<PAGE>
As filed with the Securities and Exchange Commission on December 6, 2000
Registration No. 333-50324
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
To
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MICROCHIP TECHNOLOGY INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
----------------
<TABLE>
<S> <C> <C>
DELAWARE 3674 86-0629024
State(or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
MICROCHIP TECHNOLOGY INCORPORATED
2355 West Chandler Boulevard
Chandler, Arizona 85224-6199
(480) 792-7200
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
----------------
Steve Sanghi
Chairman, President and Chief Executive Officer
2355 West Chandler Boulevard
Chandler, Arizona 85224-6199
(480) 792-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
<TABLE>
<S> <C>
With Copies to: With Copies to:
Michael J. Kennedy John R. Holzgraefe
J. Robert Suffoletta Gregory J. Schmitt
Wilson Sonsini Goodrich & Rosati Jenkens & Gilchrist,
Professional Corporation a Professional Corporation
650 Page Mill Road 1445 Ross Avenue, Suite 3200
Palo Alto, CA 94304-1050 Dallas, TX 75202
(650) 493-9300 (214) 855-4500
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment that specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
[LOGO OF TELCOM SEMICONDUCTOR, INC.]
----------------
TelCom Semiconductor, Inc.
1300 Terra Bella Avenue
Mountain View, California 94039
Date: January
16, 2001
Time: 10:00 a.m.
Place: 1300 Terra Bella Avenue
Mountain View, CA 94039
Notice of Special Meeting of TelCom Stockholders
----------------
To TelCom stockholders:
At the special meeting you will be asked to:
1. Consider and vote upon a proposal to adopt the Agreement and Plan of
Reorganization, dated as of October 26, 2000, by and among Microchip Technology
Incorporated, Matchbox Acquisition Corp., a wholly owned subsidiary of
Microchip, and TelCom Semiconductor, Inc., pursuant to which Matchbox
Acquisition Corp. will merge with and into TelCom, and TelCom will become a
wholly owned subsidiary of Microchip. In the merger:
. If the average closing price of Microchip's common stock for the ten
trading days preceding the closing of the merger is equal to or between
$28.30 and $32.61, each share of TelCom common stock will be exchanged
for a fraction of a share of Microchip common stock equal to $15.00
divided by this ten-day average price.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is less than $28.30, then each share of
TelCom common stock will be exchanged for 0.53 of a share of Microchip
common stock.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is greater than $32.61, then each share
of TelCom common stock will be exchanged for 0.46 of a share of Microchip
common stock.
Adoption of the reorganization agreement will also constitute approval of
the merger and the other transactions contemplated by the reorganization
agreement.
2. Transact such other business as may properly come before the special
meeting or any adjournment of the special meeting.
The attached proxy statement/prospectus contains a more complete description
of these items of business, including the reorganization agreement, the
proposed merger and certain actions to be taken in connection with the merger.
You are cordially invited to attend the special meeting in person. To ensure
that your vote will be counted, please complete, date and sign the enclosed
proxy and return it promptly in the enclosed postage-paid envelope, whether or
not you plan to attend the special meeting. You may revoke your proxy in the
manner described in the accompanying document at any time before it is voted at
the special meeting. Executed proxies with no instructions indicated thereon
will be voted "FOR" adoption of the reorganization agreement.
<PAGE>
Only holders of record of TelCom common stock at the close of business on
November 27, 2000, the record date, are entitled to vote on the matters listed
in this notice of special meeting. You may vote in person at the TelCom special
meeting even if you have returned a proxy.
By Order of the Board of Directors,
/s/ Mark M. Brown
MARK M. BROWN
CHIEF FINANCIAL OFFICER AND
SECRETARY
Mountain View, California
December 6, 2000
Whether or Not You Plan to Attend the Meeting,
Please Complete, Sign, Date and Return the Accompanying Proxy
In the Enclosed Self-Addressed Stamped Envelope.
<PAGE>
[LOGO OF TELCOM SEMICONDUCTOR, INC.]
To the stockholders of TelCom Semiconductor, Inc.
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
On October 26, 2000, TelCom Semiconductor, Inc.'s board of directors
approved a reorganization agreement between Microchip Technology Incorporated
and TelCom. The reorganization agreement provides for the merger of TelCom with
a newly formed, wholly owned subsidiary of Microchip. If the merger is
completed you will become a stockholder of Microchip.
In the merger, each share of your TelCom common stock will be exchanged for
a fraction of a share of Microchip common stock, with the fraction determined
as follows:
. If the average closing price of Microchip's common stock for the ten
trading days preceding the closing of the merger is equal to or between
$28.30 and $32.61, this fraction will be determined by dividing $15.00 by
this ten-day average price.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is less than $28.30, then this fraction
will equal 0.53.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is greater than $32.61, then this
fraction will equal 0.46.
Microchip common stock is listed on The Nasdaq Stock Market's National
Market under the trading symbol "MCHP," and on December 4, 2000, Microchip
common stock closed at $24.75 per share.
The merger cannot be completed unless the holders of a majority of TelCom's
common stock adopt the reorganization agreement at a special meeting of the
stockholders of TelCom. Only stockholders who hold their shares of TelCom
common stock at the close of business on November 27, 2000, will be entitled to
vote at the special meeting.
After careful consideration, your board of directors determined the merger
to be fair to you and in your best interests and declared the merger advisable.
TelCom's board of directors unanimously approved the reorganization agreement
and unanimously recommends its adoption by you.
This proxy statement/prospectus provides you with detailed information
concerning Microchip and the merger. Please give all of the information
contained in this proxy statement/prospectus your careful attention. In
particular, you should carefully consider the discussion in the section
entitled "Risk Factors" on page 19 of this proxy statement/prospectus. We
encourage you to read this entire document carefully.
The date, time and place of the special meeting is as follows:
Please use this opportunity to take part in the affairs of TelCom by voting
on the adoption of the reorganization agreement. Whether or not you plan to
attend the meeting, please complete, sign, date and return the accompanying
proxy in the enclosed self-addressed stamped envelope. Returning the proxy does
NOT deprive you of your right to attend the meeting and to vote your shares in
person. YOUR VOTE IS VERY IMPORTANT.
We appreciate your interest in TelCom and consideration of this matter.
/s/ Robert G. Gargus
Robert G. Gargus
President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the shares of Microchip common stock
to be issued in connection with the merger or determined whether this proxy
statement/prospectus is adequate or accurate. Any representation to the
contrary is a criminal offense.
This proxy statement/prospectus is dated December 6, 2000, and was first
mailed to stockholders on or about December 8, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
Summary of the Proxy Statement/Prospectus................................. 1
The Companies........................................................... 1
A Warning About Forward-Looking Statements.............................. 2
Questions and Answers About the Merger.................................. 3
Summary of the Transaction.............................................. 5
Selected Historical and Pro Forma Financial Data........................ 12
Selected Historical Financial Data of Microchip......................... 12
Selected Historical Financial Data of TelCom............................ 13
Selected Unaudited Pro Forma Combined Financial Data.................... 14
Comparative Per Share Data.............................................. 15
Comparative Per Share Market Price Data................................. 16
Risk Factors.............................................................. 18
Risks Related to the Merger............................................. 18
Risks Related to the Combined Companies................................. 22
The Special Meeting of TelCom Stockholders................................ 28
General................................................................. 28
Matters to be Considered at the TelCom Special Meeting.................. 28
Date, Time and Place.................................................... 28
Record Date; Quorum..................................................... 28
Votes Required.......................................................... 28
Voting by TelCom's Executive Officers and Directors..................... 28
Voting of Proxies; Revocability of Proxies.............................. 29
Solicitation of Proxies and Expenses.................................... 29
The Merger................................................................ 30
Background of the Merger................................................ 30
Microchip's Reasons for the Merger...................................... 32
TelCom's Reasons for the Merger......................................... 33
Recommendation of TelCom's Board of Directors........................... 35
Opinion of TelCom's Financial Advisor................................... 35
Contribution Analysis................................................... 38
Public Company Comparable Analysis...................................... 38
Comparable Transactions Analysis........................................ 39
Transaction Premiums Paid Analysis...................................... 40
Exchange Ratio Analysis................................................. 41
Pro Forma Combination Analysis.......................................... 41
TelCom Stock Performance Analysis....................................... 41
Evaluation of Microchip Equity.......................................... 41
Microchip Stock Performance Analysis.................................... 42
Considerations in Preparation of TelCom's Fairness Opinion.............. 42
Interests of TelCom Directors, Officers and Affiliates in the Merger.... 42
Completion and Effectiveness of the Merger.............................. 43
Structure of the Merger and Conversion of TelCom Common Stock........... 43
Exchange of TelCom Stock Certificates for Microchip Stock Certificates.. 44
No Dividends............................................................ 44
Material United States Federal Income Tax Consequences of the Merger.... 44
Accounting Treatment of the Merger...................................... 46
Reissuance of Shares of Microchip Common Stock.......................... 46
Regulatory Filings and Approvals Required to Complete the Merger........ 46
Restrictions on Sales of Shares by Affiliates of TelCom and Microchip... 46
Listing on The Nasdaq Stock Market's National Market of Microchip Common
Stock to be Issued in the Merger....................................... 47
Dissenters' Appraisal Rights............................................ 47
The Reorganization Agreement............................................ 47
</TABLE>
i
<PAGE>
TABLE OF CONTENTS--(Continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
General................................................................ 47
The Stock Option Agreement............................................. 57
Voting Agreements...................................................... 58
Affiliate Agreements................................................... 58
Noncompetition Agreements.............................................. 59
Operations After the Merger............................................ 59
Unaudited Pro Forma Combined Financial Information..................... 60
Comparison of Rights of Holders of TelCom Common Stock and Microchip
Common Stock............................................................ 67
Number of Directors.................................................... 67
Cumulative Voting for Directors........................................ 67
Classified Board of Directors.......................................... 67
Director Voting........................................................ 67
Removal of Directors................................................... 67
Filling Vacancies on the Board of Directors............................ 68
Advance Notice of Stockholder Proposals................................ 68
Power to Call Special Meetings of Stockholders......................... 68
Business Combination Following a Change of Control..................... 68
Amendment of Charter Documents......................................... 68
Indemnification........................................................ 69
Rights Plan............................................................ 69
No Restrictions on Sales of Stock...................................... 70
Inspection of Stockholders List........................................ 70
Dissenters' Rights..................................................... 71
Share Ownership by Principal Stockholders, Management and Directors of
TelCom.................................................................. 72
Legal Opinion............................................................ 74
Experts.................................................................. 74
Where You Can Find More Information...................................... 75
</TABLE>
Exhibit A--Agreement and Plan of Reorganization
Exhibit B--Stock Option Agreement
Exhibit C--Form of Voting Agreement
Exhibit D--Fairness Opinion of C.E. Unterberg, Towbin
Exhibit E--Form of TelCom Affiliate Agreement
Exhibit F--Form of Noncompetition Agreement
ii
<PAGE>
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary may not contain all of the information that is important to
you. You should carefully read this entire document and the other documents we
refer to for a more complete understanding of the merger. In particular, you
should read the documents attached to this proxy statement/prospectus as
exhibits, including the reorganization agreement, the stock option agreement,
the form of voting agreement, the fairness opinion of C.E. Unterberg, Towbin,
the form of TelCom affiliate agreement and the form of noncompetition agreement
that are attached as Exhibits A, B, C, D, E and F, respectively. We encourage
you to read the reorganization agreement, which is the legal document governing
the terms of the merger. In addition, we incorporate by reference important
business and financial information about Microchip and TelCom into this proxy
statement/prospectus. You may obtain the information incorporated by reference
into this proxy statement/prospectus without charge by following the
instructions in the section entitled "Where You Can Find More Information" on
page 75 of this proxy statement/prospectus.
THE COMPANIES
TelCom Semiconductor, Inc.
1300 Terra Bella Avenue
Mountain View, California 94039-7267
(650) 215-5213
TelCom designs, develops and markets a diversified portfolio of high-
performance analog and mixed-signal integrated circuits for a wide variety of
applications in the wireless communications, networking, computer, and
industrial markets. TelCom operates from facilities in Mountain View,
California; Lausanne, Switzerland; and Hong Kong. TelCom employs approximately
280 people worldwide and has sales offices in Austin, Texas; Endwell, New York;
Concord, Massachusetts; Atlanta, Georgia; London, England; and Martinsreid,
Germany.
TelCom maintains a site on the Internet at www.telcom-semi.com; however,
information found on TelCom's website is not a part of this proxy
statement/prospectus.
Microchip Technology Incorporated
2355 West Chandler Boulevard
Chandler, Arizona 85224-6199
(480) 792-7200
Microchip develops and manufactures the PICmiro(R) RISC-based
microcontrollers that serve 8- and 16-bit embedded control applications.
Specializing in field-programmable and mixed signal solutions, Microchip also
offers complementary microperipheral products including stand-alone analog,
interface and microID(TM) RFID devices, serial EEPROM and the patented
KEELOQ(R) security devices. Microchip markets its products to the automotive,
communications, computing, consumer and industrial control markets. Microchip
is headquartered in Chandler, Arizona with semiconductor fabrication facilities
in Arizona and Washington, and assembly and test operations near Bangkok,
Thailand. Microchip employs approximately 3,100 people worldwide and has sales
offices throughout Asia, Europe, Japan and the Americas.
Microchip maintains a site on the Internet at www.microchip.com; however,
information found on Microchip's website is not a part of this proxy
statement/prospectus.
1
<PAGE>
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Microchip and TelCom make forward-looking statements in this document. These
forward-looking statements are subject to risks and uncertainties, and there
can be no assurance that such statements will prove to be correct. Forward
looking statements include:
. statements relating to the cost savings anticipated to result from the
proposed merger
. statements relating to synergies anticipated to result from the proposed
merger
. statements relating to integration and other costs estimated to be
incurred in connection with the proposed merger, and
. statements anticipating future performance in the section entitled "The
Merger--Microchip's Reasons for the Merger" and "--TelCom's Reasons for
the Merger."
Also, when we use words such as "believes," "expects," "anticipates,"
"estimates," "plans," "intends," "objectives," "goals," "aims" or "projects,"
or similar words or expressions, we are making forward-looking statements.
Many possible events or factors could affect the future financial results
and performance of the combined companies after the proposed merger is
completed. This could cause actual results or performance to differ materially
from those expressed in our forward-looking statements. We have described the
risks and uncertainties that could materially impact the merger and the
combined companies in the section entitled "Risk Factors" beginning on page 18.
You are cautioned not to place undue reliance on our forward-looking
statements, which speak only as of the date of this document. Neither Microchip
nor TelCom undertakes any obligation to update publicly any forward-looking
statements to reflect events, circumstances or new information after the date
of this document or to reflect the occurrence of unanticipated events.
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is TelCom proposing to merge? (see page 33)
A: We believe that TelCom's analog capability is complementary and will add
value to Microchip's existing products and that the synergies that result
from the merger will allow the two companies to accelerate revenue growth,
particularly with respect to their combined analog portfolio, faster and
more efficiently than the two companies could separately. We believe this
will allow for enhanced stockholder value for both companies' stockholders.
Q: What does the TelCom board of directors recommend? (see page 35)
A: After careful consideration, the TelCom board of directors has determined
the merger to be fair to you and in your best interests and declared the
merger advisable. TelCom's board of directors unanimously approved the
reorganization agreement and unanimously recommends that you vote FOR the
proposal to adopt the reorganization agreement.
Q: What will TelCom stockholders receive in the merger? (see page 43)
A: If the merger is completed, each share of TelCom common stock you own will
be exchanged for a fraction of a share of Microchip common stock, with the
fraction based on the following:
. If the average closing price of Microchip's common stock for the ten
trading days preceding the closing of the merger is equal to or between
$28.30 and $32.61, this fraction will be determined by dividing $15.00 by
this ten-day average price.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is less than $28.30, then this fraction
will equal 0.53.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is greater than $32.61, then this
fraction will equal 0.46.
Microchip will not issue fractional shares of common stock. You will
receive cash based on the average closing price of Microchip common stock
for the five trading days prior to the completion of the merger instead of
any fractional share.
The value of the shares you receive in the merger will not be known at the
time you vote on the merger and may go up or down as the market price of
Microchip common stock goes up or down. TelCom is not permitted to "walk
away" from the merger or resolicit the vote of its stockholders based
solely on changes in the value of Microchip common stock.
Based on the number of TelCom and Microchip shares outstanding as of the
record date, and assuming the average market price of Microchip common
stock is $24.75, the former stockholders of TelCom will own approximately
7.5% of Microchip after the merger.
Q: Will I be able to trade the Microchip common stock that I receive in the
merger? (see page 46)
A: Yes. The Microchip common stock you receive will be freely tradable unless
you are an affiliate of Microchip or TelCom. Microchip's common stock is
listed on The Nasdaq National Market under the symbol "MCHP."
Q: What will happen to the outstanding options to purchase shares of TelCom
common stock as a result of the merger? (see page 53)
A: Each outstanding option to purchase shares of TelCom common stock will be
assumed by Microchip. The number of shares of Microchip common stock
issuable upon the exercise of an assumed option will be equal to the number
of shares of TelCom common stock subject to the option multiplied by the
applicable exchange ratio in the merger and the exercise price will be equal
to the existing option exercise price divided by the applicable exchange
ratio.
3
<PAGE>
Q: What are the tax consequences to me of the merger? (see page 44)
A: Microchip and TelCom have structured the merger so that, for federal income
tax purposes, TelCom's stockholders will generally not recognize a gain or a
loss upon the receipt of the Microchip common stock in the merger, except
with respect to cash received in lieu of fractional shares. Please read
carefully the discussion in "The Merger--Material United States Federal
Income Tax Consequences of the Merger" beginning on page 44 below. Microchip
and TelCom have conditioned the completion of the merger on receipt of legal
opinions regarding the tax consequences of the merger. You are urged to
consult your own tax advisor to determine your particular tax consequences
resulting from the merger.
Q: When will the merger occur? (see page 43)
A: The merger will occur after approval of the TelCom stockholders is obtained
at the special meeting and the other conditions to the merger, including
regulatory approvals, are satisfied or waived. Microchip and TelCom are
working towards completing the merger as quickly as possible.
Q: What do I need to do now? (see page 28)
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, mail your signed proxy card in the enclosed
postage-prepaid return envelope as soon as possible so that your shares may
be represented at the special meeting of TelCom stockholders.
Q: What happens if I return a signed proxy card but do not indicate how to vote
my proxy? (see page 29)
A: If you do not include instructions on how to vote your properly signed
proxy, your shares will be voted FOR adoption of the reorganization
agreement and approval of the merger.
Q: What happens if I don't return a proxy card? (see page 29)
A: Not returning your proxy card will have the same effect as voting against
the reorganization agreement.
Q: Can I change my vote after I have mailed my signed proxy card? (see page 29)
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice to the Secretary of TelCom stating that you would like to
revoke your proxy. Second, you can complete and submit a new proxy card.
Third, you can attend the special meeting, file a written notice of
revocation of your proxy with the Secretary of TelCom and vote in person.
Your attendance alone will not revoke your proxy.
Q: If my broker holds my shares in "street name," will my broker vote my shares
for me? (see page 29)
A: No. Your broker will not be able to vote your shares without instructions
from you. If you do not provide your broker with voting instructions, your
shares will be considered present at the special meeting for purposes of
determining a quorum but will not be considered to have been voted in favor
of adoption of the reorganization agreement. If you have instructed a broker
to vote your shares, you must follow directions received from your broker to
change those instructions.
Q: Should I send in my stock certificates now? (see page 44)
A: No. After we complete the merger, Microchip will send you written
instructions for exchanging your TelCom stock certificates for Microchip
stock certificates.
Q: Who can help answer my questions? (see page 76)
A: You can call TelCom's Investor Relations at 1300 Terra Bella Avenue,
Mountain View, CA 94039-7267, telephone (650) 215-5213 with any questions
about the merger.
4
<PAGE>
SUMMARY OF THE TRANSACTION
TelCom's Reasons for the Merger (see page 33)
TelCom's board of directors has determined that the terms of the merger and
the reorganization agreement are fair to, and in the best interests of, TelCom
and its stockholders. In reaching its decision, TelCom's board of directors
identified several potential benefits of the merger, which include:
. the potential for accelerated revenue growth resulting from combining the
companies' analog portfolios to capture a larger portion of the analog
opportunity surrounding microcontrollers, thus resulting in enhanced
stockholder value
. the possible synergies from combining TelCom and Microchip, particularly
synergies relating to Microchip's lower manufacturing costs and broader
distribution channels
. the trend toward increasing consolidation in, and the highly competitive
nature of, the market in which TelCom operates and the competitive
benefits of combining with a larger, diversified company such as
Microchip
. the likelihood that the merger will result in a combined company with
greater financial, technological, and human resources to develop new
products or acquire new technologies, and greater sales and marketing
resources to help promote and sell TelCom products
. the ability of TelCom, as part of Microchip, to increase distribution of
its products by accessing Microchip's sales channels to reach Microchip's
broader customer base, and
. the ability of TelCom, as part of Microchip, to direct more resources
towards product research and development.
Microchip's Reasons for the Merger (see page 32)
Microchip's board of directors has determined that the merger is consistent
with and in furtherance of the long-term business strategy of Microchip and
fair to, and in the best interests of, Microchip and its stockholders.
Microchip's board of directors considered a number of factors in its
deliberations, including:
. the terms and conditions of the reorganization agreement, including the
price and the anticipated accounting treatment of the transaction
. Microchip's belief that the analog portion of the semiconductor market is
growing rapidly and proprietary analog products enjoy high, sustainable
gross margins and that TelCom significantly enhances Microchip's analog
technology and expertise
. Microchip's belief that there is a revenue opportunity to embed
approximately $1.50 of analog products around each $1.00 of
microcontrollers. About 18 months ago, Microchip began targeting this
revenue opportunity by building and attaching Microchip's stand-alone
analog products to its microcontrollers. Microchip believes that the
merger will enable it to accelerate its microcontroller "attach" strategy
much faster than it could achieve alone
. the fact that TelCom has multiple customers and suppliers for its analog
products and has a large team of experienced analog design engineers who
can meet Microchip's analog development needs at a time when such
engineering resources are extremely scarce, and
. the fact that the addition of TelCom's portfolio of products
significantly expands Microchip's sales channel and distribution
partners' ability to attach analog products to sales of Microchip's
PICmicro microcontrollers.
5
<PAGE>
Structure of the Transaction (see page 43)
TelCom will merge with a subsidiary of Microchip and become a wholly owned
subsidiary of Microchip. Following the merger, as a stockholder of Microchip,
you will have an equity stake in TelCom's parent company, Microchip.
Stockholder Approval (see page 28)
The holders of a majority of the outstanding shares of TelCom common stock
must adopt the reorganization agreement. Microchip stockholders are not
required to adopt the reorganization agreement and will not vote on the merger.
You are entitled to cast one vote per share of TelCom common stock you owned as
of November 27, 2000, the record date.
Recommendation of TelCom's Board of Directors (see page 35)
After careful consideration, TelCom's board of directors determined the
merger to be fair to you and in your best interests and declared the merger
advisable. TelCom's board of directors unanimously approved the reorganization
agreement and unanimously recommends its adoption by you.
Opinion of TelCom's Financial Advisor (see page 35)
C.E. Unterberg, Towbin, TelCom's financial advisor, delivered an opinion to
TelCom's board of directors that, subject to the considerations described in
its opinion, the exchange ratio in the reorganization agreement is fair from a
financial point of view to holders of TelCom common stock. The complete opinion
of C.E. Unterberg, Towbin is attached as Exhibit D. We urge you to read it in
its entirety. This opinion is addressed to the TelCom board of directors and
does not constitute a recommendation to any stockholder as to any matters
relating to the merger.
Procedure for Casting Your Vote (see page 28)
Please mail your signed proxy card in the enclosed postage-prepaid return
envelope as soon as possible so that your shares of TelCom common stock may be
represented at the special meeting. If you return your proxy but do not include
instructions on how to vote your properly executed proxy, your shares will be
voted FOR adoption of the reorganization agreement. Your failure to vote will
have the same effect as if you had voted AGAINST adoption of the reorganization
agreement.
Procedure for Casting Your Vote if Your Shares are Held by Your Broker in
"Street Name" (see page 29)
Your broker will vote your shares only if you provide instructions on how to
vote by following the information provided to you by your broker. If you do not
provide your broker with voting instructions, your shares will not be voted at
the special meeting and it will have the same effect as voting against adoption
of the reorganization agreement.
Procedure for Changing Your Vote (see page 29)
If you want to change your vote, just send the Secretary of TelCom a later-
dated, signed proxy card before the special meeting or attend the special
meeting in person and revoke your proxy and vote in person. You may revoke your
proxy by sending written notice to the Secretary of TelCom before the special
meeting.
Procedure for Exchanging Your Stock Certificates (see page 44)
After the merger is completed, Microchip will send you written instructions
for exchanging your TelCom stock certificates for Microchip stock certificates.
Do not send your TelCom stock certificates now.
6
<PAGE>
No Dissenter's Appraisal Rights (See page 47)
Because both Microchip's common stock and TelCom's common stock are traded
on The Nasdaq National Market, holders of TelCom common stock will not be
entitled under the Delaware General Corporation Law to exercise dissenting
stockholders' appraisal rights with respect to their shares of TelCom common
stock.
Completion and Effectiveness of the Merger (see page 43)
We will complete the merger when all of the conditions to completion of the
merger are satisfied or waived. The merger will become effective when we file a
Certificate of Merger with the State of Delaware. We are working toward
completing the merger as quickly as possible. We hope to complete the merger
promptly after the special meeting.
Conditions to Completion of the Merger (see page 53)
The reorganization agreement is attached as Exhibit A. Please read the
reorganization agreement in its entirety. It is the legal document that governs
your rights in connection with the merger.
Microchip's and TelCom's respective obligations to complete the merger are
subject to the prior satisfaction or waiver of conditions. If either Microchip
or TelCom waives any conditions, TelCom will consider the facts and
circumstances at that time and make a determination as to whether a
resolicitation of proxies from TelCom stockholders is appropriate. The
conditions that must be satisfied or waived before the completion of the merger
include the following:
. TelCom's stockholders must vote a majority of the outstanding shares of
TelCom common stock for approval of the reorganization agreement
. the applicable waiting periods under the antitrust laws must expire or be
terminated
. the SEC must declare the S-4 registration statement effective and no
injunction or order preventing the completion of the merger may be in
effect
. Microchip and TelCom must each receive an opinion of their tax counsel
that the merger will qualify as a tax-free reorganization, and
. Microchip must receive a letter from Microchip's independent accountants,
KPMG LLP, stating their concurrence with Microchip management's
conclusion that the merger will qualify for "pooling of interests"
accounting treatment, and Microchip must receive from TelCom a copy of a
letter addressed from PricewaterhouseCoopers LLP, independent accountants
for TelCom, to TelCom stating their concurrence with TelCom management's
conclusion that, based upon the information furnished to
PricewaterhouseCoopers LLP by TelCom management, no conditions exist
related to TelCom that would preclude TelCom from being a party to a
business combination for which the "pooling of interests" method of
accounting is used.
Termination of the Reorganization Agreement (see page 55)
The reorganization agreement may be terminated under specified circumstances
at any time before the completion of the merger, as summarized below.
The reorganization agreement may be terminated by the mutual written consent
of Microchip and TelCom duly authorized by their boards of directors.
The reorganization agreement may also be terminated by either of Microchip
or TelCom if the conditions to completion of the merger would not be satisfied
because of a material breach of the reorganization agreement by the other party
or a representation or warranty of the other party in the reorganization
agreement becomes materially untrue, either of which is incurable or not cured
within a specified period.
7
<PAGE>
In addition, the reorganization agreement may be terminated by either
Microchip or TelCom under any of the following circumstances:
. if the merger is not completed by April 30, 2001
. if a final court order or other government decree or ruling prohibiting
the merger is issued and is not appealable, or
. if TelCom stockholders do not approve and adopt the reorganization
agreement and approve the merger at the special meeting.
Furthermore, Microchip may terminate the reorganization agreement if:
. TelCom's board of directors withdraws or changes in a manner adverse to
Microchip its recommendation in favor of adoption of the reorganization
agreement
. TelCom's board of directors does not reaffirm its recommendation in favor
of the reorganization agreement within ten business days after Microchip
requests reaffirmation following the announcement of any offer or
proposal from a party other than Microchip relating to an extraordinary
transaction including TelCom, such as a merger or a sale of significant
assets
. TelCom's board of directors approves or recommends any offer or proposal
from a party other than Microchip relating to an extraordinary
transaction
. TelCom enters into any letter of intent or other agreement accepting any
offer or proposal from a party other than Microchip relating to an
extraordinary transaction
. TelCom or one of its representatives solicits or enters into negotiations
with a third party regarding an extraordinary transaction, unless that
third party has made an offer that is superior to the merger and TelCom
has notified Microchip of the offer, or
. A person unaffiliated with Microchip starts a tender or exchange offer
relating to at least 15% of the outstanding capital stock of TelCom, and
TelCom does not recommend that its stockholders reject such offer within
ten business days after the offer is first started.
Payment of Termination Fee (see page 56)
If the reorganization agreement terminates under specified circumstances,
TelCom will pay to Microchip a termination fee of $9,000,000.
No Other Negotiations Involving TelCom (see page 51)
TelCom has agreed, subject to some limited exceptions, not to initiate or
engage in discussions with another party about a business combination with the
other party prior to the termination of the reorganization agreement.
Microchip Required TelCom to Enter Into a Stock Option Agreement That May
Discourage Third Parties Who are Interested in Acquiring a Stake in TelCom (see
page 57)
TelCom entered into a stock option agreement with Microchip that grants
Microchip the option to acquire shares of TelCom common stock that represent
approximately 19.9% of the issued and outstanding shares of TelCom common
stock. The exercise price of the option is $15.00 per share. The total economic
benefit to Microchip of the termination fee and the stock option is
$12,000,000.
Microchip required TelCom to grant the option as a prerequisite to entering
into the reorganization agreement. The option may discourage third parties who
are interested in acquiring a significant stake in TelCom and is intended by
Microchip to increase the likelihood that the merger will be completed.
8
<PAGE>
The option is not currently exercisable, and Microchip may only exercise the
option if Microchip is entitled to receive the termination fee under the
reorganization agreement. If the reorganization agreement is terminated under
any other circumstances, the option will terminate.
We urge you to read the stock option agreement, which is attached as Exhibit
B, in its entirety.
TelCom Voting Agreements (see page 58)
Some TelCom stockholders have entered into voting agreements with Microchip.
The voting agreements require these TelCom stockholders to vote all the shares
of TelCom common stock that they beneficially own in favor of adoption of the
reorganization agreement. These TelCom stockholders were not paid additional
consideration in connection with the voting agreements.
The TelCom stockholders who entered into the voting agreement collectively
held approximately 4.3% of the outstanding TelCom common stock as of the record
date.
We urge you to read the form of voting agreement, which is attached as
Exhibit C, in its entirety.
Affiliate Agreements (see page 58)
TelCom's and Microchip's directors and certain of their executive officers
have executed affiliate agreements under which each of these persons has agreed
not to sell or otherwise dispose of any shares of TelCom or Microchip common
stock, in the case of the TelCom affiliates, or Microchip common stock, in the
case of the Microchip affiliates, owned by them during the period beginning 30
days prior to the merger and ending the day Microchip publicly announces
financial results covering at least 30 days of combined operations of Microchip
and TelCom. Further, the TelCom affiliates have acknowledged resale
restrictions imposed on their shares of Microchip common stock.
Noncompetition Agreements (see page 59)
Some of TelCom's executive officers and key employees have entered into
noncompetition agreements with Microchip in which they agreed not to compete
with Microchip for a period of one year after the date on which they cease to
be employed by Microchip, so long as that date falls within one year after the
effective date of the merger. If the employee remains employed by Microchip for
more than one year, there is no restriction on the employee's ability to
compete with Microchip. The noncompetition agreements also provide that for the
same period, the employee may not take any action to, or do anything reasonably
intended to, divert business from Microchip or any of its respective
subsidiaries. In addition, the employee may not directly or indirectly recruit,
solicit, or assist others in recruiting or soliciting any person who is an
employee of Microchip.
Interests of Certain Persons in the Merger (see page 42)
When considering the recommendation of TelCom's board of directors, you
should be aware that some of TelCom's directors and officers may have interests
in the merger that are different from, or are in addition to, yours. The
directors and officers of TelCom participate in arrangements and have
continuing indemnification against liabilities that provide them with interests
in the merger that are different from, or in addition to, those of other TelCom
stockholders, including the following:
. Directors and officers holding approximately 4.3% of the outstanding
TelCom common stock as of the record date, have agreed to vote in favor
of the reorganization agreement and the merger.
. Microchip has agreed to cause the surviving corporation in the merger to
indemnify each present and former TelCom officer and director against
liabilities arising out of such person's services as an officer
9
<PAGE>
or director. Microchip will also maintain or cause the surviving
corporation to maintain officers' and directors' liability insurance to
cover any such liabilities for the next six years.
. Some officers of TelCom are parties to executive retention agreements
that provide for the payment of 12 months of base salary and benefits if
within 24 months of a change of control of TelCom they are terminated,
have a significant reduction in duties, facilities or perquisites, have a
reduction in salary or benefits, or are relocated more than 25 miles from
their existing place of employment. In addition, some officers of TelCom
have provisions that provide for the acceleration of unvested stock
options if they are terminated within 12 months of a change of control of
TelCom. The merger would constitute a change of control.
The directors and officers of TelCom may therefore have been and may be more
likely to vote to adopt the reorganization agreement and approve the merger
than if they did not have these interests. TelCom stockholders should consider
whether these interests may have influenced these directors and officers to
support or recommend the merger. You should read more about these interests
under "The Merger--Interests of TelCom Directors, Officers and Affiliates in
the Merger" on page 42.
As of the record date, directors and executive officers of TelCom and their
affiliates held approximately 4.3% of the outstanding shares of TelCom common
stock.
U.S. Federal Income Tax Consequences of the Merger (see page 44)
We have structured the merger so that, in general, Microchip, TelCom and
their respective stockholders will not recognize gain or loss for United States
federal income tax purposes in the merger, except for taxes payable because of
cash received by TelCom stockholders instead of fractional shares. It is a
condition to the merger that Microchip and TelCom receive legal opinions from
their respective tax counsel stating that the merger will be a tax-free
reorganization.
Accounting Treatment of the Merger (see page 46)
We intend to account for the merger as a "pooling of interests" business
combination. It is a condition to Microchip's obligation to complete the merger
that Microchip be advised in writing by KPMG LLP, its independent accountants,
that they concur with Microchip management's conclusion that the merger can
properly be accounted for as a "pooling of interests" business combination. In
addition, Microchip must receive from TelCom a copy of a letter addressed to
TelCom from PricewaterhouseCoopers LLP, independent accountants to TelCom,
stating their concurrence with TelCom management's conclusion that, based upon
the information furnished to PricewaterhouseCoopers LLP by TelCom management,
no conditions exist related to TelCom that would preclude TelCom from being a
party to a business combination for which the "pooling of interests," method of
accounting is used. Under the "pooling of interests" method of accounting, each
of Microchip's and TelCom's historical recorded assets and liabilities will be
carried forward to the combined company at their recorded amounts. In addition,
the operating results of the combined company will include Microchip's and
TelCom's operating results for the entire fiscal year in which the merger is
completed and Microchip's and TelCom's historical reported operating results
for prior periods will be combined and restated as the operating results of the
combined company.
Reissuance of Shares of Microchip Common Stock (see page 46)
In order to qualify for "pooling of interests" accounting treatment,
Microchip must reissue in one or more transactions certain shares of Microchip
common stock previously repurchased by Microchip and currently held in its
treasury. Microchip expects to reissue all of these shares through option
exercises or other sales to be completed prior to the closing of the merger.
See "The Merger--Reissuance of Shares of Microchip Common Stock."
10
<PAGE>
Antitrust Approval Required to Complete the Merger (see page 46)
The merger is subject to antitrust laws. Microchip and TelCom have made the
required filings with the Department of Justice and the Federal Trade
Commission and will make any required filings with any applicable foreign
regulatory agencies. The merger may not be completed, however, until the
applicable waiting periods have expired or terminated. Microchip and TelCom
each believe that they have substantially complied, or will substantially
comply, with all requests for information from the Department of Justice and
the Federal Trade Commission, however the applicable waiting periods have not
yet expired. The Department of Justice or the Federal Trade Commission, as well
as a foreign regulatory agency or government, state or private person, may
challenge the merger at any time before its completion.
Ability to Sell Microchip Stock (see page 46)
All shares of Microchip common stock received by you in connection with the
merger will be freely transferable unless you are considered an "affiliate" of
either of Microchip or TelCom under the Securities Act. Shares of Microchip
common stock held by our affiliates may only be sold pursuant to a registration
statement or exemption under the Securities Act.
11
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
Microchip and Telcom have provided the following selected historical
financial data and selected pro forma condensed combined financial data to aid
you in analyzing the financial aspects of the proposed merger. The information
is only a summary and you should read it together with Microchip's and TelCom's
consolidated financial statements and other financial information contained in
the most recent annual and quarterly reports filed by Microchip and TelCom,
which are incorporated by reference. Please see the section entitled "Where You
Can Find More Information" on page 75 of this proxy statement/prospectus.
SELECTED HISTORICAL FINANCIAL DATA OF MICROCHIP
(in thousands, except per share data)
The selected historical consolidated income statement financial data for
each of the fiscal years in the three-year period ended March 31, 2000 and for
the six-month periods ended September 30, 2000 and 1999 have been derived from
the consolidated statements of income for Microchip for such periods
incorporated by reference in this proxy statement/prospectus. The consolidated
income statement data for the fiscal years ended March 31, 1997 and 1996 have
been derived from consolidated financial statements not included herein or
incorporated herein by reference.
The selected historical consolidated balance sheet data for Microchip as of
March 31, 2000 and 1999 and September 30, 2000 have been derived from
consolidated balance sheets for such periods incorporated by reference in this
proxy statement/prospectus. The historical consolidated balance sheets as of
March 31, 1998, 1997 and 1996 have been derived from consolidated financial
statements not included herein or incorporated herein by reference.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31, September 30,
----------------------------------------------- -----------------
2000 1999 1998 1997 1996 2000 1999
-------- -------- -------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............... $495,729 $406,460 $396,894 $334,252 $285,888 $334,047 $225,731
Cost of sales........... 237,985 203,574 199,538 167,330 137,708 151,322 110,199
Research and
development............ 45,571 40,787 38,362 32,073 27,517 31,751 20,959
Selling, general and
administrative......... 76,743 63,006 67,549 56,248 48,903 46,925 35,942
Special (income) expense
(1).................... (2,400) 28,937 5,000 7,544 11,448 -- --
Operating income........ 137,830 70,156 86,445 71,057 60,312 104,049 58,631
Interest income
(expense), net......... 1,184 (2,210) 1,505 (1,852) (947) 4,100 192
Other income, net....... 770 665 217 288 569 335 472
Income before income
taxes.................. 139,784 68,611 88,167 69,493 59,934 108,484 59,295
Provision for income
taxes.................. 37,740 18,523 23,799 18,361 16,182 29,290 16,008
Net income.............. $102,044 $ 50,088 $ 64,368 $ 51,132 $ 43,752 $ 79,194 $ 43,287
Basic net income per
share.................. $ 0.89 $ 0.44 $ 0.54 $ 0.44 $ 0.38 $ 0.67 $ 0.38
Diluted net income per
share.................. $ 0.84 $ 0.42 $ 0.51 $ 0.42 $ 0.36 $ 0.63 $ 0.36
Basic common shares
outstanding............ 114,734 115,056 120,096 116,031 114,188 118,627 114,478
Diluted common shares
outstanding............ 122,031 120,438 126,705 123,038 122,700 126,466 121,145
</TABLE>
<TABLE>
<CAPTION>
As of March 31, As of
-------------------------------------------- September 30,
2000 1999 1998 1997 1996 2000
-------- -------- -------- -------- -------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and short-term
investments............ $188,112 $ 30,826 $ 32,188 $ 42,999 $ 31,059 $117,088
Working capital......... 196,813 93,780 55,171 91,176 55,855 104,033
Total assets............ 812,411 505,230 524,743 428,092 358,187 973,809
Long-term obligations,
less current portion... 918 25,000 8,768 8,999 33,250 866
Total stockholders'
equity................. 624,296 358,797 367,308 316,584 219,632 744,643
</TABLE>
--------
(1) Please refer to Management's Discussion and Analysis and note 2 to the
consolidated financial statements included in Microchip's Annual Report
filed on Form 10-K for a detailed description of special (income) expense.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF TELCOM
(in thousands, except per share data)
The selected historical consolidated statement of operations financial data
for each of the fiscal years in the three-year period ended December 31, 1999
and for the nine-month periods ended September 30, 2000 and 1999 have been
derived from the consolidated statements of operations for TelCom for such
periods incorporated by reference in this proxy statement/prospectus. The
consolidated statement of operations data for the fiscal years ended December
31, 1996 and 1995 have been derived from consolidated financial statements not
included herein or incorporated herein by reference.
The selected historical consolidated balance sheet data for TelCom as of
December 31, 1999 and 1998 and September 30, 2000 have been derived from
consolidated balance sheets for such periods incorporated by reference in this
proxy statement/prospectus. The historical consolidated balance sheets as of
December 31, 1997, 1996 and 1995 have been derived from consolidated financial
statements not included herein or incorporated herein by reference.
<TABLE>
<CAPTION>
Nine Months
Ended September
Year Ended December 31, 30,
------------------------------------------ ---------------
1999 1998 1997 1996 1995 2000 1999
------- ------- ------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $57,322 $54,263 $55,435 $37,762 $39,004 $55,385 $41,526
Cost of sales........... 31,626 34,896 31,175 26,801 24,680 27,099 23,225
Research and
development............ 6,794 5,588 5,455 4,271 2,649 7,609 5,150
Selling, general and
administrative......... 10,007 9,496 9,530 7,713 7,115 8,918 7,415
Loss on foundry
investment............. -- -- 8,264 -- -- -- --
Restructuring and
other.................. 269 7,258 -- -- -- -- 269
Income (loss) from
operations............. 8,626 (2,975) 1,011 (1,023) 4,560 11,759 5,467
Interest income
(expense), net......... 385 386 (288) 162 299 3,684 226
Gain on sale of
investment............. 5,819 -- -- -- -- 3,091 5,819
Income (loss) before
income taxes........... 14,830 (2,589) 723 (861) 4,859 18,534 11,512
Provision (benefit) for
income taxes........... 1,701 958 2,427 (233) 1,215 5,034 2,438
------- ------- ------- ------- ------- ------- -------
Income (loss) before
equity in net loss of
SAI.................... 13,129 (3,547) (1,704) (628) 3,644 13,500 9,074
Equity in net loss of
SAI.................... -- -- -- -- -- 649 --
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $13,129 $(3,547) $(1,704) $ (628) $ 3,644 $12,851 $ 9,074
======= ======= ======= ======= ======= ======= =======
Basic net income (loss)
per share.............. $ 0.92 $ (0.22) $ (0.11) $ (0.04) $ 0.43 $ 0.75 $ 0.63
======= ======= ======= ======= ======= ======= =======
Diluted net income
(loss) per share....... $ 0.84 $ (0.22) $ (0.11) $ (0.04) $ 0.23 $ 0.67 $ 0.58
======= ======= ======= ======= ======= ======= =======
Basic common shares
outstanding............ 14,302 15,933 16,184 15,612 8,436 17,115 14,300
======= ======= ======= ======= ======= ======= =======
Diluted common shares
outstanding............ 15,676 15,933 16,184 15,612 15,703 19,280 15,514
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
--------------------------------------- September 30,
1999 1998 1997 1996 1995 2000
------- ------- ------- ------- ------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and short-term
investments............ $20,699 $14,059 $17,110 $12,761 $15,849 $113,639
Working capital......... 29,191 17,108 24,681 23,760 29,356 122,060
Total assets............ 45,951 41,166 53,684 58,012 49,805 149,815
Notes payable and other
long-term obligations.. -- 2,678 3,462 10,047 3,328 --
Total stockholders'
equity................. 38,582 25,918 36,421 36,926 37,059 132,388
</TABLE>
13
<PAGE>
MICROCHIP
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31, September 30,
-------------------------- -----------------
2000 1999 1998 2000 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data: (1)
Net sales......................... $553,051 $460,723 $452,329 $372,230 $254,449
Net income........................ 115,173 46,541 62,664 88,367 47,579
Basic net income per share........ $ 0.95 $ 0.38 $ 0.49 $ 0.70 $ 0.39
Diluted net income per share...... $ 0.89 $ 0.36 $ 0.47 $ 0.65 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
As of
September 30,
2000
-------------
<S> <C>
Balance Sheet Data: (1)
Working capital................................................... $ 216,993
Total assets...................................................... 1,123,624
Long-term obligations, less current portion....................... 866
Total stockholders' equity........................................ 867,931
</TABLE>
--------
(1) See notes to unaudited pro forma combined financial statements on page 66
of this proxy statement/prospectus.
14
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents certain unaudited historical per share and
combined pro forma per share data of Microchip and TelCom after giving effect
to the merger using the "pooling of interests" method of accounting. The
equivalent TelCom per share data is calculated based on an exchange ratio of
0.46 of a share of Microchip common stock for each share of TelCom common stock
outstanding. The pro forma data does not purport to be indicative of the
results of future operations or the results that would have occurred had the
merger been consummated at the beginning of the periods presented. The
information set forth below should be read in conjunction with the historical
financial statements and notes thereto of Microchip and TelCom incorporated by
reference in this document and its exhibits, and the selected unaudited pro
forma condensed combined financial data included elsewhere in this document.
The unaudited pro forma combined and unaudited pro forma per share equivalent
data combine the results of operations of Microchip for the three years ended
March 31, 2000 with the results of operations of TelCom for the three years
ended December 31, 1999 and Microchip's financial position at March 31, 2000
with TelCom's financial position at December 31, 1999.
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended March September
31, 30,
-------------------- -----------
2000 1999 1998 2000 1999
----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Microchip historical per share data
Income per common share, basic............ $0.89 $ 0.44 $ 0.54 $0.67 $0.38
Income per common share, diluted.......... 0.84 0.42 0.51 0.63 0.36
Book value per share(1)................... 5.27 6.25
<CAPTION>
Nine Months
Ended
Year Ended September
December 31 30
-------------------- -----------
1999 1998 1997 2000 1999
----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
TelCom historical per share data
Income (loss) per common share, basic..... $0.92 $(0.22) $(0.11) $0.75 $0.63
Income (loss) per common share, diluted... 0.84 (0.22) (0.11) 0.67 0.58
Book value per share(1)................... 2.70 7.24
<CAPTION>
Six Months
Ended
Year Ended March September
31, 30,
-------------------- -----------
2000 1999 1998 2000 1999
----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Unaudited Pro Forma Combined(2)
Income per common share, basic............ $0.95 $ 0.38 $ 0.49 $0.70 $0.39
Income per common share, diluted.......... 0.89 0.36 0.47 0.65 0.37
Book value per share...................... 5.31 6.87
<CAPTION>
Six Months
Ended
Year Ended September
December 31 30
-------------------- -----------
1999 1998 1997 2000 1999
----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Unaudited Pro Forma TelCom Per Share
Equivalent(3)
Income per common share, basic............ $0.44 $ 0.18 $ 0.23 $0.32 $0.18
Income per common share, diluted.......... 0.41 0.17 0.22 0.30 0.17
Book value per share...................... 2.44 3.16
</TABLE>
--------
(1) The book value per share is computed by dividing stockholders' equity by
the number of shares of common stock outstanding at the end of each period.
(2) For purposes of the unaudited pro forma combined share data, TelCom's
historical financial data for its years ending on December 31 has been
combined with the March 31 year end of Microchip.
(3) The equivalent pro forma share amounts of TelCom are calculated by
multiplying unaudited pro forma combined net income per share and book
value per share amounts by an exchange ratio of 0.46.
15
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE DATA
Microchip's common stock is traded on The Nasdaq National Market under the
symbol "MCHP." The following table shows the high and low closing per share
sale prices of Microchip common stock as reported by The Nasdaq National Market
for the periods indicated. The prices in the following table have been adjusted
to reflect Microchip's three-for-two stock split effective February 7, 2000 and
an additional three-for-two stock split effective September 26, 2000. Microchip
has never paid a cash dividend since its inception and does not anticipate
paying any cash dividends in the foreseeable future.
<TABLE>
<CAPTION>
Microchip
Sales Price
-------------
High Low
------ ------
<S> <C> <C>
Fiscal Year Ended March 31, 1999
First Quarter.................................................. $14.11 $ 9.25
Second Quarter................................................. 14.83 8.14
Third Quarter.................................................. 17.42 8.17
Fourth Quarter................................................. 18.17 12.06
Fiscal Year Ended March 31, 2000
First Quarter.................................................. $22.42 $14.97
Second Quarter................................................. 26.53 20.83
Third Quarter.................................................. 32.47 22.72
Fourth Quarter................................................. 48.17 25.86
Fiscal Year Ended March 31, 2001
First Quarter.................................................. $48.50 $33.33
Second Quarter................................................. 47.92 33.06
Third Quarter (through December 4, 2000)....................... 37.19 23.06
</TABLE>
TelCom's common stock is traded on The Nasdaq National Market under the
symbol "TLCM." The following table shows the high and low closing per share
sale prices of TelCom common stock as reported by The Nasdaq National Market
for the periods indicated. TelCom has never paid a cash dividend since its
inception and does not anticipate paying any cash dividends in the foreseeable
future.
<TABLE>
<CAPTION>
TelCom
Sales Price
-------------
High Low
------ ------
<S> <C> <C>
Fiscal Year Ended December 31, 1998
First Quarter.................................................. $11.69 $ 7.75
Second Quarter................................................. 11.69 3.63
Third Quarter.................................................. 5.25 2.38
Fourth Quarter................................................. 5.88 1.50
Fiscal Year Ended December 31, 1999
First Quarter.................................................. $ 5.81 $ 3.50
Second Quarter................................................. 10.25 4.13
Third Quarter.................................................. 13.94 9.31
Fourth Quarter................................................. 22.13 7.88
Fiscal Year Ended December 31, 2000
First Quarter.................................................. $36.38 $18.88
Second Quarter................................................. 43.88 21.38
Third Quarter.................................................. 41.25 13.12
Fourth Quarter (through December 4, 2000)...................... 14.06 9.94
</TABLE>
16
<PAGE>
On October 26, 2000, the last full trading day before the public
announcement of the proposed merger, the high and low sale prices for Microchip
common stock, as reported on The Nasdaq National Market, were $29.88 and
$26.00, respectively. The high and low sales prices for TelCom common stock, as
reported on The Nasdaq National Market, were $12.22 and $10.75, respectively,
on October 26, 2000.
The following table sets forth the closing sale price of Microchip common
stock, as reported on The Nasdaq National Market, TelCom common stock, as
reported on The Nasdaq National Market, and the equivalent per share price of
TelCom, giving effect to the proposed merger, on October 26, 2000 (the last
full trading day prior to the public announcement of the proposed merger) and
December 4, 2000 (the latest practicable trading day prior to the printing of
this proxy statement/prospectus).
<TABLE>
<CAPTION>
Closing Sales Price
---------------------------
TelCom
Microchip TelCom Equivalent
--------- ------ ----------
<S> <C> <C> <C>
Price per share:
October 26, 2000.................................. $29.75 $11.94 $15.00
December 4, 2000.................................. $24.75 $12.13 $13.12
</TABLE>
No assurance can be given as to the market price of Microchip common stock
at or after the effective date of the proposed merger. The market price of
Microchip common stock is subject to fluctuation. The value of the shares of
Microchip common stock that holders of TelCom common stock will receive in the
proposed merger may increase or decrease prior to and following the proposed
merger.
Because the market price of TelCom and Microchip common stock may increase
or decrease before the completion of the merger, you are urged to obtain
current market quotations.
17
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RISK FACTORS
By voting in favor of the adoption of the reorganization agreement, you will
be choosing to invest in Microchip common stock. An investment in Microchip
common stock involves a high degree of risk. In addition to the other
information contained in or incorporated by reference into this proxy
statement/prospectus, you should carefully consider the following risk factors
in deciding whether to vote for the adoption of the reorganization agreement.
RISKS RELATED TO THE MERGER
Since the number of shares of Microchip common stock to be issued in the merger
is partially fixed, you are at risk with respect to declines in the market
price of Microchip's common stock, which has been historically volatile.
Upon completion of the merger, each share of TelCom common stock you own
will be exchanged for a fraction of a share of Microchip common stock, with the
fraction based on the following:
. If the average closing price of Microchip's common stock for the ten
trading days preceding the closing of the merger is equal to or between
$28.30 and $32.61, this fraction will be determined by dividing $15.00 by
such ten-day average price.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is less than $28.30, then this fraction
will equal 0.53.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is greater than $32.61, then this
fraction will equal 0.46.
There will be no other adjustments for changes in the market price of either
TelCom common stock or Microchip common stock outside this specified trading
range, and TelCom is not permitted to "walk away" from the merger or resolicit
the vote of its stockholders solely because of changes in the market price of
Microchip or TelCom common stock. Accordingly, the specific dollar value of
Microchip common stock you will receive upon completion of the merger will
depend on the market value of Microchip common stock for the ten-day trading
period prior to the completion of the merger. The market price of Microchip's
common stock has historically been extremely volatile and you should expect it
to continue to be volatile. You should consult a stock price listing to
determine the value of the Microchip common stock to be issued in the merger.
Microchip will face significant challenges in integrating our two companies
and, as a result, may not realize the expected benefits of the merger.
In deciding that the merger is in the best interests of our respective
stockholders, the Microchip board of directors and the TelCom board of
directors considered the potential complementary effects of combining our
companies. However, the process of integrating separate businesses, especially
when they are as geographically separated as Microchip, located in Arizona, and
TelCom, located in California, involves a number of special risks, including:
. the possibility that the business cultures of our two companies may not
mesh
. the possibility that management may be distracted from regular business
concerns by the need to integrate operations
. unforeseen difficulties in integrating operations and systems
. challenges in retaining the employees of TelCom
. challenges in retaining customers, distributors and contract
manufacturers
. potential adverse effects on operating results, and
. the possibility that the benefits expected from the merger may not
materialize.
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Some of TelCom's largest customers compete with Microchip in other lines of
business. Consequently, these customers may choose not to purchase products
from our combined company after the merger. The loss of business from
significant customers could have a negative effect on our combined business. In
addition, this transaction involves the combination of two significantly
different businesses. As a result, management may be required to respond to
business issues that differ from the types of business issues that they have
typically confronted. We cannot assure you that any contemplated synergies from
the integration of the businesses will be realized.
If Microchip does not successfully integrate TelCom or the merger's benefits do
not meet the expectations of financial or industry analysts, the market price
of Microchip's common stock may decline.
The market price of Microchip's common stock may decline as a result of the
merger for a number of reasons, including if:
.the integration of Microchip and TelCom is not completed in a timely and
efficient manner
. Microchip does not achieve the benefits of the merger as rapidly as, or
to the extent, anticipated by financial or industry analysts, or
. the effect of the merger on Microchip's financial results is not
consistent with the expectations of financial or industry analysts.
Microchip has limited experience in making acquisitions; its limited experience
may result in mistakes that more experienced acquirors would not make.
Microchip was formed in 1989. During its operating history, Microchip has
acquired two small privately-held companies but has never acquired a company as
large as TelCom. In order to effect a successful merger, it is important for
management to plan effectively and to anticipate potential pitfalls before they
arise. Microchip's limited experience in business acquisitions may limit
Microchip's ability to plan for, and manage, the integration of the two
companies.
Microchip may have difficulty integrating TelCom's operations and retaining
important employees of TelCom.
There can be no guarantee that management of the combined company will be
able to successfully integrate TelCom's employees and operations following the
merger. There is the risk that Microchip will be unable to retain all of
TelCom's key employees for a number of reasons, including the risk that the
cultures of the companies will not blend. Current and prospective TelCom
employees may experience uncertainty about their future roles with Microchip.
This uncertainty may adversely affect Microchip's ability to retain key TelCom
employees.
Microchip may have difficulty integrating the different sales channels
currently maintained by Microchip and TelCom.
Microchip uses its own direct sales force to generate substantially all of
its domestic sales. In contrast, TelCom uses a network of manufacturer's
representatives to generate ten to twenty percent of its domestic sales. The
selling efforts of these manufacturers' representatives will likely suffer as a
result of the announcement of the merger and the uncertainty about their future
role with Microchip. To the extent Microchip chooses after the merger to sell
TelCom products through its direct sales force, it will need to hire additional
sales personnel and effectively train its personnel in selling these products.
Any reduction in sales resulting from uncertainty related to the merger or
difficulty in transitioning sales of TelCom products could harm the business
and operating results of the combined company.
19
<PAGE>
The integration of TelCom will require substantial time and effort of key
managers of Microchip, which could divert the attention of those managers from
other matters.
The merger will place significant demands on key managers of Microchip.
Risks exist in the consolidation of the systems, operations and administrative
functions of TelCom and Microchip. Managing the growth of the TelCom business
may limit time available for those managers of Microchip to attend to other
operational, financial and strategic issues.
Microchip may incur substantial costs in integrating TelCom, and the merger
could adversely affect combined financial results.
Microchip expects to incur costs of approximately $9.1 million in connection
with the merger and expects to incur restructuring and integration costs from
combining TelCom's operations with those of Microchip. These costs may be
substantial and may include costs for relocation and disposition of excess
equipment, executive severance and other merger-related costs. Microchip has
not yet determined the total amount of these costs. If the benefits of the
merger do not exceed the costs associated with the merger, including any
dilution to Microchip stockholders resulting from the issuance of shares in
connection with the merger, Microchip's financial results, including earnings
per share, could be adversely affected.
TelCom officers and directors have conflicts of interest that may influence
them to support or approve the merger.
The directors and officers of TelCom participate in arrangements and have
continuing indemnification against liabilities that provide them with interests
in the merger that are different from, or are in addition to, yours, including
the following:
. Directors and officers holding approximately 4.3% of the outstanding
TelCom common stock on the record date, have agreed to vote in favor of
the reorganization agreement and the merger.
. Microchip has agreed to cause the surviving corporation in the merger to
indemnify each present and former TelCom officer and director against
liabilities arising out of such person's services as an officer or
director. Microchip will also maintain or cause the surviving corporation
to maintain officers' and directors' liability insurance to cover any
such liabilities for the next six years.
. Some officers of TelCom are parties to executive retention agreements
that provide for the payment of 12 months of base salary and benefits if
within 24 months of a change of control of TelCom they are terminated,
have a significant reduction in duties, facilities or perquisites, have a
reduction in salary or benefits, or are relocated more than 25 miles from
their existing place of employment. In addition, some officers of TelCom
have provisions that provide for the acceleration of unvested stock
options if they are terminated within 12 months of a change of control of
TelCom. The merger would constitute a change of control.
As a result, these directors and officers could be more likely to vote to
adopt the reorganization agreement and approve the merger than if they did not
hold these interests. TelCom stockholders should consider whether these
interests may have influenced these directors and officers to support or
recommend the merger.
Third parties may terminate or alter existing contracts or business
relationships with TelCom.
Some third parties are in non-contractual business relationships with TelCom
or are in contractual relationships with TelCom that can be terminated at any
time or upon a certain number of days notice to TelCom. We cannot assure you
that none of these third parties will elect to discontinue their business
relationship with TelCom or that none of these third parties will exercise
their right to terminate their contractual relationship as a result of the
merger. In addition, TelCom has entered into contracts with third parties that
require TelCom to obtain the consent, waiver or approval of these other parties
in connection with the reorganization agreement. If consent, waiver or approval
cannot be obtained, we may lose rights that are material to TelCom's business.
20
<PAGE>
Failure to qualify for "pooling of interests" accounting treatment may harm our
future operating results.
Microchip and TelCom will not complete the merger unless each of them
receives an opinion from its accountants that they concur with management's
conclusions that the merger qualifies for "pooling of interests" accounting
treatment under U.S. generally accepted accounting principles. Under the
"pooling of interests" method of accounting, each of Microchip's and TelCom's
historical recorded assets and liabilities will be carried forward to the
combined company at their recorded amounts. In addition, the operating results
of the combined company will include Microchip's and TelCom's operating results
for the entire fiscal year in which the merger is completed and Microchip's and
TelCom's historical reported operating results for prior periods will be
combined and restated as the operating results of the combined company.
After completion of the merger, if events occur that cause the merger to no
longer qualify for "pooling of interests" accounting treatment, the purchase
method of accounting would apply. Under that method, we would record the
estimated fair value of Microchip common stock issued in the merger as the cost
of acquiring the business of TelCom. That cost would be allocated to the
individual assets acquired and liabilities assumed according to their
respective fair values, with the excess of the estimated fair value of
Microchip common stock issued over the fair value of net assets acquired
recorded as goodwill, to be amortized over a maximum period of 20 years. The
estimated fair value of Microchip common stock to be issued in the merger is
much more than the historical net book value at which TelCom carries its assets
in its accounts. Therefore, purchase accounting treatment could have a material
adverse effect on the reported operating results of the combined company
compared to "pooling of interests" accounting treatment.
Failure to complete the merger could negatively impact TelCom's stock price and
future business and operations.
If the merger is not completed, TelCom may be subject to a number of
material risks, including the following:
. if the reorganization agreement is terminated under certain
circumstances, TelCom will be required to pay Microchip a termination fee
of $9,000,000
. if the reorganization agreement is terminated under certain
circumstances, the option granted to Microchip by TelCom will become
exercisable
. the price of TelCom common stock may decline to the extent that the
current market price of TelCom common stock reflects a market assumption
that the merger will be completed
. costs related to the merger, such as legal, accounting and financial
advisor fees, must be paid even if the merger is not completed, and
. Microchip could require TelCom to repurchase the option or shares of
TelCom common stock it acquired under the option, resulting in additional
costs to TelCom, subject to limitations on total economic benefit to
Microchip.
Further, if the reorganization agreement is terminated and TelCom's board of
directors determines to seek another merger or business combination, it is not
certain that it will be able to find another party willing to pay an equivalent
or more attractive price than that which would be paid in the merger. In
addition, while the reorganization agreement is in effect, and subject to
limited exceptions described on page 51 of this proxy statement/prospectus,
TelCom is prohibited from soliciting, initiating or knowingly encouraging
certain specified extraordinary transactions, such as a merger, sale of assets
or other business combination, with any party other than Microchip.
Furthermore, if the reorganization agreement is terminated and Microchip
exercises its option to purchase TelCom common stock, TelCom would not be able
to account for future transactions as a "pooling of interests" business
combination, which could adversely affect TelCom's ability to enter into
another merger or business combination.
21
<PAGE>
TelCom stockholders will have reduced ownership and voting power after the
merger.
After the merger's completion, TelCom stockholders will own a substantially
smaller percentage of the combined company and its voting stock than they
currently own of TelCom. Consequently, TelCom stockholders may be less able to
exercise influence over the management and policies of the combined company
than they currently exercise over TelCom.
General uncertainty related to the completed merger could cause problems.
TelCom's customers may, in response to the announcement of the merger, delay
or defer purchasing decisions. Any delay or deferral in purchasing decisions by
TelCom customers could seriously harm TelCom's business, regardless of whether
or not the merger is ultimately completed. Similarly, current and prospective
TelCom employees may experience uncertainty about their future role with
Microchip until Microchip's strategies with regard to TelCom are announced or
executed. This may adversely affect TelCom's ability to attract and retain key
management, marketing and technical personnel.
RISKS RELATED TO THE COMBINED COMPANIES
Our quarterly operating results may fluctuate due to factors that could reduce
our net sales and profitability.
Our quarterly operating results are affected by a wide variety of factors
that could reduce our net sales and profitability, many of which are beyond our
control. Some of the factors that may affect our operating results include:
. the level of orders that are received and can be shipped in a quarter,
which we refer to as turns orders
. market acceptance of both our products and our customers' products
. customer order patterns and seasonality
. availability of manufacturing capacity and fluctuations in manufacturing
yield
. disruption in the supply of wafers or assembly services
. the availability and cost of raw materials, equipment and other supplies,
and
. economic, political and other conditions in the worldwide markets served
by us.
For example, TelCom recently announced that it expects its revenues for the
quarter ended December 31, 2000 to be lower than previously expected as a
result of order cancellations and push outs from large customers and a general
weakness in demand associated with wireless customers.
We believe that period-to-period comparisons of our operating results are
not necessarily meaningful and that you should not rely upon any comparisons as
indications of future performance. In future periods our operating results may
fall below the expectations of public market analysts and investors, which
would likely have a negative effect on the price of our common stock.
If we fail to maintain manufacturing yields as we increase our capacity, our
operating results will suffer.
The manufacture and assembly of integrated circuits, particularly non-
volatile, erasable memory and logic devices such as those that we produce, are
complex processes. These processes are sensitive to a wide variety of factors,
including the level of contaminants in the manufacturing environment,
impurities in the materials used and the performance of our fabrication
personnel and equipment. As is typical in the semiconductor industry, we have
from time to time experienced lower than anticipated manufacturing yields. Our
operating results will suffer if we are unable to maintain yields at
approximately current levels.
22
<PAGE>
We believe that expansion of our manufacturing capacity is important to
enable us to respond to increased sales opportunities and maintain satisfactory
delivery schedules. Our business could suffer if the expansion of manufacturing
capacity is delayed or inefficiently implemented. Other companies in our
industry have experienced difficulty in expanding manufacturing capacity,
resulting in reduced yields or delays in product deliveries. We may experience
manufacturing yield or delivery problems in the future, which could harm our
operating results.
We depend on orders that are received and shipped in the same quarter and
therefore have limited visibility of future product shipments.
Our net sales in any given quarter depend upon a combination of orders
received in that quarter for shipment in that quarter, which we refer to as
turns orders, and shipments from backlog. If we do not achieve a sufficient
level of turns orders in a particular quarter, our net sales and operating
results will suffer. Currently, we are experiencing turns orders near the low
point of the historical range for net sales requirements. Despite the current
low turns orders requirement for our business, turns orders are difficult to
predict. We may not experience the combination of turns orders and shipments
from backlog in any quarter that would be sufficient to achieve anticipated
growth in sales.
Intense competition in our markets may lead to reduced sales of our products
and reduced market share.
The semiconductor industry is intensely competitive and has been
characterized by price erosion and rapid technological change. We compete with
major domestic and international semiconductor companies, many of which have
greater market recognition and substantially greater financial, technical,
marketing, distribution and other resources than we with which to pursue
engineering, manufacturing, marketing and distribution of their products.
Emerging companies are also increasing their participation in the market for
embedded control applications. In addition, our ability to compete successfully
depends on a number of factors both within and outside our control, including:
. the quality, performance, reliability, features, ease of use, pricing and
diversity of our products
. the quality of our customer services and our ability to address the needs
of our customers
. our success in designing and manufacturing new products including those
implementing new technologies
. efficiency of production
. adequate supplies of raw materials and other supplies at acceptable
prices
. the rate at which customers incorporate our products into their own
products
. product introductions by our competitors
. the number, nature and success of our competitors in a given market
. general market and economic conditions, and
. protection of our products and processes by effective utilization of
intellectual property laws.
Historically, average selling prices in the semiconductor industry decrease
over the life of any particular product. The overall average selling prices of
Microchip's microcontroller products have remained relatively constant, while
average selling prices of its memory products had declined through the end of
fiscal 2000. However, during the quarter ended June 30, 2000, prices for
Microchip's memory products increased due primarily to the dynamics of the
supply and demand environment. During the quarter ended September 30, 2000,
both microcontroller and memory product pricing remained relatively constant.
Future changes to memory pricing will be driven by market conditions. Microchip
has experienced, and expects to continue to experience, pricing pressure in
certain microcontroller product lines, due primarily to competitive conditions.
23
<PAGE>
We may be unable to maintain average selling prices for our microcontroller or
other products as a result of increased pricing pressure in the future, which
would reduce our operating results.
We may be unable to compete successfully in the future, which would harm our
business.
TelCom does not have any formal agreements with third-party wafer suppliers
guaranteeing a minimum supply or set prices. Any inability or unwillingness of
TelCom's wafer suppliers to meet manufacturing requirements would delay
production and product shipments.
TelCom currently purchases all of its wafers from three outside foundries.
Each of these wafer suppliers also fabricates wafers for other integrated
circuit companies, including some of our competitors. Microchip currently
manufactures all of its own wafers. Following the merger, we expect to continue
to rely on outside foundries to supply wafers for the TelCom business. We have
no written commitments specifying wafer capacities from any outside foundries
and, therefore, will be unable to purchase wafers from these foundries if they
experience manufacturing failures or yield shortfalls, choose to prioritize
capacity for other use or otherwise choose to reduce or eliminate deliveries to
us. In such case, we may not be able to qualify additional manufacturing
sources for existing or new TelCom products in a timely manner. Moreover, it is
uncertain whether additional manufacturing sources would agree to deliver an
adequate supply of wafers to us.
Market conditions could result in wafers being in short supply and prevent
us from having an adequate supply to meet our customer requirements for the
TelCom business. Any prolonged inability to utilize outside foundries as a
result of fire, natural disaster or otherwise would harm our financial
condition and cause our operating results to suffer. If we are not able to
obtain additional foundry capacity as required, our relationships with our
customers would be harmed and our sales would likely be reduced. In order to
secure additional foundry capacity for the TelCom business, we may have to
enter into various arrangements with suppliers, which could include:
. contracts that commit us to purchase specified quantities of silicon
wafers at specified prices over extended periods
. option payments, non-refundable deposits or other prepayments
. investments in outside foundries, or
. joint ventures or other strategic partnerships with foundries.
We may not be able to make any such arrangement in a timely fashion or at
all, and such arrangements, if any, may not be on terms favorable to us.
Moreover, if we are able to secure foundry capacity, we may be obligated to
utilize all of that capacity or incur penalties. These penalties may be
expensive and could harm our operating results.
We are dependent on several third-party contractors in Asia to perform key
manufacturing functions for us.
We depend on several third-party contractors located throughout Asia for a
portion of the assembly and testing of our products. Third-party assembly and
test companies are experiencing high demand and utilization of their current
capacity that could lead to capacity shortages within the industry. Although we
seek to reduce our dependence on these third-party contractors, disruption or
termination of any of these sources could harm our business and operating
results. Our reliance on third parties involves some reduction in our level of
control over the assembly and test portion of our business. Our future
operating results could suffer if any third-party contractor were to experience
financial, operational or production difficulties, or if they were unable to
maintain assembly and test yields and costs at approximately their current
levels.
24
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We may lose sales if our suppliers of raw materials and equipment fail to meet
our needs.
Our semiconductor manufacturing operations require raw materials and
equipment that must meet exacting standards. We generally have more than one
source for these supplies, but there are only a limited number of suppliers
capable of delivering various raw materials and equipment that meet our
standards. In addition, the raw materials and equipment necessary for our
business could become more difficult to obtain as worldwide use of
semiconductors increases. We have faced supply shortages from time to time in
the past, and on occasion our suppliers have told us they need more time than
expected to fill our orders. An interruption of any raw materials or equipment
sources could harm our business.
Our business is highly dependent on selling through distributors.
Distributors accounted for 62% of Microchip's net sales to customers and 49%
of TelCom's net sales to customers for the three months ended September 30,
2000. Microchip's largest distributor accounted for 14% of its total net sales
and TelCom's largest distributor accounted for 16% of its total net sales for
the three months ended September 30, 2000. Generally, we do not have long-term
agreements with our distributors and our distributors may terminate their
relationship with us with little or no advance notice. The loss of, or a
disruption in the operations of, one or more of our distributors could reduce
our net sales in a given quarter and could result in an increase in inventory
returns.
Our operating results may be impacted by the wide fluctuations of supply and
demand in the semiconductor industry.
The semiconductor industry has been characterized by wide fluctuations of
supply and demand. The industry has experienced significant economic downturns
at various times, characterized by diminished product demand, accelerated
erosion of average selling prices and production over-capacity. We have sought
to reduce our exposure to industry cyclicality by selling products to a
geographically diverse base of customers across a broad range of market
applications. However, we may experience substantial period-to-period
fluctuations in future operating results due to general industry or economic
conditions. For example, TelCom recently announced that it expects its revenues
for the quarter ended December 31, 2000 to be lower than previously expected as
a result of order cancellations and push outs from large customers and a
general weakness in demand associated with wireless customers.
If we are unable to adequately protect or enforce our intellectual property
rights, we could lose market share, incur costly litigation expenses or lose
valuable assets.
Our success depends in part on our ability to obtain patents, licenses and
other intellectual property rights covering our products and manufacturing
processes. To that end, we have acquired certain patents and patent licenses
and intend to continue to seek patents on our inventions and manufacturing
processes. The process of seeking patent protection can be long and expensive,
and patents may not be issued from currently pending or future applications. In
addition, our existing patents and any new patents that are issued may not be
of sufficient scope or strength to provide meaningful protection or any
commercial advantage to us. We may be subject to or may initiate interference
proceedings in the U.S. Patent and Trademark Office, which can require
significant financial and management resources. In addition, the laws of
certain foreign countries do not protect our intellectual property rights to
the same extent as the laws of the United States.
As is typical in the semiconductor industry, we have from time to time
received, and may in the future receive, communications alleging possible
infringement of patents or other intellectual property rights of others. We
investigate all such notices and respond as we believe is appropriate. Based on
industry practice, we believe that in most cases we can obtain any necessary
licenses or other rights on commercially reasonable terms, but we cannot assure
you that licenses would be available on acceptable terms, that litigation would
not ensue or that damages for any past infringement would not be assessed.
Litigation, which could result in substantial cost to us and diversion of
management effort, may be necessary to enforce our patents or other
intellectual property
25
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rights or to defend us against claimed infringement of the rights of others.
The failure to obtain necessary licenses or other rights or litigation arising
out of infringement claims could harm our business.
Our manufacturing facilities are subject to disruption for reasons beyond our
control.
Operations at any of our primary manufacturing facilities, or at any of our
test and assembly subcontractors, may be disrupted for reasons beyond our
control, including work stoppages, fire, earthquake, floods, or other natural
disasters. If operations at any of our facilities or by any of our
subcontractors are interrupted, we may not be able to shift production to
other facilities on a timely basis. If this occurs, we may experience delays
in shipments of products to our customers and alternate sources for production
may be unavailable on acceptable terms. This could result in the cancellation
of orders or loss of customers.
Microchip's newest wafer fabrication site located in Puyallup, Washington
is a highly complex, state-of-the-art facility. To achieve our anticipated
production rates, we will need the reliable operation and effective
integration of a variety of hardware and software components. We do not know
whether all of these components will be fully functional, or successfully
integrated, on time or that the facility's yields will meet or exceed the
forecasted yield targets. The capital expenditures required to bring the
facility to full operating capacity may be greater than we anticipate and
result in lower margins.
We are highly dependent on foreign sales and operations, which exposes us to
foreign political and economic risks.
Sales to foreign customers account for a substantial portion of our net
sales. During the three months ended September 30, 2000, 69% of Microchip's
net sales and 52% of TelCom's net sales were made to foreign customers. We
purchase a substantial portion of our raw materials and equipment from foreign
suppliers. In addition, we own product packaging and testing facilities
located near Bangkok, Thailand. We also use various third-party contractors
located throughout Asia for a portion of our packaging and testing
requirements.
Our reliance on foreign sales and operations exposes us to foreign
political and economic risks, including:
. political, social and economic instability
. trade restrictions and changes in tariffs
. import and export license requirements and restrictions
. difficulties in staffing and managing international operations
. disruptions in international transport or delivery
. fluctuations in currency exchange rates
. difficulties in collecting receivables, and
. potentially adverse tax consequences.
If any of these risks materialize, our foreign sales could decrease and our
operations and performance could suffer.
We are subject to stringent environmental regulation, which may force us to
incur significant expenses.
We must comply with many different federal, state and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in our manufacturing processes.
Although we believe that our activities conform to presently applicable
environmental regulations, our failure to comply with present or future
regulations could result in the imposition of fines, suspension of production
or a cessation of operations. Any regulation could require us to acquire
costly equipment or to incur other significant expenses to comply with
environmental regulations. Any failure by us to control the use of or
26
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adequately restrict the discharge of hazardous substances could subject us to
future liabilities. Environmental problems may occur that could subject us to
future costs or liabilities.
In 1993, TelCom acquired the semiconductor manufacturing operations of
Teledyne, Inc. previously conducted at TelCom's Mountain View, California
facility. The semiconductor manufacturing operations conducted by Teledyne at
the facility allegedly contaminated the soil and groundwater of the facility
and the groundwater of properties located down-gradient of the facility.
Although TelCom was indemnified by Teledyne as part of the acquisition
transaction against, among other things, any liabilities arising from any such
contamination, and although Microchip should be able to benefit from this
indemnification as a successor to TelCom's business, we cannot assure you that
claims will not be made against TelCom or that such indemnification will be
available or will provide meaningful protection at the time any such claim is
brought. To the extent TelCom is subject to a claim that is not covered by the
indemnity from Teledyne or as to which Teledyne is unable to provide
indemnification, our financial condition or operating results could suffer.
We must attract and retain qualified personnel to be successful, and
competition for qualified personnel is intense in our market.
Our success depends to a significant extent upon the efforts and abilities
of our senior management, engineering and other personnel. The competition for
qualified engineering and management personnel is intense. We may be
unsuccessful in retaining our existing key personnel or in attracting and
retaining additional key personnel that we require. The loss of the services of
one or more of our key personnel or the inability to add key personnel could
harm our business. We have no employment agreements with any member of our
senior management team, other than certain TelCom managers who have existing
employment agreements with TelCom.
The future trading price of our common stock could be subject to wide
fluctuations in response to a variety of factors.
The market price of our common stock has fluctuated significantly in the
past and is likely to fluctuate in the future. The future trading price of our
common stock could be subject to wide fluctuations in response to a variety of
factors, many of which are beyond our control, including:
. quarterly variations in our operating results and the operating results
of other semiconductor companies
. actual or anticipated announcements of technical innovations or new
products by us or our competitors
. changes in analysts' estimates of our financial performance or buy/sell
recommendations
. general conditions in the semiconductor industry, and
. worldwide economic and financial conditions.
In addition, the stock market has experienced significant price and volume
fluctuations that have particularly affected the market prices for many high
technology companies and that often have been unrelated to the operating
performance of such companies. These broad market fluctuations and other
factors may harm the market price of our common stock.
We have adopted charter provisions and other measures that may have anti-
takeover effects.
Provisions in our certificate of incorporation allow us to issue preferred
stock with voting, liquidation and dividend rights senior to those of our
common stock without the approval of our stockholders. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions or other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding stock. We have no present plans to issue shares of preferred stock.
In addition, we have adopted a stockholder rights plan, and our bylaws contain
advance notice procedures for director nominations and stockholder proposals.
All of these provisions may have anti-takeover effects.
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THE SPECIAL MEETING OF TELCOM STOCKHOLDERS
General
We are furnishing this proxy statement/prospectus to you in connection with
the solicitation of proxies by the TelCom board of directors for use at the
TelCom special meeting of stockholders. This proxy statement/prospectus, the
attached notice of special meeting of stockholders and the enclosed proxy card
are first being mailed to the stockholders of TelCom on or about December 8,
2000.
Matters to be Considered at the TelCom Special Meeting
At the TelCom special meeting, TelCom stockholders will consider and vote on
the proposal to approve and adopt the reorganization agreement, and approve the
related merger, and any other business as may properly come before the special
meeting.
A copy of the reorganization agreement is attached as Exhibit A to this
proxy statement/prospectus. We urge you to read carefully the reorganization
agreement.
After careful consideration, the TelCom board of directors has determined
that the merger is advisable and is fair to, and in the best interests of,
TelCom and its stockholders. The TelCom board of directors has unanimously
approved the merger and the reorganization agreement and unanimously recommends
that holders of TelCom common stock vote "FOR" the approval and adoption of the
reorganization agreement and approval of the merger.
Date, Time and Place
The TelCom special meeting is scheduled to be held at 10:00 a.m., local
time, on January 16, 2001, at TelCom Semiconductor, Inc. located at 1300 Terra
Bella Avenue, Mountain View, CA 94039.
Please complete the enclosed proxy card and mail it in the enclosed postage-
prepaid return envelope as soon as possible so that your shares may be
represented and voted at the special meeting.
You should not send your TelCom stock certificates with your proxy. A
transmittal form with instructions for the surrender of your TelCom stock
certificates will be mailed to you as soon as practicable after completion of
the merger.
Record Date; Quorum
The TelCom board of directors has fixed the close of business on November
27, 2000 as the record date for the determination of the stockholders entitled
to notice of, and to vote at, the TelCom special meeting. On that date, TelCom
had 18,321,523 shares of common stock outstanding. The holders of these shares
will be entitled to one vote per share on the reorganization agreement.
A quorum is present at a special meeting if a majority of the shares of
TelCom stock entitled to vote at the meeting is represented in person or by
proxy. Shares of TelCom common stock represented at the special meeting, but
for which the holders have abstained from voting, will be treated as present at
the special meeting for purposes of determining the presence or absence of a
quorum for the transaction of business.
Votes Required
Approval and adoption of the reorganization agreement and approval of the
merger requires the affirmative vote of at least a majority of the outstanding
shares of TelCom common stock.
Voting by TelCom's Executive Officers and Directors
To induce Microchip to enter into the reorganization agreement, certain of
TelCom's officers and directors committed, by entering into voting agreements
and without any additional consideration being paid to them, to
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vote a total of 779,786 shares of TelCom common stock, representing
approximately 4.3% of the total outstanding voting power of TelCom common stock
as of the record date, held by them in favor of approval of the reorganization
agreement at the TelCom special meeting. A copy of the form of voting agreement
is attached as Exhibit C to this proxy statement/prospectus.
Voting of Proxies; Revocability of Proxies
Shares of TelCom common stock represented by properly executed proxies
received in advance of the special meeting will, unless these proxies have been
properly revoked, be voted in accordance with instructions indicated on such
proxies or, if no instructions have been indicated, will be voted in favor of
approval of the reorganization agreement, and, in the discretion of the
individuals named in the accompanying proxy card, on any other matters that may
properly come before the TelCom special meeting. Abstentions may be specified
with respect to the approval of the reorganization agreement by properly
marking the "ABSTAIN" box on the proxy card for such proposal.
Any proxy may be revoked by the stockholder giving it, at any time prior to
its being exercised, by filing a notice of revocation with the Secretary of
TelCom at the address given on the notice of stockholders' meeting accompanying
this proxy statement/prospectus, or by submitting a duly executed proxy card
bearing a later date than an earlier-submitted proxy. Any proxy may also be
revoked by the stockholder's attendance at the TelCom special meeting and
voting in person. A notice of revocation need not be on any specific form, but
must be in writing.
Only shares affirmatively voted for the approval of the reorganization
agreement, including properly executed proxies that do not contain voting
instructions, will be counted as favorable votes for that proposal. If a TelCom
stockholder abstains from voting or does not vote, either in person or by
proxy, it will have the same effect as if that TelCom stockholder had voted
against the approval of the reorganization agreement. Brokers who hold shares
of TelCom common stock in street name for customers who are the beneficial
owners of such shares may not authorize a proxy to vote those customers' shares
in the absence of specific instructions from those customers. These non-voted
shares are referred to as "broker non-votes" and have the effect of votes
against the approval of the reorganization agreement.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to
approve the reorganization agreement will be voted in favor of any such
adjournment or postponement.
TelCom does not expect that any matter other than the proposal to approve
the reorganization agreement will be brought before the special meeting. If,
however, the TelCom board of directors properly presents other matters, the
persons named as proxies will vote in accordance with their discretion.
Solicitation of Proxies and Expenses
Proxies are being solicited by and on behalf of the TelCom board of
directors. TelCom will bear the costs relating to the solicitation of proxies.
In addition to solicitation by mail, TelCom's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
facsimile machine and personal interviews. TelCom has retained Morrow & Co.,
Inc. to aid in the solicitation of proxies and to verify records relating to
the solicitations. Morrow will receive customary fees and expenses for
reimbursement for these services.
Following the original mailing of the proxies and other soliciting
materials, TelCom will request that brokers, custodians, nominees and other
record holders of TelCom shares forward copies of the proxy and
other soliciting materials to persons for whom they hold shares and request
authority for the exercise of proxies. In these cases, TelCom will reimburse
the record holders for their reasonable expenses if they ask TelCom to do so.
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THE MERGER
This section of the proxy statement/prospectus describes material aspects of
the proposed merger, including the reorganization agreement and the stock
option agreement. While we believe that the description covers the material
terms of the merger and the related transactions, this summary may not contain
all of the information that is important to you. You should read this entire
document and the other documents we refer to carefully for a more complete
understanding of the merger.
Background of the Merger
In September 1999, Steve Sanghi, Chairman and Chief Executive Officer of
Microchip, Philip Chapman, then Vice President and Chief Financial Officer of
Microchip and Richard Simoncic, Vice President, Microperipheral Products
Division of Microchip, met with Phillip Drayer, then Chairman and Chief
Executive Officer of TelCom, and Robert Gargus, then Chief Financial Officer of
TelCom, to discuss a potential business transaction between the two companies.
At the end of the meeting, Microchip and TelCom decided not to pursue
discussions about a potential transaction, and subsequent to this meeting, no
further discussions between the senior managements of Microchip and TelCom were
held regarding a possible business transaction between the companies until the
fall of 2000. Prior to the meetings between TelCom and Microchip in the fall of
2000, the TelCom board had explored other strategic alternatives for TelCom,
including other potential acquisitions and business combinations consistent
with TelCom's long-term strategy.
On August 31, 2000, a representative of Broadview International LLC, acting
as TelCom's financial advisor, contacted Mr. Sanghi to determine Microchip's
level of interest in a possible business transaction with TelCom and proposed a
meeting between executives of the two companies on September 11, 2000. On
September 1, 2000, a representative of Broadview contacted TelCom
Chief Executive Officer Robert Gargus by telephone and discussed the proposed
meeting with Microchip.
On both September 4, 2000 and September 7, 2000, management of TelCom had
discussions with various persons at Broadview regarding a possible business
combination with Microchip.
On September 18, 2000, Microchip entered into an engagement letter with
Morgan Stanley & Co., which had been advising Microchip regarding strategic
business alliances for several months, as its financial advisor in connection
with the merger.
On September 10, 2000, Morgan Stanley & Co. made a preliminary presentation
to Microchip's management regarding a potential acquisition by Microchip of
TelCom.
On September 11, 2000, the executive management teams from both TelCom and
Microchip convened for a day-long meeting in Chandler, Arizona. Representatives
from Morgan Stanley & Co. and from Broadview attended the meeting. Both
companies presented corporate overviews that were followed by a general
discussion of the benefits of and potential issues raised by a potential
business combination between the two companies.
On September 15, 2000, representatives of Morgan Stanley & Co. contacted
representatives of Broadview and conveyed Microchip's interest in proceeding
with a possible business combination between the two companies. During this
time TelCom management had numerous conversations with Broadview, its financial
advisor, regarding the possible business combination and the relative stock
price movements of TelCom and Microchip.
On September 19, 2000, Microchip's board of directors held a telephonic
meeting to discuss the potential acquisition of TelCom. Representatives of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, legal advisors to
Microchip, and Morgan Stanley & Co. attended. Wilson Sonsini Goodrich & Rosati
advised the board regarding its duties to the stockholders of Microchip. Morgan
Stanley & Co. delivered a preliminary
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presentation of its financial analysis in connection with such a transaction to
Microchip's board. Microchip's board of directors authorized management to
proceed with due diligence on TelCom and move forward with discussions with
TelCom.
On September 19, 2000, TelCom's board of directors held a meeting at which
Broadview delivered a preliminary presentation to the TelCom board relating to
a possible business combination between the two companies. TelCom's board of
directors authorized management to proceed with due diligence on Microchip and
to move forward with discussions with Microchip regarding a possible business
combination.
On September 21, 2000, through execution of the definitive documentation
relating to the merger, representatives of Microchip, Morgan Stanley & Co.,
TelCom, Broadview, Wilson Sonsini Goodrich & Rosati, C.E. Unterberg, Towbin and
Jenkens & Gilchrist, Professional Corporation, conducted due diligence,
including a series of due diligence meetings in Burlingame, California from
September 27, 2000, through September 29, 2000, due diligence meetings at the
offices of Morgan Stanley in Menlo Park, California on October 21, 2000 and due
diligence meetings at Microchip's offices on October 23, 2000.
On September 25, 2000, a previous engagement of C.E. Unterberg, Towbin by
TelCom to render a fairness opinion was amended to engage C.E. Unterberg,
Towbin to render a fairness opinion with respect to a possible business
combination with Microchip.
On October 16, 2000, Microchip's board of directors held a meeting at which
Microchip's management, Morgan Stanley & Co. and Microchip's legal advisors
updated the board on the results of the due diligence investigation to date and
the status of discussions with TelCom regarding a potential transaction. During
the meeting, Wilson Sonsini Goodrich & Rosati reminded the board of its duties
to the stockholders of Microchip, at which time Albert Hugo-Martinez, a
director of Microchip, excused himself from the meeting due to a potential
conflict of interest based on his position as a member of the board of
directors of ON Semiconductor Corporation, a customer of TelCom. Morgan Stanley
& Co. delivered a presentation to the board that reflected a financial analysis
of a TelCom acquisition. After some discussion, Microchip's board authorized
Microchip's management and its advisors to move forward with the negotiation of
definitive documentation and additional due diligence.
On October 19, Wilson Sonsini Goodrich & Rosati distributed drafts of the
definitive agreements. On October 23, 2000, Jenkens & Gilchrist provided its
initial comments on the draft reorganization agreement, stock option agreement,
voting agreement and affiliate agreements. From October 23, 2000 until October
26, 2000, representatives of Wilson, Sonsini, Goodrich & Rosati and Jenkens &
Gilchrist participated in a series of negotiations on the terms of the
reorganization agreement and related agreements by teleconference. These
negotiations covered all aspects of the transaction, including, among other
things, the representations and warranties made by the parties, the
restrictions on the conduct of their businesses, the terms of the non-
solicitation covenant, the termination sections, the provisions regarding
payment of the termination fee and the consequences of termination and the
operation of the stock option agreement.
On October 25, 2000, TelCom's board members held a special meeting via
telephone. During the meeting, there was a continued discussion of all of the
major terms of a possible business combination with Microchip, including the
exchange ratio, termination fee, the conditions to closing, and the ability to
terminate the transaction. A discussion of the parameters of a possible
fairness opinion was discussed. TelCom's board of directors authorized
management to continue to proceed with due diligence and to continue to move
forward with discussions with Microchip.
On October 26, 2000, Microchip's board members, other than Mr. Hugo-
Martinez, held a special telephonic meeting. During the meeting, Wilson Sonsini
Goodrich & Rosati advised the board again regarding its duties to the
stockholders of Microchip. Representatives of Morgan Stanley & Co. and Wilson
Sonsini Goodrich & Rosati reviewed and discussed with Microchip's board the
material terms of the draft reorganization agreement and related agreements.
Representatives of Morgan Stanley & Co. made a
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presentation to Microchip's board regarding the financial analyses Morgan
Stanley & Co. had performed regarding TelCom, Microchip and the merger. Morgan
Stanley & Co. rendered an oral opinion, subsequently confirmed by delivery of a
written opinion dated October 26, 2000, that, as of October 26, 2000, the
exchange ratio provided in the reorganization agreement was fair to Microchip,
from a financial point of view. Following a discussion, Microchip's board
members present unanimously approved the final terms of the reorganization
agreement and the related agreements.
On October 26, 2000, TelCom's board members held a special meeting via
telephone. During the meeting, Jenkens & Gilchrist advised the board regarding
its duties to the stockholders of TelCom. Representatives of Jenkens &
Gilchrist and C.E. Unterberg, Towbin reviewed and discussed with TelCom's board
members the material terms of the draft reorganization agreement, stock option
agreement, and the other related agreements. Representatives of C.E. Unterberg,
Towbin made a presentation to TelCom's board regarding the financial analyses
it had performed with respect to Microchip, TelCom and the possible business
combination. C.E. Unterberg, Towbin rendered an oral opinion, subsequently
confirmed by delivery of a written opinion dated October 26, 2000, that, as of
October 26, 2000, the exchange ratio provided in the reorganization agreement
was fair to the stockholders of TelCom, from a financial point of view.
Following a continued discussion of all of the major terms of the
reorganization agreement, as well as the board's duties to the stockholders,
the TelCom board unanimously approved the final terms of the reorganization
agreement, the stock option agreement and the related agreements and
unanimously resolved to recommend that the TelCom stockholders approve the
reorganization agreement and the merger.
The reorganization agreement and related transaction documents were signed
on October 26, 2000, and Microchip and TelCom jointly announced the merger on
October 27, 2000.
Microchip's Reasons for the Merger
Microchip's board of directors has determined that the merger is consistent
with and in furtherance of the long-term business strategy of Microchip and
fair to, and in the best interests of, Microchip and its stockholders.
Microchip's board of directors considered a number of factors in its
deliberations, including:
. the terms and conditions of the reorganization agreement, including the
price and the anticipated accounting treatment of the transaction
. Microchip's belief that the analog portion of the semiconductor market is
growing rapidly and proprietary analog products enjoy high, sustainable
gross margins and that TelCom significantly enhances Microchip's analog
technology and expertise
. Microchip's belief that there is a revenue opportunity to embed
approximately $1.50 of analog product around each $1.00 of
microcontrollers. About 18 months ago, Microchip began targeting this
revenue opportunity by building and attaching Microchip's stand-alone
analog products to its microcontrollers. Microchip believes that the
merger will enable it to accelerate its microcontroller "attach" strategy
much faster than it could achieve alone
. the fact that TelCom has multiple customers and suppliers for its analog
products and has a large team of experienced analog design engineers who
can meet Microchip's analog development needs at a time when such
engineering resources are extremely scarce, and
. the fact that the addition of TelCom's portfolio of products
significantly expands Microchip's sales channel and distribution
partners' ability to attach analog products to sales of Microchip's
PICmicro microcontrollers.
Microchip's board of directors also considered the following in assessing
the merger:
. historical information concerning the businesses, operations, positions
and results of operations, technology and management style, competitive
position, industry trends and prospects of TelCom and Microchip
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. information contained in SEC filings by TelCom
. current and historical market prices for the common stock of TelCom and
Microchip, as well as volatility and trading data for the two companies
. the results of due diligence investigations by members of Microchip's
board of directors and management and Microchip "s legal, financial and
accounting advisors concerning the business, business trends, technology,
services, operations, properties, assets, financial condition, operating
results and prospects of TelCom and TelCom's management team
. the risk that the potential benefits sought in the merger might not be
fully realized, if at all
. the risk that the integration process may disrupt Microchip's and
TelCom's respective businesses, and
. the other risks associated with the businesses of Microchip, TelCom and
the combined companies, and the merger described in this proxy
statement/prospectus under "Risk Factors."
Microchip's board of directors did not find it practicable to quantify,
analyze or assign relative weights to each individual factor to reach its
determination. Individual members of Microchip's board of directors may have
assigned different relative weights or conclusions to each factor affecting the
board's determination.
TelCom's Reasons for the Merger
TelCom's board of directors has determined that the terms of the merger and
the reorganization agreement are fair to, and in the best interests of, TelCom
and its stockholders. Accordingly, TelCom's board of directors has unanimously
approved the reorganization agreement and the merger and unanimously recommends
that you vote FOR adoption of the reorganization agreement.
In reaching its decision, TelCom's board of directors identified several
potential benefits of the merger, which included:
. the potential for accelerated revenue growth resulting from combining the
companies' analog portfolios to capture a larger portion of the analog
opportunity surrounding microcontrollers, thus resulting in enhanced
stockholder value
. the possible synergies from combining TelCom and Microchip, particularly
synergies relating to Microchip's lower manufacturing costs and broader
distribution channels
. the trend toward increasing consolidation in, and the highly competitive
nature of, the market in which TelCom operates and the competitive
benefits of combining with a larger, diversified company such as
Microchip
. the likelihood that the merger will result in a combined company with
greater financial, technological, and human resources to develop new
products or acquire new technologies, and greater sales and marketing
resources to help promote and sell TelCom products
. the ability of TelCom, as part of Microchip, to increase distribution of
its products by accessing Microchip's sales channels to reach Microchip's
broader customer base, and
. the ability of TelCom, as part of Microchip, to direct more resources
towards product research and development.
TelCom's board of directors consulted with TelCom's senior management, as
well as its legal counsel and financial advisors, in reaching its decision to
approve the reorganization agreement. Among the factors considered by TelCom's
board of directors in its deliberations were the following:
. the financial condition, results of operations, cash flow, business and
prospects of TelCom and Microchip
. TelCom's desire for the kind of worldwide distribution network,
complementary products and strong customer relationships that Microchip
enjoys
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. TelCom's desire to direct more resources towards research and development
to remain competitive in the analog market
. competition with emerging full service semiconductor providers over the
long term, which will require TelCom to provide complementary solutions
to its analog and mixed signal integrated circuit products
. the fairness to TelCom and its stockholders of the terms of the
reorganization agreement and related agreements, which were the product
of extensive arm's length negotiations. In particular, TelCom's board of
directors considered the events triggering payment of the termination fee
and the limitations on the ability of TelCom to negotiate with other
companies regarding an alternative transaction, and the potential effect
these provisions would have on TelCom receiving alternative proposals
that could be superior to the merger
. the fact that the merger is expected to qualify as a tax-free
reorganization and to be accounted for using the "pooling of interests"
method of accounting
. the analysis prepared by C.E. Unterberg, Towbin presented to TelCom's
board of directors along with the opinion of C.E. Unterberg, Towbin that,
as of October 26, 2000, the exchange ratio set forth in the
reorganization agreement was fair from a financial point of view to the
holders of TelCom common stock, and described more fully in the text of
the entire opinion attached as Exhibit D to this document
. historical information concerning the businesses operations, positions
and results of operations, technology and management style, competitive
position, industry trends and prospects of TelCom and Microchip
. information contained in SEC filings by Microchip
. current and historical market prices for the common stock of TelCom and
Microchip, as well as volatility and trading data for the two companies
. the results of due diligence investigations by members of TelCom's board
of directors and management and TelCom's legal and financial advisors
concerning the business, business trends, technology, services,
operations, properties, assets, financial condition, operating results
and prospects of Microchip, and Microchip's management team, and
. data on companies comparable to Microchip and other financial analyses.
TelCom's board of directors also identified and considered a number of
uncertainties and risks in its deliberations concerning the merger, including
the following:
. the risk that the potential benefits sought in the merger might not be
fully realized, if at all
. the risk that the integration process may disrupt Microchip's and
TelCom's respective businesses, and
. the other risks associated with the businesses of Microchip, TelCom and
the combined companies and the merger described in this proxy
statement/prospectus under "Risk Factors."
As a result of the foregoing considerations, TelCom's board of directors
determined that the potential benefits of the merger outweighed the benefits of
remaining a separate company or pursuing alternate transactions, including the
likelihood that the combined company would have a greater opportunity than
TelCom alone to compete in the semiconductor industry.
TelCom's board of directors did not find it practicable to quantify, analyze
or assign relative weights to each individual factor to reach its
determination. In addition, individual members of TelCom's board of directors
may have assigned different relative weights or conclusions to each factor
affecting the board's determination.
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Recommendation of TelCom's Board of Directors
After careful consideration, the TelCom board of directors has determined
that the terms of the reorganization agreement and the merger are fair to, and
in the best interests of, TelCom and its stockholders. The TelCom board of
directors has unanimously approved the reorganization agreement and the merger
and unanimously recommends that the stockholders of TelCom vote "FOR" the
approval and adoption of the reorganization agreement and approval of the
merger.
Opinion of TelCom's Financial Advisor
Pursuant to a previous letter agreement dated as of August 30, 2000, amended
on September 25, 2000, C.E. Unterberg, Towbin was engaged as TelCom's
investment banking and financial advisor to render a fairness opinion to TelCom
in connection with a potential transaction with Microchip. C.E. Unterberg,
Towbin, as part of its investment banking activities, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwriting, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. At the meeting of the TelCom board of directors on October 26, 2000,
C.E. Unterberg, Towbin rendered its opinion that as of that date, based upon
and subject to the various factors and assumptions described in the C.E.
Unterberg, Towbin opinion, the exchange ratio provided in the reorganization
agreement was fair, from a financial point of view, to the stockholders of
TelCom.
C.E. Unterberg, Towbin's opinion, which describes the assumptions made,
matters considered and limitations on the review undertaken by C.E. Unterberg,
Towbin, is attached as Exhibit D to this proxy statement/prospectus. TelCom
stockholders are urged to, and should, read the C.E. Unterberg, Towbin opinion
carefully and in its entirety. The C.E. Unterberg, Towbin opinion is directed
to the TelCom board of directors and addresses only the fairness of the
exchange ratio from a financial point of view to the holders of shares of
TelCom common stock as of the date of the opinion. The C.E. Unterberg, Towbin
opinion does not address any other aspect of the merger and does not constitute
a recommendation to any holder of TelCom common stock as to how to vote at the
TelCom special meeting. The summary of the C.E. Unterberg, Towbin opinion set
forth in this proxy statement/prospectus, although materially complete, is
qualified in its entirety by reference to the full text of such opinion.
In connection with rendering its opinion, C.E. Unterberg, Towbin reviewed
the reorganization agreement; analyzed certain publicly available financial
statements and other information of TelCom and Microchip; analyzed certain
internal financial statements and other financial and operating data and
financial forecasts for TelCom, in each case, prepared by TelCom's management;
and analyzed certain internal financial statements and other financial and
operating data and financial forecasts for Microchip, in each case prepared by
Microchip's management. C.E. Unterberg, Towbin held discussions with members of
the senior management of TelCom and Microchip regarding the financial
information referred to above as well as the strategic rationale for, and the
potential benefits of, the merger and the past and current business operations,
financial condition and future prospects of TelCom and Microchip. C.E.
Unterberg, Towbin reviewed the pro forma impact of the merger on Microchip's
earnings per share and analyzed the relative contributions of TelCom and
Microchip to the combined entity. In addition, C.E. Unterberg, Towbin reviewed
the reported price and trading activity for both TelCom's common stock and
Microchip's common stock, reviewed certain historic operating information
provided by TelCom and Microchip, compared certain financial information
including market prices and valuation multiples for TelCom and Microchip with
similar information for certain other comparable publicly traded companies,
reviewed the financial terms, to the extent publicly available, of certain
recent business combinations in the semiconductor industry and performed such
other studies and analyses as it considered appropriate.
For purposes of rendering this opinion, C.E. Unterberg, Towbin assumed and
relied upon, without independent verification, the accuracy and completeness of
all of the financial and other information reviewed by and discussed with it.
In rendering this opinion, C.E. Unterberg, Towbin assumed that the financial
forecasts of TelCom and Microchip (and, in each case, the assumptions and bases
therefor) had been reasonably prepared
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in good faith and on a basis reflecting the best currently available estimates,
assumptions and judgments of the management of TelCom and Microchip as to the
future financial condition and performance of TelCom and Microchip,
respectively.
In providing this opinion, C.E. Unterberg, Towbin assumed, with the consent
of the TelCom board of directors and without independent verification, that the
representations and warranties of the parties in the reorganization agreement
were true and correct as of that date and that the merger will have the tax,
accounting and legal effects contemplated in the reorganization agreement,
including, among other things, that the merger will be accounted for as a
"pooling of interests" business combination in accordance with U.S. generally
accepted accounting principles, or GAAP, and that the merger will be treated as
a tax-free reorganization pursuant to the Internal Revenue Code of 1986, as
amended. C.E. Unterberg, Towbin also assumed that the historical financial
statements of TelCom and Microchip reviewed by it had been prepared and fairly
presented in accordance with GAAP consistently applied. In addition, C.E.
Unterberg, Towbin assumed that all conditions to the consummation of the merger
will be fulfilled and that the merger will be consummated in a timely manner.
In addition, C.E. Unterberg, Towbin has not made an independent evaluation
or appraisal of the assets and liabilities of TelCom or Microchip or any of
their respective subsidiaries and has not been furnished with any such
evaluation or appraisal. C.E. Unterberg, Towbin's advisory services and opinion
were provided for the information and assistance of the board of directors of
TelCom in connection with its consideration of the merger, and its opinion is
limited to the fairness, from a financial point of view to the stockholders of
TelCom, of the exchange ratio provided in the reorganization agreement. C.E.
Unterberg, Towbin's opinion does not address the relative merits of the merger
as compared to any alternative business strategy that might be available to
TelCom nor does its opinion address TelCom's underlying business decision to
effect the merger or constitute a recommendation of the merger to TelCom or its
stockholders. The opinion letter is not intended as a substitute for the
exercise of the business judgment of the board of directors of TelCom in
reviewing the merger. Finally, C.E. Unterberg, Towbin's opinion does not
constitute an opinion or imply a conclusion as to the current price per share
of TelCom common stock or the price at which TelCom or Microchip common stock
will trade at any future time.
C.E. Unterberg, Towbin's opinion was based upon market, economic and other
conditions as they existed and could be evaluated on October 26, 2000, and C.E.
Unterberg, Towbin assumed no responsibility to update or revise its opinion
based upon circumstances or events occurring after that date. It should be
understood that subsequent developments could affect the conclusions expressed
in C.E. Unterberg, Towbin's opinion.
The following is a brief summary of some of the sources of information and
valuation methodologies employed by C.E. Unterberg, Towbin in rendering its
opinion. These analyses were presented to the TelCom board of directors at its
meeting on October 26, 2000. This summary includes the financial analyses used
by C.E. Unterberg, Towbin and deemed to be material, but does not purport to be
a complete description of all analyses performed by C.E. Unterberg, Towbin in
arriving at its opinion. C.E. Unterberg, Towbin did not explicitly assign any
relative weights to the various factors of analyses considered. This summary of
financial analyses includes information presented in tabular format. In order
to fully understand the financial analyses used by C.E. Unterberg, Towbin, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
Microchip and TelCom do not usually publicly disclose projections of future
revenues, earnings or other financial information. Such projections were not
prepared with a view toward public disclosure, and investors should not rely on
such projections. Microchip and TelCom are not including these projections in
this proxy statement/prospectus to influence your vote with respect to the
merger or the reorganization agreement, but because these projections were made
available to C.E. Unterberg, Towbin. These projections were based on numerous
variables and assumptions that are inherently uncertain and may be beyond the
control of management. In particular, the projections may be affected by our
ability to achieve strategic goals, objectives
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<PAGE>
and targets over the applicable periods. These assumptions involve judgments
with respect to, among other things, future economic, competitive and
regulatory conditions, financial market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond Microchip's or TelCom's control. Accordingly, actual
results could vary significantly from those set forth in such projections. In
addition, such projections were not prepared with a view toward compliance with
published guidelines of the Securities and Exchange Commission, the guidelines
established by the American Institute of Certified Public Accountants for
preparation and presentation of financial projections, or generally accepted
accounting principles, and are included in this proxy statement/prospectus
because such projections were provided to C.E. Unterberg, Towbin. The
projections included in this proxy statement/prospectus have been prepared by,
and are the responsibility of, Microchip's and TelCom's management,
respectively. KPMG LLP, Microchip's accountants, and PricewaterhouseCoopers
LLP, TelCom's accountants, have neither examined nor compiled these projections
and accordingly, KPMG LLP and PricewaterhouseCoopers LLP do not express an
opinion or any other form of assurance with respect thereto. The KPMG LLP and
PricewaterhouseCoopers LLP reports incorporated by reference in this proxy
statement/prospectus relate to Microchip's and TelCom's historical financial
information, respectively. Their reports do not extend to the projections and
should not be read to do so. None of Microchip's or TelCom's advisors, agents
or representatives; Microchip's or TelCom's boards of directors; or C.E.
Unterberg, Towbin's advisors, agents or representatives assume any
responsibility for the accuracy of these projections, nor do they assume any
obligation to update or revise these projections. In the past, both Microchip
and TelCom have made projections that they did not achieve.
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<PAGE>
Contribution Analysis
C.E. Unterberg, Towbin reviewed selected historical and projected operating
results and market statistics for both TelCom and Microchip in order to derive
relative contributions of each company to the combined entity on a pro forma
basis. The contribution analysis does not take into consideration any potential
cost savings or revenue enhancements arising from the merger and relies upon
the assumption that each company contributes independently to the combined
entity. This analysis also relies upon certain financial and operating
assumptions provided by equity research analysts and publicly available data
about Microchip and TelCom. The following table presents, as of October 26,
2000, the relative contributions of both TelCom and Microchip to the combined
entity:
<TABLE>
<CAPTION>
TelCom Microchip
Semiconductor- Technology-
Fiscal Year = March 31 % Contribution % Contribution
---------------------- -------------- --------------
<S> <C> <C>
Projected Fiscal Year 2002 Revenue............ 9.1% 90.9%
Projected Fiscal Year 2001 Revenue............ 9.5% 90.5%
Projected Fiscal Year 2000 Revenue............ 11.1% 88.9%
Last 12 Months Revenue........................ 10.5% 89.5%
Projected Fiscal Year 2002 Gross Profit....... 8.7% 91.3%
Projected Fiscal Year 2001 Gross Profit....... 9.1% 90.9%
Projected Fiscal Year 2000 Gross Profit....... 10.2% 89.8%
Last 12 Months Gross Profit................... 9.9% 90.1%
Projected Fiscal Year 2002 Operating Income... 6.9% 93.1%
Projected Fiscal Year 2001 Operating Income... 6.6% 93.4%
Projected Fiscal Year 2000 Operating Income... 7.8% 92.2%
Last 12 Months Operating Income............... 7.6% 92.4%
Projected Fiscal Year 2002 Net Income......... 9.0% 91.0%
Projected Fiscal Year 2001 Net Income......... 9.0% 91.0%
Projected Fiscal Year 2000 Net Income......... 8.5% 91.5%
Last 12 Months Net Income..................... 9.4% 90.6%
Total Assets(a)............................... 13.3% 86.7%
Book Value of Equity(a)....................... 15.1% 84.9%
Cash(a)....................................... 49.3% 50.7%
Equity Market Value(b)........................ 7.3% 92.7%
Enterprise Value(b)........................... 4.8% 95.2%
</TABLE>
--------
(a) Total Assets, Book Value of Equity and Cash represent the latest data as of
September 30, 2000.
(b) Enterprise value is defined as equity market value plus total debt minus
cash and cash equivalents. Equity market and enterprise values for
Microchip reflect fully diluted shares using the latest publicly available
company information and closing stock price as of October 26, 2000. Equity
market and enterprise values for TelCom reflect fully diluted shares at a
stock price of $15.00 per share.
Public Company Comparable Analysis
C.E. Unterberg, Towbin considered ratios of share price and market
capitalization, adjusted for cash and debt when necessary, to selected
historical and projected operating results of certain other comparable publicly
traded companies in order to derive valuation multiples for such companies. In
performing this analysis, C.E. Unterberg, Towbin compared financial information
of TelCom with publicly available information for selected companies with
revenues between $40 million and $300 million for the last reported twelve
months in the analog/mixed-signal semiconductor industry. These companies
included Micrel, Inc., Micro Linear Corp., Power Integrations, Inc., Semtech
Corp., Sipex Corp. and Supertex, Inc. Publicly available information that C.E.
Unterberg, Towbin examined for this analysis included, among other things, a
range of estimates based on securities research analyst reports.
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<PAGE>
The following table compares, as of October 26, 2000, the transaction
multiples for TelCom based upon the exchange ratio for the merger with the
median multiples and the range of multiples for the comparable publicly traded
companies of enterprise value, equity market value and share price divided by
selected operating metrics:
<TABLE>
<CAPTION>
Median Range of
Transaction Comparable Comparable
Multiples(a) Multiples(b) Multiples(b)
------------ ------------ ------------
<S> <C> <C> <C>
Enterprise Value to Last 12 Months
Revenue............................ 2.6x 5.8x 0.5x-13.2x
Enterprise Value to Projected
Calendar Year 2000 Revenue......... 2.5x 8.0x 2.2x-11.6x
Enterprise Value to Projected
Calendar Year 2001 Revenue......... 2.1x 6.1x 2.1x-7.8x
Enterprise Value to Last 12 Months
Earnings Before Interest and
Taxes.............................. 12.4x 30.9x 8.8x-105.1x
Equity Market Value to Tangible Book
Value(c)........................... 2.3x 5.2x 0.4x-17.0x
Share Price to Last 12 Months
Earnings per Share(d).............. 19.8x 41.6x 14.7x-74.5x
Share Price to Projected Calendar
Year 2000 Earnings per Share(d).... 18.4x 40.8x 16.0x-64.3x
Share Price to Projected Calendar
Year 2001 Earnings per Share(d).... 15.0x 28.0x 14.8x-37.4x
</TABLE>
--------
(a) Transaction multiples and the exchange ratio used for the purposes of this
analysis were derived from the closing price of Microchip stock on October
26, 2000.
(b) Multiples were derived from closing prices on October 26, 2000.
(c) Tangible book value is defined as total assets minus total liabilities and
intangible assets.
(d) Earnings per share for TelCom based on actual and estimated average shares
outstanding for the relevant periods.
C.E. Unterberg, Towbin indicated that the transaction multiples calculated
for TelCom, based upon the exchange ratio, were within the range for multiples
for revenues, earnings before interest and taxes, earnings per share and
tangible book value of comparable companies analyzed.
No company utilized in the public company comparable analysis as a
comparison is identical to TelCom. In evaluating the comparable companies, C.E.
Unterberg, Towbin made assumptions with respect to semiconductor industry
performance and general economic conditions, many of which are beyond the
control of TelCom. Mathematical analysis, such as determining the median,
average or range, is not in itself a meaningful method of using comparable
company data.
Comparable Transactions Analysis
C.E. Unterberg, Towbin considered ratios of equity purchase price, adjusted
for the seller's cash and debt when appropriate, to selected historical
operating results in order to indicate multiples acquirers have been willing to
pay for companies in the semiconductor industry. C.E. Unterberg, Towbin
reviewed a number of transactions that they considered relevant in performing
this analysis. C.E. Unterberg, Towbin selected recent transactions, excluding
equity investments, involving sellers with revenues greater than $10 million in
the last reported twelve months before the acquisition. C.E. Unterberg, Towbin
examined publicly available information it deemed relevant for purposes of this
analysis.
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<PAGE>
The following table compares, as of October 26, 2000, the transaction
multiples for TelCom based upon the exchange ratio of the merger with the
median multiples and the range of multiples for the selected recent
transactions of enterprise value (defined as equity transaction value plus
total debt minus cash and cash equivalents of the seller) and the equity
transaction values divided by selected operating statistics of each of the
sellers in the last reported twelve months prior to acquisition:
<TABLE>
<CAPTION>
Median Range of
Transaction Transaction Transaction
Multiples(a) Multiples Multiples
------------ ----------- -----------
<S> <C> <C> <C>
Enterprise Value to Last 12 Months
Revenue.............................. 2.6x 2.0x 0.7x-23.2x
Enterprise Value to Last 12 Months
Earnings Before Interest and Taxes... 12.4x 26.5x 6.0x-100.6x
Equity Transaction Value to Last 12
Months Net Income.................... 21.1x 28.9x 7.2x-133.9x
Equity Transaction Value to Tangible
Book Value........................... 2.3x 3.6x 1.1x-21.8x
</TABLE>
--------
(a) Transaction multiples and the exchange ratio used for the purposes of
analysis were derived from the closing price of Microchip stock on October
26, 2000.
C.E. Unterberg, Towbin indicated that the multiples calculated for TelCom,
based upon the exchange ratio, were within the range for multiples for
revenues, earnings before interest and taxes, net income and tangible book
value of comparable transactions analyzed.
No transaction utilized as a comparable in the comparable transactions
analysis is identical to the merger. Mathematical analysis, such as determining
the average, median or range, is not in itself a meaningful method of using
comparable transaction data.
Transaction Premiums Paid Analysis
C.E. Unterberg, Towbin considered the premiums paid above a seller's market
price in selected recent merger transactions. In order to perform this
analysis, C.E. Unterberg, Towbin reviewed a number of transactions involving
publicly-held hardware companies which include companies in the following
industries: semiconductors, communications equipment, test equipment,
components, peripherals and subsystems. C.E. Unterberg, Towbin selected these
transactions by choosing recent transactions with an equity purchase price
greater than $10 million.
The following table compares, as of October 26, 2000, the transaction
premiums for TelCom based upon the exchange ratio of the merger with the median
premiums and the range of premiums for these transactions calculated by
dividing: (1) the offer price per share minus the closing share price of the
seller's common stock 20 trading days, 10 trading days and one trading day
prior to the public announcement of the transaction, by (2) the closing share
price of the seller's common stock 20 trading days, 10 trading days and one
trading day, respectively, prior to the public announcement of the transaction:
<TABLE>
<CAPTION>
Transaction Median Range of
Premiums(a) Premiums Premiums
----------- -------- -------------
<S> <C> <C> <C>
Premium Paid to Seller 1 Trading Day
Prior to Announcement.................. 25.7% 24.8% -6.4% -65.9%
Premium Paid to Seller 10 Trading Days
Prior to Announcement.................. 44.6% 44.8% -5.6% -90.3%
Premium Paid to Seller 20 Trading Days
Prior to Announcement.................. 0.8% 52.2% -1.5% -137.6%
</TABLE>
--------
(a) Premium percentages and the exchange ratio used for purposes of this
analysis were derived from the closing price of Microchip stock on October
26, 2000.
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<PAGE>
No transaction utilized as a comparable in the transaction premiums paid
analysis is identical to the merger. Mathematical analysis, such as determining
the average, median or range is not in itself a meaningful method of using
comparable transaction data.
Exchange Ratio Analysis
C.E. Unterberg, Towbin reviewed the ratios of the closing prices of TelCom
common stock divided by the corresponding closing prices of Microchip common
stock over the period from October 26, 1998 through October 26, 2000 and
compared this with the exchange ratio defined in the reorganization agreement.
Based on this analysis, the historical exchange ratio for the daily two-year
period ranged from 0.217 to 1.120 with an average of 0.479. The exchange ratio
as defined in the reorganization agreement is between 0.460 and 0.530 and would
have been 0.504 based upon the closing prices of Microchip's common stock on
October 26, 2000 (the actual exchange ratio will be determined based on the
average closing price of Microchip's common stock for the ten trading days
prior to closing).
C.E. Unterberg, Towbin also reviewed the average price ratios (defined as
the average ratio of closing TelCom stock prices divided by closing Microchip
stock prices) over the 1, 5, 10, 15 and 20 trading day periods ending on the
day of the TelCom board meeting, the implied exchange ratio over those same
time periods and the premium by which the exchange ratio exceeded the average
price ratio over the respective time periods. The following table presents the
premiums for this transaction calculated by dividing: (1) the exchange ratio
minus the average price ratio by (2) the average price ratio.
<TABLE>
<CAPTION>
Average
-------------------------------------
5
1 day days 10 days 15 days 20 days
----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Average Price Ratio................... 0.401 0.392 0.377 0.381 0.388
Exchange Ratio........................ 0.504 0.483 0.497 0.500 0.483
Premium Exchange Ratio................ 25.7% 23.3% 31.8% 31.5% 24.5%
</TABLE>
Pro Forma Combination Analysis
C.E. Unterberg, Towbin calculated the pro forma impact of the merger on the
combined entity's projected earnings per share for the calendar years ending
March 31, 2001 and March 31, 2002 taking into consideration various financial
effects which will result from consummation of the merger. This analysis relies
upon certain financial and operating assumptions provided by equity research
analysts and publicly available data about Microchip and TelCom. C.E.
Unterberg, Towbin assumed that the merger would be treated as a "pooling of
interests" for accounting purposes and that no opportunities for cost savings
or revenue enhancements exist. Based on this analysis, the pro forma pooling
model indicates nominal earnings-per-share accretion, excluding acquisition
expenses, for both calendar years ending March 31, 2001 and March 31, 2002.
TelCom Stock Performance Analysis
C.E. Unterberg, Towbin compared the recent stock performance of TelCom with
that of the NASDAQ Composite, the Philadelphia Semiconductor Index and the
TelCom Comparable Index. The TelCom Comparable Index is comprised of publicly
traded companies selected by C.E. Unterberg, Towbin in "Public Company
Comparable Analysis" described above.
Evaluation of Microchip Equity
C.E. Unterberg, Towbin compared financial information of Microchip with
publicly available information for publicly traded companies that C.E.
Unterberg, Towbin deemed comparable to Microchip. C.E. Unterberg, Towbin
selected companies competing in the semiconductor industry with revenues
greater than $600 million and positive operating margins for the last reported
twelve months. These companies included Altera Corporation, Atmel Corporation,
Linear Technology Corporation, Maxim Integrated Products, Inc. and
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<PAGE>
Xilinx, Inc. Publicly available information that C.E. Unterberg, Towbin
examined for this analysis included, among other things, a range of estimates
based on securities research analyst reports.
Microchip Stock Performance Analysis
C.E. Unterberg, Towbin compared the recent stock performance of Microchip
with that of the NASDAQ Composite, the Philadelphia Semiconductor Index and the
Microchip Comparable Index. The Microchip Comparable Index is comprised of
publicly traded companies selected by C.E. Unterberg, Towbin in "Evaluation of
Microchip Equity" described above.
Considerations in Preparation of TelCom's Fairness Opinion
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, C.E. Unterberg, Towbin considered the results of all of its
analyses as a whole and did not attribute any particular weight to any analysis
or factor considered by it. Furthermore, C.E. Unterberg, Towbin believes that
selecting any portion of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion.
In performing its analyses, C.E. Unterberg, Towbin made numerous assumptions
with respect to industry performance and general business and economic
conditions and other matters, many of which are beyond the control of TelCom or
Microchip. The analyses performed by C.E. Unterberg, Towbin are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. The
exchange ratio pursuant to the merger agreement and other terms of the merger
agreement were determined through arm's length negotiations between TelCom and
Microchip, and were approved by the TelCom board of directors. C.E. Unterberg,
Towbin did not recommend any specific consideration to the TelCom board of
directors or that any specific consideration constituted the only appropriate
consideration for the merger. In addition, C.E. Unterberg, Towbin's opinion and
presentation to the TelCom board of directors was one of many factors taken
into consideration by the TelCom board of directors in making its decision to
approve the merger. Consequently, the C.E. Unterberg, Towbin analyses as
described above should not be viewed as determinative of the opinion of the
TelCom board of directors with respect to the value of TelCom or of whether the
TelCom board of directors would have been willing to agree to a different
consideration.
C.E. Unterberg, Towbin will be paid a fairness opinion fee of $500,000. In
addition, TelCom has agreed to reimburse C.E. Unterberg, Towbin for its
reasonable expenses, including fees and expenses of its counsel, and to
indemnify C.E. Unterberg, Towbin and its affiliates against certain liabilities
and expenses related to their engagement, including liabilities under the
federal securities laws. The terms of the fee arrangement with C.E. Unterberg,
Towbin, which TelCom and C.E. Unterberg, Towbin believe are customary in
transactions of this nature, were negotiated at arm's length between TelCom and
C.E. Unterberg, Towbin, and the TelCom board of directors was aware of the
nature of the fee arrangement.
Interests of TelCom Directors, Officers and Affiliates in the Merger
When considering the recommendations of TelCom's board of directors, you
should be aware that the directors and officers of TelCom have interests in the
merger and have arrangements that are different from, or are in addition to,
yours. These include:
. Voting Agreements. Directors and officers and their respective
affiliates, representing approximately 4.3 % of the outstanding TelCom
common stock have agreed to vote in favor of the reorganization agreement
and the merger.
. Indemnification. TelCom directors and executive officers have customary
rights to indemnification against losses incurred as a result of actions
or omissions occurring prior to the effective time of the merger. In
addition, the reorganization agreement provides that for a period of six
years after the
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effective time, Microchip will maintain or cause the surviving corporation
to maintain directors' and officers' liability insurance covering persons
who are covered by TelCom's directors' and officers' insurance policy.
. Executive Retention Agreements. Certain officers of TelCom are parties to
executive retention agreements that provide for the payment of 12 months
of base salary and benefits if within 24 months of a change of control of
TelCom they are terminated, have a significant reduction in duties,
facilities or perquisites, have a reduction in salary or benefits, or are
relocated more than 25 miles from their existing place of employment. In
addition, certain officers of TelCom have provisions that provide for the
acceleration of unvested stock options if they are terminated within 12
months of a change of control of TelCom. The merger would constitute a
change of control.
As a result, these directors, executive officers and stockholders could be
more likely to vote in favor of recommending the reorganization agreement and
the merger than if they did not have these interests.
Completion and Effectiveness of the Merger
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including adoption of the reorganization
agreement by the stockholders of TelCom. The merger will become effective upon
the filing of a certificate of merger with the State of Delaware.
We are working towards completing the merger as quickly as possible. We hope
to complete the merger promptly after the special meeting.
Structure of the Merger and Conversion of TelCom Common Stock
In accordance with the reorganization agreement and Delaware law, Matchbox
Acquisition Corp., a newly formed and wholly owned subsidiary of Microchip,
will be merged with and into TelCom. As a result of the merger, the separate
corporate existence of Matchbox Acquisition Corp. will cease and TelCom will
survive the merger as a wholly owned subsidiary of Microchip.
Upon completion of the merger, each outstanding share of TelCom common
stock, other than shares held by Microchip and its subsidiaries, will be
exchanged for a fraction of a share of Microchip common stock, as follows:
. If the average closing price of Microchip's common stock for the ten
trading days preceding the closing of the merger is equal to or between
$28.30 and $32.61, this fraction will be determined by dividing $15.00 by
this ten-day average price.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is less than $28.30, then this fraction
will equal 0.53.
. If the ten-day average closing price of Microchip's common stock
immediately prior to the merger is greater than $32.61, then this
fraction will equal 0.46.
The number of shares of Microchip common stock issuable in the merger will
be proportionately adjusted for any additional future stock split, stock
dividend or similar event with respect to TelCom common stock or Microchip
common stock effected between the date of the reorganization agreement and the
completion of the merger.
No certificate or scrip representing fractional shares of Microchip common
stock will be issued in connection with the merger. Instead you will receive
cash, without interest, in lieu of a fraction of a share of Microchip common
stock equal to the product of the fraction and the average closing price of one
share of Microchip common stock for the five most recent trading days before
the effective time of the merger.
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Exchange of TelCom Stock Certificates for Microchip Stock Certificates
When the merger is completed, the exchange agent will mail to you a letter
of transmittal and instructions for use in surrendering your TelCom stock
certificates in exchange for Microchip stock certificates. When you deliver
your TelCom stock certificates to the exchange agent along with a properly
executed letter of transmittal and any other required documents, your TelCom
stock certificates will be canceled and you will receive Microchip stock
certificates representing the number of full shares of Microchip common stock
to which you are entitled under the reorganization agreement. You will receive
payment in cash, without interest, in lieu of any fractional shares of
Microchip common stock that would have been otherwise issuable to you as a
result of the merger.
You should not submit your TelCom stock certificates for exchange unless and
until you receive the transmittal instructions and a form of letter of
transmittal from the exchange agent.
No Dividends
You are not entitled to receive any dividends or other distributions on
Microchip common stock until the merger is completed and you have surrendered
your TelCom stock certificates in exchange for Microchip stock certificates.
If there is any dividend or other distribution on Microchip common stock
with a record date after the merger and a payment date prior to the date you
surrender your TelCom stock certificates in exchange for Microchip stock
certificates, you will receive it with respect to the whole shares of Microchip
common stock issued to you promptly after they are issued. If there is any
dividend or other distribution on Microchip common stock with a record date
after the merger and a payment date after the date you surrender your TelCom
stock certificates in exchange for Microchip stock certificates, you will
receive it with respect to the whole shares of Microchip common stock issued to
you promptly after the payment date.
Microchip will only issue a Microchip stock certificate or a check in lieu
of a fractional share in a name other than the name in which a surrendered
TelCom stock certificate is registered if you present the exchange agent with
all documents required to show and effect the unrecorded transfer of ownership
and show that you paid any applicable stock transfer taxes.
Material United States Federal Income Tax Consequences of the Merger
The following summary describes the material United States federal income
tax consequences of the merger. This discussion is based on and subject to the
Internal Revenue Code of 1986, as amended, the regulations promulgated
thereunder, existing administrative interpretations and court decisions, all of
which are subject to change, possibly with retroactive effect, and assumptions,
limitations, representations and covenants, including those contained in
certificates of officers of Microchip and TelCom expected to be executed as of
the completion of the merger. This discussion does not address all aspects of
United States federal income taxation that may be important to you in light of
your particular circumstances or if you are subject to special rules, such as
rules relating to:
. stockholders who are not citizens or residents of the United States
. stockholders subject to the alternative minimum tax provisions of the tax
code
. financial institutions
. tax-exempt organizations
. insurance companies
. dealers in securities
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<PAGE>
. stockholders who acquired their shares of TelCom common stock pursuant to
the exercise of options or similar derivative securities or otherwise as
compensation, and
. stockholders who hold their shares of TelCom common stock as part of a
hedge straddle or other risk reductions, constructive sale or conversion
transaction.
This discussion assumes you hold your shares of TelCom common stock as
capital assets within the meaning of Section 1221 of the tax code.
Our obligations to complete the merger are conditioned on (1) the delivery
of an opinion dated as of the completion of the merger to TelCom from Jenkens &
Gilchrist, a Professional Corporation and (2) the delivery of an opinion dated
as of the completion of the merger to Microchip from Wilson Sonsini Goodrich &
Rosati, Professional Corporation, in each case stating that the merger will
constitute a reorganization within the meaning of Section 368(a) of the tax
code. The opinions of counsel will assume the absence of changes in existing
facts and will rely on assumptions, representations and covenants including
those contained in certificates executed by officers of Microchip, TelCom and
Matchbox Acquisition Corp. and dated as of the completion of the merger. The
opinions of counsel contained herein and the opinions to be delivered at the
closing neither bind the IRS nor preclude the IRS from adopting a position
contrary to that expressed below, and no assurance can be given that contrary
positions will not be successfully asserted by the IRS or adopted by a court if
the issues are litigated. Neither of us intends to obtain a ruling from the IRS
with respect to the tax consequences of the merger.
If the merger constitutes a reorganization within the meaning of Section
368(a) of the tax code, the following tax treatment will apply:
Tax Implications to TelCom Stockholders. Except as discussed below, you will
not recognize gain or loss for United States federal income tax purposes when
you exchange your TelCom common stock for Microchip common stock pursuant to
the merger. The aggregate tax basis of the Microchip common stock you receive
as a result of the merger will be the same as your aggregate tax basis in the
TelCom common stock you surrender in exchange for the Microchip common stock,
reduced by the tax basis of any shares of TelCom common stock for which you
receive cash instead of fractional shares of Microchip common stock. The
holding period of the Microchip common stock you receive as a result of the
exchange will include the period during which you held the TelCom common stock
you exchange in the merger.
You will recognize gain or loss for United States federal income tax
purposes with respect to the cash you receive instead of a fractional share
interest in Microchip common stock. Your gain or loss will be measured by the
difference between the amount of cash you receive and the portion of the tax
basis of your shares of TelCom common stock allocable to the shares of TelCom
common stock exchanged for such fractional share interest. This gain or loss
will be capital gain or loss and will be a long-term capital gain or loss if
you have held your shares of TelCom common stock for more than one year at the
time the merger is completed.
Tax Implications to Microchip, TelCom and Matchbox Acquisition
Corp. Microchip, TelCom and Matchbox Acquisition will not recognize gain or
loss for United States federal income tax purposes solely as a result of the
merger.
The foregoing discussion is not intended to be a complete analysis or
description of all potential United States federal income tax consequences or
any other consequences of the merger. In addition, this discussion does not
address tax consequences that may vary with, or are contingent on, your
individual circumstances. Moreover, this discussion does not address any non-
income tax or any foreign, state or local tax consequences of the merger.
Accordingly, you are strongly urged to consult with your tax advisor to
determine the particular United States federal, state, local or foreign income
or other tax consequences to you of the merger.
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Accounting Treatment of the Merger
Microchip intends to account for the merger as a "pooling of interests"
business combination. It is a condition to completion of the merger that
Microchip be advised by KPMG LLP, Microchip's independent accountants, that
they concur with Microchip management's conclusion that the transactions
contemplated by the reorganization agreement can properly be accounted for as a
"pooling of interests" business combination, although this condition may be
waived by Microchip. In addition, Microchip must receive from TelCom a copy of
a letter from PricewaterhouseCoopers LLP, TelCom's independent accountants,
addressed to TelCom stating their concurrence with TelCom management's
conclusion that, based upon the information furnished to PricewaterhouseCoopers
LLP by TelCom management, no conditions exist related to TelCom that would
preclude TelCom from being a party to a business combination for which the
"pooling of interests" method of accounting is used. Under the "pooling of
interests" method of accounting, each of Microchip's and TelCom's historical
recorded assets and liabilities will be carried forward to the combined company
at their recorded amounts. In addition, the operating results of the combined
company will include Microchip's and TelCom's operating results for the entire
fiscal year in which the merger is completed and Microchip's and TelCom's
historical reported operating results for prior periods will be combined and
restated as the operating results of the combined company.
Reissuance of Shares of Microchip Common Stock
In order to qualify for "pooling of interests" accounting treatment,
Microchip must reissue in one or more transactions certain shares of Microchip
common stock previously repurchased by Microchip and currently held in its
treasury. Microchip expects to reissue all of these shares through option
exercises or other sales to be completed prior to the closing of the merger.
Regulatory Filings and Approvals Required to Complete the Merger
The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, which prevents some transactions from being completed
until required information and materials are furnished to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
related waiting periods end or expire. We believe that we have substantially
complied with all requests for information from the Department of Justice and
the Federal Trade Commission, however the applicable waiting periods have not
yet expired. The requirements of Hart-Scott-Rodino will be satisfied if the
merger is completed within one year from the termination of the waiting period.
However, the Antitrust Division of the Department of Justice or the Federal
Trade Commission may challenge the merger on antitrust grounds either before or
after expiration of the waiting period. Accordingly, at any time before or
after the completion of the merger, either the Antitrust Division of the
Department of Justice or the Federal Trade Commission could take action under
the antitrust laws as it deems necessary or desirable in the public interest,
or other persons could take action under the antitrust laws, including seeking
to enjoin the merger. Additionally, at any time before or after the completion
of the merger, notwithstanding that the applicable waiting period expired or
ended, any state could take action under the antitrust laws as it deems
necessary or desirable in the public interest. We cannot be sure that a
challenge to the merger will not be made or that, if a challenge is made, we
will prevail.
The merger may also be subject to regulatory approval by one or more foreign
government entities. We intend to comply with any such regulations. Neither of
us is aware of any other material governmental or regulatory approval required
for completion of the merger, other than compliance with applicable corporate
law of Delaware.
Restrictions on Sales of Shares by Affiliates of TelCom and Microchip
The shares of Microchip common stock to be issued in connection with the
merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares of Microchip common
stock issued to any person who is deemed to be an "affiliate" of either
Microchip or TelCom at the
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time of the special meeting. Persons who may be deemed to be affiliates include
individuals or entities that control, are controlled by, or are under common
control of either of us and may include some of our officers and directors, as
well as our principal stockholders. Affiliates may not sell their shares of
Microchip common stock acquired in connection with the merger except pursuant
to:
. an effective registration statement under the Securities Act covering the
resale of those shares
. an exemption under paragraph (d) of Rule 145 under the Securities Act, or
. any other applicable exemption under the Securities Act.
Listing on The Nasdaq Stock Market's National Market of Microchip Common Stock
to be Issued in the Merger
Microchip has agreed to cause the shares of Microchip common stock to be
issued in the merger to be approved for listing on The Nasdaq Stock Market's
National Market, subject to official notice of issuance, before the completion
of the merger.
Dissenters' Appraisal Rights
Holders of TelCom common stock will not be entitled to exercise dissenters'
or appraisal rights with respect to the merger.
The Reorganization Agreement
The following is a summary of the material provisions of the reorganization
agreement. However, the following is not a complete statement of all provisions
of the reorganization agreement. Microchip and TelCom urge you to read the
entire reorganization agreement, which is attached as Exhibit A to this proxy
statement/prospectus. This summary is qualified in its entirety by reference to
the full text of the reorganization agreement that is incorporated herein by
reference.
General
The reorganization agreement provides for the merger of TelCom with Matchbox
Acquisition Corp., a wholly owned subsidiary of Microchip. As a result of the
merger, TelCom will be the surviving entity in the merger and will become a
wholly owned subsidiary of Microchip. The former stockholders of TelCom will
become stockholders of Microchip. The merger will be completed upon the filing
of a certificate of merger with the Secretary of State of the State of
Delaware.
Representations and Warranties. Microchip and TelCom have each made a number
of customary representations and warranties in the reorganization agreement
regarding aspects of their respective businesses, financial condition,
structure and other facts pertinent to the merger.
The representations given by TelCom cover the following topics, among
others, as they relate to TelCom and its subsidiaries:
. TelCom's corporate organization and its qualification to do business
. TelCom's certificate of incorporation and bylaws
. TelCom's capitalization
. authorization of the reorganization agreement and stock option agreement
by TelCom
. the possession of and compliance with permits required to conduct
TelCom's business
. TelCom's compliance with applicable laws
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. regulatory approvals required to complete the merger
. the effect of the merger on obligations of TelCom and under applicable
laws
. TelCom's filings and reports with the Securities and Exchange Commission
. TelCom's financial statements
. TelCom's liabilities
. changes in TelCom's business since June 30, 2000
. litigation involving TelCom
. TelCom's employee benefit plans
. information supplied by TelCom in this proxy statement/prospectus and the
related registration statement filed by Microchip
. restrictions on the conduct of TelCom's business
. TelCom's title to the properties it owns and leases
. TelCom's taxes and tax returns
. TelCom's brokers
. intellectual property owned or used by TelCom
. TelCom's material contracts
. TelCom's financial advisors
. actions taken by TelCom's board of directors in connection with the
reorganization agreement
. the vote of TelCom's stockholders required in connection with the
reorganization agreement
. TelCom's stockholder rights agreement
. the treatment of the merger as a "pooling of interests"
. labor matters
. environmental laws that apply to TelCom
. TelCom's insurance policies, and
. state takeover statutes that apply to TelCom.
The representations given by Microchip cover the following topics, among
others, as they relate to Microchip and its subsidiaries:
. Microchip's and Matchbox Acquisition's corporate organization and its
qualification to do business
. Microchip's and Matchbox Acquisition's certificate of incorporation and
bylaws
. Microchip's and Matchbox Acquisition's capitalization
. authorization of the reorganization agreement and stock option agreement
by Microchip and Matchbox Acquisition
. regulatory approvals required to complete the merger
. the effect of the merger on obligations of Microchip and Matchbox
Acquisition and under applicable laws
. Microchip's filings and reports with the Securities and Exchange
Commission
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. Microchip's liabilities
. changes in Microchip's business since June 30, 2000
. litigation involving Microchip
. information supplied by Microchip in this proxy statement/prospectus and
the related registration statement filed by Microchip
. Microchip's taxes and tax returns
. Microchip's brokers
. intellectual property owned or used by Microchip
. Microchip's financial advisors
. actions taken by Microchip's board of directors in connection with the
reorganization agreement
. the treatment of the merger as a "pooling of interests," and
. state takeover statutes that apply to Microchip.
The representations and warranties in the reorganization agreement are
complicated and not easily summarized. You are urged to carefully read the
articles of the reorganization agreement entitled "Representations and
Warranties of Company" and "Representations and Warranties of Parent and Merger
Sub."
TelCom's Conduct of Business Before Completion of the Merger. TelCom agreed
that until the earlier of the completion of the merger or the termination of
the reorganization agreement or unless Microchip consents in writing, TelCom
and each of its subsidiaries will operate its businesses in the usual, regular
and ordinary course and use its commercially reasonable efforts to:
. preserve intact its current business organizations
. keep available the services of its current officers and employees, and
. preserve its relationships with:
. customers
. suppliers
. distributors
. licensors
. licensees, and
. others having significant business dealings with it.
TelCom also agreed that until the earlier of the completion of the merger or
the termination of the reorganization agreement or unless Microchip consents in
writing, TelCom and each of its subsidiaries will conduct its business in
compliance with specific restrictions relating to, among other things, the
following:
. the timing, pricing and rights related to options and restricted stock
. severance and termination pay
. the transfer or license of intellectual property
. the issuance of dividends or other distributions
. the issuance and redemption of securities
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. modification of TelCom's certificate of incorporation and bylaws
. merger or consolidation involving TelCom
. the acquisition of assets or other entities
. the disposition of TelCom's assets
. the incurrence of indebtedness
. employees and employee benefits
. settlement of litigation and claims
. the termination or modification of contracts
. accounting policies and procedures
. entering into material contracts
. treatment of the merger as a "reorganization" under the tax code
. interference with Microchip's ability to account for the merger as a
"pooling of interests," and
. tax elections and liabilities.
Microchip's Conduct of Business Before Completion of the Merger. Microchip
agreed that until the earlier of the completion of the merger or the
termination of the reorganization agreement or unless TelCom consents in
writing, Microchip and each of its subsidiaries will operate its businesses in
the usual, regular and ordinary course and use its commercially reasonable
efforts to:
. preserve intact its current business organization
. keep available the services of its current officers and employees, and
. preserve its relationships with:
. customers
. suppliers
. distributors
. licensors
. licensees, and
. others having business significant dealings with them.
Microchip also agreed that until the earlier of the completion of the merger
or the termination of the reorganization agreement or unless TelCom consents in
writing, Microchip and each of its subsidiaries will conduct its business in
compliance with specific restrictions relating to, among other things, the
following:
. the issuance of dividends or other distributions
. the redemption of securities
. modification of Microchip's certificate of incorporation
. treatment of the merger as a "reorganization" under the tax code
. interference with Microchip's ability to account for the merger as a
"pooling of interests," and
. any action that would materially delay the transactions contemplated by
the reorganization agreement.
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The agreements related to the conduct of TelCom's and Microchip's business
in the reorganization agreement are complicated and not easily summarized. You
are urged to carefully read the article of the reorganization agreement
entitled "Conduct Prior to the Effective Time."
No Other Negotiations Involving TelCom. Until the merger is completed or the
reorganization agreement is terminated, and subject to TelCom's ability to
address a superior offer as set forth below, TelCom has agreed that neither it
nor any of its subsidiaries or representatives will, directly or indirectly:
. solicit, initiate, encourage or induce the making, submission or
announcement of any acquisition proposal, as discussed below
. participate in any discussions or negotiations regarding any acquisition
proposal
. furnish to any person any non-public information with respect to any
acquisition proposal
. take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
acquisition proposal
. engage in discussions with any person with respect to any acquisition
proposal
. subject to limited exceptions in the event of a superior offer, as
discussed below, approve, endorse or recommend any acquisition proposal,
or
. enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
acquisition transaction, as discussed below.
For purposes of the foregoing, any violation of any of the restrictions in
the immediately preceding paragraph by any officer, director or employee of
TelCom or any of its subsidiaries or any investment banker, attorney or other
advisor or representative of TelCom or any of its subsidiaries is deemed to be
a breach of the relevant restriction by TelCom.
An "acquisition proposal" is any offer or proposal (other than an offer or
proposal by Microchip) relating to any acquisition transaction. An "acquisition
transaction" is any transaction or series of related transactions other than
the transactions contemplated by the reorganization agreement involving:
. any acquisition or purchase from TelCom by any person or "group" (as
defined under Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations thereunder) of more than a 15% interest in the
total outstanding voting securities of TelCom or any of its subsidiaries
or any tender offer or exchange offer that if consummated would result in
any person or "group" beneficially owning 15% or more of the total
outstanding voting securities of TelCom or any of its subsidiaries
. any merger, consolidation, business combination or similar transaction
involving TelCom pursuant to which the stockholders of TelCom immediately
preceding such transaction hold less than 85% of the equity interests in
the surviving or resulting entity of such transaction
. any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 15% of the assets of
TelCom, or
. any liquidation or dissolution of TelCom.
A "superior offer" is an unsolicited, bona fide written offer made by a
third party to consummate any of the following transactions on terms that the
board of directors of TelCom determines, in its reasonable judgment, based on
advice of a financial advisor of nationally recognized reputation, to be more
favorable to TelCom stockholders from a financial point of view than the terms
of the merger involving Microchip:
. a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving TelCom pursuant
to which the stockholders of TelCom immediately preceding such
transaction hold less than 51% of the equity interest in the surviving or
resulting entity of such transaction
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. a sale or other disposition by TelCom of assets, excluding inventory and
used equipment sold in the ordinary course of business, representing in
excess of 51% of the fair market value of TelCom's business immediately
prior to such sale, or
. the acquisition by any person or group, including by way of a tender
offer or an exchange offer or issuance by TelCom, directly or indirectly,
of beneficial ownership or a right to acquire beneficial ownership of
shares representing in excess of 51% of the voting power of the then
outstanding shares of capital stock of TelCom.
However, an offer will not be considered a superior offer if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not likely, in the judgment of TelCom's board of directors, to
be obtained by such third party on a timely basis.
Between the date of the reorganization agreement and the earlier of the
completion of the merger or the termination of the reorganization agreement,
the reorganization agreement allows TelCom to furnish nonpublic information
regarding TelCom and its subsidiaries to, and to enter into a confidentiality
agreement with or to enter into discussions with, any person or group in
response to a superior offer submitted by the person or group, and not
withdrawn, if all of the following conditions are met:
. neither TelCom nor any representatives of TelCom or its subsidiaries has
violated the non-solicitation provisions contained in the reorganization
agreement
. the board of directors of TelCom concludes in good faith, after
consultation with its outside legal counsel, that such action is required
in order for the TelCom board of directors to comply with its fiduciary
obligations to TelCom's stockholders under applicable law
. at least two business days prior to furnishing any such nonpublic
information, to, or entering into discussions or negotiations with, the
person or group, TelCom gives Microchip written notice of the identity of
such person or group and of TelCom's intention to furnish nonpublic
information to, or enter into discussions or negotiations with, such
person or group and TelCom receives from such person or group, an
executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information
furnished to such person or group by or on behalf of TelCom, and
. contemporaneously with furnishing any nonpublic information to the person
or group, TelCom furnishes the same information to Microchip, to the
extent the nonpublic information has not been previously furnished by
TelCom to Microchip.
TelCom has agreed to promptly inform Microchip of any request for
information that TelCom reasonably believes would lead to an acquisition
proposal, or of any acquisition proposal, or any inquiry with respect to or
which TelCom reasonably believes would lead to any acquisition proposal, the
material terms and conditions of such request, acquisition proposal or inquiry,
and the identity of the person or group making any such request, acquisition
proposal or inquiry. TelCom also has agreed to keep Microchip informed in all
material respects of the status and details, including material amendments or
proposed amendments of any such request, acquisition proposal or inquiry.
Under the reorganization agreement, the TelCom directors are allowed to
withhold, withdraw, amend or modify their recommendation in favor of the merger
if a superior offer is made and not withdrawn, neither TelCom nor any of its
representatives has violated the non-solicitation provisions of the
reorganization agreement, and the board of directors of TelCom concludes in
good faith, after consultation with its outside counsel that, in light of the
superior offer, the withholding, withdrawal, amendment or modification of its
recommendation is required in order for the TelCom directors to comply with
their fiduciary obligations to TelCom stockholders under applicable law.
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TelCom must provide Microchip with at least 48 hours prior notice of any
meeting of TelCom's board of directors at which the board is reasonably
expected to consider a superior offer and at least three days prior written
notice of any meeting at which TelCom's board of directors is reasonably
expected to recommend a superior offer to TelCom's stockholders, together with
a copy of the definitive documentation relating to such superior offer.
Regardless of whether there has been a superior offer, TelCom is obligated
under the reorganization agreement to hold and convene the TelCom special
meeting of stockholders.
TelCom's Employee Benefit Plans. Individuals who are employed by TelCom when
the merger is completed will become employees of Microchip or one of
Microchip's subsidiaries, although Microchip may terminate these employees at
any time. Microchip will give these former TelCom employees full credit for
their service with TelCom and its subsidiaries for purposes of eligibility and
vesting under each employee benefit plan maintained by Microchip and its
subsidiaries. Microchip has agreed to provide former TelCom employees with
benefits that are the same as those provided to Microchip employees who are
similarly situated and that are substantially similar, in the aggregate, to
those provided to TelCom employees prior to the merger.
Treatment of TelCom Stock Options. Upon completion of the merger, each
outstanding option to purchase TelCom common stock will be converted, in
accordance with its terms, into an option to purchase the number of shares of
Microchip common stock equal to the exchange ratio times the number of shares
of TelCom common stock that could have been obtained before the merger upon the
exercise of each option, rounded down to the nearest whole share. The exercise
price will be equal to the exercise price per share of TelCom common stock
subject to the option before conversion divided by the exchange ratio, rounded
up to the nearest whole cent.
The other terms of each option and the TelCom option plans referred to above
under which the options were issued will continue to apply in accordance with
their terms. Upon completion of the merger, each outstanding award, including
restricted stock, stock equivalents and stock units, under any employee
incentive or benefit plans, programs or arrangements maintained by TelCom that
provide for grants of equity-based awards will be amended or converted into a
similar instrument of Microchip, with adjustments to preserve their value. The
other terms of each TelCom award, and the plans or agreements under which they
were issued, will continue to apply in accordance with their terms, including
any provisions providing for acceleration.
Within 30 days following the effective time of the merger, Microchip will
file a registration statement on Form S-8 for the shares of Microchip common
stock issuable with respect to options under the TelCom stock option plans and
will maintain the effectiveness of that registration statement for as long as
any of the options remain outstanding.
TelCom Employee Stock Purchase Plan. Pursuant to the reorganization
agreement, Microchip will assume TelCom's employee stock purchase plan and all
rights to purchase shares under that plan will be converted, in accordance with
the exchange ratio, into rights to purchase shares of Microchip common stock.
All converted purchase rights will be assumed by Microchip and each current
offering period under the TelCom plan will be continued until the end of such
period. The TelCom plan will terminate with the exercise of the last assumed
purchase right. No additional purchase rights will be granted under the TelCom
plan. After the effective time of the merger, former TelCom employees will
participate in Microchip's employee stock purchase plan, and service with
TelCom will be treated as service with Microchip for purposes of determining
eligibility under the Microchip plan.
Conditions to Completion of the Merger. The obligations of Microchip and
TelCom to complete the merger and the other transactions contemplated by the
reorganization agreement are subject to the satisfaction or waiver of each of
the following conditions before completion of the merger:
. the reorganization agreement must be adopted and the merger must be
approved by the holders of a majority of outstanding shares of TelCom
common stock entitled to vote
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. Microchip's registration statement must be effective, no stop order
suspending its effectiveness will be in effect and no proceedings for
suspension of its effectiveness will be pending before or threatened in
writing by the Securities and Exchange Commission
. no law, regulation, injunction or other order must be enacted or issued
that has the effect of making the merger illegal or otherwise prohibiting
completion of the merger
. all applicable waiting periods under applicable antitrust laws must have
expired or been terminated, and
. Microchip and TelCom must each receive from their respective tax counsel,
an opinion to the effect that the merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the tax code and
such opinions have not been withdrawn. However, if counsel to TelCom does
not render this opinion, this condition will be satisfied if counsel to
Microchip renders the opinion to such party.
TelCom's obligations to complete the merger and the other transactions
contemplated by the reorganization agreement are subject to the satisfaction or
waiver of each of the following additional conditions before completion of the
merger:
. Microchip's and Matchbox Acquisition's representations and warranties
must be true and correct as of October 26, 2000 and as of the date the
merger is to be completed as if made at and as of such time except:
. to the extent Microchip's and Matchbox Acquisition's representations
and warranties address matters only as of a particular date, they
must be true and correct as of that date; and
. if any of these representations and warranties are not true and
correct but the effect in each case, or in the aggregate, of the
inaccuracies of these representations and breaches of these
warranties, is not and does not have a material adverse effect on
Microchip, then this condition will be deemed satisfied, and
. Microchip and Matchbox Acquisition must perform or comply in all material
respects with all of its agreements and covenants required by the
reorganization agreement to be performed or complied with by Microchip at
or before completion of the merger.
Microchip's obligations to complete the merger and the other transactions
contemplated by the reorganization agreement are subject to the satisfaction or
waiver of each of the following additional conditions before completion of the
merger:
. TelCom's representations and warranties must be true and correct as of
October 26, 2000 and at and as of the date the merger is to be completed
as if made at and as of such time except:
. to the extent TelCom's representations and warranties address matters
only as of a particular date, they must be true and correct as of
that date; and
. if any of these representations and warranties are not true and
correct but the effect in each case, or in the aggregate, of the
inaccuracies of these representations and breaches of these
warranties (other than those concerning TelCom's authority to enter
into the reorganization agreement, the opinion of TelCom's financial
advisor, the approval of TelCom's board of directors, the required
vote of TelCom's stockholders and the Delaware antitakeover statute,
each of which must be true and correct in all respects), is not and
does not have a material adverse effect on TelCom, then this
condition will be deemed satisfied.
. TelCom must perform or comply in all material respects with all of its
agreements and covenants required by the reorganization agreement to be
performed or complied with by TelCom at or before completion of the
merger
. TelCom must have received consents under its contracts with third parties
in connection with the merger that are identified on a schedule to the
reorganization agreement
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. Microchip shall have received (1) from TelCom a copy of a letter
addressed to TelCom from PricewaterhouseCoopers LLP, independent
accountants for TelCom, in substance reasonably satisfactory to Microchip
to the effect that PricewaterhouseCoopers LLP agrees with TelCom
management's conclusion that, based upon the information furnished to
PricewaterhouseCoopers LLP by TelCom management, no conditions related to
TelCom exist that would preclude TelCom from being party to a business
combination for which the "pooling of interests" method of accounting is
used and (2) from KPMG LLP, independent accountants for Microchip, a
letter to Microchip to the effect that KPMG LLP concurs with Microchip
management's conclusion that the merger can be properly accounted for as
a "pooling of interests," and
. each of TelCom's affiliates shall have entered into an affiliate
agreement and each of the agreements shall be in full force and effect as
of the date of the merger.
Termination of the Reorganization Agreement. The reorganization agreement
may be terminated at any time prior to completion of the merger, whether before
or after the approval and adoption of the reorganization agreement and approval
of the merger by TelCom stockholders:
. by mutual written consent of Microchip and TelCom
. by Microchip or TelCom, if the merger is not completed before April 30,
2001, except that this right to terminate the reorganization agreement is
not available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the merger to occur on
or before April 30, 2001, and such action or failure to act constitutes a
breach of the reorganization agreement
. by Microchip or TelCom, if there is any order, decree or ruling of a
court or governmental authority having the effect of permanently
restraining, enjoining or prohibiting the completion of the merger that
is final and nonappealable
. by Microchip or TelCom, if the reorganization agreement fails to receive
the requisite vote for approval by the stockholders of TelCom at the
TelCom special meeting or at any adjournment of that meeting, except that
this right to terminate the reorganization agreement is not available to
a party where the failure to obtain TelCom stockholder approval was
caused by that party's action or failure to act and such action or
failure to act constitutes a breach by that party of the reorganization
agreement
. by TelCom, upon a breach of any covenant or agreement in the
reorganization agreement on the part of Microchip, or if any of
Microchip's representations or warranties are or become untrue so that
the corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by Microchip through the
exercise of its commercially reasonable efforts, and Microchip continues
to exercise such commercially reasonable efforts, TelCom may not
terminate the reorganization agreement for 30 days after delivery of
written notice from TelCom to Microchip of the breach. If the breach is
cured during those 30 days, TelCom may not exercise this termination
right
. by Microchip, upon a breach of any covenant or agreement in the
reorganization agreement on the part of TelCom, or if any of TelCom's
representations or warranties are or become untrue so that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by TelCom through the
exercise of its commercially reasonable efforts, and TelCom continues to
exercise such commercially reasonable efforts, Microchip may not
terminate the reorganization agreement for 30 days after delivery of
written notice from Microchip to TelCom of the breach. If the breach is
cured during those 30 days, Microchip may not exercise this termination
right, or
. by Microchip if a triggering event, as discussed below, shall have
occurred.
A "triggering event" occurs if:
. TelCom's board of directors withdraws, withholds or refrains from making
or modifies, amends or changes in a manner adverse to Microchip its
recommendation in favor of the adoption of the reorganization agreement
or the approval of the merger
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. TelCom fails to include in this proxy statement/prospectus the
recommendation of TelCom's board of directors in favor of the adoption of
the reorganization agreement and the approval of the merger
. TelCom's board of directors fails to reaffirm its recommendation in favor
of the adoption of the reorganization agreement and approval of the
merger within ten business days after Microchip requests in writing that
such recommendation be reaffirmed at any time following the announcement
of an acquisition proposal
. TelCom's board of directors or any committee of the board approves or
recommends any acquisition proposal
. TelCom enters into any letter of intent or similar document or any
agreement, contract or commitment accepting any acquisition proposal
. TelCom breaches the non-solicitation provisions of the reorganization
agreement, or
. a tender or exchange offer relating to at least 15% of the then
outstanding securities of TelCom is commenced by a person unaffiliated
with Microchip, and TelCom does not send to its securityholders, within
ten business days after such tender or exchange offer is first published,
sent or given, a statement disclosing that TelCom recommends rejection of
such tender or exchange offer.
Payment Of Termination Fee. If the reorganization agreement is terminated by
Microchip because of the occurrence of a triggering event, TelCom will pay
Microchip a termination fee of $9,000,000 within three business days after
demand by Microchip.
Further, TelCom will pay to Microchip within three business days after
demand by Microchip a termination fee of $9,000,000 if the reorganization
agreement is terminated by Microchip or TelCom because the merger is not
consummated by April 30, 2001 or because TelCom's stockholders do not approve
the reorganization agreement and the merger, and either of the following occur:
. prior to the termination of the reorganization agreement, a third party
has announced an acquisition proposal and within 12 months following the
termination of the reorganization agreement a company acquisition is
consummated, or
. prior to the termination of the reorganization agreement, a third party
has announced an acquisition proposal and within 12 months following the
termination of the reorganization agreement TelCom enters into an
agreement or letter of intent providing for a company acquisition that is
subsequently consummated.
A "company acquisition" is any of the following:
. a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving TelCom pursuant
to which the stockholders of TelCom immediately preceding such
transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction
. a sale or other disposition by TelCom of assets representing in excess of
50% of the aggregate fair market value of TelCom's business immediately
prior to such sale, or
. the acquisition by any person or group, including by way of a tender
offer or an exchange offer or issuance by TelCom, directly or indirectly,
of beneficial ownership or a right to acquire beneficial ownership of
shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of TelCom.
Extension, Waiver and Amendment of the Reorganization Agreement. Subject to
applicable law, Microchip and TelCom may amend the reorganization agreement
before completion of the merger by mutual written consent.
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Either Microchip or TelCom may extend the other's time for the performance
of any of the obligations or other acts under the reorganization agreement,
waive any inaccuracies in the other's representations and warranties and waive
compliance by the other with any of the agreements or conditions contained in
the reorganization agreement.
The Stock Option Agreement
A description of the terms of the stock option agreement between Microchip
and TelCom follows. The full text is attached as Exhibit B to this proxy
statement/prospectus. We encourage you to read the entire stock option
agreement.
The stock option agreement grants Microchip the option to acquire up to a
number of shares of TelCom common stock that represent 19.9% of the issued and
outstanding TelCom common stock. The exercise price of the option is $15.00 per
share of TelCom common stock, payable in cash. The number of shares issuable
upon exercise of the option and the exercise price of the option are subject to
adjustment to prevent dilution. Based on the number of shares of TelCom common
stock outstanding on October 26, 2000, the option would be exercisable for
approximately 3,644,586 shares of TelCom common stock. Microchip required
TelCom to enter into the stock option agreement as a condition to entering into
the reorganization agreement.
The option is intended to increase the likelihood that the merger will be
completed. Some of the aspects of the stock option agreement may have the
effect of discouraging persons who might now or at any time be interested in
acquiring all or a significant interest in TelCom or its assets before
completion of the merger.
If the option becomes exercisable, or is exercised, TelCom would not be able
to account for future transactions under the "pooling of interests" accounting
method for some period of time.
Exercise Events. Microchip may exercise the option, in whole or part, at any
time or from time to time, upon the occurrence of any of the following events:
. the termination of the reorganization agreement by Microchip because of
the occurrence of a triggering event, or
. if either Microchip or TelCom terminates the reorganization agreement
because either the merger is not consummated by April 30, 2001 or the
stockholders of TelCom fail to adopt the reorganization agreement and one
of the following occurs:
-- prior to the termination of the reorganization agreement, a third
party has announced an acquisition proposal and within 12 months
following the termination of the reorganization agreement a company
acquisition is consummated, or
-- prior to the termination of the reorganization agreement, a third
party has announced an acquisition proposal and within 12 months
following the termination of the reorganization agreement TelCom
enters into an agreement or letter of intent providing for a company
acquisition that is subsequently consummated.
Termination. The option will terminate and become not exercisable upon the
earliest of any of the following:
. completion of the merger
. 12 months after termination of the reorganization agreement based on a
failure of the merger to be consummated by April 30, 2001 or the failure
to obtain the required approval of TelCom stockholders if no event
causing the termination fee to become payable has occurred
. 12 months after termination of the reorganization agreement based on the
occurrence of a triggering event
57
<PAGE>
. 12 months after payment of the termination fee if the reorganization
agreement is terminated based on a failure of the merger to be completed
by April 30, 2001 or the failure to obtain the required approval of
TelCom stockholders and an event causing the termination fee to become
payable has occurred,
. the date on which the reorganization agreement is terminated if neither a
triggering event nor the failure of the merger to be completed by April
30, 2001, nor the failure to obtain the required approval of the TelCom
stockholders has caused the termination, or
. if the option becomes exercisable but cannot be exercised by Microchip
because of a government order or because a waiting period under antitrust
laws has not expired, ten business days after the prohibition to exercise
of the option has been removed or has become final and not subject to any
appeal.
Repurchase at the Option of Microchip. During the period when the option is
exercisable, Microchip may require TelCom to repurchase from Microchip the
unexercised portion of the option.
Economic Benefit to Microchip is Limited. The stock option agreement limits
to $12 million the total cash payment that may be received by Microchip
pursuant to the termination fee under the reorganization agreement and the
exercise of its put right.
Registration Rights. The stock option agreement grants registration rights
to Microchip with respect to the shares of TelCom stock represented by the
option, including the right to demand that TelCom register all or part of such
shares with the Securities and Exchange Commission, provided that Microchip
will only be able to make two such demands, and the right to register all or
part of such shares if TelCom otherwise registers shares.
Voting Agreements
As a condition to Microchip's entering into the reorganization agreement,
each of TelCom's directors and certain of its executive officers entered into
voting agreements with Microchip. By entering into the voting agreements these
TelCom stockholders have irrevocably appointed Microchip as their lawful
attorney and proxy. These proxies give Microchip the limited right to vote the
shares of TelCom common stock beneficially owned by these TelCom stockholders,
including shares of TelCom common stock acquired after the date of the voting
agreements, in favor of the approval and adoption of the reorganization
agreement. These TelCom stockholders may vote their shares of TelCom common
stock on all other matters.
As of the record date, these individuals and entities collectively
beneficially owned 779,786 shares of TelCom common stock, which represented
approximately 4.3% of the outstanding TelCom common stock. None of the TelCom
stockholders who are parties to the voting agreements were paid additional
consideration in connection with them.
Pursuant to these voting agreements, and except as otherwise waived by
Microchip, the TelCom directors and executive officers agreed not to sell the
TelCom stock and options owned, controlled or acquired, either directly or
indirectly, by that person unless each person to which any shares or any
interest in any shares is transferred agrees to be bound by the terms and
provisions of the voting agreement.
These voting agreements will terminate upon the earlier to occur of the
termination of the reorganization agreement and the completion of the merger.
The form of voting agreement is attached to this proxy statement-prospectus as
Exhibit C, and you are urged to read it in its entirety.
Affiliate Agreements
As a condition to Microchip's entering into the reorganization agreement,
TelCom's directors and certain of its executive officers executed affiliate
agreements. Under the affiliate agreements, each of these persons has agreed
not to sell or otherwise dispose of, or to reduce their risk relative to, any
shares of TelCom or Microchip
58
<PAGE>
common stock owned by them during the period beginning 30 days prior to the
merger and ending the day Microchip publicly announces financial results
covering at least 30 days of combined operations of Microchip and TelCom. Also
under the affiliate agreements, Microchip will be entitled to place appropriate
legends on the certificates evidencing any Microchip common stock to be
received by these persons and to issue stop transfer instructions to the
transfer agent for the Microchip common stock. Further, these persons have
acknowledged the resale restrictions imposed by Rule 145 under the Securities
Act on shares of Microchip common stock to be received by them in the merger.
Microchip's directors and certain of its executive officers have also
entered into affiliate agreements with Microchip pursuant to which they agree
not to sell or otherwise dispose of, or to reduce their risk relative to, any
shares of Microchip common stock owned by them during the period beginning 30
days prior to the merger and ending the day Microchip publicly announces
financial results covering at least 30 days of combined operations of Microchip
and TelCom.
The form of TelCom affiliate agreement is attached to this proxy
statement/prospectus as Exhibit E. You are urged to read the form of affiliate
agreement in its entirety.
Noncompetition Agreements
Certain of TelCom's executive officers and key employees have entered into
noncompetition agreements with Microchip in which the TelCom employee agrees
not to compete with Microchip in any business that involves in any manner the
development, manufacturing, sale or support of a silicon product that competes
with or could potentially replace any product that is offered for sale by
Microchip now or following the merger, including TelCom products, for a period
of one year after the date on which the employee ceases to be employed by
Microchip, so long as that date falls within one year after the effective date
of the merger. If the employee remains employed by Microchip for more than one
year, there is no restriction on the employee's ability to compete with
Microchip. The non-competition agreements also provide that for the same
period, the employee may not take any action to, or do anything reasonably
intended to, divert business from Microchip or any of its respective
subsidiaries, or influence or attempt to influence any retailer, dealer,
vendor, supplier, customer or potential customer of Microchip to cease doing
business with Microchip. In addition, the employee may not directly or
indirectly recruit, solicit, or assist others in recruiting, or soliciting, any
person who is an employee of Microchip or induce or attempt to induce any such
employee to terminate his or her employment with Microchip.
The form of noncompetition agreement is attached to this proxy
statement/prospectus as Exhibit F, and you are urged to read it in its
entirety.
Operations After the Merger
Following the merger, TelCom will continue its operations as a wholly owned
subsidiary of Microchip for some period of time determined by Microchip. The
membership of Microchip's board of directors will remain unchanged as a result
of the merger. The stockholders of TelCom will become stockholders of
Microchip, and their rights as stockholders will be governed by the Microchip
Restated Certificate of Incorporation, as currently in effect, the Microchip
Restated Bylaws and the laws of the State of Delaware. See "Comparison of
Rights of Holders of TelCom Common Stock and Microchip Common Stock" on page 67
of this proxy statement/prospectus.
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MICROCHIP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
gives effect to the merger using the "pooling of interests" method of
accounting, after giving effect to the pro forma adjustments described in the
accompanying notes. The unaudited pro forma condensed combined financial
information should be read in conjunction with the audited historical
consolidated financial statements and related notes of Microchip and TelCom,
which are incorporated by reference into this proxy statement/prospectus.
The unaudited pro forma condensed combined balance sheet gives effect to the
merger as if it had occurred on the balance sheet date. The unaudited pro forma
condensed combined balance sheet combines Microchip's September 30, 2000
unaudited consolidated balance sheet with TelCom's September 30, 2000 unaudited
consolidated balance sheet. The unaudited pro forma condensed combined
statements of operations give effect to the merger as if it had occurred at the
beginning of the periods presented. The unaudited pro forma condensed combined
statements of operations combine Microchip's historical operating results for
the six months ended September 30, 2000 and for the fiscal years ended March
31, 2000, 1999 and 1998 with the corresponding TelCom historical operating
results for the six months ended September 30, 2000 and for the calendar years
ended December 31, 1999, 1998 and 1997, respectively. It is expected that upon
the closing of the merger TelCom will change its fiscal year end to coincide
with Microchip's.
For purposes of the preparation of the unaudited pro forma condensed
combined balance sheet, merger-related expenses (which the companies anticipate
will be approximately $9.1 million on a pre-tax basis) were included. The
estimate of merger-related expenses is preliminary and subject to change.
The unaudited pro forma condensed combined balance sheet does not give
effect to any proceeds that may be received from the sale of Microchip shares
of common stock held in treasury. A portion of these shares must be reissued
prior to closing of the merger in order to qualify for "pooling of interests"
accounting treatment.
TelCom has recognized revenues on sales to foreign distributors with rights
of return and price protection when the product is shipped to the distributors.
Microchip does not recognize revenue on sales to distributors with rights of
return and price protection until the distributor sells the product on to its
customers. Upon consummation of the merger, Microchip will conform TelCom's
revenue recognition policies to defer this revenue until the distributors sell
the product. As of the date of this filing, TelCom is unable to determine the
impact of conforming the accounting method. This change of accounting method is
not expected to have a material impact on the combined financial statements.
Certain financial statement balances of TelCom have been reclassified to
conform with Microchip's financial statement presentation.
The unaudited pro forma condensed combined financial information is
presented for illustrative purposes only and does not purport to be indicative
of the operating results or financial position that would have actually
occurred if the merger had been in effect on the dates indicated, nor is it
necessarily indicative of future operating results or financial position of the
merged companies. The pro forma adjustments are based on the information and
assumptions available as of the date of this proxy statement/prospectus. The
unaudited pro forma combined financial statements do not give effect to any
cost savings or synergies that may result from the integration of Microchip's
and TelCom's operations.
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<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Historical
---------------------------
Microchip TelCom
Technology Semiconductor
September 30, September 30, Pro Forma Pro Forma
2000 2000 Adjustments Combined
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
------
Cash and cash
equivalents.............. $117,088 $113,639 $ 230,727
Accounts receivable, net.. 84,736 13,249 97,985
Inventories............... 62,849 10,148 72,997
Prepaid expenses.......... 4,905 -- 4,905
Deferred tax asset........ 41,961 1,199 43,160
Other current assets...... 1,728 852 2,580
-------- -------- ------ ----------
Total current assets.... 313,267 139,087 452,354
Property, plant and
equipment, net........... 652,300 5,992 658,292
Other assets.............. 8,242 4,736 12,978
-------- -------- ------ ----------
Total assets............ $973,809 $149,815 $1,123,624
======== ======== ====== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable.......... $ 84,366 $ 4,374 $ 88,740
Accrued liabilities....... 59,345 10,003 $9,100 (a) 78,448
Deferred income on
shipments to
distributors............. 65,523 2,650 68,173
-------- -------- ------ ----------
Total current
liabilities............ 209,234 17,027 9,100 235,361
Pension accrual........... 866 -- 866
Deferred tax liability.... 19,066 400 19,466
Stockholders' equity:
Common stock............ 121 18 (9)(b) 130
Additional paid-in
capital................ 347,040 107,919 9 (b) 454,968
Retained earnings....... 445,519 24,451 (9,100)(a) 460,870
Less shares of common
stock held in treasury
at cost................ (48,037) -- (48,037)
-------- -------- ------ ----------
Net stockholders' equity.. 744,643 132,388 (9,100) 867,931
Total liabilities and
stockholders' equity... $973,809 $149,815 $1,123,624
======== ======== ====== ==========
</TABLE>
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MICROCHIP TECHNOLOGY INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
------------------------------
Microchip
Technology TelCom
Six Months Semiconductor
Ended Six Months Ended
September 30, September 30, Pro Forma Pro Forma
2000 2000 Adjustments Combined
------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............... $334,047 $38,183 $372,230
Cost of sales........... 151,322 18,380 169,702
-------- ------- --------
Gross profit........ 182,725 19,803 202,528
Operating expenses:
Research and
development.......... 31,751 5,232 36,983
Selling, general and
administrative....... 46,925 6,302 53,227
-------- ------- --------
78,676 11,534 90,210
Operating income........ 104,049 8,269 112,318
Other income (expense):
Interest income....... 4,415 3,387 7,802
Interest expense...... (315) -- (315)
Other, net............ 335 1,427 1,762
-------- ------- --------
Income before income
taxes.................. 108,484 13,083 121,567
Income taxes............ 29,290 3,497 32,787
Income before equity in
net loss of investee... 79,194 9,586 88,780
Equity in net loss of
investee............... -- 413 413
-------- ------- --------
Net income............ $ 79,194 $ 9,173 $ 88,367
======== ======= ========
Basic net income per
share................ $ 0.67 $ 0.51 $ 0.70
======== ======= ========
Diluted net income per
share................ $ 0.63 $ 0.45 $ 0.65
======== ======= ========
Weighted average common
shares outstanding..... 118,627 18,164 126,982(c)
======== ======= ========
Weighted average common
and potential common
shares outstanding..... 126,466 20,262 135,787(c)
======== ======= ========
</TABLE>
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MICROCHIP TECHNOLOGY INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
------------------------
Microchip TelCom
Technology Semiconductor
Year Ended Year Ended
March 31, December 31, Pro Forma Pro Forma
2000 1999 Adjustments Combined
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales................... $495,729 $57,322 $553,051
Cost of sales............... 237,985 31,626 269,611
-------- ------- --------
Gross profit............ 257,744 25,696 283,440
Operating expenses:
Research and development.. 45,571 6,794 52,365
Selling, general and
administrative........... 76,743 10,007 86,750
Special (income) expense.. (2,400) 269 (2,131)
-------- ------- --------
119,914 17,070 136,984
Operating income............ 137,830 8,626 146,456
Other income (expense):
Interest income........... 2,232 584 2,816
Interest expense.......... (1,048) (199) (1,247)
Other, net................ 770 5,819 6,589
-------- ------- --------
Income before income taxes.. 139,784 14,830 154,614
Income taxes................ 37,740 1,701 39,441
-------- ------- --------
Net income (loss)......... $102,044 $13,129 $115,173
======== ======= ========
Basic net income (loss)
per share................ $ 0.89 $ 0.92 $ 0.95
======== ======= ========
Diluted net income per
share.................... $ 0.84 $ 0.84 $ 0.89
======== ======= ========
Weighted average common
shares outstanding......... 114,734 14,302 121,313 (c)
======== ======= ========
Weighted average common and
potential common shares
outstanding................ 122,031 15,676 129,242 (c)
======== ======= ========
</TABLE>
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MICROCHIP TECHNOLOGY INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
--------------------------------
Microchip TelCom
Technology Semiconductor
Year Ended Year Ended Pro Forma Pro Forma
March 31, 1999 December 31, 1998 Adjustments Combined
-------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............... $406,460 $54,263 $460,723
Cost of sales........... 203,574 34,896 238,470
-------- ------- --------
Gross profit........ 202,886 19,367 222,253
Operating expenses:
Research and
development.......... 40,787 5,588 46,375
Selling, general and
administrative....... 63,006 9,496 72,502
Special expense....... 28,937 7,258 36,195
-------- ------- --------
132,730 22,342 155,072
Operating income........ 70,156 (2,975) 67,181
Other income (expense):
Interest income....... 754 845 1,599
Interest expense...... (2,964) (459) (3,423)
Other, net............ 665 -- 665
-------- ------- --------
Income (loss) before
income taxes........... 68,611 (2,589) 66,022
Income taxes............ 18,523 958 19,481
-------- ------- --------
Net income (loss) .... $ 50,088 $(3,547) $ 46,541
======== ======= ========
Basic net income
(loss) per share..... $ 0.44 $ (0.22) $ 0.38
======== ======= ========
Diluted net income
(loss) per share..... $ 0.42 $ (0.22) $ 0.36
======== ======= ========
Weighted average common
shares outstanding..... 115,056 15,933 122,385(c)
======== ======= ========
Weighted average common
and potential common
shares outstanding..... 120,438 15,933 127,767(c)
======== ======= ========
</TABLE>
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<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical
----------------------------
TelCom
Microchip Semiconductor
Technology 12 Months
Year Ended December 31, Pro Forma Pro Forma
March 31, 1998 1997 Adjustments Combined
-------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales................ $396,894 $55,435 $452,329
Cost of sales............ 199,538 31,175 230,713
-------- ------- --------
Gross profit......... 197,356 24,260 221,616
Operating expenses:
Research and
development........... 38,362 5,455 43,817
Selling, general and
administrative........ 67,549 9,530 77,079
Special expense........ 5,000 8,264 13,264
-------- ------- --------
110,911 23,249 134,160
Operating income......... 86,445 1,011 87,456
Other income (expense):
Interest income........ 2,642 959 3,601
Interest expense....... (1,137) (1,247) (2,384)
Other, net............. 217 -- 217
-------- ------- --------
Income before income
taxes................... 88,167 723 88,890
Income taxes............. 23,799 2,427 26,226
-------- ------- --------
Net income (loss) ..... $ 64,368 $(1,704) $ 62,664
======== ======= ========
Basic net income (loss)
per share............. $ 0.54 $ (0.11) $ 0.49
======== ======= ========
Diluted net income
(loss) per share...... $ 0.51 $ (0.11) $ 0.47
======== ======= ========
Weighted average common
shares outstanding...... 120,096 16,184 127,541(c)
======== ======= ========
Weighted average common
and potential common
shares outstanding...... 126,705 16,184 134,149(c)
======== ======= ========
</TABLE>
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MICROCHIP TECHNOLOGY INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined financial information reflects the merger,
and gives effect to the following:
(a) It is expected that approximately $9.1 million will be incurred for
direct costs of the merger, consisting primarily of transaction costs for
investment banking, legal and accounting fees. The unaudited pro forma
condensed combined balance sheet gives effect to $9.1 million of direct
costs of the merger as if they had been incurred as of September 30, 2000,
but the unaudited pro forma condensed combined statements of operations do
not give effect to any merger related costs.
(b) The common stock on the pro forma combined balance sheet has been
restated assuming an exchange ratio of 0.46 shares (as defined in the
reorganization agreement) of Microchip common stock for each share of
TelCom common stock. Based on this exchange ratio, the pro forma adjustment
reflects the issuance of 8.4 million shares of Microchip common stock with
a par value of $0.001, as if the merger occurred as of September 30, 2000.
The actual shares of Microchip common stock to be issued will be determined
at the effective date of the merger based on the actual shares of TelCom
common stock outstanding at such date and the ten-day average closing price
of Microchip's common stock immediately prior to the merger (as defined in
the reorganization agreement).
(c) Unaudited pro forma combined basic and diluted net income per share
is based on the combined weighted average shares of both Microchip and
TelCom, with TelCom shares included based upon the exchange ratio of 0.46
shares of Microchip common stock for each share of TelCom common stock.
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<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF TELCOM
COMMON STOCK AND MICROCHIP COMMON STOCK
This section of the proxy statement/prospectus describes the material
differences between the rights of holders of TelCom common stock and Microchip
common stock. While we believe that the description covers the material
differences between the two, this summary may not contain all of the
information that is important to you. You should carefully read this entire
document and the other documents we refer to for a more complete understanding
of the differences between being a stockholder of TelCom and being a
stockholder of Microchip.
Microchip is incorporated under the laws of the State of Delaware and the
rights of its stockholders are governed by Delaware Law, the Restated
Certificate of Incorporation of Microchip (with all amendments and restatements
thereof) and the Amended and Restated Bylaws of Microchip. TelCom is
incorporated under the laws of the State of Delaware and the rights of its
stockholders are governed by Delaware law and the Restated Certificate of
Incorporation of TelCom (with all amendments and restatements thereof) and the
Bylaws of TelCom. If the Merger is completed, former TelCom stockholders will
become stockholders of Microchip and the rights of such former TelCom
stockholders will be governed by Delaware law, the Microchip certificate and
Microchip bylaws. The following summarizes differences in the charter documents
of TelCom and Microchip that could materially affect the rights of stockholders
of TelCom after completion of the merger. A number of the provisions of
Microchip's charter documents may have the effect of delaying, deferring or
preventing a change in control of Microchip.
Number of Directors
Microchip's certificate and bylaws, as amended, fix the authorized number of
directors at five. TelCom's bylaws allow TelCom's board of directors to specify
the number of directors from time to time; TelCom's number of directors is
currently fixed at five. Microchip's and TelCom's respective boards of
directors or stockholders may change such number by amending the bylaws or the
Microchip or TelCom certificate.
Cumulative Voting for Directors
Under Delaware law, unless the corporation's certificate of incorporation
provides otherwise, there can be no cumulative voting for the election of
directors. Neither Microchip's certificate nor TelCom's certificate contain any
provision permitting cumulative voting.
Classified Board of Directors
A classified board is one to which some, but not all, of the directors are
elected on a rotating basis each year. Delaware law permits, but does not
require, a classified board of directors, with staggered terms under which one-
half or one-third of the directors are elected for terms of two or three years,
respectively. Neither Microchip nor TelCom currently have a classified board
and the surviving corporation will not have a classified board.
Director Voting
The Microchip bylaws and the TelCom bylaws provide that the number of
directors constituting a quorum shall be a majority of the number of authorized
directors.
Removal of Directors
Under Delaware law, a director of a corporation, such as Microchip or
TelCom, that does not have a classified board of directors or cumulative voting
may be removed with or without cause with the approval of a majority of the
outstanding shares entitled to vote.
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Filling Vacancies on the Board of Directors
Under Delaware law, vacancies and newly created directorships may be filled
by a majority of the directors then in office (even though less than a quorum)
unless otherwise provided in the certificate of incorporation or bylaws (and
unless the certificate of incorporation directs that a particular class is to
elect such director, in which case any other directors elected by such class,
or a sole remaining director, shall fill such vacancy). Both the Microchip
bylaws and the TelCom bylaws allow any vacancy on the board of directors to be
filled by a majority of the directors then in office, even if less than a
quorum.
Advance Notice of Stockholder Proposals
The Microchip bylaws provide that no matter proposed by Microchip
stockholders will be considered at an annual meeting or special stockholder
meeting unless:
. it is specified in the notice of meeting
. it is brought by or at the direction of the board of directors, or
. it is brought by a stockholder of the corporation who was a stockholder
of record on the record date and written notice of such matter is
provided to Microchip in compliance with the time frames set forth in the
Microchip bylaws.
The TelCom bylaws do not contain a provision concerning the advance notice
of stockholder proposals.
Power to Call Special Meetings of Stockholders
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. Pursuant to the Microchip bylaws,
a special meeting may be called at any time by the board of directors or by
the chairman of the board or by one or more stockholders owning in the
aggregate not less than fifty percent (50%) of the entire capital stock of the
corporation issued and outstanding and entitled vote. Pursuant to the TelCom
bylaws, a special meeting may be called by the chairman of the board, or the
president and shall be called by the president or secretary at the request in
writing of a majority of the board of directors. A TelCom special meeting may
also be called by the holders of ten percent (10%) or more of the outstanding
shares of stock of the corporation.
Business Combination Following a Change of Control
In the last several years, a number of states have adopted special laws
designed to make some kinds of "unfriendly" corporate takeovers, or other
transactions involving a corporation and one or more of its significant
stockholders, more difficult. Under Section 203 of the Delaware General
Corporation Law, some "business combinations" by Delaware corporations with
"interested stockholders" are subject to a three-year moratorium unless
specified conditions are met. Section 203 prohibits a Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
three years following the date that such person becomes an interested
stockholder. With some exceptions, an interested stockholder is generally a
person or group who or which owns fifteen percent (15%) or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or
upon the exercise of conversion or exchange rights, and stock with respect to
which the person has voting rights only), or is an affiliate or associate of
the corporation and was the owner of fifteen percent (15%) or more of such
voting stock at any time within the previous three years.
Amendment of Charter Documents
Generally, under Delaware law, an amendment to a corporation's certificate
of incorporation requires the approval of the board of directors and the
approval of holders of a majority of the outstanding stock entitled to vote
thereon. The holders of the outstanding shares of a class are entitled to vote
as a separate class on a
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proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. Both the
Microchip certificate and the TelCom certificate can be amended, altered or
repealed in any manner now or hereafter prescribed by Delaware law. Both the
Microchip bylaws and the TelCom bylaws may be altered, amended or repealed at
any meeting of the Board of Directors by a majority vote of the directors
present at the meeting or by a majority of the stockholders.
Indemnification
The Microchip bylaws and the TelCom certificate indemnify directors and
officers to the fullest extent permissible under Delaware law, as such law
exists currently or as it may be amended in the future. Under Delaware law,
such provisions may not eliminate or limit directors' or officers' liability
for:
. breaches of the director's or officer's duty of loyalty to the
corporation or its stockholders
. acts or omissions not in good faith or involving intentional misconduct
or knowing violations of law
. the payment of unlawful dividends or unlawful stock repurchases or
redemptions, or
. transactions in which the director or officer received an improper
personal benefit.
Both Microchip's bylaws and TelCom's certificate authorize them to provide
insurance for their directors, officers and/or agents, against any expense,
liability or loss, whether or not Microchip or TelCom would have the power to
indemnify such person against such expense, liability or loss under Delaware
law. The reorganization agreement provides that Microchip will, for a period of
six years, maintain in effect the directors' and officers' liability policies
maintained by TelCom.
Insofar as indemnification for liabilities arising pursuant to the above
provisions, Microchip has been informed by the Securities and Exchange
Commission that this indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Rights Plan
Microchip. Effective October 11, 1999, Microchip adopted an Amended and
Restated Preferred Shares Rights Agreement between Microchip and Norwest Bank,
Minnesota, N.A., as rights agent, which amends and restates the Preferred Share
Rights Agreement adopted by Microchip as of February 13, 1995. Under the
earlier rights agreement, on February 13, 1995, Microchip's Board of Directors
declared a dividend of one right to purchase one one-hundredth of a share of
Microchip's Series A preferred stock for each outstanding share of common
stock, $.001 par value, of Microchip. The dividend was payable on February 24,
1995 to stockholders of record as of the close of business on that date.
Under the new rights agreement, which supersedes the earlier rights
agreement, each right enables the holder to purchase from Microchip one one-
hundredth of a share of Series A preferred stock at a purchase price of
$111.11, subject to adjustment. Also, under the new rights agreement, the
rights become exercisable upon the earlier of: (i) 10 days following the public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of Microchip's outstanding common stock, or (ii) 10 days (or later as may be
determined by Microchip's Board of Directors) following the commencement, or
announcement of an intention to make a tender offer or exchange offer resulting
in the beneficial ownership by a person or group of 15% or more of the
outstanding common shares. Once the rights become exercisable, the holders of
the rights will be entitled to receive, upon exercise and payment of the
$111.11 purchase price per right, one one-hundredth of a share of the Series A
preferred stock. Unless the rights have been earlier redeemed, in the event
that person acquires 15% or more of Microchip's outstanding common stock, then
each holder of a right that has not previously been exercised (other than
rights beneficially owned by that acquiring person that will thereafter be
void) will thereafter have the right to
69
<PAGE>
receive, upon exercise, common shares equal to two times the $111.11 purchase
price. Similarly, unless the Rights are earlier redeemed, in the event that,
after a person becomes the beneficial owner of 15% or more of Microchip's
outstanding common stock (i) Microchip is acquired in a merger or other
business combination transaction, or (ii) 50% or more of Microchip's
consolidated assets or earning power are sold (other than in a transaction in
the ordinary course of business), provision will be made so that each holder of
a right that has not previously been exercised (other than rights beneficially
owned by that acquiring person that will thereafter be void) will thereafter
have the right to receive, upon exercise, shares of common stock of the
acquiring company having a value equal to two times the $111.11 purchase price.
TelCom. On November 12, 1998, the Board of Directors of TelCom adopted a
rights agreement between TelCom and ChaseMellon Shareholder Services, LLC, as
rights agent, that declared a dividend of one right to purchase one share of
TelCom Series A preferred stock for each outstanding share of common stock of
TelCom. The dividend was payable on December 1, 1998 to stockholders of record
as of the close of business on that date.
Under the TelCom rights agreement, each right entitles the registered holder
to purchase from TelCom one share of Series A preferred stock at an exercise
price of $30.00, subject to adjustment. Also, under the rights agreement, the
rights become exercisable upon the earlier of: (i) 10 days following the public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of TelCom's outstanding common stock, or (ii) 10 business days (or later as may
be determined by TelCom's Board of Directors) following the commencement, or
announcement of an intention to make a tender offer or exchange offer resulting
in the beneficial ownership by a person or group of 15% or more of the
outstanding common shares. Once the rights become exercisable, the holders of
the rights will be entitled to receive, upon exercise and payment of the $30.00
purchase price per right, one one-thousandth of a share of the TelCom Series A
preferred stock. Unless the rights have been earlier redeemed, in the event
that a person acquires 15% or more of TelCom's outstanding common stock, then
each holder of a right that has not previously been exercised (other than
rights beneficially owned by that acquiring person that will thereafter be
void) will thereafter have the right to receive, upon exercise, common shares
equal to two times the $30.00 purchase price. Similarly, unless the rights are
earlier redeemed, in the event that, after a person acquires 15% or more of
TelCom's outstanding common stock, (i) TelCom is acquired in a merger or other
business combination transaction, or (ii) 50% or more of TelCom's consolidated
assets or earning power are sold (other than in a transaction in the ordinary
course of business), provision will be made so that each holder of a right that
has not previously been exercised (other than rights beneficially owned by that
acquiring person that will thereafter be void) will thereafter have the right
to receive, upon exercise, shares of common stock of the acquiring company
having a value equal to two times the $30.00 purchase price.
TelCom has amended its rights agreement to exclude the merger and the stock
option agreement from triggering any rights of holders under the rights
agreement.
No Restrictions on Sales of Stock
Microchip is a public company the shares of which are listed and traded on
The Nasdaq Stock Market's National Market. As a result, the Microchip
certificate and Microchip bylaws do not provide for any restrictions on the
transfer of outstanding shares, other than those imposed by federal securities
laws for shares offered under exempt transactions.
Inspection of Stockholders List
Delaware law permits any stockholder upon written demand under oath stating
the purpose thereof to inspect (during regular business hours) a corporation's
stock ledger, a list of its stockholders and its other books and records and to
make copies of extracts therefrom for any purpose. If the corporation refuses
such request, or fails to respond within five business days after the demand
has been made, the stockholder may petition the court for an order to compel
such inspection. The court may prescribe limitations or conditions upon the
inspection, or award any other or further relief the court deems just and
proper.
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Dissenters' Rights
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal or dissenters' rights pursuant to which such stockholder may receive
cash in the amount of the fair market value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction.
Under Delaware law, such appraisal rights are not available
. with respect to a merger or consolidation by a corporation the shares of
which are either listed on a national securities exchange designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or are held of record by
more than 2,000 holders, or
. to stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the
merger because the reorganization agreement does not amend the existing
certificate of incorporation, each share of the surviving corporation
outstanding prior to the merger is an identical outstanding or treasury
share after the merger, and the number of shares to be issued in the
merger does not exceed twenty percent (20%) of the shares of the
surviving corporation outstanding immediately prior to the merger and if
other conditions are met.
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SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS,
MANAGEMENT AND DIRECTORS OF TELCOM
The following table sets forth information concerning the beneficial
ownership of common stock of TelCom as of November 27, 2000 for the following:
. each person or entity who is known by TelCom to own beneficially more
than 5% of the outstanding shares of TelCom common stock
. each of TelCom's current directors
. the chief executive officer and other highly compensated officers of
TelCom, and
. all directors and executive officers of TelCom as a group.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Exchange Act and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rule, beneficial ownership includes any shares as to which the individual
or entity has voting power or investment power and any shares that the
individual has the right to acquire within 60 days through the exercise of any
stock option or other right. Unless otherwise indicated in the footnotes or
table, each person or entity has sole voting and investment power (or shares
such powers with his or her spouse) with respect to the shares shown as
beneficially owned and has an address of c/o TelCom Semiconductor, Inc., 1300
Terra Bella Avenue, Mountain View, California 94039-7267.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name and Address of Beneficial Owner Ownership of Class
------------------------------------ ---------- --------
<S> <C> <C>
Phillip M. Drayer(1)........................................ 715,801 3.9%
Robert G. Gargus(2)......................................... 131,965 *
Edward D. Mitchell(3)....................................... 166,560 *
Edward Browder(4)........................................... 91,643 *
Thomas J. Grune(5).......................................... 35,401 *
Ken Rose(6)................................................. 71,281 *
Mark M. Brown............................................... -- *
T. Peter Thomas(7).......................................... 90,933 *
Donald E. Fowler(8)......................................... 70,000 *
Frank Gill(9)............................................... 28,000 *
All directors and executive officers as a group(10)......... 1,401,584 7.4%
</TABLE>
--------
* Less than 1%.
(1) Includes 106,770 shares of TelCom common stock issuable upon the exercise
of options that are exercisable within 60 days of November 27, 2000.
(2) Includes 125,000 shares of TelCom common stock issuable upon the exercise
of options that are exercisable within 60 days of November 27, 2000.
(3) Includes 163,560 shares of TelCom common stock issuable upon the exercise
of options that are exercisable within 60 days of November 27, 2000.
(4) Includes 83,230 shares of TelCom common stock issuable upon the exercise
of options that are exercisable within 60 days of November 27, 2000.
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(5) Includes 35,279 shares of TelCom common stock issuable upon the exercise
of options that are exercisable within 60 days of November 27, 2000.
(6) Includes 56,959 shares of TelCom common stock issuable upon the exercise
of options that are exercisable within 60 days of November 27, 2000.
(7) Includes 15,000 shares of TelCom common stock issuable upon the exercise
of options that are exercisable upon a change of control of TelCom.
(8) Includes 18,000 shares of TelCom common stock issuable upon the exercise
of options that are exercisable upon a change of control of TelCom.
(9) Includes 18,000 shares of TelCom common stock issuable upon the exercise
of options that are exercisable upon a change of control of TelCom.
(10) Includes 621,798 shares of TelCom common stock issuable upon exercise of
options that are exercisable within 60 days of November 27, 2000 or that
are exercisable upon a change of control of TelCom.
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LEGAL OPINION
The validity of the shares of Microchip common stock offered by this proxy
statement/prospectus will be passed upon for Microchip by Wilson Sonsini
Goodrich & Rosati, Professional Corporation.
EXPERTS
The consolidated financial statements of Microchip Technology Incorporated
as of March 31, 2000 and 1999, and for each of the years in the three-year
period ended March 31, 2000, have been incorporated by reference herein in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the said firm as experts in
accounting and auditing.
The financial statements of TelCom Semiconductor, Inc. incorporated in this
proxy statement/prospectus by reference to the TelCom Semiconductor, Inc.
Annual Report on Form 10-K for the year ended December 31, 1999, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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WHERE YOU CAN FIND MORE INFORMATION
This proxy statement/prospectus incorporates documents by reference that are
not presented in or delivered with this proxy statement/prospectus.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 after the date of this proxy
statement/prospectus and before the date of the special meeting are
incorporated by reference into and to be a part of this proxy
statement/prospectus from the date of filing of those documents.
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different.
The following documents, which were filed by TelCom with the Securities and
Exchange Commission, are incorporated by reference into this proxy
statement/prospectus:
. TelCom's Annual Report on Form 10-K for the fiscal year ended December
31, 1999
. TelCom's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000
. TelCom's Quarterly Report on Form 10-Q for the quarter ended June 30,
2000
. TelCom's Quarterly Report on Form 10-Q for the quarter ended September
30, 2000
. TelCom's Current Report on Form 8-K filed on October 30, 2000, and
. TelCom's Current Report on Form 8-K filed on November 20, 2000.
The following documents, which have been filed by Microchip with the
Securities and Exchange Commission, are incorporated by reference into this
proxy statement/prospectus:
. Microchip's Annual Report on Form 10-K for the fiscal year ended March
31, 2000
. Microchip's Quarterly Report on Form 10-Q for the quarter ended June 30,
2000
. Microchip's Quarterly Report on Form 10-Q for the quarter ended September
30, 2000
. Microchip's Current Report on Form 8-K filed on July 26, 2000
. Microchip's Current Report on Form 8-K filed on October 30, 2000
. the description of Microchip common stock contained in Microchip's
Registration Statement on Form 8-A filed on February 5, 1993, and any
amendment or report filed for the purpose of updating such description,
and
. the description of Microchip preferred share purchase rights contained in
Microchip's Registration Statement on Form 8-A filed on February 14,
1995, including any amendment or report updating such description.
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this proxy statement/prospectus will be deemed
to be modified or superseded for purposes of this proxy statement/prospectus to
the extent that a statement contained in this proxy statement/prospectus or any
other subsequently filed document that is deemed to be incorporated by
reference into this proxy statement/prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this proxy
statement/prospectus.
The documents incorporated by reference into this proxy statement/prospectus
are available from us upon request. We will provide a copy of any and all of
the information that is incorporated by reference in this proxy
statement/prospectus (not including exhibits to the information unless those
exhibits are specifically incorporated by reference into this proxy
statement/prospectus) to any person, without charge, upon written or oral
request. Any request for documents should be made by January 4, 2001 to ensure
timely delivery of the documents.
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<TABLE>
<S> <C>
Requests for documents relating to TelCom Requests for documents relating to Microchip
should be directed to: should be directed to:
TelCom Semiconductor, Inc. Microchip Technology Incorporated
1300 Terra Bella Avenue 2355 West Chandler Boulevard
Mountain View, California 94039-7267 Chandler, Arizona 85224-6199
(650) 215-5213 (480) 786-7200
Attention: Investor Relations
</TABLE>
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Copies of our reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC at:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
<TABLE>
<S> <C>
Reports, proxy statements and other Reports, proxy statements and other
information concerning TelCom may be information regarding Microchip may be
inspected at: inspected at:
The National Association of The National Association of
Securities Dealers Securities Dealers
1735 K Street, N.W. 1735 K Street, N.W.
Washington, D.C. 20006 Washington, D.C. 20006
</TABLE>
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy and information statements and
other information regarding each of us. The address of the SEC website is
http://www.sec.gov.
Microchip has filed a registration statement on Form S-4 under the
Securities Act with the Securities and Exchange Commission with respect to
Microchip's common stock to be issued to TelCom stockholders in the merger.
This proxy statement-prospectus constitutes the prospectus of Microchip filed
as part of the registration statement. This proxy statement/prospectus does not
contain all of the information set forth in the registration statement because
parts of the registration statement are omitted in accordance with the rules
and regulations of the SEC. The registration statement and its exhibits are
available for inspection and copying as set forth above.
If you have any questions about the merger, please call TelCom Investor
Relations at (650) 215-5213. You may also call Microchip Investor Relations at
(480) 792-7200.
This proxy statement/prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this proxy
statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or
from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction. Neither
the delivery of this proxy statement/ prospectus nor any distribution of
securities pursuant to this proxy statement/prospectus shall, under any
circumstances, create any implication that there has been no change in the
information set forth or incorporated into this proxy statement/prospectus by
reference or in our affairs since the date of this proxy statement/prospectus.
The information contained in this proxy statement/prospectus with respect to
TelCom and its subsidiaries was provided by TelCom and the information
contained in this proxy statement/prospectus with respect to Microchip was
provided by Microchip.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MICROCHIP TECHNOLOGY INCORPORATED,
MATCHBOX ACQUISITION CORP.
AND
TELCOM SEMICONDUCTOR, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I THE MERGER...................................................... A-1
Section 1.01 The Merger.................................................. A-1
Section 1.02 Effective Time; Closing..................................... A-2
Section 1.03 Effect of the Merger........................................ A-2
Section 1.04 Certificate of Incorporation; Bylaws........................ A-2
Section 1.05 Directors and Officers...................................... A-2
Section 1.06 Effect on Capital Stock..................................... A-2
Section 1.07 Surrender of Certificates................................... A-3
Section 1.08 No Further Ownership Rights in Company Common Stock......... A-4
Section 1.09 Lost, Stolen or Destroyed Certificates...................... A-4
Section 1.10 Tax and Accounting Consequences............................. A-5
Section 1.11 Taking of Necessary Action; Further Action.................. A-5
ARTICLE II REPRESENTATION AND WARRANTIES OF THE COMPANY................... A-5
Section 2.01 Organization and Qualification; Subsidiaries................ A-5
Section 2.02 Certificate of Incorporation and Bylaws..................... A-6
Section 2.03 Capitalization.............................................. A-6
Section 2.04 Authority Relative to this Agreement........................ A-7
Section 2.05 No Conflict; Required Filings and Consents.................. A-8
Section 2.06 Legal Compliance; Permits................................... A-8
Section 2.07 SEC Filings; Financial Statements........................... A-9
Section 2.08 No Undisclosed Liabilities.................................. A-9
Section 2.09 Absence of Certain Changes or Events........................ A-9
Section 2.10 Absence of Litigation....................................... A-10
Section 2.11 Employee Benefit Plans...................................... A-10
Section 2.12 Registration Statement; Proxy Statement..................... A-12
Section 2.13 Restrictions on Business Activities......................... A-12
Section 2.14 Title to Property........................................... A-12
Section 2.15 Taxes....................................................... A-13
Section 2.16 Brokers..................................................... A-14
Section 2.17 Intellectual Property....................................... A-14
Section 2.18 Agreements, Contracts and Commitments....................... A-16
Section 2.19 Opinion of Financial Advisor................................ A-17
Section 2.20 Board Approval.............................................. A-17
Section 2.21 Vote Required............................................... A-18
Section 2.22 Company Rights Agreement.................................... A-18
Section 2.23 Pooling of Interests........................................ A-18
Section 2.24 Labor Matters............................................... A-18
Section 2.25 Environmental Matters....................................... A-18
Section 2.26 Insurance................................................... A-18
Section 2.27 State Takeover Statutes..................................... A-19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....... A-19
Section 3.01 Organization and Qualification; Subsidiaries................ A-19
Section 3.02 Certificate of Incorporation and Bylaws..................... A-19
Section 3.03 Capitalization.............................................. A-20
Section 3.04 Authority Relative to this Agreement........................ A-20
Section 3.05 No Conflict; Required Filings and Consents.................. A-20
Section 3.06 No Legal Compliance......................................... A-21
Section 3.07 SEC Filings; Financial Statements........................... A-21
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 3.08 No Undisclosed Liabilities................................ A-21
Section 3.09 Absence of Certain Changes or Events...................... A-22
Section 3.10 Absence of Litigation..................................... A-22
Section 3.11 Registration Statement; Proxy Statement................... A-22
Section 3.12 Taxes..................................................... A-22
Section 3.13 Brokers................................................... A-23
Section 3.14 Intellectual Property..................................... A-23
Section 3.15 Opinion of Financial Advisor.............................. A-23
Section 3.16 Board Approval............................................ A-23
Section 3.17 Pooling of Interests...................................... A-23
Section 3.18 State Takeover Statutes................................... A-23
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................... A-24
Section 4.01 Conduct of Business by Company............................ A-24
Section 4.02 Conduct of Business by Parent............................. A-26
ARTICLE V ADDITIONAL AGREEMENTS......................................... A-27
Section 5.01 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations........................... A-27
Section 5.02 Stockholder Meeting....................................... A-28
Section 5.03 Confidentiality; Access to Information.................... A-29
Section 5.04 No Solicitation........................................... A-29
Section 5.05 Public Disclosure......................................... A-30
Section 5.06 Commercially Reasonable Efforts; Notification............. A-31
Section 5.07 Third Party Consents...................................... A-31
Section 5.08 Stock Options; ESPP and Employee Benefits................. A-32
Section 5.09 Form S-8.................................................. A-33
Section 5.10 Indemnification........................................... A-33
Section 5.11 Affiliate Agreements; Pooling Actions..................... A-34
Section 5.12 Regulatory Filings; Reasonable Efforts.................... A-34
Section 5.13 Action by Board of Directors.............................. A-34
Section 5.14 Nasdaq Listing............................................ A-34
ARTICLE VI CONDITIONS TO THE MERGER..................................... A-35
Conditions to Obligations of Each Party to Effect the
Section 6.01 Merger.................................................... A-35
Section 6.02 Additional Conditions to Obligations of Company........... A-35
Additional Conditions to the Obligations of Parent and
Section 6.03 Merger Sub................................................ A-36
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER........................... A-36
Section 7.01 Termination............................................... A-36
Section 7.02 Notice of Termination; Effect of Termination.............. A-38
Section 7.03 Fees and Expenses......................................... A-38
Section 7.04 Amendment................................................. A-39
Section 7.05 Extension; Waiver......................................... A-39
ARTICLE VIII GENERAL PROVISIONS......................................... A-39
Section 8.01 Non-Survival of Representations and Warranties............ A-39
Section 8.02 Notices................................................... A-39
Section 8.03 Interpretation............................................ A-40
Section 8.04 Counterparts.............................................. A-41
Section 8.05 Entire Agreement; Third Party Beneficiaries............... A-41
Section 8.06 Severability.............................................. A-41
Section 8.07 Other Remedies; Specific Performance...................... A-41
Section 8.08 Governing Law............................................. A-41
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 8.09 Rules of Construction....................................... A-41
Section 8.10 Assignment.................................................. A-41
Section 8.11 Waiver of Jury Trial........................................ A-42
INDEX OF EXHIBITS
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Stock Option Agreement
Exhibit C-1 Form of Company Affiliate Agreement
Exhibit C-2 Form of Parent Affiliate Agreement
</TABLE>
A-iii
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of October 26, 2000, among Microchip Technology Incorporated, a
Delaware corporation ("Parent"), Matchbox Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and Telcom
Semiconductor, Inc., a Delaware corporation ("Company").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("Delaware Law"), Parent,
Merger Sub and Company intend to enter into a business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger (as
defined in Section 1.01) is consistent with and in furtherance of the long-term
business strategy of Company and fair to, and in the best interests of, Company
and its stockholders, (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement, (iii) has adopted a
resolution declaring the Merger advisable and (iv) has determined unanimously
to recommend that the stockholders of Company adopt this Agreement.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and fair to, and in the best interests of, Parent and its stockholders, (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement, and (iii) has adopted a resolution declaring the Merger
advisable.
D. Concurrently with the execution of this Agreement and as a condition and
inducement to Parent's willingness to enter into this Agreement: (1) certain
stockholders of Company are entering into Voting Agreements in substantially
the form attached hereto as Exhibit A (the "Company Voting Agreements"),
(2) Company is executing and delivering a Stock Option Agreement in favor of
Parent in substantially the form attached hereto as Exhibit B (the "Stock
Option Agreement"), and (3) certain Company Affiliates are entering into
Company Affiliate Agreements in substantially the form attached hereto as
Exhibit C-1 (the "Company Affiliate Agreements").
E. Concurrently with the execution of this Agreement and as a condition and
inducement to Parent's willingness to enter into this Agreement certain Parent
Affiliates are entering into Parent Affiliate Agreements in substantially the
form attached hereto as Exhibit C-2 (the "Parent Affiliate Agreements").
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
G. It is also intended by the parties hereto that the Merger shall qualify
for accounting treatment as a "pooling of interests."
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger. At the Effective Time (as defined in Section 1.02)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation. Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
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Section 1.02 Effective Time; Closing. As soon as practicable on or after
the Closing Date (as defined in this Section 1.2), and upon the terms and
subject to the conditions of this Agreement, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in accordance
with the applicable provisions of Delaware Law (the time of such filing (or
such later time as may be agreed upon in writing by Parent and Company and
specified in the Certificate of Merger) being referred to herein as the
"Effective Time"). The closing of the Merger and the other transactions
contemplated hereby (the "Closing") shall take place at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, located at One Market,
Spear Tower, Suite 3300, San Francisco, California 94105, at a date and time to
be specified by Parent and Company, which shall be no later than the second
business day following the satisfaction or, if permitted pursuant hereto,
waiver of the conditions set forth in Article VI hereof, or at such other
location, date and time as Parent and Company shall mutually agree in writing.
The date upon which the Closing actually occurs shall be referred to herein as
the "Closing Date."
Section 1.03 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.04 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, subject to the provisions of Section 5.10, the
Certificate of Incorporation of Company shall be amended and restated to be
identical to the Certificate of Incorporation in effect for Merger Sub at the
Effective Time.
(b) Subject to the provisions of Section 5.10, the Bylaws of Company shall
be amended and restated to be those in effect for Merger Sub at the Effective
Time.
Section 1.05 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time until their successors shall have been duly elected and
qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time until their
successors shall have been duly elected and qualified.
Section 1.06 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, Company or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of common stock, par
value $0.001 per share, of Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other than any share
of Company Common Stock to be canceled and extinguished pursuant to Section
1.06(b)) will be automatically converted (subject to Sections 1.06(e) and
(f)) into a fraction of a share of Parent Common Stock (as defined below)
(the "Exchange Ratio") equal to (x) $15.00 divided by (y) the average
closing sale price of one share of common stock of Parent, par value $0.001
per share ("Parent Common Stock"), on the Nasdaq National Market during the
ten (10) trading days ending on the trading day immediately prior to the
Effective Time (the "ACP"); provided, that if the ACP is greater than
$32.61, the Exchange Ratio shall be .46, and provided, further that if the
ACP is less than $28.30, the Exchange Ratio shall be .53. If any shares of
Company Common Stock outstanding immediately prior to the Effective Time
are unvested or are subject to a repurchase option, risk of forfeiture or
other condition under any applicable restricted stock purchase agreement or
other agreement with Company, then, except to the extent otherwise provided
in such agreement, the shares of Parent Common Stock issued in exchange for
such shares of Company Common Stock will also be unvested and subject to
the same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends.
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(b) Cancellation of Company-Owned Stock. Each share of Company Common Stock
held by Company or any direct or indirect wholly-owned subsidiary of Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective Time, all
options to purchase Company Common Stock then outstanding under Company's 1994
Stock Option Plan, the Company's 1996 Director Stock Option Plan and the
Company's 2000 Non-Statutory Stock Option Plan (the "Company Option Plans"),
and the Company Option Plans themselves, shall, except as otherwise set forth
herein, be assumed by Parent in accordance with Section 5.08. At the Effective
Time, all purchase rights then outstanding under Company's 1995 Employee Stock
Purchase Plan (the "ESPP"), and the ESPP itself, shall be assumed by Parent in
accordance with Section 5.08.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.001 par
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $0.001 par
value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
or exercisable or exchangeable for Parent Common Stock or Company Common
Stock), extraordinary cash dividend, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to Parent Common Stock or Company Common Stock occurring or having a
record date on or after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock that otherwise would be received by such holder) shall, upon
surrender of such holder's Certificates(s) (as defined in Section 1.07(c)),
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of one share of Parent Common Stock for the five (5)
most recent days that Parent Common Stock has traded ending on the trading day
immediately prior to the Effective Time, as reported on the Nasdaq National
Market ("Nasdaq").
Section 1.07 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall select a bank
or trust company reasonably acceptable to Company to act as the exchange agent
(the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent, for exchange in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.06(a) in exchange for outstanding shares of Company Common Stock, and
cash in an amount sufficient for payment in lieu of fractional shares pursuant
to Section 1.06(f) and any dividends or distributions to which holders of
shares of Company Common Stock may be entitled pursuant to Section 1.07(d).
(c) Exchange Procedures. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates, which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") (i) a letter of transmittal in customary form (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock pursuant to Section 1.06(a), cash in lieu of any fractional shares
pursuant to
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Section 1.06(f) and any dividends or other distributions pursuant to Section
1.07(d). Upon surrender of Certificates for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holders of such Certificates shall be
entitled to receive in exchange therefor certificates representing the number
of whole shares of Parent Common Stock into which their shares of Company
Common Stock were converted pursuant to Section 1.06(a), payment in lieu of
fractional shares which such holders have the right to receive pursuant to
Section 1.06(f) and any dividends or other distributions payable pursuant to
Section 1.07(d), and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed, from
and after the Effective Time, to evidence only the ownership of the number of
whole shares of Parent Common Stock into which such shares of Company Common
Stock shall have been so converted (including any voting, notice or other
rights associated with the ownership of such shares of Parent Common Stock
under the Certificate of Incorporation or Bylaws of Parent or under Delaware
Law) and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.06(f) and any dividends or other
distributions payable pursuant to Section 1.07(d).
(d) Distributions With Respect to Unexchanged Shares. Dividends or other
distributions declared or made after the date of this Agreement with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holders of any unsurrendered Certificates with respect to the shares of
Parent Common Stock represented thereby when the holders of record of such
Certificates surrender such Certificates.
(e) Transfers of Ownership. If certificates representing shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have (i) paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the issuance
of certificates representing shares of Parent Common Stock in any name other
than that of the registered holder of the Certificates surrendered, or (ii)
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of Company Common Stock or Company Stock Options
such amounts as may be required to be deducted or withheld therefrom under the
Code or state, local or foreign law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the person to whom such amounts would
otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this Section
1.07, neither the Exchange Agent, Parent, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
Section 1.08 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued in accordance with the terms hereof (including
any cash paid in respect thereof pursuant to Sections 1.06(f) and 1.07(d))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock. There shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
Section 1.09 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue and pay in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, certificates representing the
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shares of Parent Common Stock into which the shares of Company Common Stock
represented by such Certificates were converted pursuant to Section 1.06(a),
cash for fractional shares, if any, as may be required pursuant to Section
1.06(f) and any dividends or distributions payable pursuant to Section 1.07(d);
provided, however, that the Exchange Agent, may, in its discretion and as a
condition precedent to the issuance of such certificates representing shares of
Parent Common Stock and the payment of cash and other distributions, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent, the Surviving Corporation or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
Section 1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties
hereto adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
(b) It is intended by the parties hereto that the Merger shall qualify as a
"pooling of interests" for accounting purposes.
Section 1.11 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Company and Merger Sub, the officers and directors of
Parent and the Surviving Corporation shall be fully authorized (in the name of
Merger Sub, Company, the Surviving Corporation and otherwise) to take all such
necessary action.
ARTICLE II
REPRESENTATION AND WARRANTIES OF THE COMPANY
Company represents and warrants to Parent and Merger Sub, subject to such
exceptions as are disclosed in writing in the disclosure letter supplied by
Company to Parent dated as of the date hereof (the "Company Schedule"), which
disclosure shall provide an exception to or otherwise qualify the
representations or warranties of Company contained in the section of this
Agreement corresponding by number to such disclosure and the other
representations and warranties herein to the extent such disclosure shall
reasonably appear to be applicable to such other representations or warranties,
as follows:
Section 2.01 Organization and Qualification; Subsidiaries.
(a) Each of Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted.
(b) Section 2.01(b) of the Company Schedule sets forth (i) each subsidiary
of Company, (ii) the ownership interest therein of Company and (iii) if not
wholly-owned by Company, the identity and ownership interest of each other
owner of such subsidiary. Neither Company nor any of its subsidiaries has
agreed to make nor is obligated to make nor is bound by any written or oral
agreement, contract, understanding, negotiable instrument, commitment or
undertaking of any nature, in effect as of the date hereof or as may hereafter
be in effect (a "Contract"), under which it may become obligated to make, any
future investment in or capital contribution to any other entity. Neither
Company nor any of its subsidiaries directly or indirectly owns any equity or
similar interest in or any interest convertible, exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business, association or entity other than the entities
identified in Section 2.01(b) of the Company Schedule.
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(c) Company and each of its subsidiaries is qualified or licensed to do
business as a foreign corporation, and is in good standing (with respect to
jurisdictions which recognize such concept), under the laws of all
jurisdictions where the character of the properties owned, leased or operated
by them or the nature of their activities requires such qualification or
licensing, except where the failure to be so qualified could not reasonably be
expected to result in a Material Adverse Effect on Company.
Section 2.02 Certificate of Incorporation and Bylaws. Company has previously
furnished to Parent a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended and in effect as of the date of this
Agreement (together, the "Company Charter Documents"). Such Company Charter
Documents and equivalent organizational documents of each of its subsidiaries
are in full force and effect. Company is not in violation of any of the
provisions of the Company Charter Documents, and no subsidiary of Company is in
violation of its equivalent organizational documents except where the violation
of any such equivalent organizational documents of a subsidiary of Company
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Company.
Section 2.03 Capitalization.
(a) The authorized capital stock of Company consists of 30,000,000 shares of
Company Common Stock, $0.001 par value per share, and 5,000,000 shares of
preferred stock, $0.001 par value per share, 30,000 of which are designated
Series A Participating Preferred Stock ("Company Preferred Stock"). As of the
close of business on September 30, 2000, (i) 18,290,106 shares of Company
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and were not issued in violation of any preemptive
rights, right of first refusal, or any similar rights; (ii) no shares of
Company Preferred Stock were issued or outstanding; (iii) no shares of Company
Common Stock were held in Company's treasury; (iv) no shares of Company Common
Stock were held by subsidiaries of Company; (v) 347,750 shares of Company
Common Stock were reserved for future issuance pursuant to the ESPP; (vi)
288,330 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under
Company's 1994 Stock Option Plan; (vii) 126,800 shares of Company Common Stock
were reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under Company's 2000 Nonstatutory Stock Option Plan; and
(viii) 39,000 shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding options to purchase Company Common Stock under
Company's 1996 Director Stock Option Plan.
(b) Section 2.03(b) of the Company Schedule sets forth the following
information with respect to outstanding Company Stock Options (as defined in
Section 5.08) as of September 30, 2000 the total number of shares of Company
Common Stock subject to such Company Stock Options (which number is not
exceeded by the number of shares of Company Common Stock subject to Company
Stock Options outstanding on the date of this Agreement).
(c) Company has made available to Parent accurate and complete copies of all
stock option plans pursuant to which Company has granted such Company Stock
Options that are outstanding as of September 30, 2000 and the form of all stock
option agreements evidencing such Company Stock Options. Section 2.03(c) of the
Company Schedule has attached to it Company's option schedule, which schedule
shall set forth, with respect to each Company Stock Option, the name of the
holder thereof, the number of shares subject thereto, and the grant date,
exercise price, expiration date and vesting schedule thereof.
(d) There are no commitments or agreements of any character to which Company
is bound obligating Company to accelerate the vesting of any Company Stock
Option as a result of the Merger. All outstanding shares of Company Common
Stock, all outstanding Company Stock Options, and all outstanding shares of
capital stock of each subsidiary of Company have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements (as defined below) in effect as of the time of grant and issuance
and (ii) all requirements set forth in applicable Contracts by which Company is
bound and which were in effect as of the time of grant and issuance. "Legal
Requirements" means any federal, state, local, municipal,
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foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any court, administrative agency,
commission, governmental or regulatory authority, domestic or foreign (a
"Governmental Entity").
(e) There are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding, except for securities Company
owns free and clear of all liens, pledges, hypothecations, charges, mortgages,
security interests, encumbrances, claims, options, rights of first refusal,
preemptive rights, community property interests or similar restriction
(including any restriction on the voting of any security, any restriction on
the transfer of any security or other asset, any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset)
("Encumbrances") directly or indirectly through one or more subsidiaries.
(f) Except as set forth in Sections 2.03(a) and 2.03(d) hereof and except
for the Stock Option Agreement, as of the date hereof, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive, purchase or
conversion rights), commitments or agreements of any character to which Company
or any of its subsidiaries is a party or by which it is bound obligating
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Company or any of its
subsidiaries or obligating Company or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement.
(g) As of the date of this Agreement, except as contemplated by this
Agreement, there are no registration rights and there is, except for the
Company Voting Agreements and the Company Rights Plan (as defined in Section
2.22), no voting trust, proxy, rights plan, antitakeover plan or other
agreement currently in effect to which Company or any of its subsidiaries is a
party or by which they are bound with respect to any equity security of any
class of Company or with respect to any equity security, partnership interest
or similar ownership interest of any class of any of its subsidiaries.
Stockholders of Company will not be entitled to dissenters' rights under
applicable state law in connection with the Merger.
Section 2.04 Authority Relative to this Agreement. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
execute and deliver the Stock Option Agreement and the other agreements
contemplated hereby (the "Company Ancillary Agreements") and to perform its
obligations hereunder and thereunder and, subject to adoption of this Agreement
by the stockholders of Company in accordance with Delaware Law and the Company
Charter Documents, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Company Ancillary Agreements
by Company and the consummation by Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Company and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement, the Company Ancillary
Agreements or to consummate the transactions contemplated hereby and thereby
(other than the adoption of this Agreement by the stockholders of Company in
accordance with Delaware Law and the Company Charter Documents). This Agreement
and the Company Ancillary Agreements have been duly and validly executed and
delivered by Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub, constitute the legal and binding obligation
of Company, enforceable against Company in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application affecting the enforcement of creditors' rights and the
exercise by courts of equitable powers.
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Section 2.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the Company Ancillary
Agreements by Company do not, and the performance of this Agreement and the
Company Ancillary Agreements by Company will not, (i) conflict with or violate
the Company Charter Documents or the equivalent organizational documents of any
of Company's subsidiaries, (ii) subject to obtaining the vote of Company's
stockholders in favor of the adoption of this Agreement and to compliance with
the requirements set forth in Section 2.05(b) below, conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Company or
any of its subsidiaries or by which its or any of their respective properties
is bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or alter the rights or obligations of any third party against or to
Company under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any of the properties or assets of Company or any of its subsidiaries pursuant
to, any material mortgage, Contract, permit, franchise or other obligation to
which Company or any of its subsidiaries is a party or by which Company or any
of its subsidiaries or its or any of their respective properties are bound or
affected (a "Company Obligation"), except to the extent such conflict,
violation, breach, default, impairment or other effect could not in the case of
clauses (ii) or (iii) individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Company.
(b) The execution and delivery of this Agreement and the Company Ancillary
Agreements by Company do not, and the performance of this Agreement and the
Company Ancillary Agreements by Company shall not, require Company to obtain or
make, at or prior to the Effective Time, any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity or
third party, except (i) pursuant to applicable requirements, if any, of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities laws
("Blue Sky Laws"), the pre-merger notification requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and of
foreign Governmental Entities and the rules and regulations thereunder, the
rules and regulations of the Nasdaq, and the filing and recordation of the
Certificate of Merger as required by Delaware Law and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, (A) could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company or, after
the Effective Time, Parent, or (B) would not prevent consummation of the Merger
or otherwise prevent the parties hereto from performing their obligations under
this Agreement.
Section 2.06 Legal Compliance; Permits.
(a) Neither Company nor any of its subsidiaries is in conflict with, or in
default or violation of, any Legal Requirement or Company Obligation, except
for any conflicts, defaults or violations that (individually or in the
aggregate) would not cause Company to lose any material benefit or incur any
material liability. No charge, complaint, claim, demand, notice, inquiry,
investigation, action, suit, proceeding, hearing or review by any Governmental
Entity is pending or, to the knowledge of Company, being threatened against
Company or its subsidiaries, nor, to Company's knowledge, has any Governmental
Entity indicated to Company in writing an intention to conduct the same, other
than, in each such case, those the outcome of which could not, individually or
in the aggregate, reasonably be expected to have the effect of prohibiting or
materially restricting any business practice of Company or any of its
subsidiaries, any acquisition of material property by Company or any of its
subsidiaries or the conduct of business by Company or any of its subsidiaries.
(b) Company and its subsidiaries hold all franchises, grants,
authorizations, permits, licenses, variances, exemptions, easements, consents,
certifications, orders and approvals from Governmental Entities which are
necessary to the operation of the business of Company and its subsidiaries
taken as a whole (collectively, the "Company Permits"); and Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to hold or be in compliance with the terms of such Company
Permits would not reasonably be expected to have a Material Adverse Effect on
Company.
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Section 2.07 SEC Filings; Financial Statements.
(a) Company has made available to Parent (through reference to documents
filed by EDGAR or otherwise) a correct and complete copy of each report,
schedule, registration statement and definitive proxy statement filed by
Company with the Securities and Exchange Commission ("SEC") since December 31,
1997 (the "Company SEC Reports"), which are all the forms, reports and
documents required to be filed by Company with the SEC since such date. As of
their respective dates, the Company SEC Reports (A) were prepared in accordance
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and (B) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Company does not have any subsidiaries that are required to
file any reports or other documents with the SEC.
(b) Each set of financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports was prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto and except that unaudited statements do not contain footnotes in
substance or form required by GAAP, as is permitted by Form 10-Q of the
Exchange Act) and each fairly presents in all material respects the financial
position of Company at the respective dates thereof and the results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal year-end
adjustments.
(c) Company has previously furnished to Parent a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed after the date hereof, to agreements,
documents or other instruments which previously had been filed by Company with
the SEC pursuant to the Securities Act or the Exchange Act.
Section 2.08 No Undisclosed Liabilities. Neither Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations, assets or financial condition of Company and its subsidiaries taken
as a whole, except (i) liabilities disclosed or provided for in Company's
unaudited balance sheet as of June 30, 2000 set forth in the Company SEC
Reports or in the related notes, (ii) liabilities incurred since June 30, 2000
and on or prior to the date hereof in the ordinary course of business which
have not resulted, in the aggregate, in any material increase in Company's
liabilities from those disclosed or provided for in Company's unaudited balance
sheet as of June 30, 2000 set forth in the Company SEC Reports or in the
related notes, or (iii) liabilities incurred after the date hereof in the
ordinary course of business.
Section 2.09 Absence of Certain Changes or Events. Since June 30, 2000,
there has not been: (i) any Material Adverse Effect on Company, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Company's or any of
its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Company of any of Company's capital stock or any other
securities of Company or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
from employees following their termination pursuant to the terms of their pre-
existing stock option or purchase agreements, (iii) any split, combination or
reclassification of any of Company's or any of its subsidiaries' capital stock,
(iv) any granting by Company or any of its subsidiaries of any material
increase in compensation or fringe benefits, except for normal increases in the
ordinary course of business consistent with past practice, or any payment by
Company or any of its subsidiaries of any bonus, except for bonuses made in the
ordinary course of business consistent with past practice, or any granting by
Company or any of its subsidiaries of any increase in severance or termination
pay or any entry by Company or any of its subsidiaries into any currently
effective employment, severance, termination or indemnification agreement or
any agreement the benefits of which would be contingent or the
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terms of which would be materially altered upon the consummation of the
transactions contemplated hereby, (v) entry by Company or any of its
subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property (as defined in Section
2.17) other than licenses disclosed in Section 2.17(g) of the Company Schedule,
(vi) any amendment or consent with respect to any licensing agreement filed or
required to be filed by Company with the SEC, (vii) any material change by
Company in its accounting methods, principles or practices, except as required
by concurrent changes in GAAP, (viii) any material revaluation by Company of
any of its assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any sale
of assets of Company other than in the ordinary course of business, or (x) any
material Tax elections made or a change of tax accounting method.
Section 2.10 Absence of Litigation. Except as specifically disclosed in the
Company SEC Reports, as of the date hereof, there are no material claims,
actions, suits or proceedings pending or, to the knowledge of Company,
threatened (or, to the knowledge of Company, any governmental or regulatory
investigation pending or threatened) against Company or any of its subsidiaries
or any properties or rights of Company or any of its subsidiaries, before any
Governmental Entity.
Section 2.11 Employee Benefit Plans.
(a) All material employee compensation, incentive, fringe or benefit plans,
programs, policies, commitments or other similar arrangements (whether or not
set forth in a written document and including, without limitation, all
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) covering any
active employee, former employee, director or consultant of Company, any
subsidiary of Company or any trade or business (whether or not incorporated)
which is a member of a controlled group or which is under common control with
Company within the meaning of Section 414 of the Code (an "ERISA Affiliate") or
(ii) with respect to which Company has material liability as of the date
hereof, and covering any active, former employee, director or consultant of
Company, any subsidiary of Company or any ERISA Affiliate are listed in Section
2.11(a) of the Company Schedule (the "Plans"). Except with respect to
International Employee Plans (as defined in Section 2.11(h) below) that provide
benefits primarily to comply with applicable local laws, Company has provided
or made available to Parent: (i) correct and complete copies of all documents
embodying each Plan including (without limitation) all amendments thereto, and
all related trust documents; (ii) the three (3) most recent annual reports
(Form Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Plan; (iii)
the most recent summary plan description, as applicable, together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Plan; (iv) the most recent IRS determination, opinion,
notification and advisory letters; (v) all material correspondence to or from
any governmental agency relating to an actual or potential liability under any
Plan; (vi) all forms of notice and election documents related to the
Consolidated Omnibus Budget Reconciliation Plan of 1985, as amended ("COBRA");
(vii) all discrimination tests performed with respect to each Plan for the most
recent three (3) plan years; (viii) the most recent annual actuarial
valuations, if any, prepared for each Plan; (xi) if the Plan is funded, the
most recent annual and periodic accounting of Plan assets; (x) all material
administrative service agreements, group annuity contracts, group insurance
contracts and similar written agreements and contracts relating to each Plan;
(xi) all material communications to employees or former employees relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules which would result in a
material liability under any Plan or proposed Plan; and (xii) all currently
effective registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with any Plan that
includes securities registered under the Securities Act.
(b) Each Plan has been maintained and administered in all material respects
in compliance with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations, including but not limited to ERISA
and the Code, which are applicable to such Plans. No suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
Plan activities) has been brought or, to the
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knowledge of Company, is threatened, against or with respect to any such Plan.
There are no audits, inquiries or proceedings pending or, to the knowledge of
Company, threatened by the Internal Revenue Service (the "IRS") or Department
of Labor (the "DOL") with respect to any Plans. All contributions, reserves or
premium payments required to be made or accrued as of the date hereof to the
Plans have been timely made or accrued. Any Plan intended to be qualified under
Section 401(a) of the Code and each related trust intended to qualify under
Section 501(a) of the Code (i) has either obtained a favorable determination,
notification, advisory and/or opinion letter, as applicable, as to its
qualified status from the IRS or still has a remaining period of time under
applicable Treasury Regulations or IRS pronouncements in which to apply for
such letter and to make any amendments necessary to obtain a favorable
determination, and (ii) incorporates or has been amended to incorporate all
provisions required to comply with the Tax Reform Act of 1986 and subsequent
legislation to the extent such amendment or incorporation is required. Company
does not have any plan or commitment to establish any new Plan or to modify any
Plan (except to the extent required by law or to conform any such Plan to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement). Each Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance
with its terms, without liability to Parent, Company or any of its ERISA
Affiliates except as otherwise provided in the Plan (other than ordinary
administration expenses and expenses for benefits accrued but not yet paid).
(c) Neither Company nor any its ERISA Affiliates has at any time ever
maintained, established, sponsored, participated in, or contributed to any plan
subject to Title IV of ERISA or Section 412 of the Code, and at no time has
Company or any of its ERISA Affiliates contributed to or been requested to
contribute to any "multiemployer plan," as such term is defined in ERISA or to
any plan described in Section 413(c) of the Code. Neither Company, any of its
ERISA Affiliates, nor, to the knowledge of Company, any officer or director of
Company or any of ERISA Affiliates is subject to any liability or penalty under
Section 4975 through 4980B of the Code or Title I of ERISA. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406
and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has
occurred with respect to any Plan which could subject Company or its
subsidiaries to material liabilities.
(d) None of the Plans promises or provides retiree medical or other retiree
welfare benefits to any person except as required by applicable law, and
neither Company nor any of its subsidiaries has represented, promised or
contracted to provide such retiree benefits to any employee, former employee,
director, consultant or other person, except (i) to the extent required by
statute or (ii) for benefits the cost of which are fully paid for by such
person.
(e) Neither Company nor any of its subsidiaries is bound by or subject to
(and none of its respective assets or properties is bound by or subject to) any
arrangement with any labor union. No employee of Company or any of its
subsidiaries is represented by any labor union or covered by any collective
bargaining agreement relating to Company or any of its subsidiaries and, to the
knowledge of Company, no campaign to establish such representation is in
progress. There is no pending or, to the knowledge of Company, threatened labor
dispute involving Company or any of its subsidiaries and any group of its
employees nor has Company or any of its subsidiaries experienced any
significant labor interruptions over the past three (3) years. Company and its
subsidiaries are in compliance in all material respects with all applicable
material foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
(f) Neither Company nor any of its ERISA Affiliates has, prior to the
Effective Time and in any material respect, violated any of the health
continuation requirements of COBRA, the requirements of the Family Medical
Leave Act of 1993, as amended, the requirements of the Womens' Health and
Cancer Rights Act, as amended, the requirements of the Newborns' and Mothers'
Health Protection Act of 1996, as amended, the requirements of the Health
Insurance Portability and Accountability Act of 1996, as amended, or any
similar provisions of state law applicable to employees of Company.
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(g) Except as required by the Code, including the effect of the termination
described in Section 5.08(c), neither the execution and delivery of this
Agreement by Company nor the consummation by Company of the transactions
contemplated hereby will (i) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any stockholder, director or employee of Company or any of its subsidiaries
under any Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Plan, or (iii) except as required by the Code, result in the
acceleration of the time of payment or vesting of any such benefits.
(h) Each Plan that has been adopted or maintained by Company or any of its
subsidiaries, whether informally or formally, for the benefit of current or
former employees of Company or any of its subsidiaries outside the United
States ("International Employee Plan") has been established, maintained and
administered in material compliance with its terms and conditions and with the
requirements prescribed by any and all statutory or regulatory laws that are
applicable to such International Employee Plan. No International Employee Plan
has unfunded liabilities that, as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law or the terms of any such
plan, no condition exists that would prevent Company or Parent from terminating
or amending any International Employee Plan at any time for any reason.
Section 2.12 Registration Statement; Proxy Statement. None of the
information supplied or to be supplied by Company for inclusion in: (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of the Parent Common Stock in or as a result of
the Merger (the "S-4") will, at the time the S-4 becomes effective under the
Securities Act, 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; and (ii) the joint proxy statement/prospectus to be
filed with the SEC by Company pursuant to Section 5.01(a) (the "Proxy
Statement/Prospectus") will, at the date mailed to the stockholders of Company,
at the time of the stockholders' meeting of Company (the "Company Stockholders'
Meeting") and at the Effective Time, in connection with the transactions
contemplated hereby, 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 Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
Company makes no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained in any of the foregoing
documents.
Section 2.13 Restrictions on Business Activities. There is no judgment,
injunction, order or decree binding upon Company or its subsidiaries or to
which Company or any of its subsidiaries is a party which has or would
reasonably be expected to have the effect of prohibiting or materially and
adversely restricting any current business practice of Company or any of its
subsidiaries, any acquisition of property by Company or any of its subsidiaries
or the conduct of business by Company or any of its subsidiaries as currently
conducted.
Section 2.14 Title to Property. Neither Company nor any of its subsidiaries
owns, nor has Company or any of its subsidiaries previously owned, any real
property. Company and each of its subsidiaries have good and valid title to, or
valid leasehold interests in, all of their material properties and assets, free
and clear of all Encumbrances except as reflected in the financial statements
contained in the Company SEC Reports and except for liens for taxes or other
governmental charges or levies not yet due and payable and such liens or other
imperfections of title, if any, that could not reasonably be expected to result
in a Material Adverse Effect on Company. All material leases or subleases
pursuant to which Company or any of its subsidiaries lease from others real or
personal property are set forth in Section 2.14 of the Company's Schedule (the
"Company Leases"). Company has delivered to Parent full and complete copies of
all Company Leases as amended to date. Each of the Company Leases is in full
force and effect in accordance with their respective terms and there is not,
under any of such leases, any existing default or event of default of Company
or any of its subsidiaries or, to Company's knowledge, any other party.
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Section 2.15 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed
with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for Taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) Company and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, forms, information statements
and reports ("Returns") relating to Taxes required to be filed by Company
and each of its subsidiaries with any Tax authority, except such Returns
which are not, individually or in the aggregate, material to Company.
Company and each of its subsidiaries have paid all Taxes required to be
paid whether or not shown to be due on such Returns.
(ii) Company and each of its subsidiaries as of the Effective Time will
have withheld with respect to its employees all federal and state income
Taxes, Taxes pursuant to the Federal Insurance Contribution Act, Taxes
pursuant to the Federal Unemployment Tax Act and other Taxes required to be
withheld, except such Taxes which are not, individually or in the
aggregate, material to Company.
(iii) Neither Company nor any of its subsidiaries has been delinquent in
the payment of any material Tax. There is no material Tax deficiency
outstanding, proposed or assessed against Company or any of its
subsidiaries. Neither Company nor any of its subsidiaries has executed any
unexpired waiver of any statute of limitations on or extension of any
period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Company or any of
its subsidiaries by any Tax authority is presently in progress, nor has
Company or any of its subsidiaries been notified of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed or required to be filed
by Company or any of its subsidiaries has been proposed in writing,
formally or informally, by any Tax authority to Company or any of its
subsidiaries or any representative thereof.
(vi) Neither Company nor any of its subsidiaries has any liability for
any material unpaid Taxes (whether or not shown to be done on any Return)
which has not been accrued for or reserved on Company's balance sheet dated
June 30, 2000 in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Company, other than any
liability for unpaid Taxes that may have accrued since April 1, 2000 in
connection with the operation of the business of Company and its
subsidiaries in the ordinary course. There are no liens with respect to
Taxes on any of the assets of Company or any of its subsidiaries, other
than liens which are not individually or in the aggregate material, or
customary liens for current Taxes not yet due and payable.
(vii) There is no contract, agreement, plan or arrangement to which
Company or any of its subsidiaries is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
that, individually or collectively, should give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or
162(m) of the Code. There is no contract, agreement, plan or arrangement to
which Company or any of its subsidiaries is a party or by which it is bound
to compensate any individual for excise taxes paid pursuant to Section 4999
of the Code.
(viii) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by Company or any of
its subsidiaries.
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(ix) Neither Company nor any of its subsidiaries is party to or has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement.
(x) None of Company's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(xi) Neither Company nor any of its subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (x) in the two years prior to the date of this Agreement or (y)
in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
(xii) Company and each of its subsidiaries are in full compliance with
all terms and conditions of any Tax exemptions, Tax holiday or other Tax
reduction agreement or order of a territorial or foreign government and the
consummation of the Merger will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions, Tax
holiday or other Tax reduction agreement or order.
(xiii) Company has not been and will not be required to include any
adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision
under State or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the closing.
(xiv) Company has never been a member of an affiliated group of
companies within the meaning of Section 1504 of the Code. Company has no
liability for Taxes of any Person other than Company (i) under Section
1502-6 of the Treasury regulations (or any comparable provisions under
state or foreign law) or (ii) as a transferee or successor.
Section 2.16 Brokers. Except for fees payable to each of Broadview
International LLC, pursuant to an engagement letter dated September 16,
1999, 2000, and fees payable to C.E. Unterberg, Towbin, pursuant to an
engagement letter dated August 30, 2000 (as amended September 25, 2000) a
copy of each of which has been provided to Parent, Company has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders fees or agent's commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
Section 2.17 Intellectual Property. For the purposes of this Agreement,
the following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("Patents"); (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii)
copyrights, copyright registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv) domain names,
uniform resource locators ("URLs") and other names and locators associated
with the Internet ("Domain Names"); (v) industrial designs and any
registrations and applications therefor; (vi) trade names, logos, common
law trademarks and service marks, trademark and service mark registrations
and applications therefor; (vii) all databases and data collections and all
rights therein; (viii) all moral and economic rights of authors and
inventors, however denominated; and (ix) any similar or equivalent rights
to any of the foregoing (as applicable).
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Company and its subsidiaries.
"Registered Intellectual Property" means all Intellectual Property that
is the subject of an application, certificate, filing, registration or
other document issued, filed with, or recorded by any private, state,
government or other legal authority and that has not been abandoned or
allowed to lapse.
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"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Company or any of
its subsidiaries.
(a) Section 2.17(a) of the Company Schedule is a complete and accurate list
of all Company Registered Intellectual Property which specifies the
jurisdictions in which each such item of Company Registered Intellectual
Property has been issued or registered and lists any proceedings or actions
before any court or tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to
any of the Company Registered Intellectual Property.
(b) No Company Intellectual Property or product or service offering of
Company or any of its subsidiaries (a "Company Product") is subject to any
proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation (other than those imposed by applicable law)
restricting in any manner by its terms the use, transfer, or licensing thereof
by Company or any of its subsidiaries, or which may affect the validity, use or
enforceability of such Company Intellectual Property or Company Product.
(c) Each item of Company Registered Intellectual Property is, to the
knowledge of Company, valid and subsisting. All necessary registration,
maintenance and renewal fees currently due in connection with such Company
Registered Intellectual Property have been made. All necessary documents,
recordations and certificates in connection with such Company Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions,
as the case may be, for the purposes of maintaining such Company Registered
Intellectual Property, except, in such case, as would not materially adversely
affect such item of Company Registered Intellectual Property.
(d) Company or one of its subsidiaries owns and has good title to or has all
necessary licenses to each material item of Company Intellectual Property free
of any Encumbrance (excluding rights of licensor and non-exclusive licenses and
related restrictions granted in the ordinary course). In this paragraph the
term "Encumbrance" excludes infringement of Company Intellectual Property by
third parties.
(e) To the extent that any Intellectual Property that has been developed or
created independently by a third party or jointly with a third party for
Company or any of its subsidiaries is used by Company or any of its
subsidiaries or is incorporated into any Company Products, Company has a
written agreement with such third party with respect thereto and Company
thereby either (i) has obtained ownership of, and is the exclusive owner of, or
(ii) has obtained a perpetual, non-terminable license to all such Intellectual
Property.
(f) Neither Company nor any of its subsidiaries has transferred ownership
of, or granted any exclusive license with respect to, any material Company
Intellectual Property, to any third party.
(g) Section 2.17(g) of the Company Schedule lists all material contracts,
licenses and agreements to which Company or any of its subsidiaries is a party:
(i) with respect to Company Intellectual Property licensed or transferred to
any third party (other than end-user licenses in the ordinary course); (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to Company or any of its subsidiaries; or (iii) by which Company has
agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse,
hold harmless, guarantee or otherwise assume or incur any obligation or
liability to provide a right of rescission with respect to the infringement or
misappropriation by Company or such other person of Intellectual Property
Rights of anyone other than Company.
(h) All contracts, licenses and agreements listed in Section 2.17(g) of the
Company Schedule are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension
("Termination") of such contracts, licenses and agreements by their terms. Each
of Company and its subsidiaries is in compliance with any such contracts,
licenses and agreements. To the knowledge of Company, all other parties to such
contracts, licenses and agreements are in material compliance with, and have
not breached any term of, such contracts, licenses and agreements, which breach
has not been cured. Following the Closing Date, the Surviving Corporation will
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be permitted to exercise all of Company's rights under such contracts, licenses
and agreements by their terms to the same extent Company and its subsidiaries
would have been able to had the transactions contemplated by this Agreement not
occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which Company would otherwise be
required to pay. There is no provision in any of Company's contracts or
agreements which, as a result of this Agreement and the transactions
contemplated by this Agreement, requires Parent or Merger Sub to (i) grant to
any third party any right to or with respect to any material Intellectual
Property owned by, or licensed to, either of them, (ii) be bound by, or subject
to, any non-compete or other material restriction on the operation or scope of
their respective businesses, or (iii) be obligated to pay any royalties or
other material amounts to any third party in excess of those payable by Parent
or Merger Sub, respectively, prior to the Closing.
(i) Company's and its subsidiaries' design, development, manufacture,
distribution, reproduction, marketing or sale of the products of Company and
its subsidiaries has not infringed or misappropriated and does not infringe or
misappropriate the Intellectual Property of any third party, and does not
constitute unfair competition or trade practices under the laws of any
jurisdiction.
(j) Neither Company nor any of its subsidiaries has received written notice
from any third party that the operation of the business of Company or any of
its subsidiaries or any act, product or service of Company or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(k) To the knowledge of Company, no person has infringed or misappropriated
or is infringing or misappropriating any Company Intellectual Property.
(l) Company and each of its subsidiaries has taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Company or any of its
subsidiaries. Each of Company and its subsidiaries has a policy requiring each
employee and contractor to execute a proprietary information/confidentiality
agreement substantially in the form provided to Parent. All current and former
employees and contractors of Company and any of its subsidiaries have executed
such an agreement.
Section 2.18 Agreements, Contracts and Commitments. As of the date of this
Agreement, neither Company nor any of its subsidiaries is a party to or is
bound by:
(a) any written employment or consulting agreement, contract or commitment
with any officer or employee of Company or any of its subsidiaries currently
earning an annual salary in excess of $100,000 or member of Company's Board of
Directors, other than those that are terminable by Company or any of its
subsidiaries on no more than thirty (30) days' notice without material
liability or financial obligation to Company, except to the extent general
principles of law may limit Company's ability to terminate employees at will;
(b) any material agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale of
products or license of technology in the ordinary course of business;
(c) any agreement, contract or commitment containing any covenant limiting
the right of Company or any of its subsidiaries to engage in any line of
business or to compete with any person or granting any exclusive distribution
rights;
(d) any agreement, contract or commitment relating to the disposition or
acquisition by Company or any of its subsidiaries after the date of this
Agreement of a material amount of assets not in the ordinary course of business
or pursuant to which Company or any of its subsidiaries has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than Company's subsidiaries;
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(e) any material dealer, distributor, joint marketing or development
agreement under which Company or any of its subsidiaries have continuing
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of ninety (90) days or less, or any
agreement pursuant to which Company or any of its subsidiaries have continuing
obligations to jointly develop any intellectual property that will not be
owned, in whole or in part, by Company or any of its subsidiaries and which may
not be canceled without penalty upon notice of ninety (90) days or less;
(f) any material agreement, contract or commitment to license any third
party to manufacture or reproduce any Company product, service or technology or
any material agreement, contract or commitment to sell or distribute any
Company products, service or technology except agreements with distributors or
sales representatives in the normal course of business cancelable without
penalty upon notice of ninety (90) days or less and substantially in the form
previously provided to Parent;
(g) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money by Company or any of its subsidiaries or extension of credit
(other than customer accounts receivable owing to Company or any of its
subsidiaries in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms);
(h) any material settlement agreement under which Company or any of its
subsidiaries has ongoing obligations;
(i) any other agreement, contract or commitment that calls for the payment
or receipt by Company or any of its subsidiaries of $1,000,000 or more;
(j) any agreement under which the consequences of a default could reasonably
be expected to have a Material Adverse Effect on Company; or
(k) any other agreement, contract or commitment that is of the nature
required to be filed by Company as an exhibit to a Report on Form 10-K under
the Exchange Act which has not already been filed.
Company has delivered or made available to Parent a correct and complete
copy of each Company Contract (as defined below) as amended to date. Each
Company Contract, with respect to Company and any relevant subsidiary and, to
Company's knowledge, all other parties thereto, is legal, valid, binding,
enforceable and in full force and effect in all respects. Neither Company nor
any of its subsidiaries, nor to Company's knowledge any other party to a
Company Contract, is in breach, violation or default under a Company Contract.
Neither Company nor any of its subsidiaries has received written notice within
the last twelve months that it has breached, violated or defaulted under, any
of the terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Schedule pursuant to this
Section 2.18 (any such agreement, contract or commitment, a "Company Contract")
in such a manner as would permit any other party to cancel or terminate any
such Company Contract, or would permit any other party to seek material damages
or other remedies (for any or all of such breaches, violations or defaults, in
the aggregate).
Section 2.19 Opinion of Financial Advisor. Company has been advised by its
financial advisor, C.E. Unterberg, Towbin, that in its opinion, as of the date
of this Agreement, the Exchange Ratio is fair to stockholders of Company from a
financial point of view, and Company shall provide to Parent a copy of the
written confirmation of such opinion as soon as available.
Section 2.20 Board Approval. The Board of Directors of Company has, as of
the date of this Agreement, (i) approved, subject to stockholder approval, this
Agreement, the Company Ancillary Agreements and the Merger and the other
transactions contemplated hereby and thereby, (ii) determined that the Merger
is consistent with the long-term business strategy of Company and is in the
best interests of the stockholders of Company and is on terms that are fair to
such stockholders (iii) adopted a resolution declaring the Merger advisable and
(iv) determined unanimously to recommend that the stockholders of Company adopt
this Agreement.
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Section 2.21 Vote Required. The affirmative vote of holders of a majority of
the outstanding shares of Company Common Stock which shares are entitled to
vote with respect to the Merger is the only vote of the holders of any class or
series of Company's capital stock necessary to adopt this Agreement.
Section 2.22 Company Rights Agreement. Company has delivered to Parent a
true and complete copy of the Preferred Shares Rights Agreement, dated as of
November 19, 1998, between Company and ChaseMellon Shareholder Services, LLC
(the "Company Rights Plan"). Company has taken all action so that the entering
into of this Agreement, the Stock Option Agreement, the Company Voting
Agreements and the Merger, the acquisition of shares pursuant to the Stock
Option Agreement and the other transactions contemplated hereby and thereby
will not result in a grant of any rights to any person under the Company Rights
Plan.
Section 2.23 Pooling of Interests. To its knowledge, based on consultation
with its independent accountants, neither Company nor any of its directors,
officers or affiliates has taken any action which would interfere with Parent's
ability to account for the Merger as a "pooling of interests."
Section 2.24 Labor Matters. No work stoppage or labor strike against Company
is pending or, to Company's knowledge, threatened. Company does not know of any
activities or proceedings of any labor union to organize any employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to Company. Neither Company nor any of its subsidiaries has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Company is not presently, nor has it been in the past, a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by Company.
Section 2.25 Environmental Matters. Except as could not reasonably be
expected to have a Material Adverse Effect on Company, Company (i) has obtained
all applicable permits, licenses and other authorizations that are required
under Environmental Laws and all such permits are valid and in full force and
effect; (ii) is in compliance in all respects with all terms and conditions of
such required permits, licenses and authorizations, and also is in compliance
in all respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; and (iii) has conducted its business in substantial
compliance with all applicable Environmental Laws. "Environmental Laws" means
all Federal, state, local and foreign laws and regulations relating to
pollution of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) or the protection of human health and
worker safety, including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing
materials, hazardous substances, petroleum and petroleum products or any
fraction thereof, excluding, however, Hazardous Materials contained in products
typically used for office and janitorial purposes properly and safely
maintained in accordance with Environmental Laws.
Section 2.26 Insurance. Company and each of its subsidiaries has insurance
policies and fidelity bonds of the type and in amounts customarily carried by
persons conducting business or owning assets, equipment and properties similar
to Company and its subsidiaries (collectively, the "Insurance Policies"). There
is no claim by Company or any of its subsidiaries pending under any of the
Insurance Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds, which denial of coverage could
reasonably be expected to have a Material Adverse Effect on Company. All
premiums due and
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payable under the Insurance Policies have been paid and Company and its
subsidiaries are otherwise in compliance in all material respects with the
terms of the Insurance Policies. Company has not received notice of any
threatened termination of, or any material premium increase with respect to,
any of the Insurance Policies.
Section 2.27 State Takeover Statutes. The Board of Directors of Company has
taken all actions so that the restrictions contained in Section 203 of the
Delaware Law applicable to a "business combination" (as defined in such Section
203) will not apply to the execution, delivery or performance of this
Agreement, the Company Ancillary Agreements or to the consummation of the
Merger or the other transactions contemplated by this Agreement or the Company
Ancillary Agreements. To the knowledge of Company, no other state takeover
statute is applicable to the Merger or the other transactions contemplated
hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are disclosed in writing in the
disclosure letter supplied by Parent to Company dated as of the date hereof
(the "Parent Schedule"), which disclosure shall provide an exception to or
otherwise qualify the representations or warranties of Parent and Merger Sub
contained in the section of this Agreement corresponding by number to such
disclosure and the other representations and warranties herein to the extent
such disclosure shall reasonably appear to be applicable to such other
representations or warranties, as follows:
Section 3.01 Organization and Qualification; Subsidiaries.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority to
own, lease and operate its assets and properties and to carry on its
business as it is now being conducted.
(b) Parent has no material subsidiaries except for the corporations
identified in the Parent SEC Reports (as hereinafter defined). Neither
Parent nor any of its subsidiaries has agreed nor is obligated to make nor
is bound by any Contract under which it may become obligated to make, any
future investment in or capital contribution to any other entity. Neither
Parent nor any of its subsidiaries directly or indirectly owns any 10% or
greater equity or similar interest in, or any interest convertible,
exchangeable or exercisable for, any 10% or greater equity or similar
interest in, any corporation, partnership, joint venture or other business,
association or entity other than the entities identified in the Parent SEC
Reports and Parent's limited partnership or limited liability company
interests in venture capital funds. Neither Parent nor any of its
subsidiaries directly or indirectly owns, beneficially or of record, any
shares of Company Common Stock or other equity interest in Company other
than pursuant to this Agreement and the Company Voting Agreements.
(c) Each of Parent and Merger Sub is qualified or licensed to do
business as a foreign corporation, and is in good standing (with respect to
jurisdictions which recognize such concept), under the laws of all
jurisdictions where the character of the properties owned, leased or
operated by them or the nature of their activities requires such
qualification or licensing, except where the failure to be so qualified or
licensed could not reasonably be expected to result in a Material Adverse
Effect on Parent.
Section 3.02 Certificate of Incorporation and Bylaws. Parent has previously
furnished to Company complete and correct copies of its Certificate of
Incorporation and Bylaws as amended and in effect as of the date of this
Agreement (together, the "Parent Charter Documents"). Such Parent Charter
Documents are in full force and effect. Parent is not in violation of any of
the provisions of the Parent Charter Documents. Parent has previously furnished
to Company complete and correct copies of Merger Sub's Certificate of
Incorporation and Bylaws as amended and in effect as of the date of this
Agreement (together, the "Merger Sub Charter Documents"). Such Merger Sub
Charter Documents are in full force and effect. Merger Sub is not in violation
of any of the provisions of the Merger Sub Charter Documents.
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Section 3.03 Capitalization. The authorized capital stock of Parent consists
of 300,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred
stock, $0.001 par value per share, 650,000 of which are designated Series A
Participating Preferred Stock ("Parent Preferred Stock"). As of the close of
business on September 30, 2000, (i) 119,196,721 shares of Parent Common Stock
were issued and outstanding; and (ii) no shares of Parent Preferred Stock were
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, $0.001 par value per share, all of which, as of
the date hereof, are issued and outstanding. All of the outstanding shares of
Parent's and Merger Sub's respective capital stock have been duly authorized
and validly issued and are fully paid and nonassessable and were not issued in
violation of any preemptive rights, right of first refusal, or any similar
rights. The shares of Parent Common Stock to be issued pursuant to the Merger,
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable and free and clear of all Encumbrances. All of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another subsidiary free and clear of all Encumbrances.
Section 3.04 Authority Relative to this Agreement.
(a) Each of Parent and/or Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and to execute and deliver the
Stock Option Agreement, the Company Voting Agreements and the Company Affiliate
Agreements (the "Parent Ancillary Agreements") and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Parent
Ancillary Agreements by Parent and/or Merger Sub and the consummation by Parent
and/or Merger Sub of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on the part of
Parent and/or Merger Sub, and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize this Agreement and the Parent
Ancillary Agreements or to consummate the transactions so contemplated. This
Agreement and the Parent Ancillary Agreements have been duly and validly
executed and delivered by Parent and/or Merger Sub and, assuming the due
authorization, execution and delivery by Company, constitute legal and binding
obligations of Parent and/or Merger Sub, enforceable against Parent and/or
Merger Sub in accordance with their respective terms.
Section 3.05 No Conflict; Required Filings and Consents
(a) The execution, delivery and performance of this Agreement and the Parent
Ancillary Agreements do not and will not, (i) conflict with or violate the
Parent Charter Documents or Merger Sub Charter Documents, (ii) subject to the
requirements set forth in Section 3.05(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which they or any of their respective properties are
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or materially impair Parent's or Merger Sub's rights or alter the rights
or obligations of any third party against or to Parent or Merger Sub under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of Parent or Merger Sub pursuant to, any material
mortgage, Contract, permit, franchise or other obligation to which Parent or
Merger Sub is a party or by which Parent or Merger Sub or any of their
respective properties are bound or affected, except to the extent such
conflict, violation, breach, default, impairment or other effect could not in
the case of clauses (ii) or (iii) individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Parent.
(b) The execution and delivery of this Agreement and the Parent Ancillary
Agreements by Parent and/or Merger Sub do not, and the performance of this
Agreement and the Parent Ancillary Agreements by Parent and/or Merger Sub shall
not, require Parent or Merger Sub to obtain or make any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity or third party except (i) pursuant to applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws, the pre-merger
notification requirements of the HSR Act and of foreign governmental entities
and the rules and
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regulations thereunder, the rules and regulations of Nasdaq, and the filing and
recordation of the Certificate of Merger as required by Delaware Law and (ii)
where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, (A) would not prevent
consummation of the Merger or otherwise prevent Parent or Merger Sub from
performing their respective obligations under this Agreement or (B) could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
Section 3.06 Legal Compliance. Neither Parent nor Merger Sub is in conflict
with, or in default or violation of, any Legal Requirement, except for any
conflicts, defaults or violations that (individually or in the aggregate) would
not cause Parent or Merger Sub to incur any material liability. No charge,
complaint, claim, demand, notice, inquiry, investigation, action, suit,
proceeding, hearing or review by any Governmental Entity is pending or, to the
knowledge of Parent, being threatened against Parent or Merger Sub, nor, to
Parent's knowledge, has any Governmental Entity indicated to Parent in writing
an intention to conduct the same, other than, in each such case, those the
outcome of which could not, individually or in the aggregate, reasonably be
expected to have the effect of prohibiting or materially restricting any
business practice of Parent or Merger Sub, any acquisition of material property
by the Parent or Merger Sub or the conduct of business by Parent or any of its
subsidiaries.
Section 3.07 SEC Filings; Financial Statements.
(a) Parent has made available to Company (through reference to documents
filed by EDGAR or otherwise) a correct and complete copy of each report,
schedule, registration statement and definitive proxy statement filed by Parent
with the SEC since December 31, 1997 (the "Parent SEC Reports"), which are all
the forms, reports and documents required to be filed by Parent with the SEC
since such date. As of their respective dates, the Parent SEC Reports (A) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (B) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto and except that
unaudited statements do not contain footnotes in substance or form required by
GAAP, as is permitted by Form 10-Q of the Exchange Act) and each fairly
presents in all material respects the consolidated financial position of Parent
and its subsidiaries at the respective dates thereof and the consolidated
results of their operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
year-end adjustments.
(c) Parent has previously furnished to Company a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
Section 3.08 No Undisclosed Liabilities. Neither Parent nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its subsidiaries taken as a
whole, except (i) liabilities disclosed or provided for in Parent's unaudited
balance sheet as of June 30, 2000 as set forth in the Parent SEC Reports or in
the related notes or (ii) liabilities incurred since June 30, 2000 in the
ordinary course of business.
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Section 3.09 Absence of Certain Changes or Events. Since June 30, 2000,
there has not been: (i) any Material Adverse Effect on Parent, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Parent's or any of
its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Parent of any of Parent's capital stock or any other securities
of Parent or its subsidiaries or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their pre-
existing stock option or purchase agreements, (iii) any split, combination or
reclassification of any of Parent's or any of its subsidiaries' capital stock,
(iv) any material change by Parent in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, (v) any amendment
or consent with respect to any licensing agreement filed or required to be
filed by Parent with the SEC, or (vi) any material revaluation by Parent of any
of its assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any sale
of assets of the Parent other than in the ordinary course of business.
Section 3.10 Absence of Litigation. As of the date hereof, there are no
claims, suits, actions or proceedings that have a reasonable likelihood of
success on the merits pending or, to the knowledge of Parent, threatened
against, relating to or affecting Parent or any of its subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain or enjoin the consummation
of the transactions contemplated by this Agreement or that could otherwise
reasonably be expected to have a Material Adverse Effect on Parent.
Section 3.11 Registration Statement; Proxy Statement. None of the
information supplied or to be supplied by Parent for inclusion in: (i) the S-4
will, at the time the S-4 becomes effective under the Securities Act, 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; and (ii) the Proxy Statement/Prospectus will, at the date mailed to
the stockholders of Company, at the time of the Company Stockholders' Meeting
and at the Effective Time, in connection with the transactions contemplated
hereby, 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 S-4 will comply as to form in all material respects with
the provisions of the Securities Act and the rules and regulations promulgated
by the SEC thereunder. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by Company
which is contained in any of the foregoing documents.
Section 3.12 Taxes.
(a) Parent and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, forms, information statements and
reports ("Returns") relating to Taxes required to be filed by Parent and each
of its subsidiaries with any Tax authority, except such Returns which are not,
individually or in the aggregate, material to Parent. Parent and each of its
subsidiaries have paid all Taxes required to be paid whether or not shown to be
due on such Returns.
(b) Neither Parent nor any of its subsidiaries has any liability for any
material unpaid Taxes (whether or not shown to be done on any Return) which has
not been accrued for or reserved on Parent's balance sheet dated June 30, 2000
in accordance with GAAP, whether asserted or unasserted, contingent or
otherwise, which is material to Parent, other than any liability for unpaid
Taxes that may have accrued since April 1, 2000 in connection with the
operation of the business of Parent and its subsidiaries in the ordinary
course. There are no liens with respect to Taxes on any of the assets of Parent
or any of its subsidiaries, other than liens which are not individually or in
the aggregate material, or customary liens for current Taxes not yet due and
payable.
(c) Neither Parent nor any of its subsidiaries has been delinquent in the
payment of any material Tax. There is no material Tax deficiency outstanding,
proposed or assessed against Parent or any of its subsidiaries. Neither Parent
nor any of its subsidiaries has executed any unexpired waiver of any statute of
limitations on or extension of any period for the assessment or collection of
any Tax.
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(d) Parent and each of its subsidiaries are in full compliance with all
terms and conditions of any Tax exemptions, Tax holiday or other Tax reduction
agreement or order of a territorial or foreign government and the consummation
of the Merger will not have any adverse effect on the continued validity and
effectiveness of any such Tax exemptions, Tax holiday or other Tax reduction
agreement or order.
Section 3.13 Brokers. Except for fees payable to Morgan Stanley & Co.
Incorporated pursuant to an engagement letter dated September 18, 2000, a copy
of which has been provided to Company, Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders fees or
agent's commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
Section 3.14 Intellectual Property. For the purposes of this Agreement,
"Parent Intellectual Property" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Parent and its subsidiaries.
(a) No Parent Intellectual Property is subject to any proceeding or
outstanding decree, order, judgment, contract, license, agreement, or
stipulation restricting in any manner by its terms the use, transfer, or
licensing thereof by Parent or any of its subsidiaries, or which may affect the
validity, use or enforceability of such Parent Intellectual Property, in each
case which could reasonably be expected to have Material Adverse Effect.
(b) Parent's and its subsidiaries' design, development, manufacture,
distribution, reproduction, marketing or sale of the products of Parent and its
subsidiaries has not infringed or misappropriated and does not infringe or
misappropriate the Intellectual Property of any third party, and does not
constitute unfair competition or trade practices under the laws of any
jurisdiction, except as would not be expected to have a Material Adverse
Effect.
(c) Neither Parent nor any of its subsidiaries has received written notice
from any third party that the operation of the business of Parent or any of its
subsidiaries or any act, product or service of Parent or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction, except as would not be expected to have a Material Adverse
Effect.
Section 3.15 Opinion of Financial Advisor. Parent has been advised by its
financial advisor, Morgan Stanley & Co. Incorporated, that in its opinion, as
of the date of this Agreement, the Exchange Ratio is fair from a financial
point of view, and Parent shall provide to Company a copy of the written
confirmation of such opinion as soon as available.
Section 3.16 Board Approval. The Board of Directors of Parent has, as of the
date of this Agreement, unanimously (i) approved this Agreement, the Parent
Ancillary Agreements and the transactions contemplated hereby and thereby, (ii)
determined that the Merger is consistent with the long-term business strategy
of Parent and is in the best interests of the stockholders of Parent and is on
terms that are fair to such stockholders and (iii) adopted a resolution
declaring the Merger advisable.
Section 3.17 Pooling of Interests. Except as set forth on Section 3.17 of
the Parent Disclosure Schedule, to its knowledge, based on consultation with
its independent accountants, neither Parent nor any of its directors, officers
or affiliates has taken any action which would interfere with Parent's ability
to account for the Merger as a "pooling of interests."
Section 3.18 State Takeover Statutes. The Board of Directors of Parent has
taken all actions so that the restrictions contained in Section 203 of the
Delaware Law applicable to a "business combination" (as defined in such Section
203) will not apply to the execution, delivery or performance of this Agreement
or the Parent Voting Agreement or to the consummation of the Merger or the
other transactions contemplated by this Agreement or the Company Voting
Agreement. To the knowledge of Parent, no other state takeover statute is
applicable to the Merger or the other transactions contemplated hereby.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
Section 4.01 Conduct of Business by Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business in the ordinary course in substantially the same
manner as heretofore conducted and in substantial compliance with all
applicable laws and regulations, pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, pay or perform other material
obligations when due subject to good faith disputes over such obligations, and
use its commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and employees, and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others with which it has significant business dealings. In
addition, Company will promptly notify Parent of any material event involving
its business or operations occurring outside the ordinary course of business.
In addition, except as expressly permitted by the terms of this Agreement,
without the prior written consent of Parent, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company shall not do any
of the following and shall not permit its subsidiaries to do any of the
following:
(a) Except as required by law or pursuant to the terms of a Plan in
effect as of the date hereof, waive any stock repurchase rights,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee,
consultant, director or other stock plans or authorize cash payments in
exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or practices or policies
existing, on the date hereof (or as required by applicable law) and as
previously disclosed in writing or made available to Parent, or adopt any
new severance plan, or amend or modify or alter in any manner any severance
plan, agreement or arrangement existing on the date hereof;
(c) Other than in the ordinary course of business consistent with past
practices, transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property, or enter into grants to transfer or license to any
person future patent rights; provided that in no event shall Company
license on an exclusive basis or sell any Company Intellectual Property
(other than in connection with the abandonment of immaterial Company
Intellectual Property after at least five (5) business days' written notice
to Parent);
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof (or any such agreements
entered into in the ordinary course consistent with past practice by
Company with employees hired after the date hereof);
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to any shares of capital stock or
any securities convertible into shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into shares of capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than (x) the issuance, delivery
and/or
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sale of (i) shares of Company Common Stock pursuant to the exercise of
stock options or warrants outstanding as of the date of this Agreement, and
(ii) shares of Company Common Stock issuable to participants in the ESPP
consistent with the terms thereof, and (y) the granting of stock options to
new employees in the ordinary course of business in such amounts and in all
other respects and consistent with past practices and in an amount not to
exceed 150,000 in the aggregate with similar vesting terms;
(g) Cause, permit or submit to a vote of Company's stockholders any
amendments to the Company Charter Documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to enter into any joint ventures or strategic partnerships;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except in the ordinary course of business consistent
with past practice, except for the sale, lease, licensing, encumbering or
disposition (other than through licensing permitted by clause (c)) of
property or assets which are not material, individually or in the
aggregate, to the business of Company and its subsidiaries;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than in the ordinary course
of business consistent with past practice;
(k) Other than the increase in the number of shares of Company Common
Stock available for grant pursuant to the Company's 2000 Nonstatutory Stock
Option Plan by 1,000,000, adopt or amend any Plan or any employee stock
purchase or employee stock option plan; or enter into any employment
contract or collective bargaining agreement (other than offer letters and
letter agreements entered into in the ordinary course of business
consistent with past practice); pay any special bonus or special
remuneration to any director or employee; or, other than annual salary
increases for employees and officers (but not directors) in the ordinary
course of business consistent with past practices, increase the salaries or
wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants
except, in each case, as may be required by law; or increase the cash
compensation of the persons listed on Schedule 4.01(k) hereto by more than
8% of the total base salary paid to such persons in the aggregate in
calendar year 2000; provided that any such increase is approved by the
Board of Directors of the Company and would not adversely affect the
ability of Parent to account for the merger as a "pooling of interests."
(l) (i) pay, discharge, settle or satisfy any litigation (whether or not
commenced prior to the date of this Agreement) or any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities recognized or
disclosed in the most recent financial statements (or the notes thereto) of
Company included in the Company SEC Reports or incurred since the date of
such financial statements or disclosed in Section 2.08 or 2.09 of the
Company Schedule, or (ii) waive the benefits of, agree to modify in any
manner, terminate, release any person from or knowingly fail to enforce the
confidentiality or nondisclosure provisions of any agreement to which
Company or any of its subsidiaries is a party or of which Company or any of
its subsidiaries is a beneficiary;
(m) Except in the ordinary course of business consistent with past
practice, materially modify, amend or terminate any Contract disclosed in
Section 2.17(g) or 2.18 of the Company Schedule or waive, delay the
exercise of, release or assign any material rights or claims thereunder;
(n) Except as required by GAAP, revalue any of its assets or make any
change in accounting methods, principles or practices;
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(o) Incur or enter into any agreement, contract or commitment requiring
Company or any of its subsidiaries to pay in excess of $750,000;
(p) Engage in any action that would reasonably be expected to (i) cause
the Merger to fail to qualify as a "reorganization" under Section 368(a) of
the Code or (ii) interfere with Parent's ability to account for the Merger
as a "pooling of interests," whether or not (in each case) otherwise
permitted by the provisions of this Article IV;
(q) Make any Tax election or accounting method change (except as
required by GAAP) inconsistent with past practice that, individually or in
the aggregate, is reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of Company or any of its
subsidiaries, settle or compromise any material Tax liability or consent to
any extension or waiver of any limitation period with respect to Taxes; or
(r) Agree in writing or otherwise to take any of the actions described
in Section 4.01 (a) through (q) above.
Section 4.02 Conduct of Business by Parent. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and each of its
subsidiaries shall, except to the extent that Company shall otherwise consent
in writing, carry on its business in the ordinary course in substantially the
same manner as heretofore conducted and in substantial compliance with all
applicable laws and regulations, pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, pay or perform other material
obligations when due subject to good faith disputes over such obligations, and
use its commercially reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and employees, and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others with which it has significant business dealings.
In addition, except as expressly permitted by the terms of this Agreement,
without the prior written consent of Company, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent shall not do any
of the following and shall not permit its subsidiaries to do any of the
following:
(a) Declare, set aside, or pay any dividends or make any other
distributions (whether in cash, stock, equity securities or property) in
respect to Parent's capital stock, except where (i) an adjustment is made
to the Exchange Ratio in accordance with Section 1.06(e) or (ii) the
holders of Company Common Stock will otherwise receive an equivalent,
proportional dividend or distribution (based on the Exchange Ratio, as
adjusted pursuant to Section 1.06(e)) in connection with the Merger as if
they had been holders of Parent Common Stock on the record date for such
dividend or distribution;
(b) Purchase, redeem, or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent or its subsidiaries in any amounts that
would adversely affect Parent's financial condition or liquidity;
(c) Effect any amendment to Parent's Certificate of Incorporation;
(d) Engage in any action that would reasonably be expected to (i) cause
the Merger to fail to qualify as a "reorganization" under Section 368(a) of
the Code or (ii) interfere with its ability to account for the Merger as a
"pooling of interests," whether or not (in each case) otherwise permitted
by the provisions of this Article IV;
(e) Take any action that would materially delay the consummation of the
transactions contemplated hereby; or
(f) Agree in writing or otherwise to take any of the actions described
in Section 4.02 (a) through (e) above.
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ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this Agreement, Parent
and Company shall jointly prepare and Parent shall file with the SEC the S-4,
which shall include a document or documents that will constitute (i) the
prospectus forming part of the registration statement on the S-4 and (ii) the
Proxy Statement/Prospectus. Each of the parties hereto shall use its best
efforts to cause the S-4 to become effective as promptly as practicable after
the date hereof, and, prior to the effective date of the S-4, the parties
hereto shall take all action required under any applicable laws in connection
with the issuance of shares of Parent Common Stock pursuant to the Merger. Each
of Parent and Company shall provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Proxy Statement/Prospectus and the S-4, or in
any amendments or supplements thereto, and cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Proxy
Statement/Prospectus and the S-4. As promptly as practicable after the
effective date of the S-4, the Proxy Statement/Prospectus shall be mailed to
the stockholders of Company. Each of the parties hereto shall cause the Proxy
Statement/Prospectus to comply as to form and substance with respect to such
party in all material respects with the applicable requirements of (i) the
Exchange Act, (ii) the Securities Act, and (iii) the rules and regulations of
the Nasdaq. As promptly as practicable after the date of this Agreement, each
of Company and Parent will prepare and file any other filings required to be
filed by it under the Exchange Act, the Securities Act or any other Federal,
foreign or Blue Sky or related laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Prior to the Effective
Time, Parent shall use its commercially reasonable efforts to obtain all
regulatory approvals needed to ensure that the Parent Common Stock to be issued
in the Merger will be registered or qualified under the securities law of every
jurisdiction in the United States in which any registered holder of Company
Common Stock has an address of record on the record date for determining the
stockholders entitled to notice of and to vote at the Company Stockholders'
Meeting; provided that Parent shall not be required to consent to the service
of process in any jurisdiction in which it is not so subject. Each of Company
and Parent will notify the other promptly upon the receipt of any comments from
the SEC or its staff or any other government officials of the receipt of notice
that the S-4 has become effective, of the issuance of any stop order, of the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC or its staff or any other government officials for
amendments or supplements to the S-4, the Proxy Statement/Prospectus or any
Other Filing or for additional information and, except as may be prohibited by
any Governmental Entity or by any Legal Requirement, will supply the other with
copies of all correspondence between such party or any of its representatives,
on the one hand, and the SEC or its staff or any other government officials, on
the other hand, with respect to the S-4, the Proxy Statement/Prospectus, the
Merger or any Other Filing. Each of Company and Parent will cause all documents
that it is responsible for filing with the SEC or other regulatory authorities
under this Section 5.01(a) to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder.
(b) The Proxy Statement/Prospectus shall (i) solicit the approval of this
Agreement and the Merger and include the recommendation of the Board of
Directors of Company to Company's stockholders that they vote in favor of
approval of this Agreement and the Merger, subject to the right of the Board of
Directors of Company to withdraw its recommendation and recommend a Superior
Proposal determined to be in compliance with Section 5.02(c) of this Agreement,
and (ii) include the opinion of C.E. Unterberg, Towbin referred to in
Section 2.19; provided, however, that the Board of Directors of Company shall
submit this Agreement to Company's stockholders whether or not at any time
subsequent to the date hereof such board determines that it can no longer make
such recommendation. If Company has not breached Section 5.02(c), then nothing
contained in this Agreement shall prevent the Board of Directors of Company
from complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act.
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(c) Each of Parent and Company shall promptly inform the other of any event
which is required to be set forth in an amendment or supplement to the Proxy
Statement/Prospectus, the S-4 or any Other Filing and each of Parent and
Company shall amend or supplement the Proxy Statement/Prospectus to the extent
required by law to do so. No amendment or supplement to the Proxy
Statement/Prospectus or the S-4 shall be made without the approval of Parent
and Company, which approval shall not be unreasonably withheld or delayed.
Section 5.02 Stockholder Meeting.
(a) Company shall call and hold the Company Stockholders' Meeting as
promptly as practicable after the date hereof for the purpose of voting upon
the approval of this Agreement and the Merger pursuant to the Proxy
Statement/Prospectus, and Company shall use commercially reasonable efforts to
hold the Company Stockholders' Meeting as soon as practicable after the date on
which the S-4 becomes effective. Nothing herein shall prevent Company from
adjourning or postponing the Company Stockholders' Meeting if there are
insufficient shares of Company Common Stock, represented in person or by proxy,
necessary to conduct business at the Company Stockholders' Meeting. Unless
Company's Board of Directors has withdrawn its recommendation of this Agreement
and the Merger in compliance with Section 5.02(c), Company shall use
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement and the Merger pursuant to the Proxy
Statement/Prospectus and shall take all other commercially reasonable action
necessary or advisable to secure the vote or consent of stockholders required
by Delaware Law or applicable stock exchange requirements to obtain such
approval. The Company shall take all other action reasonably necessary or
advisable to promptly and expeditiously secure any vote or consent of
stockholders required by applicable Law and its Certificate of Incorporation
and Bylaws to effect the Merger. Company's obligation to call, give notice of,
convene and hold the Company Stockholders' Meeting in accordance with this
Section 5.02(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal or any change in the Board of Directors recommendation
regarding the Merger.
(b) Subject to Section 5.02(c): (i) the Board of Directors of Company shall
recommend that Company's stockholders vote in favor of and adopt and approve
this Agreement and the Merger at the Company Stockholders' Meeting; (ii) the
Proxy Statement/Prospectus shall include a statement to the effect that the
Board of Directors of Company has recommended that Company's stockholders vote
in favor of and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting; and (iii) neither the Board of Directors of Company nor
any committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, the recommendation of
the Board of Directors of Company that Company's stockholders vote in favor of
and adopt and approve this Agreement and the Merger.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Company from withholding, withdrawing, amending or modifying its recommendation
in favor of the Merger if (i) a Superior Offer (as defined below) is made to
Company and not withdrawn, (ii) neither Company nor any of its representatives
shall have violated any of the restrictions set forth in Section 5.04, and
(iii) the Board of Directors of Company concludes in good faith, after
consultation with its outside counsel, that, in light of such Superior Offer,
the withholding, withdrawal, amendment or modification of such recommendation
is required in order for the Board of Directors of Company to comply with its
fiduciary obligations to Company's stockholders under applicable law. Nothing
contained in this Section 5.02 shall limit Company's obligation to hold and
convene the Company Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of Company shall have been withdrawn,
amended or modified). For purposes of this Agreement, "Superior Offer" shall
mean an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Company pursuant to which the stockholders of Company
immediately preceding such transaction hold less than 51% of the equity
interest in the surviving or resulting entity of such transaction; (ii) a sale
or other disposition by Company of assets (excluding inventory and used
equipment sold in the ordinary course of business) representing in excess of
51% of the fair market value of Company's
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business immediately prior to such sale, or (iii) the acquisition by any person
or group (including by way of a tender offer or an exchange offer or issuance
by Company), directly or indirectly, of beneficial ownership or a right to
acquire beneficial ownership of shares representing in excess of 51% of the
voting power of the then outstanding shares of capital stock of Company, in
each case on terms that the Board of Directors of Company determines, in its
reasonable judgment (based on advice of a financial advisor of nationally
recognized reputation) to be more favorable to Company stockholders from a
financial point of view than the terms of the Merger; provided, however, that
any such offer shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not likely in the judgment of Company's Board of Directors to
be obtained by such third party on a timely basis.
Section 5.03 Confidentiality; Access to Information
(a) Confidentiality Agreement. The parties acknowledge that Company and
Parent have previously executed a Confidentiality Agreement, dated as of
September 26, 2000 (the "Confidentiality Agreement"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms.
(b) Access to Information. Company will afford Parent and its accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Company during the period prior to the Effective Time to obtain all
information concerning the business, including the status of product
development efforts, properties, results of operations and personnel of
Company, as Parent may reasonably request. No information or knowledge obtained
by Parent in any investigation pursuant to this Section 5.03 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
Section 5.04 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to Article VII,
Company and its subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as defined below), (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in
discussions with any person with respect to any Acquisition Proposal, (iv)
subject to Section 5.02(c), approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction (as defined below); provided, however, this Section
5.04(a) shall not prohibit Company from (A) furnishing information regarding
Company and its subsidiaries to, entering into a confidentiality agreement with
or entering into discussions with, any person or group in response to a
Superior Offer submitted by such person or group (and not withdrawn) if
(1) neither Company nor any representative of Company and its subsidiaries
shall have violated any of the restrictions set forth in this Section 5.04, (2)
the Board of Directors of Company concludes in good faith, after consultation
with its outside legal counsel, that such action is required in order for the
Board of Directors of Company to comply with its fiduciary obligations to
Company's stockholders under applicable law, (3) (x) at least two (2) business
days prior to furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such person or group, Company gives Parent
written notice of the identity of such person or group and of Company's
intention to furnish nonpublic information to, or enter into discussions or
negotiations with, such person or group and (y) Company receives from such
person or group an executed confidentiality agreement containing customary
limitations on the use and disclosure of all written and oral information
furnished to such person or group by or on behalf of Company, and (4)
contemporaneously with
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furnishing any such information to such person or group, Company furnishes such
information to Parent (to the extent such information has not been previously
furnished by Company to Parent) or (B) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal with respect to
which no violation of this Section 5.04 shall have occurred. Company and its
subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding two sentences
by any officer or director of Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Company or
any of its subsidiaries shall be deemed to be a breach of this Section 5.04 by
Company. In addition to the foregoing, Company shall (i) provide Parent with at
least forty-eight (48) hours prior notice (or such lesser prior notice as
provided to the members of Company's Board of Directors) of any meeting of
Company's Board of Directors at which Company's Board of Directors is
reasonably expected to consider a Superior Offer and (ii) provide Parent with
at least three (3) business days prior written notice (or such lesser prior
notice as provided to the members of Company's Board of Directors) of a meeting
of Company's Board of Directors at which Company's Board of Directors is
reasonably expected to recommend a Superior Offer to its stockholders and
together with such notice a copy of the definitive documentation relating to
such Superior Offer.
For purposes of this Agreement, "Acquisition Proposal" shall mean any offer
or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement, "Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from Company by any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
more than a 15% interest in the total outstanding voting securities of Company
or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder)
beneficially owning 15% or more of the total outstanding voting securities of
Company or any of its subsidiaries or any merger, consolidation, business
combination or similar transaction involving Company pursuant to which the
stockholders of Company immediately preceding such transaction hold less than
85% of the equity interests in the surviving or resulting entity of such
transaction; (B) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 15% of the assets of
Company; or (C) any liquidation or dissolution of Company.
(b) In addition to the obligations of Company set forth in paragraph (a) of
this Section 5.04, Company as promptly as practicable shall advise Parent
orally and in writing of any request received by Company for information which
Company reasonably believes would lead to an Acquisition Proposal or of any
Acquisition Proposal, or any inquiry received by Company with respect to, or
which Company reasonably believes would lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or inquiry,
and the identity of the person or group making any such request, Acquisition
Proposal or inquiry. Company will keep Parent informed in all material respects
of the status and details (including material amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry.
Section 5.05 Public Disclosure. Parent and Company will consult with each
other, and to the extent practicable, agree, before issuing any press release
or otherwise making any public statement with respect to the Merger, this
Agreement or an Acquisition Proposal and will not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with a national securities exchange or
Nasdaq, in which case reasonable efforts to consult with the other party will
be made prior to such release or public statement. The parties have agreed to
the text of the joint press release announcing the signing of this Agreement.
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Section 5.06 Commercially Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including to accomplish the following: (i) causing the conditions
precedent set forth in Article VI to be satisfied; (ii) obtaining all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities; (iii) making all necessary registrations,
declarations and filings (including registrations, declarations and filings
with Governmental Entities, if any); (iv) avoiding any suit, claim, action,
investigation or proceeding by any Governmental Entity challenging the Merger
or any other transaction contemplated by this Agreement; (v) obtaining all
consents, approvals or waivers from third parties required as a result of the
transactions contemplated in this Agreement; (vi) defending any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed; and
(vii) executing or delivering any additional instruments reasonably 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, subject to the other terms and conditions hereof, Company and its
Board of Directors shall, if any state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement or any of the
transactions contemplated by this Agreement, use commercially reasonable
efforts and take all acts necessary to ensure that 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 Merger, this Agreement
and the transactions contemplated hereby. Notwithstanding anything herein to
the contrary, nothing in this Agreement shall be deemed to require Parent or
Company or any subsidiary or affiliate thereof to agree to any divestiture by
itself or any of its affiliates of shares of capital stock or of any business,
assets or property, or the imposition of any material limitation on the ability
of any of them to conduct their business or to own or exercise control of such
assets, properties and stock.
(b) Company shall give prompt notice to Parent upon becoming aware that any
representation or warranty made by it contained in this Agreement has become
untrue or inaccurate, or of any failure of Company 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, in each case, where the conditions set
forth in Section 6.03(a) or Section 6.03(b) would not be satisfied as a result
thereof; 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.
(c) Parent shall give prompt notice to Company upon becoming aware that any
representation or warranty made by it or Merger Sub contained in this Agreement
has become untrue or inaccurate, or of any failure of Parent or Merger Sub 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, in each
case, where the conditions set forth in Section 6.02(a) or Section 6.02(b)
would not be satisfied as a result thereof; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
Section 5.07 Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions
contemplated hereby.
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Section 5.08 Stock Options; ESPP and Employee Benefits.
(a) Stock Options. At the Effective Time, Parent shall assume the Company
Stock Option Plans and each outstanding option to purchase shares of Company
Common Stock (each, a "Company Stock Option") under the Company Option Plans,
whether or not vested, shall be assumed by Parent. Each Company Stock Option so
assumed by Parent under this Agreement will continue to have, and be subject
to, the same terms and conditions of such Company Stock Options immediately
prior to the Effective Time (including, without limitation, any repurchase
rights or vesting provisions and provisions regarding the acceleration of
vesting on certain transactions), except that (i) each Company Stock Option
will be exercisable (or will become exercisable in accordance with its terms)
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Common Stock that were issuable upon exercise
of such Company Stock Option immediately prior to the Effective Time multiplied
by the Exchange Ratio, rounded down to the nearest whole number of shares of
Parent Common Stock and (ii) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed Company Stock Option
will be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such Company Stock Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent. Parent shall comply with the terms of all
such Company Stock Options and use its best efforts to ensure, to the extent
required by and subject to the provisions of, the Company Option Plans, and to
the extent permitted under the Code, that any Company Stock Options that
qualified for tax treatment as incentive stock options under Section 422 of the
Code prior to the Effective Time continue to so qualify after the Effective
Time. Parent shall take all corporate actions necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon exercise
of assumed Company Stock Options on the terms set forth in this Section
5.08(a).
(b) ESPP. At the Effective Time, Parent shall assume the ESPP in accordance
with its terms, and all outstanding rights to purchase shares of Company Common
Stock under the ESPP ("Purchase Rights"), shall be converted (in accordance
with the Exchange Ratio) into rights to purchase shares of Parent Common Stock
(with the number of shares rounded down to the nearest whole share and the
purchase price as of the offering date for each offering period in effect as of
the Effective Time rounded up to the nearest whole cent). All such converted
Purchase Rights shall be assumed by Parent, and each offering period in effect
under the ESPP immediately prior to the Effective Time shall be continued in
accordance with the terms of the ESPP until the end of such offering period.
The ESPP shall terminate with the exercise of the last assumed Purchase Right,
and no additional Purchase Rights shall be granted under the ESPP following the
Effective Time, provided that references to Company in the ESPP and related
documents shall mean Parent (except that the purchase price for a relevant
period shall be determined with respect to the fair market value of Company
Common Stock on such date, as adjusted hereby). Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of
Parent Common Stock for issuance upon exercise of Purchase Rights under the
ESPP assumed in accordance with this Section 5.08(b). Parent agrees that, from
and after the Effective Time, Company's employees may participate in the
employee stock purchase plan sponsored by Parent ("Parent ESPP"), subject to
the terms and conditions of the Parent ESPP, and that service with Company
shall be treated as service with the Parent for determining eligibility of
Company's employees under the Parent ESPP.
(c) 401(k). Company shall terminate, effective as of the day immediately
preceding the Effective Time, any and all 401(k) plans sponsored or maintained
by Company unless Parent provides written notice to Company prior to the
Effective Time that any such 401(k) plan shall not be terminated. Parent shall
receive from Company evidence that Company's plan(s) and / or program(s) have
been terminated pursuant to resolutions of Company's Board of Directors (the
form and substance of such resolutions shall be subject to review and approval
of Parent), effective as of the day immediately preceding the Effective Time.
Company employees shall be eligible to participate in a 401(k) plan sponsored
by Parent no later than the first day of the next commencing month immediately
after the Effective Time.
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(d) Benefits; Prior Service. From and after the Effective Time, Company
employees shall be provided with employee benefits that are the same as those
provided to employees of Parent who are similarly situated and which are
substantially similar in the aggregate to those provided such employees prior
to the Effective Time. Parent shall cause employees of Company and its
subsidiaries to be credited with service with Company and each of its
subsidiaries for purposes of eligibility and vesting under each employee
benefit plan maintained by Parent or its subsidiaries after the Effective Time
to the extent of their service with Company; provided, however, that such
service shall not be recognized to the extent that such recognition would
result in duplication of benefits.
Section 5.09 Form S-8. Parent agrees to file a registration statement on
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options as soon as is reasonably practicable (and in any event
within 30 days) after the Effective Time and shall maintain the effectiveness
of such registration statement thereafter for so long as any of such options or
other rights remain outstanding.
Section 5.10 Indemnification.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company (or
any predecessor corporation) pursuant to (i) each indemnification agreement
between Company and its directors or officers in effect immediately prior to
the Effective Time (the "Indemnified Parties") and (ii) any indemnification
provision under the Company Charter Documents as in effect on the date hereof.
The Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the Company
Charter Documents as in effect on the date hereof, which provisions will not be
amended, repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would adversely affect the rights thereunder
of any Indemnified Party or of individuals who, immediately prior to the
Effective Time, were employees or agents of Company, unless such modification
is required by law.
(b) In the event Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers a material amount of its
properties and assets to any person in a single transaction or a series of
transactions, then, and in each such case, Parent will either guarantee or
otherwise remain liable for the indemnification obligations referred to in this
Section 5.10 or will make or cause to be made proper provision so that the
successors and assigns of Company or the Surviving Corporation, as the case may
be, assume the indemnification obligations described herein for the benefit of
the Indemnified Parties.
(c) The provisions of this Section 5.10 shall survive consummation of the
Merger and are (i) intended to be for the benefit of, and will be enforceable
by, each of the Indemnified Parties and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such Indemnified Party may have by contract or otherwise.
(d) For a period of six (6) years after the Effective Time, Parent will
either (i) cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who are
currently covered by Company's directors' and officers' liability insurance
policy on terms comparable to those applicable to the current directors and
officers of Company; provided, however, that in no event will Parent or the
Surviving Corporation be required to expend in excess of 150% of the annual
premium currently paid by Company for such coverage (or such coverage as is
available for such 150% of such annual premium), or (ii) Parent may purchase
directors' and officers' liability tail coverage on terms comparable to those
applicable to the current directors and officers of Company covering all
periods prior to the Effective Time.
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Section 5.11 Affiliate Agreements; Pooling Actions.
(a) Set forth in Section 5.11(a) of the Company Schedule is a list of those
persons who may be deemed to be, in Company's reasonable judgment, affiliates
of Company within the meaning of Rule 145 promulgated under the Securities Act
or Opinion 16 of the Accounting Principles Board applicable to SEC rules and
regulations (each, a "Company Affiliate"). Company will provide Parent with
such information and documents as Parent reasonably requests for purposes of
reviewing such list. Company will use its commercially reasonable efforts to
deliver or cause to be delivered to Parent, on or as promptly as practicable
following the date hereof, from each Company Affiliate that has not delivered a
Company Affiliate Agreement on or prior to the date hereof, an executed Company
Affiliate Agreement. Each Company Affiliate Agreement will be in full force and
effect as of the Effective Time. Parent will be entitled to place appropriate
legends on the certificates evidencing any Parent Common Stock to be received
by a Company Affiliate pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of the Company Affiliate Agreement.
(b) Promptly after execution of this Agreement, Parent will take the actions
specified in Section 3.18 of the Parent Disclosure Schedule.
Section 5.12 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, Company and Parent each shall file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") Notification and Report Forms
relating to the transactions contemplated herein as required by the HSR Act, as
well as comparable pre-merger notification forms required by the merger
notification or control laws and regulations of any other applicable
jurisdiction, as agreed to by the parties. Company and Parent each shall each
use all commercially reasonable efforts to obtain early termination of any
waiting period under HSR and Company and Parent shall each promptly (a) supply
the other with any information which may be required in order to effectuate
such filings and (b) supply any additional information which reasonably may be
required by the FTC, the DOJ or the competition or merger control authorities
of any other jurisdiction and which the parties may reasonably deem
appropriate; provided, however, that Parent shall not be required to agree to
any divestiture by Parent or Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates or of Company, its affiliates, or the
imposition of any material limitation on the ability of any of them to conduct
their businesses or to own or exercise control of such assets, properties and
stock.
Section 5.13 Action by Board of Directors. Prior to the Effective Time, the
Board of Directors of Parent, or an appropriate committee of non-employee
directors thereof, shall adopt a resolution consistent with the interpretative
guidance of the SEC so that (i) the assumption of Company Stock Options by
Company Insiders (as defined below) pursuant to this Agreement, and (ii) the
receipt by Company Insiders of Parent Common Stock in exchange for Company
Common Stock pursuant to the Merger, shall in each case be an exempt
transaction for purposes of Section 16 of the Exchange Act by any officer or
director of Company who may become a covered person of Parent for purposes of
Section 16 of the Exchange Act (a "Company Insider").
Section 5.14 Nasdaq Listing. Parent shall authorize for listing on Nasdaq
the shares of Parent Common Stock issuable, and those to be reserved for
issuance, in connection with the Merger, effective upon notice of issuance.
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ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions, any of which may be waived if waived in writing by
both Parent and Company:
(a) Stockholder Approval. This Agreement shall have been adopted and the
Merger shall have been duly approved by the requisite vote under applicable law
by the stockholders of Company.
(b) Registration Statement Effective; Proxy Statement. The SEC shall have
declared the S-4 effective. No stop order suspending the effectiveness of the
S-4 or any part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the Proxy
Statement/Prospectus, shall have been initiated or threatened in writing by the
SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger. All waiting
periods, if any, under the HSR Act relating to the transactions contemplated
hereby will have expired or terminated early and all material foreign antitrust
approvals required to be obtained prior to the Merger in connection with the
transactions contemplated hereby shall have been obtained.
(d) Tax Opinions. Each of Company and Parent shall have received a written
opinion from its respective tax counsel, in form and substance reasonably
satisfactory to Company or Parent, as the case may be, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code and such opinion shall not have been withdrawn; provided, however,
that if tax counsel to Company (Jenkens & Gilchrist, Professional Corporation)
does not render such opinion or renders but withdraws such opinion, this
condition shall nonetheless be deemed to be satisfied if counsel to Parent
(Wilson Sonsini Goodrich & Rosati, Professional Corporation) renders, and does
not withdraw, such opinion to Company. Officers of Company, Parent and Merger
Sub shall provide tax counsel with customary officer's tax certificates in
support of such tax opinions.
Section 6.02 Additional Conditions to Obligations of Company. The obligation
of Company to effect the Merger shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and warranty of
Parent and Merger Sub contained in this Agreement (i) shall have been accurate
in all respects as of the date of this Agreement and (ii) shall be true and
correct in all respects on and as of the Closing Date with the same force and
effect as if made on the Closing Date except, with respect to clauses (i) and
(ii), (A) in each case, or in the aggregate, as does not constitute a Material
Adverse Effect on Parent and (B) for those representations and warranties which
address matters only as of a particular date (which representations shall have
been true and correct (subject to the qualification as set forth in the
preceding clause (A)) as of such particular date) (it being understood that,
for purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases contained in
such representations and warranties shall be disregarded and (ii) any update of
or modification to the Parent Schedule made or purported to have been made
after the date of this Agreement shall be disregarded). Company shall have
received a certificate with respect to the foregoing signed on behalf of Parent
by an authorized officer of Parent.
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(b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied with, in all material respects, all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Company shall have received a certificate to such effect
signed on behalf of Parent by an authorized officer of Parent.
Section 6.03 Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct in
all respects as of the date of this Agreement and (ii) shall be accurate in
all respects on and as of the Closing Date with the same force and effect as
if made on and as of the Closing Date except, with respect to clauses (i) and
(ii), (A) in each case, or in the aggregate, as does not constitute a Material
Adverse Effect on Company; provided, however, such Material Adverse Effect
qualifier shall be inapplicable with respect to representations and warranties
contained in Sections 2.04, 2.19, 2.20, 2.21, and 2.27 (which representations
shall have been true and correct in all material respects as of the date of
this Agreement and shall be accurate in all material respects as of the
Closing Date) and (B) for those representations and warranties which address
matters only as of a particular date (which representations shall have been
accurate (subject to the qualification as set forth in the preceding clause
(A)) as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Schedule made or purported to have been made after the date of this
Agreement shall be disregarded). Parent shall have received a certificate with
respect to the foregoing signed on behalf of Company by an authorized officer
of Company.
(b) Agreements and Covenants. Company shall have performed or complied
with, in all material respects, all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by an authorized officer of Company.
(c) Consents. Company shall have procured consents set forth in Section
6.03(c) of the Company Schedule.
(d) Opinion of Accountants. Parent shall have received (i) from
PricewaterhouseCoopers LLP, independent auditors for Company, a copy of a
letter addressed to Company dated as of the Closing Date in substance
reasonably satisfactory to Parent (which may contain customary qualifications
and assumptions) to the effect that PricewaterhouseCoopers LLP concurs with
Company management's conclusion that no conditions exist related to Company
that would preclude Company from being a party to a business combination for
which the "pooling of interests" method of accounting is used and (ii) from
KPMG LLP, independent accountants for Parent, a copy of a letter addressed to
Parent dated as of the Closing Date in substance reasonably satisfactory to
Parent (which may contain customary qualifications and assumptions) to the
effect that KPMG LLP concurs with Parent management's conclusion that the
Merger can properly be accounted for as a "pooling of interests."
(e) Company Affiliate Agreements. The Company Affiliate Agreements shall be
in full force and effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the requisite approval of
the stockholders of Company:
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(a) by mutual written consent duly authorized by the Boards of Directors of
Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by April 30, 2001 (such date, or such other date that may be agreed
by mutual written consent, being the "Outside Date") for any reason; provided,
however, that the right to terminate this Agreement under this Section 7.01(b)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date if such action or failure to act constitutes a breach of this
Agreement;
(c) by either Company or Parent if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action shall have become final and
nonappealable;
(d) by either Company or Parent if: (i) the Company Stockholders' Meeting
(including any adjournments thereof) shall have been held and completed and the
stockholders of Company shall have taken a final vote on a proposal to adopt
this Agreement and (ii) the required approval of the stockholders of Company
contemplated by this Agreement shall not have been obtained; provided, however,
that the right to terminate this Agreement under this Section 7.01(d) shall not
be available to Company or Parent where the failure to obtain Company
stockholder approval shall have been caused by the action or failure to act of
Company or Parent, respectively, and such action or failure to act constitutes
a breach by Company or Parent, respectively, of this Agreement;
(e) by Company, upon a breach of any covenant or agreement on the part of
Parent set forth in this Agreement, or if any representation or warranty of
Parent shall have been untrue when made or shall have become untrue, in either
case such that the conditions set forth in Section 6.02(a) or Section 6.02(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue; provided, that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through exercise of its commercially reasonable efforts, then
Company may not terminate this Agreement pursuant to this Section 7.01(e) for
thirty (30) days after delivery of written notice from Company to Parent of
such breach; provided that Parent continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Company may not terminate
this Agreement pursuant to this Section 7.01(e) if such breach by Parent is
cured during such thirty-day period);
(f) by Parent, upon a breach of any covenant or agreement on the part of
Company set forth in this Agreement, or if any representation or warranty of
Company shall have been untrue when made or shall have become untrue, in either
case such that the conditions set forth in Section 6.03(a) or Section 6.03(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue; provided, that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company through exercise of its commercially reasonable efforts,
then Parent may not terminate this Agreement pursuant to this Section 7.01(f)
for thirty (30) days after delivery of written notice from Parent to Company of
such breach; provided that Company continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Parent may not
terminate this Agreement pursuant to this Section 7.01(f) if such breach by
Company is cured during such thirty-day period);
(g) by Parent if a Triggering Event (as defined below) shall have occurred.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) the Board of Directors of Company or any committee
thereof shall for any reason have withheld, withdrawn or refrained from making
or shall have modified, amended or changed in a manner adverse to Parent its
recommendation in favor of the adoption of this Agreement or the approval of
the Merger; (ii) Company shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of Company in
favor of the adoption of this Agreement and the approval of the Merger; (iii)
the Board of Directors of Company fails to reaffirm its recommendation in favor
of the adoption of this Agreement within ten (10) business days after Parent
requests in writing that such recommendation be reaffirmed at any time
following the public announcement and during the pendency of an Acquisition
Proposal; (iv) the Board of Directors of Company or any committee thereof shall
have approved or recommended any Acquisition Proposal; (v) Company shall have
entered into any letter of intent or similar document or any agreement,
contract or commitment accepting any Acquisition Proposal;
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(vi) Company shall have breached any of the provisions of Section 5.04 of this
Agreement or (vii) a tender or exchange offer relating to not less than 15% of
the then outstanding shares of capital stock of Company shall have been
commenced by a person unaffiliated with Parent and Company shall not have sent
to its securityholders pursuant to Rule 14e-2 promulgated under the Securities
Act, within ten (10) business days after such tender or exchange offer is first
published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
Section 7.02 Notice of Termination; Effect of Termination. Any termination
of this Agreement under Section 7.01 will be effective immediately upon (or if
the termination is pursuant to Section 7.01(e) or 7.01(f) and the proviso
therein is applicable, thirty (30) days after) the delivery of written notice
thereof by the terminating party to the other parties hereto. In the event of
the termination of this Agreement as provided in Section 7.01, this Agreement
shall be of no further force or effect, except (i) as set forth in this Section
7.02, Section 7.03 and Article VIII (General Provisions), each of which shall
survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any intentional or willful breach of this
Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
Section 7.03 Fees and Expenses.
(a) General. Except as set forth in this Section 7.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees and expenses whether or
not the Merger is consummated; provided, however, that Parent and Company shall
share equally all fees and expenses, other than attorneys' and accountants fees
and expenses, incurred in connection with the printing and filing (with the
SEC) of the Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the S-4 (including financial statements and exhibits) and
any amendments or supplements thereto and any fees required to be paid under
the HSR Act.
(b) Company Payments.
(i) Company shall pay to Parent in immediately available funds, within three
(3) business days after demand by Parent, an amount equal to $9,000,000 (the
"Termination Fee") if this Agreement is terminated by Parent pursuant to
Section 7.01(g).
(ii) If (A) this Agreement is terminated by Parent or Company, as
applicable, pursuant to Sections 7.01(b) or (d)(i), (B) prior to such
termination a third party shall have announced an Acquisition Proposal and
(C) within twelve (12) months following the termination of this Agreement a
Company Acquisition (as defined below) is consummated or Company enters into an
agreement or letter of intent providing for a Company Acquisition which is
subsequently consummated, then Company shall pay Parent in immediately
available funds at or prior to consummating such Company Acquisition an amount
equal to the Termination Fee.
(iii) Company acknowledges that the agreements contained in this Section
7.03(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if Company fails to pay in a timely manner the amounts
due pursuant to this Section 7.03(b) and, in order to obtain such payment,
Parent makes a claim that results in a judgment against Company for the amounts
set forth in this Section 7.03(b), Company shall pay to Parent its reasonable
costs and expenses (including reasonable attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set forth in
this Section 7.03(b) at the prime rate of Wells Fargo Bank, National
Association in effect on the date such payment was required to be made. Payment
of the fees described in this Section 7.03(b) shall not be in lieu of damages
incurred in the event of breach of this Agreement. For the purposes of this
Agreement, "Company Acquisition" shall mean any of the following transactions
(other than the transactions contemplated by this Agreement): (i) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Company pursuant to which the
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stockholders of Company immediately preceding such transaction hold less than
50% of the aggregate equity interests in the surviving or resulting entity of
such transaction, (ii) a sale or other disposition by Company of assets
representing in excess of 50% of the aggregate fair market value of Company's
business immediately prior to such sale or (iii) the acquisition by any person
or group (including by way of a tender offer or an exchange offer or issuance
by Company), directly or indirectly, of beneficial ownership or a right to
acquire beneficial ownership of shares representing in excess of 50% of the
voting power of the then outstanding shares of capital stock of Company.
Section 7.04 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and Company.
Section 7.05 Extension; Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 Non-Survival of Representations and Warranties. The
representations and warranties of Company, Parent and Merger Sub contained in
this Agreement or in any certificate or instrument delivered pursuant to
Article VI shall terminate at the Effective Time, and only the covenants that
by their terms survive the Effective Time shall survive the Effective Time.
Section 8.02 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given on the day of delivery if delivered
personally or sent via telecopy (receipt confirmed) or on the second business
day after being sent if delivered by commercial delivery service, 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):
(i) if to Parent or Merger Sub, to:
Microchip Technology Incorporated
2355 West Chandler Boulevard
Chandler, Arizona 85224
Attention: General Counsel
Telecopy No.: (480) 899-9210
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market, Spear Tower
Suite 3300
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
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(ii) if to Company, to:
Telcom Semiconductor, Inc.
1300 Terra Bella Avenue
Mountain View, California 94043
Attention: Chief Executive Officer
Telecopy No.: (650) 940-9633
with a copy to:
Jenkens & Gilchrist, Professional Corporation
1445 Ross Avenue
Suite 3200
Dallas, TX 75202
Attention: John R. Holzgraefe, Esq.
Gregory J. Schmitt, Esq.
Telecopy No.: (214) 885-4300
Section 8.03 Interpretation.
(i) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. When
reference is made herein to "the business of" an entity, such reference shall
be deemed to include the business of all direct and indirect subsidiaries of
such entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(iii) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with other
changes, events, violations, inaccuracies, circumstances or effects, that is
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity and
its subsidiaries taken as a whole; provided, however that (i) no change, event,
violation, inaccuracy, circumstance or effect directly attributable to (A)
changes in general economic conditions or changes affecting the semiconductor
industry generally, (B) the loss of current or prospective customers or
suppliers that arose from such entity entering into this Agreement, or (C) any
shareholder litigation or litigation by a Governmental Entity, in each case
brought or threatened against such entity or any member of its board of
directors in respect of this Agreement or the transactions contemplated hereby,
shall constitute a Material Adverse Effect; and (ii) in no event shall (x) any
change in the market price or trading volume of the Company Common Stock or
Parent Common Stock, nor (y) the failure by Company or Parent to meet revenue
or earnings predictions of equity analysts reflected in the First Call
consensus estimate, or any other revenue or earnings predictions or
expectations, for any period ending on or after the date of this Agreement, in
and of itself constitute a Material Adverse Effect (it being understood that
this subsection (ii), as it relates to (y), shall not exclude any underlying
change, circumstance, effect or development which resulted in such failure to
meet such estimates, predictions or expectations).
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<PAGE>
(iv) For purposes of this Agreement, an "agreement," "arrangement,"
"contract," "commitment" or "plan" shall mean a legally binding, written
agreement, arrangement, contract, commitment or plan, as the case may be.
Section 8.04 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
Section 8.05 Entire Agreement; Third Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedule and the
Parent Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood, however, that the Confidentiality
Agreement shall continue in full force and effect until the Closing and shall
survive any termination of this Agreement; and (b) except with respect to the
Indemnified Parties under Section 5.10, are not intended to confer upon any
other person any rights or remedies hereunder.
Section 8.06 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 8.07 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity. In any action at law or suit in equity to enforce this Agreement or the
rights of any of the parties hereunder, the prevailing party in such action or
suit shall be entitled to receive a reasonable sum for its attorneys' fees and
all other reasonable costs and expenses incurred in such action or suit.
Section 8.08 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 conflicts
of law thereof.
Section 8.09 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
Section 8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
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Section 8.11 Waiver of Jury Trial. EACH OF PARENT, COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[The remainder of this page has been intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
MICROCHIP TECHNOLOGY INCORPORATED
By: /s/ Steve Sanghi
___________________________________
Name: Steve Sanghi
_________________________________
Title: CEO and President
_________________________________
MATCHBOX ACQUISITION CORP.
By: /s/ Steve Sanghi
___________________________________
Name: Steve Sanghi
_________________________________
Title: CEO and President
_________________________________
TELCOM SEMICONDUCTOR, INC.
By: /s/ Robert G. Gargus
___________________________________
Name: Robert G. Gargus
_________________________________
Title: CEO and President
_________________________________
[Signature Page to Merger Agreement]
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<PAGE>
EXHBIT B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of October 26, 2000, among MICROCHIP TECHNOLOGY INCORPORATED, a Delaware
corporation ("Parent"), and TELCOM SEMICONDUCTOR, INC., a Delaware corporation
(the "Company"). Capitalized terms used but not otherwise defined herein will
have the meanings ascribed to them in the Reorganization Agreement (as defined
below).
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Reorganization (the "Reorganization Agreement") which
provides for the merger (the "Merger") of a wholly-owned subsidiary of Parent
("Merger Sub") with and into the Company. Pursuant to the Merger, all
outstanding capital stock of the Company will be converted into the right to
receive Parent Common Stock.
B. As a condition to Parent's willingness to enter into the Reorganization
Agreement, Parent has requested that Company agree, and Company has so agreed,
to grant to Parent an option to acquire shares of Company's Common Stock,
$0.001 par value per share (the "Company Shares"), upon the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Reorganization 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. Subject to the terms and conditions set forth herein,
the Company hereby grants to Parent an irrevocable option (the "Option") to
acquire up to a number of Company Shares equal to 19.9% of the issued and
outstanding shares as of the date of this Agreement (the "Option Shares"), in
the manner set forth below by paying cash at a price per share of $15.00 (the
"Exercise Price"). The Exercise Price and the number of Option Shares granted
hereunder shall be subject to adjustment as set forth herein.
2. Exercise of Option.
(a) The Option may be exercised by Parent, in whole or in part, at any time
or from time to time (i) after termination of the Reorganization Agreement
pursuant to Section 7.01(g) thereof or (ii) upon the occurrence of any event
causing the Termination Fee to become payable pursuant to Section 7.03(b)(ii)
of the Reorganization Agreement (any of the events described in clause (i) and
(ii) of this sentence being referred to herein as an "Exercise Event"). In the
event Parent wishes to exercise the Option, Parent will deliver to the Company
a written notice (each an "Exercise Notice") specifying the total number of
Option Shares it wishes to acquire. Each closing of a purchase of Option Shares
(a "Closing") will occur on a date and at a time prior to the termination of
the Option designated by Parent in an Exercise Notice delivered at least two
(2) business days prior to the date of such Closing, which Closing will be held
at the principal offices of the Company.
(b) The Option will terminate upon the earliest of (i) the Effective Time,
(ii) twelve (12) months following the date on which the Reorganization
Agreement is terminated pursuant to Section 7.01(b) or 7.01(d)(i) thereof, if
no event causing the Termination Fee to become payable pursuant to Section
7.03(b)(ii) of the Reorganization Agreement has occurred, (iii) twelve (12)
months following the date on which the Reorganization Agreement is terminated
pursuant to Section 7.1(g) thereof, (iv) in the event the Reorganization
Agreement has been terminated pursuant to Section 7.01(b) or 7.01(d)(i) thereof
and the Termination Fee became payable pursuant to Section 7.03(b)(ii) thereof,
twelve (12) months after payment of the Termination Fee; and (v) the date on
which the Reorganization Agreement is terminated other than pursuant to
Sections 7.01(b), 7.01(d)(i) or 7.01(g); provided, however, that if the Option
cannot be exercised by reason of any applicable government order or because the
waiting period related to the issuance of the Option Shares under
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the HSR Act will not have expired or been terminated, then the Option will not
terminate until the tenth business day after such impediment to exercise will
have been removed or will have become final and not subject to appeal.
3. Conditions to Closing. The obligation of Company to issue Option Shares
to Parent hereunder is subject to the conditions that (A) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
will 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 will
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 will be in effect. It is
understood and agreed that at any time during which the Option is exercisable,
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.
4. Closing. At any Closing, (A) the Company will deliver to Parent a single
certificate in definitive form representing the number of Company Shares
designated by Parent in its Exercise Notice, such certificate to be registered
in the name of Parent and to bear the legend set forth in Section 10 hereof,
against delivery of (B) payment by Parent to the Company of the aggregate
purchase price for the Company Shares so designated and being purchased by
delivery of a certified check or bank check.
5. Representations and Warranties of the Company. Company represents and
warrants to Parent that (A) Company 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
the Company and consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or any of the transactions
contemplated hereby; (C) this Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company and, assuming this Agreement constitutes a legal, valid and binding
obligation of Parent, is enforceable against the Company in accordance with its
terms; (D) except for any filings required under the HSR Act, the Company 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 Company Shares for
Parent to exercise the Option in full and will take all necessary corporate or
other action to authorize and reserve for issuance all additional Company
Shares or other securities which may be issuable pursuant to Section 8(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 Company Shares and any other
securities to Parent upon exercise of the Option, Parent will acquire such
Company 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 Parent; (F) the execution and delivery
of this Agreement by the Company do not, and the performance of this Agreement
by the Company will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws or equivalent organizational documents of the Company
or any of its subsidiaries, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected; and (G) the execution and
delivery of this Agreement by the
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Company does not, and the performance of this Agreement by the Company 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.
6. Put Right.
(a) Parent Put. At the request of and upon notice by Parent (the "Put
Notice"), at any time during the period during which the Option is exercisable
pursuant to Section 2 (the "Purchase Period"), the Company (or any successor
entity thereof) will purchase from Parent all or any portion of the Option, to
the extent not previously exercised, at the price set forth below at:
The difference between the "Market/Tender Offer Price" for the Company
Shares as of the date Parent gives notice of its intent to exercise its rights
under this Section 6(a) (defined as the higher of (A) the highest price per
share offered as of such date pursuant to any Acquisition Proposal which was
made prior to such date and (B) the average closing sale price of Company
Shares then on the Nasdaq National Market during the five (5) trading days
ending on the trading day immediately preceding such date) and the Exercise
Price, multiplied by the number of Company 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
Acquisition Proposal which involves consideration other than cash, the value of
such consideration will 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 consideration by
the proponent of such Acquisition Proposal, or if no such value is ascribed, a
value determined in good faith by the Board of Directors of the Company.
(b) Payment and Redelivery of Option or Shares. In the event Parent
exercises its rights under Section 6(a) by delivery of a Put Notice, the
Company will, within twenty (20) business days after Parent delivers such
notice, pay the required amount to Parent in immediately available funds and
Parent will surrender to the Company all or such portion of the Option with
respect to which the Put Notice relates and the certificates evidencing the
Company Shares purchased by Parent pursuant to such Put Notice.
7. Registration Rights.
(a) Following the termination of the Reorganization Agreement, Parent
(sometimes referred to herein as the "Holder") may by written notice (a
"Registration Notice") to the Company (the "Registrant") request the Registrant
to register under the Securities Act all or any part of the shares acquired by
the Holder pursuant to this Agreement (such shares requested to be registered,
the "Registrable Securities") in order to permit the sale or other disposition
of any or all shares of the Registrable Securities that have been acquired by
or are issuable to Holder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Holder, including a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision. Holder agrees to cause, and to cause any underwriters of
any sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed basis so
that upon consummation thereof no purchaser or transferee will own beneficially
more than 5.0% of the then-outstanding voting power of Registrant. Upon a
request for registration, the Registrant will have the option exercisable by
written notice delivered to the Holder within ten (10) 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 ten (10) trading days
immediately preceding the date of the Registration Notice. Any such purchase of
Registrable Securities by the Registrant hereunder will take place at a closing
to be held at the principle 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 will be made by delivery at the time of such closing of
the Option Price in immediately available funds.
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(b) If the Registrant does not elect to exercise its option to purchase
pursuant to Section 7(a) with respect to all Registrable Securities, the
Registrant will 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
and to keep such registration statement effective for such period not in excess
of 90 calendar days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sale or other
disposition; provided, however, that the Holder will not be entitled to more
than an aggregate of two (2) effective registration statements hereunder. The
obligations of Registrant hereunder to file a registration statement and to
maintain its effectiveness may be suspended for up to 120 calendar days in the
aggregate if the Board of Directors of Registrant shall have determined that
the filing of such registration statement or the maintenance of its
effectiveness would require premature disclosure of material nonpublic
information that would materially and adversely affect Registrant or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of Registrant or any other material transaction involving
Registrant. If consummation of the sale of any Registrable Securities pursuant
to a registration hereunder does not occur within 90 days after the filing with
the SEC of the initial registration statement therefor, the provisions of this
Section 7 will again be applicable to any proposed registration. The Registrant
will use all reasonable efforts to cause any Registrable Securities registered
pursuant to this Section 7 to be qualified for sale under the securities or
blue sky laws of such jurisdictions as the Holder may reasonably request and
will continue such registration or qualification in effect in such
jurisdictions; provided, however, that the Registrant will not be required to
qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision. If Registrant effects a registration
under the Securities Act of Company Common Stock for its own account or for any
other stockholders of Registrant (other than on Form S-4 or Form S-8, or any
successor form), it will allow Holder the right to participate in such
registration by selling its Registrable Securities, and such participation will
not affect the obligation of Registrant to effect demand registration
statements for Holder under this Section 7; provided that, if the managing
underwriters of such offering advise Registrant in writing that in their
opinion the number of shares of Company Common Stock requested to be included
in such registration exceeds the reasonable number which can be sold in such
offering, Registrant will include the shares requested to be included therein
by Holder pro rata with the shares intended to be included therein by
Registrant.
(c) The registration rights set forth in this Section 7 are subject to the
condition that the Holder will provide the Registrant with such information
with respect to the Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to the Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all facts required to be
disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 7 will 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 will 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 registration, 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
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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 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 expenses, 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 untrue
statement) of a material fact contained in any 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 will any indemnity under
this Section 7(e) exceed the net proceeds of the offering received by the
Holder.
(iii) Each party entitled to indemnification under this Section 7(e) (the
"Indemnified Party") will 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 will permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided, that counsel for the
Indemnifying Party, who will conduct the defense of such claim or litigation,
will be approved by the Indemnified Party (whose approval will not unreasonably
be withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party will 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, however, that the failure of
any Indemnified Party to give notice as provided herein will not relieve the
Indemnifying Party of its obligations under this Section 7(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 will, 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 litigation. No Indemnifying Party will be required to
indemnify any Indemnified Party with respect to any settlement entered into
without such Indemnifying Party's prior consent (which will not be unreasonably
withheld).
8. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in the Company 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, and the Exercise Price
will be adjusted
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appropriately, and proper provision will be made in the agreements governing
such transaction so that Parent will receive, upon exercise of the Option, the
number and class of shares or other securities or property that Parent would
have received in respect of the Company Shares if the Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
(b) Without limiting the parties' relative rights and obligations under the
Reorganization Agreement, if the number of outstanding shares of Company Common
Stock increases after the date of this Agreement (other than pursuant to an
event described in Section 8(a)), the number of shares of Company Common Stock
subject to the Option (including those Option Shares which may have already
been exercised) will be adjusted so that it equals 19.9% of the number of
shares of Company Common Stock then issued and outstanding, without giving
effect to any Option Shares.
9. Profit Limitation.
(a) Notwithstanding any other provision in this Agreement or the
Reorganization Agreement, in no event shall Parent's Total Profit (as defined
below) exceed $12,000,000 (the "Maximum Profit") and, if Parent's Total Profit
otherwise would exceed the Maximum Profit, Parent, at its sole discretion shall
either (i) reduce the number of Option Shares subject to the Option, (ii) pay
cash to the Company, or (iii-) any combination of the foregoing, so that
Parent's actual realized Total Profit shall not exceed the Maximum Profit after
taking into account the foregoing actions; provided, however, that to the
extent the payment by the Company of cash to Parent in satisfaction of the
Termination Fee pursuant to Section 7.03 of the Reorganization Agreement would
cause Parent's Total Profit to exceed the Maximum Profit (after Parent has had
an opportunity to reduce Parent's Total Profit pursuant to this Section 9(a)),
then the Company need not pay such cash portion of the Termination Fee.
(b) For purposes of this Agreement, "Total Profit" shall mean: (i) the
aggregate amount (before taxes) of (i) (A) any amounts received by Parent on
the repurchase of the Option by the Company pursuant to Section 6, plus (B) any
Termination Fee paid by the Company and received by Parent pursuant to the
Reorganization Agreement, minus (ii) the amounts of any cash previously paid by
Parent to the Company pursuant to Section 2.
(c) For purposes of Section 9(a) and clause (i) of Section 9(b), the value
of any Option Shares delivered by Parent to the Company shall be the
Market/Tender Offer Price of such Options Shares.
10. Restrictive Legends. Each certificate representing Option Shares issued
to Parent hereunder will 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. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF OCTOBER 26,
2000, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have been
sold in reliance on and in accordance with Rule 144 under the Securities Act or
Holder has delivered to Registrant a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably satisfactory to
Registrant and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and (ii) the reference to restrictions pursuant
to this Agreement in the above legend will be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do
not require the retention of such reference.
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<PAGE>
11. Listing and HSR Filing. The Company, upon the request of Parent, will
promptly file an application to list the Company Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq National Market (or any
other national securities exchange or quotation system or which the Company
Common Stock is then listed) and will use its best efforts to obtain approval
of such listing as soon as practicable. Promptly after the date hereof, each of
the parties hereto will 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 Company
Shares subject to the Option at the earliest possible date.
12. Binding Effect. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this 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 7 will, 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 will not be entitled to the rights
of such party. Certificates representing shares sold in a registered public
offering pursuant to Section 7 will not be required to bear the legend set
forth in Section 10.
13. Specific Performance. The parties hereto 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 hereto agrees that in addition to
other remedies the other party hereto will be entitled to an injunction
restraining any violation or threatened violation of the provisions of this
Agreement or the right to enforce any of the covenants or agreements set forth
herein by specific performance. In the event that any action will be brought in
equity to enforce the provisions of the Agreement, neither party hereto will
allege, and each party hereto hereby waives the defense, that there is an
adequate remedy at law.
14. Entire Agreement. This Agreement and the Reorganization Agreement
(including the appendices thereto) constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all
other prior agreements and understandings, both written and oral, between the
parties hereto with respect to the subject matter hereof.
15. Further Assurances. Each party hereto 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 will not affect the validity or enforceability of the other
provisions of this Agreement, which will 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 will
negotiate in good faith and will 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.
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<PAGE>
17. Notices. All notices and other communications pursuant to this Agreement
shall be in writing and deemed to be sufficient if contained in a written
instrument and shall be deemed given if delivered personally, telecopied, sent
by nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
Microchip Technology Incorporated
Microchip Technology Incorporated
2355 West Chandler Boulevard
Chandler, Arizona 85224
Attention: General Counsel
Telecopy No.: (480) 899-9210
with a copy to:
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
One Market, Spear Tower
Suite 3300
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
Telecopy No.: (415) 947-2099
(b) if to the Company, to:
Telcom Semiconductor, Inc.
1300 Terra Bella Avenue
Mountain View, California 94043
Attention: Chief Executive Officer
Telecopy No.: (650) 940-9633
with a copy to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue
Suite 3200
Dallas, TX 75202
Attention: John R. Holzgraefe, Esq.
Gregory J. Schmitt, Esq.
Telecopy No.: (214) 885-4300
18. Governing Law. This Agreement will 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. Expenses. Except as otherwise expressly provided herein or in the
Reorganization Agreement, all costs and expenses incurred in connection with
the transactions contemplated by this Agreement will be paid by the party
incurring such expenses.
20. 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.
21. 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
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express written consent of the other party, except that the rights and
obligations hereunder will inure to the benefit of and be binding upon any
successor of a party hereto.
22. Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed to be an original, but both of which, taken together, will
constitute one and the same instrument.
[The remainder of this page has been intentionally left blank]
B-9
<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.
MICROCHIP TECHNOLOGY INCORPORATED
By: /s/ Steve Sanghi
___________________________________
Name: Steve Sanghi
_________________________________
Title: CEO and President
_________________________________
TELCOM SEMICONDUCTOR, INC.
By: /s/ Robert G. Gargus
___________________________________
Name: Robert G. Gargus
_________________________________
Title: CEO and President
_________________________________
[Signature Page to Stock Option Agreement]
B-10
<PAGE>
EXHIBIT C
FORM OF VOTING AGREEMENT
THIS COMPANY VOTING AGREEMENT (this "Agreement") is made and entered into as
of October 26, 2000, among MICROCHIP TECHNOLOGY INCORPORATED., a Delaware
corporation ("Parent"), and the undersigned stockholder (the "Stockholder") of
TELCOM SEMICONDUCTOR, INC., a Delaware corporation ("Company").
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Reorganization of even date herewith (the
"Reorganization Agreement"), which provides for the merger (the "Merger") of
Matchbox Acquisition Corp., a wholly-owned subsidiary of Parent ("Merger Sub"),
with and into the Company. Pursuant to the Merger, all outstanding common stock
of the Company, par value $0.001 per share ("Company Common Stock"), shall be
converted into common stock of Parent, as set forth in the Reorganization
Agreement;
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such
number of shares of the outstanding capital stock of the Company and shares
subject to outstanding options as is indicated on the signature page of this
Agreement; and
C. In consideration of the execution of the Reorganization Agreement by
Parent, Stockholder (in his or her capacity as such) agrees to vote the Shares
(as defined below) and other such shares of capital stock of the Company over
which Stockholder has voting power so as to facilitate consummation of the
Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Certain Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Reorganization Agreement. For purposes of this
Agreement:
(a) "Expiration Date" shall mean the earlier to occur of (i) such date
and time as the Reorganization Agreement shall have been terminated
pursuant to Article VII thereof, or (ii) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the
Reorganization Agreement.
(b) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental
authority.
(c) "Shares" shall mean: (i) all securities of the Company (including
all shares of Company Common Stock and all options, warrants and other
rights to acquire shares of Company Common Stock) owned by Stockholder as
of the date of this Agreement; and (ii) all additional securities of the
Company (including all additional shares of Company Common Stock and all
additional options, warrants and other rights to acquire shares of Company
Common Stock) of which Stockholder acquires ownership during the period
from the date of this Agreement through the Expiration Date.
(d) Transfer. A Person shall be deemed to have effected a "Transfer" of
a security if such person directly or indirectly: (i) sells, pledges,
encumbers, grants an option with respect to, transfers or disposes of such
security or any interest in such security; or (ii) enters into an agreement
or commitment providing for the sale of, pledge of, encumbrance of, grant
of an option with respect to, transfer of or disposition of such security
or any interest therein.
2. Transfer of Shares.
(a) Transferee of Shares to be Bound by this Agreement. Stockholder agrees
that, during the period from the date of this Agreement through the Expiration
Date, Stockholder shall not cause or permit any Transfer of any of the Shares
to be effected unless each Person to which any of such Shares, or any interest
in any of such
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<PAGE>
Shares, is or may be transferred shall have: (a) executed a counterpart of this
Agreement and a proxy in the form attached hereto as Exhibit A (with such
modifications as Parent may reasonably request); and (b) agreed in writing to
hold such Shares (or interest in such Shares) subject to all of the terms and
provisions of this Agreement.
(b) Transfer of Voting Rights. Stockholder agrees that, during the period
from the date of this Agreement through the Expiration Date, Stockholder shall
not deposit (or permit the deposit of) any Shares in a voting trust or grant
any proxy or enter into any voting agreement or similar agreement in
contravention of the obligations of Stockholder under this Agreement with
respect to any of the Shares.
3. Agreement to Vote Shares. At every meeting of the stockholders of the
Company called, and at every adjournment thereof, and on every action or
approval by written consent of the stockholders of the Company, Stockholder (in
his or her capacity as such) shall cause the Shares to be voted in favor of
adoption of the Reorganization Agreement. Notwithstanding any provision of this
Agreement to the contrary, nothing in this Agreement shall limit or restrict
Stockholder from acting in Stockholder's capacity as a director or officer of
Company (it being understood that this Agreement shall apply to Stockholder
solely in Stockholder's capacity as a stockholder of Company) or voting in
Stockholder's sole discretion on any matter other than those matters referred
to in the preceding sentence.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable to the fullest extent
permissible by law, with respect to the Shares.
5. Representations and Warranties of the Stockholder. Stockholder (i) is the
beneficial owner of the shares of Company Common Stock and the options to
purchase shares of Company Common Stock indicated on the signature page of this
Agreement, which are free and clear of any liens, adverse claims, charges or
other encumbrances (except any such encumbrances arising under securities
laws); (ii) does not beneficially own any securities of the Company other than
the shares of Company Common Stock and options to purchase shares of Company
Common Stock indicated on the signature page of this Agreement; and (iii) has
full power and authority to make, enter into and carry out the terms of this
Agreement and the Proxy.
6. Additional Documents. Stockholder (in his or her capacity as such) and
Parent hereby covenant and agree to execute and deliver any additional
documents necessary or desirable, in the reasonable opinion of Parent, to carry
out the intent of this Agreement.
7. Legending of Shares. If so requested by Parent, Stockholder agrees that
the Shares shall bear a legend stating that they are subject to this Agreement
and to an irrevocable proxy.
8. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
9. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
C-2
<PAGE>
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto acknowledge
that Parent shall be irreparably harmed and that there shall be no adequate
remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
(e) Notices. All notices and other communications pursuant to this Agreement
shall be in writing and deemed to be sufficient if contained in a written
instrument and shall be deemed given if delivered personally, telecopied, sent
by nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified
by like notice):
If to Parent:
Microchip Technology Incorporated
2355 West Chandler Boulevard
Chandler, Arizona 85224
Attention: General Counsel
Telecopy No.: (480) 899-9210
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
One Market, Spear Tower
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
Telecopy No.: (415) 947-2099
If to Stockholder:
To the address for notice set forth on the signature page hereof.
(f) Governing Law. This Agreement shall be governed by the laws of the State
of Delaware, without reference to rules of conflicts of law.
(g) Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
(h) Effect of Headings. The section headings are for convenience only and
shall not affect the construction or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
(j) No Obligation to Exercise Options. Notwithstanding any provision of this
Agreement to the contrary, nothing in this Agreement shall obligate Stockholder
to exercise any option, warrant or other right to acquire shares of Company
Common Stock.
C-3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
STOCKHOLDER
MICROCHIP TECHNOLOGY INCORPORATED
By: _________________________________
By: _______________________________ Signature
Signature of Authorized Signatory
Name: _______________________________
Name: _____________________________
Title: ____________________________ Title: ______________________________
_____________________________________
_____________________________________
Print Address
_____________________________________
Telephone
_____________________________________
Facsimile No.
Share beneficially owned:
shares of Company Common Stock
shares of Company Common Stock
issuable upon exercise of
outstanding options
[Signature Page to Company Voting Agreement]
C-4
<PAGE>
IRREVOCABLE PROXY
The undersigned stockholder (the "Stockholder") of Telcom Semiconductor,
Inc., a Delaware corporation (the "Company"), hereby irrevocably (to the
fullest extent permitted by law) appoints the directors on the Board of
Directors of Microchip Technology Incorporated, a Delaware corporation
("Parent"), and each of them, as the sole and exclusive attorneys and proxies
of the undersigned, with full power of substitution and resubstitution, to vote
and exercise all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to all of the shares of capital
stock of the Company that now are or hereafter may be beneficially owned by the
undersigned, and any and all other shares or securities of the Company issued
or issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Proxy until the Expiration Date
(as defined below). Upon the undersigned's execution of this Proxy, any and all
prior proxies given by the undersigned with respect to any Shares are hereby
revoked and the undersigned agrees not to grant any subsequent proxies with
respect to the Shares until after the Expiration Date.
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Company Voting
Agreement of even date herewith by and among Parent and the undersigned
stockholder, and is granted in consideration of Parent entering into that
certain Agreement and Plan of Reorganization of even date herewith (the
"Reorganization Agreement"), among Parent, Matchbox Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"),
and the Company. The Reorganization Agreement provides for the merger of Merger
Sub with and into the Company in accordance with its terms (the "Merger"). As
used herein, the term "Expiration Date" shall mean the earlier to occur of (i)
such date and time as the Reorganization Agreement shall have been validly
terminated pursuant to Article VII thereof or (ii) such date and time as the
Merger shall become effective in accordance with the terms and provisions of
the Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the
Expiration Date, to act as the undersigned's attorney and proxy to vote the
Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the
power to execute and deliver written consents) at every annual, special or
adjourned meeting of stockholders of the Company and in every written consent
in lieu of such meeting in favor of adoption of the Reorganization Agreement.
The attorneys and proxies named above may not exercise this Proxy on any
other matter. The undersigned stockholder may vote the Shares on all other
matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically
upon the Expiration Date.
Dated: October , 2000
Signature of Stockholder: _______________
Print Name of Stockholder: ______________
[Signature Page to Irrevocable Proxy]
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<PAGE>
EXHIBIT D
October 26, 2000
Board of Directors
TelCom Semiconductor, Inc.
1300 Terra Bella Avenue
Mountain View, California 94039
Gentlemen:
We understand that TelCom Semiconductor, Inc. (the "Company"), Microchip
Technology Incorporated ("Microchip") and its wholly-owned subsidiary, Matchbox
Acquisition Corp. ("Merger Sub"), propose to enter into an Agreement and Plan
of Reorganization which will provide, among other things, for the merger
("Merger") of Merger Sub with and into the Company. Under the terms set forth
in that certain Agreement and Plan of Reorganization, dated October 26, 2000
(the "Agreement"), the Company shall become a wholly-owned subsidiary of
Microchip, and each issued and outstanding share of Common Stock, $.001 par
value, of the Company ("Company Common Stock") (other than any shares of
Company Common Stock held by the Company or any direct or indirect wholly owned
subsidiary of the Company) shall be converted into the right to receive that
number of shares of Microchip's Common Stock, $.001 par value per share
("Microchip Common Stock"), as specified in the Agreement (the "Exchange
Ratio"). The terms and conditions of the Merger are set forth more fully in the
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Agreement.
You have asked for our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to the stockholders of the Company.
For purposes of this opinion, we have reviewed the Agreement; analyzed
certain publicly available financial statements and other information of the
Company and Microchip; analyzed certain internal financial statements and other
financial and operating data and financial forecasts for the Company (the
"Company Forecasts"), in each case, prepared by the Company's management; and
analyzed certain internal financial statements and other financial and
operating data and financial forecasts for Microchip ("Microchip Forecasts"),
in each case prepared by Microchip's management. We have held discussions with
members of the senior management of the Company and Microchip regarding the
financial information referred to above as well as the strategic rationale for,
and the potential benefits of, the Merger and the past and current business
operations, financial condition and future prospects of the Company. We have
reviewed the pro forma impact of the Merger on Microchip's earnings per share,
and we have analyzed the relative contributions of the Company and Microchip to
the combined companies. In addition, we have reviewed the reported price and
trading activity for both the Company Common Stock and Microchip Common Stock,
reviewed certain historic operating information provided by the Company and
Microchip, compared certain financial information including market prices and
valuation multiples for the Company and Microchip with similar information for
certain other comparable publicly traded companies, reviewed the financial
terms, to the extent publicly available, of certain recent business
combinations in the semiconductor industry and performed such other studies and
analyses as we considered appropriate.
For purposes of rendering this opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness of all of the
financial and other information reviewed by and discussed with us. In rendering
this opinion, we have assumed, with your consent, that the Company Forecasts
and the Microchip Forecasts (and, in each case, the assumptions and bases
therefor) have been reasonably prepared in good faith and on a basis reflecting
the best currently available estimates, assumptions and judgements of the
management of the Company and Microchip as to the future financial condition
and performance of the Company and Microchip, respectively.
In providing this letter, we have assumed, with your consent and without
independent verification that the representations and warranties of the parties
in the Agreement are true and correct as of the date hereof and that
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<PAGE>
the Merger will have the tax, accounting and legal effects contemplated in the
Agreement, including, among other things, that the Merger will be accounted for
as a "pooling-of-interests" business combination in accordance with U.S.
generally accepted accounting principles ("GAAP") and that the Merger will be
treated as a tax-free reorganization pursuant to the Internal Revenue Code of
1986, as amended. We have also assumed that the historical financial statements
of each of the Company and Microchip reviewed by us have been prepared and
fairly presented in accordance with generally accepted accounting principles
consistently applied. In addition, we have assumed that all conditions to the
consummation of the Merger will be fulfilled and that the Merger will be
consummated in a timely manner.
In addition, we have not made an independent evaluation or appraisal of the
assets and liabilities of the Company or Microchip or any of their respective
subsidiaries and we have not been furnished with any such evaluation or
appraisal. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the Merger, and our opinion is limited to
the fairness, from a financial point of view to the stockholders of the
Company, of the Exchange Ratio. Our opinion does not address the relative
merits of the Merger as compared to any alternative business strategy that
might be available to the Company nor does our opinion address the Company's
underlying business decision to effect the Merger or constitute a recommendaton
of the Merger to the Company or its stockholders. This letter is not intended
as a substitute for the exercise of the business judgment of the Board of
Directors of the Company in reviewing the Merger. Finally, our opinion does not
constitute an opinion or imply a conclusion as to the current price per share
of the Company Common Stock or the price at which Company Common Stock will
trade at any future time.
Our opinion is based upon market, economic and other conditions as they
exist and can be evaluated on the date hereof, and we assume no responsibility
to update or revise our opinion based upon circumstances or events occurring
after that date. It should be understood that subsequent developments may
affect the conclusions expressed in this opinion.
Based upon and subject to the foregoing and based upon such other matters as
we considered relevant, it is our opinion that as of the date hereof, the
Exchange Ratio is fair, from a financial point of view, to the stockholders of
the Company.
We are acting as the Company's financial advisor in connection with the
Merger and will receive a fee for our services, including the rendering of this
opinion. In addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of our engagement. In addition, in the ordinary
course of our business, we may actively trade in the Company Common Stock or
Microchip Common Stock for our own account and for the accounts of our
customers and, accordingly, may at any time hold long or short positions in
such securities.
The foregoing opinion letter is provided for the information and assistance
of the Board of Directors of the Company in connection with its consideration
of the transactions contemplated herein and is not intended to be and does not
constitute a recommendation to any stockholder of the Company or Microchip as
to how such stockholder should vote, or take any other action, with respect to
the Merger. This opinion is not intended to confer any rights or remedies upon
any employee, creditor, stockholder or other equity holder of the Company or
any other party. Our opinion is not to be disclosed to or relied upon by any
other person (including any stockholder of the Company) or used, circulated,
quoted or otherwise referred to for any other purpose, nor is it to be filed
with, included in or referred to in whole or in part in any publicly available
statement or document, except in accordance with our prior written consent.
Very truly yours,
/s/ C.E. UNTERBERG, TOWBIN
C.E. Unterberg, Towbin
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EXHIBIT E
FORM OF COMPANY AFFILIATE AGREEMENT
THIS COMPANY AFFILIATE AGREEMENT (this "Agreement") is made and entered into
as of October 26, 2000, between MICROCHIP TECHNOLOGY INCORPORATED, a Delaware
corporation ("Parent"), and the undersigned stockholder of TELCOM
SEMICONDUCTOR, INC., a Delaware corporation ("Company"), who may be deemed an
affiliate ("Affiliate") of Company. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Reorganization
Agreement (as defined below).
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Reorganization (the "Reorganization Agreement") which
provides for the merger (the "Merger") of Matchbox Acquisition Corp., a wholly-
owned subsidiary of Parent ("Merger Sub"), with and into the Company. Pursuant
to the Merger, all issued and outstanding capital stock of the Company (the
"Company Capital Stock") as of the Effective Time (as defined in the
Reorganization Agreement) will be converted into common stock of Parent, par
value $0.001 per share ("Parent Common Stock") as set forth in the
Reorganization Agreement;
B. The execution and delivery of this Agreement by Affiliate is a material
inducement to Parent to enter into the Reorganization Agreement; and
C. Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Parent after the Merger as the term "affiliate" is used (i) for
purposes of Rule 144 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") and (ii) in
Accounting Series Releases 130 and 135, as amended, although nothing contained
herein shall be construed as an admission by Affiliate that Affiliate is in
fact an "affiliate" of Parent.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands that
the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by Parent, the Company and their respective affiliates,
counsel and accounting firms for purposes of determining Parent's eligibility
to account for the Merger as a "pooling of interests." Affiliate has carefully
read this Agreement and the Reorganization Agreement and has had the
opportunity to discuss the requirements of this Agreement with Affiliate's
professional advisors, who Affiliate believes are qualified to advise Affiliate
with regard to such matters.
2. Beneficial Ownership of Company Capital Stock. The Affiliate is the sole
beneficial owner of the number of shares of Company Capital Stock set forth
next to its name on the signature page hereto (the "Shares"). There are no
options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which the Affiliate is party or by which it is bound
obligating the Affiliate to issue, deliver, sell or redeem prior to the end of
the Restricted Period (as defined in Section 3 below), or cause to be issued,
delivered, sold or redeemed prior to the end of the Restricted Period, any
Shares or obligating the Affiliate to grant or enter into any such option,
warrant, call, right, commitment or agreement prior to the end of the
Restricted Period. The Affiliate has the sole right to transfer such Shares.
The Shares constitute all shares of Company Capital Stock owned, beneficially
or of record, by the Affiliate. The Affiliate has not engaged in any sale or
other transfer of the Shares in contemplation of the Merger. All shares of
Company Capital Stock and Parent Common Stock acquired by Affiliate subsequent
to the date hereof (including shares of Parent Common Stock acquired in the
Merger) shall be subject to the provisions of this Agreement, to the extent
such provisions are then still applicable, as if held by Affiliate as of the
date hereof.
E-1
<PAGE>
3. Covenants Related to Pooling of Interests. In accordance with Staff
Accounting Bulletin No. 65, during the period from the date 30 days prior to
the Effective Time until the day Parent publicly announces financial results
covering at least 30 days of combined operations of Parent and the Company (the
"Restricted Period"), Affiliate shall not sell, exchange, transfer, pledge,
distribute, make any gift or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended or having
the effect, directly or indirectly, to reduce Affiliate's risk relative to any
shares of Parent Common Stock or Company Capital Stock (including the Shares).
Parent may, at its discretion, place a stock transfer notice consistent with
the foregoing, with respect to Affiliate's shares of Parent Common Stock
provided that such notice shall be countermanded as soon as practicable upon
expiration of the necessity therefor.
4. Compliance with Rule 145 and the Securities Act.
(a) Affiliate has been advised that (i) the issuance of shares of Parent
Common Stock in connection with the Merger is expected to be effected pursuant
to a registration statement on Form S-4 promulgated under the Securities Act of
1933, as amended (the "Securities Act"), and the resale of such shares shall be
subject to restrictions set forth in Rule 145 under the Securities Act, and
(ii) Affiliate may be deemed to be an affiliate of the Company. Affiliate
accordingly agrees not to sell, transfer or otherwise dispose of any Parent
Common Stock issued to Affiliate in the Merger unless (i) such sale, transfer
or other disposition is made in conformity with the requirements of Rule 145(d)
promulgated under the Securities Act, (ii) such sale, transfer or other
disposition is made pursuant to an effective registration statement under the
Securities Act or an appropriate exemption from registration, (iii) Affiliate
delivers to Parent a written opinion of counsel, reasonably acceptable to
Parent in form and substance, that such sale, transfer or other disposition is
otherwise exempt from registration under the Securities Act or (iv) an
authorized representative of the Commission shall have rendered written advice
to Affiliate to the effect that the Commission would take no action, or that
the staff of the Commission would not recommend that the Commission take any
action, with respect to the proposed disposition if consummated (the "No Action
Correspondence").
(b) Parent shall give stop transfer instructions to its transfer agent with
respect to any Parent Common Stock received by Affiliate in the Merger and
there shall be placed on the certificates representing such Common Stock, or
any substitutions therefor issued prior to the end of the Restricted Period, a
legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED (A) IN CONFORMITY WITH
RULE 145(d), OR (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (C) IN ACCORDANCE WITH A WRITTEN
OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND
SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Parent shall instruct its transfer agent
to remove such legend, if Affiliate delivers to Parent (i) satisfactory written
evidence that the shares have been sold in compliance with Rule 145 (in which
case, the substitute certificate shall be issued in the name of the
transferee), (ii) the No Action Correspondence, (iii) an opinion of counsel, in
form and substance reasonably satisfactory to Parent, to the effect that public
sale of the shares by the holder thereof is no longer subject to Rule 145, or
(iv) a written request for removal of such legend after the first anniversary
of the Effective Time.
5. Termination.
(a) This Agreement shall be terminated and shall be of no further force and
effect in the event of the termination of the Reorganization Agreement pursuant
to Article VII of the Reorganization Agreement.
E-2
<PAGE>
6. Miscellaneous.
(a) Waiver; Severability. No waiver by any party hereto of any condition or
of any breach of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto. In the event that any provision of
this Agreement, or the application of any such provision to any person, entity
or set of circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons, entities or circumstances other than
those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue
to be valid and enforceable to the fullest extent permitted by law.
(b) Binding Effect and Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other party hereto.
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Injunctive Relief. Each of the parties acknowledge that (i) the
covenants and the restrictions contained in this Agreement are necessary,
fundamental, and required for the protection of Parent and the Company and to
preserve for Parent the benefits of the Merger; (ii) such covenants relate to
matters which are of a special, unique, and extraordinary character that gives
each of such covenants a special, unique, and extraordinary value; and (iii) a
breach of any such covenants or any other provision of this Agreement shall
result in irreparable harm and damages to Parent and the Company which cannot
be adequately compensated by a monetary award. Accordingly, it is expressly
agreed that in addition to all other remedies available at law or in equity,
Parent and the Company shall be entitled to the immediate remedy of a temporary
restraining order, preliminary injunction, or such other form of injunctive or
equitable relief as may be used by any court of competent jurisdiction to
restrain or enjoin any of the parties hereto from breaching any such covenant
or provision or to specifically enforce the provisions hereof.
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Delaware, without reference to rules
of conflicts of law.
(f) Entire Agreement. This Agreement sets forth the entire understanding of
Affiliate and Parent relating to the subject matter hereof and supersedes all
prior agreements and understandings between Affiliate and Parent relating to
the subject matter hereof.
(g) Attorneys' Fees. In the event of any legal actions or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorneys' fees, whether or not the proceeding results
in a final judgment.
(h) Further Assurances. Affiliate shall execute and/or cause to be delivered
to Parent such instruments and other documents and shall take such other
actions as Parent may reasonably request to effectuate the intent and purposes
of this Agreement.
(i) Third Party Reliance. Counsel to and independent auditors for Parent and
the Company shall be entitled to rely upon this Affiliate Agreement.
(j) Survival. The representations, warranties, covenants and other
provisions contained in this Agreement shall survive the Merger.
E-3
<PAGE>
(k) Notices. All notices and other communications pursuant to this Agreement
shall be in writing and deemed to be sufficient if contained in a written
instrument and shall be deemed given if delivered personally, telecopied, sent
by nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified
by like notice):
If to Parent:
Microchip Technology Incorporated
2355 West Chandler Boulevard
Chandler, Arizona 85224
Attention: General Counsel
Telecopy No.: (480) 899-9210
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
One Market, Spear Tower
Suite 3300
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
Telecopy No.: (415) 947-2099
If to Affiliate:
To the address for notice set forth on the signature page hereof.
(l) Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
[The remainder of this page has been intentionally left blank]
E-4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement to be
duly executed on the day and year first above written.
<TABLE>
<S> <C>
MICROCHIP TECHNOLOGY AFFILIATE
INCORPORATED
By: ____________ By: _______________________________________
Name: __________ Affiliate's Address for Notice:
Title: _________ ___________________________________________
___________________________________________
___________________________________________
</TABLE>
Shares beneficially owned:
______ shares of Company Common Stock
______ shares of Company Common Stock
issuable upon exercise of
outstanding options
shares of Parent Common
Stock
[Signature Page to Company Affiliate Agreement]
E-5
<PAGE>
EXHIBIT F
FORM OF NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into on
October 26, 2000 by and between Microchip Technology Incorporated, a Delaware
corporation ("Parent"), Matchbox Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), TelCom Semiconductor, Inc., a
Delaware corporation ("TSI" or the "Company") and ("TSI
Employee"), to be effective upon the Closing Date (as defined in the
Reorganization Agreement described below).
WHEREAS, concurrently with the execution of this Agreement, TSI, Parent and
Merger Sub have entered into an Agreement and Plan of Reorganization dated
October 26, 2000 (the "Reorganization Agreement"), pursuant to which, among
other things, Merger Sub shall merge with and into TSI and Parent shall thereby
acquire all of the issued and outstanding capital stock of TSI by means of such
merger (the "Merger");
WHEREAS, TSI Employee currently owns shares of common stock of the Company
("TSI Common Stock");
WHEREAS, the term "Parent," as used for all purposes in this Agreement,
shall include any current or future, direct or indirect subsidiaries of Parent,
including TSI, and "Company" shall also refer to the surviving corporation of
the Merger of TSI and Merger Sub, including the Company.
WHEREAS, in connection with the various transactions contemplated by the
Reorganization Agreement, TSI Employee shall have all of his or her issued and
outstanding TSI common stock converted into shares of Parent common stock
and/or shall receive options to purchase shares of Parent common stock in
connection with the various transactions contemplated by the Reorganization
Agreement;
WHEREAS, Parent, Merger Sub, the Company and TSI Employee desire to enter
into this Agreement to provide that Parent receive the benefit of the
consideration it is paying in connection with the Merger.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Confidentiality. TSI Employee hereby agrees to complete and execute
Parent's standard Proprietary Information and Inventions Agreement.
2. Conflicting Obligations. TSI Employee certifies that TSI Employee has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude TSI Employee from
complying with the provisions hereof, and further certifies that TSI Employee
will not enter into any such conflicting agreement while in the employ of
Parent.
3. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
(i) "Restricted Business" shall mean any business that is engaged in or
(to the TSI Employee's knowledge, after due inquiry) preparing to be
engaged in that involves in any manner the development, manufacturing, sale
or support of a silicon product that competes with or could potentially
replace any product that is offered for sale by the Parent (including TSI
products) now or following the Merger.
(ii) "Restricted Territory" shall mean the larger of: (A) all of the
countries of the world or (B) if (A) is found unenforceable, the countries
in which Parent sells either directly or through resellers or others,
Parent products (including TSI products) during the term of the non-compete
obligations specified in this Section 3.
F-1
<PAGE>
(iii) Restricted Period means the one-(1) year period following TSI
Employee's cessation of employment with Parent, if such cessation of
employment occurs within 12 months following the Effective Date (as defined
in the Reorganization Agreement). If the TSI Employee continues to be
employed by Parent for more than 12 months following the Effective Date,
then there shall be no Restricted Period.
(b) Non-Compete. In consideration of: (i) the receipt by TSI Employee of
consideration from Parent in connection with the Merger and transactions
contemplated by the Reorganization Agreement (including shares of Parent common
stock in exchange for shares of TSI Common Stock owned by TSI Employee and/or
options to acquire shares of Parent common stock) and (ii) Parent entering into
the Reorganization Agreement and Parent's willingness to perform its
obligations thereunder, TSI Employee agrees that (A) during the Restricted
Period or (B) in the event that the period set forth in clause (A) is
determined to be unenforceable by a court of competent jurisdiction, the
maximum period allowable, TSI Employee will not, directly or indirectly, engage
in (whether as an officer, employee, director, proprietor, partner, consultant
or otherwise), or have any ownership interest in, or participate in the
financing, operation, management or control of, any person, firm, corporation
or business that engages in a business that, at the time such TSI Employee's
employment with the Parent ceases, is a Restricted Business in a Restricted
Territory. It is agreed that ownership of less than one percent (1%) of the
outstanding voting stock of a publicly-traded company or privately held company
shall not, in and of itself, constitute a violation of this section. It is
further agreed that the foregoing consideration is not intended to constitute
liquidated damages for a violation of this section.
(c) Non-Solicit. During the period ending on the expiration of the
Restricted Period, TSI Employee agrees that TSI Employee shall not:
(i) take any action to, or do anything reasonably intended to, divert
business from Parent or any of its respective subsidiaries, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of Parent to cease doing business with Parent; or
(ii) directly or indirectly recruit, solicit, or assist others in
recruiting, or soliciting, any person who is an employee of Parent or
induce or attempt to induce any such employee to terminate his or her
employment with Parent.
(d) REMEDIES. TSI EMPLOYEE HEREBY RECOGNIZES AND ACKNOWLEDGES THAT A
MATERIAL VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 3 WOULD CAUSE
IRREPARABLE INJURY TO PARENT OR ANY OF ITS RESPECTIVE AFFILIATES, AS THE CASE
MAY BE, FOR WHICH PARENT OR ANY OF ITS RESPECTIVE AFFILIATES, WOULD HAVE NO
ADEQUATE REMEDY AT LAW. ACCORDINGLY, IN THE EVENT THAT TSI EMPLOYEE SHALL FAIL
TO MATERIALLY COMPLY WITH THE TERMS AND PROVISIONS OF THIS SECTION 3 IN ANY
RESPECT, AND TSI EMPLOYEE HAS BEEN GIVEN NOTICE OF SUCH VIOLATION AND AN
OPPORTUNITY TO CURE SUCH VIOLATION, PARENT OR ANY OF ITS RESPECTIVE
SUBSIDIARIES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE RELIEF AND
TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF. IN FURTHERANCE AND
NOT IN LIMITATION OF THE FOREGOING, TSI EMPLOYEE HEREBY WAIVES ANY CLAIM OR
DEFENSE RELATING TO ANY VIOLATION OR BREACH BY TSI EMPLOYEE OF THE TERMS AND
PROVISIONS OF THIS SECTION 3 THAT PARENT OR ANY OF ITS RESPECTIVE AFFILIATES,
HAVE AN ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN ADEQUATE
REMEDY FOR SUCH VIOLATION OR BREACH.
(e) Severability. The parties intend that the covenants contained in the
preceding paragraphs shall be construed as a series of separate covenants, one
for each county, city, state and other political subdivision of each country in
the Restricted Territory. Except for geographic coverage, each separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be
deemed eliminated from this Agreement
F-2
<PAGE>
for the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced by such
court. It is the intent of the parties that the covenants set forth herein be
enforced to the maximum degree permitted by applicable law.
4. Representations of TSI Employee. TSI Employee represents that:
(a) TSI Employee: (i) is familiar with the covenants not to compete and
not to solicit set forth in this Agreement, (ii) is fully aware of his or
her obligations hereunder, and (iii) is receiving specified, bargained-for
consideration in connection with the Merger and various transactions
contemplated in the Reorganization Agreement for his or her covenants not
to compete and not to solicit.
(b) Execution of this Agreement and performance of TSI Employee's
obligations hereunder, will not conflict with, or result in a violation of
or breach of and any other agreement to which TSI Employee is a party or
any judgment, order or decree to which TSI Employee is subject.
5. General Provisions.
(a) Entire Agreement. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter hereof, and
supersedes all prior or contemporaneous agreements, whether written or oral.
(b) Waiver. No waiver, alteration, or modification of any of the provisions
of this Agreement shall be binding unless in writing and signed by (i) a duly
authorized representative of Parent and (ii) TSI Employee (the consent of any
other party hereto need not be obtained). No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
(c) Severability. If one or more of the provisions in this Agreement is
deemed void by law, then the remaining provisions will continue in full force
and effect.
(d) Assignment. This Agreement shall inure to the benefit of and is
assignable by Parent without consent to any successor-in-interest to Parent
(whether by means of Merger, asset sale or otherwise).
(e) Counterparts. This Agreement may be executed by either of the parties
hereto in counterparts, each of which shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
(f) Governing Law; Consent to Personal Jurisdiction. This Agreement shall be
governed in all respects by the internal laws of the State of Arizona without
regard to conflict of law provisions. Each of TSI Employee and Parent hereby
consents to the personal jurisdiction of the federal courts located in the
county of Maricopa County, Arizona for any action or proceeding arising from or
relating to this Agreement.
(g) Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and delivered personally to the other party
or sent by certified or registered mail, return receipt requested and postage
prepaid.
(h) Effectiveness. This Agreement shall automatically be effective upon the
Effective Time of the Merger contemplated by the Reorganization Agreement
without any further action of any parties hereto.
F-3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
<TABLE>
<S> <C>
MICROCHIP TECHNOLOGY INCORPORATED (TELCOM EMPLOYEE)
By: ____________________________________________ _____________________________________
Name: __________________________________________
Title: _________________________________________ TelCom Employee's Address for Notice
_____________________________________
MATCHBOX ACQUISITION CORP. _____________________________________
_____________________________________
By: ____________________________________________
Name: __________________________________________ TELCOM SEMICONDUCTOR, INC.
Title: _________________________________________
By: _________________________________
Name: _______________________________
Title: ______________________________
</TABLE>
F-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Our Restated Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. Our Bylaws provide
that we shall indemnify our officers and directors and may indemnify our
employees and other agents to the fullest extent permitted by Delaware law. We
have entered into indemnification agreements with our officers and directors
containing provisions that are in some respects broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements require us, among other things to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities
arising from willful misconduct of a culpable nature), to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified, and to obtain directors' and officers' insurance, if
available on reasonable terms. We believe that these agreements are necessary
to attract and retain qualified persons as directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party
to an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable
cause to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
(a)
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
2.1+ Agreement and Plan of Reorganization, dated as of October 26, 2000, by
and among Microchip Technology, Inc., the Registrant, Matchbox
Acquisition Corp., and TelCom Semiconductor, Inc. (included as
Exhibit A to the proxy statement/prospectus filed as part of this
Registration Statement).
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
together with consent.
8.1+ Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, together with consent.
8.2 Tax Opinion of Jenkens & Gilchrist, Professional Corporation, together
with consent.
23.1 Consent of KPMG LLP, independent public accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.3 Consent of C.E. Unterberg, Towbin.
23.4+ Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included as part of its opinions filed as exhibits 5.1 and 8.1).
23.5 Consent of Jenkens & Gilchrist, a Professional Corporation (included
as part of its opinion filed as Exhibit 8.2).
24.1+ Power of Attorney.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
99.1 Form of Proxy of TelCom Semiconductor, Inc.
99.2+ Opinion of C.E. Unterberg, Towbin (included as Exhibit D to the proxy
statement/prospectus, filed as a part of this Registration Statement
and incorporated herein by reference).
</TABLE>
--------
+ Previously filed
(b) Not applicable
(c) Opinion of C.E. Unterberg, Towbin, attached as Exhibit D to the proxy
statement/prospectus which is part of this registration statement.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(2) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus that is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the registration statement through the date of
responding to the request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. If a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chandler, Arizona on
December 5, 2000.
MICROCHIP TECHNOLOGY INCORPORATED
By: /s/ Gordon W. Parnell
___________________________________
Name: Gordon W. Parnell
Title: Vice President and Chief
Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-4 has been signed by the following persons on
December 5, 2000 in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
* Chairman, President, Chief Executive
__________________________________ Officer (Principal Executive Officer)
Steve Sanghi and Director
/s/ Gordon W. Parnell Vice President and Chief Financial
__________________________________ Officer (Principal Financial and
Gordon W. Parnell Accounting Officer)
* Director
__________________________________
Matthew W. Chapman
Director
__________________________________
Albert J. Hugo-Martinez
* Director
__________________________________
L.B. Day
* Director
__________________________________
Wade F. Meyercord
</TABLE>
/s/ Gordon W. Parnell
*By: ____________________
Attorney-in-Fact
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
2.1+ Agreement and Plan of Reorganization, dated as of October 26, 2000, by
and among Microchip Technology, Inc., the Registrant, Matchbox
Acquisition Corp., and TelCom Semiconductor, Inc. (included as
Exhibit A to the proxy statement/prospectus filed as part of this
Registration Statement).
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
together with consent.
8.1+ Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, together with consent.
8.2 Tax Opinion of Jenkens & Gilchrist, Professional Corporation, together
with consent.
23.1 Consent of KPMG LLP, independent public accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.3 Consent of C.E. Unterberg, Towbin.
23.4+ Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included as part of its opinions filed as exhibits 5.1 and 8.1).
23.5 Consent of Jenkens & Gilchrist, a Professional Corporation (included
as part of its opinion filed as Exhibit 8.2).
24.1+ Power of Attorney.
99.1 Form of Proxy of TelCom Semiconductor, Inc.
99.2+ Opinion of C.E. Unterberg, Towbin (included as Exhibit D to the proxy
statement/prospectus, filed as a part of this Registration Statement
and incorporated herein by reference).
</TABLE>
--------
+ Previously filed
