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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
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MICRONICS COMPUTERS, INC.
(NAME OF SUBJECT COMPANY)
DIAMOND MULTIMEDIA SYSTEMS, INC.
BOARDWALK ACQUISITION CORPORATION
(BIDDERS)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
595127101
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
JEFFREY D. SAPER, ESQ.
HOWARD S. ZEPRUN, ESQ.
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 PAGE MILL ROAD, PALO ALTO, CA 94304
(650) 493-9300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
CALCULATION OF FILING FEE
TRANSACTION VALUATION:* AMOUNT OF FILING FEE:
$33,979,496 $6,796
* For purposes of calculating fee only. This amount is based on a per share
offer price of $2.45, for 13,869,182 shares of common stock. Pursuant to the
Agreement and Plan of Merger, dated as of May 11, 1998, by and among Micronics
Computers, Inc. (the "Company") and Diamond Multimedia Systems, Inc. and
Boardwalk Acquisition Corporation (collectively, the "Bidders"), the Company
represented to the Bidders that, as of such date, it had 12,902,565 shares of
common stock issued and outstanding and 966,617 shares of common stock
reserved for issuance upon exercise of outstanding stock options (excluding
350,627 shares which are subject to purchase upon exercise of options which
have an exercise price equal to or exceeding $2.45 per share). The amount of
the filing fee, calculated in accordance with Rule 0-11 under the Securities
Exchange Act of 1934, as amended, equals 1/50 of one percent of the aggregate
of the cash offered by the Bidder.
[ ] 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: Not applicable
Form or Registration No.: Not applicable
Filing Party: Not applicable
Dated Filed: Not applicable
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This Tender Offer Statement on Schedule 14D-1 relates to the offer by
Boardwalk Acquisition Corporation, a Delaware corporation ("Purchaser"), and a
wholly owned subsidiary of Diamond Multimedia Systems, Inc., a Delaware
corporation ("Parent"), to purchase all of the outstanding shares of Common
Stock, par value $0.01 per share (collectively, the "Shares"), of Micronics
Computers, Inc., a Delaware corporation (the "Company"), at a price of $2.45 per
Share, net to the seller in cash and without interest thereon, on the terms and
subject to the conditions set forth in the Offer to Purchase, dated May 15, 1998
(the "Offer to Purchase"), and the related Letter of Transmittal (the "Letter of
Transmittal," which together with the Offer to Purchase, constitutes the
"Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The subject company is Micronics Computers, Inc., a Delaware
corporation with its principal executive offices located at 45365 Northport Loop
West, Fremont, California 94538.
(b) The information set forth in the Introduction, and Section 1 "Terms of
the Offer," of the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 "Price Range of Shares;
Dividends on the Shares" of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND
(a) through (d), (g) The information set forth in the Introduction, Section
9 "Certain Information Concerning Purchaser," and Annex I of the Offer to
Purchase is incorporated herein by reference.
(e) None of Purchaser, Parent or, to the best knowledge of Purchaser or
Parent, any person listed in Annex I of the Offer to Purchase has, during the
last 5 years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(f) None of Purchaser, Parent or, to the best knowledge of Purchaser or
Parent, any person listed in Annex I of the Offer to Purchase has, during the
last 5 years, 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) and (b) The information set forth in Section 11 "Background of the
Offer" and Section 13 "The Transaction Documents" of the Offer to Purchase are
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) through (c) The information set forth in Section 10 "Source and Amount
of Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS
(a) through (e) The information set forth in Section 12 "Purpose of the
Offer; The Merger; Plans for the Company," Section 13 "The Transaction
Documents," and Section 14 "Dividends and Distributions" of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in the Offer to Purchase is incorporated
herein by reference.
(f) and (g) The information set forth in Section 7 "Effect of Offer on
Nasdaq National Market Listing, Market for Shares and SEC Registration" of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) and (b) The information set forth in Section 9 "Certain Information
Concerning Purchaser and Parent" of the Offer to Purchase is incorporated herein
by reference.
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ITEM 7.CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Introduction, Section 1 "Terms of the
Offer," Section 11 "Background of the Offer," Section 12 "Purpose of the Offer;
The Merger; Plans for the Company," Section 13 "The Transaction Documents,"
Section 14 "Dividends and Distributions" and Section 15 "Certain Conditions to
Purchaser's Obligations" of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in Section 17 "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 9 "Certain Information Concerning
Purchaser and Parent" is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) None or not applicable.
(b) and (c) The information set forth in Section 16 "Certain Regulatory and
Legal Matters" of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 "Effect of Offer on Nasdaq
National Market Listing, Market for Shares and SEC Registration" of the Offer to
Purchase and Section 16 "Certain Regulatory and Legal Matters -- Federal Reserve
Board Regulation" is incorporated herein by reference.
(e) None.
(f) The Offer to Purchase, a copy of which is attached as Exhibit (a)(1)
hereto, and the Letter of Transmittal, a copy of which is attached as Exhibit
(a)(2) hereto, each of which is incorporated in its entirety herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C> <C>
(a)(1) -- Offer to Purchase, dated May 15, 1998.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter from MacKenzie Partners, Inc., as Information Agent,
to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4) -- Letter to Clients from Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) -- Form of Summary Announcement, as published on May 15, 1998.
(a)(8) -- Press Release, as issued by Parent on May 11, 1998.
(b) -- None or not applicable.
(c)(1) -- The Agreement and Plan of Merger, dated as of May 11, 1998,
among Parent, Purchaser and the Company.
(c)(2) -- Mutual Confidentiality Agreement, dated as of April 8, 1998,
between Parent and the Company.
(d) through (f) -- None or not applicable.
</TABLE>
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SIGNATURES
After due inquiry and to the best of the knowledge and belief of each of
the undersigned, each of the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: May 15, 1998
DIAMOND MULTIMEDIA SYSTEMS, INC.
By: /s/ WILLIAM J. SCHROEDER
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Name: William J. Schroeder
Title: President, Chief Executive
Officer
and Chairman of the Board
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
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(a)(1) Offer to Purchase, dated May 15, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Letter from MacKenzie Partners, Inc., as Information Agent,
to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4) Letter to Clients from Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Form of Summary Announcement, as published on May 15, 1998.
(a)(8) Press Release, as issued by Parent on May 11, 1998.
(b) None or not applicable.
(c)(1) The Agreement and Plan of Merger, dated as of May 11, 1998,
among Parent, Purchaser and the Company.
(c)(2) Mutual Confidentiality Agreement, dated as of April 8, 1998,
between Parent and the Company.
(d) through (f) None or not applicable.
</TABLE>
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MICRONICS COMPUTERS, INC.
AT
$2.45 NET PER SHARE
BY
BOARDWALK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
DIAMOND MULTIMEDIA SYSTEMS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 12, 1998, UNLESS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF MICRONICS
COMPUTERS, INC. (THE "COMPANY"), WHICH WOULD REPRESENT, ON A FULLY DILUTED BASIS
AT LEAST FIFTY-ONE PERCENT (51%) OF THE OUTSTANDING SHARES (THE "SHARES"). THE
OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO
PURCHASE. SEE INTRODUCTION AND SECTIONS 1 AND 15 HEREOF.
THIS OFFER (THE "OFFER") IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND
PLAN OF MERGER, DATED AS OF MAY 11, 1998 (THE "MERGER AGREEMENT"), AMONG DIAMOND
MULTIMEDIA SYSTEMS, INC., BOARDWALK ACQUISITION CORPORATION AND THE COMPANY. THE
BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
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IMPORTANT
Any stockholder of the Company desiring to tender Shares should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in accordance
with the instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary
(as defined herein) or follow the procedures for book-entry transfer set forth
in Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any stockholder of the Company who desires to tender Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary, in each case prior
to the expiration of the Offer, must tender such Shares pursuant to the
guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to MacKenzie
Partners, Inc., the Information Agent, at the address and telephone number set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and other related materials may be
obtained from the Information Agent or from brokers, dealers, commercial banks
and trust companies.
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May 15, 1998
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TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
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<C> <S> <C>
Introduction ............................................................ 3
1. Terms of the Offer.......................................... 4
2. Acceptance for Payment and Payment for Shares............... 5
3. Procedure for Tendering Shares.............................. 6
4. Withdrawal Rights........................................... 8
5. Certain Federal Income Tax Consequences..................... 9
6. Price Range of Shares; Dividends on the Shares.............. 10
7. Effect of Offer on Nasdaq National Market Listing, Market
for Shares and SEC Registration........................... 10
8. Certain Information Concerning the Company.................. 11
9. Certain Information Concerning Purchaser and Parent......... 13
10. Source and Amount of Funds.................................. 14
11. Background of the Offer..................................... 14
12. Purpose of the Offer; The Merger; Plans for the Company..... 15
13. The Transaction Documents................................... 17
14. Dividends and Distributions................................. 25
15. Certain Conditions to Purchaser's Obligations............... 25
16. Certain Regulatory and Legal Matters........................ 27
17. Fees and Expenses........................................... 28
18. Miscellaneous............................................... 28
Annex I. Certain Information Concerning the Directors and Executive
Officers of Parent and Purchaser.......................... 29
</TABLE>
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TO THE HOLDERS OF COMMON STOCK OF MICRONICS COMPUTERS, INC.:
INTRODUCTION
Boardwalk Acquisition Corporation, a Delaware corporation ("Purchaser") and
a wholly-owned subsidiary of Diamond Multimedia Systems, Inc., a Delaware
corporation ("Parent"), hereby offers to purchase all of the outstanding shares
of common stock, par value $0.01 per share (collectively, the "Shares"), of
Micronics Computers Inc., a Delaware corporation (the "Company") at a purchase
price of $2.45 per share (such amount, or any greater amount per share paid
pursuant to the Offer, being hereinafter referred to as the "Offer Price"), net
to the seller in cash, without interest thereon, less any required withholding
taxes, upon the terms and subject to the conditions set forth in this Offer to
Purchase and 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, transfer taxes on the purchase of Shares by Purchaser pursuant to
the Offer. Purchaser will pay all charges and expenses of BankBoston, N.A. (the
"Depositary"), and MacKenzie Partners, Inc. (the "Information Agent") for their
respective services in connection with the Offer and the Merger (as hereinafter
defined). See Section 17.
Purchaser is a corporation newly formed by Parent in connection with the
Offer and the transactions contemplated by the Merger Agreement (as hereinafter
defined).
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE BOARD OF DIRECTORS OF THE COMPANY HAS RECEIVED THE OPINION OF ALLIANT
PARTNERS, THE COMPANY'S FINANCIAL ADVISOR ("ALLIANT PARTNERS"), DATED MAY 7,
1998, TO THE EFFECT THAT, AS OF SUCH DATE AND SUBJECT TO THE VARIOUS ASSUMPTIONS
AND LIMITATIONS SET FORTH THEREIN, THE CASH CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR, FROM A
FINANCIAL POINT OF VIEW, TO SUCH HOLDERS. A COPY OF THAT OPINION IS SET FORTH IN
FULL AS AN EXHIBIT TO THE COMPANY'S SOLICITATION/ RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9 WHICH IS BEING MAILED TO THE COMPANY'S STOCKHOLDERS, AND
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED)
SHARES REPRESENTING AT LEAST FIFTY-ONE PERCENT (51%) OF SHARES OUTSTANDING, ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE (INCLUDING SHARES ISSUABLE UPON
EXERCISE OR CONVERSION OF ALL STOCK OPTIONS VESTED OR SCHEDULED TO VEST PRIOR TO
JULY 31, 1998 AND ALL CONVERTIBLE SECURITIES OR OTHER RIGHTS TO PURCHASE OR
ACQUIRE SHARES) (THE "MINIMUM CONDITION"). SEE SECTION 15.
The Company has represented to Parent and Purchaser that, as of May 11,
1998, there were 12,902,565 Shares issued and outstanding and 3,120,084 Shares
reserved for issuance in connection with outstanding stock options (542,749 of
which are estimated to be vested or scheduled to vest as of July 31, 1998).
Based on the foregoing, Purchaser believes that approximately 6,857,111 Shares
must be validly tendered and not withdrawn prior to the expiration of the Offer
in order for the Minimum Condition to be satisfied. See Section 1.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 11, 1998 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser, and further provides that, after the
purchase of Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent. The Merger Agreement is more fully described
in Section 13. The Merger is subject to a number of conditions, including the
approval and adoption of the Merger Agreement by stockholders of the Company if
such approval is required by applicable law. See Section 12. In the Merger, each
outstanding Share shall automatically be canceled and extinguished and each
outstanding Share (other than Shares owned by the Company as treasury stock, by
Parent, or any subsidiary
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thereof, or Shares held by stockholders who perfect their appraisal rights under
Delaware law) will be converted into and represent the right to receive the
Offer Price, without interest thereon.
THIS 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.
This Offer to Purchase contains forward-looking statements that involve
risks and uncertainties, including the risks associated with satisfying the
various conditions to the Offer. Certain of these factors as well as additional
risks and uncertainties, are detailed in the Company's periodic filings with the
Securities and Exchange Commission (the "Commission").
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
extension or amendment), Purchaser will accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00
midnight, New York City time, on Friday, June 12, 1998, unless and until
Purchaser, in accordance with the terms of the Offer and the Merger Agreement,
extends the period of time during which the Offer is open, in which event the
term "Expiration Date" means the latest time and date at which the Offer, as so
extended, expires.
Purchaser has agreed in the Merger Agreement that, without the prior
written approval of the Company, it will not extend the period during which the
Offer is open, except (subject to the Company's right of termination, discussed
under Section 13, "Merger Agreement -- Termination of the Merger Agreement,"
below) (A) as required to comply with any rule, regulation or interpretation of
the Commission, (B) until such time as all such conditions described under
Section 15, "Certain Conditions to Purchaser's Obligations," below, have been
satisfied or waived or (C) only if less than 90% of the outstanding Shares have
been tendered, for one or more times for a total number of days in the aggregate
for any extension in accordance with this clause (C) not to exceed 20 business
days for any reason other than those specified in the immediately preceding
clauses (A) and (B). Subject to the foregoing restrictions, Purchaser reserves
the right (but will not be obligated), in its sole discretion, to extend the
period during which the Offer is open by giving oral or written notice of such
extension to the Depositary and by making a public announcement of such
extension. There can be no assurance that Purchaser will exercise its right to
extend the Offer.
If Purchaser shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and, if at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15. As
described in the Introduction to this Offer to Purchase, Purchaser believes that
in order to satisfy the Minimum Condition, Purchaser must purchase 6,857,111
Shares.
Subject to the applicable rules and regulations of the Commission,
Purchaser expressly reserves the right, in its sole discretion, to delay payment
for any Shares regardless of whether such Shares were theretofore accepted for
payment, or, subject to the limitations set forth in the Merger Agreement, to
terminate the Offer and not accept for payment or pay for any Shares not
theretofore accepted for payment or paid for, upon the occurrence of any of the
conditions set forth in Section 15 by giving oral or written notice of such
delay or termination to the Depositary. Purchaser's right to delay payment for
any Shares or not to pay for any Shares theretofore accepted for payment is
subject to the applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), relating to Purchaser's obligation to pay for or return
tendered Shares promptly after the termination or
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withdrawal of the Offer. Any extension of the period during which the Offer is
open, or delay in acceptance for payment or payment, or termination or amendment
of the Offer, will be followed, as promptly as practicable, by public
announcement thereof, such announcement in the case of an extension to be issued
not later than 9:00 a.m. New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act.
In the Merger Agreement, Purchaser has also agreed that it will not, (1)
reduce the cash price per Share to be paid pursuant to the Offer, (2) reduce the
number of Shares to be purchased pursuant to the Offer, (3) impose additional
conditions to the Offer, (4) extend the Offer beyond 120 days from the
commencement of the Offer without the prior written consent of the Company,
except as contemplated in the Merger Agreement, or (5) otherwise amend any other
material terms of the Offer in a manner that is materially adverse to the
stockholders of the Company.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act or otherwise. The minimum period during which an offer
must remain open following material changes in the terms of the offer or
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the terms or information changes. With
respect to a change in price or a change in percentage of securities sought, a
minimum ten business day period is generally required to allow for adequate
dissemination to stockholders and investor response.
The Company has provided Purchaser with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will be
mailed to record holders of the Shares and will be furnished to brokers,
dealers, commercial banks and similar persons whose names, or the names of whose
nominees, appear on the list of stockholders or, if applicable, who are listed
as participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will purchase, by accepting for payment, and will pay
for, all Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) promptly after the Expiration Date.
Subject to compliance with Rule 14e-1(c) under the Exchange Act, Purchaser
expressly reserves the right to delay payment for Shares in order to comply in
whole or in part with any applicable law. See Sections 1 and 15. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares 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 (collectively, the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3, (ii) a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with all required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message (as defined below) and (iii) any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will
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act as agent for tendering stockholders for the purpose of receiving payment
from Purchaser and transmitting such payment to tendering stockholders. If, for
any reason whatsoever, acceptance for payment of any Shares tendered pursuant to
the Offer is delayed, or Purchaser is unable to accept for payment Shares
tendered pursuant to the Offer, then, without prejudice to Purchaser's rights
under Section 15, the Depositary may, nevertheless, on behalf of Purchaser,
retain tendered Shares, and such Shares may not be withdrawn, except to the
extent that the tendering stockholders are entitled to withdrawal rights as
described in Section 4 below and as otherwise required by Rule 14e-1(c) under
the Exchange Act. Under no circumstances will interest be paid on the purchase
price for Shares by Purchaser by reason of any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer to a Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration
offered to stockholders pursuant to the Offer, such increased consideration will
be paid to all stockholders whose Shares are purchased pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to Parent or to one or more direct or indirect subsidiaries of
Parent, the right to purchase 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.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date. In
addition, either (i) certificates representing such Shares must be received by
the Depositary or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
there must be compliance with the guaranteed delivery procedure set forth below.
No alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each 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's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility, the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
Signature Guarantees. Signatures on the Letter of Transmittal need not be
guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act), by a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States or by any other "Eligible
Guarantor Institution," as defined in Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"), unless the Shares tendered thereby are
tendered (i) by a registered holder of Shares who has completed either the box
entitled
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<PAGE> 7
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) as noted in the following
sentence. If the certificates evidencing Shares are registered in the name of a
person or persons other than the signer of the Letter of Transmittal, or if
payment is to be made or certificates for unpurchased Shares are to be issued to
a person other than the registered owner or owners, then the certificates must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
as provided in the Letter of Transmittal. 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 certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if such
tender complies with all of the following guaranteed delivery procedures:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), and any
required signature guarantees and any other documents required by the
Letter of Transmittal are received by the Depositary within three Nasdaq
National Market trading days after the date of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for the Shares (or a Book-Entry
Confirmation), a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT HE IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 SET FORTH IN THE
LETTER OF TRANSMITTAL.
Determinations of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. Purchaser
reserves the absolute right to reject any or all tenders of any Shares that are
determined by it not to be in proper form or the acceptance of or payment for
which may, in the opinion of Purchaser, be unlawful. Purchaser also reserves the
absolute right to waive any of the conditions of the Offer (other than the
Minimum Condition, as described above) or any defect or irregularity in the
tender of any Shares. Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the Instructions to the
Letter of Transmittal) will be final and binding on all parties. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser, the Depositary, the
Information Agent or any other person will be under any duty to give
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<PAGE> 8
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and any and all other Shares or other securities or rights
issued or issuable in respect of such Shares on or after May 11, 1998). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment is effective when, and only to the extent that, Purchaser
deposits the payment for such Shares. Upon acceptance for payment, all prior
proxies given by the stockholder with respect to such Shares or other securities
or rights will, without further action, be revoked and no subsequent proxies may
be given (and, if given, will not be deemed effective). The designees of
Purchaser will, with respect to the Shares and other securities or rights, be
empowered to exercise all voting and other rights of such stockholder as they in
their sole judgment deem proper in respect of any annual or special meeting of
the Company's stockholders, or any adjournment or postponement thereof, or in
connection with any action 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 and other rights with
respect to such Shares and the other securities or rights, including voting at
any meeting of stockholders then scheduled.
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer as well as the tendering stockholder's representation
and warranty that (a) such stockholder has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 under the Exchange Act and (b)
the tender of such Shares complies with Rule 14e-4. It is a violation of Rule
14e-4 for a person, directly or indirectly, to tender Shares for such person's
own account unless, at the time of tender, the person so tendering (i) has a net
long position equal to or greater than the amount of (x) Shares tendered or (y)
other securities immediately convertible into or exchangeable or exercisable for
the Shares tendered and such person will acquire such Shares for tender by
conversion, exchange or exercise and (ii) will cause such Shares to be delivered
in accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. Purchaser's acceptance for payment of Shares tendered pursuant
to the Offer will constitute a binding agreement between the tendering
stockholder and Purchaser upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after July 13, 1998. If purchase of or payment for Shares is delayed for any
reason or if Purchaser is unable to purchase or pay for Shares for any reason,
then, without prejudice to Purchaser's rights under the Offer, tendered Shares
may be retained by the Depositary on behalf of Purchaser and may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c) under
the Exchange Act which provides that no person who makes a tender offer shall
fail to pay the consideration offered or return the securities deposited by or
on behalf of security holders promptly after the termination or withdrawal of
the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover 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
the name in which the certificates representing such Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
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<PAGE> 9
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. None of
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be returned at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to cash in the Merger (including
pursuant to the exercise of appraisal rights). The discussion applies only to
holders of Shares in whose hands Shares are capital assets, and may not apply to
Shares received pursuant to the exercise of employee stock options or otherwise
as compensation, or to holders of Shares who are in special tax situations (such
as insurance companies, tax-exempt organizations or non-U.S. persons), or to
persons holding Shares as part of a "straddle," "hedge," or "conversion
transaction." This discussion does not address any aspect of state, local or
foreign taxation.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between the holder's adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Merger and the
amount of cash received therefor. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger. Such
gain or loss will be capital gain or loss (other than, with respect to the
exercise of appraisal rights, amounts, if any, which are or are deemed to be
interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be (i) long-term gain or loss if, on the date of sale
(or, if applicable, the date of the Merger), the Shares were held for more than
eighteen months, and (ii) mid-term gain or loss if, on the date of sale (or, if
applicable, the date of the Merger), the Shares were held for more than one year
but not more than eighteen months.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a 31% rate. Backup withholding generally applies if the
stockholder (a) fails to furnish his social security number or other taxpayer
identification number ("TIN"), (b) furnishes an incorrect TIN, (c) fails
properly to report interest or dividends or (d) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is his correct number and that he is not subject to backup
withholding. Backup withholding is not an additional tax but merely an advance
payment, which may be refunded to the extent it results in an overpayment of
tax. Certain persons generally are entitled to exemption from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder
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<PAGE> 10
should consult with his own tax advisor as to his qualification for exemption
from withholding and the procedure for obtaining such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997 (the "Company 10-K"), the Shares are listed and traded
on the Nasdaq National Market under the symbol "MCRN" and the Company has not
paid any cash dividends on the Shares. Pursuant to the Merger Agreement, the
Company has agreed not to declare, set aside for payment or pay any dividends or
other distributions with respect to the Shares prior to consummation of the
Merger. The following table sets forth the high and low closing sales prices per
Share on the Nasdaq National Market for the periods indicated, as reported in
published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
Year Ended September 30, 1996:
First Quarter............................................ $4.875 $3.250
Second Quarter........................................... 4.250 2.500
Third Quarter............................................ 3.375 2.500
Fourth Quarter........................................... 3.000 1.875
Year Ended September 30, 1997:
First Quarter............................................ 2.875 2.156
Second Quarter........................................... 3.000 2.016
Third Quarter............................................ 3.875 1.781
Fourth Quarter........................................... 3.188 1.875
Year Ending September 30, 1998
First Quarter............................................ 2.688 1.688
Second Quarter........................................... 2.219 2.531
Third Quarter (through May 14, 1998)..................... 1.438 2.344
</TABLE>
The closing sale price per Share on the Nasdaq National Market on May 8,
1998, the last full day of trading prior to the public announcement of
Purchaser's intention to make the Offer, was $1.781. The closing sale price per
Share on the Nasdaq National Market on May 14, 1998, the last full day of
trading prior to the commencement of the Offer, was $2.344. Stockholders are
urged to obtain current market quotations for the Shares and to review all
information received by them from the Company, including the proxy materials and
annual and quarterly reports referred to in Section 8.
7. EFFECT OF OFFER ON NASDAQ NATIONAL MARKET LISTING, MARKET FOR SHARES AND SEC
REGISTRATION.
The purchase of the Shares by Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and may reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion on the Nasdaq
National Market. If trading volume were lower than such standards, quotations
might continue to be published in the "additional list" or in one of the "local
lists," or such quotations might not be published at all. If the number of
holders of Shares (based on round lots) fell below 400, Nasdaq might cease to
provide quotations but quotations might still be available from other sources.
Purchaser cannot predict whether Nasdaq trading volume standards for publication
will be met after the Offer.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of Shares. It is the intention of
Purchaser to seek to cause an application for such termination to be made as
soon after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such
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<PAGE> 11
registration were terminated, the Company would no longer legally be required to
disclose publicly in proxy materials distributed to stockholders the information
which it now must provide under the Exchange Act or to make public disclosure of
financial and other information in annual, quarterly and other reports required
to be filed with the Commission under the Exchange Act; the officers, directors
and 10% stockholders of the Company would no longer be subject to the
"short-swing" insider trading reporting and profit recovery provisions of the
Exchange Act or the proxy statement requirements of the Exchange Act in
connection with stockholders' meetings; and the Shares would no longer be
eligible for Nasdaq National Market reporting. Furthermore, if such registration
were terminated, persons holding "restricted securities" of the Company may be
deprived of their ability to dispose of such securities under Rule 144
promulgated under the Securities Act of 1933, as amended.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as specifically set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or is based upon
publicly available documents and records on file with the Commission and other
public sources. Neither Parent nor Purchaser has any knowledge that would
indicate that any statements contained herein based on such documents and
records are untrue. However, neither Parent nor Purchaser 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
which may affect the significance or accuracy of any such information but which
are unknown to Parent and Purchaser.
The Company is a Delaware corporation with its principal executive offices
located at 45365 Northport Loop West, Fremont, California 94538. According to
the Company 10-K, the Company is a supplier of advanced system boards for
high-performance personal computers sold by original equipment manufacturers,
distributors and value-added resellers, graphics accelerator products and the
nucleus of "barebones" system products.
Set forth below is certain summary consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
consolidated financial statements presented in the Company 10-K and the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and 1998. More comprehensive financial information is included in such reports
and in other documents filed by the Company with the Commission (which may be
inspected or obtained in the manner set forth below), and the following summary
is qualified in its entirety by reference to such reports and other documents
and all of the financial information and notes contained therein or incorporated
therein by reference.
MICRONICS COMPUTERS, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
------------------ --------------------------------
1998 1997 1997 1996 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Net sales............................. $30,332 $60,470 $ 99,276 $171,245 $234,077
Income (loss) from operations......... (4,035) (2,998) (10,505) (5,391) (19,470)
Net income (loss)..................... (3,419) (2,498) (9,789) (13,288) (12,836)
Net income (loss) per common share.... (0.26) (0.18) (.70) (.96) (.95)
BALANCE SHEET DATA (END OF PERIOD)
Total assets.......................... $39,420 $51,547 $ 49,649 $ 61,563 $ 93,254
Long-term debt........................ -- -- -- -- 397
Stockholders' equity.................. 28,604 41,508 34,379 43,888 56,554
</TABLE>
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Certain Company Estimates. During the course of discussions between Parent
and the Company that led to the execution of the Merger Agreement (see Section
11), the Company provided Parent with certain information relating to the
Company which Purchaser believes is not publicly available. This information
included a preliminary pro forma income statement for the Company for fiscal
years 1998, 1999 and 2000 developed by the Company's senior management following
the Company's first quarter ended March 31, 1998 and predicated on preliminary
assumptions at that time (April 1997) for macroeconomic conditions, gross
profits and operating expenses. The projection also assumed that the Company
would close its motherboard and system business and take other actions to reduce
operating losses significantly (action which the Company had not resolved to
undertake, and does not intend to undertake during the pending of the Offer).
Based on the foregoing, the estimates provided a fiscal year 1998 operating
budget with estimated net sales of $72.0 million, gross profit of $12.1 million,
operating expenses of $13 million and operating losses of $800,000. The
Company's fiscal year 1999 pro forma income statement (prepared on the same
assumption) estimated revenues of $65.0 million, gross profit of $13.1 million,
operating expenses of $11.6 million and operating income of $1.5 million. The
Company's fiscal year 2000 operating budget (prepared on the same assumption)
estimated net sales of $90 million, gross profit of $13.1 million, operating
expenses of $11.0 million and operating income of $3.8 million. The foregoing
information has been excerpted from the materials presented to Parent by the
Company and does not reflect consummation of the Offer or the Merger.
The foregoing estimates constitute forward-looking statements that involve
risks and uncertainties, including, but not limited to, risks associated with
fluctuations in operating results, the ability to retain existing and win new
OEM business, business conditions in the personal computer industry, product
introductions, competition, rapid technological change and other factors. These
risks and uncertainties are discussed in greater detail in the Company's
periodic filings with the Commission.
THE COMPANY DOES NOT AS A MATTER OF COURSE MAKE PUBLIC ANY ESTIMATES AS TO
FUTURE PERFORMANCE OR EARNINGS, AND THE ESTIMATES SET FORTH ABOVE ARE INCLUDED
IN THIS OFFER TO PURCHASE ONLY BECAUSE THE INFORMATION WAS MADE AVAILABLE TO
PARENT BY THE COMPANY. THE COMPANY HAS INFORMED PARENT THAT THE ESTIMATES WERE
NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED
GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING ESTIMATES OR FORECASTS. THE
COMPANY HAS ALSO INFORMED PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON
WHICH THE ESTIMATES PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL,
PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT
DECISION-MAKING PURPOSES AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS
SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL
EXPERIENCE AND BUSINESS DEVELOPMENTS. PROJECTED INFORMATION OF THIS TYPE IS
BASED ON ESTIMATES AND ASSUMPTIONS 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 CONTROL OF THE COMPANY,
PURCHASER OR PARENT OR THEIR RESPECTIVE FINANCIAL ADVISORS. MANY OF THE
ASSUMPTIONS UPON WHICH THE ESTIMATES WERE BASED, NONE OF WHICH WERE APPROVED BY
PARENT OR PURCHASER, ARE DEPENDENT UPON ECONOMIC FORECASTING (BOTH GENERAL AND
SPECIFIC TO THE COMPANY'S BUSINESSES), WHICH IS INHERENTLY UNCERTAIN AND
SUBJECTIVE. THE INCLUSION OF THE FOREGOING ESTIMATES SHOULD NOT BE REGARDED AS
AN INDICATION THAT THE COMPANY, PURCHASER, PARENT OR ANY OTHER PERSON WHO
RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS,
AND NEITHER PURCHASER NOR PARENT HAS RELIED ON THEM AS SUCH. NONE OF PURCHASER
OR PARENT OR THEIR FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE
ACCURACY OR VALIDITY OF ANY OF THE ESTIMATES.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, is
obligated to file reports and other information with the Commission relating to
its business, financial condition, and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company, and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements, and other information should be
available for inspection at the Commission's Public Reference Room, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies should be obtainable
upon payment of the Commission's customary charges by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
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<PAGE> 13
Such material should also be available for inspection and copying at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York, 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission also maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy
statements and other information regarding companies that file electronically
with the Commission.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Purchaser, a Delaware corporation, was recently incorporated for the
purposes of making the Offer and the Merger. All of the outstanding capital
stock of Purchaser is owned by Parent. The principal executive offices of
Purchaser are located at 2880 Junction Avenue, San Jose, California 95134.
Until, immediately prior to the time Purchaser purchases Shares and
immediately prior to the Merger, it is not anticipated that Purchaser will have
any significant assets or liabilities or engage in activities other than those
incidental to its formation and capitalization and the transactions contemplated
by the Offer, the Merger Agreement and the Merger. Since Purchaser is newly
formed and has minimal assets and capitalization, no meaningful financial
information is available with respect to it.
Parent is a Delaware corporation with its principal executive offices
located at 2880 Junction Avenue, San Jose, California 95134. Parent is engaged
in the business of designing, developing, manufacturing and marketing multimedia
and connectivity products for IBM-compatible personal computers and modems for
Apple MacIntosh computers.
The name, business address, past and present principal occupations and
citizenship of each of the directors and executive officers of Purchaser and
Parent are set forth in Annex I to this Offer to Purchase. None of Parent
Purchaser or, to the best knowledge of Parent and Purchaser, any of the persons
listed in Annex I of this Offer to Purchase or any associate or majority-owned
subsidiary of such person or entity beneficially owns or has any right to
acquire, directly or indirectly, any Shares, and, to the best knowledge of
Parent and Purchaser, no such person or entity has effected any transaction in
the Shares during the past 60 days.
Set forth below is certain summary condensed consolidated financial
information with respect to Parent and its subsidiaries excerpted or derived
from the condensed consolidated financial statements presented in Parent's
Annual Report on Form 10-K for the year ended December 31, 1997 and the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and 1998. More comprehensive financial information is included in such reports
and in other documents filed by Parent with the Commission (which may be
inspected or obtained in the manner set forth below), and the following summary
is qualified in its entirety by reference to such reports or other documents and
all of the financial information and notes contained therein or incorporated
therein by reference.
DIAMOND MULTIMEDIA SYSTEMS, INC. AND SUBSIDIARIES
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
13
<PAGE> 14
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Net sales................................................. $443,281 $598,050 $467,635
Gross profit.............................................. 55,795 112,766 108,350
Write-off of in-process technology........................ -- -- 76,710
Income (loss) from operations............................. (67,719) 22,708 (19,273)
Net income (loss)......................................... (45,605) 16,337 (41,347)
Net income (loss) per share:
Basic.................................................. (1.33) 0.48 (1.55)
Diluted................................................ (1.33) 0.46 (1.55)
BALANCE SHEETS DATA
Total assets.............................................. 337,554 332,438 351,729
Current portion of long-term debt......................... 36,455 18,068 18,077
Long-term debt, net of current portion.................... 1,873 2,720 11,705
Total stockholders' equity................................ 180,521 224,295 208,610
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA
Net sales................................................. $186,196 $112,402
-------- --------
Gross profit.............................................. 41,626 19,585
-------- --------
Income (loss) from operations............................. 11,132 (9,934)
-------- --------
Net income (loss)......................................... $ 7,927 $ (5,951)
-------- --------
Net income (loss) per share:
Basic.................................................. $ 0.23 $ (0.17)
Diluted................................................ $ 0.22 $ (0.17)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
BALANCE SHEETS DATA
Total assets.............................................. $349,762 $337,554
Current portion of long-term debt......................... 35,301 36,455
Long-term debt, net of current portion.................... 1,747 1,873
Total stockholders' equity................................ 190,842 180,521
</TABLE>
Available Information. Purchaser is not subject to the informational filing
requirements of the Exchange Act. Purchaser does not file reports or other
information with the Commission relating to its business, financial condition or
other matters. Parent is subject to the information and reporting requirements
of the Exchange Act and, in accordance therewith is obligated to file reports
and other information with the Commission relating to its business, financial
condition, and other matters. Information as of particular dates concerning
Parent's directors, officers, their renumeration, stock options granted to them,
the principal holders of Parent's securities, any material interest of such
persons in transactions with Parent, and other matters is required to be
disclosed in proxy statements distributed to Parent's stockholders and filed
with the Commission. Such reports, proxy statements, and other information
should be available for inspection at the Commission's Public Reference Room,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies should be
obtainable upon payment of the Commission's customary charges by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such material should also be available for inspection and copying at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York, 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago,
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<PAGE> 15
Illinois 60661. The Commission also maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares (including Shares issuable upon exercise or conversion of all
stock options, vested or scheduled to vest prior to July 31, 1998, and
convertible securities or other rights to purchase or acquire Shares, are
tendered to and purchased by Purchaser, the aggregate purchase price and all
estimated commissions, fees and expenses will be approximately $35.5 million.
Purchaser intends to obtain all of such funds from Parent which in turn would
obtain such funds from Parent's existing working capital.
11. BACKGROUND OF THE OFFER.
The Company engages in lines of business complimentary to those of Parent.
Accordingly, Parent has followed the business of the Company for several years,
and has also been aware for some time of the Company's efforts to identify an
acquiror. In early 1998, Parent began to consider seriously a bid to acquire the
Company, primarily as a result of developing trends in the multimedia systems
boards and PC gaming industries and Parent's perception of growing potential
value from a combination of the two companies.
On March 31, 1998, William Schroeder, Parent's President, Chief Executive
Officer and Chairman of the Board, met with Broadview Associates LLC
("Broadview") to discuss generally the status of pending strategic initiatives
in the multimedia systems board industry, including the possibility of a
potential combination of Parent and the Company. On that same date,
representatives of Broadview, on behalf of Parent, contacted Charles Hart,
President and Chief Executive Officer of the Company, to inquire about the
Company's interest in a possible combination with Parent. Mr. Hart referred
Broadview to Alliant Partners, the Company's financial advisor ("Alliant").
Broadview contacted Alliant and discussed certain parameters and alternatives
regarding a potential transaction.
On April 2, 1998, Mr. Schroeder, James Walker, Parent's Senior Vice
President, Finance and Administration and Chief Financial Officer, and certain
other members of senior management of Parent, along with representatives of
Broadview, met with Mr. Hart, Bill Finley, Vice President, Finance and Chief
Financial Officer of the Company, another member of the Company's senior
management team and representatives of Alliant at Alliant's offices. The parties
exchanged information on their respective financial condition, the strategies
and prospects of their respective companies, personnel matters, synergies
between the companies, and the possibility of a business combination. Based on
the discussion at the meeting, the parties agreed to continue discussions.
On April 6, 1998, Mr. Schroeder and Mr. Walker met with representatives of
Broadview to discuss pending strategic initiatives, including a potential
business combination with the Company.
During the week of April 6, 1998, the Company provided Parent with certain
confidential information regarding the Company, as part of Parent's preliminary
due diligence review of the Company and to assist Parent in its valuation
analysis. Numerous discussions were held between representatives of Broadview
and Alliant regarding parameters and terms of a potential transaction.
On April 8, 1998, Parent and the Company executed a mutual confidentiality
agreement.
On April 9, 1998, Parent provided to the Company a preliminary proposal to
acquire the Company for cash, subject to the satisfactory completion of due
diligence, execution of a definitive agreement, as well as other customary
conditions. The preliminary proposal contemplated a cash acquisition of the
Company for an aggregate consideration of approximately $34.5 million.
On April 10, 1998, members of Parent's technical staff met and
representatives of Broadview met with Mr. Hart, Mr. Finley, members of the
Company's technical staff and Alliant at the Company's offices to conduct due
diligence and to discuss issues related to the Company's organization,
technology and product offering.
15
<PAGE> 16
On April 14, 1998, Mr. Walker, other members of Parent's management staff,
representatives of Broadview and representatives of Coopers & Lybrand LLP,
Parent's independent accountants, met with Mr. Hart and Mr. Finley at Parent's
offices to further discuss a potential transaction. Following such meeting,
Parent proposed transaction terms to the Company.
From April 14 to April 17, 1998, legal and financial representatives of
Parent and the Company continued to exchange information and met on four
occasions to conduct due diligence and to discuss the proposed transaction.
On April 15, 1998, at a regularly scheduled meeting of the Board of
Directors of Parent, Mr. Schroeder, Mr. Walker and representatives of Broadview
briefed the Board of Directors of Parent as to the status of discussions with
the Company, outlined the structure of the proposed transaction and presented
the strategic reasons for such a transaction. After discussion, the Board of
Directors unanimously authorized Mr. Schroeder and Mr. Walker to continue
discussions with the Company regarding the transaction.
On April 23, 1998, legal counsel to Parent provided a draft of a definitive
acquisition agreement to legal counsel to the Company. Over the subsequent two
week period, Parent and the Company, through their financial representatives and
legal counsel, negotiated the terms and conditions of the draft agreement.
On April 23, 1998 and April 24, 1998, Mr. Schroeder and members of Parent's
management met with Mr. Hart and members of the Company's management and
technical staff to discuss the proposed transaction and to evaluate the
capabilities of the Company's engineering organization.
On April 27, 1998, the Board of Directors of Parent held a special
telephonic meeting. At this meeting, Mr. Schroeder and Mr. Walker, together with
representatives of Broadview and legal counsel to Parent, discussed with the
Board the results of due diligence, the strategic reasons for the transaction,
the status of the negotiations with the Company and the terms of the definitive
agreement. Following discussion, the Board of Directors of Parent unanimously
approved the proposed transaction at a price of $2.45 per share and directed
management to complete the transaction pursuant to such terms and with the
advice of counsel.
On May 1, 1998, representatives of Broadview informed representatives of
Alliant that Parent, due to various considerations, including the results of
Parent's due diligence, was not prepared to proceed with the preliminary offer
of approximately $34.5 million Following a series of discussions, Parent
proposed a cash tender offer for the outstanding Shares at a price of $2.45 per
Share. On May 7, 1998, the Board of Directors of the Company unanimously
approved entering into the proposed transaction at the 2.45 per share price and
the other terms proposed by Parent.
From May 4 to May 11, 1998, attorneys for the parties finalized the terms
of the agreement, with input from respective management and owners of the two
companies, final terms were reached. On May 11, 1998, the Merger Agreement was
executed and delivered and the transaction was publicly announced.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
Purpose. The purpose of the Offer and the Merger is for Purchaser to
acquire control of, and the entire equity interest in, the Company. The purpose
of the Merger is for Purchaser to acquire all Shares not purchased pursuant to
the Offer. Upon consummation of the Merger, the Company will become a wholly
owned subsidiary of Purchaser. The Offer is being made pursuant to the Merger
Agreement.
Approval. Under the DGCL, the approval of the Board of Directors of the
Company 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 of Directors
of the Company has unanimously approved and adopted the Merger Agreement and the
transactions contemplated thereby, and, unless the Merger is consummated
pursuant to the short-form merger provisions under 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
16
<PAGE> 17
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 stockholders.
Stockholder Meetings. In the Merger Agreement, the Company has agreed to
take all action necessary to convene a meeting of its stockholders as soon as
practicable after the consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby, if such action is required by the DGCL. Parent has agreed that all
Shares owned by it or any of its subsidiaries (including Purchaser) will be
voted in favor of the Merger Agreement and the transactions contemplated
thereby.
Board Representation. If Purchaser purchases at least fifty-one percent
(51%) of the outstanding Shares pursuant to the Offer, the Merger Agreement
provides that Parent will be entitled to designate a majority of the members of
the Board of Directors and the Company, upon request by the Parent, shall
increase the size of the Board of Directors or secure resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board of Directors. Parent currently intends to designate a majority of
the directors of the Company following consummation of the Offer. It is
currently anticipated that Parent will designate William J. Schroeder, Bruce C.
Edwards, Carl W. Neun and James T. Schraith, or such other persons listed on
Annex I as Parent shall determine, to serve as directors of the Company
following consummation of the Offer. See Annex I. Purchaser expects that such
representation would permit Purchaser to exert substantial influence over the
Company's conduct of its business and operations.
Short Form Merger. Under the DGCL, if Purchaser acquires, pursuant to the
Offer, at least 90% of the outstanding Shares, Purchaser will be able to approve
the Merger without a vote of the Company's stockholders. In such event, Parent
and Purchaser anticipate that they will 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 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 would be required
to effect the Merger. Pursuant to the Merger Agreement the Company has agreed to
take all action necessary under the DGCL and its certificate of incorporation
and by-laws to convene a meeting of its stockholders promptly following
consummation of the Offer to consider and vote on the Merger, if a stockholders'
vote is required.
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 appraisal of, and to receive payment
in cash of the fair value of, their Shares. Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares, as of the day prior to the date on which the
stockholders' vote was taken approving the Merger or similar business
combination (excluding any 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 as, or more or less than, the Offer
Price.
In addition, several decisions by Delaware courts have held that, in
certain circumstances, a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available
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<PAGE> 18
to minority stockholders in a cash-out merger is the right to appraisal
described above. However, a damages remedy or injunctive relief may be available
if a merger is found to be the product of procedural unfairness, including
fraud, misrepresentation or other misconduct.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or otherwise
in which Purchaser seeks to acquire the remaining Shares not held by it.
Purchaser believes, however, that Rule 13e-3 will not be applicable to the
Merger, if the Merger is consummated within one year after the Expiration Date
at the same per Share price as paid in the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior to
consummation of the transaction.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Company 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 exploitation of the Company's potential in conjunction with Parent's
business.
Confidentiality. In connection with each of Parent and the Company granting
the other party and its representatives access to certain confidential
information for purposes of evaluating the contemplated transaction, Parent and
the Company executed a Mutual Confidentiality Agreement, dated as of April 8,
1998 (the "Confidentiality Agreement"). Among other things, the Confidentiality
Agreement provides that, on and after the date of the Confidentiality Agreement,
neither Parent nor the Company will (i) disclose any evaluation material (as
defined in the Confidentiality Agreement) to any third party, except as required
by applicable law or legal process, and subject to certain additional exceptions
or (ii) solicit the other party's employees or contractors involved in the
discussions between the parties for a period of six months thereafter, in each
case without the prior written consent of the other party. In the event that the
contemplated transaction is not consummated, each party must return all
evaluation material upon the other party's request and may not use such material
without the prior written consent of the other party for any purpose.
Extraordinary Corporate Transactions. Except as indicated in this Offer to
Purchase, neither Parent nor Purchaser have any present plans or proposals which
relate to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company or any subsidiary,
a sale or transfer of a material amount of assets of the Company or any
subsidiary or any 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 Company's Board of Directors or management.
13. THE TRANSACTION DOCUMENTS.
The Merger Agreement
Commencement. The Merger Agreement provides for the commencement of the
Offer not later than five business days after the public announcement of the
execution of the Merger Agreement, provided that the Merger Agreement has not
theretofore been terminated pursuant to its terms. Parent, Purchaser and the
Company are required to use all reasonable efforts to take all action as may be
necessary or appropriate in order to effectuate the Offer and the Merger as
promptly as possible and to carry out the transactions provided for or
contemplated by the Merger Agreement.
Merger. The Merger Agreement provides that, as soon as practicable after
expiration of the Offer and the receipt of any required approvals and adoption
of the Merger Agreement by the stockholders of the
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<PAGE> 19
Company, to the extent required by the DGCL, and the satisfaction or waiver, if
possible, of certain other conditions contained in the Merger Agreement,
Purchaser (or another direct or indirect Delaware wholly-owned subsidiary of
Parent) will be merged with and into the Company, with the Company continuing as
the surviving corporation (the "Surviving Corporation") (the "Effective Time").
Notwithstanding the foregoing, the parties to the Merger Agreement have agreed
that Purchaser may make changes in the terms and conditions of the Offer
(including substitution of indirect wholly-owned subsidiary of Parent for
Purchaser) provided that any such changes do not (i) reduce the maximum number
of Shares to be purchased in the Offer, (ii) impose conditions to the Offer in
addition to those set forth in Annex I to the Merger Agreement, (iii) or amend
any other material terms of the Offer in a manner materially adverse to the
Company's stockholders, and provided, further, that the Offer may not, without
the Company's prior written consent, be extended beyond 120 days from the
commencement of the Offer except as necessary to provide time to satisfy the
conditions set forth in Annex I to the Merger Agreement or as required by any
rule, regulation, interpretation or position of the Commission and except that
Purchaser may extend the Offer for up to 20 business days, if as of such date,
there shall not have been tendered at least ninety percent (90%) of the
outstanding Shares so that the Merger could be effected without a meeting of the
Company's stockholders in accordance with applicable provisions of the DGCL.
Vote Required to Approve Merger. In the Merger Agreement, the Company has
agreed, if required by the DGCL, in order to consummate the Merger, to take all
action necessary in accordance with the DGCL to convene a meeting of its
stockholders promptly following consummation of the Offer for the purpose of
considering and approving the Merger. The Company, acting through its Board of
Directors, has further agreed that if a stockholders' meeting is convened, the
Company shall recommend that stockholders of the Company vote in favor of the
Merger and shall take all reasonable actions necessary to solicit such approval.
Subject to compliance with applicable fiduciary duties, the Company, acting
through its Board of Directors, shall include in the proxy statement the
unanimous recommendation of its Board of Directors that stockholders of the
Company vote in favor of the Merger and shall disclose that each of the
Company's directors and executive officers intend to tender all outstanding
shares beneficially owned by such persons to Purchaser pursuant to the Offer
unless to do so would subject such person to liability under Section 16(b) of
the Exchange Act. In the event that proxies are to be solicited from the
Company's stockholders, the Company shall, use all reasonable commercial efforts
to solicit from stockholders of the Company proxies in favor of the Merger, and
to take all other action necessary or, in the reasonable judgment of Parent and
Purchaser, advisable to secure the vote of its stockholders required by DGCL to
effect the Merger. At any such meeting, all of the Shares then owned by Parent,
Purchaser or any subsidiary of Parent, and all Shares for which the Company has
received proxies to vote, will be voted in favor of the Merger.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be canceled and extinguished and
each Share (other than Shares held by Parent or any subsidiary thereof, and
Shares with respect to which appraisal rights are properly exercised
("Dissenting Shares")) shall, by virtue of the Merger and without any action on
the part of Purchaser, the Company or the holders of the Shares, be converted
into the right to receive the Offer Price upon the surrender of the certificate
formerly representing such Share. Each share of common stock of Purchaser issued
and outstanding immediately prior to the Effective Time shall, 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, be converted into and shall thereafter
evidence one validly issued and outstanding share of common stock of the
Surviving Corporation.
Treatment of Stock Option Plans, 401(k) Plan and Employee Stock Purchase
Plan. The Company, Parent and Purchaser have agreed that Parent shall not assume
or continue any outstanding stock options (the "Outstanding Options") under any
of the Company's 1989 Stock Option Plan, 1992 Directors Stock Option Plan, the
1998 Equity Incentive Plan and options assumed in connection with the Company's
acquisition of Orchid Technology or any other agreement or arrangement, or
substitute any additional options for such outstanding options (collectively,
the "Stock Plans"). The Company shall take all actions necessary to provide that
at the Effective Time, (i) each Outstanding Option shall be canceled and (ii) in
consideration for such cancellation, each holder of an Outstanding Option shall
receive in consideration thereof an amount (subject to applicable withholding
requirements) in cash equal to the product of (x) the excess, if any, of the
Offer
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<PAGE> 20
Price over the per Share exercise price of each Outstanding Option and (y) the
number of Shares subject to such Outstanding Option. The Company has agreed to
take all actions necessary to effectuate the foregoing including without
limitation amending the Stock Plans and obtaining any necessary consents from
holders of Outstanding Options.
The Company will take any and all actions necessary and appropriate to
terminate the Company's 401(k) Plan and the Employee Stock Purchase Plan (the
"ESPP"), including without limitation (i) adoption of resolutions by the
Company's Board of Directors terminating the 401(k) Plan and the ESPP
immediately prior to the Effective Time and (ii) timely delivery of any notices
required under the terms of the 401(k) Plan and the ESPP. Notwithstanding the
foregoing, the Company's 401(k) Plan in effect as of the date of the Merger
Agreement, to the extent practicable, will remain in effect until Company
employees are allowed to participate in a comparable benefit plan of Parent.
With respect to such comparable benefit plan of Parent, such plan shall give
full credit to each Company employee for each participant's respective period of
service with the Company prior to the Effective Time for all purposes for which
such period of service is relevant to benefits provided under such benefit plan
of Parent. From and after the Effective Time, Parent shall provide employees of
the Company with the opportunity to participate in any employee stock option or
other incentive compensation plan of Parent or Purchaser on substantially the
same terms and subject to substantially the same conditions as are available to
similarly situated employees of Parent and Purchaser, provided for any employee
that such employee otherwise fulfills all eligibility criteria.
Except as set forth above, the Company has agreed in the Merger Agreement
not to modify or accelerate the exercisability of any stock options, rights or
warrants presently outstanding.
Conditions to Obligations of All Parties to the Merger. The obligations of
each of the parties to effect the Merger following completion of the Offer are
subject to the following conditions: (i) the Merger shall have been approved and
adopted by the vote of the stockholders of the Company to the extent required by
the DGCL; (ii) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "Hart-Scott-Rodino Act") shall have expired or been
terminated; (iii) Shares shall have been purchased pursuant to the Offer; and
(iv) no temporary restraining order, preliminary or permanent injunction,
judgment or other order, decree or ruling nor any statute, rule, regulation or
order shall be in effect which would (x) make the acquisition or holding by
Parent or its affiliates of Shares or shares of Common Stock of the Surviving
Corporation illegal or otherwise prevent the consummation of the Merger, (y)
prohibit Parent's or Purchaser's ownership or operation of, or compel Parent or
Purchaser to dispose of or hold separate, all or a material portion of the
business or assets of Purchaser, the Company or any subsidiary of the Company
thereof, (z) compel Parent, Purchaser or the Company to dispose of or hold
separate all or a material portion of the business or assets of Parent or any
such subsidiary or the Company or any such subsidiary, (xx) impose material
limitations on the ability of Parent or Purchaser or their affiliates
effectively to exercise full ownership and financial benefits of the Surviving
Corporation, or (yy) impose any condition to the Offer, the Merger Agreement or
the Merger that is materially adverse to the party objecting thereto.
Schedule 14D-9. In the Merger Agreement, the Company has agreed that
concurrently with the filing by Parent and Purchaser of the Schedule 14D-1, it
will file with the Commission and promptly mail to its stockholders, a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
containing the recommendation of the Board of Directors that the Company's
stockholders accept the Offer, tender their Shares thereunder to Purchaser and,
if required by applicable law, approve the Merger; provided, that such
recommendation may not be withdrawn, modified or amended in connection with a
Superior Proposal (as defined below).
Board of Directors. The Merger Agreement provides that promptly upon the
acquisition by Purchaser pursuant to the Offer of such number of Shares which
satisfies the Minimum Condition and from time to time thereafter, Parent shall
be entitled to designate a majority of the members of the Company's Board of
Directors, subject to compliance with Section 14(f) of the Exchange Act. The
Company shall, upon request by Parent, promptly increase the size of the Board
of Directors to the extent permitted by its certificate of incorporation and/or
secure the resignations of such number of directors as is necessary to enable
Parent's
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<PAGE> 21
designees to be elected to the Board of Directors and shall use its reasonable
efforts to cause Parent's designees to be so elected. The Company shall take, at
its expense, all action necessary to effect any such election, including mailing
to its stockholders the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder in form and substance reasonably
satisfactory to Parent and its counsel. Following the election or appointment of
Parent's designees pursuant to the Merger Agreement and prior to the Effective
Time, any amendment or termination of the Merger Agreement, extension for the
performance or waiver of the obligations or other acts of Parent or Purchaser or
waiver of the Company's rights hereunder, shall require the concurrence of a
majority of the Company's directors (or the concurrence of the director, if
there is only one remaining) then in office who are directors on the date
thereof, or are directors (other than directors designated by Parent in
accordance with the Merger Agreement) designated by such persons to fill any
vacancy (the "Continuing Directors"); provided, however, that, if there shall be
no Continuing Directors, such actions may be affected by majority vote of the
entire Board of Directors, except that no such action shall amend the terms of
the Merger Agreement or waive any right or obligation under the Merger Agreement
in a manner adverse to the stockholders of the Company.
Parent currently intends to designate a majority of the directors of the
Company following consummation of the Offer. It is currently anticipated that
Parent will designate William J. Schroeder, Bruce C. Edwards, Carl W. Neun and
James T. Schraith, or such other persons listed on Annex I as Parent shall
determine, to serve as directors of the Company following consummation of the
Offer. See Annex I.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser,
including, but not limited to, representations and warranties relating to the
Company's organization and qualification, capitalization and authority to enter
into the Merger Agreement and carry out the transactions contemplated thereby,
the Company's subsidiaries, Commission filings (including financial statements),
the documents supplied by the Company relating to the Offer, required consents
and approvals, employee benefit plans, litigation, the material liabilities of
the Company and its subsidiaries, environmental matters relating to the Company
and its subsidiaries, labor matters, trademarks, patents and other intellectual
property, the payment of taxes, arrangements with financial advisors, related
party transactions, and the absence of certain material adverse changes or
events since March 31, 1998. The Company has also represented that it has taken
or will take all action necessary to render Section 203 of the DGCL (see Section
16, "State Takeover Laws," below) inapplicable to Parent or Purchaser solely by
virtue of the Offer, the Merger, the Merger Agreement, the purchase of Shares
pursuant to the Offer, the Merger and the transactions contemplated thereby or
therein.
Parent and Purchaser have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to Parent's and Purchaser's organization and qualification,
their authority to enter into the Merger Agreement and consummate the Offer and
the Merger, required consents and approvals, documents related to the Offer and
the availability of sufficient financing to consummate the Offer.
Conduct of Company's Business Pending Merger. Pursuant to the Merger
Agreement, the Company and its subsidiaries has agreed that, prior to the
Effective Time, unless Parent shall otherwise have agreed in writing or as
otherwise contemplated by the Merger Agreement, the Company (including its
subsidiaries) will carry on its business diligently and in accordance with good
commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as conducted prior to the
execution of the Merger Agreement and in compliance with all applicable laws and
regulations, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others with which it has business dealings. In addition, the Company will
promptly notify Parent of any material event involving its business or
operations.
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The Company has also agreed pursuant to the Merger Agreement that, prior to
the Effective Time, except as permitted by the terms of the Merger Agreement,
without the prior written consent of Parent, it will not, or permit any of its
subsidiaries to do any of the following:
(i) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
(ii) Grant any severance or termination pay to any director, officer
or employee except payments in amounts consistent with policies and past
practices or pursuant to written agreements outstanding, or policies
existing, on the date of the Merger Agreement and as previously disclosed
in writing to the other, or adopt any new severance plan, or provide any
other compensation or benefit to any employee, officer or director that
would accrue or become payable as a result of or in connection with the
Offer and/or Merger;
(iii) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property (as defined in the Merger Agreement) or other
proprietary rights, or enter into grants to future patent rights, other
than in the ordinary course of business, consistent with past practice;
(iv) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(v) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on
the date of the Merger Agreement (which repurchase rights the Company shall
be obligated to exercise if the repurchase price is less than the Offer
Price);
(vi) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into
shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible
securities, other than the issuance of Shares pursuant to the exercise of
stock options therefor outstanding as of the date of the Merger Agreement;
(vii) Cause, permit or propose any amendments to any charter document
or bylaw (or similar governing instruments of any subsidiaries);
(viii) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of the Company, or enter
into any joint ventures, strategic partnerships or alliances;
(ix) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate,
to the business of the Company, except in the ordinary course of business
consistent with past practice;
(x) Incur any indebtedness for borrowed money in excess of $100,000
(other than ordinary course trade payables or pursuant to existing credit
facilities in the ordinary course of business) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire debt securities, or guarantee any debt securities of others;
(xi) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates of its officers or employees other than
in the ordinary
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<PAGE> 23
course of business, consistent with past practice, or change in any
material respect any management policies or procedures;
(xii) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business;
(xiii) Make any grant of exclusive distribution or other resale rights
to any third party; or
(xiv) Agree in writing or otherwise to take any of the actions
described in (i) through (xiii) above.
Non-Solicitation. The Company has agreed in the Merger Agreement that from
and after the date of the Merger Agreement until the earlier of the Effective
Time or termination of the Merger Agreement pursuant its terms, the Company and
its subsidiaries shall not, and will instruct their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, (i) solicit or encourage submission of, any
proposals or offers by any person, entity or group of such entity (other than
Parent and its affiliates, agents and representatives), or (ii) participate in
any discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. For the purposes of the Merger Agreement, an "Acquisition
Proposal" with respect to an entity means any proposal or offer relating to (i)
any merger, consolidation, sale or license of substantial assets or similar
transactions of such entity (other than sales of assets or inventory in the
ordinary course of business or as permitted under the terms of the Merger
Agreement), (ii) sale of 10% or more of the outstanding shares of capital stock
of the Company (including without limitation by way of a tender offer or an
exchange offer), (iii) the acquisition by any person of beneficial ownership or
a right to acquire beneficial ownership of, or the formation of any "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock of the
entity (except for acquisitions for passive investment purposes only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto or qualifies for and files a Schedule 13D with respect
thereto, indicating that the acquisition of such shares is for passive
investment purposes only, and such person or group does not subsequently file an
amendment to such 13D indicating that such shares were not acquired for passive
investment purposes only and the Minimum Condition is not satisfied); or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. The Company will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted previously with respect to any of the foregoing. The
Company will (i) notify Parent as promptly as practicable if any inquiry or
proposal is made or any information or access is requested in connection with an
Acquisition Proposal or potential Acquisition Proposal and (ii) as promptly as
practicable notify Parent of the terms and conditions of any such Acquisition
Proposal. In addition, subject to the other provisions of the Merger Agreement,
from and after the date of the Merger Agreement until the earlier of the
Effective Time and termination of the Merger Agreement pursuant to its terms,
the Company and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any person, entity or group (other than Parent or Purchaser); provided,
however, that nothing shall prohibit the Company' Board of Directors from taking
and disclosing to the Company's stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Prior to consummation of the Offer, the Company may, to the extent the
Board of Directors of the Company determines, in good faith, after consultation
with outside legal counsel, that the Board's fiduciary duties under applicable
law require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of the paragraph below, furnish information to any
person, entity or group after such person, entity or group has delivered to the
Company in writing, an unsolicited bona fide Acquisition Proposal which
23
<PAGE> 24
the Board of Directors of the Company in its good faith reasonable judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable than the Offer and the Merger to the
stockholders of the Company from a financial point of view and for which
financing, to the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors of the Company (based upon the
advice of independent financial advisors), is reasonably capable of being
financed by such person, entity or group and which is reasonably likely to be
consummated (a "Superior Proposal"). In the event the Company receives a
Superior Proposal, nothing contained in the Merger Agreement (but subject to the
terms hereof) will prevent the Board of Directors of the Company from
recommending such Superior Proposal to the Company's stockholders, if the Board
determines, in good faith, after consultation with outside legal counsel, that
such action is required by its fiduciary duties under applicable law; provided,
however, that the Company shall not recommend to its stockholders a Superior
Proposal for a period of not less than 48 hours after Parent's receipt of a copy
of such Superior Proposal (or a description of the terms and conditions thereof,
if not in writing).
The Company will not provide any non-public information to a third party
unless: (i) the Company provides such non-public information pursuant to a
nondisclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreement; and (ii) such non-public information has been previously delivered to
Parent.
Public Announcements. Parent and Purchaser on the one hand and the Company
on the other hand will consult with each other before issuing any press release
or otherwise making any public statements with respect to the Merger Agreement,
the Offer or the Merger or the other transactions contemplated hereby, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
Indemnification. Pursuant to the terms of the Merger Agreement, all rights
to indemnification existing in favor of the current directors and officers of
the Company (the "Indemnified Persons") for acts and omissions occurring prior
to the Effective Time, as provided in the Company's certificate of incorporation
and/or bylaws (as in effect as of the date of the Merger Agreement) and as
provided in the indemnification agreements between the Company and the
Indemnified Persons (as in effect as of the date of the Merger Agreement), shall
survive the Offer and the Merger for a period of not less than four years after
the Effective Time; provided, however, that if, at any time prior to the fourth
anniversary of the Effective Time, any Indemnified Persons delivers to Parent or
the Surviving Corporation a written notice asserting a claim for
indemnification, then the claim asserted in such notice shall survive the fourth
anniversary of the Effective Time until such time as such claim is fully and
finally resolved. The certificate of incorporation and bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to current Indemnified Persons as
those contained in the certificate of incorporation and bylaws of the Company as
in effect on the date of the Merger Agreement, which provisions will not be
amended, repealed or otherwise modified from the Effective Time until the fourth
anniversary of the date on which the Merger becomes effective in any manner that
would adversely affect the rights thereunder of any such Indemnified Person.
Parent has agreed in the Merger Agreement that from the Effective Time
until the fourth anniversary of the date on which the Merger becomes effective,
Parent shall maintain in effect, for the benefit of the Indemnified Persons with
respect to acts or omissions occurring prior to the Effective Time, the
directors' and officers' liability insurance policy currently carried: provided,
however, that Parent may substitute for such policy or policies of materially
equivalent coverage for acts or commissions prior to the Effective Date and
provided, further, that Parent shall not be obligated to maintain such coverage
for policy limits which would cause the annual cost of such coverage to exceed
$397,248, representing 150% of the cost of such coverage paid by the Company in
fiscal year 1998 and, provided, further, that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
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Termination of Merger Agreement. The Merger Agreement provides grounds for
which it may be terminated at any time prior to the Effective Time, whether
before or after approval by the stockholders of the Company. The Merger
Agreement may be so terminated:
(a) by mutual written agreement of the Boards of Directors of Parent
and the Company;
(b) by either Parent or the Company:
(i) if the Offer shall be terminated or expire without any Shares
having been purchased pursuant to the Offer; provided, however, that a
party shall not be entitled to terminate the Merger Agreement if it is
in material breach of its representations and warranties, covenants or
other obligations under the Merger Agreement; or
(ii) if any court of competent jurisdiction in the United States or
other United States governmental body shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
(c) by Parent:
(i) if the Board of Directors of the Company or any committee
thereof shall have approved, or recommended (and not rescinded such
recommendation within two (2) business days) that stockholders of the
Company accept or approve, an Acquisition Proposal by a third party;
(ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified (and not rescinded such
recommendation within two (2) business days) its approval of, or
recommendation that the stockholders of the Company accept or approve
(as the case may be), the Offer, the Merger Agreement and the Merger;
(iii) if the Company shall have failed to include in the Schedule
14D-9 the recommendation of the Board of Directors of the Company that
the stockholders of the Company accept the Offer;
(iv) prior to the purchase of Shares pursuant to the Offer, in the
event that any waiting period (and any extension thereof) under the
Hart-Scott-Rodino Act applicable to the Purchase of Shares pursuant to
the Offer shall not have expired or been terminated, the Minimum
Condition shall not be satisfied or if any of the events set forth in
clause (iii) of Annex I to the Merger Agreement shall have occurred;
provided in the case of an event set forth in clause (iii), item (A),
(B), (C), (F) or (H) of Annex I to the Merger Agreement that if such
event is and continues to be reasonably probable of being cured by the
date which is 20 business days after commencement of the Offer, Parent
shall not terminate the Merger Agreement as a result of such event until
the date that is 20 business days after the commencement of the Offer;
or
(v) prior to the purchase of Shares pursuant to the Offer if the
Company is in material breach of any of its covenants or obligations
under the Merger Agreement, or any representation or warranty of the
Company contained in the Merger Agreement shall have been incorrect, in
any material respect, when made or shall have since the date of the
Merger Agreement ceased to be true and correct in any material respect;
provided, that, if such breach is curable through exercise of the
Company's commercially reasonable efforts, then Parent may not terminate
the Merger Agreement unless the breach is not cured within 10 days after
giving notice to the Company;
(d) by the Company:
(i) if the Offer shall not have been commenced in accordance with
the terms of the Merger Agreement, or Parent or Purchaser shall have
failed to purchase validly tendered Shares in violation of the terms of
the Offer within ten business days after the expiration of the Offer;
provided, however, that the Company shall not be entitled to terminate
the Merger Agreement if it is in material breach of its representations
and warranties, covenants or other obligations under the Merger
Agreement;
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(ii) if the Board of Directors of the Company has resolved to, and
in fact does, recommend to the Company's Stockholders that they accept a
Superior Proposal, and provided further that the Company shall have paid
to Parent the entire Break-up Fee (as defined below); or
(iii) prior to the purchase of Shares pursuant to the Offer, if
Parent or Purchaser is in material breach of any of its covenants or
obligations under the Merger Agreement, or any representation or
warranty of Parent or Purchaser contained in the Merger Agreement shall
have been incorrect, in any material respect, when made or shall have
since ceased to be true and correct in any material respect; provided,
that, if such breach is curable through exercise of the Parent's or
Purchaser's commercially reasonable efforts, then the Company may not
terminate the Merger Agreement unless the breach is not cured within 10
days after giving notice to the Parent.
In the event of the termination of the Merger Agreement by the Company or
Parent or both of them, the terminating party shall provide written notice of
such termination to the other party and the Merger Agreement shall forthwith
become void and there shall be no liability on the part of Parent, Purchaser or
the Company, except as otherwise provided in the Merger Agreement.
Fees and Expenses. The Merger Agreement provides that whether or not the
transactions contemplated by the Offer and the Merger Agreement are consummated,
all costs and expenses incurred in connection with the transactions contemplated
by the Offer and the Merger Agreement shall be paid by the party incurring such
expenses.
The Merger Agreement also provides that the Company shall pay Parent, in
same day funds, upon demand, a fee of $2,000,000 (the "Break-up Fee"), if any of
the following shall occur:
(i) if the Board of Directors of the Company or any committee thereof
shall have approved, or recommended that stockholders of the Company accept
or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified its unanimous approval of, or unanimous
recommendation that the stockholders of the Company accept or approve (as
the case may be), the Offer, the Merger Agreement and the Merger, or shall
have resolved to do any of the foregoing;
(iii) if the Company shall have failed to include in the Schedule
14D-9 the unanimous recommendation of the Board of Directors of the Company
that the stockholders of the Company accept the Offer; or
(iv) the following shall occur: (A) prior to the Effective Time, any
person, entity or "group" (as that term is used in Section 13(d)(3) of the
Exchange Act), shall beneficially own (as that term is used in Section
13(d)(3) of the Exchange Act), or shall have acquired, 25% or more of the
Shares, or shall have been granted any option or right, conditional or
otherwise, to acquire 25% or more of the Shares (the "25% Person"), which
Shares are not tendered to Parent in connection with the Offer, (B) the
Minimum Condition shall not be met as of the Expiration Date and (C) either
(1) the 25% Person shall, at any time within twelve (12) months of the
expiration of the Offer, effect the Acquisition (as defined below) of the
Company or enter into an agreement with the Company or commence a tender
offer to effect such an Acquisition, and the transactions contemplated
thereby are subsequently consummated at any time, or (2) any person other
than Parent or any affiliate of Parent effects the Acquisition of the
Company during 1998, or during 1998 enters into an agreement with the
Company or commences a tender offer for the Acquisition of the Company and
the transactions contemplated thereby are subsequently consummated at any
time, in any such case under this clause (2) at a purchase price equivalent
to a price per Share in excess of $2.45. For the purposes of the Merger
Agreement, an "Acquisition" of the Company means any merger, consolidation
or other reorganization, any tender offer or other transaction or series of
related transactions involving the acquisition of securities of the
Company, or any sale or license of all or substantially all the business or
assets of the Company, unless the shareholders of the Company prior to such
transaction or series of related transactions retain following such
transaction or series of related
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transactions (in respect of their equity interest in the Company prior
thereto) more than 50% of the voting equity securities of the surviving or
successor corporation to the business of the Company.
The Break-up Fee is payable to compensate Parent and Purchaser for their
direct and indirect costs and expenses associated with the negotiation and
execution of the Merger Agreement and the undertaking of the transactions
contemplated therein in the event of the occurrence of all of the events set
forth in clauses (i), (ii), (iii) and (iv) of the paragraph above, and shall
constitute liquidated damages with respect to (but solely with respect to) the
events itemized in clauses (i), (ii), (iii) and/or (iv) of the paragraph above.
However, the right to the payment of the Break-up Fee shall be in addition to
any other damages or remedies at law or in equity to which Parent or Purchaser
may be entitled as a result of the Company's violation or breach of any other
term or provision of this Agreement.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, (a) waive any stock repurchase rights,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant or
director stock plans or authorize cash payments in exchange for any options
granted under any of such plans; (b) grant any severance or termination pay to
any director, officer or employee except payments in amounts consistent with
policies and past practices or pursuant to written agreement outstanding, or
policies existing, on the date of the Merger Agreement and as previously
disclosed in writing to the other, or adopt any new severance plan, or provide
any other compensation or benefit to any employee, officer or director that
would accrue or become payable as a result of or in connection with the Offer
and/or Merger; (c) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock; (d) repurchase or otherwise acquire,
directly or indirectly, any shares of capital stock except pursuant to rights of
repurchase of any such shares under any employee, consultant or director stock
plan existing on the date of the Merger Agreement (which repurchase rights the
Company shall be obligated to exercise if the repurchase price is less than the
Offer Price); (e) issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than the
issuance of Shares pursuant to the exercise of stock options therefor
outstanding as of the date of the Merger Agreement; See Section 13, "Conduct of
Company's Business Pending Merger."
15. CERTAIN CONDITIONS TO PURCHASER'S OBLIGATIONS.
In the Merger Agreement, Purchaser has agreed notwithstanding any other
provision of the Offer, and in addition to (and not in limitation of)
Purchaser's rights to extend and amend the Offer at any time, Purchaser shall
not be required to accept for payment, purchase or pay for, or may terminate or
amend the Offer and may postpone the acceptance of, and payment for, subject to
Rule 14e-1(c) under the Exchange Act (whether or not any Shares have theretofore
been accepted for payment or paid for pursuant to the Offer), any Shares
tendered pursuant to the Offer if:
(i) any waiting period (and any extension thereof) under the
Hart-Scott-Rodino Act applicable to the purchase of Shares pursuant to the
Offer shall not have expired or been terminated;
(ii) the Minimum Condition is not satisfied;
(iii) at any time on or after the date of the Merger Agreement, any of
the following events shall be determined by Parent or Purchaser to have
occurred through no fault of Parent or Purchaser:
(iv) there shall have been any action taken or threatened, or any
statute, rule, regulation, judgment, temporary restraining order,
preliminary or permanent injunction or other order, decree or ruling
promulgated, enacted, entered, enforced or deemed applicable to the Offer
or the Merger by any
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Governmental Entity (as defined in the Merger Agreement) could reasonably
be expected to, directly or indirectly, (1) make the acceptance for payment
or the payment for, or the purchase of some or all of the Shares pursuant
to the Offer illegal or otherwise materially prohibit, delay or restrict
consummation of the Offer or the Merger or the consummation of any
transaction contemplated by the Merger Agreement, (2) require the
divestiture by Parent, Purchaser, the Company or any of their respective
subsidiaries taken as a whole of all or any material portion of the
business, assets or property of any of them or any Shares or impose any
material limitation on the ability of any of them to conduct their business
and own such assets, properties or Shares, in each case, as a result of the
Offer the Merger or the transactions contemplated thereby (3) impose any
material limitation on the ability of Parent or Purchaser to acquire or
hold or to exercise effectively all rights of ownership of the Shares,
including the right to vote any Shares purchased by any of them on all
matters properly presented to the stockholders of the Company, including,
without limitation, the adoption and approval of the Merger Agreement and
the Merger (4) result in a material diminution in the benefits expected to
be derived by Parent or Purchaser as a result of the transactions
contemplated by the Offer or the Merger Agreement, (5) impose any material
condition to the Offer, the Merger Agreement or the Merger unacceptable to
Parent or Purchaser; or
(v) the Company shall have failed to obtain all of the consents of
third parties as described in the Merger Agreement by the Expiration Date
if such failure would result in a Material Adverse Effect (as defined in
the Merger Agreement); or
(vi) the Company shall have breached, or failed to comply with, in any
material respect, any of its covenants or obligations under the Merger
Agreement or any representation or warranty of the Company in the Merger
Agreement shall have been incorrect, in any material respect when made or
on and as of the date of any scheduled expiration or consummation of the
Offer.
(vii) the Board of Directors of the Company or any committee thereof
shall have (1) withdrawn or modified (including without limitation, by
amendment of the Company's Schedule 14D-9) in a manner adverse to Parent or
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, (2) approved or recommended any Acquisition Proposal by a
third party other than the Offer and the Merger, (3) publicly resolved to
do any of the foregoing, or (4) upon a request to reaffirm the Company's
approval or recommendation of the Offer, the Merger Agreement or the
Merger, the Board of Directors of the Company shall fail to do so within
two business days after such request is made, in any event described in the
Section (D), so long as such withdrawal modification, approval,
recommendation, resolution or failure has not been rescinded within two
business days; or
(viii) the Merger Agreement shall have been terminated in accordance
with its terms; or
(ix) there shall have occurred any Material Adverse Effect (as defined
in the Merger Agreement) on the Company, or any event, fact or change which
could reasonably be expected to result in a Material Adverse Effect (as
defined in the Merger Agreement) on the Company;
which in the sole but reasonable judgment of Parent in such case, and regardless
of the circumstances makes it inadvisable to proceed with the Offer or with
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent, Purchaser and
their permitted assignees and may be asserted by Parent or Purchaser regardless
of the circumstances (including any action or inaction by Parent or Purchaser or
any of their assignees) giving rise to such condition. Except as otherwise
specified in the Merger Agreement, all the foregoing conditions may be waived by
Parent or Purchaser in whole or in part at any time and from time to time in the
sole discretion of Parent or Purchaser. The failure by Parent or Purchaser at
any time to exercise its rights with respect to the foregoing conditions shall
not be deemed a waiver of any such condition, and each condition shall be deemed
an ongoing condition with respect to which Parent or Purchaser may assert its
rights at any time prior to the completion of the Offer and from time to time.
Any determination by Parent or Purchaser concerning any event described in this
Section 15 is binding upon all persons to whom the Offer is made.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser and Parent regardless of the circumstances
(except in the case any such condition is not satisfied as
28
<PAGE> 29
the direct result of a breach by Parent or Purchaser of obligations under the
Merger Agreement) giving rise to such conditions, or may be waived (except for
the Minimum Condition) by Purchaser or Parent in whole at any time or in part
from time to time in their sole discretion. The failure by Purchaser or Parent
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right and may
be asserted at any time and from time to time. Any determination by Purchaser or
Parent concerning the conditions described in this Section shall be final and
binding upon all parties.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section, Purchaser is not aware of any approval
or other action by any governmental or administrative agency which would be
required for the acquisition or ownership of Shares by Purchaser as contemplated
herein. Should any such approval or other action be required, it will be sought,
but Purchaser has no current intention to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such matter, subject, however,
to Purchaser's right to decline to purchase Shares if any of the conditions
specified in Section 15 shall have occurred. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be obtained
without substantial conditions, or that adverse consequences might not result to
the Company's business or that certain parts of the Company's business might not
have to be disposed of if any such approvals were not obtained or other action
taken.
Antitrust. The Hart-Scott-Rodino Act provides that the acquisition of
Shares by Purchaser may not be consummated unless certain information has been
furnished to the Division (the "Division") and the FTC and certain waiting
period requirements have been satisfied. The rules promulgated by the FTC under
the Hart-Scott-Rodino Act require the filing of a Notification and Report Form
(the "Form") with the Division and the FTC and that the acquisition of Shares
under the Offer may not be consummated until 15 days after receipt of the Form
by the Division and the FTC. Within such 15 day period the Division or the FTC
may request additional information or documentary material from Purchaser. In
the event of such request the acquisition of Shares under the Offer may not be
consummated until 10 days after receipt of such additional information or
documentary material by the Division or the FTC. Purchaser expects to file its
Form with the Division and the FTC on May 15, 1998. The Company advised the
Purchaser that the Company expects to file its Form with the Division and the
FTC on May 15, 1998.
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 date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. On May 7, 1998,
prior to the execution of the Merger Agreement, the Board of Directors of the
Company, by unanimous vote of all directors present at a meeting held on such
date, (i) approved and adopted the Merger Agreement and the transactions
contemplated thereby, (ii) determined that the Merger Agreement and the
transactions contemplated thereby, including each of the Offer and the Merger,
is fair to and in the best interests of, the stockholders of the Company and
(iii) recommended that the stockholders of the Company accept the Offer and
approve and adopt the Merger Agreement and the transactions contemplated
thereby. Accordingly, Section 203 is inapplicable to the Offer or the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
29
<PAGE> 30
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. Purchaser does not know whether any of these laws will, by their
terms, apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, Offeror 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 15.
17. 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.
Parent and Purchaser have engaged Broadview Associates LLC ("Broadview") as
financial advisor in connection with their effort to acquire the Company. Parent
has agreed to pay a fee of $500,000 upon successful completion of the Offer. In
addition, Parent has agreed, whether or not the Offer is consummated, to
reimburse Broadview for its reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its legal counsel, incurred in connection with
its engagement, and to indemnify Broadview against certain liabilities and
expenses in connection with its engagement. Broadview has rendered other
advisory services to Parent from time to time in the past and may continue to
represent Parent from time to time in the future, for which it would receive
customary compensation from Parent.
Parent and Purchaser have retained MacKenzie Partners, Inc. to act as
Information Agent and BankBoston, N.A. to act as Depositary in connection with
the Offer. Such firms each will receive reasonable and customary compensation
for their services. Purchaser has also agreed to reimburse each such firm for
certain reasonable out-of-pocket expenses and to indemnify each such firm
against certain liabilities in connection with their services, including certain
liabilities under federal securities laws.
Parent and Purchaser will no pay any fees or commissions to any broker or
dealer or other person (other than the Information Agent) for making
solicitations or recommendations in connection with the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding material to their
customers.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities or blue sky
laws of such jurisdiction. In any jurisdiction where the securities or blue sky
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 one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Purchaser other than as contained in this Offer to
Purchase or in the Letter of Transmittal, and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by Purchaser.
Purchaser has filed with the Commission a statement on Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be examined and
copies may
30
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MICRONICS COMPUTERS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED MAY 15, 1998
BY
BOARDWALK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
DIAMOND MULTIMEDIA SYSTEMS, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 12, 1998, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
c/o Boston Equiserve c/o Boston Equiserve Securities Transfer & Reporting
Corporate Reorganization Corporate Reorganization Services, Inc.
Department Department 55 Broadway-3rd Floor
P.O. Box 8029 150 Royall Street New York, NY
Boston, MA 02266-8029 Mail Stop 45-01-40 Attention: Delivery Window
Canton, MA 02021
</TABLE>
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
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 holders of Shares (as
defined below) of Micronics Computers, Inc. (the "Stockholders") if certificates
evidencing Shares ("Certificates") 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 an account maintained by the
Depositary at The Depository Trust Company ("DTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates for, or a Book-Entry Confirmation (as defined in
Section 2 of the Offer to Purchase) with respect to, their Shares and all other
required documents to the Depositary prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
See Instruction 2 hereof.
<PAGE> 2
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
- --------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
CERTIFICATE NUMBER(S)* REPRESENTED BY CERTIFICATE(S)** NUMBER OF SHARES TENDERED**
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:
Account No.: at
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code No.:
<PAGE> 3
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Shareholder(s):
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if any):
Name of Institution which Guaranteed Delivery:
If delivery is by book-entry transfer:
Name of Tendering Institution:
Account No.:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Transaction Code Number:
------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to Boardwalk Acquisition Corporation, a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Diamond
Multimedia Systems, Inc., a Delaware corporation ("Parent"), the above-described
shares of Common Stock, $0.01 par value per share (collectively, the "Shares"),
of Micronics Computers, Inc., a Delaware corporation (the "Company"), for $2.45
per share, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated May 15,
1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which together constitute the "Offer"). The Offer is
being made in connection with the Agreement and Plan of Merger, dated as of May
11, 1998, among the Parent, Purchaser and the Company (the "Merger Agreement").
The undersigned understands that Purchaser reserves the right to transfer or
assign, in whole or from time to time in part, to one or more of its or Parent's
affiliates, 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 or prejudice the rights of
tendering holders of the Shares ("Stockholders") to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, Purchaser all right,
title and interest in and to all of the Shares that are being tendered hereby
and any and all other Shares or other securities issued or issuable in respect
of such Shares on or after the date of the Offer (a "Distribution"), and
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Certificates evidencing such Shares (and any Distributions), or transfer
ownership of such Shares (and any Distributions) on the account books maintained
by a Book-Entry Transfer Facility together, in any such case, with all
accompanying evidences of transfer and authenticity to, or upon the order of,
Purchaser, upon receipt by the Depositary, as the undersigned's agent, of the
purchase price with respect to such Shares, (ii) present such Shares (and any
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 any Distributions), all in accordance with the terms and subject to
the conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to all
Shares tendered hereby and accepted for payment and paid for by Purchaser (and
any Distributions), including, without limitation, the right to vote such Shares
(and any Distributions) in such manner as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper. All such powers of
attorney and proxies, being deemed to be irrevocable, shall be considered
coupled with an interest in the Shares tendered herewith. Such appointment will
be effective when, and only to the extent that, Purchaser accepts such Shares
for payment. Upon such acceptance for payment, all prior powers of attorney and
proxies given by the undersigned with respect to such Shares (and any
Distributions) will be revoked, without further action, and no subsequent powers
of attorney and proxies may be given (and, if given, will be deemed
ineffective). The designees of Purchaser will, with respect to the Shares (and
any Distributions) for which such appointment is effective, be empowered to
exercise all voting and other rights of the
<PAGE> 4
undersigned with respect to such Shares (and any Distributions) as they in their
sole discretion may deem proper. Purchaser reserves the absolute right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, Purchaser or its designees are
able to exercise full voting rights with respect to such Shares (and any
Distributions).
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
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 any Distributions) and that, when the same are accepted for
payment and paid for by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances including irrevocable proxies, and that the Shares tendered
hereby (and any Distributions) will not be subject to any adverse claim. The
undersigned, upon request, will 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 Shares tendered hereby (and any
Distributions). In addition, the undersigned shall promptly remit and transfer
to the Depositary, for the account of Purchaser, all Distributions issued to the
undersigned on or after May 11, 1998, 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 any such Distributions and may
withhold the entire purchase price or deduct from the purchase price the amount
of value thereof, as determined by Purchaser in its sole discretion.
The undersigned understands that Purchaser's acceptance for payment of any
Shares tendered hereby will constitute a binding agreement between the
undersigned and Purchaser with respect to such Shares upon the terms and subject
to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Purchaser may not be required to accept for payment any
of the Shares tendered hereby or may accept for payment fewer than all of the
Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing 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 and/or return any such Certificates evidencing
Shares not tendered or not accepted for payment in the name(s) of, and deliver
such check and/or return such Certificates to, the person(s) so indicated.
Unless otherwise indicated herein under "Special Payment Instructions," in the
case of a book-entry delivery of Shares, please credit the account maintained at
the Book-Entry Transfer Facility indicated above with respect to any Shares not
accepted for payment. The undersigned recognizes that Purchaser has no
obligation pursuant to the "Special Payment Instructions" to transfer any Shares
from the name of the registered holder thereof if Purchaser does not accept for
payment any of the Shares tendered hereby.
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if Certificates not tendered or not accepted for
payment and/or the check for the purchase price of Shares accepted for payment
are to be issued in the name of someone other than the undersigned, or if
Shares delivered by book-entry transfer that are not accepted for payment are
to be returned by credit to an account maintained at a Book-Entry Transfer
Facility, other than to the account indicated above.
Issue: [ ] Check [ ] Certificate(s) to:
Name
(PLEASE PRINT)
Address
========================================================
(ZIP CODE)
--------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
[ ] Credit Shares by book-entry transfer and not purchased to the account set
forth below
Check appropriate Box:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Acct No.:
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if Certificates not tendered or not accepted for
payment and/or the check for the purchase price of Shares accepted for payment
are to be sent to someone other than the undersigned or to the undersigned at
an address other than that shown above.
Mail check and/or certificates to:
Name
(PLEASE PRINT)
Address
========================================================
(ZIP CODE)
--------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on this Letter of Transmittal need not be guaranteed by a member firm of a
registered national securities exchange (registered under Section 6 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or by a member
firm of the National Association of Securities Dealers, Inc., by a commercial
bank or trust company having an office or correspondent in the United States or
by any other "Eligible Guarantor Institution" (bank, stockholder, savings and
loan association or credit union with membership approved signature guarantee
medallion program) as defined in Rule 17Ad-15 under the Exchange Act (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered hereby are tendered (i) by the registered holder (which term, for
purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of Shares) of such Shares who has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" herein
or (ii) as noted in the following sentence. If the Certificates are registered
in the name of a person other than the signer of this Letter of Transmittal, or
if payment is to be made to, or Certificates evidencing unpurchased Shares are
to be issued or returned to, a person other than the registered owner, then the
tendered Certificates must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name(s) of the registered owner(s)
appear(s) on the Certificates, with the signatures on the Certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See Instruction
5.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
Stockholders if Certificates evidencing Shares 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 pursuant to the procedures for book-entry
transfer set forth in Section 3 of the Offer to Purchase. For a Stockholder to
validly tender Shares pursuant to the Offer, either (a) a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof),
with any required signature guarantees and any other required documents, or an
Agent's Message in the case of a book-entry delivery, must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration Date
and either (i) Certificates for tendered Shares must be received by the
Depositary at one of such addresses prior to the Expiration Date or (ii) Shares
must be delivered pursuant to the procedures for book-entry transfer set forth
in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Date or (b) the tendering
Stockholder must comply with the guaranteed delivery procedures set forth below
and in Section 3 of the Offer to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary or
complete the procedures for book-entry transfer prior to the Expiration Date may
tender their Shares by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution, (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by Purchaser, must be received by the Depositary prior to the
Expiration Date, and (iii) the Certificates representing all tendered Shares in
proper form for transfer, or a Book-Entry Confirmation with respect to all
tendered Shares, together with a Letter of Transmittal (or a manually signed
facsimile thereof), 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 Nasdaq National
Market trading days after the date of such Notice of Guaranteed Delivery. If
Certificates are forwarded separately to the Depositary, a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile thereof)
must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, 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. All
tendering Stockholders, by execution of this Letter of Transmittal (or a
facsimile thereof), waive any right to receive any notice of the acceptance of
their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
information required under "Description of Shares Tendered" should be listed on
a separate signed schedule attached hereto.
4. Partial Tenders. If less than all of the Shares represented by any
Certificates delivered to the Depositary herewith is to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such case, a new Certificate for the remainder of the
Shares that were evidenced by the old Certificate(s) will be sent, without
expense, to the person(s) signing this Letter of Transmittal, unless otherwise
provided in the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on this Letter of
<PAGE> 7
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by Certificate(s) delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Instruments of Transfer 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 Certificate(s) without
alteration, or any change whatsoever.
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 of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Certificates. To
obtain additional Letters of Transmittal, you may either make a photocopy of
this Letter of Transmittal or call MacKenzie Partners, Inc., the Information
Agent, toll-free at (800) 322-2885 or collect at (212) 929-5500.
If this Letter of Transmittal or any Certificates or instruments of
transfer 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.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on the Certificate(s).
Signature(s) on such Certificate(s) and such endorsements or instruments of
transfer must be guaranteed by an Eligible Institution.
6. Transfer Taxes. Except as set forth in this Instruction 6, Purchaser
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale 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 (in the circumstances
permitted hereby) if Certificates for Shares not tendered or not purchased are
to be registered in the name of, any person other than the registered holder(s),
or if tendered Certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any transfer
taxes (whether imposed on the registered holder(s) or such person) 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 herewith.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check and/or
Certificates for unpurchased Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be sent
and/or such Certificates are to be returned to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. If any
tendered Shares are not purchased for any reason and such Shares are delivered
by book-entry transfer to a Book-Entry Transfer Facility, such Shares will be
credited to an account maintained at the appropriate Book-Entry Transfer
Facility.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance may be directed to the Information Agent at its address or telephone
number set forth below and requests for additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or brokers, dealers, commercial banks and
trust companies and such materials will be furnished at Purchaser's expense.
9. Waiver of Conditions. The conditions of the Offer may be waived by
Purchaser, in whole or in part, at any time or from time to time, at Offeror's
sole discretion, subject to the terms of the Offer and the Merger Agreement.
10. Backup Withholding Tax. Each tendering Stockholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided under "Important Tax Information" below.
FAILURE TO PROVIDE THE INFORMATION ON THE SUBSTITUTE FORM W-9 MAY SUBJECT THE
TENDERING STOCKHOLDER TO 31% FEDERAL INCOME TAX BACKUP WITHHOLDING ON THE
PAYMENT OF THE PURCHASE PRICE FOR THE SHARES. The tendering Stockholder should
indicate in the box in Part III of the Substitute Form W-9 if the tendering
Stockholder has not been issued a TIN and has applied for or intends to apply
for a TIN in the near future, in which case the tendering Stockholder should
complete the Certificate of Awaiting Taxpayer Identification Number provided
below. If the Stockholder has indicated in the box in Part III that a TIN has
been applied for and the Depositary is not provided a TIN
<PAGE> 8
within 60 days, the Depositary will withhold 31% of all payments of the purchase
price, if any, made thereafter pursuant to the Offer until a TIN is provided to
the Depositary.
11. Lost or Destroyed Certificates. If any Certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify the
Depositary. The holders will then be instructed as to the procedure to be
followed in order to replace the Certificate(s). This Letter of Transmittal and
related documents cannot be processed until the procedures for replacing lost or
destroyed Certificate(s) have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH CERTIFICATES OR A
BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Stockholder whose tendered Shares are
accepted for payment is required 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 his social security number. 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 so indicate on
the Substitute Form W-9 and should complete the Certificate of Awaiting Taxpayer
Identification Number provided below. See Instruction 10. 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 Stockholders with respect to Shares purchased pursuant to the Offer
may be subject to federal income tax backup withholding.
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. Forms for such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
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 with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, a Stockholder
must provide the Depositary with his correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such Stockholder is awaiting a TIN) and that (1) such
Stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified the Stockholder that
he 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.
<PAGE> 9
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Name(s)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------------------------------------
Area Code and Telephone Number
--------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
----------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
Dated:
--------------------------------- , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
Authorized Signature(s)
--------------------------------------------------------------------------
Name
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------------------------------
Dated:
--------------------------------- , 1998
<PAGE> 10
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: BANKBOSTON, N.A.
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT PART III -
FORM W-9 THE RIGHT AND CERTIFY BY SIGNING AND DATING TIN:
BELOW. Social Security Number
or Employer Identification Number
-------------------------------------------------------------------------------------------
DEPARTMENT OF THE PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines for
TREASURY, Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
INTERNAL REVENUE SERVICE instructed therein.
-------------------------------------------------------------------------------------------
PAYOR'S REQUEST Certification -- Under penalties of perjury, I certify that:
FOR TAXPAYER (1) The number shown on this form is my correct TIN (or I am waiting for a number to be
IDENTIFICATION issued to me); and
NUMBER ("TIN") (2) I am not subject to backup withholding because (a) I am exempt from backup
AND CERTIFICATION withholding, (b) I have not been notified by the Internal Revenue Service ("IRS") that
I am subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
-------------------------------------------------------------------------------------------
Signature: Date: ______________
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see the instructions in the
enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to
me, and either (1) I have mailed or delivered an application to receive a TIN
to the appropriate IRS Center or Social Security Administration Officer or (2)
I intend to mail or deliver an application in the near future. I understand
that if I do not provide a TIN by the time of payment, 31% of all payments
pursuant to the Offer made to me thereafter will be withheld until I provide a
number.
<TABLE>
<C> <S> <C>
Signature: Date: ______________
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC. LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call Toll Free (800) 322-2885
<PAGE> 1
MACKENZIE PARTNERS, INC. LOGO
156 Fifth Avenue
New York, NY 10010
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MICRONICS COMPUTERS, INC.
AT
$2.45 NET PER SHARE
BY
BOARDWALK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
DIAMOND MULTIMEDIA SYSTEMS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 12, 1998, UNLESS EXTENDED.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Boardwalk Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Diamond
Multimedia Systems, Inc., a Delaware corporation ("Parent"), to act as
Information Agent in connection with Purchaser's offer to purchase all of the
outstanding shares of Common Stock, $0.01 par value per share (collectively, the
"Shares"), of Micronics Computers, Inc. (the "Company"), at a purchase price of
$2.45 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
May 15, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together with any amendments or supplements thereto, collectively
constitute the "Offer") enclosed herewith. The Offer is being made in connection
with the Agreement and Plan of Merger, dated as of May 11, 1998, among Parent,
Purchaser and the Company (the "Merger Agreement"). Holders of Shares whose
certificates for such Shares are not immediately available or who cannot deliver
their certificates and all other required documents to BankBoston, N.A. (the
"Depositary") or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, SHARES
REPRESENTING AT LEAST FIFTY-ONE PERCENT (51%) OF THE SHARES THEN OUTSTANDING ON
A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (INCLUDING ALL SHARES ISSUABLE
UPON EXERCISE OR CONVERSION OF ALL STOCK OPTIONS, VESTED OR SCHEDULED TO VEST
PRIOR TO JULY 31, 1998, AND CONVERTIBLE SECURITIES OR OTHER RIGHTS TO PURCHASE
OR ACQUIRE SHARES). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTIONS 1 AND 15 OF THE OFFER TO
PURCHASE.
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.
<PAGE> 2
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. The Offer to Purchase, dated May 15, 1998.
2. The Letter of Transmittal to be used by holders of Shares in
accepting the Offer and tendering Shares. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares.
3. A letter to stockholders of the Company from Charles J. Hart,
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if neither of the two procedures for tendering Shares set forth
in the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of the Offer to Purchase promptly after the later to
occur of (a) the Expiration Date and (b) the satisfaction or waiver of the
conditions set forth in Section 15 of the Offer to Purchase related to
regulatory matters. Subject to compliance with Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended, Purchaser expressly reserves the
right to delay payment for Shares in order to comply in whole or in part with
any applicable law. See Sections 1 and 16 of the Offer to Purchase. 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)
certificates for such Shares 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 properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with all required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message (as defined in Section 2 of the Offer to Purchase) and (iii) any other
documents required by the Letter of Transmittal.
Neither Purchaser nor Parent will pay any fees or commission to any broker,
dealer or any other person (other than the Information Agent and the Depositary
as described in Section 17 of the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes incident to
the transfer to it of validly tendered Shares, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. 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 FRIDAY, JUNE 12, 1998, UNLESS
THE OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message or other required documents should be sent to the Depositary and
(ii) certificates representing the tendered Shares or a timely Book-Entry
Confirmation (as defined in Section 2 of the Offer to Purchase) should be
delivered to the Depositary in accordance with the instructions set forth in the
Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender must
be effected by following the guaranteed delivery procedures specified in Section
3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer, including requests
for additional copies of the enclosed materials, should be addressed to
MacKenzie Partners, Inc., the Information Agent for the Offer, at 156 Fifth
Avenue, New York, New York 10010, (212) 929-5500 (call collect) or toll free at
(800) 322-2885.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MICRONICS COMPUTERS, INC.
AT
$2.45 NET PER SHARE
BY
BOARDWALK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
DIAMOND MULTIMEDIA SYSTEMS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 12, 1998, UNLESS EXTENDED.
May 15, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated May 15,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Boardwalk Acquisition
Corporation, a Delaware corporation ("Purchaser") and a wholly owned subsidiary
of Diamond Multimedia Systems, Inc. ("Parent"), to purchase all of the
outstanding shares of Common Stock, $0.01 par value per share (collectively, the
"Shares") of Micronics Computers, Inc., a Delaware corporation (the "Company"),
at a price of $2.45 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer.
The Offer is being made in connection with the Agreement and Plan of Merger,
dated as of May 11, 1998, among Parent, Purchaser and the Company (the "Merger
Agreement"). Holders of Shares whose certificates for such Shares (the
"Certificates") are not immediately available or who cannot deliver their
Certificates and all other required documents to the Depositary or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
the Offer to Purchase) must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US
FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf any or all of the Shares held by us for your account, pursuant to
the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $2.45 per Share, net to the seller in cash.
2. The Offer is subject to a Minimum Condition (as defined in the
Offer to Purchase) and certain other conditions. See Sections 1 and 15 of
the Offer to Purchase.
3. The Offer is being made for all of the outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by
Purchaser pursuant to the Offer. However, federal income tax backup
withholding at a rate of 31% may be required, unless an exemption is
provided or unless the required taxpayer identification information is
provided. See Instruction 10 of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, June 12, 1998, unless the Offer is extended.
6. The Board of Directors of the Company (the "Board") has unanimously
approved the Offer and the Merger Agreement (as defined in the Offer to
Purchase) and determined that the Offer and the Merger are fair to and in
the
<PAGE> 2
best interests of the Company and its stockholders and unanimously
recommends that the stockholders accept the Offer and tender their Shares.
7. Notwithstanding any other provision of the Offer, payment for
Shares accepted for payment pursuant to the offer will in all cases be made
only after timely receipt by the Depositary of (a) Certificates pursuant to
the procedures set forth in Section 3 of the Offer to Purchase, or a timely
Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase)
with respect to such Shares, (b) the Letter of Transmittal (or a manually
signed 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 2 of the Offer to Purchase) and (c)
any other documents required by the Letter of Transmittal. Accordingly,
payment may not be made to all tendering stockholders at the same time
depending upon when Certificates are actually received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. YOUR
INSTRUCTIONS TO US SHOULD BE FORWARDED PROMPTLY TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Purchaser may,
in its discretion, take such action as it may deem necessary to make the Offer
in any jurisdiction and extend the Offer to holders of shares in such
jurisdiction.
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 will be deemed to
be made on behalf of Purchaser by one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MICRONICS COMPUTERS, INC.
BY
BOARDWALK ACQUISITION CORPORATION
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase of Boardwalk Acquisition Corporation dated May 15, 1998, and the
related Letter of Transmittal (which together constitute the "Offer") in
connection with the offer by Boardwalk Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Diamond Multimedia Systems, Inc., a
Delaware corporation, to purchase all outstanding shares of Common Stock
(collectively, the "Shares") of Micronics Computers, 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) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered: *
SIGN HERE
Account Number: ------------------------------------------------
Date: , 1998 ------------------------------------------------
Signature(s)
------------------------------------------------
------------------------------------------------
(Print Name(s))
------------------------------------------------
------------------------------------------------
(Print Address(es))
------------------------------------------------
(Area Code and Telephone Number(s))
------------------------------------------------
(Taxpayer Identification or Social Security
Number(s))
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK
OF
MICRONICS COMPUTERS, INC.
AT
$2.45 NET PER SHARE
BY
BOARDWALK ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
DIAMOND MULTIMEDIA SYSTEMS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 12, 1998, UNLESS EXTENDED.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
the Common Stock, $0.01 par value per share (collectively, the "Shares") of
Micronics Computers, Inc., a Delaware corporation (the "Company"), are not
immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach BankBoston, N.A. (the "Depositary") prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase). This Notice of Guaranteed
Delivery may be delivered by hand or transmitted by facsimile transmission or
United States mail, overnight mail or courier to the Depositary. See Section 3
of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
c/o Boston Equiserve c/o Boston Equiserve Securities Transfer & Reporting
Corporate Reorganization Corporate Reorganization Services, Inc.
Department Department 55 Broadway-3rd Floor
P.O. Box 8029 150 Royall Street New York, NY
Boston, MA 02266-8029 Mail Stop 45-01-40 Attention: Delivery Window
Canton, MA 02021
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery 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.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Boardwalk Acquisition Corporation, a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Diamond
Multimedia Systems, Inc., a Delaware corporation ("Parent"), upon the terms and
subject to the conditions set forth in the Offer to Purchase dated May 15, 1998
(the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged, the
number of Shares indicated below pursuant to the guaranteed delivery procedure
set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: Name(s) of Record Holder(s):
Certificate Numbers (if available): ------------------------------------------------
- ------------------------------------------------ ------------------------------------------------
(Please Type or Print)
- ------------------------------------------------
Check ONE box if Share(s) will be tendered by Address(es):
book entry transfer: ------------------------------------------------
[ ] The Depository Trust Company ------------------------------------------------
[ ] Philadelphia Depository Trust Company
Area Code and Tel. No(s).:
Account No.: Signature(s):
Date: ------------------------------------------------
</TABLE>
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in Section 3 of the
Offer to Purchase), hereby guarantees to deliver to the Depositary the
certificates representing Shares tendered hereby, in proper form for transfer,
or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase)
with respect to such Shares, in either case together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), with any required signature guarantees, and any other documents
required by the Letter of Transmittal, all within three Nasdaq National Market
trading days after the date hereof.
<TABLE>
<S> <C>
Name of Firm:
(AUTHORIZED SIGNATURE)
Address: Name:
(PLEASE TYPE OR PRINT)
Title:
ZIP CODE
Area Code and Tel. No.: Dated:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT ONLY TOGETHER WITH YOUR
LETTER OF TRANSMITTAL.
<PAGE> 1
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the Payer.
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a minor The Minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The grantor-
savings trust (grantor is trustee(1)
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner(3)
=============================================================
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: EMPLOYER
IDENTIFICATION
NUMBER OF --
- -------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or
other tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
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. If
only one person on a joint account has a SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employment identification number (if you have one).
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
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 (for businesses and all
other entities), or Form W-7 for Individual Taxpayer Identification Number (for
alien individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all payments include the
following:
-- A financial institution.
-- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
-- The United States or any agency or instrumentality thereof.
-- A State, the District of Columbia, a possession of the United States, or
any political 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.
Payees that may be exempted from backup withholding:
-- A corporation.
-- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
-- A real estate investment trust.
-- A common trust fund operated by a bank under section 584(a).
-- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
-- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
-- Payments to nonresident aliens subject to withholding under section 1441.
-- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
-- Payments of patronage dividends where the amount received is not paid in
money.
-- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
-- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
-- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
-- Payments described in section 6049(b)(5) to nonresident aliens.
-- Payments on tax-free covenant bonds under section 1451.
-- Payments made by certain foreign organizations.
-- Mortgage interest paid to you.
Exempt payees described above should file a Substitute 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 sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and their regulations.
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 the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
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 correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated May 15,
1998 and related Letter of Transmittal. The Offer is not being made to, and
tenders will not be accepted from, or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. If the securities laws
of any jurisdiction require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of Boardwalk Acquisition
Corporation by 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
MICRONICS COMPUTERS, INC.
AT
$2.45 NET PER SHARE IN CASH
BY
BOARDWALK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
DIAMOND MULTIMEDIA SYSTEMS, INC.
Boardwalk Acquisition Corporation, a Delaware corporation ("Purchaser")
and a wholly-owned subsidiary of Diamond Multimedia Systems, Inc., a Delaware
corporation ("Parent"), is offering to purchase all outstanding shares of Common
Stock, par value $0.01 per share (collectively, the "Shares"), of Micronics
Computers, Inc., a Delaware corporation (the "Company"), at a purchase price of
$2.45 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being hereinafter referred to as the "Offer Price"), net to the
seller in cash, without interest thereon, less any required withholding taxes,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated May 15, 1998 and the related Letter of Transmittal (which together
constitute the "Offer"). See the Offer to Purchase for capitalized terms used
but not defined herein.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, JUNE 12, 1998, 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 Date (as defined
below) Shares representing at least fifty-one percent (51%) of the Shares then
outstanding on a fully diluted basis on the date of purchase (including all
Shares issuable upon exercise or conversion of all outstanding stock
options,vested or scheduled to vest prior to July 31, 1998, and convertible
securities or other rights to purchase or acquire Shares) (the "Minimum
Condition"), and (ii) the expiration or termination of any applicable waiting
periods imposed by the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended. See Sections 1 and 15 of the Offer to Purchase.
The Offer is not conditioned on obtaining financing.
The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of May 11, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides, among other things,
for the commencement of the Offer by Purchaser and further provides that, after
the purchase of Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent. Pursuant to the Merger, each outstanding
Share (other than (i) Shares held directly or indirectly by Parent, Purchaser,
the Company or any of their majority-owned subsidiaries and (ii) Shares held by
holders who have properly exercised their appraisal rights under the Delaware
General Corporation Law) immediately prior to the Effective Time (as defined in
the Merger Agreement), will be canceled and extinguished and converted into the
right to receive the Offer Price, in cash, without interest thereon, less any
required withholding of taxes, upon the surrender of certificates formerly
representing such Shares.
The Board of Directors of the Company has unanimously approved the Offer
and the Merger and determined that the Offer and the Merger are fair to and in
the best interests of the Company and the holders of Shares (the "Stockholders")
and unanimously recommended that the Stockholders accept the Offer and tender
their Shares.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered to Purchaser and not
withdrawn on or prior to the Expiration Date if, as and when Purchaser gives
oral or written notice to BankBoston, N.A. (the "Depositary") of Purchaser's
acceptance for payment of such Shares. 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 payment from Purchaser and transmitting payments to tendering
Stockholders. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering Stockholders, Purchaser's obligation to make such
payment will be satisfied, and tendering Stockholders must thereafter look
solely to the Depositary for payments of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Friday, June 12, 1998, unless and until Purchaser, in accordance with the term
of the Offer and the Merger Agreement, extends the period of time during which
the Offer is open, in which event the term "Expiration Date" means the latest
time and date at which the Offer, as so extended, expires. Purchaser has agreed
in the Merger Agreement that, without the prior written approval of the Company,
it will not extend the period during which the Offer is open, except (subject to
the Company's right to terminate the Merger Agreement, discussed under Section
13 of the Offer to Purchase) (A) as required to comply with any rule, regulation
or interpretation of the Securities and Exchange Commission (the "Commission"),
(B) until such time as all such conditions described under Section 15 of the
Offer to Purchase have been satisfied or waived or (C) if less than 90% of the
outstanding Shares have been tendered, for one or more times for a total number
of days in the aggregate for any extension in accordance with this clause (C)
not to exceed 20 business days for any reason other than those specified in the
immediately preceding clauses (A) and (B). Subject to the restrictions set forth
in the Merger Agreement, Purchaser reserves the right (but will not be
obligated), in its sole discretion, to extend the period during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
by making a public announcement of such extension. There can be no assurance
that Purchaser will exercise its right to extend the Offer.
Subject to the applicable rules and regulations of the Commission,
Purchaser expressly reserves the right, in its sole discretion, to delay payment
for the Shares regardless of whether such Shares were theretofore accepted for
payment, or, subject to the limitations set forth in the Merger Agreement, to
terminate the Offer and not accept for payment or pay for any Shares not
theretofore accepted for payment or paid for, upon the occurrence of any
conditions set forth in Section 15 of the Offer to Purchase by giving oral or
written notice of such delay or termination to the Depositary. Any extension of
the period during which the Offer is open, or delay in acceptance for payment or
payment, or termination or amendment of the Offer, will be followed, as promptly
as practicable, by public announcement thereof, such announcement in the case of
an extension to be issued not later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date in accordance
with the public announcement requirements of Rule 14d-4(c) under the Exchange
Act. The reservation by Purchaser of the right to delay acceptance for payment
of, or payment for, Shares is subject to the provisions of Rule 14e-1(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
requires that Purchaser pay consideration offered or return the Shares deposited
by or on behalf of Stockholders promptly after the termination or withdrawal of
the Offer. The Purchaser shall not have any obligation to pay interest on the
purchase price for tendered Shares whether or not the Purchaser exercises its
right to extend the Offer.
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in Section 4 of the Offer to Purchase. Shares tendered
pursuant to the Offer may be withdrawn pursuant to the procedures set forth in
Section 4 of the Offer to Purchase at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by Purchaser pursuant to
the Offer, may also be withdrawn at any time after July 13, 1998. For a
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 of the Offer to Purchase. Any notice of
withdrawal must specify the name of the persons who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder, if different from that of the person who tendered such Shares. If
certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the tendering Stockholder must also submit to the Depositary the
serial numbers shown on the particular certificates evidencing the Shares to be
withdrawn, and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution (as defined below), except in the case of Shares
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer set forth in Section
3 of the Offer to Purchase, the notice of withdrawal must also specify the name
and number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures. An Eligible Institution is a member firm of a
registered national securities exchange (registered under Section 6 of the
Exchange Act), a member of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States, or any other "Eligible Guarantor Institution" as defined in Rule
17Ad-15 under the Exchange Act.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Exchange Act is contained in the Offer
to Purchase and is incorporated herein by reference.
The Company has provided Purchaser with its stockholder list and
security position listings for the purpose of disseminating the Offer to
Stockholders. The Offer to Purchase, the related Letter of Transmittal and other
relevant materials 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 Company's
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.
Stockholders are urged to read the Offer to Purchase and the related
Letter of Transmittal carefully before deciding whether to tender their Shares
pursuant to the Offer.
Questions and requests for assistance or for copies of the Offer to
Purchase, the Letter of Transmittal or other related materials may be directed
to the Information Agent at its address and telephone number set forth below,
and copies will be furnished promptly at Purchaser's expense. Holders of Shares
may also contact brokers, dealers, commercial bankers and trust companies for
additional copies of the Offer to Purchase, the Letter of Transmittal or other
related materials.
The Information Agent for the Offer is:
[MacKenzie Partners Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
May 15, 1998
<PAGE> 1
Exhibit (a)(8)
DIAMOND MULTIMEDIA
FOR IMMEDIATE RELEASE
<TABLE>
<CAPTION>
<S> <C>
Contacts:
Ken Wirt, Vice President, Corporate Marketing Jim Walker, Sr VP & Chief Financial Officer
Diamond Multimedia Systems, Inc. Diamond Multimedia Systems, Inc.
Voice: (408) 324-7376 Voice: (408) 325-7333
Fax: (408) 325-7827 Fax: (408) 325-7956
[email protected] [email protected]
</TABLE>
DIAMOND MULTIMEDIA TO ACQUIRE MICRONICS/ORCHID
Combination Provides Diamond Entry into Multimedia Systems Board Business
and Consolidates Voodoo2 Business
SAN JOSE, Calif.--May 11, 1998--Diamond Multimedia Systems, Inc. (NASDAQ:DIMD),
a leader in interactive multimedia acceleration, and Micronics Computers, Inc.
(NASDAQ:MCRN) announced today that the two firms have entered into a definitive
agreement for Diamond to acquire Micronics at a price of $2.45 per share in
cash, or approximately $31.6 million.
Diamond Multimedia expects to initiate a cash tender offer within five business
days and intends to complete the transaction in June 1998, subject to regulatory
approval and other customary conditions. The offer has been approved by the
Boards of Directors of both Micronics and Diamond Multimedia. The acquisition of
Micronics will enable Diamond's entry into the multimedia systems board business
and support the consolidation of Voodoo2-based computer gaming boards.
Multimedia Systems Boards
As multimedia peripherals become an increasingly important factor in the design
and sales of personal computer systems, and as the personal computer converges
with low-cost digital appliances, Diamond Multimedia anticipates an expanding
market for integrated systems boards that combine the attributes of both
low-cost and multimedia capabilities. Diamond's acquisition of Micronics
therefore comprises two strategic initiatives: first, Diamond intends to
leverage Micronics' existing motherboard business through Diamond's worldwide
procurement, sales and customer support infrastructure, including the sale of
Micronics' Twister LX, Redstone and Helios motherboards which support the
Pentium II, up to dual 400 MHz processors, the accelerated graphics port (AGP)
and front side bus speeds up to 100 MHz. Second, Diamond intends to combine
Micronics' motherboard expertise and highly-qualified engineering team with
Diamond's multimedia and communications expertise to develop integrated
multimedia systems boards for the sub-$1,000 PC market and the emerging set-top,
media center and Internet appliance market.
PC Gaming Market
The PC gaming market has experienced rapid growth over the past year. Diamond
has been the leader in supplying PC gaming boards with its award-winning Monster
Sound and, in graphics, its Monster 3D and Monster 3D II products based on the
Voodoo Graphics and Voodoo2 chipsets, respectively, from 3Dfx Interactive
(NASDAQ:TDFX - news). Micronics/Orchid is also a supplier of Voodoo Graphics and
Voodoo2-based PC gaming boards. Diamond Multimedia intends to continue the
Orchid Righteous
<PAGE> 2
3D brand in the computer gaming market and to coordinate the marketing of the
Righteous 3D and Monster 3D brands to their respective target markets worldwide.
"The acquisition of Micronics provides Diamond with an entry into the market
for multimedia systems boards," said Bill Schroeder, president and CEO of
Diamond Multimedia. "The addition of the systems board business coupled with
the consolidation of the PC gaming business provides strong synergy between
Diamond and Micronics."
"Diamond's worldwide procurement, channel penetration and brand strength, plus
the addition of Diamond's multimedia and communications capabilities to
Micronics' traditional motherboard design strengths, make this a great fit,"
said Charles Hart, president and CEO of Micronics.
Financial Considerations
Diamond Multimedia intends to finance the acquisition of Micronics with
existing cash and the approximately $20 million in cash currently held by
Micronics. Diamond Multimedia expects to commence a tender offer promptly at
$2.45 per share for all outstanding shares of Micronics. The offer is also
subject to the condition that at least fifty-one percent (51%) of the shares
are tendered. If the tender offer is successful, it will be followed as
promptly as possible by a merger in which any remaining shares of Micronics
stock will be converted into the right to receive $2.45 per share in cash.
"Diamond expects to take a one-time charge during the second quarter in
connection with the acquisition of Micronics," said Jim Walker, senior vice
president and CFO of Diamond Multimedia. "We anticipate this charge will be
comprised of both expensed in-process R&D and the costs associated with the
integration of the two businesses. However, on an ongoing basis, we do not
expect this deal to be dilutive." Diamond Multimedia was advised in the
acquisition by Broadview Associates, LLC.
Diamond Multimedia Systems, Inc.
Diamond Multimedia is driving the interactive multimedia market by providing
advanced solutions for home, business and professional desktop computer users,
enabling them to create, access and experience compelling new media content
from their desktops and through the Internet. Diamond accelerates multimedia
from the Internet to the hard drive with products that include the Stealth and
Viper series of media accelerators, the Monster series of entertainment 3D and
sound accelerators, the Fire series of professional 3D and SCSI accelerators,
and the Supra series of modems. Diamond also markets DVD and video phone kits.
Diamond's common stock is traded on the Nasdaq Stock Market under the symbol
DIMD, and its web site address is www.diamondmm.com.
Micronics/Orchid
Micronics is an independent supplier of high performance motherboards and
multimedia peripherals, sold under the Orchid brand, for personal computers and
servers. Based in Fremont, California, Micronics markets its products worldwide
to computer system manufacturers, system integrators, value added resellers
and the distribution channel. The company's toll-free sales number is
800/577-0977. Web sites are www.micronics.com and www.orchid.com.
Except for historical information contained herein, the matters set forth in
this press release, such as statements relating to the Company's ability to
successfully exploit technological and market developments, the expansion of
the systems board market, the ability of Diamond to leverage Micronics'
motherboard business, the synergy of Diamond and Micronics with respect to the
PC gaming market and the supply of multimedia systems boards, the timing and
success of new product introductions by the Company and its competitors, and
the Company's ability to invest in new technologies and to enhance its existing
systems are forward-looking statements that are subject to risks and
uncertainties, including the impact of competitive products and pricing and
alternative technological advances, the timely and successful development and
market acceptance of new products and upgrades to existing products, the
impact, if any, of the announcement of the proposed acquisition on the
Company's business, the ability of the Company to successfully integrate the
business and operations of Micronics if the acquisition is
<PAGE> 3
consummated, and other risks as detailed from time to time in Diamond
Multimedia's SEC filings, including its most recent Forms 10-K and 10-Q.
How to Contact Diamond Multimedia
There are many ways to reach Diamond for sales support, technical assistance,
driver updates and general information:
Internet Web Site: http://www.diamondmm.com
Diamond Multimedia's Headquarters and
Multimedia Division: 408/325-7000; Fax: 408/325-7070
Communications Division (Supra brand modems)
Main Phone Number: 360/604-1400; Fax: 360/604-1401
European Division (Germany): +49-8151-266-0;
(UK): +44-1189-444400; (France) +33-1-55381600
Korean Office (Seoul): +82-2-551-2700; Fax: +82-2-551-2710
Japanese Office (Tokyo); +81-3-5695-8401; Fax: +81-3-5695-8403
ASEAN Office (Singapore): +65-353-9511; Fax: +65-353-9510
Hong Kong Office: +852-2375-9023; Fax: +852-2375-9021
Australian Office (Sydney); +61-2-9460-2355; Fax: +61-2-9460-2360
Swedish Office: +46-417-40060; Fax: +46-417-40054
Product Support (Voice), United States: 541-967-2450;
Europe (Germany) +49-8151-266-330;
Europe (UK) +44-1189-444444; TDD/TTY Support 541-967-2451 Product Support (Fax),
United States: 541/967-2401; Europe (Germany) +49-8151-266-331;
Europe (UK): +44-1189-444445; (France) +33-1-47561139
Pre-sales Information: 1-800/468-5846
Investor Relations: 408/325-7476; 1-888/474-3463 (U.S. and Canada) 24-(Hour
Fax-On-Demand Service: 1-800/380-0030 FTP site: ftp.diamondmm.com BBS:
541/967-2444 (to 33.6 Kbps); Europe (Germany) BBS at +49-8151-266333 (to 28.8
Kbps) or +49-8151-266334 (ISDN); Europe (UK) at +44-1189-444415 (to 33.6 Kbps)
Note To Editors: Monster 3D and Supra are either trademarks or registered
trademarks of Diamond Multimedia Systems, Inc. Monster(R) is a registered
trademark of Monster Cable. Viper(R) is a registered trademark of Directed
Electronics, Inc., Used under License. All other trademarks referenced are the
service mark, trademark or registered trademark of their respective
manufacturers. This announcement relates to products whose introductions and
sales are in North America. The product name, contents, prices and
availability may differ elsewhere in the world according to local factors and
requirements.
- ---------------
Contact:
Diamond Multimedia Systems, Inc.
Ken Wirt, 408/325-7376 (VP, Corporate Marketing)
[email protected]
Jim Walker, 408/325-7333 (Sr. VP and CFO)
[email protected]
<PAGE> 1
Exhibit (c)(1)
================================================================================
AGREEMENT AND PLAN OF MERGER
By and Among
Diamond Multimedia Systems, Inc.
Boardwalk Acquisition Corporation
and
Micronics Computers, Inc.
Dated as of May 11, 1998
================================================================================
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Company Action . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . 5
2.4 Certificate of Incorporation . . . . . . . . . . . . . . . . 5
2.5 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Conversion of Shares . . . . . . . . . . . . . . . . . . . . 6
2.10 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . 7
2.11 Payment For Shares . . . . . . . . . . . . . . . . . . . . . 7
2.12 No Further Rights or Transfers . . . . . . . . . . . . . . . 8
2.13 Supplementary Action . . . . . . . . . . . . . . . . . . . . 8
2.14 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . 9
3.1 Organization of the Company . . . . . . . . . . . . . . . . 9
3.2 Company Capital Structure . . . . . . . . . . . . . . . . . 10
3.3 Obligations With Respect to Capital Stock . . . . . . . . . 10
3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 SEC Filings; the Company Financial Statements . . . . . . . 12
3.6 Absence of Certain Changes or Events . . . . . . . . . . . . 13
3.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Title to Properties; Absence of Liens and Encumbrances . . . 14
3.9 Intellectual Property . . . . . . . . . . . . . . . . . . . 15
3.10 Compliance; Permits; Restrictions . . . . . . . . . . . . . 18
3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . 19
3.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 19
3.14 Employees; Labor Matters . . . . . . . . . . . . . . . . . . 19
3.15 Environmental Matters . . . . . . . . . . . . . . . . . . . 20
3.16 Agreements, Contracts and Commitments . . . . . . . . . . . 21
3.17 Change of Control Payments . . . . . . . . . . . . . . . . . 22
3.18 Board Approval . . . . . . . . . . . . . . . . . . . . . . . 22
3.19 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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3.20 Offer Documents . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER . . . 22
4.1 Organization and Qualification . . . . . . . . . . . . . . . 22
4.2 Corporate Power, Authorization and Enforceability . . . . . 22
4.3 No Conflict; Required Filings and Consents . . . . . . . . . 23
4.4 Schedule 14D-1 . . . . . . . . . . . . . . . . . . . . . . . 24
4.5 Available Funds . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Conduct of Business by the Company . . . . . . . . . . . . . 24
5.2 Access to Information; Confidentiality . . . . . . . . . . . 26
5.3 Proxy Material; Stockholders' Meeting . . . . . . . . . . . 27
5.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Public Announcements . . . . . . . . . . . . . . . . . . . . 29
5.6 Notification of Certain Matters . . . . . . . . . . . . . . 30
5.7 Actions by Company . . . . . . . . . . . . . . . . . . . . . 30
5.8 Officers' and Directors' Indemnification . . . . . . . . . . 30
5.9 intentionally left blank] . . . . . . . . . . . . . . . . . 31
5.10 Additional Agreements . . . . . . . . . . . . . . . . . . . 31
5.11 Other Actions by the Company . . . . . . . . . . . . . . . . 31
5.12 Section 203 of the DGCL . . . . . . . . . . . . . . . . . . 32
5.13 Stockholder Litigation . . . . . . . . . . . . . . . . . . . 32
5.14 Section 401(k) Plan Termination; ESPP Termination . . . . . 32
ARTICLE VI CONDITIONS OF MERGER . . . . . . . . . . . . . . . . . . . . 32
6.1 Conditions to the Obligations of Each Party to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . 33
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 33
7.2 Procedure and Effect of Termination . . . . . . . . . . . . 35
7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 35
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Severability . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Entire Agreement; No Third Party Beneficiaries; No
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.4 Interpretation; Knowledge . . . . . . . . . . . . . . . . . 39
</TABLE>
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(continued)
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8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 39
8.6 Other Remedies; Specific Performance . . . . . . . . . . . . 39
8.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 39
8.8 Rules of Construction . . . . . . . . . . . . . . . . . . . 40
8.9 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 40
8.10 Survival of Representations and Warranties . . . . . . . . . 40
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (THE "AGREEMENT") is made and
entered into as of this 11th day of May, 1998, by and among Diamond Multimedia
Systems, Inc., a Delaware corporation ("PARENT"), Boardwalk Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("PURCHASER"), and Micronics Computers, Inc., a Delaware corporation (the
"COMPANY").
RECITALS
A. The Boards of Directors of Parent, Purchaser and the Company
have each unanimously approved the terms and conditions of a merger of
Purchaser with and into the Company (the "MERGER") upon the terms and subject
to the conditions set forth herein.
B. Pursuant to the Merger, Purchaser will acquire each issued and
outstanding share of Common Stock par value $0.01 per share, of the Company
(shares of the Common Stock are referred to herein as the "SHARES") at a price
of $2.45 net per Share to the seller in cash and without interest thereon (the
"OFFER PRICE"). In order to accomplish the Merger, Purchaser shall first
commence a tender offer (the "OFFER") by Purchaser under Section 14(d)(1) of
the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to
purchase all outstanding Shares.
C. The Board of Directors of the Company has unanimously resolved
to recommend the acceptance of the Offer and approval of the Merger to the
holders of Shares and determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to the holders of such Shares and
that the Offer and the Merger are in the best interests of the holders of such
Shares.
NOW, THEREFORE, intending to be legally bound hereby, the parties
agree as follows:
ARTICLE I
THE TENDER OFFER
1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated pursuant to Section 7.1 and none of the events set forth in clause
(iii) of Annex I shall have occurred or be existing, Purchaser shall, and
Parent shall cause Purchaser to, within five business days after the public
announcement of the execution of this Agreement commence (within the meaning of
Rule 14d-2 under the Exchange Act) the Offer at the Offer Price.
(b) The obligations of Purchaser to consummate the Offer
and to accept for payment and pay for any of the Shares tendered shall be
subject to the conditions set forth on
<PAGE> 6
Annex I, including that a minimum of not less than fifty-one percent (51%) of
the Shares outstanding on a fully diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all stock options vested or
scheduled to vest prior to July 31, 1998, 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 "MINIMUM
CONDITION"). The per Share amount shall be net to the seller in cash, upon the
terms and subject to the conditions of the Offer and subject to reduction for
any applicable federal back-up or other applicable withholding or stock
transfer taxes. The Offer shall remain open until 12:00 Midnight, New York
City time, on such date as is twenty (20) business days following the
commencement of the Offer. As used in this Agreement, the "EXPIRATION DATE"
means 12:00 Midnight, New York City time, on such date, unless Purchaser
extends the Offer as permitted by this Agreement, in which case the "Expiration
Date" means the latest time and date to which the Offer is extended.
(c) Purchaser expressly reserves the right to waive any
condition to the Offer (other than the condition set forth in clause (ii) or
(iii)(E) of Annex I), to increase the price per Share payable in the Offer, to
extend the duration of the Offer, or to make any other changes in the terms and
conditions of the Offer; provided, however, that no such change may be made
which decreases the price per Share payable in the Offer, reduces the maximum
number of Shares to be purchased in the Offer, imposes conditions to the Offer
in addition to those set forth in Annex I or amends any other material terms of
the Offer in a manner materially adverse to the Company's stockholders, and
provided, further, that the Offer may not, without the Company's prior written
consent, be extended beyond 120 days from the commencement of the Offer except
as necessary to provide time to satisfy the conditions set forth in Annex I or
as required by any rule, regulation, interpretation or position of the
Securities Exchange Commission (the "SEC") and except that Purchaser may extend
the Offer for up to 20 business days, if as of such date, there shall not have
been tendered at least ninety percent (90%) of the outstanding Shares so that
the Merger could be effected without a meeting of the Company's stockholders in
accordance with applicable provisions of the Delaware General Corporation Law
("DGCL").
(d) The Offer shall be made by means of an offer to
purchase (the "OFFER TO PURCHASE") containing the terms set forth in this
Agreement and the conditions set forth in Annex I. Concurrently with the
commencement of the Offer, Parent and Purchaser shall file with the SEC a
tender offer statement on Schedule 14D-1 reflecting the Offer (together with
all exhibits, amendments and supplements thereto, the "SCHEDULE 14D-1"). The
Schedule 14D-1 will contain or will incorporate by reference the Offer to
Purchase (or portions thereof) and forms of the related letter of transmittal
and summary advertisements (which Schedule 14D-1, Offer to Purchase and other
documents, together with any supplements or amendments thereto, are referred to
herein collectively as the "OFFER DOCUMENTS"). The Company and its counsel
shall be given a reasonable opportunity to review and comment on the Offer
Documents prior to their filing with the SEC or dissemination to the
stockholders of the Company. Parent and Purchaser agree to provide the Company
and its counsel with any comments which Parent, Purchaser or their counsel may
receive from the SEC or the staff of the SEC with respect to such documents
promptly after receipt thereof. 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 purchase by
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<PAGE> 7
accepting for payment and will pay for Shares validly tendered and not properly
withdrawn, as promptly as practicable after the Expiration Date. Parent,
Purchaser and the Company agree promptly to correct any information provided by
any of them for use in the Offer Documents that shall have become false or
misleading in any material respect and to provide any information, the omission
of which would make any previously provided information false or misleading in
any material respect, and Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to the holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Offer Documents will, on the date filed and on the date
first published, sent or given to the Company's stockholders, comply in all
material respects with all provisions of applicable federal securities laws and
the rules and regulations promulgated thereunder.
1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the
Offer and represents and warrants that (i) its Board of Directors has
unanimously (A) determined that this Agreement and the transactions
contemplated hereby, including each of the Offer and the Merger, are fair to
and in the best interests of the holders of the Shares, (B) approved and
adopted this Agreement and the transactions contemplated hereby and (C)
resolved to recommend that the stockholders of the Company accept the Offer and
approve and adopt this Agreement and the transactions contemplated hereby and
thereby (provided, however, that subject to the provisions of Section 5.4 such
recommendation may be withdrawn, modified or amended in connection with a
Superior Proposal (as defined in Section 5.4)) and (ii) Alliant Partners
("ALLIANT PARTNERS") has rendered to the Board of Directors of the Company its
written opinion (which opinion is permitted to be included in writing in the
Schedule 14D-9 (as defined in Section 1.2(b)), to the effect that the
consideration to be received by the holders of Shares pursuant to each of the
Offer and (so long as the price per Share equals or exceeds $2.45) the Merger
is fair to the holders of Shares. The Company hereby consents to the inclusion
in the Offer Documents of the recommendation of the Company's Board of
Directors described in clause (i) of this Section 1.2(a), and has obtained the
consent of Alliant Partners to the inclusion in the Schedule 14D-9 of a copy of
the written opinion referred to in clause (ii) above.
(b) The Company shall file with the SEC, concurrently
with the filing by Parent and Purchaser of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 under the Exchange Act
relating to the Offer (together with all exhibits, amendments and supplements
thereto as well as the Information Statement required pursuant to Section 14(f)
under the Exchange Act, collectively the "SCHEDULE 14D-9"), which shall contain
the recommendation of the Company's Board of Directors described in Section
1.2(a), and shall disseminate the Schedule 14D-9 as required by Rule 14d-9
promulgated under the Exchange Act. The Schedule 14D-9, and each amendment
thereto, will, on the date filed, comply in all material respects with the
provisions of applicable federal securities laws. The Company, Parent and
Purchaser agree promptly to correct any information provided by any of them for
use in the Schedule 14D-9 that shall have become false or misleading in any
material respect and to provide any information, the omission of which would
make any previously provided information false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be
-3-
<PAGE> 8
filed with the SEC and the Schedule 14D-9 as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given the opportunity
to review and comment on the Schedule 14D-9, and all amendments and supplements
thereto, prior to the time at which such documents and all documents related
thereto are filed with the SEC. The Company shall provide Purchaser and its
counsel with any comments the Company or its counsel may receive from the SEC
with respect to the Schedule 14D-9 promptly after receipt of such comments.
(c) The Company has been advised by all of its directors
and executive officers, that, as of the date of this Agreement, each intends to
tender all outstanding Shares beneficially owned by such person to Purchaser
pursuant to the Offer unless to do so would subject such person to liability
under Section 16(b) of the Exchange Act.
(d) The Company shall promptly furnish Purchaser with
the names and addresses either on preprinted mailing labels or in such
electronic or other form reasonably requested by Parent of all record holders
of Shares and security position listings of Shares held in stock depositories,
each of a recent date, and shall promptly furnish Purchaser with such
additional information, including updated lists of stockholders, mailing labels
and security position listings, and such other assistance as Parent, Purchaser
or their agents may reasonably request in connection with communicating the
Offer and any amendments or supplements thereto to the Company's stockholders.
Subject to the requirements of applicable laws and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Purchaser shall hold in confidence the
information contained in any of such labels and lists.
1.3 DIRECTORS. Promptly upon the acquisition by Purchaser
pursuant to the Offer of such number of Shares which satisfies the Minimum
Condition and from time to time thereafter, Parent shall be entitled to
designate a majority of the members of the Company's Board of Directors,
subject to compliance with Section 14(f) of the Exchange Act. The Company
shall, upon request by Parent, promptly increase the size of the Board of
Directors to the extent permitted by its Certificate of Incorporation and/or
secure the resignations of such number of directors as is necessary to enable
Parent's designees to be elected to the Board of Directors and shall use its
reasonable efforts to cause Parent's designees to be so elected. The Company
shall take, at its expense, all action necessary to effect any such election,
including mailing to its stockholders the information required by Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder in form and substance
reasonably satisfactory to Parent and its counsel. Following the election or
appointment of Parent's designees pursuant to this Section 1.3 and prior to the
Effective Time, any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or
Purchaser or waiver of the Company's rights hereunder, shall require the
concurrence of a majority of the Company's directors (or the concurrence of the
director, if there is only one remaining) then in office who are directors on
the date hereof, or are directors (other than directors designated by Parent in
accordance with this Section 1.3) designated by such persons to fill any
vacancy (the "CONTINUING DIRECTORS"); provided, however, that, if there shall
be no Continuing Directors, such actions may be affected by majority vote of
the entire Board of Directors, except that
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<PAGE> 9
no such action shall amend the terms of this Agreement or waive any right or
obligation under this Agreement in a manner adverse to the stockholders of the
Company.
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions
hereof and in accordance with the DGCL, Purchaser shall be merged with and into
the Company as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VI of this Agreement.
Following the Merger, the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and the separate corporate existence of Purchaser
shall cease. At the election of Parent or Purchaser, any direct or indirect
wholly-owned subsidiary of Parent incorporated under the laws of the State of
Delaware may be substituted for Purchaser as a constituent corporation in the
Merger. As used herein, the term "PURCHASER" shall, upon such substitution,
refer to any such substituted corporation.
2.2 EFFECTIVE TIME. The Merger shall be consummated by and
shall be effective at the time there has been filed as provided by Section 2.14
with the Delaware Secretary of State a certificate or agreement of merger in
such form as is required by, and executed in accordance with, the relevant
provisions of the DGCL, and such other documents as may be required by the
provisions of the DGCL. The time of such filing is referred to as the
"EFFECTIVE TIME."
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in applicable sections of the DGCL. As of the Effective Time, the
Company shall be a wholly-owned subsidiary of Parent.
2.4 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be amended to contain the
substantive provisions of the Certificate of Incorporation of the Purchaser as
in effect at the Effective Time.
2.5 BYLAWS. Subject to Section 5.8 below, the Bylaws of
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation, until thereafter duly amended in
accordance with applicable law.
2.6 DIRECTORS. The directors of Purchaser immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
and will hold office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, as such
instruments may be amended from time to time, either before or after the
Effective Time, or as otherwise provided by law.
-5-
<PAGE> 10
2.7 OFFICERS. The officers of the Purchaser immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation, except as Parent may determine and notify the Company in writing
prior to the Effective Time. Such officers of the Surviving Corporation will
hold office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, as such instruments may
be amended from time to time, either before or after the Effective Time, or as
otherwise provided by law.
2.8 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Purchaser, the Company or the holders
of the Shares:
(i) Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held,
directly or indirectly, by Parent, Purchaser, the Company or any of
their majority-owned subsidiaries, and any Dissenting Shares (as
defined in Section 2.10)) shall automatically be canceled and
extinguished and be converted into the right to receive $2.45, or the
highest amount per Share as is paid pursuant to the Offer (the "MERGER
CONSIDERATION"), in cash, without interest thereon.
(ii) Each Share issued and outstanding
immediately prior to the Effective Time which is owned or held,
directly or indirectly, by Parent, Purchaser, the Company or any of
their majority-owned subsidiaries shall be canceled and extinguished
and cease to exist, without any conversion thereof, and no payment
shall be made with respect thereto.
(iii) Each holder (other than holders referred to
in Section 2.8(a)(ii)) of a certificate representing any Shares shall
after the Effective Time cease to have any rights with respect to such
Shares, except either to receive the Merger Consideration upon
surrender of such certificate, or to exercise such holder's appraisal
rights as provided in Section 2.10 and the DGCL.
(iv) Each share of Common Stock of Purchaser
issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and thereafter represent one validly
issued, fully paid and nonassessable share of Common Stock of the
Surviving Corporation.
2.9 COMPANY STOCK OPTIONS. The Company, Parent and Purchaser
hereby acknowledge and agree that Parent shall not assume or continue any
outstanding stock options (the "OUTSTANDING OPTIONS") under any of the
Company's 1989 Stock Option Plan (the "1989 PLAN"), 1992 Directors Stock Option
Plan (the "1992 PLAN"), the 1998 Equity Incentive Plan (the "1998 PLAN") and
options assumed in connection with the Company's acquisition of Orchid
Technology (the "ASSUMED ORCHID OPTIONS") or any other agreement or
arrangement, or substitute any additional options for such outstanding options
(collectively, the "STOCK PLANS"). The Company shall take all actions
necessary to provide that at the Effective Time, (i) each Outstanding Option
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<PAGE> 11
shall be canceled and (ii) in consideration for such cancellation, each holder
of an Outstanding Option shall receive in consideration thereof an amount
(subject to applicable withholding requirements) in cash equal to the product
of (x) the excess, if any, of the Merger Consideration over the per Share
exercise price of each Outstanding Option and (y) the number of Shares subject
to such Outstanding Option. The Company shall take all actions necessary to
effectuate the foregoing including without limitation amending the Stock Plans
and obtaining any necessary consents from holders of Outstanding Options.
2.10 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares which are outstanding immediately prior to
the Effective Time and which are held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who has demanded appraisal for
such Shares in accordance with Section 262 of the DGCL ("DISSENTING SHARES")
shall not be converted into a right to receive the Merger Consideration
pursuant to Section 2.8, but the holders of Dissenting Shares shall instead be
entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if any such holder shall have
failed to perfect or shall withdraw or lose such holder's right of appraisal
and payment under the DGCL, such holder's Shares shall be treated as if they
had been converted as of the Effective Time into the right to receive the
Merger Consideration, without interest thereon, as provided in Section 2.8, and
such Shares shall no longer be Dissenting Shares. The Company shall give
Parent and Purchaser prompt notice of any demands received by the Company for
appraisal of Shares, and of any withdrawals of demands for appraisal, or of any
other instruments served pursuant to Section 262 of the DGCL and received by
the Company. Prior to the Effective Time, Parent and Purchaser shall have the
right to participate in all negotiations and proceedings with respect to such
demands for appraisal. Prior to the Effective Time, the Company shall not,
except with the prior written consent of Parent and Purchaser, make any payment
with respect to, or settle or offer to settle, any such demands. Each holder
of Dissenting Shares shall have only such rights and remedies as are granted to
such holder under Section 262 of the DGCL.
2.11 PAYMENT FOR SHARES.
(a) Prior to the Effective Time, Purchaser shall select
and appoint a bank or trust Company to act as agent for the holders of Shares
(the "PAYING AGENT") to receive and disburse the Merger Consideration to which
holders of Shares shall become entitled pursuant to Section 2.8. At the
Effective Time, Purchaser or Parent shall provide the Paying Agent with
sufficient cash to allow the Merger Consideration to be paid by the Paying
Agent for each Share then entitled to receive the Merger Consideration.
(b) As soon as practicable after the Effective Time,
Purchaser or Parent shall cause the Paying Agent to mail to each record holder
of a certificate or certificates representing Shares which as of the Effective
Time represents the right to receive the Merger Consideration (the
"CERTIFICATES"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying Agent)
and instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal
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duly executed and completed in accordance with the instructions thereto, and
such other documents as may be requested, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration and such
Certificate shall forthwith be canceled. No interest shall be paid or accrued
on the Merger Consideration upon the surrender of the Certificates. Until
surrendered in accordance with the provisions of this Section, each Certificate
shall be deemed for all purposes to evidence only the right to receive the
Merger Consideration (without interest thereon), and shall, subject to Section
2.9, have no other right.
(c) If the Merger Consideration (or any portion thereof)
is to be delivered to a person other than the person in whose name the
Certificates surrendered in exchange therefor are registered, it shall be a
condition to the payment that the Certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such payment or delivery shall pay any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to a holder of Shares for any Merger Consideration delivered to
a public official pursuant to applicable abandoned property, escheat and
similar laws.
(d) Promptly following the date that is nine months
after the Effective Date, the Paying Agent shall return to the Surviving
Corporation all Merger Consideration and other cash, property and instruments
in its possession relating to the transactions described in this Agreement, and
the Paying Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a Share may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat
and similar laws) receive in exchange therefor the Merger Consideration
(without interest thereon). Notwithstanding the foregoing, the Surviving
Corporation shall be entitled to receive from time to time all interest or
other amounts earned with respect to any cash deposited with the Paying Agent
as such amounts accrue or become available.
2.12 NO FURTHER RIGHTS OR TRANSFERS. At and after the Effective
Time the holders of Certificates to be exchanged for the Merger Consideration
pursuant to this Agreement shall cease to have any rights as to stockholders of
the Company except for the right to surrender such holder's Certificates in
exchange for payment of the Merger Consideration, and after the Effective Time
there shall be no transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. Any Certificates formerly representing Shares presented to the
Surviving Corporation or Paying Agent shall be canceled and exchanged for the
Merger Consideration, as provided in this Article II, subject to applicable law
in the case of Dissenting Shares.
2.13 SUPPLEMENTARY ACTION. If at any time after the Effective
Time, any further assignments or assurances in law or any other things are
necessary or desirable to vest or to perfect or confirm of record in the
Surviving Corporation the title to any property or rights of either the Company
or Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to
execute and deliver any and all things necessary or proper
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to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions
of this Agreement.
2.14 CLOSING. Upon the terms and subject to the conditions of
this Agreement, as soon as practicable after all the conditions to the
obligations of the parties hereto to effect the Merger under Article VI of this
Agreement shall have been satisfied or waived, the Company, Parent and
Purchaser shall (i) file with the Secretary of State of the State of Delaware a
certificate or agreement of merger or a certificate of ownership and merger in
such form as may be required by, and executed in accordance with, the relevant
provisions of the DGCL and (ii) take all such other and further actions as may
be required by law to make the Merger effective. Contemporaneous with the
filing referred to in this Section, a closing (the "CLOSING") will be held at
the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo
Alto, California 94304 or at such other location as the parties may establish
for the purpose of confirming all the foregoing. The date and the time of such
Closing are referred to as the "CLOSING DATE."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser, subject
to the exceptions specifically disclosed in writing in the disclosure letter
supplied by the Company to Parent and Purchaser dated as of the date hereof and
certified by a duly authorized officer of the Company (the "COMPANY
SCHEDULES"), as follows:
3.1 ORGANIZATION OF THE COMPANY.
(a) The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation; has the corporate power and
authority to own, lease and operate its assets and property and to carry on its
business as now being conducted (as disclosed by the Company in its publicly
filed reports and publicly announced press releases) and is duly qualified or
licensed 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 activities makes such qualification or licensing necessary, except where
the failure to be so qualified would not have a Material Adverse Effect (as
defined below).
(b) The Company has delivered to Parent a true and
complete list of all of the Company's subsidiaries, indicating the jurisdiction
of incorporation of each subsidiary, the jurisdictions in which such subsidiary
is qualified or licensed, and the Company's and any other person's equity
interest therein. All shares of subsidiaries owned of record by persons other
than the Company are owned beneficially (or the substantive equivalent) by the
Company.
(c) The Company has delivered or made available to
Parent a true and correct copy of the Certificate of Incorporation and Bylaws
of the Company and similar governing
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<PAGE> 14
instruments of each of its subsidiaries, each as amended to date, and each such
instrument is in full force and effect. Neither the Company nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) For the purposes of this Agreement, the term
"MATERIAL ADVERSE EFFECT" means any change, event, violation, inaccuracy,
circumstance or effect that is materially adverse to the business, prospects,
assets (including intangible assets), capitalization, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.
3.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of
the Company consists of 30,000,000 shares of Common Stock, $0.01 par value per
share, of which there were 12,902,565 shares issued and outstanding as of the
date of this Agreement and 5,000,000 shares of Preferred Stock, $0.01 par value
per share, of which no shares are issued or outstanding as of the date of this
Agreement. All outstanding shares of the Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Certificate of Incorporation or
Bylaws of the Company or any agreement or document to which the Company is a
party or by which it is bound. As of the date of this Agreement, the Company
had reserved an aggregate of 3,120,084 shares of the Company Common Stock for
issuance to employees, consultants and non-employee directors pursuant to the
1989 Plan, the 1992 Plan, the 1998 Plan and the Assumed Orchid Options, of
which, as of the date of this Agreement, options for an aggregate of 831,867
shares had been exercised, options to purchase an aggregate of 1,317,244 shares
were outstanding and an aggregate of 970,973 shares remained available for
future grants. There are no shares reserved for issuance or issuable under the
Company's Employee Stock Purchase Plan (the "ESPP"). All shares of the Company
Common Stock subject to issuance pursuant to outstanding stock options or
purchase agreements entered into in connection with such plans, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, would be duly authorized, validly issued, fully paid and
nonassessable. The Company Schedules list for each person who held restricted
stock or options, the name of the holder of such shares or option, the exercise
price of such option, the number of shares which will have vested at such date,
the vesting schedule for such shares or option and whether the lapsing of the
Company's repurchase rights or exercisability of such option will be
accelerated in any way by the transactions contemplated by this Agreement, and
indicate the extent of acceleration, if any.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set
forth in Section 3.2, there are no shares of capital stock of the Company, or
any securities exchangeable or convertible into or exercisable for such capital
stock, issued, reserved for issuance or outstanding. Except for securities the
Company owns, directly or indirectly through one or more subsidiaries, there
are no equity securities, partnership interests or similar ownership interests
of any subsidiary of the Company, or any security exchangeable or convertible
into or exercisable for such equity securities, convertible securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Section 3.2, there are no
options, warrants, equity securities, convertible securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries are bound,
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<PAGE> 15
obligating the Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition, of any shares of
capital stock, equity interests, partnership interests or similar ownership
interests of the Company or any of its subsidiaries or obligating the Company
or any of its subsidiaries to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. There are no registration rights and, to the knowledge of the
Company, as of the date of this Agreement, there are no voting trusts, proxies
or other agreements or understandings with respect to any equity security of
the Company or with respect to any equity security, partnership interest or
similar ownership interest of any of its subsidiaries.
3.4 AUTHORITY.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval and adoption of this Agreement and the approval of the Merger by
the Company's stockholders and the filing and recordation of the Certificate of
Merger pursuant to the DGCL. A vote of the holders of a majority of the
outstanding Shares is required for the Company's stockholders to approve and
adopt this Agreement and approve the Merger. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and, if applicable, Purchaser, constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of the Company or the
equivalent organizational documents of any of its subsidiaries, (ii) subject to
obtaining the approval and adoption of this Agreement and the approval of the
Merger by the Company's stockholders, and subject to such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the securities or antitrust laws of any foreign country
(collectively, the "REGULATORY FILINGS"), conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or subject, which conflict or violation could reasonably be expected to result
in a Material Adverse Effect, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or subject, which conflict
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<PAGE> 16
or violation could reasonably be expected to result in a Material Adverse
Effect. The Company Schedules list all consents, waivers and approvals under
any of the Company's or any of its subsidiaries' agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) the
Regulatory Filings, and (iii) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to the Company, or the Surviving Corporation or have a material adverse effect
on the ability of the parties to consummate the Offer or the Merger.
3.5 SEC FILINGS; THE COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed in a timely manner all forms,
reports and documents required to be filed with the SEC since its initial
public offering and has made available to Parent such forms, reports and
documents in the form filed with the SEC. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the "COMPANY SEC REPORTS." As of their
respective dates, the Company SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Exchange Act, as the case may be, and the rules and regulations
of the SEC thereunder applicable to such the Company SEC Reports, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
None of the Company's subsidiaries is required to file any forms, reports or
other documents as a public company pursuant to Section 13 of the Exchange Act
with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIALS"), including any of the Company SEC
Reports filed after the date hereof until the Closing, (i) complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, (ii) was prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act and except that such unaudited interim
financial statements do not include all of the footnotes required under GAAP)
and (iii) fairly presented the consolidated financial position of the Company
and its subsidiaries as at the respective dates thereof and the consolidated
results of the Company's operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring
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<PAGE> 17
year-end adjustments. The balance sheet of the Company contained in the
Company SEC Reports as of March 31, 1998 is hereinafter referred to as the
"COMPANY BALANCE SHEET." Except as disclosed in the Company Financials, since
the date of the Company Balance Sheet neither the Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its subsidiaries taken as
a whole, except liabilities (i) provided for in the Company Balance Sheet, or
(ii) incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practices and immaterial in the
aggregate.
(c) The Company has previously furnished to Parent a
complete and correct copy of any amendments or modifications that have not yet
been filed with the SEC but are required to be so filed, with respect to
agreements, documents or other instruments have previously been filed by the
Company with the SEC pursuant to the Securities Act or the Exchange Act.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Company Balance Sheet there has not been: (i) any Material Adverse Effect, (ii)
any material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (iii) any
material revaluation by the Company of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off
notes or accounts receivable other than in the ordinary course of business.
3.7 TAXES.
(a) For the purposes of this Agreement, "TAX" or "TAXES"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) The Company and each of its subsidiaries have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to Taxes required to be filed by
the Company and each of its subsidiaries prior to the date hereof, except such
Returns which are not material to the Company, and have timely paid all Taxes
shown to be due on such Returns. The Company has provided adequate accruals in
accordance with generally accepted accounting principles in its financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any Tax Returns.
(c) Except as is not material to the Company, the
Company and each of its subsidiaries as of the Effective Time will have
withheld with respect to its employees all federal and
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<PAGE> 18
state income taxes, the Federal Insurance Contribution Act ("FICA"), the
Federal Unemployment Tax Act ("FUTA") and other Taxes required to be withheld.
(d) Except as is not material to the Company, neither
the Company nor any of its subsidiaries has been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company or any of its subsidiaries, nor has the Company or any of
its subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(e) Except as is not material to the Company, no audit
or other examination of any Return of the Company or any of its subsidiaries is
presently in progress, nor has the Company or any of its subsidiaries been
notified of any request for such an audit or other examination by the Internal
Revenue Service or any state or foreign taxing agency or authority during the
past five fiscal years or in the current fiscal year or any interim period
within the past five fiscal years and/or the current fiscal year.
(f) Except as is not material to the Company, no
adjustment relating to any Returns filed by the Company or any of its
subsidiaries has been proposed formally or informally by any Tax authority to
the Company or any of its subsidiaries or any representative thereof.
(g) Except as is not material to the Company, neither
the Company nor any of its subsidiaries has any liability for unpaid Taxes
which has not been accrued for or reserved on the Company Balance Sheet,
whether asserted or unasserted, contingent or otherwise, which is material to
the Company.
(h) There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Sections 280G, 404 or
162(m) of the Code.
(i) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by the Company.
(j) Neither the Company nor any of its subsidiaries is
party to or has any obligation under any tax-sharing or allocation agreement or
arrangement with anyone outside of the Company's consolidated group of
companies.
3.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company Schedules list all real property owned
by the Company. The Company Schedules list all real property leases to which
the Company or any of its subsidiaries is a party and each amendment thereto.
All such current leases are in full force and effect, are valid and
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<PAGE> 19
effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default) that would
give rise to a claim in an amount greater than $50,000.
(b) The Company and each of its subsidiaries have good
and marketable title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of their tangible properties and assets, real,
personal and mixed, used or held for use in their respective businesses, free
and clear of any liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("LIENS"), except as reflected in the Company
Financials or in the Company Schedules and except for liens for taxes not yet
due and payable and such imperfections of title and encumbrances, if any, which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
3.9 INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have the
following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the
following and all rights in, arising out of, or associated
therewith: (i) all United States, international and foreign
patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof; (ii) all inventions
(whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know
how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications
therefor, and all other rights corresponding thereto
throughout the world; (iv) all industrial designs and any
registrations and applications therefor throughout the
world; (v) all trade names, logos, trademarks and service
marks, trademark and service mark registrations and
applications therefor throughout the world; (vi) all
proprietary databases and data collections and all rights
therein throughout the world; and (vii) any similar or
equivalent rights to any of the foregoing anywhere in the
world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the
Company or any of its subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent
applications (including provisional applications); (ii)
registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered
copyrights and applications for copyright registration; and
(iv) any other Intellectual Property that is the subject of
an application, certificate, filing, registration or other
document issued, filed with, or recorded by any state,
government or other public legal authority other than a
recordation of a Lien.
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(a) The Company Schedules lists all of the Registered
Intellectual Property owned by, or filed in the name of, the Company and each
of its subsidiaries (the "COMPANY REGISTERED INTELLECTUAL PROPERTY").
(b) The Company Schedules lists all proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office ("PTO") or equivalent authority anywhere in the world) related
to any Company Intellectual Property.
(c) No Company Intellectual Property or product or
service of the Company or any of its subsidiaries is subject to any proceeding
or outstanding decree, order, judgment, agreement, or stipulation materially
restricting in any manner the use, transfer, or licensing thereof by the
Company or any of its subsidiaries, or which may affect the validity, use or
enforceability of such Company Intellectual Property.
(d) Each item of Company Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees in connection with such Registered Intellectual Property have been
made and all necessary documents and certificates in connection with such
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property.
(e) Except as set forth in the Company Schedules: (i)
the Company and each of its subsidiaries owns and has marketable title and
exclusive rights to each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed on the Company Schedules, free
and clear of any Lien; and (ii) the Company together with its subsidiaries is
the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of such entities, including the sale
of any products or the provision of any services by such entities.
(f) The Company and each of its subsidiaries owns
exclusively, and has good and marketable title to, all copyrighted works that
are products produced, marketed or sold by the Company or any of its
subsidiaries or which any such entity otherwise purports to own.
(g) To the extent that any Intellectual Property has
been developed or created by a third party for the Company or any of its
subsidiaries and is material to the business of the Company and its
subsidiaries taken as a whole, the Company or a subsidiary of the Company has a
written agreement with such third party with respect thereto and such entity
thereby has obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment.
(h) Except as set forth in the Company Schedules,
neither the Company nor any of its subsidiaries has transferred ownership of,
or granted any exclusive license with respect to, any Intellectual Property
that is or was Company Intellectual Property, to any third party.
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(i) The Company Schedules list all material contracts,
licenses and agreements to which the Company or any of its subsidiaries is a
party (i) with respect to Company Intellectual Property licensed or transferred
to any third party; or (ii) pursuant to which a third party has licensed or
transferred any Intellectual Property to the Company, with a potential value or
cost in excess of $10,000. The Company Schedules lists any agreements pursuant
to which the Company or any of its subsidiaries has licensed any Company
Intellectual Property or products to any third party that differs in any
material respect from its standard form.
(j) The contracts, licenses and agreements listed on the
Company Schedules are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of any such
contract, license or agreement. The Company (either directly or through one of
its subsidiaries) is in compliance with, and has not breached any material
term of any such contract, license or agreement and, to the knowledge of the
Company, all other parties to such contract, license and agreement are in
compliance with, and have not breached any material term of, such contract,
license or agreement. Following the Closing Date, Parent and the Surviving
Corporation, either directly or through one or more of its subsidiaries, will
be permitted to exercise all of the Company's and its subsidiaries rights under
the contracts, licenses and agreements listed on the Company Schedules to the
same extent the Company would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which the Company or its subsidiaries would otherwise be required to
pay.
(k) The Company Schedules list all contracts, licenses
and agreements between the Company or any of its subsidiaries and any third
party (other than sales made to customers in the ordinary course of business
through the exchange of purchase orders, order acknowledgments and invoices
wherein or whereby the Company or any of its subsidiaries has agreed to, or
assumed, any obligation or duty to warrant, indemnify, hold harmless or
otherwise assume or incur any obligation or liability with respect to the
infringement or misappropriation by the Company or any of its subsidiaries or
such third party of the Intellectual Property of any third party.
(l) The operation of the business of the Company or its
subsidiaries as such business currently is conducted, or is reasonably
contemplated to be conducted, including the Company's design, development,
manufacture, marketing and sale of the products or services of the Company or
its subsidiaries (including with respect to products currently under
development) has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(m) The Company has not received notice from any third
party that the operation of the business of the Company or any of its
subsidiaries or any act, product or service of the same, infringes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction, other
than notice with respect to any claims which have previously been waived or
otherwise resolved (and any such claims which
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have been previously resolved have been fully paid or are fully provided for on
the Company Balance Sheet).
(n) Except as set forth in the Company Schedules, to the
knowledge of the Company, no Person has or is infringing or misappropriating
any Company Intellectual Property.
(o) Except as set forth in the Company Schedules, there
have been, and are, no material claims asserted against the Company or any of
its subsidiaries, or any customer of the Company or any of its subsidiaries
which have not previously been waived or otherwise resolved (and any such
claims which have been previously resolved have been fully paid or are fully
provided for on the Company Balance Sheet), related to infringement of
Intellectual Property.
(p) The Company and each of its subsidiaries have taken
all steps that are reasonably required to protect the rights of the Company and
its subsidiaries in the Company's confidential information and trade secrets or
any trade secrets or confidential information of third parties provided to the
Company or any of its subsidiaries, and, without limiting the foregoing, the
Company and each of its subsidiaries has and enforces a policy requiring each
employee and contractor to execute a proprietary information / confidentiality
agreement substantially in the Company's standard form and to the Company's
knowledge all current and former employees and contractors of the Company and
each of its subsidiaries have executed such an agreement.
3.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Neither the Company nor any of its subsidiaries is,
in any material respect, in conflict with, or in default or violation of (i)
any law, rule, regulation, order, judgment or decree applicable to the Company
or any of its subsidiaries or by which the Company or any of its subsidiaries
or any of their respective properties is bound or subject, or (ii) any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties is bound or subject. To the
knowledge of the Company, no investigation or review by any Governmental Entity
is pending or threatened against the Company or any of its subsidiaries, nor
has any Governmental Entity currently indicated an intention to the Company or
any of its subsidiaries in writing to conduct the same. There is no material
agreement, judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any material business practice of
the Company or any of its subsidiaries, any acquisition of material property by
the Company or any of its subsidiaries or the conduct of any material business
by the Company or any of its subsidiaries as currently conducted.
(b) The Company and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals from Governmental
Entities that are material to the operation of the business of the Company
(collectively, the "COMPANY PERMITS"). The Company and its subsidiaries are in
compliance in all material respects with the terms of the Company Permits.
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3.11 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending or as to which the Company or any of its
subsidiaries has received any notice of assertion, nor, to the Company's
knowledge, is there a threatened action, suit, proceeding, claim, arbitration
or investigation against the Company or any of its subsidiaries which if
determined adversely to the Company or such subsidiary, could reasonably likely
have a Material Adverse Effect. To the knowledge of the Company, no
Governmental Entity has at any time challenged or questioned in writing the
legal right of the Company or any of its subsidiaries, to manufacture, offer or
sell any of its products in the present manner or style thereof, which has not
been satisfactorily resolved.
3.12 BROKERS' AND FINDERS' FEES. Except for fees payable to
Alliant Partners pursuant to an engagement letter dated October 30, 1996, a
copy of which has been provided to Parent, the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.13 EMPLOYEE BENEFIT PLANS.
(a) With respect to each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "EMPLOYEE
BENEFIT PLAN" as defined in Section 3(3) of ERISA) maintained or contributed to
by the Company or any trade or business which is under common control with the
Company within the meaning of Section 414 of the Code (the "COMPANY EMPLOYEE
PLANS"), the Company has made available to Parent a true and complete copy of,
to the extent applicable, (i) such Company Employee Plan, (ii) the most recent
annual report (Form 5500), (iii) each trust agreement related to such Company
Employee Plan, (iv) the most recent summary plan description for each Company
Employee Plan for which such a description is required, (v) the most recent
actuarial report relating to any Company Employee Plan subject to Title IV of
ERISA and (vi) the most recent IRS determination letter issued with respect to
any Company Employee Plan.
(b) Each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination from the IRS covering the provisions of the Tax Reform Act of
1986 stating that such Company Employee Plan is so qualified and nothing has
occurred since the date of such letter that could reasonably be expected to
affect the qualified status of such plan. Each Company Employee Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law. Neither the Company nor any ERISA Affiliate of
the Company has incurred or is reasonably expected to incur any material
liability under Title IV of ERISA in connection with any Company Employee Plan.
3.14 EMPLOYEES; LABOR MATTERS. To the Company's knowledge, no
employee of the Company or any of its subsidiaries (i) is in violation of any
term of any employment contract, patent disclosure agreement, non-competition
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee to be employed by the Company or any of its
subsidiaries because of the nature of the business conducted or presently
proposed to be conducted by the Company or any of its subsidiaries or to the
use of trade secrets or proprietary information of others
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and (ii) has given notice to the Company or any of its subsidiaries, nor is the
Company otherwise aware, that any employee intends to terminate his or her
employment with the Company or any of its subsidiaries except for terminations
of a nature and number that are consistent with the Company's prior experience.
To the Company's knowledge, there are no activities or proceedings of any labor
union to organize any employees of the Company or any of its subsidiaries and
there are no strikes, or material slowdowns, work stoppages or lockouts, or
threats thereof by or with respect to any employees of the Company or any of
its subsidiaries. The Company and its subsidiaries are and have been in
compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of employment, and wages and hours
(including, without limitation, OSHA, ERISA, WARN or any similar state or local
law).
3.15 ENVIRONMENTAL MATTERS.
(a) No underground storage tanks and, except as
reasonably would not be likely to result in a material liability to the Company
and its subsidiaries, no amount of any substance that has been designated by
any Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial
supplies, (a "HAZARDOUS MATERIAL"), are present, in, on or under any property,
including the land and the improvements, ground water and surface water
thereof, that the Company or any of its subsidiaries has at any time owned,
operated, occupied or leased.
(b) Except as would not be reasonably likely result in a
Material Adverse Effect, neither the Company nor any of its subsidiaries has
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company or any of its subsidiaries
disposed of, transported, sold, used, released, exposed its employees or others
to or manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") required for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
the Company's knowledge, threatened concerning any Company Environmental
Permit, Hazardous Material or any Hazardous Materials
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Activity of the Company or any of its subsidiaries. The Company is not aware
of any fact or circumstance which could involve the Company or any of its
subsidiaries in any material environmental litigation or impose upon the
Company any material environmental liability.
3.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth
in the Company Schedules, neither the Company nor any of its subsidiaries is a
party to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of the
Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit the Company's or any of its subsidiaries'
ability to terminate employees at will and except for potential liabilities for
future actions by the Company to the extent covered by the WARN Act;
(b) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation right plan, stock
purchase plan or restricted stock purchase agreement, any of the benefits of
which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not
entered into in the ordinary course of business other than indemnification
agreements between the Company or any of its subsidiaries and any of its
officers or directors;
(d) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company or any of its subsidiaries to
engage in any line of business or compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in
force relating to the disposition or acquisition of a material portion of the
assets of the Company and its subsidiaries or any ownership interest in any
corporation, partnership, joint venture or other business enterprise; or
(f) any material joint marketing or development
agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound of the type described in
clauses (a) through (f) above (any such agreement, contract or commitment, as
well as any agreement, contract or commitment that is an exhibit to any Company
SEC Report, a "COMPANY CONTRACT") in such a manner as would
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permit any other party to cancel or terminate any such Company Contract, or
would permit any other party to seek damages, which could reasonably likely
have a Material Adverse Effect.
3.17 CHANGE OF CONTROL PAYMENTS. The Company Schedules set forth
each plan, agreement or other arrangement or obligation pursuant to which any
amounts may become payable or any additional rights or benefits may accrue
(whether currently or in the future) in favor of any current or former
employee, officer or director of the Company as a result of or in connection
with the Offer and/or the Merger, and the nature and amount of any such
obligation.
3.18 BOARD APPROVAL. The Board of Directors of the Company has,
as of the date of this Agreement (i) determined that this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
are fair to and in the best interests of the holders of the Shares, (ii)
approved and adopted this Agreement and the transactions contemplated hereby
and (iii) resolved to recommend that the stockholders of the Company accept the
Offer and approve and adopt this Agreement and the transactions contemplated
hereby and thereby.
3.19 FAIRNESS OPINION. The Company's Board of Directors has
received a written opinion from Alliant Partners to the effect that the
consideration to be received by the holders of Shares pursuant to each of the
Offer and the Merger is fair to the holders of Shares.
3.20 OFFER DOCUMENTS. Neither the Schedule 14D-9, nor any of the
information supplied by the Company for inclusion in the Offer Documents,
shall, at the respective times that the Schedule 14D-9, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
Schedule 14D-9 will comply in all material respects as to form and substance
with the requirements of the Exchange Act and the rules and regulations
thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to
the Company that:
4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted.
4.2 CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Each of
Parent and Purchaser has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate all the
transactions contemplated hereby. The execution
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and delivery of this Agreement by Parent and Purchaser, the performance by each
of Parent and Purchaser of their respective obligations hereunder and the
consummation by Parent and Purchaser of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of each of
Parent and Purchaser and no other corporate action on the part of Parent or
Purchaser are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the filing and recordation of
appropriate merger documents as required by the DGCL and the Regulatory Filings
which shall be made prior to the Closing). This Agreement has been duly
executed and delivered by each of Parent and Purchaser and is a legal, valid
and binding obligation of each of Parent and Purchaser, enforceable against
Parent and Purchaser in accordance with its terms.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of all applicable requirements
referred to in Section 4.3 (b) below, the execution and delivery of this
Agreement by Parent and Purchaser, the compliance by Parent and Purchaser with
the provisions hereof and the consummation by Parent and Purchaser of the
transactions contemplated hereby will not conflict with or violate (i) any
statute, law, ordinance, rule, regulation, order, writ, judgment, award,
injunction, decree or ruling applicable to Parent or Purchaser or any of their
properties, other than such conflicts or violations which individually or in
the aggregate do not and will not have a material adverse effect on the
business, properties, assets, results of operations or financial condition of
Parent and Purchaser, taken as a whole, or (ii) conflict with or violate the
Certificate of Incorporation or Bylaws of Parent or Purchaser.
(b) Other than in connection with or in compliance with
the provisions of the DGCL, the Exchange Act, the "takeover" or "blue sky" laws
of various states and the HSR Act, (i) neither Parent nor Purchaser is required
to submit any notice, report, registration, declaration or other filing with
any Governmental Entity in connection with the execution or delivery of this
Agreement by Parent and Purchaser or the performance by Parent and Purchaser of
their obligations hereunder or the consummation by Parent and Purchaser of the
transactions contemplated by this Agreement and (ii) no waiver, consent,
approval, order or authorization of any Governmental Entity is required to be
obtained by Parent or Purchaser in connection with the execution or delivery of
this Agreement by Parent and Purchaser or the performance by Parent and
Purchaser of their obligations hereunder or the consummation by Parent and
Purchaser of the transactions contemplated by this Agreement. None of the
information supplied by Parent or Purchaser for inclusion in the information
statement to be sent to the Company's stockholders to consider the Merger, as
appropriate (such proxy statement or information statement, as amended or
supplemented, is referred to as the "PROXY STATEMENT"), shall, at the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to stockholders or at the time of the meeting of the Company's
stockholders to consider the Merger (the "COMPANY STOCKHOLDERS' MEETING"),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein in light of the circumstances under which they were made, not
misleading.
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4.4 SCHEDULE 14D-1. Neither the Schedule 14D-1 nor the Offer
Documents, nor any of the information supplied by Parent and Purchaser for
inclusion in the Schedule 14D-9, shall at the respective times the Schedule
14D-1 or the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to stockholders of the
Company or upon the expiration of the Offer, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made not misleading
(except for information supplied by the Company for inclusion in the Schedule
14D-1 and the Offer Documents, as to which Parent and Purchaser make no
representation). None of the information supplied by Parent or Purchaser for
inclusion in the Proxy Statement shall, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders, at
the time of the Company Stockholders' Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated or necessary in order to make the statements made
therein in light of the circumstances under which they were made, not
misleading.
4.5 AVAILABLE FUNDS. Parent has or has available to it, and
will make available to Purchaser, all funds necessary to satisfy all of
Parent's and Purchaser's obligations under this Agreement and in connection
with the transaction contemplated hereby, including, without limitation, the
obligation to purchase all outstanding Shares pursuant to the Offer and the
Merger and to pay all related fees and expenses in connection with the Offer
and the Merger and any financing necessary to consummate the Offer and the
Merger has been committed as of the date hereof.
ARTICLE V
COVENANTS
The following provisions shall apply during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the Effective Time (or, in the case of
Sections 5.8 and 5.14 until the covenant terminates by its term).
5.1 CONDUCT OF BUSINESS BY THE COMPANY. The Company (which for
the purposes of this Article 4 shall include the Company and its subsidiaries
taken as a whole) agrees, except to the extent that Parent shall otherwise
consent in writing, to carry on its business diligently and in accordance with
good commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and
in compliance with all applicable laws and regulations, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
business dealings. In addition, the Company will promptly notify Parent of any
material event involving its business or operations.
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In addition, except as permitted by the terms of this Agreement (other
than as provided in Article 5.1 of the Company Schedules or required under
agreements existing as of the date hereof and described in the Company
Schedules together with a description of any action contemplated thereunder),
without the prior written consent of Parent, the Company shall not do any of
the following, and shall not permit any of its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, accelerate, amend
or change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant or director stock plans
or authorize cash payments in exchange for any options granted under any of
such plans;
(b) Grant any severance or termination pay to any
director, officer or employee except payments in amounts consistent with
policies and past practices or pursuant to written agreements outstanding, or
policies existing, on the date hereof and as previously disclosed in writing to
the other, or adopt any new severance plan, or provide any other compensation
or benefit to any employee, officer or director that would accrue or become
payable as a result of or in connection with the Offer and/or Merger;
(c) Transfer or license to any person or entity or
otherwise extend, amend or modify in any material respect any rights to the
Company Intellectual Property or other proprietary rights, or enter into grants
to future patent rights, other than in the ordinary course of business,
consistent with past practice;
(d) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) Repurchase or otherwise acquire, directly or
indirectly, any shares of capital stock except pursuant to rights of repurchase
of any such shares under any employee, consultant or director stock plan
existing on the date hereof (which repurchase rights the Company shall be
obligated to exercise if the repurchase price is less than the Offer Price);
(f) Issue, deliver, sell, authorize or propose the
issuance, delivery or sale of, any shares of capital stock or any securities
convertible into shares of capital stock, or subscriptions, rights, warrants or
options to acquire any shares of capital stock or any securities convertible
into shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible securities,
other than the issuance of Shares pursuant to the exercise of stock options
therefor outstanding as of the date of this Agreement;
(g) Cause, permit or propose any amendments to any
charter document or Bylaw (or similar governing instruments of any
subsidiaries);
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(h) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or a material
portion of the assets of, or by any other manner, any business or any
corporation, partnership interest, association or other business organization
or division thereof, or otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to the business of the Company,
or enter into any joint ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose
of any properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice;
(j) Incur any indebtedness for borrowed money in excess
of $100,000 (other than ordinary course trade payables or pursuant to existing
credit facilities in the ordinary course of business) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire debt securities, or guarantee any debt securities of others;
(k) Adopt or amend any employee benefit or employee
stock purchase or employee option plan, or enter into any employment contract,
pay any special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates of its officers or employees other than in
the ordinary course of business, consistent with past practice, or change in
any material respect any management policies or procedures;
(l) Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business;
(m) Make any grant of exclusive distribution or other
resale rights to any third party; or
(n) Agree in writing or otherwise to take any of the
actions described in (a) through (m) above.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to and in accordance with the terms and
conditions of that certain letter dated April 8, 1998 between Parent and the
Company (the "CONFIDENTIALITY AGREEMENT"), the Company and its subsidiaries
shall, and the Company and its subsidiaries shall use all reasonable commercial
efforts to cause its officers, directors, employees and agents to, afford the
officers, employees and agents of Parent, Purchaser and their affiliates and
the attorneys, accountants, banks, other financial institutions and investment
banks working with Parent or Purchaser, and their respective officers,
employees and agents, complete access at all reasonable times to its officers,
employees, agents, properties, books, records and contracts, and shall furnish
Parent, Purchaser and their affiliates and the attorneys, banks, other
financial institutions and investment banks working
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with Parent or Purchaser, all financial, operating and other data and
information as they reasonably request.
(b) Subject to the requirements of law, Parent and
Purchaser shall, and shall use all commercially reasonable efforts to cause
their officers, employees and agents, and the attorneys, banks, other financial
institutions and investment banks who obtain such information to, hold all
information obtained pursuant to this Agreement or the Confidentiality
Agreement in accordance with the terms and conditions of the Confidentiality
Agreement.
(c) No investigation pursuant to this Section 5.2 shall
affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
5.3 PROXY MATERIAL; STOCKHOLDERS' MEETING.
(a) The Company and each of Parent and Purchaser shall
prepare and file, or shall cause to be prepared and filed, with the SEC those
documents, schedules and amendments and supplements thereto required to be
filed with respect to the transactions contemplated by this Agreement. To the
extent required by the DGCL or other applicable law, the Company, acting
through its Board of Directors, shall, cause the Company Stockholders' Meeting
to be duly called (including establishing the record date, if requested, to be
a date immediately after the date the Purchaser first purchases any Shares
pursuant to the Offer) and shall give notice of, convene and hold the Company
Stockholders' Meeting as soon as practicable, and at such time and place
designated by Parent or Purchaser, for the purpose of approving the Merger,
this Agreement and any other actions contemplated hereby which require the
approval of the Company's stockholders. The Company shall recommend to its
stockholders approval of the Merger and take all reasonable actions necessary
to solicit such approval. The Company shall use all reasonable commercial
efforts to obtain and furnish the information required to be included by it in
the Proxy Statement and, after consultation with Parent and Purchaser, shall
respond promptly to any comments of the SEC relating to any preliminary proxy
statement regarding the Merger and the other transactions contemplated by this
Agreement and to cause the Proxy Statement to be mailed to its stockholders,
all at the earliest practicable time. Whenever any event occurs which should
be set forth in an amendment or supplement to the Proxy Statement or any other
filing required to be made with the SEC with respect to the Proxy Statement or
the Company Stockholders' Meeting, each party shall promptly inform the other
of such occurrence and cooperate in filing with the SEC and/or mailing to the
Company's stockholders such amendment or supplement. The Proxy Statement and
all amendments and supplements thereto shall comply with applicable law and be
in form and substance reasonably satisfactory to each of Parent and Purchaser
and the Company. Subject to compliance with applicable fiduciary duties, the
Company, acting through its Board of Directors, shall include in the Proxy
Statement the unanimous recommendation of its Board of Directors that
stockholders of the Company vote in favor of the approval and adoption of this
Agreement and the Merger and shall disclose that each of the Company's
directors and executive officers intend to tender all outstanding shares
beneficially owned by such persons to Purchaser pursuant to the offer unless to
do so would subject such person to liability under Section 16(b) of the
Exchange Act. The Company shall use all reasonable commercial efforts to
solicit from stockholders of the Company proxies in favor of such
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approval and adoption and shall take all other actions necessary or, in the
reasonable judgment of Parent and Purchaser, advisable to secure the vote or
consent of the Company's stockholders required by the DGCL to effect the
Merger.
(b) Notwithstanding the foregoing, in the event that
Purchaser shall acquire at least ninety percent (90%) of the outstanding
Shares, the parties hereto agree, at the request of Purchaser, subject to
Article VI, 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 and without a vote of the Company's stockholders, in
accordance with the DGCL.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant its
terms, the Company and its subsidiaries shall not, and will instruct their
respective directors, officers, employees, representatives, investment bankers,
agents and affiliates not to, directly or indirectly, (i) solicit or encourage
submission of, any proposals or offers by any person, entity or group of such
entity (other than Parent and its affiliates, agents and representatives), or
(ii) participate in any discussions or negotiations with, or disclose any
non-public information concerning the Company or any of its subsidiaries to, or
afford any access to the properties, books or records of the Company or any of
its subsidiaries to, or otherwise assist or facilitate, or enter into any
agreement or understanding with, any person, entity or group (other than Parent
and its affiliates, agents and representatives), in connection with any
Acquisition Proposal with respect to the Company. For the purposes of this
Agreement, an "ACQUISITION PROPOSAL" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale or license of
substantial assets or similar transactions of such entity (other than sales of
assets or inventory in the ordinary course of business or as permitted under
the terms of this Agreement), (ii) sale of 10% or more of the outstanding
shares of capital stock of the Company (including without limitation by way of
a tender offer or an exchange offer), (iii) the acquisition by any person of
beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act
and the rules and regulations thereunder) which beneficially owns, or has the
right to acquire beneficial ownership of, 10% or more of the then outstanding
shares of capital stock of the entity (except for acquisitions for passive
investment purposes only in circumstances where the person or group qualifies
for and files a Schedule 13G with respect thereto or qualifies for and files a
Schedule 13D with respect thereto, indicating that the acquisition of such
shares is for passive investment purposes only, and such person or group does
not subsequently file an amendment to such 13D indicating that such shares were
not acquired for passive investment purposes only and the Minimum Condition is
not satisfied); or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted previously with respect
to any of the foregoing. The Company will (i) notify Parent as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) as promptly as practicable notify Parent of the terms and
conditions of any such Acquisition Proposal. In addition, subject to the other
provisions of this
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Section 5.4(a), from and after the date of this Agreement until the earlier of
the Effective Time and termination of this Agreement pursuant to its terms, the
Company and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition
Proposal made by any person, entity or group (other than Parent or Purchaser);
provided, however, that nothing herein shall prohibit the Company' Board of
Directors from taking and disclosing to the Company' stockholders a position
with respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act.
(b) Notwithstanding the provisions of paragraph (a)
above, prior to consummation of the Offer, the Company may, to the extent the
Board of Directors of the Company determines, in good faith, after consultation
with outside legal counsel, that the Board's fiduciary duties under applicable
law require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (c), below, furnish information to any
person, entity or group after such person, entity or group has delivered to the
Company in writing, an unsolicited bona fide Acquisition Proposal which the
Board of Directors of the Company in its good faith reasonable judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable than the Offer and the Merger to the
stockholders of the Company [from a financial point of view] and for which
financing, to the extent required, is then committed or which, in the good
faith reasonable judgment of the Board of Directors of the Company (based upon
the advice of independent financial advisors), is reasonably capable of being
financed by such person, entity or group and which is reasonably likely to be
consummated (a "SUPERIOR PROPOSAL"). In the event the Company receives a
Superior Proposal, nothing contained in this Agreement (but subject to the
terms hereof) will prevent the Board of Directors of the Company from
recommending such Superior Proposal to the Company's stockholders, if the Board
determines, in good faith, after consultation with outside legal counsel, that
such action is required by its fiduciary duties under applicable law; provided,
however, that the Company shall not recommend to its stockholders a Superior
Proposal for a period of not less than 48 hours after Parent's receipt of a
copy of such Superior Proposal (or a description of the terms and conditions
thereof, if not in writing).
(c) Notwithstanding anything to the contrary herein,
the Company will not provide any non-public information to a third party
unless: (x) the Company provides such non-public information pursuant to a
nondisclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreement; and (y) such non-public information has been previously delivered to
Parent.
5.5 PUBLIC ANNOUNCEMENTS. Parent and Purchaser on the one hand
and the Company on the other hand will consult with each other before issuing
any press release or otherwise making any public statements with respect to
this Agreement, the Offer or the Merger or the other transactions contemplated
hereby, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law. This
Section 5.5 shall supersede any conflicting provisions in the Confidentiality
Agreement.
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5.6 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice (which notice
shall state that it is delivered pursuant to Section 5.6(a) of this Agreement)
in writing to Parent, and Parent and Purchaser shall give prompt notice in
writing to the Company, of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement through the
Effective Time and (ii) any failure of the Company, Parent or Purchaser, as the
case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, no such notification
shall affect the representations or warranties of the parties or the conditions
to the obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing
(which notice shall state that it is delivered pursuant to Section 5.6(b) of
this Agreement) to Parent of (i) any act, omission to act, event or occurrence
which, with the passage of time or otherwise, would likely have a Material
Adverse Effect on the Company and (ii) any material contingent liability of the
Company or any of its subsidiaries for which such party reasonably believes it
will, with the passage of time or otherwise, become liable; provided, however,
that no such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder.
5.7 ACTIONS BY COMPANY. Subject to the terms and conditions
hereof, the Company shall, and shall cause its subsidiaries to, cooperate with
Parent and Purchaser and take all such actions as may be reasonably requested
by Parent and Purchaser to accomplish the Merger.
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) All rights to indemnification existing in favor of
the current directors and officers of the Company ( the "INDEMNIFIED PERSONS")
for acts and omissions occurring prior to the Effective Time, as provided in
the Company's Certificate of Incorporation and/or Bylaws (as in effect as of
the date of this Agreement) and as provided in the indemnification agreements
between the Company and the Indemnified Persons (as in effect as of the date of
this Agreement), shall survive the Offer and the Merger for a period of not
less than four years after the Effective Time; provided, however, that if, at
any time prior to the fourth anniversary of the Effective Time, any Indemnified
Persons delivers to Parent or the Surviving Corporation a written notice
asserting a claim for indemnification, then the claim asserted in such notice
shall survive the fourth anniversary of the Effective Time until such time as
such claim is fully and finally resolved. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least favorable to current
Indemnified Persons as those contained in the Certificate of Incorporation and
Bylaws of the Company as in effect on the date hereof, which provisions will
not be amended, repealed or otherwise modified from the Effective Time until
the fourth anniversary of the date on which the Merger becomes effective in any
manner that would adversely affect the rights thereunder of any such
Indemnified Person.
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(b) From the Effective Time until the fourth anniversary of the
date on which the Merger becomes effective, Parent shall maintain in effect,
for the benefit of the Indemnified Persons with respect to acts or omissions
occurring prior to the Effective Time, the directors' and officers' liability
insurance policy currently carried: provided, however, that Parent may
substitute for such policy or policies of materially equivalent coverage for
acts or commissions prior to the Effective Date and provided, further, that
Parent shall not be obligated to maintain such coverage for policy limits which
would cause the annual cost of such coverage to exceed $397,248, representing
150% of the cost of such coverage paid by the Company in fiscal year 1998 and,
provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) The provisions of this Section 5.8 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Persons.
[5.9 INTENTIONALLY LEFT BLANK]
5.10 ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions hereof, each of
the parties to this Agreement agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement
(including consummation of the Offer and the Merger) and to cooperate with each
other in connection with the foregoing.
(b) Subject to the terms and conditions hereof, each of
the parties to this Agreement agrees to use (i) all commercially reasonable
efforts to obtain all necessary waivers, consents and approvals from other
parties to loan agreements, leases, licenses and other contracts, and (ii) all
commercially reasonable efforts to obtain all necessary consents, approvals and
authorizations as required to be obtained under any federal, state or foreign
law or regulations, including, but not limited to, those required under the HSR
Act, to defend all lawsuits or other legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby, to lift
or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby, to effect all necessary registrations and filings,
including, but not limited to, filings under the HSR Act and submissions of
information requested by Governmental Entities, and to fulfill all conditions
to this Agreement.
5.11 OTHER ACTIONS BY THE COMPANY. If any "fair price,"
"moratorium," "control share acquisition," "shareholder protection" or other
form of antitakeover statute, regulation or charter provision or contract is or
shall become applicable to the Offer or the Merger or the transactions
contemplated hereby, the Company shall grant such approvals and take such
actions as are necessary under such laws and provisions so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute, regulation, provision or contract on the transactions
contemplated hereby.
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5.12 SECTION 203 OF THE DGCL. The Company will not approve any
acquisition of shares of Common Stock by any person (other than Parent,
Purchaser or their respective affiliates) which would result in such person
becoming an "interested stockholder" (as such term is defined in Section 203 of
the DGCL) or otherwise become subject to Section 203 of the DGCL.
5.13 STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement until the purchase of Shares
pursuant to the Offer, and thereafter, notwithstanding the initial sentence of
this Article V, shall give Parent the opportunity to direct the defense of such
litigation and, if Parent so chooses to direct such litigation, Parent shall
give the Company and its directors an opportunity to participate in such
litigation; provided, however, that no settlement of such litigation shall be
agreed to without Parent's consent; and provided further that no settlement
requiring a payment by a director shall be agreed to without such director's
consent, which consent, in either case, shall not be unreasonably withheld or
delayed.
5.14 SECTION 401(K) PLAN TERMINATION; ESPP TERMINATION. The
Company will promptly take any and all actions necessary and appropriate to
terminate the Company's 401(k) plan and the ESPP, including without limitation
(i) adoption of resolutions by the Company's board of directors terminating the
401(k) plan and the ESPP immediately prior to the Effective Time and (ii)
timely delivery of any notices required under the terms of the 401(k) plan and
the ESPP. The Company's 401K in effect as of the date hereof shall, to the
extent practicable, remain in effect until Company employees are allowed to
participate in a comparable Employee Benefit Plan of Parent. With respect to
such comparable Employee Benefit Plan of Parent, such plan shall give full
credit to each Company employee for each participant's respective period of
service with the Company prior to the Effective Time for all purposes for which
such period of service is relevant to benefits provided under such benefit plan
of Parent. From and after the Effective Time, Parent shall provide employees
of the Company with the opportunity to participate in any employee stock option
or other incentive compensation plan of Parent or Purchaser on substantially
the same terms and subject to substantially the same conditions as are
available to similarly situated employees of Parent and Purchaser, provided for
any employee that such employee otherwise fulfills all eligibility criteria.
ARTICLE VI
CONDITIONS OF MERGER
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions:
(a) If required by the DGCL, this Agreement and the
Merger shall have been approved and adopted by the requisite vote of the
stockholders of the Company.
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(b) Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) Shares shall have been purchased pursuant to the
Offer.
(d) No temporary restraining order, preliminary or
permanent injunction, judgment or other order, decree or ruling nor any
statute, rule, regulation or order shall be in effect which would (i) make the
acquisition or holding by Parent or its affiliates of Shares or shares of
Common Stock of the Surviving Corporation illegal or otherwise prevent the
consummation of the Merger, (ii) prohibit Parent's or Purchaser's ownership or
operation of, or compel Parent or Purchaser to dispose of or hold separate, all
or a material portion of the business or assets of Purchaser, the Company or
any subsidiary of the Company thereof, (iii) compel Parent, Purchaser or the
Company to dispose of or hold separate all or a material portion of the
business or assets of Parent or any such subsidiary or the Company or any such
subsidiary, (iv) impose material limitations on the ability of Parent or
Purchaser or their affiliates effectively to exercise full ownership and
financial benefits of the Surviving Corporation, or (v) impose any condition to
the Offer, this Agreement or the Merger that is materially adverse to the party
objecting thereto.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated, at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual written agreement of the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Offer shall be terminated or
expire without any Shares having been purchased pursuant to the Offer;
provided, however, that a party shall not be entitled to terminate
this Agreement pursuant to this Section 7.1(b)(i) if it is in material
breach of its representations and warranties, covenants or other
obligations under this Agreement; or
(ii) if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Offer or
the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by Parent:
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(i) if the Board of Directors of the
Company or any committee thereof shall have approved, or recommended
(and not rescinded such recommendation within two (2) business days)
that stockholders of the Company accept or approve, an Acquisition
Proposal by a third party;
(ii) if the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified (and
not rescinded such recommendation within two (2) business days) its
approval of, or recommendation that the stockholders of the Company
accept or approve (as the case may be), the Offer, this Agreement and
the Merger;
(iii) if the Company shall have failed to
include in the Schedule 14D-9 the recommendation of the Board of
Directors of the Company that the stockholders of the Company accept
the Offer;
(iv) prior to the purchase of Shares
pursuant to the Offer, in the event that the conditions to the Offer
set forth in clause (i) or (ii) of Annex I shall not be satisfied or
if any of the events set forth in clause (iii) thereof shall have
occurred; provided in the case of an event set forth in clause (iii),
item (A), (B), (C), (F) or (H) of Annex I that if such event is and
continues to be reasonably probable of being cured by the date which
is 20 business days after commencement of the Offer, Parent shall not
terminate this Agreement pursuant to this Section 7 (c)(iv) as a
result of such event until the date that is 20 business days after the
commencement of the Offer; or
(v) prior to the purchase of Shares
pursuant to the Offer if the Company is in material breach of any of
its covenants or obligations under this Agreement, or any
representation or warranty of the Company contained in this Agreement
shall have been incorrect, in any material respect, when made or shall
have since ceased to be true and correct in any material respect;
provided, that, if such breach is curable through exercise of the
Company's commercially reasonable efforts, then Parent may not
terminate this Agreement under this Section 7.1(c)(v) unless the
breach is not cured within 10 days after giving notice to the Company;
(d) by the Company:
(i) if the Offer shall not have been
commenced in accordance with Section 1.1, or Parent or Purchaser shall
have failed to purchase validly tendered Shares in violation of the
terms of the Offer within ten business days after the expiration of
the Offer; provided, however, that the Company shall not be entitled
to terminate this Agreement pursuant to Section 7.1(d)(i) if it is in
material breach of its representations and warranties, covenants or
other obligations under this Agreement;
(ii) if the Board of Directors of the
Company has resolved to, and in fact does, recommend to the Company's
Stockholders that they accept a Superior Proposal, provided that all
the provisions of Section 5.4 have been fully complied with, and
provided
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further that the Company shall have paid to Parent the entire Break-up
Fee as provided in Section 7.3(b); or
(iii) prior to the purchase of Shares
pursuant to the Offer, if Parent or Purchaser is in material breach of
any of its covenants or obligations under this Agreement, or any
representation or warranty of Parent or Purchaser contained in this
Agreement shall have been incorrect, in any material respect, when
made or shall have since ceased to be true and correct in any material
respect; provided, that, if such breach is curable through exercise of
the Parent's or Purchaser's commercially reasonable efforts, then the
Company may not terminate this Agreement under this Section
7.1(d)(iii) unless the breach is not cured within 10 days after giving
notice to the Parent.
7.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement by
the Company or Parent or both of them pursuant to Section 7.1, the terminating
party shall provide written notice of such termination to the other party and
this Agreement shall forthwith become void and there shall be no liability on
the part of Parent, Purchaser or the Company, except as set forth in this
Section 7.2 and in Sections 5.2(b) and 7.3, The foregoing shall not relieve any
party for liability for damages actually incurred as a result of any breach of
this Agreement. Sections 5.2(b), 7.2, 7.3 and Article VIII shall survive the
termination of this Agreement.
7.3 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement and
whether or not the transactions contemplated by the Offer and this Agreement
are consummated, all costs and expenses incurred in connection with the
transactions contemplated by the Offer and this Agreement shall be paid by the
party incurring such expenses.
(b) The Company shall pay the Parent, in same day funds,
upon demand, a fee of $2,000,000 (the "BREAK-UP FEE"), if any of the following
shall occur:
(i) if the Board of Directors of the
Company or any committee thereof shall have approved, or recommended
that stockholders of the Company accept or approve, an Acquisition
Proposal by a third party, or shall have resolved to do any of the
foregoing;
(ii) if the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified its
unanimous approval of, or unanimous recommendation that the
stockholders of the Company accept or approve (as the case may be),
the Offer, this Agreement and the Merger, or shall have resolved to do
any of the foregoing;
(iii) if the Company shall have failed to
include in the
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Schedule 14D-9 the unanimous recommendation of the Board of Directors
of the Company that the stockholders of the Company accept the Offer;
or
(iv) the following shall occur: (A)
prior to the Effective Time, any person, entity or "GROUP" (as that
term is used in Section 13(d)(3) of the Exchange Act), shall
beneficially own (as that term is used in Section 13(d)(3) of the
Exchange Act), or shall have acquired, 25% or more of the Shares, or
shall have been granted any option or right, conditional or otherwise,
to acquire 25% or more of the Shares (the "25% PERSON"), which Shares
are not tendered to Parent in connection with the Offer, (B) the
Minimum Condition shall not be met as of the Expiration Date and (C)
either (1) the 25% Person shall, at any time within twelve (12) months
of the expiration of the Offer, effect the Acquisition (as defined
below) of the Company or enter into an agreement with the Company or
commence a tender offer to effect such an Acquisition, and the
transactions contemplated thereby are subsequently consummated at any
time, or (2) any person other than Parent or any affiliate of Parent
effects the Acquisition of the Company during 1998, or during 1998
enters into an agreement with the Company or commences a tender offer
for the Acquisition of the Company and the transactions contemplated
thereby are subsequently consummated at any time, in any such case
under this clause (2) at a purchase price equivalent to a price per
Share in excess of $2.45. For the purposes hereof, an "ACQUISITION"
of the Company shall mean any merger, consolidation or other
reorganization, any tender offer or other transaction or series of
related transactions involoving the acquisition of securities of the
Company, or any sale or license of all or substantially all the
business or assets of the Company, unless the shareholders of the
Company prior to such transaction or series of related transactions
retain following such transaction or series of related transactions
(in respect of their equity interest in the Company prior thereto)
more than 50% of the voting equity securities of the surviving or
successor corporation to the business of the Company.
(c) The Break-up Fee is payable to compensate Parent and
Purchaser for their direct and indirect costs and expenses associated with the
negotiation and execution of this Agreement and the undertaking of the
transactions contemplated herein in the event of the occurrence of all of the
events set forth in clauses (i), (ii), (iii) and (iv) of paragraph (b) above,
and shall constitute liquidated damages with respect to (but solely with
respect to) the events itemized in clauses (i), (ii), (iii) and /or (iv) of
paragraph (b) above. However, the right to the payment of the Break-up Fee
shall be in addition to any other damages or remedies at law or in equity to
which Parent or Purchaser may be entitled as a result of the Company's
violation or breach of any other term or provision of this Agreement.
7.4 AMENDMENT. This Agreement may be amended by each of the
parties by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that (i) such
amendment shall be in writing signed by all of the parties hereto, (ii) any
such waiver, amendment or supplement by the Company shall be effective as
against the Company only if approved by a majority of the Continuing Directors
and (iii) after adoption of this Agreement and the Merger by the stockholders
of the Company, no amendment may be made without the further approval of the
stockholders of the Company which reduces the Merger
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<PAGE> 41
Consideration or the Offer Price or changes the form thereof or changes any
other terms and conditions of this Agreement if the changes, alone or in the
aggregate, would materially adversely affect the stockholders of the Company.
7.5 WAIVER. At any time prior to the Effective Time, whether
before or after the Company's Stockholders Meeting, any party hereto, by action
taken by its Board of Directors, may (i) extend the time for the performance of
any of the obligations or other acts of any other party hereto or (ii) subject
to the provisions of Section 7.4, waive compliance with any of the agreements
of any other party or with any conditions to its own obligations. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such
party by a duly authorized officer of such party; provided that any such
extension or waiver by the Company after the Offer has been completed shall be
effective against the Company only if approved by a majority of the Continuing
Directors. Notwithstanding the above, any waiver given shall not apply to any
other or subsequent failure of compliance with agreements of the other party or
conditions to its own obligations.
ARTICLE VIII
MISCELLANEOUS
8.1 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by 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 contemplated hereby 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 an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible given the original intent of the parties.
8.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing, shall be effective when received and shall
in any event be deemed to have been received and to be effective (i) on the
date of delivery, if hand delivered (ii) three days after deposit in U.S. mail
if sent via certified mail return receipt requested, postage prepaid or (iii)
the first business day after the business day of deposit with Federal Express
or similar carrier for overnight delivery, as return receipt requested and
freight prepaid and shall be sent to the parties at the following addresses (or
at such other address for a party as shall be specified by similar notice,
except that notices of changes of address shall be effective upon receipt):
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(a) If to Parent or Purchaser:
Diamond Multimedia Systems, Inc.
2880 Junction Avenue
San Jose, California 95134
Attention: William J. Schroeder
James Walker
Telecopier No.: (408) 325-7070
With copies to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Jeffrey D. Saper, Esq.
Howard S. Zeprun, Esq.
Telecopier No.: (650) 493-6811
and to:
Boardwalk Acquisition Corporation
2880 Junction Avenue
San Jose, CA 95134
Attention: William J. Schroeder
James Walker
Telecopier No.: (408) 325-7070
(b) If to the Company:
Micronics Computers, Inc.
45365 Northport Loop West
Fremont, California 94538
Telecopier No.: (510) 770-1863
With copies to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Gail E. Suniga, Esq.
Telecopier No.: (650) 254-0857
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Alliant Partners
435 Tasso Street, Third Floor
Palo Alto, California 94301
Attention: James L. Kochman
Telecopier No.: (650) 325-7692
8.3 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; NO
ASSIGNMENT. This Agreement, Annex I, the documents delivered pursuant hereto
or in connection herewith and the Confidentiality Agreement (i) constitute the
entire agreement and supersede all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof, (ii) are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder (except as expressly
set forth in Section 5.9 with respect to present officers and directors of the
Company), and (iii) may not be assigned, except that Purchaser may assign their
rights hereunder in whole or in part to one or more direct or indirect
subsidiaries or affiliates of Parent which, in written instruments reasonably
satisfactory to the Company, shall agree to make all representations and
warranties of Purchaser set forth herein and shall agree to assume all of such
party's obligations hereunder and be bound by all of the terms and conditions
of this Agreement; provided, however, that no such assignment shall relieve the
assignor of its obligations hereunder.
8.4 INTERPRETATION; KNOWLEDGE.
(i) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. Unless otherwise specifically stated herein in any
particular case, the words "INCLUDE," "INCLUDES" and "INCLUDING" when used
herein shall be deemed in each case to be followed by the words
"without_limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein to
"THE BUSINESS OF" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "KNOWLEDGE"
means, with respect to any matter in question, that any of the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer or Controller (or
principal accounting officer if different from the foregoing) of the parties,
as the case may be, have knowledge of such matter.
(iii) In this Agreement, any reference to any
"subsidiary"of any party shall mean any association, corporation, individual,
partnership, trust, or any other entity or organization in which such party has
a direct or indirect equity ownership interest of more than 50%. In this
Agreement, any reference to any action, suit, proceeding, claim, arbitration,
or investigation being "pending" or "threatened" shall mean that the relevant
party shall have either been served thereunder or otherwise notified of the
existence thereof.
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<PAGE> 44
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, by law or equity or otherwise upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
The parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction in
addition to any other remedy, without proving actual damages, to which they are
entitled at law or in equity.
8.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law thereof; provided that issues involving the corporate governance of any
of the parties hereto shall be governed by their respective jurisdictions of
incorporation. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any state or federal court within the Northern
District of California, in connection with any matter based upon or arising out
of this Agreement or the matters contemplated herein, other than issues
involving the corporate governance of any of the parties hereto, agrees that
process may be served upon them in any manner authorized by the laws of the
State of California for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
8.8 RULES OF CONSTRUCTION. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO 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 THE PARTIES IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
8.10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties set forth herein shall be deemed
to be continuing from the date hereof to the time Parent acquires the Shares
pursuant to the Offer.
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<PAGE> 45
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
Diamond Multimedia Systems, Inc.
By: /s/ WILLIAM J. SCHROEDER
--------------------------------------
William J. Schroeder, President and
Chief Executive Officer
Boardwalk Acquisition Corporation
By: /s/ WILLIAM J. SCHROEDER
--------------------------------------
William J. Schroeder, President
Micronics Computers, Inc.
By: /s/ CHARLES J. HART
--------------------------------------
Charles J. Hart, President and
Chief Executive Officer
*****SIGNATURE PAGE--AGREEMENT AND PLAN OF MERGER*****
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<PAGE> 46
ANNEX I
CONDITIONS OF THE OFFER
The term "AGREEMENT" as used in this Annex I shall mean the Agreement
and Plan of Merger to which this Annex I is attached, and all capitalized terms
used in this Annex I and not defined in this Annex I shall have the respective
meanings set forth in the Agreement.
Notwithstanding any other provision of the Offer, and in addition to
(and not in limitation of) Purchaser's rights to extend and amend the Offer at
any time, Purchaser shall not be required to accept for payment, purchase or
pay for, or may terminate or amend the Offer and may postpone the acceptance
of, and payment for, subject to Rule 14e-1(c) under the Exchange Act (whether
or not any Shares have theretofore been accepted for payment or paid for
pursuant to the Offer), any Shares tendered pursuant to the Offer if:
(i) any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of Shares pursuant to the Offer
shall not have expired or been terminated;
(ii) the Minimum Condition is not satisfied;
(iii) at any time on or after the date of the Agreement,
any of the following events shall be determined by Parent or Purchaser
to have occurred through no fault of Parent or Purchaser:
(A) there shall have been any action taken or
threatened, or any statute, rule, regulation, judgment, temporary
restraining order, preliminary or permanent injunction or other order,
decree or ruling promulgated, enacted, entered, enforced or deemed
applicable to the Offer or the Merger by any Governmental Entity could
reasonably be expected to, directly or indirectly, (1) make the
acceptance for payment or the payment for, or the purchase of some or
all of the Shares pursuant to the Offer illegal or otherwise
materially prohibit, delay or restrict consummation of the Offer or
the Merger or the consummation of any transaction contemplated by the
Agreement, (2) require the divestiture by Parent, Purchaser, the
Company or any of their respective subsidiaries taken as a whole of
all or any material portion of the business, assets or property of any
of them or any Shares or impose any material limitation on the ability
of any of them to conduct their business and own such assets,
properties or Shares, in each case, as a result of the Offer the
Merger or the transactions contemplated thereby (3) impose any
material limitation on the ability of Parent or Purchaser to acquire
or hold or to exercise effectively all rights of ownership of the
Shares, including the right to vote any Shares purchased by any of
them on all matters properly presented to the stockholders of the
Company, including, without limitation, the adoption and approval of
the Agreement and the Merger (4) result in a material diminution in
the benefits expected to be derived by Parent or Purchaser as a result
of the transactions contemplated by
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<PAGE> 47
the Offer or the Agreement, (5) impose any material condition to the
Offer, the Agreement or the Merger unacceptable to Parent or
Purchaser; or
(B) the Company shall have failed to obtain all
of the consents of third parties set forth in Schedule 3.9 of the
Agreement by the Expiration Date if such failure would result in a
Material Adverse Effect; or
(C) the Company shall have breached, or failed to
comply with, in any material respect, any of its covenants or
obligations under the Agreement or any representation or warranty of
the Company in the Agreement shall have been incorrect, in any
material respect when made or on and as of the date of any scheduled
expiration or consummation of the Offer.
(D) the Board of Directors of the Company or any
committee thereof shall have (1) withdrawn or modified (including
without limitation, by amendment of the Company's Schedule 14D-9) in a
manner adverse to Parent or Purchaser its approval or recommendation
of the Offer, the Merger or the Agreement, (2) approved or recommended
any Acquisition Proposal by a third party other than the Offer and the
Merger, (3) publicly resolved to do any of the foregoing, or (4) upon
a request to reaffirm the Company's approval or recommendation of the
Offer, the Agreement or the Merger, the Board of Directors of the
Company shall fail to do so within two business days after such
request is made, in any event described in the Section (D), so long as
such withdrawal modification, approval, recommendation, resolution or
failure has not been rescinded within two business days; or
(E) the Agreement shall have been terminated in
accordance with its terms; or
(F) there shall have occurred any Material
Adverse Effect on the Company, or any event, fact or change which
could reasonably be expected to result in a Material Adverse Effect on
the Company;
which in the sole but reasonable judgment of Parent in such case, and
regardless of the circumstances makes it inadvisable to proceed with the Offer
or with acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent, Purchaser
and their permitted assignees and may be asserted by Parent or Purchaser
regardless of the circumstances (including any action or inaction by Parent or
Purchaser or any of their assignees) giving rise to such condition. Except as
specified in Section 1.1(c), all the foregoing conditions may be waived by
Parent or Purchaser in whole or in part at any time and from time to time in
the sole discretion of Parent or Purchaser. The failure by Parent or Purchaser
at any time to exercise its rights with respect to the foregoing conditions
shall not be deemed a waiver of any such condition, and each condition shall be
deemed an ongoing condition with respect to which Parent or Purchaser may
assert its rights at any time prior to the completion of the Offer and from
time to time. Any determination by Parent or
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<PAGE> 48
Purchaser concerning any event described in this Annex I shall be
binding upon all persons to whom the Offer is made.
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<PAGE> 1
EXHIBIT (c)(2)
April 8, 1998
CONFIDENTIAL
------------
Mr. Charles J. Hart
CEO
Micronics Computers, Inc.
232 E. Warren Avenue
Fremont, CA 94539-7085
Dear Charles:
In connection with your consideration of a possible transaction, Diamond
Multimedia Systems Inc. and Micronics Computers, Inc. (the "Parties") may
request and disclose financial and other information concerning the business and
affairs of the other party. As a condition to furnishing to the other party or
its representatives financial and other information which has not theretofore
been made available to the public, both Parties agree to treat all such
non-public information furnished in writing or orally by the other party or its
representatives on or after the date of this agreement (herein collectively
referred to as the "evaluation material"), as follows:
(1) Both Parties recognize and acknowledge the competitive value and
confidential nature of the evaluation material and the damage
that could result to the other party if information contained
therein is disclosed to any third party. Both Parties also
recognize and acknowledge that the evaluation material is being
provided in reliance upon the mutual acceptance of the terms of
this agreement.
(2) Both Parties agree that the evaluation material will be used
solely for the purpose of evaluating the proposed transaction.
Both Parties also agree that its directors, officers, employees
and agents and representatives of its advisors, herein
collectively referred to as "representatives," will not disclose
or permit the disclosure of any of the evaluation material now or
hereafter received or obtained from the other party or its
representatives to any third party or otherwise use or permit the
use of the evaluation material in any way detrimental to the
other party, except as required by applicable law or legal
process, without the prior written consent of the other party,
provided, however, that any such information may be disclosed to
such of the party's representatives who need to know such
information for the purpose of evaluating the proposed
transaction and who are advised of this agreement and agree to
keep such information confidential and to be bound by this
agreement to the same extent as if they were parties hereto, it
being understood that both Parties shall be responsible for any
breach of this agreement to the same extent as if they were
parties hereto, it being understood that both Parties shall be
responsible for any breach of this agreement by its
representatives.
<PAGE> 2
Mr. Charles J. Hart April 8, 1998
Page 2
(3) In the event that the transaction contemplated by this agreement
is not consummated, neither party nor any of its representatives
shall, without prior written consent of the other party, use any
of the evaluation material now or hereafter received or obtained
from the other party or its representatives for any purpose.
(4) In the event that the transaction contemplated by this agreement
is not consummated, all evaluation material (and all copies,
summaries, and notes of the contents or parts thereof) shall be
returned upon the other party's request or destroyed and not
retained by it or its representatives in any form or for any
reason.
(5) Both Parties and their representatives shall have no obligation
hereunder with respect to any information in the evaluation
materials to the extent that such information has been made
publicly available nor any obligation with respect to information
which can be demonstrated by either party to be already properly
in its possession on a non-confidential basis from sources other
than the party or its representatives, other than by acts by it
or its representatives in violation of this agreement.
(6) Both Parties are aware, and will advise their representatives who
are informed of the matters that are the subject of this
agreement, of the restrictions imposed by the United States
securities laws on the purchase or sale of securities by any
person who has received material, non-public information from
either party and on the communication of such information to any
other person who may purchase or sell such securities in reliance
upon such information. Both Parties will comply with all
applicable securities laws in connection with the purchase or
sale, directly or indirectly, of securities of the other party
for as long as it or its representatives are in possession of or
have knowledge of material non-public information about the other
party.
(7) Both Parties agree that they will not solicit directly or
indirectly any of the other party's employees or contractors
involved in these discussions during the period of these
discussions and for a period of 6 months thereafter, without the
express written approval of the other party. Furthermore, both
Parties agree that they will not use the information disclosed in
the course of these discussions to directly or indirectly solicit
the employees or contractors of the other party during the same
period.
<PAGE> 3
Mr. Charles J. Hart April 8, 1998
Page 3
It is further agreed that the intention of the Parties to engage in these
discussions, and the subsequent exercise of that intention shall be kept
confidential by both Parties.
Acceptance of the above terms shall be indicated by having this letter
countersigned on your behalf and returning one original to Broadview.
Sincerely,
BROADVIEW ASSOCIATES LLC
Maryfrances Galligan
Principal
Accepted and Agreed: Accepted and Agreed:
By:____________________________ By:______________________________________
Diamond Multimedia Systems Inc. Micronics Computers, Inc.
Date:__________________________ Date:____________________________________
