<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
(RULE 13d-101)
ADVANCED LOGIC RESEARCH, INC.
(NAME OF SUBJECT COMPANY)
DEUCE ACQUISITION CORPORATION
GATEWAY 2000, INC.
(BIDDERS)
COMMON STOCK PAR VALUE $.01
(TITLE OF CLASS OF SECURITIES)
00 7948102
(CUSIP NUMBER OF CLASS OF SECURITIES)
William M. Elliott, Esq.
Gateway 2000, Inc.
610 Gateway Drive
N. Sioux City, SD 57049
(605) 232-2000
_______________
Copy to:
Barry L. Dastin, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, 16th Floor
Los Angeles, CA 90067
(310) 788-1000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
JUNE 19, 1997
(DATE OF EVENT WHICH REQUIRES FILING OF STATEMENT ON SCHEDULE 13D)
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction valuation: $200,600,214* Amount of filing fee: $40,120
- --------------------------------------------------------------------------------
* For purposes of calculating amount of fee only. This amount assumes the
purchase of 13,140,836 shares of Common Stock, par value $.01 per share, of
Advanced Logic Research, Inc. at a price of $15.50 per share. Such number
of shares represents all outstanding shares as of June 19, 1997 and assumes
the exercise of all outstanding vested employee stock options, less the
exercise price of such options.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11
(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
----------------- ----------------
Form or Registration No.: N/A Date Filed: N/A
--------------- ----------------
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Exhibit Index is located on Page 9
Page 1 of 9 Pages
<PAGE>
14D-1 AND 13D
CUSIP No. 00 7948102
----------
- --------------------------------------------------------------------------------
1. Name of Reporting Persons: Deuce Acquisition Corporation
S.S. or I.R.S. Identification Nos. of Above Persons
95-4639816
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of Group (See Instructions)
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds (See Instructions)
WC
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE, U.S.A.
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person*
5,326,569*
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
42%
- --------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
CO
Page 2 of 9 Pages
<PAGE>
14D-1 AND 13D
CUSIP No. 00 7948102
----------
- --------------------------------------------------------------------------------
1. Name of Reporting Persons: Gateway 2000, Inc.
S.S. or I.R.S. Identification Nos. of Above Persons
42-1249184
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of Group (See Instructions)
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds (See Instructions)
WC
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE, U.S.A.
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person*
5,326,569*
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
(See Instructions) [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
42%
- --------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
CO
Page 3 of 9 Pages
<PAGE>
* This Statement on Schedule 14D-1 relates to the offer by Deuce Acquisition
Corporation, a Delaware corporation ("Purchaser" or "Deuce Acquisition") and
wholly-owned subsidiary of Gateway 2000, Inc., a Delaware corporation
("Parent"), to purchase all outstanding shares of common stock, par value $.01
per share (the "Shares"), of Advanced Logic Research, Inc. (the "Company"), at a
price of $15.50 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated June 24, 1997 (the
"Offer to Purchase"), and related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a)(1) and (a)(2), respectively.
On June 19, 1997, Purchaser, Parent and the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which, subject
to certain terms and conditions, Purchaser agreed to commence the Offer to
Purchase and following purchase of Shares pursuant thereto, to merge with the
Company. In connection with the Merger Agreement, Purchaser and certain
stockholders of the Company beneficially owning in the aggregate 5,326,569
Shares (representing approximately 42% of the issued and outstanding Shares and
approximately 38% of the Shares on a fully diluted basis) entered into a
Stockholders Agreement (the "Stockholders Agreement"), pursuant to which, among
other things, each such stockholder has agreed (i) to vote the Shares then owned
by such stockholder in favor of the approval and adoption of the Merger
Agreement, the Merger (as defined in the Merger Agreement) and all the
transactions contemplated by the Merger Agreement and the Stockholders Agreement
and any other actions required in furtherance thereof and against any Competing
Transaction (as defined in the Merger Agreement) and any actions in furtherance
thereof during the period specified therein, (ii) to grant Purchaser an
irrevocable proxy to vote and otherwise act with respect to such Shares on the
matters set forth in the previous clause (i), (iii) to tender all Shares then
owned by such stockholder to Purchaser in accordance with the Offer as soon as
practicable (and in any event within five business days of the commencement of
the Offer) and (iv) to grant an option to purchase such Shares at a price of
$15.50 per Share, under certain circumstances. The full text of the Merger
Agreement and the Stockholders Agreement has been filed as exhibits to this
Schedule 14D-1 and 13D, and are incorporated herein by reference.
This Statement on Schedule 14D-1 also constitutes a Statement on Schedule
13D with respect to the acquisition by Purchaser of beneficial ownership of the
Shares subject to the Stockholders Agreement. The item numbers and responses
thereto below are in accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
- ------- ----------------------------
(a) The name of the subject company is Advanced Logic Research, Inc., a
Delaware corporation (the "Company"), which has its principal executive offices
at 9401 Jeronimo Road, Irvine, California 92618.
(b) This Statement on Schedule 14D-1 relates to the offer by Purchaser, or
Deuce Acquisition, to purchase all outstanding Shares of the Company, at $15.50
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase and related Letter of Transmittal,
copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
Based upon information provided by the Company there are 12,552,951 Shares
outstanding as of June 19, 1997. The information set forth in the introduction
of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in "Section 6. Price Range of the Shares" of
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
- ------- -----------------------
(a)-(d), (g) This statement is being filed by Parent and Purchaser. The
information concerning the name, state or other place of organization, its
principal business and the address of its principal office with respect to each
of Parent and Purchaser set forth in the Introduction and "Section 8. Certain
Information Concerning Purchaser and Parent" of the Offer to Purchase is
incorporated herein by reference.
Page 4 of 9 Pages
<PAGE>
(e)-(f) During the last five years, neither the Purchaser nor Parent nor,
to the best knowledge of the Purchaser and Parent, any of the persons listed on
Schedule I to the Offer to Purchase, has (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
- ------- --------------------------------------------------------------------
(a)-(b) The information set forth in "Section 10. Background of the Offer;
Contacts with the Company; Merger Agreement; Stockholders Agreement; Retention
Agreement" of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
- ------- -------------------------------------------------
(a) The information set forth in "Section 9. Financing of the Offer and the
Merger" of the Offer to Purchase is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
- ------- ----------------------------------------------------------------
(a)-(e) The information set forth and in "Section 10. Background of the
Offer; Contacts with the Company; Merger Agreement; Stockholders Agreement;
Retention Agreement" and "Section 11. Purpose of the Offer; Plans for the
Surviving Corporation after the Offer and the Merger" of the Offer to Purchase
is incorporated herein by reference.
(f)-(g) The information set forth in "Section 6. Price Range of the Shares"
and "Section 13. Effect of the Offer on Market for Shares; NASDAQ/NNM Exchange
Listing; Registration under the Exchange Act" of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
- ------- ---------------------------------------------
(a) The information set forth in the Introduction, "Section 8. Certain
Information Concerning Purchaser and Parent" and "Section 10. Background of the
Offer; Contacts with the Company; Merger Agreement; Stockholders Agreement;
Retention Agreement" of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in the Introduction, "Section 8. Certain
Information Concerning Purchaser and Parent" and "Section 10. Background of the
Offer; Contacts with the Company; Merger Agreement; Stockholders Agreement;
Retention Agreement" of the Offer to Purchase is incorporated herein by
reference.
Page 5 of 9 Pages
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
- ------- ---------------------------------------------------------------------
TO THE SUBJECT COMPANY'S SECURITIES.
-----------------------------------
The information set forth in the Introduction, "Section 8. Certain
Information Concerning Purchaser and Parent," and "Section 10. Background of the
Offer; Contacts with the Company; Merger Agreement; Stockholders Agreement;
Retention Agreement" of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
- ------- -----------------------------------------------
The information set forth and in "Section 16. Fees and Expenses" of
the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
- ------- ---------------------------------------
The information set forth in "Section 8. Certain Information
Concerning Purchaser and Parent" of the Offer to Purchase is incorporated herein
by reference.
ITEM 10. ADDITIONAL INFORMATION.
- -------- ----------------------
(a) The information set forth in the Introduction, "Section 10.
Background of the Offer; Contacts with the Company; Merger Agreement;
Stockholders Agreement; Retention Agreement" of the Offer to Purchase is
incorporated herein by reference.
(b) and (c) The information set forth in "Section 15. Certain Legal
Matters and Regulatory Approvals" of the Offer to Purchase is incorporated
herein by reference.
(d) The information set forth in "Section 13. Effect of the Offer on
Market for Shares; NASDAQ/NNM Exchange Listing; Registration under the Exchange
Act" of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter
of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
- -------- --------------------------------
(a)(1) Offer to Purchase, dated June 24, 1997
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
Page 6 of 9 Pages
<PAGE>
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees
(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees to their Clients
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9
(a)(7) Press release, dated June 19, 1997
(a)(8) Form of Summary Advertisement, dated June 24, 1997
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of June 19, 1997, among
Gateway 2000, Inc., Deuce Acquisition Corporation and Advanced
Logic Research, Inc.
(c)(2) Stockholders Agreement, dated as of June 19, 1997, among
Gateway 2000, Inc., Deuce Acquisition Corporation, Wearnes
Technology (Private) Limited, Eugene Y. Lu, Chun Win Wong and
Philip A. Harding
(c)(3) Stock Option Retention Bonus Agreement, dated as of June 19,
1997, by and among Gateway 2000, Inc., Eugene Y. Lu, David L.
Kelly, Donald E. Kullgren, Visish Sangveraphunsiri, Ronald J.
Sipkovich, Toan Q. Luu, Benedict R. Marchak, Genevieve Ortegon
and Vikram S. Sial
(d) None.
(e) Not applicable.
(f) None.
Page 7 of 9 Pages
<PAGE>
SIGNATURE
---------
After due and reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
June 24, 1997
GATEWAY 2000, INC.,
a Delaware corporation
By: /s/ William M. Elliott
----------------------------------------------
Name: William M. Elliott
Title: Senior Vice President, General Counsel
and Corporate Secretary
DEUCE ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Stephen P. Johns
-----------------------------------------------
Name: Stephen P. Johns
Title: President
Page 8 of 9 Pages
<PAGE>
EXHIBIT NO. TITLE PAGE NO. IN SEQUENTIALLY
- ----------- ----- NUMBERED SCHEDULE
-----------------
(a)(1) Offer to Purchase, dated June 24, 1997
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers,
Commercial Banks, Trust Companies and
Other Nominees
(a)(5) Letter from Brokers, Dealers,
Commercial Banks, Trust Companies and
Other Nominees to their Clients
(a)(6) Guidelines for Certification of
Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Press release, dated June 19, 1997
(a)(8) Form of Summary Advertisement, dated
June 24, 1997
(c)(1) Agreement and Plan of Merger, dated
as of June 19, 1997, among Gateway
2000, Inc., Deuce Acquisition
Corporation and Advanced Logic
Research, Inc.
(c)(2) Stockholders Agreement, dated as of
June 19, 1997, among Gateway 2000,
Inc., Deuce Acquisition Corporation,
Wearnes Technology (Private) Limited,
Eugene Y. Lu, Chun Win Wong and Philip
A. Harding
(c)(3) Stock Option Retention Bonus Agreement,
dated as of June 19, 1997, by and among
Gateway 2000, Inc., Eugene Y. Lu, David
L. Kelly, Donald E. Kullgren, Visish
Sangveraphunsiri, Ronald J.
Sipkovich, Toan Q. Luu, Benedict R.
Marchak, Genevieve Ortegon and Vikram
S. Sial
Page 9 of 9 Pages
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
AT
$15.50 PER SHARE, NET
BY
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JULY 22, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING OF ADVANCED LOGIC RESEARCH, INC. ("ALR" OR
THE "COMPANY") ON A FULLY DILUTED BASIS AND (II) THE EXPIRATION OR TERMINATION
OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED. THE OFFER IS ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS WHICH ARE CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
----------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share (the "Shares"), of the
Company, should either (1) complete and sign the Letter of Transmittal, or a
facsimile copy thereof, in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) evidencing
tendered Shares (the "Share Certificates"), and any other required documents,
to the Depositary or tender such Shares pursuant to the procedure for book-
entry transfer set forth in Section 3, or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee must contact such broker, dealer, commercial bank, trust company or
other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose Share Certificates are
not immediately available, or who cannot comply with the procedures for book-
entry transfer described in this Offer to Purchase on a timely basis, may
tender such Shares by following the procedure for guaranteed delivery set
forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
----------------
The Dealer Manager for the Offer is:
DEUTSCHE MORGAN GRENFELL INC.
June 24, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 1
SECTION 1. Terms of Offer; Expiration Date............................... 3
SECTION 2. Acceptance for Payment and Payment for Shares................. 4
SECTION 3. Procedure for Accepting the Offer and Tendering Shares........ 5
SECTION 4. Withdrawal Rights............................................. 7
SECTION 5. Certain Federal Income Tax Consequences....................... 8
SECTION 6. Price Range of the Shares..................................... 9
SECTION 7. Certain Information Concerning the Company.................... 10
SECTION 8. Certain Information Concerning Purchaser and Parent........... 12
SECTION 9. Financing of the Offer and the Merger......................... 13
SECTION 10. Background of the Offer; Contacts with the Company; Merger
Agreement; Stockholders Agreement; Retention Agreement........ 14
SECTION 11. Purpose of the Offer; Plans for the Surviving Corporation
after the Offer and the Merger................................ 24
SECTION 12. Dividends and Distributions................................... 26
SECTION 13. Effect of the Offer on Market for Shares; NASDAQ/NNM Exchange
Listing; Registration under the Exchange Act.................. 26
SECTION 14. Certain Conditions of the Offer............................... 26
SECTION 15. Certain Legal Matters and Regulatory Approvals................ 28
SECTION 16. Fees and Expenses............................................. 31
SECTION 17. Miscellaneous ................................................ 31
SCHEDULE I. Directors and Executive Officers of Parent and Purchaser ..... 32
</TABLE>
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
ADVANCED LOGIC RESEARCH, INC.
INTRODUCTION
Deuce Acquisition Corporation, a Delaware corporation (the "Purchaser") and
wholly-owned subsidiary of Gateway 2000, Inc., a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
par value $.01 per share (the shares subject to the Offer being hereinafter
called the "Shares"), of Advanced Logic Research, Inc., a Delaware corporation
("ALR" or the "Company"), at a price of $15.50 per share, net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together constitute
the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. Purchaser will pay all charges and expenses of Deutsche
Morgan Grenfell Inc. ("DMG") which is acting as Dealer Manager for the Offer
(in such capacity, the "Dealer Manager"), First Chicago Trust Company of New
York (the "Depositary") and Georgeson & Company Inc. (the "Information Agent")
incurred in connection with the Offer.
THE BOARD OF DIRECTORS OF ALR (THE "BOARD") UNANIMOUSLY HAS DETERMINED THAT
EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE STOCKHOLDERS OF ALR, AND RECOMMENDS THAT STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE OUTSTANDING SHARES OF ALR ON A FULLY DILUTED BASIS (THE
"MINIMUM CONDITION"), AND (II) THE EXPIRATION OR TERMINATION OF ALL APPLICABLE
WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED (THE "HSR ACT"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS WHICH ARE CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 19, 1997 (the "Merger Agreement"), by and among Parent, Purchaser,
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by Purchaser and further provides that, following the
purchase of Shares pursuant to the Offer and promptly after the satisfaction
or waiver of certain other conditions and in accordance with the relevant
provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), either Purchaser will be merged with and into the Company and the
separate corporate existence of Purchaser will cease or the Company will be
merged with and into Purchaser and the separate corporate existence of the
Company will cease (the "Merger"). It is currently anticipated that the
surviving corporation of the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") will be the Company. The Surviving Corporation will
be a wholly-owned subsidiary of Parent. At the time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Purchaser, Parent or any direct or
indirect wholly-owned subsidiary of Parent or owned by the Company or any
direct or indirect wholly-owned subsidiary of the Company or held by
stockholders who shall have demanded and perfected appraisal rights, if any,
under the DGCL) will be canceled and converted automatically into the right to
receive $15.50 in cash, or any higher price that may be paid per share in the
Offer, without interest (the "Merger Consideration"). See Section 10 for a
more detailed description of the Merger Agreement.
1
<PAGE>
The Merger Agreement provides that, promptly upon the acceptance for payment
of, and payment for, Shares constituting a majority of the then outstanding
Shares by Purchaser pursuant to the Offer, Purchaser shall from time to time
be entitled to designate such number of directors (rounded up to the next
whole number) on the Board as will give Purchaser that percentage of the total
number of Directors on the Board equal to the percentage of the then
outstanding Shares owned by Purchaser, subject to compliance with Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
provided that such percentage of the total Directors shall not be less than a
majority of the Board. In the Merger Agreement, the Company has agreed to take
all actions necessary to cause Purchaser's designees to be elected as members
of the Board, including increasing the size of the Board or securing the
resignations of incumbent directors or both. See Section 10.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger
Agreement by the requisite vote of the stockholders of the Company, if such
vote is required under the DGCL. See Section 11. Under the Company's
Certificate of Incorporation and the DGCL, except as provided in the next
succeeding paragraph, the affirmative vote of the holders of a majority of the
outstanding Shares is required to approve and adopt the Merger Agreement and
the Merger. Consequently, if Purchaser acquires (pursuant to the Offer or
otherwise) at least a majority of the outstanding Shares, Purchaser will have
sufficient voting power to approve and adopt the Merger Agreement and the
Merger without the vote of any other stockholder.
Under the DGCL, if Purchaser acquires, pursuant to the Offer or otherwise,
at least 90% of the then outstanding Shares, Purchaser will be able to approve
and adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger, without a vote of the Company's stockholders. In such
event, Purchaser and the Company have agreed to take all necessary and
appropriate action to cause the Merger to become effective as soon as
reasonably practicable after such acquisition, without a meeting of the
Company's stockholders. If, however, Purchaser does not acquire at least 90%
of the then outstanding Shares pursuant to the Offer or otherwise and a vote
of the Company's stockholders is required under the DGCL, a significantly
longer period of time will be required to effect the Merger. See Section 10
for a more detailed description of the Merger.
The Company has advised Purchaser that as of June 19, 1997, 12,552,951
Shares were issued and outstanding. The Company has advised Purchaser that as
of June 19, 1997, the Company had duly reserved a total of 1,232,929 Shares
for future issuance pursuant to outstanding employee stock options granted
pursuant to the Company's Flexible Stock Incentive Plan, Director's
Nonqualified Stock Option Plan and 1996 Stock Option/Stock Issuance Plan
(collectively, the "Company Stock Option Plans"), of which 587,885 were vested
as of such date. See Section 10 for a description of the treatment of options
under the Company Stock Option Plans.
Purchaser has entered into an agreement with certain stockholders of the
Company (the "Stockholders Agreement"), pursuant to which, among other things,
each such stockholder has (i) agreed to vote the Shares then owned by such
stockholder in favor of the approval and adoption of the Merger Agreement, the
Merger and all the transactions contemplated by the Merger Agreement and the
Stockholders Agreement and any other actions required in furtherance thereof
and against any Competing Transaction and any action in furtherance thereof,
(ii) granted Purchaser an irrevocable proxy to vote and otherwise act with
respect to such Shares on the matters set forth in the previous clause (i),
(iii) agreed to tender all Shares then owned by such stockholder to Purchaser
as soon as practicable (and in any event within five business days) after the
commencement of the Offer in accordance with the Offer and (iv) granted Parent
an irrevocable option to purchase such Stockholder's Shares at a price of
$15.50 per Share, under certain circumstances. See Section 10.
The Company has been advised by each of its directors and officers that they
intend to tender all Shares beneficially owned by them pursuant to the Offer.
Such persons, together with Wearnes Technology (Private) Limited ("Wearnes"),
hold in the aggregate approximately 42% of the issued and outstanding Shares
and approximately 38% of the Shares on a fully diluted basis.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN ITS ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
2
<PAGE>
SECTION 1. Terms of Offer; Expiration Date. Upon the terms and subject to
the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), Purchaser will
accept for payment and will pay for all Shares duly tendered on or prior to
the Expiration Date (as hereinafter defined) and not properly withdrawn in
accordance with the provisions set forth in Section 4. The term "Expiration
Date" shall mean 12:00 Midnight, New York City time, on Tuesday, July 22,
1997, unless and until Purchaser, in its sole discretion (but subject to the
terms and conditions of the Merger Agreement), shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended
by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time or from time
to time, to extend for any reason the period of time during which the Offer is
open, including the occurrence of any of the conditions set forth in Section
14, by giving oral or written notice of such extension to the Depositary and
by providing notice thereof, if applicable, as required by the Securities and
Exchange Commission (the "Commission"). During any such extension, all Shares
previously tendered and not properly withdrawn will remain subject to the
Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. See Section 4.
Subject to the applicable rules and regulations of the Commission, Purchaser
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time,
upon the failure to be satisfied of any of the conditions to the Offer, to (i)
terminate the Offer, (ii) postpone acceptance of, and payment for, any Shares
or (iii) waive any condition or otherwise amend the Offer in any respect, by
giving oral or written notice of such termination, extension, waiver or
amendment to the Depositary and by providing notice thereof, if applicable, as
required by the Commission. However, the Merger Agreement provides that
Purchaser may not decrease the price per Share payable in the Offer, reduce
the maximum number of Shares to be purchased in the Offer, impose conditions
to the Offer other than those set forth in Section 14 hereof or extend the
Offer, except that Purchaser may, without the consent of the Company, extend
the Offer (a) beyond the scheduled expiration date if, at the scheduled
expiration date of the Offer, any of the conditions to Purchaser's obligation
to accept for payment, and to pay for, the Shares, shall not be satisfied or
waived, (b) for any period required by any rule, regulation or interpretation
of the Commission or the staff thereof applicable to the Offer, or (c) for an
aggregate period of not more than 10 business days beyond the latest
applicable date that would otherwise be permitted under clause (a) or (b) of
this sentence, if as of such date, all of the conditions to Purchaser's
obligations to accept for payment, and to pay for, the Shares are satisfied or
waived, but the number of Shares validly tendered and not withdrawn pursuant
to the Offer is less than 90 percent of the outstanding Shares on a fully
diluted basis.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its payment for Shares or is
unable to pay for the Shares pursuant to the Offer for any reason, then,
without prejudice to Purchaser's rights under the Offer, the Depositary may
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled
to withdrawal rights. See Section 4.
Any extension, delay in payment, amendment or termination of the Offer will
be followed as promptly as practicable by a public announcement in accordance
with the public announcement requirements of Rule 14e-1(d) under the Exchange
Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under
the Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to
inform stockholders of such change) and without limiting the manner in which
Purchaser may choose to make any public announcement, Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will extend the Offer to the extent required by Rules 14d-4(c), 14d-
6(d) and 14e-1 under the Exchange Act.
3
<PAGE>
The Company has provided Purchaser with the Company's stockholder list, and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, dealers, commercial banks, trust companies and similar persons
whose names, or the names of whose nominees, appear on the stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
SECTION 2. Acceptance for Payment and Payment for Shares. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
purchase of and payment for Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4 will be
made as promptly as reasonably practicable after the latest to occur of (i)
the Expiration Date, (ii) the expiration or termination of any applicable
waiting period under the HSR Act and (iii) the satisfaction or waiver of the
conditions to the Offer set forth in Section 14. Any determination concerning
the satisfaction of the terms and conditions of the Offer shall be within the
sole discretion of Purchaser and such determination shall be final and binding
on all tendering stockholders. In addition, Purchaser reserves the right, in
its sole discretion, subject to applicable rules promulgated by the
Commission, (A) to accelerate the acceptance for payment of, and the payment
for, Shares consistent with any applicable withdrawal rights and (B) to delay
acceptance for payment of, or payment for, Shares pending receipt of any
regulatory approvals specified in Section 15 or in order to comply, in whole
or in part, with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the Share Certificates or timely confirmation (a "Book-Entry Confirmation") of
a book-entry transfer of such Shares into the Depositary's account at the
Depository Trust Company or The Philadelphia Depository Trust Company (the
"Eligible Depositories"), pursuant to the procedures set forth in Section 3,
(ii) a properly completed and duly executed Form of Acceptance and Letter of
Transmittal (or a facsimile thereof), with any required signature guarantees
or an Agent's Message (as defined in Section 3 hereof) in connection with a
book-entry transfer, and (iii) any other documents required by the Letter of
Transmittal.
On June 20, 1997, Parent filed with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a Premerger Notification and Report Form under the HSR Act with
respect to the Offer. Accordingly, it is anticipated that the waiting period
with respect to the Offer under the HSR Act will expire at 11:59 P.M., New
York City time, on July 5, 1997. Prior to such time the FTC or the Antitrust
Division may extend such waiting period by requesting additional information
or material from Parent. If such request is made, the waiting period will
expire at 11:59 P.M., New York City time, on the tenth calendar day after
substantial compliance by Purchaser with such a request. Thereafter, the
waiting period may only be extended by court order. Any waiting period under
the HSR Act may be terminated in individual cases by the FTC and the Antitrust
Division prior to its expiration. See Section 15.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment and purchased Shares validly tendered and not properly withdrawn if
and when Purchaser gives oral or written notice to the Depositary of its
acceptance of payment for such Shares pursuant to the Offer. In all cases,
upon the terms and subject to the conditions of the Offer, payment for Shares
so accepted for payment will be made by the deposit of the purchase price
thereafter with the Depositary, which will act as agent for the tendering
stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to validly tendering stockholders whose Shares have been
accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE
PRICE FOR SHARES TENDERED PURSUANT TO THE OFFER BE PAID BY PURCHASER
REGARDLESS OF ANY EXTENSION OR DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer or if Share Certificates are submitted evidencing
more Shares than are tendered, Share Certificates for such unpurchased or
untendered Shares will be returned (or, in the case of Shares tendered by
book-entry transfer
4
<PAGE>
within an Eligible Depository, such Shares will be credited to an account
maintained within an Eligible Depository), without expense to the tendering
stockholder, as promptly as practicable following the expiration or
termination of the Offer. Return of such Share Certificates will be made to
and at the risk of the tendering stockholder. Upon the deposit of funds with
the Depositary for the purpose of making payments to tendering stockholders,
Purchaser's obligation to make such payments shall be satisfied and tendering
stockholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares
pursuant to the Offer.
If Purchaser is delayed in its acceptance for payment of, or payment for
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule 14e-
1(c) under the Exchange Act to pay for or return the tendered Shares promptly
after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled
to exercise, and duly exercise, withdrawal rights in accordance with the
provisions set forth in Section 4.
If, prior to the Expiration Date, Purchaser varies the terms of the Offer by
increasing the consideration to be paid for Shares, Purchaser will pay such
increased consideration for all Shares purchased pursuant to the Offer,
whether or not such Shares have been tendered or purchased prior to such
variation in the terms of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its subsidiaries or affiliates of Parent the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. Procedure for Accepting the Offer and Tendering Shares.
Valid Tender of Shares. For a stockholder to validly tender Shares pursuant
to the Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees (or an Agent's
Message in connection with a book-entry transfer of Shares) and any other
required documents, must be transmitted to and received by the Depositary at
its address set forth on the back cover of this Offer to Purchase and either
(i) Share Certificates for tendered Shares must be received by the Depositary
at such address or such Shares must be tendered pursuant to the procedures for
book-entry transfer set forth below (and a confirmation of receipt of such
tender received by the Depositary), in each case, and prior to the Expiration
Date, or (ii) the tendering stockholder must comply with the guaranteed
delivery procedure described below.
Book-Entry Transfers. The Depositary will establish an account with respect
to the Shares at the Eligible Depositories (each a "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date
of this Offer to Purchase. Any financial institution that is a participant in
a Book-Entry Transfer Facility may make book-entry delivery of the Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedure for such transfer. However, although delivery of Shares may be
effected through book-entry transfer at the Book-Entry Transfer Facility, the
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other required documents, must,
in any case, be received by the Depositary at its address set forth on the
back cover of this Offer to Purchase on or prior to the Expiration Date, or
the tendering stockholder must comply with the guaranteed delivery procedure
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS BOOK-ENTRY PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
5
<PAGE>
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of
the Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that such participant has
received the Letter of Transmittal and agrees to be bound by the terms of the
Letter of Transmittal and that Purchaser may enforce such agreement against
such participant.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee on the Letter of Transmittal is
required if (a) the Letter of Transmittal is signed by the registered holder
of Shares (which term, for purposes of this Section, includes any participant
in a Book-Entry Transfer Facility system whose name appears on a security
position listing as the owner of the Shares) tendered therewith and such
registered holder has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on such
Letter of Transmittal or (b) such Shares are tendered for the account of a
bank, broker, dealer, credit union, savings association or other entity that
is a member in good standing of the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all
other cases, all signatures on the Letter of Transmittal must be guaranteed by
an Eligible Institution. See Instructions 1 and 5 to the Letter of
Transmittal. If the Share Certificates are registered in the name of a person
other than the signer of the Letter of Transmittal, or if payment is to be
made to, or Share Certificates not validly tendered or not accepted for
payment are to be issued or returned to, a person other than the registered
holder of the Share Certificates, the tendered Share Certificates must be
endorsed in blank or accompanied by appropriate stock powers, signed exactly
as the name of the registered holder appears on the Share Certificates with
the signature on such Share Certificates or stock powers guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date, or the procedures for book-
entry transfer cannot be completed on a timely basis, such Shares may
nevertheless be tendered, provided that all of the following conditions are
satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates, in proper form for transfer (or Book-Entry
Confirmation with respect to such Shares), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof)
and any other documents required by the Letter of Transmittal, are received
by the Depositary within three National Association of Securities Dealers,
Inc. Automated Quotation/National Market System ("NASDAQ/NNM") trading days
after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, facsimile transmission or mail, to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery provided by Purchaser.
6
<PAGE>
Notwithstanding any other provision hereof, payment for Shares tendered and
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (i) Share Certificates (or a timely
Book-Entry Confirmation with respect thereto), (ii) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) or, in the case of
Book-Entry Transfer, an Agent's Message and (iii) any other documents required
by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser, in its sole discretion,
which determination shall be final and binding. Purchaser reserves the
absolute right to reject any or all tenders of any particular Shares that it
determines are not in proper form or the acceptance for payment of which may,
in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves
the absolute right to waive any of the conditions of the Offer or to waive any
defect or irregularity in the tender of any Shares with respect to any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of any Shares will be
deemed to have been validly made until all defects and irregularities have
been cured or waived. None of Purchaser, Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty
to give notice of any defects or irregularities in tenders or incur any
liability for failure to give any such notice. Purchaser's interpretation of
the terms and conditions of the Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
Other Requirements. By executing a Letter of Transmittal as set forth
herein, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by Purchaser (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after June 19, 1997), effective when, if and to the extent that Purchaser
accepts such Shares for payment pursuant to the Offer. All such proxies shall
be considered coupled with an interest in the tendered Shares. Such
appointment is effective when, and only to the extent that Purchaser accepts
such Shares for payment. Upon such acceptance for payment, all prior proxies
given by such stockholder with respect to such Shares, will, without further
action, be revoked, and no subsequent proxies may be given nor any subsequent
written consent executed by such stockholder with respect to such Shares (and
if given or executed, will not be deemed to be effective). The designees of
Purchaser will be empowered, with respect to such Shares for which the
appointment is effective, to exercise all voting and other rights (whether by
written consent or otherwise) of such stockholder as they, in their sole
discretion, may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment of postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING ON PAYMENTS OF CASH
PURSUANT TO THE OFFER, A STOCKHOLDER TENDERING SHARES IN THE OFFER MUST
PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION
NUMBER ("TIN") ON A SUBSTITUTE FORM W-9 AND CERTIFY UNDER PENALTIES OF PERJURY
THAT SUCH TIN IS CORRECT AND THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP
WITHHOLDING. All stockholders tendering Shares pursuant to the Offer should
complete and sign the Substitute Form W-9 included as a part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding. Noncorporate foreign stockholders should complete and sign
a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. See Instruction 10
to the Letter of Transmittal.
SECTION 4. Withdrawal Rights. Tenders of Shares made pursuant to the Offer
are irrevocable except as otherwise provided in this Section 4. Shares
tendered pursuant to the Offer may be withdrawn at any time prior
7
<PAGE>
to the Expiration Date Shares may also be withdrawn at any time after August
22, 1997 unless theretofore accepted for payment as provided herein. If
Purchaser extends the Offer or if Purchaser is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer, the Depositary may nevertheless, on behalf of Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
that tendering stockholders are entitled to withdraw such Shares as set forth
in this Section 4.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address specified on the back cover page of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and (if Share
Certificates for such Shares have been tendered) the names in which the Share
Certificate(s) representing such Shares are registered, if different from that
of the person tendering such Shares. If Share Certificate(s) have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Share Certificate(s), the serial numbers shown on
such Share Certificate(s) must be submitted to the Depositary and, unless such
Shares have been tendered by an Eligible Institution, the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution. If Shares
to be withdrawn have been tendered pursuant to the procedure for book-entry
transfer as set forth in Section 3, any notice of withdrawal of such Shares
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with
such Book-Entry Transfer Facility's procedures for withdrawal, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, properly withdrawn Shares may be retendered at any
subsequent time prior to the Expiration Date by following any of the
procedures set forth in Section 3.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be resolved by Purchaser, in its sole discretion,
which resolution shall be final and binding. None of Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notice of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notice.
SECTION 5. Certain Federal Income Tax Consequences. The summary of federal
income tax consequences set forth below is for general information only and is
based on Purchaser's understanding of the law as currently in effect. The tax
consequences to each stockholder will depend in part upon such stockholder's
particular situation. Special tax consequences not described herein may be
applicable to particular classes of taxpayers, such as financial institutions,
broker-dealers, persons who are not citizens or residents of the United
States, stockholders who acquired their Shares through the exercise of an
employee stock option or otherwise as compensation and other stockholders who
do not hold their Shares as capital assets. ALL STOCKHOLDERS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX
LAWS AND OF CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or in the Merger will
be a taxable sale or exchange for U.S. federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"), and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a stockholder who receives cash for Shares pursuant to the Offer or
the Merger will recognize gain or loss for U.S. federal income tax purposes
equal to the difference between the amount of cash received in exchange for
the Shares sold and such stockholder's adjusted tax basis in such Shares.
Assuming the Shares constitute capital assets in the hands of the stockholder,
such gain or loss will be capital gain or loss and will be long term capital
gain or loss if the
8
<PAGE>
stockholder has held the Shares for more than one year at the time of sale.
Under current law, gain or loss will be calculated separately for each Share
or, where applicable, block of Shares (i.e., a group of Shares with the same
tax basis and holding period) tendered pursuant to the Offer.
Various legislative proposals have been and are currently under
consideration that would have an impact on the tax consequences of this
transaction, including, without limitation, an amendment to reduce the rate of
federal income taxation of certain capital gains. It is unclear and cannot be
predicted whether such legislation will be enacted or, if enacted, will apply
to the exchange pursuant to the Offer or the Merger. Stockholders should
consult with their own tax advisors.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to backup withholding if the stockholder fails
to provide its TIN, fails to certify that such number is correct or properly
certify that it is awaiting a TIN or if the Internal Revenue Service (the
"IRS") notifies the Depositary that the TIN is incorrect. A stockholder who
does not furnish its TIN may be subject to a penalty imposed by the IRS. See
Section 3.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not
an additional tax. Rather, the amount of the backup withholding can be
credited against the federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a refund can be
obtained by the stockholder upon filing an appropriate income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS
WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN
CORPORATIONS.
SECTION 6. Price Range of the Shares. The Shares are listed and principally
traded on the NASDAQ/NNM under the symbol AALR. The following table sets
forth, for the periods indicated, the high and low sales prices per Share on
the NASDAQ/NNM, as reported by the NASDAQ/NNM:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year Ended September 30, 1995:
First Quarter.............................................. $ 4.88 $ 3.75
Second Quarter............................................. 5.38 4.00
Third Quarter.............................................. 6.75 4.50
Fourth Quarter............................................. 9.38 5.75
Year Ended September 30, 1996:
First Quarter.............................................. $ 8.50 $ 6.00
Second Quarter............................................. 7.75 6.13
Third Quarter.............................................. 9.88 6.69
Fourth Quarter............................................. 8.63 6.50
Year Ending September 30, 1997:
First Quarter.............................................. $14.75 $ 8.25
Second Quarter ............................................ 13.75 8.63
Third Quarter (through June 23, 1997) ..................... 15.33 8.38
</TABLE>
As of June 23, 1997, there were 228 holders of record of the Shares. On June
19, 1997, the last full trading day prior to the announcement of the execution
of the Merger Agreement, the closing sales price on the NASDAQ/NNM was $14.13
per Share. On June 18, 1997, the last full trading day prior to the approval
of the Merger Agreement by the Board, the closing sales price on the
NASDAQ/NNM was $12.00.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
9
<PAGE>
SECTION 7. Certain Information Concerning the Company. Except as otherwise
set forth herein, the information concerning the Company contained in this
Offer to Purchase, including financial information, has been furnished by the
Company or has been taken from, or based upon, publicly available documents
and records on file with the SEC and other public sources. Stockholders are
urged to review the publicly available information concerning the Company
before acting on the Offer. Neither Purchaser, Parent nor any of their
respective affiliates assumes any responsibility for the accuracy or
completeness of the information concerning the Company furnished by the
Company or contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Purchaser, Parent or their respective affiliates.
General. The Company is a Delaware corporation with its principal executive
offices at 9401 Jeronimo, Irvine, California 92618. The Company designs,
manufactures, markets and supports a broad line of computer systems ("PCs")
that offer leading-edge performance and value. The Company's comprehensive
portfolio of environmentally friendly, upgradeable products includes
sophisticated network servers, high-performance workstations and entry-level
PCs. All of the Company's systems feature advanced designs to enhance
performance while supporting the major industry standards. The Company markets
its products through a worldwide network of resellers, system integrators,
dealers and distributors. It also sells to selected original equipment
manufacturer customers ("OEMs") and direct to end-users through its Primeline
Direct program.
Financial Information. Set forth below is a summary of certain selected
consolidated financial information relating to the Company and its
subsidiaries which has been excerpted or derived from the audited consolidated
financial statements contained in Part I, Item 8 of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996 (the "Form
10-K") and the unaudited consolidated financial statements contained in Part
I, Item 1 of the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and 1996 (the "Form 10-Qs"), which financial statements
are incorporated herein by this reference. More comprehensive financial
information is included in the Form 10-K, Form 10-Qs and other documents filed
by the Company with the Commission. The financial information that follows is
qualified in its entirety by reference to such reports and other documents,
including the consolidated financial statements and related notes contained
therein. Such reports and other documents may be examined and copies may be
obtained from the offices of the Commission in the same places and in the same
manner as set forth below.
ADVANCED LOGIC RESEARCH, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT:
Net sales........................................ $217,855 $192,425 $183,387
Gross profits.................................... 47,820 35,960 27,735
Operating income (loss).......................... 11,547 3,994 (1,849)
Net income (loss)................................ 10,603 4,872 (346)
Net income (loss) per common and common
equivalent share................................ 0.87 0.41 (0.03)
Common and common equivalent shares used in per
share calculation............................... 12,249 11,750 11,434
BALANCE SHEET (AT END OF PERIOD):
Cash and cash equivalents........................ $ 60,272 $ 46,580 $ 40,836
Total assets..................................... 118,640 107,220 97,929
Long-term debt................................... -- -- --
Stockholders' equity............................. $ 96,778 $ 83,249 $ 76,861
</TABLE>
10
<PAGE>
ADVANCED LOGIC RESEARCH, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
INCOME STATEMENT:
Net sales......................................... $111,803 $112,186 $ 93,077
Gross profits..................................... 26,399 23,479 16,482
Operating income.................................. 7,997 4,565 1,082
Net income (loss)................................. 6,380 4,374 1,707
Net income (loss) per common and common equivalent
share............................................ $ 0.50 $ 0.36 $ 0.15
Common and common equivalent shares used in per
share calculation................................ 12,789 12,066 11,580
BALANCE SHEET (AT END OF PERIOD):
Cash and cash equivalents......................... $ 58,147 $ 44,790 $ 48,813
Total assets...................................... 128,486 111,435 106,353
Long-term debt.................................... -- -- --
Stockholders' equity.............................. $104,486 $ 88,931 $ 79,698
</TABLE>
In connection with Parent's review of the Company and in the course of the
discussions between Parent and the Company described in Section 10, the
Company provided Parent with certain business and financial information that
Purchaser and Parent believe is not publicly available, including, among other
things, projections for the Company on a stand alone basis for the calendar
years 1997 and 1998. The Company's forecasts estimated the following results
for the calendar year ending December 31, 1997: net sales of $247.9 million,
gross profits of $58.8 million, operating income of $19.5 million, net income
of $14.6 million, net income per common and common equivalent share of $1.10
and 13,328,000 common and common equivalent shares used in per share
calculation. The Company's forecasts further estimated the following results
for the calendar year ending December 31, 1998: net sales of $294.3 million,
gross profits of $70.3 million, operating income of $25.4 million, net income
of $18.7 million, net income per common and common equivalent share of $1.35
and 13,820,000 common and common equivalent shares used in per share
calculation. Subsequent to providing such forecasts, members of the Company's
management advised Purchaser that the Company revised downward its forecast
sales for the second calendar quarter ending June 30, 1997 by as much as 10%,
which would lead the Company to lower estimated net income per common and
common equivalent shares by approximately $.04 per share for the quarter. The
Company attributed the downward revision primarily to timing delays related to
high end server shipments. The Company believes that it is possible that these
timing delays could impact the results for calendar 1997.
PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND ASSUMPTIONS
ABOUT COMPLEX ECONOMIC AND OPERATING FACTORS THAT ARE INHERENTLY SUBJECT TO
SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF
WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE COMPANY'S
CONTROL. ACCORDINGLY, THERE IS NO ASSURANCE THAT THE PROJECTED RESULTS WOULD
BE REALIZED OR THAT ACTUAL RESULTS WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER
THAN THOSE SET FORTH ABOVE. IN ADDITION, THESE PROJECTIONS WERE NOT PREPARED
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES
OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS AND ARE
INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS MADE
AVAILABLE TO PURCHASER AND PARENT BY THE COMPANY. NONE OF PURCHASER, PARENT,
THE COMPANY, ANY OF THEIR RESPECTIVE AFFILIATES OR ANY OTHER PARTY ASSUMES ANY
RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS.
11
<PAGE>
The Company is subject to the informational filing requirements of the
Exchange Act, and in accordance therewith is obligated to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial statements and other matters. Certain information,
as of particular dates, concerning the Company's directors and officers
(including their remuneration, stock options granted to them and Shares held
by them), the principal holders of the Company's securities and any material
interest of such persons in transactions contemplated by the Merger Agreement
with the Company is required to be disclosed in proxy statements and annual
reports distributed to the Company's stockholders and filed with the
Commission. In addition, the Company has filed a statement on Schedule 14D-9
regarding its recommendation to the Company's stockholders with respect to the
Offer. Such reports, proxy statements and other information filed by the
Company are available for inspection and copying at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, or may be obtained from the Commission's World Wide Web site at
http://www.sec.gov. Copies of such materials may also be obtained by mail,
upon payment of the Commission's customary fees from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
SECTION 8. Certain Information Concerning Purchaser and Parent.
Purchaser. Purchaser is a newly incorporated Delaware corporation organized
in connection with the Offer and the Merger and has not carried on any
activities other than in connection with the Offer and the Merger. The
principal offices of Purchaser are located at 610 Gateway Drive, North Sioux
City, South Dakota 57049. Purchaser is a direct wholly-owned subsidiary of
Parent. Until immediately prior to the time that Purchaser will purchase
Shares pursuant to the Offer, it is not anticipated that Purchaser will have
any significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
Parent. Parent is a Delaware corporation, with its principal offices at 610
Gateway Drive, North Sioux City, South Dakota 57049. Parent is a leading
direct marketer of PCs. Parent develops, manufactures, markets and supports a
broad line of desktop and portable PCs, convergence PCs, and PC-related
products used by individuals, families, businesses, government agencies and
educational institutions. Parent's strategy is to deliver the best value to
the PC customer by offering quality, high-performance products employing the
latest technology at competitive prices and by providing outstanding service
and support.
The name, current business address, citizenship, and present principal
occupation or employment, and five-year employment history for each of the
directors and executive officers of Purchaser and Parent, and certain other
information are set forth on Schedule I hereto.
Parent is subject to the informational filing requirements of the Exchange
Act, and in accordance therewith is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial statements and other matters. Such reports, proxy statements and
other information filed by Purchaser are available for inspection and copying
at the public reference facilities of the Commission in the same places and in
the same manner as set forth with respect to the Company in Section 7.
For the year ended December 31, 1996, Parent had revenues of approximately
$5.0 billion and net earnings of approximately $251.7 million. Parent's
stockholders' equity at March 31, 1997 was approximately $883.1 million with
approximately $556.2 million of cash and cash equivalents.
Parent's consolidated balance sheet and the related consolidated statement
of operations, consolidated statements of cash flow and consolidated
statements of stockholders' equity for the three years ended December 31,
1996, 1995 and 1994 contained in Part I, Item 8 of Parent's Annual Report on
Form 10-K for the year ended December 31, 1996 filed with the Commission (the
"Annual Report") and Parent's unaudited
12
<PAGE>
consolidated financial statements contained in Part I, Item 1 of Parent's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (the
"Parent Form 10-Q") are hereby incorporated by reference. A copy of the Annual
Report and Parent Form 10-Q may be obtained by: (i) writing to Parent at 610
Gateway Drive, North Sioux City, South Dakota, 57049, attention: Corporate
Secretary, (ii) mail, upon payment of the Commission's customary fees, by
writing to its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 or (iii) down-loading such report from the
Commission's World Wide Web site at http://www.sec.gov. Summary financial
information can also be obtained from the Parent's World Wide Web site at
http://www.GW2K.com. Information obtained at such worldwide web site shall not
be deemed to be part of this Offer to Purchase. Additionally, the Annual
Report may be inspected at the Commission's offices.
Except as provided in the Merger Agreement, the Stockholders Agreement and
as otherwise described in this Offer to Purchase, (i) none of Purchaser,
Parent nor, to the knowledge of Purchaser and Parent, any of the persons
listed in Schedule I to this Offer to Purchase, or any associate or majority-
owned subsidiary of Purchaser, Parent or any of the persons so listed
beneficially owns or has any right to acquire, directly or indirectly, any
Shares or has any contract, arrangement, understanding or relationship with
any other person with respect to any securities of the Company, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of such securities, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies and (ii) none of Purchaser,
Parent nor, to the knowledge of Purchaser and Parent, any of the persons or
entities referred to above nor any director, executive officer or subsidiary
of any of the foregoing has effected any transactions contemplated by the
Merger Agreement in any Shares during the past 60 days.
Except as provided in the Merger Agreement, the Stockholders Agreement and
as otherwise described in this Offer to Purchase, since October 1, 1993 none
of Purchaser, Parent nor to the knowledge of Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase, has had any
transactions with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Except as provided in the Merger
Agreement, the Stockholders Agreement and as otherwise outlined in this Offer
to Purchase, since October 1, 1993 there have been no contacts, negotiations
or transactions between any of Purchaser, Parent, or any of their subsidiaries
or, to the best knowledge of Purchaser and Parent, any of the persons listed
in Schedule I to this Offer to Purchase, on the one hand, and the Company or
its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer for or other acquisition of securities of any
class of the Company, an election of directors of the Company, or a sale or
other transfer of a material amount of assets of the Company or any of its
subsidiaries.
Except as provided in the Merger Agreement, the Stockholders Agreement and
as otherwise described in this Offer to Purchase, none of Purchaser, Parent
nor, to the knowledge of Purchaser and Parent, any of the persons listed in
Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship (whether or not legally enforceable) with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship
concerning the transfer or voting of such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies.
SECTION 9. Financing of the Offer and the Merger. The total amount of funds
required by Purchaser to consummate the Offer and the Merger is estimated to
be approximately $203.7 million, including approximately $3.1 million to pay
related fees and expenses. Purchaser will obtain all such funds from Parent.
Parent will provide such funds from its working capital.
13
<PAGE>
SECTION 10. Background of the Offer; Contacts with the Company; Merger
Agreement; Stockholders Agreement; Retention Agreement.
Background of the Offer; Contacts with the Company.
On February 21, 1997, representatives of Parent and the Company negotiated
and executed a confidentiality agreement.
On March 19, 1997, representatives of Parent and its financial advisor, DMG,
met with representatives of the Company and PaineWebber in Irvine, California
to discuss a potential acquisition or other business arrangement with the
Company, such as a possible OEM relationship.
During the period of March 21, 1997 through March 31, 1997, representatives
of DMG, and the Company's financial advisors, PaineWebber Incorporated
("PaineWebber"), had numerous discussions regarding the Company's business and
operations and the possible acquisition of the Company by Parent. Again, no
formal acquisition proposal was made.
On April 22 and April 23, representatives of Parent, DMG, the Company and
PaineWebber met at Parent's offices in North Sioux City, South Dakota as well
as other locations in and around the North Sioux City area to discuss the
business and operations of the Company. On May 1, 1997, Theodore W. Waitt,
Chairman of the Board and Chief Executive Officer of Parent, Richard D.
Snyder, President and Chief Operating Officer of Parent, Stephen P. Johns,
Director of Corporate Development of Parent and representatives of DMG met to
discuss potential alternative strategic transactions with the Company. The
following day, representatives of DMG and PaineWebber conferred to develop a
procedure for further discussions.
On May 9, 1997, Messrs. Waitt and Lu met at Mr. Lu's residence in Orange
County, California to discuss certain matters relating to a possible
acquisition by Parent of the Company. Also on May 9, PaineWebber requested
that DMG submit a proposal on behalf of Parent, prior to additional due
diligence meetings.
Over the next few days, representatives of Parent, DMG and Parent's outside
counsel, Kaye, Scholer, Fierman, Hays & Handler, LLP ("Kaye, Scholer"), held
numerous discussions regarding the terms of a potential transaction between
Parent and the Company. On May 13, 1997, a non-binding term sheet outlining a
proposed acquisition of the Company by Parent based upon a purchase price at a
premium to the then current market price of the Shares was sent to PaineWebber
and, over the next few days, representatives of DMG and PaineWebber held
numerous discussions regarding such proposal. PaineWebber informed DMG that
the Company was not prepared to continue the due diligence process based upon
the purchase price then being proposed.
On June 3 and 4, 1997, Messrs. Waitt, Snyder and Lu reopened discussions of
a proposed transaction based upon a potentially higher price. In such
conversation, Mr. Lu expressed the desire of the Company to obtain an offer
that would represent both a substantial premium to the then-current trading
price for the Shares and a price above the 12-months' high sales price for the
Shares. Mr. Waitt indicated he was willing to proceed on the basis of a final
purchase price of $15.25 per share. Mr. Lu contacted individual members of the
Board to obtain their reaction to this development. On June 4, 1997, Messrs.
Waitt and Lu had an additional conversation in which the parties agreed to
continue to investigate the possibility of a transaction on the basis of a
purchase price of $15.50 per Share. Representatives of Parent and the Company
agreed to continue the diligence process and, over the next week,
representatives of the Company, Parent, DMG, PaineWebber, Kaye, Scholer and
the Company's outside counsel, Brobeck, Phleger & Harrison LLP ("Brobeck"),
met relating to Parent's conducting of further due diligence on the Company.
On June 11, 1997, drafts of the Merger Agreement and the Stockholders
Agreement were delivered to the Company, Brobeck and PaineWebber for their
review.
On June 13, 1997, representatives of the Company, Parent, DMG, PaineWebber,
Kaye, Scholer and Brobeck met in Irvine and telephonically to begin
negotiations of the terms of the Merger Agreement and ancillary agreements.
14
<PAGE>
On June 13, 1997, the Board held a special meeting to receive an update
regarding the proposed business combination. All of the Company's directors
were present in person or by telephone. At the meeting, the Board reviewed the
first draft of the Merger Agreement, and the principal open issues related
thereto, with the Company's management, representatives of Brobeck and
representatives of PaineWebber. In addition, the Board reviewed certain
interests members thereof may have in the proposed transaction. The Board
heard a detailed presentation by its legal counsel with respect to the
members' fiduciary duties. Representatives of PaineWebber described the
financial analysis of the proposed transaction that they were performing for
the Company and the preliminary results thereof. The Board discussed
alternatives reasonably available to the Company with the Company's management
and legal and financial advisors. At the conclusion of such meeting, the Board
authorized continued negotiation of the terms of the proposed transaction.
On June 16, 1997, representatives of the Company and Brobeck met
telephonically with representatives of Parent and Kaye, Scholer to further
negotiate the terms of the proposed Merger Agreement and ancillary agreements.
Representatives of the Company, Brobeck and PaineWebber met telephonically
with representatives of Parent, Kaye, Scholer and DMG on June 17, 18 and 19,
1997 to finalize negotiations of the Merger Agreement and ancillary
agreements.
On June 19, 1997, the Company's Board held a special meeting at Brobeck's
offices in Newport Beach, California to consider the Merger Agreement, the
Stockholders Agreement, the Offer, the Merger and the transactions
contemplated thereby. All of the Company's directors were present at the
meeting. At the meeting, the Board reviewed the Merger Agreement, the
Stockholders Agreement, the Offer, the Merger and the transactions
contemplated thereby with the Company's management, representatives of Brobeck
and representatives of PaineWebber. The Board heard a presentation by its
legal counsel with respect to the members' fiduciary duties and the terms of
the proposed Offer and Merger and by representatives of PaineWebber with
respect to the financial terms of the proposed Offer and the Merger. The Board
discussed among themselves and with the Company's management and advisors
alternatives reasonably available to the Company. At the conclusion of their
presentation, representatives of PaineWebber delivered their oral opinion to
the Board (subsequently confirmed in writing) that, as of such date, the
proposed cash consideration to be received by the stockholders of the Company
(other than Parent and Purchaser) pursuant to the Offer and the Merger is fair
to such stockholders from a financial point of view.
Based upon such discussions, presentations and opinion, the Board
unanimously (i) approved the Offer, the Merger and the Merger Agreement, in
the form presented to the Board, and the transactions contemplated by the
Merger Agreement, and (ii) recommended that the Company's stockholders accept
the Offer and tender their Shares pursuant to the Offer and approve and adopt
the Merger Agreement and the transactions contemplated thereby. Later that
same day, (i) representatives of the Company, Parent and Purchaser signed the
Merger Agreement, (ii) representatives of Parent and Purchaser, a
representative of Wearnes, Mr. Lu, Philip A. Harding and Chun Win Wong signed
the Stockholders Agreement, (iii) a representative of Parent and each of
Eugene Y. Lu, David L. Kelly, Donald E. Kullgren, Visish Sangveraphunsiri,
Ronald J. Sipkovich, Toan Q. Luu, Benedict R. Marchak, Genevieve Ortegon and
Vikram S. Sial (the "Executives") signed a Stock Option Retention Bonus
Agreement (the "Retention Agreement") and (iv) Parent and the Company issued a
joint press release with respect to the Offer and the Merger.
The Merger Agreement.
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to
the Merger Agreement, a copy of which has been filed as an exhibit to
Purchaser's and Parent's Schedule 14D-1 and 13D.
The Offer. The Merger Agreement provides that as promptly as reasonably
practicable after the date of execution of the Merger Agreement, but in no
event later than five business days after the public announcement of the
execution of the Merger Agreement, Purchaser will commence the Offer for all
of the outstanding Shares at a price of not less than $15.50 per share in
cash, net to the seller, subject to the satisfaction of conditions set forth
in Section 14 and, subject only to the terms and conditions of the Offer, will
pay, as promptly as reasonably
15
<PAGE>
practicable, after expiration of the Offer for all Shares duly tendered and
not withdrawn. Purchaser may waive any condition to the Offer, increase the
price per Share payable in the Offer and make any other changes in the terms
and conditions of the Offer. However, no change may be made which decreases
the price per Share payable in the Offer, which reduces the maximum number of
Shares to be purchased in the Offer or which imposes conditions to the Offer
other than those described in Section 14 or which extends the Offer (except as
set forth in the following sentence). Notwithstanding the foregoing, Purchaser
may, without the consent of the Company, (i) extend the Offer beyond the
scheduled expiration date (the initial scheduled expiration date being 20
business days following the commencement of the Offer) if, at the scheduled
expiration date of the Offer, any of the conditions to Purchaser's obligation
to accept for payment, and to pay for, the Shares, shall not be satisfied or
waived, (ii) extend the Offer for any period required by any rule, regulation
or interpretation of the Commission or the staff thereof applicable to the
Offer, or (iii) extend the Offer for an aggregate period of not more than
10 business days beyond the latest applicable date that would otherwise be
permitted under clause (i) or (ii) of this sentence, if as of such date, all
of the conditions to Purchaser's obligations to accept for payment, and to pay
for, the Shares are satisfied or waived, but the number of shares validly
tendered and not withdrawn pursuant to the Offer is less than 90 percent of
the outstanding Shares on a fully diluted basis.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, at the Effective Time, at the election of Parent, either
Purchaser will be merged with and into the Company and the separate corporate
existence of Purchaser will cease or the Company will be merged with and into
Purchaser and the separate corporate existence of the Company will cease. At
the Effective Time, by virtue of the Merger and without any action on the part
of Purchaser, the Company or the holders of Shares, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned
by Purchaser, Parent or any direct or indirect wholly-owned subsidiary of
Parent or owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company and Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of the DGCL) will be converted into the right to receive the
Merger Consideration. Pursuant to the Merger Agreement, each share of common
stock, par value $.01 per share, of Purchaser issued and outstanding
immediately prior to the Effective Time will be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
Charter Documents; Initial Directors and Officers. The Merger Agreement
provides that the Certificate of Incorporation of Purchaser in effect at the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL, provided, that Article First of the Certificate of Incorporation of the
Surviving Corporation will be amended to read in its entirety as follows:
"FIRST: The name of the corporation is Advanced Logic Research, Inc." The
Merger Agreement also provides that the By-Laws of Purchaser in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL. Pursuant to the
Merger Agreement, the directors of Purchaser and the officers of the Company
at the Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws.
Stockholders Meeting. The Merger Agreement provides that the Company will
take all action necessary, in accordance with applicable law and its
Certificate of Incorporation and By-Laws to convene a meeting of its
stockholders to consider and vote upon the approval of the Merger Agreement,
the Merger and such other matters as may be necessary to effectuate the
transactions contemplated by the Merger Agreement, if necessary to comply with
applicable law, as promptly as practicable after the expiration of the Offer.
The Board will recommend such approval and take all lawful action to solicit
such approval, provided, however, that the Board at any time prior to such
time of acceptance for payment of at least a majority of the Shares pursuant
to the Offer, may withdraw, modify or change any such recommendations to the
extent that the Board (i) determines in good faith after consultation with and
based upon the advice of independent legal counsel that the failure to so
withdraw, modify or change its recommendation would cause the Board to breach
its fiduciary duties to the
16
<PAGE>
Company's stockholders under applicable law and (ii) the Company has received
in writing a "Superior Proposal" (as defined below), which is then pending,
which the Board has determined to recommend to the stockholders of the
Company. For purposes of the Merger Agreement, a "Superior Proposal" means any
bona fide proposal relating to a Competing Transaction (as defined below) made
by a third party on terms which the Board determines in its good faith
judgment (based upon the advice of a financial advisor of nationally
recognized reputation) to be more financially favorable to the Company's
stockholders than the Offer and the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment (based
upon the advice of a financial advisor of nationally recognized reputation) of
the Board, is reasonably capable of being financed by such third party.
Parent and Purchaser will vote all Shares over which they exercise voting
control in favor of the Merger Agreement and the Merger. Under the DGCL, if
Purchaser acquires at least 90% of the outstanding Shares, Purchaser will be
able to approve the Merger without a vote of the Company's stockholders. See
Section 11 for a further discussion of certain provisions of the DGCL
applicable to the Merger.
Conduct of Business. Pursuant to the Merger Agreement, prior to the
Effective Time, except to the extent that Purchaser shall otherwise consent
(including by virtue of action by the Board approved by all of Purchaser's or
Parent's designees, as applicable, at such time as they shall constitute a
majority of the Board), the Company shall, and shall cause its subsidiaries
to, except as expressly permitted by the Merger Agreement, conduct their
respective businesses in, and to not take any action except in, the ordinary
course of business in a manner consistent with past practice. The Company
shall, and shall cause its subsidiaries to, use their respective reasonable
best efforts to preserve intact the business organization of the Company and
its subsidiaries, to keep available the services of the current officers,
employees and consultants of the Company and its subsidiaries and to preserve
the current business relationships of the Company and its subsidiaries,
including, without limitation, with customers, licensors, suppliers,
distributors and others with which the Company or any subsidiary has business
relations. Without limiting the generality of the foregoing, and except as
expressly permitted or specifically contemplated by the Merger Agreement,
between the date of the Merger Agreement and the Effective Time, the Company
shall not, and it shall not permit any subsidiary to, directly or indirectly
do, or propose to do, any of the following without the prior written consent
of Purchaser (except as otherwise expressly permitted by the Merger
Agreement):
(i) (A) declare, set aside or pay any dividends on or other distributions
in respect of any of its capital stock (other than dividends and
distributions by any direct or indirect wholly-owned subsidiary of the
Company to the Company), (B) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) repurchase, redeem or otherwise acquire, or permit any
subsidiary to repurchase, redeem or otherwise acquire, any shares of
capital stock;
(ii) issue, deliver, sell, pledge, dispose or encumber, or authorize or
propose the issuance, delivery, sale, pledge, disposal or encumbrance of,
any shares of its capital stock of any class or any securities convertible
into, or any rights, warrants, calls, subscriptions or options to acquire,
any such shares or convertible securities, or any other ownership interest
other than (A) the issuance of shares of the Company's common stock (the
"Company Common Stock") upon the exercise of stock options granted under
the Company Stock Option Plans outstanding on the date of the Merger
Agreement and in accordance with the current terms of such options, (B)
issuances by a subsidiary of the Company of its capital stock to the
Company or a subsidiary of the Company so long as the Company will, after
such issuance, directly or indirectly own all the outstanding capital stock
of such issuing subsidiary and (C) the grant of stock options to new hires
in the ordinary course of business consistent with past practice and with
the written consent of Parent;
(iii) amend or propose to amend its Certificate of Incorporation or By-
Laws;
(iv) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or by purchasing a substantial equity
interest in or 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;
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(v) sell, lease, license, grant a security interest in, encumber or
otherwise dispose of, or agree to sell, lease, grant a security interest
in, encumber or otherwise dispose of, any of its material assets other than
(A) sales or licenses of its products in the ordinary course of business
consistent with past practice, (B) equipment and property no longer used in
the operation of the Company's or any subsidiary of the Company's
respective businesses and (C) assets related to any discontinued operations
of the Company and any subsidiary of the Company which operations were
discontinued prior to the date of the execution of the Merger Agreement;
(vi) incur (which shall not be deemed to include entering into credit
agreements, lines of credit or similar arrangements until borrowings are
made under such arrangements) any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any
subsidiary of the Company or guarantee any debt securities of others,
except in the ordinary course of business consistent with past practice;
(vii) (A) grant any increase in the compensation of any of its directors,
officers or employees, except for increases for employees in the ordinary
course of business consistent with past practices, (B) grant, pay or agree
to pay any pension, retirement allowance or other employee benefit not
required or contemplated by any existing employee benefit plan, program,
arrangement, agreement or contract (including, without limitation, any
"employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained
or contributed to by the Company or any subsidiary of the Company, or with
respect to which the Company or any subsidiary of the Company could incur
liability under Sections 4069, 4212(c) or 4204 of ERISA (the "Company
Benefit Plans") as in effect on the date hereof to any director, officer or
employee, (C) enter into any new employment, severance or termination plan,
program, arrangement, agreement or contract with any such director, officer
or employee or (D) except as may be required to comply with applicable law,
become obligated under any Company Benefit Plan that was not in existence
on the date of the execution of the Merger Agreement or amend any such plan
in existence on the date of the execution of the Merger Agreement to
enhance the benefits thereunder;
(viii) make any capital expenditure or expenditures which exceed $250,000
in the aggregate; or
(ix) authorize any of, or commit or agree to take any of, the actions
described in the immediately foregoing paragraphs (i) through (viii).
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed to
immediately cease and cause to be terminated all existing discussions or
negotiations relating to a Competing Transaction, other than with respect to
the transactions contemplated by the Merger Agreement, with any parties
conducted prior thereto. The Company has agreed not to, directly or
indirectly, and to instruct its representatives not to, directly or
indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction or enter into or maintain
discussions or negotiate with any person in furtherance of or relating to such
inquiries or to obtain a Competing Transaction or agree to or endorse any
Competing Transaction or authorize or permit any representative of the Company
or any of its subsidiaries to take any such action. The Company also agreed to
use its best efforts to cause its representatives and subsidiaries not to take
any such action and to promptly notify Parent if any such inquiries or
proposals are made regarding a Competing Transaction and as to the material
details of any such inquiry or proposal and, if in writing, to promptly
deliver or cause to be delivered to Parent a copy of such inquiry or proposal.
The Company also agreed to keep Parent informed, on a current basis, of the
details of any such inquiries and the status and terms of any such proposals;
provided, however, that prior to the time of acceptance for payment of at
least a majority of Shares pursuant to the Offer, the Merger Agreement shall
not prohibit the Board from (i) furnishing information to, or entering into
discussions or negotiations with, any person that after the date of the Merger
Agreement makes an unsolicited bona fide proposal regarding a Competing
Transaction or agreeing to or endorsing any Competing Transaction, if, and
only to the extent that, (A) the Board, after consultation with and based upon
the advice of independent legal counsel, determines in good faith that such
action is required for the Board to comply
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with its fiduciary duties to the Company's stockholders imposed by the DGCL,
(B) prior to furnishing such information to, or entering into discussions or
negotiations with such person or agreeing to or endorsing any Competing
Transaction, the Board determines in good faith, after consultation with and
based upon the advice of a financial advisor of a nationally recognized
reputation, that such Competing Transaction is a Superior Proposal, (C) prior
to furnishing such information to, or entering into discussions or
negotiations with, such person, the Company provides written notice to
Purchaser to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person, (D) prior to furnishing such
information to such person, the Company receives from such person an executed
confidentiality agreement with terms no less favorable to the Company than
those contained in the confidentiality agreement between the Company and
Parent, and (E) such information to be so furnished has been previously
delivered to Parent; or (ii) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a Competing Transaction.
For purposes of the Merger Agreement, "Competing Transaction" means any of
the following involving the Company or any of its subsidiaries (other than the
entering into or consummation of the transactions contemplated by the Merger
Agreement): (a) any merger, consolidation, share exchange, business
combination, or other similar transaction; (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of substantial assets (other
than assets held in inventory for resale in the ordinary course of business)
of the Company and its subsidiaries, taken as a whole, in a single transaction
or series of transactions; (c) any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), in connection therewith; (d) any solicitation of proxies in
opposition to approval by the Company's stockholders of the Merger; (e) the
acquisition by any person, after the date hereof, of beneficial ownership or
the right to acquire beneficial ownership of, or the formation of any "group"
(as such term is defined under Section 13(d) of the Exchange Act), that
beneficially owns or has the right to acquire beneficial ownership of 20% or
more of the then outstanding shares of capital stock of the Company, or the
acquisition by any person or "group" that, as of the date hereof, beneficially
owns 20% or more of the outstanding shares of capital stock of the Company
(other than any passive institutional investor) of beneficial ownership or the
right to acquire beneficial ownership of any additional shares of capital
stock of the Company; (f) the adoption by the Company of a plan of
liquidation, the declaration or payment by the Company of an extraordinary
dividend on any of its shares of capital stock or the effectuation by the
Company of a recapitalization or other type of transaction that would involve
either a change in the Company's outstanding capital stock or a distribution
of assets of any kind to the holders of such capital stock; (g) the repurchase
by the Company or any subsidiary of the Company of shares of Company Common
Stock; or (h) any agreement to, or public announcement by the Company or any
other person, entity or group of a proposal, plan or intention to, do any of
the foregoing.
Directors. The Merger Agreement provides that, promptly upon the acceptance
for payment of, and payment for, Shares constituting a majority of the then
outstanding Shares by Purchaser pursuant to the Offer, Purchaser from time to
time shall be entitled to designate such number of directors (rounded up to
the next whole number) on the Board as will give Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, that percentage of the
total number of directors on the Board (giving effect to the election of any
additional directors pursuant to the Merger Agreement) equal to the percentage
of then outstanding Shares owned by Purchaser and Parent (provided that such
percentage of the total number of directors shall not be less than a majority
of the Board), and at such time, the Company shall cause Purchaser's designees
to be elected by the existing Board, provided, however, that in the event that
such designees are elected to the Board, from the date of the Merger Agreement
until the Effective Time, the Board shall have at least two directors who are
directors on the date of the Merger Agreement and who are neither officers of
the Company nor affiliates of Purchaser or Parent (the "Independent
Directors"); and provided further that if the number of Independent Directors
shall be reduced below two for any reasons whatsoever, the remaining
Independent Director shall designate a person to fill such vacancy who shall
be deemed to be an Independent Director for purposes of the Merger Agreement
or, if no Independent Directors then remain, the other directors shall
designate two persons to fill such vacancies who shall not be officers or
affiliates of the Company or officers or affiliates of Parent or any of its
subsidiaries, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement.
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Subject to applicable law, the Company shall take all actions requested by
Parent necessary to effect any such election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder by the
Commission, and the Company agrees to make such mailing with the mailing of
its Schedule 14D-9. In connection with the foregoing, the Company will
promptly, at the option of Parent, either increase the size of the Company's
Board and/or obtain the resignation of such number of its current directors as
is necessary to enable Purchaser's designees to be elected or appointed to,
and to constitute that percentage of the total number of directors on the
Board (giving effect to the election of any additional directors pursuant to
this Section) equal to the percentage of then outstanding Shares owned by
Purchaser and Parent (provided that such percentage of the total number of
directors shall not be less than a majority of the Board).
The Merger Agreement also provides that following the election of
Purchaser's designees, pursuant to the Merger Agreement, prior to the
Effective Time, any amendment or termination of the Merger Agreement or waiver
of any of the Company's rights thereunder shall require the concurrence of a
majority of the Independent Directors.
Directors' and Officers' Indemnification. The Merger Agreement requires that
the Certificate of Incorporation and By-Laws of the Surviving Corporation
contain the same provisions with respect to indemnification, advancement and
director exculpation as set forth in the Certificate of Incorporation and By-
Laws of the Company as of the date of the Merger Agreement, and that such
provisions not be amended, repealed or otherwise modified for a period of six
years after the Effective Time in any manner that would adversely affect the
rights thereunder of persons who at any time prior to the Effective Time were
entitled to indemnification, advancement or exculpation under the Certificate
of Incorporation or By-Laws of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by the Merger Agreement), unless such
modification is required by any foreign or domestic (federal, state or local)
law, statute, ordinance, rule, regulation, interpretation, permit, injunction,
writ, judgment, decree or order ("Law").
Purchaser will not permit the provisions with respect to indemnification,
advancement or director exculpation set forth in the Certificate of
Incorporation and By-Laws of any of the Company's subsidiaries on the date of
the Merger Agreement to be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of persons who at any time prior to the
Effective Time were entitled to indemnification, advancement or exculpation
under any such Certificate of Incorporation or By-Laws in respect of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), unless
such modification is required by Law.
The Merger Agreement further provides that from and after the Effective
Time, the Surviving Corporation shall indemnify, defend and hold harmless the
present and former officers, directors and employees of the Company
(collectively, the "Indemnified Parties") against all losses, expenses,
claims, damages, liabilities or amounts that are paid in settlement of (with
approval of Parent and the Surviving Corporation), or otherwise in connection
with, any claim, action, suit, proceeding or investigation, based in whole or
in part on the fact that such person is or was such a director, officer or
employee and arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated
by the Merger Agreement), in each case to the fullest extent permitted under
the DGCL (and shall pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the fullest extent
permitted under the DGCL, upon receipt from the Indemnified Party to whom
expenses are advance of the undertaking to repay such advances contemplated by
Section 145(e) of the DGCL).
Parent has agreed to maintain in effect for not less than six years after
the Effective Time (except to the extent not generally available in the
market) directors' and officers' liability insurance that is substantially
equivalent in coverage to the Company's current insurance, with an amount of
coverage of not less than the amount of coverage maintained by the Company as
of the date of the Merger Agreement with respect to matters
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occurring prior to the Effective Time; provided, however, that Parent is not
required to pay an annual premium for such insurance in excess of 150% of the
last annual premium paid prior to the date of the Merger Agreement (which the
Company represented and warranted to have been $250,000 plus applicable
taxes), but in such case shall purchase as much coverage as possible for such
amount.
Company Options. The Merger Agreement provides that, at the Effective Time,
each option to purchase shares of Company Common Stock (each a "Company
Option") issued pursuant to the Company Stock Option Plans or granted by the
Company to any person outside of any Company Stock Option Plan that is
outstanding and unexercised immediately prior to the Effective Time shall be
converted, at the Effective Time, into an option to acquire, on the same terms
and conditions as were applicable under the Company Stock Option Plans and the
underlying option agreements (as modified by the Merger Agreement), that
number of shares of common stock, $.01 par value, of Parent (the "Parent
Common Stock") determined by multiplying the number of shares of Company
Common Stock subject to such option by the Exchange Ratio (as defined herein)
(rounded up to the nearest whole share) at a price per share of Parent Common
Stock equal to the exercise price per share of Company Common Stock under such
Company Option divided by the Exchange Ratio (rounded up to the nearest whole
cent); provided, however, that in the case of any option to which Section 421
of the Code applies by reason of its qualification under section 422 of the
Code, the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The term
"Exchange Ratio" means that amount equal to the price of the Offer divided by
the closing price of Parent Common Stock on the New York Stock Exchange, Inc.
("NYSE") for the twenty consecutive trading days immediately preceding the
date of the Effective Time. The Company agreed to take all necessary action to
effectuate the foregoing and, except with respect to options currently
outstanding under the Directors' Non-Qualified Stock Option Plan (which the
Company has advised Purchaser consists of 72,500 shares), to preclude the
acceleration of any vesting or other provisions of any Company Option,
including pursuant to a Company Stock Option Plan or any agreement evidencing
the grant of a Company Option, as a result of the Merger Agreement and the
transactions contemplated by the Merger Agreement.
Employees. Following the Effective Time, the Surviving Corporation agreed to
honor in accordance with their terms all bonus, deferred compensation,
severance pay, insurance, stock purchase, stock option or other fringe
benefits plan, program or arrangement and all accrued benefits vested
thereunder. Purchaser agreed to provide, after the Effective Time, or cause
the Surviving Corporation to provide employees of the Company and its
subsidiaries retained and who continue to be employed by Purchaser with
employee benefits (other than stock options) in the aggregate substantially no
less favorable than those benefits provided to Purchaser's similarly situated
employees for a period ending on the first anniversary of the Effective Time.
Conditions to the Obligations of Each Party. The Merger Agreement provides
that the respective obligations of each party to consummate the Merger are
subject to the satisfaction of a number of conditions, including, but not
limited to, (i) the approval and adoption of the Merger Agreement by the
stockholders of the Company (if required), (ii) the expiration of any waiting
period applicable to the consummation of the Merger under the HSR Act and any
required approvals in connection with any premerger notification filing with
the German Federal Cartel Office, (iii) no United States (federal, state or
local) or foreign government or governmental regulatory, administrative
authority, agency, commission, board, bureau, court or instrumentality or
arbitrator of any kind ("Governmental Authority"), having enacted, issued,
promulgated, enforced or entered into any law, rule, regulation, executive
order or decree, judgment, injunction, ruling or other order, whether
temporary, preliminary or permanent, that is then in effect and has the effect
of prohibiting the consummation of the Merger, and (iv) the Offer not having
been terminated in accordance with its terms prior to the purchase of any
Shares.
Conditions to the Obligations of Parent and Purchaser. The Merger Agreement
provides that the obligations of Parent and Purchaser to consummate the Merger
is subject to the satisfaction of a number of further conditions, including
but not limited to, (i) the accuracy of representations and warranties as of
the times specified in the Merger Agreement, (ii) the performance by the
Company, in all material respects, with its
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agreements and covenants contained in the Merger Agreement and (iii) receipt
of an Accountant's Letter from the Company's independent auditors regarding
agreed-upon procedures relating to unaudited information after September 30,
1996.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including, but
not limited to, representations by the Company as to corporate organization
and qualification, subsidiaries, capitalization, authority to enter into the
Merger Agreement, filings with the Commission and other governmental
authorities, the absence of certain changes or events, intellectual property,
material contracts, environmental matters, employee benefit matters, the
opinion of the Company's financial advisor, labor relations, the application
of California law, tax returns, audits, brokers and litigation.
Expenses. The Merger Agreement provides that, if (i) Parent terminates the
Merger Agreement because the Company withdraws, modifies or changes its
recommendation of the Merger Agreement or Merger or recommends a Competing
Transaction or resolves to do so or because the Company is in breach of any
material provision of the Merger Agreement; (ii) the Company terminates the
Merger Agreement because the Board recommends a Superior Proposal or resolves
to do so; (iii) Parent terminates the Offer because the Minimum Condition is
not satisfied and at or prior to such time the Company has received one or
more proposals for a Competing Transaction which at the time of such
occurrence has not been absolutely and unconditionally withdrawn or abandoned;
or (iv) within six months after the date of termination of the Merger
Agreement (other than a termination solely pursuant to Section 8.1(a) (mutual
agreement), (e) (breach of any material provision of the Merger Agreement by
Parent or Purchaser) or (g) (failure of Purchaser to timely commence the
Offer) of the Merger Agreement at which time the Merger Agreement is not
terminable pursuant to any other provision of Section 8.1 thereof) of the
Merger Agreement a Competing Transaction is entered into by the Company, then
promptly after such termination (or, with respect to item (iv), upon the
entering into of such Competing Transaction) by Purchaser, Parent or the
Company, the Company shall pay to Parent an amount equal to $7,500,000 (the
"Break-up Fee") and shall reimburse Parent for all of its expenses up to an
amount equal to $1,500,000; provided that with respect to item (iii), the
Company shall pay to Parent an amount equal to $2,500,000 (the "Initial Break-
up Fee") plus all of Parent's expenses up to an amount equal to $1,500,000
promptly following such termination and the balance of the Break-up Fee only
shall be payable subject to the terms of item (iv) above.
Except as set forth in the above paragraph, all expenses incurred in
connection with the Merger Agreement and the transactions contemplated by the
Merger Agreement will be paid by the party incurring such expenses, whether or
not any transaction contemplated by the Merger Agreement is consummated, other
than expenses for services provided by the Company's principal outside counsel
to management that are ancillary to those provided by such counsel to the
Company in connection with the Offer, the Merger and the other transactions
contemplated by the Merger Agreement, which may be paid by the Company.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger and the transactions contemplated by the Merger Agreement may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of the Merger Agreement and the transactions
contemplated by the Merger Agreement, as follows:
(i) by mutual written consent duly authorized by the Boards of Directors
of each of Parent and the Company;
(ii) by either Parent or the Company, if either (a) the Effective Time
shall not have occurred on or before November 15, 1997; provided, however,
that the right to terminate the Merger Agreement under this Section shall
not be available to any party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date; (b) there shall be any
Law that makes consummation of the Merger illegal or otherwise prohibited
or any order that is final and nonappealable preventing the consummation of
the Merger, except if the party relying on such order has not complied with
its obligations under Section 6.6(b) (consisting of its agreement to take
all other appropriate actions in connection with the Offer, the Merger and
the transactions
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contemplated by the Merger Agreement) of the Merger Agreement or (c)
Purchaser or Parent shall have terminated the Offer in accordance with its
terms and conditions without purchasing any Shares pursuant thereto;
(iii) by Parent, if the Board (a) withdraws, modifies or changes its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Parent or Purchaser, (b) shall have recommended to the stockholders of the
Company any Competing Transaction or (c) shall have resolved to do any of
the foregoing;
(iv) by Parent, if there has been a breach of any material
representation, warranty, covenant or agreement on the part of the Company
set forth in the Merger Agreement, or if any representation or warranty of
the Company shall have become untrue, in either case such that the
condition to Parent and Purchaser's obligations set forth in Section 7.2(a)
of the Merger Agreement (breach of representations) would not be satisfied
(a "Terminating Company Breach"); provided, however, that, if such
Terminating Company Breach is curable by the Company through the exercise
of its reasonable best efforts and for so long as the Company continues to
exercise such reasonable best efforts (but in no event longer than thirty
days after Parent's notification of the Company of the occurrence of such
Terminating Company Breach), Parent may not terminate the Merger Agreement
pursuant to this provision;
(v) by the Company, if there has been a breach of any material
representation, warranty, covenant or agreement on the part of Parent and
Purchaser set forth in the Merger Agreement, or if any representation or
warranty of Parent and Purchaser shall have become untrue in any material
respect ("Terminating Purchaser Breach"); provided, however, that, if such
Terminating Purchaser Breach is curable by Parent and Purchaser through the
exercise of their reasonable best efforts and for so long as Parent and
Purchaser continue to exercise such reasonable best efforts (but in no
event longer than thirty days after the Company's notification of Parent of
the occurrence of such Terminating Purchaser Breach), the Company may not
terminate the Merger Agreement pursuant to this provision;
(vi) by the Company, if, prior to such time as Purchaser's designees
constitute a majority of the members of the Board, the Board shall have
recommended to the stockholders of the Company any Superior Proposal, which
is then pending, or resolved to do so, provided that any termination of the
Merger Agreement by the Company pursuant to this provision shall not be
effective until the close of business on the second full business day after
notice of such termination to Parent; or
(vii) by the Company, if Parent, Purchaser or an affiliate of Parent
shall have failed to commence the Offer within five business days after the
public announcement of the execution of the Merger Agreement.
Stockholders Agreement.
Parent, Purchaser and Wearnes, Eugene Y. Lu, Chun Win Wong and Philip A.
Harding, have entered into the Stockholders Agreement, pursuant to which,
among other things, each such stockholder has agreed to vote the Shares then
owned by such stockholder in favor of the approval and adoption of the Merger
Agreement, the Merger and all the transactions contemplated by the Merger
Agreement and the Stockholders Agreement and any other actions required in
furtherance thereof and against any Competing Transaction and any actions in
furtherance thereof, to grant Purchaser an irrevocable proxy to vote such
Shares, to tender all Shares then owned by such stockholder to Purchaser in
accordance with the Offer as soon as practicable (and in any event within five
business days) of the commencement of the Offer and to grant an option to
purchase such Shares at a price of $15.50 per Share, under certain
circumstances. Wearnes, Mr. Lu, Mr. Wong and Mr. Harding beneficially owned of
record 4,780,549, 410,000, 30,000 and 25,704 Shares, respectively, at the time
of execution of the Stockholders Agreement, representing approximately 42% of
the issued and outstanding Shares and approximately 38% on a fully diluted
basis. In addition, Messrs. Lu, Wong and Harding own vested options to acquire
45,316, 17,500 and 17,500 Shares, respectively, which Shares, issuable upon
exercise of such options, would be subject to the provisions of the
Stockholders Agreement. The foregoing is a summary of certain provisions of
the Stockholders Agreement, is presented only as a summary and is qualified in
its entirety by
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reference to the Stockholders Agreement, a copy of which has been filed as an
exhibit to Purchaser's and Parent's Schedule 14D-1 and 13D.
Retention Agreement.
Contemporaneously with the execution of the Merger Agreement, Parent entered
into the Retention Agreement with each of the Executives . The Retention
Agreement provides that, effective upon the Merger, there will be a one time
grant of the following options to acquire shares of common stock of Parent at
an exercise price equal to the closing price of Parent's common stock on the
NYSE: 120,000 for Mr. Lu; 50,000 for Mr. Kelly; 50,000 for Mr. Kullgren;
50,000 for Mr. Sangveraphunsiri; 50,000 for Mr. Sipkovich; 20,000 for Mr. Luu;
20,000 for Mr. Marchak; 20,000 for Ms. Ortegon and 20,000 for Mr. Sial. The
options will vest one-third each year on the anniversary date of the grant.
The Retention Agreement also provides that if an Employee's employment is
terminated by Parent without cause within two years of the Merger, the initial
stock options will vest and the Executive will receive up to 12 months payment
of base salary. The Executives have agreed as part of the Retention Agreement
not to disclose any confidential or proprietary information, not to solicit
any employee, customer or supplier of the Company or Parent while employed or
for one year following termination of employment without express written
permission of Parent, to assign all rights in inventions to Parent and to not
compete with the Company or Parent. The foregoing is a summary of certain
provisions of the Retention Agreement, is presented only as a summary and is
qualified in its entirety by reference to the Retention Agreement, a copy of
which has been filed as an exhibit to Purchaser's and Parent's Schedule 14D-1
and 13D.
SECTION 11. Purpose of the Offer; Plans for the Surviving Corporation after
the Offer and the Merger.
Purpose of the Offer. The purpose of the Offer and the Merger is for Parent
to acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Merger, the Surviving
Corporation will become a wholly-owned subsidiary of Parent. The Offer is
being made pursuant to the Merger Agreement.
Plans for Merger Consummation. Under the DGCL, the approval of the Board and
the affirmative vote of the holders of a majority of the outstanding Shares
are required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. The Board has unanimously approved
and adopted the Merger Agreement and the transactions contemplated thereby,
and, unless the Merger is consummated pursuant to the short-form merger
provisions under the DGCL described below, the only remaining required
corporate action of the Company is the approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the holders of a majority of the Shares. Accordingly, if the Minimum Condition
is satisfied, Purchaser will have sufficient voting power to cause the
approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholder.
In the Merger Agreement, the Company has agreed to take all action necessary
as promptly as practicable after the expiration of the Offer, to convene a
meeting of its stockholders to consider and vote upon the approval of the
Merger Agreement, the Merger and such other matters as may be necessary to
effectuate the transactions contemplated by the Merger Agreement. Parent and
Purchaser have agreed that all Shares owned by them and their subsidiaries
will be voted in favor of the Merger Agreement and the transactions
contemplated by the Merger Agreement at any such meeting.
If Purchaser purchases Shares sufficient to constitute a majority of the
then outstanding Shares, the Merger Agreement provides that Purchaser will be
entitled to designate representatives to serve on the Board in proportion to
Purchaser's ownership of Shares following such purchase constituting at least
a majority of the Board. See Section 10. Purchaser expects that such
representation would permit Purchaser to exert control over the Company's
conduct of its business and operations.
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Pursuant to the DGCL, if Purchaser acquires, pursuant to the Offer or
otherwise, such number of Shares which, when added to the Shares owned of
record by Parent and Purchaser on such date, constitutes at least 90% of the
then outstanding Shares, Purchaser will be able to approve and adopt the
Merger Agreement and the transactions contemplated thereby, including the
Merger, without a vote of the Company's stockholders. In such event, Parent,
Purchaser and the Company have agreed to take all necessary and appropriate
action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders. If, however, Purchaser does not acquire such number of Shares
which constitutes at least 90% of the then outstanding Shares pursuant to the
Offer or otherwise and a vote of the Company's stockholders is required
pursuant to the DGCL, a significantly longer period of time will be required
to effect the Merger.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders will have certain
rights under the DGCL to dissent and demand appraisals of, and to receive
payment in cash of the fair value of their Shares. Such rights to dissent, if
the statutory procedures are complied with, could lead to a judicial
determination of the fair value of the Shares, as of the day prior to the date
on which the stockholders' vote was taken approving the Merger or similar
business combination (excluding any element of value arising from the
accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting holders for their Shares. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, the
court is required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition
to, the market value of the Shares, including, among other things, asset
values and earning capacity. In Weinberger v. UOP, Inc., the Delaware Supreme
Court stated, among other things, that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered in an appraisal
proceeding. Therefore, the value so determined in any appraisal proceeding
could be the same, more or less than the purchase price per Share in the Offer
or the Merger Consideration. The Merger Agreement recites that the parties
believe that $15.50 is not less than the fair market value of a Share.
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions. Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transactions
contemplated by the Merger Agreement and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of such transaction. Purchaser believes
that Rule 13e-3 will not be applicable to the Offer or the Merger. However,
there is no assurance that the Commission will not take the position that Rule
13e-3 is applicable to the Offer or the Merger.
Plans for the Surviving Corporation. It is expected that, initially
following the Merger, the business and operations of the Surviving Corporation
will, except as set forth in this Offer to Purchase, be continued by the
Surviving Corporation substantially as they are currently being conducted.
Parent will continue to evaluate the business and operations of the Company
during the pendency of the Offer and after the consummation of the Offer and
the Merger, and will take such actions as it deems appropriate under the
circumstances then existing. Parent intends to seek additional information
about the Company during this period. Thereafter, Parent intends to review
such information as part of a comprehensive review of the Company's business,
operations, capitalization and management with a view to optimizing
realization of the Company's potential in conjunction with Parent's
businesses. It is expected that the business and operations of the Surviving
Corporation would form an important part of Parent's future business plans.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation
involving the Company, a sale or transfer of a material change in the
Company's capitalization or dividend policy or any other material changes in
the Company's corporate structure or business, or the composition of the Board
or the Company's management.
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SECTION 12. Dividends and Distributions.
The Merger Agreement provides that the Company will not, between the date of
the Merger Agreement and the Effective Time, without the prior written consent
of Parent, declare, set aside or pay any dividends on or other distributions
in respect of any of its capital stock, split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or repurchase, redeem or otherwise acquire, any shares of
capital stock.
SECTION 13. Effect of the Offer on Market for Shares; NASDAQ/NNM Exchange
Listing; Registration under the Exchange Act. The purchase of Shares by
Purchaser pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly, may reduce the number of holders of Shares and could
thereby adversely affect the liquidity and market value of the remaining
publicly held Shares.
Depending upon the aggregate market value and per share price of any Shares
not purchased pursuant to the Offer, the Shares may no longer meet the
standards for continued inclusion in the NASDAQ/NNM, which require, among
other things, that an issuer have at least 200,000 publicly held shares with a
market value of $1 million held by at least 400 stockholders or 300
stockholders holding round lots. If these standards were not met, quotations
might continue to be published in the over-the-counter "additional list" or in
one of the "local lists," but if the number of holders of Shares falls below
300, or if the number of publicly held Shares falls below 100,000, or there
are not at least two market makers for the Shares, the National Association of
Securities Dealers ("NASD") rules provide that the securities would no longer
be "authorized" for NASDAQ/NNM reporting and NASDAQ/NNM would cease to provide
any quotations. Shares held directly or indirectly by an officer or director
of the Company, or by any beneficial owner of more than 10 percent of the
Shares, ordinarily will not be considered as being publicly held for this
purpose. In the event the Shares were no longer eligible for NASDAQ/NNM
quotation, quotations might still be available from other sources. The extent
of the public market for the Shares and availability of such quotations would,
however, depend upon the number of holders of Shares remaining at such time,
the interest in maintaining a market in the Shares on the part of securities
firms, the possible termination of registration under the Exchange Act, as
described below, and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such Shares for the purpose of buying,
carrying or trading in securities. Depending upon factors similar to those
described above regarding the continued listing, public trading and market
quotations of the Shares, it is possible that following the purchase of the
Shares pursuant to the Offer, the Shares would no longer constitute "margin
securities" for purposes of the Federal Reserve Board's margin regulations, in
which event the Shares could no longer be used as collateral for loans made by
brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if the Shares are not listed on a national securities exchange and
there are fewer than 300 record holders. The termination of the registration
of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and
to the Commission and would make certain provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement in connection with stockholders'
meetings and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Shares.
In addition, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or be eligible for NASDAQ/NNM
reporting. Purchaser currently intends to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon after
consummation of the Offer as the requirements for termination of registration
are met.
SECTION 14. Certain Conditions of the Offer. Notwithstanding any other
provision of the Offer, Purchaser shall not be required to accept for payment
or pay for any Shares tendered, and may terminate or
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amend the Offer (subject to the provisions of the Merger Agreement) and may
postpone the acceptance of, and payment for, subject to Rule 14e-1(c) of the
Exchange Act, any Shares tendered, if:
(i) the Minimum Condition shall not have been satisfied,
(ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer, or
(iii) at any time on or after the date of execution of the Merger
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been instituted by any Governmental Authority
any action or proceeding before any Governmental Authority (including
such Governmental Authority instituting or initiating such action or
proceeding), (i) challenging or seeking to make illegal, materially
delay or otherwise directly or indirectly restrain or prohibit the
making of the Offer, the acceptance for payment of, or payment for, any
Shares by Parent, Purchaser, or any other affiliate of Parent, or the
consummation of any other transaction contemplated by the Merger
Agreement, or seeking to obtain material damages in connection with any
transaction contemplated by the Merger Agreement; (ii) seeking to
prohibit or limit materially the ownership or operation by the Company,
Parent or any of their respective subsidiaries of all or any material
portion of the business or assets of the Company, Parent or any of
their respective subsidiaries, or to compel the Company, Parent or any
of their respective subsidiaries to dispose of or to hold separate all
or any material portion of the business or assets of the Company,
Parent or any of their respective subsidiaries, as a result of the
transactions contemplated by the Merger Agreement; (iii) seeking to
impose or confirm limitations on the ability of Parent, Purchaser or
any other affiliate of Parent to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Company's
stockholders, including, without limitation, the approval and adoption
of the Merger Agreement and the transactions contemplated by the Merger
Agreement; (iv) seeking to require divestiture by Parent, Purchaser or
any other affiliate of Parent of any Shares; or (v) which otherwise has
a Company Material Adverse Effect (as defined in the Merger Agreement)
or which relates to the transactions contemplated by the Merger
Agreement and has a Purchaser Material Adverse Effect (as defined in
the Merger Agreement);
(b) there shall have been any action taken, or any Law enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to
(i) Parent, the Company or any subsidiary or affiliate of Parent or the
Company or (ii) any transaction contemplated by the Merger Agreement,
by any government or Governmental Authority other than the routine
application of the waiting period provisions of the HSR Act to the
Offer or the Merger, which is reasonably likely to result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a)
above;
(c) there shall have occurred any change, condition, event or
development that has a Company Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE or the
NASDAQ/NNM (excluding any coordinated trading halt triggered solely as
a result of a specified decrease in a market index), (ii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) any limitation (whether or not
mandatory) by any government or Governmental Authority of the United
States on the extension of credit by banks or other lending
institutions or (iv) a commencement of a war or material armed
hostilities or other national or international calamity involving the
United States;
(e) the Company or any of its subsidiaries shall have sustained a
loss or interference with its business by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious
act which constitutes a Company Material Adverse Effect, whether or not
said loss shall have been insured, which will, in the reasonable
opinion of Parent, make it inadvisable or impractical to proceed with
the Offer;
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(f) (i) it shall have been publicly disclosed or Parent or Purchaser
shall have otherwise learned that beneficial ownership of 20% or more
of the then outstanding Shares has been acquired by any person, other
than Parent or any of its affiliates or any other person not required
to file a Schedule 13D under the rules promulgated under the Exchange
Act or (ii) (A) the Board or any committee thereof shall have
withdrawn, modified or changed in a manner adverse to Parent or
Purchaser its approval or recommendation of the Offer, the Merger or
the Merger Agreement, or approved or recommended any Competing
Transaction or any other acquisition of Shares other than the Offer or
the Merger or (B) the Board or any committee thereof shall have
resolved to do any of the foregoing;
(g) the representations and warranties of the Company in the Merger
Agreement shall not be true and correct as of the date of the execution
of the Merger Agreement or as of the expiration of the Offer except for
(i) changes specifically contemplated by the Merger Agreement and (ii)
those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such date)
and in each case except where failure to be so true and correct would
not have a Company Material Adverse Effect (other than representations
and warranties that are already so qualified or that are qualified as
to the prevention or delay of the consummation of any of the
transactions contemplated by the Merger Agreement or as to the
performance by the Company of its obligations under the Merger
Agreement, which in each such case shall be true and correct as
written);
(h) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant of the Company to be performed or
complied with by it under the Merger Agreement unless all such failures
together in their entirety, would not, individually or in the
aggregate, have a Company Material Adverse Effect;
(i) the Merger Agreement shall have been terminated in accordance
with its terms; or
(j) Parent and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by Parent or Purchaser in
whole or in part at any time and from time to time in their sole discretion,
subject in each case to the terms of the Merger Agreement. The failure by
Parent or Purchaser at any time to execute any of the foregoing rights shall
not be deemed a waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances; and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
SECTION 15. Certain Legal Matters and Regulatory Approvals.
General. Based upon its examination of publicly available information with
respect to the Company and its review of certain information furnished by the
Company to Parent and discussions by representatives of Parent with
representatives of the Company during Parent's investigation of the Company,
Parent is not aware of any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a
whole, that might be adversely affected by Purchaser's acquisition of the
Shares pursuant to the Offer. Except as disclosed herein, Parent is not aware
of any approval or other action by any domestic (federal or state) or foreign
governmental, administrative or regulatory authority or public body that would
be required for the acquisition or ownership of Shares by Purchaser pursuant
to the Offer. Should any such approval or other action be required, it is
Parent's and Purchaser's current intention to seek such approval or action.
There is, however, no current intent to delay acceptance for payment of Shares
tendered pursuant to the Offer pending the outcome of any such matter or the
receipt of any such approval (subject to Purchaser's right to decline to
purchase Shares if any of the conditions in Section 14 shall have occurred).
There is no assurance that any such approval or other action, if needed, would
be obtained without substantial conditions or that adverse consequences might
not result to the business of the Company, Purchaser or Parent or that certain
parts of the business of the Company, Purchaser or Parent might not have to be
disposed of or held separate or other substantial conditions complied
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with in order to obtain such approval or other action or in the event that
such approvals were not obtained or such other actions were not taken.
Purchaser's obligation under the Offer to accept the Shares for payment and to
pay for such Shares is subject to certain conditions, including conditions
relating to certain legal matters discussed in this Section 15, which are
described in Section 14.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions contemplated by the
Merger Agreement may not be consummated unless certain information has been
furnished to the Antitrust Division and the FTC and certain waiting period
requirements have been satisfied. The acquisition of Shares pursuant to the
Offer is subject to such requirements. See Section 14.
On June 20, 1997, Parent filed a Premerger Notification and Report Form
under the HSR Act with respect to the purchase of Shares pursuant to the Offer
with the Antitrust Division and the FTC. Under the provisions of the HSR Act
applicable to the Offer, the purchase of Shares pursuant to the Offer may not
be consummated until the expiration of a 15-calendar day waiting period
following the filing by Parent. Accordingly, it is anticipated that the
waiting period with respect to the Offer under the HSR Act will expire at
11:59 p.m. New York City time, on July 5, 1997, unless early termination of
the waiting period is granted. In addition, the Antitrust Division or the FTC
may extend such waiting periods by requesting additional information or
documentary material from Parent prior to the expiration of the waiting
period. If such a request is made with respect to the Offer by either the
Antitrust Division or the FTC, the waiting period related to the Offer will
expire at 11:59 p.m. New York City time on the tenth calendar day after
substantial compliance by Parent with such request. Thereafter, the waiting
period could be extended only by court order. With respect to each
acquisition, the Antitrust Division or the FTC may issue only one request for
additional information. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transactions contemplated by the Merger Agreement, the parties may
engage in negotiations with the relevant governmental agency concerning
possible means of addressing those issues and may agree to delay consummation
of the transactions contemplated by the Merger Agreement while such
negotiations continue. Expiration or termination of applicable waiting periods
under the HSR Act is a condition to Purchaser's obligation to accept for
payment and pay for Shares tendered pursuant to the Offer.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
by Purchaser pursuant to the Offer. At any time before or after such purchase,
the Antitrust Division or the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the purchase of Shares pursuant to the Offer by Purchaser or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of Parent, the Company or their respective subsidiaries. Litigation
seeking similar relief could be brought by private parties.
Based upon an examination of information available to Parent relating to the
business in which Parent, the Company and their respective subsidiaries are
engaged, Parent and Purchaser believe that the Offer and the other
transactions contemplated by the Merger Agreement will not violate the
antitrust laws and that such transactions will lead to increased competition.
However, there is no assurance that a challenge to the Offer and the other
transactions contemplated by the Merger Agreement on such grounds will not be
made, or if such a challenge is made, what the result will be. See Section 14
for certain conditions to the purchase of the Shares, including conditions
with respect to litigation and certain governmental actions.
Foreign Laws. Parent and Purchaser have been advised by German counsel to
Parent that because of the operations of certain subsidiaries of each of
Parent and the Company, a pre-merger notification filing and approval is
required with the German Federal Cartel Office. Parent expects to make the
required pre-merger notification filing on or about June 24, 1997 with the
German Federal Cartel Office. Based upon an examination of information
available to Parent relating to the business in which Parent, the Company and
their respective subsidiaries are engaged, Parent and Purchaser believe that
the Offer and the other transactions contemplated by the Merger Agreement will
not violate the applicable laws, rules and regulations of the German Federal
Cartel
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Office and believe such filing will be approved. However, there is no
assurance that a challenge to the Offer and the other transactions
contemplated by the Merger Agreement will not be made, or if such a challenge
is made, what the result will be. See Section 14 for certain conditions to the
purchase of the Shares, including conditions with respect to litigation and
certain governmental actions.
According to the Company's Form 10-K, the Company and its subsidiaries
conduct operations in several foreign countries. In the event that one or more
other foreign laws is deemed to be applicable to the Offer, Purchaser may be
required to file certain information or to receive the approval of the
relevant foreign authorities. Purchaser will seek such approvals as may be
necessary or appropriate, but there is no assurance that such approvals will
be obtained.
After Purchaser has had an opportunity to review the nature and extent of
the Company's operations in foreign countries, it will determine what action,
if any, in addition to that referred to above will be taken in each instance.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the time such person became an interested stockholder
unless, among other things, prior to such time the board of directors of the
corporation approved either the business combination or the transaction in
which the interested stockholder became an interested stockholder. On June 19,
1997, prior to the execution of the Merger Agreement and the Stockholders
Agreement, the Board, by unanimous vote of all directors at a meeting held on
such date, approved the Merger Agreement, the Stockholders Agreement, the
Merger, the Offer and the other transactions contemplated by the Merger
Agreement, including the Stockholders Agreement, and exempted Parent and
Purchaser from the application of Section 203. Accordingly, Section 203 is
inapplicable to the Offer and the Merger and the transactions contemplated by
the Merger Agreement.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. Mite Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, an anti-takeover statute, which, as a matter of state
securities law, made takeovers of corporations meeting certain requirements
more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court held that the State of Indiana may, as a matter of corporate
law and, in particular, with respect to those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders. The state law before the Supreme Court
was a shareholder rights statute that was, by its terms, applicable only to
corporations that had a substantial number of stockholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, the Purchaser will
take such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
is applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment any Shares tendered pursuant
to the Offer, or be delayed in continuing or consummating the Offer and the
Merger. In such case, Purchaser may not be obligated to accept for payment any
Shares tendered. See Section 14.
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SECTION 16. Fees and Expenses. Except as set forth below, neither Parent nor
Purchaser will pay any fees or commissions to any broker, dealer or other
person for soliciting tenders of Shares pursuant to the Offer.
DMG is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services in connection with the
acquisition of the Company. Parent has agreed to pay DMG a success fee of
approximately $2.4 million payable upon the closing of the Merger. Parent has
also agreed to reimburse DMG for all reasonable out-of-pocket expenses
incurred by DMG, including the reasonable fees and expenses of legal counsel,
and to indemnify DMG against certain liabilities and expenses in connection
with its engagement, including certain liabilities under the federal
securities laws.
Purchaser and Parent have retained Georgeson & Company Inc., as the
Information Agent, and First Chicago Trust Company of New York, as the
Depositary, in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telecopy, telegraph and personal
interview and may request banks, brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Georgeson & Company Inc. will be paid a fee of $7,500 and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws. Purchaser will pay the
Depositary reasonable and customary compensation for its services in
connection with the Offer, plus reimbursement for out-of-pocket expenses, and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including under federal securities laws. Brokers,
dealers, commercial banks and trust companies will be reimbursed by Purchaser
for customary handling and mailing expenses incurred by them in forwarding
material to their customers.
SECTION 17. Miscellaneous.
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser
will make a good faith effort to comply with such state statute. If, after
such good faith effort, Purchaser cannot comply with such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of Purchaser by the Dealer Manager or by one or more
registered broker-dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the Commission a Schedule
14D-1 and 13D, together with exhibits, furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and 13D any
amendments thereto, including exhibits, may be inspected at, and copies may be
obtained from, the same places and in the same manner as set forth in Section
7 (except that they will not be available at the regional offices of the
Commission).
DEUCE ACQUISITION CORPORATION
June 24, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name, current business address, citizenship, and present principal
occupation or employment, and material occupations and positions, offices or
employments and business addresses thereof for the past five years, of each
member of the Board of Directors and executive officer of Parent. Unless
otherwise indicated each such person (i) has held his Principal Occupation for
the past five years, (ii) is a citizen of the United States, (iii) has as his
current business address, 610 Gateway Drive, North Sioux City, South Dakota
57049 and (iv) has not been convicted in a criminal proceeding and has not
been party to a proceeding related to U.S. state and federal securities laws.
The directors and executive officers of Parent are:
<TABLE>
<S> <C> <C> <C>
NAME AND POSITION WITH PRINCIPAL OCCUPATION PRIOR POSITION
ADDRESS PARENT (IF WITHIN 5 YEARS)
- ---------------------------------------------------------------------------------------------
Theodore W. Chairman of the Board, Chairman of the Board, Chief
Waitt Chief Executive Officer Executive Officer and
and Director (Since 1983) Director (Since 1983)
- ---------------------------------------------------------------------------------------------
Richard D. President, Chief President, Chief Operating Executive Vice
Snyder Operating Officer and Officer and Director President of Parent
Director (since 1991) (since 1996) from July 1991 until
his election as
President of Parent
in January 1996
- ---------------------------------------------------------------------------------------------
Charles G. Director (since 1996) Chairman of the Board and
("Chase") Chief Executive Officer of
Carey the Fox Television Division
of Fox Inc. and co-chief
operating officer of News
Corporation (Mr. Carey has
served in various executive
capacities at Fox since 1988)
- ---------------------------------------------------------------------------------------------
James W. Director (since 1991) Chairman of the Board of
Cravens Sanborn Savings Bank,
Dickinson County Savings
Bank and Ocheyedan Savings
Bank
- ---------------------------------------------------------------------------------------------
George H. Director (since 1991) Attorney with the law firm
Krauss of Kutak Rock in Omaha,
Nebraska (since 1972); Board
of Directors of the general
partner of America First
Financial fund 1987-A Limited
Partnership
- ---------------------------------------------------------------------------------------------
Douglas L. Director (since 1989) Partner in the accounting
Lacey firm of Nichols, Rise
& Company, L.L.P. and managing
partner of its Sioux City,
Iowa office (since 1973)
- ---------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C> <C>
NAME AND POSITION WITH PRINCIPAL OCCUPATION PRIOR POSITION
ADDRESS PARENT (IF WITHIN 5 YEARS)
- --------------------------------------------------------------------------------------------
James F. Director (since 1996) President of 1-800-FLOWERS
McCann (since 1988)
- --------------------------------------------------------------------------------------------
Robert N. Senior Vice President Senior Vice President Senior Vice President
Beck (since 1995) of Human Resources
of Abbott Laboratories,
Inc., an instructional
health care company
- --------------------------------------------------------------------------------------------
James P. Senior Vice President Senior Vice President President of Anigma,
Collas (since 1995) Inc., a PC system
board and motherboard
design and development
company
- --------------------------------------------------------------------------------------------
William M. Senior Vice President, Senior Vice President, Senior Vice President
Elliott General Counsel and General Counsel and of International
Corporate Secretary Corporate Secretary Telecharge,
(since 1995) Inc., a
telecommunications
company
- --------------------------------------------------------------------------------------------
David J. Senior Vice President, Senior Vice President, Vice Chairman and
McKittrick Chief Financial Officer Chief Financial Officer and Chief Operating Office
and Treasurer Treasurer of Collins & Aikman
(since 1995) Group, Inc., a
diversified
manufacturing company
- --------------------------------------------------------------------------------------------
Robert M. Senior Vice President Senior Vice President America First
Spears (various capacities with Financial Corporation
Parent since 1990) and Bank of
America
- --------------------------------------------------------------------------------------------
James A. Senior Vice President Senior Vice President Executive Managing
Taylor (since 1996) Director and General
Manager of Hill &
Knowlton
- --------------------------------------------------------------------------------------------
Bartholomew Vice President Vice President Director of Desktop
R. Brown (since 1997) Products of Parent
- --------------------------------------------------------------------------------------------
Joseph J. Vice President Vice President Senior Vice President
Burke (since 1995) and Chief Financial
Officer Blockbuster
Entertainment
Corporation,
International
Division, a worldwide
home entertainment
retailer
- --------------------------------------------------------------------------------------------
Robert J. Vice President (various Vice President Texas Instruments
Cheng capacities with Parent Incorporated, a
since 1991) computer and
electronics company
- --------------------------------------------------------------------------------------------
John Vice President Vice President Vice President of
D'Auguste (since 1993) General Railway
Signal Corporation, a
railway signaling
equipment manufacturer
- --------------------------------------------------------------------------------------------
Bernard F. Vice President Vice President Texas Instruments
Ebert (since 1996) Incorporated
- --------------------------------------------------------------------------------------------
Michael D. Vice President Vice President
Hammond (since 1992)
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C> <C>
NAME AND POSITION WITH PRINCIPAL OCCUPATION PRIOR POSITION
ADDRESS PARENT (IF WITHIN 5 YEARS)
- -------------------------------------------------------------------------------------------
John Vice President Vice President Executive Director of
Heubusch (since 1997) the National Republican
Senatorial Committee
- -------------------------------------------------------------------------------------------
Eric G. Vice President Vice President Managing Partner, M2
Larsen (since 1997) Communications, a
consulting firm, from
July 1995 until
December 1996;
National Program
Manager, Apple
Computer Inc. from
1985 until 1995
- -------------------------------------------------------------------------------------------
William G. Vice President Vice President Vice President, Sales
Shea (since 1993) and General Manager
of OPTA Corporation,
a manufacturer of
high-end computer
graphics cards
- -------------------------------------------------------------------------------------------
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship, and present principal
occupation or employment, and material occupations positions, offices or
employments and business addresses thereof for the past five years, of each
member of the Board of Directors and executive officer of Purchaser. Unless
otherwise indicated each such person (i) has held his Principal Occupation for
the past five years, (ii) is a citizen of the United States, (iii) has as his
or her current business address, 610 Gateway Drive, North Sioux City, South
Dakota 57049 and (iv) has not been convicted in a criminal proceeding and has
not been party to a proceeding related to state and federal securities laws.
<TABLE>
<S> <C> <C> <C>
NAME AND POSITION WITH PRINCIPAL OCCUPATION PRIOR POSITION
ADDRESS PURCHASER (IF WITHIN 5 YEARS)
- --------------------------------------------------------------------------------------------
William M. Director Senior Vice President, Senior Vice President
Elliott (since 1997) General Counsel and of International
Corporate Secretary of Telecharge, Inc., a
Parent telecommunications
company
- --------------------------------------------------------------------------------------------
David J. Director Senior Vice President, Vice Chairman and
McKittrick (since 1997) Chief Financial Officer and Chief Operating Office
Treasurer of Parent of Collins & Aikman
Group, Inc., a
diversified
manufacturing company
- --------------------------------------------------------------------------------------------
Stephen P. President and Director Director of Corporate Director of Financial
Johns (since 1997) Development of Parent Advisory Services of
Coopers & Lybrand
- --------------------------------------------------------------------------------------------
Randall D. Treasurer Director of Tax and Tax Accountant of
Harvey (since 1997) Assistant Treasurer of Bandag, Inc., a
Parent manufacturer of
tread rubber and
retreading equipment
- --------------------------------------------------------------------------------------------
Stephanie G. Corporate Secretary Senior Staff Counsel of Associate General
Heim (since 1997) Parent Counsel and Assistant
Secretary of Federal-
Mogul Corporation, an
auto parts
manufacturer and
distributor
</TABLE>
34
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and the Share Certificates should be sent by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of the following addresses:
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Facsimile Transmission: By Hand:
<S> <C> <C>
First Chicago Trust Company (201) 222-4720 First Chicago Trust Company
of New York or of New York
Attn: Tenders & Exchanges (201) 222-4721 Attn: Tenders & Exchanges
P.O. Box 2565, Suite 4660- c/o THE DEPOSITARY
ALR TRUST COMPANY
Jersey City, NJ 07303-2565 55 Water Street, DTC TAD
Vietnam Veterans
Memorial Plaza
New York, NY 10041
By Overnight Courier: Confirm by Telephone:
First Chicago Trust Company (201) 222-4707
of New York
Attn: Tenders & Exchanges
Suite 4680-ALR
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers listed below. Additional copies of the Offer to Purchase and the
Letter of Transmittal and other tender offer materials may be obtained from
the Information Agent as set forth below and will be furnished promptly at
Purchaser's expense. You may also contact your broker, dealer, commercial
bank, or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC.]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
[LOGO OF DEUTSCHE MORGAN GRENFELL INC.]
Deutsche Morgan Grenfell Inc.
1550 El Camino Real
Suite 100
Menlo Park, CA 94025
Banks and Brokers call collect (415) 614-5050
Call Toll Free: 1-888-DMG-4TEC
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
AT $15.50 PER SHARE, NET
PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 24, 1997
BY
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JULY 22, 1997 UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Overnight Courier: By Hand:
<S> <C> <C>
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Attn: Tenders & Exchanges Attn: Tenders & Exchanges Attn: Tenders & Exchanges
P.O. Box 2565, Suite 4660-ALR Suite 4680-ALR c/o THE DEPOSITORY
Jersey City, NJ 07303-2565 14 Wall Street, 8th Floor TRUST COMPANY
New York, NY 10005 55 Water Street, DTC TAD
Vietnam Veterans
Memorial Plaza
New York, NY 10041
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR, WITH SIGNATURE
GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
SEE INSTRUCTION 1.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates (the "Share Certificates") evidencing Shares (as defined below)
are to be forwarded herewith or, unless an Agent's Message (as defined in the
Offer to Purchase) is utilized, if delivery of Shares is to be made by book-
entry transfer to the account maintained by the Depositary at The Depository
Trust Company or the Philadelphia Depository Trust Company (the "Book-Entry
Transfer Facilities") pursuant to the book-entry transfer procedures described
in Section 3 of the Offer to Purchase (as defined below).
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required
hereby to the Depositary prior to the Expiration Date (as defined in Section 1
of the Offer to Purchase) or who cannot complete the procedures for delivery
by book-entry transfer on a timely basis and who wish to tender their Shares
must do so pursuant to the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
[_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution: ________________________________________________
CHECK BOX OF APPLICABLE BOOK-ENTRY TRANSFER FACILITY:
(CHECK ONE) [_] THE DEPOSITORY TRUST COMPANY
[_] PHILADELPHIA DEPOSITORY TRUST COMPANY
Account Number: _______________________________________________________________
Transaction Code Number: ______________________________________________________
[_]CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ______________________________________________
Window Ticket No. (if any): ___________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Name of Institution which Guaranteed Delivery: ________________________________
DESCRIPTION OF SHARES TENDERED
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
SHARE CERTIFICATE(S) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL NUMBER
OF
SHARES
REPRESENTED NUMBER OF
BY SHARE SHARES
SHARE CERTIFICATE CERTIFICATES* TENDERED**
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET
FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Deuce Acquisition Corporation, a Delaware
corporation (the "Purchaser") and wholly-owned subsidiary of Gateway 2000,
Inc., a Delaware corporation ("Parent"), all outstanding shares of common
stock, par value $.01 per share (the "Shares"), of Advanced Logic Research,
Inc., a Delaware corporation (the "Company"), pursuant to Purchaser's offer to
purchase all Shares, at a price of $15.50 per Share, net to seller in cash,
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated June 24, 1997 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with
the Offer to Purchase, constitute the "Offer"). The undersigned understands
that Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more affiliates of Parent, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed
in respect of such Shares on or after June 19, 1997 (collectively,
"Distributions") and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver Share Certificates for such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with
all accompanying evidences of transfer and authenticity, to or upon the order
of Purchaser, (ii) present such Shares and all Distributions for transfer on
the books of the Company and (iii) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Distributions, all
in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints David J. McKittrick and William
M. Elliott, Esq., and each of them, as such stockholder's attorneys and
proxies, each with full power of substitution, to vote in such manner as each
such attorney or proxy or his substitute shall, in his sole discretion, deem
proper, and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby which have been accepted for payment by
Purchaser prior to the time of such vote or other action (and any and all
other Shares or securities issued or issuable in respect thereof on or after
June 19, 1997). This proxy and power of attorney is coupled with an interest
in the Shares tendered hereby, is irrevocable and is granted in consideration
of, and is effective upon, the acceptance for payment by Purchaser of such
Shares in accordance with the terms of the Offer. Upon such acceptance for
payment, all prior proxies and powers of attorney granted by such stockholder
will, without further action, be revoked, and no subsequent proxy or power of
attorney may be given nor any subsequent written consent executed by such
stockholder (and if given or executed, shall not be effective). The designees
of Purchaser will be empowered, with respect to such Shares for which the
appointment is effective, to exercise all voting and other rights (whether by
written consent or otherwise) of such stockholder as they, in their sole
discretion, may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment of postponement thereof, by written consent in
lieu of any such meeting or otherwise. The undersigned understands that, in
order for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance of such Shares, Purchaser must be able to exercise full voting
rights with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restrictions,
charges and encumbrances, and that none of such Shares and Distributions will
be subject to any adverse claim. The undersigned, upon request, shall execute
and deliver any additional documents deemed by the Depositary or Purchaser to
be necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned
shall remit and transfer promptly to the Depositary for the account of
Purchaser all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and
may withhold the entire purchase price of the Shares tendered hereby, or
deduct from such purchase price, the amount or value of such Distribution as
determined by Purchaser in its sole discretion.
<PAGE>
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and all such authority shall survive,
the death or incapacity of the undersigned. Any obligations of the undersigned
hereunder shall be binding upon the heirs, executors, administrators and legal
and personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the acceptance of the undersigned of the
terms and conditions of the Offer. Purchaser's acceptance of such Shares for
payment will constitute a binding agreement between the undersigned and
Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased
or not tendered in the name(s) of the registered holder(s) appearing above
under "Description of Shares Tendered." Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions," please mail the check for
the purchase price of all Shares purchased and all Share Certificates
evidencing Shares not tendered or not purchased (and accompanying documents,
as appropriate) to the undersigned at the address shown above under
"Description of Shares Tendered." In the event that both the Special Payment
Instructions and the Special Delivery Instructions are completed, please issue
the check for the purchase price of all Shares purchased and return all Share
Certificates evidencing Shares not tendered or accepted for payment in the
name(s) of, and mail such check and Share Certificates to, the person(s) so
indicated. Unless otherwise indicated herein in the box entitled "Special
Payment Instructions," please credit any Shares tendered hereby and delivered
by book-entry transfer, but which are not purchased, by crediting the account
at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name(s) of the registered
holder(s) thereof if Purchaser does not purchase any of the Shares tendered
hereby.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if Share To be completed ONLY if Share
Certificates for Shares not Certificates for Shares not
tendered or not purchased and/or tendered or not purchased and/or
the check for the purchase price of the check for the purchase price of
Shares purchased are to be issued Shares purchased are to be sent to
in the name of someone other than someone other than the undersigned,
the undersigned, or if Shares or to the undersigned at an address
tendered hereby and delivered by other than that shown above.
book-entry transfer which are not
purchased are to be returned by
credit to an account maintained at
a Book-Entry Transfer Facility
other than that designated above.
Issue check and/or certificate to:
Name _______________________________
(Please Print)
Address ____________________________
Issue check and/or certificate to:
Name _______________________________
(Please Print)
____________________________________
Address ____________________________
(Include Zip Code)
____________________________________ ____________________________________
(Tax Identification or Social
(Include Zip Code) Security Number)
____________________________________
(Tax Identification or Social
Security Number)
[_] Credit unpurchased Shares
delivered by book-entry transfer
to the Book-Entry Transfer
Facility account set forth
below.
Check Appropriate box.
[_] The Depository Trust Company
[_] Philadelphia Depository Trust
Company
__________________________________
(Account Number)
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
X _____________________________________________________________________________
X _____________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S)
Dated: _____________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by Share Certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please provide the following
information. See Instructions 1 and 5.)
Name(s) _______________________________________________________________________
_______________________________________________________________________________
(Please Print)
Capacity (Full Title) _________________________________________________________
(See Instruction 5)
Address _______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________________
Taxpayer Identification or Social Security No. ________________________________
(Complete Substitute Form W-9 on Reverse
Side)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________________________________
Name __________________________________________________________________________
(Please Print)
Title _________________________________________________________________________
Name of Firm __________________________________________________________________
Address _______________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
Area Code and Telephone Number ________________________________________________
Dated: _____________________, 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if (a) this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
includes any participant in a Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of the Shares) tendered herewith
unless such holder has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the
reverse hereof or (b) such Shares are tendered for the account of a bank,
broker, dealer, credit union, savings association or other entity that is a
member in good standing of the Securities Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (each an "Eligible Institution"). In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if Share Certificates
are to be forwarded herewith or if tenders of Shares are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in Section 3
of the Offer to Purchase. Share Certificates evidencing all physically
tendered Shares, or any Book Entry Confirmation of Shares, as the case may be,
as well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
transfer facility, and any other documents required by this Letter of
Transmittal, must, in any case, be received by the Depositary at its addresses
set forth herein on or prior to the Expiration Date (as defined in Section 1
of the Offer to Purchase). If Share Certificates are forwarded to the
Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery. Stockholders whose
Share Certificates are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary on or
prior to the Expiration Date or who cannot complete the procedures for
delivery by book-entry transfer on a timely basis may tender their Shares by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase. Pursuant to such procedures: (a) such tender must be made
by or through an Eligible Institution; (b) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made
available by Purchaser, must be received by the Depositary prior to the
Expiration Date; and (c) the Share Certificates evidencing all physically
delivered Shares in proper form for transfer by delivery, or Book Entry
Confirmation of Shares, in each case together with properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), unless an Agent's
Message is utilized, properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three National
Association of Securities Dealers, Inc. Automated Quotation/National Market
System trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE SHARE CERTIFICATE
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or a facsimile hereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers and/or the
number of Shares should be listed on a separate schedule attached hereto.
4. PARTIAL TENDER. (Not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares evidenced by any Share Certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Number of Shares Tendered." In such cases, new
Share Certificate(s) evidencing the remainder of the Shares that were
evidenced by your old Share Certificates will be sent to you as soon as
practicable after the Expiration Date. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificates without alteration, enlargement
or any change whatsoever.
<PAGE>
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of Share Certificates.
If this Letter of Transmittal or any Share Certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority to so act
must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment or Share Certificates for
Shares not tendered or purchased are to be issued to a person other than the
registered owner(s). Signatures on such Share Certificates or stock powers
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares listed, the Share Certificate(s) must be
endorsed in blank or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on such
Share Certificate(s). Signatures on such Share Certificate(s) or stock powers
must be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the sale and transfer of purchased Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
Share Certificate(s) for Shares not tendered or purchased are to be registered
in the name of, any person other than the registered holder(s), or if tendered
Share Certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s), such other person or
otherwise) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS
INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED
TO THE SHARE CERTIFICATES EVIDENCING THE SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
for unpurchased Shares are to be issued, in the name of a person other than
the person(s) signing this Letter of Transmittal or if a check is to be sent
or such Share Certificates are to be returned to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering Shares by book-entry transfer may request that Shares
not purchased be credited to such account maintained at a Book-Entry Transfer
Facility as such stockholder may designate hereon. If no such instructions are
given, such Shares not purchased will be returned by crediting the account at
the Book-Entry Transfer Facility designated above as the account from which
such Shares were delivered.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Information Agent or the Dealer
Manager at their respective addresses or telephone numbers set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be obtained from the Information Agent or
from brokers, dealers, commercial banks or trust companies.
9. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide the
Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and
that such stockholder is not subject to backup withholding of federal income
tax. If a tendering stockholder has been notified by the Internal Revenue
Service that such stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9, unless such stockholder has since been notified by the Internal
Revenue Service that such stockholder is no longer subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to 31% federal income tax withholding on the
payment of the purchase price . If the tendering stockholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, such stockholder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, and sign and date
the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price to such stockholder until a
TIN is provided to the Depositary.
<PAGE>
10. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any Share
Certificate(s) representing Shares has been lost, destroyed or stolen, the
stockholder should promptly notify the Information Agent. The stockholder will
then be instructed as to the steps that must be taken in order to replace the
Share Certificate(s). This Letter of Transmittal and related documents cannot
be processed until the procedures for replacing lost or destroyed Share
Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF
GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If a tendering stockholder is subject to backup withholding, he or she
must cross out Item (2) of the Certification box on the Substitute Form W-9.
If the Depositary is not provided with the correct TIN, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding. In addition, if a
stockholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for such statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. Exempt stockholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions. A
stockholder should consult his or her tax advisor as to such stockholder's
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent federal income tax backup withholding on payments of cash that
are made to a stockholder with respect to Shares purchased pursuant to the
Offer, the stockholder must provide the Depositary with such stockholder's
correct TIN by completing the form below certifying under penalties of perjury
(a) that the TIN provided on Substitute Form W-9 is correct (or that such
stockholder is awaiting a TIN) and (b) that (i) such stockholder has not been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance
on which number to report. If the tendering stockholder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for
the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of all payments of the purchase price
until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
PART I--PLEASE PROVIDE
SUBSTITUTE YOUR TIN IN THE BOX AT ___________________________
FORM W-9 RIGHT AND CERTIFY BY SOCIAL SECURITY NUMBER
SIGNING AND DATING BELOW.
Department of the OR ________________________
Treasury Internal Revenue EMPLOYER IDENTIFICATION
Service NUMBER
-----------------------------------------------------
PART II--For Payees exempt from backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-
9 and complete as instructed therein.
Payer's Request for Tax- (If awaiting TIN write
payer Identification Num- "Applied For")
ber (TIN)
- -------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Num-
ber (or a Taxpayer Identification Number has not been issued to me) and
either (a) I have mailed or delivered an application to receive a Tax-
payer Identification Number to the appropriate Internal Revenue Service
("IRS") or Social Security Administration office or (b) I intend to mail
or deliver an application in the near future. (I understand that if I do
not provide a Taxpayer Identification Number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I pro-
vide a number); and
(2) I am not subject to backup withholding either because I have not been no-
tified by the IRS that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or the IRS has notified me
that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you re-
ceived another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines).
- -------------------------------------------------------------------------------
SIGNATURE ___________________________________ DATE ____________ , 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
Facsimiles of the Letter of Transmittal, properly completed and duly signed,
will be accepted. The Letter of Transmittal, Share Certificates and any other
required documents should be sent or delivered by each stockholder to such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to the Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail By Overnight Courier: By Hand:
First Chicago Trust First Chicago Trust Company First Chicago Trust Company
Company of New York of New York of New York
Attn: Tenders & Exchanges Attn: Tenders & Exchanges Attn: Tenders & Exchanges
P.O. Box 2565, Suite 4660- Suite 4680-ALR c/o THE DEPOSITORY
ALR 14 Wall Street, 8th Floor TRUST COMPANY
Jersey City, NJ 07303-2565 New York, NY 10005 55 Water Street, DTC TAD
Vietnam Veterans
Memorial Plaza
New York, NY 10041
</TABLE>
<PAGE>
Questions or request for assistance may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A stockholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC.]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
[LOGO OF DUETSCHE MORGAN GRENFELL INC.]
Deutsche Morgan Grenfell Inc.
1550 El Camino Real
Suite 100
Menlo Park, CA 94025
Banks and Brokers call collect (415) 614-5050
Call Toll Free: 1-888-DMG-4TEC
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
TO
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock, par value $.01 per
share (the "Shares"), of Advanced Logic Research, Inc., a Delaware corporation
(the "Company"), are not immediately available, (ii) if Share Certificates and
all other required documents cannot be delivered to First Chicago Trust
Company of New York, as Depositary (the "Depositary"), prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or
(iii) if the procedures for book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand or
mail or transmitted by telegram, telex or facsimile transmission to the
Depositary. See Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
First Chicago Trust Company (201) 222-4720 First Chicago Trust Company
of New York or of New York
Attn: Tenders & Exchanges (201) 222-4721 Attn: Tenders & Exchanges
P.O. Box 2565, Suite 4660- c/o THE DEPOSITORY
ALR TRUST COMPANY
Jersey City, NJ 07303-2565 55 Water Street, DTC TAD
Vietnam Veterans
Memorial Plaza
New York, NY 10041
By Overnight Courier: Confirm by Telephone:
First Chicago Trust Company (201) 222-4707
of New York
Attn: Tenders & Exchanges
Suite 4680-ALR
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE
TRANSMISSION OR TELEX OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to Deuce Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Gateway 2000, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated June 24, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which constitute the "Offer"), receipt of each
of which is hereby acknowledged, the number of Shares specified below pursuant
to the guaranteed delivery procedures described in Section 3 of the Offer to
Purchase.
Number of Shares:____________________ Name(s) of Record Holder(s)__________
Share Certificate No(s). (if _____________________________________
available)___________________________
_____________________________________
_____________________________________ Please Type or Print
Check ONE box if Shares will be Address(es)__________________________
tendered by book-entry transfer:
_____________________________________
[_] The Depository Trust Company Zip Code
[_] Philadelphia Depository Trust Area Code and Tel. No._______________
Company
Signature(s)_________________________
Account Number_______________________
_____________________________________
Dated _________________________, 1997
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, guarantees delivery
to the Depositary, at one of its addresses set forth above, Share Certificates
representing the Shares tendered hereby in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
account at an Eligible Depository (as defined in the Offer to Purchase) with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees or an Agent's
Message (as defined in the Offer to Purchase) in the case of a book-entry
delivery, and any other required documents, within three National Association
of Securities Dealers, Inc./National Market System trading days after the date
hereof.
_____________________________________ _____________________________________
Name of Firm Authorized Signature
_____________________________________ _____________________________________
Address Title
_____________________________________ Name_________________________________
Zip Code Please Type or Print
Area Code and Tel. No._______________ Date __________________________, 1997
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
AT
$15.50 PER SHARE, NET
BY
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JULY 22, 1997, UNLESS THE OFFER IS EXTENDED.
June 24, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed to act as Dealer Manager in connection with the offer
by Deuce Acquisition Corporation, a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of Gateway 2000, Inc., a Delaware corporation, to
purchase all outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Advanced Logic Research, Inc., a Delaware corporation (the
"Company"), at a price of $15.50 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase, dated June 24, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") enclosed
herewith. Please furnish copies of the enclosed materials to those of your
clients for whose accounts you hold Shares registered in your name or in the
name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING OF THE COMPANY ON A FULLY DILUTED BASIS AND
(II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. THE OFFER IS
ALSO SUBJECT TO OTHER TERMS AND CONDITIONS WHICH ARE CONTAINED IN THE OFFER TO
PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. Offer to Purchase, dated June 24, 1997;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates evidencing such Shares (the "Share Certificates") are not
immediately available or time will not permit all required documents to
reach First Chicago Trust Company of New York (the "Depositary") prior to
the Expiration Date (as defined in the Offer to Purchase) or if the
procedures for book-entry transfer, as set forth in the Offer to Purchase,
cannot be completed on a timely basis;
4. A letter to stockholders of the Company from Eugene Y. Lu, Chairman of
the Board, President and Chief Executive Officer of the Company, together
with the Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company;
<PAGE>
5. A letter which may be sent to your clients for whose account you hold
Shares registered in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JULY 22, 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Share Certificates or timely confirmation of a book-entry transfer of such
Shares, into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (ii) a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined in the Offer to Purchase) in
connection with a book-entry delivery of Shares and (iii) any other documents
required by the Letter of Transmittal.
If a holder of Shares wishes to tender, but cannot deliver his, her or its
Share Certificates or other required documents, or cannot comply with the
procedures for book-entry transfer, prior to the expiration of the Offer, a
tender of Shares may be effected by following the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the
Information Agent as described in the Offer to Purchase) in connection with
the solicitation of tenders of Shares pursuant to the Offer. However,
Purchaser will, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable with
respect to the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the enclosed Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Deutsche Morgan Grenfell Inc. or Georgeson & Company Inc., at their respective
addresses and telephone numbers set forth on the back cover page of the Offer
to Purchase.
Additional copies of the enclosed materials may be obtained from the
undersigned, Deutsche Morgan & Grenfell Inc., at (800) 334-1898, or by calling
the Information Agent, Georgeson & Company Inc. at(800) 223-2064.
Very truly yours,
DEUTSCHE MORGAN GRENFELL INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON TO ACT ON BEHALF OF OR AS AN AGENT OF PARENT, PURCHASER, THE
DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS
CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
AT
$15.50 PER SHARE, NET
BY
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JULY 22, 1997, UNLESS THE OFFER IS EXTENDED.
June 24, 1997
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated June 24, 1997
(the "Offer to Purchase"), and a related Letter of Transmittal (which together
constitute the "Offer") in connection with the offer by Deuce Acquisition
Corporation, a Delaware corporation ("Purchaser") and a wholly-owned
subsidiary of Gateway 2000, Inc., a Delaware corporation (the "Parent"), to
purchase all outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Advanced Logic Research, Inc., a Delaware corporation (the
"Company"), at a price of $15.50 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase.
Also enclosed is the letter to stockholders of the Company from Eugene Y. Lu,
Chairman of the Board, President and Chief Executive Officer of the Company,
together with the Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER FOR SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender on your behalf
any or all of such Shares held by us for your account, pursuant to the terms
and conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $15.50 per Share, net to the seller in cash.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company unanimously has determined that
each of the Offer and the Merger pursuant to the Offer (as defined in the
Offer to Purchase) is fair to, and in the best interests of, the Company's
stockholders and recommends that stockholders of the Company accept the
Offer and tender their Shares.
4. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON TUESDAY, JULY 22, 1997, UNLESS THE OFFER IS EXTENDED.
<PAGE>
5. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT
LEAST A MAJORITY OF THE SHARES OUTSTANDING OF THE COMPANY ON A FULLY
DILUTED BASIS AND (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS
WHICH ARE CONTAINED IN THE OFFER TO PURCHASE.
6. Stockholders who tender Shares will not be obligated to pay brokerage
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant
to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, signing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS TO
US SHOULD BE FORWARDED IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal, and is being made to all holders of Shares. Purchaser is not
aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a
good faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Deutsche Morgan
Grenfell Inc. or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
BY
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase of Deuce Acquisition Corporation, a Delaware corporation
("Purchaser") and a wholly-owned subsidiary of Gateway 2000, Inc., a Delaware
corporation, dated June 24, 1997, and the related Letter of Transmittal
relating to shares of common stock, par value $.01 per share (the "Shares"),
of Advanced Logic Research, Inc., a Delaware corporation.
This will instruct you to tender to Purchaser the number of Shares indicated
below (or, if no number is indicated below, all Shares) that are held by you
for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase and Letter of Transmittal.
SIGN HERE
NUMBER OF SHARES TO BE TENDERED:*
_____________________________________
SHARES
_____________________________________
Signature(s)
Account Number:________________________ _____________________________________
Dated: __________________________, 1997 _____________________________________
Please print name(s) and address(es)
here
_____________________________________
Tax Identification or Social
Security Number
- --------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -----------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one of
the
individuals(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee for or incompetent
a designated ward, minor, person(3)
or incompetent person
7.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust The actual
account that is not a owner(1)
legal or valid trust
under State law
8. Sole proprietorship The owner(4)
account
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
--------
<S> <C>
9. A valid trust, estate, or The legal entity
pension trust (Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- --------------------------------------- ---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount renewed is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE
THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure due to reasonable cause and
not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
2
<PAGE>
EXHIBIT (a)(7)
NEWS [COMPANY LOGO OF GATEWAY 2000]
610 Gateway Drive
P.O. Box 2000
North Sioux City, SD 57049-2000
FOR IMMEDIATE RELEASE
- --------------------- Phone: 605-232-2000
Toll Free: 800-846-2000
GATEWAY 2000, INC. ANNOUNCES AGREEMENT TO ACQUIRE
ADVANCED LOGIC RESEARCH, INC. fax: 605-232-2023
NORTH SIOUX CITY, SD, June 19, 1997 - Gateway 2000, Inc., (NYSE: GTW) and
Advanced Logic Research, Inc. (Nasdaq: AALR) announced today that they have
signed a definitive agreement for Gateway to acquire ALR for $15.50 per share in
cash, or a total equity value of approximately $194 million for the outstanding
shares of common stock.
In announcing the transaction, Ted Waitt, Chairman and Chief Executive
Officer of Gateway 2000, said, "Combining Gateway and ALR represents a
tremendous opportunity. The new relationship gives Gateway immediate access to
established server technology, a key component of the growth strategy for our
Enterprise line."
"ALR and its employees are proven innovators with a track record of
developing successful products," Waitt continued. "The combination of the
expertise of these two companies will benefit both companies' customers and
ALR's channel partners."
ALR Chairman, CEO and President, Gene Lu, said, "By combining ALR's
award-winning products with Gateway's build-to-order expertise and commitment to
customer service and technology, we intend to provide customers with the best
possible products and solutions."
"This is a great next step for ALR. We will continue to build our reseller
channel relationships and serve our customers through this channel," said Lu.
"Our customers and channel partners will benefit from lower component costs and
purchasing benefits. This will allow us to deliver even greater value and to
serve our markets better."
ALR is a pioneer in open, multiprocessor, Intel/R/-based PC servers, with
design, manufacturing and marketing support targeted at the client/server and
high-end desk-top markets.
ALR will operate as a wholly-owned subsidiary of Gateway and continue to
market products under the ALR brand through its established channels. ALR will
retain its offices and operations in Irvine, California and Mr. Lu will remain
President of ALR and be a Vice President and officer of Gateway. Gateway
expects the acquisition will result in accelerated growth in ALR's business and
a continued expansion of the workforce.
<PAGE>
Gateway expects the acquisition to be immediately additive to continuing
earnings and anticipates incurring a one-time, non-cash charge to earnings for
the write-off of in-process research and development for ALR products under
development.
Pursuant to the definitive agreement announced today, a cash tender offer
will be commenced by a wholly-owned subsidiary of Gateway no later than June 25,
1997 to acquire all the outstanding shares of ALR common stock.
The Board of Directors of ALR has approved the definitive agreement and has
unanimously recommended that ALR stockholders tender their shares pursuant to
the offer.
The tender offer will be conditional upon the tender of a majority of
outstanding ALR shares on a fully-diluted basis, the expiration or termination
of the waiting period under applicable antitrust law and certain customary
conditions. ALR's largest stockholder, Wearnes Technology (Private) Ltd.,
together with Mr. Lu and two other members of ALR's Board of Directors,
collectively holding approximately 42 percent of the outstanding shares, have
agreed to tender their shares in the offer and to provide Gateway with an option
on their shares at the tender offer price.
The tender offer is expected to be completed by the end of July. It is
expected that all shares not purchased in the tender offer will be converted
into the right to receive $15.50 per share in a second step merger following the
tender offer.
Special Note
The above statements include forward-looking statements based on current
management expectations. Factors that could cause future results to differ from
these expectations include the following: general economic conditions; growth in
the personal computer industry; competitive factors and pricing pressures;
component supply shortages; risks relating to acquired businesses; and inventory
risks due to shifts in market demand. Additional factors are described in the
company's reports filed with the Securities and Exchange Commission.
About ALR
Advanced Logic Research, Inc., an industry leader in the design and
manufacture of high-performance computer systems, engineered the industry's
first four-way and six-way SMP server systems featuring Intel Pentium Pro
technology. Developed in response to the changing role of the PC server in
today's corporate computing environment, these products form the cornerstone of
ALR's award-winning portfolio of advanced multiprocessor servers, computer
workstations, and desktop PCs. Founded in 1984 and headquartered in Irvine,
California, ALR serves its worldwide markets through export sales from the U.S.
and its subsidiaries located in Singapore, Germany, and the United Kingdom. ALR,
Inc.'s common stock is traded on NASDAQ under the symbol "AALR". For further
information, visit ALR at http://www.ALR.com or call 1-800-444-4ALR.
<PAGE>
ABOUT GATEWAY
Gateway (NYSE:GTW), a Fortune 500 company founded in 1985, is a leading
global manufacturer and direct marketer of PC products. The company,
headquartered in North Sioux City, South Dakota, has manufacturing facilities in
the United States, Ireland and Malaysia and employs over 10,000 people
worldwide. Gateway products and services consistently win top awards from
leading industry publications. For further information, visit Gateway at
http://www.gw2k.com.
MEDIA ADVISORY:
Gateway and ALR will conduct a joint media conference call beginning at
5:00 p.m. (Eastern Daylight Time). To join the call, dial (415)356-0701.
Contact: Jim Wharton Vic Sial
Director of Corporate Communications Vice President & Treasurer
Gateway 2000, Inc. Advanced Logic Research, Inc.
(605)232-2709 (714)581-6770
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase (as defined below), dated June 24, 1997, and
the related Letter of Transmittal, and is being made to all holders of Shares.
Purchaser (as defined below) is not aware of any state where the making of the
Offer is prohibited by administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of Shares in such state. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by Deutsche Morgan Grenfell Inc. or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED LOGIC RESEARCH, INC.
AT
$15.50 NET PER SHARE
BY
DEUCE ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
GATEWAY 2000, INC.
Deuce Acquisition Corporation, a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of Gateway 2000, Inc., a Delaware corporation
("Parent"), is offering to purchase all outstanding shares of common stock,
par value $.01 per share (the "Shares"), of Advanced Logic Research, Inc., a
Delaware corporation (the "Company"), at a price of $15.50 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated June 24, 1997 (the "Offer to Purchase") and in
the related Letter of Transmittal (which together constitute the "Offer").
Following the Offer, Purchaser intends to effect the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JULY 22, 1997, UNLESS THE OFFER IS EXTENDED
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer at least a
majority of the Shares outstanding on a fully diluted basis and (ii) the
expiration or termination of any applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Offer is also
subject to other terms and conditions contained in the Offer to Purchase.
The offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 19, 1997, among Parent, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides that, among other things, as soon
as practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware (the "DGCL"), at the election of Parent, either Purchaser
will be merged with and into the Company or the Company will be merged with
and into the Purchaser (the "Merger"). It is currently contemplated that the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") will be the Company. Following consummation of the
Merger, the Surviving Corporation will be a wholly-owned subsidiary of Parent.
At the effective time of the Merger (the "Effective Time"), each Share issued
and outstanding immediately prior to the Effective Time (other than Shares
owned
<PAGE>
by Purchaser, Parent or any direct or indirect wholly-owned subsidiary of
Parent, or owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company or held by stockholders who shall have demanded and
perfected appraisal rights, if any, under the DGCL) will be canceled and
converted automatically into the right to receive $15.50 in cash, or any
higher price that may be paid per Share in the Offer, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to First
Chicago Trust Company of New York (the "Depositary") of Purchaser's acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject
to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for
the purpose of receiving payments from Purchaser and transmitting such
payments to tendering stockholders whose Shares have been accepted for
payment. Under no circumstances will interest on the purchase price for Shares
be paid, regardless of any extension of the Offer or delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (1) the certificates evidencing such Shares (the "Share Certificates") or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined
in Section 2 of the Offer to Purchase) pursuant to the procedure set forth in
Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message (as defined in Section 3 of the Offer to Purchase) and (iii) any other
documents required under the Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion (subject to
the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including the occurrence of any condition specified in Section 14 of the
Offer to Purchase, by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement thereof, such announcement to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date (as defined below) of the Offer. During any such
extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw his, her or its Shares.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Tuesday, July 22, 1997, unless and until Purchaser, in its sole discretion,
shall have extended the period of time during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, will expire.
Tenders of Shares made pursuant to the offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer,
may also be withdrawn at any time after August 22, 1997. For the withdrawal to
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover page of the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of such Shares, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Share Certificates, the serial numbers shown on such
Share Certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in Section 3 of the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure
2
<PAGE>
for book-entry transfer as set forth in Section 3 of the Offer to Purchase,
any notice of withdrawal must specify the name and number of the account at
the Book-entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as
set forth below, and copies will be furnished promptly at Purchaser's expense.
No fees or commissions will be paid to brokers, dealers or other persons
(other than the Information Agent and the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC.]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
[LOGO OF DEUTSCHE MORGAN GRENFELL INC.]
Deutsche Morgan Grenfell Inc.
1550 El Camino Real
Suite 100
Menlo Park, CA 94025
Banks and Brokers call collect (415) 614-5050
Call Toll Free: 1-888-DMG-4TEC
3
<PAGE>
EXHIBIT(C)(1)
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADVANCED LOGIC RESEARCH, INC.,
GATEWAY 2000, INC.
AND
DEUCE ACQUISITION CORPORATION
DATED AS OF JUNE 19, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER; CLOSING; EFFECTIVE TIME.............................. 2
SECTION 1.1 The Merger............................................... 2
----------
SECTION 1.2 Closing.................................................. 2
-------
SECTION 1.3 Effective Time........................................... 2
--------------
SECTION 1.4 Subsequent Actions....................................... 3
------------------
SECTION 1.5 Certificate of Incorporation............................. 3
----------------------------
SECTION 1.6 The By-Laws.............................................. 3
-----------
SECTION 1.7 Officers and Directors................................... 3
----------------------
ARTICLE II CONVERSION AND CANCELLATION OF SHARES
IN THE MERGER................................................... 3
SECTION 2.1 Conversion or Cancellation of Shares..................... 3
------------------------------------
SECTION 2.2 Payment for Shares in the Merger......................... 4
--------------------------------
SECTION 2.3 Company Stock Options and Related Matters................ 5
-----------------------------------------
SECTION 2.4 Transfer of Shares After the Effective Time.............. 7
-------------------------------------------
SECTION 2.5 No Further Rights in Company Common Stock................ 7
-----------------------------------------
SECTION 2.6 No Liability............................................. 7
------------
SECTION 2.7 Withholding Rights....................................... 7
------------------
SECTION 2.8 Lost Certificates........................................ 7
-----------------
SECTION 2.9 Dissenting Shares........................................ 8
-----------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 8
SECTION 3.1 Organization and Qualification........................... 8
------------------------------
SECTION 3.2 Certificate of Incorporation and By-Laws................. 9
----------------------------------------
SECTION 3.3 Subsidiaries............................................. 9
------------
SECTION 3.4 Capitalization........................................... 10
--------------
SECTION 3.5 Authority Relative to this Agreement..................... 11
------------------------------------
SECTION 3.6 No Conflict; Required Filings and Consents............... 11
------------------------------------------
SECTION 3.7 SEC Filings; Financial Statements........................ 12
---------------------------------
SECTION 3.8 Absence of Certain Changes or Events..................... 13
------------------------------------
SECTION 3.9 Intellectual Property.................................... 14
---------------------
SECTION 3.10 Material Contracts....................................... 17
------------------
SECTION 3.11 Environmental Matters.................................... 18
---------------------
SECTION 3.12 Employee Benefits........................................ 18
------------------
SECTION 3.13 Opinion of Financial Advisor............................. 21
----------------------------
SECTION 3.14 Brokers.................................................. 21
-------
SECTION 3.15 Litigation............................................... 21
-----------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.16 Labor Relations.......................................... 21
----------------
SECTION 3.17 Application of California Statute........................ 22
---------------------------------
SECTION 3.18 Tax Returns and Audits................................... 22
----------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
MERGER SUB...................................................... 22
SECTION 4.1 Organization and Qualification; Subsidiaries............. 22
--------------------------------------------
SECTION 4.2 Certificate of Incorporation and By-Laws................. 23
----------------------------------------
SECTION 4.3 Authority Relative to this Agreement..................... 23
------------------------------------
SECTION 4.4 No Conflict; Required Filings and Consents............... 24
------------------------------------------
SECTION 4.5 Brokers.................................................. 24
-------
SECTION 4.6 Financing................................................ 24
---------
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................... 25
SECTION 5.1 Conduct of Business by the Company Pending the Merger..... 25
-----------------------------------------------------
ARTICLE VI ADDITIONAL AGREEMENTS........................................... 27
SECTION 6.1 Meeting of the Stockholders............................... 27
---------------------------
SECTION 6.2 Access to Information; Confidentiality.................... 28
--------------------------------------
SECTION 6.3 No Solicitation of Transactions........................... 29
-------------------------------
SECTION 6.4 Indemnification........................................... 30
---------------
SECTION 6.5 Obligations of Merger Sub................................. 32
--------------------------
SECTION 6.6 Further Action; Consents; Filings......................... 33
---------------------------------
SECTION 6.7 Public Announcements...................................... 34
--------------------
SECTION 6.8 Company SEC Reports....................................... 34
-------------------
SECTION 6.9 Notification of Certain Matters........................... 34
-------------------------------
SECTION 6.10 Accountants............................................... 35
-----------
SECTION 6.11 Directors................................................. 35
---------
SECTION 6.12 Employees................................................. 36
----------
ARTICLE VII CONDITIONS TO THE MERGER....................................... 36
SECTION 7.1 Conditions to the Obligations of Each Party............... 36
-------------------------------------------
SECTION 7.2 Conditions to the Obligations of Purchaser and Merger Sub. 37
---------------------------------------------------------
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................. 38
SECTION 8.1 Termination............................................... 38
-----------
SECTION 8.2 Effect of Termination..................................... 39
---------------------
SECTION 8.3 Amendment................................................. 39
---------
SECTION 8.4 Waiver.................................................... 39
------
SECTION 8.5 Expenses.................................................. 39
--------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX THE OFFER....................................................... 41
SECTION 9.1 Tender Offer.............................................. 41
------------
ARTICLE X GENERAL PROVISIONS............................................... 42
SECTION 10.1 Nonsurvival of Representations, Warranties and Agreements 42
---------------------------------------------------------
SECTION 10.2 Notices.................................................. 42
-------
SECTION 10.3 Certain Definitions...................................... 43
-------------------
SECTION 10.4 Severability............................................. 44
------------
SECTION 10.5 Assignment; Binding Effect; Benefit...................... 44
-----------------------------------
SECTION 10.6 Specific Performance..................................... 45
--------------------
SECTION 10.7 Governing Law............................................ 45
-------------
SECTION 10.8 Headings................................................. 45
--------
SECTION 10.9 Counterparts............................................. 45
------------
SECTION 10.10 Waiver of Jury Trial..................................... 45
--------------------
SECTION 10.11 Entire Agreement; Modification........................... 46
------------------------------
SECTION 10.12 Mutual Drafting.......................................... 46
---------------
SECTION 10.13 No Waivers............................................... 46
----------
</TABLE>
iii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM POSITION OF DEFINITION
- ------------ ----------------------
<S> <C>
Accountant's Letter (S) 6.10
affiliate (S) 10.3(a)
Agreement Preamble
beneficial owner (S) 10.3(b)
Blue Sky Laws (S) 3.6(b)
Break-up Fee (S) 8.5(b)
business day (S) 10.3(c)
Certificate of Merger (S) 1.3
Certificate of Ownership (S) 1.3
Certificates (S) 2.2(b)
Claim (S) 6.4(b)
Closing (S) 1.2
Code (S) 2.3(a)
Company Preamble
Company Benefit Plans (S) 5.1(g)
Company Common Stock Recitals
Company Disclosure Schedule Article III Preamble
Company Intellectual Property Rights (S) 3.9(a)
Company Material Adverse Effect (S) 3.1
Company Option (S) 2.3(a)
Company SEC Reports (S) 3.7(a)
Company Stock Option Plans (S) 2.3(a)
Competing Transaction (S) 6.3(a)
Confidentiality Agreement (S) 6.2(b)
Constituent Corporations Preamble
control (S) 10.3(d)
controlled by (S) 10.3(d)
Copyrights (S) 3.9(f)(i)
DGCL (S) 1.1
Dissenting Shares (S) 2.9(a)
Effective Time (S) 1.3
Environmental Laws (S) 3.11(a)
Encumbrances (S) 3.3
Environmental Permits (S) 3.11(b)
ERISA (S) 3.12(b)
ERISA Affiliates (S) 3.12(c)
Exchange Act (S) 3.6(b)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM POSITION OF DEFINITION
- ------------ ----------------------
<S> <C>
Exchange Agent (S) 2.2(a)
Exchange Fund (S) 2.2(a)
Exchange Ratio (S) 2.3(a)
Expenses (S) 8.5(a)
Governmental Authority (S) 3.6(b)
Hazardous Substances (S) 3.11(a)
HSR Act (S) 3.6(b)
Indemnified Parties (S) 6.4(b)
Independent Directors (S) 6.11(a)
Initial Break-up Fee (S) 8.5(b)
knowledge (S) 10.3(e)
known (S) 10.3(e)
Law (S) 3.6(a)
Marks (S) 3.9(e)(i)
Meeting (S) 6.1(a)
Merger (S) 1.1
Merger Consideration (S) 2.1(a)
Merger Sub Preamble
NASDAQ/NMS (S) 3.6(b)
NYSE (S) 2.3(a)
Offer Recitals
Offer Documents (S) 9.1(b)
Order (S) 6.6(b)
Patents (S) 3.9(d)(i)
person (S) 10.3(f)
Plans (S) 3.12(b)
Proxy Statement (S) 6.1(c)
Purchaser Common Stock (S) 2.3(a)
Purchaser Companies (S) 2.1(a)
Purchaser Material Adverse Effect (S) 4.1
Purchaser Preamble
Representatives (S) 6.2(a)
Schedule 14D-9 (S) 9.1(b)
SEC (S) 3.7(a)
SEC Reports (S) 3.7(a)
Securities Act (S) 3.6(b)
Shares (S) 2.1(a)
Stockholders Recitals
Stockholder Agreements Recitals
Subsidiary (S) 3.3
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM POSITION OF DEFINITION
- ------------ ----------------------
<S> <C>
Superior Proposal (S) 6.1(b)
Surviving Corporation (S) 1.1
Terminating Company Breach (S) 8.1(d)
Terminating Purchaser Breach (S) 8.1(e)
Third Party Provisions (S) 10.5
Trade Secrets (S) 3.9(g)(ii)
Transactions Recitals
</TABLE>
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of June 19, 1997, among Advanced Logic Research, Inc., a Delaware corporation
(the "Company"), Gateway 2000, Inc., a Delaware corporation ("Purchaser"), and
Deuce Acquisition Corporation, a Delaware corporation ("Merger Sub"), the
Company and Merger Sub sometimes being hereinafter collectively referred to as
the "Constituent Corporations."
RECITALS
WHEREAS, the Company desires to merge with Merger Sub and Merger Sub
desires to merge with the Company, all upon the terms and subject to the
conditions of this Agreement;
WHEREAS, the Board of Directors of the Company (a) has determined that the
Merger (as such term is hereinafter defined) is in the best interests of the
Company and its stockholders and approved and adopted this Agreement and the
transactions contemplated hereby, including without limitation, the Merger (the
"Transactions"), and (b) has recommended approval and adoption of this
Agreement, and the transactions contemplated hereby by the stockholders of the
Company;
WHEREAS, the Board of Directors of Purchaser has determined that the Merger
is in the best interests of Purchaser and its stockholders and has approved and
adopted this Agreement and the Transactions;
WHEREAS, the Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, in furtherance of the Merger it is proposed that Merger Sub
commence a tender offer for all of the outstanding shares of the Company's
common stock, par value $.01 (the "Company Common Stock"), at a price of $15.50
per share (the "Offer") which price is not less than the fair market value per
share; and
WHEREAS, as a condition and inducement to Purchaser's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Purchaser and
Merger Sub are entering into one or more stockholder agreements with the
individuals and entities (the "Stockholders") listed on Schedule I hereto
(collectively, the "Stockholder Agreements"), pursuant to which, among other
things, each Stockholder has agreed to vote the Shares (as such term is
hereinafter defined) then owned by such Stockholder in favor of the Merger, to
grant Purchaser an irrevocable proxy to vote such Shares, to tender all Shares
then owned by such Stockholder to Purchaser or Merger
1
<PAGE>
Sub, as applicable, in accordance with the Offer and to grant an option to
purchase such Shares to Purchaser.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
SECTION 1.1 The Merger. Subject to the terms and conditions of this
----------
Agreement, at the Effective Time (as defined in Section 1.3), at the election of
Purchaser, either Merger Sub shall be merged with and into the Company and the
separate corporate existence of Merger Sub shall thereupon cease or the Company
shall be merged with and into Merger Sub and the separate corporate existence of
the Company shall thereupon cease (the "Merger"). The surviving corporation in
the Merger (sometimes hereinafter referred to as the "Surviving Corporation"),
shall continue to be governed by the laws of the State of Delaware, the separate
corporate existence of the Surviving Corporation with all its rights,
privileges, powers, immunities and franchises shall continue unaffected by the
Merger and all debts, liabilities, obligations, resolutions and duties of each
of the Company and Merger Sub shall become the debts, liabilities, obligations
restrictions and duties of the Surviving Corporation. The Merger shall have the
effects specified in the General Corporation Law of the State of Delaware (the
"DGCL").
SECTION 1.2 Closing. The closing of the Merger (the "Closing") shall
-------
take place (i) at the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP,
1999 Avenue of the Stars, Los Angeles, California 90067 as promptly as
practicable and in no event later than the third business day following the
satisfaction or waiver of the conditions set forth in Article VII hereof in
accordance with this Agreement, at such time as the Company and Purchaser may
agree, or (ii) at such other place and time and/or on such other date as the
Company and Purchaser may agree.
SECTION 1.3 Effective Time. Immediately following the Closing, the
--------------
Company and Purchaser shall cause a Certificate of Merger (the "Certificate of
Merger") or Purchaser shall cause a Certificate of Ownership and Merger (the
"Certificate of Ownership") to be executed and filed with the Secretary of State
of the State of Delaware as provided in the DGCL. The Merger shall become
effective at such time as the Certificate of Merger or the Certificate of
Ownership has been duly filed with the Secretary of State of the State of
Delaware, and such time, or such later time as may, with the consent of the
Independent Directors (as defined below), be specified in the Certificate of
Merger or the Certificate of Ownership, is hereinafter referred to as the
"Effective Time."
2
<PAGE>
SECTION 1.4 Subsequent Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 1.5 Certificate of Incorporation. The Certificate of
----------------------------
Incorporation of Merger Sub in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL, provided that Article First of
the Certificate of Incorporation of the Surviving Corporation shall be amended
to read in its entirety as follows:
"FIRST: The name of the Corporation is Advanced Logic Research, Inc."
SECTION 1.6 The By-Laws. The By-Laws of Merger Sub in effect at the
-----------
Effective Time shall be the By-Laws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL.
SECTION 1.7 Officers and Directors. The directors of Merger Sub and the
----------------------
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE II
CONVERSION AND CANCELLATION OF SHARES IN THE MERGER
SECTION 2.1 Conversion or Cancellation of Shares. At the Effective
------------------------------------
Time, by virtue of the Merger and without any action on the part of the Merger
Sub, the Company or the holders of any of the following securities:
(a) each share of Company Common Stock (all issued and outstanding
shares of Company Common Stock hereinafter collectively referred to as the
"Shares") issued
3
<PAGE>
and outstanding immediately prior to the Effective Time, other than (i) Shares
owned by Purchaser, Merger Sub or any other direct or indirect wholly-owned
subsidiary of Purchaser (collectively, the "Purchaser Companies"), or by the
Company or any direct or indirect wholly owned subsidiary of the Company, and
(ii) Dissenting Shares (as hereinafter defined), shall be converted into the
right to receive, in cash, without interest thereon, the higher of (x) $15.50 or
(y) such greater amount which may be paid pursuant to the Offer (the "Merger
Consideration"); provided, nothing herein shall be deemed an agreement by
Purchaser to increase the Merger Consideration. All such Shares shall no longer
be outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall thereafter cease
to have any rights with respect to such Shares, except the right to receive the
Merger Consideration for such Shares upon the surrender of such certificate in
accordance with Section 2.2;
(b) each Share issued and outstanding immediately prior to the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held in the Company's treasury immediately prior to the Effective
Time, shall cease to be outstanding, be canceled and be retired without payment
of any consideration therefor and cease to exist; and
(c) each share of common stock, $.01 par value, of Merger Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation.
SECTION 2.2 Payment for Shares in the Merger. The manner of making
--------------------------------
payment for Shares in the Merger shall be as follows:
(a) At the Effective Time, Purchaser or Merger Sub, as applicable,
shall deposit in trust, or enter such other agreement or arrangement as may be
reasonably satisfactory to the Company, with a bank or trust company designated
by Purchaser and reasonably acceptable to the Company (the "Exchange Agent"),
cash in an aggregate amount equal to the product of (i) the number of Shares
issued and outstanding at the Effective Time (other than Shares owned by the
Purchaser Companies, the Company or any direct or indirect wholly-owned
subsidiary of the Company) and (ii) the Merger Consideration (such amount being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, make the payments provided for in Section
2.1 of this Agreement out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose, except as provided in this Agreement or as otherwise
agreed to by Purchaser and Merger Sub.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
or cause to be mailed to each holder (other than the Purchaser Companies, the
Company or any direct or indirect wholly-owned subsidiary of the Company), as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Shares (collectively, the
"Certificates") a form letter of transmittal (which shall specify that
4
<PAGE>
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payments
therefor. Upon surrender to the Exchange Agent of a Certificate representing
Shares that have been converted into, or representing, in accordance with the
terms of this Agreement, the right to receive the Merger Consideration, together
with such letter of transmittal duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor cash in an amount equal to the
product of (i) the number of Shares represented by such Certificate and (ii) the
Merger Consideration, and such Certificate shall forthwith be canceled. No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate surrendered, or
such person shall establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 2.2, each Certificate (other than
Certificates representing Shares owned by the Purchaser Companies, Shares owned
by the Company or any direct or indirect wholly owned subsidiary of the Company
or Dissenting Shares) shall solely represent, for all purposes, the right to
receive the Merger Consideration in cash multiplied by the number of Shares
evidenced by such Certificate, without any interest thereon.
(c) Any portion of the Exchange Fund that remains undistributed to the
holders of Company Common Stock for six months after the Effective Time shall be
delivered to Purchaser, upon demand, and any holders of Company Common Stock who
have not theretofore complied with Section 2.2 shall thereafter look only to
Purchaser for the payment of their claim for the Merger Consideration for
Shares, without any interest thereon. Any portion of the Exchange Fund
remaining unclaimed by holders of Shares as of a date which is immediately prior
to such time as such amounts would otherwise escheat to or become property of
any government entity shall, to the extent permitted by applicable law, become
the property of Purchaser free and clear of any claims or interest of any person
previously entitled thereto. The Exchange Agent shall retain the right to
invest and reinvest the Exchange Fund on behalf of the Purchaser in securities
issued or guaranteed by the United States government or certificates of deposit
of commercial banks that have, or are members of a group of commercial banks
that has, consolidated total assets of not less than $500,000,000 and Purchaser
shall receive the interest earned thereon.
SECTION 2.3 Company Stock Options and Related Matters.
-----------------------------------------
(a) At the Effective Time, each option to purchase shares of Company Common
Stock (each a "Company Option") issued pursuant to the Company's Flexible Stock
Incentive Plan, Director's Nonqualified Stock Option Plan and 1996 Stock
Option/Stock Issuance Plan
5
<PAGE>
(collectively, the "Company Stock Option Plans") or granted by the Company to
any person outside of any Company Stock Option Plan that is outstanding and
unexercised immediately prior to the Effective Time shall be converted, at the
Effective Time, into an option to acquire, on the same terms and conditions as
were applicable under the Company Stock Option Plans and the underlying option
agreements (as modified by this Section 2.3), that number of shares of common
stock $.01 par value, of the Purchaser (the "Purchaser Common Stock") determined
by multiplying the number of shares of Company Common Stock subject to such
option by the Exchange Ratio (rounded up to the nearest whole share) at a price
per share of Purchaser Common Stock equal to the exercise price per share of
Company Common Stock under such Company Option divided by the Exchange Ratio
(rounded up to the nearest whole cent); provided, however, that in the case of
-------- -------
any option to which Section 421 of the United States Internal Revenue Code 1986,
as amended (the "Code"), applies by reason of its qualification under section
422 of the Code, the option price, the number of shares purchasable pursuant to
such option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The term
"Exchange Ratio" means that amount equal to the Merger Consideration divided by
the average of the closing prices of Purchaser Common Stock on the New York
Stock Exchange, Inc. ("NYSE") for the twenty consecutive trading days
immediately preceding the date of the Effective Time.
(b) As soon as practicable after the Effective Time, Purchaser shall
deliver to the holders of Company Options appropriate notices setting forth such
holders' rights pursuant to the applicable Company Stock Option Plan and the
agreements pursuant to which such Company Options were issued and the agreements
evidencing the grants of such Company Options shall continue in effect on the
same terms and conditions as specified with respect to such Company Options as
of the Effective Time in the applicable Company Stock Option Plan governing such
Company Option (subject to the adjustments and amendments required by this
Section 2.3, and after giving effect to the Merger and the conversion set forth
above). It is the intention of the parties that, subject to applicable law,
each Company Option that qualified as an incentive stock option under section
422 of the Code prior to the Effective Time shall continue to qualify as an
incentive stock option of Purchaser after the Effective Time. The Company
agrees that it shall take all necessary action to effectuate the provisions of
this Section 2.3 and, except to the extent set forth in Section 2.3(b) to the
Company Disclosure Schedule (as hereinafter defined) with respect to options
currently outstanding under the Directors' Non-Qualified Stock Option Plan, to
preclude the acceleration of any vesting or other provisions of any Company
Option, including pursuant to a Company Stock Option Plan or any agreement
evidencing the grant of a Company Option, as a result of the Transactions.
Immediately following the Effective Time, each employee stock option, stock
bonus, stock award or similar plan of the Company or any of its Subsidiaries
will be terminated and, except as otherwise specifically permitted herein, no
further stock awards, stock options or stock appreciation or similar rights will
be granted thereunder subsequent to the date hereof.
6
<PAGE>
(c) Purchaser shall take all corporate action necessary to reserve for
issuance and have available for delivery a sufficient number of shares of
Purchaser Common Stock to be delivered upon exercise, vesting or payment, as
applicable, of the Company Options converted in accordance with this Section
2.3. As soon as practicable after the Effective Time, Purchaser shall file a
registration statement on Form S-8 (or any successor or other appropriate form)
with respect to the delivery of such shares of Purchaser Common Stock, to the
extent such registration statement is required under applicable law so as to
permit public resale of such shares, and Purchaser shall use its reasonable best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such benefits and grants remain
payable and such options remain outstanding. With respect to those individuals,
if any, who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act (as hereinafter defined),
the Board of Directors (or a committee thereof) of Purchaser shall approve the
Company Options held by such individuals and assumed pursuant to this Section
2.3 in a manner that complies with Rule 16b-3 promulgated under the Exchange
Act.
SECTION 2.4 Transfer of Shares After the Effective Time. At the
-------------------------------------------
Effective Time, the stock transfer books of the Company shall be closed and no
transfers of Shares shall be made on such stock transfer books of the Surviving
Corporation at or after the Effective Time.
SECTION 2.5 No Further Rights in Company Common Stock. All Merger
-----------------------------------------
Consideration paid upon the acceptance of tendered and not withdrawn Shares in
accordance with the terms of the Offer shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Shares.
SECTION 2.6 No Liability. Neither Purchaser nor the Surviving
------------
Corporation shall be liable to any holder of Shares of Company Common Stock for
any cash delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
SECTION 2.7 Withholding Rights. Each of the Surviving Corporation and
------------------
Purchaser shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any person such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or Purchaser, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to a person in respect of which such deduction and
withholding was made by the Surviving Corporation or Purchaser, as the case may
be.
SECTION 2.8 Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as
7
<PAGE>
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will pay the Merger Consideration in accordance
with the terms of the Offer to the registered owner of such Shares.
SECTION 2.9 Dissenting Shares. (a) Notwithstanding any provision of
-----------------
this Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be
-----------------
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of Section 262, except
that all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such Shares under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration, without any interest thereon,
upon surrender, in the manner provided in Section 2.2 hereof, of the certificate
or certificates that formerly evidenced such Shares.
(b) The Company shall give Purchaser (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to the DGCL and received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Purchaser, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
Purchaser and Merger Sub concurrently with the execution of this Agreement (the
"Company Disclosure Schedule"), as referenced below, the Company hereby
represents and warrants to Purchaser and Merger Sub that:
SECTION 3.1 Organization and Qualification. The Company is a
------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so incorporated, existing or in good standing or to have
such power, authority and governmental approvals would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
the Company from performing its material obligations under the Agreement, and
would not, individually or in the
8
<PAGE>
aggregate, have a Company Material Adverse Effect (as defined below). The
Company is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed or in good standing that would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
the Company from performing its material obligations under this Agreement and
would not, individually or in the aggregate, have a Company Material Adverse
Effect. The term "Company Material Adverse Effect" means any circumstance,
change in or effect on the Company or any of its Subsidiaries (as defined below)
that is materially adverse to the business, operations, properties, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole, except for cancelations or delays in (affecting not more than 10%, in
the aggregate, of) the Company's reseller channel sales that the Company bears
the burden of demonstrating are directly and primarily attributable to the
announcement of the execution of this Agreement.
SECTION 3.2 Certificate of Incorporation and By-Laws. The Company has
----------------------------------------
heretofore furnished to Purchaser a complete and correct copy of the Certificate
of Incorporation and the By-Laws of the Company. The Certificate of
Incorporation and By-Laws of the Company are in full force and effect. As of
the date of this Agreement, the Company is not in violation of any of the
provisions of its Certificate of Incorporation or By-Laws.
SECTION 3.3 Subsidiaries. Section 3.3 of the Company Disclosure
------------
Schedule contains a complete and accurate list of all corporations,
partnerships, joint ventures or other legal entities of which the Company owns,
directly or indirectly, any voting stock or other equity or beneficial interest,
together with the jurisdiction of organization of such entity and the percentage
of each entity's outstanding capital stock or other equity or beneficial
interests owned directly or indirectly by the Company. Each Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so incorporated, existing or in good standing or to have
such power, authority and governmental approvals would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
the Company from performing its material obligations under this Agreement, and
would not, individually or in the aggregate, have a Company Material Adverse
Effect. Each Subsidiary is duly qualified or licensed as a foreign corporation
to do business and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed or in good standing that would not prevent or
materially delay consummation of the Merger or the other Transactions, or
otherwise prevent the Company from performing its material obligations under
this Agreement and would not, individually or in the aggregate, have a Company
Material Adverse Effect. All of the outstanding capital stock of each
Subsidiary have been validly issued,
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<PAGE>
and are fully paid and nonassessable. All of the capital stock of each of such
Subsidiaries are owned, directly or indirectly, by the Company free and clear of
all Encumbrances. For purposes of this Agreement, the term (i) "Subsidiary" of
any person means any corporation, partnership, joint venture or other legal
entity of which such person (either alone or through or together with another
subsidiary), owns, directly or indirectly, more than 50% of the stock or other
equity or beneficial interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity and (ii) "Encumbrances" shall mean any pledge,
security interest, lien, claim, encumbrance, mortgage, charge, hypothecation,
option, right of first refusal or offer, preemptive right, voting agreement,
voting trust, proxy, power of attorney, escrow, option, forfeiture, penalty,
action at law or in equity, security agreement, stockholder agreement or other
agreement, arrangement, contract, commitment, understanding or obligation, or
any other restriction, qualification or limitation on the use, transfer, right
to vote, right to dissent and seek appraisal, receipt of income or other
exercise of any attribute of ownership.
SECTION 3.4 Capitalization. The authorized capital stock of the Company
--------------
consists of (a) 25,000,000 Shares (b) and 2,500,000 shares of preferred stock,
$.01 par value. As of the date hereof (i) 12,502,976 Shares are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no Shares are held in the treasury of the Company, (iii) no Shares are held by
the Company or any of its Subsidiaries (as defined below), (iv) 1,232,929 Shares
are reserved for future issuance pursuant to outstanding Company Options and (v)
no shares of Preferred Stock are issued and outstanding. Except as provided in,
or contemplated by, this Agreement and except for Company Options granted
pursuant to the Company Stock Option Plans, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue or
sell any shares of capital stock of, or other equity or beneficial interests in,
the Company or any of its Subsidiaries. No Company Options shall be accelerated
or in any other way altered or changed, whether in connection with the
acceleration of any vesting period or otherwise, by the execution, delivery or
performance of this Agreement by the Company or the consummation of any of the
Transactions except pursuant to and in accordance with Section 2.3 hereof. All
Shares subject to issuance, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares. Other than the Stockholder Agreements, there
are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party, or of which the Company is
aware, relating to voting, registration or disposition of any shares of capital
stock of the Company or granting to any person or group of persons the right to
elect, or to designate or nominate for election, a director to the board of
directors of the Company.
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SECTION 3.5 Authority Relative to this Agreement.
------------------------------------
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the Transactions have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the then outstanding Shares and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Purchaser and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
(b) The Board of Directors of the Company has, on June 19, 1997,
unanimously (i) approved and adopted this Agreement and the Transactions, (ii)
determined that this Agreement and the Transactions, including each of the Offer
and the Merger, are in the best interests of the Company and its stockholders
and that the terms of this Agreement are fair to the Company and its
stockholders and (iii) determined to recommend that the stockholders of the
Company approve and adopt this Agreement. The Company has been advised by each
of its directors and officers that they intend to tender all Shares beneficially
owned by them pursuant to the Offer.
(c) The Board of Directors of the Company has approved Purchaser as an
"interested stockholder" within the meaning of Section 203 of the DGCL with
respect to the Merger, any acquisition of Shares pursuant to the Offer or any of
the other Transactions.
SECTION 3.6 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company and the consummation
of the Transactions will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws or equivalent organizational documents of the Company
or conflict with or violate the certificate of incorporation or by-laws or
equivalent organizational documents of any Subsidiary, (ii) assuming that all
consents, approvals, authorizations and other actions described in subsection
3.6(b) have been obtained and all filings and obligations described in
subsection 3.6(b) have been made or complied with, conflict with or violate any
foreign or domestic (federal, state or local) law, statute, ordinance, rule,
regulation, interpretation, permit, injunction, writ, judgment, decree or order
("Law") applicable to the Company or any Subsidiary or by which any asset of the
Company or any Subsidiary is bound or affected, or (iii) conflict with, result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default)
11
<PAGE>
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or require any payment under, or result in the creation of a
lien, claim, security interest or other charge or Encumbrance on any asset of
the Company or any Subsidiary pursuant to, any contract or other instrument or
obligation to which the Company or any Subsidiary is a party or by which any
asset of the Company or any Subsidiary is bound or affected, except with respect
to the foregoing clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company and the consummation
of the Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any United States (federal, state
or local) or foreign government or governmental, regulatory or administrative
authority, agency, commission, board, bureau, court or instrumentality or
arbitrator of any kind ("Governmental Authority"), except (i) for applicable
requirements, if any, of the Securities Act of 1933, as amended, and the rules
and regulations thereunder (collectively the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(collectively the "Exchange Act"), state securities or "blue sky" laws ("Blue
Sky Laws"), National Association of Securities Dealers, Inc. Automated
Quotation/National Market System ("NASDAQ/NMS") and state takeover laws, the
pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), any pre-merger notification filing with the German Federal
Cartel Office and filing and recordation of appropriate merger documents as
required by the DGCL and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Offer or the Merger or otherwise prevent
the Company from performing its obligations under this Agreement or consummating
any of the Transactions, and would not, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 3.7 SEC Filings; Financial Statements.
---------------------------------
(a) Since January 1, 1994, the Company has filed all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission (the "SEC") through the date of this Agreement
(collectively, the "Company SEC Reports") including, without limitation, (i) all
Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all
proxy statements relating to meetings of stockholders (whether annual or
special), (iv) all Reports on Form 8-K, (v) all other reports or registration
statements and (vi) all amendments and supplements to all such reports and
registration statements (collectively, the "SEC Reports"). The Company SEC
Reports (A) were prepared in all material respects in accordance with the
requirements Securities Act and the Exchange Act applicable to such Company SEC
Reports and (B) did not at the time they were filed contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or
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<PAGE>
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Since September 30, 1996, there has not been any Company Material
Adverse Effect.
(c) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports has been prepared
in accordance with the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto) and each
fairly presents, in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its consolidated
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise indicated in the notes thereto (subject,
in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to have a Company Material Adverse Effect).
(d) Except as and to the extent set forth on, or reserved against on,
the consolidated balance sheet of the Company and its consolidated Subsidiaries
as of March 31, 1997, including the notes thereto, or incurred since March 31,
1997 in the ordinary course of business consistent with past practice, none of
the Company or any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent, fixed, liquidated, unliquidated or
otherwise) that would be required to be reflected on, or reserved against in, a
balance sheet of the Company, or in the notes thereto, prepared in accordance
with the published rules and regulations of the SEC and generally accepted
accounting principles, which are, individually or in the aggregate, material to
the business, operations, properties, financial condition, results of operations
of the Company and its Subsidiaries, taken as a whole.
(e) Except as disclosed in the Company SEC Reports, none of the
Company or any of its Subsidiaries is indebted to any director, officer,
employee or agent of the 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 the Company or any of its Subsidiaries, and
there have been no other transactions of the type required to be disclosed
pursuant to Items 402 and 404 of Regulation S-K under the Exchange Act.
SECTION 3.8 Absence of Certain Changes or Events. Since September 30,
------------------------------------
1996 except as contemplated by this Agreement or as disclosed in any Company SEC
Report filed since September 30, 1996, the Company and its Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
change by the Company in its accounting methods, principles or practices, (b)
any revaluation by the Company of any material asset (including, without
limitation, any writing down of the value of inventory or writing off of notes
or accounts
13
<PAGE>
receivable), other than in the ordinary course of business consistent with past
practice, (c) any entry by the Company or any Subsidiary into any commitment or
transaction material to the Company and its Subsidiaries taken as a whole,
except in the ordinary course of business and consistent with past practice, (d)
any declaration, setting aside or payment of any dividend or distribution in
respect of the Shares or any redemption, purchase or other acquisition of any of
its securities, (e) any increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any officers
or key employees of the Company or any Subsidiary except as set forth in Section
3.8 of the Company Disclosure Schedule, (f) any entry by the Company or any
Subsidiary into any employment, consulting, termination or indemnification
agreement with any officer or key employee of the Company or any Subsidiary or
entry into any such agreement with any other person outside the ordinary course
of business except as set forth in Section 3.8 of the Company Disclosure
Schedule, or (g) any agreement by the Company or any Subsidiary to take any of
the actions described in this Section 3.8 except as expressly contemplated by
this Agreement. Between September 30, 1996, and the execution and delivery of
this Agreement, neither the Company nor any Subsidiary has taken, or agreed to
take, any action that would constitute a breach of Section 5.1 if taken after
the date of this Agreement.
SECTION 3.9 Intellectual Property.
---------------------
(a) "Company Intellectual Property Rights" means all trademarks,
trademark rights, trade names, trade name rights, patents, patent rights,
industrial models, copyrights, servicemarks, trade secrets, computer software
programs or applications (in both source code and object code form), maskworks,
net lists, schematics, technology, ideas, algorithms, processes, know-how,
inventions and applications for patents, trademarks, copyrights and servicemarks
and all other tangible and intangible proprietary rights and information owned
by or licensed to the Company or any Subsidiary or which the Company or any
Subsidiary otherwise possesses legally enforceable rights to use.
(b) Section 3.9(b) of the Company Disclosure Schedule contains a
complete and accurate list and summary description, including any royalties paid
or received by the Company or any of its Subsidiaries, of all contracts,
agreements, understandings or arrangements relating to the Company Intellectual
Property Rights to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for
commercially available software programs with a value of less than $1,000 under
which the Company or any of its Subsidiaries is the licensee. There are no
outstanding and, to the Company's knowledge, no threatened disputes or
disagreements with respect to any such contracts, agreements, understandings or
arrangements.
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<PAGE>
(c) Know-How Necessary for the Business.
-----------------------------------
(i) The Company Intellectual Property rights are all those used or
proposed to be used by the Company for the operation of the businesses of the
Company and its Subsidiaries as they are currently conducted or currently
proposed to be conducted, respectively. Either the Company, or one of its direct
or indirect wholly owned subsidiaries, is the owner of all right, title, and
interest in and to each of the Company Intellectual Property Rights, free and
clear of all liens, security interests, charges, encumbrances, equities and
other adverse claims, and has the right to use without payment to a third party
such Company Intellectual Property Rights.
(ii) All former and current employees of each the Company and
each of its Subsidiaries have executed written agreements with one or more of
the Company and its direct or indirect wholly owned subsidiaries that assign to
one or more of such entities all rights to any inventions, improvements,
discoveries or information relating to the business of the Company or one of its
Subsidiaries. No employee of the Company or one of its Subsidiaries has entered
into any contract, agreement, understanding or arrangement that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than one or more of the Company and its direct or
indirect wholly owned subsidiaries.
(d) Patents.
-------
(i) Section 3.9(d) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all inventions, patents,
patent applications and patent rights used or proposed to be used by the Company
or any of its Subsidiaries (collectively, "Patents").
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Effective Time.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Company's knowledge,
there is no potentially interfering patent or patent application of any third
party.
(iv) To the Company's knowledge, no Patent is infringed or, to
Company's knowledge, has been challenged or threatened in any way. To the
Company's knowledge, none of the products manufactured and sold, nor any process
or know-how used, by the Company or any of its Subsidiaries infringes or is
alleged to infringe any patent or other proprietary right of any other person.
15
<PAGE>
(v) All products made, used, or sold under the Patents have been
marked with a proper patent notice.
(e) Trademarks.
----------
(i) Section 3.9(e) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all trademarks, trademark
rights, trade names, trade name rights and servicemarks used or proposed to be
used by the Company or any of its Subsidiaries (collectively, the "Marks").
(ii) All applications for registration of the Marks that have
been registered with the United States Patents and Trademark Office are
currently in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and the registered Marks and pending
applications are not subject to any maintenance fees or taxes or actions falling
due within ninety days after the Effective Time.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to the Company's knowledge, no such action is
threatened with the respect to any of the Marks.
(iv) To the Company's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) To the Company's knowledge, no Mark is infringed or has been
challenged or threatened in any way. To the Company's knowledge, none of the
Marks infringes or is alleged to infringe any trade name, trademark, or service
mark of any third party.
(vi) All products and materials containing a Mark bear a proper
federal registration notice where permitted by law.
(f) Copyrights.
----------
(i) Section 3.9(f) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all copyrights for works
of authorship used or proposed to be used by the Company or any of its
Subsidiaries and registered with the United States Copyright Office
("Copyrights").
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and the
Copyrights are not subject to any maintenance fees or taxes or actions falling
due within ninety days after the Effective Time.
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<PAGE>
(iii) To the Company's knowledge, no Copyright is infringed or has
been challenged or threatened in any way. To the Company's knowledge, none of
the subject matter of any of the Copyrights infringes or is alleged to infringe
any copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have been marked
with a proper copyright notice.
(v) To the Company's knowledge, all works subject to Copyright are
original works of authorship of regular employees of the Company or independent
contractors who have assigned their rights in such works to the Company and no
part of any such work has been copied from any other source.
(g) Trade Secrets.
-------------
(i) Each of the Company and each of its Subsidiaries has taken
reasonable and necessary precautions to protect the secrecy, confidentiality,
and value of their trade secrets.
(ii) To the Company's knowledge, either the Company or one or
more of its direct or indirect wholly owned subsidiaries has good title and an
absolute (but not necessarily exclusive) right to use the trade secrets used or
proposed to be used by the Company or any of its Subsidiaries ("Trade Secrets").
To the Company's knowledge, the Trade Secrets are not part of the public
knowledge or literature, and have not been used, divulged, or appropriated
either for the benefit of any person (other than the Company or its
Subsidiaries) or to the detriment of the Company or its Subsidiaries. To the
Company's knowledge, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
(h) Since September 30, 1996, (i) none of the Company Intellectual
Property Rights has been sold, transferred, assigned or otherwise disposed of
and (ii) there has been no change in the Company Intellectual Property Rights.
SECTION 3.10 Material Contracts. Section 3.10 of the Company Disclosure
------------------
Schedule sets forth a list of all agreements of the Company with any stockholder
who beneficially owns 5% or more of the outstanding Shares, executive officer of
the Company or director of the Company. Except as set forth in Section 3.10 of
the Company Disclosure Schedule, no officer or director of the Company, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any material interest in any material contract
or property (real or personal, tangible or intangible), used in, or pertaining
to the business of the Company or any of its Subsidiaries.
17
<PAGE>
SECTION 3.11 Environmental Matters.
---------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under the following federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (B) petroleum and petroleum products including crude
oil and any fractions thereof; (C) natural gas, synthetic gas, and mixtures
thereof; (D) radon; (E) asbestos; (F) any other contaminant; and (G) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and (ii)
"Environmental Laws" means any federal, state or local law relating to (A)
releases or threatened releases of Hazardous Substances or materials containing
Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or material containing Hazardous
Substances; or (C) otherwise relating to pollution of the environment.
(b) Except as could not reasonably be expected to have a Company
Material Adverse Effect, (i) the Company is not in violation of any
Environmental Law; (ii) none of the properties owned or leased by the Company
are contaminated with any Hazardous Substance; (iii) the Company is not liable
for any off-site contamination; (iv) the Company is not liable under any
Environmental Law; (v) the Company has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits");
(vi) the Company is in compliance with its Environmental Permits; and (vii)
there are no pending, or, to the knowledge of the Company, threatened claims
against the Company or any Subsidiary relating to any Environmental Law or
Hazardous Substance.
SECTION 3.12 Employee Benefits.
-----------------
(a) Section 3.12(a) of the Company Disclosure Schedule contains a true
and complete summary or list of or otherwise describes all material employment
contracts or other employee benefit arrangements with "change of control" or
similar provisions, all severance agreements with directors or executive
officers and all bonus, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase and other employee benefit plans (other
than medical and other similar welfare plans made generally available to all
employees) to which the Company or any of its Subsidiaries is a party. True and
complete copies of all such plans and agreements have been made available to
Purchaser.
(b) The Company has heretofore delivered or otherwise made available
to Purchaser true, correct and complete copies of (i) each "employee benefit
plan" as defined in
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<PAGE>
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), it maintains or to which it contributes and any bonus, deferred
compensation, severance pay, insurance, stock purchase, stock option or other
fringe benefit plan, program or arrangement, whether formal or informal (the
"Plans"), (ii) the three most recent Annual Reports (Form 5500 Series) and
accompanying schedules for each of the Plans for which such a report is
required, (iii) the most current summary plan description (and any summary of
material modifications) for each Plan, (iv) the three most recent certified
financial statements for each of the Plans for which such a statement is
required or was prepared, (v) the Forms PBGC-1 filed in each of the three most
recent plan years for each of the Plans for which such form was required to be
filed, and (vi) for each Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code, the most recent Internal Revenue Service
determination letter issued with respect to such Plan.
(c) The Company and each Subsidiary and ERISA Affiliate (as defined
below) has performed and complied in all material respects with all of its
obligations under and with respect to the Plans and each of the Plans has, at
all times, in form and operation complied in all material respects with its
terms, and, where applicable, the requirements of the Code, ERISA and all other
applicable laws. Each Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and, to the knowledge of the Company, nothing
has occurred which reasonably could be expected to adversely affect such
qualified status. For purposes of this Agreement, the term "ERISA Affiliates"
as applied to any person, shall mean (a) any corporation which is a member of a
controlled group of corporations, within the meaning of Section 414(b) of the
Code of which that person is a member, (b) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under common
control, within the meaning of Section 414(c) of the Code, of which that person
is a member, and (c) any member of any affiliate service group, within the
meaning of Section 414(m) and (o) of the Code, of which that person or any
entity descried in clause (a) or (b) is a member.
(d) There are no unpaid contributions due prior to the date hereof
with respect to any Plan, and with respect to each Plan that is subject to
Section 412 of the Code, there has occurred no failure to meet the minimum
funding standards of such Section, or failure to make a required installment
under Section 412(m) of the Code by its due date.
(e) Neither the Company, any Subsidiary nor any ERISA Affiliate has
withdrawn from any Plan during a plan year in which it was a "substantial
employer," as defined in Section 4001(a)(2) of ERISA, where such withdrawal
could result in liability of such substantial employer pursuant to Section
4062(e) or 4063 of ERISA, and neither the Company, nor any Subsidiary nor any
ERISA Affiliate has filed a notice of intent to terminate any such plan or
adopted any amendment to treat any such plan as terminated. The Pension
Benefit Guaranty Corporation has not instituted proceedings to terminate any
Plan, and no other event or condition has occurred which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such plan. No reportable
19
<PAGE>
event, as described in Section 4043 of ERISA (whether or not waived), has
occurred with respect to any Plan, and there has been no event which could
subject the Company, any Subsidiary or ERISA Affiliate to liability under
Section 4064 or 4069 of ERISA for any Plan.
(f) With respect to each Plan that is subject to the provisions of
Title I, Sub title B, Part 3 of ERISA, the actuarial present value (based on the
actuarial assumptions used in the most recent actuarial valuation) of vested and
nonvested "benefit liabilities," as defined in Section 4001(a)(16) of ERISA
(calculated on a termination basis and taking into account all contingent and
subsidized benefits) of each such Plan, determined as of the most recent
valuation date for each such plan, did not exceed the fair market value of the
assets of such Plan as of such date.
(g) Except as described in Section 3.12(g) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary or ERISA Affiliate has any
obligation to provide health benefits or other non-pension benefits to retired
or other former employees, except as specifically required by Section 4980B of
the Code or Part 6 of Title I of ERISA, and the Company and any Subsidiary or
ERISA Affiliate has complied in all material respects with the requirements of
Code Section 4980B and such Part 6.
(h) To the knowledge of the Company, neither the Company, any
Subsidiary or any ERISA Affiliate, nor any other "disqualified person" or "party
in interest," as defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively, has engaged in any "prohibited transaction," as defined in Section
4975 of the Code or Section 406 of ERISA, with respect to any Plan which could
subject the Company or any ERISA Affiliate to any material penalty or tax under
Section 502(i) of ERISA or Sections 4971 and 4975 of the Code. Except as set
forth in Section 3.12(h) of the Company Disclosure Schedule, with respect to any
Plan, no action, suit or claim is pending with respect to any Plan, other than
routine claims for benefits.
(i) To the knowledge of the Company, neither the Company nor any
Subsidiary or ERISA Affiliate has incurred any liability or taken any action and
none of them has any knowledge of any action or event that could cause any one
of them to incur any liability (i) under Section 412 of the Code or Title IV of
ERISA, or (ii) on account of a partial or complete withdrawal (as defined in
Sections 4203 and 4205 of ERISA, respectively) with respect to any Multiemployer
Plan.
(j) Except as set forth in Section 3.12(j) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of any or all of the contemplated transactions will: (i) entitle
any current or former employee of the Company nor any Subsidiary or ERISA
Affiliate to severance pay, unemployment compensation or any similar payment, or
(ii) result in the payment of any "excess parachute payment" to any person under
Section 280G of the Code.
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SECTION 3.13 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of PaineWebber Incorporated on the date of this Agreement to the effect
that, as of the date of this Agreement, the Merger Consideration is fair to the
Company's stockholders from a financial point of view and the Company will
promptly, after the receipt thereof, deliver a copy of such opinion to
Purchaser.
SECTION 3.14 Brokers. No broker, finder or investment banker (other
-------
than PaineWebber Incorporated) is entitled to any brokerage, finder's or other
fee or commission in connection with the Transactions based upon arrangements
made by or on behalf of the Company. The Company has heretofore made available
to Purchaser a complete and correct copy of all agreements between the Company
and PaineWebber Incorporated pursuant to which such firm would be entitled to
any payment relating to the Transactions.
SECTION 3.15 Litigation. Except as set forth in Section 3.15 of the
----------
Company Disclosure Schedule, (a) there is no action, suit, proceeding or, to the
Company's knowledge, investigation pending against or affecting the Company or
any of its Subsidiaries or any of their respective properties and, to the
Company's knowledge, there is no action, suit, proceeding or investigation
threatened against or affecting the Company or any of its Subsidiaries or any of
their respective properties before any Governmental Authority and (b) neither
the Company nor any of its Subsidiaries is subject to any judgment, decree,
injunction, rule or order of any Governmental Authority or arbitrator.
SECTION 3.16 Labor Relations. The Company and its Subsidiaries are in
---------------
material compliance with all federal, state and local laws, rules, regulations
and orders respecting employment and employment practices, including, without
limitation, immigration and terms and conditions of employment, wages and hours.
To the Company's knowledge, there are no pending investigations involving the
Company or any of its Subsidiaries by any Governmental Authority for the
enforcement of such federal, state or local laws, rules regulations and orders.
There is no unfair labor practice charge or complaint pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
its Subsidiaries before any Governmental Authority or any strike, picketing,
boycott, dispute, slowdown or stoppage pending, or, to the Company's knowledge,
threatened or contemplated, against or involving the Company or any of its
Subsidiaries. There are no existing collective bargaining agreements with the
Company or any of its Subsidiaries. No representation question exists
respecting the employees of the Company or any of its Subsidiaries and no
collective bargaining agreement or modification thereof is currently being
negotiated by or on behalf of the Company or any of its Subsidiaries. No
grievance or arbitration proceeding is pending, or, to the Company's knowledge,
threatened or contemplated, under any expired collective bargaining agreements
of the Company or its Subsidiaries. No labor dispute with the employees of the
Company or any of its Subsidiaries is pending, or, to the Company's knowledge,
threatened or contemplated.
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SECTION 3.17 Application of California Statute. The Company is not a
---------------------------------
foreign corporation subject to Section 2115 of the California General
Corporation Law.
SECTION 3.18 Tax Returns and Audits. Each of the Company and its
----------------------
Subsidiaries has duly filed all federal income tax returns to be filed by it and
has duly filed all other federal, state, local and foreign tax returns and
reports required to be filed by it and has duly paid or made adequate provision
on its books in accordance with generally accepted accounting principles for the
payment of all taxes which have been incurred or are due and payable. Except as
set forth in Section 3.18 of the Company Disclosure Schedule (a) there are no
pending audits, examinations or proposed audits or examinations of any tax
returns filed by the Company or any of its Subsidiaries and (b) neither the
Company nor any of its Subsidiaries have given or been requested to give waivers
or extensions of any statute of limitations relating to the payment of taxes for
which the Company or any of its Subsidiaries may be liable. As of the date of
this Agreement, the consolidated federal income tax returns of the Company and
its Subsidiaries have been audited by the Internal Revenue Service (or the
appropriate statute of limitations has expired) for all fiscal years through and
including September 30, 1992. All deficiencies asserted or proposed as a result
of any examinations or audits of any tax returns have been paid or adequately
provided for on the books of the Company or one of its Subsidiaries in
accordance with generally accepted accounting principles. Except as set forth
in Section 3.18 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries (i) is a party to any agreement providing for the
allocation, payment or sharing of taxes among the Company, its Subsidiaries or
any third parties, (ii) has any net operating loss carryovers, net capital loss
carryovers or any other items the use of which, by deduction or credit or
otherwise, would or may be limited by Section 382 of the Code (except as a
result of the transactions contemplated hereby), (iii) has filed any consent to
the application of Section 341(f) of the Code with respect to any of its
property, (iv) has an application pending with respect to any tax requesting
permission for a change in accounting method, (v) is required to make any
adjustments to income pursuant to Section 481 of the Code or (vi) owns or leases
any real property or otherwise holds any interest in real property that would or
may subject the parties hereto or the Surviving Corporation to a transfer or
gains tax as a result of the Merger (unless Purchaser elects to merge the
Company into Merger Sub and except for transactions after the Merger).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub hereby jointly and severally represent and warrant
to the Company that:
SECTION 4.1 Organization and Qualification; Subsidiaries. Purchaser is
--------------------------------------------
a corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental
22
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approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so incorporated,
existing or in good standing or to have such power, authority and governmental
approvals would not prevent or materially delay consummation of the Merger or
the other Transactions or otherwise prevent Purchaser or Merger Sub from
performing their material obligations under this Agreement or, individually or
in the aggregate, have a Purchaser Material Adverse Effect (as defined below).
Purchaser is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, and in good standing in each jurisdiction where the
character of the properties owned, lease or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed or in good standing that would not
prevent or materially delay consummation of the Merger or the other
Transactions, or otherwise prevent Purchaser or Merger Sub from performing their
material obligations under this Agreement and would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect. The term "Purchaser
Material Adverse Effect" means any circumstance, change in or effect on
Purchaser or any of its Subsidiaries that is materially adverse to the business,
operations, properties, financial condition or results of operations of
Purchaser and its Subsidiaries, taken as a whole.
SECTION 4.2 Certificate of Incorporation and By-Laws. Purchaser
----------------------------------------
heretofore has made available to the Company a complete and correct copy of the
Certificate of Incorporation and the By-Laws of each of Purchaser and Merger
Sub. The Certificate of Incorporation and By-Laws of each of Purchaser and
Merger Sub are in full force and effect. Neither Purchaser nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation or By-
Laws.
SECTION 4.3 Authority Relative to this Agreement.
------------------------------------
(a) Each of Purchaser and Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement, to perform their respective
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by each of Purchaser and Merger Sub and the
consummation by each of Purchaser and Merger Sub of the Transactions have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Purchaser or Merger Sub are necessary to
authorize this Agreement or to consummate the Transactions (other than the
filing and recordation of appropriate merger documents as required by the DGCL).
This Agreement has been duly and validly executed and delivered by each of
Purchaser and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligations of
each Purchaser and Merger Sub, enforceable against each of Purchaser and Merger
Sub in accordance with its terms.
(b) The Board of Directors of Purchaser has, on June 18, 1997,
approved and adopted this Agreement and the Transactions and Purchaser has
approved this Agreement and the Transactions as the sole stockholder of Merger
Sub.
23
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SECTION 4.4 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by each of Purchaser
and Merger Sub does not, and the performance of this Agreement by each of
Purchaser and Merger Sub and the consummation of the Transactions will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws or
equivalent organizational documents of Purchaser or Merger Sub, (ii) assuming
that all consents, approvals, authorizations and other actions described in
subsection 4.4(b) have been obtained and all filings and obligations described
in subsection 4.4(b) have been made or complied with, conflict with or violate
any Law applicable to Purchaser or by which any asset of Purchaser is bound or
affected, or (iii) conflict with, result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or require any payment under or result in the
creation of a lien, claim, security interest or other charge or Encumbrance on
any asset of Purchaser pursuant to, any contract or other instrument or
obligation to which Purchaser or Merger Sub is a party or by which any asset of
Purchaser or Merger Sub is bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults, or other
occurrences which would not, individually or in the aggregate, have a Purchaser
Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of Purchaser
and Merger Sub does not, and the performance of this Agreement by each of
Purchaser and Merger Sub and the consummation of the Transactions will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
the NYSE and state takeover laws, the pre-merger notification requirements of
the HSR Act, any pre-merger notification filing with the German Federal Cartel
Office and recordation of appropriate merger documents as required by the DGCL
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notification would not prevent or delay
consummation of the Offer or the Merger, or otherwise prevent either Purchaser
or Merger Sub from performing their respective obligations under this Agreement
or consummating any of the Transactions, and would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
SECTION 4.5 Brokers. No broker, finder or investment banker (other than
-------
Deutsche Morgan Grenfell) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Purchaser.
SECTION 4.6 Financing. Purchaser shall provide or cause to be provided
---------
to Merger Sub the funds necessary to satisfy all of Purchaser's and Merger Sub's
obligations under this Agreement to consummate the Offer and the Merger in
accordance with their respective terms and the terms of this Agreement, each as
may be amended from time to time.
24
<PAGE>
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Prior to the Effective Time, except to the extent that Purchaser shall otherwise
consent (including by virtue of action by the Board of Directors of the Company
approved by all of Purchaser's or Merger Sub's designees, as applicable, at such
time as they shall constitute a majority of such Board), the Company shall, and
shall cause its Subsidiaries to, except as expressly permitted by this
Agreement, conduct their respective businesses in, and shall not take any action
except in, the ordinary course of business in a manner consistent with past
practice; and the Company shall, and shall cause its Subsidiaries to, use their
respective reasonable best efforts to preserve intact the business organization
of the Company and its Subsidiaries, to keep available the services of the
current officers, employees and consultants of the Company and its Subsidiaries
and to preserve the current business relationships of the Company and its
Subsidiaries, including, without limitation, with customers, licensors,
suppliers, distributors and others with which the Company or any Subsidiary has
business relations. Without limiting the generality of the foregoing, and
except as expressly permitted or specifically contemplated by this Agreement,
the Company shall not, and shall not permit any Subsidiary to, between the date
of this Agreement and the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Purchaser
(except as otherwise expressly permitted by this Agreement):
(a) (i) declare, set aside or pay any dividends on or other
distributions in respect of any of its capital stock (other than dividends and
distributions by any direct or indirect wholly owned subsidiary of the Company
to its parent), (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
repurchase, redeem or otherwise acquire, or permit any Subsidiary to repurchase,
redeem or otherwise acquire, any shares of capital stock;
(b) issue, deliver, sell, pledge, dispose or encumber, or authorize or
propose the issuance, delivery, sale, pledge, disposal or encumbrance of, any
shares of its capital stock of any class or any securities convertible into, or
any rights, warrants, calls, subscriptions or options to acquire, any such
shares or convertible securities, or any other ownership interest other than (i)
the issuance of shares of Company Common Stock upon the exercise of stock
options granted under the Company Stock Option Plans outstanding on the date of
this Agreement and in accordance with the current terms of such options, (ii)
issuances by a Subsidiary of its capital stock to the Company or a Subsidiary so
long as the Company will, after such issuance, directly or indirectly own all
the outstanding capital stock of the issuing Subsidiary and (iii) the grant of
stock options to new hires in the ordinary course of business consistent with
past practice and with the written consent of Purchaser;
25
<PAGE>
(c) amend or propose to amend its Certificate of Incorporation or By-
Laws;
(d) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or by purchasing a substantial equity interest in
or 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;
(e) sell, lease, license, grant a security interest in, encumber or
otherwise dispose of, or agree to sell, lease, grant a security interest in,
encumber or otherwise dispose of, any of its material assets other than (i)
sales or licenses of its products in the ordinary course of business consistent
with past practice, (ii) equipment and property no longer used in the operation
of the Company and its Subsidiaries' respective businesses and (iii) assets
related to any discontinued operations of the Company and its Subsidiaries which
operations were discontinued prior to the date hereof;
(f) incur (which shall not be deemed to include entering into credit
agreements, lines of credit or similar arrangements until borrowings are made
under such arrangements) any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any Subsidiary or guarantee any
debt securities of others, except in the ordinary course of business consistent
with past practice;
(g) (i) grant any increase in the compensation of any of its
directors, officers or employees, except for increases for employees in the
ordinary course of business consistent with past practices, (ii) grant, pay or
agree to pay any pension, retirement allowance or other employee benefit not
required or contemplated by any existing employee benefit plan, program,
arrangement, agreement or contract (including, without limitation, any "employee
benefit plan", as defined in Section 3(3) of ERISA), maintained or contributed
to by the Company or any Subsidiary, or with respect to which the Company or any
Subsidiary could incur liability under Sections 4069, 4212(c) or 4204 of ERISA
(the "Company Benefit Plans") as in effect on the date hereof to any director,
officer or employee, (iii) enter into any new employment, severance or
termination plan, program, arrangement, agreement or contract with any such
director, officer or employee or (iv) except as may be required to comply with
applicable law, become obligated under any Company Benefit Plan that was not in
existence on the date hereof or amend any such plan in existence on the date
hereof to enhance the benefits thereunder;
(h) make any capital expenditure or expenditures which exceed $250,000
in the aggregate; or
(i) authorize any of, or commit or agree to take any of, the actions
described in paragraphs (a) through (h) of this Section 5.1.
26
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Meeting of the Stockholders.
---------------------------
(a) The Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and By-Laws to convene a
meeting of its stockholders to consider and vote upon the approval of this
Agreement and the Merger and such other matters as may be necessary to
effectuate the Transactions (the "Meeting"), if necessary to comply with
applicable law, as promptly as practicable after the expiration of the Offer.
The Purchaser Companies will vote all Shares over which they exercise voting
control in favor of this Agreement and the Merger.
(b) The Board of Directors of the Company shall recommend such
approval and take all lawful action to solicit such approval; provided, however,
-------- -------
that the Board of Directors of the Company at any time prior to the time of
acceptance for payment of at least a majority of Shares pursuant to the Offer
may withdraw, modify or change any such recommendations to the extent that the
Board of Directors of the Company (i) determines in good faith after
consultation with and based upon the advice of independent legal counsel that
the failure to so withdraw, modify or change its recommendation would cause the
Board of Directors of the Company to breach its fiduciary duties to the
Company's stockholders under applicable law and (ii) the Company has received in
writing a Superior Proposal (as defined below), which is then pending, which the
Board of Directors of the Company has determined to recommend to the
stockholders of the Company. For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal relating to a Competing Transaction (as
hereinafter defined) made by a third party on terms which the Board of Directors
of the Company determines in its good faith judgment (based upon the advice of a
financial advisor of nationally recognized reputation) to be more financially
favorable to the Company's stockholders than the Offer and the Merger and for
which financing, to the extent required, is then committed or which, in the good
faith judgment (based upon the advice of a financial advisor of nationally
recognized reputation) of the Board of Directors of the Company, is reasonably
capable of being financed by such third party. The Company agrees that it shall
notify Purchaser at least forty-eight hours prior to taking any action with
respect to such Superior Proposal or taking any action with respect to the
withdrawal, modification or change of its recommendation for approval of this
Agreement, the Merger or the Transactions. Notwithstanding anything to the
contrary contained in this Agreement, any such withdrawal, modification or
change of recommendation in accordance with the provisions of this Section
6.1(b) shall not constitute a breach of this Agreement by the Company.
(c) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, subject to Article VII, to take all necessary and appropriate action to
cause the Merger to become effective, in
27
<PAGE>
accordance with Section 253 of the DGCL, as soon as reasonably practicable after
such acquisition, without a meeting of the stockholders of the Company.
(d) If required by applicable law, as soon as practicable after the
expiration of the Offer, the Company shall file with the SEC a proxy statement
(the "Proxy Statement") and form of proxy relating to the Merger, which shall
comply as to form with all applicable laws. The Company shall obtain and furnish
the information required to be included in the Proxy Statement and shall respond
promptly to any comments made by the SEC with respect to the Proxy Statement and
cause the Proxy Statement and form of proxy to be mailed to the Company's
stockholders at the earliest practicable date. Purchaser and Merger Sub shall
cooperate in the preparation of the Proxy Statement and shall furnish the
Company with all information with respect to itself, and its directors,
officers, stockholders and Subsidiaries, as may be required for inclusion in the
Proxy Statement. The Company agrees, as to information with respect to the
Company, its officers, directors, stockholders and Subsidiaries contained in the
Proxy Statement, and Purchaser agrees, as to information with respect to
Purchaser, its officers, directors, stockholders and Subsidiaries contained in
the Proxy Statement, that such information, at the date the Proxy Statement is
mailed and (as then amended or supplemented) at the time of the Meeting, will
not be false or misleading with respect to any material fact, or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. Purchaser and its counsel shall be given an
opportunity to review the Proxy Statement, and all amendments or supplements
thereof, prior to their being filed with the SEC and the Company shall not make
any such filing without the approval of Purchaser (which shall not be
unreasonably withheld). The Company will advise Purchaser, promptly after it
receives notice thereof, of the time when the Proxy Statement has been cleared
by the SEC or any request by the SEC for amendment of the Proxy Statement or
comments thereon and proposed responses thereto or requests by the SEC for
additional information.
SECTION 6.2 Access to Information; Confidentiality.
--------------------------------------
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which the Company or any of its Subsidiaries
is a party (as to which it will use its reasonable best efforts to obtain any
necessary consents) or pursuant to applicable Law, from the date of this
Agreement to the Effective Time, the Company shall (and shall cause its
Subsidiaries to): (i) provide to Purchaser and its officers, directors,
employees, accountants, legal counsel, agents, investment bankers and other
authorized representatives (collectively, "Representatives") access at
reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of the Company and its Subsidiaries and
to the books and records thereof and (ii) furnish promptly to Purchaser and its
Representatives such information concerning the business, properties, contracts,
assets, liabilities, personnel and other aspects with respect to the Company and
its Subsidiaries as Purchaser may reasonably request.
28
<PAGE>
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all their respective obligations under the
Confidential Disclosure Agreement dated February 21, 1997 (the "Confidentiality
Agreement"), between the Company and Purchaser.
(c) No investigation pursuant to this Section 6.2 shall affect any
representation or warranty in this agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.3 No Solicitation of Transactions.
-------------------------------
The Company shall immediately cease and cause to be terminated all
existing discussions or negotiations relating to a Competing Transaction (as
defined below), other than with respect to the Transactions, with any parties
conducted heretofore. The Company will not, directly or indirectly, and will
instruct its Representatives not to, directly or indirectly, initiate, solicit
or encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain discussions or negotiate with any person
in furtherance of or relating to such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any Representative of the Company or any of its Subsidiaries to take any
such action, the Company shall use its best efforts to cause the Representatives
of the Company and its Subsidiaries not to take any such action, the Company
shall promptly notify Purchaser if any such inquiries or proposals are made
regarding a Competing Transaction, and the Company shall promptly inform
Purchaser as to the material details of any such inquiry or proposal and, if in
writing, promptly deliver or cause to be delivered to Purchaser a copy of such
inquiry or proposal. The Company shall keep Purchaser informed, on a current
basis, of the details of any such inquiries and the status and terms of any such
proposals; provided, however, that prior to the time of acceptance for payment
-------- -------
of at least a majority of Shares pursuant to the Offer, nothing contained in
this Section 6.3 shall prohibit the Board of Directors of the Company from (i)
furnishing information to, or entering into discussions or negotiations with,
any person that after the date hereof makes an unsolicited bona fide proposal
regarding a Competing Transaction or agreeing to or endorsing any Competing
Transaction, if, and only to the extent that, (A) the Board of Directors of the
Company, after consultation with and based upon the advice of independent legal
counsel, determines in good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
imposed by the DGCL, (B) prior to furnishing such information to, or entering
into discussions or negotiations with such person or agreeing to or endorsing
any Competing Transaction, the Board of Directors of the Company determines in
good faith, after consultation with and based upon the advice of a financial
advisor of a nationally recognized reputation, that such Competing Transaction
is a Superior Proposal, (C) prior to furnishing such information to, or entering
into discussions or negotiations with, such person, the Company provides written
notice to Purchaser to the effect
29
<PAGE>
that it is furnishing information to, or entering into discussions or
negotiations with, such person, (D) prior to furnishing such information to such
person, the Company receives from such person an executed confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement, and (E) such information to be so furnished has
been previously delivered to Purchaser; or (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction.
For purposes of this Agreement, "Competing Transaction" shall mean any
of the following involving the Company or any of its Subsidiaries (other than
the entering into or consummation of the Transactions): (a) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of substantial assets (other than assets held in inventory for
resale in the ordinary course of business) of the Company and its Subsidiaries,
taken as a whole, in a single transaction or series of transactions; (c) any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (d) any solicitation of proxies in opposition to
approval by the Company's stockholders of the Merger; (e) the acquisition by any
person, after the date hereof, of beneficial ownership or the right to acquire
beneficial ownership of, or the formation of any "group" (as such term is
defined under Section 13(d) of the Exchange Act), that beneficially owns or has
the right to acquire beneficial ownership of 20% or more of the then outstanding
shares of capital stock of the Company, or the acquisition by any person or
"group" that, as of the date hereof, beneficially owns 20% or more of the
outstanding shares of capital stock of the Company (other than any passive
institutional investor) of beneficial ownership or the right to acquire
beneficial ownership of any additional shares of capital stock of the Company;
(f) the adoption by the Company of a plan of liquidation, the declaration or
payment by the Company of an extraordinary dividend on any of its shares of
capital stock or the effectuation by the Company of a recapitalization or other
type of transaction that would involve either a change in the Company's
outstanding capital stock or a distribution of assets of any kind to the holders
of such capital stock; (g) the repurchase by the Company or any of its
Subsidiaries of shares of Company Common Stock; or (h) any agreement to, or
public announcement by the Company or any other person, entity or group of a
proposal, plan or intention to, do any of the foregoing.
SECTION 6.4 Indemnification.
---------------
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the same provisions with respect to indemnification,
advancement and director exculpation set forth in the Certificate of
Incorporation and By-Laws of the Company on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of persons who at any time prior to the Effective Time were
entitled
30
<PAGE>
to indemnification, advancement or exculpation under the Certificate of
Incorporation or By-Laws of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
Transactions), unless such modification is required by Law.
Purchaser will not permit the provisions with respect to
indemnification, advancement or director exculpation set forth in the
Certificate of Incorporation and By-Laws of any of the Company's Subsidiaries on
the date of this Agreement to be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of persons who at any time prior to the Effective
Time were entitled to indemnification, advancement or exculpation under any such
Certificate of Incorporation or By-Laws in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
Transactions), unless such modification is required by Law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of the Company (collectively, the "Indemnified Parties") against
all losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of (with approval of Purchaser and the Surviving Corporation), or
otherwise in connection with, any claim, action, suit, proceeding or
investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer or employee and arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the Transactions), in each case to the fullest extent permitted
under the DGCL (and shall pay expenses in advance of the final disposition of
any such action or proceeding to each Indemnified Party to the fullest extent
permitted under the DGCL, upon receipt from the Indemnified Party to whom
expenses are advance of the undertaking to repay such advances contemplated by
Section 145(e) of the DGCL).
(c) Any Indemnified Party wishing to claim indemnification under this
Section 6.4, upon learning of any such Claim, shall notify Purchaser and the
Surviving Corporation (although the failure so to notify Purchaser and the
Surviving Corporation shall not relieve the Surviving Corporation from any
liability that it may have under this Section 6.4, except to the extent such
failure materially prejudices such party), and shall deliver to the Surviving
Corporation the undertaking contemplated by Section 145(e) of the DGCL.
Purchaser and the Surviving Corporation shall have the right to assume the
defense thereof and the Surviving Corporation, including its affiliates, shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if Purchaser and the
Surviving Corporation elect not to assume such defense or there is a conflict of
interest between, or different defenses exist for Purchaser and the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them (and reasonably satisfactory to Purchaser) and the
Surviving Corporation shall pay all reasonable fees and
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expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, however, that (i) the Surviving Corporation,
-------- -------
including its affiliates, shall not, in connection with any one such action or
proceeding or separate but substantially similar actions or proceedings arising
out of the same general allegations, be liable for the fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties
except to the extent that local counsel, in addition to such parties' regular
counsel, is necessary or desirable in order to effectively defend against such
action or proceeding, (ii) Purchaser, the Surviving Corporation and the
Indemnified Parties will cooperate in the defense of any such matter, and (iii)
the Surviving Corporation, including its affiliates, shall not be liable for any
settlement effected without Purchaser's prior written consent, which consent
will not be unreasonably withheld or delayed, and provided, further, however,
that the Surviving Corporation, including its affiliates, shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and not subject to further appeal, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law. No Indemnified Party shall consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release, in form and
substance reasonably satisfactory to such Indemnified Party, from all liability
in respect of such claim or litigation for which such Indemnified Party would be
entitled to indemnification hereunder.
(d) Purchaser shall cause to be maintained in effect for not less than
six years after the Effective Time (except to the extent not generally available
in the market) directors' and officers' liability insurance that is
substantially equivalent in coverage to the Company's current insurance, with an
amount of coverage of not less than the amount of coverage maintained by the
Company as of the date of this Agreement with respect to matters occurring prior
to the Effective Time; provided, however, that Purchaser shall not be required
-------- -------
to pay an annual premium for such insurance in excess of 150% of the last annual
premium paid prior to the date of this Agreement (which the Company represents
and warrants to have been $250,000 plus applicable taxes), but in such case
shall purchase as much coverage as possible for such amount.
(e) This Section 6.4 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Purchaser and Merger Sub and
the Surviving Corporation and their respective successors and assigns.
SECTION 6.5 Obligations of Merger Sub. Purchaser shall take all actions
-------------------------
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to conditions set forth in
this Agreement.
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SECTION 6.6 Further Action; Consents; Filings.
---------------------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and to do, or cause to be done, and to assist and
cooperate with the other party in doing, all things necessary, proper or
advisable under applicable law or otherwise to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other Transactions,
(ii) obtain from Governmental Authorities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Purchaser or the Company or any of their respective Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger and the other Transactions, (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement, the Merger and the other Transactions required under (A) the
Exchange Act, the Securities Act and any other applicable federal or state
securities laws, (B) the HSR Act and any pre-merger notification filing with the
German Federal Cartel Office and (C) any other applicable Law. The parties
hereto shall cooperate with each other in connection with the making of all such
filings, including by providing copies of all such documents to the nonfiling
party and its advisors prior to filing and, if requested, by accepting all
reasonable additions, deletions or changes suggested in connection therewith.
(b) The Company and Purchaser each agree to use all reasonable efforts
vigorously to contest and resist any action, including legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction, ruling or other order, whether
temporary, preliminary or permanent (an "Order"), that is in effect and that
restricts, prevents or prohibits the consummation of any of the Transactions,
including, without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action.
(c) Each of Purchaser, Merger Sub and the Company shall not, and shall
not permit any of its respective Subsidiaries to, take any action that would, or
that would reasonably be expected to, result in (i) any of its respective
representations and warranties set forth in this Agreement that are qualified as
to materiality becoming untrue, (ii) any of such respective representations and
warranties that are not so qualified becoming untrue in any material respect or
(iii) except as otherwise permitted by Section 6.1(b) or Section 6.3, any of the
conditions to the Merger set forth in Article VII not being satisfied.
(d) Each of the Company and Purchaser shall give prompt notice to the
other of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or (ii) the failure by it
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
--------
33
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however, that no such notification shall affect the representations, warranties,
- -------
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
SECTION 6.7 Public Announcements. Without the prior written consent of
--------------------
the other party, neither party will issue any press release or otherwise make
any public statements with respect to this Agreement or any Transaction except
(a) to such party's directors, employees, agents, advisors and affiliates, in
each case on a confidential and need-to-know basis, or (b) as is required, in
the opinion of its outside counsel, by applicable Law (including, without
limitation, Federal securities laws) or pursuant to applicable requirements of
any listing agreement with or the rules of the NYSE or the NASDAQ/NMS, as
applicable, provided that if any party hereto proposes to make any disclosure
based upon the opinion of its counsel such party will advise and consult with
the other party reasonably prior to such disclosure concerning the information
such party proposes to disclose.
SECTION 6.8 Company SEC Reports.
-------------------
(a) The Company shall timely file all required SEC Reports, each of
which (i) shall be prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act applicable to such SEC
Reports and (ii) shall not at the time they are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports filed after the date of
this Agreement and prior to the Effective Time shall be prepared in accordance
with the published rules and regulations of the SEC and generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated and each shall present fairly, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which are not expected,
individually or in the aggregate, to have a Company Material Adverse Effect).
SECTION 6.9 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Purchaser of (a) any notice of, or other communication relating
to, a default or event which, with notice or lapse of time or both, would become
a default, received by the Company or any of its Subsidiaries subsequent to the
date of this Agreement and prior to the Effective Time, under any contract
material to the business, operations, properties, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole, to which
the Company or any of its Subsidiaries is a party or is subject or (b) any
material adverse change in its business, operations, properties, financial
condition or results of operations or the occurrence of any event
34
<PAGE>
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in any such change. Each of the Company and
Purchaser shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the Transactions.
SECTION 6.10 Accountants. The Company shall cause KPMG Peat Marwick
-----------
LLP, the Company's independent auditors, to deliver to Purchaser and Merger Sub
on or prior to the Effective Date a letter (the "Accountant's Letter"), dated
the Effective Time, in form and substance reasonably satisfactory to the
Purchaser to the effect that they have performed certain agreed upon procedures
and that based upon such procedures, nothing has come to their attention which
would cause them to believe that any financial statements contained in any
Company SEC Reports filed by the Company with respect to the periods ending on
or after September 30, 1996 do not comply in all material respects with all
applicable accounting requirements of the Exchange Act or that such financial
statements are not fairly presented in all material respects in conformity with
generally accepted accounting principles.
SECTION 6.11 Directors.
---------
(a) Promptly upon the acceptance for payment of, and payment for,
Shares constituting a majority of the then outstanding Shares by Purchaser or
Merger Sub, as applicable, pursuant to the Offer, Purchaser from time to time
shall be entitled to designate such number of directors (rounded up to the next
whole number) on the Board of Directors of the Company as will give Purchaser or
Merger Sub, as applicable, subject to compliance with Section 14(f) of the
Exchange Act, that percentage of the total number of directors on the Board of
Directors of the Company (giving effect to the election of any additional
directors pursuant to this Section) equal to the percentage of then outstanding
Shares owned by Purchaser or Merger Sub (provided that such percentage of the
total number of directors shall not be less than a majority of the Board of
Directors of the Company), and the Company shall, at such time, cause
Purchaser's or Merger Sub's designees, as applicable, to be so elected by its
existing Board of Directors; provided, however, that in the event that such
-------- -------
designees are elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least two directors who are
directors on the date of this Agreement and who are neither officers of the
Company nor affiliates of Purchaser or Merger Sub (the "Independent Directors");
and provided further that if the number of Independent Directors shall be
reduced below two for any reasons whatsoever, the remaining Independent Director
shall designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate two persons to fill
such vacancies who shall not be officers or affiliates of the Company or
officers or affiliates of Purchaser or any of its Subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
35
<PAGE>
(b) Subject to applicable law, the Company shall take all actions
requested by Purchaser necessary to effect any such election, including mailing
to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder by the SEC, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (as defined below). In connection with the
foregoing, the Company will promptly, at the option of Purchaser, either
increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Purchaser's or Merger Sub's designees, as applicable, to be elected or appointed
to, and to constitute (rounded up to the next whole number) that percentage of
the total number of directors on the Board of Directors of the Company (giving
effect to the election of any additional directors pursuant to this Section)
equal to the percentage of then outstanding Shares owned by Purchaser or Merger
Sub (provided that such percentage of the total number of directors shall not be
less than a majority of the Board of Directors of the Company).
(c) Following the election of Purchaser's or Merger Sub's designees,
as applicable, pursuant to this Section 6.11, prior to the Effective Time, any
amendment or termination of this Agreement or waiver of any of the Company's
rights hereunder shall require the concurrence of a majority of the Independent
Directors.
SECTION 6.12 Employees. (a) Following the Effective Time, the Surviving
---------
Corporation shall honor in accordance with their terms all Plans and all accrued
benefits vested thereunder. Purchaser agrees to provide, after the Effective
Time, or cause the Surviving Corporation to provide employees of the Company and
its Subsidiaries retained and who continue to be employed by Purchaser with
employee benefits (other than stock options) in the aggregate substantially no
less favorable than those benefits provided to Purchaser's similarly situated
employees for a period ending on the first anniversary of the Effective Time.
(b) Each of Purchaser and the Company shall use reasonable efforts to
cause the execution and delivery of mutually satisfactory retention and non-
competition agreements between Purchaser, the Company and the management
employees of the Company set forth on Exhibit B hereto in addition to those
agreements entered into on the date hereof.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Purchaser and Merger Sub to consummate the Merger
are subject to the satisfaction of the following conditions:
36
<PAGE>
(a) Company Stockholder Approval. If required by the DGCL, this
----------------------------
Agreement shall have been approved and adopted by the stockholders of the
Company in accordance with the DGCL, the Company's Certificate of Incorporation
and its By-Laws.
(b) HSR; German Federal Cartel Office. Any waiting period (and any
---------------------------------
extension thereof) applicable to the consummation of the Merger under the HSR
Act and any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated and any required
approvals in connection with any pre-merger notification filing with the German
Federal Cartel Office shall have been obtained and shall have remained in full
force and effect.
(c) No Order. No Governmental Authority shall have enacted, issued,
--------
promulgated, enforced or entered any law, rule, regulation, executive order or
Order that is then in effect and has the effect of prohibiting the consummation
of the Merger.
(d) The Offer. The Offer shall not have been terminated in accordance
---------
with its terms prior to the purchase of any Shares.
SECTION 7.2 Conditions to the Obligations of Purchaser and Merger Sub.
---------------------------------------------------------
The obligations of Purchaser and Merger Sub to consummate the Merger are subject
to the satisfaction by Purchaser and Merger Sub of the following further
conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement (i) was when made as of
the date of this Agreement true and correct, and was as of the expiration of the
Offer true and correct as if made on and as of the expiration of the Offer, and
(ii) in the case of the representations and warranties contained in Section 3.9,
are true and correct as of the Effective Time as though made on and as of the
Effective Time, except that those representations and warranties that address
matters only as of a particular date shall remain true and correct as of such
date and in each case except where failure to be so true and correct would not
have a Company Material Adverse Effect (other than representations and
warranties that are already so qualified or that are qualified as to the
prevention or delay of the consummation of any of the Transactions or as to the
performance by the Company of its obligations under this Agreement, which in
each such case shall be true and correct as written).
(b) Compliance. The Company shall have performed or complied with, in
----------
all material respects, all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time and
Purchaser shall have received a certificate of the Chairman, President or Chief
Financial Officer of the Company to that effect.
(c) Accountants. Purchaser and Merger Sub shall have received the
-----------
Accountant's Letter from KPMG Peat Marwick LLP, the Company's independent
auditors.
37
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
-----------
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Purchaser and the Company;
(b) by either Purchaser or the Company, if either (i) the Effective
Time shall not have occurred on or before November 15, 1997; provided, however,
-------- -------
that the right to terminate this Agreement under this Section 8.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; (ii) there shall be any Law that makes
consummation of the Merger illegal or otherwise prohibited or any Order that is
final and nonappealable preventing the consummation of the Merger, except if the
party relying on such Order has not complied with its obligations under Section
6.6(b) or (iii) Merger Sub or Purchaser shall have terminated the Offer in
accordance with its terms and conditions without purchasing any Shares pursuant
thereto.
(c) by Purchaser, if the Board of Directors of the Company (i)
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to Purchaser or Merger Sub, (ii) shall have
recommended to the stockholders of the Company any Competing Transaction or
(iii) shall have resolved to do any of the foregoing;
(d) by Purchaser, if there has been a breach of any material
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that any of the conditions set
forth in Section 7.2(a) would not be satisfied (a "Terminating Company Breach");
provided, however, that, if such Terminating Company Breach is curable by the
- -------- -------
Company through the exercise of its reasonable best efforts and for so long as
the Company continues to exercise such reasonable best efforts (but in no event
longer than thirty days after Purchaser's notification of the Company of the
occurrence of such Terminating Company Breach), Purchaser may not terminate this
Agreement under this Section 8.1(d);
(e) by the Company, if there has been a breach of any material
representation, warranty, covenant or agreement on the part of Purchaser and
Merger Sub set forth in this Agreement, or if any representation or warranty of
Purchaser and Merger Sub shall have become untrue in any material respect
("Terminating Purchaser Breach"); provided,
--------
38
<PAGE>
however, that, if such Terminating Purchaser Breach is curable by Purchaser and
- -------
Merger Sub through the exercise of its reasonable best efforts and for so long
as Purchaser and Merger Sub continue to exercise such reasonable best efforts
(but in no event longer than thirty days after the Company's notification of
Purchaser of the occurrence of such Terminating Purchaser Breach), the Company
may not terminate this Agreement under this Section 8.1(e); or
(f) by the Company, if, prior to such time as Purchaser's designees
constitute a majority of the members of the Board of Directors of the Company,
the Board of Directors of the Company shall have recommended to the stockholders
of the Company any Superior Proposal, which is then pending, or resolved to do
so; provided that any termination of this Agreement by the Company pursuant to
--------
this Section 8.1(f) shall not be effective until the close of business on the
second full business day after notice of such termination to Purchaser; or
(g) by the Company, if Purchaser or Merger Sub or another Purchaser
Company shall have failed to commence the Offer within the time required in
Section 9.1.
SECTION 8.2 Effect of Termination. Except as provided in Section
---------------------
6.2(b), Section 8.5 and Section 10.1, in the event of termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void,
there shall be no liability, except as a result of any prior breach thereof,
under this Agreement on the part of Purchaser, Merger Sub or the Company or any
of their respective officers or directors and all rights and obligations, except
as a result of any prior breach thereof, of each party hereto shall cease.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
---------
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
-------- -------
approval and adoption of this Agreement and the Merger by the stockholders of
the Company, no amendment may be made that would reduce the amount or change the
type of consideration into which each Share shall be converted upon consummation
of the Merger without the approval of the stockholders of the Company. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.4 Waiver. At any time prior to the Effective Time, any party
------
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 8.5 Expenses.
--------
(a) Except as otherwise set forth in this Section 8.5, all Expenses
(as defined below) incurred in connection with this Agreement and the
Transactions shall be paid by the
39
<PAGE>
party incurring such expenses, whether or not any Transaction is consummated.
"Expenses" as used in this Agreement shall include all reasonable out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of stockholder approvals and all other
matters relating to the closing of the Transactions, it being understood that
the Company shall not pay or be liable for any of the separate Expenses of its
affiliates in connection herewith (including, without limitation, the
Stockholders party to the Stockholder Agreements but excluding reasonable
expenses for services provided by the Company's principal outside counsel to
management ancillary to the services provided by such counsel to the Company in
connection with the Transactions, which Expenses may be paid by the Company).
(b) The Company agrees that, if (i) Purchaser shall terminate this
Agreement pursuant to Section 8.1(c) or (d); (ii) the Company shall terminate
this Agreement pursuant to Section 8.1(f); (iii) the Purchaser shall terminate
the Offer because the Minimum Condition (as defined in Exhibit A hereof) is not
satisfied and at or prior to such time the Company has received one or more
proposals for a Competing Transaction which at the time of such occurrence has
not been absolutely and unconditionally withdrawn or abandoned or (iv) within
six months after the date of termination (other than a termination solely
pursuant to Section 8.1(a), (e) or (g) of this Agreement at which time this
Agreement is not terminable pursuant to any other provision of Section 8.1) a
Competing Transaction is entered into by the Company, then promptly after such
termination (or, with respect to item (iv), upon the entering into of such
Competing Transaction) by Purchaser or the Company, the Company shall pay to
Purchaser an amount equal to $7,500,000 (the "Break-up Fee") and shall reimburse
Purchaser for all of its Expenses up to an amount equal to $1,500,000; provided
that with respect to item (iii), the Company shall pay to Purchaser an amount
equal to $2,500,000 (the "Initial Break-up Fee") plus all of Purchaser's
Expenses up to an amount equal to $1,500,000 promptly following such termination
and the balance of the Break-up Fee only shall be payable subject to the terms
of item (iv) above.
(c) Any payment required to be made pursuant to Section 8.5(b) shall
be made to Purchaser not later than three business days after delivery to the
Company of notice of demand for payment and shall be made by wire transfer of
immediately available funds to an account designated by the Purchaser in the
notice of demand for payment delivered pursuant to this Section 8.5(c).
(d) The payouts, if any, made pursuant to Section 8.5(b) shall not be
deemed to be liquidated damages, and the right to the payment of such amount
shall be in addition to (and not a maximum payment in respect of) any other
damages or remedies at law or in equity to
40
<PAGE>
which Purchaser or Merger Sub may be entitled as a result of the Company's
violation or breach of any term of provision of this Agreement.
ARTICLE IX
THE OFFER
SECTION 9.1 Tender Offer.
------------
(a) As promptly as reasonably practicable after the date hereof, but
in no event later than five business days after the public announcement of the
execution of this Agreement, Purchaser or Merger Sub will commence the Offer for
all of the outstanding Shares at a price of not less than $15.50 per Share in
cash, net to the seller, subject to the conditions set forth in Exhibit A, and,
subject only to the terms and conditions of the Offer, will pay, as promptly as
reasonably practicable after expiration of the Offer, for all Shares duly
tendered and not withdrawn. Purchaser expressly reserves the right to waive any
such condition, to increase the price per Share payable in the Offer, and to
make any other changes in the terms and conditions of the Offer; provided,
--------
however, that no change may be made which decreases the price per Share payable
- -------
in the Offer, which reduces the maximum number of Shares to be purchased in the
Offer, which imposes conditions to the Offer other than those set forth in
Exhibit A hereto or which extends the Offer (except as set forth in the
following sentence). Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, (i) extend the Offer beyond the scheduled expiration
date (the initial scheduled expiration date being 20 business days following the
commencement of the Offer) if, at the scheduled expiration date of the Offer,
any of the conditions to Purchaser's obligation to accept for payment, and to
pay for, the Shares, shall not be satisfied or waived, (ii) extend the Offer for
any period required by any rule, regulation or interpretation of the SEC or the
staff thereof applicable to the Offer, or (iii) extend the Offer for an
aggregate period of not more than 10 business days beyond the latest applicable
date that would otherwise be permitted under clause (i) or (ii) of this
sentence, if as of such date, all of the conditions to Purchaser's obligations
to accept for payment, and to pay for, the Shares are satisfied or waived, but
the number of Shares validly tendered and not withdrawn pursuant to the Offer is
less than 90 percent, of the outstanding Shares on a fully diluted basis.
(b) The Company hereby consents to the Offer and represents that the
Board of Directors of the Company has unanimously determined that the Offer is
fair to the holders of the Shares and the Merger is in the best interests of the
Company and the stockholders of the Company, approved the making of the Offer
and resolved to recommend acceptance of the Offer by the holders of the Shares
and approval of the Merger by the Company's stockholders. The Company's Board
of Directors shall recommend, in accordance with the provisions of Section
6.1(b) hereof, to its stockholders in a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") to be filed with the SEC as soon as
practicable on the day the Offer is commenced. Purchaser agrees, as to the
Offer to Purchase and related Letter of
41
<PAGE>
Transmittal (which together constitute the "Offer Documents") and the Company
agrees, as to the Schedule 14D-9, that such documents shall, in all material
respects, comply with the requirements of the Exchange Act and other applicable
laws. The Company and its counsel, as to the Offer Documents, and the Purchaser
and its counsel, as to the Schedule 14D- 9, shall be given an opportunity to
review such documents prior to their being filed with the SEC. Neither Purchaser
nor the Company shall file any of such documents with the SEC without the
approval of the other party (which shall not be unreasonably withheld).
(c) In connection with the Offer, the Company will cause the transfer
agent for the Company Common Stock to furnish promptly to Merger Sub a list, as
of a recent date, of the record holders of shares and their addresses, as well
as mailing labels containing the names and addresses of all record holders of
Shares and lists of security positions of Shares held in stock depositories.
The Company will furnish Merger Sub with such additional information (including,
without limitation, updated lists of holders of Shares and their addresses,
mailing labels and lists of security positions) and such other assistance as
Purchaser or Merger Sub or their agents may reasonably request in communicating
the Offer to the record and beneficial holders of Shares.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
The representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time or
upon the termination of this Agreement pursuant to Section 8.1, as the case may
be, except that the agreements set forth in Articles I (but only to the extent
that such expressly relates to actions to be taken after the Effective Time) and
II (but only to the extent that such expressly relates to actions to be taken
after the Effective Time) and Section 6.4 and Article X shall survive the
Effective Time and those set forth in Section 6.2(b), Section 8.2, Section 8.5
and Article X shall survive termination.
SECTION 10.2 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person, by
facsimile transmission, by registered or certified mail (postage prepaid, return
receipt requested) or courier service providing proof of delivery to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.2):
42
<PAGE>
If to Purchaser or Merger Sub: Gateway 2000, Inc.
610 Gateway Drive
North Sioux City, South Dakota 57049
Attention: William M. Elliott, Esq.
Facsimile No.: (605) 232-2612
with a copy to: Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
Attention: Barry L. Dastin, Esq.
Facsimile No.: (310) 788-1200
If to the Company: Advanced Logic Research, Inc.
9401 Jeronimo Road
Irvine, California 92718
Attention: Gene Lu
Facsimile No.: (714) 581-9240
with copies to: Brobeck, Phleger & Harrison LLP
4675 MacArthur Court, Suite 1000
Newport Beach, California 92600-1846
Attention: Bruce R. Hallett, Esq.
Facsimile No.: (714) 752-7522
and
Brobeck, Phleger & Harrison LLP
Spear Street Tower
One Market
San Francisco, California 94105
Attention: Steve L. Camahort, Esq.
Facsimile No.: (415) 442-1010
SECTION 10.3 Certain Definitions. For purposes of this Agreement, the
-------------------
term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or
43
<PAGE>
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or within sixty days of the date of such
determination), pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange rights, warrants or options or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned, directly or indirectly, by
any other persons with whom such person or any of its affiliates or associates
or person with whom such person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any Shares;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
authorized or obligated to be closed in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "knowledge" or "known" means, with respect to any matter in
question, if any of the officers of the Company or Purchaser, as the case may
be, has actual knowledge of such matter; and
(f) "person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
SECTION 10.4 Severability. If any term or other provision of this
------------
Agreement is or is deemed invalid, illegal or incapable of being enforced by any
rule of Law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Transactions is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the Transactions be consummated as originally contemplated
to the fullest extent possible.
SECTION 10.5 Assignment; Binding Effect; Benefit. Neither this Agreement
-----------------------------------
nor any of the rights or interests hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to
44
<PAGE>
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Section 6.4 (the "Third Party Provisions"), nothing in this
Agreement, expressed or implied, including, without limitation, the provisions
of Section 6.12, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third Party
Provisions in Section 6.4 may be enforced by any of the beneficiaries thereof.
SECTION 10.6 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.7 Governing Law.
-------------
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
(b) Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
----- --- ----------
venue therein); provided, however, that such consent to jurisdiction is solely
-------- -------
for the purpose referred to in this subsection (b) and shall not be deemed to be
a general submission to the jurisdiction of such court or in the State of
Delaware other than for such purposes.
SECTION 10.8 Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.9 Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same instrument.
SECTION 10.10 Waiver of Jury Trial. EACH OF PURCHASER, THE COMPANY AND
--------------------
MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS
45
<PAGE>
AGREEMENT OR THE ACTIONS OF PURCHASER, THE COMPANY OR MERGER SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
SECTION 10.11 Entire Agreement; Modification. This Agreement and the
------------------------------
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
SECTION 10.12 Mutual Drafting. Each party hereto has participated in the
---------------
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 10.13 No Waivers. The failure of any party hereto to exercise any
----------
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon strict compliance by any
other party hereto with its obligations hereunder, and any custom or practice of
the parties at variance with the terms hereof, shall not constitute a wavier by
such party of its rights to exercise any such or other right, power or remedy or
to demand such compliance.
46
<PAGE>
IN WITNESS WHEREOF, Purchaser, Merger Sub and the Company have caused this
Agreement to be executed as of the date first above written by their respective
officers thereunto.
GATEWAY 2000, INC.
By: /s/ William M. Elliott
-------------------------------
Name: William M. Elliott
Title: Senior Vice President
DEUCE ACQUISITION CORPORATION
By: /s/ Stephen P. Johns
-------------------------------
Name: Stephen P. Johns
Title: President
ADVANCED LOGIC RESEARCH, INC.
By: /s/ Gene Lu
-------------------------------
Name: Gene Lu
Title: CEO
47
<PAGE>
SCHEDULE I
STOCKHOLDERS
<TABLE>
<CAPTION>
Name Number of Shares Vested Options
- ---- ---------------- --------------
<S> <C> <C>
Wearnes Technology 4,780,549 -0-
(Private) Limited
Eugene Lu 410,000 85,594
Chun Win Wong 30,000 20,000
Philip A. Harding 25,704 20,000
</TABLE>
I-i
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser or the Merger
Sub, as applicable, shall not be required to accept for payment or pay for any
Shares tendered, and may terminate or amend the Offer (subject to the provisions
of the Merger Agreement) and may postpone the acceptance of, and payment for,
subject to Rule 14e-1(c) of the Exchange Act, any Shares tendered, if:
(i) the Minimum Condition (as defined below) shall not have been
satisfied,
(ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer, or
(iii) at any time on or after the date of this Agreement, and prior to the
acceptance for payment of Shares, any of the following conditions shall exist:
(a) there shall have been instituted by any government or Governmental
Authority, any action or proceeding before any Governmental Authority (including
such Governmental Authority instituting or initiating such action or
proceeding), (i) challenging or seeking to make illegal, materially delay or
otherwise directly or indirectly restrain or prohibit the making of the Offer,
the acceptance for payment of, or payment for, any Shares by Purchaser, Merger
Sub or any other affiliate of Purchaser, or the consummation of any other
Transaction, or seeking to obtain material damages in connection with any
Transaction; (ii) seeking to prohibit or limit materially the ownership or
operation by the Company, Purchaser or any of their respective Subsidiaries of
all or any material portion of the business or assets of the Company, Purchaser
or any of their respective Subsidiaries, or to compel the Company, Purchaser or
any of their respective Subsidiaries to dispose of or to hold separate all or
any material portion of the business or assets of the Company, Purchaser or any
of their respective Subsidiaries, as a result of the Transactions; (iii) seeking
to impose or confirm limitations on the ability of Purchaser, Merger Sub or any
other affiliate of Purchaser to exercise effectively full rights of ownership of
any Shares, including, without limitation, the right to vote any Shares acquired
by Merger Sub pursuant to the Offer or otherwise on all matters properly
presented to the Company's stockholders, including, without limitation, the
approval and adoption of this Agreement and the Transactions; (iv) seeking to
require divestiture by Purchaser, Merger Sub or any other affiliate of Purchaser
of any Shares; or (v) which otherwise has a Company Material Adverse Effect or
which relates to the Transactions and has a Purchaser Material Adverse Effect;
(b) there shall have been any action taken, or any Law enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Purchaser, the Company or any Subsidiary or affiliate of Purchaser or the
Company or (ii) any Transaction, by any
A-1
<PAGE>
government or Governmental Authority other than the routine application of the
waiting period provisions of the HSR Act to the Offer or the Merger, which is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Company Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE or the NASDAQ/NMS
(excluding any coordinated trading halt triggered solely as a result of a
specified decrease in a market index), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) any limitation (whether or not mandatory) by any government or
Governmental Authority of the United States on the extension of credit by banks
or other lending institutions or (iv) a commencement of a war or material armed
hostilities or other national or international calamity involving the United
States;
(e) the Company or any of its Subsidiaries shall have sustained a loss
or interference with its business by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which constitutes
a Company Material Adverse Effect, whether or not said loss shall have been
insured, which will, in the reasonable opinion of Purchaser, make it inadvisable
or impractical to proceed with the Offer.
(f) (i) it shall have been publicly disclosed or Purchaser or Merger
Sub shall have otherwise learned that beneficial ownership of 20% or more of the
then outstanding Shares has been acquired by any person, other than Purchaser or
any of its affiliates or any other person not required to file a Schedule 13D
under the rules promulgated under the Exchange Act or (ii) (A) the Board of
Directors of the Company or any committee thereof shall have withdrawn, modified
or changed in a manner adverse to Purchaser or Merger Sub the approval or
recommendation of the Offer, the Merger or the Agreement, or approved or
recommended any Competing Transaction or any other acquisition of Shares other
than the Offer or the Merger or (B) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(g) the representations and warranties of the Company shall not be
true and correct as of the date of this Agreement or as of the expiration of the
Offer except for (i) changes specifically contemplated by this Agreement and
(ii) those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such date) and in
each case except in where failure to be so true and correct would not have a
Company Material Adverse Effect (other than representations and warranties that
are already so qualified or that are qualified as to the prevention or delay of
the consummation of any of the Transactions or as to the performance by the
Company of its obligations under this Agreement, which in each such case shall
be true and correct as written);
A-2
<PAGE>
(h) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant of the Company to be performed or complied
with by it under the Agreement unless all such failures together in their
entirety, would not, individually or in the aggregate, have a Company Material
Adverse Effect;
(i) the Agreement shall have been terminated in accordance with its
terms; or
(j) Purchaser and the Company shall have agreed that Purchaser or
Merger Sub, as applicable, shall terminate the Offer or postpone the acceptance
for payment of or payment for Shares thereunder.
For purposes hereof, the term "Minimum Condition" shall mean a majority of
the Shares outstanding on a fully diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested and unvested stock
options, and conversion of convertible securities or other rights to purchase or
acquire Shares) being validly tendered and not withdrawn prior to the expiration
of the Offer.
The foregoing conditions are for the sole benefit of Purchaser and Merger
Sub and may be asserted by Purchaser or Merger Sub regardless of the
circumstances giving rise to any such condition or may be waived by Purchaser or
Merger Sub in whole or in part at any time and from time to time in their sole
discretion, subject in each case to the terms of the Agreement. The failure by
Purchaser or Merger Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right; the waiver of any such right
with respect to particular facts and other circumstances shall not be deemed a
waiver with respect to any other facts and circumstances; and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
A-3
<PAGE>
EXHIBIT B
KEY EMPLOYEES
Gene Y. Lu
David L. Kelly
Donald E. Kullgren
Visish Sangveraphunsir
Ronald J. Sipkovich
Toan Q. Luu
Benedict R. Marchak
Genevieve Ortegon
Vikram S. Sial
B-1
<PAGE>
EXHIBIT(C)(2)
STOCKHOLDERS AGREEMENT, dated as of June 19, 1997, among Gateway 2000,
Inc., a Delaware corporation ("Purchaser"), Deuce Acquisition Corporation, a
Delaware corporation ("Merger Sub"), and Wearnes Technology (Private) Limited,
Eugene Lu, Chun Win Wong and Philip A. Harding (each, a "Stockholder").
WHEREAS, Purchaser and Merger Sub propose to enter into simultaneously
herewith an Agreement and Plan of Merger, dated as of the date hereof (as
amended from time to time, the "Merger Agreement"; capitalized terms used but
not defined herein shall have the meanings set forth in the Merger Agreement,
whether or not such Merger Agreement shall be in effect from time to time), with
Advanced Logic Research, Inc., a Delaware corporation (the "Company"), which
contemplates, among other things, that Purchaser or Merger Sub will commence a
tender offer (as modified from time to time as permitted by the Merger
Agreement, the "Offer") for all of the outstanding shares of common stock, $.01
par value, of the Company ("Company Common Stock"); and that Merger Sub will
merge with the Company pursuant to the merger contemplated by the Merger
Agreement (the "Merger");
WHEREAS, as of the date hereof, each Stockholder owns (either beneficially
or of record) the number shares of Company Common Stock set forth opposite such
Stockholder's name on Exhibit A hereto (all such shares owned by the
Stockholders and any shares hereafter acquired by the Stockholders prior to the
termination of this Agreement being referred to herein as the "Shares"); and
WHEREAS, as a condition to the willingness of Purchaser to enter into the
Merger Agreement, Purchaser has requested that each Stockholder agree, and in
order to induce Purchaser to enter into the Merger Agreement, each Stockholder
has agreed, severally and not jointly, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
OPTION
SECTION 1.1 Grant of Options. Each Stockholder hereby grants to Purchaser
----------------
an irrevocable option (each, an "Option") to purchase, subject to the terms and
conditions described herein, such Stockholder's Shares at a price per Share
equal to $15.50 (the "Purchase Price"). Each Stockholder agrees to (i) deliver
one or more certificates evidencing all of the Shares owned (either beneficially
or of record) as of the date hereof (together with any replacement certificates
or certificates reflecting additional Shares hereafter acquired, the "Share
Certificates") to Purchaser for placement of an appropriate legend reflecting
this Agreement; (ii)
<PAGE>
keep the Share Certificates at all other times during the term of this Agreement
prior to exercise of the Option to purchase such Shares in the safekeeping of
the Depositary for the Offer; and (iii) obtain the agreement of the Depositary
in form acceptable to Purchaser to notify Purchaser five business days prior to
the date such Share Certificates are to be removed from Depositary's
safekeeping.
SECTION 1.2 Exercise of Option.
------------------
(a) The Purchaser may exercise any or all of the Options in whole or in
part at any time and from time to time that is both (x) after termination of the
Merger Agreement pursuant to Section 8.1(c), 8.1(d) (relating to a breach of
Section 6.1(b) or Section 6.3) or Section 8.1(f) or if the Purchaser shall
terminate the Offer because the Minimum Condition is not satisfied and at or
prior to such time the Company has received one or more proposals for a
Competing Transaction which at the time of such occurrence has not been
absolutely and unconditionally withdrawn or abandoned and (y) before termination
of this Agreement. In the event Purchaser wishes to exercise an Option,
Purchaser shall send a written notice to each Stockholder whose Shares are being
purchased (each a "Selling Stockholder") specifying the place, date and time for
the closing of such purchase (each an "Option Closing"). Purchaser's obligation
to purchase the Shares upon any exercise of any Option shall be subject to (i)
each of the representations and warranties of the Selling Stockholder contained
in this Agreement was when made on the date of this Agreement true and correct
and is true and correct as of the time of the Option Closing as though made on
and as of the time of the Option Closing, (ii) the Selling Stockholder shall
have performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Option
Closing, (iii) the expiration or termination of any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and (iv) no Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order or
Order that is then in effect and has the effect of prohibiting the purchase of
the Shares. Upon request of Purchaser, each Stockholder shall promptly take, or
cause to be taken, after the date hereof, all action required to effect all
necessary filings by such Stockholder under the HSR Act and shall cooperate with
the Purchaser with respect to its filing obligations.
(b) At any Option Closing, each Selling Stockholder will deliver to
Purchaser a certificate as to the satisfaction of conditions (i), (ii) and (iv)
of the penultimate sentence of Section 1.2(a), and Purchaser will deliver to
such Selling Stockholder a certificate of an officer of Purchaser certifying the
truth and correctness of Purchaser's representations and warranties contained in
this Agreement as if made on the date of the Option Closing.
SECTION 1.3 Purchase of Shares.
------------------
(a) At any Option Closing, (i) Purchaser shall pay the aggregate Purchase
Price for the Shares then being purchased from each Selling Stockholder by
certified or cashier's check or
2
<PAGE>
wire transfer, as determined solely by Purchaser, and (ii) each Selling
Stockholder shall deliver, or cause to be delivered, to Purchaser one or more
Share Certificates evidencing such Stockholder's Shares then being sold, and
such Stockholder agrees that such Shares shall be transferred free and clear of
all Encumbrances (as defined in Section 7.1(c) below). All such Share
Certificates shall be duly endorsed in blank, or with appropriate stock powers,
duly executed in blank, attached thereto, in proper form for transfer, with the
signature of such Selling Stockholder thereon guaranteed, and with all
applicable taxes paid (including any tax stamps attached).
(b) If Purchaser shall exercise any Option pursuant to this Agreement, and
without additional consideration, each Selling Stockholder shall execute and
deliver further transfers, assignments, endorsements, consents and other
instruments as Purchaser may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement and the Merger
Agreement, including the transfer of any and all of such Selling Stockholder's
Shares sold to Purchaser and the release of any and all Encumbrances covering
such Shares.
SECTION 1.4 Certain Option Adjustments. In the event of any dividend or
--------------------------
distribution on the Company Common Stock or any change in the issued and
outstanding shares of Company Common Stock by reason of any stock dividend,
split-up, combination, recapitalization, merger or other change in the corporate
or capital structure of the Company, Purchaser shall be entitled to receive,
upon exercise of the Option and upon payment of the Purchase Price, the stock or
other securities, cash or property which each Selling Stockholder received
(which consideration shall be escrowed with the Depositary during the term of
this Agreement on terms satisfactory to Purchaser) or is entitled to receive as
a consequence of such dividend, distribution or change.
SECTION 1.5 Termination. This Agreement shall terminate upon the earlier
-----------
of (i) the effective time of the Merger, (ii) the date three months after
termination of the Merger Agreement or October 15, 1997, if later, and (iii)
the termination of the Merger Agreement by the Company solely in accordance with
the provisions of Sections 8.1(a), (e) or (g) of the Merger Agreement and is not
then terminable pursuant to any other provision of Section 8.1 of the Merger
Agreement (the "Termination Date"). In the event of the termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of either Purchaser or any Stockholder under this
Agreement; provided the foregoing provisions shall not limit the liability of
any party for breach of this Agreement prior to such termination.
ARTICLE II
VOTING AGREEMENT
SECTION 2.1 Voting Agreement. Each Stockholder hereby agrees that, at any
----------------
meeting of the stockholders of the Company, however called, or in connection
with any written consent of the holders of shares of Company Common Stock, the
Stockholder shall vote the Shares (a) in
3
<PAGE>
favor of the approval and adoption of the Merger Agreement, the Merger and all
the transactions contemplated by the Merger Agreement and this Agreement and any
other actions required in furtherance thereof and hereof and (b) against any
Competing Transaction and any actions in furtherance thereof for a period ending
three months after the termination of the Merger Agreement or October 15, 1997,
if later.
SECTION 2.2 Irrevocable Proxy. Each Stockholder hereby irrevocably
-----------------
constitutes and appoints Purchaser and its officers, and each of them, as its
attorney and proxy pursuant to the provisions of Section 212(c) of the Delaware
General Corporation Law ("DGCL"), with full power of substitution, to vote and
otherwise act (by written consent or otherwise) with respect to the Shares which
such Stockholder is entitled to vote at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned or postponed
meeting) or consent in lieu of any such meeting or otherwise, on, and only on,
the matters described in Section 2.1 and to execute and deliver any and all
consents, instruments or other agreements or documents in order to take any and
all such actions in connection with or in furtherance of the obligations of such
Stockholder set forth in this Agreement and each of the transactions
contemplated by this Agreement or the Merger Agreement. THIS PROXY AND POWER OF
ATTORNEY IS IRREVOCABLE, SUBJECT TO SECTION 1.5, AND COUPLED WITH AN INTEREST.
Each Stockholder hereby revokes all other proxies and powers of attorney with
respect to such Stockholder's Shares that it may have heretofore appointed or
granted, and no subsequent proxy or power of attorney shall be given or written
consent executed (and if given or executed, shall not be effective) by such
Stockholder with respect thereto. All authority herein conferred or agreed to
be conferred shall survive the death or incapacity of a Stockholder and any
obligation of such Stockholder under this Agreement shall be binding upon the
heirs, personal representatives, successors and assigns of such Stockholder.
ARTICLE III
AGREEMENT TO TENDER
SECTION 3.1 Agreement to Tender. Each Stockholder hereby agrees that,
-------------------
if Purchaser or Merger Sub commences the Offer, such Stockholder will tender, or
cause to be tendered, all of the Shares then beneficially owned by such
Stockholder to Purchaser or Merger Sub, as applicable, as soon as practicable
(and in any event within five business days) after the commencement of the Offer
in accordance with the terms and conditions of the Offer. Each Stockholder
further agrees that it will not withdraw such tendered Shares unless the Offer
is terminated by Purchaser or Merger Sub, as applicable. Each Stockholder will
be entitled, upon consummation of the Offer subject to and in accordance with
the Offer's terms and conditions, to receive an amount equal to the Merger
Consideration with respect to its tendered Shares.
4
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of the Stockholders. Each
--------------------------------------------------
Stockholder, severally and not jointly, represents and warrants to each of
Purchaser and Merger Sub as follows:
(a) Such Stockholder (if it is a corporation, partnership or other legal
entity) is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization. Such Stockholder has
the requisite power and authority (whether corporate or otherwise) to enter into
and deliver this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by and no other
proceedings on the part of such Stockholder are necessary to authorize this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such Stockholder and, assuming
its due authorization, execution and delivery by Purchaser, is a legal, valid
and binding obligation of such Stockholder, enforceable against such Stockholder
in accordance with its terms.
(b) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder will not, (i)
conflict with or violate the Certificate of Incorporation or By-laws or similar
organizational document of such Stockholder (in the case of Stockholder that is
a corporation, partnership or other legal entity), (ii) conflict with or violate
any federal, state, local or foreign law, statute, ordinance, rule, regulation,
permit, injunction, writ, judgment, decree or order (collectively, "Laws") of
any Governmental Authority applicable to such Stockholder or by which any of
its assets are bound (subject to the required consents referenced in Section
4.1(c)), or (iii) conflict with, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of any
Encumbrance on any of the assets of such Stockholder pursuant to, any contract
or other instrument to which such Stockholder is a party or by which such
Stockholder or (if such Stockholder purports to be a corporation) any of its
subsidiaries or any of their respective assets are bound, except for any thereof
that could not reasonably be expected to impair the ability of such Stockholder
to perform its obligations hereunder and except for any Encumbrances created
hereby.
(c) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder will not, require
such Stockholder to obtain any consent, approval, authorization or permit of, or
to make any filing with or notification to, any Governmental Authority based on
any Laws of any Governmental Authority, except (i) the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the
5
<PAGE>
Securities and Exchange Commission (the "SEC") thereunder (collectively, the
"Exchange Act"), and the HSR Act; and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, could not reasonably be expected to impair the ability of such
Stockholder to perform its obligations hereunder.
(d) There is no suit, action, investigation or proceeding pending or, to
the knowledge of such Stockholder, threatened against such Stockholder at law or
in equity before or by any Governmental Authority that could reasonably be
expected to impair the ability of such Stockholder to perform its obligations
hereunder, and there is no judgment, decree, injunction, rule, order or writ of
any Governmental Authority to which such Stockholder or its assets are subject
that could reasonably be expected to impair the ability of such Stockholder to
perform its obligations hereunder.
(e) Such Stockholder owns beneficially and of record the shares of Company
Common Stock set forth opposite such Stockholder's name on Exhibit A hereto
(with respect to such Stockholder, the "Existing Shares"). The Existing Shares
constitute all the shares of Company Common Stock owned beneficially and of
record by such Stockholder. Such Stockholder has sole voting power, sole power
of disposition and all other stockholder rights with respect to all of its
Existing Shares, with no restrictions, other than restrictions on disposition
pursuant to applicable securities laws, on such Stockholder's rights of voting
or disposition pertaining thereto. Such Stockholder has good and valid title to
all its Existing Shares, free and clear of all Encumbrances (other than any
Encumbrances created hereby) and, when delivered by such Stockholder to
Purchaser upon exercise of the Option, good and valid title in and to such
Existing Shares will be transferred to the Purchaser free and clear of all
Encumbrances.
SECTION 4.2 Representations and Warranties of Purchaser. Purchaser
-------------------------------------------
represents and warrants to each Stockholder as follows:
(a) Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Purchaser has the requisite
corporate power and authority to enter into and deliver this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by Purchaser and no other proceedings on the part of Purchaser
are necessary to authorize this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and, assuming its due authorization, execution and
delivery by each Stockholder, is a legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms.
(b) The execution and delivery of this Agreement by Purchaser do not, and
the performance of this Agreement by Purchaser will not, (i) conflict with or
violate the Certificate
6
<PAGE>
of Incorporation or By-laws of Purchaser, (ii) conflict with or violate any Laws
of any Governmental Authority applicable to Purchaser or by which any of its
assets are bound (subject to the required consents referenced in Section
4.2(c)), or (iii) conflict with, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of any
Encumbrance on any of the assets of Purchaser pursuant to any contract or other
instrument to which Purchaser is a party or by which Purchaser or any of its
assets are bound, except for any thereof that could not reasonably be expected
to impair the ability of Purchaser to perform its obligations hereunder.
(c) The execution and deliver of this Agreement by Purchaser do not, and
the performance of this Agreement by Purchaser will not, require Purchaser to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Authority based on any Laws of any
Governmental Authority, except (i) the Exchange Act and the HSR Act; and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, could not reasonably be expected to
impair the ability of Purchaser to perform its obligations hereunder.
ARTICLE V
COVENANTS OF THE STOCKHOLDER
SECTION 5.1 "No Shop". Each Stockholder shall immediately cease and cause
-------
to be terminated all existing discussions or negotiations relating to a
Competing Transaction, other than with respect to the Transactions, with any
parties conducted heretofore. Each Stockholder will not, directly or
indirectly, and will instruct its Representatives not to, directly or
indirectly, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction, or enter into or maintain
discussions or negotiate with any person in furtherance of or relating to such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of its Representatives to take
any such action. Each Stockholder shall use its best efforts to cause its
Representatives not to take any such action, each Stockholder shall promptly
notify Purchaser if any such inquiries or proposals are made regarding a
Competing Transaction, and each Stockholder shall promptly inform Purchaser as
to the material details of any such inquiry or proposal and, if in writing,
promptly deliver or cause to be delivered to Purchaser a copy of such inquiry or
proposal. Each Stockholder shall keep Purchaser informed, on a current basis,
of the details of any such inquiries and the status and terms of any such
proposals. Anything in this Section 5.1 to the contrary notwithstanding, nothing
in this Section 5.1 shall limit in any way a Stockholder who is a director of
the Company from exercising any of his rights or performing any of his duties as
a director of the Company.
7
<PAGE>
SECTION 5.2 Restriction on Transfer. Until and unless this Agreement has
-----------------------
been terminated, each Stockholder shall not except as expressly provided for in
this Agreement (a) sell, exchange, pledge, encumber or otherwise transfer or
dispose of, or agree to sell, exchange, pledge, encumber or otherwise transfer
or dispose of, any its Shares, or any interest therein, (b) deposit its Shares
into a voting trust or enter into voting agreement or arrangement with respect
to such Shares or grant any proxy with respect thereto or (c) enter into any
agreement, arrangement, understanding, or undertaking to do any of the
foregoing. Until and unless this Agreement has been terminated, the Share
Certificates shall remain in the sole custody and possession of Depositary
except for any delivery of possession contemplated by Article I or Article III
hereof.
SECTION 5.3 Further Assurances. Each Stockholder agrees to use its
------------------
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by this Agreement. If any further action is necessary or desirable to carry out
the purposes of this Agreement, such Stockholder shall use its reasonable best
efforts to take, or cause to be taken, all such action as promptly as
practicable.
ARTICLE VI
SURVIVAL
SECTION 6.1 Survival. All provisions of this Agreement shall survive any
--------
termination of the Merger Agreement and shall remain in full force and effect,
except as otherwise provided in Sections 1.5 or 6.2.
SECTION 6.2 Effect of Termination. In the event that any part of this
---------------------
Agreement shall terminate pursuant to this Article VI, such part of this
Agreement shall thereafter be void and the parties hereto shall have no further
rights or obligations with respect thereto, except as a result of any prior
breach thereof.
ARTICLE VII
DEFINITIONS
SECTION 7.1 Definitions. For the purpose of this Agreement:
-----------
(a) "beneficially own" or "beneficial ownership" with respect to any
---------------- --------------------
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing, subject
to any fiduciary duty in the case of securities not held of record.
8
<PAGE>
(b) "person" shall mean any individual, corporation, partnership,
------
limited liability company, limited liability partnership, joint venture,
association, trust, unincorporated organization or other entity.
(c) "Encumbrance" means any pledge, security interest, lien, claim,
-----------
encumbrance, mortgage, charge, hypothecation, option, right of first refusal or
offer, community property right, other marital right, preemptive right, voting
agreement, voting trust, proxy, power of attorney, escrow, option, forfeiture,
penalty, action at law or in equity, security agreement, stockholder agreement
or other agreement, arrangement, contract, commitment, understanding or
obligation, or any other restriction, qualification or limitation on the use,
transfer, right to vote, right to dissent and seek appraisal, receipt of income
or other exercise of any attribute of ownership.
ARTICLE VII
MISCELLANEOUS
SECTION 8.1 Severability. If any term or other provision of this
------------
Agreement is or is deemed to be invalid, illegal or incapable of being enforced
by any applicable rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner so that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
SECTION 8.2 Entire Agreement. This Agreement constitutes the entire
----------------
understanding between Purchaser, Merger Sub and each Stockholder with respect
to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, between Purchaser, Merger Sub and each
Stockholder with respect to the subject matter hereof and thereof.
SECTION 8.3 Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same instrument.
SECTION 8.4 Mutual Drafting. Each party hereto has participated in the
---------------
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
9
<PAGE>
SECTION 8.5 Assignment. This Agreement shall not be assigned by operation
----------
of law or otherwise without the prior written consent of the other parties
hereto, provided that Purchaser may assign its rights hereunder to any direct or
indirect wholly owned subsidiary of Purchaser, but no such assignment shall
relieve Purchaser of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 8.6 Amendments. This Agreement may not be amended, supplemented,
----------
waived or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by the parties hereto.
SECTION 8.7 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person, facsimile
transmission, registered or certified mail (postage prepaid, return receipt
requested), or courier service providing proof of delivery to the respective
parties at the following addresses (or to such other address for a party as
shall be specified in a notice given in accordance with this Section 8.7).
If to Purchaser or Merger Sub:
Gateway 2000, Inc.
610 Gateway Drive
North Sioux City, South Dakota 57049
Attention: William M. Elliott, Esq.
Facsimile No.: (605) 232-2612
with copies to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Suite 1600
Los Angeles, California 90067
Attention: Barry L. Dastin, Esq.
Fax: (310) 788-1200
If to any Stockholder:
To the address of such Stockholder
on the books and records of the Company
10
<PAGE>
with copies to:
Brobeck, Phleger & Harrison LLP
4675 MacArthur Court, Suite 1000
Newport Beach, California 92600-1846
Attention: Bruce R. Hallett, Esq.
Facsimile No.: (714) 752-7522
and
Brobeck, Phleger & Harrison LLP
Spear Street Tower
One Market
San Francisco, California 94105
Attention: Steve L. Camahort, Esq.
Facsimile No.: (415) 442-1010
SECTION 8.8 No Third Party Beneficiaries. This Agreement is not intended
----------------------------
to be for the benefit of, and shall not be enforceable by, any person or entity
not a party hereto.
SECTION 8.9 Specific Performance. Each of the parties hereto acknowledges
--------------------
that a breach by it of any agreement contained in this Agreement will cause the
other party to sustain damage for which it would not have an adequate remedy at
law for money damages, and therefore each of the parties hereto agrees that in
the event of any such breach the aggrieved party shall be entitled to the remedy
of specific performance of such agreement and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
SECTION 8.1 Remedies Cumulative. All rights, powers and remedies provided
-------------------
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
right, power or remedy by such party.
SECTION 8.1 No Waiver. The failure of any party hereto to exercise any
---------
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon strict compliance by any
other party hereto with its obligations hereunder, and any custom or practice of
the parties at variance with the terms hereof, shall not constitute a waiver by
such party of its rights to exercise any such or other right, power or remedy or
to demand such compliance.
11
<PAGE>
SECTION 8.1 Governing Law.
-------------
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to the principles
of conflicts of law.
(b) Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
----- --- ----------
venue therein); provided, however, that such consent to jurisdiction is solely
-------- -------
for the purpose referred to in this subsection (b) and shall not be deemed to be
a general submission to the jurisdiction of such court or in the State of
Delaware other than for such purposes.
SECTION 8.1 Waiver of Jury Trial. EACH OF PURCHASER, MERGER SUB AND EACH
--------------------
STOCKHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PURCHASER, MERGER
SUB OR ANY STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT THEREOF.
12
<PAGE>
SECTION 8.1 Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, Purchaser, Merger Sub and each Stockholder have caused
this Agreement to be duly executed as of the date first above written.
GATEWAY 2000, INC.
By: /s/ William M. Elliott
------------------------------
Name: William M. Elliott
Title: Senior Vice President
DEUCE ACQUISITION CORPORATION
By: /s/ Stephen P. Johns
------------------------------
Name: Stephen P. Johns
Title: President
WEARNES TECHNOLOGY
(PRIVATE) LIMITED
By: /s/ Chun Win Wong
------------------------------
Name: Chun Win Wong
Title: Chairman
/s/ Eugene Lu
---------------------------------
EUGENE LU
/s/ Chun Win Wong
---------------------------------
CHUN WIN WONG
/s/ Philip A. Harding
---------------------------------
PHILIP A. HARDING
13
<PAGE>
EXHIBIT A
List of Stockholders
<TABLE>
<CAPTION>
Number of Shares of
Advanced Logic Research,
Inc. Common Stock Owned Share
Name of Beneficially and Vested Certificate
Stockholder of Record Options Numbers
- ----------- ----------------------- ------- -----------
<S> <C> <C> <C>
Wearnes 4,780,549 -0-
Technology
(Private) Limited
Eugene Lu 410,000 85,594
Chun Win Wong 30,000 20,000
Philip A. Harding 25,704 20,000
</TABLE>
14
<PAGE>
STOCK OPTION RETENTION BONUS
Purpose: To provide certain executives and key employees of
Advanced Logic Research, Inc. (ALR) an incentive to
stay in the employ of Gateway 2000, Inc. (Company)
following the merger. This arrangement provides for the
making of an Initial Stock Option Grant.
Participants: Eugene Y. Lu Chairman of the Board,
President and Chief
Executive Officer
David L. Kelly VP, Hardware Engineering
Donald E. Kullgren Dir, Manufacturing
Operations
Visish Sangveraphunsiri VP, Enhanced Engineering/
Dir, Asia
Ronald J. Sipkovich CFO and VP, Finance and
Administration
Toan Q. Luu VP, Procurement
Benedict R. Marchak VP, Computer Products
Geneviene Ortegon VP, Marketing
Vikram S. Sial VP and Treasurer
Initial Stock Option: Effective at the merger, a one time stock option grant
under the Company's 1996 Long-Term Incentive Equity
Plan will be given to the Participants per the schedule
below (stock option grants are stated pre-split). The
grant price will be the closing price on the New York
Stock Exchange on the day of the merger. These options
vest 1/3 each year on the anniversary date of the
grant. The Participants will be considered for
additional grants at the Company's discretion in
January 1998 in the normal grant cycle.
Eugene Y. Lu 60,000
David L. Kelly 25,000
Donald E. Kullgren 25,000
Visish Sangveraphunsiri 25,000
Ronald J. Sipkovich 25,000
Toan Q. Luu 10,000
Benedict R. Marchak 10,000
Genevieve Ortegon 10,000
Vikram S. Sial 10,000
Effect of Termination
of Employment: CAUSE: If a Participant is terminated for cause, the
Participant will not be eligible to exercise any stock
options not vested through the last day worked.
VOLUNTARY RESIGNATION. If a Participant voluntarily
resigns, the Participant will be eligible to exercise
any stock options vested through the last day worked.
TERMINATION WITHOUT CAUSE. If a Participant's
employment is terminated by the Company without cause
within the first two years, including a reduction in
base salary by the Company of more than 15% or
involuntary relocation of greater than 26 miles:
. The Initial Stock Option grant will be vested. In
addition, all prior unvested ALR stock option grants
converted to the Company's stock option grants in
1997 will be vested. The Participant will have 90
days to exercise vested stock option grants
following the termination date. If termination is
due to death, disability or approved retirement, the
Participant will have 1 year to exercise vested
stock options following the death, disability or
approved retirement.
. Base Pay
. If Termination is within 12 months following the
merger, the Participant will receive 12 months
payment of base salary. This will be paid on a
month to month basis. If the Participant becomes
employed during this 12 month
1
<PAGE>
period, the balance of the base salary payments
due will be paid in a lump sum within 30 days,
or
. If Termination occurs between the 13th and 24th
month following the Merger, the Participant will
receive 12 months payment of base salary. The
number of months of base salary continuation will
be reduced by 1 month for each month after the
13th that the termination occurs. This will be
paid on a month to month basis. If the
Participant becomes employed during this 12 month
period, the balance of the base salary payments
due will be paid in a lump sum within 30 days.
. All amounts shall be pro-rated in the case of
partial months.
. During this period, the employee and eligible
dependents may continue Medical and Dental coverage
through COBRA. For up to the first 12 months of this
period or until the Participant is eligible to be
covered by another employer's plan, the Participant
will be reimbursed for the difference between the
COBRA rates for the coverage elected and the active
employee rates for the same coverage.
Protective Covenants: As a condition to the payments above, Participants will
agree as follows:
All Participants will agree to sign the Company's
NONCOMPETITION AGREEMENT, the terms of such agreement
shall be reasonably satisfactory to the Participants,
as soon as practicable after the date hereof.
All Participants agree (i) not to disclose any
confidential or proprietary information at any time;
(ii) not to solicit any employee, customer or supplier
of ALR or the Company, while employed by the Company
and for the one year period following termination of
employment, without expressed written permission of the
Company; (iii) to assign all rights in inventions to
the Company; and (iv) to not compete with ALR or the
Company, each as more fully described in the Company's
NONCOMPETITION AGREEMENT.
Breach by a Participant of any of these protective
covenants will result in immediate forfeiture of any
right to future payment covered by this agreement not
yet made.
The Company shall also be entitled to appropriate
equitable relief to enjoin any such breach.
Agreements: Each Participant shall sign one or more agreements
further expanding on the terms above.
Governing Law: Delaware. Nothing in this agreement creates or is
implied to create an employment contract.
<TABLE>
<CAPTION>
GATEWAY 2000, INC. ADVANCED LOGIC RESEARCH, INC.
------------------ -----------------------------
<S> <C> <C> <C>
Name /s/ William M. Elliott Date Name /s/ Eugene Y. Lu Date
--------------------------- --------- --------------------------- ---------
William M. Elliott Eugene Y. Lu
Name /s/ David L. Kelly Date
--------------------------- ---------
David L. Kelly
Name /s/ Donald E. Kullgren Date
--------------------------- ---------
Donald E. Kullgren
Name /s/ Visish Sangveraphunsiri Date
--------------------------- ---------
Visish Sangveraphunsiri
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Name /s/ Ronald J. Sipkovich Date
--------------------------- ---------
Ronald J. Sipkovich
Name /s/ Toan Q. Luu Date
--------------------------- ---------
Toan Q. Luu
Name /s/ Benedict R. Marchak Date
--------------------------- ---------
Benedict R. Marchak
Name /s/ Genevieve Ortegon Date
--------------------------- ---------
Genevieve Ortegon
Name /s/ Vikram S. Sial Date
--------------------------- ---------
Vikram S. Sial
</TABLE>
3
