<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-78601
LOGO
Dear GeoTel Stockholders:
I am writing to you today about the most significant opportunity in our
young history. This is our proposal to merge with Cisco Systems, Inc.
This merger will permit the resulting combined company to offer a single
comprehensive solution for telephony and data. In the merger, each share of your
GeoTel common stock will be exchanged for 0.5138 of a share of Cisco common
stock, prior to adjustment for Cisco's two-for-one stock split which will be
effected on June 21, 1999. Giving effect to Cisco's two-for-one stock split,
each share of your GeoTel common stock will be exchanged for 1.0276 shares of
Cisco common stock. Cisco common stock is traded on the Nasdaq National Market
under the trading symbol "CSCO," and on May 17, 1999, Cisco common stock closed
at $116.44 per share. We believe the merger offers significant value to our
stockholders.
Before we can merge, a majority of the stockholders of GeoTel must vote on
the specific proposal that will allow the merger to take place. This proposal
approves the merger agreement related to the merger. Only stockholders who hold
shares of GeoTel common stock at the close of business on May 17, 1999 will be
entitled to vote at the special meeting.
We are very excited by the opportunities we envision for the combined
company. Your Board of Directors has carefully studied the terms and conditions
of the merger and unanimously recommends that you approve the merger agreement.
This proxy statement/prospectus provides you with detailed information
concerning Cisco and the merger. Please give all of the information contained in
the proxy statement/prospectus your careful attention. IN PARTICULAR, YOU SHOULD
CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE
14 OF THIS PROXY STATEMENT/PROSPECTUS.
TO VOTE YOUR SHARES, you may use the enclosed proxy card or attend a
special stockholders meeting that will be held for this important vote. The
special meeting will be held on Wednesday, June 23, 1999, at 10:00 a.m., at
Cross Point at 900 Chelmsford Street, Lowell, Massachusetts in the Dining Room
of Tower 3 on the first floor.
YOUR VOTE IS VERY IMPORTANT. To approve the merger agreement, you MUST vote
"FOR" the proposal by following the instructions stated on the enclosed proxy
card. If you do not vote at all, it will, in effect, count as a vote against the
proposal.
We urge you to vote FOR this proposal, a necessary step in the merger of
GeoTel Communications Corporation and Cisco Systems, Inc.
Sincerely,
LOGO
John C. Thibault
President and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES OF CISCO COMMON STOCK TO BE
ISSUED IN THE MERGER, OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE.
This proxy statement/prospectus is dated May 17, 1999, and was first mailed
to GeoTel stockholders on May 21, 1999.
<PAGE> 2
REFERENCE TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Cisco and GeoTel from documents that are not
included in or delivered with this proxy statement/prospectus. This information
is available to you without charge upon your written or oral request. You can
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from Cisco or GeoTel, as the case may
be, at the following addresses and telephone numbers:
<TABLE>
<S> <C>
Cisco Systems, Inc. GeoTel Communications Corporation
Investor Relations Office Investor Relations
170 West Tasman Drive 900 Chelmsford Street, Tower II,
San Jose, CA 95134 Floor 12
(408) 526-4000 Lowell, MA 01851
(978) 275-5115
</TABLE>
If you would like to request documents, please do so by June 16, 1999 in
order to receive them before the GeoTel special meeting.
See "Where You Can Find More Information" on page 50.
<PAGE> 3
GEOTEL COMMUNICATIONS CORPORATION
900 CHELMSFORD STREET, TOWER II, FLOOR 12
LOWELL, MA 01851
(978) 275-5100
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1999
------------------------
We will hold a special meeting of stockholders of GeoTel Communications
Corporation at 10:00 a.m., local time, on Wednesday, June 23, 1999 at Cross
Point at 900 Chelmsford Street, Lowell, Massachusetts, in the Dining Room of
Tower 3 on the first floor for the following purposes:
1. To consider and vote on a proposal to approve the agreement and
plan of merger and reorganization by and among Cisco Systems, Inc.,
Geronimo Merger Corp. and GeoTel Communications Corporation. Under the
agreement and plan of merger and reorganization, each outstanding share of
GeoTel common stock will be converted into the right to receive 0.5138 of a
share of Cisco common stock prior to adjustment for Cisco's two-for-one
stock split which will be effected on June 21, 1999. Giving effect to
Cisco's two-for-one stock split, holders of outstanding shares of GeoTel
common stock will receive 1.0276 shares of Cisco common stock for each
share held by them. A corresponding right to purchase shares of Cisco
Series A Junior Participating Preferred Stock, no par value, pursuant to
the Cisco Rights Agreement dated as of June 10, 1998 between Cisco and Bank
Boston, N.A. will accompany each share of Cisco common stock. In addition,
each outstanding option to purchase a share of GeoTel common stock will be
assumed by Cisco and converted into an option to purchase that number of
whole shares of Cisco common stock according to the same formula as the
outstanding shares of GeoTel common stock are converted to Cisco common
stock, rounded down to the nearest whole number of shares of Cisco common
stock, with the exercise price adjusted accordingly.
2. To grant the Board of Directors of GeoTel discretionary authority
to adjourn the special meeting in order to solicit additional votes for
approval of the merger agreement.
3. To transact such other business as may properly come before the
special meeting.
We describe these items of business more fully in the proxy
statement/prospectus attached to this notice.
Only stockholders of record of GeoTel common stock at the close of business
on May 17, 1999 are entitled to notice of, and will be entitled to vote at, the
special meeting or any adjournment or postponement. Approval of the merger
agreement will require the affirmative vote of the holders of GeoTel common
stock representing a majority of the outstanding shares of GeoTel common stock
entitled to vote at the special meeting.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT
THE SPECIAL MEETING. ANY STOCKHOLDERS ATTENDING THE SPECIAL MEETING MAY VOTE IN
PERSON EVEN IF SUCH STOCKHOLDER HAS RETURNED A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
LOGO
Timothy J. Allen
Vice President of Finance, Chief Financial
Officer,
Treasurer and Secretary
Lowell, Massachusetts
May 21, 1999
<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE GEOTEL/CISCO MERGER
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is completed, you will receive 0.5138 of a share of Cisco
common stock for each share of GeoTel common stock you own, prior to
adjustment for Cisco's two-for-one stock split which will be effected on June
21, 1999. Giving effect to Cisco's two-for-one stock split, each share of
your GeoTel common stock will be exchanged for 1.0276 shares of Cisco common
stock. Cisco will not issue fractional shares of common stock. You will
receive cash based on the market price of Cisco common stock instead of any
fractional share.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We hope to complete the merger by the end of June 1999. Because the merger is
subject to governmental approvals, however, we cannot predict the exact
timing.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After we complete the merger, Cisco will send instructions to you
explaining how to exchange your shares of GeoTel common stock for the
appropriate number of shares of Cisco common stock.
Q: HOW DO I VOTE?
A: Mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the special meeting. If
your shares are held in "street name" by your broker, your broker will vote
your shares only if you provide instructions on how to vote. You should
follow the directions provided by your broker regarding how to instruct your
broker to vote your shares. Without instructions, your shares will not be
voted at the special meeting and it will have the same effect as voting
against approval of the merger agreement.
Q: HOW CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY?
A: You may change your vote by delivering a signed notice of revocation or a
later-dated, signed proxy card to GeoTel's corporate secretary before the
stockholder meeting, or by attending the stockholder meeting and voting in
person.
Q: WHO CAN I CALL WITH QUESTIONS?
A: If you have any questions about the merger, please call GeoTel Investor
Relations at (978) 275-5115.
<PAGE> 5
LOGO LOGO
Proxy Statement Prospectus
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS................... 1
SELECTED HISTORICAL FINANCIAL DATA.......................... 7
COMPARATIVE PER SHARE DATA.................................. 9
MARKET PRICE AND DIVIDEND INFORMATION....................... 11
RISK FACTORS................................................ 13
THE SPECIAL MEETING OF GEOTEL STOCKHOLDERS.................. 16
Proxy Statement-Prospectus................................ 16
Date, Time and Place of the Special Meeting............... 16
Matters to be Considered at the Special Meeting........... 16
Record Date and Shares Entitled to Vote................... 16
Voting of Proxies......................................... 16
Vote Required............................................. 16
Quorum; Abstentions and Broker Non-Votes.................. 17
Solicitation of Proxies and Expenses...................... 17
No Appraisal Rights....................................... 17
Board Recommendation...................................... 17
THE MERGER AND RELATED TRANSACTIONS......................... 18
Background of the Merger.................................. 18
Reasons for the Merger.................................... 22
Recommendation of GeoTel's Board of Directors............. 24
Opinion of GeoTel's Financial Advisor..................... 24
Completion and Effectiveness of the Merger................ 28
Structure of the Merger and Conversion of GeoTel Common
Stock.................................................. 28
Exchange of GeoTel Stock Certificates for Cisco Stock
Certificates........................................... 28
The Merger Agreement...................................... 29
Related Agreements........................................ 36
Operations Following the Merger........................... 38
Indemnification and Insurance............................. 38
Interests of Certain GeoTel Directors, Officers and
Affiliates in the Merger.................................. 38
Regulatory Matters........................................ 40
Certain Federal Income Tax Considerations................. 41
Accounting Treatment...................................... 42
No Appraisal Rights....................................... 42
Restrictions on Sale of Shares By Affiliates of GeoTel and
Cisco.................................................. 42
COMPARISON OF RIGHTS OF STOCKHOLDERS OF CISCO AND GEOTEL.... 43
Vote Required for Extraordinary Transactions.............. 43
Director Nominations...................................... 43
Amendment to Governing Documents.......................... 44
Appraisal Rights.......................................... 44
Derivative Action......................................... 45
Stockholder Consent in Lieu of Meeting.................... 45
Fiduciary Duties of Directors............................. 45
Stockholder Proposals..................................... 46
Indemnification........................................... 46
Director Liability........................................ 47
Anti-Takeover Provisions and Interested Stockholder
Transactions........................................... 47
Cumulative Voting......................................... 48
Advance Notice of Record Date............................. 48
Inspection of Books and Records........................... 48
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Size of the Board of Directors............................ 49
Removal of Directors...................................... 49
Transactions Involving Directors.......................... 49
Filling Vacancies on the Board of Directors............... 50
EXPERTS..................................................... 50
LEGAL MATTERS............................................... 50
WHERE YOU CAN FIND MORE INFORMATION......................... 50
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 51
APPENDICES
A -- Agreement and Plan of Merger and Reorganization...... A-1
B -- Stock Option Agreement.............................. B-1
C -- Form of Stockholder Agreement....................... C-1
D -- Opinion of Dain Rauscher Wessels, financial advisor
to GeoTel.............................................. D-1
</TABLE>
ii
<PAGE> 7
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy
statement/prospectus and 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, including the merger agreement, the stock option
agreement, the form of stockholder agreement and the opinion of Dain Rauscher
Wessels, financial advisor to GeoTel, which are attached as Appendices A, B, C
and D, respectively. In addition, we incorporate by reference important business
and financial information about Cisco and GeoTel 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 50 of this proxy statement/prospectus.
THE COMPANIES
GEOTEL COMMUNICATIONS CORPORATION
900 Chelmsford Street
Tower II, Floor 12
Lowell, Massachusetts 01851
(978) 275-5100
http://www.geotel.com
GeoTel Communications Corporation is a leading global provider of
customer-interaction software solutions for mission-critical call center
applications. GeoTel's full-featured computer telephony integration (CTI)
products create an enterprise-wide customer-interaction platform by integrating
multi-vendor networks, automatic call distributors, voice response systems,
databases, desktop applications and other resources. Solutions are provided for
single-site, multi-site and network service provider deployments.
GeoTel products allow companies that utilize call center technology to
deliver cost-effective, premium customer service. GeoTel software also provides
interfaces to multiple carrier networks enabling call routing independent of the
toll-free network provider as well as enterprise CTI functionality that delivers
call-associated data to an agent's desktop independent of agent location.
GeoTel's software is distributed through a direct sales organization with
offices throughout the U.S., Europe and Asia-Pacific, and through selected
business partners.
CISCO SYSTEMS, INC.
170 West Tasman Drive
San Jose, California 95134
(408) 526-4000
http://www.cisco.com
Cisco Systems, Inc. is the worldwide leader in networking for the Internet.
Cisco's hardware and software solutions are used to link computers and computer
networks so people have easy access to information, regardless of differences in
time, place, or type of computer system. Customers benefit from Cisco networking
solutions through more efficient exchange of information, which in turn leads to
cost savings, process efficiencies, and closer relationships with their
customers, prospects, business partners, suppliers, and employees. Cisco
solutions are the networking foundation for companies, universities, utilities,
and government agencies worldwide.
Cisco's products encompass the broadest range of networking solutions
available from any single supplier. These solutions include routers, LAN and WAN
switches, dial and other access solutions, SNA-to-LAN integration solutions, web
site management tools, Internet appliances, and network management software. The
thread that ties these products together is the CISCO IOS(C) software platform,
which delivers Internet services and enables networked applications. Cisco's
offerings also include industry-leading customer services for network design,
implementation, maintenance, and support.
The Company was founded in late 1984 by a small group of computer
scientists from Stanford University seeking an easier way to connect different
types of computer systems. Cisco Systems shipped its first products in 1986.
Since then, Cisco has grown into a multinational corporation with over 14,500
employees in more than 200 offices in 55 countries.
1
<PAGE> 8
SUMMARY OF THE TRANSACTION
STRUCTURE OF THE TRANSACTION (SEE PAGE 28)
GeoTel will merge with Geronimo Merger Corp., a newly formed, wholly-owned
subsidiary of Cisco. GeoTel will be the surviving corporation and will become a
wholly-owned subsidiary of Cisco.
STOCKHOLDER APPROVAL (SEE PAGE 16)
The holders of a majority of the outstanding shares of GeoTel common stock
must approve the merger agreement. Cisco stockholders are not required to
approve the merger agreement and will not vote on the merger.
You are entitled to cast one vote per share of GeoTel common stock you
owned as of May 17, 1999, the record date.
RECOMMENDATION OF GEOTEL'S BOARD OF DIRECTORS (SEE PAGE 24)
After careful consideration, your board of directors has unanimously
approved the merger agreement and determined that the merger is advisable and in
the best interests of GeoTel and its stockholders and recommends that GeoTel
stockholders vote FOR approval of the merger agreement.
OPINION OF GEOTEL'S FINANCIAL ADVISOR (SEE PAGE 24)
Dain Rauscher Wessels, GeoTel's financial advisor, delivered an opinion to
the GeoTel board of directors that, subject to the considerations described in
its opinion, the consideration to be received by the holders of GeoTel common
stock pursuant to the merger agreement is fair from a financial point of view to
GeoTel stockholders. The complete opinion of Dain Rauscher Wessels is attached
as Appendix D. We urge you to read it in its entirety.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 32)
Our respective obligations to complete the merger are subject to the prior
satisfaction or waiver of conditions. If either Cisco or GeoTel waives any
conditions, GeoTel will consider the facts and circumstances at that time and
make a determination as to whether a resolicitation of proxies from GeoTel
stockholders is appropriate. The following conditions, among others, must be
satisfied or waived before the completion of the merger:
- the merger agreement must be approved by GeoTel stockholders;
- no law, statute, rule, regulation or order which makes consummation of
the merger illegal may be enacted or issued;
- the applicable waiting periods under U.S. antitrust laws must expire or
be terminated;
- no injunction or order preventing the completion of the merger or
restricting Cisco's operation of GeoTel after the merger may be in
effect;
- our respective representations and warranties in the merger agreement
must be true and correct, with certain exceptions;
- we must comply with our respective agreements in the merger agreement;
- we must each receive an opinion of our respective tax counsel to the
effect that the merger will qualify as a tax-free reorganization;
- we must be advised in writing by our respective independent auditors that
pooling of interests accounting is appropriate for the merger;
- certain employees of GeoTel must have entered into employment and
non-competition agreements with Cisco; and
- the shares of Cisco common stock to be issued to GeoTel stockholders in
the merger must be approved for trading on the Nasdaq National Market.
2
<PAGE> 9
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 33)
The merger agreement may be terminated under certain circumstances at any
time before the completion of the merger, as summarized below:
- the merger agreement may be terminated by our mutual consent; or
- the merger agreement may also be terminated by either of us if the
conditions to completion of the merger would not be satisfied because of
either (A) a breach of an agreement in the merger agreement by the other
or (B) a breach of a representation or warranty of the other in the
merger agreement, either of which is not cured within five business days
of written notice of such breach.
In addition, the merger agreement may be terminated by either of us under
any of the following circumstances:
- if the merger is not completed, without the fault of the terminating
party, by September 30, 1999 (or, under certain circumstances, December
31, 1999);
- if a final court order prohibiting the merger is issued and is not
appealable; or
- if the GeoTel stockholders do not approve the merger agreement at the
special meeting.
Furthermore, the merger agreement may be terminated by Cisco if the GeoTel
board of directors takes any of the following actions:
- withdraws or modifies its recommendation that GeoTel stockholders adopt
the merger agreement in a manner adverse to Cisco, or resolves to do so;
- fails to comply with the nonsolicitation provisions contained in the
merger agreement, which, provisions are discussed in detail on page 33;
- fails to call the special meeting by September 10, 1999 (or December 10,
1999 under certain circumstances); or
- with respect to an extraordinary transaction of the nature specified in
the merger agreement such as a merger or a sale of significant assets,
involving GeoTel and a party other than Cisco, within six (and in certain
circumstances ten) business days, does not reconfirm its approval and
recommendation of the merger agreement and does not reject such other
extraordinary transaction.
PAYMENT OF TERMINATION FEE (SEE PAGE 34)
GeoTel has agreed to pay Cisco a termination fee of $55 million or
reimburse Cisco for its out-of-pocket expenses if the merger agreement is
terminated under circumstances which are described on page 35 under the heading
"Payment of Fees and Expenses."
NO OTHER NEGOTIATIONS INVOLVING GEOTEL (SEE PAGE 32)
Until the merger is completed or the merger agreement is terminated, GeoTel
has agreed not to directly or indirectly take any of the following actions:
- solicit, initiate, encourage or agree to any takeover proposal; or
- engage in negotiations with, or disclose any nonpublic information
relating to GeoTel or any of its subsidiaries to, or afford access to the
properties, books or records of GeoTel or any of its subsidiaries to, any
person that has advised GeoTel that it may be considering making, or that
has made, a takeover proposal.
However, GeoTel's board of directors is not prohibited from taking and
disclosing to the GeoTel stockholders a position with respect to a tender offer
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Additionally, the GeoTel board of directors is not prohibited from providing a
copy of the non-solicitation provision of the merger agreement to any third
party.
GeoTel has agreed to provide Cisco with detailed information about any
takeover proposal it receives.
3
<PAGE> 10
However, GeoTel may engage in any of these acts otherwise prohibited, other
than solicitation, initiation or encouragement of any takeover proposal, if:
- GeoTel's board of directors believes in good faith that a particular
proposal concerning an extraordinary transaction of the nature specified
in the merger agreement, such as a merger or a sale of significant assets
will result in a transaction more favorable than the merger to the GeoTel
stockholders from a financial point of view; and
- GeoTel's board of directors determines in good faith after advice from
outside legal counsel that the failure to engage in the prohibited
negotiations or discussions or provide non-public information is
inconsistent with the fiduciary duties of the board under applicable law.
A takeover proposal is:
- any offer or proposal for a merger or other business combination
involving GeoTel; or
- the acquisition of 20% or more of the outstanding shares of capital stock
of GeoTel or any of its subsidiaries; or
- the sale or transfer of any significant portion of the assets of GeoTel
or any of its subsidiaries, other than the merger.
CISCO REQUIRED GEOTEL TO ENTER INTO A STOCK OPTION AGREEMENT WHICH MAY
DISCOURAGE THIRD PARTIES WHO ARE INTERESTED IN ACQUIRING A STAKE IN GEOTEL (SEE
PAGE 36)
GeoTel entered into a stock option agreement with Cisco which granted Cisco
the option to buy up to 3,000,000 shares of GeoTel common stock, which
represents approximately 11% of the shares of GeoTel common stock outstanding on
May 7, 1999, or approximately 10% after issuance of the shares of GeoTel common
stock subject to the option. The exercise price of the option is $60.50 per
share.
Cisco required GeoTel to grant the option as a prerequisite to entering
into the merger agreement. The option may discourage third parties who are
interested in acquiring a significant stake in GeoTel and is intended by Cisco
to increase the likelihood that the merger will be completed.
The option is not currently exercisable and Cisco may only exercise the
option if the merger agreement is terminated in circumstances in which the
termination fee is payable or prior to an extraordinary transaction of the
nature specified in the merger agreement which obligates GeoTel to pay the
termination fee. Otherwise, the option will terminate and may not be exercised
by Cisco.
If the merger agreement is terminated and Cisco exercises its option to
purchase GeoTel common stock, GeoTel would not be able to account for future
transactions as a pooling of interests.
You are urged to read the stock option agreement in its entirety.
CERTAIN INDIVIDUALS HAVE ENTERED INTO A STOCKHOLDER AGREEMENT (SEE PAGE 36)
In connection with the merger, Gary J. Bowen, Alexander V. d'Arbeloff,
Gardner C. Hendrie, W. Michael Humphreys, Timothy J. Allen, G. Wayne Andrews,
Jane E. Eisenberg, Judith A. Kelly, John D. McMahon, John C. Thibault, Louis J.
Volpe and Steven H. Webber entered into a stockholder agreement with Cisco. The
stockholder agreement requires, among other things, these GeoTel stockholders to
vote all shares of GeoTel common stock beneficially owned by them in favor of
approval of the merger agreement. These GeoTel stockholders were not paid
additional consideration in connection with the stockholder agreement.
The GeoTel stockholders who entered into the stockholder agreement
collectively held approximately 7% of the outstanding GeoTel common stock as of
May 7, 1999.
You are urged to read the stockholder agreement in its entirety.
4
<PAGE> 11
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 38)
When considering the recommendation of the GeoTel board of directors, you
should be aware that some GeoTel directors and officers have interests in the
merger that are different from, or are in addition to, yours.
Options granted by GeoTel under GeoTel's 1995 Stock Option Plan, as
amended, and GeoTel's Second Amended and Restated 1998 Non-Executive Employee
Stock Option Plan provide for the acceleration of vesting of outstanding options
by twelve months in the event of a change in control of GeoTel, if the optionee
has a minimum of six months service at the time of the change of control.
Approximately 479,002 unvested stock options granted to all of the officers and
directors of GeoTel will vest upon completion of the merger in accordance with
these provisions.
Certain executive officers have entered into employment and non-competition
agreements with Cisco that will become effective upon completion of the merger.
In addition, certain other officers previously entered into change of control
agreements with GeoTel. Under each of these agreements, these officers are
entitled to severance and other payments if the officer is terminated or resigns
under certain circumstances set forth in the agreements within 18 months of the
merger.
Furthermore, Cisco has agreed for the next 5 years, to indemnify each
present and former GeoTel officer and director against liabilities arising out
of the fact that such person is or was a director or officer.
As of May 7, 1999, directors and executive officers of GeoTel and their
affiliates beneficially owned approximately 26% of the outstanding shares of
GeoTel common stock.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 41)
We have structured the merger so that, in general, GeoTel 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 GeoTel stockholders
instead of fractional shares. It is a condition to the merger that we receive
legal opinions to the effect that the merger constitutes a reorganization within
the meaning of the Internal Revenue Code.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 42)
We intend to account for the merger as a pooling of interests business
combination. It is a condition to completion of the merger that Cisco be advised
in writing by PricewaterhouseCoopers LLP that the merger can properly be
accounted for as a pooling of interests business combination, although this
condition may be waived. Under the pooling of interests method of accounting,
each of our 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 our operating results for the
entire fiscal year in which the merger is completed and our historical reported
operating results for prior periods will be combined and restated as the
operating results of the combined company.
ANTITRUST APPROVAL REQUIRED TO COMPLETE THE MERGER (SEE PAGE 40)
The merger is subject to U.S. antitrust laws. We have made the required
filings with the U.S. Department of Justice and the Federal Trade Commission.
However, we are not permitted to complete the merger until the applicable
waiting period has expired or terminated. We believe that we have substantially
complied with all requests for information from the U.S. Department of Justice
and the Federal Trade Commission and we expect that the applicable waiting
period will expire at 5:00 p.m. on May 21, 1999. The Department of Justice or
the Federal Trade Commission, as well as a state or private person, may
challenge the merger at any time before its completion.
RESTRICTIONS ON THE ABILITY TO SELL CISCO STOCK (SEE PAGE 42)
All shares of Cisco common stock received by you in connection with the
merger will be freely transferable unless you are considered an "affiliate" of
either of GeoTel or Cisco for purposes of the Securities Act of 1933. Shares of
Cisco common stock held by these affiliates may only be sold pursuant to a
registration statement or exemption under the Securities Act.
5
<PAGE> 12
YOU DO NOT HAVE DISSENTERS' OR APPRAISAL RIGHTS (SEE PAGE 42)
Under Delaware law, you are not entitled to dissenters' or appraisal rights
in the merger.
FORWARD-LOOKING STATEMENTS IN THIS PROXY STATEMENT-PROSPECTUS
This proxy statement/prospectus and the documents incorporated by reference
into this proxy statement/prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to Cisco's and GeoTel's financial condition, results of
operations and business and on the expected impact of the merger on Cisco's
financial performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties in the section entitled "Risk
Factors" on page 13 of this proxy statement/prospectus.
6
<PAGE> 13
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data of Cisco is unaudited and
has been derived from its historical consolidated financial statements. However,
in the opinion of Cisco's management, the financial data presented reflects all
adjustments (consisting only of normal recurring adjustments) necessary for the
fair presentation of the results of operations for all periods presented. The
results of operations for those interim periods presented are not necessarily
indicative of the results to be expected for the entire year. All financial data
contained herein should be read in conjunction with Cisco's historical
consolidated financial statements and the notes thereto that are incorporated
herein by reference.
CISCO SYSTEMS, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
---------------------------------------------------- -------------------------
JULY 31, JULY 30, JULY 28, JULY 26, JULY 25, JANUARY 24, JANUARY 23,
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $1,334 $2,233 $4,096 $6,440 $8,459 $ 3,885 $5,415
Net income......................... $ 323 $ 456 $ 913 $1,049 $1,350 $ 794 $ 806
Net income per common share --
basic............................ $ 0.25 $ 0.33 $ 0.64 $ 0.71 $ 0.88 $ 0.52 $ 0.51
Net income per common share --
diluted.......................... $ 0.24 $ 0.32 $ 0.61 $ 0.68 $ 0.84 $ 0.50 $ 0.48
Shares used in per-share
calculation -- basic(1).......... 1,296 1,367 1,437 1,486 1,534 1,518 1,578
Shares used in per-share
calculation -- diluted(1)........ 1,342 1,425 1,490 1,551 1,608 1,589 1,668
</TABLE>
- ---------------
(1) Gives effect to the Cisco two-for-one stock splits effective March 1994,
February 1996 and the three-for-two stock splits effective December 1997 and
September 1998. Does not reflect the Cisco two-for-one stock split to be
effected June 21, 1999.
<TABLE>
<CAPTION>
JULY 31, JULY 30, JULY 28, JULY 26, JULY 25, JANUARY 23,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED
BALANCE SHEET DATA:
Total assets....................... $1,129 $1,992 $3,630 $5,452 $8,917 $11,434
</TABLE>
7
<PAGE> 14
GEOTEL COMMUNICATIONS CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following selected historical financial data of GeoTel is unaudited and
has been derived from its historical consolidated financial statements. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year. All financial data
contained herein (except as noted) should be read in conjunction with GeoTel's
historical consolidated financial statements and the notes thereto that are
incorporated herein by reference. The GeoTel consolidated statement of
operations data for the years ended December 31, 1994 and 1995 and the
consolidated balance sheet data at December 31, 1994, 1995 and 1996 have been
derived from their historical consolidated financial statements which are not
included or incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------ -------------
1994 1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Consolidated Statement of Operations
Data:
Net sales....................................... $ 0 $ 2 $ 9 $ 19 $ 45 $ 8 $ 18
Net income (loss) available to common
shareholders.................................. $ (3) $ (4) $ 1 $ 6 $ 9 $ 1 $ 4
Net income (loss) per common share -- basic..... $(4.80) $(2.79) $0.09 $0.25 $0.34 $0.05 $0.16
Net income (loss) per common share -- diluted... $(4.80) $(2.79) $0.03 $0.23 $0.32 $0.05 $0.14
Shares used in per share
calculation -- basic(1)....................... 1 1 7 25 26 26 27
Shares used in per
share -- calculation -- diluted(1)............ 1 1 22 28 29 28 30
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------- ---------
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Historical Consolidated Balance Sheet
Data:
Total assets.......................... $ 5 $ 6 $ 37 $ 50 $ 74 $ 83
Convertible preferred stock........... $ 8 $ 12
</TABLE>
- ---------------
(1) Gives effect to the GeoTel two-for-one stock split effective September 1998.
8
<PAGE> 15
COMPARATIVE PER SHARE DATA
In the following table, we provide you with certain historical per share
data and combined per share data on an unaudited pro forma basis after giving
effect to the merger assuming that 0.5138 shares of Cisco common stock are
issued in exchange for each share of GeoTel common stock but without taking into
account the Cisco two-for-one stock split to be effected on June 21, 1999. For
all periods presented, GeoTel shares as of March 1999 were used for purposes of
this calculation. This data should be read along with the selected historical
financial data set forth herein and the historical financial statements of Cisco
and GeoTel and the notes thereto that are incorporated herein by reference. The
pro forma information is presented for illustrative purposes only. You should
not rely on the pro forma financial information as an indication of the combined
financial position or results of operations of future periods or the results
that actually would have been realized had the entities been a single entity
during the periods presented.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------ -------------------------
JULY 28, JULY 26, JULY 25, JANUARY 24, JANUARY 23,
1996 1997 1998 1998 1999
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CISCO HISTORICAL NET INCOME PER COMMON SHARE:
Net income per common share -- basic............ $ 0.64 $0.71 $0.88 $0.52 $0.51
Net income per common share -- diluted.......... $ 0.61 $0.68 $0.84 $0.50 $0.48
Book value...................................... $ 1.93 $2.84 $4.55 $3.55 $5.75
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
------------------------------ -------------------------
1996 1997 1998 1997 1998
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
GEOTEL HISTORICAL NET INCOME (LOSS) PER COMMON
SHARE(1):
Net income (loss) per common share -- basic..... $(0.32) $0.13 $0.30 $0.18 $0.22
Net income (loss) per common share -- diluted... $(0.12) $0.09 $0.27 $0.16 $0.20
Book value...................................... $(1.50) $1.32 $1.68
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------ -------------------------
JULY 28, JULY 26, JULY 25, JANUARY 24, JANUARY 23,
1996 1997 1998 1998 1999
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED NET INCOME PER SHARE:(6)
Per Cisco common share -- basic(2)................ $ 0.63 $0.70 $0.88 $0.52 $0.51
Per Cisco common share -- diluted(2).............. $ 0.61 $0.67 $0.83 $0.50 $0.48
Equivalent per GeoTel share -- basic(3)........... $ 0.32 $0.36 $0.45 $0.27 $0.26
Equivalent per GeoTel share -- diluted(3)......... $ 0.31 $0.34 $0.43 $0.26 $0.25
PRO FORMA COMBINED BOOK VALUE PER SHARE:(4)(5)
Per Cisco share................................... $ 1.92 $2.84 $4.53 $3.55 $5.73
Equivalent per GeoTel share....................... $ 0.99 $1.46 $2.33 $1.82 $2.94
</TABLE>
- ---------------
(1) The GeoTel financial information presented has been derived from audited
financial statements; however, the periods shown above are presented to
conform more closely with Cisco's fiscal year-end rather than the historical
presentation of GeoTel's fiscal year-end at December 31.
(2) The pro forma combined per share information combines financial information
of Cisco for the fiscal years ended July 28, 1996, July 26, 1997 and July
25, 1998 and the six months ended January 24, 1998 and January 23, 1999 with
the financial information of GeoTel for the twelve months ended June 30,
1996, 1997 and 1998 and the six months ended December 31, 1997 and 1998,
respectively. This information also assumes the merger occurred as of the
beginning of the earliest period presented and was accounted for as a
pooling of interests.
(3) The unaudited equivalent GeoTel pro forma per share amounts are calculated
by multiplying the Cisco combined pro forma per share amounts by the
exchange ratio.
(4) Historical 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. Pro forma book value per share is computed
9
<PAGE> 16
by dividing pro forma stockholders' equity by the pro forma number of shares
of common stock outstanding at the end of the period.
(5) Cisco and GeoTel estimate that they will incur merger-related expenses,
consisting primarily of transaction costs for investment banker fees,
attorneys, accountants, financial printing and other related charges of
approximately $14.0 million. The pro forma combined balance sheet data gives
effect to such expenses as if they had been incurred as of January 23, 1999,
but the pro forma combined condensed statement of operations do not give
effect to such expenses.
(6) The pro forma financial information includes pro forma adjustments which
increase/(decrease) income tax expenses by $3, $(3) and $3 for the six
months ended January 24, 1998 and the years ended July 28, 1996 and July 25,
1998, respectively. These amounts reflect the impact of the establishment
and reversal of valuation allowances realized in the historical financial
statements of GeoTel which would not have been present had the companies
always been combined historically.
10
<PAGE> 17
MARKET PRICE AND DIVIDEND INFORMATION
CISCO MARKET PRICE DATA
Cisco's common stock is traded on the Nasdaq National Market under the
symbol "CSCO." The following table shows the range of high and low closing sales
prices reported on the Nasdaq National Market for Cisco common stock for the
periods indicated, adjusted to reflect the three-for-two stock splits effective
in September 1998 and December 1997 and the two-for-one stock split effective in
February 1996, but without taking into account the Cisco two-for-one stock split
to be effected on June 21, 1999.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
FISCAL 1996
First Quarter........................................... $ 17.17 $11.61
Second Quarter.......................................... 19.53 14.53
Third Quarter........................................... 23.28 18.03
Fourth Quarter.......................................... 26.11 20.94
FISCAL 1997
First Quarter........................................... $ 29.78 $22.22
Second Quarter.......................................... 33.28 25.61
Third Quarter........................................... 31.00 20.61
Fourth Quarter.......................................... 35.72 20.67
FISCAL 1998
First Quarter........................................... $ 37.47 $31.00
Second Quarter.......................................... 40.19 32.39
Third Quarter........................................... 49.25 37.75
Fourth Quarter.......................................... 68.79 46.96
FISCAL 1999
First Quarter........................................... $ 69.29 $54.58
Second Quarter.......................................... 106.69 60.75
Third Quarter........................................... 117.38 95.13
Fourth Quarter (through May 17, 1999)................... 118.75 106.94
</TABLE>
GEOTEL MARKET PRICE DATA
GeoTel's common stock is traded on the Nasdaq National Market under the
symbol "GEOC". The following table shows the range of high and low closing
prices reported on the Nasdaq National Market for GeoTel common stock for the
periods indicated, adjusted to reflect the two-for-one stock split effective in
September 1998.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
DECEMBER 31, 1996
Fourth Quarter (Public Offering November 20, 1996)....... $ 9.06 $ 6.00
DECEMBER 31, 1997
First Quarter............................................ $ 9.44 $ 5.50
Second Quarter........................................... 7.25 4.75
Third Quarter............................................ 10.00 6.31
Fourth Quarter........................................... 10.19 7.06
DECEMBER 31, 1998
First Quarter............................................ $13.81 $ 7.50
Second Quarter........................................... 20.38 11.63
Third Quarter............................................ 28.31 17.50
Fourth Quarter........................................... 40.50 19.22
DECEMBER 31, 1999
First Quarter............................................ $47.31 $31.75
Second Quarter (through May 17, 1999).................... 59.13 39.38
</TABLE>
11
<PAGE> 18
DIVIDEND INFORMATION
Neither Cisco nor GeoTel have ever paid any cash dividends on its stock,
and both anticipate that they will continue to retain any earnings for the
foreseeable future for use in the operation of their respective businesses.
RECENT CLOSING PRICES
As of April 12, 1999, the last trading day before announcement of the
proposed merger, the closing prices per share of Cisco common stock and GeoTel
common stock on the Nasdaq National Market were $117.75 and $44.25,
respectively. On May 17, 1999, the latest practicable trading day before the
printing of this proxy statement/prospectus, the closing prices per share of
Cisco common stock and GeoTel common stock on the Nasdaq National Market were
$116.44 and $58.88, respectively.
Because the market price of Cisco common stock is subject to fluctuation,
the market value of the shares of Cisco common stock that holders of GeoTel
common stock will receive in the merger may increase or decrease prior to and
following the merger. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR CISCO COMMON STOCK AND GEOTEL COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO
THE FUTURE PRICES OR MARKETS FOR CISCO COMMON STOCK OR GEOTEL COMMON STOCK.
NUMBER OF STOCKHOLDERS
As of May 7, 1999, there were approximately 162 stockholders of record who
held shares of GeoTel common stock, as shown on the records of GeoTel's transfer
agent for such shares.
12
<PAGE> 19
RISK FACTORS
By voting in favor of the merger, you will be choosing to invest in Cisco
common stock. An investment in Cisco 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 merger.
This proxy statement/prospectus and the documents incorporated by reference
into this proxy statement/prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to Cisco's and GeoTel's financial condition, results of
operations and business and on the expected impact of the merger on Cisco's
financial performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties described below and in the
documents incorporated by reference into this proxy statement/prospectus.
YOU WILL RECEIVE 0.5138 OF A SHARE OF CISCO COMMON STOCK DESPITE CHANGES IN
MARKET VALUE OF GEOTEL COMMON STOCK OR CISCO COMMON STOCK
Upon completion of the merger, each share of GeoTel common stock will be
exchanged for 0.5138 of a share of Cisco common stock prior to adjustment for
Cisco's two-for-one stock split which will be effected on June 21, 1999. Giving
effect to the stock split, each share of your GeoTel common stock will be
exchanged for 1.0276 shares of Cisco. There will be no adjustment for changes in
the market price of either GeoTel common stock or Cisco common stock, and GeoTel
and Cisco are not permitted to "walk away" from the merger or resolicit the vote
of its stockholders solely because of changes in the market price of Cisco
common stock. Accordingly, the specific dollar value of Cisco common stock to be
received by you upon completion of the merger will depend on the market value of
Cisco common stock at the time of completion of the merger. The share price of
Cisco common stock is by nature subject to the general price fluctuations in the
market for publicly traded equity securities and has experienced significant
volatility. No prediction can be made as to the market price of Cisco common
stock at the completion of the merger or as to the market price of Cisco common
stock after the completion of the merger.
ALTHOUGH CISCO AND GEOTEL EXPECT THAT THE MERGER WILL RESULT IN BENEFITS, THOSE
BENEFITS MAY NOT BE REALIZED
Cisco and GeoTel entered into the merger agreement with the expectation
that the merger will result in benefits, including:
- providing a single, best-of-class distributed call center solution for
both enterprise and service provider customers of GeoTel and Cisco;
- increasing sales of GeoTel's products by selling through Cisco's
extensive channels of distribution;
- hastening the convergence of voice and data networks;
- providing Cisco with a carrier-class reliability platform; and
- adding employees experienced in call center and voice technologies.
Achieving the benefits of the merger will depend in part on the integration
of the technology, operations and personnel of the two companies in a timely and
efficient manner so as to minimize the risk that the merger will result in the
loss of customers or key employees or the continued diversion of the attention
of management.
In addition, synergies from the merger may not materialize. GeoTel's
product line consists of software products only. Selling software-only products
involves a very different process than the selling process that
13
<PAGE> 20
Cisco employs for its own products. Integrating such sales into Cisco's business
model will involve risks that may jeopardize the success of the merged company.
The GeoTel technology and products address a new market for Cisco, namely the
Call Center market. Cisco has very little experience selling into the Call
Center marketplace. For merger related synergies to be realized, Cisco will have
to learn to satisfy the needs of Call Center customers in a timely and efficient
manner. GeoTel's ICR and related products are a new platform for Cisco. In order
for the merger to be successful, Cisco and GeoTel will have to successfully
integrate the new platform with other Cisco products and platforms. Such an
integration will involve considerable technology and execution risk and may or
may not be successful. For the full benefits of the merger to be realized, the
combined company will have to evolve the GeoTel product platform to the next
generation of converged voice/data networks. This evolution entails significant
technology risks that may or may not be overcome by the engineering teams of the
combined company. There can be no assurance that Cisco and GeoTel can be
successfully integrated or that any of the anticipated benefits will be
realized, and failure to do so could have a material adverse effect on Cisco's
business, financial condition and operating results.
GEOTEL OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE THEM
TO SUPPORT OR APPROVE THE MERGER
The directors and officers of GeoTel 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.
Options granted by GeoTel under GeoTel's 1995 Stock Option Plan, as
amended, and GeoTel's Second Amended and Restated 1998 Non-Executive Employee
Stock Option Plan provide for the acceleration of vesting of outstanding options
by twelve months in the event of a change in control of GeoTel, if the optionee
has a minimum of six months service at the time of the change of control.
Approximately 479,002 unvested stock options granted to certain officers and
directors of GeoTel will vest upon completion of the merger in accordance with
these provisions.
Restricted stock grants made by GeoTel under GeoTel's 1993 Restricted Stock
Purchase Plan provide for the acceleration of vesting of the restricted stock by
twelve months in the event of a change in control of GeoTel, if the holder has a
minimum of six months service at the time of the change of control.
Approximately 22,000 unvested shares granted to certain officers and directors
of GeoTel will vest upon completion of the merger in accordance with these
provisions.
Certain executive officers have entered into employment and non-competition
agreements with Cisco that will become effective upon completion of the merger.
In addition, certain other officers previously entered into change of control
agreements with GeoTel. Under each of these agreements, these officers are
entitled to severance and other payments if the officer is terminated or resigns
under certain circumstances set forth in the agreements within 18 months of the
merger.
Furthermore, Cisco has agreed for the next 5 years, to indemnify each
present and former GeoTel officer and director against liabilities arising out
of the fact that such person is or was a director or officer.
As a result, these directors and officers could be more likely to vote to
approve the merger agreement than if they did not hold these interests. GeoTel
stockholders should consider whether these interests may have influenced these
directors and officers to support or recommend the merger.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT GEOTEL'S STOCK PRICE
AND FUTURE BUSINESS AND OPERATIONS
If the merger is not completed for any reason, GeoTel may be subject to a
number of material risks, including the following:
- GeoTel may be required to pay Cisco a termination fee of $55 million;
- the option granted to Cisco by GeoTel may become exercisable under
certain circumstances;
14
<PAGE> 21
- the price of GeoTel common stock may decline to the extent that the
current market price of GeoTel common stock reflects a market assumption
that the merger will be completed; and
- costs related to the merger, such as legal, accounting and financial
advisor fees, must be paid even if the merger is not completed.
In addition, GeoTel customers may, in response to the announcement of the
merger, delay or defer purchasing decisions. Any delay or deferral in purchasing
decisions by GeoTel customers could have a material adverse effect on GeoTel's
business, regardless of whether or not the merger is ultimately completed.
Similarly, current and prospective GeoTel employees may experience uncertainty
about their future role with Cisco until Cisco's strategies with regard to
GeoTel are announced or executed. This may adversely affect GeoTel's ability to
attract and retain key management, sales, marketing and technical personnel.
Further, if the merger is terminated and GeoTel's board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than that which would be paid in the merger. In addition,
while the merger agreement is in effect and subject to certain limited
exceptions described on page 32 of this proxy statement/prospectus, GeoTel is
prohibited from soliciting, initiating or encouraging or entering into certain
extraordinary transactions, such as a merger, sale of assets or other business
combination, with any party other than Cisco. Furthermore, if the merger
agreement is terminated and Cisco exercises its option to purchase GeoTel common
stock, GeoTel would not be able to account for future transactions as a pooling
of interests.
15
<PAGE> 22
THE SPECIAL MEETING OF GEOTEL STOCKHOLDERS
PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from the holders of GeoTel common stock by the GeoTel
board of directors for use at a special meeting of GeoTel stockholders.
This proxy statement/prospectus is first being furnished to stockholders of
GeoTel on or about May 21, 1999.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on Wednesday, June 23, 1999 at 10:00 a.m.,
local time, at GeoTel's facilities located at Crosspoint at 900 Chelmsford
Street, Lowell, Massachusetts in the Dining Room of Tower 3 on the first floor.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting and any adjournment or postponement of the special
meeting, stockholders of GeoTel will be asked to consider and vote upon
proposals:
- to approve the merger agreement;
- to grant the GeoTel board of directors discretionary authority to adjourn
the special meeting to solicit additional votes for approval of the
merger agreement; and
- to transact such other business as may properly come before the special
meeting.
RECORD DATE AND SHARES ENTITLED TO VOTE
GeoTel's board of directors has fixed the close of business on May 17,
1999, as the record date for determination of GeoTel stockholders entitled to
notice of and to vote at the special meeting. As of the close of business on May
7, 1999, there were 27,200,258 shares of GeoTel common stock outstanding and
entitled to vote, held of record by approximately 162 stockholders. A majority,
or 13,600,130 of these shares, present in person or represented by proxy, will
constitute a quorum for the transaction of business. If a quorum is not present,
it is expected that the special meeting will be adjourned or postponed to
solicit additional proxies. Each GeoTel stockholder is entitled to one vote for
each share of GeoTel common stock held as of the record date.
VOTING OF PROXIES
You are requested to complete, date and sign the accompanying proxy and
promptly return it in the accompanying envelope or otherwise mail it to GeoTel.
If your shares are held in "street name" by your broker, your broker will vote
your shares only if you provide instructions on how to vote. Your broker will
provide you directions regarding how to instruct your broker to vote your
shares. All properly executed proxies received by GeoTel prior to the vote at
the special meeting, and that are not revoked, will be voted in accordance with
the instructions indicated on the proxies or, if no direction is indicated, to
approve the merger agreement. GeoTel's Board of Directors does not presently
intend to bring any other business before the special meeting and, so far as is
known to GeoTel's Board of Directors, no other matters are to be brought before
the special meeting. As to any business that may properly come before the
special meeting, however, it is intended that proxies, in the form enclosed,
will be voted in respect thereof in accordance with the judgment of the persons
voting such proxies.
You may revoke your proxy at any time prior to its use by delivering to the
Secretary of GeoTel a signed notice of revocation or a later-dated, signed
proxy, or by attending the special meeting and voting in person. Attendance at
the special meeting does not in itself constitute the revocation of a proxy.
VOTE REQUIRED
Approval of the merger agreement by GeoTel stockholders is required by the
Delaware General Corporation Law. Such approval requires the affirmative vote of
the holders of a majority of the shares of
16
<PAGE> 23
GeoTel common stock outstanding and entitled to vote at the special meeting.
Certain stockholders of GeoTel have entered into a stockholder agreement and
have delivered irrevocable proxies obligating them to vote in favor of the
merger agreement and the merger. As of May 7, 1999, such stockholders,
constituting all executive officers and all directors of GeoTel, as a group
beneficially owned 1,794,564 shares (exclusive of any shares issuable upon the
exercise of options) of GeoTel common stock (constituting approximately 7% of
the shares of GeoTel common stock outstanding as of the record date). As of the
record date and the date of this proxy statement/prospectus, Cisco owns no
shares of GeoTel common stock.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the special meeting
is a majority of the shares of GeoTel common stock issued and outstanding on the
record date. Abstentions and broker non-votes each will be included in
determining the number of shares present and voting at the meeting for the
purpose of determining the presence of a quorum. Because approval of the merger
agreement and the consummation of the merger requires the affirmative vote of a
majority of the outstanding shares of GeoTel common stock entitled to vote,
abstentions and broker non-votes will have the same effect as votes against the
merger agreement and the consummation of the merger. In addition, the failure of
a GeoTel stockholder to return a proxy will have the effect of a vote against
the approval of the merger agreement. THE ACTIONS PROPOSED IN THIS PROXY
STATEMENT/PROSPECTUS ARE NOT MATTERS THAT CAN BE VOTED ON BY BROKERS HOLDING
SHARES FOR BENEFICIAL OWNERS WITHOUT THE OWNERS' SPECIFIC INSTRUCTIONS.
ACCORDINGLY, YOU ARE URGED TO RETURN THE ENCLOSED PROXY CARD MARKED TO INDICATE
YOUR VOTE.
SOLICITATION OF PROXIES AND EXPENSES
Cisco and GeoTel will share the cost of solicitation of proxies from you by
Innisfree M&A Incorporated, estimated to be $9,000 plus reasonable out-of-pocket
expenses. In addition to solicitation by mail, the directors, officers and
employees of GeoTel may solicit proxies from stockholders by telephone,
facsimile or in person. Following the original mailing of the proxies and other
soliciting materials, GeoTel will request brokers, custodians, nominees and
other record holders to forward copies of the proxy and other soliciting
materials to persons for whom they hold shares of GeoTel common stock and to
request authority for the exercise of proxies. In such cases, GeoTel, upon the
request of the record holders, will reimburse such holders for their reasonable
expenses.
NO APPRAISAL RIGHTS
You are not entitled to exercise dissenter's or appraisal rights as a
result of the merger or to demand payment for your shares under Delaware law.
BOARD RECOMMENDATION
THE GEOTEL BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT GEOTEL STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT. In considering such recommendation, GeoTel stockholders should be
aware that Cisco has agreed to provide certain employment, severance and
indemnification arrangements to certain directors and officers of GeoTel.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF GEOTEL. ACCORDINGLY, YOU ARE URGED TO READ AND CAREFULLY
CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS, AND TO
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER AND RELATED TRANSACTIONS
This section of the proxy statement/prospectus describes material aspects
of the proposed merger, including the merger 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.
The following discussion of the background of the merger and the parties'
reasons for the merger and the potential benefits that could result from the
merger contains forward-looking statements which involve risks and
uncertainties. Readers are cautioned not to place undue reliance on these
forward-looking statements. The actual results of Cisco could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and in the
documents incorporated by reference in this proxy statement/prospectus.
BACKGROUND OF THE MERGER
On October 8, 1998, John Thibault, the President of GeoTel, sent a letter
to John Chambers, the Chief Executive Officer and President of Cisco, via
electronic mail, requesting that GeoTel and Cisco meet to explore a technology
relationship between the two companies.
On October 22, 1998, Mr. Thibault, along with Wayne Andrews, GeoTel's Vice
President and Chief Technology Officer, and Steve Webber, GeoTel's Vice
President of Engineering, met at Cisco with Ammar Hanafi, Cisco's Director of
Business Development, Prem Jain, Cisco's Vice President, Engineering Working
Group Business Unit and Saurabh Srivastava, Cisco's Manager of Business
Development. At the meeting, the GeoTel representatives presented to Cisco an
overview of GeoTel's business and strategy to facilitate Cisco's evaluation of a
technology relationship with GeoTel.
On November 2, 1998, Mr. Srivastava and Tim Danford, Cisco's Manager,
Business Development, visited GeoTel to meet with Mr. Thibault, Mr. Webber, Mr.
Andrews and Pat Kelly, GeoTel's Vice President of Carrier Sales. At this
meeting, the attendees discussed GeoTel's business in further detail. Based upon
this meeting, the parties entered into a mutual non-disclosure agreement on
November 5, 1998 to allow for a detailed investigation by Cisco of GeoTel's
technology which, if satisfactory to Cisco, would lead to negotiations related
to a technology relationship.
On November 11, 1998, Mr. Hanafi, Mr. Danford and Mr. Srivastava met with
GeoTel's senior management to discuss a potential joint development relationship
and virtual call center application of GeoTel's technology and concluded that
the two companies should partner. The parties began negotiating a memorandum of
understanding whereby the parties would agree to work together on an exclusive
basis to develop virtual call center applications.
During the weeks of November 16 and 23, executives at Cisco and GeoTel
exchanged comments and revisions to the memorandum of understanding. On November
25, 1998, Cisco and GeoTel executed the memorandum of understanding which was
terminable by either party without cause upon thirty days' notice. During the
weeks of November 30 through December 13, the respective engineering teams from
Cisco and GeoTel began drafting a statement of work that detailed the
engineering work required to implement the joint development relationship and to
develop a proof of concept demo by February 15, 1999.
On December 17, 1998, Mr. Thibault met at Cisco with Mr. Hanafi,
Michelangelo Volpi, Cisco's Vice President, Business Development, and Mario
Mazolla, Cisco's Senior Vice President, Enterprise Line of Business, to discuss
GeoTel's market opportunity of a virtual call center application and how the
companies could work together towards a joint technology partnership. Subsequent
to this meeting, the parties held frequent discussions and weekly status
meetings between the engineering and marketing organizations focused on the
development of the objectives of the virtual call center project.
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<PAGE> 25
On January 26, 1999, members of GeoTel's senior management met with Mr.
Hanafi, Mr. Volpi, Don Listwin, Cisco's Executive Vice President, Service
Provider and Consumer Lines of Business, and Lev Volftson, Cisco's Vice
President, Manager TISU, at Cisco's Herndon, Virginia office to introduce the
GeoTel senior management team to Cisco's Service Provider Group and to discuss
opportunities to work together with joint carrier customers.
On February 16, 1999, Mr. Thibault and Mr. Hanafi had a telephone
conversation to discuss project status, including delays in completing the proof
of concept demo, the timing of an announcement of the virtual call center
project and the overall joint development relationship. As a part of this
conversation, Mr. Thibault discussed the potential of eliminating the exclusive
nature of their joint development relationship.
On March 3, 1999, at a meeting of Cisco's Board of Directors, Mr. Volpi
presented an overview of the call center market as an opportunity for Cisco and
discussed Cisco's interest in the call center market as an infrastructure tool
for Cisco packet voice infrastructure. On March 4, 1999, Cisco held an internal
meeting to discuss progress on the joint development efforts with GeoTel.
On March 10, during a phone call between Mr. Volpi and Mr. Thibault, the
parties indicated their respective interest in a strategic combination and
agreed that a meeting with Mr. Chambers was necessary to explore the potential
of any such combination.
On March 12, the Board of Directors of GeoTel discussed the concept of a
strategic combination and approved Mr. Thibault's recommendation that GeoTel
retain two investment banking firms to represent it in connection with its
pursuit of several potential strategic alternatives.
On March 25, 1999, Mr. Thibault met in New York City with Mr. Chambers, Mr.
Volpi and Mr. Listwin. At the meeting, Mr. Chambers indicated that the call
center market was strategic to Cisco and that Cisco would be interested in
exploring a strategic combination with GeoTel. Mr. Thibault agreed to proceed
with such discussions. The next day, Mr. Volpi, along with Mr. Listwin and
Michael Kirby, Cisco's Area Vice President, U.S. Sales, visited GeoTel to review
its business model and business outlook and to discuss combination
possibilities.
On March 31, 1999, representatives of Merrill Lynch & Co., financial
advisor to Cisco, in a telephone conversation with representatives of Dain
Rauscher Wessels, financial advisor to GeoTel, requested that GeoTel enter into
an agreement to negotiate exclusively with Cisco. Mr. Thibault discussed the
possibility of entering into an exclusivity agreement with Cisco. Testa, Hurwitz
& Thibeault, LLP reviewed, and the board of directors engaged in discussion of,
the board's fiduciary duties in pursuing a potential strategic combination with
Cisco. After consultation with Dain Rauscher Wessels and Testa, Hurwitz &
Thibeault, LLP, a determination was made not to enter into an exclusivity
agreement at that time.
From March 31 through April 2, 1999, representatives of Cisco and GeoTel,
as well as both companies' financial advisors, met by telephone to discuss
transaction valuation ranges and potential deal terms upon which the parties
would agree to a strategic combination.
On April 2, 1999, Cisco, through Merrill Lynch, proposed a transaction
whereby Cisco would acquire all of the outstanding shares of GeoTel common stock
in a stock-for-stock merger to be treated as a pooling-of-interests for
accounting purposes under U.S. generally accepted accounting principles.
Representatives of Merrill Lynch also presented transaction valuation ranges at
which Cisco would be willing to pursue a strategic combination with GeoTel.
Merrill Lynch indicated that in order for Cisco to proceed with the negotiation
of the proposed combination it would require voting agreements from management
and the key stockholders and would also require that GeoTel execute a stock
option agreement that would be exercisable by Cisco in certain events upon the
occurrence of a competing offer for GeoTel. In doing so, Cisco stated that it
believed such arrangements were necessary in order to provide it with reasonable
assurance that any transaction would be consummated and that without such
arrangements in place it was not interested in continuing its discussions with
GeoTel regarding the proposed strategic combination. The Merrill Lynch
representatives further indicated that Cisco would be unwilling to pursue
further discussions with GeoTel regarding the proposed strategic combination,
increase
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<PAGE> 26
its due diligence of GeoTel or provide a draft merger agreement unless GeoTel
entered into a limited-duration exclusivity agreement with Cisco.
On the evening of April 2, 1999 the Board of Directors of GeoTel met by
teleconference to discuss the potential business combination with Cisco and
Cisco's request for an exclusivity agreement. Timothy J. Allen, GeoTel's Chief
Financial Officer, and representatives of Dain Rauscher Wessels and Testa,
Hurwitz & Thibeault, LLP also attended the meeting. At the meeting,
representatives from GeoTel's management described the status of the proposed
transaction with Cisco. Representatives from Dain Rauscher Wessels reviewed
written documentation containing preliminary valuation analyses and related
financial information which had been provided to the GeoTel board of directors
prior to the meeting. Testa, Hurwitz & Thibeault, LLP reviewed, and the board of
directors engaged in a discussion of, the board's fiduciary duties in, pursuing
a strategic combination with Cisco including executing the exclusivity
agreement. The GeoTel board of directors asked questions and discussed the
strategy underlying the proposed transaction, the risks inherent in the proposed
transaction, and the implications of the proposed transaction on GeoTel
stockholder value. The GeoTel board of directors also discussed Cisco's
requirement that GeoTel enter into a limited-duration exclusivity agreement
before Cisco would consider further exploration of a strategic combination of
the companies. Following significant discussion and review and the advice of
Testa, Hurwitz & Thibeault, LLP and Dain Rauscher Wessels, GeoTel's board of
directors authorized management to continue its discussions regarding the
proposed strategic combination and negotiate a mutually acceptable exclusivity
agreement with Cisco.
On April 2, 1999, Cisco and GeoTel entered into a six business day
exclusivity agreement.
On April 5, 1999, a draft merger agreement and other transaction documents
were circulated by Brobeck, Phleger & Harrison LLP, outside legal counsel to
Cisco.
On April 6, 1999, representatives of Dain Rauscher Wessels met with Larry
Carter, Cisco's Chief Financial Officer, in Cisco's San Jose office to conduct
financial due diligence on Cisco.
During the period between April 6 and 12, 1999, management of Cisco and
GeoTel, together with their respective legal and financial advisors, held
extensive negotiations regarding the terms and conditions of the definitive
agreements relating to the proposed transaction.
On the afternoon of April 9, 1999, the GeoTel board of directors held a
special meeting with all directors participating by telephone. At the meeting,
members of GeoTel's management and representatives from Dain Rauscher Wessels
and Testa, Hurwitz & Thibeault, LLP discussed with the GeoTel board of
directors, and responded to numerous questions from the GeoTel board of
directors concerning:
- the status of the ongoing negotiations with Cisco;
- the strategic rationale for the transaction, potential synergies and
benefits to GeoTel and the competitive landscape facing GeoTel on a
stand-alone basis;
- the then-currently proposed principal terms of the merger agreement,
including the size of the stock option, and conditions upon which it
would become exercisable, the nonsolicitation provisions, the termination
rights relating to the transaction, the conditions upon which any
break-up fees would be payable and the amount of such fees, and the
representations, warranties and covenants to be made; and
- the results of the business and financial due diligence conducted on
Cisco.
Testa, Hurwitz & Thibeault, LLP discussed the GeoTel board of directors'
fiduciary duties in considering the strategic combination and Dain Rauscher
Wessels discussed the results of their financial due diligence of Cisco. After
careful consideration, the GeoTel board of directors determined that, because
of, among other things, the proposed valuation ranges and the perceived
strategic advantages of the proposed strategic combination, management of GeoTel
should continue to pursue the strategic combination with Cisco. The GeoTel board
of directors authorized and instructed senior management to continue negotiation
of a definitive merger agreement with Cisco, including specifically emphasizing
the importance of the
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<PAGE> 27
conditions upon which the stock option would become exercisable, the
nonsolicitation provisions, termination rights related to the transaction, the
conditions upon which break-up fees would be payable and the amount of such
fees.
On the evening of April 9, 1999, GeoTel management conveyed the GeoTel
board of directors' concerns to members of the Cisco management team.
On April 10, 1999, a telephonic meeting between members of Cisco's
management team, together with Cisco's outside legal and financial advisors, and
members of GeoTel's management team, together with GeoTel's outside legal and
financial advisors, was held to discuss the issues raised by the GeoTel board of
directors. Following the telephonic meeting between representatives of GeoTel
and Cisco, GeoTel's and Cisco's management and legal counsel continued
negotiation of the terms of the proposed transaction and the transaction
documents.
On the morning of April 12, 1999, the GeoTel board of directors held a
special meeting with all directors participating by telephone. Representatives
of Testa, Hurwitz & Thibeault, LLP and Dain Rauscher Wessels also participated
in the meeting. The GeoTel board of directors reviewed the status of the
negotiations with Cisco and reviewed with counsel the specific terms of the
proposed merger agreement between the parties as modified following further
negotiation, including the conditions upon which such option would become
exercisable, nonsolicitation provisions, the termination rights relating to the
agreement, the conditions upon which any break-up fees would be payable to
Cisco, and the amount of such fees.
On the afternoon of April 12, 1999, representatives at Merrill Lynch
presented Cisco's proposed per share valuation of the transaction to
representatives of Dain Rauscher Wessels. Messrs. Thibault and Volpi
subsequently discussed Cisco's proposal.
On the afternoon of April 12, 1999, Cisco's board of directors held a
special meeting to discuss the proposed transaction. Mr. Chambers and other
members of management reviewed the status of the transaction, including the
following:
- the details related to the proposed merger that still required
resolution;
- a financial review of the proposed transaction;
- a review of GeoTel's business operations; and
- the results of Cisco's due diligence review.
At the special meeting, representatives of Merrill Lynch presented to
Cisco's board of directors a summary of its analysis of the financial aspects of
the proposed transaction. In addition, Daniel Scheinman, Vice President and
General Counsel of Cisco and representatives of Brobeck, Phleger & Harrison LLP,
Cisco's legal advisors, outlined the terms of the proposed merger and the
directors' legal duties and responsibilities. At the conclusion of the meeting,
Cisco's board of directors unanimously approved the principal terms of the
proposed business combination, approved the merger agreement in the form
presented and authorized management to finalize the details of the merger
agreement.
On the evening of April 12, 1999, the GeoTel board of directors held a
special meeting with all directors participating by telephone. Members of
GeoTel's senior management and representatives of Dain Rauscher Wessels and
Testa, Hurwitz & Thibeault, LLP also participated. At the special meeting:
- Mr. Thibeault reviewed the status of the negotiations with Cisco;
- Dain Rauscher Wessels reviewed its financial analysis of the proposed
transaction, answered questions posed by the GeoTel board of directors
and delivered its opinion that, as of such date, the consideration to be
received in the transaction by GeoTel stockholders was fair to such
holders from a financial point of view; and
- legal counsel reviewed the terms of the various agreements, particularly
the proposed definitive merger agreement, answered questions posed by the
GeoTel board of directors and discussed the GeoTel board of directors'
fiduciary duties in reviewing and approving the business combination.
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<PAGE> 28
At the conclusion to these discussions the GeoTel board of directors unanimously
voted to approve the merger agreement and related transaction documents.
During the evening of April 12, 1999, Cisco and GeoTel worked towards
resolving outstanding details and finalizing the definitive merger agreement and
related documents.
GeoTel and Cisco entered into the merger agreement and the stock option
agreement as of April 12, 1999, stockholders of GeoTel entered into the
stockholder agreement with Cisco, and each of the members of Cisco's and
GeoTel's boards of directors and certain officers of GeoTel and Cisco entered
into affiliate agreements with GeoTel and Cisco, respectively. On April 13,
1999, Cisco and GeoTel issued a joint press release announcing the proposed
business combination.
REASONS FOR THE MERGER
Cisco's Reasons for the Merger
Cisco's board of directors has identified several potential benefits of the
merger that it believes will contribute to the success of the combined company.
These potential benefits include the ability to:
- provide a single, best-of-class distributed call center solution for both
enterprises and service provider customers of Cisco and GeoTel;
- increase sales of GeoTel's products by selling through Cisco's extensive
channels of distribution;
- hasten the convergence of voice and data networks by providing a
compelling solution on Cisco's packet voice networks;
- provide Cisco with a carrier-class reliability platform; and
- add employees experienced in call center and voice technologies.
Additionally, in evaluating the proposed merger, the Cisco board of
directors considered the pro forma contribution of GeoTel to net income both
historically and in the near term. Although based on such analyses the Cisco
board concluded that the merger would not be accretive in the near term, for the
strategic reasons set forth above, the board determined that the merger
agreement and the merger were in the best interests of Cisco and its
stockholders and that Cisco should proceed with the merger agreement and the
merger.
GeoTel's Reasons for the Merger
The GeoTel board of directors has unanimously approved the merger agreement
and recommends that the holders of shares of GeoTel common stock vote FOR the
approval of the merger agreement.
The GeoTel board of directors' decision to approve the merger agreement was
based primarily on factors resulting from the rapid expansion of the
telecommunications industry in recent years and GeoTel's business prospects
within that industry. In particular, the board of directors noted the
opportunities for voice and data convergence created by the rapid proliferation
of private IP networks and the Internet, as well as the new class of
telecommunications service providers enabled by the Telecommunications Act of
1996. The board of directors concluded that the best means for GeoTel to
capitalize on these opportunities was to enter into a strategic combination with
a much larger company already well established in these new markets and with
which GeoTel products and technology would be synergistic.
The GeoTel board of directors also believed that increasing competition in
the expanding computer technology integration (CTI) market would make it more
difficult for GeoTel to succeed as a relatively small independent company.
Despite GeoTel's success to date, the board of directors believed that it would
be increasingly important for GeoTel to grow and gain critical mass in order to
compete against larger companies with substantially greater resources and
broader, more integrated product offerings. In order to enhance its competitive
position, GeoTel's management has considered a number of alternatives, including
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<PAGE> 29
growth through the acquisition of smaller companies that could extend GeoTel's
product offerings and enhance the distribution of GeoTel products and services,
or merger with a larger company.
The GeoTel board of directors identified a number of benefits for GeoTel's
stockholders, employees and customers that could result from the merger. These
potential benefits include:
- synergies and compatibility of GeoTel and Cisco, based on their
complementary technologies, which could lead to the creation of a single
comprehensive solution for telephony and data;
- opportunities for GeoTel, as part of the combined company, to compete
more effectively in the increasingly competitive and rapidly changing CTI
industry;
- the ability to dedicate greater resources to both current and emerging
product development efforts and to fund the future growth of GeoTel's
business; and
- the ability of GeoTel to leverage Cisco's extensive distribution network
and expertise, particularly internationally, and to use Cisco's presence
in major markets to increase the sales of its products and to further
expand GeoTel's own distribution base.
- the merger consideration to be received by GeoTel stockholders which, as
of the date of the merger agreement:
- represented a premium of approximately 37% over the market price as of
the date of the merger agreement;
- represented a premium of approximately 34% over the market price as of
one week prior to April 12, 1999; and
- represented a premium of approximately 42% over the market price as of
one month prior to April 12, 1999.
- the opportunity for GeoTel stockholders to participate in the potential
for growth of the combined company after the merger;
- the greater liquidity to GeoTel stockholders offered by Cisco's common
stock relative to GeoTel's common stock;
- the presentation by Dain Rauscher Wessels and its opinion dated as of
April 12, 1999, that based upon the facts and circumstances as they
existed at that time, and subject to certain assumptions and factors set
forth in the opinion, the consideration to be received by the GeoTel
stockholders under the terms of the merger agreement is fair to the
GeoTel stockholders from a financial point of view. In particular, the
GeoTel board of directors focused on the portions of the Dain Rauscher
Wessels presentation regarding the implied valuation of the GeoTel common
stock in the proposed transaction, including the comparison of the
implied valuation to historic and recent market valuations of shares of
GeoTel common stock as well as the premium cited by Dain Rauscher Wessels
for the GeoTel common stock to be acquired by Cisco. See "Opinion of
GeoTel's Financial Advisor" for a discussion of the factors considered by
Dain Rauscher Wessels in rendering its opinion;
- the tax-free aspects of the merger to the GeoTel stockholders;
- the compatibility of the business philosophies and strategies of GeoTel
and Cisco, which the GeoTel board of directors believes is important for
the successful integration of the companies;
- historical information concerning GeoTel's and Cisco's respective
businesses, prospects, financial performance and condition, operations,
technology, management and competitive position, including public reports
concerning results of operations during the most recent fiscal year and
fiscal quarter for each company; and
- current financial market conditions and historical market prices,
volatility and trading information with respect to GeoTel and Cisco
common stock.
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In addition, the GeoTel board of directors noted that the merger is
expected to be accounted for as a pooling of interests and that no goodwill is
expected to be created on the books of the combined company as a result thereof.
The GeoTel board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including, but not limited to:
- the risk that the potential benefits sought in the merger might not be
realized fully, or within the time frame contemplated, if at all;
- the possibility that the merger would not be consummated and the effect
of the public announcement of the merger on (a) GeoTel's sales and
operating results and (b) GeoTel's ability to attract and retain key
management, sales, marketing and technical personnel;
- the risk that, despite the efforts of GeoTel and Cisco, key technical,
marketing and management personnel might choose not to remain employed by
Cisco after the merger;
- the substantial charges to be incurred, primarily in the quarter in which
the merger is consummated, including costs of integrating the business
and transaction expenses arising from the merger; and
- the other risks associated with Cisco's business and the merger described
under "Risk Factors" herein.
The GeoTel board of directors believes that the potential benefits of the
merger outweigh these risks.
The foregoing discussion of the information and factors considered by the
GeoTel board of directors is not intended to be exhaustive but is believed to
include all material factors considered by the GeoTel board of directors. In
view of the variety of factors considered in connection with its evaluation of
the merger, the GeoTel board of directors did not find it practicable to and did
not quantify or otherwise assign relative weight to the specific factors
considered in reaching its determination. In addition, individual members of the
GeoTel board of directors may have given different weight to different factors.
In light of the size and diversity of the marketplace and the competitive
positions of both Cisco and GeoTel, the GeoTel board of directors has concluded
that the merger represents the best current and long-term strategy for GeoTel.
RECOMMENDATION OF GEOTEL'S BOARD OF DIRECTORS
FOR THE REASONS DISCUSSED ABOVE, THE GEOTEL BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT GEOTEL
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
In considering the recommendation of the GeoTel board of directors with
respect to the merger agreement, you should be aware that certain directors and
officers of GeoTel have certain interests in the merger that are different from,
or are in addition to, the interests of GeoTel stockholders generally. Please
see the section entitled "Interests of Certain GeoTel Directors, Officers and
Affiliates in the Merger" on page 38 of this proxy statement/prospectus.
OPINION OF GEOTEL'S FINANCIAL ADVISOR
On March 12, 1999, GeoTel retained Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated, to furnish an opinion as to the fairness, from a
financial point of view, to GeoTel stockholders of the consideration GeoTel
stockholders would receive in the merger.
On April 12, 1999, Dain Rauscher Wessels delivered its opinion to the
GeoTel board of directors. The opinion stated that, as of the date of the
opinion and subject to the assumptions, factors and limitations contained in the
opinion and as described below, the consideration to be received by the holders
of GeoTel common stock under the terms of the merger agreement was fair, from a
financial point of view, to those
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<PAGE> 31
stockholders. A copy of the Dain Rauscher Wessels opinion is attached as
Appendix D to this proxy statement/prospectus and is incorporated in this proxy
statement/prospectus by reference. This summary of the opinion is qualified by
reference to the full text of the Dain Rauscher Wessels opinion, and we urge
GeoTel stockholders to read the attached Dain Rauscher Wessels opinion in its
entirety.
THE DAIN RAUSCHER WESSELS OPINION APPLIES ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY GEOTEL
STOCKHOLDERS UNDER THE MERGER AGREEMENT AND SHOULD NOT BE UNDERSTOOD TO BE A
RECOMMENDATION BY DAIN RAUSCHER WESSELS TO VOTE IN FAVOR OF ANY MATTER PRESENTED
IN THIS PROXY STATEMENT/PROSPECTUS. GEOTEL STOCKHOLDERS SHOULD NOTE THAT THE
OPINION EXPRESSED BY DAIN RAUSCHER WESSELS WAS PROVIDED SOLELY FOR THE
INFORMATION OF THE GEOTEL BOARD OF DIRECTORS IN ITS EVALUATION OF THE MERGER AND
WAS NOT PREPARED ON BEHALF OF, NOR INTENDED TO CONFER RIGHTS OR REMEDIES UPON,
CISCO, GEOTEL, ANY STOCKHOLDER OF GEOTEL OR CISCO, OR ANY PERSONS OTHER THAN THE
GEOTEL BOARD OF DIRECTORS. THE GEOTEL BOARD OF DIRECTORS DID NOT IMPOSE ANY
LIMITATIONS ON THE SCOPE OF THE INVESTIGATION CONDUCTED BY DAIN RAUSCHER WESSELS
IN THE COURSE OF RENDERING ITS OPINION.
In providing its opinion, Dain Rauscher Wessels assumed and relied upon the
accuracy and completeness of the financial, legal, tax, operating and other
information provided to it by GeoTel and Cisco (including the financial
statements and related notes of GeoTel and Cisco) and other publicly available
information. Dain Rauscher Wessels did not independently verify such
information. Additionally, Dain Rauscher Wessels did not consider the possible
effects of any litigation, other legal claims or any other contingent matters
for purposes of completing its analysis. Dain Rauscher Wessels did not perform
any independent evaluation or appraisal of any of the respective assets or
liabilities of GeoTel or Cisco, nor did GeoTel or Cisco furnish Dain Rauscher
Wessels with any such evaluations or appraisals. The Dain Rauscher Wessels
opinion is based on the existing conditions and available information known by
Dain Rauscher Wessels as of the date of the Dain Rauscher Wessels opinion. This
opinion does not take into account events occurring after the date of the Dain
Rauscher Wessels opinion, which may materially affect the assumptions used in
preparing the Dain Rauscher Wessels opinion.
In its review of the merger, and in arriving at its opinion, Dain Rauscher
Wessels:
- reviewed and analyzed the financial terms of the merger agreement;
- reviewed and analyzed publicly available financial and other data with
respect to GeoTel and Cisco;
- reviewed and analyzed historical operating data relating to GeoTel and
Cisco made available to Dain Rauscher Wessels through published sources
and from the internal records of GeoTel and Cisco;
- conducted discussions with members of GeoTel's senior management on the
business prospects and financial outlook of GeoTel;
- conducted discussions with members of Cisco's senior management on the
business prospects and financial outlook of Cisco;
- reviewed the reported prices and trading activity for both Cisco common
stock and GeoTel common stock;
- compared both the financial performance of Cisco and GeoTel and the
prices of Cisco common stock and GeoTel common stock with the financial
performance and stock price performance of other comparable publicly
traded companies; and
- reviewed the financial terms, to the extent publicly available, of
comparable merger transactions.
In addition, Dain Rauscher Wessels conducted such other analyses and
examinations and considered such other relevant financial, economic and market
criteria as it deemed necessary in providing its opinion.
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The following is a summary of the financial analyses performed by Dain
Rauscher Wessels in connection with the delivery of its opinion to the GeoTel
board of directors:
Comparable Company Analysis. Dain Rauscher Wessels utilized a comparable
company analysis in comparing GeoTel's operating performance to a group of
publicly traded companies that Dain Rauscher Wessels believed to be comparable
to GeoTel. In its analysis, Dain Rauscher Wessels compared the value to be
received by the GeoTel stockholders in the merger, expressed as a multiple of
certain operating data, to the stock prices of the comparable companies
expressed as a multiple of the same operating data. Dain Rauscher Wessels made
these comparisons between GeoTel and the following publicly traded companies:
Clarify, Inc., Concord Communications, Inc., Genesys Telecommunications
Laboratories, Inc., Micromuse, Inc., Siebel Systems, Inc., and Visual Networks,
Inc. Although Dain Rauscher Wessels considered these companies to be comparable
to GeoTel for purposes of its opinion, none of these companies possesses
characteristics which are identical to those of GeoTel.
Dain Rauscher Wessels calculated the following valuation multiples based on
an implied value of $60.50 per share of GeoTel common stock, based on Cisco's
closing stock price on April 12, 1999, and, with respect to the comparable
companies, based on either market prices or other information available as of
April 12, 1999. Multiples of future earnings were calculated based on publicly
available projected earnings estimates.
<TABLE>
<CAPTION>
1999 2000
----- -----
<S> <C> <C>
GeoTel price/earnings ratio................................. 121.0x 94.5x
Comparable companies' median price/earnings ratio........... 46.1x 40.1x
GeoTel market capitalization/revenues ratio................. 27.1x 19.6x
Comparable companies, median market capitalization/revenues
ratio..................................................... 8.3x 6.0x
</TABLE>
As indicated in the above table, GeoTel stockholders would receive greater
value in the merger, in terms of a higher multiple of operating results, than
the value being realized by stockholders of the comparable companies.
Comparable Transactions. Dain Rauscher Wessels compared multiples of the
value to be received by GeoTel stockholders in the merger to revenues of GeoTel
with comparable multiples from other mergers since 1997 involving publicly
traded networking and software technology companies. Dain Rauscher Wessels also
compared the premium of the merger value to GeoTel stockholders over the trading
price of the GeoTel common stock to the same premiums from those comparable
merger transactions. The comparable transactions, referred to below as either
networking or software transactions, were selected primarily based on the
aggregate transaction value of the business acquired (greater than $500 million)
and the target companies' involvement in the networking and software technology
industries. Dain Rauscher Wessels noted that none of the target companies
involved in these transactions had a business that was directly comparable to
GeoTel.
The tables below indicate that the ratio of merger value to revenues and
the premium of merger value over market price achieved by GeoTel stockholders
would be comparable to those realized in the comparable transactions.
Comparison of merger value/revenues:
<TABLE>
<CAPTION>
RANGE MEDIAN
------------- ------
<S> <C> <C>
Comparable networking merger value/revenues................. .6x to 16.7x 2.9x
Comparable software merger value/revenues................... .4x to 338.7x 4.0x
GEOTEL MERGER VALUE/REVENUES................................ -- 44.0X
</TABLE>
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<PAGE> 33
Comparison of premium of merger value per share over market price of the target
company's stock:
<TABLE>
<CAPTION>
ONE MONTH PRIOR TO ONE WEEK PRIOR TO ONE DAY PRIOR TO
ANNOUNCEMENT ANNOUNCEMENT ANNOUNCEMENT
----------------------- ----------------------- -----------------------
RANGE MEDIAN RANGE MEDIAN RANGE MEDIAN
-------------- ------ -------------- ------ -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Networking
transactions......... .4 to 98.7% 49.7% 13.2 to 111.9% 37.4% -.3 to 81.6% 24.6%
Software
transactions......... -3.6 to 250.9% 52.1% 3.8 to 188.9% 32.6% 5.0 to 196.2% 28.5%
</TABLE>
<TABLE>
<CAPTION>
ONE MONTH PRIOR TO ONE WEEK PRIOR TO ONE DAY PRIOR TO
ANNOUNCEMENT ANNOUNCEMENT ANNOUNCEMENT
------------------ ----------------- ----------------
<S> <C> <C> <C>
GeoTel transaction.................. 42.1% 33.5% 36.7%
</TABLE>
Discounted Cash Flow Analysis. Dain Rauscher Wessels estimated present
values of GeoTel using a discounted cash flow analysis based on financial data
and estimates provided by GeoTel's management. Dain Rauscher Wessels calculated
present values of projected operating cash flows after net changes to working
capital over the period between December 31, 1999 and December 31, 2003. Dain
Rauscher Wessels then calculated terminal values by applying multiples, ranging
from 27.4x to 35.4x, to GeoTel's estimated earnings before interest and taxes
("EBIT") for 2003. GeoTel's cash flow streams and terminal values were then
discounted to present value using discount rates ranging from 15.4% to 25.4%,
chosen to reflect different assumptions regarding GeoTel's cost of capital. Dain
Rauscher Wessels utilized a range of discount rates it believed appropriate for
a company with performance, technological, manufacturing and operational risks
similar to GeoTel. Based on this discounted cash flow analysis, GeoTel had a
range of implied equity values of between $1.345 billion and $2.538 billion, or
between $41.13 and $77.61 per share of common stock. The value to be received by
GeoTel stockholders in the merger, based on Cisco's closing stock price on April
12, 1999, is $60.50 per share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or the summary set forth above, without considering the
analyses as whole, could create an incomplete or misleading view of the
processes underlying Dain Rauscher Wessels' opinion. In arriving at its fairness
determination, Dain Rauscher Wessels considered the results of all the analyses
it performed. In view of the wide variety of factors considered in its
evaluation of the fairness of the merger consideration, Dain Rauscher Wessels
did not find it practicable to assign relative weights to the factors considered
in reaching its opinion. No company or transaction used in the above analyses as
a comparison is identical to GeoTel or Cisco or the proposed merger. Dain
Rauscher Wessels' analyses were prepared solely for purposes of providing its
opinion to the GeoTel board of directors as to the fairness of the merger
consideration to GeoTel stockholders. Dain Rauscher Wessels' analyses do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested or assumed by such analyses.
As described above, Dain Rauscher Wessels' opinion to the GeoTel board of
directors was one of many factors taken into consideration by the GeoTel board
of directors in making its determination to approve the merger agreement.
Dain Rauscher Wessels is a nationally recognized investment banking firm,
and it is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations of corporations. Dain Rauscher Wessels is familiar with GeoTel,
having acted as a managing underwriter of the initial public offering of GeoTel
common stock in 1996. GeoTel selected Dain Rauscher Wessels to render the
fairness opinion based on Dain Rauscher Wessels' familiarity with GeoTel, its
knowledge of the technology industry and its experience in mergers and
acquisitions and securities valuation.
In the ordinary course of its business, Dain Rauscher Wessels acts as a
market maker and broker in the publicly traded securities of GeoTel and Cisco,
receives customary compensation for such activities, and also provides research
coverage of GeoTel and Cisco. In the ordinary course of its business, Dain
Rauscher Wessels also actively trades for its own account and for the accounts
of its customers in the publicly traded securities of GeoTel and Cisco and,
accordingly, may at any time hold a long or short
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<PAGE> 34
position in these securities. On occasion, these positions may be material
either in size or relative to the volume of trading activity.
GeoTel engaged Dain Rauscher Wessels pursuant to an engagement letter,
dated March 12, 1999. Under the terms of this engagement letter, GeoTel paid
Dain Rauscher Wessels a nonrefundable opinion fee of $400,000 upon the rendering
of the Dain Rauscher Wessels opinion. Payment of the opinion fee to Dain
Rauscher Wessels was not contingent upon the closing of the merger. In addition,
pursuant to the Dain Rauscher Wessels engagement letter, GeoTel has agreed to
pay Dain Rauscher Wessels, upon the closing of the merger, an estimated
$8,000,000 transaction fee. The opinion fee will be credited against the
transaction fee. Payment of the transaction fee is contingent upon the closing
of the merger. GeoTel has also agreed to reimburse Dain Rauscher Wessels for its
reasonable out-of-pocket expenses and to indemnify Dain Rauscher Wessels against
certain liabilities relating to or arising out of services performed by Dain
Rauscher Wessels in connection with the merger. Dain Rauscher Wessels and GeoTel
negotiated the terms of the engagement letter at arm's length. Dain Rauscher
Wessels and GeoTel believe the terms of the engagement letter are customary for
transactions of this nature, and the GeoTel board of directors was aware of Dain
Rauscher Wessels' fee arrangement at the time it approved the merger agreement.
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 merger agreement
by the GeoTel stockholders. 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 by the end of June 1999. Because the merger is
subject to government approvals, however, we cannot predict the exact timing.
STRUCTURE OF THE MERGER AND CONVERSION OF GEOTEL COMMON STOCK
In accordance with the merger agreement and Delaware law, Geronimo Merger
Corp., a newly-formed, wholly-owned subsidiary of Cisco, will be merged with and
into GeoTel. As a result of the merger, the separate corporate existence of
Geronimo Merger Corp. will cease and GeoTel will survive the merger as a
wholly-owned subsidiary of Cisco.
Upon completion of the merger, each outstanding share of GeoTel common
stock, other than shares held by Cisco and its subsidiaries, will be canceled
and converted into the right to receive 0.5138 shares of Cisco common stock,
prior to adjustment for Cisco's two-for-one stock split which will be effected
on June 21, 1999. Giving effect to Cisco's two-for-one stock split, each share
of your GeoTel common stock will be exchanged for 1.0276 shares of Cisco common
stock. A corresponding right to purchase shares of Cisco Series A Junior
Participating Preferred Stock, no par value, pursuant to the Cisco Rights
Agreement dated as of June 10, 1998 between Cisco and Bank Boston, N.A. will
accompany each share of Cisco common stock. The number of shares of Cisco common
stock issuable in the merger will be proportionately adjusted for any additional
future stock split, stock dividend or similar event with respect to GeoTel
common stock or Cisco common stock effected between the date of the merger
agreement and the completion of the merger.
No fractional shares of Cisco common stock will be issued in connection
with the merger. Instead you will receive an amount of cash, in lieu of a
fraction of a share of Cisco common stock equal to the product of such fraction
multiplied by the closing price for a share of Cisco common stock on the Nasdaq
National Market on the last full trading day prior to the Effective Time.
EXCHANGE OF GEOTEL STOCK CERTIFICATES FOR CISCO 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 GeoTel stock
certificates in exchange for Cisco stock certificates. When you deliver your
GeoTel stock certificates to the exchange agent along with a properly executed
letter of transmittal and any other required documents, your GeoTel stock
certificates will be cancelled and you will receive Cisco stock certificates
representing the number of full shares of Cisco common stock to which you are
entitled under the merger agreement (and cash in lieu of fractional shares).
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<PAGE> 35
YOU SHOULD NOT SUBMIT YOUR STOCK CERTIFICATES FOR
EXCHANGE UNTIL YOU HAVE RECEIVED THE LETTER OF TRANSMITTAL AND
INSTRUCTIONS REFERRED TO ABOVE.
You are not entitled to receive any dividends or other distributions on
Cisco common stock with a record date after the merger is completed until you
have surrendered your GeoTel stock certificates in exchange for Cisco stock
certificates.
If there is any dividend or other distribution on Cisco common stock with a
record date after the merger and a payment date prior to the date you surrender
your GeoTel stock certificates in exchange for Cisco stock certificates, you
will receive it with respect to the whole shares of Cisco common stock issued to
you promptly after they are issued. If there is any dividend or other
distribution on Cisco common stock with a record date after the merger and a
payment date after the date you surrender your GeoTel stock certificates in
exchange for Cisco stock certificates, you will receive it with respect to the
whole shares of Cisco common stock issued to you promptly after the payment
date.
Cisco will only issue a Cisco stock certificate or a check in lieu of a
fractional share in a name other than the name in which a surrendered GeoTel
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.
THE MERGER AGREEMENT
Representations and Warranties
We each made a number of representations and warranties in the merger
agreement regarding authority to enter into the merger agreement, and to
consummate the other transactions contemplated by the merger agreement and with
regard to aspects of our business, financial condition, structure and other
facts pertinent to the merger.
The representations given by GeoTel cover the following topics as they
relate to GeoTel and its subsidiaries:
- GeoTel's organization, qualification to do business and power;
- GeoTel's capitalization;
- authorization of the merger and the transaction agreements by GeoTel;
- GeoTel's filings and reports with the Securities and Exchange Commission;
- GeoTel's financial statements;
- changes in GeoTel's business since December 31, 1998;
- GeoTel's undisclosed liabilities;
- litigation involving GeoTel;
- restrictions on GeoTel's business;
- the possession of and compliance with permits required to conduct
GeoTel's business;
- GeoTel's title to the properties it owns and leases;
- intellectual property used and owned by GeoTel;
- environmental laws that apply to GeoTel;
- GeoTel's taxes;
- GeoTel's employee benefit plans;
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<PAGE> 36
- the effect of the merger on obligations of GeoTel;
- matters relating to GeoTel's employees;
- GeoTel's transactions with interested parties;
- GeoTel's insurance;
- GeoTel's compliance with applicable laws;
- GeoTel's financial advisors;
- information supplied by GeoTel in this proxy statement/prospectus and the
related registration statement of Cisco;
- the vote required of the GeoTel stockholders to approve the merger;
- authorization and recommendation by the GeoTel board of directors of the
merger;
- the inapplicability of state anti-takeover statutes to the merger;
- GeoTel's compliance with export control laws;
- the effect of the Year 2000 on GeoTel's business and products;
- the treatment of the merger as a pooling of interests and a tax-free
reorganization; and
- authorization and recommendation by the GeoTel board of directors.
The representations given by Cisco and Geronimo Merger Corp. cover the
following topics as they relate to Cisco, Geronimo Merger Corp. and their
respective subsidiaries:
- organization, qualification to do business and power of Cisco and
Geronimo Merger Corp.;
- capitalization of Cisco and Geronimo Merger Corp.;
- authorization of the merger by Cisco and Geronimo Merger Corp.;
- Cisco's filings and reports with the Securities and Exchange Commission;
- Cisco's financial statements;
- Cisco's undisclosed liabilities;
- litigation involving Cisco;
- information supplied by Cisco and Geronimo Merger Corp. in this proxy
statement/prospectus and the related registration statement of Cisco;
- the inapplicability of a vote of Cisco's shareholders; and
- the treatment of the merger as a pooling of interests and a tax-free
reorganization.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles in the
merger agreement entitled "Representations and Warranties of Company" and
"Representations and Warranties of Parent and Merger Sub."
GeoTel's Conduct of Business before Completion of the Merger
GeoTel agreed that until the completion of the merger or unless Cisco
consents in writing, GeoTel and its subsidiaries will pay its taxes and will
operate its businesses in the same manner as past practices and in good faith
with the goal of:
- preserving intact its assets and current business organizations;
- keeping available the services of if its current officers and employees;
and
- maintaining its material contracts and preserving its relationships with:
- customers;
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<PAGE> 37
- suppliers;
- distributors;
- licensors; and
- licensees and others having business dealings with them.
GeoTel also agreed to promptly notify Cisco of any event which would harm
its or its subsidiaries' business or of any occurrence not in the usual course
of business. GeoTel also agreed that until the completion of the merger or
unless Cisco consents in writing, GeoTel and its subsidiaries will conduct their
business in compliance with specific restrictions relating to the following:
- modification of GeoTel's certificate of incorporation or bylaws;
- the issuance of dividends or other distributions;
- the modification of any stock options;
- entrance into or modification of material contracts;
- the issuance and redemption of securities, except for limited grants of
stock options under GeoTel's stock option plans;
- the transfer of GeoTel's intellectual property;
- the granting of exclusive rights to its products or technology;
- the disposition of any properties or assets that are material to GeoTel's
business other than in the ordinary course;
- the incurrence of indebtedness other than in the ordinary course;
- entrance into operating leases;
- the payment of obligations over a specified amount and other than in the
ordinary course;
- capital expenditures over a specified amount and other than in the
ordinary course;
- insurance;
- the waiver or termination of any right of value to GeoTel;
- employees and employee benefits;
- severance arrangements;
- commencement of any lawsuit;
- the acquisition of assets or other entities;
- tax elections and liabilities other than in the ordinary course;
- notices;
- the revaluation of GeoTel's assets other than in the ordinary course;
- accounting policies and procedures; and
- GeoTel's Year 2000 compliance plan.
The agreements related to the conduct of GeoTel's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the article in the merger agreement entitled "Conduct Prior to the
Effective Time."
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<PAGE> 38
No Solicitation of Transactions
Until the merger is completed or the merger agreement is terminated, GeoTel
has agreed not to directly or indirectly take any of the following actions:
- solicit, initiate, encourage or agree to any takeover proposal; or
- engage in negotiations with, or disclose any nonpublic information
relating to GeoTel or any of its subsidiaries to, or afford access to the
properties, books or records of GeoTel or any of its subsidiaries to, any
person that has advised GeoTel that it may be considering making, or that
has made, a takeover proposal.
However, the GeoTel board of directors is not prohibited from taking and
disclosing to GeoTel's stockholders a position with respect to a tender offer
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Additionally, the GeoTel board of directors is not prohibited from providing a
copy of the non-solicitation provision of the merger agreement to any third
party.
GeoTel has agreed to provide Cisco with detailed information about any
takeover proposal it receives.
However, GeoTel may engage in any of these acts otherwise prohibited, other
than solicitation, initiation or encouragement of any takeover proposal, if:
- the GeoTel board of directors believes in good faith that a particular
proposal concerning an extraordinary transaction of the nature specified
in the merger agreement, such as a merger or a sale of significant assets
will result in a transaction more favorable than the merger to the GeoTel
stockholders from a financial point of view; and
- the GeoTel board of directors determines in good faith after advice from
outside legal counsel that the failure to engage in the prohibited
negotiations or discussions or provide non-public information is
inconsistent with the fiduciary duties of the board under applicable law.
A takeover proposal is:
- any offer or proposal for a merger or other business combination
involving GeoTel; or
- the acquisition of 20% or more of the outstanding shares of capital stock
of GeoTel or any of its subsidiaries; or
- the sale or transfer of any significant portion of the assets of GeoTel
or any of its subsidiaries, other than the merger.
Conditions to the Merger
Our respective obligations to complete the merger and the other
transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following conditions before completion of
the merger:
- the merger agreement must be approved by the holders of a majority of the
outstanding shares of GeoTel common stock;
- no law, regulation or order must be enacted or issued which has the
effect of making the merger illegal or otherwise prohibiting completion
of the merger;
- the applicable waiting period under U.S. antitrust laws must expire or be
terminated;
- the application with the Nasdaq National Market for the listing of the
shares of Cisco common stock to be issued in the merger must be filed;
and
- Cisco and GeoTel must be advised in writing by PricewaterhouseCoopers LLP
that they concur with Cisco and GeoTel that the transactions contemplated
by the merger agreement, if completed, can properly be accounted for as a
pooling of interests business combination in accordance with
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<PAGE> 39
generally accepted accounting principles and the criteria of Accounting
Principles Board Opinion No. 16 and the rules and regulations of the
Securities and Exchange Commission.
GeoTel's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- Cisco's and Geronimo Merger Corp.'s representations and warranties must
be true and correct when made and as of the closing of the merger;
- Cisco and Geronimo Merger Corp. shall have complied in all material
respects with all covenants, obligations and conditions of the merger
agreement required to be performed and complied with by them;
- GeoTel shall have been provided with a certificate executed on behalf of
Cisco that all representations are true and correct and that all
obligations have been complied with; and
- GeoTel shall have received the opinion of its tax counsel, Testa, Hurwitz
& Thibeault, LLP to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Cisco's and Geronimo Merger Corp.'s obligations to complete the merger and
the other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- GeoTel's representations and warranties must be true and correct when
made and as of the closing of the merger;
- GeoTel shall have complied in all material respects with all covenants,
obligations and conditions of the merger agreement required to be
performed and complied with by it;
- Cisco shall have been provided with a certificate executed on behalf of
GeoTel that all representations are true and correct and that all
obligations have been complied with;
- no injunctions or restraints shall have been imposed preventing Cisco's
conduct or operation of GeoTel's business following the merger;
- certain employees of GeoTel shall have entered into employment and
non-competition agreements with Cisco; and
- Cisco shall have received the opinion of its tax counsel, Brobeck,
Phleger & Harrison LLP to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Termination of the Merger Agreement
At any time prior to the completion of the merger, the merger agreement may
be terminated:
- by mutual written consent of Cisco and GeoTel.
- by either Cisco or GeoTel, if:
- without fault of the terminating party, the closing shall not have
occurred on or before September 30, 1999 or a later date which is
agreed upon in writing by Cisco and GeoTel. However, the final date
may be extended to December 31, 1999 if the only reason the closing
has not occurred by September 30, 1999 is the failure of the
registration statement to be declared effective or the applicable
waiting period under the Hart-Scott-Rodino Act has not expired or
terminated;
- any permanent injunction or other order of a court or other
competent authority preventing the consummation of the merger shall
have become final and nonappealable; or
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<PAGE> 40
- if any required approval of the stockholders of GeoTel shall not have
been obtained by reason of the failure to obtain the required vote
upon a vote held at a duly held meeting of stockholders or at any
adjournment thereof.
- by Cisco, if:
- GeoTel shall have breached any of its representations, warranties or
obligations and such breach shall not have been cured within five
business days of receipt by GeoTel of written notice of such breach;
- the GeoTel board of directors shall have withdrawn or modified its
recommendation of the merger agreement or the merger in a manner
adverse to Cisco or shall have resolved to do any of the foregoing;
- GeoTel shall have solicited, initiated, encouraged or agreed to any
takeover proposal or engaged in any negotiations with, or disclosed
any nonpublic information relating to GeoTel or any of its
subsidiaries, or afforded access to the properties, books or records
of GeoTel to any person that has advised GeoTel that it may be
considering making, or that has made, a takeover proposal;
- the GeoTel board of directors shall have recommended, endorsed,
accepted or agreed to a takeover proposal or has resolved to do so;
- for any reason GeoTel fails to call the special meeting by September
10, 1999 or December 10, 1999 if this proxy statement/prospectus
shall not be declared effective by August 31, 1999 under
circumstances in which it can be reasonably expected that the final
date will be extended because this proxy statement/prospectus shall
not be declared effective or the applicable waiting period under the
Hart-Scott-Rodino Act shall not be terminated or expired; or
- if a trigger event (as defined in the merger agreement) or takeover
proposal (as defined in the merger agreement) shall have occurred and
the board of directors of GeoTel in connection therewith, does not
within six business days of such occurrence (or, in the event of a
tender offer or exchange offer, 10 business days):
- reconfirm its approval and recommendation of the merger agreement
and the transactions contemplated thereby; and
- reject such takeover proposal or trigger event.
- by GeoTel, if Cisco shall breach any of its representations, warranties
or obligations and such breach shall not have been cured within five
business days following receipt by Cisco of written notice of such
breach.
Payment of Fees and Expenses
Whether or not the merger is consummated, all costs and expenses incurred
in connection with the merger agreement and the merger will be paid by the party
incurring the expense except that expenses incurred in connection with printing
the proxy statement/prospectus, registration and filing fees incurred in
connection with the proxy statement/prospectus and the listing of additional
shares and fees, costs and expenses, associated with compliance with applicable
state securities laws in connection with the merger shall be shared equally.
In the event that the merger agreement is terminated because:
- a trigger event or takeover proposal shall have occurred and the board of
directors of GeoTel does not within six business days of such occurrence
(or, in the event of a tender or exchange offer, 10 business days)
reconfirm its approval and recommendation of the merger agreement and the
transactions contemplated thereby, and reject such takeover proposal or
trigger event;
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<PAGE> 41
- GeoTel through its, or otherwise by its, officers, directors or advisors
or any person authorized by such persons, solicits, initiates, encourages
or agrees to a takeover proposal or engages in any negotiations with, or
discloses any nonpublic information relating to GeoTel or any of its
subsidiaries, or affords access to the properties, books or records of
GeoTel to any person that has advised GeoTel that it may be considering
making, or that it has made, a takeover proposal in violation of the
non-solicitation provisions contained in the merger agreement;
- the GeoTel board of directors shall have recommended, endorsed, accepted
or agreed to a takeover proposal or shall have resolved to do so and at
the time of such action there shall not exist circumstances giving rise
to a material adverse effect on Cisco;
- the GeoTel board of directors shall have withdrawn or modified its
recommendation of the reorganization agreement or the reorganization
agreement or the merger in a manner adverse to Cisco or shall have
resolved to do any of the foregoing and prior to such event a trigger
event or takeover proposal that had not been rejected by GeoTel or
withdrawn shall have occurred and at the time of such action there does
not exist circumstances giving rise to a material adverse effect on
Cisco;
- any required approval of the stockholders of GeoTel shall not have been
obtained by reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders and prior to the meeting
there was a takeover proposal which was not rejected by GeoTel and prior
to such event a trigger event or takeover proposal that had not been
rejected by GeoTel or withdrawn shall have occurred and at the time of
such action there does not exist circumstances giving rise to a material
adverse effect on Cisco;
- GeoTel has breached its representations, warranties or obligations under
the reorganization agreement, GeoTel has failed to timely call its
stockholders' meeting or the merger shall not have been timely
consummated and prior to such event a trigger event or takeover proposal
that has not been rejected by GeoTel or withdrawn shall have occurred;
then GeoTel will pay Cisco the termination fee of $55,000,000 if Cisco
terminates the merger agreement within five days of the event giving rise to the
right to terminate the merger agreement. In addition, GeoTel has agreed that
under certain circumstances it shall pay Cisco's out-of-pocket costs and
expenses upon termination of the merger agreement and in the event any takeover
proposal or trigger event is consummated within 9 or 12 months (depending on the
persons making such takeover proposal or trigger event) of the later of the
termination of the merger agreement or payment of Cisco's fees and expenses,
GeoTel will pay the additional sum of $55,000,000 less any expenses previously
paid by GeoTel to Cisco.
Extension, Waiver and Amendment of the Merger Agreement
We may amend the merger agreement before completion of the merger. However,
after the GeoTel stockholders adopt the merger agreement, no change will be
made:
- to the number of shares of Cisco common stock for which GeoTel common
stock will be converted;
- to any term of the certificate of incorporation of GeoTel to be effected
by the merger; or
- to any of the terms and conditions of the merger agreement if such change
would harm the holders of Cisco common stock or Geronimo Merger Sub
common stock.
Either of us may extend the other's time for the performance of any of the
obligations or other acts under the merger 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 merger agreement.
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<PAGE> 42
RELATED AGREEMENTS
Stockholder Agreement
In connection with the merger, Gary J. Bowen, Alexander V. d'Arbeloff,
Gardner C. Hendrie, W. Michael Humphreys, Timothy J. Allen, G. Wayne Andrews,
Jane E. Eisenberg, Judith A. Kelly, John D. McMahon, John C. Thibault, Louis J.
Volpe and Steven H. Webber have entered into a stockholder agreement with Cisco.
The terms of the stockholder agreement provide (i) that the stockholders will
not transfer or sell any shares of GeoTel common stock beneficially owned by
them, or any new shares of GeoTel stock they may acquire, at any time prior to
the earlier of the effective time of the merger and the termination of the
merger agreement (unless the person to whom the shares are sold agrees to be
bound by the stockholder agreement), and (ii) that the stockholders will vote
all shares of GeoTel common stock beneficially owned by them in favor of the
approval of the merger agreement. As of May 7, 1999, the GeoTel stockholders who
entered into the stockholder agreement collectively held approximately 1,794,564
shares of GeoTel common stock which represented approximately 7% of the
outstanding GeoTel common stock. None of the stockholders who are parties to the
stockholder agreement was paid additional consideration in connection with the
stockholder agreement.
Employment and Non-Competition Agreements
Cisco has entered into employment and non-competition agreements with
certain employees of GeoTel (including John C. Thibault, G. Wayne Andrews,
Steven H. Webber, Timothy J. Allen, Judith A. Kelly, John D. McMahon and Jane E.
Eisenberg). The employment and non-competition agreements are contingent upon
the occurrence of the closing of the merger and will become effective upon the
merger. The employees have agreed to remain with Cisco for a period of 18 months
from the closing of the merger unless Cisco terminates them earlier. If the
employee's employment is terminated without cause or if the employee resigns
from employment for good cause prior to the 18-month period, then Cisco will
continue to pay the employee's base salary for a certain period as a severance
payment and will reimburse the employee for COBRA medical benefits for a certain
period. If the employee resigns without good cause or the employment is
terminated for cause prior to the 18-month period, then the employee will be
paid all salary and benefits through the date of termination of employment, but
nothing else.
The employment and non-competition agreements require that the employee
will not (i) participate or engage in the design, development, manufacture,
production, marketing, sale or servicing of any product, or the provision of any
service, that directly relates to the business of Cisco or (ii) permit the
employee's name to be used in connection with a business which is competitive or
substantially similar to the business of Cisco, in each case for a certain
period after the merger.
Cisco has also agreed that, after the merger, Cisco will indemnify each
officer and director of GeoTel serving as such on the date of the merger
agreement as provided in the Delaware General Corporation Law, the GeoTel
restated certificate of incorporation and the GeoTel amended and restated
bylaws, and existing indemnification agreements between GeoTel and such officers
and directors. Please also see the section entitled "Indemnification and
Insurance" on page 38 of this proxy statement/prospectus.
Stock Option Agreement
Cisco required GeoTel to enter into the stock option agreement as a
prerequisite to entering into the merger agreement. The stock option agreement
grants Cisco the option to buy up to 3,000,000 shares of GeoTel common stock,
constituting approximately 11% of the outstanding shares of GeoTel common stock
as of May 7, 1999, at an exercise price, payable in cash, of $60.50 per share.
The option is intended to increase the likelihood that the merger will be
completed. Consequently, 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 GeoTel or its assets before
completion of the merger.
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The stock option agreement is exercisable by Cisco, in whole or in part, at
any time or from time to time after the occurrence of an event occurs which
would permit termination of the merger agreement and require payment to Cisco of
the $55 million termination fee or immediately prior to an extraordinary
transaction of the nature specified in the merger agreement which obligates
GeoTel to pay the termination fee. The Cisco option will terminate upon the
earlier of: (i) the effective time of the merger; (ii) the termination of the
merger agreement pursuant to its terms, other than a termination in connection
with which Cisco is entitled to the payment of the termination fee or expense
reimbursement; or (iii) 180 days following any termination of the merger
agreement in connection with which Cisco is entitled to the payment of the $55
million termination fee, or, if at the expiration of such 180-day period, the
Cisco option cannot be exercised by reason of any applicable judgment, decree,
order, law or regulation, ten business days after such impediment to exercise
shall have been removed or shall have become final and not subject to appeal.
The Cisco option may not, however, be exercised if Cisco is in material breach
of any of its representations, warranties, covenants or agreements contained in
the stock option agreement or in the merger agreement.
Under the terms of the stock option agreement, at any time during which the
Cisco option is exercisable, or the repurchase period, Cisco has the right to
require GeoTel, or any successor entity thereof, to repurchase from Cisco all or
any part of the Cisco option, to the extent not previously exercised (the Cisco
Put) and GeoTel has the right to require Cisco, or any successor entity thereof,
to sell to GeoTel all or any part of the Cisco option, to the extent not
previously exercised (the GeoTel Call), at the price set forth in subparagraph
(a) below. Also, at any time during which the Cisco option is exercisable, Cisco
has the right to require GeoTel, or any successor entity thereof, to repurchase
from Cisco (the Cisco Put) and GeoTel has the right to require Cisco, or any
successor entity thereof, to sell to GeoTel all or any part of the Cisco option,
to the extent not previously exercised (the GeoTel Call), all or any part of the
GeoTel shares purchased by Cisco pursuant to the Cisco option at the price set
forth in subparagraph (b) below:
(a) The difference between the "market/tender offer price" for shares
of GeoTel common stock as of the date either party gives notice of its
intent to exercise its rights, which is defined as the higher of:
- the price per share offered as of the notice date pursuant to any
tender or exchange offer or other takeover proposal, as defined in
the merger agreement, which was made prior to the notice date and
not terminated or withdrawn as of the notice date of the exercise
of the Cisco Put or the GeoTel Call, as the case may be, or the
tender price; or
- the average of the closing prices of shares of GeoTel common stock
on the Nasdaq National Market for the ten trading days immediately
preceding the notice date of the exercise of the Cisco Put or the
GeoTel Call, as the case may be, and $60.50, multiplied by the
number of GeoTel shares purchasable pursuant to the stock option
agreement, or portion thereof with respect to which either party
can exercise this right under the stock option agreement, but only
if the market/tender offer price exceeds $60.50.
(b) The exercise price paid by Cisco for the GeoTel shares acquired
pursuant to the stock option agreement plus the difference between the
market/tender offer price and $60.50, but only if the market/tender offer
price exceeds $60.50, multiplied by the number of GeoTel shares purchased
by Cisco pursuant to the stock option agreement.
Notwithstanding (a) and (b) above, in no event shall the proceeds payable
to Cisco as a result of the Cisco Put or the GeoTel Call exceed the sum of (x)
$75 million, plus (y) $60.50 multiplied by the number of GeoTel shares purchased
by Cisco pursuant to the stock option agreement minus (z) any amount paid to
Cisco by GeoTel as a termination fee pursuant to the merger agreement.
Subsequent to the termination of the merger agreement, Cisco may, by
written notice, request that GeoTel register under the Securities Act all or any
part of the shares of GeoTel common stock acquired pursuant to the stock option
agreement. GeoTel shall use its best efforts to register the unpurchased
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<PAGE> 44
registrable shares; provided, however, (a) Cisco shall not be entitled to more
than an aggregate of two effective registration statements and (b) GeoTel will
not be required to file any registration statement for a certain period of time
when (i) GeoTel is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at that time and, after
consultation with legal counsel to GeoTel. GeoTel determined that the
information would have to be disclosed if a registration statement were filed at
that time; (ii) GeoTel is required under the Securities Act to include audited
financial statements for any period in the registration statement and such
financial statements are not then available for inclusion in the registration
statement; or (iii) GeoTel determines, in its reasonable judgment, that the
registration would interfere with any financing, acquisition or other material
transaction involving GeoTel or any of its affiliates.
OPERATIONS FOLLOWING THE MERGER
Following the merger, GeoTel will continue its operations as a wholly-owned
subsidiary of Cisco. Upon consummation of the merger, the members of GeoTel's
Board of Directors will be John T. Chambers and Larry R. Carter. The membership
of the Cisco Board of Directors will remain unchanged as a result of the merger.
The stockholders of GeoTel will become stockholders of Cisco, and their rights
as stockholders will be governed by the Cisco Articles and the Cisco Bylaws and
the laws of the State of California.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that Cisco will, after the completion of the
merger, indemnify, defend and hold harmless the present and former officers and
directors of GeoTel in respect of acts or omissions occurring on or prior to the
completion of the merger, in each case to the fullest extent such corporation is
permitted under Delaware law, the GeoTel restated certificate of incorporation
or the GeoTel amended and restated bylaws or any indemnification agreement to
which GeoTel is a party, in each case as in effect on April 12, 1999.
The merger agreement also provides that, for five years after the
completion of the merger, Cisco will either:
- at all times maintain at least $50,000,000 in cash, marketable securities
and unrestricted lines of credit to be available to indemnify the present
and former officers, directors, employees and agents of GeoTel against
certain liabilities; or
- cause GeoTel to use its best efforts to cause to be maintained for the
benefit of GeoTel's current directors and officers and other persons
covered by GeoTel's current directors' and officers' liability insurance
with respect to all matters occurring on or prior to the completion of
the merger, directors and officers liability insurance on terms
substantially equivalent to the GeoTel directors' and officers' liability
insurance policy in effect on the date of the merger agreement.
INTERESTS OF CERTAIN GEOTEL DIRECTORS, OFFICERS AND AFFILIATES IN THE MERGER
In considering the recommendation of the GeoTel board of directors you
should be aware that certain officers and directors of GeoTel have interests in
the merger which are different from, or in addition to yours. The GeoTel board
of directors was aware of these potential conflicts and considered them.
As of May 7, 1999, options to purchase a total of 5,691,292 shares of
GeoTel common stock, at exercise prices ranging from $0.09 to $55.97 per share
and 90,515 shares of unvested restricted common stock were held by an aggregate
of 313 GeoTel employees, directors and officers. GeoTel's 1993 Restricted Stock
Plan, 1995 Stock Option Plan and the 1998 Non-Executive Employee Stock Option
Plan include acceleration of vesting upon a change in control of GeoTel. Under
the proposed merger with Cisco, all the restricted common stock and certain
options granted under these plans will earn twelve months of vesting
acceleration. Assuming the merger occurs on June 23, 1999, options to purchase
1,459,371 shares of GeoTel common stock, at exercise prices ranging from $0.09
to $54.50 per share, and 70,017 shares of
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<PAGE> 45
restricted common stock will automatically become vested in connection with the
merger. As of May 7, 1999, options to purchase a total of 2,079,004 shares of
GeoTel common stock, at exercise prices ranging from $0.15 to $27.6875 per share
and 26,000 shares of unvested restricted common stock were held by directors and
officers of GeoTel. Assuming the merger occurs on June 23, 1999, options to
purchase 479,002 shares of GeoTel common stock, at exercise prices ranging from
$0.15 to $27.6875 per share, and 22,000 shares of restricted common stock held
by officers and directors will automatically become vested in connection with
the merger.
Upon completion of the merger, the vesting under stock options held by all
of the officers and directors of GeoTel will accelerate as set forth below:
<TABLE>
<CAPTION>
OPTIONS
NAME ACCELERATED
---- -----------
<S> <C>
Gary J. Bowen............................................ 15,000
Alexander V. d'Arbeloff.................................. 5,000
Gardner C. Hendrie....................................... 5,000
W. Michael Humphreys..................................... 5,000
Timothy J. Allen......................................... 22,500
G. Wayne Andrews......................................... 35,000
Jane E. Eisenberg........................................ 75,001
Judith A. Kelly.......................................... 25,000
John D. McMahon.......................................... 112,501
John C. Thibault......................................... 119,000
Louis J. Volpe........................................... 15,000
Steven H. Webber......................................... 45,000
</TABLE>
Restricted stock grants made by GeoTel under GeoTel's 1993 Restricted Stock
Purchase Plan provide for the acceleration of vesting of the restricted stock by
twelve months in the event of a change in control of GeoTel, if the holder has a
minimum of six months service at the time of the change of control.
Approximately 22,000 unvested shares granted to certain officers and directors
of GeoTel will vest upon completion of the merger in accordance with these
provisions. In this event, the vesting under restricted stock held by an officer
and a director of GeoTel will accelerate as set forth below:
<TABLE>
<CAPTION>
RESTRICTED STOCK
NAME ACCELERATED
---- ----------------
<S> <C>
Alexander V. d'Arbeloff............................... 3,333
Timothy J. Allen...................................... 18,667
</TABLE>
Pursuant to the terms of his Executive Change in Control Agreement, GeoTel
is obligated to provide Louis J. Volpe, with the following upon a change in
control of GeoTel and the subsequent termination of his employment within twelve
months following the change in control:
- twelve months of his base salary on the termination date; and
- twelve months of medical benefit plan coverage.
Pursuant to the terms of his Executive Change in Control Agreement, GeoTel
is obligated to provide John J. McCarthy with the following upon a change in
control of GeoTel and the subsequent termination of his employment within twelve
months following the change in control:
- six months of his base salary on the termination date; and
- six months of medical benefits plan coverage.
In addition, a number of GeoTel employees have entered into employment
agreements with Cisco. These employment agreements provide the terms of the
employee's employment with Cisco.
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<PAGE> 46
If Cisco terminates the employment of Messrs Thibault, Webber, Allen,
Andrews, or McMahon or of Ms. Eisenberg or Ms. Kelly "without cause," or if such
individuals otherwise terminate their employment with Cisco for "good cause,"
within eighteen (18) months after the closing date, then Cisco will provide the
following severance benefits: salary continuation and reimbursement of COBRA
premiums for a period of time ranging from six months to one year. .
For purposes of these severance benefits, "without cause" shall mean the
individual's termination for any reason other than: (i) failure to perform the
duties of his or her position after receipt of a written warning and a period of
not less than sixty (60) days in which to cure, (ii) gross misconduct, (iii)
conviction of a felony, (iv) any act of fraud against, or the misappropriation
of property belonging to Cisco, or (v) material breach of the employment
agreement or any confidentiality or proprietary information agreement with
Cisco.
For purposes of this section a resignation for "good cause" shall mean a
resignation within thirty (30) days after; (i) any reduction in base salary
unless such reduction is pursuant to Cisco's compensation policies generally, or
(ii) relocation of the individual's principal place of employment by more than
fifty miles from the individual's current office.
Cisco has entered into employment and non-competition agreements with
certain GeoTel executive officers and employees in positions comparable to such
employee's current position with GeoTel, as the case may be. These agreements
generally provide that if the employment of the employees were terminated by
Cisco without cause or if the employee were to resign with good cause, then
Cisco would continue the employee's base salary for a certain period as a
severance payment. For more information relating to these agreements, please see
the section called "Employment and Non-Competition Agreements" under the caption
"Related Agreements" on page 36 of this proxy statement/prospectus.
The merger agreement provides that Cisco will, from and after the effective
time, and will cause GeoTel to indemnify the present and former officers,
directors and employees and agents of GeoTel in respect of acts or omissions
occurring on or prior to the effective time, in each case to the full extent
such corporation is permitted under Delaware law, the GeoTel restated
certificate of incorporation or the GeoTel amended and restated bylaws or any
indemnification agreement to which GeoTel is a party, in each case as in effect
on the date of the merger agreement.
REGULATORY MATTERS
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 certain 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 and we expect that the applicable waiting periods
will expire at 5:00 p.m. on May 21, 1999. 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. There can be no assurance that a challenge to the merger
will not be made or that, if a challenge is made, we will prevail.
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.
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<PAGE> 47
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material federal income tax
considerations relevant to the exchange of shares of GeoTel common stock for
Cisco common stock pursuant to the merger that are generally applicable to
holders of GeoTel common stock. This discussion is based on currently existing
provisions of the Internal Revenue Code, existing and proposed treasury
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to GeoTel stockholders as
described herein.
GeoTel stockholders should be aware that this discussion does not deal with
all federal income tax considerations that may be relevant to particular GeoTel
stockholders in light of their particular circumstances, such as stockholders
who are dealers in securities, who are subject to the alternative minimum tax
provisions of the Internal Revenue Code, who are foreign persons, who do not
hold their GeoTel common stock as capital assets, or who acquired their shares
in connection with stock option or stock purchase plans or in other compensatory
transactions. In addition, the following discussion does not address the tax
consequences of the merger under foreign, state or local tax laws, the tax
consequences of transactions effectuated prior or subsequent to, or concurrently
with, the merger (whether or not any such transactions are undertaken in
connection with the merger), including without limitation any transaction in
which shares of GeoTel common stock are acquired or shares of Cisco common stock
are disposed of, or the tax consequences of the assumption by Cisco of the
GeoTel Options or the tax consequences of the receipt of rights to acquire Cisco
common stock. Accordingly, GEOTEL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
The merger is intended to constitute a reorganization within the meaning of
the Internal Revenue Code. Provided that the merger does so qualify as a
reorganization, then, subject to the limitations and qualifications referred to
herein, the merger will generally result in the following federal income tax
consequences to the GeoTel stockholders:
(a) No gain or loss will be recognized by holders of GeoTel common
stock solely upon their receipt of Cisco common stock in exchange for
GeoTel common stock in the merger (except to the extent of cash received in
lieu of a fractional share of Cisco common stock).
(b) The aggregate tax basis of the Cisco common stock received by
GeoTel stockholders in the merger (reduced by any tax basis attributable to
fractional shares deemed to be disposed of) will be the same as the
aggregate tax basis of the GeoTel common stock surrendered in exchange
therefor.
(c) The holding period of the Cisco common stock received by each
GeoTel stockholder in the merger will include the period for which the
GeoTel common stock surrendered in exchange therefor was considered to be
held, provided that the GeoTel common stock so surrendered is held as a
capital asset at the time of the merger.
(d) Cash payments received by holders of GeoTel common stock in lieu
of a fractional share will be treated as if such fractional share of Cisco
common stock had been issued in the merger and then redeemed by Cisco. A
GeoTel stockholder receiving such cash will recognize gain or loss, upon
such payment, measured by the difference, if any, between the amount of
cash received and the basis in such fractional share.
The parties are not requesting and will not request a ruling from the
Internal Revenue Service as to the tax consequences of the merger. The
consummation of the merger is conditioned on the receipt by Cisco of an opinion
from Brobeck, Phleger & Harrison LLP and the receipt by GeoTel of an opinion
from Testa, Hurwitz & Thibeault, LLP to the effect that the merger will
constitute a reorganization within the meaning of the Internal Revenue Code.
GeoTel stockholders should be aware that the tax opinions do not bind the
Internal Revenue Service and the Internal Revenue Service is therefore not
precluded from successfully asserting a contrary opinion. The tax opinions will
be subject to certain assumptions and
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<PAGE> 48
qualifications, including but not limited to the truth and accuracy of certain
representations made by Cisco, GeoTel and Geronimo Merger Corp.
A successful Internal Revenue Service challenge to the reorganization
status of the merger would result in GeoTel stockholders recognizing taxable
gain or loss with respect to each share of common stock of GeoTel surrendered
equal to the difference between the stockholder's basis in such share and the
fair market value, as of the Effective Time, of the Cisco common stock received
in exchange therefor. In such event, a stockholder's aggregate basis in the
Cisco common stock so received would equal its fair market value, and the
stockholder's holding period for such stock would begin the day after the
merger.
ACCOUNTING TREATMENT
We intend to account for the merger as a pooling of interests business
combination. It is a condition to completion of the merger that Cisco be advised
by PricewaterhouseCoopers LLP that the transactions contemplated by the merger
agreement can properly be accounted for as a pooling of interests business
combination, although this condition may be waived by Cisco. Under the pooling
of interests method of accounting, each of our 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
our operating results for the entire fiscal year in which the merger is
completed and our historical reported operating results for prior periods will
be combined and restated as the operating results of the combined company.
NO APPRAISAL RIGHTS
You are not entitled to exercise dissenter's or appraisal rights as a
result of the merger or to demand payment for your shares under Delaware law.
RESTRICTIONS ON SALE OF SHARES BY AFFILIATES OF GEOTEL AND CISCO
The shares of Cisco common stock to be issued in connection with the merger
will be registered under the Securities Act of 1933 and will be freely
transferable under the Securities Act, except for shares of Cisco common stock
issued to any person who is deemed to be an affiliate of either of us at the
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
Cisco 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;
and
- another applicable exemption under the Securities Act.
Cisco's registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, does not cover the resale of shares of Cisco
common stock to be received by affiliates in the merger.
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<PAGE> 49
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF CISCO AND GEOTEL
This section of the proxy statement/prospectus describes certain
differences between the rights of holders of GeoTel common stock and Cisco
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 GeoTel and being a shareholder of Cisco.
As a stockholder of GeoTel, your rights are governed by GeoTel's restated
certificate of incorporation, as currently in effect, and GeoTel's amended and
restated bylaws. After completion of the merger, you will become a shareholder
of Cisco. As a Cisco shareholder, your rights will be governed by Cisco's
articles of incorporation and Cisco's bylaws. In addition, Cisco is incorporated
in California while GeoTel is incorporated in Delaware. Although the rights and
privileges of stockholders of a Delaware corporation are in many instances
comparable to those of shareholders of a California corporation, there are also
differences.
VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS
The California law requires that the principal terms of a merger be
approved by the affirmative vote of a majority of the outstanding shares of each
class entitled to vote thereon, except that, unless required by its articles of
incorporation, no authorizing shareholder vote is required of a corporation
surviving a merger if the shareholders of such corporation shall own,
immediately after the merger, more than five-sixths of the voting power of the
surviving corporation. The Cisco articles do not require a greater percentage
vote. The California law further requires the affirmative vote of a majority of
the outstanding shares entitled to vote thereon if (a) the surviving
corporation's articles of incorporation will be amended and would otherwise
require shareholder approval or (b) shareholders of such corporation will
receive shares of the surviving corporation having different rights,
preferences, privileges or restrictions (including shares in a foreign
corporation) than the shares surrendered. Shareholder approval is not required
under the California law for mergers or consolidations in which a parent
corporation merges or consolidates with a subsidiary of which it owns at least
90% of the outstanding shares of each class of stock.
The Delaware law requires the affirmative vote of a majority of the
outstanding stock entitled to vote thereon to authorize any merger or
consolidation of a corporation, except that, unless required by its certificate
of incorporation, no authorizing stockholder vote is required of a corporation
surviving a merger if (a) such corporation's certificate of incorporation is not
amended in any respect by the merger; (b) each share of stock of such
corporation outstanding immediately prior to the effective date of the merger
will be an identical outstanding or treasury share of the surviving corporation
after the effective date of the merger; and (c) the number of shares to be
issued in the merger does not exceed 20% of such corporation's outstanding
common stock immediately prior to the effective date of the merger. The GeoTel
certificate does not require a greater percentage vote for such actions.
Shareholder approval is also not required under the Delaware law for mergers or
consolidations in which a parent corporation merges or consolidates with a
subsidiary of which it owns at least 90% of the outstanding shares of each class
of stock.
DIRECTOR NOMINATIONS
The GeoTel bylaws require advance notice of director nominations. Such
notice must contain all information regarding each nominee which would be
required to be set forth in a definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Section 14 of the Exchange Act
and must be delivered by written notice to the Secretary of GeoTel. In the case
of an election to be held at an annual meeting of stockholders or a special
meeting in lieu of the annual meeting, such notice shall be given 60 days prior
to the date of the annual meeting set forth in the bylaws or the date of such
special meeting. In the case of a special meeting of stockholders not in lieu of
an annual meeting, such notice
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<PAGE> 50
shall be given by the tenth business day following the date notice of such
meeting was given to stockholders. The Cisco bylaws require advance notice of
director nominations.
AMENDMENT TO GOVERNING DOCUMENTS
Unless otherwise specified in a California corporation's articles of
incorporation, an amendment to the articles of incorporation requires the
approval of the corporation's board of directors and the affirmative vote of a
majority of the outstanding shares entitled to vote thereon, either before or
after the board approval, although certain minor amendments may be adopted by
the board alone such as amendments causing stock splits (including an increase
in the authorized number of shares in proportion thereto) and amendments
changing names and addresses given in the articles. The Cisco articles do not
require a greater level of approval for an amendment thereto. Under the
California law, the holders of the outstanding shares of a class are entitled to
vote as a class if a proposed amendment to the articles of incorporation would
(i) increase or decrease the aggregate number of authorized shares of such
class; (ii) effect an exchange, reclassification or cancellation of all or part
of the shares of such class, other than a stock split; (iii) effect an exchange,
or create a right of exchange, of all or part of the shares of another class
into the shares of such class; (iv) change the rights, preferences, privileges
or restrictions of the shares of such class; (v) create a new class of shares
having rights, preferences or privileges prior to the shares of such class, or
increase the rights, preferences or privileges or the number of authorized
shares having rights, preference or privileges prior to the shares of such
class; (vi) in the case of preferred shares, divide the shares of any class into
series having different rights, preferences, privileges or restrictions or
authorize the board of directors to do so; or (vii) cancel or otherwise affect
dividends on the shares of such class which have accrued but have not been paid.
Under the California law, a corporation's bylaws may be adopted, amended or
repealed either by the board of directors or the shareholders of the
corporation. The Cisco bylaws provide that the Cisco bylaws may be adopted,
amended or repealed either by the vote of the holders of a majority of the
outstanding shares entitled to vote or by the board of directors; provided,
however, that the Cisco board of directors may not amend the Cisco bylaws in
order to change the authorized number of directors (except to alter the
authorized number of directors within the existing range of a minimum of seven
and a maximum of thirteen directors).
The Delaware law requires a vote of the corporation's board of directors
followed by the affirmative vote of a majority of the outstanding stock of each
class entitled to vote for any amendment to the certificate of incorporation,
unless a greater level of approval is required by the certificate of
incorporation. Further, the Delaware law states that if an amendment would
increase or decrease the aggregate number of authorized shares of such class,
increase or decrease the par value of shares of such class or alter or change
the powers, preferences or special rights of a particular class or series of
stock so as to affect them adversely, the class or series shall be given the
power to vote as a class notwithstanding the absence of any specifically
enumerated power in the certificate of incorporation. The Delaware law also
states that the power to adopt, amend or repeal the bylaws of a corporation
shall be in the stockholders entitled to vote, provided that the corporation in
its certificate of incorporation may confer such power on the board of directors
in addition to the stockholders. The GeoTel certificate expressly authorizes the
board of directors to adopt, amend or repeal the GeoTel bylaws.
APPRAISAL RIGHTS
Under the Delaware law, holders of shares of any class or series, who
neither vote in favor of the merger or consolidation nor consent thereto in
writing, have the right, in certain circumstances, to dissent from a merger or
consolidation by demanding payment in cash for their shares equal to the fair
value (excluding any appreciation or depreciation as a consequence or in
expectation of the transaction) of such shares, as determined by agreement with
the corporation or by an independent appraiser appointed by a court in an action
timely brought by the corporation or the dissenters. The Delaware law grants
dissenters' appraisal rights only in the case of mergers or consolidations and
not in the case of a sale or transfer of assets or a purchase of assets for
stock regardless of the number of shares being issued. Further, no appraisal
rights are available for shares of any class or series listed on a national
securities exchange or
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designated as a national market system security on the Nasdaq National Market or
held of record by more than 2,000 stockholders, unless the agreement of merger
or consolidation converts such shares into anything other than (a) stock of the
surviving corporation; (b) stock of another corporation which is either listed
on a national securities exchange or designated as a national market system
security on the Nasdaq National Market or held of record by more than 2,000
stockholders; (c) cash in lieu of fractional shares; or (d) some combination of
the above. In addition, dissenters' rights are not available for any shares of
the surviving corporation if the merger did not require the vote of the
stockholders of the surviving corporation. See "The Merger and Related
Transactions -- No Appraisal Rights."
Under the California law, if the approval of the outstanding shares of the
corporation is required for a merger or reorganization, each shareholder
entitled to vote on the transaction, and who did not vote in favor of the
reorganization may require the corporation to purchase for cash at their fair
market value the shares owned by such shareholder. No appraisal rights are
available for shares listed on any national securities exchange certified by the
Commissioner of Corporations or listed on the list of OTC margin stocks issued
by the Board of Governors of the Federal Reserve Systems, unless (a) there
exists with respect to such shares any restriction on transfer imposed by the
corporation or by any law or regulation or (b) if demands for payment are filed
with respect to 5% or more of the outstanding shares of that class.
DERIVATIVE ACTION
The California law provides that a shareholder bringing a derivative action
on behalf of the corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met concerning the
fairness of allowing the action to go forward. The shareholder must make his or
her demands on the board before filing suit. The California law also provides
that the corporation or the defendant in a derivative suit may make a motion to
the court for an order requiring the plaintiff shareholder to furnish a security
bond.
Derivative actions may be brought in Delaware by a stockholder on behalf
of, and for the benefit of, the corporation. The Delaware law provides that a
stockholder must aver in the complaint that he or she was a stockholder of the
corporation at the time of the transaction of which he or she complains. A
stockholder may not sue derivatively unless he first makes demand on the
corporation that it bring suit and such demand has been refused, unless it is
shown that such demand would have been futile.
STOCKHOLDER CONSENT IN LIEU OF MEETING
Under the Delaware law and the California law, unless otherwise provided in
the certificate or articles of incorporation, any action required to be taken or
which may be taken at an annual or special meeting of stockholders may be taken
without a meeting if a consent in writing is signed by the holders of
outstanding stock having at least the minimum number of votes required to
authorize such action. If consent is sought for less than all shareholders
entitled to vote, notice as required under the California law shall be given.
The Cisco articles provide that directors may not be elected by written consent
except by unanimous written consent of all shares entitled to vote for the
election of directors. The GeoTel certificate permits stockholder action without
a meeting only by unanimous written consent of all GeoTel stockholders entitled
to vote on the matter.
FIDUCIARY DUTIES OF DIRECTORS
Directors of corporations incorporated or organized under the Delaware law
and the California law have fiduciary obligations to the corporation and its
shareholders. Pursuant to these fiduciary obligations, the directors must act in
accordance with the so-called duties of "due care" and "loyalty." Under the
Delaware law, the duty of care requires that the directors act in an informed
and deliberative manner and to inform themselves, prior to making a business
decision, of all material information reasonably available to them. The duty of
loyalty may be summarized as the duty to act in good faith, not out of
self-interest and in a manner that the directors reasonably believe to be in the
best interests of the corporation. Under the California law, the duty of loyalty
requires directors to perform their duties in good faith in a manner
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that the directors reasonably believe to be in the best interests of the
corporation and its stockholders. The duty of care requires that the directors
act with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would exercise under similar circumstances.
STOCKHOLDER PROPOSALS
The GeoTel bylaws provide that GeoTel stockholders may bring proposals at
an annual or special meeting if they provide GeoTel with written notice that
complies with the time and content requirements of the GeoTel bylaws and other
regulatory requirements. The Cisco bylaws provide that shareholders may propose
business to be brought before a meeting of shareholders only if they provide
notice to Cisco no later than 60 days prior to such meeting.
INDEMNIFICATION
The Delaware law generally permits a corporation to indemnify its directors
and officers against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with a third-party action, other
than a derivative action, and against expenses actually and reasonably incurred
in the defense or settlement of a derivative action, provided that there is a
determination that the individual acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation. Such
determination shall be made, in the case of an individual who is a director or
officer at the time of such determination:
- by a majority of the disinterested directors, even though less than a
quorum;
- by a committee of such directors designated by a majority vote of such
directors, even though less than a quorum;
- by independent legal counsel, regardless of whether a quorum of
disinterested directors exists; or
- by a majority vote of the stockholders, at a meeting at which a quorum is
present.
Without court approval, however, no indemnification may be made in respect
of any derivative action in which such individual is adjudged liable to the
corporation.
The Delaware law requires indemnification of directors and officers for
expenses relating to a successful defense on the merits or otherwise of a
derivative or third-party action.
The Delaware law permits a corporation to advance expenses relating to the
defense of any proceeding to directors and officers contingent upon such
individuals' commitment to repay any advances unless it is determined ultimately
that such individuals are entitled to be indemnified.
Under the Delaware law, the rights to indemnification and advancement of
expenses provided in the law are non-exclusive, in that, subject to public
policy issues, indemnification and advancement of expenses beyond that provided
by statute may be provided by by-law, agreement, vote of stockholders,
disinterested directors or otherwise.
The GeoTel certificate and bylaws provide that the corporation may
indemnify its present and former directors, officers, employees and agents
against all reasonable expenses (including attorneys' fees), fines and amounts
paid in settlement in actions brought against them, if such individual acted in
accordance with the requirements set forth in GeoTel bylaws and certificates.
Under the California law, (i) a corporation has the power to indemnify
present and former directors, officers, employees and agents against expenses,
judgments, fines, settlements and other amounts (other than in connection with
actions by or in the right of the corporation) if that person acted in good
faith and in a manner the person reasonably believed to be in the best interests
of the corporation and, in the case of a criminal proceeding, had no reasonable
cause to believe the conduct of the person was unlawful, and (ii) a corporation
has the power to indemnify, with certain exceptions, any person who is a party
to any action by or in the right of the corporation, against expenses actually
and reasonably incurred by that
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person in connection with the defense or settlement of the action if the person
acted in good faith and in a manner the person believed to be in the best
interests of the corporation and its shareholders.
The indemnification authorized by the California law is not exclusive, and
a corporation may grant its directors, officers, employees or other agents
certain additional rights to indemnification. The Cisco articles and the Cisco
bylaws provide for the indemnification of its agents (as defined under the
California law) to the fullest extent permissible under the California law,
which may be in excess of the indemnification expressly permitted by Section 317
of the California law, subject to the limits set forth in Section 204 of the
California law with respect to actions for breach of duty to the corporation and
its shareholders.
The Delaware law and the California law allow for the advance payment of an
Indemnitee's expenses prior to the final disposition of an action, provided that
the Indemnitee undertakes to repay any such amount advanced if it is later
determined that the Indemnitee is not entitled to indemnification with regard to
the action for which the expenses were advanced.
DIRECTOR LIABILITY
The Delaware law and the California law each provide that the charter
documents of the corporation may include provisions which limit or eliminate the
liability of directors to the corporation or its stockholders, provided such
liability does not arise from certain proscribed conduct, including, in the case
of the Delaware law, for any breach of the director's duty of loyalty to the
corporation or its stockholders acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, the payment of
unlawful dividends or expenditure of funds for unlawful stock purchases or
redemptions or transactions from which such director derived an improper
personal benefit, or, in the case of the California law, intentional misconduct
or knowing and culpable violation of law, acts or omissions that a director
believes to be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the part of the
director, the receipt of an improper personal benefit, acts or omissions that
show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders, acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders, interested transactions between the
corporation and a director in which a director has a material financial interest
and liability for improper distributions, loans or guarantees. The GeoTel
certificate contains a provision limiting the liability of its directors under
certain circumstances as specified in the certificate. The Cisco articles
contain a provision limiting the liability of its directors to the fullest
extent provided by the California law.
ANTI-TAKEOVER PROVISIONS AND INTERESTED STOCKHOLDER TRANSACTIONS
The GeoTel bylaws provide that a special meeting of the stockholders may be
called by the chairman of the board, the board of directors or the President.
The Cisco bylaws provide that in addition to the board of directors, the
chairman of the board and the president, one or more shareholders holding not
less than 10% of the voting power of the corporation may call a special meeting
of the shareholders.
The Delaware law prohibits, in certain circumstances, a "business
combination" between the corporation and an "interested stockholder" within
three years of the stockholder becoming an "interested stockholder." An
"interested stockholder" is a holder who, directly or indirectly, controls 15%
or more of the outstanding voting stock or is an affiliate of the corporation
and was the owner of 15% or more of the outstanding voting stock at any time
within the prior three year period. A "business combination" includes a merger
or consolidation, a sale or other disposition of assets having an aggregate
market value equal to 10% or more of the consolidated assets of the corporation
or the aggregate market value of the outstanding stock of the corporation and
certain transactions that would increase the interested stockholder's
proportionate share ownership in the corporation. This provision does not apply
where: (i) either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder is approved by the
corporation's board of directors prior to the date the interested stockholder
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acquired such 15% interest; (ii) upon the consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding voting stock of the
corporation excluding for the purposes of determining the number of shares
outstanding shares held by persons who are directors and also officers and by
employee stock plans in which participants do not have the right to determine
confidentiality whether shares held subject to the plan will be tendered; (iii)
the business combination is approved by a majority of the board of directors and
the affirmative vote of two-thirds of the outstanding votes entitled to be cast
by disinterested stockholders at an annual or special meeting; (iv) the
corporation does not have a class of voting stock that is listed on a national
securities exchange, authorized for quotation on an inter-dealer quotation
system of a registered national securities association, or held of record by
more than 2,000 stockholders unless any of the foregoing results from action
taken, directly or indirectly, by an interested stockholder or from a
transaction in which a person becomes an interested stockholder; (v) the
stockholder acquires a 15% interest inadvertently and divests itself of such
ownership and would not have been a 15% stockholder in the preceding 3 years but
for the inadvertent acquisition of ownership; (vi) the stockholder acquired the
15% interest when these restrictions did not apply; or (vii) the corporation has
opted out of this provision. GeoTel has not opted out of this provision.
Under the California law, there is no comparable provision. However, the
California law does provide that, except where the fairness of the terms and
conditions of the transaction has been approved by the California Commissioner
of Corporations and except in a "short-form" merger (the merger of a parent
corporation with a subsidiary in which the parent owns at least 90% of the
outstanding shares of each class of the subsidiary's stock), if the surviving
corporation or its parent corporation owns, directly or indirectly, shares of
the target corporation representing more than 50% of the voting power of the
target corporation prior to the merger, the nonredeemable common stock of a
target corporation may be converted only into nonredeemable common stock of the
surviving corporation or its parent corporation, unless all of the shareholders
of the class consent. The effect of this provision is to prohibit a cash-out
merger of minority shareholders, except where the majority shareholders already
own 90% or more of the voting power of the target corporation and could,
therefore, effect a short-form merger to accomplish such a cash-out of minority
shareholders.
CUMULATIVE VOTING
The GeoTel certificate states that there shall be no cumulative voting. The
Cisco articles provide for the elimination of cumulative voting in elections of
directors. Therefore, under California law, cumulative voting rights are not
available to Cisco shareholders.
ADVANCE NOTICE OF RECORD DATE
The Delaware law requires that stockholders be provided prior written
notice no more than 60 days nor less than 10 days prior to the record date for
determining the rights to vote at the meeting of stockholders. The Delaware law
further states that stockholders be provided prior written notice no more than
60 days prior to the record date to determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action.
The California law requires that shareholders be provided prior written
notice no more than 60 days nor less than 10 days prior to the record date for
determining the shareholders entitled to notice of any meeting or to vote or
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action.
INSPECTION OF BOOKS AND RECORDS
Delaware and California law allow any stockholder to inspect the accounting
books and records and minutes of proceedings of the shareholders and the board
and to inspect the stockholders' list at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests as a
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shareholder. Additionally, the California law provides for an absolute right to
inspect and copy the corporation's shareholders list by a shareholder or
shareholders holding at least 5% in the aggregate of the of the corporation's
outstanding voting shares, or any shareholder or shareholders holding 1% or more
of such shares who have filed a Schedule 14A with the Commission.
SIZE OF THE BOARD OF DIRECTORS
The Delaware law states that the board of directors shall consist of one or
more members with the number of directors to be fixed as provided in the bylaws
of the corporation, unless the certificate of incorporation fixes the number of
directors, in which case a change in the number of directors shall be made only
by amendment of the certificate. The GeoTel bylaws provide that the number of
directors which shall constitute the board of directors shall be determined by
resolution of the board of directors, but in no event shall be less than one.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of death, resignation, removal or expiration of the term of a
director.
Under the California law, as provided in the articles or bylaws, the number
of directors may be specific or may be not less than a stated minimum nor more
than a stated maximum, with the exact number to be fixed by the board or the
shareholders. The minimum number cannot be less than three. A bylaw changing or
fixing a number of directors may only be adopted by approval of a majority of
the outstanding shares. The Cisco bylaws provide that the authorized number of
directors of the corporation shall be not less than seven nor more than
thirteen, the exact number of directors to be fixed from time to time within
such range by duly adopted resolutions of the board of directors or
shareholders.
REMOVAL OF DIRECTORS
The Delaware law states that any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
The California law provides that the board of directors may declare vacant
the office of a director who has been declared of unsound mind by an order of
court or convicted of a felony. Further, any director or the entire board of
directors may be removed, with or without cause, with the approval of a majority
of the outstanding shares entitled to vote thereon; however, no director may be
removed (unless the entire board is removed) if the number of shares voted
against the removal would be sufficient to elect the director under cumulative
voting. Shareholders holding at least 10% of the outstanding shares in any class
may sue in superior county court to remove from office any officer or director
for fraud, dishonest acts or gross abuse of authority or discretion.
TRANSACTIONS INVOLVING DIRECTORS
Both the Delaware law and the California law state that any contract or
transaction between a corporation and any of its directors, or a second
corporation in which a director has a material financial interest is not void or
voidable if the material facts as to the transaction and as to the director's
interest are fully disclosed and a majority of the disinterested shareholders
represented and voting at a duly held meeting approve or ratify the transaction
in good faith. The California law provides that such a contract or transaction
also is not void or voidable if either (a) after full disclosure the transaction
is approved by the board or a committee (excluding the vote of interested
directors) in good faith and the transaction is just and reasonable to the
corporation, or (b) the person asserting the validity of the contract or
transaction sustains the burden of proving that the contract or transaction was
just and reasonable as to the corporation at the time it was authorized,
approved or ratified. The Delaware law is similar except that, with respect to
clause (a), there is no need for the transaction to be shown to be just and
reasonable and, with respect to clause (b), the transaction must be shown to be
fair instead of just and reasonable.
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FILLING VACANCIES ON THE BOARD OF DIRECTORS
The Delaware law provides that, unless otherwise provided in the
certificate of incorporation or bylaws, vacancies may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. Further, if, at the time of filling any vacancy, the
directors then in office shall constitute less than a majority of the whole
board, the Court of Chancery may, upon application of any stockholder or
stockholders holding at least 10% of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order any
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Under the California law, any vacancy on the board of directors other than
one created by removal of a director may be filled by the board of directors,
unless otherwise provided in the articles or bylaws. If the number of directors
is less than a quorum, a vacancy may be filled by the unanimous written consent
of the directors then in office, by the affirmative vote of a majority of the
directors at a meeting held pursuant to notice or waivers of notice or by a sole
remaining director. A vacancy created by removal of a director can only be
filled by the shareholders unless board approval is authorized by a
corporation's articles of incorporation or by a bylaw approved by the
corporation's shareholders. The Cisco bylaws authorize the Board to fill a
vacancy created by the removal of a director.
The foregoing discussion of certain similarities and material differences
between the rights of Cisco shareholders and the rights of GeoTel stockholders
under the respective articles/certificate of incorporation and bylaws is only a
summary of certain provisions and does not purport to be a complete description
of such similarities and differences, and is qualified in its entirety by
reference to the California law and the Delaware law, the common law thereunder
and the full text of the articles/certificate of incorporation and bylaws of
each of Cisco and GeoTel.
EXPERTS
The consolidated balance sheets of Cisco Systems, Inc. as of July 25, 1998
and July 26, 1997 and the consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended July 25,
1998, incorporated by reference in this proxy statement/prospectus, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheets of GeoTel Communications Corporation as of
December 31, 1998 and 1997 and the consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998, incorporated by reference in this proxy statement/
prospectus, have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Cisco common stock offered by this proxy
statement/prospectus and the federal income tax consequences in connection with
the Merger will be passed upon for Cisco by Brobeck, Phleger & Harrison LLP,
Palo Alto, California. Certain legal matters with respect to federal income tax
consequences in connection with the merger will be passed upon for GeoTel by
Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
WHERE YOU CAN FIND MORE INFORMATION
GeoTel and Cisco file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information we file at
the Securities and Exchange Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Securities and
Exchange Commission at
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1-800-SEC-0330 for further information on the public reference rooms. Our
Securities and Exchange Commission filings are also available to the public from
commercial document retrieval services and at the Internet Website maintained by
the Securities and Exchange Commission at http://www.sec.gov.
Cisco filed the Registration Statement on Form S-4 to register with the
Securities and Exchange Commission Cisco common stock to be issued to GeoTel
stockholders in the merger. This proxy statement/prospectus is a part of that
registration statement and constitutes the prospectus of Cisco as well as being
a proxy statement of GeoTel for the GeoTel special meeting.
Cisco has supplied all the information contained in this proxy
statement/prospectus relating to Cisco and GeoTel has supplied all such
information relating to GeoTel. As allowed by Securities and Exchange Commission
rules, this proxy statement/prospectus does not contain all of the information
relating to Cisco and GeoTel you can find in the registration statement or the
exhibits to the registration statement.
Some of the important business and financial information relating to Cisco
and GeoTel that you may want to consider in deciding how to vote is not included
in this proxy statement/prospectus, but rather is "incorporated by reference" to
documents that have been previously filed by Cisco and GeoTel with the
Securities and Exchange Commission. The information incorporated by reference is
deemed to be a part of this proxy statement/prospectus, except for any
information superseded by information contained directly in this proxy
statement/prospectus.
If you are a stockholder, you can obtain any of the documents incorporated
by reference through Cisco, GeoTel or the Securities and Exchange Commission.
Documents incorporated by reference are available from Cisco or GeoTel without
charge, excluding all exhibits. You may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them orally or in
writing to the following addresses or by telephone:
<TABLE>
<S> <C>
Cisco Systems, Inc. GeoTel Communications Corporation
Investor Relations Office Investor Relations
170 West Tasman Drive 900 Chelmsford Street, Tower II,
Floor 12
San Jose, CA 95134 Lowell, MA 01851
(408) 526-4000 (978) 275-5115
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED MAY 17, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE
PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE
ISSUANCE OF CISCO COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Cisco with the Securities and Exchange
Commission are incorporated by reference in this proxy statement/prospectus:
1. Cisco's Annual Report on Form 10-K for the fiscal year ended July
25, 1998, including certain information in Cisco's Definitive Proxy
Statement in connection with Cisco's 1998 Annual Meeting of Shareholders
and certain information in Cisco's Annual Report to Shareholders for the
fiscal year ended July 25, 1998.
2. Cisco's Quarterly Report on Form 10-Q for the quarterly period
ended October 24, 1998.
3. Cisco's Quarterly Report on Form 10-Q for the quarterly period
ended January 23, 1999, as amended by Form 10-Q/A filed May 14, 1999.
4. Cisco's Current Report on Form 8-K filed May 14, 1999.
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5. The description of Cisco's capital stock contained in Cisco's
Registration Statement on Form 8-A dated January 8, 1990, including any
amendment or report filed for the purpose of updating such description.
The following documents filed by GeoTel with the Securities and Exchange
Commission are incorporated by reference in this proxy statement/prospectus:
1. GeoTel's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (as amended by the Form 10-K/A dated April 12, 1999),
including certain information in GeoTel's Definitive Proxy Statement dated
April 9, 1999, in connection with GeoTel's 1998 Annual Meeting of
Stockholders.
2. GeoTel's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1999 filed on May 11, 1999.
3. GeoTel's Current Report on Form 8-K filed April 22, 1999.
4. The description of GeoTel's capital stock contained in GeoTel's
Registration Statement on Form 8-A dated October 9, 1996, including any
amendment or report filed for the purpose of updating such description.
All reports and definitive proxy or information statements filed by Cisco
and GeoTel pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this proxy statement/ prospectus and prior to the date
of the special meeting shall be deemed to be incorporated by reference into this
proxy statement/prospectus from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for purposes of this proxy
statement/prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this proxy statement/prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THERE WILL BE PROVIDED WITHOUT
CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL HOLDER OF GEOTEL COMMON STOCK,
TO WHOM A PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST
OF ANY SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE
HEREIN (EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN). WITH RESPECT TO CISCO'S DOCUMENTS, REQUESTS SHOULD BE
DIRECTED TO CISCO SYSTEMS, INC., INVESTOR RELATIONS OFFICE, 170 WEST TASMAN
DRIVE, SAN JOSE, CALIFORNIA 95134 (TELEPHONE (408) 526-4000). WITH RESPECT TO
GEOTEL'S DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO GEOTEL COMMUNICATIONS
CORPORATION, INVESTOR RELATIONS, 900 CHELMSFORD STREET, TOWER II, FLOOR 12,
LOWELL, MASSACHUSETTS 01851 (TELEPHONE (978) 275-5115). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE SPECIAL MEETING TO WHICH THIS
PROXY STATEMENT/PROSPECTUS RELATES, ANY SUCH REQUEST SHOULD BE MADE AT LEAST
FIVE BUSINESS DAYS PRIOR TO THE DATE OF THE SPECIAL MEETING.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
CISCO SYSTEMS, INC.,
GERONIMO MERGER CORP.
AND
GEOTEL COMMUNICATIONS CORPORATION
DATED AS OF APRIL 12, 1999
<PAGE> 60
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER........................................ A-1
1.1 The Merger........................................... A-1
1.2 Closing; Effective Time.............................. A-1
1.3 Effect of the Merger................................. A-2
1.4 Certificate of Incorporation; Bylaws................. A-2
1.5 Directors and Officers............................... A-2
1.6 Effect on Capital Stock.............................. A-2
1.7 Surrender of Certificates............................ A-3
1.8 No Further Ownership Rights in Company Common
Stock.................................................. A-4
1.9 Lost, Stolen or Destroyed Certificates............... A-4
1.10 Tax and Accounting Consequences...................... A-4
1.11 Withholding Rights................................... A-4
1.12 Taking of Necessary Action; Further Action........... A-4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY........ A-5
2.1 Organization, Standing and Power..................... A-5
2.2 Capital Structure.................................... A-6
2.3 Authority............................................ A-6
2.4 SEC Documents; Financial Statements.................. A-7
2.5 Absence of Certain Changes........................... A-7
2.6 Absence of Undisclosed Liabilities................... A-8
2.7 Litigation........................................... A-8
2.8 Restrictions on Business Activities.................. A-8
2.9 Governmental Authorization........................... A-8
2.10 Title to Property.................................... A-8
2.11 Intellectual Property................................ A-9
2.12 Environmental Matters................................ A-10
2.13 Taxes................................................ A-11
2.14 Employee Benefit Plans............................... A-12
2.15 Certain Agreements Affected by the Merger............ A-13
2.16 Employee Matters..................................... A-13
2.17 Interested Party Transactions........................ A-14
2.18 Insurance............................................ A-14
2.19 Compliance With Laws................................. A-14
2.20 Brokers' and Finders' Fees........................... A-14
2.21 Registration Statement; Proxy Statement/Prospectus... A-15
2.22 Opinion of Financial Advisor......................... A-15
2.23 Vote Required........................................ A-15
2.24 Board Approval....................................... A-15
2.25 State Takeover Statutes.............................. A-15
2.26 Export Control Laws.................................. A-15
2.27 Year 2000............................................ A-15
2.28 Accounting and Tax Matters........................... A-16
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB................................................ A-16
3.1 Organization, Standing and Power..................... A-16
3.2 Capital Structure.................................... A-16
3.3 Authority............................................ A-16
3.4 SEC Documents; Financial Statements.................. A-17
3.5 Absence of Undisclosed Liabilities................... A-17
3.6 Litigation........................................... A-17
3.7 Broker's and Finders' Fees........................... A-18
3.8 Registration Statement; Proxy Statement/Prospectus... A-18
3.9 No Shareholder Vote Required......................... A-18
3.10 Board Approval....................................... A-18
3.11 Accounting and Tax Matters........................... A-18
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.............. A-18
4.1 Conduct of Business of Company....................... A-18
4.2 Restrictions on Conduct of Business of Company....... A-19
4.3 No Solicitation...................................... A-21
ARTICLE V ADDITIONAL AGREEMENTS............................. A-22
5.1 Proxy Statement/Prospectus; Registration Statement... A-22
5.2 Meeting of Stockholders.............................. A-22
5.3 Access to Information................................ A-22
5.4 Confidentiality...................................... A-23
5.5 Public Disclosure.................................... A-23
5.6 Consents; Cooperation................................ A-23
5.7 Affiliates........................................... A-24
5.8 Legal Requirements................................... A-24
5.9 Blue Sky Laws........................................ A-24
5.10 Employee Benefit Plans............................... A-24
5.11 Form S-8............................................. A-26
5.12 Option Agreement..................................... A-26
5.13 Listing of Additional Shares......................... A-26
5.14 Nasdaq Quotation..................................... A-26
5.15 Employees............................................ A-26
5.16 Indemnification...................................... A-26
5.17 Pooling Accounting................................... A-28
5.18 Tax Treatment........................................ A-28
5.19 Stockholder Litigation............................... A-28
5.20 Commercially Reasonable Efforts and Further
Assurances............................................. A-28
ARTICLE VI CONDITIONS TO THE MERGER......................... A-28
6.1 Conditions to Obligations of Each Party to Effect the
Merger................................................. A-28
6.2 Additional Conditions to Obligations of Company...... A-29
6.3 Additional Conditions to the Obligations of Parent
and Merger Sub......................................... A-29
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............... A-30
7.1 Termination.......................................... A-30
7.2 Effect of Termination................................ A-31
7.3 Expenses and Termination Fees........................ A-31
7.4 Amendment............................................ A-33
7.5 Extension; Waiver.................................... A-33
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE VIII GENERAL PROVISIONS............................. A-34
8.1 Non-Survival at Effective Time....................... A-34
8.2 Notices.............................................. A-34
8.3 Interpretation....................................... A-34
8.4 Counterparts......................................... A-35
8.5 Entire Agreement; Nonassignability; Parties in
Interest............................................... A-35
8.6 Severability......................................... A-35
8.7 Remedies Cumulative.................................. A-35
8.8 Governing Law........................................ A-35
8.9 Rules of Construction................................ A-35
</TABLE>
EXHIBITS
Exhibit A -- Form of Option Agreement
Exhibit B -- Form of Stockholder Agreement
Exhibit C -- Form of Certificate of Merger
Exhibit D-1 -- Form of Company Affiliate Agreement
Exhibit D-2 -- Form of Parent Affiliate Agreement
Exhibit E-1 -- Form of Employment and Non-Competition Agreement
Exhibit E-2 -- Form of Employment and Non-Competition Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement") is
made and entered into as of April 12, 1999, by and among Cisco Systems, Inc., a
California corporation ("Parent"), Geronimo Merger Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Parent, and GeoTel
Communications Corporation, a Delaware corporation ("Company").
RECITALS
A. The Boards of Directors of Company, Parent and Merger Sub believe it is
in the best interests of their respective companies and the stockholders of
their respective companies that Merger Sub merge with and into Company (the
"Merger") and, in furtherance thereof, have unanimously approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Company Common Stock, $0.01 par value ("Company Common Stock"), shall be
converted into shares of Parent Common Stock, $0.001 par value ("Parent Common
Stock"), at the rate set forth herein.
C. Company, Parent and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code and as a pooling of interests for financial accounting purposes.
E. Concurrently with the execution of this Agreement and as an inducement
to Parent and Merger Sub to enter into this Agreement, (a) Company and Parent
have entered into a stock option agreement dated the date hereof in the form
attached hereto as Exhibit A (the "Option Agreement") providing for the purchase
by Parent of newly-issued shares of Company's Common Stock, and (b) certain
stockholders of the Company have on the date hereof entered into a stockholder
agreement in the form attached hereto as Exhibit B (the "Stockholder Agreement")
to, among other things, vote the shares of Company Common Stock owned by such
persons to approve the Merger.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger attached hereto as Exhibit C (the "Certificate of Merger") and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into Company, 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."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions contemplated
hereby (the "Closing") shall take place as soon as practicable (in any event not
later than two business days) after the satisfaction or waiver of each of the
conditions set forth in Article VI hereof or at such other time as the parties
hereto agree (the "Closing Date"). The Closing shall take place at the offices
of Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, California 94303, or at such other location as the parties hereto agree.
In connection with the Closing, the parties hereto shall cause the Merger to be
consummated by filing the Certificate of Merger with the Secretary of State of
the State of Delaware, in accordance with the relevant provisions of Delaware
Law (the time of such filing, or such later time as may be agreed to by the
parties and set forth in the Certificate of Merger, being the "Effective Time").
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1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger 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.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation; provided,
however, that immediately after the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall be amended so as to read
in its entirety like the Certificate of Incorporation of Merger Sub with
Article I of the Certificate of Incorporation amended to read as follows:
"The name of the corporation is GeoTel Communications Corporation."
(b) The Bylaws of Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation; provided,
however, that immediately after the Effective Time the Bylaws of the
Surviving Corporation shall be amended so as to read like the Bylaws of
Merger Sub.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of the
Surviving Corporation shall be the directors of Merger Sub. The officers of the
Surviving Corporation shall be the initial officers of Merger Sub, until their
respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. At the Effective Time, each
share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(b)) will be canceled and extinguished and
be converted automatically into the right to receive 0.5138 shares of
Parent Common Stock (the "Exchange Ratio"). All references in this
Agreement to Parent Common Stock to be issued pursuant to the Merger shall
be deemed to include the corresponding rights ("Parent Rights") to purchase
shares of Parent Series A Junior Participating Preferred Stock, no par
value, pursuant to the Parent Rights Agreement dated as of June 10, 1998
between Parent and Bank Boston, N.A., except where the context otherwise
requires.
(b) Cancellation of Company Common Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Common Stock that are
owned by Company as treasury stock and each share of Company Common Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent
or of Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Company Stock Option Plans. At the Effective Time, the Company
1995 Stock Option Plan, as amended, the Company 1993 Restricted Stock
Purchase Plan and the Company Second Amended and Restated 1998
Non-Executive Employee Stock Option Plan (collectively, the "Company Stock
Option Plans") and all options to purchase Company Common Stock then
outstanding under the Company Stock Option Plans shall be assumed by Parent
in accordance with Section 5.10.
(d) Capital Stock of Merger Sub. At the Effective Time, each share of
Common Stock, $0.01 par value, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, $0.01 par value, of the Surviving
Corporation, and the Surviving Corporation shall be a wholly-owned
subsidiary of Parent. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation.
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(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted in the event of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock
or Company Common Stock occurring after the date hereof and prior to the
Effective Time and of any increase in the number of shares of Company
Common Stock on a fully diluted, as converted basis relative to such number
as derived from Section 2.2 hereof, so as to provide holders of Company
Common Stock and Parent the same economic effect as contemplated by this
Agreement prior to such stock split, reverse split, stock dividend,
reorganization, recapitalization, like change or increase.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the closing price for a share of Parent
Company Stock on the Nasdaq National Market on the last full trading day
prior to the Effective Time.
1.7 SURRENDER OF CERTIFICATES.
(a) Exchange Agent. Parent's transfer agent shall act as exchange
agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly after the
Effective Time, Parent shall deliver to the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as
Parent may adopt, (i) the shares of Parent Common Stock issuable pursuant
to Section 1.6(a) in exchange for shares of Company Common Stock
outstanding immediately prior to the Effective Time and (ii) cash in an
amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 1.6(f).
(c) Exchange Procedures. Promptly and in any event not later than 15
business days after the Effective Time, the Surviving Corporation shall
cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock, whose shares
were converted into the right to receive shares of Parent Common Stock (and
cash in lieu of fractional shares) pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock (and cash in lieu
of fractional shares). Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock
and payment in lieu of fractional shares which such holder has the right to
receive pursuant to Section 1.6, and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Common
Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the ownership of
the number of full shares of Parent Common Stock into which such shares of
Company Common Stock shall have been so converted and the right to receive
an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date
after the Effective Time will be paid to the
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holder of any unsurrendered Certificate with respect to the shares of
Parent Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, at the time of
such surrender, the amount of any such dividends or other distributions
with a record date after the Effective Time theretofore payable (but for
the provisions of this Section 1.7(d)) with respect to such shares of
Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it
that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, none of the Exchange Agent, the Surviving Corporation, Parent
or any party hereto shall be liable to any person for any amount properly
paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and 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.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common Stock
(and cash in lieu of fractional shares) as may be required pursuant to Section
1.6; provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.10 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code and a pooling of interests for accounting purposes.
1.11 WITHHOLDING RIGHTS. Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the number of shares of Parent Common Stock
otherwise deliverable under this Agreement, and from any other payments made
pursuant to this Agreement, such amounts as Parent and the Surviving Corporation
are required to deduct and withhold with respect to such delivery and payment
under the Code or any provision of state, local, provincial or foreign tax law.
To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been delivered and paid to
the holder of shares of Company Common Stock in respect of which such deduction
and withholding was made by Parent and the Surviving Corporation.
1.12 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
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and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
In this Agreement, any reference to a "Material Adverse Effect" with
respect to any person means any event, change or effect that is materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, business, operations or results of operations of such person and
its subsidiaries, taken as a whole, provided, however, that none of the
following shall be deemed by itself or by themselves, either alone or in
combination, to constitute a Material Adverse Effect on such person: (a) any
change in the market price or trading volume of such person; (b) with respect to
Company, any adverse effect on the bookings, revenues, gross margins or earnings
of Company, or any delay in or reduction or cancellation of orders of Company's
products, following execution of this Agreement which is primarily attributable
to the announcement of the execution of this Agreement and the transactions
contemplated hereby; (c) any change arising out of conditions affecting the
economy or industry of such person in general which does not affect such person
in a materially disproportionate manner relative to other participants in the
economy or such industry, respectively; or (d) with respect to the Company,
employee attrition which is primarily attributable to (i) the announcement of
the execution of this Agreement and the transactions contemplated hereby or (ii)
any action directly required of Company by Parent under Section 4.2 or any
omission of Company directly resulting from Parent's failure to consent to
actions requested to be taken by Company under Section 4.2.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after reasonable inquiry of officers, directors and
other employees of such party charged with senior administrative or operational
responsibility for such matters.
Except as disclosed in a document of even date herewith and delivered by
Company to Parent prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Company
Disclosure Schedule"), any exception so disclosed in the Company Disclosure
Schedule to specifically identify the Section, Subsection or clause hereof to
which such exception relates or to otherwise have its applicability to any
Section, Subsection or clause be reasonably apparent on the face of such
exception, Company represents and warrants to Parent and Merger Sub as follows:
2.1 ORGANIZATION, STANDING AND POWER. Each of Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Company and its subsidiaries
has the corporate power to own its properties and to carry on its business as
now being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Company. Company has delivered or made available a true and correct copy of the
Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and Amended and Restated Bylaws or other charter documents, as
applicable, of Company and each of its subsidiaries, each as amended to date, to
Parent. Neither Company nor any of its subsidiaries is in violation of any of
the provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents. Company is the owner of all outstanding shares of
capital stock of each of its subsidiaries (other than directors' qualifying
shares) and all such shares are duly authorized, validly issued, fully paid and
nonassessable. All of the outstanding shares of capital stock of each such
subsidiary are owned by Company free and clear of all liens, charges, claims or
encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such subsidiary, or otherwise
obligating Company or any such subsidiary to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities. Except as disclosed in the
Company SEC Documents (as defined in Section 2.4), Company does not directly or
indirectly own any equity or similar interest in, or any interest
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convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity.
2.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital stock
of Company consists of 40,000,000 shares of Common Stock, $0.01 par value, and
5,000,000 shares of Preferred Stock, $0.01 par value, of which there were issued
and outstanding as of the close of business on April 8, 1999, 27,160,093 shares
of Common Stock and no shares of Preferred Stock. There are no other outstanding
shares of capital stock or voting securities and no outstanding commitments to
issue any shares of capital stock or voting securities after April 8, 1999 other
than pursuant to the Option Agreement, the exercise of options outstanding as of
such date under the Company Stock Option Plans, pursuant to the Company 1996
Employee Stock Purchase Plan, as amended (the "Company ESPP"), or grants of
capital stock of Company or options to purchase capital stock of Company
permitted by Article IV of this Agreement. All outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof, and are not subject to
preemptive rights or rights of first refusal created by statute, the Certificate
of Incorporation or Bylaws of Company or any agreement to which Company is a
party or by which it is bound. As of the close of business on April 7, 1999,
Company has reserved (i) 8,527,671 shares of Common Stock for issuance to
employees, consultants and directors pursuant to the Company Stock Option Plans,
of which 1,145,633 shares have been issued pursuant to option exercises or
direct stock purchases, 5,440,640 shares are subject to outstanding, unexercised
options, and no shares are subject to outstanding stock purchase rights, and
(ii) 500,000 shares of Common Stock for issuance to employees pursuant to the
Company ESPP, of which 121,218 shares have been issued. Except for (i) the
rights created pursuant to this Agreement, the Option Agreement, the Company
Stock Option Plans and the Company ESPP and (ii) the Company's rights to
repurchase any unvested shares under the Company Stock Option Plans, there are
no other options, warrants, calls, rights, commitments or agreements of any
character to which Company is a party or by which it is bound obligating Company
to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of Company or
obligating Company to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. Except as contemplated by this Agreement, there are no
contracts, commitments or agreements relating to voting, purchase or sale of
Company's capital stock (i) between or among Company and any of its stockholders
and (ii) to Company's knowledge, between or among any of Company's stockholders.
The terms of the Company Stock Option Plans permit the assumption or
substitution of options to purchase Parent Common Stock as provided in this
Agreement, without the consent or approval of the holders of such securities,
the Company stockholders, or otherwise. True and complete copies of all
agreements and instruments relating to or issued under the Company Stock Option
Plans or Company ESPP have been made available to Parent and such agreements and
instruments have not been amended, modified or supplemented other than as
permitted by Article IV of this Agreement, and there are no agreements to amend,
modify or supplement such agreements or instruments in any case from the form
made available to Parent other than as permitted by Article IV of this
Agreement.
2.3 AUTHORITY. Company has all requisite corporate power and authority to
enter into this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval of the
Merger by Company's stockholders as contemplated by Section 6.1(a). Each of this
Agreement and the Option Agreement has been duly executed and delivered by
Company and constitutes the valid and binding obligation of Company enforceable
against Company in accordance with its terms, except as enforceability may be
limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity. The execution and delivery
of this Agreement and the Option Agreement by Company does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
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the Certificate of Incorporation or Bylaws of Company or any of its
subsidiaries, as amended, or, subject to obtaining the approval of the Company's
stockholders of the Merger and compliance with the requirements set forth in the
next sentence of this Section 2.3, (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company or any of its subsidiaries or any of their properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Company or any of its subsidiaries in connection
with the execution and delivery of this Agreement, the Option Agreement, or the
consummation of the transactions contemplated hereby and thereby, except for (i)
the filing of the Certificate of Merger as provided in Section 1.2; (ii) the
filing with the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers, Inc. (the "NASD") of the Proxy Statement (as
defined in Section 2.23) relating to the Company Stockholders Meeting (as
defined in Section 2.23); (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
(iv) such filings as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR"); (v) the filing of a Form S-4
Registration Statement with the SEC in accordance with the Securities Act of
1933, as amended; (vi) the filing of a Current Report on Form 8-K with the SEC;
and (vii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Company and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement or the Option Agreement.
2.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. Company has furnished or made
available to Parent a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act of 1933, as amended (the "Securities Act")),
definitive proxy statement and other filing filed with the SEC by Company since
November 20, 1996, and, prior to the Effective Time, Company will have furnished
Parent with true and complete copies of any additional documents filed with the
SEC by Company prior to the Effective Time (collectively, the "Company SEC
Documents"). In addition, Company has made available to Parent all exhibits to
the Company SEC Documents filed prior to the date hereof, and will promptly make
available to Parent all exhibits to any additional Company SEC Documents filed
prior to the Effective Time. All documents required to be filed as exhibits to
the Company SEC Documents have been so filed, and all material contracts so
filed as exhibits are in full force and effect, except those which have expired
in accordance with their terms, and neither Company nor any of its subsidiaries
is in default thereunder. As of their respective filing dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Company SEC Document. The financial statements
of Company, including the notes thereto, included in the Company SEC Documents
(the "Company Financial Statements") were complete and correct in all material
respects as of their respective dates, complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Company
Financial Statements fairly present the consolidated financial condition and
operating results of Company and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments).
2.5 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998 (the "Company
Balance Sheet Date"), Company has conducted its business in the ordinary course
consistent with past practice and there has not
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occurred: (i) any change, event or condition (whether or not covered by
insurance) that has resulted in a Material Adverse Effect to Company; (ii) any
acquisition, sale or transfer of any material asset of Company or any of its
subsidiaries other than in the ordinary course of business and consistent with
past practice; (iii) any change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Company or any
revaluation by Company of any of its or any of its subsidiaries' assets; (iv)
any declaration, setting aside, or payment of a dividend or other distribution
with respect to the shares of Company, or any direct or indirect redemption,
purchase or other acquisition by Company of any of its shares of capital stock;
(v) any amendment or change to the Certificate of Incorporation or Bylaws; (vi)
any increase in or modification of the compensation or benefits payable or to
become payable by Company to any of its directors or employees other than in the
ordinary course consistent with past practice; or (vii) any negotiation or
agreement by Company or any of its subsidiaries to do any of the things
described in the preceding clauses (i) through (vi) (other than negotiations
with Parent and its representatives regarding the transactions contemplated by
this Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Company has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet or in the related Notes to Consolidated Financial Statements
included in Company's Annual Report on Form 10-K for the period ended December
31, 1998 (the "Company Balance Sheet"), (ii) those incurred in the ordinary
course of business since the date of the Company Balance Sheet and not
reasonably likely to have a Material Adverse Effect on the Company, and (iii)
those incurred in connection with the execution of this Agreement.
2.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Company or any of its
subsidiaries, threatened against Company or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Company. There is no
judgment, decree or order against Company or any of its subsidiaries, or, to the
knowledge of Company and its subsidiaries, any of their respective directors or
officers (in their capacities as such), that could prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Company.
2.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, judgment,
injunction, order or decree binding upon Company or any of its subsidiaries
which has or reasonably could be expected to have the effect of prohibiting or
materially impairing any 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.
2.9 GOVERNMENTAL AUTHORIZATION. Company and each of its subsidiaries have
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Company or any of its subsidiaries currently operates or holds
any interest in any of its properties or (ii) that is required for the operation
of Company's or any of its subsidiaries' business or the holding of any such
interest ((i) and (ii) herein collectively called "Company Authorizations"), and
all of such Company Authorizations are in full force and effect, except where
the failure to obtain or have any of such Company Authorizations could not
reasonably be expected to have a Material Adverse Effect on Company.
2.10 TITLE TO PROPERTY. Company and its subsidiaries have good and valid
title to all of their respective properties, interests in properties and assets,
real and personal, reflected in the Company Balance Sheet or acquired after the
Company Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Company Balance Sheet Date in the
ordinary course of business), or in the case of leased properties and assets,
valid leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected
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thereby, or otherwise materially impair business operations involving such
properties, (iii) liens securing debt which is reflected on the Company Balance
Sheet, and (iv) liens that in the aggregate would not have a Material Adverse
Effect on Company. The plants, property and equipment of Company and its
subsidiaries that are used in the operations of their businesses are in good
operating condition and repair. All properties used in the operations of Company
and its subsidiaries are reflected in the Company Balance Sheet to the extent
generally accepted accounting principles require the same to be reflected.
Schedule 2.10 identifies each parcel of real property owned or leased by Company
or any of its subsidiaries. No lease relating to a foreign parcel contains any
extraordinary payment obligation.
2.11 INTELLECTUAL PROPERTY.
(a) Company and its subsidiaries own, or are licensed or otherwise
possess legally enforceable and unencumbered rights to use all patents,
trademarks, trade names, service marks, domain names, database rights,
copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas,
algorithms, processes, computer software programs or applications (in both
source code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") that are used in the
business of Company and its subsidiaries as currently conducted. Except as
permitted by Article IV of this Agreement, Company has not (i) licensed any
of its Intellectual Property in source code form to any party or (ii)
entered into any exclusive agreements relating to its Intellectual
Property. No royalties or other continuing payment obligations are due in
respect of Third Party Intellectual Property Rights.
(b) Schedule 2.11 lists (i) all patents and patent applications and
all registered and unregistered trademarks, trade names and service marks,
registered copyrights, and maskworks owned by the Company, including the
jurisdictions in which each such Intellectual Property right has been
issued or registered or in which any application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses and
other agreements as to which Company is a party and pursuant to which any
person is authorized to use any Intellectual Property owned by the Company,
and (iii) all licenses, sublicenses and other agreements as to which
Company is a party and pursuant to which Company is authorized to use any
third party patents, trademarks or copyrights, including software ("Third
Party Intellectual Property Rights") which are incorporated in, are, or
form a part of any product material to Company's business, other than
commercially available, off-the-shelf software.
(c) To the knowledge of Company, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property
rights owned by Company or any of its subsidiaries, or any Intellectual
Property right of any third party to the extent licensed by or through
Company or any of its subsidiaries, by any third party, including any
employee or former employee of Company or any of its subsidiaries. Except
as permitted by Article IV of this Agreement, neither Company nor any of
its subsidiaries has entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property
owned by the Company, other than indemnification provisions contained in
purchase orders, distribution agreements and license agreements arising in
the ordinary course of business.
(d) Company is not, and will not be, as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating
to the Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, trademarks, service marks and copyrights held by
Company are valid and subsisting. Company (i) has not been sued in any
suit, action or proceeding, or received any notice or, to Company's
knowledge, threat, which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or
other intellectual property right of any third party and (ii) has not
brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual
Property against any third party. The manufacture, marketing, licensing or
sale of Company's products does not infringe any patent, trademark, service
mark, copyright, trade secret or other intellectual property right of any
third party.
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(f) Company has secured from all consultants and employees who
contributed to the creation or development of Intellectual Property valid
written assignments of the rights to such contributions that Company does
not already own by operation of law.
(g) Company has taken reasonable measures consistent with industry
practice to protect and preserve the confidentiality of all non-public
Intellectual Property not otherwise protected by patents, or patent
applications or copyright ("Confidential Information"). All authorized use,
disclosure or appropriation of Confidential Information owned by Company by
or to a third party has been pursuant to the terms of a written agreement
between Company and such third party. All use, disclosure or appropriation
of Confidential Information not owned by Company has been pursuant to the
terms of a written agreement between Company and the owner of such
Confidential Information, or is otherwise lawful.
(h) Except as set forth on Schedule 2.11, Company has not assumed any
contracts pursuant to its acquisition of the assets of Danar Corporation or
TeleQuery, Inc.
(i) To Company's knowledge, all users of Company's products are using
Release 4.0, Release 3.0, Release 2.5 or Release 2.0 of such products.
(j) Company has not received any opinion of counsel in relation to
third party patents.
2.12 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal, state
or local laws, ordinances, codes, regulations, rules, policies and
orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting
with respect to, or list or define air, water, groundwater, solid waste,
hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees,
workers or other persons, including the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without
limitation, those substances, materials and wastes defined in or
regulated under any Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or owned by
Company or its subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on the
Property of Company or its subsidiaries.
(b) Company represents and warrants that, except in all cases as, in
the aggregate, would not have a Material Adverse Effect on Company, as
follows: (i) to Company's knowledge, no methylene chloride or asbestos is
contained in or has been used at or released from the Facilities; (ii) all
Hazardous Materials and wastes have been disposed of in accordance with all
Environmental and Safety Laws; (iii) Company and its subsidiaries have
received no notice (verbal or written) of any noncompliance of the
Facilities or its past or present operations with Environmental and Safety
Laws; (iv) no notices, administrative actions or suits are pending or, to
Company's knowledge, threatened relating to a violation of any
Environmental and Safety Laws; (v) neither Company nor its subsidiaries are
a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), or state
analog statute, arising out of events occurring prior to the Closing Date;
(vi) there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property;
(vii) to Company's knowledge, there have not been in the past, and are not
now, any underground tanks or underground improvements at, on or under the
Property including without limitation, treatment or storage tanks, sumps,
or water, gas or oil wells; (viii) to Company's knowledge, there are no
polychlorinated
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biphenyls (PCBs) deposited, stored, disposed of or located on the Property
or Facilities or any equipment on the Property containing PCBs at levels in
excess of 50 parts per million; (ix) to Company's knowledge, there is no
formaldehyde on the Property or in the Facilities, nor any insulating
material containing urea formaldehyde in the Facilities; (x) Company's and
its subsidiaries uses and activities in the Facilities, and, to Company's
knowledge, the Facilities, have at all times complied with all
Environmental and Safety Laws; and (xi) Company and its subsidiaries have
all the permits and licenses required to be issued and are in full
compliance with the terms and conditions of those permits.
2.13 TAXES. The Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which the Company or any of its subsidiaries is or has been a
member, have properly completed and timely filed all Tax Returns required to be
filed by them and have paid all Taxes shown thereon to be due, other than any
Taxes for which adequate reserves under generally accepted accounting principles
have been recorded in the Financial Statements. The Company has provided
adequate accruals in accordance with generally accepted accounting principles in
its Financial Statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns. The Company has no material liability for
unpaid Taxes accruing after the date of its latest Financial Statements other
than Taxes arising in the ordinary course of its business. There is (i) no
material claim for Taxes that is a lien against the property of the Company or
any of its subsidiaries or is being asserted against the Company or any of its
subsidiaries other than liens for Taxes not yet due and payable, (ii) the
Company has not been notified and has no other knowledge that any audit of any
Tax Return of the Company or any of its subsidiaries is being conducted by a Tax
Authority, and (iii) no extension of the statute of limitations on the
assessment of any Taxes granted by the Company or any of its subsidiaries and
currently in effect. The Company has not been and will not be required to
include any material 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, events or
accounting methods employed prior to the Merger. Neither the Company nor any of
its subsidiaries has filed or will file any consent to have the provisions of
paragraph 341(f)(2) of the Code (or comparable provisions of any state Tax laws)
apply to the Company or any of its subsidiaries. Neither the Company nor any of
its subsidiaries is a party to any Tax sharing or Tax allocation agreement nor
does the Company or any of its subsidiaries have any liability or potential
liability to another party under any such agreement. Neither the Company nor any
of its subsidiaries has filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any Tax Return. Neither the
Company nor any of its subsidiaries has ever been a member of a consolidated,
combined or unitary group of which the Company was not the ultimate parent
corporation. The Company and each of its subsidiaries have in their possession
receipts for any Taxes paid to foreign Tax authorities. For purposes of this
Agreement, the following terms have the following meanings: "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental entity (a "Tax Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period, and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of being a transferee of or successor to any person or as a
result of any express or implied obligatio n to indemnify any other person. As
used herein, "Tax Return" shall mean any return, statement, report or form
(including, without limitation, estimated tax returns and reports, withholding
tax returns and reports and information reports and returns) required to be
filed with respect to Taxes.
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2.14 EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.14 lists, with respect to Company, any subsidiary of
Company and any trade or business (whether or not incorporated) which is
treated as a single employer with Company (an "ERISA Affiliate") within the
meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each
loan to a non-officer employee in excess of $50,000, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria
benefit (Code section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit
plans, programs or arrangements that apply to senior management of Company
and that do not generally apply to all employees, and (v) any current or
former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of Company of
greater than $50,000 remain for the benefit of, or relating to, any present
or former employee, consultant or director of Company (together, the
"Company Employee Plans").
(b) Company has furnished or made available to Parent a copy of each
of the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and any material employee
communications relating thereto) and has, with respect to each Company
Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any
Company Employee Plan intended to be qualified under Section 401(a) of the
Code may rely on an opinion letter issued by the Internal Revenue Service
for a prototype plan or has either obtained from the Internal Revenue
Service a favorable determination letter as to its qualified status under
the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of
the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable
determination. Company has also furnished Parent with the most recent
Internal Revenue Service determination letter or opinion letter, if
applicable, issued with respect to each such Company Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Company Employee Plan subject to Code Section 401(a). Company has also
furnished Parent with all registration statements and prospectuses prepared
in connection with each Company Employee Plan.
(c) (i) None of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, except as
required by applicable law; (ii) there has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA and Section
4975 of the Code, with respect to any Company Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect
on Company; (iii) each Company Employee Plan has been administered in
accordance with its terms and in compliance with the requirements
prescribed by any and all statutes, rules and regulations (including ERISA
and the Code), except as would not have, in the aggregate, a Material
Adverse Effect on Company, and Company and each subsidiary or ERISA
Affiliate have performed all material obligations required to be performed
by them under, are not in any material respect in default under or
violation of, and have no knowledge of any default or material violation by
any other party to, any of the Company Employee Plans; (iv) neither Company
nor any subsidiary or ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA
with respect to any of the Company Employee Plans; (v) all material
contributions required to be made by Company or any subsidiary or ERISA
Affiliate to any Company Employee Plan have been made on or before their
due dates and a reasonable amount has
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been accrued for contributions to each Company Employee Plan for the
current plan years; (vi) with respect to each Company Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding
any such event for which the thirty (30) day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no
Company Employee Plan is covered by, and neither Company nor any subsidiary
or ERISA Affiliate has incurred or expects to incur any liability under
Title IV of ERISA or Section 412 of the Code; and (viii) each Company
Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to
Parent (other than for benefits accrued through the date of termination and
ordinary administrative expenses typically incurred in a termination
event). With respect to each Company Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA
or an employee welfare benefit plan within the meaning of Section 3(1) of
ERISA, Company has prepared in good faith and timely filed all requisite
governmental reports (which were true and correct as of the date filed) and
has properly and timely filed and distributed or posted all notices and
reports to employees required to be filed, distributed or posted with
respect to each such Company Employee Plan, except to the extent that
failure to do so would not, in the aggregate, have a Material Adverse
Effect on the Company. No suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of Company is threatened
(other than routine claims for benefits), against or with respect to any
such Company Employee Plan, including any audit or inquiry by the IRS or
United States Department of Labor.
(d) With respect to each Company Employee Plan, Company and each of
its United States subsidiaries have complied except to the extent that such
failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect on Company, with (i) the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the regulations (including
proposed regulations) thereunder, (ii) the applicable requirements of the
Family Medical and Leave Act of 1993 and the regulations thereunder, and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations (including proposed
regulations) thereunder.
(e) Except as permitted by Article IV of this Agreement, there has
been no amendment to, written interpretation or announcement (whether or
not written) by Company, any Company subsidiary or other ERISA Affiliate
relating to, or change in participation or coverage under, any Company
Employee Plan which would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for
the most recent fiscal year included in Company's financial statements.
(f) Company does not currently maintain, sponsor, participate in or
contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I
of ERISA, Title IV of ERISA or Section 4.12 of the Code.
(g) Neither Company nor any Company subsidiary or other ERISA
Affiliate is a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multiemployer plan" as defined in
Section 3(37) of ERISA.
2.15 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the execution and
delivery of this Agreement nor the consummation of the transaction contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any director or employee of Company or any of its subsidiaries, (ii) materially
increase any benefits otherwise payable by Company or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.16 EMPLOYEE MATTERS. Company and each of its subsidiaries are in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
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employment practices, and is not engaged in any unfair labor practice, except
where the failure to be in compliance or the engagement in such unfair labor
practices would not have a Material Adverse Effect on Company. Company has in
all material respects withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to employees; and is not
liable for any material arrears of wages or any material taxes or any material
penalty for failure to comply with any of the foregoing. Company is not liable
for any material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending claims against Company or any of its
subsidiaries for any material amounts under any workers compensation plan or
policy or for long term disability that are not covered by insurance. Neither
Company nor any of its subsidiaries has any obligations under COBRA with respect
to any former employees or qualifying beneficiaries thereunder, except for
obligations that are not material in amount or covered by insurance. There are
no material controversies pending or, to the knowledge of Company or any of its
subsidiaries, threatened, between Company or any of its subsidiaries and any of
their respective employees, which controversies have or could reasonably be
expected to result in a material action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic. Neither
Company nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract nor does Company nor any of its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees. To Company's knowledge, no employees of Company are
in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by Company
because of the nature of the business conducted or presently proposed to be
conducted by Company or to the use of trade secrets or proprietary information
of others. No employees of Company have given notice to Company, nor is Company
otherwise aware, that any such employee intends to terminate his or her
employment with Company.
2.17 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Company SEC
Documents, neither Company nor any of its subsidiaries is indebted to any
director or officer of Company or any of its subsidiaries (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses),
and no such person is indebted to Company or any of its subsidiaries, and there
are no other transactions of the type required to be disclosed pursuant to Items
402 and 404 of Regulation S-K under the Securities Act and the Exchange Act.
2.18 INSURANCE. Company has made available to Parent all material policies
of insurance and bonds. To the Company's knowledge, there is no material claim
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and Company and its subsidiaries are otherwise in compliance in all material
respects with the terms of such policies and bonds. Company has no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
2.19 COMPLIANCE WITH LAWS. Each of Company and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Company.
2.20 BROKERS' AND FINDERS' FEES. Except for payment obligations to Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated ("DRW"), and to BT
Alex. Brown Incorporated set forth in engagement letters, copies of which have
been provided to Parent, Company has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
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2.21 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by Company for inclusion in the registration statement on Form S-4 (or
such other or successor form as shall be appropriate) pursuant to which the
shares of Parent Common Stock to be issued in the Merger will be registered with
the SEC (the "Registration Statement") shall not at the time the Registration
Statement (including any amendments or supplements thereto) is declared
effective by the SEC 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. The information supplied by Company for inclusion in the
proxy statement/prospectus to be sent to the stockholders of Company in
connection with the meeting of Company's stockholders to consider the Merger
(the "Company Stockholders Meeting") (such proxy statement/prospectus as amended
or supplemented is referred to herein as the "Proxy Statement") shall not, on
the date the Proxy Statement is first mailed to Company's stockholders, at the
time of the Company Stockholders Meeting and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Stockholders Meeting which has become
false or misleading. If at any time prior to the Effective Time any event or
information should be discovered by Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Company shall promptly inform Parent and Merger Sub. Notwithstanding the
foregoing, Company makes no representation, warranty or covenant with respect to
any information supplied by Parent or Merger Sub which is contained in any of
the foregoing documents.
2.22 OPINION OF FINANCIAL ADVISOR. Company has been advised in writing by
its financial advisor, DRW, that in DRW's opinion, as of the date hereof, the
Exchange Ratio is fair, from a financial point of view, to the stockholders of
Company.
2.23 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date set for the
Company Stockholders Meeting is the only vote of the holders of any of Company's
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.24 BOARD APPROVAL. The Board of Directors of Company has unanimously (i)
approved this Agreement and the Merger, (ii) determined that the Merger is
advisable and in the best interests of the stockholders of Company and is on
terms that are fair to such stockholders and (iii) recommended that the
stockholders of Company approve this Agreement and consummation of the Merger.
2.25 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 Section 203) will not
apply to the execution, delivery or performance of this Agreement or the Option
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement or by the Option Agreement. No other state
takeover statute is applicable to the Merger, the Merger Agreement, the Option
Agreement or the transaction contemplated hereby and thereby.
2.26 EXPORT CONTROL LAWS. (a) Company has conducted its export
transactions in accordance with applicable provisions of United States export
control laws and regulations, including but not limited to the Export
Administration Act and implementing Export Administration Regulations, except
for such violations which would not have a Material Adverse Effect on Company.
2.27 YEAR 2000. Company's current products are "Year 2000 Compliant,"
where "Year 2000 Compliant" means that such products have been designed and
tested so that, when used in accordance with their associated documentation,
they are capable upon installation of accurately processing, providing and/or
receiving (i) date-related data from, into and between the Twentieth (20th) and
Twenty-First (21st) centuries, or (ii) date-related data in connection with any
valid date in the Twentieth (20th) and Twenty-First (21st) centuries; provided
that all other products used in combination in any way with Company's current
products properly exchange date-related data with them. Company has
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commenced efforts to ensure that the information technology systems and
non-information technology systems used by Company in its internal operations
will function properly beyond 1999. Company has made inquiries to its key
third-party vendors and providers as to the status of their Year 2000 efforts,
and has not uncovered any problems that would aversely affect the operation of
the products or that could disrupt or harm the day-to-day functioning of the
business or operations of Company.
2.28 ACCOUNTING AND TAX MATTERS. As of the date hereof, neither Company
nor, to Company's knowledge, any of its Affiliates has taken or agreed to take
any action, nor does Company have knowledge of any fact or circumstance, that
would prevent Parent from accounting for the business combination to be effected
by the Merger as a pooling of interests or prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in a document of even date herewith and delivered by
Parent to Company prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Parent
Disclosure Schedule"), any exception so disclosed in the Parent Disclosure
Schedule to specifically identify the Section, Subsection or clause hereof to
which such exception relates or to otherwise have its applicability to any
Section, Subsection or clause be reasonably apparent on the face of such
exception, Parent and Merger Sub represent and warrant to Company as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Parent and Merger Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Parent.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
Articles of Incorporation or Bylaws or equivalent organizational documents.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Parent consists of
2,700,000,000 shares of Common Stock, $0.001 par value, and 5,000,000 shares of
Preferred Stock, no par value, of which there were issued and outstanding as of
the close of business on April 12, 1999, 1,605,498,499 shares of Common Stock
and no shares of Preferred Stock. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, $.0001 par value, all of which are
issued and outstanding and are held by Parent. The shares of Parent Common Stock
to be issued pursuant to the Merger will be duly authorized, validly issued,
fully paid, and non-assessable.
3.3 AUTHORITY. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of the Articles of
Incorporation or Bylaws of Parent or any of its subsidiaries, as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions of (ii) would not have had and would not reasonably be
expected to have a Material Adverse Effect on Parent. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to Parent or any of its
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subsidiaries in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger as provided in Section 1.2, (ii) the filing with the SEC and NASD of
the Registration Statement, (iii) any filings as may be required under
applicable state securities laws and the securities laws of any foreign country,
(iv) such filings as may be required under HSR, (v) the filing with the Nasdaq
National Market of a Notification Form for Listing of Additional Shares with
respect to the shares of Parent Common Stock issuable upon conversion of the
Company Common Stock in the Merger and upon exercise of the options under the
Company Stock Option Plans assumed by Parent, (vi) the filing of a registration
statement on Form S-8 with the SEC, or other applicable form covering the shares
of Parent Common Stock issuable pursuant to outstanding options under the
Company Stock Option Plans assumed by Parent, and (vii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Parent and would not prevent
or materially alter or delay any of the transactions contemplated by this
Agreement.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. Parent has made available to
Company each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement, and other filing filed with the SEC by Parent since July 25, 1998,
and, prior to the Effective Time, Parent will have furnished Company with true
and complete copies of any additional documents filed with the SEC by Parent
prior to the Effective Time (collectively, the "Parent SEC Documents"). In
addition, Parent has made available to Company all exhibits to the Parent SEC
Documents filed prior to the date hereof, and will promptly make available to
Company all exhibits to any additional Parent SEC Documents filed prior to the
Effective Time. All documents required to be filed as exhibits to the Company
SEC Documents have been so filed, and all material contracts so filed as
exhibits are in full force and effect, except those which have expired in
accordance with their terms, and neither Parent nor any of its subsidiaries is
in default thereunder. As of their respective filing dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed Parent SEC Document. The
financial statements of Parent, including the notes thereto, included in the
Parent SEC Documents (the "Parent Financial Statements") were complete and
correct in all material respects as of their respective dates, complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with GAAP applied on a
basis consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q
of the SEC). The Parent Financial Statements fairly present the consolidated
financial condition and operating results of Parent and its subsidiaries at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments).
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Parent has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the Balance Sheet or in
the related Notes to Consolidated Financial Statements included in Parent's
Quarterly Report on Form 10-Q for the period ended January 23, 1999 (the "Parent
Balance Sheet"), (ii) those disclosed in Parent SEC documents filed subsequent
to such Quarterly Report on Form 10-Q for the period ended January 23, 1999 and
(iii) those incurred in the ordinary course of business since the date of the
Parent Balance Sheet and not reasonably likely to have a Material Adverse Effect
on Parent.
3.6 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Parent or any of its
subsidiaries, threatened against Parent or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on the
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ability of Parent to consummate the transactions contemplated by this Agreement.
There is no judgment, decree or order against Parent or any of its subsidiaries
or, to the knowledge of Parent or any of its subsidiaries, any of their
respective directors or officers (in their capacities as such) that could
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a material
adverse effect on the ability of Parent to consummate the transactions
contemplated by this Agreement.
3.7 BROKER'S AND FINDERS' FEES. Except for payment obligations to Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.8 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by Parent and Merger Sub for inclusion in the Registration Statement
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by Parent for inclusion
in the Proxy Statement shall not, on the date the Proxy Statement is first
mailed to Company's stockholders, at the time of the Company Stockholders
Meeting and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which it is made, not false or misleading; or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Parent or Merger Sub will
promptly inform Company. Notwithstanding the foregoing, Parent and Merger Sub
make no representation, warranty or covenant with respect to any information
supplied by Company which is contained in any of the foregoing documents.
3.9 NO SHAREHOLDER VOTE REQUIRED. No vote of the shareholders of Parent is
necessary to approve this Agreement and the transactions contemplated hereby.
3.10 BOARD APPROVAL. The Board of Directors of Parent has unanimously (i)
approved this Agreement and the Merger and (ii) determined that the Merger is
advisable and in the best interests of the shareholders of Parent.
3.11 ACCOUNTING AND TAX MATTERS. As of the date hereof, neither Parent
nor, to Parent's knowledge, any of its Affiliates has taken or agreed to take
any action, nor does Parent have knowledge of any fact or circumstance, that
would prevent Parent from accounting for the business combination to be effected
by the Merger as a pooling of interests or prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except to the extent consented
to in writing by Parent), to carry on its and its subsidiaries' business in the
ordinary course in substantially the same manner as heretofore conducted, to pay
and to cause its subsidiaries to pay debts and Taxes when due subject to good
faith disputes over such debts or taxes, to pay or perform other obligations
when due, and to use all reasonable efforts consistent with past practice and
policies to preserve intact its and its subsidiaries' present business
organizations, use commercially reasonable efforts consistent with past practice
to keep available the services of its and its subsidiaries' present officers and
key employees and use commercially reasonable efforts consistent with past
practice to
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preserve its and its subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it
or its subsidiaries, to the end that its and its subsidiaries' goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Company agrees to
promptly notify Parent of any material event or occurrence not in the ordinary
course of its or its subsidiaries' business, and of any event which could have a
Material Adverse Effect.
4.2 RESTRICTIONS ON CONDUCT OF BUSINESS OF COMPANY. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, except as expressly contemplated by
this Agreement, Company shall not do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Parent:
(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of
shares in connection with any termination of service to it or its
subsidiaries;
(c) Stock Option Plans, Etc. Take any action to accelerate, amend or
change the period of exercisability or vesting of options or other rights
granted under its stock plans (other than as permitted by clause (e) below)
or authorize cash payments in exchange for any options or other rights
granted under any of such plans.
(d) Material Contracts. Enter into any contract or commitment, or
violate, amend or otherwise modify or waive any of the terms of any of its
contracts, other than in the ordinary course of business consistent with
past practice and in no event shall such contract, commitment, amendment,
modification or waiver involve the payment by Company or any of its
subsidiaries of more than $200,000 to a licensor thereunder;
(e) Issuance of Securities. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the issuance of shares
of its Common Stock pursuant to the exercise of stock options, warrants or
other rights therefor outstanding as of the date of this Agreement;
provided, however, that Company may, in the ordinary course of business
consistent with past practice, grant options for the purchase of Company
Common Stock at an exercise price equal to the fair market value of the
Company Common Stock on the grant date under the Company Option Plans (not
to exceed an aggregate of 600,000 options to purchase shares of Company
Common Stock in the aggregate or an aggregate of 300,000 options to
purchase Company Common Stock in any three month period).
(f) Intellectual Property. Transfer to any person or entity any rights
to its Intellectual Property other than the transfer of non-exclusive
rights to its Intellectual Property in the ordinary course of business
consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products or
technology;
(h) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually
or in the aggregate, to its and its subsidiaries' business, taken as a
whole, except in the ordinary course of business consistent with past
practice;
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(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others, except in the ordinary course of
business consistent with past practice;
(j) Leases. Enter into any operating lease in excess of $250,000;
(k) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of $250,000 in any one case, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise)
arising other than in the ordinary course of business, other than the
payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financial Statements;
(l) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business
and consistent with past practice that do not exceed $250,000 individually
or $2,000,000 in the aggregate;
(m) Insurance. Materially reduce the amount of any material insurance
coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of substantial
value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend
any employee benefit or stock purchase or option plan, or hire any new
director level or officer level employee, pay any special bonus or special
remuneration to any employee or director, or increase the salaries or wage
rates of its employees other than, with respect to non-officer employees
and those officers set forth on Schedule 4.2(o), in the ordinary course of
business consistent with past practice;
(p) Severance Arrangements. Grant any severance or termination pay (i)
to any director or officer or (ii) to any other employee except payments
made pursuant to written agreements outstanding on the date hereof other
than, with respect to non-officer employees and those officers set forth on
Schedule 4.2(o), in the ordinary course of business consistent with past
practice.
(q) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines
that failure to commence suit would result in the material impairment of a
valuable aspect of its business, provided that it consults with Parent
prior to the filing of such a suit, or (iii) for a breach of this Agreement
or any Exhibits hereto;
(r) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its subsidiaries' business,
taken as a whole, or acquire or agree to acquire any equity securities of
any corporation, partnership, association or business organization;
(s) Taxes. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(t) Notices. Company shall give all notices and other information
required to be given to the employees of Company, any collective bargaining
unit representing any group of employees of Company, and any applicable
government authority under the WARN Act, the National Labor Relations Act,
the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation
Act, and other applicable law in connection with the transactions provided
for in this Agreement;
(u) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business;
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(v) Accounting Policies and Procedures. Make any change to its
accounting methods, principles, policies, procedures or practices, except
as may be required by GAAP, Regulation S-X promulgated by the SEC or
applicable statutory accounting principles;
(w) Year 2000 Compliance. Fail to carry forward in all material
respects Company's Year 2000 assessment and compliance program, as made
available to Parent by Company; or
(x) Other. Take or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through (w) above, or any action for
the primary purpose of making any of its representations or warranties
contained in this Agreement untrue or incorrect in any material respect.
4.3 NO SOLICITATION. From and after the date hereof until the earlier of
the Effective Time or the termination of this Agreement in accordance with
Article VII, Company and its subsidiaries and the officers, directors,
representatives, employees, agents and advisors of Company and its subsidiaries
(collectively, Company's "Representatives") will not, directly or indirectly,
(i) take any action to solicit, initiate, encourage or agree to any Takeover
Proposal (as defined in Section 7.3(f)) or (ii) subject to the terms of the
immediately following sentence, engage in negotiations with, or disclose any
nonpublic information relating to Company or any of it subsidiaries to, or
afford access to the properties, books or records of Company or any of its
subsidiaries to, any person that has advised Company that it may be considering
making, or that has made, Takeover Proposal; provided, nothing herein shall
prohibit Company's Board of Directors from complying with Rules 14d-9 and 14e-2
promulgated under the Exchange Act and, provided, further, that nothing
contained in this Agreement shall prevent the Board of Directors from referring
any third party to this Section 4.3 or providing any third party with a copy of
this Section 4.3. Notwithstanding the immediately preceding sentence, if an
unsolicited written Takeover Proposal shall be received by the Board of
Directors of Company, then, to the extent the Board of Directors of Company
believes in good faith (after receiving advice from its financial advisor to
such effect) that such Takeover Proposal would, if consummated, result in a
transaction more favorable to Company's stockholders from a financial point of
view than the transaction contemplated by this Agreement (any such more
favorable Takeover Proposal being referred to in this Agreement as a "Superior
Proposal") and the Board of Directors of Company determines in good faith (after
receiving advice to such effect from outside legal counsel) that the failure to
do so would be inconsistent with the Board of Directors of Company's fiduciary
duties to Company's stockholders under applicable law, Company and its
Representatives may furnish in connection therewith information to the party
making such Superior Proposal and engage in negotiations with such party, and,
subject to the provisions hereof, endorse, recommend, approve and/or agree to
such Superior Proposal, and such actions shall not be considered a breach of
this Section 4.3 or any other provisions of this Agreement, provided that in
each such event Company notifies Parent of such determination by the Company
Board of Directors and provides Parent with a true and complete copy of the
Superior Proposal received from such third party, and provides Parent with all
documents containing or referring to non-public information of Company that are
supplied to such third party; provided, further, that Company provides such
non-public information pursuant to a non-disclosure agreement at least as
restrictive on such third party as the Confidentiality Agreement is on Parent
(as defined in Section 5.4); and provided, further, that Company may only agree
to a Superior Proposal hereunder if the agreement related to such Superior
Proposal terminates upon the satisfaction of the condition set forth in Section
6.1(a) hereof. Company may only and may only permit any of its Representatives
to, endorse, recommend, approve and/or agree to any Superior Proposal and
withdraw its recommendation of the Merger in connection with such an endorsement
if Company has provided Parent at least three (3) days prior notice thereof.
Company will promptly (and in any event within 24 hours) notify Parent after
receipt of any Takeover Proposal or any notice that any person is considering
making a Takeover Proposal or any request for non-public information relating to
Company or any of its subsidiaries or for access to the properties, books or
records of Company or any of its subsidiaries by any person that has advised
Company that it may be considering making, or that has made, a Takeover
Proposal, or whose efforts to formulate a Takeover Proposal would be assisted
thereby (such notice to include the identity of such person or persons), and
will keep Parent fully informed of the status and details of any such Takeover
Proposal notice, request or any correspondence or communications
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related thereto and shall provide Parent with a true and complete copy of such
Takeover Proposal notice or request or correspondence or communications related
thereto, if it is in writing, or a complete written summary thereof, if it is
not in writing. Company shall immediately cease and cause to be terminated all
existing discussions or negotiations with any persons conducted heretofore with
respect to a Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, Company and Parent shall
prepare, and Company shall file with the SEC, preliminary proxy materials
relating to the approval of the Merger and the transactions contemplated hereby
by the stockholders of Company. As promptly as practicable following receipt of
SEC comments thereon, Company shall file with the SEC definitive proxy materials
and Parent shall file with the SEC a Registration Statement on Form S-4 (or such
other or successor form as shall be appropriate), in each case which complies in
form with applicable SEC requirements and shall use all reasonable efforts to
cause the Registration Statement to become effective as soon thereafter as
practicable. Company will notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff or any
other government officials for amendments or supplements to the Proxy Statement
or any other filing or for additional information and will supply Parent with
copies of all correspondence between Company or any of its representatives, on
the one hand, and the SEC, or its staff or any other government officials, on
the other hand, with respect to the Proxy Statement or other filing. Whenever
any event occurs that is required to be set forth in an amendment or supplement
to the Proxy Statement or any other filing, Company shall promptly inform Parent
of such occurrence and cooperate in filing with the SEC or its staff or any
other government officials, and/or mailing to shareholders of Company, such
amendment or supplement. The Proxy Statement shall include the recommendation of
the Board of Directors of Company in favor of the Merger; provided that such
recommendation may not be included, or may be withdrawn or modified if
previously included, if (i) a Superior Proposal has been made and Company and
Company's Board of Directors withdraw such recommendation in compliance with,
and otherwise have complied in all respects with, Section 4.3 or (ii) Company's
Board of Directors determines in good faith (after receiving advice to such
effect from outside legal counsel) that including, or failing to withdraw or
modify, such recommendation would be inconsistent with the fiduciary duties of
Company's Board of Directors to Company's stockholders under applicable law.
5.2 MEETING OF STOCKHOLDERS. Company shall promptly after the date hereof
take all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders Meeting within 40
days of the Registration Statement being declared effective by the SEC. Company
shall consult with Parent regarding the date of the Company Stockholders
Meeting. Subject to Section 5.1, Company shall use commercially reasonable
efforts to solicit from stockholders of Company proxies in favor of the Merger
and shall take all other commercially reasonable action necessary or advisable
to secure the vote or consent of stockholders required to effect the Merger.
5.3 ACCESS TO INFORMATION.
(a) Upon reasonable notice, Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to (i)
all of Company's and its subsidiaries' properties, books, contracts,
commitments and records, and (ii) all other information concerning the
business, properties and personnel of Company and its subsidiaries as
Parent may reasonably request. Company agrees to provide to Parent and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request. Parent shall treat all such information
as confidential pursuant to the terms of the Confidentiality Agreement.
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(b) Subject to compliance with applicable law, from the date hereof
until the Effective Time, each of Parent and Company shall confer on a
regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status
of ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant
to this Section 5.3 shall 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.
5.4 CONFIDENTIALITY. The parties acknowledge that each of Parent and
Company have previously executed a non-disclosure agreement dated November 11,
1998 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
5.5 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD, in which case the party proposing to issue such press release or make
such public statement or disclosure shall use commercially reasonable efforts to
consult with the other party before issuing such press release or making such
public statement or disclosure.
5.6 CONSENTS; COOPERATION.
(a) Each of Parent and Company shall promptly apply for or otherwise
seek, and use its commercially reasonable efforts to obtain, all consents
and approvals required to be obtained by it for the consummation of the
Merger, including those required under HSR, and shall use its commercially
reasonable efforts to obtain all necessary consents, waivers and approvals
under any of its material contracts in connection with the Merger for the
assignment thereof or otherwise. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one
another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by
or on behalf of any party hereto in connection with proceedings under or
relating to HSR or any other federal or state antitrust or fair trade law.
(b) Each of Parent and Company shall use all commercially reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other
Federal, state or foreign statutes, rules, regulations, orders or decrees
that are designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade (collectively,
"Antitrust Laws"). In connection therewith, if any administrative or
judicial action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Parent and Company shall cooperate
and use all commercially reasonable efforts vigorously to contest and
resist any such action or proceeding and to have vacated, lifted, reversed,
or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect
and that prohibits, prevents, or restricts consummation of the Merger or
any such other transactions, unless by mutual agreement Parent and Company
decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither Parent nor Company shall have
any obligation to litigate or contest any administrative or judicial action
or proceeding or any Order beyond the earlier of (i) the Final Date or (ii)
the date of a ruling preliminarily enjoining the Merger issued by a court
of competent jurisdiction. Each of Parent and Company shall use all
reasonable efforts to take such action as may be required to cause the
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expiration of the notice periods under the HSR or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of
this Agreement.
(c) Notwithstanding anything to the contrary in Section 5.6(a) or (b),
(i) neither Parent nor any of it subsidiaries shall be required to divest
any of their respective businesses, product lines or assets, or to take or
agree to take any other action or agree to any limitation that could
reasonably be expected to have a Material Adverse Effect on Parent or the
Surviving Corporation after the Effective Time or (ii) neither Company nor
its subsidiaries shall be required to divest any of their respective
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation that could reasonably be expected to have
a Material Adverse Effect on Company.
5.7 AFFILIATES. (a) Schedule 5.7 sets forth those persons who may be
deemed "Affiliates" of Company within the meaning of Rule 145 promulgated under
the Securities Act ("Rule 145") or applicable requirements related to pooling of
interests accounting treatment. Company shall provide Parent such information
and documents as Parent shall reasonably request for purposes of reviewing such
list. Parent shall be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement and to issue appropriate stock transfer instructions
to the transfer agent for Parent Common Stock.
(b) Company shall use commercially reasonable efforts, on behalf of
Parent and pursuant to the request of Parent, to cause each Company
stockholder named on Schedule 5.7 and each other person who may be deemed
to be an Affiliate of Company after the date of this Agreement to execute
and deliver to Parent an Affiliate Agreement in the form of Exhibit D-1
attached hereto.
(c) Parent shall use commercially reasonable efforts to cause each
person who may be deemed to be an Affiliate of Parent to execute and
deliver to Company an Affiliate Agreement in the form of Exhibit D-2
attached hereto.
5.8 LEGAL REQUIREMENTS. Each of Parent, Merger Sub and Company will, and
will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
5.9 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger. Company shall use commercially reasonable efforts to assist Parent as
may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Parent
Common Stock in connection with the Merger.
5.10 EMPLOYEE BENEFIT PLANS.
(a) At the Effective Time, the Company Stock Option Plans and each
outstanding option to purchase shares of Company Common Stock under the
Company Stock Option Plans, whether vested or unvested, will be assumed by
Parent. Schedule 5.10A hereto sets forth a true and complete list as of the
date hereof of all holders of outstanding options under the Company Stock
Option Plans, including the number of shares of Company capital stock
subject to each such option, the exercise or vesting schedule, the exercise
price per share and the term of each such option. On the Closing Date,
Company shall deliver to Parent an updated Schedule 5.10A hereto current as
of such date. Each such option so assumed by Parent under this Agreement
shall continue to have, and be subject to, the same terms and conditions
set forth in the Company Stock Option Plans and the applicable stock option
agreements, including but not limited to the performance criteria as
described in
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Schedule 5.10A, immediately prior to the Effective Time, except that (i)
such option will be exercisable 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 option immediately prior to
the Effective Time multiplied by the Exchange Ratio and 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 option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent. It is the intention
of the parties that the options so assumed by Parent qualify, to the
maximum extent permissible following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent such options
qualified as incentive stock options prior to the Effective Time. Within 20
business days after the Effective Time, Parent will issue to each person
who, immediately prior to the Effective Time was a holder of an outstanding
option under the Company Stock Option Plans a document in form and
substance satisfactory to Company evidencing the foregoing assumption of
such option by Parent.
(b) All outstanding rights of Company which it may hold immediately
prior to the Effective Time to repurchase unvested shares of Company Common
Stock (the "Repurchase Options") shall continue in effect following the
Merger and shall continue to be exercisable by Company upon the same terms
and conditions in effect immediately prior to the Effective Time, except
that the shares purchasable pursuant to the Repurchase Options and the
purchase price per shall be adjusted to reflect the Exchange Ratio.
(c) Purchase rights under the Company ESPP, and participation by
Company employees in the Parent 1989 Employee Stock Purchase Plan, as
amended (the "Parent ESPP"), shall be subject to the following:
(i) Parent shall assume all purchase rights outstanding under the
Company ESPP as of the Effective Time. Each purchase right so assumed by
Parent shall continue to have, and be subject to, the same terms and
conditions set forth in the Company ESPP and the documents governing
such purchase rights immediately prior to the Effective Time, except
that (A) the purchase price of shares of Parent Common Stock and the
number of shares of Parent Common Stock to be issued upon the exercise
of such purchase rights shall be adjusted in accordance with the
Exchange Ratio and (B) the offering period for purchase rights
outstanding under the Company ESPP as of the Effective Time shall end
and the company ESPP shall be terminated immediately prior to the next
offering period under the Parent ESPP that begins after the Effective
Time.
(ii) Company employees who meet the eligibility requirements for
participation in the Parent ESPP shall be eligible to participate in the
Parent ESPP starting with the first offering period of the Parent ESPP
that begins after the Effective Time.
(d) Except as otherwise provided herein, the employees of the Company
(the "Company Employees") shall continue to participate in the Company
Employee Plans in effect as of the Effective Time; provided, however, that
within a reasonable period (not to exceed one year after the Effective
Time) the Company Employees shall cease to participate in the Company
Employee Plans and shall be eligible to participate in the "employee
welfare benefit plans," (within the meaning of Section 3(1) and Section
3(2) of ERISA, respectively) and other benefit arrangements of Parent
("Parent Employee Plans") to the same extent as similarly situated
employees of Parent. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length
of service in any such Parent Employee Plan (other than the Parent ESPP and
Parent's stock option plans) for which a Company Employee may be eligible
after the Effective Time, Parent shall ensure that service by such Company
Employee with the Company shall be deemed to have been service with Parent.
The Company Employees shall be given credit for amounts paid under a
corresponding Company Employee Plan during the same period for purposes of
applying
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deductibles, copayments and out-of-pocket maximums as though such amounts
had been paid in accordance with the terms and conditions of the Parent
Employee Plan. For purposes of any Parent Employee Plan that is a group
health plan subject to ERISA, neither Company Employees nor their
dependents shall be excluded from coverage on account of any pre-existing
condition.
(e) Parent shall assume and honor the obligations of the Company and
its subsidiaries under all employment, severance, consulting and other
compensation contracts, arrangements, commitments or understandings that it
has to Louis Volpe as of the Closing Date. Parent hereby acknowledges that
the Merger will constitute a "Change in Control" for purposes of all the
Company Employee Plans.
(f) Within five (5) business days following the date of this
Agreement, Company shall set forth on Schedule 5.10(f) a list of all
persons who the Company reasonably believes are, with respect to the
Company and as of the date of this Agreement, "disqualified individuals"
(within the meaning of Section 280G of the Code and the regulations
promulgated thereunder). For this purpose, Company shall assume that the
fair market value of Company Common Stock is $60.50 per share. Within a
reasonable period of time after the last business day of each month after
the date of this Agreement (other than April, 1999) and on or about the
date five business days prior to the expected Closing Date, the Company
shall revise Schedule 5.10(f) to reflect the most recently available
closing price of Company Common Stock as of the last business day of such
month and to reflect any additional information which the Company
reasonably believes would impact the determination of persons who are, with
respect to the Company and as of the each such date, "disqualified
individuals" (within the meaning of Section 280G of the Code and the
regulations promulgated thereunder).
5.11 FORM S-8. Parent agrees to file as promptly as practicable, and in no
event later than thirty (30) days, after the Closing, a registration statement
on Form S-8 covering the shares of Parent Common Stock issuable pursuant to
outstanding options under the Company Stock Option Plans assumed by Parent.
Company shall cooperate with and assist Parent in the preparation of such
registration statement.
5.12 OPTION AGREEMENT. Company agrees to fully perform its obligations
under the Option Agreement.
5.13 LISTING OF ADDITIONAL SHARES. Prior to the Effective Time, Parent
shall file with the Nasdaq National Market a Notification Form for Listing of
Additional Shares with respect to the shares referred to in Section 6.1(f).
5.14 NASDAQ QUOTATION. Company and Parent agree to continue the quotation
of Company Common Stock and Parent Common Stock, respectively, on the Nasdaq
Stock Market during the term of the Agreement so that appraisal rights will not
be available to stockholders of Company under Section 262 of the Delaware Law.
5.15 EMPLOYEES. Company shall use commercially reasonable efforts to cause
each of the individuals set forth on Part A and Part B of Schedule 5.15 to
deliver to Parent an executed Employment Agreement in the form of Exhibit E-1
and Exhibit E-2, respectively.
5.16 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
pursuant to the indemnification provisions of Company's Restated
Certificate of Incorporation and Amended and Restated Bylaws and/or any
indemnification agreement with Company officers and directors to which
Company is a party, in each case in effect on the date hereof; provided
that such indemnification shall be subject to any limitation imposed from
time to time under applicable law. Without limitation of the foregoing, in
the event any person so indemnified (an "Indemnified Party") is or becomes
involved in any capacity in any claim, action, suit, proceeding or
investigation in connection with any Indemnified Liability (as defined
below), including, without limitation, any matter relating to this
Agreement or the transactions contemplated hereby, occurring on or prior to
the Effective Time, Parent shall, or shall cause the
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Surviving Corporation to, pay as incurred such Indemnified Party's
reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith to the
fullest extent permitted by the Delaware Law upon receipt of any
undertaking contemplated by Section 145(e) of the Delaware Law. Any
Indemnified Party wishing to claim indemnification under this Section 5.16,
upon learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify Parent and the Surviving Corporation (but the failure
so to notify Parent or Surviving Corporation shall not relieve it from any
liability which it may have under this Section 5.16 except to the extent
such failure prejudices such party), and shall deliver to Parent and the
Surviving Corporation the undertaking contemplated by Section 145(e) of the
Delaware Law.
(b) For a period of five years after the Effective Date, Parent shall,
and will cause Surviving Corporation to, to the fullest extent permitted
under applicable law and under the Surviving Corporation's and Parent's, as
the case may be, Articles of Incorporation and By-Laws, indemnify and hold
harmless, each present and former director and officer of Company or any of
its subsidiaries against (i) any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts
paid in settlement of or in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, or whether formal or informal, based in whole or in part on
or arising in whole or in part out of, the fact that such person is or was
a director or officer, employee, fiduciary or agent of the Company or any
of its subsidiaries, whether pertaining to any matter, action or omission
existing or occurring at or prior to the Effective Date and whether
asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities") and (ii) all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining
to this Agreement or the transactions contemplated hereby, in each case to
the full extent a corporation is permitted by law to indemnify its own
directors, officers and employees.
(c) For five years after the Effective Time, Parent will either (i) at
all times maintain at least $50,000,000 in cash, marketable securities or
unrestricted lines of credit (or any combination thereof) to be available
to indemnify the Indemnified Parties in accordance with Section 5.16(a)
above or (ii) cause the Surviving Corporation to provide officers' and
directors' liability insurance in respect of acts or omissions occurring on
or prior to the Effective Time covering each such person currently covered
by Company's officers' and directors' liability insurance policy on terms
substantially similar to those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this Section, Parent shall
not be obligated to cause the Surviving Corporation to pay premiums in
excess of 150% of the amount per annum Company paid in its last full fiscal
year, which amount Company represents was $8,700, and if the Surviving
Corporation is unable to obtain the insurance required by this Section
5.16, it shall obtain as much comparable insurance as possible for an
annual premium equal to such maximum amount.
(d) To the extent there is any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) against
an Indemnified Party that arises out of or pertains to any action or
omission in his or her capacity as director, officer, employee, fiduciary
or agent of Company, or resulting from his or her status as a director,
officer, employee, fiduciary or agent of Company, occurring prior to the
Effective Time, or arises out of or pertains to the transactions
contemplated by this Agreement (whether arising before or after the
Effective Time), in each case for which such Indemnified Party is
indemnified under this Section 5.16, such Indemnified Party shall be
entitled to be represented by counsel, which counsel shall be counsel of
Parent (provided that if use of counsel of Parent would be expected under
applicable standards of professional conduct to give rise to a conflict
between the position of the Indemnified Person and of Parent, the
Indemnified Party shall be entitled instead to be represented by counsel
selected by the Indemnified Party and reasonably acceptable to Parent) and
following the Effective Time the Surviving Corporation and Parent shall pay
the reasonable fees and expenses of such counsel, promptly after statements
therefor are received and the Surviving Corporation and Parent will
cooperate in the defense of any such matter; and provided, however, that
neither the Surviving Corporation nor Parent shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). The
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Indemnified Parties as a group may retain only one law firm (in addition to
local counsel) to represent them with respect to any single action unless
there is, under applicable standards of professional conduct, a conflict on
any significant issue between the position of any two or more Indemnified
Parties or such a conflict could reasonably be expected to arise.
(e) The provisions of this Section 5.16 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives and may not be amended, altered or repealed
without the prior written consent of the affected Indemnified Party.
5.17 POOLING ACCOUNTING. Parent and Company shall each use best efforts to
cause the business combination to be effected by the Merger to be accounted for
as a pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations. Each of Parent and Company shall use
its best efforts to cause its "Affiliates" (as defined in Section 5.7) not to
take any action that would adversely affect the ability of Parent to account for
the business combination to be effected by the merger as a pooling of interest.
5.18 TAX TREATMENT. The parties each intend that the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code and shall
use best efforts to cause the Merger to so qualify.
5.19 STOCKHOLDER LITIGATION. Unless and until Company has withdrawn its
recommendation of the Merger in compliance with Section 5.1 of this Agreement,
Company shall give Parent the opportunity to participate at its own expense in
the defense of any stockholder litigation against Company and/or its directors
relating to the transactions contemplated by this Agreement and the Option
Agreement.
5.20 COMMERCIALLY REASONABLE EFFORTS AND FURTHER ASSURANCES. Each of the
parties to this Agreement shall use its commercially reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of
Company under Delaware Law.
(b) Registration Statement Effective. The SEC shall have declared the
Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding
in respect of the Proxy Statement, shall have been initiated or threatened
by the SEC; and all requests for additional information on the part of the
SEC shall have been complied with to the reasonable satisfaction of the
parties hereto.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced
or deemed applicable to the Merger, which makes the consummation of the
Merger illegal. In the event
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an injunction or other order shall have been issued, each party agrees to
use its commercially reasonable efforts to have such injunction or other
order lifted.
(d) HSR Waiting Period. The applicable waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have
been terminated or expired.
(e) Listing of Additional Shares. The filing with the Nasdaq National
Market of a Notification Form for Listing of Additional Shares with respect
to the shares of Parent Common Stock issuable upon conversion of the
Company Common Stock in the Merger and upon exercise of the options under
the Company Stock Option Plans assumed by Parent shall have been made.
(f) Letter of Accountants. Each of Parent and Company shall have
received letters, dated as of the Closing Date, in each case addressed to
Parent and Company, from PricewaterhouseCoopers LLP, independent
accountants to Parent and Company, stating in substance that pooling of
interest accounting is appropriate for the Merger under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Company:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
Material Adverse Effect or words of similar import, which representations
and warranties as so qualified shall be true in all respects) both when
made and on and as of the Effective Time as though such representations and
warranties were made on and as of such time (except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date) and
where the failure to be true and correct does not constitute a Material
Adverse Effect on Parent) and (ii) Parent and Merger Sub shall have
performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Effective Time.
(b) Certificate of Parent. Company shall have been provided with a
certificate executed on behalf of Parent by its President and its Chief
Financial Officer certifying that the condition set forth in Section 6.2(a)
shall have been fulfilled.
(c) Tax Opinion. Company shall have received an opinion dated the
Effective Time from Testa, Hurwitz & Thibeault, LLP, counsel to Company, in
form and substance reasonably satisfactory to Company, substantially to the
effect that on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
on the Effective Time, the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code. In rendering such opinion, Testa, Hurwitz & Thibeault, LLP may
require and rely upon (and may incorporate by reference) representations
and covenants, including those contained in certificates of officers of
Parent, Company, Merger Sub and others. Company shall have received
executed copies of the certificates of officers and directors of Parent,
Company and Merger Sub that may reasonably be required by counsel in
connection with the tax opinion referred to in this Agreement.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Company in this Agreement shall be true and correct in
all material respects (except for such
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representations and warranties that are qualified by their terms by a
reference to materiality, Material Adverse Effect or words of similar
import, which representations and warranties as so qualified shall be true
in all respects) both when made and on and as of the Effective Time as
though such representations and warranties were made on and as of such time
(except (x) for those representations and warranties which address matters
only as of a particular date (which shall remain true and correct as of
such date) and (y) where the failure to be true and correct does not
constitute a Material Adverse Effect on the Company) and (ii) Company shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Certificate of Company. Parent shall have been provided with a
certificate executed on behalf of Company by its President and Chief
Financial Officer certifying that the condition set forth in Section 6.3(a)
shall have been fulfilled.
(c) Injunctions or Restraints on Conduct of Business. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction limiting or restricting, or
other legal or regulatory restraint provision materially limiting or
restricting, Parent's conduct or operation of the business of Company and
its subsidiaries, following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(d) Employment and Non-Competition Agreements/Waivers. At least 75% of
the employees of Company set forth on Part A of Schedule 5.15 and all of
the employees of Company set forth on Part B of Schedule 5.15 shall have
accepted employment with Parent and shall have entered into an Employment
and Non-Competition Agreement substantially in the form attached hereto as
Exhibit E.
(e) Tax Opinion. Parent shall have received an opinion dated the
Effective Time from Brobeck, Phleger & Harrison LLP, counsel to Parent and
Merger Sub, in form and substance reasonably satisfactory to Parent and
Merger Sub, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing on the Effective Time, the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such
opinion, Brobeck, Phleger & Harrison LLP may require and rely upon (and may
incorporate by reference) representations and covenants, including those
contained in certificates of officers of Parent, Company, Merger Sub and
others. Parent shall have received executed copies of the certificates of
officers and directors of Parent, Company and Merger Sub that may
reasonably be required by counsel in connection with the tax opinion
referred to in this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of Company, this Agreement may be terminated:
(a) by mutual consent of Parent and Company;
(b) by either Parent or Company, if, without fault of the terminating
party, the Closing shall not have occurred on or before September 30, 1999
or such later date as may be agreed upon in writing by the parties hereto
(the "Final Date"); provided, however, that the Final Date shall be
extended to December 31, 1999 in the event that if the only reason the
Closing shall not have occurred by September 30, 1999 is the failure of the
conditions set forth in Section 6.1(b) and/or Section 6.1(d) (although such
extension shall not occur if the failure of such conditions has been caused
or resulted from one party's action or failure to act constituting a breach
of this Agreement and the other party does not consent to such extension);
provided, further, that the right to terminate this Agreement
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under this Section 7.1(b) shall not be available to any party whose action
or failure to act has been the cause of or resulted in the failure of the
Merger to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement;
(c) by Parent, if (i) Company shall breach any of its representations,
warranties or obligations hereunder to an extent that would cause the
condition set forth in Section 6.3(a) not to be satisfied and such breach
shall not have been cured within five business days of receipt by Company
of written notice of such breach from Parent, (ii) the Board of Directors
of Company shall have withdrawn or modified its recommendation of this
Agreement or the Merger in a manner adverse to Parent or shall have
resolved to do so, (iii) Company shall have failed to comply with Section
4.3, (iv) the Board of Directors of Company shall have recommended,
endorsed, accepted or agreed to a Takeover Proposal or shall have resolved
to do so, or (v) for any reason Company fails to call the Company
Stockholders Meeting by September 10, 1999 or, in the event the condition
set forth in Section 6.1(b) shall not have been satisfied by August 31,
1999 under circumstances in which it can be reasonably expected that the
Final Date will be extended pursuant to the proviso set forth in Section
7.1(b), December 10, 1999;
(d) by Company, if Parent shall breach any of its representations,
warranties or obligations hereunder to an extent that would cause the
condition set forth in Section 6.2(a) not to be satisfied and such breach
shall not have been cured within five business days following receipt by
Parent of written notice of such breach from Company;
(e) by Parent if a Trigger Event (as defined in Section 7.3(e)) or
Takeover Proposal shall have occurred and the Board of Directors of Company
in connection with such Trigger Event or Takeover Proposal, does not within
six (6) business days (or, in the event of a tender offer or exchange
offer, ten (10) business days) of such occurrence (i) reconfirm its
approval and recommendation of this Agreement and the transactions
contemplated hereby and (ii) reject such Takeover Proposal or Trigger Event
(in the case of a Trigger Event involving a tender or exchange offer); or
(f) by either Parent or Company if (i) any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable or
(ii) if any required approval of the stockholders of Company shall not have
been obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders or at any adjournment
thereof.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or Company
or their respective officers, directors, stockholders or affiliates, except (i)
the provisions of Section 5.4 (Confidentiality), Section 7.3 (Expenses and
Termination Fees) and this Section 7.2 shall remain in full force and effect and
survive any termination of this Agreement and (ii) nothing herein shall relieve
any party from liability for fraud or willful breach in connection with this
agreement or the transactions contemplated hereby.
7.3 EXPENSES AND TERMINATION FEES.
(a) Subject to subsections (b), (c), (d) and (e) of this Section 7.3,
whether or not the Merger is consummated, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense, except that expenses incurred in connection with printing the
Proxy Materials and the Registration Statement, registration and filing
fees incurred in connection with the Registration Statement, the Proxy
Materials and the listing of additional shares pursuant to Section 6.1(f)
and fees, costs and expenses associated with compliance with applicable
state securities laws in connection with the Merger shall be shared equally
by Company and Parent.
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(b) In the event that (i) Parent shall terminate this Agreement
pursuant to Section 7.1(e), (ii) Parent shall terminate this Agreement
pursuant to Section 7.1(c)(iii) as a result of the failure by Company
through its, or otherwise by, the officers, directors or advisors of the
Company, or any person authorized by such persons, to comply with the
requirements of Section 4.3, (iii) Parent shall terminate this Agreement
pursuant to Section 7.1(c)(iv) and at the time of such recommendation,
endorsement, acceptance or agreement under Section 7.1(c)(iv) there shall
not exist circumstances giving rise to a Material Adverse Effect on Parent,
(iv) Parent (or, in the case of Section 7.1(f)(ii), Company) shall
terminate this Agreement pursuant to Section 7.1(c)(ii) or 7.1(f)(ii) and,
prior to such withdrawal, modification or stockholder rejection, there
shall have been (A) a Trigger Event with respect to Company or (B) a
Takeover Proposal with respect to Company which at the time of such
withdrawal, modification or stockholder rejection shall not have been (x)
rejected by Company or (y) withdrawn by the third party and at the time of
such withdrawal, modification or stockholder rejection, there shall not
exist circumstances giving rise to a Material Adverse Effect on Parent, or
(v) Parent (or, in the case of Section 7.1(b), Company) shall terminate
this Agreement pursuant to Section 7.1(b), 7.1(c)(i) or 7.1(c)(v), due
primarily to any failure by Company to use commercially reasonable efforts
to perform and comply with all agreements and conditions required by this
Agreement to be performed or complied with by Company prior to or on the
Closing Date or any failure by Company's affiliates to take any actions
required to be taken hereby, and prior thereto there shall have been (A) a
Trigger Event with respect to Company or (B) a Takeover Proposal with
respect to Company which shall not have been (x) rejected by Company or (y)
withdrawn by the third party, then Company shall promptly pay to Parent the
sum of $55 million (the "Termination Fee") pursuant to this Section 7.3(b)
if Parent terminates this Agreement pursuant to clauses (i), (ii), (iii),
(iv) or (v) above within five business days of the occurrence of the event
giving Parent the right to so terminate this Agreement.
(c) If no payment shall have been required pursuant to Section 7.3(b),
in the event that (i) Parent (or, in the case of Section 7.1(b), Company)
shall terminate this Agreement pursuant to Section 7.1(b) or Section
7.1(c)(v) under the circumstances described in Section 7.3(b)(v) (but
replacing the word "or" between clauses (x) and (y) thereof with the word
"and"), (ii) Parent shall terminate this Agreement pursuant to Section
7.1(c)(i) under circumstances not described in Section 7.3(b)(iv), (iii)
Parent shall terminate this Agreement pursuant to Section 7.1(f)(ii) under
circumstances not described in Section 7.3(b)(iv) (other than the
circumstance that prior to the time of the meeting of Company's
stockholders, (x) either (A) no Takeover Proposal or Trigger Event with
respect to Company shall have occurred (whether or not rejected or
withdrawn prior to such meeting) or (B) each Takeover Proposal or Trigger
Event occurring prior to such meeting shall have been rejected by Company
and withdrawn by the third party and after the latest to occur of such
rejections and/or withdrawals there shall have occurred circumstances
giving rise to a Material Adverse Effect on Parent and (y) there shall have
been no failure by Company to use commercially reasonable efforts to
perform and comply with all agreements and conditions required by this
Agreement to be performed or completed by Company prior to or on the
Closing Date), (iv) Parent shall terminate this Agreement pursuant to
Section 7.1(c) (ii) under circumstances not described in Section 7.3(b)(iv)
and at the time of such withdrawal or modification there shall not exist
circumstances giving rise to a Material Adverse Effect on Parent, or (v)
this Agreement shall be terminated under the circumstances described in
Section 7.3(b) other than the requirement under Section 7.3(b) that Parent
terminate this Agreement within five business days of the occurrence of the
events described therein, the Company shall promptly reimburse Parent for
all of the out-of-pocket costs and expenses incurred by Parent in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel); and, in the event (A) any Takeover Proposal
is consummated by or with any person that made a Takeover Proposal prior to
termination of this Agreement or that caused a Trigger Event prior to such
termination, or any affiliate of any such person, within nine months, or
(B) any other Takeover Proposal not described in clause (A) is consummated
within twelve months, of the later of (x) such termination of this
Agreement and (y) the payment of the above-described
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expenses, Company shall promptly pay to Parent the additional sum equal to
the Termination Fee (less the amount of Parent's costs and expenses
previously reimbursed by Company pursuant to this Section 7.3(c)).
(d) In the event that Company shall terminate this Agreement pursuant
to Section 7.1(d) Parent shall promptly reimburse Company for all of the
out-of-pocket costs and expenses incurred by Company in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
(e) As used herein, a "Trigger Event" shall occur if any Person (as
that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) acquires securities representing 20% or
more, or commences a tender or exchange offer, open market purchase program
or other publicly announced initiative following the successful
consummation of which the offeror and its affiliate would beneficially own
securities representing 20% or more, of the voting power of Company;
provided, however, a Trigger Event shall not be deemed to include the
acquisition by any Person of securities representing 20% or more of Company
if such Person has acquired such securities not with the purpose nor with
the effect of changing or influencing the control of Company, nor in
connection with or as a participant in any transaction having such purpose
or effect, including without limitation not in connection with such Person
(i) making any public announcement with respect to the voting of such
shares at any meeting to consider any merger, consolidation, sale of
substantial assets or other business combination or extraordinary
transaction involving Company, (ii) making, or in any way participating in,
any "solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the Exchange Act) to vote any voting securities of
Company (including, without limitation, any such solicitation subject to
Rule 14a-11 under the Exchange Act) or seeking to advise or influence any
Person with respect to the voting of any voting securities of Company,
directly or indirectly, relating to a merger or other business combination
involving Company or the sale or transfer of a significant portion of
assets (excluding the sale or disposition of assets in the ordinary course
of business) of Company, (iii) forming, joining or in any way participating
in any "group" within the meaning of Section 13(d)(3) of the Exchange Act
with respect to any voting securities of Company, directly or indirectly,
relating to a merger or other business combination involving Company or the
sale or transfer of a significant portion of assets (excluding the sale or
disposition of assets in the ordinary course of business) of Company, or
(iv) otherwise acting, alone or in concert with others, to seek control of
Company or to seek to control or influence the management or policies of
Company.
(f) For purposes of this Agreement, "Takeover Proposal" means any
offer or proposal for a merger or other business combination involving
Company or any of its subsidiaries or the acquisition of 20% or more of the
outstanding shares of capital stock of Company, or a significant portion of
the assets of, Company or any of its subsidiaries, other than the Merger.
7.4 AMENDMENT. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Company or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Company Common Stock, (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
materially adversely affect the holders of Company Common Stock or Merger Sub
Common Stock.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a
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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.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL AT EFFECTIVE TIME. The representations, warranties and
agreements set forth in this Agreement shall terminate at the Effective Time,
except that the agreements set forth in Article I, Section 5.4
(Confidentiality), 5.11(S-8), 5.16 (Indemnification), 5.17 (Pooling Accounting),
5.18 (Tax Treatment), 5.20 (Commercially Reasonable Efforts and Further
Assurances), 7.3 (Expenses and Termination Fees), 7.4 (Amendment), and this
Article VIII shall survive the Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) 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 or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Attention: President
Facsimile No.: (408) 526-4914
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Therese A. Mrozek
Facsimile No.: (650) 496-2885
(b) if to Company, to:
GeoTel Communications Corporation
900 Chelmsford Street
Tower II, Floor 12
Lowell, MA 01851
Attention: President
Facsimile No.: (978) 275-5399
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attention: Mark J. Macenka
Facsimile No.: (617) 248-7100
8.3 INTERPRETATION. When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by
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the words "without limitation." The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. 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.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent Disclosure
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, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(c) and (f), 1.7-1.9 and 5.16; and (c) shall not be assigned by operation
of law or otherwise except as otherwise specifically provided.
8.6 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 REMEDIES CUMULATIVE. 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.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware other than principles of
conflicts of law. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any court located within the State of Delaware in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation 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.
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IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ JOHN C. THIBAULT
------------------------------------
Name: John C. Thibault
------------------------------------
Title: President and CEO
------------------------------------
CISCO SYSTEMS, INC.
By: /s/ LARRY R. CARTER
------------------------------------
Name: Larry R. Carter
------------------------------------
Title: Senior VP, Finance and
Administration,
Chief Financial Officer and
Secretary
-------
GERONIMO MERGER CORP.
By: /s/ DANIEL SCHEINMAN
------------------------------------
Name: Daniel Scheinman
------------------------------------
Title: VP, Legal and Government
Affairs
------------------------------------
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APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of April 12, 1999, by
and between, Cisco Systems, Inc., a California corporation ("Parent"), and
GeoTel Communications Corporation, a Delaware corporation ("Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Company, Parent and Geronimo Merger Corp., a Delaware corporation and wholly
owned subsidiary of Parent ("Merger Sub"), are entering into an Agreement and
Plan of Merger and Reorganization, dated as of the date hereof (the
"Reorganization Agreement"), which provides that, among other things, upon the
terms and subject to the conditions thereof, Merger Sub will be merged with and
into Company (the "Merger"), with Company continuing as the surviving
corporation; and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into the Reorganization Agreement, Parent has required that Company agree, and
Company has so agreed, to grant to Parent an option with respect to certain
shares of Company's common stock on 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,
the parties hereto agree as follows:
I. Grant of Option. Company hereby grants Parent an irrevocable option (the
"Company Option") to purchase up to 3,000,000 shares (the "Company Shares") of
common stock, par value $.01 per share, of Company (the "Company Common Stock")
in the manner set forth below at a price (the "Exercise Price") of $60.50 per
Company share, payable in cash. Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Reorganization Agreement.
II. Exercise of Option. The Company Option may be exercised by Parent, in
whole or in part at any time or from time to time after (i) the occurrence of
any of the events described in Sections 7.3(b) of the Reorganization Agreement
or (ii) immediately prior to the consummation of a takeover proposal which
obligates company to pay Parent the Termination Fee pursuant to Section 7.3(c)
of the Reorganization Agreement. In the event Parent wishes to exercise the
Company Option, Parent shall deliver to Company a written notice (an "Exercise
Notice") specifying the total number of Company shares it wishes to purchase.
Each closing of a purchase of Company shares (a "Closing") shall occur at a
place, on a date and at a time designated by Parent in an Exercise Notice
delivered at least two business days prior to the date of the closing. The
Company Option shall terminate upon the earlier of: (i) the Effective Time; (ii)
the termination of the Reorganization Agreement pursuant to Section 7.1 thereof
(other than a termination in connection with which Parent is entitled to any
payments as specified in Sections 7.3(b) or (c) thereof); (iii) 180 days
following any termination of the Reorganization Agreement in connection with
which Parent is entitled to a payment as specified in Section 7.3(b) thereof (or
if, at the expiration of such 180 day period, the Company Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, ten business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal); or (iv) 180 days
following the occurrence of any event in connection with which Parent has become
entitled to payment of the Termination Fee pursuant to Section 7.3(c) of the
Reorganization Agreement (or if, at the expiration of such 180 day period, the
Company Option cannot be exercised by reason of any applicable judgment, decree,
order, law or regulation, ten business days after such impediment to exercise
shall have been removed or shall have become final and not subject to appeal).
Notwithstanding the foregoing, the Company Option may not be exercised if Parent
is in breach in any material respect of any of its covenants or agreements
contained in the Reorganization Agreement.
III. Conditions to Closing. The obligation of Company to issue the Company
Shares to Parent hereunder is subject to the conditions that (i) all waiting
periods, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder
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("HSR Act"), applicable to the issuance of the Company Shares hereunder shall
have expired or have been terminated; (ii) all 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 Company Shares hereunder shall have been obtained or
made, as the case may be; and (iii) no preliminary or permanent injunction or
other order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect.
IV. Closing. At any closing, (a) 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, and (b)
Parent will deliver to Company the aggregate price for the Company Shares so
designated and being purchased by wire transfer of immediately available funds
or certified check or bank check. At any Closing at which Parent is exercising
the Company Option in part, Parent shall present and surrender this agreement to
Company, and Company shall deliver to Parent an executed new agreement with the
same terms as this agreement evidencing the right to purchase the balance of the
shares of Company Common Stock purchasable hereunder.
V. Representations and Warranties of 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
Company and the consummation by Company of the transactions contemplated hereby
have been duly 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 or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Company and constitutes a
valid and binding obligation of Company, and, assuming this Agreement
constitutes a valid and binding obligation of Parent, is enforceable against
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy and other laws affecting the rights and remedies of creditors
generally and general principles of equity, (d) except for any filings as may be
required by the HSR Act, Company has taken all necessary corporate action to
authorize and reserve for issuance and to permit it to issue, upon exercise of
the Company Option, and at all times from the date hereof through the expiration
of the Company Option will have reserved, that number of unissued Company Shares
that are subject to the Company 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 to Parent
upon the exercise of the Company Option, Parent will acquire the Company Shares
free and clear of all material claims, liens, charges, encumbrances and security
interests of any nature whatsoever except those imposed by Parent, (f) except as
may be required under the Securities Act of 1933, as amended (the "Securities
Act"), the execution and delivery of this agreement by Company does not, and the
performance of this Agreement by Company will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets pursuant to (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation"), (A) any provision of the
certificate of incorporation, as amended, or Amended and Restated By-laws, as
amended, of company or (B) any provisions of any material mortgage, indenture,
lease, contract or other agreement, instrument, permit, concession, franchise,
or license or (C) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to company or its properties or assets, except in the case
of clauses (B) and (C) above, for violations which would not, individually or in
the aggregate, have a Material Adverse Effect on Company and its subsidiaries
taken as a whole, and (g) except as described in Section 2.3 of the
Reorganization Agreement, the execution and delivery of this Agreement by
Company does not, and the performance of this Agreement by Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority except pursuant to the
HSR Act.
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VI. Representations and Warranties of Parent. Parent represents and
warrants to Company that (a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of California 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
Parent and the consummation by Parent of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and no other corporate proceedings on the part of Parent are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Parent and constitutes a
valid and binding obligation of Parent, and, assuming this Agreement constitutes
a valid and binding obligation of Company, is enforceable against Parent in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other laws affecting the rights and remedies of creditors generally and
general principles of equity, (d) except as described in Section 3.3 of the
Reorganization Agreement, the execution and delivery of this Agreement by Parent
does not, and the performance of this Agreement by Parent will not, result in
any violation pursuant to, (A) any provision of the Articles of Incorporation or
By-laws of Parent, (B) any provisions of any material mortgage, indenture,
lease, contract or other agreement, instrument, permit, concession, franchise,
or license or (C) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or its properties or assets, except in the case
of clauses (B) and (C) above, for violations which would not, individually or in
the aggregate, have a Material Adverse Effect on Parent and its subsidiaries,
taken as a whole, (e) except as described in Section 3.3 of the Reorganization
Agreement and Section 3(i) of this Agreement, and except as may be required
under the Securities Act, the execution and delivery of this agreement by Parent
does not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority and (f) any Company Shares acquired
upon exercise of the Company Option will not be, and the Company Option is not
being, acquired by Parent with a view to the public distribution thereof and
Parent will not sell or otherwise dispose of such shares in violation of
applicable law or this Agreement.
VII. PUT AND CALL.
A. Exercise. At any time during which the Company Option is exercisable
pursuant to Section 2 (the "Repurchase Period"), upon demand by Parent, Parent
shall have the right to sell to Company (or any successor entity thereof), and
Company (or such successor entity) shall be obligated to repurchase from Parent
(the "Put"), and upon demand by Company, Company (or any successor entity
thereof) shall have the right to purchase from Parent and Parent shall be
obligated to sell to Company (or any successor entity) (the "Call"), all or any
portion of the Company Option, to the extent not previously exercised, at the
price set forth in subparagraph (i) below, or all or any portion of the Company
Shares purchased by Parent pursuant thereto, at a price set forth in
subparagraph (ii) below:
i. the difference between the "Market/Tender Offer Price" for shares
of Company Common Stock as of the date (the "Notice Date") notice of
exercise of the Put or the Call, as the case may be, is given to the other
party (defined as the higher of (A) the price per share offered as of the
Notice Date pursuant to any tender or exchange offer or other Takeover
Proposal (as defined in the Reorganization Agreement) which was made prior
to the Notice Date and not terminated or withdrawn as of the Notice Date
(the "Tender Price") or (B) the average of the closing prices of shares of
Company Common Stock on the Nasdaq National Market for the ten trading days
immediately preceding the Notice Date (the "Market Price")), and the
Exercise Price, multiplied by the number of Company Shares purchasable
pursuant to the Company Option (or portion thereof with respect to which
Parent is exercising its rights under this Section 7), but only if the
Market/ Tender Offer Price is greater than the Exercise Price;
ii. the Exercise Price paid by Parent for the Company Shares acquired
pursuant to the Company Option plus the difference between the
Market/Tender Offer Price and the Exercise Price, but only if the
Market/Tender Offer Price is greater than the Exercise Price, multiplied by
the number of Company Shares so purchased.
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iii. Notwithstanding subparagraphs (i) and (ii) above, in no event
shall the proceeds payable to Parent pursuant to this Section 7 exceed the
sum of (x) $75,000,000 plus (y) the Exercise Price multiplied by the number
of Company Shares purchased minus (z) any amount paid or payable to Parent
by Company pursuant to Section 7.3(b) or Section 7.3(c) of the
Reorganization Agreement.
For purposes of this Section 7(a), the Tender Price shall be the highest
price per share offered pursuant to a tender or exchange offer or other Takeover
Proposal during the Repurchase Period.
B. Payment and Redelivery of Company Option or Shares. In the event Parent
or Company exercises its rights under this Section 7, Company shall, within ten
business days of the Notice Date, pay the required amount to Parent in
immediately available funds and Parent shall surrender to Company the Company
Option or the certificates evidencing the Company Shares purchased by Parent
pursuant thereto, and Parent shall represent and warrant that it owns such
shares and that such shares are then free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever.
VIII. REGISTRATION RIGHTS.
A. Following any exercise of the Company Option, Parent may by written
notice (the "Registration Notice") to Company request Company to register under
the Securities Act all or any part of the shares of Company Common Stock
acquired pursuant to this Agreement (the "Restricted Shares") beneficially owned
by Parent (the "Registrable Securities") in order to permit the sale or other
distribution of such Registrable Securities pursuant to a bona fide firm
commitment underwritten public offering in which Parent and the underwriters
shall effect as wide a distribution of such Registrable Securities as is
reasonably practicable and shall use commercially reasonable efforts to prevent
any Person (including any Group) and its affiliates from purchasing through such
offering Restricted Shares representing more than 10% of the outstanding shares
of Common Stock of Company on a fully diluted basis (a "Permitted Offering");
provided, further, that any such Registration Notice must relate to a number of
shares equal to at least 2% of the outstanding shares of Company Common Stock
and that any rights to require registration hereunder shall terminate with
respect to any Shares that may be sold pursuant to Rule 144(k) under the
Securities Act. The Registration Notice shall include a certificate executed by
Parent and its proposed managing underwriter, which underwriter shall be an
investment banking firm of nationally recognized standing (the "Manager"),
stating that (i) they have a good faith intention to commence promptly a
Permitted Offering and (ii) the Manager in good faith believes that, based on
the then prevailing market conditions, it will be able to sell the Registrable
Securities at a per share price equal to at least 70% of the Fair Market Value
of such shares. For purposes of this Section 8, the term "Fair Market Value"
shall mean the per share average of the closing sale prices of Company's Common
Stock on the Nasdaq National Market for the ten trading days immediately
preceding the date of the Registration Notice.
B. Company shall use commercially reasonable efforts to effect, as promptly
as practicable, the registration under the Securities Act of the unpurchased
Registrable Securities; provided, however, that (i) Parent shall not be entitled
to more than an aggregate of two effective registration statements hereunder and
(ii) Company will not be required to file any such registration statement during
any period of time (not to exceed 45 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when (A)
Company is in possession of material non-public information which it reasonably
believes would be detrimental to be disclosed at such time and, based on
consultation with counsel to Company, such information would have to be
disclosed if a registration statement were filed at that time; (B) Company is
required under the Securities Act to include audited financial statements for
any period in such registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (C) Company
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving Company
or any of its affiliates. If consummation of the sale of any Registrable
Securities pursuant to a registration hereunder does not occur within 180 days
after the filing with the SEC of the initial registration statement, the
provisions of this Section 8 shall again be applicable to any proposed
registration; provided, however, that Parent shall not be entitled to request
more than two registrations
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pursuant to this Section 8. Company shall use commercially reasonable efforts to
cause any Registrable Securities registered pursuant to this Section 8 to be
qualified for sale under the securities or Blue Sky laws of such jurisdictions
as Parent may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that Company
shall not be required to qualify to do business in, or consent to general
service of process in, any jurisdiction by reason of this provision.
C. The registration rights set forth in this Section 8 are subject to the
condition that Parent shall provide Company with such information with respect
to Parent's Registrable Securities, the plans for the distribution thereof, and
such other information with respect to Parent as, in the reasonable judgment of
counsel for Company, is necessary to enable Company to include in such
registration statement all material facts required to be disclosed with respect
to a registration thereunder.
D. If Company's securities of the same type as the Registrable Securities
are then authorized for quotation or trading or listing on the New York Stock
Exchange, Nasdaq National Market System, or any other securities exchange or
automated quotations system, Company, upon the request of Parent, shall promptly
file an application, if required, to authorize for quotation, trading or listing
the shares of Registrable Securities on such exchange or system and will use its
reasonable efforts to obtain approval, if required, of such quotation, trading
or listing as soon as practicable.
E. A registration effected under this Section 8 shall be effected at
Company's expense, except for underwriting discounts and commissions and fees
and expenses of counsel to Parent, and Company shall provide to the underwriters
such documentation (including certificates, opinions of counsel and "comfort"
letters from auditors) as are customary in connection with underwritten public
offerings as such underwriters may reasonably require. In connection with any
such registration, the parties agree (i) to indemnify each other and the
underwriters in the customary manner and (ii) to enter into an underwriting
agreement in form and substance customary to transactions of this type with the
Manager and the other underwriters participating in such offering.
IX. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
A. In the event of any change in Company Common Stock by reason of stock
dividends, splitups, mergers (other than the Merger), recapitalizations,
combinations, exchange of shares or the like, the type and number of shares or
securities subject to the Company Option, and the purchase price per share
provided in Section 1, shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction so that Parent shall
receive, upon exercise of the Company Option, the number and class of shares or
other securities or property that Parent would have received in respect of the
Company Common Stock if the Company Option had been exercised immediately prior
to such event or the record date therefor, as applicable.
B. In the event that Company shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Parent or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Parent or one of
its subsidiaries, to merge into Company and Company shall be the continuing or
surviving corporation, but, in connection with such merger, in the
then-outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of Company or any other person or cash
or any other property or the outstanding shares of Company Common Stock
immediately prior to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged company; or (iii)
to sell or otherwise transfer all or substantially all of its assets to any
person, other than Parent or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that upon the consummation of any such transaction and upon the terms and
conditions set forth herein, Parent shall receive for each Company Share with
respect to which the Company Option has not been exercised an amount of
consideration in the form of and equal to the per share amount of consideration
that would be received by the holder of one share of Company Common Stock less
the Exercise Price (and, in the event of an election or similar arrangement with
respect to the type of consideration to be received by the holders of Company
Common Stock, subject to the foregoing, proper provision shall be made so that
the holder of the Company Option would have the same election or
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similar rights as would the holder of the number of shares of Company Common
Stock for which the Company Option is then exercisable).
X. Restrictive Legends. Each certificate representing shares of Company
Common Stock issued to Parent hereunder shall include a legend in substantially
the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may be reoffered or sold only
if so registered or if an exemption from such registration is available. Such
securities are also subject to additional restrictions on transfer as set forth
in the stock option agreement, dated as of April 12, 1999, a copy of which may
be obtained from the issuer.
XI. Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor the rights or the obligations of
either party hereto are assignable, except by operation of law, or with the
written consent of the other party. Nothing contained in this Agreement, express
or implied, is intended to confer upon any person other than the parties hereto
and their respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement. Any Restricted Shares sold by Parent in
compliance with the provisions of Section 8 shall, upon consummation of such
sale, be free of the restrictions imposed with respect to such shares by this
Agreement, unless and until Parent shall repurchase or otherwise become the
beneficial owner of such shares, and any transferee of such shares shall not be
entitled to the rights of Parent. Certificates representing shares sold in a
registered public offering pursuant to Section 8 shall not be required to bear
the legend set forth in Section 10.
XII. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of this Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
XIII. Entire Agreement. This Agreement and the Reorganization Agreement
(including the Company disclosure schedule and the Parent disclosure schedule
relating thereto) constitute the entire Agreement among the parties with respect
to the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
XIV. Further Assurance. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
XV. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of 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. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this agreement or
part hereof as the result of such holding or order.
XVI. Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
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telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder.
A. if to Parent or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Attention: President
Facsimile No.: (408) 526-4914
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Therese M. Mrozek
Facsimile No.: (415) 496-2885
B. if to Company, to:
GeoTel Communications Corporation
900 Chelmsford Street
Tower II, Floor 12
Lowell, MA 01851
Attention: President
Facsimile No.: (978) 275-5399
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attention: Mark J. Macenka
Facsimile No.: (617) 248-7100
XVII. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such state without regard to any applicable
conflicts of law rules.
XVIII. Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
XIX. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
XX. 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 shall be paid by the party incurring
such expenses.
XXI. 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.
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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.
CISCO SYSTEMS, INC.
By: /s/ LARRY R. CARTER
------------------------------------
Name: Larry R. Carter
Title: Senior VP, Finance and
Administration,
Chief Financial Officer and
Secretary
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ JOHN C. THIBAULT
------------------------------------
Name: John C. Thibault
Title: President & CEO
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
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