California 95305 Nampa, Idaho 83687
9
<PAGE>
EXHIBIT A
NetFRAME Technology
-------------------
The NF 9016 Product:
The NF 9016 is a 4-way SMP Pentium Pro based, 16 PCI slot, rack mount server
with continuous availability features. The 16 PCI slots are hot swapable in
groups of 4 PCI cards for both Intranetware 1.0 and NT 4.0. Those 16 PCI slots
are hot add capable for Intranetware 1.0.
The NF 9008 Product:
The NF 9008 is a 4-way SMP Pentium Pro based, 8 PCI slot, rack mount server with
continuous availability features. The 8 PCI slots are individually hot for both
Intranetware 1.0 and NT 4.0. Those 16 PCI slots are hot add capable for
Intranetware 1.0.
Multispan
Multispan is a networking software that allows for load sharing of network
traffic over 2 LAN adapters for FDDI, Ethernet, and Tokenring for both
Intranetware 1.0 and NT 4.0. The software also has a failover functionality by
recognizingfailure and automatically filing over the traffic on the remaining
network adapters.
ClusterData
Clusterdata is a NetWare (NDS based) volume failover product that utilizes dual-
ported SCSI disks. It relies on path replication and allows for load
distribution of a down server.
ClusterCache
ClusterCache is a distributed caching software that provides Coherent and
persistent caching on demand across a LAN or a WAN for NT 4.0.
10
<PAGE>
EXHIBIT (c)(4)
[LOGO OF MICRON APPEARS HERE]
EMPLOYMENT TERM SHEET
1. EMPLOYER: NetFRAME a subsidiary or a division of Micron Electronics,
Inc.
2. EMPLOYEE: Robert Puette
3. PROPOSED TITLE: Chairman, President and Chief Executive Officer of
NetFRAME, a subsidiary or a division of Micron Electronics, Inc.
4. INITIAL SALARY: $330,000
5. STOCK OPTIONS: Number of Options 75,000
Term of Option 6 years
Vesting 20% per year for 5 years
Pricing FMV on date of grant
Date of grant Effective date of acquisition
6. BONUS: Target Amount $600,000
-50% or $300,000 tied to achievement of July through
December 1997 financial goals attached hereto and
achievement of technological goals to be mutually agreed
to by the parties.
Paid in two installments as follows:
$150,000 paid upon achievement of goals
$150,000 paid one year following achievement
of goals
-50% or $300,000 tied to achievement of January through
June 1998 financial goals attached hereto and
achievement of technological goals to be mutually agreed
to by the parties.
Paid in two installments as follows:
$150,000 paid upon achievement of goals
$150,000 paid one year following achievement
of goals
Payments are contingent on continued employment through
date of distribution
7. The parties agree that the terms of the Change of Control Agreement entered
into by the undersigned with NetFRAME Systems Incorporated shall remain in
effect provided that acceptance of the proposed position and terms set forth
above does not constitute actual or constructive termination of employment under
the terms of such Change of Control Agreement.
8. The terms set forth herein are contingent upon 1) the acquisition by Micron
Electronics, Inc. of more than 50% of the total voting control of NetFRAME
Systems Incorporated within 120 days of June 8, 1997, and 2) the approval of the
Board of Directors of Micron Electronics, Inc.
9. The forgoing is acceptable to the parties.
/s/ Robert L. Puette
Signature______________________________
6/9/97
Date___________________________________
Accepted by Micron Electonics, Inc.
/s/ T. Erik Oaas
By:____________________________________
6/9/97
Date:__________________________________
<PAGE>
[LOGO OF MICRON APPEARS HERE]
EMPLOYMENT TERM SHEET
1. EMPLOYER: NetFRAME a subsidiary or a division of Micron Electronics, Inc.
2. EMPLOYEE: Bulent Erbilgin
3. PROPOSED TITLE: Vice President, Product Development of NetFRAME, a
subsidiary or a division of Micron Electronics, Inc.
4. INITIAL SALARY: $192,000
5. STOCK OPTIONS: Number of Options 25,000
Term of Option 6 years
Vesting 20% per year for 5 years
Pricing FMV on date of grant
Date of grant Effective date of acquisition
6. BONUS: Target Amount $192,000
-50% or $96,000 tied to achievement of July through
December 1997 financial goals attached hereto and
achievement of technological goals to be mutually
agreed to by the parties.
Paid in two installments as follows:
$48,000 paid upon achievement of goals
$48,000 paid one year following achievement of
goals
-50% or $96,000 tied to achievement of January through
June 1998 financial goals attached hereto paid and
achievement of technological goals to be mutually
agreed to by the parties.
Paid in two installments as follows:
$48,000 paid upon achievement of goals
$48,000 paid one year following achievement of
goals
Payments are contingent on continued employment through
date of distribution
7. The parties agree that the terms of the Change of Control Agreement entered
into by the undersigned with NetFRAME Systems Incorporated shall remain in
effect provided that acceptance of the proposed position and terms set forth
above does not constitute actual or constructive termination of employment
under the terms of such Change of Control Agreement.
8. The terms set forth herein are contingent upon 1) the acquisition by
Micron Electronics, Inc. of more than 50% of the total voting control of
NetFRAME Systems Incorporated within 120 days of June 8, 1997, and 2) the
approval of the Board of Directors of Micron Electronics, Inc.
9. The foregoing is acceptable to the parties.
/s/ Bulent Erbilgin
Signature______________________________
6/9/97
Date___________________________________
Accepted by Micron Electonics, Inc.
/s/ T. Erik Oaas
By:____________________________________
6/9/97
Date:__________________________________
<PAGE>
[LOGO OF MICRON ELECTRONICS APPEARS HERE]
EMPLOYMENT TERM SHEET
1. EMPLOYER: NetFRAME a subsidiary or a division of Micron Electronics, Inc.
2. EMPLOYEE: Terry Hartsfield
3. PROPOSED TITLE: Vice President, Customer Service & Quality of NetFRAME, a
subsidiary or a division of Micron Electronics, Inc.
4. INITIAL SALARY: $175,000
5. STOCK OPTIONS: Number of Options 25,000
Term of Option 6 years
Vesting 20% per year for 5 years
Pricing FMV on date of grant
Date of grant Effective date of acquisition
6. BONUS: Target Amount $175,000
-50% or $87,500 tied to achievement of July through
December 1997 financial goals attached hereto and
achievement of technological goals to be mutually agreed
to by the parties.
Paid in two installments as follows:
$43,750 paid upon achievement of goals
$43,750 paid one year following achievement of
goals
-50% or $87,500 tied to achievement of January through
June 1998 financial goals attached hereto paid and
achievement of technological goals to be mutually
agreed to by the parties.
Paid in two installments as follows:
$43,750 paid upon achievement of goals
$43,750 paid one year following achievement of
goals
Payments are contingent on continued employment through
date of distribution
7. The parties agree that the terms of the Change of Control Agreement
entered into by the undersigned with NetFRAME Systems Incorporated shall
remain in effect provided that acceptance of the proposed position and terms
set forth above does not constitute actual or constructive termination of
employment under the terms of such Change of Control Agreement.
8. The terms set forth herein are contingent upon 1) the acquisition by Micron
Electronics, Inc. of more than 50% of the total voting control of NetFRAME
Systems Incorporated within 120 days of June 8, 1997, and 2) the approval of
the Board of Directors of Micron Electronics, Inc.
9. The forgoing is acceptable to the parties.
/s/ Terry Hartsfield
Signature______________________________
6/9/97
Date___________________________________
Accepted by Micron Electronics, Inc.
/s/ T. Erik Oaas
By:____________________________________
6/9/97
Date:__________________________________
<PAGE>
[LOGO OF MICRON ELECTRONICS APPEARS HERE]
EMPLOYMENT TERM SHEET
1. EMPLOYER: NetFRAME a subsidiary or a division of Micron Electronics, Inc.
2. EMPLOYEE: Steven Huey
3. PROPOSED TITLE: Vice President, Marketing of NetFRAME, a subsidiary or a
division of Micron Electronics, Inc.
4. INITIAL SALARY: $192,000
5. STOCK OPTIONS: Number of Options 25,000
Term of Option 6 years
Vesting 20% per year for 5 years
Pricing FMV on date of grant
Date of grant Effective date of acquisition
6. BONUS: Target Amount $192,000
-50% or $96,000 tied to achievement of July through
December 1997 financial goals attached hereto and
achievement of technological goals to be mutually agreed
to by the parties.
Paid in two installments as follows:
$48,000 paid upon achievement of goals
$48,000 paid one year following achievement of
goals
-50% or $96,000 tied to achievement of January through
June 1998 financial goals attached hereto paid and
achievement of technological goals to be mutually agreed
to by the parties.
Paid in two installments as follows:
$48,000 paid upon achievement of goals
$48,000 paid one year following achievement of
goals
Payments are contingent on continued employment through
date of distribution
7. The parties agree that the terms of the Change of Control Agreement
entered into by the undersigned with NetFRAME Systems Incorporated shall
remain in effect provided that acceptance of the proposed position and terms
set forth above does not constitute actual or constructive termination of
employment under the terms of such Change of Control Agreement.
8. The terms set forth herein are contingent upon 1) the acquisition by
Micron Electronics, Inc. of more than 50% of the total voting control of
NetFRAME Systems Incorporated within 120 days of June 8, 1997, and 2) the
approval of the Board of Directors of Micron Electronics, Inc.
9. The forgoing is acceptable to the parties.
/s/ Steven Huey
Signature __________________________
6/10/97
Date _______________________________
Accepted by Micron Electronics, Inc.
/s/ T. Erik Oaas
By: ________________________________
6/10/97
Date: ______________________________
