<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section240.14a-11(c)
or Section240.1a-12
CENTIGRAM COMMUNICATIONS CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies: Common
Stock, par value $.001 per share, of Centigram Communications
Corporation
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2) Aggregate number of securities to which transaction applies: 6,177,096
outstanding shares of Common Stock, plus stock options to acquire
2,268,975 shares of Common Stock that will be converted into options to
acquire ADC Telecommunications, Inc. common stock, based on data
available as to Centigram's outstanding shares and options as of May
26, 2000.
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): The per unit
price is expected to be approximately $26.38 per share. The proposed
maximum value of the transaction is $199,070,073, which is the sum of:
(1) $162,951,792, which represents 6,177,096 outstanding shares of
Centigram common stock multiplied by $26.38 per share and (2)
$36,118,281 to be paid in stock of ADC Telecommunications, Inc. through
the conversion of 2,268,975 shares subject to outstanding Centigram
stock options to shares subject to ADC stock options.
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4) Proposed maximum aggregate value of transaction: $199,070,073
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5) Total fee paid: $39,815
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE> 2
CENTIGRAM COMMUNICATIONS CORPORATION
91 East Tasman Drive
San Jose, California 95134
June [__], 2000
Dear Stockholder:
You are cordially invited to attend our Special Meeting of Stockholders
of Centigram Communications Corporation to be held on July [__], 2000 at 9:00
a.m., at the offices of Centigram, 91 East Tasman Drive, San Jose, California
95134.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger dated as of June
9, 2000, pursuant to which Poundstone Acquisition Corp., a newly formed Delaware
corporation and a wholly owned subsidiary of ADC Telecommunications, Inc., a
Minnesota corporation, will be merged with and into Centigram and Centigram will
become a wholly owned subsidiary of ADC. If the merger agreement is approved and
the merger is subsequently consummated, each outstanding share of Centigram
common stock will be cancelled and converted automatically into the right to
receive cash. The per share amount of cash will be determined as of the closing
of the merger based on the number of our outstanding shares and options on that
date. Based on the number of outstanding shares and stock options as of May 26,
2000, the merger consideration would be $26.38 in cash per share.
However, as we previously announced, 900,000 shares of our treasury
stock are currently in brokerage accounts controlled by the court-appointed
receiver for Credit Bancorp, Ltd. We have entered into an agreement with the
receiver for Credit Bancorp which provides for the return of our treasury shares
and the court supervising the Credit Bancorp receivership has approved the
agreement. If the treasury shares have not been returned to us by the time the
merger is to take place or the time period in which an appeal of the court's
order approving the agreement with the receiver has not expired or an appeal of
the order has been taken and not resolved as of that time, the per share amount
paid to you will be calculated as if the 900,000 shares were outstanding, which
would result in a cash payment to you of approximately $23.84 per share and
approximately $21.5 million in cash ($23.84 per share multiplied by 900,000
shares) being placed in escrow until resolution of the treasury stock matters.
The amount, if any, remaining in escrow after the recovery of all the treasury
shares held by the Credit Bancorp receiver and resolution of any outstanding
treasury share issues will be paid to you and the conversion ratio of our stock
options will be adjusted.
Your Board of Directors has reviewed and considered the terms and
conditions of the merger agreement, has determined that the merger is in the
best interests of Centigram and its stockholders and has approved the merger
agreement. First Analysis Securities Corporation rendered a written opinion
dated June 9, 2000 to the effect that, as of such date and based upon and
subject to the matters stated in the opinion, the merger consideration of at
least $23.84 in cash per share is fair, from a financial point of view, to our
stockholders. First Analysis Securities Corporation's written opinion is
attached as APPENDIX B to the enclosed proxy statement and you should read it
carefully and in its entirety.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Approval and adoption of the
merger agreement requires the affirmative vote of the holders of a majority of
our issued and outstanding shares of common stock. Each share of Centigram
common stock is entitled to one vote on all matters to come before the Special
Meeting. The Centigram common stock constitutes the only outstanding class of
our capital stock.
Attached to this letter you will find a formal Notice of Special
Meeting and a proxy statement. The accompanying proxy statement provides you
with detailed information about the Special Meeting and the proposed merger. If
the merger agreement is approved by the requisite holders of Centigram common
stock, the closing of the merger will occur soon after the Special Meeting and
after all of the other conditions to closing the merger are satisfied. Please
give this material your careful attention. You may also obtain more information
about us from documents we have filed with the Securities and Exchange
Commission.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF CENTIGRAM
COMMON STOCK YOU OWN. A FAILURE TO VOTE WILL COUNT AS A VOTE AGAINST THE MERGER.
ACCORDINGLY, YOU ARE REQUESTED PROMPTLY TO COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO
ATTEND. THIS WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON IF YOU
SUBSEQUENTLY CHOOSE TO ATTEND THE SPECIAL MEETING.
Thank you for your cooperation.
Very truly yours,
Robert L. Puette
President and Chief Executive Officer
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[GRAPHIC OMITTED]
CENTIGRAM
COMMUNICATIONS CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY [__], 2000
TO THE STOCKHOLDERS OF CENTIGRAM COMMUNICATIONS CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Centigram Communications Corporation, a Delaware corporation ("Centigram"), will
be held at the offices of Centigram, 91 East Tasman Drive, San Jose, California
95134, at 9:00 a.m., local time, on July [__], 2000 for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of June 9, 2000 by and among
Centigram, ADC Telecommunications, Inc., a Minnesota corporation
("ADC"), and Poundstone Acquisition Corp., a newly formed Delaware
corporation and a wholly owned subsidiary of ADC ("Poundstone"), a
copy of which is attached as APPENDIX A to the accompanying proxy
statement, pursuant to which Poundstone will merge with and into
Centigram, and each share of common stock of Centigram (other than
those shares held by the stockholders, if any, who properly exercise
their appraisal rights under Delaware law), will be converted into the
right to receive cash. The per share amount of cash will be determined
as of the closing of the merger based on the number of outstanding
Centigram shares and options on such date.
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement.
Only stockholders of record at the close of business on June 26, 2000
will be entitled to notice of and to vote at the special meeting and at any
adjournment or postponement of the special meeting. ALL STOCKHOLDERS ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER, TO ASSURE YOUR
REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE PREPAID ENVELOPE
ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING THE MEETING MAY VOTE IN
PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.
<PAGE> 4
Centigram stockholders have the right to dissent from the merger and
obtain payment in cash of the fair value of their shares of common stock under
applicable provisions of Delaware law. In order to perfect appraisal rights,
stockholders must give written demand for appraisal of their shares before the
taking of the vote on the merger at the special meeting and must not vote in
favor of the merger. A copy of the applicable Delaware statutory provisions is
included as APPENDIX C to the accompanying proxy statement and a summary of
these provisions can be found under "You Have Appraisal Rights in the Merger" in
the accompanying proxy statement.
In the event that there are not sufficient votes to approve the
proposed merger at the time of the special meeting, the special meeting may be
adjourned in order to permit further solicitation by Centigram.
By order of the Board of Directors
Thomas E. Brunton
Assistant Secretary
San Jose, California
June [__], 2000
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER
AGREEMENT IS APPROVED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF
YOUR STOCK CERTIFICATES.
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CENTIGRAM COMMUNICATIONS CORPORATION
91 East Tasman Drive
San Jose, California 95134
PROXY STATEMENT
------------------
INTRODUCTION
We are furnishing this Proxy Statement to the stockholders of Centigram
Communications Corporation, a Delaware corporation, in connection with the
solicitation by the Board of Directors of proxies to be used at a Special
Meeting of Stockholders, as it may be adjourned or postponed from time to time,
to be held on July [__], 2000 at 9:00 a.m., local time, at the offices of
Centigram, 91 East Tasman Drive, San Jose, California 95134. The purpose of the
Special Meeting is for Centigram stockholders to consider and vote upon a
proposal to approve an Agreement and Plan of Merger dated as of June 9, 2000 by
and among Centigram, ADC Telecommunications, Inc., a Minnesota corporation, and
Poundstone Acquisition Corp., a Delaware corporation and newly formed subsidiary
of ADC, and the transactions contemplated thereby. The Merger Agreement
provides, among other things, that:
- Poundstone will merge with and into Centigram;
- Centigram will continue as the surviving corporation and will be a
wholly owned subsidiary of ADC;
- each share of Centigram common stock issued and outstanding at the
effective time of the merger (other than shares held by stockholders,
if any, who properly exercise their appraisal rights under Delaware
law) will convert into the right to receive cash; and
- each option to purchase Centigram common stock outstanding at the
effective time of the merger will be converted into an option to
purchase ADC common stock of equivalent value.
ADC will pay a total fixed purchase price of approximately $200 million
for the Centigram shares and options outstanding at the effective time of the
merger. The per share purchase price will be determined as of the closing of the
merger based on the number of outstanding Centigram shares and options on that
date, and whether at the time of closing we have recovered our 900,000 treasury
shares held by the court-appointed receiver for Credit Bancorp Ltd. in
accordance with an agreement between Centigram and the receiver. We expect that
the per share purchase price will be approximately $26.38 per share if the
Credit Bancorp treasury share matter is resolved in accordance with our
agreement with the receiver at the time of closing, or approximately $23.84 if
the matter is not resolved at the time of closing (with approximately $21.5
million being placed into an escrow for possible future distribution to the
Centigram stockholders after resolution of the Credit Bancorp treasury share
matter). The actual per share amount to be received by the Centigram
stockholders may be more or less than the amounts described above because the
number of shares and options outstanding at the closing of the merger may be
more or less than those outstanding on May 26, 2000, the date used for the
illustrative calculation.
We are first mailing this Proxy Statement and the accompanying notice,
proxy card and letter on or about June [__], 2000 to Centigram stockholders
entitled to receive notice of, and to vote at, the Special Meeting.
Stockholders who do not vote in favor of the Merger Agreement and who
otherwise comply with the applicable procedures described in Section 262 of the
Delaware General Corporation Law will be entitled to appraisal rights. We have
summarized for you the provisions of Section 262 of the Delaware General
Corporation Law in the section of this Proxy Statement called "You Have
Appraisal Rights in the Merger." That summary includes a description of the
procedure that dissenting stockholders must follow to assert appraisal rights.
The entire text of Section 262 of the Delaware General Corporation Law is
attached as APPENDIX C to this Proxy Statement.
THE CENTIGRAM BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
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TABLE OF CONTENTS
INTRODUCTION
TABLE OF CONTENTS .......................................... i
QUESTIONS AND ANSWERS ABOUT THE MERGER ..................... 1
SUMMARY TERM SHEET ......................................... 5
Proposed Acquisition .................................... 5
Reasons for the Merger .................................. 6
Centigram Stock Price ................................... 6
Unanimous Board Recommendation .......................... 6
Fairness Opinion ........................................ 6
The Special Meeting of Stockholders ..................... 6
Appraisal Rights ........................................ 7
Federal Income Tax Consequences ......................... 7
When the Merger Will Be Completed ....................... 7
Conditions to Completing the Merger ..................... 7
Interests of Directors and Officers in the Merger that
Differ From Your Interests .............................. 8
The Merger .............................................. 9
Contact Information ..................................... 9
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION ................................ 10
THE PARTIES TO THE MERGER .................................. 11
Centigram Communications Corporation .................... 11
ADC Telecommunications, Inc. ............................ 11
Poundstone Acquisition Corporation ...................... 11
WHERE YOU CAN FIND MORE
INFORMATION ................................................ 11
THE SPECIAL MEETING OF CENTIGRAM STOCKHOLDERS .............. 12
Place, Date, Time and Purpose ........................... 12
Who Can Vote at the Special Meeting ..................... 12
Attending the Meeting ................................... 12
Vote Required ........................................... 12
Voting by Proxy ......................................... 13
THE MERGER ................................................. 13
Background of the Merger ................................ 14
Reasons for the Merger .................................. 21
Credit Bancorp Treasury Share Matter .................... 23
THE MERGER AGREEMENT ....................................... 25
Generally ............................................... 25
Conversion of Centigram Shares .......................... 25
Stock Options ........................................... 26
Employee Stock Purchase Plan ............................ 27
Preferred Shares Rights Plan ............................ 27
Employee Benefit Plan ................................... 27
Payment for Centigram Shares ............................ 27
Source and Amount of Funds .............................. 27
Interests of Centigram's Directors and Officers in the
Merger that Differ from Your Interests .................. 28
Regulatory Approvals .................................... 29
When the Merger Will Be Completed ....................... 30
Procedures for Exchanging Your Stock Certificates ....... 30
Certain Federal Income Tax Consequences ................. 31
Anticipated Accounting Treatment ........................ 31
Escrow For Certain Shares of Centigram Treasury Stock ... 32
Representations and Warranties of Centigram ............. 33
Representations and Warranties of ADC and Poundstone .... 34
Conduct of Business Prior to the Closing ................ 35
No Solicitation Provision ............................... 35
Additional Covenants of ADC and Centigram ............... 36
Conditions to Closing ................................... 37
Termination ............................................. 38
Fees and Expenses ....................................... 39
FAIRNESS OPINION OF FIRST ANALYSIS
SECURITIES CORPORATION ..................................... 41
YOU HAVE APPRAISAL RIGHTS IN THE MERGER .................... 48
MARKET PRICE OF CENTIGRAM COMMON STOCK ..................... 51
BENEFICIAL OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS ................................. 51
OTHER MATTERS .............................................. 52
APPENDIX A -- Agreement and Plan of Merger ................. A-1
APPENDIX B -- Opinion of First Analysis Securities
Corporation ................................................ B-1
APPENDIX C -- Section 262 of the Delaware
General Corporation Law .................................... C-1
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QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly
some commonly asked questions regarding the merger. These questions and answers
may not address all questions that may be important to you as a stockholder of
Centigram. Please refer to the more detailed information contained elsewhere in
this proxy statement and its appendices.
1 IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE FOR MY CENTIGRAM COMMON
STOCK?
You will receive cash. ADC will pay cash for all Centigram shares
outstanding as of the closing and will assume Centigram stock options
outstanding as of the Closing for a total purchase price of approximately $200
million. The per share amount of cash will be determined as of the closing of
the merger based on the number of outstanding Centigram shares and options on
that date, and whether at the time of closing Centigram has recovered its
900,000 treasury shares held in brokerage accounts controlled by the
court-appointed receiver for Credit Bancorp, Ltd. Based on the number of
outstanding Centigram shares and stock options as of May 26, 2000, the purchase
price will consist of approximately $163 million in cash to Centigram's
stockholders, or approximately $26.38 per share, and approximately $36 million
to be paid in ADC common stock through the conversion of Centigram stock options
to ADC stock options. If at the time of the merger closing, the court's order
approving Centigram's agreement with the Credit Bancorp receiver has been
appealed or any applicable appeal period has not expired, or if Centigram has
not fully recovered the 900,000 treasury shares, the per share amount paid to
Centigram's stockholders will be calculated as if the 900,000 shares were
outstanding, resulting in a cash payment of approximately $23.84 per share, and
approximately $21.5 million ($23.84 per share multiplied by 900,000 shares) in
cash will be placed in escrow until any appeal has been finally resolved, the
appeal period has expired, or the treasury shares are fully recovered. If an
escrow is established at the closing, any liability (other than the payment
required by the agreement with the receiver) or expense incurred by ADC or
Centigram following the closing in recovering the treasury shares or prosecuting
any appeal will be reimbursed to ADC or Centigram from the escrowed funds. The
amount, if any, remaining in escrow after resolution of these treasury share
matters will be paid to the former Centigram stockholders and the ADC stock
options received upon conversion of Centigram stock options will be
appropriately adjusted.
The actual per share amount to be received by you may be more or less
than the amounts described in the preceding paragraph because the number of
shares and options outstanding at the closing of the merger may be more or less
than those outstanding on May 26, 2000, the date used for the illustrative
calculation. If the total number of shares and options outstanding at the
closing of the merger is greater than the total outstanding on May 26, 2000, the
per share amount will be less than the $26.38 and $23.84 per share amounts
described above. If the total number of shares and options outstanding at the
closing are less than the total outstanding on May 26, 2000, the per share
amount will be more than those illustrative per share amounts. Because of
anticipated option grants, employee stock purchases under the 1991 Employee
Stock Purchase Plan and termination of options, it is likely that the total
number of shares and options outstanding at the merger closing will be different
than the total on May 26, 2000.
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2. WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
The Special Meeting is scheduled to take place at 9:00 a.m. local time
on July [__], 2000, at Centigram's principal office at 91 East Tasman Drive, San
Jose, California 95134.
3. WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
Holders of record of Centigram common stock as of the close of business
on June 26, 2000 are entitled to vote at the special meeting. Each stockholder
has one vote for each share of Centigram common stock he or she owns.
4. WHAT VOTE IS REQUIRED FOR CENTIGRAM STOCKHOLDERS TO APPROVE THE MERGER?
In order for the merger to be approved, holders of a majority of the
outstanding Centigram common stock must vote "FOR" the merger. If your shares
are not voted, it has the same effect as a vote "AGAINST" the merger.
5. WHAT DO I NEED TO DO NOW?
After carefully reading and considering the information contained in
this proxy statement, please vote your shares as soon as possible by filling
out, signing and returning the enclosed proxy card. Your voting materials
include detailed information on how to vote.
6. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
No. Your broker can only vote your shares if you provide instructions
on how to vote. You should instruct your broker on how to vote your shares using
the instructions provided by your broker. If your shares are not voted, it has
the same effect as a vote "AGAINST" the merger.
7. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You may revoke your proxy by notifying the Assistant
Secretary of Centigram in writing or by submitting a new proxy dated after the
date of the proxy being revoked. In addition, your proxy will be revoked by you
if you attend the special meeting and vote in person. However, simply attending
the special meeting will not revoke your proxy. If you have instructed a broker
to vote your shares, you must follow the instructions received from your broker
to change your vote.
8. DO I NEED TO ATTEND THE CENTIGRAM SPECIAL MEETING IN PERSON?
No. It is not necessary for you to attend the special meeting to vote
your shares if Centigram has previously received your proxy, although you are
welcome to attend.
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9. WILL I HAVE APPRAISAL RIGHTS AS A RESULT OF THE MERGER?
Yes. If you wish to exercise your appraisal rights, you must follow the
requirements of Delaware law. A summary of the requirements you must follow to
exercise your appraisal rights is included in "You Have Appraisal Rights in the
Merger" in this proxy statement.
10. WHEN WILL HOLDERS OF CENTIGRAM COMMON STOCK RECEIVE THE MERGER
CONSIDERATION?
The merger is expected to be completed promptly following the special
meeting of the Centigram stockholders. However, it is possible that delays could
require that the merger be completed at a later time. Following the merger, you
will receive instructions on how to receive your cash payment in exchange for
each share of Centigram common stock. You must return your Centigram stock
certificates as described in the instructions, and you will receive your cash
payment as soon as practicable after Norwest Bank Minnesota, N.A., the paying
agent, receives your Centigram stock certificate. If you hold shares through a
brokerage account, your broker will handle the surrender of stock certificates
to Norwest Bank.
As discussed above in question 1, if all of the treasury shares held in
accounts controlled by the receiver of Credit Bancorp have not been returned to
Centigram by the time the merger is to take place or the time period for an
appeal of the court's order approving the agreement with the receiver has not
expired or an appeal of that order has been taken and not resolved at that time,
a portion of the merger consideration (estimated at approximately $21.5 million)
will be placed in escrow until resolution of the outstanding issues related to
the Centigram treasury stock. If an escrow is established at the closing, any
liability (other than the payment required by the agreement with the receiver)
or expense incurred by ADC or Centigram following the closing in recovering the
treasury shares or prosecuting any appeal will be reimbursed to ADC or Centigram
from the escrowed funds. The amount, if any, remaining in escrow after the
recovery of all the treasury shares and resolution of any outstanding treasury
share issues will be paid to Centigram's former stockholders and the conversion
ratio of stock options will be adjusted. The period in which a party may appeal
the court's order approving the agreement between Centigram and the receiver
will expire on August [__], 2000. Centigram anticipates that the merger will be
completed shortly after the stockholders' approval of the merger and the merger
agreement at the special stockholders' meeting on July [__], 2000. Therefore, it
is likely that an escrow will be required because the period in which an appeal
of the court's order approving the agreement with the receiver will not have
expired prior to closing. See "The Merger - Credit Bancorp Treasury Share
Matter" and "The Merger Agreement - Escrow For Certain Shares of Centigram
Treasury Stock."
11. WHO WILL OWN CENTIGRAM AFTER THE MERGER?
After the merger, Centigram will be a wholly owned subsidiary of ADC
Telecommunications, Inc., a Minnesota corporation.
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12. SHOULD I SEND IN MY CENTIGRAM STOCK CERTIFICATES NOW?
No. After the merger is completed, Norwest Bank, as paying agent, will
send you written instructions for exchanging your Centigram stock certificates.
13. WILL I OWE TAXES AS A RESULT OF THE MERGER?
The cash you receive in the merger in exchange for your shares of
Centigram common stock and any cash you may receive from exercising your
appraisal rights will be subject to United States federal income tax and also
may be taxed under applicable state, local and foreign tax laws. In general, you
will recognize gain or loss equal to the difference between the amount of cash
you receive and your adjusted tax basis in your shares of Centigram common
stock. We recommend that you read the section entitled "The Merger
Agreement--Certain Federal Income Tax Consequences" in this proxy statement for
a more detailed explanation of the tax consequences of the merger. You should
consult your tax advisor regarding the specific tax consequences of the merger
applicable to you.
14. WHO CAN HELP ANSWER MY QUESTIONS?
If you have additional questions about the merger after reading this
proxy statement, you should contact:
Marcia Speece
Centigram Communications Corporation
91 East Tasman Drive
San Jose, California 95134
(408) 944-0250 (telephone)
Email Address: [email protected]
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SUMMARY TERM SHEET
This summary term sheet does not contain all of the information that is
important to you. You should carefully read the entire proxy statement to fully
understand the merger. The merger agreement is attached as APPENDIX A to this
proxy statement. We encourage you to read the merger agreement, as it is the
legal document that governs the merger.
PROPOSED ACQUISITION
- Stockholder Vote. You are being asked to vote to approve a merger
transaction whereby Centigram Communications Corporation will be
acquired by ADC Telecommunications, Inc.
- Price for Your Stock. As a result of the merger, you will receive cash
for each of your shares of Centigram common stock. ADC will pay cash
for all Centigram shares outstanding as of the closing and will assume
Centigram stock options outstanding as of the Closing for a total
purchase price of approximately $200 million. The per share amount of
cash will be determined as of the closing of the merger based on the
number of outstanding Centigram shares and options on that date, and
whether at the time of closing Centigram has recovered its 900,000
treasury shares held in brokerage accounts controlled by the
court-appointed receiver for Credit Bancorp, Ltd. Based on the number
of outstanding Centigram shares and stock options as of May 26, 2000,
the purchase price will consist of approximately $163 million in cash
to Centigram's stockholders, or approximately $26.38 per share, and
approximately $36 million to be paid in ADC common stock through the
conversion of Centigram stock options to ADC stock options. If at the
time of the merger closing, the court's order approving Centigram's
agreement with the Credit Bancorp receiver has been appealed or any
applicable appeal period has not expired, or if Centigram has not fully
recovered the 900,000 treasury shares, the per share amount paid to
Centigram's stockholders will be calculated as if the 900,000 shares
were outstanding, resulting in a cash payment of approximately $23.84
per share, and approximately $21.5 million ($23.84 per share multiplied
by 900,000 shares) in cash will be placed in escrow until any appeal
has been finally resolved, the appeal period has expired, or the
treasury shares are fully recovered. If an escrow is established at the
closing, any liability (other than the payment required by the
agreement with the receiver) or expense incurred by ADC or Centigram
following the closing in recovering the treasury shares or prosecuting
any appeal will be reimbursed to ADC or Centigram from the escrowed
funds. The amount, if any, remaining in escrow after resolution of
these treasury share matters will be paid to the former Centigram
stockholders and the ADC stock options received upon conversion of
Centigram stock options will be appropriately adjusted. See "The Merger
- Credit Bancorp Treasury Share Matter," "The Merger Agreement -
Conversion of Centigram Shares" and "The Merger Agreement - Escrow For
Certain Shares of Centigram Treasury Stock."
- The Acquiror. ADC is a Minnesota corporation which provides network
equipment, software and integration services for broadband,
multiservice networks that deliver Internet/data, video and voice
communications over telephone, cable television, Internet, broadcast,
wireless and enterprise networks. Poundstone Acquisition Corp., a
Delaware corporation, is a wholly
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owned subsidiary of ADC, formed for the purpose of acquiring Centigram.
See "The Parties to the Merger."
REASONS FOR THE MERGER
The merger presents an opportunity for Centigram stockholders to
realize a significant premium over recent market prices for their shares. In
addition, the merger allows Centigram an opportunity to better compete in the
enhanced telecommunications and call management services markets. See "The
Merger - Background of the Merger" and "The Merger - Reasons for the Merger."
CENTIGRAM STOCK PRICE
Shares of Centigram are quoted on the Nasdaq National Market System
under the symbol "CGRM". On June 8, 2000, which was the last trading day before
we announced the merger, Centigram common stock closed at $22.00 per share. The
average closing price of Centigram common stock for the 20 trading days
immediately preceding the announcement of the merger was $18.95 per share. See
"Market Price for Centigram Common Stock."
UNANIMOUS BOARD RECOMMENDATION
Centigram's Board of Directors has unanimously approved the merger and
recommends that Centigram stockholders vote to adopt the merger agreement and
approve the merger.
FAIRNESS OPINION
First Analysis Securities Corporation has delivered to the Centigram
Board of Directors its opinion, dated June 9, 2000, that merger consideration of
at least $23.84 in cash per share is fair to the holders of Centigram common
stock from a financial point of view. See "Opinion of First Analysis Securities
Corporation."
THE SPECIAL MEETING OF STOCKHOLDERS
- Place, Date and Time. The special meeting will be held at the offices
of Centigram, 91 East Tasman Drive, San Jose, California 95134, at 9:00
a.m., local time, on July [__], 2000.
- What Vote is Required for Approval of the Merger. The merger requires
the approval of the holders of a majority of the outstanding shares of
Centigram common stock. The failure to vote has the same effect as a
vote against the merger.
- Who Can Vote at the Meeting. You can vote at the special meeting all of
the shares of Centigram common stock you own of record as of June 26,
2000, which is the record date for the special meeting. If you own
shares which are registered in someone else's name, for example, a
broker, you need to direct that person to vote those shares or obtain
an authorization from them and vote the shares yourself at the meeting.
As of the close of
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business on June 26, 2000, there were ___________ shares of Centigram
common stock outstanding, held by approximately _____ stockholders of
record.
- Procedure for Voting. You can vote your shares by attending the special
meeting and voting in person or by mailing the enclosed proxy card. You
may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Assistant
Secretary of Centigram in writing, deliver a later dated proxy, before
your common stock has been voted at the special meeting, or attend the
meeting and vote your shares in person. Merely attending the special
meeting will not constitute revocation of your proxy. See "The Special
Meeting of Centigram Stockholders - Voting by Proxy."
APPRAISAL RIGHTS
Delaware law provides you with appraisal rights in the merger. This
means that if you are not satisfied with the amount you are receiving in the
merger, you are entitled to have the value of your shares independently
determined and to receive payment based on that valuation. The ultimate amount
received by a dissenting stockholder in an appraisal proceeding may be more or
less than, or the same as, the amount the dissenting stockholder would have
received in the merger. To exercise your appraisal rights, you must deliver a
written objection to the merger to Centigram at or before the special meeting
and you must not vote in favor of the merger. Your failure to follow exactly the
procedures specified under Delaware law will result in the loss of your
appraisal rights. See "You Have Appraisal Rights in the Merger."
FEDERAL INCOME TAX CONSEQUENCES
The merger will be a taxable transaction to you. For United States
federal income tax purposes, your receipt of cash in exchange for your shares of
Centigram common stock generally will cause you to recognize a gain or loss
measured by the difference between the cash you receive in the merger and your
tax basis in your shares of Centigram common stock. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES THAT ARE
PARTICULAR TO YOU. See "The Merger Agreement - Certain Federal Income Tax
Consequences."
WHEN THE MERGER WILL BE COMPLETED
We are working to complete the merger as soon as possible. We
anticipate completing the merger by the end of July 2000, subject to receipt of
stockholder approval and satisfaction of other requirements, including the
conditions described immediately below. See "The Merger Agreement - When the
Merger Will be Completed."
CONDITIONS TO COMPLETING THE MERGER
The completion of the merger depends on a number of conditions being
met. In addition to the parties complying with the merger agreement, these
conditions, unless waived, include:
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- approval of the merger and the merger agreement by Centigram's
stockholders;
- no action or proceeding having been instituted by any governmental
entity seeking to prevent consummation of the merger, and the receipt
of required governmental approvals;
- holders of no more than 5% of Centigram's outstanding shares of common
stock having exercised appraisal rights;
- the resignation of certain directors and officers of Centigram;
- the absence of a material adverse change in Centigram's business from
the date of the merger agreement to the effective date of the merger;
- four specified Centigram employees having signed employment agreements
with ADC and not having indicated any intention not to comply with the
terms of those agreements; and
- twelve of fifteen specified employees having agreed to waive certain
change of control benefits in their respective employment or change of
control agreements.
See "The Merger Agreement - Conditions to Closing."
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER THAT DIFFER FROM YOUR
INTERESTS
Some of Centigram's directors and officers have interests in the merger
that are different from, or are in addition to, their interests as stockholders
in Centigram. Centigram's Board of Directors knew about these additional
interests and considered them when they approved the merger agreement. These
interests include the following:
- severance packages and change of control benefits to certain of the
executive officers who will not continue as employees of ADC or
Centigram;
- change of control benefits, including the partial accelerated vesting
of options to certain of the directors and to certain of the executive
officers who will continue as employees of ADC or Centigram;
- some of the executive officers will continue as employees of ADC or
Centigram, in some cases pursuant to written employment agreements; and
- provisions in the merger agreement regarding directors' and officers'
indemnification and insurance.
See "The Merger Agreement - Interests of Centigram's Directors and Officers
in the Merger that Differ from Your Interests."
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THE MERGER
- Procedure for Receiving Merger Consideration. ADC has appointed Norwest
Bank Minnesota, N.A., as paying agent, to coordinate the payment of the
cash merger consideration following the merger. The paying agent will
send you written instructions for surrendering your certificates and
obtaining the cash merger consideration after we have completed the
merger. If the escrow established under the merger agreement is funded
at the closing and there are funds remaining in the escrow when it is
terminated in connection with resolution of the Credit Bancorp treasury
share matter, Norwest Bank, as the escrow agent, will send you an
additional cash payment without any further requirement on your part.
The right to receive the additional cash payment is personal to each
holder of Centigram common stock and may not be transferred. See and
"The Merger - Credit Bancorp Treasury Share Matter" and "The Merger
Agreement - Payment for Centigram Shares."
- Terminating the Merger Agreement. Centigram and ADC can mutually agree
at any time to terminate the merger agreement without completing the
merger, even if the stockholders of Centigram have approved it. Also,
under certain circumstances either Centigram or ADC can decide, without
the consent of the other, to terminate the agreement prior to the
closing of the merger, even if the stockholders of Centigram have
approved the merger agreement. See "The Merger Agreement -
Termination."
- Fees and Expenses. Generally, whether or not the merger is consummated,
Centigram and ADC are each responsible for their respective expenses
incurred in connection with the merger. Centigram, however, is required
to reimburse ADC for all reasonable out-of-pocket fees and expenses,
not to exceed $500,000, incurred by ADC in connection with the merger
agreement, if the merger agreement is terminated under certain
circumstances. Centigram is also required to pay a termination fee of
$6.4 million if the merger agreement is terminated under certain
circumstances. ADC, however, is also required to reimburse Centigram
for reasonable out-of-pocket fees and expenses, not to exceed $500,000,
incurred by Centigram in connection with the merger agreement, if the
merger agreement is terminated due to ADC breaching, subject to
materiality thresholds and cure periods, any of its representations,
warranties, covenants or agreements contained in the merger agreement.
See "The Merger Agreement - Fees and Expenses."
CONTACT INFORMATION
If you have any questions regarding the merger or any other matters
discussed in this proxy statement, please contact:
Marcia Speece
Centigram Communications Corporation
91 East Tasman Drive
San Jose, California 95134
(408) 944-0250 (telephone)
Email Address: [email protected]
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This proxy statement (and the documents to which we refer you in this
proxy statement) contains forward-looking statements based on estimates and
assumptions. Forward-looking statements include information concerning possible
or assumed future results of operations of each of ADC and Centigram as well as
certain information relating to the merger. There are forward-looking statements
throughout this proxy statement, including under the headings "Summary Term
Sheet," "Questions and Answers About the Merger," "The Merger" and "Fairness
Opinion of First Analysis Securities Corporation," and in statements containing
the words "believes," "expects," "anticipates," "intends," "estimates" or other
similar expressions. For each of these statements, Centigram claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
You should be aware that forward-looking statements involve known and
unknown risks and uncertainties. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that the actual results or developments we anticipate will be realized, or
even if realized, that they will have the expected effects on the business or
operations of each of Centigram and ADC. These forward-looking statements speak
only as of the date on which the statements were made, and we assume no
obligation to update any forward-looking statements to reflect future events or
developments occurring after the date on which any of those statements is made.
In addition to other factors and matters contained or incorporated in
this document, we believe the following factors could cause actual results to
differ materially from those discussed in the forward-looking statements:
- financial performance of each of ADC and Centigram through completion
of the merger;
- events arising in connection with the Credit Bancorp treasury share
matter;
- changes in the economic conditions in the markets served by us;
- changes and/or delays in technology, product development plans and
schedules;
- customer acceptance of new products;
- risk of foreign operations and markets;
- the timing of, and regulatory and other conditions associated with, the
completion of the merger;
- intensified competitive pressures in the markets in which we compete;
- the loss of key employees;
- difficulty in obtaining supplies; and
- general economic conditions.
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THE PARTIES TO THE MERGER
CENTIGRAM COMMUNICATIONS CORPORATION. Centigram is a Delaware
corporation that designs, manufactures and markets unified communications,
messaging, Internet- and WAP-enabled call management services to wireless,
wireline and Internet service providers. Centigram's applications operate on
common hardware and software platforms based on industry-standard hardware and
software, which is Centigram's implementation of its Modular Expandable System
Architecture (MESA). Centigram's system architecture enables a user generally to
expand the capacity of a system in cost-effective increments from the company's
smallest to its largest system configuration. Centigram's systems can be
integrated with wireline and wireless switches, paging systems and IP gateways.
Such systems are used for switching telephone calls and integrating voice and
data messaging in a variety of service provider environments. In addition,
Centigram systems located at different sites can be linked together in a digital
network. Centigram common stock is quoted on the Nasdaq National Market System
under the symbol "CGRM." Centigram's principal executive offices are located at
91 East Tasman Drive, San Jose, California 95134, and its telephone number is
(408) 944-0250.
ADC TELECOMMUNICATIONS, INC. ADC is a Minnesota corporation that offers
a broad range of network equipment, software and integration services for
broadband, multiservice networks that deliver Internet, data, video and voice
communications over telephone, cable television, Internet, broadcast, wireless
and enterprise networks. ADC's broadband, multiservice network solutions enable
local access, high-speed transmission and software management of communications
services from service providers to consumers and businesses over fiber-optic,
copper, coaxial and wireless media. Telephone companies, cable television
operators, Internet/data service providers, wireless service providers and other
communications service providers are building the broadband infrastructure
required to offer high-speed Internet access and data, video, telephony and
other interactive multimedia services to residential and business customers.
Broader network bandwidths are continually required for these services, and
ADC's product offerings and development efforts are focused on increasing the
speed and efficiency of communications networks from the service providers'
offices through the network equipment that connects to end users' residences and
businesses. ADC common stock is quoted on the Nasdaq National Market System
under the symbol "ADCT." ADC's principal offices are located at 12501 Whitewater
Drive, Minnetonka, Minnesota, 55343, and its telephone number is (612) 938-8080.
POUNDSTONE ACQUISITION CORP. Poundstone is a Delaware corporation and
wholly owned subsidiary of ADC formed solely for the purpose of engaging in the
merger. Pursuant to the terms of the merger agreement, at the effective time of
the merger, Poundstone will be merged with and into Centigram, with Centigram
being the surviving corporation.
WHERE YOU CAN FIND MORE INFORMATION
Centigram and ADC file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Centigram or ADC files at the SEC's
public reference rooms in Washington, D.C., New York, New York, and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Centigram's and ADC's public filings are also available
to the public from document retrieval services and at the Internet website
maintained by the SEC at http://www.sec.gov.
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THE SPECIAL MEETING OF CENTIGRAM STOCKHOLDERS
PLACE, DATE, TIME AND PURPOSE
The special meeting will be held at the offices of Centigram, 91 East
Tasman Drive, San Jose, California 95134, on July [__], 2000 at 9:00 a.m., local
time. The purpose of the special meeting is to consider and vote on the proposal
to approve and adopt the merger agreement.
THE CENTIGRAM BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF CENTIGRAM AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND RECOMMENDS THAT CENTIGRAM STOCKHOLDERS VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
WHO CAN VOTE AT THE SPECIAL MEETING
The holders of record of Centigram common stock as of the close of
business on June 26, 2000, which is the record date for the special meeting, are
entitled to receive notice of and to vote at the special meeting. On the record
date, there were _________ shares of Centigram common stock outstanding held by
approximately _____ stockholders of record.
ATTENDING THE MEETING
If you are a beneficial owner of Centigram common stock held by a
broker, bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of Centigram common stock held in street name in person at the
meeting, you will have to obtain a written proxy or authorization in your name
from the broker, bank or other nominee who holds your shares.
VOTE REQUIRED
The approval and adoption of the merger agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote. Each share of common stock is entitled to one
vote. Failure to return a properly executed proxy card or to vote in person will
have the same effect as a vote "AGAINST" the merger. Abstentions and broker
non-votes also will have the same effect as a vote against the merger. Your
broker or nominee does not have the right to vote your shares of Centigram
common stock without your instruction. It is important that you instruct your
broker or nominee on how to vote your shares of Centigram common stock for your
shares to be represented at the special meeting.
The holders of a majority of the outstanding shares of Centigram common
stock as of the record date, represented in person or by proxy, will constitute
a quorum for purposes of the special meeting. A quorum is necessary to hold the
special meeting. Once a share is represented at the special meeting, it will be
counted for the purpose of determining a quorum and any adjournment
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of the special meeting, unless the holder is present solely to object to the
special meeting. However, if a new record date is set for an adjourned meeting,
then a new quorum will have to be established.
VOTING BY PROXY
This proxy statement is being sent to you on behalf of the Board of
Directors of Centigram for the purpose of requesting that you allow your shares
of Centigram common stock to be represented at the special meeting by the
persons named in the enclosed proxy card. All shares of Centigram common stock
represented at the meeting by properly executed proxies will be voted in
accordance with the instructions indicated on the proxy card. If you sign and
return a proxy card without giving voting instructions, your shares will be
voted as recommended by Centigram's Board of Directors. The Board recommends a
vote "FOR" approval of the merger agreement.
If any matters not described in this proxy statement are properly
presented at the special meeting, the persons named in the proxy card will use
their own judgment to determine how to vote your shares. This includes a motion
to adjourn or postpone the meeting to solicit additional proxies. However, no
proxy voted against the proposal to approve the merger will be voted in favor of
an adjournment or postponement to solicit additional votes in favor of the
merger. Centigram does not know of any other matters to be presented at the
meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Assistant Secretary of
Centigram in writing, deliver a later dated proxy before your common stock has
been voted at the special meeting or attend the meeting and vote your shares in
person. Merely attending the special meeting will not constitute revocation of
your proxy.
If your Centigram common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow to
have your shares voted. Your broker or bank may allow you to deliver your voting
instructions via telephone or the Internet. Please see the instruction form that
accompanies this proxy statement.
Centigram will pay the cost of this proxy solicitation. In addition to
soliciting proxies by mail, directors, officers and employees of Centigram may
solicit proxies personally and by telephone. None of these persons will receive
additional or special compensation for soliciting proxies. Centigram will, upon
request, reimburse brokers, banks and other nominees for their expenses in
sending proxy materials to their customers who are beneficial owners and
obtaining their voting instructions. Centigram has engaged Georgeson & Co., Inc.
to assist in the solicitation of proxies for the meeting and will pay Georgeson
a fee of approximately $7,500.
THE MERGER
The discussion of the merger in this proxy statement is qualified by
reference to the merger agreement, which is attached to this proxy statement as
APPENDIX A. You should read the entire merger agreement carefully.
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BACKGROUND OF THE MERGER
As part of its ongoing business planning process, Centigram's Board of
Directors and senior management regularly have considered strategic alternatives
in light of existing conditions and developments in the enhanced messaging and
communications services industry. In connection with this ongoing process,
Centigram's senior management concluded in early 1998 that the company should
explore the feasibility of a combination with another company engaged in
Centigram's industry while continuing to execute its business plan. The
principal reasons for this conclusion were management's view that the greater
resources and broader product lines of Centigram's principal competitors were
increasingly placing Centigram at a competitive disadvantage, and management's
belief that becoming part of a larger organization would enable Centigram to
compete more effectively with these companies. Management had considered
developing one or more major strategic alliances with customers and/or suppliers
as alternatives to a merger or acquisition transaction, but ultimately concluded
that having the market presence that comes with greater size was becoming a
critical success factor in Centigram's markets, and that obtaining greater
market share and a larger presence in the industry was difficult at Centigram's
current size.
In early 1998, the Centigram Board of Directors approved the
streamlining of Centigram's business into its core competency of selling
enhanced messaging and communications services products to service providers
rather than to end-users. To that end, in May 1998 Centigram disposed of its
customer premises equipment (or "CPE") business of selling equipment directly to
end-users and distributors. In June 1998, Centigram acquired The Telephone
Connection, Inc., a company engaged in sales of enhanced services products.
These efforts better positioned Centigram to consider a strategic transaction
like an acquisition of one or more other companies or a merger with a larger
company. Centigram remained receptive to opportunities for strategic
transactions, and in the fall of 1998 engaged in discussions with a major
computer equipment and networking products manufacturer about a potential
acquisition of Centigram by that company. The company ultimately terminated
discussions with Centigram and consummated an acquisition of another company in
Centigram's industry.
In early 1999, Centigram explored the possibility of acquiring one or
more companies in its industry that were its size or smaller, in an effort to
consolidate a number of smaller industry participants into a single entity that
would better be able to compete with the dominant industry players. Centigram
management identified only one candidate that it considered to be a potentially
attractive acquisition candidate. In early 1999, representatives of Centigram
approached representatives of this company to inquire if the company would be
interested in discussing a potential business combination with Centigram.
However, discussions with this company never reached the point of negotiating a
transaction because the company entered into an agreement to be acquired by
another company -- one considerably larger than Centigram.
In mid-1999, Centigram was approached by another company in its
industry that it had not previously considered to be a potentially attractive
acquisition candidate, inquiring if Centigram might be interested in acquiring
that company. Again, before acquisition negotiations could begin, this company
entered into an agreement to be acquired by a larger company.
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Centigram remained attuned to opportunities to acquire other companies,
but no such opportunities presented themselves for the remainder of 1999. As a
result, Centigram management considered further the possibility of achieving its
goals of increased size, market presence and market share by becoming part of a
larger entity. In mid-1999, Centigram approached a major networking products
company that senior management believed would make a good merger partner for
Centigram to explore the possibility of entering into a merger or similar
strategic transaction. Management viewed this company as a good potential merger
partner for Centigram because, while it was a very large company with a
significant market presence, it did not have a product line comparable to
Centigram's, and that Centigram would therefore present to this company an
opportunity to integrate vertically its product line while allowing Centigram to
expand significantly the breadth of its product offering and achieve significant
name brand recognition. After preliminary discussions, this prospective acquiror
informed Centigram in mid-1999 that it had determined not to vertically
integrate its product line further by acquiring Centigram, and discussions with
this company terminated.
At its year-end meeting on December 6, 1999, the Centigram Board of
Directors considered the company's efforts to grow through acquisition and the
strategic direction of the company. Senior management advised the Board that
there were no companies remaining in Centigram's industry that senior management
considered to be attractive acquisition candidates. Based on the absence of
attractive acquisition candidates, the Board concurred in senior management's
recommendation that Centigram focus its efforts on strategic alternatives with
an entity larger than Centigram.
After considering a list of candidates that senior management thought
would be likely to be interested in a strategic transaction with Centigram,
management narrowed the list to the twenty-one companies in its industry that
management believed to be the best prospective candidates. Management made this
determination based on a variety of factors, generally seeking companies with
substantial size and market presence, and reputable management and product
lines. In December 1999, Centigram sent to contacts at each of the twenty-one
companies it had identified a letter summarizing Centigram's results for the
preceding fiscal year and soliciting the recipient's interest in exploring
strategic initiatives with Centigram.
Also in December 1999, members of Centigram's senior management met
with representatives of First Analysis Securities Corporation to discuss
Centigram's strategic alternatives. Centigram did not at that time formally
engage First Analysis to represent Centigram, but rather invited First Analysis
representatives to communicate with a major participant in Centigram's industry
with which First Analysis had direct contacts. The purpose of this communication
was to determine if this company would be interested in discussing a possible
business combination with Centigram. Centigram's senior management contacted
First Analysis because of that firm's history of working with Centigram over the
past several years. Centigram had engaged First Analysis in 1997 to provide
advisory services in connection with the sale of Centigram's CPE business, and
in 1998 also engaged First Analysis to provide additional advisory services
related to the acquisition of The Telephone Connection, Inc. First Analysis
initiated research coverage of Centigram in 1995, and Centigram's senior
management considered First Analysis to have a thorough knowledge of Centigram's
industry and Centigram's business in particular.
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In late 1999 and early 2000, First Analysis had several communications
with the potential merger partner that Centigram management had identified.
Representatives of First Analysis discussed with this company the prospect of
acquiring Centigram through a merger or otherwise. In January 2000, this company
informed First Analysis that it had decided not to pursue further discussions
concerning a strategic transaction with Centigram.
In November 1999, as Centigram was determining to pursue a possible
merger transaction with a larger company, the Securities and Exchange Commission
commenced a legal action in the United States District Court for the Southern
District of New York against Credit Bancorp, Ltd., an entity with which
Centigram had entered into a credit facility and deposited 900,000 shares of its
treasury stock. In December 1999, Centigram terminated its credit facility with
Credit Bancorp and demanded the return of the 900,000 treasury shares. However,
the district court had already frozen assets in Credit Bancorp's possession or
control and the 900,000 treasury shares were not returned at that time. The
receiver appointed by the court confirmed that the treasury shares remained in
Credit Bancorp brokerage accounts and had not been sold. The circumstances of
the Credit Bancorp treasury share matter are discussed in greater detail in this
proxy statement under the heading "The Merger Credit Bancorp Treasury Share
Matter."
Centigram realized that it would be preferable to obtain the return of
the 900,000 treasury shares held by Credit Bancorp and to resolve its claims
against Credit Bancorp, if possible, before proceeding with a merger
transaction. At the same time, Centigram realized that it should continue to
pursue, or at least be open to the prospect of, a strategic transaction like a
merger with a larger company if one could be obtained on favorable terms, even
if the Credit Bancorp treasury matter remained unresolved. In late 1999,
Centigram engaged legal counsel and began the process of resolving the issues
affecting Centigram in connection with the Credit Bancorp treasury share matter,
in particular to obtain the return of the 900,000 treasury shares.
In early 2000, Centigram's senior management continued to communicate
with First Analysis to determine if that firm's contacts might yield a potential
merger partner that had not already been identified, or to enhance Centigram's
probability of success with one of the companies management had already
identified. Centigram had received limited responses to its December 1999 letter
and followed up on those responses, but no substantive discussions regarding a
potential acquisition of the Company resulted.
In February 2000, David Russell, Director of Business Development of
ADC, contacted Tom Brunton, Centigram's Chief Financial Officer, to inquire
whether Centigram would be receptive to discussing an acquisition transaction
with ADC. ADC was not one of the twenty-one companies that received Centigram's
December 1999 letter because ADC's business was at the time more focused on
providing broadband networking components than enhanced telecommunications
services. Mr. Brunton asked Janine Roth, Centigram's Senior Vice President of
Marketing and Business Development, to follow up on this contact. Mr. Russell
informed Ms. Roth that ADC had identified Centigram as a potential acquisition
candidate to enable ADC to obtain a significant presence in Centigram's industry
and broaden its product line. Mr. Russell did not discuss a transaction
structure or value, but instead proposed a meeting between representatives of
Centigram and representatives
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of ADC so that the parties could discuss the strategic direction of the two
companies and whether or not a business combination made sense.
Ms. Roth communicated ADC's expression of interest to Bob Puette,
Centigram's CEO. Mr. Puette and Ms. Roth concurred that a preliminary meeting
between the parties would be appropriate. Mr. Puette and Ms. Roth contacted Mr.
Russell and scheduled an in-person meeting between representatives of Centigram
and ADC for March 2, 2000.
On March 2, 2000, representatives of ADC and Centigram met in San Jose.
The representatives discussed their respective products and strategies and
explored possibilities for operating as a combined company. They also discussed
conceptually how the companies might combine, ADC expressing a preference for a
stock-for-stock transaction if the transaction could be accounted for under the
"pooling of interests" method. Upon further investigation, the parties
determined that the transaction would not be able to qualify for pooling of
interests treatment, which made a stock transaction less appealing to ADC.
Shortly after the March 2 meeting, Mr. Russell advised Centigram that
ADC was interested in proceeding further toward an acquisition transaction with
Centigram. Mr. Russell asked Centigram to make some of its representatives
available to meet with ADC for a series of days, and to put together key
documents and information regarding Centigram for their review during this
period. After considering the information disclosed by ADC at the March 2
meeting and information obtained about ADC from third-party sources, Centigram
management had concluded that ADC had the resources to enable Centigram to meet
the competitive pressures in its industry, and that proceeding with discussions
with ADC toward a strategic transaction would be worthwhile. In response to
ADC's request, Centigram agreed to a series of meetings and to make documents
regarding Centigram and Centigram personnel available to ADC in San Jose from
March 14 through March 16, 2000.
On March 9, 2000, Mr. Russell contacted Mr. Puette with a preliminary
indication of the terms on which ADC would acquire Centigram. ADC proposed a
base purchase price of $214 million in cash for all of the outstanding shares of
Centigram common stock and for ADC's assumption of all of the outstanding
Centigram options, with those options being converted into ADC options upon
completion of the acquisition. The price offered by ADC assumed the resolution
of the Credit Bancorp treasury share matter and the return of the Centigram
treasury shares held by Credit Bancorp at no cost to Centigram, and was subject
to ADC's due diligence. Taking into account all of the outstanding options, this
represented a purchase price of approximately $28.50 for each outstanding share
of Centigram common stock. Mr. Russell indicated that the consideration would be
payable in cash rather than shares of ADC stock, this transaction structure
being largely due to the inability of the parties to structure a stock-for-stock
transaction in a manner that would qualify for pooling-of-interests accounting
treatment.
In responding to ADC's offer, Mr. Puette and Mr. Brunton proposed that
Centigram be permitted to settle the Credit Bancorp treasury share matter for an
agreed-upon amount without reducing the purchase price. After discussions, the
parties agreed that, if the Credit Bancorp treasury share matter could be
finally resolved before closing, Centigram could pay up to $10 million to settle
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it without reducing the purchase price, and beyond that amount payments to
settle Credit Bancorp would reduce the purchase price dollar-for-dollar.
During this period, Mr. Puette communicated to the Centigram Board of
Directors the latest developments with respect to ADC and the preliminary terms
of its offer. The Board determined that the preliminary terms suggested by ADC
represented a potentially attractive offer for Centigram, in part because the
price offered represented a significant premium over recent trading prices of
Centigram stock. The price offered by ADC represented an 18.75% premium over the
closing price of Centigram stock on the Nasdaq Stock Market on March 8, 2000,
the day before the offer, and represented an even greater premium over the price
at which Centigram stock had traded for a period of months before a recent jump
in Centigram's share price in March 2000. For example, the offered price
represented an 80% premium over the $15.75 closing price of Centigram stock on
February 9, 2000, one month prior to ADC's offer. The Board also noted Centigram
senior management's view that ADC was a company with the size and resources to
enable Centigram to compete more effectively in its industry.
From March 14 through March 16, 2000, representatives of ADC conducted
a due diligence investigation of Centigram in San Jose. ADC reviewed documents
and information regarding Centigram and met with Centigram representatives. On
March 20, Mr. Russell contacted Mr. Puette to indicate ADC's general
satisfaction with the due diligence investigation of Centigram. Mr. Russell and
Mr. Puette discussed a number of issues raised in the ADC due diligence that
could affect the terms of the merger agreement and the price being offered by
ADC. In particular, Mr. Russell advised that an amendment to Centigram's
license agreement with Lucent Technologies, Inc. would be necessary to effect
the merger, that ADC would not expect to bear the costs associated with the
amendment, and that any such costs would be treated as a reduction of the
purchase price being offered by ADC.
Following the meetings in San Jose, ADC worked with its outside counsel
to prepare a draft merger agreement reflecting the purchase offer that ADC had
communicated to Centigram and ADC's further due diligence investigation of
Centigram. ADC's counsel provided this draft merger agreement to Centigram on
March 22, 2000. The draft reflected the terms that Mr. Russell had previously
outlined to Mr. Puette, but also included a purchase price adjustment based on
the cost of resolution of the Credit Bancorp treasury share matter, reducing the
purchase price dollar-for-dollar to the extent Centigram paid more than $10
million to settle the Credit Bancorp treasury share matter, and an escrow
arrangement if the matter remained unresolved as of the closing of the
acquisition. ADC also required a purchase price reduction in the amount of any
costs incurred by Centigram related to an amendment to Centigram's license
agreement with Lucent Technologies to facilitate the acquisition. The terms of
the offer were communicated to the Centigram Board, which acknowledged that the
price being offered to Centigram's stockholders would be less than $28.50 per
share, depending on the cost of resolution of the Credit Bancorp treasury share
matter, whether the Credit Bancorp treasury share matter could be resolved prior
to closing, and the cost to Centigram of amending its license agreement with
Lucent, which would be required for the ADC merger. The Board determined that,
notwithstanding these uncertainties, the ADC offer could remain an attractive
one, and therefore authorized management to continue working with ADC to
negotiate the price and terms of the transaction while attempting to amend the
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Lucent license, settle the Credit Bancorp treasury share matter and obtain the
return of the 900,000 treasury shares held in accounts controlled by the Credit
Bancorp receiver.
Throughout April and May of 2000, Centigram worked toward resolving the
Credit Bancorp treasury share matter and amending the Lucent license. To
continue to advance the ADC transaction, Centigram also worked with outside
legal counsel to address issues associated with the draft merger agreement
proposed by ADC and continued to negotiate the economic terms of the
transaction. Centigram also continued to pursue a potential strategic
partnership with a third party that had previously expressed a desire only to
create a contractual partnering arrangement with Centigram but not to acquire
Centigram.
In April and May of 2000, Centigram interviewed prospective investment
bankers to render an opinion as to the fairness of the consideration proposed by
ADC to the Centigram stockholders, from a financial point of view. Based in part
on its knowledge of Centigram's business and industry, Centigram ultimately
engaged First Analysis to provide that opinion.
On May 15, 2000, the Centigram Board of Directors held its regular
quarterly meeting. At that meeting, representatives of Sutherland Asbill &
Brennan LLP, Centigram's outside legal counsel, gave status reports on the
Credit Bancorp treasury share matter, including negotiations with the receiver
for the return of the deposited treasury shares, and the Lucent negotiations.
Legal counsel also advised the Board of Directors as to the directors' fiduciary
duties in connection with the proposed sale of the company and discussed the
legal issues associated with the draft merger agreement received from ADC.
On May 24, 2000, the Centigram Board of Directors met to discuss the
status of the ADC transaction and to discuss with First Analysis the
methodologies it proposed to use to value Centigram and the preliminary results
of its valuation analyses. Representatives of First Analysis discussed with the
Centigram Board their approach to valuing Centigram as a preliminary step in
rendering their opinion as to whether the ADC offer was fair, from a financial
point of view, to the stockholders of Centigram. The First Analysis
representatives explained the methodologies involved and the Board of Directors
provided guidance as to areas in which the Board would want additional detail or
amplification when First Analysis made its presentation to the Board as to the
fairness of the consideration proposed. The preliminary analyses prepared by
First Analysis indicated that the consideration proposed by ADC was likely to be
within a range of values that First Analysis would determine to be fair to the
Centigram stockholders from a financial point of view.
On May 25, 2000, representatives of Centigram and Lucent finalized the
terms of an amendment to the Centigram-Lucent license agreement that would
permit Centigram to complete an acquisition transaction with ADC. The amendments
negotiated by Centigram were intended to facilitate the ADC transaction or,
should the ADC transaction not be consummated, another transaction involving the
acquisition of Centigram by a third party.
On May 26, 2000, representatives of Centigram and ADC, with their
respective attorneys, began the process of negotiating the terms of the merger
agreement proposed by ADC. These negotiations continued from time to time
throughout the remainder of May and into early June 2000.
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On June 7, 2000, Centigram and the receiver for Credit Bancorp reached
an agreement providing for the return of the 900,000 treasury shares deposited
by Centigram with Credit Bancorp. The agreement provides for the receiver to use
reasonable commercial efforts to return the treasury shares, which are held in
brokerage accounts in the name of Credit Bancorp, in exchange for a cash payment
of approximately $12.1 million, payable as the shares are ready to be delivered.
Centigram also agreed to release Credit Bancorp and the receiver from any claim
that Centigram may have against Credit Bancorp relating to the deposit of the
treasury shares, including any claim to future distributions to customers from
the receivership estate. The receiver, on behalf of Credit Bancorp, agreed to
release Centigram from any further claim for contribution or liability to the
receivership estate or claim to ownership of Centigram's deposited treasury
shares. The court supervising the Credit Bancorp receivership approved the
agreement on June 14, 2000.
On June 7 and 8, 2000, Centigram and ADC and their attorneys continued
to negotiate the terms of the merger agreement based on the resolution of the
Lucent and Credit Bancorp treasury share matters. The economic terms of the
proposed agreement permitted Centigram to settle the Credit Bancorp treasury
share matter for up to $10 million without reducing the purchase price, provided
that the settlement agreement was made prior to the merger closing and was not
subsequently overturned. Based on the $12.1 million settlement agreement entered
into with the receiver on June 7, this would have the effect of reducing the
purchase price by $2.1 million. The parties also agreed that, based on the costs
incurred and anticipated to be incurred by Centigram related to the amendment of
the Lucent license, the base purchase price would be reduced by an additional
$13.2 million. Giving effect to the Lucent amendment, the merger agreement
reflected a base purchase price of $200.8 million, with any further reduction
being dependent on the consummation of the agreement with the Credit Bancorp
receiver.
On the evening of June 8, 2000, the Centigram Board of Directors met to
consider the proposed final terms of the acquisition of Centigram by ADC, and to
receive a presentation from First Analysis as to the fairness of the purchase
price to be paid by ADC, from a financial point of view, to Centigram's
stockholders. First Analysis presented an overview of the financial terms of the
transaction. Giving effect to the reductions in the base purchase price
originally offered by ADC resulting from the Lucent amendment and the resolution
of the Credit Bancorp treasury share matter, First Analysis noted that, based on
the number of outstanding Centigram shares and stock options as of May 26, 2000,
Centigram had computed the purchase price to be $26.38 for each Centigram share.
First Analysis also noted that, if the resolution of the Credit Bancorp treasury
share matter is not final as of the closing, Centigram had computed the purchase
price to be $23.84 per share, with the Centigram stockholders having the right
to receive the amount, if any, distributed out of the escrow established
pursuant to the merger agreement after consummation of the agreement with the
Credit Bancorp receiver.
The Board of Directors noted that the price being offered by ADC was,
at $23.84 per share, 8.4% above the $22.00 closing price of Centigram stock on
June 8, 2000, and at $26.38 per share, 19.9% above that price. However, the
Board noted that Centigram stock had experienced a substantial increase in price
over the last several trading days, and that the price offered by ADC
represented a more substantial premium when compared to the market price of
Centigram stock prior
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to the recent increase. For example, the price being offered by ADC was, at
$23.84 per share, 53.8% above the $15.50 closing price of Centigram stock on May
8, 2000, one month prior to the Board's meeting, and at $26.38 per share, 70.2%
above that price; and when compared with the $18.95 average closing price of
Centigram common stock for the 20 trading days immediately prior to the
announcement of the merger, represented a premium of 25.8% at $23.84 per share
and 39.2% at $26.38 per share.
First Analysis presented to the Board of Directors the other valuation
methodologies it had considered in performing its analysis of the fairness of
the price offered by ADC. The Board members questioned First Analysis as to
several aspects of its analyses. The analyses performed by First Analysis are
summarized in greater detail elsewhere in this proxy statement under the heading
"Fairness Opinion of First Analysis Securities Corporation." At the conclusion
of its presentation to the Centigram Board on June 8, 2000, First Analysis
rendered its verbal opinion that the consideration being offered by ADC was
fair, from a financial point of view, to the Centigram stockholders.
Following the presentation by First Analysis, attorneys from Sutherland
Asbill & Brennan LLP summarized the terms of the latest draft merger agreement
and responded to questions from the Board. The Board noted, among other things,
that the merger agreement would prevent Centigram from seeking other buyers,
although an unsolicited offer could be entertained in certain circumstances. The
Board considered Centigram management's prior efforts to market the company and
the flexibility under the merger agreement to consider unsolicited acquisition
proposals arising after the announcement of the ADC transaction if they are
deemed superior to the ADC offer in determining that the provisions in the
merger agreement prohibiting Centigram from soliciting other buyers were not
unreasonable in light of the substantial benefits that would accrue to the
Centigram stockholders as a result of the consummation of the ADC transaction.
The Board noted that if a competing offer came to light after announcement of
the ADC transaction, and Centigram wished to pursue that offer, the company had
some flexibility to do so but would be required to pay to ADC a termination fee
of $6.4 million plus reimburse ADC's transaction expenses up to $500,000.
Following further discussion, the Board of Directors, based on the
totality of information presented and the consideration given by the Board at
all of the meetings pertaining to the proposed merger, determined that the
proposed merger was advisable, fair and in the best interests of the Centigram
stockholders, approved the merger with ADC on the terms set forth in the merger
agreement, and approved the submission of the merger agreement and the merger to
the Centigram stockholders for their approval. Early in the morning of Friday,
June 9, 2000, all open business items were resolved between Centigram and ADC
and the parties signed the merger agreement.
REASONS FOR THE MERGER
Centigram's Board has determined by unanimous vote that the merger is
in the best interests of Centigram's stockholders. ACCORDINGLY, CENTIGRAM'S
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT CENTIGRAM'S STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
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In reaching its determination to approve the merger agreement, the
Board considered a number of matters affecting the strategic alternatives
available to Centigram, including the matters described above in "The Merger --
Background of the Merger" and the following factors:
- the price being offered by ADC which, when compared with the $18.95
average closing price of Centigram common stock for the 20 trading
days immediately prior to the announcement of the merger,
represented a premium of 25.8% at a $23.84 per share purchase price
and 39.2% at a $26.38 per share purchase price;
- the results of an examination of strategic alternatives, including
remaining independent, growing through acquisition or growing by
combining with a larger company like ADC, and the determination that
a merger with ADC, a large company with an excellent reputation and
substantial resources, would better enable Centigram to compete with
the small number of companies that, largely because of their size
and market power, continue to dominate Centigram's industry and
inhibit Centigram's opportunities for growth.
- the determination that the size and resources of its larger
competitors have made it increasingly difficult for Centigram to
compete in its industry at its current size;
- the determination that ADC would enable Centigram to increase its
desired size and market presence because ADC is a broader based
company, both on a products and geographic basis;
- ADC's excellent business reputation and its ability to continue to
provide Centigram's customers with premium quality and service, and
to provide Centigram's employees with excellent career
opportunities;
- the presentation given by First Analysis Securities Corporation to
the Centigram Board, including the oral opinion of First Analysis to
the Board that, based upon and subject to the matters discussed in
its presentation to the Board, the merger consideration is fair from
a financial point of view to the holders of Centigram common stock
as of the date of the opinion;
- the terms of the merger agreement, including the parties'
representations, warranties, covenants and conditions; and
- the potential impact of the merger on customers, employees and other
constituencies of Centigram.
This discussion of the information and factors considered by the
Centigram Board of Directors is not intended to be exhaustive, but identifies
material factors considered by the Board. In view of the wide variety of factors
considered in connection with the evaluation and determination to approve and
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recommend the merger agreement with ADC, the Centigram Board of Directors found
it impracticable and did not quantify or otherwise attempt to assign any
relative or specific weights to the factors considered, and individual directors
may have weighted factors differently.
CREDIT BANCORP TREASURY SHARE MATTER
In August 1999, Centigram entered into a credit facility with Credit
Bancorp, Ltd. Pursuant to the credit facility, Centigram deposited 900,000
shares of its treasury stock with Credit Bancorp to serve as security if
Centigram borrowed funds under the credit facility. Credit Bancorp agreed that
Centigram's treasury shares were to be placed in a trust account and were not to
be sold, pledged, margined or otherwise transferred. Contrary to the express
terms of the credit facility, Credit Bancorp placed Centigram's treasury shares
in margin accounts and borrowed against these shares. Centigram did not borrow
any funds under the Credit Bancorp credit facility.
In November 1999, the Securities and Exchange Commission commenced a
civil action against Credit Bancorp and certain entities and individuals
affiliated with it, alleging numerous violations of the federal securities laws
relating to Credit Bancorp's "insured credit facility program." The SEC alleges
that the Credit Bancorp defendants induced customers to place restricted
securities in trust accounts with Credit Bancorp, which securities Credit
Bancorp improperly sold or used to obtain margin loans and converted the
proceeds. The Credit Bancorp credit facility entered into by Centigram is
similar to the "insured credit facility" described in the SEC complaint and the
SEC recognizes Centigram as a customer of Credit Bancorp. In December 1999,
Centigram terminated the Credit Bancorp credit facility pursuant to its terms
and demanded the return of the treasury shares. In connection with its action
against the Credit Bancorp defendants, the SEC subpoenaed Centigram to produce
all documents relating to its Credit Bancorp credit facility. Centigram
cooperated fully with the SEC.
Upon the request of the SEC, the United States District Court for the
Southern District of New York issued a temporary restraining order against the
Credit Bancorp defendants prohibiting any further violation of the federal
securities laws. The court also froze the assets owned by, controlled by or in
the name of the Credit Bancorp defendants, including Centigram's treasury
shares. In January 2000, the court appointed a receiver to take control of the
funds, assets and property owned by, controlled by or in the name of Credit
Bancorp and to take any action necessary and appropriate to preserve and prevent
the dissipation of those funds, assets and properties. The receiver reported to
Centigram that none of the 900,000 treasury shares had been sold by Credit
Bancorp and that all of Centigram's treasury shares remain in brokerage accounts
in the name of Credit Bancorp. Under the court's order, the receiver may not
sell any securities deposited by Credit Bancorp customers, including Centigram's
treasury shares, without the approval of the Court after notice to all Credit
Bancorp customers.
In the second quarter of fiscal year 2000, Centigram intervened in the
SEC civil action against the Credit Bancorp defendants and requested the court
to lift the freeze order and direct the receiver to return the deposited
Centigram shares. The SEC and the receiver took the position that Centigram's
shares are the property of the receivership estate, which Centigram vigorously
disputed. The court denied Centigram's request for the return of the shares, but
granted Centigram leave to
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renew its motion upon a change in circumstances. The court did not, however,
rule on the merits of the ownership issue.
On May 25, 2000, the SEC filed with the court a Plan of Partial
Distribution. If approved by the court, the Plan would authorize the receiver to
make a partial distribution of available assets to all Credit Bancorp customers,
after payment of administrative expenses, taxes and margin loans secured by
valid liens on securities in Credit Bancorp accounts. Under the Plan, the amount
of Centigram's claim would be determined on the basis of the value of the
deposited treasury shares on the date of deposit, which the receiver has
indicated would be approximately $8.5 million. The SEC has informed the court
that at this time there are insufficient assets owned and controlled by the
receivership estate (even assuming that all customer deposited stock belongs to
the receivership) to pay 100% of customers' claims determined in this manner.
The receiver is seeking, however, to marshal and/or take control over additional
assets.
On June 7, 2000, Centigram and the receiver for Credit Bancorp reached
an agreement providing for the return of the 900,000 treasury shares deposited
by Centigram with Credit Bancorp. The agreement provides for the receiver to use
reasonable commercial efforts to return the treasury shares, which are held in
brokerage accounts in the name of Credit Bancorp, in exchange for a cash payment
of approximately $12.1 million, payable as the shares are ready to be delivered.
Centigram also agreed to release Credit Bancorp and the receiver from any claim
that Centigram may have against Credit Bancorp relating to the deposit of the
treasury shares, including any claim to future distributions to customers from
the receivership estate. The receiver, on behalf of Credit Bancorp, agreed to
release Centigram from any further claim for contribution or liability to the
receivership estate or claim to ownership of Centigram's deposited treasury
shares.
The court supervising the Credit Bancorp receivership approved the
agreement between Centigram and the Credit Bancorp receiver on June 14, 2000.
The period in which a party may appeal the court's order approving the
agreement, 60 days (subject to extension in certain limited circumstances),
commences on the date the clerk enters the judgment. The clerk entered the
judgment on June __, 2000. Accordingly the appeal period will expire on August
__, 2000 (subject to extension in certain limited circumstances).
If the treasury shares have not been returned to Centigram by the time
the merger is to take place or the time period in which an appeal of the court's
order approving the agreement with the receiver has not expired or an appeal of
the order has been taken and not resolved as of that time, the per share amount
paid to Centigram stockholders will be calculated as if the 900,000 shares were
outstanding, which would result in a cash payment of approximately $23.84 per
share and approximately $21.5 million in cash ($23.84 per share multiplied by
900,000 shares) being placed in escrow until resolution of the Credit Bancorp
treasury share matter. If an escrow is established at the closing, any liability
(other than the approximate $12.1 million payment required by the agreement with
the receiver) or expense incurred by ADC or Centigram following the closing in
recovering the treasury shares or prosecuting any appeal will be reimbursed to
ADC or Centigram from the escrowed funds. The amount, if any, remaining in
escrow after the recovery of all the treasury shares held by the Credit Bancorp
receiver and resolution of any outstanding treasury share
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issues will be paid to Centigram's former stockholders and the ADC stock options
received upon conversion of Centigram stock options will be appropriately
adjusted.
On the date this proxy statement was first mailed to Centigram
stockholders, _______ shares of the 900,000 treasury shares have been returned
to Centigram, Centigram has paid the receiver approximately $_____ million of
the approximate $12.1 million required under the agreement, and no appeal of the
court's order approving the agreement has been taken. However, since it is
anticipated that the merger will be completed shortly after the stockholders'
approval of the merger and the merger agreement at the special meeting on July
[__], 2000, it is likely that an escrow will be required because the period in
which an appeal of the court's order approving the agreement with the receiver
will not have expired.
THE MERGER AGREEMENT
GENERALLY
The merger agreement provides for a business combination in which
Centigram will merge with Poundstone Acquisition Corp., a wholly owned
subsidiary of ADC. Upon the merger being completed, Poundstone will cease to
exist and Centigram, as the surviving corporation, will become a wholly owned
subsidiary of ADC. The current directors and officers of Centigram will cease to
be directors and officers of Centigram upon completion of the merger, although
most Centigram employees, including many officers, will continue as employees of
ADC or Centigram after the merger.
CONVERSION OF CENTIGRAM SHARES
At the effective time of the merger, each share of Centigram common
stock issued and outstanding immediately prior to the effective time of the
merger (other than those shares held by the stockholders, if any, who properly
exercise their appraisal rights under Delaware law) will be automatically
converted into the right to receive cash. The per share amount of cash will be
determined as of the closing of the merger based on the number of outstanding
Centigram shares and options on that date, and whether at the time of closing
Centigram has recovered its 900,000 treasury shares held in brokerage accounts
controlled by the court-appointed receiver for Credit Bancorp, Ltd. Based on the
number of outstanding Centigram shares and stock options as of May 26, 2000, the
purchase price will consist of approximately $163 million in cash to Centigram's
stockholders, or approximately $26.38 per share, and approximately $36 million
to be paid in ADC common stock through the conversion of Centigram stock options
to ADC stock options. If at the time of the merger closing, the court's order
approving Centigram's agreement with the Credit Bancorp receiver has been
appealed or any applicable appeal period has not expired, or if Centigram has
not fully recovered the 900,000 treasury shares, the per share amount paid to
Centigram's stockholders will be calculated as if the 900,000 shares were
outstanding, resulting in a cash payment of approximately $23.84 per share, and
approximately $21.5 million ($23.84 per share multiplied by 900,000 shares) in
cash will be placed in escrow until any appeal has been finally resolved, the
appeal period has expired, or the treasury shares are fully recovered. If an
escrow is established at the closing, any liability (other than the payment
required by the agreement with the receiver) or
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expense incurred by ADC or Centigram following the closing in recovering the
treasury shares or prosecuting any appeal will be reimbursed to ADC or Centigram
from the escrowed funds. The amount, if any, remaining in escrow after
resolution of these treasury share matters will be paid to the former Centigram
stockholders and the ADC stock options received upon conversion of Centigram
stock options will be appropriately adjusted. See "The Merger - Credit Bancorp
Treasury Share Matter" and "The Merger Agreement - Escrow For Certain Shares of
Centigram Treasury Stock."
The actual per share amount to be received by the Centigram
stockholders (other than those stockholders who have properly exercised their
appraisal rights under Delaware law) may be more or less than the amounts
described in the preceding paragraph because the number of shares outstanding
and the number of shares subject to options outstanding at the closing of the
merger may be more or less than those outstanding on May 26, 2000, the date used
for the illustrative calculation. Under the merger agreement, Centigram is
generally not permitted to issue additional shares of common stock. Centigram
will, however, issue prior to closing additional shares purchased by employees
pursuant to Centigram's 1991 Employee Stock Purchase Plan. The merger agreement
permits Centigram to grant prior to closing additional stock options for up to
50,000 shares of common stock to employees. Since May 26, 2000, Centigram has
granted options to purchase _______ shares of common stock. Any increase in
shares outstanding and shares subject to options outstanding since May 26, 2000
will reduce the per share amounts described in the preceding paragraph. On the
other hand, any decrease in shares outstanding and shares subject to options
outstanding from May 26, 2000 will increase the per share amounts described in
the preceding paragraph. The merger agreement prohibits Centigram from
purchasing any of its common stock prior to closing. However, shares subject to
outstanding options may decrease due to the expiration of options or the
termination of options upon employees' termination of employment. Centigram
cannot predict how many shares and how many options will be outstanding at the
closing of the merger. For illustrative purposes only, if the number of shares
outstanding and shares subject to options outstanding increase by 50,000 shares
from May 26, 2000 to the closing based on the grant of options to acquire 20,640
shares of common stock at $17.88 per share and 29,360 shares at $25.25 per
share, the per share amount to be received by Centigram stockholders would be
$26.35, and, if an escrow was established in connection with the Credit Bancorp
treasury share matter, the per share amount payable at closing would be $23.83.
STOCK OPTIONS
All outstanding Centigram stock options, whether vested or unvested,
including those granted under Centigram's 1997 Stock Plan, 1995 Nonstatutory
Stock Option Plan, Amended and Restated 1987 Incentive Stock Option Plan and
otherwise, will be assumed by ADC and converted into options to acquire ADC
common stock on substantially the same terms and conditions, including
performance criteria, as were applicable under Centigram's plans. The number of
shares of ADC common stock to be received and the per share exercise price for
the ADC options into which the Centigram options are converted will be
determined based upon the relative values of ADC common stock prior to the
closing and the per share merger consideration. In addition, the former holders
of Centigram options who receive ADC options may be notified by ADC at a future
date of an amendment to the ADC options to give effect to the distribution to
the former Centigram
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stockholders of any funds remaining in the escrow that may be established in
connection with any unresolved Credit Bancorp treasury share matters. See "The
Merger - Credit Bancorp Treasury Share Matter" and "The Merger Agreement -
Escrow For Certain Shares of Centigram Treasury Stock." Prior to the effective
time of the merger, the exercise period for any outstanding Centigram options
will not be extended, nor will the vesting period be accelerated, except for
certain directors and officers. See "The Merger Agreement--Interests of
Centigram's Directors and Officers in the Merger that May Differ from Your
Interests."
EMPLOYEE STOCK PURCHASE PLAN
Centigram's 1991 Employee Stock Purchase Plan will be amended by
setting a final exercise date of one business day prior to the effective time of
the merger at which time any outstanding purchase options will be automatically
exercised. Immediately prior to the merger, Centigram's Employee Stock Purchase
Plan will be terminated, and no purchase rights will be subsequently granted or
exercised under the plan.
PREFERRED SHARES RIGHTS PLAN
Centigram and American Stock Transfer & Trust Company are parties to
the Preferred Shares Rights Agreement, as amended. The Preferred Shares Rights
Agreement (also known as a "poison pill") has been amended to prevent the merger
from resulting in the issuance of preferred shares of Centigram to the holders
of Centigram common stock.
EMPLOYEE BENEFIT PLAN
Centigram's 401(k) plan will be terminated at least three days prior to
the effective time of the merger. Individuals employed by Centigram before the
merger will begin participating in ADC's 401(k) plan after the merger. All
service with Centigram by its employees will be considered service with ADC for
purposes of determining eligibility, vesting and benefit accrual (i.e., matching
contributions) under ADC's 401(k) plan.
PAYMENT FOR CENTIGRAM SHARES
As soon as practicable after the closing of the merger (but in any
event, within five business days), Norwest Bank Minnesota, N.A. or another bank
or trust company designated by ADC, in its capacity as paying agent, will send a
transmittal letter to each former Centigram stockholder. The transmittal letter
will contain instructions on how to surrender your shares of Centigram common
stock in order to receive the cash merger consideration. Centigram stockholders
should not send in their stock certificates until they receive the transmittal
materials from Norwest Bank.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by ADC to acquire all the
outstanding shares of Centigram common stock and to pay fees and expenses
associated with the merger is estimated to be approximately $____________. At
the close of trading on ______, 2000, ADC had a market
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capitalization of approximately $_______, with cash and cash equivalents as of
its April 30, 2000 consolidated balance sheet of $233 million. In addition, ADC
has a $340 million credit facility available for general corporate purposes,
none of which was outstanding as of April 30, 2000.
INTERESTS OF CENTIGRAM'S DIRECTORS AND OFFICERS IN THE MERGER THAT MAY DIFFER
FROM YOUR INTERESTS
When you consider the Centigram Board of Directors' recommendation that
you vote in favor of the merger, you should be aware that Centigram's officers
and directors may have interests in the merger that may be different from, or in
addition to, your interests. These interests include:
SEVERANCE ARRANGEMENTS
- Robert L. Puette, President and Chief Executive Officer and a
director of Centigram, is scheduled to remain with Centigram for
only a short period of time after completion of the merger in order
to provide transition support. Mr. Puette's employment agreement
provides that, upon the termination of Mr. Puette's employment
within one year of a change in control, which will occur after the
consummation of the merger, Mr. Puette will receive (subject to a
possible reduction due to certain conditions and limitations in his
employment agreement) a severance payment equal to $510,012 (150% of
his base salary), plus $331,508 (150% of his bonus for the year
2000), and will continue to participate in Centigram's employee
benefit plans for approximately one and a half years following his
retirement. Upon a change of control, Mr. Puette's employment
agreement provides that all unvested options to purchase shares of
Centigram common stock that would have become exercisable within two
years following the change of control will immediately vest and
become exercisable in full. Mr. Puette's employment agreement also
provides that upon termination within one year of a change of
control Mr. Puette's remaining options to purchase shares of
Centigram common stock will vest and become exercisable in full.
- Thomas E. Brunton, Senior Vice President and Chief Financial
Officer, is also scheduled to remain with Centigram for only a short
period of time after completion of the merger in order to provide
transition support. Mr. Brunton's change in control agreement with
Centigram provides that Mr. Brunton will be entitled to receive a
severance package consisting of $185,004 (100% of his current base
annual salary), plus $83,252 (100% of his bonus for the current
year) and will continue to participate in Centigram's medical plans
for one year following his termination. Upon a change of control,
Mr. Brunton's change in control agreement provides that all unvested
options to purchase shares of Centigram common stock that would have
become exercisable within two years following the change of control
will immediately vest and become exercisable in full. Mr. Brunton's
change in control agreement also provides that upon termination
within one year of a change of control Mr. Brunton's remaining
options to purchase shares of Centigram common stock will vest and
become exercisable in full.
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- The members of the Board of Directors of Centigram, other than Mr.
Puette, have entered into change of control agreements with
Centigram. The change in control agreements provide for the
immediate vesting of all unvested options held by a director of
Centigram upon consummation of the merger.
- Certain officers of Centigram have entered into change in control
agreements with Centigram. The change in control agreements provide
for immediate vesting upon consummation of the merger of all
unvested options held by each officer that would have become
exercisable within two years following the merger. However, some of
these officers will enter into written agreements with ADC that will
provide, among other terms and conditions, that only a portion of
such options will vest immediately, with the remaining portion
vesting according to their normal vesting schedule.
INDEMNIFICATION OF CENTIGRAM OFFICERS AND DIRECTORS
- ADC has agreed to indemnify and hold harmless Mr. Puette, in his
capacity as Centigram's Chief Executive Officer, and those
individuals who, as of June 1, 2000, were parties to change of
control agreements with Centigram, which includes all other
directors, from liability and expenses arising out of matters
existing or occurring prior to the consummation of the merger to the
fullest extent allowed under Delaware law and in accordance with
indemnification agreements of Centigram as in effect prior to the
merger. ADC has also agreed that it will maintain in effect the
current directors' and officers' liability insurance policies
maintained by Centigram, for the benefit of Centigram directors and
officers, for seven years following the closing of the merger (up to
a maximum of as much insurance as 200% of Centigram's current
premiums will buy).
REGULATORY APPROVALS
The closing of the merger is conditioned upon all material governmental
consents, approvals and authorizations legally required for the closing of the
merger and the transactions contemplated thereby having been obtained and being
in effect. However, no assurance can be given that the required consents,
approvals or authorizations will be obtained. Centigram and ADC are not
currently aware of any governmental approvals or actions that may be required to
effect the merger, other than the Hart-Scott-Rodino clearance described below.
The United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice frequently scrutinize the legality
under the antitrust laws of transactions such as the proposed merger. At any
time before or after the merger, the Department of Justice or the Federal Trade
Commission could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the merger or
seeking divestiture of substantial assets of Centigram, ADC or their
subsidiaries. Private parties and state attorneys general may also bring an
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the merger on antitrust grounds will not be made
or, if such a challenge is made, of the result. On June 19, 2000, Centigram and
ADC filed Pre-Merger Notification and Report Forms with the Federal Trade
Commission and the Department of Justice under the Hart-
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Scott-Rodino Act, and the rules and regulations of the FTC provide that some
merger transactions, including the proposed merger, may not be consummated until
required information and materials have been furnished to the Department of
Justice and the FTC and certain waiting periods (initially, a 30-day waiting
period) have expired or been terminated.
WHEN THE MERGER WILL BE COMPLETED
We expect to complete the merger by the end of July 2000. However, we
cannot guarantee when or if the required regulatory approvals will be obtained.
Furthermore, either ADC or Centigram may terminate the merger agreement if,
among other reasons, the merger has not been completed on or before October 31,
2000, unless failure to complete the merger by that time is due to the
terminating party's failure to perform its obligations under the merger
agreement.
The closing of the merger will take place on a date within three
business days after satisfaction or waiver of all of the conditions to
consummation of the merger or on a date to which ADC and Centigram mutually
agree. On the date of the closing, the parties will file a certificate of merger
with the Delaware Secretary of State. The merger will become effective upon the
filing of the certificate of merger or at a later time if specified in the
certificate of merger.
PROCEDURES FOR EXCHANGING YOUR STOCK CERTIFICATES
Within five business days after the completion of the merger, Norwest
Bank, as paying agent, will mail to each former holder of record of Centigram
common stock a letter with instructions on how to exchange Centigram stock
certificates for the cash merger consideration.
Please do not send in your Centigram stock certificates until you
receive the letter of transmittal and instructions from Norwest Bank. Do not
return your stock certificates with the enclosed proxy card. If your shares of
Centigram stock are held through a broker, your broker will surrender your
shares for cancellation.
After you mail the letter of transmittal and your stock certificates to
Norwest Bank, your check will be mailed to you. The Centigram stock certificates
you surrender will be canceled.
After the completion of the merger, there will be no further transfers
of Centigram common stock. Centigram stock certificates presented for transfer
after the completion of the merger will be canceled and exchanged for the merger
consideration.
If your Centigram stock certificates have been lost, stolen or
destroyed, you will have to prove your ownership of those certificates and that
they were lost, stolen or destroyed before you receive any consideration for
your shares. Norwest Bank will send you instructions on how to provide such
evidence.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax
consequences of the merger to holders of Centigram common stock. The discussion
is based upon the Internal Revenue Code, Treasury regulations, IRS rulings, and
judicial and administrative decisions in effect as of the date of this proxy
statement. This discussion assumes that the Centigram common stock is generally
held for investment. In addition, this discussion does not address all of the
tax consequences that may be relevant to you in light of your particular
circumstances or to Centigram stockholders subject to special rules, such as
stockholders who acquired their Centigram stock pursuant to the exercise of
stock options or otherwise as compensation, non-United States persons, financial
institutions, tax-exempt organizations, dealers in securities or foreign
currencies or insurance companies.
The receipt of cash for Centigram common stock pursuant to the merger
will be a taxable transaction for federal income tax purposes and may be a
taxable transaction for state, local and foreign tax purposes as well. You will
recognize gain or loss measured by the difference between your adjusted tax
basis for the Centigram common stock owned by you at the time of the merger and
the amount of cash you receive for your Centigram shares. Your gain or loss will
be a capital gain or loss if your Centigram stock is a capital asset in your
hands, and will be long-term capital gain or loss if you have held your
Centigram stock for more than one year on the date of the merger. If an escrow
is established at the closing in connection with the Credit Bancorp treasury
share matter, the amount placed in escrow with respect to a Centigram share may
be taxable to its owner if the owner's right to receive the escrowed amount
could be deemed to have a reasonably ascertainable market value.
The cash payments due to the holders of Centigram common stock upon the
exchange of Centigram common stock pursuant to the merger generally will be
subject to "backup withholding" at a 31% rate unless certain requirements are
met. Backup withholding will not apply if you (i) furnish a correct taxpayer
identification number on IRS Form W-9 or an appropriate substitute form and
certify on such form that you are not subject to backup withholding, (ii)
provide a certificate of foreign status on IRS Form W-8 or an appropriate
substitute form or (iii) are a corporation or are otherwise exempt from backup
withholding. Any amount paid as backup withholding will be credited against your
federal income tax liability.
Neither ADC nor Centigram has requested or will request a ruling from
the IRS as to any of the tax effects to Centigram stockholders of the
transactions discussed in this proxy statement, and no opinion of counsel has
been or will be rendered to Centigram stockholders with respect to any of the
tax effects of the merger to stockholders.
The tax consequences of the merger to you may vary depending upon your
particular circumstances. Therefore, you should consult your tax advisor to
determine the particular tax consequences of the merger to you, including those
relating to state, local and/or foreign taxes.
ANTICIPATED ACCOUNTING TREATMENT
Centigram anticipates that the merger will be accounted for by ADC
using the purchase method of accounting in accordance with generally accepted
accounting principles.
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ESCROW FOR CERTAIN SHARES OF CENTIGRAM TREASURY STOCK
The per share amount of cash payable following the closing will be
determined as of the closing of the merger based on the number of outstanding
Centigram shares and options on that date, and whether at the time of closing
Centigram has recovered its 900,000 treasury shares held in brokerage accounts
controlled by the court appointed receiver for Credit Bancorp, Ltd. Based on the
number of outstanding Centigram shares and stock options as of May 26, 2000, the
purchase price will consist of approximately $163 million in cash to Centigram's
stockholders, or approximately $26.38 per share, and approximately $36 million
to be paid in ADC common stock through the conversion of Centigram stock options
to ADC stock options. If at the time of the merger closing, the court's order
approving Centigram's agreement with the Credit Bancorp receiver has been
appealed or any applicable appeal period has not expired, or if Centigram has
not fully recovered the 900,000 treasury shares, the per share amount paid to
Centigram's stockholders will be calculated as if the 900,000 shares were
outstanding, resulting in a cash payment of approximately $23.84 per share, and
approximately $21.5 million ($23.84 per share multiplied by 900,000 shares) in
cash will be placed in escrow until any appeal has been finally resolved, the
appeal period has expired, or the treasury shares are fully recovered. If an
escrow is established at the closing, any liability (other than the approximate
$12.1 million payment required by the agreement with the receiver) or expense
incurred by ADC or Centigram following the closing in recovering the treasury
shares or prosecuting any appeal will be reimbursed to ADC or Centigram from the
escrowed funds. The amount, if any, remaining in escrow after resolution of
these treasury share matters will be paid to the former Centigram stockholders
and the ADC stock options received upon conversion of Centigram stock options
will be appropriately adjusted.
As noted above, while Centigram agreed to pay approximately $12.1
million under the agreement with the receiver for Credit Bancorp, Centigram and
ADC agreed that only the amount in excess of $10.0 million paid to settle that
matter (approximately $2.1 million) would reduce the merger purchase price.
However, the merger agreement provides that, if Centigram's agreement with the
Credit Bancorp receiver is found to be void or unenforceable and each of the
receiver and Credit Bancorp is unable or unwilling to repay or give full credit
to ADC or Centigram for any amount previously paid to obtain the return of the
900,000 treasury shares, then the lesser of the $10.0 million "credit" given to
Centigram to settle the Credit Bancorp treasury share matter or the amount not
repaid or credited to ADC or Centigram will be deducted from the escrow and paid
to ADC.
No funds will be escrowed if the Credit Bancorp treasury share matter
is finally resolved at the time of the merger closing and all of the treasury
shares have been returned. The merger agreement includes as an exhibit a form of
escrow agreement to be entered into with Norwest Bank Minnesota, N.A., as escrow
agent, if the Credit Bancorp treasury share matter is not finally resolved as of
the closing and an escrow must be established. In that event, the merger
agreement provides that Centigram will be entitled to designate one member of
the post-merger Board of Directors of Centigram to serve as a member of a
special litigation committee that will be established for the sole purpose of
negotiating or otherwise participating on behalf of Centigram in the resolution
of any appeal of the court's order approving the agreement that Centigram has
entered into with the Credit
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Bancorp receiver. This individual will be consulted by the special litigation
committee prior to Centigram's resolving any and all appeals of the court's
order approving the agreement.
Because the appeal period applicable to the court's order approving the
agreement between Centigram and the Credit Bancorp receiver does not expire
until after the date of the special meeting of Centigram's stockholders to
approve the merger, it is likely that an escrow will be established at the
closing. If an escrow is established at the closing, the timing of any
distributions from escrow will likely be uncertain because distributions will
only occur when any appeal of the court's order has been finally resolved and
the 900,000 Centigram treasury shares are recovered. This process could take a
considerable amount of time, and if Centigram's agreement with the Credit
Bancorp receiver is not ultimately consummated, it is possible that the entire
amount of the escrow will be used to settle the Credit Bancorp treasury share
matter and to pay related expenses, which would leave no remaining funds to
distribute to the former Centigram stockholders.
REPRESENTATIONS AND WARRANTIES OF CENTIGRAM
Centigram made representations and warranties in the merger agreement
regarding the following:
- corporate organization and qualification to do business of
Centigram and each of its subsidiaries;
- validity and effectiveness of charter and bylaws;
- capitalization of Centigram and each of its subsidiaries;
- authority to enter into the merger agreement and to consummate
the merger;
- absence of conflicts between the merger agreement and the
merger, on the one hand, and other contractual and legal
obligations of Centigram and each of its subsidiaries, on the
other hand;
- requirement of consents, approvals, filings or other
authorizations to enter into the merger agreement and
consummate the merger;
- compliance with all applicable SEC filing requirements and
accuracy and completeness of SEC filings since January 1,
1997;
- accuracy of financial statements contained in SEC filings
filed since January 1, 1997;
- material liabilities and obligations;
- material changes or events since January 29, 2000;
- material litigation;
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- validity and effectiveness of all leasehold interests;
- possession, effectiveness and compliance with permits and
licenses necessary to carry on the business as currently
conducted;
- validity and enforceability of material contracts and
commitments;
- ownership of intellectual property rights and non-infringement
of the rights of others;
- compliance with applicable law;
- tax matters;
- labor matters;
- employee benefits matters;
- environmental matters;
- insurance matters;
- use of brokers or finders;
- board approval of the merger;
- stockholder vote required to adopt the merger agreement;
- the fairness opinion of First Analysis Securities Corporation;
and
- action by the board to exempt the merger from applicability of
a Delaware anti-takeover statute and Centigram's Preferred
Shares Rights Agreement.
None of the representations and warranties made by Centigram in the merger
agreement survive the closing of the merger.
REPRESENTATIONS AND WARRANTIES OF ADC AND POUNDSTONE
ADC and Poundstone each made representations and warranties in the
merger agreement regarding the following:
- corporate organization and qualification to do business;
- authority to enter into the merger agreement;
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- absence of conflicts between the merger agreement and the
merger, on the one hand, and other contractual and legal
obligations of ADC and Poundstone, on the other hand; and
- ADC's ability to fund the merger consideration.
None of the representations and warranties made by ADC and Poundstone
in the merger agreement survive the closing of the merger.
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
Centigram has agreed that, subject to certain exceptions, between the
execution of the merger agreement and the earlier to occur of the termination of
the merger agreement or the consummation of the merger, Centigram and its
subsidiaries will:
- conduct their respective businesses in the ordinary course and
in a manner consistent with past practice; and
- use commercially reasonable efforts to preserve substantially
intact their respective business organizations and to keep
available the services of their respective current officers,
employees and consultants and to preserve their respective
current relationships with customers, suppliers, distributors
and other persons that have significant business relations
with Centigram.
Centigram has also agreed that, subject to certain exceptions, prior to
the effective time of the merger, Centigram and its subsidiaries will not amend
their charter documents, issue new shares of stock (except for issuances upon
the exercise of Centigram options or shares acquired under Centigram's employee
stock purchase plan), or enter into other enumerated non-ordinary course
transactions.
NO SOLICITATION PROVISION
Centigram has agreed not to seek a buyer for Centigram, other than ADC,
and has agreed to terminate all existing discussions or negotiations with
respect to an acquisition. In particular, Centigram has agreed, subject to
fiduciary obligations discussed below, not to, or permit any of its subsidiaries
to:
- initiate, solicit or encourage any inquires or the making of
any proposal that constitutes an acquisition proposal;
- except as discussed below, engage or participate in
negotiations or discussions or provide information to any
person in connection with any proposal that constitutes or
could reasonably be expected to lead to an acquisition
proposal; or
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- except as discussed below, enter into any agreement with
respect to an acquisition proposal or approve an acquisition
proposal.
An acquisition proposal is defined in the merger agreement as a
proposal made by any person, other than ADC, to acquire 20% or more of the
assets of Centigram or its subsidiaries or 20% or more of the outstanding
capital stock of Centigram or its subsidiaries.
However, prior to the adoption of the merger agreement by the
stockholders of Centigram, the Centigram Board may participate in discussions or
negotiations with any party who makes an acquisition proposal which has not been
solicited by Centigram and furnish information to such party, if:
- a majority of disinterested directors on the Centigram Board
determines, after receiving advice from its financial advisor,
that the potential acquiror has submitted to Centigram a
superior proposal; and
- a majority of the disinterested directors also determines,
after considering advice from its legal counsel, that the
failure to participate in discussions or negotiations with a
third party, to furnish information requested by a third
party, or to approve or recommend a third party's acquisition
is inconsistent with the Board's fiduciary duties.
A superior proposal is defined in the merger agreement as a bona fide
acquisition proposal for more than 50% of Centigram's outstanding capital stock
or all or substantially all of Centigram's assets, and on terms that a majority
of the disinterested directors of Centigram determines in good faith is
reasonably likely to be more favorable to Centigram and its stockholders than
the ADC transaction (after considering advice from Centigram's independent
financial advisor that the third-party acquisition proposal is more favorable to
Centigram's stockholders, from a financial point of view, than the ADC
transaction).
Centigram has agreed to notify ADC promptly of all inquiries and
proposals that Centigram may receive relating to a third-party acquisition
proposal.
ADDITIONAL COVENANTS OF ADC AND CENTIGRAM
ADC and Centigram have agreed as follows:
- each company will cooperate to file the SEC documents
necessary to complete the merger;
- each company will use its best efforts to make all
governmental filings necessary to consummate the merger, and
to obtain all required consents, licenses, permits, waivers,
approvals, authorizations or orders;
- for seven years following the merger, ADC will maintain
directors' and officers' liability insurance covering those
persons who are currently covered by Centigram's directors'
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and officers' liability insurance policies on terms comparable
to Centigram's existing coverage (up to the amount of coverage
that can be purchased for 200% of the current premium);
- Centigram will call a stockholders' meeting as promptly as
practicable for the purpose of voting on the merger and use
its commercially reasonable efforts to solicit votes in favor
of the merger;
- each company will consult with the other regarding any public
announcements it makes concerning the merger;
- Centigram will terminate any outstanding stock repurchase
plans;
- each company will give notices to third parties and use its
best efforts to obtain any third party consents required to
effect the merger;
- ADC will cause the surviving corporation to provide welfare
and employee benefits to Centigram employees;
- Centigram will deliver to ADC the resignations of specified
officers and directors; and
- ADC will retain one Centigram designee on the Board of
Directors of Centigram after the closing, solely for purposes
of serving on a special litigation committee to handle the
Credit Bancorp treasury share matter, if it is not fully
resolved as of the closing.
CONDITIONS TO CLOSING
The obligations of ADC and Centigram to consummate the merger are
subject to satisfaction or waiver of the following conditions:
- Centigram stockholders approve and adopt the merger agreement
and the merger;
- no governmental authority or court having entered an order
making the merger illegal or otherwise prohibiting its
consummation, or taken any legal action which seeks to prevent
or delay consummation of the merger; and
- the receipt of all necessary governmental consents, approvals
or other authorizations legally required to consummate the
merger from all governmental authorities, including expiration
or termination of any applicable waiting period under the
Hart-Scott-Rodino Act.
The obligation of ADC to consummate the merger is also subject to the
satisfaction or waiver of the following additional conditions:
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- the continued truthfulness and accuracy of the representations
and warranties made by Centigram in the merger agreement;
- the performance or compliance in all material respects by
Centigram with all agreements and covenants required by the
merger agreement;
- the lack of a material adverse change in Centigram's business;
- no judgment, order, decree or law imposing material
limitations on ADC's ability to acquire the stock of
Centigram, imposing limitations on ADC's ability to operate
the business of Centigram, imposing other material sanctions
against ADC for consummating the merger, or requiring
divestiture by ADC of a substantial portion of its assets due
to the consummation of the merger;
- Centigram having delivered certain closing documents
contemporaneously with the consummation of the merger;
- the resignations of certain of Centigram's directors and
officers;
- four specified Centigram employees having entered into
employment agreements with ADC and 12 of 15 specified
employees having waived certain change of control benefits in
their respective employment or change of control agreements;
and
- holders of no more than 5% of all shares of Centigram common
stock outstanding as of the date of the special meeting having
demanded appraisal rights under Delaware law.
The obligation of Centigram to consummate the merger is also subject to
the satisfaction or waiver of the following additional conditions:
- the continued truthfulness and accuracy of the representations
and warranties made by ADC and Poundstone in the merger
agreement;
- the performance or compliance in all material respects by ADC
with all agreements and covenants required by the merger
agreement; and
- ADC having delivered certain closing documents
contemporaneously with the consummation of the merger.
TERMINATION
The merger agreement may be terminated and the merger abandoned at any
time prior to the effective time:
- by mutual consent of ADC and Centigram;
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- by either ADC or Centigram if:
- the transaction is not completed by October 31, 2000,
unless failure to complete the merger by that time is
due to the failure to perform obligations by the
party seeking to terminate;
- Centigram stockholder approval is not obtained at the
Centigram stockholders meeting, or a final and
nonappealable governmental restraint adversely
affecting the merger is in effect;
- Centigram enters into an agreement or understanding
to effect a superior acquisition proposal or the
Centigram Board resolves to do so, provided Centigram
may not terminate the merger agreement unless
Centigram has delivered to ADC and Poundstone notice
of Centigram's intent to enter into an acquisition
agreement with a third party and gives ADC an
opportunity to meet or better the third-party
proposal.
- by either ADC or Centigram upon the other's breach, subject to
materiality thresholds and cure periods, of a representation,
warranty, covenant or agreement;
- by ADC if the Centigram Board:
- withdraws or modifies its approval of the merger in a
manner adverse to ADC;
- recommends a third-party acquisition proposal to the
stockholders of Centigram; or
- resolves to take any of the foregoing actions.
FEES AND EXPENSES
Except as discussed below, whether or not the merger is consummated,
Centigram and ADC are each responsible for their respective expenses incurred in
connection with the merger, including the preparation of the merger agreement
and all fees and expenses of investment bankers, legal counsel and accountants.
Centigram, however, is required to reimburse ADC for all reasonable
out-of-pocket fees and expenses, not to exceed $500,000, incurred by ADC in
connection with the merger agreement, if the merger agreement is terminated:
- by either Centigram or ADC because the stockholders of
Centigram do not approve the merger at the stockholders
meeting and a third-party acquisition proposal (whether or not
superior to ADC's) has occurred;
- by ADC, due to Centigram entering into an agreement or
understanding to effect a superior acquisition proposal;
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- by ADC, due to Centigram breaching, subject to materiality
thresholds and cure periods, any of Centigram's
representations, warranties, covenants or agreements; or
- by ADC, due to Centigram's Board withdrawing or modifying its
approval of the merger in a manner adverse to ADC,
recommending a third-party acquisition proposal, including a
superior proposal, to the stockholders of Centigram, or
resolving to take any of the foregoing actions.
In addition to Centigram's requirement to pay fees and expenses of ADC
described above, Centigram is also required to pay a termination fee of $6.4
million if the merger agreement is terminated:
- by ADC or Centigram, at a time when ADC is entitled to
terminate the merger agreement due to:
- Centigram stockholder approval not being obtained at
the Centigram stockholder meeting, or
- Centigram breaching, subject to materiality
thresholds and cure periods, any of Centigram's
representations, warranties, covenants or agreements,
and within nine months of such termination Centigram enters
into an agreement with a third party with respect to an
acquisition proposal;
- by ADC or Centigram, due to Centigram entering into an
agreement or understanding with a third party to effect a
superior acquisition proposal;
- by ADC, due to a breach by Centigram of its obligations not to
initiate, solicit or encourage the making of any acquisition
proposal by a third party, or to engage or participate in
negotiations or discussions which facilitate the making of an
acquisition proposal by a third party, or enter into an
agreement with respect to an acquisition proposal; or
- by ADC, due to Centigram's Board withdrawing or modifying its
approval of the merger in a manner adverse to ADC,
recommending a third-party acquisition proposal, including a
superior proposal, to the stockholders of Centigram, or
resolving to take any of the foregoing actions.
ADC is required to reimburse Centigram for all reasonable out-of-pocket
fees and expenses, not to exceed $500,000, incurred by Centigram in connection
with the merger agreement, if the merger agreement is terminated due to ADC
breaching, subject to materiality thresholds and cure periods, any of ADC's
representations, warranties, covenants or agreements contained in the merger
agreement.
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FAIRNESS OPINION OF FIRST ANALYSIS SECURITIES CORPORATION
Pursuant to an engagement letter dated May 17, 2000, Centigram retained
First Analysis Securities Corporation to deliver a fairness opinion in
connection with a proposed acquisition of Centigram by ADC. At the meeting of
Centigram's Board of Directors beginning on June 8, 2000 and continuing into
June 9, 2000, First Analysis rendered its oral opinion to the Board, which was
subsequently confirmed in writing, that, as of June 9, 2000, and based upon and
subject to the various considerations set forth in the opinion, the
consideration to be paid to stockholders in the merger was fair, from a
financial point of view, to Centigram's stockholders. Centigram's Board of
Directors did not limit First Analysis in any way in the investigations it made
or the procedures it followed in giving its opinion.
We have attached as APPENDIX B to this proxy statement the full text of
First Analysis' written opinion dated June 9, 2000. This opinion sets forth the
assumptions made, matters considered and limits on the review undertaken.
Centigram's stockholders are urged to read the opinion in its entirety. The
opinion addresses only the consideration to be paid in the transaction and is
not a recommendation to any Centigram stockholder as to how that stockholder
should vote at Centigram's special meeting.
In arriving at its opinion, First Analysis:
- Reviewed the terms of the merger agreement and the associated
exhibits thereto dated June 9, 2000 furnished to them by
Sutherland Asbill & Brennan LLP on June 9, 2000 (which, for
the purposes of its opinion, First Analysis assumed to be
identical in all material respects to the agreement to be
executed);
- Reviewed certain publicly available financial statements and
other information of Centigram, including Centigram's annual
report to stockholders and Form 10-K for the fiscal year ended
October 30, 1999, including the audited financial statements
included therein, the Definitive Proxy Statement and Notice of
Annual Meeting of Stockholders of Centigram dated February 18,
2000, Centigram's Form 10-Q for the quarterly period ended
January 29, 2000, including the unaudited financial statements
included therein, and Centigram's press release of May 15,
2000 regarding its unaudited financial results and balance
sheet for the quarterly period ended April 29, 2000;
- Reviewed certain internal financial and operating information,
including financial forecasts and projections for the fiscal
years ending October 28, 2000 and October 27, 2001, relating
to the business, earnings, cash flow, assets and prospects of
Centigram;
- Conducted discussions with members of the management of
Centigram concerning the operations, business strategy,
financial performance and prospects of Centigram;
- Discussed with the management of Centigram its view of the
strategic rationale for the merger;
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<PAGE> 48
- Reviewed the historical market prices and trading activity of
the common stock of Centigram;
- Compared the results of Centigram with those of certain public
companies which First Analysis deemed to be reasonably
comparable to Centigram;
- Compared the financial terms of the merger with the financial
terms of certain other precedent mergers and acquisitions of
companies First Analysis deemed to be comparable to Centigram;
- Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as First Analysis deemed appropriate for
purposes of its opinion, including First Analysis' assessment
of general economic, market, industry, competitive, monetary
and other conditions.
First Analysis relied upon and assumed, without responsibility for
independent verification, the accuracy and completeness of all information
that was publicly available or that was furnished to it by Centigram or
otherwise reviewed by First Analysis. First Analysis is not responsible or
liable for that information or its accuracy. First Analysis has not conducted
any valuation or appraisal of any assets or liabilities of Centigram, nor have
any valuations or appraisals been provided to First Analysis. In relying on
financial analyses and forecasts provided to it, First Analysis has assumed
that they have been reasonably prepared based on assumptions reflecting the
best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of Centigram to
which those analyses or forecasts relate. First Analysis has also assumed that
the transaction will have the tax consequences described in discussions with,
and materials furnished to First Analysis by, representatives of Centigram and
that the parties will complete the transaction and other transactions
contemplated by the merger agreement as described in the merger agreement.
First Analysis relied as to all legal matters relevant to rendering its
opinion upon the advice of its counsel.
The management of Centigram prepared the projections furnished to First
Analysis for Centigram. Centigram does not publicly disclose internal
management projections of the type provided to First Analysis in connection
with First Analysis' analysis, and such projections were not prepared with a
view toward public disclosure. These projections were based on numerous
variables and assumptions that are inherently uncertain and may be beyond the
control of Centigram, including, but not limited to, factors related to
general economic and competitive conditions and prevailing interest rates.
Accordingly, actual results could vary significantly from those set forth in
the projections.
As is customary in the rendering of fairness opinions, First Analysis
based its opinion on general economic, market, industry, competitive, monetary
and other conditions as in effect on, and the information made available to
First Analysis as of, the date of its opinion. Subsequent developments may
affect First Analysis' opinion.
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<PAGE> 49
In accordance with customary investment banking practices, First
Analysis employed generally accepted valuation methods in reaching its
opinion. The following is a summary of the material financial analyses that
First Analysis utilized in providing its opinion, and to the extent that it is
based on market data, is based on market data as it existed at June 8, 2000,
and is not necessarily indicative of current market conditions.
Public Comparables Trading Analysis. First Analysis compared selected
financial data of Centigram with certain financial data from publicly traded
telecommunications equipment and systems companies considered by First Analysis
to be comparable in some respect to Centigram. Criteria for inclusion in the
comparison group (the "Comparable Companies") included, among many factors, mix
of sales attributed to voice messaging systems and mix of sales to network
service provider customers and Centigram's primary product and customer base
respectively. Ten telecommunications equipment and systems companies were
ultimately chosen as Comparable Companies. These were:
- Active Voice Corporation;
- Altigen Communications, Inc.;
- AVT Corporation;
- Boston Communications Group, Inc.;
- Comdial Corporation;
- Comverse Technology, Inc.;
- Glenayre Technologies, Inc.;
- InterVoice-Brite, Inc.;
- MCK Communications, Inc.; and
- Vodavi Technology, Inc.
For the Comparable Companies, First Analysis calculated the ratios of
current stock prices to projected earnings per share ("EPS") for the current
year (2000) and forward year (2001) based on First Call Corporation consensus
estimates as of June 8, 2000. First Analysis' analysis indicated multiples of
current year EPS estimates ranged from a high of 61.6x to a low of 4.1x, with a
median value of 10.7x. First Analysis' analysis indicated multiples of forward
year EPS estimates ranged from a high of 51.2x to a low of 3.5x, with a median
value of 12.4x.
First Analysis also calculated the Enterprise Value ("EV"), defined as
net debt and equity market capitalization, and analyzed this value as a multiple
of latest twelve months ("LTM") EBITDA (defined as earnings before interest,
taxes and depreciation and amortization) for the Comparable Companies. First
Analysis' analysis indicated multiples of LTM EBITDA that ranged from a high of
179.9x to a low of 3.5x, with a median value of 8.4x. Additionally, First
Analysis compared the equity value (defined as current stock price multiplied by
fully diluted shares outstanding) of the Comparable Companies to the most
recently reported quarter's tangible book value (defined as shareholders equity
less the value of any intangible assets). First Analysis' analysis indicated
multiples of tangible book value ranged from a high of 20.5x to a low of 0.8x,
with a median value of 2.5x.
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<PAGE> 50
Given the wide range of multiples and based on the above, First
Analysis deemed it reasonable to limit the equity value ranges to within 20% of
the medians determined, resulting in multiples of current year EPS of 8.6x to
12.9x and as a multiple of forward year EPS of 9.9x to 14.7x. These multiples
imply a value for Centigram's equity of $52.7 to $79.1 million and $80.6 to
$120.9 million, respectively. In similar fashion, First Analysis established EV
multiples of LTM EBITDA of 6.7 to 10.1 and equity valuation multiples of
tangible book value of 2.0 to 3.0. The EV multiples of LTM EBITDA implied a
value of Centigram equity of $49.4 to $74.1 million. The equity valuation
multiples of tangible book value after deducting $25.3 million in cash as a
result of the proposed Lucent amendment and Credit Bancorp settlement implied a
value of $87.2 to $130.8 million. In aggregate, the Comparable Company analysis
implied equity valuations ranging from $49.4 to $130.8 million. First Analysis
noted the value to be paid for all of Centigram common shares and stock options
outstanding as of the closing date of $199.1 million exceeded the high end of
this range.
Precedent Transactions Analysis. First Analysis reviewed the following
ten selected merger and acquisition transactions (the "Precedent Transactions")
in the telecommunications equipment and systems industry since the beginning of
1998:
- Aspect Telecommunications acquisition of Voicetek Corporation;
- Mitel Corporation acquisition of Centigram Communications
Corporation Customer Premises Equipment business;
- Lucent Technologies, Inc. acquisition of Mosaix, Inc.;
- LHS Group Inc. acquisition of Priority Call Management, Inc.;
- InterVoice, Inc. acquisition of Brite Voice Systems, Inc.;
- Intel Corporation acquisition of Dialogic Corporation;
- Unisys Corporation acquisition of PulsePoint Communications;
- Lucent Technologies, Inc. acquisition of Excel Switching
Corporation;
- Nortel Networks Corporation acquisition of Periphonics
Corporation; and
- SER Systeme AG acquisition of EIS International, Inc.
Criteria for inclusion in the analysis included, among many factors,
primary market of the acquired company, mix of sales attributed to hardware and
software systems, and the percentage of sales attributed to the provision of
services, if any. First Analysis compared the transaction value of the acquired
company as multiples of LTM Sales, LTM EBITDA and LTM Net Income. First
Analysis' analysis of the transaction value of the Precedent Transactions
indicated multiples of LTM Sales ranging from a high of 12.8x to a low of 0.9
with a median value of 2.6x, multiples of LTM
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<PAGE> 51
EBITDA ranging from a high of 63.9x to a low of 10.0x with a median value of
19.1x, and multiples of LTM Net Income that ranged from a high of 79.6x to a low
of 21.1x with a median value of 56.1x.
Given the wide range of multiples and based on the above, First
Analysis deemed it reasonable to limit the transaction value ranges to within
20% of the medians determined for the Precedent Transactions, resulting in
multiples of LTM Sales of 2.1x to 3.1x, multiples of LTM EBITDA of 15.3x to
23.0x, and multiples of LTM Net Income of 44.9x to 67.3x. Applying these
multiples to:
- Centigram's LTM Sales indicated a transaction value ranging
from $168.4 to $252.6 million;
- Centigram's LTM EBITDA indicated a transaction value ranging
from $112.5 to $168.7 million; and
- Centigram's LTM Net Income indicated a transaction value
ranging from $179.5 to $269.3 million.
In aggregate, the Precedent Transactions analysis implied equity
valuations ranging from $112.5 to $269.3 million. First Analysis noted the value
to be paid for all of Centigram common shares and stock options outstanding as
of the closing date of $199.1 million was within this range.
First Analysis also considered the premiums offered relative to the
acquired company's stock price one day, one week and four weeks, respectively,
prior to the announcement of seven of the ten Precedent Transactions which were
acquisitions of publicly traded companies. The premium offered in these
Precedent Transactions ranged from:
- a high of 34.6% to a low of 15.8% with a median of 27.7% based
on the stock price one day prior to announcement;
- a high of 46.2% to a low of 11.2% with a median of 35.2% based
on the stock price one week prior to announcement; and
- a high of 67.5% to a low of 25.5% with a median of 37.4% based
on the stock price four weeks prior to announcement.
Based on the foregoing and given the number and range of premiums paid in the
Precedent Transactions, First Analysis deemed it reasonable to limit the
analysis of the premium offered to within 20% of the relevant median premiums
determined for the Precedent Transactions resulting in one-day premiums of 22.2%
to 33.3%, one-week premiums of 28.2% to 42.3%, and four-week premiums of 30.0%
to 44.9%. Applying these multiples to (i) Centigram's closing stock price one
day prior to the announcement of the merger indicated a transaction value
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<PAGE> 52
ranging from $222.4 to $242.6 million, (ii) Centigram's closing stock price one
week prior to the announcement of the merger indicated a transaction value
ranging from $230.7 to $256.0 million, and (iii) Centigram's closing stock price
four weeks prior to the announcement of the merger indicated a transaction value
ranging from $177.4 to $197.9 million. In aggregate, the Precedent Transactions
analysis of premiums offered implied equity valuations ranging from $177.4 to
$256.0 million. First Analysis noted the value to be paid for all of Centigram
common shares and stock options outstanding as of the closing date of $199.1
million was within this range.
Discounted Cash Flow Analysis. First Analysis prepared a discounted
free cash flow analysis based on financial projections for Centigram provided by
Centigram management and reviewed by First Analysis as to the assumptions and
reasonableness of those projections. First Analysis calculated the estimated
free cash flows of Centigram based on the unlevered operating income adjusted
for:
- taxes at 40%;
- certain projected non-cash items (e.g., depreciation and
amortization);
- projected capital expenditures; and
- changes in working capital.
First Analysis then calculated a net present value of free cash flows
for Centigram for the fiscal years ended 2000 through 2004, which will end on
the Saturday nearest October 31 of each respective year, along with terminal
values based on (i) free cash flow growth into perpetuity and (ii) multiples of
2004 EBITDA. Free cash flow for fiscal year 2000 was reduced by one-half due to
the projected timing of the merger. A weighted average cost of capital ("WACC")
of 22.14% was then calculated for Centigram. The analysis utilizing discount
rates ranging from 20.0% to 24.0% (based on WACC) and free cash flow perpetuity
growth rates ranging from 10.0% to 13.0% yielded Enterprise Values between $46.1
and $93.8 million. Adding projected cash of $31.1 million to exist at closing
after the reduction for the proposed Lucent amendment and Credit Bancorp
settlement yielded total values ranging from $77.2 to $124.9 million. The
analysis utilizing discount rates ranging from 20.0% to 24.0% (based on WACC)
and EBITDA multiples ranging from 10.0 to 13.0 times yielded Enterprise Values
between $111.1 and $162.5 million. Adding projected cash of $31.1 million to
exist at closing after the reduction for the proposed Lucent amendment and
Credit Bancorp settlement yielded total values ranging from $142.2 to $193.6
million. In aggregate, the Discounted Cash Flow analysis implied equity
valuations ranging from $77.2 to $193.6 million. First Analysis noted the value
to be paid for all of Centigram common shares and stock options outstanding as
of the closing date of $199.1 million was above this range.
Although First Analysis undertook other analyses in connection with the
delivery of its opinion, the foregoing is a summary of the material analyses and
data presented by First Analysis. It should be noted that the transactions
utilized in these analyses are not identical to the proposed Centigram
transaction. The preparation of a fairness opinion is a complex process and is
not necessarily susceptible to partial analyses or summary description. First
Analysis believes that you must consider its opinion, this summary and its
analyses as a whole. Selecting portions of this summary and these analyses,
without considering the analyses as a whole, could create an incomplete view of
the processes underlying the analyses and opinion. In arriving at its opinion,
First Analysis
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<PAGE> 53
considered the results of all of the analyses as a whole. No single factor or
analysis was determinative of First Analysis' fairness determination. Rather,
the totality of the factors considered and analyses performed operated
collectively to support its determination. First Analysis based the analyses on
assumptions that it deemed reasonable, including assumptions concerning general
business and economic conditions which impact growth rates, labor costs and
price competition and industry-specific factors. First Analysis' analyses are
not necessarily indicative of actual values or actual future results that
Centigram might achieve, which values may be higher or lower than those
indicated. First Analysis' analyses also do not necessarily reflect the prices
at which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their advisors.
Accordingly, these forecasts and analyses are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by those analyses. Therefore, none of Centigram, First Analysis or any
other person assumes responsibility if future results are materially different
from those forecasted.
First Analysis will receive a fee of $250,000.00 for rendering its
fairness opinion. In addition, Centigram has agreed to indemnify First
Analysis against certain liabilities arising out of its engagement. First
Analysis has also, from time to time, provided investment banking and other
financial services to Centigram for which First Analysis has received
compensation, including advising Centigram in the sale of its Customer
Premises Equipment business unit assets to Mitel Corporation in May 1998 and
advising Centigram in its purchase of the assets of The Telephone Connection,
Inc. in June 1998. As a part of its investment banking business, First
Analysis and its affiliates are continually engaged in the valuation of
businesses and their securities in connection with mergers, acquisitions and
other transactions, investments for passive and control purposes, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements, and valuations for estate, corporate and other purposes.
First Analysis was selected to advise Centigram with respect to the
transaction on the basis of its experience and familiarity with Centigram.
First Analysis is not affiliated with and has no conflicts of interest with
any parties to the merger agreement.
In the ordinary course of their businesses, First Analysis and its
affiliates may actively trade securities of Centigram and/or ADC for their own
accounts or for the accounts of customers and, accordingly, they may hold long
and/or short positions in those securities at any given time.
THE FULL TEXT OF FIRST ANALYSIS' OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. FIRST ANALYSIS' OPINION IS ADDRESSED ONLY TO
THE CENTIGRAM BOARD AND IS DIRECTED ONLY TO THE MERGER CONSIDERATION TO BE
RECEIVED IN THE MERGER BY THE HOLDERS OF CENTIGRAM COMMON STOCK AND DOES NOT
CONSTITUTE A RECOMMENDATION AS TO HOW YOU SHOULD VOTE AT THE SPECIAL MEETING.
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YOU HAVE APPRAISAL RIGHTS IN THE MERGER
Under Delaware law, if you do not wish to accept the cash payment
provided for in the merger agreement, you have the right to dissent from the
merger and to receive payment in cash for the fair value of your Centigram
common stock. Centigram stockholders electing to exercise appraisal rights must
comply with the provisions of Section 262 of the Delaware General Corporation
Law in order to perfect their rights. Centigram will require strict compliance
with the statutory procedures. A copy of Section 262 is attached as APPENDIX C.
The following is intended as a brief summary of the material provisions
of the Delaware statutory procedures required to be followed by a stockholder in
order to dissent from the merger and perfect appraisal rights. This summary,
however, is not a complete statement of all applicable requirements and is
qualified in its entirety by reference to Section 262 of the Delaware General
Corporation Law, the full text of which appears in APPENDIX C of this proxy
statement.
Section 262 requires that stockholders be notified not less than 20
days before the special meeting to vote on the merger that appraisal rights will
be available. A copy of Section 262 must be included with such notice. This
proxy statement constitutes Centigram's notice to its stockholders of the
availability of appraisal rights in connection with the merger in compliance
with the requirements of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of Section 262 contained
in APPENDIX C because failure to timely and properly comply with the
requirements of Section 262 will result in the loss of your appraisal rights
under Delaware law.
If you elect to demand appraisal of your shares, you must satisfy each
of the following conditions:
- You must deliver to Centigram a written demand for appraisal
of your shares before the vote with respect to the merger is taken. This written
demand for appraisal must be in addition to and separate from any proxy or vote
abstaining from or voting against the merger. Voting against or failing to vote
for the merger by itself does not constitute a demand for appraisal within the
meaning of Section 262.
- You must not vote in favor of the merger. A vote in favor of
the merger, by proxy or in person, will constitute a waiver of your appraisal
rights in respect of the shares so voted and will nullify any previously filed
written demands for appraisal.
If you fail to comply with either of these conditions and the merger is
completed, you will be entitled to receive the cash payment for your shares of
Centigram common stock as provided for in the merger agreement, but you will
have no appraisal rights with respect to your shares of Centigram common stock.
All demands for appraisal should be addressed to Thomas E. Brunton,
Assistant Secretary, 91 East Tasman Drive, San Jose, California 95134, before
the vote on the merger is taken at the special meeting and should be executed
by, or on behalf of, the record holder of the shares of
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Centigram common stock. The demand must reasonably inform Centigram of the
identity of the stockholder and the intention of the stockholder to demand
appraisal of his or her shares.
To be effective, a demand for appraisal by a holder of Centigram common
stock must be made by, or in the name of, such registered stockholder, fully and
correctly, as the stockholder's name appears on his or her stock certificate(s)
and cannot be made by the beneficial owner if he or she does not also hold the
shares of record. The beneficial holder must, in such cases, have the registered
owner submit the required demand in respect of such shares.
If shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of a demand for appraisal should be
made in such capacity; and if the shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent, including an
authorized agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for the record owner. A record owner, such
as a broker, who holds shares as a nominee for others, may exercise his or her
right of appraisal with respect to the shares held for one or more beneficial
owners, while not exercising this right for other beneficial owners. In such
case, the written demand should state the number of shares as to which appraisal
is sought. Where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares held in the name of such record owner.
If you hold your shares of Centigram common stock in a brokerage
account or in other nominee form and you wish to exercise appraisal rights, you
should consult with your broker or such other nominee to determine the
appropriate procedures for the making of a demand for appraisal by such nominee.
Within 10 days after the effective date of the merger, ADC must give
written notice that the merger has become effective to each Centigram
stockholder who has properly filed a written demand for appraisal and who did
not vote in favor of the merger. At any time within 60 days after the effective
date, any stockholder who has demanded an appraisal has the right to withdraw
the demand and to accept the cash payment specified by the merger agreement for
his or her shares of Centigram common stock. Within 120 days after the effective
date, either ADC or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares held by all stockholders entitled
to appraisal. ADC has no obligation to file such a petition in the event there
are dissenting stockholders. Accordingly, the failure of a stockholder to file
such a petition within the period specified could nullify such stockholder's
previously written demand for appraisal.
If a petition for appraisal is duly filed by a stockholder and a copy
of the petition is delivered to ADC, ADC will then be obligated within 20 days
after receiving service of a copy of the petition to provide the Chancery Court
with a duly verified list containing the names and addresses of all stockholders
who have demanded an appraisal of their shares. After notice to dissenting
stockholders, the Chancery Court is empowered to conduct a hearing upon the
petition, to determine those stockholders who have complied with Section 262 and
who have become entitled to the
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appraisal rights provided thereby. The Chancery Court may require the
stockholders who have demanded payment for their shares to submit their stock
certificates to the Register in Chancery for notation thereon of the pendency of
the appraisal proceedings; and if any stockholder fails to comply with such
direction, the Chancery Court may dismiss the proceedings as to such
stockholder.
After determination of the stockholders entitled to appraisal of their
shares of Centigram common stock, the Chancery Court will appraise the shares,
determining their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest. When the value is determined, the Chancery Court will direct the
payment of such value, with interest thereon accrued during the pendency of the
proceeding, if the Chancery Court so determines, to the stockholders entitled to
receive the same, upon surrender by such holders of the certificates
representing such shares.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of your
shares as determined under Section 262 could be more, the same, or less than the
value that you are entitled to receive pursuant to the merger agreement.
Costs of the appraisal proceeding may be imposed upon ADC and the
stockholders participating in the appraisal proceeding by the Chancery Court as
the Chancery Court deems equitable in the circumstances. Upon the application of
a stockholder, the Chancery Court may order all or a portion of the expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal. Any stockholder who had demanded appraisal rights will
not, after the effective date, be entitled to vote shares subject to such demand
for any purpose or to receive payments of dividends or any other distribution
with respect to such shares (other than with respect to payment as of a record
date prior to the effective date); however, if no petition for appraisal is
filed within 120 days after the effective date of the merger, or if such
stockholder delivers a written withdrawal of his or her demand for appraisal and
an acceptance of the merger within 60 days after the effective date of the
merger, then the right of such stockholder to appraisal will cease and such
stockholder will be entitled to receive the cash payment for shares of his or
her Centigram common stock pursuant to the merger agreement. Any withdrawal of a
demand for appraisal made more than 60 days after the effective date of the
merger may only be made with the written approval of the surviving corporation
and must, to be effective, be made within 120 days after the effective date.
In view of the complexity of Section 262, Centigram stockholders who
may wish to dissent from the merger and pursue appraisal rights should consult
their legal advisors.
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MARKET PRICE OF CENTIGRAM COMMON STOCK
Centigram common stock is quoted on the National Market System of the
Nasdaq Stock Market under the symbol "CGRM." The following table sets forth, for
the periods indicated, the high and low sales prices per share for Centigram
common stock as reported on the Nasdaq National Market System.
<TABLE>
<CAPTION>
High Low
--------- ---------
<S> <C> <C>
1998
First Quarter $ 13.563 $ 11.625
Second Quarter 13.375 11.250
Third Quarter 11.186 7.250
Fourth Quarter 10.125 6.625
1999
First Quarter $ 11.500 $ 9.750
Second Quarter 9.875 7.875
Third Quarter 10.938 9.000
Fourth Quarter 16.938 9.312
2000
First Quarter $ 24.625 $ 14.500
Second Quarter (through June $______ $______
__, 2000)
</TABLE>
The closing market price per share of Centigram common stock on June 8,
2000, which was the last full trading day immediately preceding the public
announcement of the proposed merger, was $22.00. On ________, 2000, which is the
latest practicable date prior to the printing of this proxy statement, the
closing price for Centigram common stock was $_____.
As of June 26, 2000, there were _________ shares of Centigram common
stock outstanding, held by approximately _____ stockholders of record of
Centigram common stock. This number does not reflect the number of persons or
entities who may hold their stock in nominee or "street" name through brokerage
firms.
Centigram has never paid any cash dividends on its common stock, nor
does it have any intention of doing so in the near future.
BENEFICIAL OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of May 26, 2000, information relating
to the beneficial ownership of Centigram's common stock by (a) each person known
by Centigram to be the beneficial owner of more than five percent (5%) of the
outstanding shares of Centigram common stock, (b) each executive officer, (c)
each director, and (d) all executive officers and directors as a group. As of
May 26, 2000, 6,150,869 shares of the Centigram's common stock were outstanding
(excluding the 900,000 treasury shares held in brokerage accounts controlled by
the Credit Bancorp receiver). Unless otherwise indicated, all persons named as
beneficial owners of common stock have sole
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voting power and sole investment power with respect to the shares indicated as
beneficially owned. Unless indicated otherwise, the address of each of these
persons is c/o Centigram Communications Corporation, 91 East Tasman Drive, San
Jose, California 95134.
<TABLE>
<CAPTION>
Name No. of Shares Owned Approximate Percentage Owned
---- ------------------- ----------------------------
<S> <C> <C>
Kopp Investment Advisors (1) 1,180,550 19.2%
7701 France Avenue South
Suite 500
Edina MN 55435
Dimensional Fund Advisers, Inc. (2) 626,000 10.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Robert L. Puette (3)(4) 257,258 4.2%
Thomas E. Brunton (4) (5) 73,992 1.2%
Robert M. Krueger (4) 104,375 1.7%
Thomas Rappath (4) 26,234 *
Janine Roth (4) 33,183 *
Chusak Siripocanont (4) 72,821 1.2%
James H. Boyle (4) 37,875 *
Doug Chance (4) 27,264 *
David S. Lee (4) 41,875 *
Dean O. Morton (4) (6) 57,792 *
All directors and executive officers 732,669 11.9%
as a group (10 persons) (4)
</TABLE>
* Less than one percent (1%)
(1) Based on Form 13G/A filed on April 10, 2000.
(2) Based on Form 13G/A filed on February 3, 2000.
(3) Includes 3,300 shares held by the Robert L. Puette and J.P. Puette as
co-trustees of the Puette 1997 Living Trust.
(4) Includes shares issuable upon exercise of stock options presently
exercisable within 60 days of May 26, 2000, as follows: Mr. Puette,
253,958; Mr. Brunton, 53,652 shares; Mr. Krueger, 140,375 shares; Mr.
Rappath, 24,167 shares; Ms. Roth, 29,792 shares; Mr. Siripocanont,
63,752 shares; Mr. Boyle, 36,875; Mr. Chance, 23,264 shares; Mr. Lee,
41,875 shares; Mr. Morton, 52,292 shares; and all directors and
executive officers as a group, 684,002 shares.
(5) Includes 100 shares held by Mr. Brunton's son as to which Mr. Brunton
disclaims beneficial ownership.
(6) Includes 3,000 shares issued in the name of the Dean O. and Laura
Morton Trust UTA DTD 9/20/78.
OTHER MATTERS
You should rely only on the information contained in this proxy
statement to vote your shares at the meeting. Centigram has not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement. This proxy statement is dated June [__], 2000. You
should not assume that the information contained in this proxy statement is
accurate as of any date other than that date, and the mailing of this document
to stockholders is not intended to create any implication to the contrary.
52
<PAGE> 59
In order to be considered for inclusion in the proxy statement for the
next annual meeting, if any, of stockholders of Centigram, any stockholder
proposal intended to be presented at the meeting must be received by Centigram
on or before October __, 2000. The annual meeting will be held only if the
merger is not consummated.
The Board of Directors does not intend to bring before the meeting any
matters other than those set forth herein, and has no present knowledge that any
other matters will or may be brought before the meeting by others. If, however,
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the proxies in accordance
with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
San Jose, California Thomas E. Brunton
June [__], 2000 Assistant Secretary
53
<PAGE> 60
Appendix A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
ADC TELECOMMUNICATIONS, INC.,
POUNDSTONE ACQUISITION CORP.
AND
CENTIGRAM COMMUNICATIONS CORPORATION
----------------
June 9, 2000
----------------
<PAGE> 61
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I THE MERGER..............................................................................................1
1.1. The Merger..............................................................................................1
1.2. Effect of Merger........................................................................................1
1.3. Effective Time..........................................................................................2
1.4. Certificate of Incorporation; Bylaws....................................................................2
1.5. Directors and Officers..................................................................................2
1.6. Taking of Necessary Action; Further Action..............................................................2
1.7. The Closing.............................................................................................2
ARTICLE II CONVERSION OF SECURITIES...............................................................................3
2.1. Conversion of Securities................................................................................3
2.2. Stock Options...........................................................................................5
2.3. Employee Stock Purchase Plan............................................................................7
2.4. Dissenting Shares.......................................................................................7
2.5. Exchange of Certificates................................................................................8
2.6. Escrow for Receivership Shares..........................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................11
3.1. Organization and Qualification.........................................................................11
3.2. Capital Stock of Subsidiaries..........................................................................12
3.3. Capitalization.........................................................................................12
3.4. Authority Relative to this Agreement...................................................................13
3.5. No Conflict; Required Filings and Consents.............................................................13
3.6. SEC Filings; Financial Statements......................................................................14
3.7. Absence of Changes or Events...........................................................................15
3.8. Absence of Certain Developments........................................................................16
3.9. Litigation.............................................................................................16
3.10. Title to Properties.................................................................................16
3.11. Certain Contracts...................................................................................16
3.12. Compliance with Law.................................................................................17
3.13. Intellectual Property Rights; Year 2000.............................................................18
3.14. Taxes...............................................................................................19
3.15. Employees...........................................................................................21
3.16. Employee Benefit Plans..............................................................................22
3.17. Environmental Matters...............................................................................25
3.18. Insurance...........................................................................................25
3.19. Anti-Bribery Compliance.............................................................................26
3.20. Export Control Laws.................................................................................26
3.21. Finders or Brokers..................................................................................26
3.22. Board Recommendation................................................................................26
3.23. Vote Required.......................................................................................26
3.24. Opinion of Financial Advisor........................................................................26
3.25. State Takeover Statutes; Rights Agreement...........................................................26
</TABLE>
i
<PAGE> 62
<TABLE>
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT...............................................27
4.1. Organization and Qualification.........................................................................27
4.2. Authority Relative to this Agreement...................................................................28
4.3. No Conflicts; Required Filings and Consents............................................................28
4.4. Funds..................................................................................................29
ARTICLE V COVENANTS AND AGREEMENTS...............................................................................29
5.1. Conduct of Business of the Company Pending the Merger..................................................29
5.2. Preparation of Proxy Statement.........................................................................32
5.3 Meeting of Stockholders................................................................................32
5.4. Additional Agreements, Cooperation.....................................................................33
5.5. Publicity..............................................................................................33
5.6. No Solicitation........................................................................................34
5.7. Access to Information..................................................................................35
5.8. Notification of Certain Matters........................................................................36
5.9. Resignation of Officers and Directors..................................................................36
5.10. Indemnification.....................................................................................36
5.11. Stockholder Litigation..............................................................................37
5.12. Employee Benefit Plans..............................................................................37
5.13. Determination of Optionholders......................................................................38
5.14. Preparation of Tax Returns..........................................................................39
5.15. SEC Filings; Compliance.............................................................................39
5.16. Rights Agreement....................................................................................39
5.17. Stock Repurchase Plan...............................................................................39
5.18 Release of Receivership Stock.......................................................................39
ARTICLE VI CONDITIONS TO CLOSING.................................................................................40
6.1. Conditions to Each Party's Obligation to Effect the Merger.............................................40
6.2. Conditions to Obligations of Parent....................................................................40
6.3. Conditions to Obligations of the Company...............................................................42
ARTICLE VII TERMINATION..........................................................................................43
7.1. Termination............................................................................................43
7.2. Effect of Termination..................................................................................44
7.3. Fees and Expenses......................................................................................44
ARTICLE VIII MISCELLANEOUS.......................................................................................46
8.1. Nonsurvival of Representations and Warranties..........................................................46
8.2. Waiver.................................................................................................46
8.3. Notices................................................................................................46
8.4. Counterparts...........................................................................................47
8.5. Interpretation.........................................................................................48
8.6. Amendment..............................................................................................48
8.7. No Third Party Beneficiaries...........................................................................48
8.8. Governing Law..........................................................................................48
8.9. Entire Agreement.......................................................................................48
8.10. Validity............................................................................................48
</TABLE>
ii
<PAGE> 63
EXHIBITS
EXHIBITS
A Certificate of Merger
B Escrow Agreement
iii
<PAGE> 64
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated June 9,
2000, is made and entered into by and among ADC Telecommunications, Inc., a
Minnesota corporation ("Parent"), Poundstone Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and Centigram
Communications Corporation, a Delaware corporation (the "Company"). Merger Sub
and the Company are sometimes collectively referred to as the "Constituent
Corporations."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the respective corporations and their stockholders that Merger Sub be merged
with and into the Company in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the terms of this Agreement, pursuant to
which the Company will be the surviving corporation and will be a wholly owned
subsidiary of Parent (the "Merger"); and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. At the Effective Time (as defined in Section 1.3
hereof), subject to the terms and conditions of this Agreement and the
Certificate of Merger (as defined in Section 1.3 hereof), Merger Sub shall be
merged with and into the Company, the separate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation. The Company,
in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2. Effect of Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, the Surviving Corporation shall succeed to and possess all the
properties, rights, privileges, immunities, powers, franchises and purposes, and
be subject to all the duties, liabilities, debts, obligations, restrictions and
disabilities, of the Constituent Corporations, all without further act or deed.
1
<PAGE> 65
1.3. Effective Time. Subject to the terms and conditions of this
Agreement, the parties hereto will cause a copy of the Certificate of Merger,
attached hereto as Exhibit A (the "Certificate of Merger") to be executed,
delivered and filed with the Secretary of State of the State of Delaware in
accordance with the applicable provisions of the DGCL at the time of the Closing
(as defined in Section 1.7 hereof). The Merger shall become effective upon
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, or at such later time as may be agreed to by the parties and set forth
in the Certificate of Merger. The time of effectiveness is herein referred to as
the "Effective Time." The day on which the Effective Time shall occur is herein
referred to as the "Effective Date."
1.4. Certificate of Incorporation; Bylaws. From and after the
Effective Time and until further amended in accordance with applicable law, the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation, as amended as set forth in an exhibit to the Certificate of Merger.
From and after the Effective Time and until further amended in accordance with
law, the Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation.
1.5. Directors and Officers. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Merger Sub immediately prior to the Effective Time, and the
officers of the Surviving Corporation shall be the persons who were the officers
of Merger Sub immediately prior to the Effective Time. Said directors and
officers of the Surviving Corporation shall hold office for the term specified
in, and subject to the provisions contained in, the Certificate of Incorporation
and the Bylaws of the Surviving Corporation and applicable law. If, at or after
the Effective Time, a vacancy shall exist on the Board of Directors or in any of
the offices of the Surviving Corporation, such vacancy shall be filled in the
manner provided in the Certificate of Incorporation and the Bylaws of the
Surviving Corporation.
1.6. Taking of Necessary Action; Further Action. Parent, Merger Sub
and the Company, respectively, shall each use its best efforts to take all such
action as may be necessary or appropriate to effectuate the Merger under the
DGCL at the time specified in Section 1.3 hereof. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges, immunities,
powers and franchises of either of the Constituent Corporations, the officers of
the Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
1.7. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Dorsey &
Whitney LLP, Pillsbury Center South, 220 South Sixth Street, Minneapolis,
Minnesota, within three business days after the date on which the last of the
conditions set forth in Article VI shall have been satisfied or waived, or at
such other place and on such other date as is mutually agreeable to Parent and
the Company (the "Closing Date"). The Closing will be effective as of the
Effective Time.
2
<PAGE> 66
ARTICLE II
CONVERSION OF SECURITIES
2.1. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the
Company, the holder of any shares of Company Common Stock (defined below) or the
holder of any options, warrants or other rights to acquire or receive shares of
Company Common Stock, the following shall occur:
(a) Conversion of Company Common Stock. At the Effective
Time, each share of common stock, par value $.001 per share, of the Company (the
"Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 2.1(b) hereof or any Dissenting Shares (as defined in
Section 2.4 hereof)) will be canceled and extinguished and be converted
automatically into the right to receive an amount of cash equal to the Per Share
Amount (as defined in Section 2.1(e)(i) hereof), without interest thereon, plus
the Escrow Per Share Amount (as defined in Section 2.6(d)(i) hereof), with
interest thereon as described in Section 2.6 hereof, upon surrender of the
certificate formerly representing such share.
(b) Cancellation of Company Common Stock Owned by Parent
or Company. At the Effective Time, all shares of Company Common Stock that are
owned by the Company as treasury stock and each share of Company Common Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent or
of Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof; provided, however, if: (i) any of
the 900,000 shares of Company Common Stock designated by the Company as its
treasury stock and currently in accounts in the name of Credit Bancorp Ltd.,
which accounts are under the control of the receiver appointed by the United
States District Court for the Southern District of New York to administer the
estate of Credit Bancorp Ltd. (the "Bancorp Receiver") as of the date hereof
(the "Receivership Stock") has not been returned to the Company or has been
ordered by a court of competent jurisdiction to be returned to the Bancorp
Receiver as of the Effective Time, or (ii) the period during which any party may
legally appeal (the "Appeal Period") the final order of a court having proper
and nonappealable jurisdiction (the "Final Order") approving that certain
Agreement dated June 7, 2000 (the "Settlement Agreement") between the Company
and the Bancorp Receiver remains open or if an appeal of the Final Order has
been filed and remains pending at the Effective Time, such shares of
Receivership Stock shall (x) be included as Diluted Shares (as defined in
Section 2.1(e)(ii) hereof) for purposes of calculating the Per Share Amount, and
(y) (if deemed outstanding) be converted automatically into the right to receive
an amount of cash equal to the Per Share Amount, without interest thereon;
provided, further, that the aggregate Per Share Amount payable with respect to
such shares of Receivership Stock (if deemed outstanding) shall be placed in
escrow and released in accordance with the provisions of Section 2.6 hereof.
(c) Company Stock Option Plans. At the Effective Time,
the Company's 1997 Stock Plan and the 1995 Nonstatutory Stock Option Plan and
the Amended and Restated
3
<PAGE> 67
1987 Incentive Stock Option Plan (collectively, the "Company Stock Option
Plans") and all options to purchase Company Common Stock then outstanding under
the Company Stock Option Plans or otherwise shall be assumed by Parent in
accordance with Section 2.2 hereof.
(d) Capital Stock of Merger Sub. At the Effective Time,
each share of common stock, $0.01 par value, of Merger Sub ("Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the Surviving
Corporation, and the Surviving Corporation shall be a wholly owned subsidiary of
Parent. Each stock certificate of Merger Sub evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(e) Definitions.
(i) Per Share Amount. The "Per Share Amount" shall be
equal to the quotient (rounded to the second decimal place) of (A)
$200,800,000 (the "Base Purchase Price") plus the aggregate exercise
price of all Company Options (as defined in Section 2.2(a) hereof)
outstanding immediately prior to the Effective Time plus the aggregate
exercise price of all Company Options that are exercised after the date
of this Agreement but prior to the Effective Time and the aggregate
amount received by the Company, if any, pursuant to the automatic
exercise of outstanding purchase options under the ESPP (as defined in
Section 2.3 hereof) immediately prior to the Effective Time pursuant to
Section 2.3 hereof divided by (B) the number of Diluted Shares. If all
shares of Receivership Stock are returned to the Company prior to the
Effective Time, the amount paid by the Company to cause such return,
minus the lesser of (x) $10,000,000 or (y) the amount paid to the
Bancorp Receiver plus the Company's out-of-pocket costs, including the
reasonable fees and expenses of legal counsel and other advisors,
incurred to obtain such return (including the resolution of any appeal
of the Final Order) (the amount referred to in either (x) or (y)
hereinafter referred to as the "Receiver Payment Credit") shall be
deducted from the Base Purchase Price prior to calculation of the Per
Share Amount, subject, however, to the second sentence of Section
2.6(b) hereof.
(ii) Diluted Shares. "Diluted Shares" shall mean that
number equal to the sum of (A) the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time
(regardless of whether such shares are unvested, subject to right of
repurchase, risk of forfeiture or other condition in favor of the
Company at such time) plus (B) the number of shares of Company Common
Stock issuable upon exercise of the Company Options outstanding at the
Effective Time (regardless of whether such Company Options are vested
or exercisable at such time), plus (C) the number of shares of Company
capital stock issuable in connection with any other options, warrants,
calls, rights exchangeable or convertible securities, commitments or
agreements of any character, written or oral, to which the Company is a
party or by which it is bound obligating the Company to issue, deliver,
sell or cause to be issued, delivered or sold any Company capital
stock, and which are outstanding immediately
4
<PAGE> 68
prior to the Effective Time, plus (D) if provided for by Section 2.1(b)
hereof, all shares of Receivership Stock.
2.2. Stock Options.
(a) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock under the Company Stock Option Plans or
otherwise (each, a "Company Option"), whether vested or unvested, shall be
assumed by Parent and converted into an option (each, a "Parent Option") to
acquire, on substantially the same terms and conditions, including but not
limited to any performance criteria set forth in the applicable stock option
agreements, as were applicable under such Company Option, the number of whole
shares of common stock, par value $.20 per share, of Parent ("Parent Common
Stock") equal to the number of shares of Company Common Stock that were issuable
upon exercise of such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio (as defined in Section 2.2(f)(i) hereof)
(rounded down to the nearest whole number of shares of Parent Common Stock), and
the per share exercise price of the shares of Parent Common Stock issuable upon
exercise of such Parent Option shall be equal to the exercise price per share of
Company Common Stock at which such Company Option was exercisable immediately
prior to the Effective Time divided by the Exchange Ratio (rounded to the
nearest whole cent). The Company shall not, and shall cause any Company Stock
Option Plan administrator (including, for this purpose, the Company's Board of
Directors or a committee thereof) not to, take any action prior to the Effective
Time that will extend the exercise period of any Company Option or cause the
vesting period of any Company Option to accelerate in lieu of assumption or
under any other circumstances, regardless of whether such circumstances are to
occur before or after the Effective Time, or otherwise amend the terms of
outstanding Company Options.
(b) Intentionally omitted.
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Parent Options and to file all documents required
to be filed to cause the shares of Parent Common Stock issuable upon exercise of
the Parent Options to be listed on the Nasdaq National Market. As soon as
practicable after the Effective Time, but no later than five business days after
the Effective Time, Parent shall file a registration statement with the U.S.
Securities and Exchange Commission (the "SEC") on Form S-8 (or any successor
form) or another appropriate form with respect to the Parent Common Stock
subject to such Parent Options, and shall use all commercially reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Parent Options remain
outstanding. As soon as practicable after the Effective Time, Parent shall
inform in writing the holders of Company Options of their rights pursuant to the
Company Stock Option Plans and the agreements evidencing the grants of such
Company Options shall continue in effect on substantially the same terms and
conditions (subject to the adjustments required by Section 2.2(a) hereof), after
giving effect to the Merger and the assumption by Parent of the Company Options
as set forth herein.
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<PAGE> 69
(d) In the case of any Company Option to which Section
421 of the Internal Revenue Code of 1986 (the "Code") applies by reason of
Section 422 of the Code ("Incentive Stock Options"), the option exercise price,
the number of shares of Parent Common Stock purchasable pursuant to such option
and the terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code.
(e) Parent will make good faith efforts to ensure, to the
extent permitted by the Code and to the extent required by and subject to the
terms of any such Incentive Stock Options, that Company Options which qualified
as Incentive Stock Options prior to the Closing Date continue to qualify as
Incentive Stock Options of Parent after the Closing. Parent makes no
representation regarding the qualification of such Company Options as Incentive
Stock Options. Parent gives no guarantee or assurances of any particular result
with respect to Taxes (as defined in Section 3.14 hereof) for any holder of
Company Options.
(f) Definitions
(i) Exchange Ratio. The "Exchange Ratio" shall be equal
to the quotient (rounded to the fourth decimal place) of the Per Share
Amount divided by the Average Closing Price.
(ii) Average Closing Price. The "Average Closing Price"
shall be determined by dividing the Total Weighted Trading Price by the
Total Parent Trading Volume.
(iii) Total Weighted Trading Price. The "Total Weighted
Trading Price" shall be the sum of the Weighted Trading Prices for the
period of the ten (10) trading days ending on the close of the third
trading day immediately preceding the Effective Time (the "Measurement
Period").
(iv) Weighted Trading Price. The "Weighted Trading Price"
for any trading day shall be (A) the total trading volume of Parent
Common Stock on the Nasdaq National Market as reported in the U.S.
Midwest edition of the Wall Street Journal for such trading day
multiplied by (B) the closing price of one share of Parent Common Stock
on the Nasdaq National Market as reported in the U.S. Midwest edition
of the Wall Street Journal for such trading day.
(v) Total Parent Trading Volume. The "Total Parent
Trading Volume" shall be the sum of the daily trading volumes of Parent
Common Stock for each trading day during the Measurement Period as
reported in the U.S. Midwest edition of the Wall Street Journal.
2.3. Employee Stock Purchase Plan. The parties acknowledge that the
Company's 1991 Employee Stock Purchase Plan (the "ESPP") shall continue to
operate in accordance with its terms following the execution of this Agreement,
except as provided below. Effective as of ten days prior to the Effective Time,
the Company shall shorten the Offering Period (as defined in the ESPP) then in
progress by setting a New Exercise Date (as defined in the ESPP) one
6
<PAGE> 70
business day prior to the Effective Time and shall cause each outstanding
purchase option to be automatically exercised on such New Exercise Date in
accordance with Section 18 of the ESPP, the Company shall cause the ESPP to
terminate, and no purchase rights shall be subsequently granted or exercised
under the ESPP. The Company shall take all actions necessary to ensure that the
ESPP will not be amended or modified in any respect after the date hereof,
except to effect the terms of this Section 2.3.
2.4. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have not voted such shares in favor of the Merger, who shall have delivered,
prior to any vote on the Merger, a written demand for appraisal of such shares
in the manner provided in Section 262 of the DGCL and who, as of the Effective
Time, shall not have effectively withdrawn or lost such right to dissenters'
rights ("Dissenting Shares") shall not be converted into or represent a right to
receive the Per Share Amount and the Escrow Per Share Amount pursuant to Section
2.1 hereof, but the holders thereof shall be entitled only to such rights as are
granted by Section 262 of the DGCL. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to Section 262 of the DGCL shall
receive payment therefor from the Surviving Corporation in accordance with the
DGCL; provided, however, that if any such holder of Dissenting Shares shall have
effectively withdrawn such holder's demand for appraisal of such shares or lost
such holder's right to appraisal and payment of such shares under Section 262 of
the DGCL, such holder or holders (as the case may be) shall forfeit the right to
appraisal of such shares and each such share shall thereupon be deemed to have
been canceled, extinguished and converted, as of the Effective Time, into and
represent the right to receive payment from the Surviving Corporation of the Per
Share Amount and the Escrow Per Share Amount, as provided in Section 2.1 hereof.
(b) The Company shall give Parent (i) prompt notice of
any written demand for appraisal, any withdrawal of a demand for appraisal and
any other instrument served pursuant to Section 262 of the DGCL received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under such Section 262 of the DGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demand for appraisal or offer to settle or settle
any such demand.
2.5. Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate a
commercial bank, trust company or other financial institution, which may include
Parent's stock transfer agent, to act as disbursement agent ("Disbursement
Agent") in the Merger.
(b) Promptly after the Effective Time, Parent shall make
available to the Disbursement Agent for exchange in accordance with this Article
II, cash in an amount sufficient to permit payment of the aggregate Per Share
Amount pursuant to Section 2.1 hereof (the
7
<PAGE> 71
"Exchange Fund"), except for any amount to be placed in escrow in accordance
with Section 2.6 hereof.
(c) Promptly, and in any event no later than five
business days after the Effective Time, the Parent shall cause to be mailed to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
(the "Certificates") (i) a letter of transmittal (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 Disbursement Agent,
and shall be in such form and have such other provisions as Parent may
reasonably specify and which shall be reasonably acceptable to the Company) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Per Share Amount and the Escrow Per Share Amount. Upon
surrender of a Certificate for cancellation to the Disbursement Agent, together
with such letter of transmittal, duly completed and validly executed, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange a check
representing the Per Share Amount in accordance with Section 2.1 hereof and a
right to receive any Escrow Per Share Amount in accordance with Section 2.6
hereof to which such holder is entitled pursuant to Section 2.1, and the
Certificate so surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 2.5, each Certificate that, prior to the Effective
Time, represented shares of Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes, to evidence the right to receive
the Per Share Amount and the Escrow Per Share Amount, if any, multiplied by the
number of shares of Company Common Stock such certificate represented.
Notwithstanding the foregoing, so long as the Settlement Agreement has not been
fully consummated and has not been held void or unenforceable pursuant to a
final, nonappealable judgment of a court of competent jurisdiction, the
Disbursement Agent shall not make any payment of the Per Share Amount and the
Escrow Agent shall not make any payment of the Escrow Per Share Amount to any
person presenting any Certificate evidencing shares of Receivership Stock,
unless a court having proper jurisdiction shall have determined, pursuant to a
final, nonappealable judgment, that such shares of Receivership Stock are
outstanding and held of record by the person making such presentation, in which
case the Escrow Agent shall release to the Disbursement Agent funds sufficient
to pay the Per Share Amount to such person applicable to such shares, provided,
however that, if the person presenting such Certificate is the Bancorp Receiver
and, at the time of such presentation, the Settlement Agreement has not been
held void or unenforceable pursuant to a final, nonappealable judgment of a
court of competent jurisdiction, the terms of the Settlement Agreement shall
govern the disposition of the shares of Receivership Stock represented by such
Certificate.
(d) None of Parent, the Surviving Corporation or the
Disbursement Agent shall be liable to any holder of shares of Company Common
Stock for any amount properly delivered to a public official in compliance with
any abandoned property, escheat or similar law.
(e) At the Effective Time, the stock transfer books of
the Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company, except in favor of the Company. From and after the Effective Time, the
holders of certificates representing shares of Company Common Stock
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outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Company Common Stock except as otherwise
provided in this Agreement or by law.
(f) Subject to any applicable escheat or similar laws,
any portion of the Exchange Fund that remains unclaimed by the former
stockholders of the Company for one year after the Effective Time shall be
delivered by the Disbursement Agent to Parent, upon demand of Parent, and any
former stockholders of the Company shall thereafter look only to Parent for
satisfaction of their claim for cash in exchange for their shares of Company
Common Stock pursuant to the terms of Section 2.1 hereof.
(g) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact, in form and substance
acceptable to the Disbursement Agent, by the person claiming such Certificate to
be lost, stolen or destroyed, and complying with such other conditions as the
Disbursement Agent may reasonably impose (including the execution of an
indemnification undertaking or the posting of an indemnity bond or other surety
in favor of the Disbursement Agent and Parent with respect to the Certificate
alleged to be lost, stolen or destroyed), the Disbursement Agent will deliver to
such as may be required pursuant to Section 2.1 hereof.
2.6. Escrow for Receivership Shares.
(a) If (i) any shares of Receivership Stock have not been
returned to the Company or have been ordered by a court of competent
jurisdiction to be returned to the Bancorp Receiver as of the Effective Time or
(ii) the Appeal Period remains open or an appeal of the Final Order has been
filed and remains pending at the Effective Time, Parent shall deposit in an
escrow account with Norwest Bank Minnesota, N.A. (the "Escrow Agent"), the
aggregate Per Share Amount payable with respect to such shares of Receivership
Stock pursuant to Section 2.1(b) hereof (the "Escrow Deposit"), to be held by
the Escrow Agent in accordance with the terms of the escrow agreement attached
hereto as Exhibit B. Any interest earned on the Escrow Deposit shall be paid in
accordance with this Section 2.6, after first deducting any fees of the Escrow
Agent from such interest amount.
(b) At such time as all shares of Receivership Stock are
returned to the Surviving Corporation, the Appeal Period has terminated and all
pending appeals, if any, have been resolved, the amount paid after the Effective
Time by Parent, the Surviving Corporation or an affiliate thereof plus Parent or
the Surviving Corporation's out-of-pocket costs, including the reasonable fees
and expenses of legal counsel and other advisors, incurred to cause such return
(including the resolution of any appeal) shall be deducted from the Escrow
Deposit and, together with the interest earned on such amount while held by the
Escrow Agent, paid to Parent. The parties further agree that if, upon final
resolution of all available methods of appeal by any party, the Settlement
Agreement is found to be void or unenforceable and each of the Bancorp Receiver
and Credit Bancorp Ltd. is unable or unwilling to repay or give full credit to
Parent or the Surviving Corporation for the amount previously paid to the
Bancorp Receiver to obtain the return of the Receivership Stock, then the lesser
of the Receiver Payment Credit and the amount
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not repaid or credited to Parent or the Surviving Corporation shall be deducted
from the Escrow Deposit and paid to Parent. Any portion of the Escrow Deposit
remaining after such payments to Parent (the "Escrow Remainder") shall be
distributed as follows:
(i) Company Stockholders. Each former holder of Company
Common Stock that received the Per Share Amount pursuant to Section
2.1(a) hereof shall be entitled to receive an amount of cash equal to
the Escrow Per Share Amount (as defined in Section 2.6(d)(i) hereof),
with the interest earned thereon while held by the Escrow Agent (the
aggregate amount of cash payable to such former holders of Company
Common Stock is referred to herein as the "Additional Stockholder
Payment").
(ii) Company Optionholders. Each former holder of Company
Options who received Parent Options pursuant to Section 2.2 hereof
shall be notified by Parent that each such Parent Option has been
amended to reflect the following: (A) the number of whole shares of
Parent Common Stock issuable thereunder shall be equal to the number of
shares of Company Common Stock that were issuable upon exercise of such
Company Option immediately prior to the Effective Time multiplied by
the Escrow Exchange Ratio (as defined in Section 2.6(d)(ii) hereof)
(rounded down to the nearest whole number of shares of Parent Common
Stock), and (B) the per share exercise price of the shares of Parent
Common Stock issuable upon exercise of such Parent Option shall be
equal to the exercise price per share of Company Common Stock at which
such Company Option was exercisable immediately prior to the Effective
Time divided by the Escrow Exchange Ratio (rounded to the nearest whole
cent). The cash portion of the Escrow Remainder equal to the difference
between the Escrow Remainder and the Additional Stockholder Payment
shall be released to Parent.
(c) The Escrow Agent shall be entitled to rely on the
letters of transmittal received by the Disbursement Agent for purposes of
distributing the Escrow Per Share Amount and the interest thereon.
(d) Definitions.
(i) Escrow Per Share Amount. The "Escrow Per Share
Amount" shall be equal to the quotient (rounded to the second decimal
place) of (A) the Escrow Remainder divided by (B) the number of Diluted
Shares (excluding the Receivership Stock).
(ii) Escrow Exchange Ratio. The "Escrow Exchange Ratio"
shall be equal to the quotient (rounded to the fourth decimal place) of
(A) the sum of the Per Share Amount plus the Escrow Per Share Amount
divided by (B) the Average Closing Price.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Sub and Parent that the
statements contained in this Article III are true and correct, except as set
forth in the letter delivered by the Company to Merger Sub on the date hereof
(the "Company Disclosure Letter") (which Company Disclosure Letter sets forth
the exceptions to the representations and warranties contained in this Article
III under captions referencing the Sections to which such exceptions apply):
3.1. Organization and Qualification. Each of the Company and its
Subsidiaries (as defined below) is a company (or similar entity with corporate
characteristics including limited liability of stockholders or other owners)
duly organized, validly existing, duly registered and, if applicable, in good
standing under the laws of the jurisdiction of its organization and each such
entity has all requisite corporate (or similar) power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified or
licensed to carry on its business as it is now being conducted, and is qualified
to conduct business, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified that would not, individually
or in the aggregate, have, or would not reasonably be expected to have, a
Company Material Adverse Effect (as defined below). Neither the Company nor any
of its Subsidiaries is in violation of any of the provisions of its Certificate
of Incorporation or other applicable charter document (any such document of any
business entity hereinafter referred to as its "Charter Document") or its
Bylaws, or other applicable governing document (any such documents of any
business entity hereinafter referred to as its "Governing Document"). The
Company has made available to Parent accurate and complete copies of the
respective Charter Documents and Governing Documents, as currently in effect, of
each of the Company and its Subsidiaries. As used in this Agreement, the term
"Company Material Adverse Effect" means any change, effect, event or condition
that (i) has a material adverse effect on the assets, business, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole (other than any such change, effect, event or condition that arises from
changes in general economic conditions or conditions affecting the Company's
industry generally, or such changes, effects, events or conditions resulting
from the consummation of the transactions contemplated hereby; provided,
however, that the termination of contracts requiring third party consent or
approval because of the consummation of the transactions contemplated hereby the
loss of which would otherwise have a material adverse effect on the assets,
business, results of operations or financial condition of the Company shall not
be excluded from this definition), or (ii) would prevent or materially delay the
Company's ability to consummate the transactions contemplated hereby. As used in
this Agreement, the term "Subsidiary" when used with respect to any party means
any corporation or other organization, whether incorporated or unincorporated,
of which such party directly or indirectly owns or controls at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions.
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3.2. Capital Stock of Subsidiaries. Neither the Company nor any of
its Subsidiaries owns, controls or holds with the power to vote, directly or
indirectly, of record, beneficially or otherwise, any share capital, capital
stock or any equity or ownership interest in any company, corporation,
partnership, association, joint venture, business, trust or other entity, except
for the Subsidiaries described in the Company SEC Reports (as defined in Section
3.6(a) hereof) or listed in Section 3.2 of the Company Disclosure Letter, and
except for ownership of securities in any publicly traded company held for
investment by the Company or any of its Subsidiaries and comprising less than
five percent of the outstanding stock of such company. Except as set forth in
Section 3.2 of the Company Disclosure Letter, the Company is directly or
indirectly the registered, record and beneficial owner of all of the outstanding
share capital or shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of each of its
Subsidiaries, there are no proxies with respect to such shares, and no equity
securities of any of such Subsidiaries are or may be required to be issued by
reason of any options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, share capital or shares of any capital
stock of any such Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which the Company or any such Subsidiary is
bound to issue, transfer or sell any share capital or shares of such capital
stock or securities convertible into or exchangeable for such shares. Other than
as set forth in Section 3.2 of the Company Disclosure Letter, all of such shares
so owned by the Company are validly issued, fully paid and nonassessable and are
owned by it free and clear of any claim, lien, pledge, security interest or
other encumbrance of any kind (collectively "Liens") with respect thereto.
3.3. Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, $.001 par value per share (the "Company Preferred Stock"). As
of the close of business on May 26, 2000 (the "Company Measurement Date"), (a)
6,150,869 shares of Company Common Stock were issued and outstanding, (b) no
shares of Company Preferred Stock were issued and outstanding, (c) the Company
had 1,020,056 shares of Company Common Stock held in its treasury, (d) 3,407,000
shares of Company Common Stock were reserved for issuance under the Company
Stock Option Plans and the ESPP, (e) Company Options to purchase 2,268,975
shares of Company Common Stock in the aggregate had been granted and remained
outstanding under the Company Stock Option Plans or otherwise, (f) no warrants
to purchase shares of Company Common Stock were outstanding and (g) except for
the Company Options, rights to the issuance of 26,227 shares of Company Common
Stock in the aggregate under the ESPP and rights to purchase shares of Series A
Participating Preferred Stock pursuant to the Company Rights Agreement (defined
in Section 3.25 hereof), there were no outstanding Rights (defined below). Since
the Company Measurement Date, no additional shares in the Company have been
issued, except pursuant to the exercise of Company Options outstanding at the
Measurement Date and the ESPP, and no Rights have been granted. Except as
described in the preceding sentence or as set forth in Section 3.3 of the
Company Disclosure Letter, the Company has no outstanding bonds, debentures,
notes or other securities or obligations the holders of which have the right to
vote or which are convertible into or exercisable for securities having the
right to vote on any matter on which any stockholder of the Company has a right
to vote. All issued and outstanding
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shares of Company Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section 3.3
of the Company Disclosure Letter, there are not as of the date hereof any
existing options, warrants, stock appreciation rights, stock issuance rights,
calls, subscriptions, convertible securities or other rights which obligate the
Company or any of its Subsidiaries to issue, exchange, transfer or sell any
shares in the capital of the Company or any of its Subsidiaries, other than
rights to purchase shares of Series A Participating Preferred Stock pursuant to
the Company Rights Agreement, Company Common Stock issuable under the Company
Stock Option Plans and the ESPP, or awards granted pursuant thereto
(collectively, "Rights"). As of the date hereof, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
reprice, redeem or otherwise acquire any shares of the capital of the Company or
any of its Subsidiaries. As of the date hereof, there are no outstanding
contractual obligations of the Company to vote or to dispose of any shares in
the capital of any of its Subsidiaries.
3.4. Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to execute and deliver, and perform its
obligations under, this Agreement and, subject to obtaining the necessary
approval of its stockholders, to consummate the Merger and the other
transactions contemplated hereby under applicable law. The execution and
delivery of this Agreement and the consummation of the Merger and other
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
Merger or other transactions contemplated hereby (other than approval by the
Company's stockholders required by applicable law). This Agreement has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Parent and Merger Sub,
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors
rights generally or by general equitable principles.
3.5. No Conflict; Required Filings and Consents.
(a) Assuming that all filings, permits, authorizations,
consents and approvals or waivers thereof have been duly made or obtained as
contemplated by Section 3.5(b) hereof, neither the execution and delivery of
this Agreement by the Company nor the consummation of the Merger or other
transactions contemplated hereby nor compliance by the Company with any of the
provisions hereof will (i) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
or suspension of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of (x) their
respective Charter Documents or Governing Documents, (y) any note, bond, charge,
lien, pledge, mortgage, indenture or deed of trust to which the Company or any
such Subsidiary is a party or to which they or any of their respective
properties or assets may be subject, or (z) any license, lease, agreement or
other
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instrument or obligation to which the Company or any such Subsidiary is a party
or to which they or any of their respective properties or assets may be subject,
or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries or any
of their respective properties or assets, except, in the case of clauses (i) (y)
and (z) and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, suspensions, accelerations, rights of termination or acceleration
or creations of liens, security interests, charges or encumbrances which would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(b) No filing or registration with or notification to and
no permit, authorization, consent or approval of any court, commission,
governmental body, regulatory authority, agency or tribunal wherever located (a
"Governmental Entity") is required to be obtained, made or given by the Company
in connection with the execution and delivery of this Agreement or the
consummation by the Company of the Merger or other transactions contemplated
hereby except (i) (A) the filing of the Certificate of Merger as provided in
Section 1.3 hereof, (B) in connection with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (C) the filing of the Proxy Statement (as defined in Section 5.2 hereof)
and such reports under Sections 13(a), 13(d), 15(d) or 16(a) with the SEC in
accordance with the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"), as may be required
in connection with this Agreement and the transactions contemplated hereby, or
(D) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws and the laws of any country other than the United States, or (ii) where the
failure to obtain any such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, schedules,
statements and other documents required to be filed by it since January 1, 1997
to the date hereof (collectively, as supplemented and amended since the time of
filing, the "Company SEC Reports") with the SEC. The Company SEC Reports (i)
were prepared in all material respects with all applicable requirements of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), and the Exchange Act, as the case may be and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The representation in
clause (ii) of the preceding sentence does not apply to any misstatement or
omission in any Company SEC Report filed prior to the date of this Agreement
which was superseded by a subsequent Company SEC Report filed prior to the date
of this Agreement. No Subsidiary of the Company is required to file any report,
form or other document with the SEC.
(b) The audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company and its
Subsidiaries included or incorporated by
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reference in such Company SEC Reports (collectively, the "Financial Statements")
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be otherwise indicated in the notes thereto) and present fairly,
in all material respects, the financial position and results of operations and
cash flows of the Company and its Subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated (except, in the case
of all such financial statements that are interim financial statements, for
footnotes and normal year-end adjustments).
(c) Neither the Company nor any of its Subsidiaries has
any liabilities or obligations of any nature, whether absolute, accrued,
unmatured, contingent or otherwise whether due or to become due, known or
unknown, or any unsatisfied judgments or any leases of personalty or realty or
unusual or extraordinary commitments that are required to be disclosed under
United States generally accepted accounting principles, except (i) as set forth
in the Company SEC Reports or in Section 3.6(c) of the Company Disclosure
Letter, (ii) the liabilities recorded on the Company's consolidated balance
sheet at January 29, 2000 (the "Balance Sheet") included in the financial
statements referred in Section 3.6(a) hereof and the notes thereto, (iii)
liabilities or obligations incurred since January 29, 2000 (whether or not
incurred in the ordinary course of business and consistent with past practice)
that would not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect, or (iv) liabilities that would not be
required by United States generally accepted accounting principles to be
disclosed in financial statements or in the notes thereto and that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.7. Absence of Changes or Events. Except as set forth in Section
3.7 of the Company Disclosure Letter or in the Company SEC Reports, since
January 29, 2000 through the date of this Agreement, the Company and its
Subsidiaries have not incurred any liability or obligation that has resulted or
would reasonably be expected to result in a Company Material Adverse Effect, and
there has not been any change in the business, financial condition or results of
operations of the Company or any of its Subsidiaries which has had, or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and the Company and its Subsidiaries have conducted
their respective businesses in the ordinary course consistent with their past
practices.
3.8. Absence of Certain Developments. Except as disclosed in the
Company SEC Reports or as set forth in Section 3.8 of the Company Disclosure
Letter, since January 29, 2000, the Company has not taken any of the actions set
forth in Section 5.1 hereof.
3.9. Litigation. Except as disclosed in the Company SEC Reports or
as set forth in Section 3.9 of the Company Disclosure Letter, there is no (a)
claim, action, suit or proceeding pending or, to the Knowledge of the Company or
any of its Subsidiaries, threatened against or relating to the Company or any of
its Subsidiaries before any Governmental Entity, or (b) outstanding judgment,
order, writ, injunction or decree (collectively, "Orders"), or application,
request or motion therefor, of any Governmental Entity in a proceeding to which
the Company, any Subsidiary of the Company or any of their respective assets was
or is a party
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except actions, suits, proceedings or Orders that, individually or in the
aggregate, has not had or would not reasonably be expected to have a Company
Material Adverse Effect, and neither the Company nor any Subsidiary is in
default in any material respect with respect to any such Order.
3.10. Title to Properties. Neither the Company nor any of its
Subsidiaries owns any real property. The Company has heretofore made available
to Parent correct and complete copies of all leases, subleases and other
agreements (collectively, the "Real Property Leases") under which the Company or
any of its Subsidiaries uses or occupies or has the right to use or occupy, now
or in the future, any real property or facility (the "Leased Real Property"),
including without limitation all modifications, amendments and supplements
thereto. Except in each case where the failure would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect or
except as otherwise set forth in Section 3.10 of the Company Disclosure Letter,
(i) the Company or one of its Subsidiaries has a valid leasehold interest in
each parcel of Leased Real Property free and clear of all Liens except liens of
record and each Real Property Lease is in full force and effect, (ii) all rent
and other sums and charges due and payable by the Company or its Subsidiaries as
tenants thereunder are current in all material respects, (iii) no termination
event or condition or uncured default of a material nature on the part of the
Company or any such Subsidiary or, to the Knowledge of the Company or any such
Subsidiary, the landlord, exists under any Real Property Lease, (iv) the Company
or one of its Subsidiaries is in actual possession of each Leased Real Property
and is entitled to quiet enjoyment thereof in accordance with the terms of the
applicable Real Property Lease and applicable law, and (v) the Company and its
Subsidiaries own outright all of the property (except for leased property or
assets for which it has a valid and enforceable right to use) which is reflected
on the Balance Sheet, except for property since sold or otherwise disposed of in
the ordinary course of business and consistent with past practice and except for
liens of record. The plant, property and equipment of the Company and its
Subsidiaries that are used in the operations of their businesses are in good
operating condition and repair, subject to ordinary wear and tear, and, subject
to normal maintenance, are available for use.
3.11. Certain Contracts. Neither the Company nor any of its
Subsidiaries has breached, or received in writing any claim or notice that it
has breached, any of the terms or conditions of (i) any agreement, contract or
commitment required to be filed as an exhibit to the Company SEC Reports
(including any agreements, contracts or commitments entered into since January
29, 2000 that will be required to be filed by the Company with the SEC in any
report), (ii) any agreements, contracts or commitments with manufacturers,
suppliers, sales representatives, distributors, OEM strategic partners or
customers of the Company pursuant to which the Company recognized revenues or
payments in excess of $500,000 for the twelve-month period ended October 30,
1999, or (iii) any agreements, contracts or commitments containing covenants
that limit the ability of the Company or any of its Subsidiaries to compete in
any line of business or with any Person (as defined in Section 8.5 hereof), or
that include any exclusivity provision or involve any restriction on the
geographic area in which the Company or any of its Subsidiaries may carry on its
business (collectively, "Company Material Contracts"), in such a manner as,
individually or in the aggregate, has had or would reasonably be expected to
have a Company Material Adverse Effect. Section 3.11 of the Company Disclosure
Letter lists each Company Material Contract described in clauses (ii) and (iii)
of the preceding sentence. Each Company
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Material Contract that has not expired by its terms is in full force and effect
and is the legal, valid and binding obligation of the Company and/or its
Subsidiaries, enforceable against them in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), except where the
failure of such Company Material Contract to be in full force and effect or to
be legal, valid, binding or enforceable against the Company and/or its
Subsidiaries has not had and would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 3.11 of the Company Disclosure Letter, no consent, approval,
waiver or authorization of, or notice to any Person is needed in order that each
such Company Material Contract shall continue in full force and effect in
accordance with its terms without penalty, acceleration or rights of early
termination by reason of the consummation of the Merger and the other
transactions contemplated by this Agreement.
3.12. Compliance with Law. Except as disclosed in Section 3.12 of
the Company Disclosure Letter, all activities of the Company and its
Subsidiaries have been, and are currently being, conducted in compliance in all
material respects with all applicable United States federal, state, provincial
and local and other foreign laws, ordinances, regulations, interpretations,
judgments, decrees, injunctions, permits, licenses, certificates, governmental
requirements, Orders and other similar items of any court or other Governmental
Entity or any nongovernmental self-regulatory agency, and no notice has been
received by the Company or any Subsidiary of any claims filed against the
Company or any Subsidiary alleging a violation of any such laws, regulations or
other requirements which would be required to be disclosed in any Company SEC
Report or any New SEC Report (as defined in Section 5.15 hereof). The Company
Stock Option Plans and the ESPP have been duly authorized, approved and operated
in compliance in all material respects with all applicable securities, corporate
and other laws of each jurisdiction in which participants of such plans are
located. The Company and its Subsidiaries have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted (including, but not limited to, permits issued under or
pursuant to the Communications Act or the rules or regulations of the Federal
Communications Commission), except for such permits, licenses and franchises the
absence of which has not had and would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
3.13. Intellectual Property Rights; Year 2000.
(a) The Company and its Subsidiaries own, or are validly
licensed or otherwise possess legally enforceable and, except for limitations
arising under a license or similar agreement governing the Company's or a
Subsidiary's rights therein, unencumbered rights to use, all patents,
trademarks, trade names, service marks, domain names and copyrights, any
applications for and registrations of such patents, trademarks, trade names,
service marks, domain names and copyrights, and all database rights, net lists,
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of the
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Company and its Subsidiaries as currently conducted, or necessary with respect
to the production, marketing and/or sale of products currently under development
by the Company, except for such rights the absence of which would not be
reasonably expected to have a Company Material Adverse Effect (the "Company
Intellectual Property Rights"). The Company and its Subsidiaries have taken all
action reasonably necessary to protect the Company Intellectual Property Rights
which is customary in the industry, including without limitation, use of
reasonable secrecy measures to protect the trade secrets included in the Company
Intellectual Property Rights.
(b) The execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not result in the
breach of, or create on behalf of any third party the right to terminate or
modify, any license, sublicense or other agreement relating to the Company
Intellectual Property Rights, or any material licenses, sublicenses or other
agreements as to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any third party patents, trademarks, copyrights or trade secrets ("Company Third
Party Intellectual Property Rights"), including software that is used in the
manufacture of, incorporated in, or forms a part of any product sold by or
expected to be sold by the Company or any of its Subsidiaries, the breach of
which would, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect. The Company Disclosure Letter, under the
caption referencing this Section 3.13, lists all royalties, license fees,
sublicense fees or similar obligations involving aggregate annual payments by
the Company or any Subsidiary in excess of $25,000 for any Company Third Party
Intellectual Property Rights that are used in the manufacture of, incorporated
in, or forms a part of any product sold by or expected to be sold by the Company
or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks,
domain names and copyrights which are held by the Company or any of its
Subsidiaries, the loss or invalidity of which would reasonably be expected to
cause a Company Material Adverse Effect, are valid and subsisting. The Company
(i) has not, since January 1, 1997, been sued in any suit, action or proceeding,
or received in writing any claim or notice, which involves a claim of
infringement or misappropriation of any patents, trademarks, service marks,
domain names, copyrights or violation of any trade secret or other proprietary
right of any third party (nor are there any suits, actions or proceedings that
arose prior to such date that remain outstanding and unresolved); and (ii) has
no Knowledge that the manufacturing, marketing, licensing or sale of its
products or services infringe upon, misappropriate or otherwise come into
conflict with any patent, trademark, service mark, copyright, trade secret or
other proprietary right of any third party, which infringement, misappropriation
or conflict in the cases of clause (i) and (ii) would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect. To
the Knowledge of the Company, no other Person has interfered with, infringed
upon, or otherwise come into conflict with any Company Intellectual Property
Rights or other proprietary information of the Company or any of its
Subsidiaries which has or would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(d) Each employee, agent, consultant or contractor who
has materially contributed to or participated in the creation or development of
any copyrightable, patentable or
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trade secret material on behalf of the Company, any of its Subsidiaries or any
predecessor in interest thereto either: (i) is a party to an agreement under
which the Company or such Subsidiary is deemed to be the original owner/author
of all property rights therein; or (ii) has executed an assignment or an
agreement to assign in favor of the Company, such Subsidiary or such predecessor
in interest, as applicable, all right, title and interest in such material.
(e) The Company and its Subsidiaries have experienced no
material disruption or interruption of their business or operations as a result
of or related to any of their information systems, data processing and other
hardware, software and other systems, facilities, programs and procedures used
or sold by the Company or any of its Subsidiaries (collectively, "Information
Systems") failing to be Y2K Compliant. "Y2K Compliant" means, with respect to
any Information System, that such Information System (i) handles date
information involving any and all dates before, during and/or after January 1,
2000, including accepting input, providing output and performing date
calculations in whole or in part; (ii) operates accurately without interruption
on and in respect of any and all dates before, during and/or after January 1,
2000 and without any change in performance; (iii) responds to and processes
two-digit year input without creating any ambiguity as to the century; and (iv)
stores and provides date input information without creating any ambiguity as to
the century, in each case without utilizing bridges, gateways and the like while
still preserving the level of functionality, usability, reliability, efficiency,
performance and accessibility of such data and associated programs as existed
prior to any modification to such Information System and its constituent
elements to make the same Y2K Compliant.
3.14. Taxes.
(a) "Tax" or "Taxes" shall mean all United States
federal, state, provincial, local or foreign taxes and any other applicable
duties, levies, fees, charges and assessments that are in the nature of a tax,
including income, gross receipts, property, sales, use, license, excise,
franchise, ad valorem, value-added, transfer, social security payments, and
health taxes and any deductibles relating to wages, salaries and benefits and
payments to subcontractors for any jurisdiction in which the Company or any of
its Subsidiaries does business (to the extent required under applicable Tax
law), together with all interest, penalties and additions imposed with respect
to such amounts.
(b) Except as set forth in Section 3.14 of the Company
Disclosure Letter or as could not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect:
(i) the Company and its Subsidiaries have
prepared and timely filed with the appropriate governmental agencies
all franchise, income and all other material Tax returns and reports
required to be filed on or before the Effective Time (collectively
"Returns"), taking into account any extension of time to file granted
to or obtained on behalf of the Company and/or its Subsidiaries;
(ii) all Taxes of the Company and its
Subsidiaries shown on such Returns or otherwise known by the Company to
be due or payable for any period ending
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on, ending on and including, or ending prior to the Effective Time,
have been timely paid in full to the proper authorities, other than
such Taxes as are being contested in good faith by appropriate
proceedings or which are adequately reserved for in accordance with
generally accepted accounting principles and reflected, in a manner
consistent with past practice, on the Company's books as an accrued Tax
liability, either current or deferred;
(iii) all deficiencies resulting from Tax
examinations of income, sales and franchise and all other material
Returns filed by the Company and its Subsidiaries in any jurisdiction
in which such Returns are required to be so filed have either been paid
or are being contested in good faith by appropriate proceedings;
(iv) no deficiency has been asserted against the
Company or any of its Subsidiaries which has not been satisfied or
otherwise resolved, and no examination of the Company or any of its
Subsidiaries is pending or, to the Knowledge of the Company, threatened
for any material amount of Tax by any taxing authority;
(v) no extension of the period for assessment or
collection of any material Tax is currently in effect and no extension
of time within which to file any material Return has been requested,
which Return has not since been filed;
(vi) all Returns filed by the Company and its
Subsidiaries are correct and complete or adequate reserves have been
established with respect to any additional Taxes that may be due (or
may become due) as a result of such Returns not being correct or
complete;
(vii) to the Knowledge of the Company, no Tax
liens have been filed with respect to any Taxes;
(viii) neither the Company nor any of its
Subsidiaries have made, and none will make, any voluntary adjustment by
reason of a change in their accounting methods for any pre-Merger
period;
(ix) the Company and its Subsidiaries have made
timely payments of the Taxes required to be deducted and withheld from
the wages paid to their employees;
(x) the Company and its Subsidiaries are not
parties to any Tax sharing or Tax matters agreement;
(xi) to the Knowledge of the Company, neither the
Company nor any of its Subsidiaries is liable to suffer any recapture,
clawback or withdrawal of any relief or exemption from Tax howsoever
arising (including the entering into and the consummation of the
Merger), and whether by virtue of any act or omission by the Company or
any of its Subsidiaries or by any other person or persons; and
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(xii) to the Knowledge of the Company, neither the
Company nor any of its Subsidiaries is liable to be assessed for or
made accountable for any Tax for which any other person or persons may
be liable to be assessed or made accountable whether by virtue of the
entering into or the consummation of the Merger or by virtue of any act
or acts done by or which may be done by or any circumstance or
circumstances involving or which may involve any other person or
persons.
(c) The Company and its Subsidiaries are not parties to
any agreement, contract, or arrangement that would, as a result of the
transactions contemplated hereby, result, separately or in the aggregate, in (i)
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code by reason of the Merger or (ii) the payment of any form of
compensation or reimbursement for any Tax incurred by any Person arising under
Section 280G of the Code.
3.15. Employees. Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement, arrangement or labor contract
with a labor union or labor organization, whether formal or otherwise. The
Company Disclosure Letter, under the caption referencing this Section 3.15,
lists all employment, severance and change of control agreements (or any other
agreements that may result in the acceleration of the exercisability of
outstanding options) of the Company or its Subsidiaries. Each of the Company and
its Subsidiaries is in compliance in all material respects with all applicable
laws (including, without limitation, all applicable extension orders) respecting
employment and employment practices, terms and conditions of employment, equal
opportunity, anti-discrimination laws, and wages and hours. There is no labor
strike, slowdown or stoppage pending (or, to the Knowledge of the Company or any
of its Subsidiaries, any unfair labor practice complaints, labor disturbances or
other controversies respecting employment which are pending or threatened which,
if they actually occurred, would materially disrupt the operations of the
Company or its Subsidiaries) against the Company or any of its Subsidiaries.
3.16. Employee Benefit Plans.
(a) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and "Plan" means every plan, fund, contract, program
and arrangement (whether written or not) which is maintained or contributed to
by the Company for the benefit of present or former United States employees or
with respect to which the Company otherwise has current or potential liability,
including, but not limited to, Plans which have been terminated but with respect
to which the Company has current or potential liability. "Plan" includes any
arrangement intended to provide: (i) medical, surgical, health care,
hospitalization, dental, vision, workers' compensation, life insurance, death,
disability, legal services, severance, sickness, accident, or cafeteria plan
benefits (whether or not defined in Section 3(1) of ERISA), (ii) pension, profit
sharing, stock bonus, retirement, supplemental retirement or deferred
compensation benefits (whether or not tax qualified and whether or not defined
in Section 3(2) of ERISA), (iii) bonus, incentive compensation, stock option,
stock appreciation right, phantom stock or stock purchase benefits, change in
control benefits or (iv) salary continuation, unemployment, supplemental
unemployment, termination pay, vacation or holiday benefits (whether or not
defined in Section
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3(3) of ERISA). The Company Disclosure Letter, under the caption referencing
this Section 3.16(a), sets forth all Plans by name and brief description
identifying: (i) the type of Plan, including a specific reference to any Plan
which provides benefits (or increased benefits or vesting) as a result of a
change in control of the Company, (ii) the funding arrangements for the Plan,
(iii) the sponsorship of the Plan and (iv) the participating employers in the
Plan.
(b) To the extent required (either as a matter of law or
to obtain the intended tax treatment and tax benefits), all Plans comply with
all material requirements of ERISA and the Code. With respect to the Plans,
except as set forth in Section 3.16 of the Company Disclosure Letter (i) all
required contributions which are due have been made and any accrual required by
generally accepted accounting principles has been made on the books and records
of the Company for all future contribution obligations; (ii) there are no
actions, suits or claims pending, other than routine uncontested claims for
benefits; and (iii) there have been no prohibited transactions (as defined in
Section 406 of ERISA or Section 4975 of the Code) except for such items which
have not or would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect. Except as otherwise disclosed in the
Company Disclosure Letter under the caption referencing this Section 3.16(b),
all benefits under the Plans (other than Code Section 125 cafeteria plans) are
payable either through a fully-funded trust or an insurance contract and no
welfare benefit Plan (as defined in Section 3(1) of ERISA) is self-funded.
Except as otherwise disclosed in the Company Disclosure Letter under the caption
referencing this Section 3.16(b), no qualified retirement plans sponsored by the
Company are invested in stock of the Company.
(c) Parent has received true and complete copies of (i)
all Plan documents, including related trust agreements or funding arrangements;
(ii) the most recent determination letter, if any, received by the Company from
the Internal Revenue Service (the "IRS") regarding the Plans, the termination of
any Plan, and any amendment to any Plan made subsequent to any Plan amendments
covered by any such determination letter; (iii) the most recent financial
statements for the Plans, if any; (iv) the most recently prepared actuarial
valuation reports, if any; (v) current summary plan descriptions; (vi) annual
returns/reports on Form 5500 and summary annual reports for the most recent plan
year, and (vii) any filings (other than Forms 5500) with the IRS or the
Department of Labor ("DOL") within the last five years preceding the date of
this Agreement with respect to the Plans. To the Knowledge of the Company,
nothing has occurred that could materially adversely affect the qualification of
the Plans and their related trusts.
(d) Except as set forth in Section 3.16 of the Company
Disclosure Letter, the Company does not maintain or contribute to (and has never
contributed to) any multi-employer plan, as defined in Section 3(37) of ERISA.
The Company has no actual or potential liabilities under Title IV of ERISA,
including under Section 4201 of ERISA for any complete or partial withdrawal
from a multi-employer plan.
(e) The Company has no actual or potential liability for
death, or medical or dental benefits after separation from employment, other
than (i) death benefits under the Plans (whether or not subject to ERISA) set
forth in Section 3.16 of the Company Disclosure Letter and (ii) health care
continuation benefits described in Section 4980B of the Code.
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(f) Neither the Company nor any of its directors,
officers, employees or other "fiduciaries", as such term is defined in Section
3(21) of ERISA, has committed any breach of fiduciary responsibility imposed by
ERISA or any other applicable law with respect to the Plans which would subject
the Company, Parent or any of their respective directors, officers or employees
to any liability under ERISA or any applicable law except for such breaches
which have not or would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(g) Except as set forth in Section 3.16 of the Company
Disclosure Letter, there are no other trades or businesses, whether or not
incorporated, which, together with the Company, would be deemed to be a "single
employer" within the meaning of Code Sections 414(b), (c) or (m).
(h) Except with respect to Taxes on benefits paid or
provided, no Tax has been waived or excused, has been paid or is owed by any
person (including, but not limited to, any Plan, any Plan fiduciary or the
Company) with respect to the operations of, or any transactions with respect to,
any Plan. No action has been taken by the Company, nor has there been any
failure by the Company to take any action, nor is any action or failure to take
action contemplated by the Company (including all actions contemplated under
this Agreement), that would subject the Company, Parent or any of their
respective directors, officers or employees to any liability or Tax imposed by
the IRS or DOL in connection with any Plan. No reserve for any Taxes has been
established with respect to any Plan by the Company nor has any advice been
given to the Company with respect to the need to establish such a reserve.
(i) There are no (i) legal, administrative or other
proceedings or governmental investigations or audits, or (ii) complaints to or
by any Governmental Entity, which are pending, anticipated or, to the Knowledge
of the Company, threatened, against any Plan or its assets, or against any Plan
fiduciary or administrator, or against the Company or its officers or employees
with respect to any Plan.
(j) There are no leased employees, as defined in Section
414(n) of the Code, providing services to the Company, that must be taken into
account with respect to the requirements under Section 414(n)(3) of the Code.
(k) Except as set forth in Section 3.16 of the Company
Disclosure Letter, each Plan may be terminated directly or indirectly by the
Company, in its sole discretion, at any time before or after the Effective Date
in accordance with its terms, without causing the Parent or the Company to incur
any liability to any person, entity or government agency for any conduct,
practice or omission of the Company which occurred prior to the Effective Date,
except for liabilities to, and the rights of, the employees thereunder accrued
prior to the Effective Date, or if later, the time of termination, and except
for continuation rights required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or other applicable law.
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(l) "Foreign Plan" means every plan, fund, contract
program and arrangement (whether written or not) which is maintained or
contributed to by the Company or an affiliate for the benefit of present or
former employees working outside of the United States or with respect to which
the Company or an affiliate otherwise has current or potential liability for
such current or former employees that is not subject to the laws of the United
States. Foreign Plan may include plans that also benefit United States employees
and include any arrangement intended to provide: (i) medical, surgical, health
care, hospitalization, dental, vision, workers compensation, life insurance,
death, disability, legal services, severance, sickness, or accident benefits;
(ii) pension, profit sharing, retirement, supplemental retirement or deferred
compensation benefits; (iii) bonus, incentive compensation, stock option, stock
appreciation rights, phantom stock or stock purchase benefits, change in control
benefits; or (iv) salary continuation, unemployment, supplemental unemployment,
termination pay, vacation or holiday benefits. Section 3.16 of the Company
Disclosure Letter sets forth all Foreign Plans by name and provides a brief
description for each plan. Except as described in Section 3.16 of the Company
Disclosure Letter, no condition, agreement or plan provision limits the right of
the Company or an affiliate to amend, cut back or terminate any Foreign Plan,
nor will the transaction contemplated by this Agreement limit the right of the
Company or an affiliate or the Parent to amend, cut back or terminate any
Foreign Plan and none of the benefits under a Foreign Plan have been materially
augmented. Either as a matter of law or to obtain the intended tax treatment and
tax benefits, the Foreign Plans have at all times complied with and been duly
administered in accordance with all applicable laws and regulations and
requirements having force of law and in accordance with their terms except for
such matters which have not or would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. There are not
in respect of any Foreign Plan or the benefits thereunder any actions, suits or
claims pending or, to the Knowledge of the Company, threatened other than
routine claims for benefits. Neither the Company nor any of its affiliates have
received any notice or directive that it has not complied with all material
provisions of the Foreign Plans applicable to it and has no Knowledge of any
reason why the tax exempt (or favored) status, if any of the Foreign Plans might
be withdrawn.
3.17. Environmental Matters.
(a) The Company and its Subsidiaries (i) have been in
compliance and are presently complying with all applicable health, safety and
Environmental Laws (defined below), and (ii) have obtained all material permits,
licenses and authorizations which are required under all applicable health,
safety and Environmental Laws and are in compliance in all material respects
with such permits, licenses and authorizations, except in each case for such
failure to comply or to obtain permits, licenses or authorizations that would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. To the Knowledge of the Company, (i) none of the Leased
Real Property (including without limitation soils and surface and ground waters)
are contaminated with any Hazardous Materials in quantities which require
investigation or remediation under Environmental Laws, (ii) neither the Company
nor any of its Subsidiaries is liable for any off-site contamination, and (iii)
there is no environmental matter which could reasonably be expected to expose
the Company or any of its Subsidiaries to a claim to clean-up any Hazardous
Materials or otherwise to remedy any pollution
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or damage at any of the properties utilized in the Company's business under any
Environmental Laws.
(b) For purposes of this Agreement, the term (i)
"Environmental Laws" means all applicable United States federal, state,
provincial, local and other foreign laws, rules, regulations, codes, ordinances,
orders, decrees, directives, permits, licenses and judgments relating to
pollution, contamination or protection of the environment (including, without
limitation, all applicable United States federal, state, provincial, local and
other foreign laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to Hazardous Materials in
effect as of the date of this Agreement), and (ii) "Hazardous Materials" means
any dangerous, toxic or hazardous pollutant, contaminant, chemical, waste,
material or substance as defined in or governed by any United States federal,
state, provincial, local or other foreign law, statute, code, ordinance,
regulation, rule or other requirement relating to such substance or otherwise
relating to the environment or human health or safety, including without
limitation any waste, material, substance, pollutant or contaminant that might
cause any injury to human health or safety or to the environment or might
subject the Company or any of its Subsidiaries to any imposition of costs or
liability under any Environmental Law.
3.18. Insurance. The Company has made available to Parent copies of
all material policies of insurance and bonds in force on the date hereof
covering the businesses, properties and assets of the Company and its
Subsidiaries, and all such policies are currently in effect and all premiums
with respect thereto have been duly paid to date. Except as disclosed in Section
3.18 of the Company Disclosure Letter, there are no claims outstanding under any
insurance policy which could, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect and, to the Knowledge of the
Company or any of its Subsidiaries, neither the Company nor any of its
Subsidiaries has failed to give any notice or to present any such claim with
respect to its business under any such policy in due and timely fashion which
could, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
3.19. Anti-Bribery Compliance. Neither the Company nor any of its
Subsidiaries (nor any person representing the Company or any of its
Subsidiaries) has at any time during the last five years (a) made any payment in
violation of the Foreign Corrupt Practices Act, the OECD Convention or similar
laws of other countries where the Company engages in business, or (b) made any
payment to any foreign, federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the OECD Convention, the laws of the United
States or any jurisdiction thereof or the laws of the countries in which such
payments were made and received.
3.20. Export Control Laws. The Company has conducted its export
transactions in accordance in all material respects with applicable provisions
of United States export control laws and regulations, including but not limited
to the Export Administration Act and implementing Export Administration
Regulations.
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3.21. Finders or Brokers. Except for First Analysis Securities
Corporation, none of the Company, the Subsidiaries of the Company, the Board of
Directors of the Company (the "Company Board") or any member of the Company
Board has employed any agent, investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
a fee or any commission in connection with the Merger or the other transactions
contemplated hereby.
3.22. Board Recommendation. The Company Board has, at a meeting of
such Company Board duly held on June 8, 2000, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby, declared
the advisability of the Merger and recommended that the stockholders of the
Company approve the Merger and the other transactions contemplated hereby, and
has not as of the date hereof rescinded or modified in any respect any of such
actions.
3.23. Vote Required. The affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding on the record date
set for the Company Stockholders Meeting (as defined in Section 5.2 hereof) is
the only vote of the holders of any of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
3.24. Opinion of Financial Advisor. The Company has received the
opinion of First Analysis Securities Corporation dated the date of the meeting
of the Company Board referenced in Section 3.22 above, to the effect that, as of
such date, the Per Share Amount is fair, from a financial point of view, to the
holders of Company Common Stock.
3.25. State Takeover Statutes; Rights Agreement. The Company Board
has taken all actions so that the restrictions contained in Section 203 of the
DGCL applicable to a "business combination" (as defined in Section 203 of the
DGCL) will not apply to the execution, delivery of performance of this Agreement
or the consummation of the Merger or the other transactions contemplated by this
Agreement. The Company has taken all actions and completed all amendments, if
any, necessary or appropriate so that (a) the Preferred Shares Rights Agreement,
dated as of October 20, 1992, as amended, between the Company and The First
National Bank of Boston (the "Company Rights Agreement"), is inapplicable to the
transactions contemplated by this Agreement, and (b) the execution of this
Agreement and the consummation of the transactions contemplated hereby or
thereby, do not and will not (i) result in Parent being an "Acquiring Person"
(as such term is defined in the Company Rights Agreement), (ii) result in the
ability of any person to exercise any Rights under the Company Rights Agreement,
(iii) enable or require the "Rights" (as such term is defined in the Company
Rights Agreement) to separate from the shares of Company Common Stock to which
they are attached or to be triggered or become exercisable, or (iv) otherwise
result in the occurrence of a "Distribution Date" or "Shares Acquisition Date"
(as such terms are defined in the Company Rights Agreement).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT
Merger Sub and Parent represent and warrant to the Company that the
statements contained in this Article IV are true and correct:
4.1. Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, with the corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Merger Sub is a
corporation validly existing and in good standing under the laws of the State of
Delaware. Each of Merger Sub and Parent is duly qualified or licensed to carry
on its business as it is now being conducted, and is qualified to conduct
business, in each jurisdiction where the character of its properties owned or
leased or the nature of its activities makes such qualification necessary,
except for failures to be so qualified that would not, individually or in the
aggregate, have, or would not reasonably be expected to have, a Parent Material
Adverse Effect (as defined below). Neither Parent nor Merger Sub is in violation
of any of the provisions of its Charter Document or its Governing Document. As
used in this Agreement, the term "Parent Material Adverse Effect" means any
change, effect, event or condition that (i) has a material adverse effect on the
assets, business, results of operations or financial condition of Parent and its
Subsidiaries, taken as a whole (other than any such change, effect, event or
condition that arises from changes in general economic conditions or conditions
affecting Parent's industry generally, or such changes, effects, events or
conditions resulting from the consummation of the transactions contemplated
hereby; provided, however, that the termination of contracts requiring third
party consent or approval because of the consummation of the transactions
contemplated hereby the loss of which would otherwise have a material adverse
effect on the assets, business, results of operations or financial condition of
Parent shall not be excluded from this definition) or (ii) would prevent or
materially delay Merger Sub's or Parent's ability to consummate the transactions
contemplated hereby.
4.2. Authority Relative to this Agreement. Each of Parent and
Merger Sub has the requisite corporate power and authority to execute and
deliver, and to perform its obligations under, this Agreement under applicable
law. The execution and delivery by Parent and Merger Sub of this Agreement, and
the consummation of the Merger and the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate action on the part
of Parent and Merger Sub. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery of this Agreement by the Company, is a valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors rights generally or by general equitable
principles. The Parent Options and the shares of Parent Common Stock to be
issued upon exercise thereof: (i) have been duly authorized, and, when such
shares of Parent Common Stock are issued in accordance with the terms of the
Merger and this Agreement (or the applicable option agreements), such shares
will be validly issued, fully paid and nonassessable and will not be
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subject to preemptive rights, (ii) will, when issued in accordance with the
terms of the Merger and this Agreement (or the applicable option agreements), be
registered under the Securities Act, and registered or exempt from registration
under applicable United States "Blue Sky" laws and (iii) will, when issued in
accordance with the terms of the Merger and this Agreement (or the applicable
option agreements), be listed on the Nasdaq National Market.
4.3. No Conflicts; Required Filings and Consents.
(a) Neither the execution, delivery or performance of
this Agreement by Merger Sub or Parent, nor the consummation of the transactions
contemplated hereby, nor compliance by Merger Sub or Parent with any provision
hereof will (i) conflict with or result in a breach of any provision of the
Charter Documents or Governing Documents of Merger Sub or Parent, (ii) cause a
default or give rise to any right of termination, cancellation or acceleration
or loss of a material benefit under, or result in the creation of any lien,
charge or other encumbrance upon any of the properties of Merger Sub or Parent
under any of the terms, conditions or provisions of any note, bond, mortgage or
indenture, or any other material instrument, obligation or agreement to which
Merger Sub or Parent is a party or by which its properties or assets may be
bound or (iii) violate any law applicable to Merger Sub or Parent or binding
upon any of its properties, except for, in the case of clauses (ii) and (iii),
such defaults or violations which would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
(b) No filing or registration with or notification to and
no permit, authorization, consent or approval of any Governmental Entity is
required to be obtained, made or given by Merger Sub or Parent in connection
with the execution and delivery of this Agreement or the consummation by Merger
Sub of the Merger or other transactions contemplated hereby except (i) (A) in
connection with the applicable requirements of the HSR Act or (B) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state securities laws and the laws of any
country other than the United States, or (ii) where the failure to obtain any
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
4.4. Funds. At the Closing, Parent will have the funds necessary to
consummate the Merger and pay the aggregate Per Share Amount in accordance with
the terms of this Agreement.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1. Conduct of Business of the Company Pending the Merger. Except
as contemplated by this Agreement or as expressly agreed to in writing by
Parent, during the period from the date of this Agreement to the earlier of (i)
the termination of this Agreement or (ii) the Effective Time, each of the
Company and its Subsidiaries will conduct their respective operations according
to its ordinary course of business consistent with past practice, and will use
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commercially reasonable efforts consistent with past practice and policies to
preserve intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it and will take no action which would adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement, or the
timing thereof. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not nor will it permit any of its Subsidiaries to, without the
prior written consent of Parent:
(a) amend any of its Charter Documents or Governing
Documents;
(b) authorize for issuance, issue, sell, deliver, grant
any options, warrants, stock appreciation rights, or stock issuance rights for,
or otherwise agree or commit to issue, sell, deliver, pledge, dispose of or
otherwise encumber any shares of any class of its share capital or any
securities convertible into shares of any class of its share capital, except (i)
pursuant to and in accordance with the terms of Company Options outstanding on
the Company Measurement Date or granted pursuant to clause (iii) below, (ii)
pursuant to the ESPP (to the extent shares of Company Common Stock have been
paid for with payroll deductions), or (iii) the grant of Company Options as set
forth in Section 5.1(b) of the Company Disclosure Letter or consistent with past
practices to new employees (or, subject to the prior written consent of Parent,
which consent shall not be unreasonably withheld, to existing employees in
connection with regularly scheduled performance reviews), which Company Options
will represent the right to acquire no more than 5,000 shares of Company Common
Stock per employee, and no more than 50,000 shares of Company Common Stock in
the aggregate;
(c) subdivide, cancel, consolidate or reclassify any
shares of its share capital, issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its share
capital, declare, set aside or pay any dividend or other distribution (whether
in cash, shares or property or any combination thereof) in respect of its share
capital or purchase, redeem or otherwise acquire any shares of its own share
capital (other than the Receivership Shares) or of any of its Subsidiaries,
except as otherwise expressly provided in this Agreement;
(d) (i) incur or assume any long-term or short-term debt
or issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business consistent with past practice; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the material obligations of any other
person (other than Subsidiaries of the Company); or (iii) make any material
loans, advances or capital contributions to, or investments in, any other person
(other than to Subsidiaries of the Company);
(e) except as otherwise expressly contemplated by this
Agreement or as set forth in Section 5.1(e) of the Company Disclosure Letter,
(i) increase in any manner the compensation of (A) any employee who is not an
officer of the Company or any Subsidiary (a "NonExecutive Employee"), except in
the ordinary course of business consistent with past practice or (B) any of its
directors or officers, except in the ordinary course of business,
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consistent with past practice, after consultation with Parent, (ii) pay or agree
to pay any pension, retirement allowance or other employee benefit not required,
or enter into, amend or agree to enter into or amend any agreement or
arrangement with any such director or officer or employee, whether past or
present, relating to any such pension, retirement allowance or other employee
benefit, except as required to comply with law or under currently existing
agreements, plans or arrangements or with respect to NonExecutive Employees, in
the ordinary course of business consistent with past practice; (iii) grant any
rights to receive any severance or termination pay to, or enter into or amend
any employment or severance agreement with, any employee or any of its directors
or officers, except as required by applicable law or with respect to severance
or termination pay to NonExecutive Employees in the ordinary course of business,
consistent with past practices; or (iv) except as may be required to comply with
applicable law, become obligated (other than pursuant to any new or renewed
collective bargaining agreement) under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement, or similar plan
or arrangement, which was not in existence on the date hereof, including any
bonus, incentive, deferred compensation, share purchase, share option, share
appreciation right, group insurance, severance pay, retirement or other benefit
plan, agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof; provided, however, that this clause
(iv) shall not prohibit the Company from renewing any such plan, agreement or
arrangement already in existence on terms no more favorable to the parties to
such plan, agreement or arrangement;
(f) except as otherwise expressly contemplated by this
Agreement, enter into, amend in any material respect or terminate any Company
Material Contracts other than in the ordinary course of business consistent with
past practice;
(g) sell, lease, license, mortgage or dispose of any of
its properties or assets, other than (i) transactions in the ordinary course of
business consistent with past practice, and (ii) sales of assets, for the fair
market value thereof, which sales do not individually or in the aggregate exceed
$1,000,000 and, in the case of both clauses (i) and (ii), except as may be
required or contemplated by this Agreement;
(h) except as otherwise contemplated by the Merger,
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, limited liability company, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets, other than the acquisition of assets that are in the
ordinary course of business consistent with past practice and not material to
the Company and its Subsidiaries taken as a whole;
(i) alter (through merger, liquidation, reorganization,
restructuring or in any fashion) the corporate structure or ownership of the
Company or any Subsidiary;
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(j) authorize or commit to make any material capital
expenditures not reflected in the budget previously provided in writing by the
Company to Parent without the prior written consent of Parent, which consent
shall not be unreasonably withheld;
(k) make any change in the accounting methods or
accounting practices followed by the Company, except as required by generally
accepted accounting principles or applicable law;
(l) make any election under United States federal, state,
provincial, local or foreign Tax law which would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect;
(m) settle any action, suit, claim, investigation or
proceeding (legal, administrative or arbitrative) requiring a payment by the
Company or its Subsidiaries in excess of $250,000 (other than in connection with
obtaining the return or release of the Receivership Shares) without the consent
of Parent, which consent shall not be unreasonably withheld or delayed;
(n) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in connection with obtaining the return or release of the
Receivership Shares or the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the most recent financial statements (or the notes thereto)
of the Company included in the Company SEC Reports or incurred in the ordinary
course of business consistent with past practice; or
(o) authorize, recommend, propose, agree or announce an
intention to do any of the foregoing or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
5.2. Preparation of Proxy Statement. As promptly as practicable and
no later than 10 days after the date hereof, the Company shall prepare and file
with the SEC the proxy statement to be sent to the stockholders of the Company
in connection with the meeting of the Company's stockholders to consider the
Merger (the "Company Stockholders Meeting") (such proxy statement as amended or
supplemented is referred to herein as the "Proxy Statement"). The Proxy
Statement will, when prepared pursuant to this Section 5.2 and mailed to the
Company's stockholders, comply in all material respects with the applicable
requirements of the Exchange Act. The information supplied by each of Parent and
the Company for inclusion in the Proxy Statement shall not, on the date the
Proxy Statement is first mailed to Company's stockholders, at the time of the
Company Stockholders Meeting and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become false or
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misleading. Each of Parent and the Company shall indemnify and hold harmless the
other from any obligations, claims or liabilities arising from any statement
supplied by such party for inclusion in the Proxy Statement which, at the time
such statement was made, is false or misleading with respect to any material
fact, or omits to state any material fact necessary in order to make the
statement, in light of the circumstances under which is was made, not false or
misleading. If at any time prior to the Effective Time any event or information
should be discovered by Parent, Merger Sub or the Company which should be set
forth in a supplement to the Proxy Statement, Parent, Merger Sub or the Company,
as the case may be, will promptly inform the other parties. The Proxy Statement
shall include the declaration of the Company Board of the advisability of the
Merger and its recommendation that the Company's stockholders approve the
Merger, unless the Company Board determines in good faith, after considering the
advice of its financial advisor and reputable outside legal counsel experienced
in such matters (and the parties recognize that Sutherland Asbill & Brennan LLP
is so experienced), that withdrawal or modification of its declaration and
recommendation is necessary because this Agreement or the Merger is no longer in
the best interests of the Company's stockholders. The Proxy Statement shall be
reviewed and approved by Parent and Parent's counsel prior to the mailing of
such Proxy Statement to the Company's stockholders.
5.3 Meeting of Stockholders. The Company shall, promptly after the
date hereof, take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and Bylaws to convene the Company Stockholders
Meeting within 30 days of the filing of a definitive Proxy Statement with the
SEC, whether or not the Company Board determines at any time after the date
hereof that the Merger is no longer advisable. The Company shall consult with
Parent regarding the date of the Company Stockholders Meeting. The Company shall
use commercially reasonable efforts to solicit from stockholders of the Company
proxies in favor of the Merger and shall take all other commercially reasonable
action necessary or advisable to secure the vote or consent of stockholders
required to effect the Merger, unless the Company Board determines in good
faith, after considering the advice of its financial advisor and reputable
outside legal counsel experienced in such matters (and the parties recognize
that Sutherland Asbill & Brennan LLP is so experienced), that the Merger is no
longer in the best interests of the Company's stockholders.
5.4. Additional Agreements, Cooperation.
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its best efforts to take, or cause to
be taken, all action 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, and to cooperate, subject to
compliance with applicable law, with each other in connection with the
foregoing, including using its best efforts (i) to obtain all necessary waivers,
consents and approvals from other parties to loan agreements, material leases
and other material contracts, (ii) to obtain all necessary consents, approvals
and authorizations as are required to be obtained under any United States
federal or state, or other foreign law or regulations, (iii) to defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) to lift or rescind
any injunction or restraining order or other order adversely affecting
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the ability of the parties to consummate the transactions contemplated hereby,
(v) to effect all necessary registrations and filings and submissions of
information requested by Governmental Entities, and (vi) to fulfill all
conditions to this Agreement.
(b) Each of the parties hereto agrees, subject to
compliance with applicable law, to furnish to each other party hereto such
necessary information and reasonable assistance as such other party may request
in connection with its preparation of necessary filings or submissions to any
regulatory or governmental agency or authority, including, without limitation,
any filing necessary under the provisions of the HSR Act, the Exchange Act, the
Securities Act or any other United States federal or state, or foreign statute
or regulation. Each party hereto shall promptly inform each other party of any
material communication from the U.S. Federal Trade Commission or any other
government or governmental authority regarding any of the transactions
contemplated thereby.
5.5. Publicity. Except as otherwise required by law or the rules of
any applicable securities exchange or the Nasdaq National Market, so long as
this Agreement is in effect, Parent and the Company will not, and will not
permit any of their respective affiliates or representatives to, issue or cause
the publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld or delayed.
Parent and the Company will cooperate with each other in the development and
distribution of all press releases and other public announcements with respect
to this Agreement and the transactions contemplated hereby, and will furnish the
other with drafts of any such releases and announcements as far in advance as
possible. Nothing in this Section 5.5 shall prohibit or restrict the Company
from at any time communicating to the Company's stockholders if the Company
Board has determined in good faith, after considering the advice of reputable
outside legal counsel experienced in such matters (and the parties recognize
that Sutherland Asbill & Brennan LLP is so experienced), that any such
communication is required to fulfill its fiduciary duties to the Company's
stockholders.
5.6. No Solicitation.
(a) Immediately upon execution of this Agreement, the
Company shall (and shall cause its officers, directors, employees, investment
bankers, attorneys and other agents or representatives to) cease all
discussions, negotiations, responses to inquiries and other communications
relating to any potential business combination with all third parties who, prior
to the date hereof, may have expressed or otherwise indicated any interest in
pursuing an Acquisition Proposal (as hereinafter defined) with the Company.
(b) Prior to termination of this Agreement pursuant to
Article VII hereof, the Company and its Subsidiaries shall not, nor shall the
Company authorize or permit any officers, directors or employees of, or any
investment bankers, attorneys or other agents or representatives retained by or
acting on behalf of, the Company or any of its Subsidiaries to, (i) initiate,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal that constitutes an Acquisition Proposal, (ii) except as permitted
below, engage or participate in negotiations or discussions with, or furnish any
information or data to, or take any other action to, facilitate any
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inquiries or making any proposal by, any third party relating to an Acquisition
Proposal, or (iii) except as permitted below, enter into any agreement with
respect to any Acquisition Proposal or approve an Acquisition Proposal.
Notwithstanding anything to the contrary contained in this Section 5.6 or in any
other provision of this Agreement, prior to the Company Stockholders Meeting,
the Company Board may participate in discussions or negotiations with or furnish
information to any third party making an unsolicited Acquisition Proposal (a
"Potential Acquiror") or approve or recommend an unsolicited Acquisition
Proposal if both (A) a majority of the directors of the Company Board, without
including directors who may be considered Affiliates (as defined in Rule 405
under the Securities Act) of any person making an Acquisition Proposal
("Disinterested Directors") determines in good faith, after receiving advice
from its independent financial advisor, that a Potential Acquiror has submitted
to the Company an Acquisition Proposal that is a Superior Proposal (as
hereinafter defined), and (B) a majority of the Disinterested Directors of the
Company Board determines in good faith, after considering advice from reputable
outside legal counsel experienced in such matters (and the parties hereto agree
that the law firm of Sutherland Asbill & Brennan LLP is so experienced), that
the failure to participate in such discussions or negotiations or to furnish
such information or to approve or recommend such unsolicited Acquisition
Proposal is inconsistent with the Company Board's fiduciary duties under
applicable law. In the event that the Company shall receive any Acquisition
Proposal, it shall promptly (and in no event later than 24 hours after receipt
thereof) furnish to Parent the identity of the recipient of the Acquisition
Proposal and of the Potential Acquiror, the terms of such Acquisition Proposal
and copies of all non-public information requested by the Potential Acquiror not
previously delivered to Parent, and shall further promptly inform Parent in
writing as to the fact such information is to be provided after compliance with
the terms of the preceding sentence. Nothing contained herein shall prevent the
Company from complying with Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal or making any disclosure to the
Company's stockholders if, in the good faith judgment of the Company Board,
after considering advice from reputable outside legal counsel experienced in
such matters (and the parties hereto agree that the law firm of Sutherland
Asbill & Brennan LLP is so experienced), such disclosure is required by
applicable law. Without limiting the foregoing, the Company understands and
agrees that any violation of the restrictions set forth in this Section 5.6(b)
by the Company or any of its Subsidiaries, or by any director or officer of the
Company or any of its Subsidiaries or any financial advisor, attorney or other
advisor or representative of the Company or any of its Subsidiaries, whether or
not such person is purporting to act on behalf of the Company or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section 5.6(b)
sufficient to enable Parent to terminate this Agreement pursuant to Section
7.1(d)(i) hereof.
(c) For the purposes of this Agreement, "Acquisition
Proposal" shall mean any proposal, whether in writing or otherwise, made by any
person other than Parent and its Subsidiaries to acquire "beneficial ownership"
(as defined under Rule 13(d) of the Exchange Act) of 20% or more of the assets
of, or 20% or more of the outstanding capital stock of any of the Company or its
Subsidiaries pursuant to a merger, consolidation, exchange of shares or other
business combination, sale of shares of capital stock, sales of assets, tender
offer or exchange offer or similar transaction involving the Company or its
Subsidiaries.
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(d) The term "Superior Proposal" means any bona fide
Acquisition Proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the Company Common Stock
then outstanding or all or substantially all the assets of the Company, and
otherwise on terms that a majority of the Disinterested Directors determines, in
good faith, is reasonably likely to be more favorable to the Company and its
stockholders than the Merger (after considering advice from the Company's
independent financial advisor that the Acquisition Proposal is more favorable to
the Company's stockholders, from a financial point of view, than the Merger).
5.7. Access to Information. From the date of this Agreement until
the Effective Time, and upon reasonable notice, the Company will give Parent and
its authorized representatives (including counsel, other consultants,
accountants and auditors) reasonable access during normal business hours to all
facilities, personnel and operations and to all books and records of it and its
Subsidiaries, will permit Parent to make such inspections as it may reasonably
require, will cause its officers and those of its Subsidiaries to furnish Parent
with such financial and operating data and other information with respect to its
business and properties as Parent may from time to time reasonably request and
confer with Parent to keep it reasonably informed with respect to operational
and other business matters relating to the Company and its Subsidiaries and the
status of satisfaction of conditions to the Closing. All information obtained by
Parent pursuant to this Section 5.7 shall be kept confidential in accordance
with the Confidentiality Agreement, dated February 10, 2000, between Parent and
the Company.
5.8. Notification of Certain Matters. The Company or Parent, as the
case may be, shall promptly notify the other of (a) its obtaining of Knowledge
as to the matters set forth in clauses (i), (ii) and (iii) below, or (b) the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time, (ii) any material failure of the
Company or Parent, 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 or (iii) the
institution of any claim, suit, action or proceeding arising out of or related
to the Merger or the transactions contemplated hereby; 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.
5.9. Resignation of Officers and Directors. Except as otherwise
provided in Section 5.18 hereof, at or prior to the Effective Time, the Company
shall deliver to Parent the resignations of such officers and directors of the
Company and its Subsidiaries (in each case, in their capacities as officers and
directors, but not as employees if any of such persons are employees of the
Company or any Subsidiary) as Parent shall specify, which resignations shall be
effective at the Effective Time and shall contain an acknowledgment that the
relevant individual has no outstanding claims for compensation for loss of
office, redundancy, unfair dismissal or otherwise.
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5.10. Indemnification.
(a) As of the Effective Time and for a period of seven
years following the Effective Time, Parent will indemnify and hold harmless from
and against all claims, damages, losses, obligations or liabilities ("Losses")
Company's Chief Executive Officer and any persons who, as of June 1, 2000, were
parties to change of control agreements with the Company (the "Indemnified
Persons") to the fullest extent such person could have been indemnified for such
Losses under applicable law and under the Governing Documents of the Company or
any Subsidiary or under the indemnification agreements listed in Section 5.10 of
the Company Disclosure Letter (a true and accurate form of which has been
attached to the Company Disclosure Letter) in effect immediately prior to the
date hereof (the "Indemnification Agreements"), with respect to any act or
failure to act by any such Indemnified Person prior to the Effective Time.
(b) Except as otherwise set forth in the Indemnification
Agreements, any determination required to be made with respect to whether an
Indemnified Person's conduct complies with the standards set forth under the
DGCL or other applicable law shall be made by independent counsel selected by
Parent and reasonably acceptable to the Indemnified Persons. Except as otherwise
set forth in the Indemnification Agreements, Parent shall pay such counsel's
fees and expenses so long as the Indemnified Persons do not challenge any such
determination by such independent counsel.
(c) In the event that Parent or any of its successors or
assigns (i) consolidates with or merges into any other person, and Parent or
such successor or assign is not the continuing or surviving corporation or
entity of such consolidation or merger, (ii) sells or otherwise disposes of all
of the capital stock of the Surviving Corporation to any person, or (iii)
transfers all or substantially all of its properties and assets to any person,
then, and in each case, proper provision shall be made so that such person or
the continuing or surviving corporation assumes the obligations set forth in
this Section 5.10 and none of the actions described in clauses (i), (ii) and
(iii) above shall be taken until such provision is made.
(d) Parent shall maintain in effect for not less than
seven years from the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor policies of at least comparable coverage containing
terms and conditions which are no less advantageous to the Indemnified Parties
in all material respects so long as no lapse in coverage occurs as a result of
such substitution) with respect to all matters, including the transactions
contemplated hereby, occurring prior to, and including the Effective Time;
provided, however, that, in the event that any Claim is asserted or made within
such seven-year period, such insurance shall be continued in respect of any such
Claim until final disposition of any and all such Claims; and provided, further,
that Parent shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 200% of the premiums paid as of the
date hereof by the Company or any Subsidiary for such insurance. In such case,
Parent shall purchase as much coverage as possible for 200% of the premiums paid
as of the date hereof for such insurance, which coverage shall be at least as
favorable as that provided by Parent to its directors.
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5.11. Stockholder Litigation. The Company shall give Parent the
reasonable opportunity to participate in the defense of any stockholder
litigation against or in the name of the Company and/or its respective directors
relating to the transactions contemplated by this Agreement.
5.12. Employee Benefit Plans.
(a) 401(k) Plan. At least three days prior to the
Effective Time, the Company shall terminate the Centigram Communications
Corporation 401(k) Plan pursuant to written resolutions, the form and substance
of which shall be reasonably satisfactory to Parent. Subject to plan eligibility
rules, individuals employed by the Company at the Effective Time ("Company
Employees") shall be allowed to participate in Parent's 401(k) plan effective as
of the first full payroll period following the Effective Time; and all service
with the Company shall be considered service with Parent for purposes of
determining eligibility, vesting, and benefit accrual (i.e., matching
contributions) under Parent's 401(k) plan. As soon as administratively feasible
after assets are distributed from the Centigram Communications Corporation
401(k) Plan, Company Employees shall be offered an opportunity to roll their
Centigram Communications Corporation 401(k) Plan account balances into Parent's
401(k) Plan, subject to the rules of such plan. Parent shall make reasonable
efforts to amend its 401(k) Plan to accept rollovers of unpaid loan balances,
but makes no assurances that such amendment will be effective as of the date
assets are distributed from Company's 401(k) Plan.
(b) Welfare Plans. Company Employees shall be eligible to
participate in Parent's short term disability plan, long term disability plan,
group life insurance plan, medical plan, dental plan, and section 125 cafeteria
plan as soon as administratively feasible after the Effective Time but no later
than January 1, 2001. Prior to such time, Company Employees shall remain
eligible for Company's welfare plans, as applicable, and such plans will not be
amended or changed by Parent or Company. Parent shall include service and prior
earnings with the Company for purposes of determining eligibility,
participation, and benefit accrual under its short-term disability plan,
long-term disability plan, group life insurance plan, medical plan, dental plan,
and section 125 cafeteria plan. In connection with the transfer of Company
employees to Parent's long-term disability plan, no Company employee who becomes
disabled after the transition to Parent's plan shall have long-term disability
benefits less favorable than those provided to similarly situated Parent
employees and all participation in the Company's long-term disability plan shall
be treated as participation in Parent's long-term disability plan for purposes
of applying the preexisting condition exclusion under Parent's long-term
disability plan.
(c) Vacation and PTO. Company Employees shall be eligible
to participate in Parent's vacation or PTO policy, as applicable, as soon as
administratively feasible after the Effective Time but no later than January 1,
2001. Prior to such date Company Employees shall remain eligible for Company's
vacation pay or sick pay policies, as applicable, and such plans or policies
will not be amended or changed by Parent or Company. Parent shall include
service with the Company for purposes of determining eligibility, participation,
and calculation of
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vacation pay, sick pay, or paid time off (PTO) under Parent's vacation or PTO
policy, as applicable. With respect to accrued but unused vacation pay under
Company's vacation plan, employees may carry over to Parent's vacation plan or
PTO policy, as applicable, any accrued but unused vacation time that does not
exceed 175% of an employee's annual accrual under Company's vacation plan. As
soon as administratively feasible after the Effective Date, but in any event no
later than 60 days thereafter, a payment shall be made to employees in an amount
that reflects any accrued but unused vacation time in excess of such carryover
amount.
5.13. Determination of Optionholders. At least ten business days
before the Effective Time, the Company shall provide Parent with a true and
complete list of (a) the holders of Company Options, (b) the number of shares of
Company Common Stock subject to Company Options held by each such optionholder,
(c) the exercise price of each option outstanding and (d) the address of each
such optionholder as set forth in the books and records of the Company or any
Subsidiary, which list shall be certified by the Company's Secretary as being
true and correct based upon the Company's records, following upon which there
shall be no additional grants of Company Options without Parent's prior consent.
5.14. Preparation of Tax Returns. The Company shall file (or cause
to be filed) at its own expense, on or prior to the due date thereof, all
Returns required to be filed on or before the Closing Date. The Company shall
provide Parent with a copy of appropriate workpapers, schedules, drafts and
final copies of each foreign and domestic, federal, provincial and state income
Tax return or election of the Company (including returns of all Employee Benefit
Plans) at least ten days before filing such return or election and shall consult
with Parent with respect thereto prior to such filing. Any Return filed after
the date hereof but prior to the Closing Date shall first be approved by Parent,
which approval shall not be unreasonably withheld.
5.15. SEC Filings; Compliance. The Company and Parent shall each
cause the forms, reports, schedules, statements and other documents required to
be filed with the SEC by the Company and Parent, respectively, between the date
of this Agreement and the Effective Time (with respect to either the Company or
Parent, the "New SEC Reports") to be prepared in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and such New SEC Reports will not at the time they are filed contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
5.16. Rights Agreement. Prior to the Effective Time, the Company
Board shall not take any action in contravention of the actions required by
Section 3.25 hereof.
5.17. Stock Repurchase Plan. As of the date of this Agreement, the
Company shall terminate its stock repurchase plan, if any.
5.18 Release of Receivership Stock; Appeal Process. The Company
shall use its reasonable commercial efforts to obtain the release of the
Receivership Stock from Credit Bancorp or the Bancorp Receiver prior to the
Effective Time and at the lowest reasonable cost to
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<PAGE> 102
the Company. If, at the Effective Time, the Appeal Period remains open or an
appeal of the Final Order remains pending, the Company shall be entitled to
designate one member of the Company Board who shall be appointed by the
Surviving Corporation to serve as a director of the Surviving Corporation until
such time as the Appeal Period terminates and all pending appeals have been
resolved, and such designee director shall be appointed as a member of a special
litigation committee of the board of directors of the Surviving Corporation
which shall be established by the Surviving Corporation for the sole purpose of
negotiating or otherwise participating on behalf of the Surviving Corporation in
the resolution of any and all appeals of the Final Order. Such designee director
shall be consulted by such committee prior to the Surviving Corporation
negotiating or executing any resolution of any and all appeals of the Final
Order.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the stockholders
of the Company under the DGCL and the Company's Charter Document and Governing
Documents.
(b) Governmental Action; No Injunction or Restraints. No
action or proceeding shall be instituted by any Governmental Entity seeking to
prevent consummation of the Merger, asserting the illegality of the Merger or
this Agreement or seeking material damages directly arising out of the
transactions contemplated hereby which continues to be outstanding. No judgment,
order, decree, statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition shall be in
effect (i) imposing or seeking to impose material sanctions, damages, or
liabilities directly arising out of the Merger on the Company or any of its
officers or directors; or (ii) preventing the consummation of the Merger.
(c) Governmental Consents. All necessary authorizations,
consents, orders or approvals of, or declarations or filings with, or expiration
or waiver of waiting periods imposed by, any Governmental Entity of any
applicable jurisdiction required for the consummation of the transactions
contemplated by this Agreement shall have been filed, expired or obtained, as to
which the failure to obtain, make or occur would have the effect of making the
Merger or this Agreement or any of the transactions contemplated hereby illegal
or which, individually or in the aggregate, would have a Parent Material Adverse
Effect (assuming the Merger had taken place), including, but not limited to, the
expiration or termination of the applicable waiting period, or any extensions
thereof, pursuant to the HSR Act.
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<PAGE> 103
6.2. Conditions to Obligations of Parent. The obligation of Parent
to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company set forth herein shall be true and correct both
when made and at and as of the Effective Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
materiality or material adverse effect set forth therein) does not have, and
would not, individually or in the aggregate, reasonably be expected to have, a
Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective Date.
(c) No Material Adverse Effect. Since the date of this
Agreement, there has not been a Company Material Adverse Effect nor has there
been any change, event or condition that, with the passage of time, would
reasonably be expected to result in a Company Material Adverse Effect.
(d) No Injunctions or Restraints. No judgment, order,
decree, statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction or other legal restraint or prohibition shall be in
effect (i) imposing or seeking to impose material limitations on the ability of
Parent to acquire or hold or to exercise full rights of ownership of any
securities of the Company; (ii) imposing or seeking to impose material
limitations on the ability of Parent or its Affiliates to combine and operate
the business and assets of the Company; (iii) imposing or seeking to impose
other material sanctions, damages, or liabilities directly arising out of the
Merger on Parent or any of its officers or directors; or (iv) requiring or
seeking to require divestiture by Parent of any significant portion of the
business, assets or property of the Company or of Parent.
(e) Delivery of Closing Documents. At or prior to the
Effective Time, the Company shall have delivered to Parent all of the following:
(i) a certificate of the President and the Chief
Financial Officer of the Company (in their capacities as such
officers), dated as of the Effective Date, stating that the conditions
precedent set forth in Sections 6.2(a), (b) and (c) hereof have been
satisfied;
(ii) a copy of (A) the Certificate of
Incorporation of the Company, dated as of a recent date, certified by
the Secretary of State of the State of Delaware, and (B) the Bylaws of
the Company and the resolutions of the Company Board and stockholders
authorizing the Merger and the other transactions contemplated by this
Agreement, certified by the Secretary of the Company; and
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<PAGE> 104
(iii) a list of (A) all options that have been
exercised after the date of this Agreement and (B) the gross amount
received by the Company for the ESPP Offering Period occurring
immediately prior to the Effective Time and the number of shares issued
thereunder for such period.
(f) Director and Officer Resignations. Merger Sub shall
have received the resignation of the directors and officers of the Company as
are described in Section 5.9 hereof.
(g) Key Employee Agreements. The persons identified in
Section 6.2(g) of the Company Disclosure Letter shall have entered into
employment agreements with Parent, and such agreements shall be in full force
and effect, and none of such employees shall have indicated any intention of not
fulfilling his or her obligations thereunder.
(h) Employee Waivers. From the list of employees
identified by the Company on Section 3.15 of the Company Disclosure Letter as
having change of control agreements in place as of the date hereof, Parent shall
specify fifteen (15) of such employees who will be offered positions by Parent
providing equal or better duties, responsibilities and total compensation, of
whom at least twelve (12) shall have executed and delivered to Parent waivers of
certain change in control benefits provided in such agreements to the
satisfaction of Parent, and such waivers shall not have been in any way amended
or rescinded; provided, however, if Parent is unable to offer equal or better
total compensation to one or more of such specified employees, such employee(s)
shall not be counted toward the number of employees who must execute and deliver
the waivers described above, and the minimum number of waivers shall be reduced
accordingly.
(i) Exercise of Appraisal Rights. The total shares of
Company Common Stock held by stockholders of the Company who have indicated in
accordance with the DGCL (and not withdrawn) their intent to elect to exercise
their appraisal rights under the DGCL shall not exceed 5% of the shares of
Company Common Stock outstanding as of the date of the Company Stockholders
Meeting. Parent shall have received a certificate of the Chief Executive Officer
or Chief Financial Officer of the Company to that effect.
6.3. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations
and warranties of Parent and Merger Sub set forth herein shall be true and
correct both when made and at and as of the Effective Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to materiality or material adverse effect set forth therein) does
not have, and would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
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<PAGE> 105
(b) Performance of Obligations of Parent. Parent shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Date.
(c) Delivery of Closing Documents. At or prior to the
Effective Time, the Parent shall have delivered to the Company a certificate of
the President and the Chief Financial Officer of Parent (in their capacities as
such officers), dated as of the Effective Date, stating that the conditions
precedent set forth in Sections 6.3(a) and (b) hereof have been satisfied.
ARTICLE VII
TERMINATION
7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger by
the Company's stockholders:
(a) by mutual written consent of the Company and Parent
(on behalf of Parent and Merger Sub);
(b) by either the Company or Parent (on behalf of Parent
and Merger Sub):
(i) if the Merger shall not have been completed
by October 31, 2000; provided, however, that the right to terminate
this Agreement pursuant to this Section 7.1(b)(i) shall not be
available to any party whose failure to perform any of its obligations
under this Agreement results in the failure of the Merger to be
consummated by such time;
(ii) if stockholder approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) if any restraint having any of the effects
set forth in Section 6.1(b) or Section 6.2(d) hereof shall be in effect
and shall have become final and nonappealable; or
(iv) if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) or
understanding to effect a Superior Proposal or the Company Board or a
committee thereof resolves to do so; provided, however, that the
Company may not terminate this Agreement pursuant to this Section
7.1(b)(iv) unless (a) the Company has delivered to Parent and Merger
Sub a written notice of the Company's intent to enter into such an
agreement to effect such Acquisition Proposal, which notice shall
include, without limitation, the material terms and conditions of the
Acquisition Proposal and the identity of the Person making the
Acquisition Proposal, (b) three business days have elapsed following
delivery to Parent and Merger Sub of such written notice by the Company
and (c) during such three-business-day
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<PAGE> 106
period, the Company has fully cooperated with Parent and Merger Sub to
allow Parent and Merger Sub within such three-business-day period to
propose amendments to the terms of this Agreement to be at least as
favorable as the Superior Proposal; provided, further, that the Company
may not terminate this Agreement pursuant to this Section 7.1(b)(iv)
unless, at the end of such three-business-day-period (and after due
consideration by the Company Board of any proposed amendment to this
Agreement that has been submitted by Parent during such three-day
period), the Company Board continues reasonably to believe that the
Acquisition Proposal constitutes a Superior Proposal;
(c) by the Company, if Parent or Merger Sub shall have
breached any of its representations and warranties contained in Article IV
hereof which breach has or is reasonably likely to have a Parent Material
Adverse Effect or Parent or Merger Sub shall have breached or failed to perform
in any material respect any of its covenants or other agreements contained in
this Agreement, in each case, which breach or failure to perform has not been
cured by Parent or Merger Sub within thirty days following receipt of notice
thereof from the Company; or
(d) by Parent (on behalf of Parent and Merger Sub):
(i) if the Company shall have breached any of
its representations and warranties contained in Article III hereof
which breach has or is reasonably likely to have a Company Material
Adverse Effect or the Company shall have breached or failed to perform
in any material respect any of its covenants or other agreements
contained in this Agreement, in each case (other than a breach of
Section 5.6(b) hereof, as to which no cure period shall apply), which
breach or failure to perform has not been cured by the Company within
thirty days following receipt of notice thereof from Parent; or
(ii) if (a) the Company Board or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
its approval or recommendation of the Merger or this Agreement, or
approved or recommended an Acquisition Proposal (including a Superior
Proposal), or (b) the Company Board or any committee thereof shall have
resolved to take any of the foregoing actions.
7.2. Effect of Termination. The termination of this Agreement
pursuant to the terms of Section 7.1 hereof shall become effective upon delivery
to the other party of written notice thereof. In the event of the termination of
this Agreement pursuant to the foregoing provisions of this Article VII, there
shall be no obligation or liability on the part of any party hereto (except as
provided in Section 7.3 hereof) or its stockholders or directors or officers in
respect thereof, except for agreements in Sections 5.5, 5.7, 7.2, 7.3 and 8.8,
which survive the termination of this Agreement, and except for liability that
Parent or Merger Sub or the Company might have to the other party or parties
arising from the willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach results in a termination of this Agreement pursuant to
Sections 7.1(c) or 7.1(d)(i), or otherwise due to the fraudulent or willful
misconduct of such party.
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<PAGE> 107
7.3. Fees and Expenses.
(a) Except as provided in this Section 7.3, whether or
not the Merger is consummated, the Company, on the one hand, and Parent and
Merger Sub, on the other, shall bear their respective expenses incurred in
connection with the Merger, including, without limitation, the preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants.
(b) Notwithstanding any provision in this Agreement to
the contrary, if this Agreement is terminated (x) by the Company or Parent
pursuant to Section 7.1(b)(ii) and if, after the date hereof and prior to the
termination date, an Acquisition Proposal occurs, or (y) by Parent pursuant to
Section 7.1(b)(iv), 7.1(d)(i) or 7.1(d)(ii) hereof, then, in each case, the
Company shall (without prejudice to any other rights Parent may have against the
Company for breach of this Agreement), reimburse Parent upon demand for all
reasonable out-of-pocket fees and expenses not to exceed $500,000 incurred or
paid by or on behalf of Parent or any Affiliate of Parent in connection with
this Agreement, the Merger and transactions contemplated herein, including all
fees and expenses of counsel, investment banking firms, accountants and
consultants.
(c) Notwithstanding any other provision in this Agreement
to the contrary, if (x) this Agreement is terminated by the Company or Parent at
a time when Parent is entitled to terminate this Agreement pursuant to Section
7.1(b)(ii) or 7.1(d)(i) (other than due to a breach of Section 5.6(b) hereof)
and, concurrently with or within nine months after such a termination, the
Company shall enter into an agreement, arrangement or binding understanding with
respect to an Acquisition Proposal (which shall include, for this purpose, the
commencement by a third party of a tender offer or exchange offer or similar
transaction directly with the Company's stockholders) with a third party
(collectively, a "Third Party Deal") or (y) this Agreement is terminated
pursuant to Section 7.1(b)(iv), Section 7.1(d)(i) (if such termination results
from a breach of Section 5.6(b) hereof) or 7.1(d)(ii), then, in each case, the
Company shall (in addition to any obligation under Section 7.3(b) hereof and as
liquidated damages and not as a penalty or forfeiture) pay to Parent
U.S.$6,400,000 (the "Termination Fee") in cash, such payment to be made
promptly, but in no event later than the second business day following, in the
case of clause (x), the later to occur of such termination and the entry into of
such Third Party Deal, or, in the case of clause (y), such termination.
(d) Notwithstanding any provision in this Agreement to
the contrary, if this Agreement is terminated by the Company pursuant to Section
7.1(c) hereof, then Parent shall (without prejudice to any other rights the
Company may have against Parent for breach of this Agreement), reimburse the
Company upon demand for all reasonable out-of-pocket fees and expenses not to
exceed $500,000 incurred or paid by or on behalf of the Company or any Affiliate
of the Company in connection with this Agreement, the Merger and the
transactions contemplated herein, including all fees and expenses of counsel,
investment banking firm, accountants and consultants.
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<PAGE> 108
(e) The parties acknowledge that the agreements contained
in Sections 7.3(b), (c) and (d) hereof are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Sub on the one hand, and the Company on the other, would not enter into
this Agreement. Accordingly, if the Company fails promptly to pay the amounts
due pursuant to Sections 7.3(b) and/or (c) hereof, or if Parent fails promptly
to pay the amounts due pursuant to Section 7.3(d) hereof, (i) the party failing
to so pay shall pay interest on such amounts at the prime rate announced by U.S.
Bank National Association, Minneapolis office, in effect on the date the
Termination Fee (or fees and expenses) were required to be paid, and (ii) if, in
order to obtain such payment, a party commences a suit or takes other action
which results in a judgment or other binding determination against the nonpaying
party for the fees and expenses in Sections 7.3(b) or 7.3(d) hereof or the
Termination Fee, the nonpaying party shall also pay to the party entitled to
receive payment its reasonable costs and expenses (including reasonable
attorneys' fees) incurred in connection with such suit, together with interest
payable under the preceding clause (i).
ARTICLE VIII
MISCELLANEOUS
8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
8.2. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
duly authorized by and signed on behalf of such party.
8.3. Notices.
(a) Any notice or communication to any party hereto shall
be duly given if in writing and delivered in person, by facsimile (with receipt
electronically acknowledged) or by overnight air courier guaranteeing next day
delivery, to such other party's address.
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If to Parent:
ADC Telecommunications, Inc.
12501 Whitewater Drive
Minnetonka, Minnesota
Telephone No.: (952) 946-8080
Facsimile No.: (952) 946-3209
Attention: General Counsel
with a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
Telephone No.: (612) 340-2600
Facsimile No.: (612) 340-8738
Attention: Robert A. Rosenbaum, Esq.
If to the Company:
Centigram Communications Corporation
91 East Tasman Drive
San Jose, California 95134
Telephone No.: (408) 944-0250
Facsimile No.: (408) 432-2645
Attention: President and Chief Executive Officer
with copies to:
Sutherland Asbill & Brennan LLP
999 Peachtree Street
Atlanta, Georgia 30309
Telephone No.: (404) 853-8000
Facsimile No.: (404) 853-8806
Attention: Thomas C. Herman, Esq.
and to:
Centigram Communications Corporation
91 East Tasman Drive
San Jose, California 95134
Telephone No.: (408) 944-0250
Facsimile No.: (408) 432-2645
Attention: Senior Director of Legal Affairs
46
<PAGE> 110
(b) All notices and communications will be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
sent, if sent by facsimile and receipt is electronically confirmed; and one
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
8.4. Counterparts. This Agreement may be executed via facsimile in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.5. Interpretation. The language used in this Agreement and the
other agreements contemplated hereby shall be deemed to be the language chosen
by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. The headings of articles and
sections herein are for convenience of reference, do not constitute a part of
this Agreement, and shall not be deemed to limit or affect any of the provisions
hereof. As used in this Agreement, "Person" means any individual, corporation,
limited liability company, limited or general partnership, joint venture,
association, joint stock company, trust, unincorporated organization or other
entity; "Knowledge" means the actual knowledge of a director or any executive
officer of the applicable party or any of its Subsidiaries, and with respect to
the Company, any employee who has an executive change in control agreement with
Company, the Company's Chief Scientist and the Senior Director of Legal Affairs,
as such knowledge has been obtained by such person in the normal conduct of the
business; and all amounts shall be deemed to be stated in U.S. dollars, unless
specifically referenced otherwise.
8.6. Amendment. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall not be made any amendment that by law
requires further approval by such stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
8.7. No Third Party Beneficiaries. Except for the provisions of
Section 5.10 hereof (which is intended to be for the benefit of the persons
referred to therein, and may be enforced by such persons) nothing in this
Agreement shall confer any rights upon any person or entity which is not a party
or permitted assignee of a party to this Agreement.
8.8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
8.9. Entire Agreement. This Agreement (together with the Exhibits
and the Company Disclosure Letter, and the other documents delivered pursuant
hereto or contemplated hereby) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, in each case other than the
Confidentiality Agreement.
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<PAGE> 111
8.10. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties 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.
* * * * *
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<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be executed by their duly authorized officers all as of the
day and year first above written.
ADC TELECOMMUNICATIONS, INC.
By: /s/ LARRY J. FORD
------------------------------------------
Larry J. Ford
Senior Vice President and President of
Integrated Solutions Group
POUNDSTONE ACQUISITION CORP.
By: /s/ LARRY J. FORD
------------------------------------------
Larry J. Ford
President
CENTIGRAM COMMUNICATIONS
CORPORATION
By: /s/ ROBERT L. PUETTE
------------------------------------------
Robert L. Puette
President and Chief Executive
Officer
<PAGE> 113
EXHIBIT A
CERTIFICATE OF MERGER
MERGING
POUNDSTONE ACQUISITION CORP.
WITH AND INTO
CENTIGRAM COMMUNICATIONS CORPORATION
Pursuant to Section 251 of the General Corporation Law of
the State of Delaware
Poundstone Acquisition Corp., a Delaware corporation ("Merger Sub"),
and Centigram Communications Corporation, a Delaware corporation ("Company"), DO
HEREBY CERTIFY AS FOLLOWS:
FIRST: That Merger Sub was incorporated on May 25, 2000, pursuant to
the Delaware General Corporation Law (the "Delaware Law"), and that Company was
incorporated on _______, 19__ pursuant to the Delaware Law.
SECOND: That an Agreement and Plan of Merger dated as of June 9, 2000
(the "Merger Agreement"), among ADC Telecommunications, Inc., a Minnesota
corporation, Merger Sub and Company, setting forth the terms and conditions of
the merger of Merger Sub with and into Company (the "Merger"), has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Section 251 of the Delaware Law.
THIRD: That the name of the surviving corporation (the "Surviving
Corporation") shall be Centigram Communications Corporation.
FOURTH: That, pursuant to the Merger Agreement, the Restated
Certificate of Incorporation of the Surviving Corporation is amended to read in
its entirety as set forth in Exhibit A hereto.
FIFTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
-------------------------
-------------------------
Attention: Secretary
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: That the Merger shall become effective immediately upon the
filing of this Certificate with the Office of the Secretary of State of the
State of Delaware.
<PAGE> 114
IN WITNESS WHEREOF, each of Merger Sub and Company has caused this
Certificate of Merger to be executed in its corporate name this
____________________________ day of , 2000.
POUNDSTONE ACQUISITION CORP.
By
-----------------------------------
CENTIGRAM COMMUNICATIONS
CORPORATION
By
-----------------------------------
[SIGNATURE PAGE TO CERTIFICATE OF MERGER]
<PAGE> 115
EXHIBIT A TO CERTIFICATE OF MERGER
RESTATED CERTIFICATE OF INCORPORATION
OF
CENTIGRAM COMMUNICATIONS CORPORATION
ARTICLE 1.
The name of this corporation is Centigram Communications
Corporation.
ARTICLE 2.
The purpose of this corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
ARTICLE 3.
The registered office of this corporation in Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801, and the name of its registered agent is The Corporation Trust
Company.
ARTICLE 4.
The total number of shares of stock which this corporation is
authorized to issue is 1,000 common shares, $.0001 per share par value.
ARTICLE 5.
Elections of directors need not be by written ballot except
and to the extent provided in the bylaws of the corporation.
ARTICLE 6.
In furtherance, and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized to make, amend,
alter, change, add to or repeal bylaws of this corporation, without any action
on the part of the stockholders. The bylaws made by the directors may be
amended, altered, changed, added to or repealed by the stockholders. Any
specific provision in the bylaws regarding amendment thereof shall be
controlling.
ARTICLE 7.
A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that this article shall not
eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) for the unlawful payment of dividends or unlawful
stock repurchases under Section 174 of the Delaware General Corporation Law; or
(d) for any transaction from which the director derived an improper personal
<PAGE> 116
benefit. This article shall not eliminate or limit the liability of a director
for any act or omission occurring prior to the effective date of this article.
If the Delaware General Corporation Law is hereafter amended
to authorize any further limitation of the liability of a director, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as amended.
Any repeal or modification of the foregoing provisions of this
article by the stockholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
ARTICLE 8.
The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the Delaware General Corporation Law, as the same
may be amended and supplemented, provide indemnification of (and advancement of
expenses to) any and all persons whom it shall have the power to indemnify under
said section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled through bylaw provisions, agreements with such
agents or persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the General Corporation Law of the State of Delaware, subject only to
limits created by applicable Delaware law (statutory or non-statutory).
Any repeal or modification of any of the foregoing provisions
of this Article 8 shall not adversely affect any right or protection of a
director, officer, agent or other person existing at the time of, or increase
the liability of any directors of this corporation with respect to any acts or
omissions of such directors, officer or agent occurring prior to such repeal or
modification.
<PAGE> 117
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement) is made and entered into
as of _________ __, 2000, by and among ADC Telecommunications, Inc., a Minnesota
corporation ("Parent"), Centigram Communications Corporation, a Delaware
corporation (the "Company"), Norwest Bank Minnesota, N.A., as escrow agent (the
"Escrow Agent"), and _____________, (the "Stockholders' Representative").
WHEREAS, Parent, Poundstone Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of Parent ("Merger Sub"), and the Company entered
into an Agreement and Plan of Merger (the "Merger Agreement") dated as of June
9, 2000 pursuant to which the Merger Sub will be merged with and into the
Company (the "Merger"), the separate existence of the Merger Sub will cease, and
the Company will continue as the surviving corporation (the Company, in its
capacity as the corporation surviving the Merger, is referred to herein as the
"Surviving Corporation"). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Merger Agreement;
WHEREAS, the Merger Agreement requires that if (i) any shares of
Receivership Stock have not been returned to the Company or have been ordered by
a court of competent jurisdiction to be returned to the Bancorp Receiver as of
the Effective Time or (ii) the Appeal Period remains open or an appeal of the
Final Order has been filed and remains pending at the Effective Time, Parent
shall deposit into an escrow account with Escrow Agent the aggregate Per Share
Amount payable with respect to such shares of Receivership Stock pursuant to
Section 2.1(b) of the Merger Agreement (the "Escrow Amount") until such time as
all shares of Receivership Stock have been returned to the Surviving
Corporation, the Appeal Period has terminated and all pending appeals, if any,
have been resolved; and
WHEREAS, this Escrow Agreement sets forth the basis on which the Escrow
Agent will receive and hold, and make disbursements from, the Escrow Amount and
the duties for which the Escrow Agent will be responsible.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. Appointment and Agreement of Escrow Agent. Parent, Company and
Stockholders' Representative hereby appoint and designate Norwest Bank
Minnesota, N.A. as the Escrow Agent, and Norwest Bank Minnesota, N.A. hereby
accepts such appointment and agrees to perform the duties of the Escrow Agent
under the terms and conditions set forth herein.
2. Merger Agreement Not Limited by this Escrow Agreement. The
Merger Agreement and the procedures contained therein are not limited by this
Escrow Agreement. Notwithstanding any express provision of this Escrow Agreement
to the contrary, in the event
<PAGE> 118
this Escrow Agreement is unclear, silent or in conflict with the Merger
Agreement, reference shall be made to the Merger Agreement and the Merger
Agreement shall control.
3. Deposit of Escrow Amount. Promptly after the Effective Time,
Parent shall deposit into an escrow account an amount in cash equal to the
Escrow Amount. The Escrow Agent shall hold the Escrow Amount in escrow on behalf
of the parties hereto. The Escrow Amount shall be held and invested by the
Escrow Agent in such investments as shall be directed in accordance with the
instructions set forth in Schedule A attached hereto (the "Permitted
Investments"), and shall be treated by the Escrow Agent as a trust fund in
accordance with the terms hereof. The Escrow Agent agrees to disburse the Escrow
Amount, including the interest earned thereon, in accordance with the terms and
procedures set forth in this Escrow Agreement and the Merger Agreement.
4. Escrow Period; Termination. Subject to the following
requirements, the Escrow Amount shall be held in escrow until such time as the
Escrow Agent shall be notified by Parent and the Stockholders' Representative
that all shares of Receivership Stock have been returned to the Surviving
Corporation and canceled, the Appeal Period has terminated and all pending
appeals, if any, have been resolved (the "Escrow Period"). At the termination of
the Escrow Period, the Escrow Agent shall deliver to the former stockholders of
the Company the portion of the Escrow Amount not required to reimburse Parent or
the Surviving Corporation for the amount paid to cause the return of the
Receivership Stock, as set forth in greater detail in Section 5 below. The
Escrow Agent shall be entitled to rely on the letters of transmittal received by
the Disbursement Agent for purposes of distributing funds from the Escrow Amount
to the former stockholders of the Company.
5. Procedures for Disbursements. Parent and the Stockholders'
Representative shall notify the Escrow Agent in writing (a "Release
Certificate"), (a) that all shares of Receivership Stock have been returned to
the Surviving Corporation and canceled, (b) the amount paid after the Effective
Time by Parent, the Surviving Corporation or an affiliate thereof plus Parent or
the Surviving Corporation's out-of-pocket costs, including the reasonable fees
and expenses of legal counsel and other advisors, incurred to cause such return
(including the resolution of any appeal) (the "Offset Amount"), and (c) the
calculation of the Escrow Per Share Amount. Subject to payment of all
outstanding fees of Escrow Agent pursuant to Section 6.3 hereof, the Escrow
Agent shall release and promptly disburse to Parent from the Escrow Fund the
Offset Amount (plus any amount to be reimbursed to Parent pursuant to Section
6.3) together with the interest earned on such amount while held by the Escrow
Agent. Additionally, if, upon resolution of all available methods of appeal by
any party, the Settlement Agreement is found to be void or unenforceable and
each of the Bancorp Receiver and Credit Bancorp Ltd. is unable or unwilling to
repay or give full credit to Parent or the Surviving Corporation for the amount
previously paid to the Bancorp Receiver to obtain the return of the Receivership
Stock, the Release Certificate shall so state and set forth the lesser of the
amount of the Receiver Payment Credit and the amount not repaid or credited to
Parent or the Surviving Corporation, which lesser amount shall be released from
the Escrow Amount and disbursed to Parent. After payment of the Offset Amount
and/or Receiver Payment Credit amount (or such lesser amount as determined in
the immediately preceding sentence) to Parent, each former holder of Company
Common Stock that
<PAGE> 119
received the Per Share Amount pursuant to Section 2.1(a) of the Merger Agreement
shall be entitled to receive an amount of cash equal to the Escrow Per Share
Amount, with the interest earned thereon while held by the Escrow Agent. Any
portion of the Escrow Amount remaining after payment of the Additional
Stockholder Payment shall be released to Parent.
6. Escrow Agent.
6.1 Indemnification of the Escrow Agent. Parent and the
Surviving Corporation jointly and severally agree to indemnify and hold the
Escrow Agent and its directors, officers and employees harmless from and against
any and all costs, charges, damages and reasonable attorneys' fees that the
Escrow Agent in good faith may incur or suffer in connection with or arising out
of this Escrow Agreement except as set forth in Section 6.7 hereof.
6.2 Duties of the Escrow Agent. The Escrow Agent shall
have no duties other than those expressly imposed on it herein and in the Merger
Agreement, and shall not be liable for any act or omission except for its own
gross negligence or willful misconduct.
6.3 Fees of the Escrow Agent. The fees and charges of the
Escrow Agent with respect to this Agreement are identified on Schedule B
attached hereto. The initial fee shall be paid by Parent, with the amount of
such initial fee reimbursed to Parent from the interest earned on the Escrow
Amount while held by Escrow Agent. The annual fees and any miscellaneous fees of
Escrow Agent shall first be deducted from the interest earned on the Escrow
Amount while held by the Escrow Agent, and second, if such interest earned is
insufficient to cover the fees of Escrow Agent, shall be paid by Parent.
6.4 Instructions to the Escrow Agent. Notwithstanding any
provision herein to the contrary, the Escrow Agent shall at any time and from
time to time take such additional actions hereunder with respect to the Escrow
Amount as shall be agreed to in writing by the Parent and the Stockholders'
Representative. In the performance of its duties hereunder, the Escrow Agent may
rely on any document reasonably believed by it to be genuine.
6.5 Resignation of the Escrow Agent. The Escrow Agent may
resign at any time by providing Parent, the Surviving Corporation and
Stockholders' Representative with 30 days' prior written notice of its intention
to do so; provided that a successor Escrow Agent has been appointed in writing
by Parent, the Surviving Corporation and Stockholders' Representative. If a
successor Escrow Agent is not appointed within the 30-day period following such
notice, the Escrow Agent may petition any court of competent jurisdiction to
name a successor Escrow Agent. The Escrow Agent's resignation shall be effective
upon delivery of the Escrow Amount to the successor Escrow Agent and upon such
successor's assumption of the obligations, rights and duties of the Escrow Agent
hereunder.
6.6 Disputes. In the event conflicting demands are made
or notices are served upon the Escrow Agent with respect to the Escrow Amount,
or there is any dispute over action to be taken or not taken by the Escrow
Agent, the Escrow Agent will have the absolute right, at the Escrow Agent's
election, to do either or both of the following: resign so a successor can be
<PAGE> 120
appointed pursuant to Section 6.5 hereof or file a suit in interpleader and
obtain an order from a court of competent jurisdiction requiring the parties to
interplead and litigate in such court their several claims and rights among
themselves. The Escrow Agent agrees that, if it files a suit in interpleader, it
shall do so in any of the state or federal courts having jurisdiction in the
State of Minnesota. In the event such interpleader suit is brought, the Escrow
Agent will thereby be fully released and discharged from all further obligations
imposed upon it under the provisions hereof, and Parent will bear the costs,
expenses and reasonable attorneys' fees expended or incurred by the Escrow Agent
pursuant to the exercise of the Escrow Agent's rights under this Section 6.6.
6.7 Liability of Escrow Agent. In order to induce the
Escrow Agent to act as Escrow Agent, the parties hereto agree that the Escrow
Agent shall not be liable for any mistake of fact or error of judgment, or for
any acts or omissions of any kind unless caused by its willful misconduct or
gross negligence.
7. Miscellaneous.
7.1 Severability. Whenever possible, each provision of
this Escrow Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Escrow Agreement is
held to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Escrow Agreement.
7.2 Assignment. This Escrow Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
permitted assigns, except that neither this Escrow Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto.
7.3 Amendment and Waiver. The provisions of this Escrow
Agreement may not be amended or waived except in a writing executed by the party
against which such amendment or waiver is sought to be enforced. No course of
dealing between or among any persons having any interest in this Escrow
Agreement will be deemed effective to modify or amend any part of this Escrow
Agreement or any rights or obligations of any person under or by reason of this
Escrow Agreement.
7.4 Notices. All notices, requests, claims, demands and
other communications to be given or delivered under or by reason of the
provisions of this Escrow Agreement shall be in writing and shall be deemed to
have been given when personally delivered, or one day after being sent by
reputable overnight delivery service, or when receipt is acknowledged, if sent
by facsimile, telecopy or other electronic transmission device. Notices, demands
and communications to any party hereto shall be sent to the address indicated
below:
<PAGE> 121
<TABLE>
<S> <C>
If to Parent and
Surviving Corporation: ADC Telecommunications, Inc.
12501 Whitewater Drive
Minnetonka, Minnesota 55343
Attention: Office of General Counsel
Fax: (952) 946-3209
With a copy to: Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Robert A. Rosenbaum
Fax: 612/340-8738
Notices to the Stockholders'
Representative:
With a copy to: -------------------------
-------------------------
Attention:
--------------
Fax:
---------------------
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
7.5 Governing Law. This Escrow Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Minnesota, without regard for its conflict of laws principles.
7.6 Counterparts. This Escrow Agreement may be executed
in one or more counterparts, each of which when so executed shall be deemed to
be an original, and any one of which need not contain the signatures of more
than one party, and all of such counterparts taken together shall constitute one
and the same instrument.
7.7 Entire Agreement. This Escrow Agreement and the
Merger Agreement constitute the entire understanding and agreement of the
parties hereto and supersede all other prior agreements and understandings,
written or oral, between or among the parties with respect to the subject matter
of this Escrow Agreement.
* * * * *
<PAGE> 122
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the day and year first above written.
ADC TELECOMMUNICATIONS, INC.
-------------------------------------
Name:
Title:
CENTIGRAM COMMUNICATIONS
CORPORATION
-------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, N.A.
-------------------------------------
Name:
Title:
[Stockholder Representative]
-------------------------------------
Name:
Title:
<PAGE> 123
SCHEDULE A
PERMITTED INVESTMENTS
<PAGE> 124
SCHEDULE B
FEES OF ESCROW AGENT
<PAGE> 125
APPENDIX B
FAIRNESS OPINION OF FIRST ANALYSIS SECURITIES CORPORATION
June 9, 2000
Board of Directors
Centigram Communications Corporation
91 East Tasman Drive
San Jose, CA 95134
Gentlemen:
We understand that Centigram Communications Corporation ("Centigram"), a
Delaware corporation, ADC Telecommunications, Inc. ("ADC"), a Minnesota
corporation, and Poundstone Acquisition Corp. ("Poundstone") a Delaware
corporation and wholly owned subsidiary of ADC, propose to enter into an
Agreement and Plan of Merger to be dated June 9, 2000 (the "Merger Agreement")
which provides, among other things, for the merger of Poundstone with and into
Centigram, pursuant to which the separate existence of Poundstone will cease,
Centigram will be the surviving corporation and be a wholly owned subsidiary of
ADC (the "Merger"). As set forth more fully in the Merger Agreement, owners of
the common stock of Centigram will receive the Per Share Amount of $23.84 in
cash per common share subject to adjustment under certain circumstances. The
terms and conditions of the Merger are more fully set forth in the Merger
Agreement.
You have asked us whether, in our opinion, the Per Share Amount as defined in
the Merger Agreement to be paid to Centigram's common stockholders pursuant to
the Merger is fair to Centigram's common stockholders from a financial point of
view.
In arriving at our opinion set forth below, we have, among other things:
(1) Reviewed the terms of the Agreement and Plan of Merger and the
associated exhibits thereto dated June 9, 2000 furnished to us
by Sutherland Asbill & Brennan LLP (which, for the purposes of
this opinion, we have assumed, with your permission, to be
identical in all material respects to the agreement to be
executed);
(2) Reviewed certain publicly available financial statements and
other information of Centigram, including Centigram's Annual
Report on Form 10-K for the fiscal year ended October 30,
1999, including the audited financial statements included
therein, the Definitive Proxy Statement and Notice of Annual
Meeting of Stockholders of Centigram dated February 18, 2000,
Centigram's Form 10-Q for the quarterly period ended January
29, 2000, including the unaudited financial statements
included therein, and Centigram's press release of May 15,
2000 regarding its unaudited financial results and balance
sheet for the second fiscal quarter 2000 ended April 29, 2000;
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(3) Reviewed certain internal financial and operating information,
including financial forecasts and projections for the fiscal
years ending October 28, 2000 and October 27, 2001, relating
to the business, earnings, cash flow, assets and prospects of
Centigram;
(4) Conducted discussions with members of the management of
Centigram concerning the operations, business strategy,
financial performance and prospects for Centigram;
(5) Discussed with the management of Centigram its view of the
strategic rationale for the Merger;
(6) Reviewed the historical market prices and trading activity of
the common stock of Centigram;
(7) Compared the results of Centigram with that of certain public
companies which we deemed to be reasonably comparable to
Centigram;
(8) Compared the financial terms of the Merger with the financial
terms of certain other precedent mergers and acquisitions of
companies we deemed to be comparable to Centigram;
(9) Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as we deemed appropriate for purposes of this
opinion, including our assessment of general economic, market,
industry, competitive, monetary and other conditions.
In rendering our opinion, we have assumed and relied, without responsibility for
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have been advised by the management of Centigram that such forecasts and
other information and data were reasonably prepared in good faith on bases
reflecting the best currently available estimates and judgments of the
management of Centigram as to the future financial performance of Centigram, and
we have relied upon Centigram to advise us promptly if any information
previously provided became inaccurate or was required to be updated during the
period of our review. We have not made or been provided with an independent
evaluation or appraisal of any assets or liabilities (contingent or otherwise)
of Centigram nor have we made any physical inspection of any properties or
assets of Centigram. Our opinion is necessarily based upon information available
to us, as of the date hereof, and any material change in such information would
require a reevaluation of this opinion.
We have been engaged to render this opinion to the Board of Directors in
connection with the Merger and will be paid a fee for such services. We have
also, from time to time, provided investment banking and other financial
services to Centigram for which we have received
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<PAGE> 127
compensation, including advising Centigram in the sale of its Customer Premise
Equipment business unit assets to Mitel Corporation in May 1998 and advising
Centigram in its purchase of the assets of The Telephone Connection, Inc. in
June 1998. In addition, Centigram has agreed to indemnify us against certain
liabilities arising out of our engagement. We are actively engaged in the
investment banking business and regularly undertake the valuation of investment
securities in connection with public offerings, private placements, business
combinations and similar transactions. We are not affiliated with and have no
conflicts of interest with any parties to the Merger Agreement. In the ordinary
course of our business, we and our affiliates may actively trade or hold the
securities of Centigram and/or ADC for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion expressed herein is provided for the information of the Board of
Directors of Centigram in their evaluation of the proposed Merger and does not
constitute a recommendation to any Company stockholder as to whether such
stockholder should tender his shares or as to how such stockholder should vote
on the Merger. Our opinion may not be published or otherwise used or referred
to, nor shall any public reference to First Analysis Securities Corporation be
made, without our prior written consent, which shall not be unreasonably
withheld. First Analysis Securities Corporation hereby consents to references
to, and the inclusion of this opinion in its entirety in the proxy statement to
be distributed to Centigram's common stockholders in connection with the Merger.
Our opinion is provided to you pursuant to the terms of our engagement letter
dated May 17, 2000.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Per Share Amount to be paid to
Centigram's common stockholders pursuant to the Merger is fair to Centigram's
common stockholders from a financial point of view.
First Analysis Securities Corporation
By: /s/ Michael Siemplenski
-----------------------------------
Michael Siemplenski
Managing Director
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<PAGE> 128
APPENDIX C
DELAWARE GENERAL CORPORATION LAW
SS.262 APPRAISAL RIGHTS - (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to s 251 (other than a merger effected
pursuant to s 251(g) of this title), s 252, s 254, s 257, s 258, s 263 or s 264
of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of s 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to ss 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
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b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under s 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be available for
the shares of any class or series of its stock as a result of an amendment to
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not constitute
such a demand. A stockholder electing to take such action must do so by a
separate written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
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(2) If the merger or consolidation was approved pursuant to s 228
or s 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with
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respect to which demands for appraisal have been received and the aggregate
number of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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REVOCABLE PROXY
CENTIGRAM COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Centigram Communications Corporation
("Centigram") hereby appoints Robert L. Puette and Thomas E. Brunton, and
each of them, with full power of substitution in each, to act as proxies to
cast all votes which the undersigned stockholder is entitled to cast at the
special meeting of stockholders to be held at 9:00 a.m. on July __, 2000 at
Centigram's offices located at 91 East Tasman Drive, San Jose, California 95134
and at any adjournments or postponements thereof, upon the following matters.
The undersigned stockholder hereby revokes any proxy or proxies heretofore
given.
When this proxy is properly executed, the shares represented hereby will
be voted as specified. If no specification is made, this proxy will be voted
for the approval of the merger agreement and, in the discretion of the proxies,
with respect to all other matters which may properly come before the meeting
and any and all adjournments thereof.
If you receive more than one proxy card, please sign and return all cards
in the accompanying envelope.
(continued and to be signed and dated on reverse side)
SEE
REVERSE SIDE
<PAGE> 134
[X]
Please mark your
vote as this.
Proposal 1: To approve and adopt the Agreement and Plan of Merger, dated as
of June 9, 2000, between Centigram Communications Corporation,
ADC Telecommunications, Inc. and Poundstone Acquisition Corp.,
and the merger contemplated thereby.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Other Matters: The proxies are authorized to vote upon such other business as
may properly come before the stockholders meeting, or any
adjournments or postponements of the meeting.
Please sign exactly as name or names
appear on this proxy. If stock is held
jointly, each holder should sign. If
signing as attorney, trustee, executor,
administrator, custodian, guardian or
corporate officer, please give full
title.
Dated: __________________________, 2000
_______________________________________
Signature
_______________________________________
Signature
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
