<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
SHIVA CORPORATION
(Name of Registrant as Specified In Its Charter)
[NAME OF PERSON FILING]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required.
[ ] 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, $.01 par value per share, of Shiva Corporation
2) Aggregate number of securities to which transaction applies:
30,422,850 shares of Shiva Corporation Common Stock, being the total
number of shares of Shiva Corporation Common Stock outstanding as of
November 4, 1998
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):
$6.00 per share, representing the purchase price set forth in the
Agreement and Plan of Merger
4) Proposed maximum aggregate value of transaction:
$182,537,100, determined by multiplying $6.00 per share times 30,422,850,
the total number of shares of Shiva Corporation Common Stock outstanding
at November 4, 1998
5) Total fee paid:
$36,507.42
[X] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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SHIVA CORPORATION
28 CROSBY DRIVE
BEDFORD, MASSACHUSETTS 01730
January 22, 1999
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Shiva Corporation (the "Company"), to be held at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, on Friday, February 26, 1999
at 9:00 a.m.
At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of October 19, 1998, by
and among the Company, Intel Corporation ("Intel") and Intel Networks,
Incorporated ("Merger Sub"), a wholly owned subsidiary of Intel, pursuant to
which Merger Sub will be merged (the "Merger") with and into the Company, and
the Company will become a subsidiary of Intel. If the Merger is consummated,
each issued and outstanding share of the Company's common stock, par value $.01
per share (the "Common Stock") (other than shares of Common Stock held by
stockholders exercising dissenters' appraisal rights), will be converted into
the right to receive $6.00 in cash, without interest.
Enclosed with this letter is a Notice of Special Meeting, Proxy Statement,
proxy card and return envelope. I urge you to read the enclosed material
carefully.
YOUR BOARD OF DIRECTORS, AFTER CAREFUL CONSIDERATION, HAS APPROVED THE
MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS, AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
In arriving at its recommendation, your Board of Directors gave careful
consideration to a number of factors described in the attached Proxy Statement,
including, among other things, the opinion of its investment banker, Lazard
Freres & Co. LLC, dated as of October 18, 1998, to the effect that, as of such
date, the $6.00 in cash per share to be received by the holders of Common Stock
pursuant to the Merger Agreement is fair to such stockholders from a financial
point of view. A copy of the full text of the opinion, which sets forth, among
other things, the assumptions made, procedures followed, matters considered and
the limitations on the scope of the review undertaken by Lazard Freres in
rendering such opinion, is attached as Annex B to the Proxy Statement.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION OF LAZARD FRERES
CAREFULLY AND IN ITS ENTIRETY IN CONJUNCTION WITH THE PROXY STATEMENT.
Your vote is important. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the accompanying proxy card and return
it in the enclosed prepaid envelope as soon as possible. If you attend the
Special Meeting, you may vote your shares in person, even if you have previously
submitted a proxy card, except in the event your shares are held in "street
name." Shares held in "street name," meaning, generally, shares held by a broker
for the account of a customer, will require your broker's consent to be voted at
the Special Meeting. APPROVAL OF THE MERGER AGREEMENT AND THE MERGER REQUIRES
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF THE COMPANY'S
COMMON STOCK AND, AS A RESULT, A FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER.
Your continued support of and interest in Shiva is greatly appreciated.
Sincerely,
/s/ James L. Zucco, Jr.
-----------------------------------
James L. Zucco, Jr.
President, Chief Executive Officer
and Chairman of the Board
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SHIVA CORPORATION
28 CROSBY DRIVE
BEDFORD, MASSACHUSETTS 01730
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1999
January 22, 1999
To the Stockholders of
Shiva Corporation:
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of Shiva Corporation (the "Company") will be held at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, on Friday,
February 26, 1999 at 9:00 a.m. for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of October 19,
1998, by and among the Company, Intel Corporation ("Intel") and Intel
Networks, Incorporated ("Merger Sub"), a wholly owned subsidiary of
Intel, pursuant to which (a) Merger Sub will be merged (the "Merger")
with and into the Company, and the Company will become a subsidiary of
Intel and (b) each issued and outstanding share of the Company's common
stock, par value $.01 per share (the "Common Stock") (other than shares
of Common Stock held by stockholders exercising dissenters' appraisal
rights), will be converted into the right to receive $6.00 in cash,
without interest, and to approve and adopt the Merger. A copy of the
Merger Agreement is included as Annex A to the attached Proxy Statement
and is incorporated herein by reference.
2. To transact such other business as may properly be brought before the
Special Meeting or at any adjournments thereof.
The proposed Merger and other related matters are more fully described in
the attached Proxy Statement and the Annexes thereto.
The close of business on January 18, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Special Meeting and any adjournments or postponements thereof. Only holders of
record of Common Stock on the record date are entitled to vote at the Special
Meeting.
If the Merger is approved by the stockholders at the Special Meeting and
effected by the Company and the other parties to the Merger Agreement, any
stockholder (i) who files with the Company before the taking of the vote on the
approval of the Merger, written objection to the proposed Merger stating that
he, she or it intends to demand payment for his, her or its shares if the Merger
is consummated and (ii) whose shares are not voted in favor of the Merger has or
may have the right to demand in writing from the Surviving Corporation (as
defined in the attached Proxy Statement), within twenty days after the date of
mailing to him, her or it of notice in writing that the Merger has become
effective, payment for his, her or its shares and an appraisal of the value
thereof. The Surviving Corporation and any such stockholder shall in such cases
have the rights and duties and shall follow the procedure set forth in Sections
88 to 98, inclusive, of Chapter 156B of the Massachusetts General Laws, a copy
of which is included as Annex C to the attached Proxy Statement. For a
discussion of the procedures to be followed in asserting dissenters' appraisal
rights in connection with the proposed Merger, see "APPRAISAL RIGHTS" in the
accompanying Proxy Statement.
The affirmative vote of a majority of the outstanding shares of Common
Stock is required to approve the Merger Agreement and the Merger.
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YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE WITHOUT DELAY. ANY
STOCKHOLDER PRESENT AT THE SPECIAL MEETING MAY VOTE PERSONALLY ON EACH MATTER
BROUGHT BEFORE THE SPECIAL MEETING AND ANY PROXY GIVEN BY A STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. PLEASE DO NOT SEND ANY CERTIFICATES
FOR YOUR SHARES AT THIS TIME.
By Order of the Board of Directors,
/s/ M. Elizabeth Potthoff
-----------------------------
M. Elizabeth Potthoff
Clerk
January 22, 1999
-- IMPORTANT --
If your shares are held in "street name," only your bank or broker can vote
your shares. Please contact the person responsible for your account and instruct
him or her to complete, sign, date and return the enclosed proxy card as soon as
possible.
If you have any questions or need further assistance in voting your shares,
please call Morrow & Company, Inc., which is assisting the Company in soliciting
proxies, at (212) 754-8000.
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SHIVA CORPORATION
28 CROSBY DRIVE
BEDFORD, MASSACHUSETTS 01730
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1999
This Proxy Statement is being furnished to the stockholders of Shiva
Corporation, a Massachusetts corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board")
from holders of outstanding shares of common stock, par value $.01 per share, of
the Company (the "Common Stock") for use at the Special Meeting of Stockholders
to be held at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109 on Friday, February 26, 1999 at 9:00 a.m., and at any
adjournments thereof (the "Special Meeting"). This Proxy Statement and the
related proxy card are first being mailed to stockholders on or about January
22, 1999.
At the Special Meeting, holders of the Common Stock (the "Stockholders")
will consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of October 19, 1998, by and
among the Company, Intel Corporation ("Intel") and Intel Networks, Incorporated
("Merger Sub"), a wholly owned subsidiary of Intel, pursuant to which (a) Merger
Sub will be merged (the "Merger") with and into the Company, and the Company
will become a subsidiary of Intel and (b) each issued and outstanding share of
Common Stock (other than shares of Common Stock held by Stockholders exercising
dissenters' appraisal rights) will be converted into the right to receive $6.00
in cash, without interest, and to approve and adopt the Merger.
Consummation of the Merger is conditioned upon, among other things,
approval and adoption of the Merger Agreement by the requisite vote of the
Stockholders and the receipt of certain regulatory approvals and consents. The
Special Meeting may be postponed or adjourned until the requisite vote is
obtained. The Company currently anticipates that the closing of the Merger will
occur on the date of, or the business day immediately following, the date on
which the Stockholders approve the Merger Agreement. There can be no assurance
that the conditions to the Merger will be satisfied or, where permissible,
waived or that the Merger will be consummated. For further information
concerning the terms and conditions of the Merger, see "THE MERGER AGREEMENT."
A copy of the Merger Agreement is attached hereto as Annex A and is
incorporated herein by reference. The summaries of the portions of the Merger
Agreement set forth in this Proxy Statement do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, the text of
the Merger Agreement.
THE BOARD OF DIRECTORS, AFTER CAREFUL CONSIDERATION, HAS APPROVED THE
MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS, AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Proxy Statement,
including, among other things, the opinion of its investment banker, Lazard
Freres & Co. LLC ("Lazard Freres"), dated as of October 18, 1998, to the effect
that, as of such date, the $6.00 in cash per share to be received by the holders
of Common Stock pursuant to the Merger Agreement was fair to such stockholders
from a financial point of view. A copy of the full text of the opinion, which
sets forth, among other things, the assumptions made, procedures followed,
matters considered and the limitations on the scope of the review undertaken by
Lazard Freres in rendering such opinion, is attached hereto as Annex B.
Stockholders are urged to, and should, read the opinion of Lazard Freres
carefully and in its entirety in conjunction with the Proxy Statement.
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In connection with the Merger, dissenters' appraisal rights will be
available to those Stockholders who meet and comply with the requirements of
Sections 85 to 98 of Chapter 156B of the Massachusetts General Laws (the
"Massachusetts Business Corporation Law" or the "Massachusetts BCL"). A copy of
Sections 85 to 98 of the Massachusetts BCL is attached hereto as Annex C. For a
discussion of the procedures to be followed in asserting appraisal rights under
Sections 85 to 98 of the Massachusetts BCL in connection with the Merger, see
"APPRAISAL RIGHTS."
Pursuant to the Company's By-laws, stockholder proposals for the Special
Meeting must be received by the Clerk of the Company at the principal offices of
the Company by no later than February 1, 1999. Any stockholder proposal must
also comply with the other applicable provisions of the Company's Articles of
Organization and By-laws, as well as the Exchange Act. No stockholder proposal
will be considered at the Special Meeting unless it is presented in accordance
with the foregoing requirements.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION OF PROXIES MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OTHER PERSON.
The date of this Proxy Statement is January 22, 1999
2
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TABLE OF CONTENTS
PAGE
----
SUMMARY..................................................... 5
The Special Meeting....................................... 5
The Parties............................................... 5
Recommendation of the Board of Directors and Reasons for
the Merger............................................. 6
Opinion of Lazard Freres & Co. LLC........................ 7
The Merger Agreement...................................... 7
Interests of Certain Persons in the Merger................ 8
Regulatory Approval....................................... 9
Surrender of Stock Certificates........................... 9
Tax Consequences of the Merger............................ 9
Accounting Treatment...................................... 9
Appraisal Rights.......................................... 9
Certain Financial Information............................. 9
Market Prices............................................. 9
VOTING AND PROXIES.......................................... 10
Record Date and Voting.................................... 10
Vote Required; Revocability of Proxies.................... 10
Solicitation of Proxies................................... 10
THE PARTIES................................................. 12
The Company............................................... 12
Intel..................................................... 12
Merger Sub................................................ 12
THE MERGER.................................................. 13
General................................................... 13
Background of the Merger.................................. 13
Reasons for the Merger and Board Recommendation........... 14
Opinion of Lazard Freres & Co. LLC........................ 16
Accounting Treatment...................................... 19
THE MERGER AGREEMENT........................................ 20
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 25
REGULATORY APPROVAL......................................... 26
TAX CONSEQUENCES TO STOCKHOLDERS............................ 27
APPRAISAL RIGHTS............................................ 27
CERTAIN LITIGATION.......................................... 29
SELECTED CONSOLIDATED FINANCIAL INFORMATION................. 31
MARKET PRICES AND DIVIDENDS................................. 32
CERTAIN PER SHARE DATA...................................... 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 33
AVAILABLE INFORMATION....................................... 34
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 34
3
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PAGE
----
INDEPENDENT ACCOUNTANTS..................................... 35
STOCKHOLDER PROPOSALS....................................... 35
OTHER MATTERS............................................... 36
Annex A -- Agreement and Plan of Merger, dated as of October 19, 1998,
by and among Shiva Corporation, Intel Corporation and Intel
Networks, Incorporated.
Annex B -- Opinion of Lazard Freres & Co. LLC.
Annex C -- Sections 85 to 98 of Chapter 156B of the Massachusetts
General Laws.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this Proxy
Statement, in the attached annexes and in the documents incorporated herein by
reference. Stockholders are urged to read carefully this Proxy Statement,
including the annexes hereto, in its entirety.
THE SPECIAL MEETING
Purpose of the Special Meeting; Date, Time and Place. The Special Meeting
of Stockholders will be held at the offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts 02109 on Friday, February 26, 1999 at 9:00 a.m. At
the Special Meeting, the holders of shares of Common Stock will consider and
vote upon the approval and adoption of the Merger Agreement and the Merger.
Upon the consummation of the Merger, each issued and outstanding share of
Common Stock (other than shares of Common Stock held by Stockholders exercising
dissenters' appraisal rights) (see "APPRAISAL RIGHTS"), will be cancelled,
extinguished and converted automatically into the right to receive $6.00 in
cash, without interest (the "Merger Consideration").
Record Date and Voting. The close of business on January 18, 1999 has been
fixed as the record date (the "Record Date") for the determination of
Stockholders entitled to notice of, and to vote at, the Special Meeting. Only
holders of record of Common Stock at the close of business on the Record Date
will be entitled to vote at the Special Meeting. At the Record Date, 30,532,299
shares of Common Stock were issued and outstanding, each of which will be
entitled to one vote on each matter to be acted upon at the Special Meeting.
Vote Required. A majority of the outstanding shares of Common Stock
entitled to vote, represented in person or by proxy, is required for a quorum at
the Special Meeting. Approval and adoption of the Merger Agreement and the
Merger requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock as of the Record Date. Abstentions may be
specified with respect to the approval and adoption of the Merger Agreement and
the Merger and will be counted as present for the purpose of determining the
existence of a quorum but will have the effect of a vote against the proposal
due to the requirement of affirmative votes described in the preceding sentence.
In addition, shares held in "street name" by brokers or nominees who indicate on
their proxies that they do not have discretionary authority to vote such shares
will also have the effect of a vote against the Merger Agreement and the Merger.
Revocability of Proxies. Any Stockholder may revoke a proxy at any time
before it is voted by filing with the Clerk of the Company an instrument
revoking the proxy or by returning a duly executed proxy bearing a later date,
or by attending the Special Meeting and voting in person. Any such filing should
be sent to Shiva Corporation, 28 Crosby Drive, Bedford, MA 01730; Attention:
Clerk. Attendance at the Special Meeting will not by itself constitute
revocation of a proxy.
Solicitation of Proxies. In addition to the solicitation of proxies by use
of the mails, proxies may also be solicited by the Company and its directors,
officers and employees (who will receive no additional compensation therefor) by
telephone, telegram, facsimile transmission and other electronic communication
methods or personal interview. The Company will reimburse banks, brokerage
houses, custodians and other fiduciaries who hold shares of Common Stock in
their name or custody, or in the name of nominees for others, for their
out-of-pocket expenses incurred in forwarding copies of the proxy materials to
those persons for whom they hold such shares. The Company will bear the costs of
the Special Meeting and of soliciting proxies therefor. The Company has retained
Morrow & Company, Inc., an independent proxy solicitation firm, to assist in the
solicitation of proxies. See "VOTING AND PROXIES."
THE PARTIES
Shiva Corporation. The Company is a Massachusetts corporation with its
principal executive offices located at 28 Crosby Drive, Bedford, Massachusetts
01730. Its telephone number is (781) 687-1000. The
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Company designs, develops, manufactures and sells hardware and software products
that enable remote connectivity to enterprise networks from locations having
access to analog or digital telephone service or a connection to a public data
network such as the Internet. The Company has applied its expertise in
internetworking, personal computer ("PC") software and telephony to pioneer the
"remote node" approach to remote network access. The Company's remote access
solutions enable a remote PC to access an existing network as a fully functional
network node, thereby allowing users to access network resources from their
remote PCs as if they were directly connected to their corporate network. The
Company's servers enable users to connect to computing resources from home,
while traveling, or as part of a branch office or multi-user worksite.
Intel Corporation. Intel is a Delaware corporation with its principal
executive offices located at 2200 Mission College Boulevard, Santa Clara,
California 95052-8119. Its telephone number is (408) 765-8080. Intel designs,
develops, manufactures and markets computer components and related products at
various levels of integration. Intel's principal components consist of
silicon-based semiconductors etched with complex patterns of transistors. Many
of these integrated circuits can perform the functions of millions of individual
transistors, diodes, capacitors and resistors.
Intel Networks, Incorporated. Merger Sub is a Massachusetts corporation
with its principal executive offices located at 2200 Mission College Boulevard,
Santa Clara, California 95052-8119. Its telephone number is (408) 765-8080.
Merger Sub is a wholly owned subsidiary of Intel organized for the purpose of
consummating the Merger and has not conducted any unrelated activities since its
organization in October 1998.
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REASONS FOR THE MERGER
Approval by Board. The Board of Directors of the Company, at a special
meeting held on October 18, 1998, approved the Merger Agreement and the Merger
and directed that the Merger Agreement be submitted to the holders of Common
Stock for approval and adoption. THE BOARD OF DIRECTORS, AFTER CAREFUL
CONSIDERATION, HAS APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER
IS FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS, AND RECOMMENDS THAT
YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
Advantages and Disadvantages to Stockholders. In reaching its decision to
approve the Merger Agreement and the Merger, the Company's Board of Directors
considered a number of factors, including the following: (i) the price to be
received by the Stockholders in the Merger represents a premium over the trading
price on the last trading day prior to public announcement of the Merger
Agreement; (ii) the Company's industry has become subject to increased
competition; (iii) the Company's industry has been, and may continue to be,
affected by rapid technological change, and the Company's future success in the
Virtual Private Network ("VPN") market is uncertain; (iv) the Board received an
opinion of its financial advisor that, as of the date thereof, the cash to be
received by the Stockholders in the Merger is fair to such holders from a
financial point of view; (v) the Board believes Intel is in a strong position to
optimize the value of the Company and to reflect that in the price paid to the
Stockholders in the Merger, and the Company cannot be certain that any
alternative transactions would be available; (vi) the Merger Agreement permits
the Board, in the exercise of its fiduciary duties, to terminate the Merger
Agreement and consider other alternatives in certain situations; (vii) the
likelihood of consummating the Merger; and (viii) the Merger cannot be
consummated unless approved by a majority of the outstanding shares of Common
Stock. The Board also considered negative factors that did not support its
determination that the Merger is fair to the Stockholders and its recommendation
that the Stockholders approve the Merger. Such factors included (i) the risk
that the Merger would not be consummated and the effect of the public
announcement of the Merger on the Company's sales, relationships with customers,
suppliers and employees, and operating results, (ii) the possibility that the
Company's future operating results would result in an increase in the market
price of the Common Stock above the price proposed to be paid to Stockholders in
the Merger, and (iii) the possibility of another party in the future offering to
pay a higher price than the price proposed to be paid by Intel. Taking into
account the degree of likelihood of such factors, the Company's Board concluded
that these factors were outweighed by the potential benefits to be gained by the
Merger. For a more detailed discussion of the factors
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considered by the Board in reaching its determination, see "THE MERGER --
Background of the Merger" and "-- Reasons for the Merger and Board
Recommendation."
Failure to Approve the Merger. In the event the Stockholders fail to
approve the Merger, in light of the factors summarized above, the Company is
unable to predict whether it will be able to successfully compete in its market
and grow or sustain its business. In addition, any failure of the Company to
compete successfully in the VPN market could have a material adverse effect on
the Company's business, financial condition and results of operations.
OPINION OF LAZARD FRERES & CO. LLC
In reaching its determination, the Board of Directors considered a number
of factors described herein, including, among other things, the opinion of its
investment banker, Lazard Freres, dated as of October 18, 1998, to the effect
that, as of such date, the $6.00 in cash per share to be received by the holders
of Common Stock pursuant to the Merger Agreement was fair to such stockholders
from a financial point of view. A copy of the full text of the opinion, which
sets forth, among other things, the assumptions made, procedures followed,
matters considered and the limitations on the scope of the review undertaken by
Lazard Freres in rendering such opinion, is attached hereto as Annex B and is
incorporated herein by reference. The opinion addresses only the fairness of the
consideration to be received by the holders of Common Stock pursuant to the
Merger Agreement from a financial point of view as of the date of such opinion,
and does not address any other aspect of the Merger or constitute a
recommendation to any holder of Common Stock as to how to vote with respect to
the Merger. The summary of the opinion set forth in this Proxy Statement does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the full text of the opinion. STOCKHOLDERS ARE URGED TO, AND
SHOULD, READ THE OPINION OF LAZARD FRERES CAREFULLY AND IN ITS ENTIRETY IN
CONJUNCTION WITH THIS PROXY STATEMENT. See "THE MERGER -- Opinion of Lazard
Freres & Co. LLC."
THE MERGER AGREEMENT
The Merger. Merger Sub will be merged with and into the Company, and the
Company will continue as the Surviving Corporation (the "Surviving
Corporation"). In the Merger, each issued and outstanding share of Common Stock
(other than shares of Common Stock held by Stockholders exercising dissenters'
appraisal rights) will be converted into the right to receive $6.00 in cash,
without interest. See "THE MERGER AGREEMENT -- The Merger."
Representations and Warranties; Conduct of Business Pending the
Merger. The Merger Agreement contains various representations and warranties of
the parties. The Merger Agreement also contains provisions concerning the
conduct of the business of the Company pending the merger, including that the
Company will conduct is business in the usual and ordinary course. See "THE
MERGER AGREEMENT -- Representations and Warranties."
Conditions to the Merger. The obligation of each of the Company, Intel and
Merger Sub to consummate the Merger is subject to certain conditions, including
(i) the approval of the Merger by the Stockholders, (ii) the receipt of required
governmental consents and approvals, (iii) the absence of a governmental order
restraining or prohibiting the Merger, (iv) the continued truth of the
representations and warranties contained in the Merger Agreement, and (v)
compliance with obligations to be performed prior to the Merger. See "REGULATORY
APPROVAL" and "THE MERGER AGREEMENT -- Conditions to the Merger."
No Solicitation; Fiduciary Duties. Prior to the Merger, the Company and
its subsidiaries, employees, directors and certain other parties generally may
not directly or indirectly initiate, solicit or encourage, or otherwise
facilitate any inquiries or provide information in respect of, and the Board of
Directors generally may not withdraw its recommendation of the Merger or
approve, recommend, or cause the Company to enter into any agreement with
respect to, an acquisition of the Company by any party other than Intel unless
reasonably likely to be required as a result of the Board of Directors'
fiduciary duties to the Stockholders. The
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Company must notify Intel if it receives from a third party an inquiry, or a
request for confidential information, concerning a potential acquisition. See
"THE MERGER AGREEMENT -- Third Party Acquisition."
Termination. The Merger Agreement generally may be terminated at any time
prior to the Effective Time of the Merger (the "Effective Time") as follows: (i)
by mutual consent of the Company and Intel; (ii) by either Intel or the Company
if (a) a governmental order restrains or prohibits the Merger or (b) the
Stockholders fail to approve the Merger; (iii) by the Company if (a) the Company
enters into an acquisition agreement with a third party with terms superior to
those of the Merger, provided the Company complies with all of the requirements
set forth in the Merger Agreement with respect thereto, (b) Intel breaches the
Merger Agreement or (c) the Merger is not consummated by March 31, 1999; or (iv)
by Intel if (a) the Board of Directors of the Company withdrawals or adversely
modifies its recommendation of the Merger, (b) the Company breaches the Merger
Agreement or (c) the Merger is not consummated by March 31, 1999. In certain
circumstances, upon a termination of the Merger Agreement the Company must
reimburse Intel for its out-of-pocket costs and expenses and/or pay Intel a
termination fee of $5,450,000. See "THE MERGER AGREEMENT -- Third Party
Acquisition" and "-- Termination."
Assumption of Options. All outstanding options to purchase Common Stock of
the Company will be assumed by Intel (the "Assumed Options"), other than (i)
options outstanding under the Company's 1994 Non-Employee Director Stock Option
Plan and other options held by the Company's non-employee directors, which will
terminate upon the Merger unless exercised prior thereto, and (ii) options held
by certain of the Company's executive officers and other key employees, who will
cancel their existing options and receive new option grants (the "New Options")
as described under "INTERESTS OF CERTAIN PERSONS IN THE MERGER." The exercise
price of the Assumed Options will not be greater than the fair market value of
the Intel Common Stock on the Closing Date. Intel has also agreed to grant new
Intel options to Company employees whose employment is continued by Intel after
the Merger (the "Post-Closing Options"), provided that the total number of
options, taking into account both the Post-Closing Options and the Assumed
Options (but excluding the New Options), need not exceed 518,000. See "THE
MERGER AGREEMENT -- Assumption of Options."
Certain Employee Arrangements. Intel has agreed that employees of the
Company who receive offers of employment from Intel will receive compensation
and benefits substantially equal to similarly situated Intel employees and
receive credit for services performed for the Company under vacation, disability
and certain other benefit plans. Intel also agreed to establish a special
severance program for all Company employees. See "THE MERGER AGREEMENT --
Certain Employee Arrangements." In addition, the Company's executive officers
and certain other employees entered into arrangements with Intel as described
under "INTERESTS OF CERTAIN PERSONS IN THE MERGER."
Director and Officer Indemnification and Insurance. Intel has agreed to
provide certain indemnification and liability insurance benefits to the
Company's directors and executive officers. See "THE MERGER AGREEMENT --
Director and Officer Indemnification and Insurance."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
At the closing of the Merger (the "Closing"), all options held by the
Company's three executive officers (other than Mr. James L. Zucco, Jr., the
Company's President and Chief Executive Officer) and certain other employees
will be cancelled, and such persons will receive new Intel options, half of
which will vest approximately in accordance with the vesting schedule of the
original options and half of which will vest over a five-year period beginning
on the first anniversary of the grant date. Mr. Zucco will serve as a consultant
to Intel following the Closing. At the Closing, Mr. Zucco's options will be
cancelled, and he will receive a grant of Intel "phantom shares" with an
exercise price equal to the fair market value of Intel Common Stock on the
Closing Date that will vest if he remains as a consultant to Intel for at least
three months. Each of the other executive officers has accepted an offer of
employment with Intel and will receive a transition bonus, subject to continued
employment. Each of the Company's executive officers will be entitled to a
severance payment in the event such officer's employment with Intel is
terminated without cause within 24 months of the Merger (or longer in certain
cases). The options held by the Company's non-employee directors will not be
assumed
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by Intel and will terminate upon the Merger unless exercised prior thereto.
Certain directors of the Company own shares, or options to purchase shares, of
Intel. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER."
REGULATORY APPROVAL
The obligation of each of the Company, Intel and Merger Sub to consummate
the Merger is conditioned upon the expiration of any required waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). See "REGULATORY APPROVAL."
SURRENDER OF STOCK CERTIFICATES
Following the Closing, Stockholders will receive a letter of transmittal
with instructions for use in surrendering their stock certificates in exchange
for a cash payment. CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL IS RECEIVED.
TAX CONSEQUENCES OF THE MERGER
The receipt of cash for shares of Common Stock in the Merger or pursuant to
the exercise of dissenters' appraisal rights will be a taxable transaction for
federal income tax purposes and may also be a taxable transaction under
applicable state, local, foreign or other tax laws. Stockholders are urged to
consult their own tax advisors as to the particular tax consequences of the
Merger, including the applicability and effect of state, local, foreign and
other taxes. See "TAX CONSEQUENCES TO STOCKHOLDERS."
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for accounting purposes.
APPRAISAL RIGHTS
Stockholders who comply with the requirements of Sections 85 to 98 of the
Massachusetts BCL are entitled to dissenters' appraisal rights with respect to
their shares in connection with the Merger. A copy of the text of Sections 85 to
98 of the Massachusetts BCL is attached hereto as Annex C. See "APPRAISAL
RIGHTS."
CERTAIN FINANCIAL INFORMATION
See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" for certain financial information with respect
to the Company.
MARKET PRICES
The Common Stock is traded on the Nasdaq National Market under the symbol
"SHVA." On October 16, 1998, the date preceding public announcement of the
signing of the Merger Agreement, the high, low and closing sales prices of a
share of Common Stock reported on the Nasdaq National Market were $4.50, $3.91
and $4.25, respectively. On January 14, 1999, the latest practicable trading day
before the printing of this Proxy Statement, the high, low and closing sales
prices of a share of Common Stock reported on the Nasdaq National Market were
$5.75, $5.69 and $5.69, respectively. See "MARKET PRICES AND DIVIDENDS."
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VOTING AND PROXIES
This Proxy Statement is being furnished to Stockholders in connection with
the solicitation of proxies by or on behalf of the Board of Directors for use at
the Special Meeting.
RECORD DATE AND VOTING
The close of business on January 18, 1999 has been fixed as the Record Date
for the determination of Stockholders entitled to notice of and to vote at the
Special Meeting. At the Record Date, there were 30,532,299 shares of Common
Stock issued and outstanding and entitled to vote at the Special Meeting.
Stockholders are entitled to one vote at the Special Meeting for each share of
Common Stock held of record by them at the Record Date.
VOTE REQUIRED; REVOCABILITY OF PROXIES
A majority of the outstanding shares of Common Stock entitled to vote as of
the Record Date, represented in person or by proxy, is required for a quorum at
the Special Meeting. The affirmative vote of a majority of the shares of
outstanding Common Stock as of the Record Date is required for approval and
adoption of the Merger Agreement and the Merger. Abstentions may be specified
with respect to the approval and adoption of the Merger Agreement and the Merger
and will be counted as present for the purpose of determining the existence of a
quorum but will have the effect of a negative vote due to the requirement of
affirmative votes described in the preceding sentence.
Shares of Common Stock which are represented by properly executed proxies,
unless such proxies shall have previously been properly revoked, will be voted
in accordance with the instructions indicated in such proxies. If no contrary
instructions are indicated, such shares will be voted FOR approval and adoption
of the Merger Agreement and the Merger, and in the discretion of the persons
named in the proxy as proxy appointees, as to any other matter which may
properly come before the Special Meeting.
Shares represented by proxies that contain abstentions or broker
"non-votes" are counted as present or represented for purposes of determining
the presence or absence of a quorum for the Special Meeting. A "non-vote" occurs
when a broker or other nominee holding shares for a beneficial owner does not
vote a proposal because, with respect to such proposal, the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner.
Shares which abstain from voting as to a particular matter and broker
non-votes will not be voted in favor of such matter and will also not be counted
as votes cast or shares voting on such matter. Accordingly, abstentions and
broker non-votes will have the effect of a vote against the approval and
adoption of the Merger Agreement and the Merger.
Any holder of shares of Common Stock may revoke a proxy at any time before
it is voted by filing with the Clerk of the Company an instrument revoking the
proxy or by returning a duly executed proxy bearing a later date, or by
attending the Special Meeting and voting in person. Any such filing should be
sent to Shiva Corporation, 28 Crosby Drive, Bedford, MA 01730; Attention: Clerk.
Attendance at the Special Meeting will not by itself constitute revocation of a
proxy.
The Merger Agreement and the Merger to be considered at the Special Meeting
involve matters of great importance to the Stockholders. Accordingly,
Stockholders are urged to read and carefully consider the information presented
in this Proxy Statement, including the annexes hereto, and are urged to
complete, date, sign and promptly return the enclosed proxy card in the
accompanying prepaid envelope.
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by use of the mails, proxies may
also be solicited by the Company and its directors, officers and employees (who
will receive no additional compensation therefor) by telephone, telegram,
facsimile transmission and other electronic communication methods or personal
interview. The Company will reimburse banks, brokerage houses, custodians and
other fiduciaries who hold shares of
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<PAGE> 15
Common Stock in their name or custody, or in the name of nominees for others,
for their out-of-pocket expenses incurred in forwarding copies of the proxy
materials to those persons for whom they hold such shares. The Company will bear
the costs of the Special Meeting and of soliciting proxies therefor. The Company
has retained Morrow & Company, Inc., an independent proxy solicitation firm, to
assist in the solicitation of proxies for the Company in connection with the
Special Meeting at a cost of approximately $10,000, plus reasonable
out-of-pocket expenses. Any questions or requests for assistance regarding this
Proxy Statement and related proxy materials may be directed to Morrow & Company,
Inc. by telephone at (212) 754-8000.
STOCK CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY CARD. IF THE
MERGER IS CONSUMMATED, STOCKHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR
EXCHANGING THEIR SHARES OF COMMON STOCK FOR CASH.
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THE PARTIES
THE COMPANY
The Company is a Massachusetts corporation with its principal executive
offices located at 28 Crosby Drive, Bedford, Massachusetts 01730. Its telephone
number is (781) 687-1000. The Company designs, develops, manufactures and sells
hardware and software products that enable remote connectivity to enterprise
networks from locations having access to analog or digital telephone service or
a connection to a public data network such as the Internet. The Company has
applied its expertise in internetworking, PC software and telephony to pioneer
the "remote node" approach to remote network access. The Company's remote access
solutions enable a remote PC to access an existing network as a fully functional
network node, thereby allowing users to access network resources from their
remote PCs as if they were directly connected to their corporate network. The
Company's servers enable users to connect to computing resources from home,
while traveling, or as part of a branch office or multi-user worksite.
The Company offers a full line of remote access solutions, technical
training and services supporting telecommuters and remote offices to large
enterprise networks and to the ISPs and Carriers providing remote access to the
public data networks. The enterprise-based remote access servers, such as the
LanRover Access Switch, LanRover and ShivaIntegrator product families, enable
network managers of large networks to link telecommuters, mobile professionals
and branch offices with dial-in access to Local Area Networks ("LANs") offering
either remote node PC-to-LAN connections or LAN-to-LAN dial up connections
through both public and private telephone networks. During 1998, the Company
began offering products that allow users to connect to networks using a
telephone network or the Internet through direct-dial and virtual private
network ("VPN") technologies. The Company's technology provides LAN-based users
the ability to make dial-out connections from the desktop to the Internet or
other on-line services. Network managers can control and manage remote user
access into the enterprise-based servers with the Shiva AccessManager security
and accounting solution. Shiva AccessManager is a Windows-based application that
provides comprehensive, centralized and cost-effective remote access management.
For the remote office and smaller branch, the Company provides the Shiva
AccessPort ISDN client router and the NetModem server, as well as ShivaRemote
client software and PowerBurst remote node acceleration software for enhanced
performance. The Company also offers other communications products, such as the
ShivaPort product family of communications servers, that permit users to connect
terminals, printers, modems and other serial devices to Ethernet networks. The
Company markets its products in domestic and international markets through
indirect distribution channels to reach a wide range of customers.
INTEL
Intel is a Delaware corporation with its principal executive offices
located at 2200 Mission College Boulevard, Santa Clara, California 95052-8119.
Its telephone number is (408) 765-8080. Intel designs, develops, manufactures
and markets computer components and related products at various levels of
integration. Intel's principal components consist of silicon-based
semiconductors etched with complex patterns of transistors. Many of these
integrated circuits can perform the functions of millions of individual
transistors, diodes, capacitors and resistors.
MERGER SUB
Merger Sub is a Massachusetts corporation with its principal executive
offices located at 2200 Mission College Boulevard, Santa Clara, California
95052-8119. Its telephone number is (408) 765-8080. Merger Sub is a wholly owned
subsidiary of Intel organized for the purpose of consummating the Merger and has
not conducted any unrelated activities since its organization in October 1998.
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THE MERGER
GENERAL
The following information with respect to the Merger is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is attached hereto as Annex A. The Merger Agreement sets forth the terms
and conditions upon which the Merger is to be effected. If the Merger Agreement
is approved and adopted by the holders of a majority of the outstanding shares
of Common Stock at the Special Meeting, and all other conditions to the
obligations of the parties thereto are satisfied or waived, the Merger will be
consummated and the Company will become a wholly owned subsidiary of Intel.
Pursuant to the Merger, each issued and outstanding share of Common Stock,
other than shares of Common Stock in respect of which dissenters' appraisal
rights have been properly exercised, will be cancelled, extinguished and
converted automatically into the right to receive the Merger Consideration. As a
result of the Merger, holders of shares of Common Stock will cease to have an
equity interest in, or possess any rights as stockholders of, the Company or the
Surviving Corporation.
BACKGROUND OF THE MERGER
In July 1998, a member of the Company's Board of Directors, David B.
Yoffie, who is also a member of Intel's Board of Directors, arranged an
introductory meeting between the Company and Intel for the purpose of evaluating
the possibility of a strategic distribution alliance.
In July 1998, representatives of the Company met with representatives of
Intel to discuss a strategic alliance that would allow Intel to distribute the
Company's products in an OEM arrangement under the Intel brand name. During
August and September 1998, there were numerous additional meetings between the
Company and Intel, and the companies exchanged products for evaluation and
interoperability testing.
In July 1998, representatives of the Company met with representatives of
Lazard Freres to discuss and review recent Company and market trends and a list
of potential strategic partners for a distribution-oriented alliance. During
August and September 1998, representatives of the Company held discussions with
representatives of Lazard Freres regarding the various strategic and financial
alternatives that were available to the Company with respect to an alliance that
would give the Company access to greater distribution resources.
On September 23, 1998, representatives of the Company met with
representatives of Intel to further discuss a possible strategic alliance. At
that meeting, the parties discussed the possibility of an acquisition of the
Company.
On September 29, 1998, the Company and Intel entered into a non-disclosure
agreement.
On September 30, 1998, representatives of the Company met with
representatives of Intel to discuss in greater detail a potential merger. The
Company and Intel agreed to continue their discussions.
On October 2, 1998, management of the Company met with the Company's Board
of Directors to discuss Intel's possible interest in a merger. The Board
authorized the Company to engage Lazard Freres to represent the Company in
negotiating the financial terms of the merger. The Board of Directors also
authorized the Company to allow Intel to engage in a due diligence review of the
Company.
Between October 2 and October 5, 1998, Mr. Zucco discussed the proposed
transaction separately with each member of the Company's Board, other than Mr.
Yoffie, who did not participate in any meetings with respect to the proposed
merger.
Between October 5 and October 19, 1998, representatives of the Company and
Intel, together with their respective advisors, held numerous meetings and
teleconferences to discuss and review the Company's business, Intel's due
diligence investigation, the price, terms and conditions of the Merger Agreement
and various other legal, financial and regulatory issues.
On October 5, 1998, the Company held a meeting of the Board of Directors to
discuss the status of the merger discussions with Intel. At this meeting,
representatives of Lazard Freres presented certain financial
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<PAGE> 18
and other materials and analyses. The Board of Directors authorized management
to continue discussions with Intel.
On October 6, 1998, representatives of Lazard Freres and Intel met to
discuss timing and potential terms of a transaction with the Company including,
among others, price, form of consideration, structure of the transaction,
termination provisions and the treatment of outstanding options to purchase
Common Stock. Between October 7 and 12, 1998, representatives of Lazard Freres
had numerous telephone conversations with representatives of Intel regarding
price and terms of a potential transaction.
On October 11, 1998, Intel's legal advisors delivered a draft merger
agreement to the Company and its advisors.
On October 12, 1998, the Company's Board held a meeting via teleconference
to consider the possible acquisition of the Company by Intel. Management and the
Company's investment banker and legal advisors reviewed the status of the
discussions.
From October 13 through October 19, 1998, representatives of the Company
and Intel, together with their respective advisors, continued to discuss various
issues relating the proposed Merger and the terms of the Merger Agreement and
related documents.
On October 16, 1998, the Company's Board met to review the terms and
conditions of the proposed Merger. Representatives of Lazard Freres presented
certain financial and other analyses. Outside counsel reviewed certain legal
matters, including a detailed review of the terms of the proposed Merger
Agreement.
On October 16, 1998, the Intel Board approved the proposed Merger.
On October 18, 1998, the Company's Board held a special meeting via
teleconference to consider the Merger. The directors reviewed the terms of the
Merger. Representatives of Lazard Freres then presented various analyses of the
Merger. Following such presentation, Lazard Freres delivered to the Board its
oral opinion (subsequently confirmed in writing) that, as of such date, the
Merger Consideration was fair to the Stockholders from a financial point of
view. See "-- Opinion of Lazard Freres & Co. LLC." After discussing such
presentation and after receiving Lazard Freres' oral opinion, the Company's
Board of Directors (by the unanimous vote of the directors present) approved the
Merger Agreement and the Merger, determined that the Merger is fair to and in
the best interests of the Stockholders and recommended that the Stockholders
vote for approval and adoption of the Merger Agreement and the Merger.
The Merger Agreement was signed by all parties on the morning of October
19, 1998. Thereafter, prior to the commencement of trading on the Nasdaq
National Market, the Company and Intel issued a joint press release announcing
the execution of the Merger Agreement.
REASONS FOR THE MERGER AND BOARD RECOMMENDATION
In reaching its conclusion that the terms of the Merger Agreement are in
the best interests of the Stockholders, the Company's Board of Directors
considered the following factors:
- Premium Over Market Price. The $6.00 per share to be received by the
Stockholders in the Merger represents an approximately 41% premium over
the last reported sale price of $4.25 per share on October 16, 1998 (the
last trading day prior to the Company's public announcement of the
execution of the Merger Agreement) and an approximately 55% premium over
the $3.87 average closing price of the Common Stock in the 30 days
preceding the announcement of the proposed Merger.
- Increased Competition. The rapid entry of large telecommunications and
service provider competitors, such as Lucent and Nortel, to the remote
access market, in addition to large traditional networking vendors, such
as Cisco and 3Com, has resulted in increased competition. In addition,
customers increasingly view remote access offerings as a component of an
end-to-end solution that is most effectively provided by very large-scale
companies, which have significantly greater resources than the Company
and which customers may perceive as best suited to address a variety of
their needs
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over a long period of time. The Board considered the effects of these
factors on the prospects of the Company's continued operation as an
independent company.
- Effect of Rapid Technological Change. The market for remote access
products has changed dramatically in recent years. Computer users have
increasingly utilized the Internet for remote access. A number of factors
contributed to this transition, including cost, ease of use and the
increasing public awareness, use and acceptance of the Internet. In order
to address the changing needs of this market, the Company began to devote
additional resources to products that increase the security of remote
access conducted on the Internet, allowing the establishment of VPNs. The
new Internet-based products represented less than 10% of the Company's
sales in the third quarter of 1998. The Board considered the uncertainty
of the overall size and strength of the VPN market and the difficulties
the Company was experiencing in competing against its larger competitors
in assessing the potential for future success of its VPN products.
Specifically, the Board considered the fact that large, well-funded
competitors, such as Nortel/Bay Networks and Cisco, have entered the VPN
market, offering brand name recognition, broad market reach and a
dedicated, direct sales force. In addition, the Company believes that
customer uncertainty about the long-term prospects of the Company as an
independent company has impaired its ability to sell VPN products.
- Opinion of Lazard Freres. The Board relied in part on the opinion of its
financial advisor that, as of the date thereof, the $6.00 per share in
cash to be received by the Stockholders in the Merger is fair to such
holders from a financial point of view. The Board also considered the
information supporting the financial advisor's opinion. See "-- Opinion
of Lazard Freres & Co. LLC."
- Price Offered by Intel; Uncertainty of Alternatives. The Board
considered Intel's business reputation and global activities, together
with its marketing capabilities and reputation, which the Company's Board
believed place Intel in a strong position to optimize the value of the
Company's business and to reflect that value in the price paid to the
Stockholders in the Merger. In addition, the Board took into account the
fact that its investment banker had approached a number of other
companies as to the possibility of acquiring the Company and none of such
approaches had led to any substantive acquisition discussions.
- Terms of the Merger Agreement. The terms and conditions of the Merger
Agreement permit the Board, in the exercise of its fiduciary duties, to
(i) furnish information to or participate in negotiations with a third
party that initiates such discussions in connection with an acquisition
proposal and (ii) terminate the Merger Agreement in certain
circumstances. The Board noted that the Merger Agreement provides that,
in certain circumstances, the Company would be obligated to pay Intel a
termination fee of $5,450,000, plus expenses.
- Likelihood of Consummation of the Merger. The Board considered the
likelihood that the proposed transaction would be consummated, including
the absence of any financing contingencies and the likelihood of
satisfaction of the conditions contained in the Merger Agreement.
- Stockholder Approval Required. The Merger cannot be consummated unless
approved by a majority of the outstanding shares of Common Stock.
The Board also considered negative factors that did not support its
determination that the Merger is fair to the Stockholders and its recommendation
that the Stockholders approve the Merger. Such factors included (i) the risk
that the Merger would not be consummated and the effect of the public
announcement of the Merger on the Company's sales, relationships with customers,
suppliers and employees, and operating results, (ii) the possibility that the
Company's future operating results would result in an increase in the market
price of the Common Stock above the price proposed to be paid to Stockholders in
the Merger, and (iii) the possibility of another party in the future offering to
pay a higher price than the price proposed to be paid by Intel. Taking into
account the degree of likelihood of such factors, the Company's Board concluded
that these factors were outweighed by the potential benefits to be gained by the
Merger.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger and the Merger Consideration, both positive and
negative, the Board did not find it practicable to assign relative
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<PAGE> 20
weights to the factors considered in reaching its decision and, therefore, the
Board did not quantify or otherwise attach relative weights to the specific
factors considered. The Board believes that each of the factors favoring the
Merger discussed above, and all of the positive and negative factors taken as a
whole, supported the opinion of its financial advisor.
THE BOARD OF DIRECTORS OF THE COMPANY HAS CONCLUDED THAT THE MERGER AND THE
MERGER CONSIDERATION ARE FAIR TO THE STOCKHOLDERS AND RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
OPINION OF LAZARD FRERES & CO. LLC
At the meeting of the Board on October 18, 1998, Lazard Freres rendered its
opinion (the "Lazard Opinion") that as of such date, based upon and subject to
the various considerations set forth therein, the Merger Consideration was fair
to the Stockholders from a financial point of view.
A COPY OF THE FULL TEXT OF THE LAZARD OPINION, WHICH SETS FORTH, AMONG
OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY LAZARD FRERES IN RENDERING
SUCH OPINION, IS ATTACHED HERETO AS ANNEX B AND IS INCORPORATED HEREIN BY
REFERENCE. THE LAZARD OPINION ADDRESSES ONLY THE FAIRNESS OF THE MERGER
CONSIDERATION TO THE STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW AS OF THE DATE
OF THE LAZARD OPINION AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW TO VOTE WITH RESPECT TO
THE MERGER. THE SUMMARY OF THE LAZARD OPINION SET FORTH IN THIS PROXY STATEMENT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE LAZARD
OPINION. STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE LAZARD OPINION
CAREFULLY AND IN ITS ENTIRETY IN CONJUNCTION WITH THIS PROXY STATEMENT.
In connection with rendering the Lazard Opinion, Lazard Freres: (i)
reviewed the financial terms and conditions of an October 17, 1998 draft of the
Merger Agreement; (ii) analyzed certain publicly available historical business
and financial information relating to the Company; (iii) reviewed various
financial forecasts and other data provided to Lazard Freres by the Company
relating to its business; (iv) held discussions with members of the Company's
senior management with respect to the businesses, prospects and strategic
objectives of the Company; (v) reviewed the historical market prices and trading
activity of the Company's Common Stock; (vi) reviewed publicly available
information with respect to the financial performance and stock prices and
trading activity of certain other companies in lines of business that Lazard
Freres believed to be generally comparable to those of the Company and compared
such information to corresponding information with respect to the Company and
its Common Stock; (vii) reviewed the financial terms, to the extent publicly
available, of certain business combinations involving companies in lines of
business that Lazard Freres believed to be generally comparable to those of the
Company; (viii) participated in discussions and negotiations among
representatives of the Company and Intel and their advisors; and (ix) conducted
such other financial studies, analyses and investigations as Lazard Freres
deemed appropriate.
Lazard Freres relied with the Company's consent upon the accuracy and
completeness of the foregoing information and did not assume any responsibility
for any independent verification of such information. Lazard Freres also relied
upon, without independent verification, the assessment by the Company's
management of the Company's products and services and the validity of, and risks
associated with, the Company's existing and anticipated future products and
services. With respect to financial forecasts and any financial or operating
information furnished by the Company or during discussions with the Company's
management, Lazard Freres assumed that they had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the Company's competitive, operating and regulatory
environment and related future financial performance. Lazard Freres assumed no
responsibility for and expressed no view as to such forecasts or the assumptions
on which they were based. Lazard Freres did not undertake to make any
independent valuation or appraisal of any of the Company's assets or liabilities
or concerning the Company's solvency or fair value. Further, the Lazard Opinion
was necessarily based on economic, monetary, market and other conditions as in
effect on, and the information made available to Lazard Freres as of, the date
of the Lazard Opinion.
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In rendering the Lazard Opinion, Lazard Freres assumed that: (i) the Merger
Agreement would not differ in any material respect from the October 17, 1998
draft referred to above; (ii) the Merger would be consummated on the terms
described in the October 17, 1998 draft of the Merger Agreement, without any
waiver of any material terms or conditions by the Company; and (iii) obtaining
the necessary regulatory approvals for the Merger would not have an adverse
effect on the Company.
The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or the summary set forth herein, without considering
the analysis as a whole, could create an incomplete or a misleading view of the
process underlying the Lazard Opinion. Lazard Freres did not attribute any
particular weight to any analysis or factor considered by them. No company or
transaction used in the analyses as a comparison is identical to the Company or
Intel or the transaction contemplated by the Merger Agreement.
The following is a brief summary of the analysis performed by Lazard Freres
in connection with the Lazard Opinion.
Historical Trading Analysis. Lazard Freres' examination included the
historical trading prices and volumes for the Common Stock during the last
three-year period and the indexed historical trading prices for the Common Stock
during the last three-year period as compared to the indexed historical trading
prices for indices comprised of certain small capitalization and large
capitalization comparable network remote access and networking companies and the
Nasdaq Composite Index. The index of small capitalization companies included a
combination of companies in the remote access/enterprise networking sector
(Digital Link Corporation, Netopia, Inc., Network Peripherals, Inc. and MRV
Communications, Inc.) (the "Small Cap Access/Enterprise Networking Companies")
and companies in the virtual private networking sector (V-ONE Corporation,
Cylink Corporation and Information Resources Engineering, Inc.) (the "Small Cap
VPN Companies"). The index of large capitalization companies included ADTRAN,
Inc., Cabletron Systems, Inc., FORE Systems, Inc., 3Com Corporation and Xylan
Corporation (the "Large Cap Networking Companies"). Lazard Freres noted that,
over both the one-year and three-year periods ended October 16, 1998, the
Company underperformed both the small capitalization and the large
capitalization indices and the Nasdaq Composite Index.
Pre-Tax "Sum of the Parts" Analysis. Based upon information provided by
the Company's management, Lazard Freres developed estimated ranges for the
values of the Company's two lines of business (direct-dial remote access and
VPN), then added to these amounts the estimated net present value of the
Company's cash and certain other significant non-operating assets and
liabilities to arrive at an estimated valuation range for the Common Stock. This
analysis indicated an equity value reference range per share of the Common Stock
of approximately $5.26 to $6.96. The Merger Consideration falls within this
range.
Comparable Publicly Traded Companies Analysis. Lazard Freres reviewed and
compared certain actual and projected financial, operating and stock market
information of the Small Cap Access/Enterprise Networking Companies, the Small
Cap VPN Companies and the Large Cap Networking Companies.
This analysis indicated that the median enterprise value (determined as
equity market value plus net debt, net of minority interests and other asset
adjustments, where applicable) as a multiple of annualized revenues based on the
most recently completed quarter was 0.25x for the Small Cap Access/Enterprise
Networking Companies, 1.28x for the Small Cap VPN Companies and 1.69x for the
Large Cap Networking Companies. The multiple of 0.90x implied by the Merger
Consideration is within this range. The median price to projected calendar year
1999 earnings was 7.4x, 10.2x and 15.8x for the Small Cap Access/Enterprise
Networking Companies, the Small Cap VPN Companies and the Large Cap Networking
Companies, respectively. The multiple of 11.3x implied by the Merger
Consideration and the projections provided by the Company's management is within
this range.
Selected Precedent Transactions Analysis. Lazard Freres reviewed and
analyzed selected financial, operating and stock market information relating to
selected acquisition transactions in the networking industry, including the
following: Lucent Technologies Inc./LANNET subsidiary of Madge Networks N.V.,
Cabletron Systems, Inc./NetVantage, Inc., Cabletron Systems, Inc./Digital
Equipment Corporation Network
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<PAGE> 22
Products business unit, Lucent Technologies, Inc./Livingston Enterprises, Inc.,
Compaq Computer Corporation/Microcom, Inc. and Olicom A/S/Crosscom Corporation
(the "Networking Transactions"). This analysis indicated that for the Networking
Transactions for which relevant data was available (i) transaction value as a
multiple of last twelve months revenues ranged from 0.80x to 6.18x with a median
of 1.67x,; and (ii) the premium to the share price one week prior to
announcement ranged from 54% to 91% with a median of 70%. The multiple of last
twelve months revenues of 0.90x implied by the Merger Consideration is within
the above-described range of multiples in other transactions, although it is
below the median value, and the premium to share price one week prior to
announcement of 113% implied by the Merger Consideration exceeds the highest
value in the above-described range of premiums in other transactions.
Premiums Paid Analysis. Lazard Freres reviewed and analyzed the publicly
available information concerning premiums paid in 214 selected publicly
announced technology acquisition transactions from January 1, 1990 through
October 16, 1998, of which 37 were cash purchase transactions. The purchase
prices paid in all such transactions represented median premiums of
approximately 28%, 35% and 44%, respectively, over the closing prices of the
target company's stock on the day prior, seven days prior and 30 days prior to
announcement. The purchase prices paid in the cash purchase transactions
represented median premiums of approximately 32%, 41% and 50%, respectively,
over the closing prices of the target company's stock on the day prior, seven
days prior and 30 days prior to announcement. Lazard Freres noted that the
Merger Consideration represented a premium of approximately 41%, 66% and 55%,
respectively, over the closing price of the Common Stock on such date and the
average closing prices of the Common Stock for the seven-day and 30-day periods
ended on such date. For each measurement period, the premium represented by the
Merger Consideration exceeds the median premiums paid in (i) all of the other
transactions analyzed by Lazard Freres and (ii) the other cash purchase
transactions analyzed by Lazard Freres.
Discounted Cash Flow Analysis. Based upon forecasts provided by the
Company's management, Lazard Freres estimated the net present value of the
future cash flows of the Company. Lazard Freres utilized discount rates ranging
from 15% to 20% and terminal multiples of estimated revenues in 2003 ranging
from 0.5x to 1.0x for the Company's business. These factors were applied to two
different forecasts of future financial performance of the Company: a "base
case" based on future growth in the Company's direct dial business and
relatively faster growth of the Company's virtual private network business and a
"sensitivity case" based on the absence of future growth in the Company's direct
dial business and relatively slower growth in the Company's virtual private
network business. These analyses indicated net present equity value reference
ranges per share of the Common Stock of approximately $5.50 to $8.19 for the
base case and $5.09 to $7.37 for the sensitivity case. The Merger Consideration
falls within both of these ranges.
Special Considerations. In connection with the review of the Merger by the
Board, Lazard Freres performed a variety of financial and comparative analyses
for purposes of its opinion given in connection therewith. While the foregoing
summary describes the analyses and factors reviewed by Lazard Freres in
connection with its opinion, it does not purport to be a complete description of
all the analyses performed by Lazard Freres in arriving at its opinion. The
analyses were prepared solely for the purpose of Lazard Freres in providing the
Lazard Opinion to the Board in connection with its consideration of the Merger
and do not purport to be appraisals or to reflect the prices at which businesses
or securities actually may be sold, which may be significantly more or less
favorable than as set forth in the analyses. Similarly, any estimate of values
or forecast of future results contained in the analyses is not necessarily
indicative of actual values or actual results, which may be significantly more
or less favorable than suggested by such analyses. In performing its analyses,
Lazard Freres assumed that the Company would perform substantially in accordance
with earnings forecasts provided to Lazard Freres by the Company's management.
In addition, Lazard Freres noted that the reasons for, and circumstances
surrounding, each of the transactions analyzed were diverse and characteristics
of such transactions and the companies involved were not directly comparable to
the Merger or to the Company. Among other factors, Lazard Freres indicated that
the merger and acquisition transaction environment varies over time because of
macroeconomic factors, such as interest rate and equity market fluctuations, and
microeconomic factors, such as industry results and growth expectations. As
noted above, no transaction reviewed was identical to the Merger and,
accordingly, an assessment of the results of this analysis necessarily involves
complex considerations and judgments concerning differences in financial and
operating
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<PAGE> 23
characteristics of the Company and other factors that would affect the
acquisition value of the companies to which the Company was compared.
The forecasts and other projections furnished to Lazard Freres for the
Company were prepared by the Company's management and constitute forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of
1933, as amended. As a matter of policy, the Company does not publicly disclose
internal management forecasts, projections or estimates of the type furnished to
Lazard Freres in connection with its analysis of the Merger terms, and such
forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which may
not be in the control of the Company's management, including, without
limitation, factors related to the degree or rate of market acceptance of the
Company's current and anticipated future products and general economic,
regulatory and competitive conditions. Accordingly, actual results could vary
materially from those set forth in such forecasts, projections and estimates.
In performing these analyses, Lazard Freres made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters. Because such analyses are inherently subject to uncertainty,
being based on numerous factors or events beyond the control of the Company or
Intel or their respective advisors, none of the Company, Intel or Lazard Freres
or any other person assumes responsibility if future results or actual values
are materially different from those forecasts or estimates contained in the
analyses. The Lazard Opinion was one of many factors taken into consideration by
the Board in making its determination to approve the Merger Agreement. The
foregoing summary does not purport to be a complete description of the analyses
performed by Lazard Freres.
The Company retained Lazard Freres to act as its investment banker in
connection with the Merger. Lazard Freres was selected by the Company's Board
based on Lazard Freres' qualifications, expertise and reputation in transactions
similar to the Merger and its knowledge of the national and worldwide
communications equipment industry and business and affairs of the Company.
Lazard Freres is an internationally recognized investment banking and advisory
firm. Lazard Freres, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts and valuations for estate, corporate and other purposes. In the ordinary
course of its business, Lazard Freres and its affiliates may actively trade in
the securities of the Company or Intel for their own accounts and for the
accounts of their customers and, accordingly, may at any time hold a long or
short position in such securities.
Pursuant to a letter agreement dated October 9, 1998, the Company retained
Lazard Freres as its investment banker in connection with the Merger. The
Company has agreed to pay Lazard Freres a fee ranging from 1.3% to 1.4% of the
aggregate consideration related to the transaction if the Merger is consummated,
subject to a $2,000,000 minimum, and to reimburse Lazard Freres for reasonable
expenses as incurred. In addition, the Company has also agreed to indemnify
Lazard Freres and its affiliates, their respective directors, officers, agents
and employees and each person, if any, controlling Lazard Freres or any of its
affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, related to Lazard Freres
engagement. In the past, Lazard Freres or its affiliates have provided financial
advisory services to Intel.
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for accounting purposes.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached hereto as Annex A. The following summary of the Merger
Agreement is not a complete description of the terms and conditions thereof and
is qualified in its entirety by reference to the Merger Agreement. Stockholders
are urged to review the Merger Agreement carefully. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in the Merger Agreement.
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Merger Sub will be merged with and into the Company,
as a result of which the separate corporate existence of Merger Sub will cease
and the Company will continue as the Surviving Corporation. The Effective Time
will occur at the date and time that Articles of Merger in the form as is
required by, and executed in accordance with, the relevant provisions of
Massachusetts law (the "Articles of Merger") are filed with the Secretary of
State of the Commonwealth of Massachusetts. The Surviving Corporation shall
continue its corporate existence under the laws of the Commonwealth of
Massachusetts. In the Merger, each issued and outstanding share of Common Stock
(other than shares of Common Stock held by Stockholders exercising appraisal
rights) will be converted into the right to receive $6.00 in cash, without
interest (the "Merger Consideration"). Each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time will be converted
into one share of common stock of the Surviving Corporation. At the Effective
Time, the Articles of Organization of the Surviving Corporation shall be amended
to be identical to the Articles of Organization of the Merger Sub (except that
the name of the Surviving Corporation will be changed to "Intel Shiva Corp.").
The By-laws of Merger Sub in effect at the Effective Time shall be the By-laws
of the Surviving Corporation (except that such By-laws shall be amended to
identify the name of the Surviving Corporation as "Intel Shiva Corp."). The
directors of Merger Sub at the Effective Time will be the directors of the
Surviving Corporation until their successors are duly elected and qualified, and
the officers of Merger Sub at the Effective Time will be the officers of the
Surviving Corporation until replaced in accordance with the By-laws of the
Surviving Corporation.
Stockholders Meeting. The Merger Agreement provides that the Company will
call a meeting of its stockholders, to be held as promptly as practicable
following the receipt of clearance by the Securities and Exchange Commission
(the "Commission") of the proxy materials relating to such meeting, for the
purpose of considering and voting on the approval and adoption of the Merger
Agreement and the Merger. Under the Merger Agreement, Intel has agreed to vote,
or cause to be voted, at any such meeting all shares of Common Stock owned by
it, Merger Sub or any other subsidiary of Intel in favor of the Merger Agreement
and the Merger.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to organization, good
standing, corporate power and qualification, subsidiaries and other interests,
capital structure, corporate authority and approval, governmental filings,
reports and financial statements, absence of certain changes, litigation, human
resources, compliance with laws, environmental matters, intellectual property,
taxes, insurance, brokers and finders, certain business practices and other
matters. Intel and Merger Sub have also made certain representations and
warranties with respect to corporate existence and power, corporate authority,
government filings, brokers and finders, financing and other matters.
Conduct of Business Pending the Merger. The Company has agreed that, prior
to the Merger, unless Intel shall otherwise agree, or as otherwise contemplated
in the Merger Agreement: (i) the business of the Company and its subsidiaries
will be conducted in the ordinary and usual course; (ii) the Company will not,
among other things, (a) sell, pledge or redeem any stock owned by it or any of
its subsidiaries (subject to certain exceptions), (b) amend its Articles of
Organization or By-laws in a manner adverse to Intel, (c) split, combine or
reclassify the outstanding shares of Common Stock, (d) declare, set aside or pay
any dividend payable in cash, stock or property with respect to the Common
Stock, or (e) adopt a plan of liquidation, dissolution, merger, or
consolidation; and (iii) neither the Company nor any of its subsidiaries will,
except under certain circumstances as set forth in the Merger Agreement, (a)
issue or agree to issue any additional shares of, or rights of any kind to
acquire any shares of, its capital stock of any class other than shares of
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<PAGE> 25
Common Stock issuable pursuant to presently outstanding Options (including under
its employee stock purchase plan), (b) transfer property or assets, (c) incur or
modify any material indebtedness, (d) assume the obligations of any other
person, (e) make any loan to any other person, (f) make any capital or prepaid
expenditures in excess of certain limits, (g) change any accounting principles
or practices, (h) revalue any material assets, (i) settle or compromise any
material claim, (j) make a tax election, (k) take any action which would cause
the representations and warranties contained in the Merger Agreement to become
untrue, or (l) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing. The Company also agreed to institute
certain product return procedures and provide Intel with manufacturing, supplier
and other information concerning the business of the Company.
Conditions to the Merger. The obligation of each of the Company, Intel and
Merger Sub to consummate the Merger is subject to the satisfaction or waiver of
each of the following conditions: (i) the Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the vote of the
Stockholders holding a majority of the issued and outstanding shares of Common
Stock of the Company; (ii) any governmental consents or approvals required to
consummate the Merger shall have been obtained, any required governmental filing
shall have been made, and any required waiting periods under the HSR Act shall
have expired (except as would not have a Company Material Adverse Effect or
Parent Material Adverse Effect (each as defined)); and (iii) no statute, rule,
regulation, decree, order or injunction shall have been promulgated, enacted,
entered or enforced by any governmental agency or authority or court which
remains in effect and restrains, enjoins or otherwise prohibits the consummation
of the Merger or the transactions contemplated by the Merger Agreement, and no
governmental entity shall have instituted any proceeding, or given written
notice that it intends to institute any proceeding, seeking an order that
restrains, enjoins or otherwise prohibits the consummation of the Merger or the
transactions contemplated by the Merger Agreement, which proceeding remains
unresolved.
The obligations of Intel and Merger Sub to effect the Merger are also
subject to the following conditions: (i) the representations and warranties of
the Company qualified by materiality or a certain dollar threshold shall be true
and correct (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date, and all other representations and warranties of the Company shall
be true and correct in all material respects (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except as would not have, or
could not reasonably be interpreted as reflecting, a Company Material Adverse
Effect (as defined); (ii) the Company shall have performed in all material
respects all obligations required to be performed by it at or prior to the
Closing Date; (iii) the Chief Executive Officer of the Company shall have
executed and delivered to Intel a certificate, in form reasonably acceptable to
Intel, certifying as to the matters set forth in clauses (i) and (ii) above; and
(iv) Intel shall have received an opinion of counsel to the Company dated as of
the Effective Time as to the approval and consummation of the Merger.
The obligations of the Company to complete the Merger are also subject to
the following conditions: (i) the representations and warranties of Intel and
Merger Sub qualified by materiality shall be true and correct (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, and all other
representations and warranties of Intel and Merger Sub shall be true and correct
in all material respects (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, except as would not have, or could not reasonably be
interpreted as reflecting, a Parent Material Adverse Effect (as defined); (ii)
each of Intel and Merger Sub shall have performed in all material respects all
obligations required to be performed by it at or prior to the Closing Date; and
(iii) the President of each of Intel and Merger Sub shall have executed and
delivered to the Company a certificate, in form reasonably acceptable to the
Company, certifying as to the matters set forth in clauses (i) and (ii) above
with respect to Intel or Merger Sub, as the case may be.
Third Party Acquisition. Pursuant to the Merger Agreement, the Company has
agreed that neither it nor any of its subsidiaries, nor any of its or its
subsidiaries' employees or directors, shall, and it shall direct and use its
best efforts to cause its and its subsidiaries' agents and representatives
(including any investment banker and any attorney or accountant retained by it
or any of its Subsidiaries (collectively, "Company
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Advisers")) not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries in respect of, or the making of any proposal
for, a Third Party Acquisition (as hereinafter defined). The Company has also
agreed that neither it nor any of its subsidiaries, nor any of its or its
subsidiaries' employees or directors, shall, and it shall direct and use its
best efforts to cause all Company Advisers not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Third Party (as hereinafter
defined) relating to the proposal of a Third Party Acquisition, or otherwise
facilitate any effort or attempt to make or implement a Third Party Acquisition.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith, after consultation with and advice from a nationally
recognized law firm, that failure to do so would be reasonably likely to result
in a violation of its fiduciary duties to the Company's stockholders under
applicable law, the Company may, in response to an inquiry, proposal or offer
for a Third Party Acquisition which was not solicited subsequent to the date of
the Merger Agreement, (i) furnish only such information with respect to the
Company to any such person pursuant to a customary confidentiality agreement as
was delivered to Intel and (ii) participate in the discussions and negotiations
regarding such inquiry, proposal or offer. Nothing contained the Merger
Agreement shall prohibit the Company or its Board of Directors from complying
with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
proposed Third Party Acquisition, which allows the Company to take certain
actions in the event of a tender offer. Pursuant to the Merger Agreement, the
Company agreed to immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Third Parties conducted prior
to the date of the Merger Agreement with respect to any of the foregoing. The
Company also agreed to take the necessary steps to promptly inform all Company
Advisers of such obligations.
The Company has agreed to notify Intel promptly (and in no event later than
24 hours after receipt of a proposal of a Third Party Acquisition) if: (i) any
inquiries relating to or proposals for a Third Party Acquisition are received by
the Company, any of its subsidiaries or any of the Company Advisers; (ii) any
confidential or other non-public information about the Company or any of its
subsidiaries is requested from the Company, any of its subsidiaries or any of
the Company Advisers in connection with a Third Party Acquisition; or (iii) any
negotiations or discussions in connection with a possible Third Party
Acquisition are sought to be initiated or continued with the Company, any of its
subsidiaries or any of the Company Advisers. Such notice must indicate the
principal terms and conditions of any proposals or offers. The Company also
agreed to thereafter to keep Intel informed in writing, on a reasonably current
basis, on the status and terms of any such proposals or offers and the status of
any such negotiations or discussions.
The Company has agreed that its Board of Directors may not withdraw its
recommendation of the Merger or approve or recommend, or cause the Company to
enter into any agreement with respect to, any Third Party Acquisition.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith, after consultation with and advice from a nationally
recognized law firm, that failure to do so would be reasonably likely to result
in a violation of its fiduciary duties, the Board of Directors may withdraw its
recommendation of the Merger, or approve or recommend or cause the Company to
enter into an agreement with respect to a Superior Proposal (as defined below),
but in each case only: (i) if the Company has complied with the obligations
described in the previous paragraph; (ii) if the Company has provided written
notice to Intel (a "Notice of Superior Proposal") advising Intel that the Board
of Directors has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal; and (iii) such Superior Proposal does not contain any "right
of first refusal" or "right of first offer" in favor of the person making such
Superior Proposal. The Company shall not be entitled to enter into any agreement
with respect to a Superior Proposal unless the Merger Agreement is concurrently
terminated by the Company and the Company pays to Intel $5,450,000 and
reimburses Intel for its out-of-pocket costs and expenses, as described below
under the heading "Termination."
As used herein, the term "Third Party Acquisition" means the occurrence of
any of the following events: (i) the acquisition of the Company by merger or
otherwise by any person other than Intel, Merger Sub or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of 20% or more of the
total assets of the Company and its subsidiaries, taken as a whole (other than
the purchase of the Company's products in the
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ordinary course of business); (iii) the acquisition by a Third Party of 20% or
more of the outstanding shares of capital stock of the Company; (iv) the
adoption by the Company of a plan of partial or complete liquidation or the
declaration or payment of an extraordinary dividend; (v) the repurchase by the
Company or any of its subsidiaries of 20% or more of the outstanding shares of
capital stock of the Company; or (vi) the acquisition by the Company or any of
its subsidiaries by merger, purchase of stock or assets, joint venture or
otherwise of a direct or indirect ownership interest or investment in any
business whose annual revenues, net income or assets is equal to or greater than
20% of the annual revenues, net income or assets of the Company and its
subsidiaries, taken as a whole. A "Superior Proposal" means any bona fide
proposal that is not subject to any financing condition to acquire directly or
indirectly for consideration consisting of cash and/or securities all of the
shares of capital stock of the Company then outstanding or all or substantially
all the assets of the Company and its subsidiaries, taken as a whole, and
otherwise on terms which the Board of Directors of the Company by a majority
vote determines in its good faith judgment (based on consultation with its
financial adviser) to be reasonably capable of being completed (taking into
account all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal) and more favorable to the Stockholders than the
Merger.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after Stockholder approval thereof: (i) by
the mutual consent of Intel and the Company; (ii) by either Intel or the Company
if (a) a court or government agency has entered an order permanently
restraining, enjoining or otherwise prohibiting the Merger and such order has
become nonappealable or (b) the Stockholders fail to approve the Merger; (iii)
by the Company if (a) prior to the consummation of the Merger, the Company
enters into a definitive acquisition agreement with respect to a Superior
Proposal and the Company makes the required payment to Intel, as described
below, (b) Intel breaches any of the covenants and agreements in the Merger
Agreement, such breach is not curable or, if curable, is not cured within 10
days after notice of such breach is given and such breach is likely to have a
Parent Material Adverse Effect (as defined), or (c) the Merger is not
consummated by March 31, 1999, provided that the failure to consummate the
Merger is not proximately contributed to by a material breach of the Merger
Agreement by the Company; or (iv) by Intel if (a) the Board of Directors of the
Company shall have withdrawn or modified, in a manner adverse to Intel, its
approval or recommendation of the Merger Agreement, (b) the Company breaches any
of the covenants and agreements in the Merger Agreement, such failure is not
cured within 10 days after notice of such breach is given and such breach is
likely to have a Company Material Adverse Effect (as defined), or (c) the Merger
is not consummated by March 31, 1999, provided that the failure to consummate
the Merger is not proximately contributed to by a material breach of the Merger
Agreement by Intel.
If the Merger is terminated and the Merger abandoned pursuant to the terms
of the Merger Agreement, the Company has agreed to reimburse Intel for all of
its out-of-pocket costs and expenses in connection with the Merger Agreement and
the Merger unless: (i) the Merger Agreement has been terminated by mutual
consent or by either party as a result of (a) the failure of the Stockholders to
approve the Merger or (b) a court or government order permanently restraining,
enjoining or otherwise prohibiting the Merger having been entered and having
become nonappealable; (ii) the Company has terminated the Merger Agreement as a
result of (a) the Merger not having been consummated by March 31, 1999 (other
than if such non-consummation was proximately contributed to by a material
breach by the Company) or (b) a breach by Intel or Merger Sub that is not
curable or, if curable, is not cured within 10 days of notice thereof and which
is likely to have a Parent Material Adverse Effect (as defined); or (iii) Intel
has terminated the Merger Agreement as a result of the Merger not having been
consummated by March 31, 1999 (other than if such non-consummation was
proximately contributed to by a material breach of Intel or Merger Sub),
provided that the Company has not breached in any material respect its
obligations under the Merger Agreement in any manner which proximately
contributed to the failure to close the Merger.
In lieu of any liability or obligation to pay damages (other than the
obligation to reimburse Intel for out-of-pocket expenses as described above), if
(i) there is a proposal by a Third Party for a Third Party Acquisition existing
at the time of termination of the Merger Agreement by Intel and Merger Sub and
(ii) Intel and Merger Sub terminate the Merger Agreement as a result of the
Board of Directors of the
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<PAGE> 28
Company withdrawing or adversely modifying its approval or recommendation of the
Merger Agreement, the Company has agreed to pay to Intel within two business
days after such termination $5,450,000.
In lieu of any liability or obligation to pay damages (other than the
obligation to reimburse Intel for expenses as described above), (i) if there
shall not have been a material breach of any representation, warranty, covenant
or agreement on the part of Intel or Merger Sub and (ii) the Company shall have
terminated the Merger Agreement as a result of entering into a binding written
agreement concerning a Superior Proposal after complying with the required
procedures in connection therewith, the Company shall pay to Intel concurrently
with such termination $5,450,000.
Amendment and Waiver. The Merger Agreement can only be amended by a
written agreement executed by the parties.
Expenses. Except as described above, each party will bear its own expenses
in connection with the Merger. Upon termination of the Merger Agreement, under
certain circumstances the Company has agreed to reimburse Intel for its
third-party costs and expenses in connection with the Merger.
Assumption of Options. The Merger Agreement provides that all outstanding
options to purchase Common Stock of the Company, most of which currently have an
exercise price greater than $6.00 per share, will be assumed by Intel (the
"Assumed Options"), other than (i) options outstanding under the Company's 1994
Non-Employee Director Stock Option Plan and other options held by the Company's
non-employee directors, which will terminate upon the Merger; unless exercised
prior thereto, and (ii) options held by certain of the Company's executive
officers and other key employees, who will cancel their existing options and
receive new option grants (the "New Options") as described under "INTERESTS OF
CERTAIN PERSONS IN THE MERGER." Each Assumed Option will continue to have the
same terms and conditions as in effect prior to the Merger, except (i) the
number of shares of Intel Common Stock covered by the Assumed Option will equal
the number of shares covered by the option immediately prior to the Merger
multiplied by the Exchange Ratio (as defined below) and (ii) the option exercise
price will equal the exercise price immediately prior to the Merger divided by
the Exchange Ratio, provided, that the exercise price of all such Assumed
Options shall not be greater than the fair market value of Intel Common Stock on
the Closing Date. The "Exchange Ratio" will equal $6.00 divided by the last sale
price of Intel Common Stock on the Nasdaq National Market on the trading day
immediately preceding the Closing Date. Intel has also agreed to grant new Intel
options to Company employees whose employment is continued by Intel after the
Merger (the "Post-Closing Options"), provided that the total number of options,
taking into account both the Post-Closing Options and the Assumed Options (but
excluding the New Options), need not exceed 518,000.
Certain Employee Arrangements. With respect to employees who receive
offers of employment from Intel, Intel agreed, among other things, to offer
compensation and benefits substantially equal to similarly situated Intel
employees and to give credit for service performed for the Company under
vacation, disability and certain other benefit plans. Intel also agreed to
implement a special severance program for all Company employees, which will
provide a payment equal to six months of base pay to employees who remain
employed up to and through the Closing Date and whose employment is terminated
by Intel within six months following the Closing Date, other than for cause. In
addition, the Company's executive officers and certain other employees entered
into arrangements with Intel as described under "INTERESTS OF CERTAIN PERSONS IN
THE MERGER."
Rights Agreement. The Company has amended the Rights Agreement, dated as
of September 29, 1995, between the Company and American Stock Transfer and Trust
Company (the "Rights Agreement") to provide that the anti-takeover provisions of
the Rights Agreement will not be triggered by the Merger Agreement or the
Merger.
Director and Officer Indemnification and Insurance. The Surviving
Corporation shall indemnify each current, previous or future director or officer
of the Company and its subsidiaries against any costs or expenses incurred in
connection with any claim based on, or arising out of, such person's position as
an officer or director, to the fullest extent permitted under the Massachusetts
BCL and the Company's Articles of Organization, By-laws and other agreements in
effect on the date of the Merger Agreement. To the extent
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<PAGE> 29
such indemnification is not provided by the Surviving Corporation, it shall be
provided by Intel, in an amount not to exceed (i) the net worth of the Company
as of October 3, 1998, as determined under generally accepted accounting
principles consistently applied, less (ii) the amount of costs paid by the
Company from and after the date of the Merger Agreement to any indemnified
parties or to any third parties, with respect to any claims, actions, suits,
proceedings or investigations relating to or arising out of the conduct of any
of the indemnified parties.
Intel and the Surviving Corporation also agreed to maintain for six years
following the consummation of the Merger directors' and officers' liability
insurance for the benefit of the directors and officers for the Company and its
subsidiaries, so long as the annual premium therefor is not in excess of 200% of
the last annual premium paid prior to the date of the Merger Agreement (the
"Current Premium"); provided, however, that if the existing insurance expires,
is terminated or cancelled during such six-year period, the Surviving
Corporation will obtain as much insurance as can be obtained for the remainder
of such period for a premium not in excess (on an annualized basis) of 200% of
the Current Premium; provided further, that, in lieu of maintaining such
existing insurance as provided above, Intel may cause coverage to be provided
under any policy maintained for the benefit of Intel or any of its subsidiaries,
so long as the terms are no less advantageous to the intended beneficiaries
thereof than the existing insurance. In lieu of the purchase of such insurance
by Intel or the Surviving Corporation, the Company may purchase a six-year
extended reporting period endorsement ("reporting tail coverage") under its
existing directors' and liability insurance coverage, provided that the total
cost of the reporting tail coverage shall not exceed $400,000, and provided that
such reporting tail coverage shall extend the director and officer liability
coverage in force as of the date of the Merger Agreement for a period of six
years from the Effective Time for any claims based upon, arising out of,
directly or indirectly resulting from, in consequence of, or in any way
involving wrongful acts or omissions occurring on or prior to the Effective
Time, including without limitation all claims based upon, arising out of,
directly or indirectly resulting from, in consequence of, or in any way
involving the Merger and any and all related transactions or related events.
From and after the Effective Time, Intel has agreed that the Surviving
Corporation will fulfill the obligations of the Company pursuant to the
Company's Articles of Organization, By-laws and any indemnification agreement
between the Company and any of the Company's directors and officers existing and
in force as of the Effective Time. The indemnification obligations set forth in
the Company's Articles of Organization and By-laws, in each case as of the date
of the Merger Agreement, will survive the Merger and, subject to certain
exceptions, may not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would materially adversely
affect the rights thereunder of the indemnified parties.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Company's three executive officers other than Mr. Zucco and seven other
employees (collectively, the "Key Employees") are each parties to individual
Severance Agreements with the Company and Intel, dated October 16, 1998,
pursuant to which the Key Employees will be paid a lump sum cash payment equal
to 100% of his or her annual compensation in the event that he or she is
terminated without cause (as defined therein) within 24 months after the
effective date of the Merger (or longer in certain cases). These Severance
Agreements supersede severance arrangements previously in effect between the
Company and the Key Employees.
Under the Merger Agreement, all outstanding options to purchase Common
Stock of the Company, most of which currently have an exercise price greater
than $6.00 per share, will be assumed by Intel, other than (i) options
outstanding under the Company's 1994 Non-Employee Director Stock Option Plan and
other options held by the Company's non-employee directors, which will terminate
upon the Merger, unless exercised prior thereto, and (ii) options held by the
Key Employees, who will cancel their existing options and receive New Options.
The exercise price of the Assumed Options shall not be greater than the fair
market value of Intel Common Stock on the Closing Date. Intel has also agreed to
grant Post-Closing Options to Company employees whose employment is continued by
Intel after the Merger, provided that the total
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<PAGE> 30
number of options, taking into account both the Post-Closing Options and the
Assumed Options (but excluding the New Options), need not exceed 518,000. See
"THE MERGER AGREEMENT -- Assumption of Options" for a description of the terms
of the Assumed Options.
At the Closing, the options to purchase shares of Common Stock held by the
Key Employees (the "Old Options"), covering an aggregate of approximately
1,447,000 shares of Common Stock with a weighted average exercise price of $9.32
per share, will be cancelled, and such Key Employees will receive New Options
covering an aggregate of 92,300 shares of Intel Common Stock. The exercise price
of the New Options will equal the fair market value of the Intel Common Stock on
the Closing Date. One-half of the New Options will vest over a five-year period
beginning on the first anniversary of the Closing, and the balance of the New
Options will vest approximately in accordance with the vesting schedule of the
Old Options. Of the New Options, 14,000 will be granted to Mr. Cirrone; 15,000
to Mr. Duffy; and 11,000 to Mr. Finucane.
Mr. Zucco has agreed to be engaged as a consultant to Intel for a period of
three months following the Closing at a monthly consulting fee of $100,000. Mr.
Zucco has agreed to the cancellation of all of his outstanding options to
purchase Common Stock of the Company at the Closing. In exchange therefor, he
will be granted stock appreciation rights with respect to any increase in the
value of 10,484 shares of Intel Common Stock above the fair market value of
Intel Common Stock on such date. These rights shall vest on the date that is
three months after the Closing if Mr. Zucco remains a consultant with Intel
through such date, and may be exercised until 90 days after the termination of
his consultancy. Intel has also agreed to maintain Mr. Zucco's life insurance
benefits until 12 months after he ceases to be a consultant to Intel.
Pursuant to the Merger Agreement, all options granted to members of the
Board of Directors of the Company under the Company's 1994 Non-Employee Director
Stock Option Plan will terminate upon the Merger, unless exercised prior
thereto. In addition, the Company's non-employee directors who hold additional
options have agreed that such options will terminate upon the Merger, unless
exercised prior thereto.
The Key Employees who have accepted employment with Intel following the
Merger will be paid transition bonuses. Such transition bonuses will be paid by
Intel in two annual installments beginning on the first anniversary of the
Closing Date, subject to continued employment of the Key Employee by Intel
through such date. The transition bonuses to be paid to Messrs. Cirrone, Duffy
and Finucane will each be $120,000.
The Merger Agreement provides that each current, previous or future
director and officer of the Company shall be indemnified against any costs or
expenses incurred in connection with any claim based on, or arising from, such
person's position as a director or officer. In addition, Intel has agreed to
maintain directors' and officers' liability insurance for the benefit of such
individuals for a period of six years following the Merger. See "THE MERGER
AGREEMENT -- Director and Officer Indemnification and Insurance."
Mr. David B. Yoffie is a member of the Board of Directors of each of the
Company and Intel. Mr. Yoffie did not participate in the meetings of the Board
of Directors of the Company or Intel held to consider the Merger.
Certain members of the Company's Board of Directors owned shares of Intel
common stock as of October 31, 1998, as follows: a trust of which Richard J.
Egan is a trustee and beneficiary owned 37,592 shares; Michael E. Lehman owned
224 shares; and David B. Yoffie owned 1,600 shares and options to purchase
95,000 shares. Certain members of the Board are also stockholders, directors or
officers of corporations that may from time to time directly or indirectly hold
shares of Intel or engage in transactions with Intel.
REGULATORY APPROVAL
The HSR Act provides that certain acquisition transactions (including the
Merger) may not be consummated until notifications and certain information have
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") and certain
waiting period requirements have been satisfied. Under the provisions of the HSR
Act applicable to the Merger,
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<PAGE> 31
the Merger may be consummated only following the expiration of a 30-calendar day
waiting period, unless extended by a formal request for additional information
or documents. The 30-day period began on November 10, 1998 with the filing by
the Company and Intel of the required Notification and Report Forms. Early
termination of the waiting period with respect to the Merger was granted by the
FTC, on behalf of itself and the Antitrust Division, on November 27, 1998. At
any time before or after the consummation of the Merger, the Antitrust Division,
the FTC or another third party could seek to enjoin or rescind the Merger on
antitrust grounds. In addition, at any time before or after the consummation of
the Merger, and notwithstanding that the waiting period under the HSR Act may
have expired, any state could take such action under state antitrust laws as it
deems necessary or desirable in the public interest. Private parties may also
bring legal 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 thereof.
TAX CONSEQUENCES TO STOCKHOLDERS
The following is a summary of the material United States income tax
consequences of the Merger to Stockholders.
The receipt of cash in exchange for Common Stock pursuant to the Merger or
pursuant to the exercise of dissenters' appraisal rights will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign tax laws. A Stockholder
will generally recognize gain or loss for U.S. federal income tax purposes in an
amount equal to the difference between such Stockholder's adjusted tax basis in
such Stockholder's Common Stock and the cash received by such Stockholder
(sec.1001(a) of the Internal Revenue Code of 1986, as amended (the "Code")).
Such gain or loss will be a capital gain or loss if such Common Stock is held as
a capital asset and will be long-term capital gain or loss if such Common Stock
has been held for more than one year (sec.1222(3) of the Code).
The receipt of consideration pursuant to the Merger or the exercise of
dissenters' appraisal rights may be subject, under certain circumstances, to
"backup withholding" at a 31% rate (sec.3406 of the Code). This backup
withholding generally applies only if the Stockholder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN") within a
reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) is notified by the Internal Revenue Service that he or she has failed to
report properly interest or dividends, or (iv) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is the correct number and that he or she is not
subject to backup withholding.
The foregoing discussion may not apply to Stockholders who acquired their
Common Stock pursuant to the exercise of employee stock options or other
compensation arrangements with the Company, who are not citizens or residents of
the United States or who are otherwise subject to special tax treatment. EACH
STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL
OR OTHER TAX LAWS.
APPRAISAL RIGHTS
Pursuant to Massachusetts law, Stockholders have the right to object to the
Merger and, if the Merger is consummated, to be paid the "fair value" of their
shares of Common Stock determined as of the day preceding the date of the vote
of the Stockholders approving the Merger (without taking into account any
element of value arising from the expectation or accomplishment of the Merger).
Any Stockholders desiring to exercise such dissenters' appraisal rights will
have the respective rights and duties, and must follow the procedures, set forth
in Sections 85 to 98, inclusive, of the Massachusetts BCL in order to perfect
such rights. A brief summary of Sections 85 to 98, inclusive, of the
Massachusetts BCL is set forth below. The following summary does not purport to
be a complete statement of the procedures to be followed by Stockholders
desiring to exercise their dissenting appraisal rights and is qualified in its
entirety by express reference to those sections, the full text of which is
attached hereto as Annex C. STOCKHOLDERS ARE URGED TO READ
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<PAGE> 32
ANNEX C IN ITS ENTIRETY SINCE FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH
THEREIN MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS.
To exercise dissenters' appraisal rights under Massachusetts law, a
Stockholder must (i) deliver to the Company, before the Stockholder vote on the
Merger, a written objection to the Merger stating that such Stockholder objects
to the Merger and intends to demand payment for his or her shares if the Merger
is approved and consummated through the exercise of statutory appraisal rights,
(ii) not vote his or her shares in favor of or consent to the approval of the
Merger and (iii) within 20 days after the date of mailing to such Stockholder of
a written notice that the Merger has become effective (which is required to be
mailed by the Company to each Stockholder who has met the requirements of (i)
and (ii) within ten days following the Merger), make written demand upon the
Company for payment of his or her shares and an appraisal of the value thereof.
A Stockholder who fails to satisfy all of the conditions set forth above will
acquire no right to payment for such Stockholder's shares other than the
consideration to be paid in the Merger as described in more detail under "THE
MERGER AGREEMENT -- The Merger." Signed proxies returned to the Company but left
blank will be voted in favor of the Merger; therefore, in order to be assured
that shares are not voted in favor of the Merger, a Stockholder must either vote
in person or by proxy against the Merger or abstain from voting. Failure to vote
against the Merger will not constitute a waiver of appraisal rights, but voting
against the Merger will not by itself satisfy the obligations of a Stockholder
described in clauses (i) and (iii) above. The written objection described in
clause (i), and the demand in clause (iii), above must be sent to the Company at
28 Crosby Drive, Bedford, Massachusetts 01730, Attention: Clerk within the time
periods set forth above.
If, following the Merger, a Stockholder perfects a demand for payment of
his or her shares as provided above, and if the Company and such dissenting
Stockholder are able to reach agreement on the fair value of the shares, the
Company will pay to the dissenting Stockholder the fair value of such shares of
the Common Stock, as the case may be, within 30 days after the expiration of the
period during which the demand may be made. If within the 30-day period the
parties fail to agree as to the fair value of such shares, either the Company or
the dissenting Stockholder may have the fair value of the stock of all
dissenting Stockholders determined by judicial proceedings by filing a bill in
equity in the Massachusetts Superior Court for Middlesex County within four
months after the 30-day period expires. While Massachusetts courts have broad
discretion in determining fair value of stock of dissenting stockholders,
Massachusetts courts have generally used a weighted average of the market,
earnings and asset values for the stock. The Massachusetts Supreme Judicial
Court has recently held that such method is an appropriate, but not mandated,
approach to determining the fair value of stock of dissenting stockholders, and
that such valuation is within the discretion of the trial judge. Interest shall
be paid by the Company on any award determined by the Court from the date of the
vote of the Stockholders approving the Merger. If (i) no suit is filed within
four months to determine the value of the stock, (ii) any such suit is dismissed
as to that Stockholder or (iii) the Stockholder withdraws his, her or its
objection in writing with the written approval of the Company, the Stockholder
will have only the rights of a nondissenting Stockholder to receive the Merger
Consideration. After the Special Meeting, a dissenting Stockholder will not be
entitled to notices of meetings of stockholders, to vote at any such meeting or
to receive dividends or other distributions on the Common Stock.
Under Massachusetts statutory law, the enforcement by a dissenting
Stockholder of such Stockholder's right to receive payment for his or her shares
in the manner provided by Sections 85 through 98, inclusive, of the
Massachusetts BCL is stated to be the exclusive remedy of a Stockholder
objecting to the Merger, except upon the grounds that consummation of the Merger
will be or is illegal or fraudulent as to such Stockholder. The Massachusetts
Supreme Judicial Court, however, has held that dissenting Stockholders are not
limited to the statutory remedy of judicial appraisal in cases where violations
of fiduciary duty are found.
Stockholders who receive cash for their shares of Common Stock upon
exercise of dissenters' appraisal rights will generally realize taxable gain or
loss. See "TAX CONSEQUENCES TO STOCKHOLDERS."
The foregoing is a summary of certain of the provisions of Sections 85 to
98, inclusive, of the Massachusetts BCL and is qualified in its entirety by
reference to the full text of such sections, a copy of which is attached hereto
as Annex C.
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CERTAIN LITIGATION
The Company is a defendant in Lirette, et al. v. Shiva Corporation, et al.,
Civil Action No. 97-11159-WGY, a purported class action complaint filed against
the Company, Frank Ingari, Cynthia Deysher and David Cole, in the United States
District Court for the District of Massachusetts on May 21, 1997. This claim was
dismissed on November 19, 1998. The Company is also a defendant in Abraham
Schwartz and Norman Marcus v. Shiva Corporation, Case No. BC164278, a purported
class action complaint filed against the Company in the Superior Court of the
State of California for the County of Los Angeles on January 17, 1997. The
currently operative complaint contains claims for common law negligent
misrepresentation, common law fraud and deceit and statutory fraud in violation
of California Civil Code sec.sec.1709-10 in connection with certain public
disclosures made by the Company. The complaint seeks damages, interest, fees and
expenses, including punitive damages and treble damages and is currently in
discovery. The Company and the plaintiffs agreed as of January 6, 1999 to settle
the foregoing claims, subject to court approval.
The Company and its directors are defendants in six identical purported
class action complaints filed in the Middlesex Superior Court Department of the
Trial Court of the Commonwealth of Massachusetts: (i) Fredric C. Stein and
Theodore Kaplan v. James Zucco, Jr., David B. Yoffie, Richard J. Egan, Michael
E. Lehman, Paul O'Brien, Henry F. McCance, David Cole, Carol Herod Sharer and
Shiva Corporation, Civil Action No. 98-5613; (ii) Mark and David Debora v. James
Zucco, Jr., David B. Yoffie, Richard J. Egan, Michael E. Lehman, Paul O'Brien,
Henry F. McCance, David Cole, Carol Herod Sharer and Shiva Corporation, Civil
Action No. 98-5734; (iii) Mark A. Forte and Edward Pekarek v. James Zucco, Jr.,
David B. Yoffie, Richard J. Egan, Michael E. Lehman, Paul O'Brien, Henry F.
McCance, David Cole, Carol Herod Sharer and Shiva Corporation, Civil Action No.
98-5710; (iv) Ludwig Mosberg v. James Zucco, Jr., David B. Yoffie, Richard J.
Egan, Michael E. Lehman, Paul O'Brien, Henry F. McCance, David Cole, Carol Herod
Sharer and Shiva Corporation, Civil Action No. 98-5733; (v) James Hoffey v.
James Zucco, Jr., David B. Yoffie, Richard J. Egan, Michael E. Lehman, Paul
O'Brien, Henry McCance, David Cole, Carol Herod Sharer and Shiva Corporation,
Civil Action No. 98-5709; (vi) Charles Tomeo v. James Zucco, Jr., David B.
Yoffie, Richard J. Egan, Michael E. Lehman, Paul O'Brien, Henry F. McCance,
David Cole, Carol Herod Sharer and Shiva Corporation, Civil Action No. 98-5795.
Counsel for plaintiffs in these actions have moved to consolidate the
above-referenced actions with a seventh action: Alex Sicherman v. James Zucco,
Jr., Richard J. Egan, Michael E. Lehman, Paul O'Brien, Henry F. McCance, David
Cole, Carol Herod Sharer, and Shiva Corporation, Civil Action No. 98-8095. The
complaint in the seventh action will govern all of the actions. By agreement
with plaintiffs, the defendants have not responded to any of the original six
complaints. The Sicherman complaint differs from the six already on file in some
respects, including that Mr. Yoffie is not named as a defendant in the
consolidated action.
In the Sicherman complaint, plaintiffs claim that the proposed Merger is
not in the best interests of stockholders because plaintiffs assert that the
price Intel has agreed to pay is unfair and inadequate. Plaintiffs assert that
Shiva's directors breached their fiduciary duties, and duties of care and
loyalty, by causing Shiva to enter into the Merger Agreement.
In general, plaintiffs claim that the price Intel has agreed to pay for the
Company's shares is inadequate given plaintiffs' belief that the Company is
poised for growth in the future. Plaintiffs claim that the Company has
successfully repositioned itself as a provider of VPN products, and that the
price Intel has offered to pay is insufficient given plaintiffs' view of the
Company's future potential. Plaintiffs claim that the market price of Shiva
common stock was depressed prior to the Merger Agreement by general market
conditions, and by restructuring and non-recurring charges from which Shiva is
now positioned to benefit. Plaintiffs also claim that the price Intel has
offered to pay is unfair because the Company has a strong balance sheet, and
more than a third of Intel's proposed $6 per share offer allegedly could be paid
from the Company's liquid assets and unused lines of credit, and Shiva possesses
net operating loss carry forwards plaintiffs claim will benefit Intel.
Plaintiffs calculate that the Company's balance sheet includes cash and cash
equivalents in excess of $2.24 per share, and that the net operating loss carry
forwards are worth at least $1 per share. Plaintiffs assert that the balance of
the purchase price offered by Intel is less than the $4.80 of revenues per share
recorded by the Company in the prior four quarters. Plaintiffs also claim that
stock market analysts, as late as July 24, 1998,
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<PAGE> 34
issued reports suggesting that the Company's stock price would rise in 1999,
including a report by a Lazard Freres analyst suggesting a year-end 1999 price
target of $17. Lazard Freres served as financial advisor to the Company's Board
of Directors in connection with the Merger Agreement.
Plaintiffs claim that before entering into the Merger Agreement the
Company's directors did not adequately shop the Company, conduct an auction, or
conduct a market check to test the fairness of Intel's offer. Plaintiffs assert
that the provision of the Merger Agreement preventing the Company from
soliciting bids from other companies but allowing the Company to accept
unsolicited superior bids, and the provision requiring the Company to pay Intel
$5,450,000 if a superior competing offer is accepted, foreclose an auction of
the Company.
Plaintiffs also assert that certain of the Company's directors have
financial interests in the proposed merger or close personal or business ties to
Intel that precluded them from negotiating an appropriate price for the
Company's stockholders. These interests include the following allegations:
(a) Plaintiffs allege that Mr. Zucco, the Company's President, Chief
Executive Officer and Chairman of the Board, has options to purchase 400,000
shares of Company stock that are now underwater (i.e., the option price of Mr.
Zucco's Company options is greater than the Intel offering price for the
Company's stock), but that as a result of the Merger Mr. Zucco's Company options
will be converted into valuable options for Intel stock.
(b) Plaintiffs allege that Mr. Egan, an outside director of the Company and
the Chairman of EMC Corporation, had personal and financial interests in
conflict of those of the Company's stockholders because: (i) he worked for Intel
before founding EMC in 1979; (ii) because EMC used to sell Intel products and
Intel now buys EMC products; (iii) because EMC, Intel and two other large
computer-industry companies are working together on developing a database
infrastructure for central storage of corporate information, and (iv) because
Mr. Egan is a personal friend of Intel's Chairman.
(c) Plaintiffs allege that Mr. Lehman, an outside director of the Company
and Chief Financial Officer of Sun Microsystems, Inc., had financial interests
in conflict with the Company's stockholders because Sun and Intel do business
together.
(d) Plaintiffs allege that Mr. O'Brien, an outside director of the Company
and Chairman of View Tech Inc., had financial interests in conflict with the
Company's stockholders because View Tech agreed in August 1998 to sell an Intel
product, a conference room workstation combining video conferencing, Internet
access, corporate network access and PC applications.
(e) Plaintiffs allege that Mr. McCance, a former outside director of the
Company and President of a venture capital firm, Greylock Management Corp., has
financial interest in conflict with the Company's stockholders because: (i) both
Greylock and Intel invested in Red Hat Software Inc. in October 1995; (ii) both
Greylock and Intel allegedly have also invested in other computer companies,
including Wildfire Communications, Inc.; and (iii) Greylock allegedly has
substantial investments in computer companies for which Intel is an important
customer, including Narrative Communications.
(f) Plaintiffs note that Mr. Yoffie is an outside director of both the
Company and Intel.
The Company believes the Plaintiffs' claims are without merit.
The Company is unable to determine at this time the potential liability, if
any, of any of these actions. Accordingly, no provision has been made in the
consolidated financial statements incorporated by reference in this Proxy
Statement for these claims. It is possible that the Company could incur a
material loss related to these actions in the future.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain selected historical consolidated financial
information of the Company. The selected financial information for each year in
the five-year period ended January 3, 1998, and as of the end of each fiscal
year in such five-year period, included in the following table, have been
derived from the Company's consolidated financial statements, audited by
PricewaterhouseCoopers LLP, independent certified public accountants. The
financial data as of and for the nine months ended October 3, 1998 and September
27, 1997 were derived from the Company's unaudited quarterly financial
statements, which in the opinion of the Company's management, reflect all
adjustments necessary for a fair presentation of such data. The data for the
nine months ended October 3, 1998 and September 27, 1997 are not necessarily
indicative of results of operations for the entire year. The selected financial
data presented in the table should be read in conjunction with the consolidated
financial statements, related notes and other financial information included
herein or incorporated herein by reference. All data are in thousands except per
share information.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------- FISCAL YEARS
OCTOBER 3, SEPTEMBER 27, --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ------------- -------- -------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total Revenues................ $108,017 $106,478 $144,329 $200,119 $118,581 $81,058 $61,262
Operating Income (Loss)....... (21,754) (21,034) (25,535) 22,682 (4,040) 3,859 1,764
Income (Loss) before Income
Taxes....................... (17,800) (18,541) (22,013) 26,026 (2,466) 2,961 716
Income Tax Provision
(Benefit)................... (5,696) (7,045) (8,366) 9,185 2,386 921 300
Net Income (Loss)............. (12,104) (11,496) (13,647) 16,841 (4,852) 2,040 416
Net Income (Loss) per Share --
Basic....................... (0.40) (0.39) (0.47) 0.59 (0.19) 0.16 0.04
Net Income (Loss) per Share --
Diluted..................... (0.40) (0.39) (0.47) 0.54 (0.19) 0.10 0.03
BALANCE SHEET DATA
Total Assets.................. 175,668 185,937 182,246 198,050 150,123 72,559 29,514
Working Capital............... 66,752 114,734 108,314 130,464 109,376 38,307 1,252
Long-term Obligations......... -- -- -- 122 452 4,037 3,418
Stockholders' Equity.......... 134,807 147,709 145,944 156,834 122,904 44,114 6,072
</TABLE>
31
<PAGE> 36
MARKET PRICES AND DIVIDENDS
The Common Stock is traded on the Nasdaq National Market under the symbol
"SHVA." On October 16, 1998, the date preceding public announcement of the
signing of the Merger Agreement, the high, low and closing sales prices of a
share of Common Stock reported on the Nasdaq National Market were $4.50, $3.91
and $4.25, respectively. On January 14, 1999, the latest practicable trading day
before the printing of this Proxy Statement, the high, low and closing sales
prices of a share of Common Stock reported on the Nasdaq National Market were
$5.75, $5.69 and $5.69, respectively. The Company has never paid any cash
dividends on the Common Stock and does not anticipate paying any cash dividends
in the foreseeable future. The following table sets forth, for the fiscal
periods indicated, the high and low sales prices per share of the Common Stock
as reported on the Nasdaq National Market:
<TABLE>
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 28, 1996 HIGH LOW
------ ------
First Quarter............................................... $48.13 $25.13
Second Quarter.............................................. 87.25 44.38
Third Quarter............................................... 85.88 41.25
Fourth Quarter.............................................. 60.00 34.88
FISCAL YEAR ENDED JANUARY 3, 1998 HIGH LOW
------ ------
First Quarter............................................... $36.75 $11.63
Second Quarter.............................................. 13.88 8.25
Third Quarter............................................... 16.44 10.06
Fourth Quarter.............................................. 14.69 8.06
FISCAL YEAR ENDED JANUARY 2, 1999 HIGH LOW
------ ------
First Quarter............................................... $14.38 $ 8.81
Second Quarter.............................................. 11.94 8.09
Third Quarter............................................... 8.94 3.50
Fourth Quarter.............................................. 6.00 2.75
FISCAL YEAR ENDING JANUARY 1, 2000 HIGH LOW
------ ------
First Quarter (through January 14, 1999).................... $ 5.81 $ 5.66
</TABLE>
CERTAIN PER SHARE DATA
The following table sets forth certain loss, book value and dividend per
share data for the Company. The information below should be read in conjunction
with the historical consolidated financial statements of the Company, including
the notes thereto, which are incorporated herein by reference.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
JANUARY 3, 1998 OCTOBER 3, 1998
----------------- -----------------
<S> <C> <C>
Loss per share.................................... $(0.47) $(0.40)
Book value per share at period end................ $ 4.93 $ 4.42
Cash dividends declared........................... -- --
</TABLE>
32
<PAGE> 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of September 30, 1998 with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) the Company's Chief Executive Officer and its three other
executive officers and (iv) all directors and executive officers of the Company
as a group. To the knowledge of the Company, the beneficial owners listed have
sole voting and investment power (subject to community property laws where
applicable) as to all of the shares beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
-----------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES CLASS
- ------------------------ --------- ----------
<S> <C> <C>
James L. Zucco, Jr.......................................... 262,500(1) *
Richard J. Egan............................................. 8,250(2) *
Michael E. Lehman........................................... 0 *
Paul C. O'Brien............................................. 34,250(3) *
Carol Herod Sharer.......................................... 0 *
David B. Yoffie............................................. 0 *
Michael J. Duffy............................................ 98,438(4) *
James F. Finucane........................................... 85,938(5) *
Robert P. Cirrone........................................... 68,750(6) *
All executive officers and directors, as a group
(9 persons)................................................. 558,126(7) 1.8%
</TABLE>
- ---------------
* Less than 1%
(1) Consists of 262,500 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
(2) Consists of 8,250 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
(3) Includes 30,250 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
(4) Consists of 98,438 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
(5) Consists of 85,938 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
(6) Consists of 68,750 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
(7) Consists of 554,126 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days after September 30,
1998.
33
<PAGE> 38
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, proxy statements and other
information with the Commission. Copies of such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following Regional Offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Information may be obtained on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. In addition, the Company is
required to file electronic versions of these documents through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The Commission
also maintains a World Wide Web site at http://www.sec.gov. that contains
reports and other information regarding registrants that file electronically
with the Commission. The Common Stock is traded on the Nasdaq National Market
under the symbol "SHVA."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Proxy Statement by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998;
2. The Company's Current Report on Form 8-K, dated March 26, 1998;
3. The Company's Amendment No. 1 to Annual Report on Form 10-K/A for the
fiscal year ended January 3, 1998;
4. The Company's Definitive Schedule 14A for the Company's 1998 Annual
Meeting of Stockholders;
5. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 4, 1998;
6. The Company's Amendment No. 1 to Current Report on Form 8-K/A dated
March 26, 1998;
7. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 4, 1998;
8. The Company's Current Report on Form 8-K, dated October 19, 1998;
9. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 3, 1998;
10. The Company's Amendment No. 1 to Quarterly Report on Form 10-Q/A for
the fiscal quarter ended April 4, 1998;
11. The Company's Amendment No. 1 to Quarterly Report on Form 10-Q/A for
the fiscal quarter ended July 4, 1998; and
12. The Company's Amendment No. 1 to Quarterly Report on Form 10-Q/A for
the fiscal quarter ended October 3, 1998.
All documents or reports subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement and to be a part of this Proxy Statement
from the date of filing of such document. Any statement contained herein, or in
a document all or a portion of which is incorporated or deemed to be
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
34
<PAGE> 39
The Company will provide without charge to any person to whom this Proxy
Statement is delivered, on the written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference (other than
exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be addressed to the Investor
Relations Department of the Company, 28 Crosby Drive, Bedford, Massachusetts
01730, (telephone: (781) 687-1000). To assure timely delivery of such documents,
requests for such documents should be made no later than February 12, 1999.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements and schedules of the Company and its
subsidiaries as of January 3, 1998 and December 28, 1996 and for each of the
years in the three-year period ended January 3, 1998 that are incorporated by
reference in this Proxy Statement have been audited by PricewaterhouseCoopers
LLP, independent accountants, and incorporated by reference herein in reliance
upon the report of PricewaterhouseCoopers LLP, incorporated by reference herein.
The financial statements of AirSoft, Inc. for the year ended December 31, 1995
that are incorporated by reference in this Proxy Statement have been audited by
Deloitte & Touche LLP, independent auditors, and incorporated by reference
herein in reliance upon the report of Deloitte & Touche LLP, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The financial statements of Isolation Systems Limited as of August
31, 1997 and 1996, and for the years then ended, that are incorporated by
reference in this Proxy Statement have been audited by KPMG, independent
auditors, and incorporated by reference herein in reliance upon the report of
KPMG, incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
PricewaterhouseCoopers LLP serves as the Company's independent accountants.
A representative of PricewaterhouseCoopers LLP is expected to be at the Special
Meeting to answer questions by Stockholders and will have the opportunity to
make a statement if so desired.
STOCKHOLDER PROPOSALS
Pursuant to the Company's By-laws, stockholder proposals for the Special
Meeting must be received by the Clerk of the Company at the principal offices of
the Company by no later than February 1, 1999. Any stockholder proposal must
also comply with the other applicable provisions of the Company's Articles of
Organization and By-laws, as well as the Exchange Act. No stockholder proposal
will be considered at the Special Meeting unless it is presented in accordance
with the foregoing requirements.
The Company will hold a 1999 Annual Meeting of Stockholders (the "1999
Annual Meeting") if the Merger is not consummated prior thereto. As set forth in
the Company's Proxy Statement for its 1998 Annual Meeting of Stockholders,
stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act
for inclusion in the Company's proxy materials for its 1999 Annual Meeting must
have been received by the Clerk of the Company at the principal offices of the
Company no later than December 4, 1998. In addition, the Company's By-laws
require that the Company be given advance notice of stockholder nominations for
election to the Company's Board of Directors and of other matters which
stockholders wish to present for action at an annual meeting of stockholders
(other than matters included in the Company's proxy statement in accordance with
Rule 14a-8). The required notice must be made in writing and delivered or mailed
by first class United States mail, postage prepaid, to the Clerk of the Company
at the principal offices of the Company, and received not less than 60 days nor
more than 90 days prior to the 1999 Annual Meeting; provided however, that if
less than 70 days notice or prior public disclosure of the date of the meeting
is given to stockholders, such nomination or other proposal shall have been
mailed or delivered to the Clerk not later than the close of business on the
10th day following the date on which the notice of the meeting was mailed or
such public disclosure made, whichever occurs first. The 1999 Annual Meeting is
currently expected to be held on June 3, 1999 (if the Merger is not consummated
prior to such date). Assuming that this date does not change, in order to comply
with the time periods set forth in the Company's By-laws, appropriate notice
would need to be provided no earlier than March 5, 1999 and no later than April
5, 1999. The advance notice provisions of the
35
<PAGE> 40
Company's By-laws supersede the notice requirements contained in recent
amendments to Rule 14a-4 under the Exchange Act.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other
matters before the Special Meeting and as of the date hereof does not know of
any other matters that may be brought before the Special Meeting by others. If
any other matter should properly come before the Special Meeting, the persons
named in the enclosed proxy as proxy appointees will have discretionary
authority to vote the shares of Common Stock thereby represented in accordance
with their best judgment.
By Order of the Board of Directors,
/s/ M. Elizabeth Potthoff
--------------------------------
M. Elizabeth Potthoff
Clerk
January 22, 1999
36
<PAGE> 41
ANNEX A
TO PROXY STATEMENT
AGREEMENT AND PLAN OF MERGER
AMONG
SHIVA CORPORATION,
INTEL CORPORATION
AND
INTEL NETWORKS, INCORPORATED
DATED AS OF OCTOBER 19, 1998
<PAGE> 42
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger.................................................. 1
1.2. Closing..................................................... 1
1.3. Effective Time.............................................. 1
ARTICLE II
ARTICLES OF ORGANIZATION AND BY-LAWS
OF THE SURVIVING CORPORATION;
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
2.1. Articles of Organization.................................... 2
2.2. By-laws..................................................... 2
2.3. Directors................................................... 2
2.4. Officers.................................................... 2
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
3.1. Conversion or Cancellation of Shares........................ 2
3.2. Payment for Shares.......................................... 2
3.3. Dissenters' Rights.......................................... 3
3.4. Transfer of Shares After the Effective Time................. 3
3.5. Lost, Stolen or Destroyed Certificates...................... 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Company............... 4
(a) Organization, Good Standing, Corporate Power and
Qualification; Subsidiaries and Other Interests......... 4
(b) Capital Structure....................................... 4
(c) Corporate Authority and Approval........................ 5
(d) Governmental Filings; No Violations..................... 6
(e) Company Reports; Financial Statements................... 6
(f) Absence of Certain Changes.............................. 7
(g) Litigation.............................................. 8
(h) Human Resources......................................... 8
(i) Compliance with Laws.................................... 8
(j) Environmental Matters................................... 8
(k) Intellectual Property................................... 9
(l) Taxes................................................... 10
(m) Insurance............................................... 10
(n) Brokers and Finders..................................... 11
(o) Certain Business Practices.............................. 11
4.2. Representations and Warranties of Parent and Merger Sub..... 11
(a) Organization, Good Standing and Qualification........... 11
(b) Ownership of Merger Sub................................. 11
-i-
<PAGE> 43
PAGE
----
(c) Corporate Authority..................................... 11
(d) Governmental Filings; No Violations..................... 11
(e) Brokers and Finders..................................... 12
(f) Financing............................................... 12
ARTICLE V
COVENANTS
5.1. Interim Operations.......................................... 12
5.2. Third Party Acquisitions.................................... 13
5.3. Stockholder Approval........................................ 15
5.4. Access...................................................... 15
5.5. Publicity................................................... 16
5.6. Status of Company Employees; Company Stock Options;
Employee Benefits........................................... 16
5.7. Expenses.................................................... 16
5.8. Indemnification; Directors' and Officers' Insurance......... 16
5.9. Rights Agreement............................................ 18
5.10. Product Return Procedures................................... 18
5.11. Manufacturing Costs and Supplies Verified................... 18
5.12. Further Assurances.......................................... 18
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligation to Effect Merger...... 18
(a) Stockholder Approval.................................... 18
(b) Regulatory Consents..................................... 18
(c) Litigation.............................................. 19
6.2. Conditions to Obligations of Parent and Merger Sub.......... 19
(a) Representations and Warranties.......................... 19
(b) Performance of Obligations of the Company............... 19
(c) Officer's Certificate................................... 19
(d) Opinion of Counsel...................................... 19
6.3. Conditions to Obligations of the Company.................... 19
(a) Representations and Warranties.......................... 19
(b) Performance of Obligations of Parent and Merger Sub..... 20
(c) Officer's Certificate................................... 20
ARTICLE VII
TERMINATION
7.1. Termination by Mutual Consent............................... 20
7.2. Termination by Either Parent or the Company................. 20
7.3. Termination by the Company.................................. 20
7.4. Termination by Parent and Merger Sub........................ 20
7.5. Effect of Termination and Abandonment....................... 21
7.6. Procedure for Termination................................... 21
-ii-
<PAGE> 44
PAGE
----
ARTICLE VIII
MISCELLANEOUS
8.1. Survival.................................................... 21
8.2. Certain Definitions......................................... 22
8.3. No Personal Liability....................................... 23
8.4. Modification or Amendment................................... 23
8.5. Waiver of Conditions........................................ 23
8.6. Counterparts................................................ 23
8.7. Governing Law and Venue; Waiver of Jury Trial............... 23
8.8. Notices..................................................... 24
8.9. Entire Agreement............................................ 25
8.10. No Third Party Beneficiaries................................ 25
8.11. Obligations of the Company and Surviving Corporation........ 25
8.12. Severability................................................ 25
8.13. Interpretation.............................................. 25
8.14. Assignment.................................................. 25
ANNEX A
Human Resources Rider
ANNEX B
Amendment to Rights Agreements
-iii-
<PAGE> 45
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of October 19, 1998, among SHIVA CORPORATION, a Massachusetts corporation
(the "Company"), INTEL CORPORATION, a Delaware corporation ("Parent"), and INTEL
NETWORKS, INCORPORATED, a Massachusetts corporation and a direct, wholly owned
subsidiary of Parent ("Merger Sub," with the Company and Merger Sub sometimes
being hereinafter together referred to as the "Constituent Corporations").
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in Section 8.2 of this Agreement.
RECITALS
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub
and the Company have determined that it is in the best interests of their
respective stockholders for Parent to acquire the Company;
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "Merger") and approved the Merger upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the promises, and of the
representations, warranties, covenants and agreements, contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub shall be
merged with and into the Company and the separate existence of Merger Sub shall
thereupon cease. The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the Commonwealth of Massachusetts, and
the separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in Article II hereof. The Merger shall have the effects
specified by Section 80 of Chapter 156B of the Massachusetts General Laws (the
"MBCL"). Parent, as the sole stockholder of Merger Sub, hereby approves the
Merger and this Agreement.
1.2. Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
at 9:00 a.m., Eastern time, on the first Business Day after the day on which the
last to be fulfilled or waived of the conditions set forth in Article VI (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions) shall be satisfied
or waived in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and Parent may agree in writing (the
"Closing Date").
1.3. Effective Time. As soon as practicable following the Closing, and
provided that this Agreement has not been terminated or abandoned pursuant to
Article VII hereof, the Company and Parent will cause Articles of Merger (the
"Articles of Merger") to be executed, acknowledged and filed with the Secretary
of State of the Commonwealth of Massachusetts as provided in Section 78 of the
MBCL. The Merger shall become effective at the time when the Articles of Merger
have been duly filed with the Secretary of State of the Commonwealth of
Massachusetts (the "Effective Time").
<PAGE> 46
ARTICLE II
ARTICLES OF ORGANIZATION AND
BY-LAWS OF THE SURVIVING CORPORATION;
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
2.1. Articles of Organization. The Articles of Merger shall provide that
the articles of organization of the Surviving Corporation shall be amended to be
identical to the articles of organization of Merger Sub as in effect immediately
prior to the Effective Time (the "Articles"), except that (i) the name of the
Surviving Corporation shall be "Intel Shiva Corp." and (ii) the purposes and
authorized capital stock of the Surviving Corporation shall be identical to
those of Merger Sub as set forth in its articles of organization as in effect
prior to the Effective Time.
2.2. By-laws. The by-laws of Merger Sub in effect at the Effective Time
shall be the by-laws of the Surviving Corporation (the "By-laws"), except that
the Articles shall be amended as of the Effective Time to identify the name of
the Surviving Corporation as "Intel Shiva Corp."
2.3. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Articles and By-laws.
2.4. Officers. The officers of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Articles and By-laws.
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
3.1. Conversion or Cancellation of Shares. The manner of converting or
canceling shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, each share ("Share") of the Company's
common stock, $.01 par value per share ("Common Stock"), issued and
outstanding immediately prior to the Effective Time, other than Shares that
are held by stockholders exercising appraisal rights pursuant to Sections
86 to 98 of the MBCL ("Dissenting Stockholders"), shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into the right to receive, without interest, an amount in cash
equal to $6.00 (the "Merger Consideration"). All such Shares, by virtue of
the Merger and without any action on the part of the holders thereof, shall
no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Shares
shall thereafter cease to have any rights with respect to such Shares,
except the right to receive the Merger Consideration for such Shares upon
the surrender of such certificate in accordance with Section 3.2 or the
right, if any, to receive payment from the Surviving Corporation as
determined in accordance with Sections 86 to 98 of the MBCL.
(b) At the Effective Time, each Share issued and held in the Company's
treasury at the Effective Time, shall, by virtue of the Merger and without
any action on the part of the holder thereof, cease to be outstanding,
shall be canceled and retired without payment of any consideration therefor
and shall cease to exist.
(c) At the Effective time, each share of Common Stock, par value $.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of Merger Sub or the holders of such shares, be converted into one
Share of the Surviving Corporation.
3.2. Payment for Shares. As of the Effective Time, Parent shall deposit
with the paying agent appointed by Parent with the Company's prior reasonable
approval (the "Paying Agent"), for the benefit of the holders of Shares, cash in
U.S. dollars in an amount equal to the Merger Consideration multiplied by the
2
<PAGE> 47
aggregate outstanding Shares (other than Shares held by Dissenting Stockholders)
to be paid pursuant to Section 3.1(a). After the Effective Time, there shall be
no transfers on the stock transfer books of the Surviving Corporation of shares
of capital stock of the Company which were outstanding immediately prior to the
Effective Time. Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record of Shares a form (mutually agreed to by Parent and the Company) of
letter of transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Time, represented any of
such Shares in exchange for payment therefor. Upon surrender to the Paying Agent
of such certificates (or affidavit of loss in lieu thereof), together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the Surviving Corporation shall promptly cause to be paid
to the persons entitled thereto a check in the amount equal to the Merger
Consideration multiplied by the number of Shares held by such person less any
required tax withholdings. No interest will be paid or will accrue on the amount
payable upon the surrender of any such certificate. If payment is to be made to
a person other than the registered holder of the certificate surrendered, it
shall be a condition of such payment that the certificate so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered or establish to the reasonable satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is not
applicable. One hundred and eighty (180) days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any funds (including any interest received with respect thereto) made
available to the Paying Agent which have not been disbursed to holders of
certificates formerly representing Shares outstanding on the Effective Time, and
thereafter such holders shall be entitled to look to the Surviving Corporation
only as general creditors thereof with respect to the cash payable upon due
surrender of their certificates. Notwithstanding the foregoing, neither the
Paying Agent nor any party hereto shall be liable to any holder of certificates
formerly representing Shares for any amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law. The Surviving
Corporation shall pay all charges and expenses, including those of the Paying
Agent, in connection with the exchange of cash for Shares.
3.3. Dissenters' Rights. If any Dissenting Stockholder demands payment
for his or her Shares as provided in Sections 86 to 98 of the MBCL, the Company
shall give Parent notice thereof and Parent shall have the right to participate
in all negotiations and proceedings with respect to any such demands. Neither
the Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Shares had been converted into the Merger Consideration
pursuant to Section 3.1.
3.4. Transfer of Shares After the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Surviving Corporation at or
after the Effective Time.
3.5. Lost, Stolen or Destroyed Certificates. In the event any certificate
for Shares shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such person of a
bond in a customary and reasonable amount determined by Parent as indemnity
against any claim that may be made against it with respect to such certificate,
the Paying Agent will issue in exchange therefor the Merger Consideration
payable pursuant to Section 3.2.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub as follows:
(a) Organization, Good Standing, Corporate Power and Qualification;
Subsidiaries and Other Interests.
(i) Each of the Company and its Subsidiaries (A) is a corporation
duly organized, validly existing and in good standing under the laws of
its respective jurisdiction of organization, (B) has all requisite
corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently
conducted and (C) is qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the ownership or
operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good
standing, individually or in the aggregate, has not had and is not
reasonably likely to have a Company Material Adverse Effect. The Company
has made available to Parent a complete and correct copy of each of the
Company's and each Subsidiary's articles of organization and by-laws (or
comparable governing documents), each as amended to the date hereof.
Each of the Company's and each Subsidiary's articles of organization and
by-laws (or comparable governing documents) made available are in full
force and effect.
(ii) Schedule 4.1(a) contains a correct and complete list of each
of the Company's Subsidiaries, the jurisdiction where each of such
Subsidiaries is organized, the jurisdictions in which the Company and
each such Subsidiary has property or employees, and the percentage of
outstanding Capital Stock of such Subsidiaries that is directly or
indirectly owned by the Company. The Company or another Subsidiary of
the Company owns its shares of the Capital Stock of each Subsidiary of
the Company free and clear of all Liens except Permitted Liens. Schedule
4.1(a) sets forth a true and complete list of each equity investment in
an amount of $100,000 or more or which represents a 5% or greater
ownership interest in the subject of such investment made by the Company
or any of its Subsidiaries in any other Person other than the Company's
Subsidiaries ("Other Interests"). The Other Interests are owned by the
Company, by one or more of the Company's Subsidiaries or by the Company
and one or more of its Subsidiaries, in each case free and clear of all
Liens, except for Permitted Liens.
(b) Capital Structure. The authorized Capital Stock of the Company
consists of (i) one hundred million (100,000,000) Shares of Common Stock,
of which 30,421,650 were outstanding (net of 106,115 Shares of treasury
stock) as of the close of business on October 13, 1998, and (ii) one
million (1,000,000) shares of Preferred Stock, par value $.01 per share
(the "Preferred Shares"), none of which is outstanding. All of the
outstanding Shares have been duly authorized and are validly issued, fully
paid and nonassessable. The Company has designated three hundred thousand
(300,000) of the Preferred Shares as Series A Junior Participating
Preferred Stock (the "Series A Stock"). Other than the Series A Stock,
which has been reserved for issuance pursuant to the Rights Agreement,
dated as of September 29, 1995, between the Company and American Stock
Transfer and Trust Company, as Rights Agent (the "Rights Agreement"), the
Company has no Preferred Shares reserved for issuance. Schedule 4.1(b)
contains a correct and complete list as of October 13, 1998 of each
outstanding purchase right or option (each a "Company Option") to purchase
Shares, including all Company options issued under the Company's Amended
and Restated 1988 Stock Plan, 1994 Non-employee Director Stock Option Plan,
1994 Employee Stock Purchase Plan, 1997 Stock Incentive Plan, and 1997
Employee Non-Qualified Plan, and under the Airsoft 1993 Stock Plan, in each
case as amended to the date hereof (collectively, the "Stock Option
Plans"), including the holder, date of grant, exercise price and number of
Shares subject thereto. The Stock Option Plans are the only plans under
which any Company Options are outstanding. From October 13, 1998 to the
date hereof, there have been no issuances of capital stock of the Company,
except issuances upon exercise of Company Options. As of October 13, 1998,
other than (1) the 6,068,728 Shares reserved for issuance upon exercise of
outstanding Company Options and (2) Shares
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reserved for issuance pursuant to the Rights Agreement, there are no Shares
reserved for issuance or any commitments for the Company to issue Shares.
Each of the outstanding shares of Capital Stock or other securities of each
of the Company's Subsidiaries directly or indirectly owned by the Company
is duly authorized, validly issued, fully paid and nonassessable and owned
by the Company or by a direct or indirect Subsidiary of the Company, free
and clear of any limitation or restriction (including any restriction on
the right to vote or sell the same except as may be provided as a matter of
law). Except for Company Options, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements or
commitments to issue or sell any shares of Capital Stock or other
securities of the Company or any of its subsidiaries or any securities or
obligations convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire, any shares of Capital Stock
or other securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. The Company does not have outstanding any bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote)
with the stockholders of the Company on any matter ("Voting Debt"). If
Parent takes the actions provided for in Annex A hereof, after the
Effective Time, the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of Capital Stock or other securities of the
Surviving Corporation pursuant to the Stock Option Plans. The Shares and
the rights contemplated by the Rights Agreement constitute the only classes
of securities of the Company or any of its Subsidiaries registered or
required to be registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(c) Corporate Authority and Approval.
(i) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder, subject to the approval and adoption of this Agreement by the
stockholders of the Company in the manner set forth in Section 5.3, to
the extent required by applicable Law. The execution, delivery and
performance of this Agreement by the Company and the consummation by it
of the transactions contemplated hereby have been duly authorized by the
Company's Board of Directors and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement and the
transactions contemplated hereby, other than the approval and adoption
of this Agreement by the stockholders of the Company in the manner set
forth in Section 5.3, to the extent required by applicable Law. This
Agreement has been duly executed and delivered by the Company and,
subject (as to the obligation to consummate the Merger) to such
stockholder approval and, assuming due authorization, execution and
delivery of this Agreement by Parent and Merger Sub, constitutes the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy laws or creditors' rights
generally or by general principles of equity.
(ii) The Board of Directors of the Company, at a meeting duly
called and held has (A) approved this Agreement, the Merger and the
other transactions contemplated hereby and (B) resolved to recommend
approval and adoption of this Agreement, the Merger and the other
transactions contemplated hereby by the Company's stockholders.
(iii) The Board of Directors of the Company has received an opinion
from Lazard Freres & Co. LLC, the Company's financial Adviser (the
"Financial Adviser"), to the effect that, as of the date of such
opinion, the consideration to be received by the holders of Shares in
the Merger is fair to such holders from a financial point of view. Such
opinion has not been withdrawn, revoked or modified. A true and complete
copy of such opinion has been delivered to Parent.
(iv) The Company and its Board of Directors have authorized and
taken all necessary action to amend the Rights Agreement in a form
satisfactory to Parent substantially similar to the form attached hereto
as Annex B without redeeming the Rights (as defined in the Rights
Agreement), such that none of the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated
hereby or thereby will (A) cause any Rights issued pursuant to the
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Rights Agreement to become exercisable or to separate from the stock
certificate to which they are attached, (B) cause Parent, Merger Sub or
any of their Affiliates to be an Acquiring Person (as defined in the
Rights Agreement) or (C) trigger other provisions of the Rights
Agreement, including giving rise to a Distribution Date (as defined in
the Rights Agreement), and such amendment shall be in full force and
effect at all times from and after the date hereof through the Effective
Time.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) with the Secretary of
State of the Commonwealth of Massachusetts, (B) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (C) the Exchange Act, (D) with the National Association of
Securities Dealers, Inc., including the Nasdaq National Market
(together, the "NASD"), and (E) as may be required by those foreign
jurisdictions in which the Company or any of the Subsidiaries conducts
business, no notices, reports or other filings are required to be made
nor are any consents, registrations, approvals, permits or
authorizations (collectively, "Government Consents") required to be
obtained by the Company from any court or other governmental or
regulatory authority, agency, commission, body or other governmental
entity (a "Governmental Entity"), in connection with the execution and
delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated hereby,
except those that the failure to make or obtain are not, individually or
in the aggregate, reasonably likely to have a Company Material Adverse
Effect or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of this Agreement by
the Company does not, and the consummation by the Company of the Merger
and the other transactions contemplated hereby will not, constitute or
result in (A) a breach or violation of or a default under, the articles
of organization or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) except as set forth on
Schedule 4.1(d), a breach or violation of, or a default under, the
acceleration of any obligations or the creation of any Lien on the
assets of the Company or any of its Subsidiaries (with or without
notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture or other obligation (a "Contract")
binding upon the Company or any of its Subsidiaries or any order, writ,
injunction, decree of any court or any Law or governmental or
non-governmental permit or license to which the Company or any of its
Subsidiaries is subject or (C) any change in the rights or obligations
of any party under any Contract except, in the case of clause (B) or (C)
above, for any breach, violation, default, acceleration, creation or
change that, individually or in the aggregate, is not reasonably likely
to have a Company Material Adverse Effect or prevent, materially delay
or materially impair the ability of the Company to Consummate the
transactions contemplated by this Agreement. Except as set forth on
Schedule 4.1(d), there are no Contracts of the Company or its
Subsidiaries which are material to the Company and its Subsidiaries,
taken as a whole, pursuant to which consents or waivers are or may be
required prior to consummation of the Merger and the other transactions
contemplated by this Agreement.
(e) Company Reports; Financial Statements. The Company has made
available to Parent each registration statement, report, proxy statement or
information statement filed with the Securities and Exchange Commission
(the "SEC") by it since January 3, 1998 (the "Audit Date"), including the
Company's Annual Report on Form 10-K for the year ended January 3, 1998 (as
amended, the "Company 10-K") in the form (including exhibits, annexes and
any amendments thereto) filed with the SEC (collectively, including any
such reports filed subsequent to the date hereof, the "Company Reports").
As of their respective dates, the Company Reports complied, and any Company
Reports filed with the SEC after the date hereof will comply, as to form in
all material respects with the applicable requirements of the Exchange Act
and the Securities Act of 1933, as amended (the "Securities Act"), and the
Company Reports did not, and any Company Reports filed with the SEC after
the date hereof will not, at the time of their filing, contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in
light of
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the circumstances in which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into
the Company Reports (including the related notes and schedules) fairly
presents, or will fairly present, the consolidated financial position of
the Company and its Subsidiaries as of its date and each of the
consolidated statements of operations and of changes in stockholders'
equity and of cash flows included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly
presents, or will fairly present, the results of operations, retained
earnings, changes in stockholders' equity and cash flow, as the case may
be, of the Company and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to notes and normal year-end
audit adjustments that will not be material in amount or effect), in each
case in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved,
except as may be noted therein. The Company has heretofore made available
or promptly will make available to Parent a complete and correct copy of
all amendments or modifications which are required to be filed with the SEC
but have not yet been filed with the SEC to the Company Reports,
agreements, documents or other instruments which previously had been filed
by the Company with the SEC pursuant to the Exchange Act. For purposes of
this Agreement, "Balance Sheet" means the consolidated balance sheet of the
Company as of January 3, 1998 set forth in the Company 10-K. Except as set
forth in Company Reports filed with the SEC prior to the date hereof or as
incurred in the ordinary course of business since the date of the most
recent financial statements included in the Company Reports, neither the
Company nor any of its subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) which would
be required under GAAP to be set forth on a consolidated balance sheet of
the Company and its subsidiaries taken as a whole and which individually or
in the aggregate would have a Company Material Adverse Effect.
(f) Absence of Certain Changes. Except as disclosed in Schedule
4.1(f) or in the Company Reports filed prior to the date hereof, since the
Audit Date, the Company and its Subsidiaries have conducted their
respective businesses in all material respects only in, and have not
engaged in any material transaction other than according to, the ordinary
and usual course of such businesses consistent with past practices, and
there has not been any (i) change in the financial condition, properties,
business or results of operations of the Company and its Subsidiaries,
except for those changes that, individually or in the aggregate, have not
had and are not reasonably likely to have a Company Material Adverse Effect
or prevent, materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement, (ii)
material damage, destruction or other casualty loss with respect to any
material asset or property owned, leased or otherwise used by the Company
or any of its Subsidiaries, not covered by insurance, (iii) declaration,
setting aside or payment of any dividend or other distribution in respect
of the Capital Stock of the Company or any of its Subsidiaries (other than
wholly owned Subsidiaries) or any repurchase, redemption or other
acquisition by the Company or any of its Subsidiaries of any outstanding
shares of Capital Stock or other securities of, or other ownership
interests in, the Company or any of its Subsidiaries, (iv) amendment of any
material term of any outstanding security of the Company or any of its
Subsidiaries, (v) incurrence, assumption or guarantee by the Company or any
of its Subsidiaries of any indebtedness for borrowed money other than in
the ordinary course of business and in amounts and on terms consistent with
past practices, (vi) creation or assumption by the Company or any of its
Subsidiaries of any Lien (other than Permitted Liens) on any material asset
other than in the ordinary course of business consistent with past
practices, (vii) making of any loan, advance or capital contributions by
the Company or any of its Subsidiaries to, or investment in, or guarantee
of obligations of, any Person other than (A) loans or advances to employees
in connection with business-related travel (B) loans made to employees
consistent with past practices which are not in the aggregate in excess of
$100,000 and (C) loans, advances or capital contributions to or investments
in wholly owned Subsidiaries, and in each case made in the ordinary course
of business consistent with past practices, (viii) transaction or
commitment made, or any contract or agreement entered into, by the Company
or any of its Subsidiaries relating to its assets or business (including
the acquisition or disposition of any assets) or any relinquishment by the
Company or any of its Subsidiaries of any Contract or other right, in
either case, material to the Company and its Subsidiaries, taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices
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and those contemplated by this Agreement, (ix) labor dispute, other than
routine individual grievances, or any activity or proceeding by a labor
union or representative thereof to organize any employees of the Company or
any of its Subsidiaries, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such employees or (x)
change by the Company or any of its Subsidiaries in accounting principles,
practices or methods, except as may be required as a result of a change in
law or in GAAP.
(g) Litigation. Except as disclosed on Schedule 4.1(g) or in the
Company Reports filed prior to the date hereof, there are no civil,
criminal or administrative actions, suits, claims, hearings, investigations
or proceedings pending or, to the Knowledge of the Company, threatened
against the Company or any of its Subsidiaries.
(h) Human Resources. The Company hereby makes each of the
representations and warranties contained in Article I of Annex A, which
representations and warranties are incorporated herein by reference.
(i) Compliance with Laws. Except as set forth in the Company Reports
filed prior to the date hereof or as set forth on Schedule 4.1(i), the
businesses of each of the Company and its Subsidiaries have not been, and
are not being, conducted in violation of any law, ordinance, regulation,
judgment, order, injunction, decree, arbitration award, license or permit
of any Governmental Entity (collectively, "Laws"), except for violations
that, individually or in the aggregate, have not had and are not reasonably
likely to result in a loss to the Company of $1,000,000 or more or prevent,
materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement. Except as set
forth in the Company Reports filed prior to the date hereof, or as set
forth on Schedule 4.1(i), no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending
or, to the Knowledge of the Company, threatened, nor has any Governmental
Entity indicated to the Company an intention to conduct the same, except
for those the outcome of which are not, individually or in the aggregate,
reasonably likely to result in a loss to the Company of $1,000,000 or more
or prevent, materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement.
(j) Environmental Matters.
(i) The term "Environmental Laws" means any applicable federal,
state, local or foreign statute, treaty, ordinance, rule, regulation,
policy, permit, consent, approval, license, judgment, order, decree or
injunction relating to: (A) Releases (as defined in 42 U.S.C. sec.
9601(22)) or threatened Releases of Hazardous Material (as hereinafter
defined) into the environment, (B) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment of
Hazardous Material, (C) the health or safety of employees in the
workplace, (D) protecting or restoring natural resources or (E) the
environment. The term "Hazardous Material" means (1) hazardous
substances (as defined in 42 U.S.C. sec. 9601(14)), including "hazardous
waste" as defined in 42 U.S.C. sec. 6903, (2) petroleum, including crude
oil and any fractions thereof, (3) natural gas, synthetic gas and any
mixtures thereof, (4) asbestos and/or asbestos containing materials, (5)
PCBs or materials containing PCBs, (6) any material regulated as a
medical waste, (7) lead containing paint, (8) radioactive materials and
(9) "Hazardous Substance" or "Hazardous Material" as those terms are
defined in any indemnification provision in any contract, lease, or
agreement to which the Company is a party, but excludes all office,
janitorial or maintenance supplies used by the Company or any
Subsidiary.
(ii) During the period of ownership or operation by the Company and
its Subsidiaries of any of their current or previously owned or leased
properties, there have been no Releases of Hazardous Material by the
Company or any of its Subsidiaries in, on, under or affecting such
properties or any surrounding site, and neither the Company nor any of
its Subsidiaries has disposed of any Hazardous Material in a manner that
has led, or could reasonably be anticipated to lead to a Release, except
in each case (A) for those which individually or in the aggregate would
not have a Company Material Adverse Effect and (B) except as disclosed
in the Company Reports. Except as set forth on
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Schedule 4.1(j)(ii), to the Company's Knowledge there have been no
Releases of Hazardous Material by the Company or any of its Subsidiaries
in, on, under or affecting their current or previously owned or leased
properties or any surrounding site at times outside of such periods of
ownership, operation, or lease, except in each case for those which,
individually on in the aggregate, would not have a Company Material
Adverse Effect. Since January 1, 1995, the Company and its Subsidiaries
have not received any written notice of, or entered into any order,
settlement or decree relating to: (A) any violation of any Environmental
Laws or the institution or pendency of any suit, action, claim,
proceeding or investigation by any Governmental Entity or any third
party in connection with any alleged violation of Environmental Laws or
(B) the response to or remediation of Hazardous Material at or arising
from any of the Company's properties or any Subsidiary's properties. To
the Company's Knowledge there have been no violations of any
Environmental Laws by the Company or any Subsidiary which violations,
individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect.
(k) Intellectual Property.
(i) The Company and/or its Subsidiaries own, or are validly
licensed or otherwise have the right to use all (i) foreign and United
States federal and state patents, trademarks, trade names, service marks
and copyright registrations, (ii) foreign and United States federal and
state patent, trademark, trade name, service mark and copyright
applications for registration, (iii) common law claims to trademarks,
service marks and trade names, (iv) claims of copyright which exist
although no registrations have been issued with respect thereto, (v)
fictitious business name filings with any state or local Governmental
Entity and (vi) inventions, concepts, designs, improvements, original
works of authorship, computer programs, know-how, research and
development, techniques, modifications to existing copyrightable works
of authorship, data and other proprietary and intellectual property
rights (whether or not patentable or subject to copyright, mask work or
trade secret protection), in each case which are used in its business
and the absence of which would have a Company Material Adverse Effect
(collectively, the "Intellectual Property Rights"). There are no Liens
other than Permitted Liens on the Intellectual Property Rights. There
are no outstanding and, to the Company's Knowledge, no threatened
disputes or disagreements with respect to any Contract in respect of the
Intellectual Property Rights.
(ii) Neither the Company nor any of its Subsidiaries is, nor has it
during the three (3) years preceding the date of this Agreement been, a
party to any litigation or arbitral or other proceeding other than those
actions disclosed on Schedule 4.1(g), nor, to the Knowledge of the
Company, is any such proceeding threatened as to which there is a
reasonable possibility of a determination adverse to the Company or any
of its Subsidiaries, that involved a claim of infringement by the
Company or any of its Subsidiaries of any intellectual property right,
or a claim challenging the validity or enforceability of any
Intellectual Property Right. No Intellectual Property Right is subject
to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by the Company or any of its Subsidiaries
or, in the case of any Intellectual Property Right owned by the Company
or its Subsidiaries licensed to others, restricting the sale, transfer,
assignment or licensing thereof by the Company or any of its
Subsidiaries to any other Person. Except as set forth on Schedule
4.1(k)(ii), the Company has no Knowledge that would cause it to believe
that its or any Subsidiary's use of any material Intellectual Property
Right conflicts with, infringes upon or violates any patent, patent
license, trademark, tradename, copyright, service mark, brand mark or
brand name, or any trade secret of any Person.
(iii) Schedule 4.1(k)(iii) sets forth as of the date hereof a
complete list of all material contracts related to the Intellectual
Property Rights.
(iv) All employees and independent contractors of the Company or
any of its Subsidiaries have executed written agreements with the
Company or applicable Subsidiary that assign to the Company or such
Subsidiary all rights to any Intellectual Property Rights (other than
moral rights) that are
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developed by such employees and contractors in the course of their
employment with or in rendering services to the Company, the absence of
which would have a Company Material Adverse Effect.
(v) All Intellectual Property Rights which are registered or the
subject of pending applications have been duly maintained and all
necessary filings, payments and other submissions have been made which
are necessary to keep such registration and application valid and/or
subsisting and, except as set forth on Schedule 4.1(k)(v), there have
been no proceedings of any kind, nor are there to the Company's
Knowledge any threatened proceedings, which if determined adversely to
the Company, could result in the loss of any Intellectual Property
Rights that may cause a Company Material Adverse Effect.
(vi) To the Company's knowledge after due inquiry, except as
disclosed on Schedule 4.1(k)(vi), all software, hardware, firmware,
products of the Company, and, to the Company's Knowledge, all
third-party software, hardware and firmware products that are material
to the Company's business operations, that contain or call on
date-related data, including without limitation any function that is
indexed to a computer processing unit clock or provides specific dates
or calculates spans of dates, is able to record, store, process, output,
exchange, and provide true and accurate dates and calculations for dates
and spans of dates prior to, including and following January 1, 2000.
Except as disclosed on Schedule 4.1(k)(vi), to the Company's knowledge
upon due inquiry, none of the Company's or the Subsidiaries' software,
hardware or firmware, accounting systems or, to the Company's Knowledge,
any third-party systems used by the Company will be materially adversely
affected or impaired by the input, storage, processing, exchange or
output of date data within and between the 20th and 21st Centuries.
(l) Taxes. Except as set forth on Schedule 4.1(l), (i) the Company and
its Subsidiaries have accurately prepared and timely filed, or will timely
file, all material returns and reports required to be filed by them with
any taxing authority with respect to Taxes for any period ending on or
before the date hereof, taking into account any extension of time to file
granted to or obtained on behalf of the Company or any of its
Subsidiaries, (ii) all Taxes shown to be payable on such returns or
reports that are due prior to the date hereof have been timely paid, (iii)
as of the date hereof, no deficiency for any amount of Tax has been
asserted or assessed or, to the Company's Knowledge, has been threatened
or is likely to be assessed by a taxing authority against the Company or
any of its Subsidiaries other than deficiencies as to which adequate
reserves have been provided for in the Company's consolidated financial
statements and (iv) the Company has provided in accordance with GAAP
adequate reserves in its consolidated financial statements for any Taxes
that have not been paid, whether or not shown as being due on any returns.
For purposes of this Agreement, "Taxes" means any and all taxes, fees,
levies, duties, tariffs, imposts and other charges of any kind (together
with any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any Governmental Entity
or other taxing authority, including taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, Capital Stock, payroll, employment, social security,
workers' compensation, unemployment compensation or net worth; taxes or
other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added or gains taxes; license, registration and
documentation fees; and customers' duties, tariffs and similar charges.
Neither the Company nor any of its Subsidiaries is subject to any Tax
sharing agreement. No payments to be made to any of the employees of the
Company or any of its Subsidiaries will, as a direct or indirect result of
the consummation of the Merger, be subject to the deduction limitations of
Section 280G of the Code.
(m) Insurance. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts
as are usually insured against by similarly situated companies in the same
or similar businesses. Each Insurance Policy is in full force and effect
and is valid, outstanding and enforceable, and all premiums due thereon
have been paid in full. None of the Insurance Policies will terminate or
lapse (or be affected in any other materially adverse manner) by reason of
the transactions contemplated by this Agreement. The Company and its
Subsidiaries have complied in all material respects with the provisions of
each Insurance Policy under which it is the insured party. Except as set
forth on Schedule 4.1(m), no insurer under any Insurance Policy has
canceled or generally disclaimed
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liability under any such policy or indicated to the Company any intent to
do so or not to renew any such policy. All material claims under the
Insurance Policies have been filed in a timely fashion.
(n) Brokers and Finders. Neither the Company nor any of its
Subsidiaries, officers, directors, or employees or other Affiliates has
employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the Merger or the
other transactions contemplated by this Agreement, except that the Company
has employed the Financial Adviser, the arrangements with which have been
disclosed to Parent prior to the date hereof.
(o) Certain Business Practices. Neither the Company, any of its
Subsidiaries nor, to the Knowledge of the Company, any directors, officers,
agents or employees of the Company or any of its Subsidiaries has (i) used
any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or
(iii) made any other similar payment prohibited by applicable Law.
4.2. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub each hereby represents and warrants to the Company as follows:
(a) Organization, Good Standing and Qualification. Each of Parent and
Merger Sub (i) is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation, (ii) has all requisite corporate or similar power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and (iii) is qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business
requires such qualification, except where the failure to be so qualified or
in such good standing, when taken together with all other such failures,
has not had and is not reasonably likely to have a Parent Material Adverse
Effect. Parent has made available to the Company a complete and correct
copy of Parent's certificate or incorporation and by-laws, as amended to
the date hereof. Parent's certificate of incorporation and by-laws so
delivered are in full force and effect.
(b) Ownership of Merger Sub. All of the issued and outstanding Capital
Stock of Merger Sub is, and at the Effective Time will be, owned by
Parent, and there are no (i) other outstanding shares of Capital Stock or
other voting securities of Merger Sub, (ii) securities of Merger Sub
convertible into or exchangeable for shares of Capital Stock or other
voting securities of Merger Sub or (iii) options or other rights to
acquire from Merger Sub, and no obligations of Merger Sub to issue, any
Capital Stock, other voting securities or securities convertible into or
exchangeable for Capital Stock or other voting securities of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
(c) Corporate Authority. Each of Parent and Merger Sub has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Merger. Assuming due execution and
delivery by the Company, this Agreement is a valid and binding agreement of
Parent and Merger Sub, enforceable against each of them in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy laws or creditors' rights generally or by general principles of
equity.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) with the Secretary of
State of the Commonwealth of Massachusetts, (B) under the HSR Act, (C)
the Exchange Act, (D) required to be made with the NASD and (E) as may
be required by those foreign jurisdictions in which the Company and its
Subsidiaries conduct business, no notices, reports or other filings are
required to be made by Parent or Merger Sub with, nor are any Government
Consents required to be obtained by Parent or Merger Sub from, any
Governmental Entity, in connection with the execution and delivery of
this
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Agreement by Parent and Merger Sub, and the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated hereby.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default
under, the certificate of incorporation or by-laws of Parent or the
articles of organization or by-laws of Merger Sub, (B) a breach or
violation of, or a default under, the acceleration of or the creation of
a Lien, on the assets of Parent or any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any Contract binding
upon Parent or any of its Subsidiaries or any Law to which Parent or any
of its Subsidiaries is subject or (C) any change in the rights or
obligations of any party under any such Contract.
(e) Brokers and Finders. Neither Parent nor Merger Sub, nor any of
their respective officers, directors, employees or other Affiliates, has
employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the Merger or the
other transactions contemplated by this Agreement.
(f) Financing. At the Effective Time, Parent and Merger Sub will have
available all the funds necessary for the acquisition of all Shares and to
perform their respective obligations under this Agreement, including
without limitation payment in full for all Shares outstanding as of the
Effective Time.
ARTICLE V
COVENANTS
5.1. Interim Operations. The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, which approval shall not be
unreasonably withheld, and except as otherwise expressly contemplated by this
Agreement):
(a) its business and the business of its Subsidiaries (including,
without limitation, research and development, establishment and maintenance
of marketing and sales programs, and customer support) shall be conducted
in the ordinary and usual course consistent in all material respects with
past practices and, to the extent consistent therewith, it and its
Subsidiaries shall use commercially reasonable efforts to preserve its
business organization intact and maintain its existing relations and
goodwill with customers, suppliers, distributors, creditors, lessors,
employees and business associates;
(b) it shall not, (i) issue, sell otherwise dispose of or subject to
Lien (other than Permitted Liens) any of its Subsidiaries' Capital Stock
owned by it, (ii) amend its articles of organization, by-laws or, except
for any amendment which will not hinder, delay or make more costly to
Parent the Merger, the Rights Agreement other than that amendment
contemplated hereby, (iii) split, combine or reclassify its outstanding
shares of Capital Stock, (iv) declare, set aside or pay any dividend
payable in cash, stock or property in respect of any Capital Stock other
than the issuance of Rights in connection with the issuance of Capital
Stock upon the exercise of Company Options, (v) repurchase, redeem or
otherwise acquire or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its Capital Stock or any securities
convertible into or exchangeable or exercisable for any shares of its
Capital Stock or (vi) adopt a plan of complete or partial liquidation or
dissolution, merger or otherwise restructure or recapitalize or consolidate
with any Person other than Merger Sub or another wholly owned Subsidiary of
Parent;
(c) neither it nor any of its Subsidiaries shall (i) except as provided
in Annex A, authorize for issuance or issue, sell or otherwise dispose of
or subject to any Lien (other than Permitted Liens) any shares of, or
securities convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to acquire,
Capital Stock of any class (other than Shares issuable pursuant to Company
Options outstanding on the date hereof, Shares that may be issuable under
the
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Company's 1994 Employee Stock Purchase Plan as of January 31, 1999, and
automatic grants of director stock options that may be mandated by the
Director Stock Option Plans) or any Voting Debt (ii) other than for sales
of products and licenses of software in the ordinary and usual course of
business consistent with past practices and as set forth on Schedule
5.1(c), transfer, lease, license, guarantee, sell or otherwise dispose of
or subject to any Lien (other than Permitted Liens) any other property or
assets, (iii) other than in the ordinary and usual course of business
consistent with past practices, incur or modify any indebtedness or other
material liability (except for borrowings in the ordinary course under
lines of credit in existence on the date hereof), (iv) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except
in the ordinary course of business consistent with past practices and
except for obligations of Subsidiaries of the Company incurred in the
ordinary course of business, (v) make any loans to any other Person (other
than to Subsidiaries of the Company or reasonable and customary loans or
advances to employees in connection with business-related travel in the
ordinary course of business consistent with past practices) or (vi) make
any commitments for, make or authorize any capital or prepaid expenditures
other than in amounts less than $150,000 individually and $3,000,000 in the
aggregate or, by any means, make any acquisition of, or investment in,
assets or stock of any other Person;
(d) neither it nor any of its Subsidiaries shall, except as may be
required as a result of a change in law or in GAAP, change any of the
accounting principles or practices used by it;
(e) neither it nor any of its Subsidiaries shall revalue in any
respect any of its material assets, including writing down the value of
inventory or writing-off notes or accounts receivable except in the
ordinary course of business consistent with past practices, except as may
be required as a result of a change in law or in GAAP;
(f) except as set forth on Schedule 5.1(f) neither it nor any of its
Subsidiaries shall settle or compromise any material claims or litigation
which involves a payment of more than $50,000 or terminate or materially
amend or modify any of its material Contracts or waive, release or assign
any material rights or claims;
(g) neither it nor any of its Subsidiaries shall make any Tax election
or permit any insurance policy naming it as a beneficiary or loss-payable
payee to be canceled or terminated;
(h) neither it nor any of its Subsidiaries shall take any action or
omit to take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(i) neither it nor any of its Subsidiaries will authorize or enter
into any agreement to do any of the foregoing.
5.2. Third Party Acquisitions.
(a) The Company agrees that neither it nor any of its Subsidiaries, nor any
of its or its Subsidiaries' employees or directors, shall, and it shall direct
and use its best efforts to cause its and its Subsidiaries' agents and
representatives (including the Financial Adviser or any other investment banker
and any attorney or accountant retained by it or any of its Subsidiaries
(collectively, "Company Advisers")) not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries in respect of, or the
making of any proposal for, a Third Party Acquisition (as hereinafter defined).
The Company further agrees that neither it nor any of its Subsidiaries nor any
of its or its Subsidiaries' employees or directors shall, and it shall direct
and use its best efforts to cause all Company Advisers not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Third Party (as
hereinafter defined) relating to the proposal of a Third Party Acquisition, or
otherwise facilitate any effort or attempt to make or implement a Third Party
Acquisition; provided, however, that if the Board of Directors of the Company
determines in good faith, after consultation with and advice from a nationally
recognized law firm, that failure to do so would be reasonably likely to result
in a violation of its fiduciary duties to the Company's stockholders under
applicable law, the Company may, in response to an inquiry, proposal or offer
for a Third Party Acquisition which was not solicited subsequent to the date
hereof, (x) furnish only such information with respect to the Company to any
such Person pursuant to a customary confidentiality
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agreement as was delivered to Parent and (y) participate in the discussions and
negotiations regarding such inquiry, proposal or offer; and provided further
that nothing contained in this Agreement shall prohibit the Company or its Board
of Directors from complying with Rules 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to any proposed Third Party Acquisition. The Company
shall immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Third Parties conducted heretofore with
respect to any of the foregoing. The Company shall take the necessary steps to
promptly inform all Company Advisers of the obligations undertaken in this
Section 5.2(a). The Company agrees to notify Parent promptly (and in no event
later than 24 hours after receipt of a proposal of a Third Party Acquisition) if
(i) any inquiries relating to or proposals for a Third Party Acquisition are
received by the Company, any of its Subsidiaries or any of the Company Advisers,
(ii) any confidential or other non-public information about the Company or any
of its Subsidiaries is requested from the Company, any of its Subsidiaries or
any of the Company Advisers in connection with a Third Party Acquisition or
(iii) any negotiations or discussions in connection with a possible Third Party
Acquisition are sought to be initiated or continued with the Company, any of its
Subsidiaries or any of the Company Advisers indicating, in connection with such
notice, the principal terms and conditions of any proposals or offers, and
thereafter shall keep Parent informed in writing, on a reasonably current basis,
on the status and terms of any such proposals or offers and the status of any
such negotiations or discussions. The Company also agrees promptly to request
each Person that has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Company or any of its
Subsidiaries, if any, to return all confidential information heretofore
furnished to such Person by or on behalf of the Company or any of its
subsidiaries.
(b) The Board of Directors of the Company shall not withdraw its
recommendation of the Merger and other transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the preceding sentence,
if the Board of Directors of the Company determines in good faith, after
consultation with and advice from a nationally recognized law firm, that failure
to do so would be reasonably likely to result in a violation of its fiduciary
duties, the Board of Directors may withdraw its recommendation of the Merger and
the other transactions contemplated hereby, or approve or recommend or cause the
Company to enter into an agreement with respect to a Superior Proposal (as
defined below), but in each case only (i) if the Company has complied with the
penultimate sentence of Section 5.2(a), (ii) if the Company has provided written
notice to Parent (a "Notice of Superior Proposal") advising Parent that the
Board of Directors has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the Person making
such Superior Proposal and (iii) such Superior Proposal does not contain any
"right of first refusal" or "right of first offer" in favor of the Person making
such Superior Proposal; provided, however, that the Company shall not be
entitled to enter into any agreement with respect to a Superior Proposal unless
this Agreement is concurrently terminated by its terms pursuant to Section
7.3(b). For purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any Person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Parent, Merger Sub
or any Affiliate thereof (a "Third Party"), (ii) the acquisition by a Third
Party of 20% or more of the total assets of the Company and its Subsidiaries,
taken as a whole (other than the purchase of the Company's products in the
ordinary course of business), (iii) the acquisition by a Third Party of 20% or
more of the outstanding Shares, (iv) the adoption by the Company of a plan of
partial or complete liquidation or the declaration or payment of an
extraordinary dividend, (v) the repurchase by the Company or any of its
Subsidiaries of 20% or more of the outstanding Shares or (vi) the acquisition by
the Company or any of its Subsidiaries by merger, purchase of stock or assets,
joint venture or otherwise of a direct or indirect ownership interest or
investment in any business whose annual revenues, net income or assets is equal
to or greater than 20% of the annual revenues, net income or assets of the
Company and its Subsidiaries, taken as a whole. For purposes of this Agreement,
a "Superior Proposal" means any bona fide proposal that is not subject to any
financing condition to acquire directly or indirectly for consideration
consisting of cash and/or securities all of the Shares then outstanding or all
or substantially all the assets of the Company and its Subsidiaries, taken as a
whole, and otherwise on terms which the Board of Directors of the Company by a
majority vote determines in its good faith judgment (based on consultation with
the Financial Adviser or another financial adviser of nationally recognized
reputation) to be reasonably capable of being
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completed (taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal) and more favorable
to the Company's stockholders than the Merger.
5.3. Stockholder Approval.
(a) As soon as reasonably practicable after the Proxy Statement (as defined
below) is cleared by the SEC, the Company shall take all action necessary in
accordance with the MBCL and its articles of organization and by-laws to call,
give notice of and convene a meeting (a "Meeting") of its stockholders to
consider and vote upon the approval and adoption of this Agreement, the Merger
and the transactions contemplated hereby. The Board of Directors shall recommend
that the stockholders of the Company vote to approve and adopt this Agreement
and the Merger and any other matters to be submitted by the Board of Directors
to stockholders in connection therewith. Parent agrees to cause all Shares owned
by it or any Subsidiary of it to be voted in favor of the Merger.
(b) As promptly as reasonably practicable after the date hereof, other than
as contemplated by Section 5.2(b), the Company shall prepare a proxy statement,
prepared in accordance with the requirements of the Exchange Act, the MBCL and
the Company's articles of organization and by-laws pertaining to the Merger and
containing the recommendation of the Company's Board of Directors to approve and
adopt this Agreement and the Merger (the "Proxy Statement"). Parent shall
reasonably cooperate with the Company in the preparation of the Proxy Statement
and any amendments and supplements thereto. The Proxy Statement shall not be
distributed, and no amendment or supplement thereto shall be made by the
Company, without the prior consent of Parent and its counsel, which consent
shall not be unreasonably withheld or delayed. The Company shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC as
promptly as practicable following filing and shall cause a definitive Proxy
Statement to be distributed to its stockholders entitled to vote upon the Merger
as promptly as practicable thereafter.
(c) The Company represents and warrants that the Proxy Statement will
comply as to form in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by Parent or Merger Sub or any other person. Parent represents and
warrants that none of the information supplied by Parent or Merger Sub for
inclusion in the Proxy Statement will, at the respective times filed with the
SEC and distributed to stockholders of the Company, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(d) The Company shall notify Parent of the receipt of the comments of the
SEC and of any requests by the SEC for amendments or supplements to the Proxy
Statement or for additional information, and promptly supply Parent with copies
of all correspondence between the Company (or its representatives) and the SEC
(or its staff) with respect thereto, all of which correspondence shall be
subject to Parent's prior reasonable approval, which consent shall not be
unreasonably withheld or delayed. If, at any time prior to the Meeting, any
event should occur relating to or affecting the Company or Parent, or to their
respective officers or directors, which event should be described in an
amendment or supplement to the Proxy Statement, the parties shall promptly
inform one another and shall cooperate in promptly preparing, filing and
clearing with the SEC and, if required by applicable securities laws,
distributing to the Company's stockholders such amendment or supplement.
5.4. Access. Upon reasonable notice, and except as may otherwise be
required by applicable law or relevant contractual provisions contained in such
agreements, the Company shall (and shall cause its Subsidiaries to) (i) afford
Parent's officers, employees, counsel, accountants and other authorized
representatives (collectively, "Representatives") access, during normal business
hours throughout the period prior to the Effective Time, to its properties,
books, contracts and records and, during such period, (ii) furnish promptly to
Parent all information concerning its business, properties and personnel as may
reasonably be requested; provided, however, that no investigation pursuant to
this Section 5.4 shall affect or be deemed to modify any
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representation or warranty made by the Company. All requests for information
made pursuant to this Section 5.4 shall be directed to an executive officer of
the Company or such Person as may be designated by its officers. Notwithstanding
the foregoing, the parties shall comply in all material respects with, and shall
cause their respective Representatives to comply in all material respects with,
all their respective obligations under the Corporate Non-Disclosure Agreement,
dated September 29, 1998, between the Company and Parent.
5.5. Publicity. The initial press release concerning the Merger has been
approved by Parent and the Company and thereafter the Company and its
Subsidiaries, on the one hand, and Parent and Merger Sub, on the other hand,
shall consult with each other prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any Governmental Entity or other Person (including the NASD) with respect
hereto, except as may be required by law or by obligations pursuant to any
listing agreement with the Nasdaq National Market.
5.6. Status of Company Employees; Company Stock Options; Employee
Benefits. The Company and Parent shall comply with each of the covenants
contained in Annex A, which covenants are incorporated herein by reference.
5.7. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article III. Except as otherwise provided in
Section 7.5 whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense.
5.8. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time a director or officer of the Company or any of its Subsidiaries (when
acting in such capacity) (the "Indemnified Parties"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, demands, liabilities, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative arising out of matters
existing or occurring prior to or after the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, which is based in whole or in
part on, or arising in whole or in part out of the fact that such person is or
was a director or officer of the Company or any of its Subsidiaries including,
without limitation, all losses, claims, damages, costs, expenses, liabilities,
judgments or settlement amounts based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, all to the fullest extent that the Company would have been
permitted under the MBCL and its article of organization, by-laws and other
agreements in effect on the date hereof to indemnify such individual.
(b) To the extent that the Surviving Corporation does not pay any Costs
required to be paid by it pursuant to Section 5.8(a), Parent shall indemnify,
defend and hold harmless the Indemnified Parties in an amount not to exceed (x)
the net worth of the Company as of October 3, 1998, as determined under GAAP
consistently applied, less (y) the amount of Costs paid by the Company or the
Surviving Corporation from and after the date of this Agreement to any
Indemnified Parties or to any third parties, with respect to any claims,
actions, suits, proceedings or investigations relating to or arising out of the
conduct of any of the Indemnified Parties.
(c) Any Indemnified Party wishing to claim indemnification under subsection
(a) of this Section 5.8, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent and the Surviving
Corporation thereof (but the failure so to notify Parent or the Surviving
Corporation shall not relieve it from any liability which it may have under this
Section 5.8 except to the extent such failure materially prejudices such party).
In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the Surviving
Corporation shall have the right to assume the defense thereof, in which case
the Surviving Corporation shall not be liable to any such
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Indemnified Party for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof (provided that the Indemnified party shall be entitled to participate
in, but not control, such defense, with its counsel at its own expense, and
provided further that the Surviving Corporation shall be responsible for the
reasonable fees and expenses or separate counsel for the Indemnified Party in
the event the Indemnified Party reasonably concludes that the counsel the
Surviving Corporation has selected has a conflict of interest), (ii) the
Indemnified Party and the Surviving Corporation will cooperate in the defense of
any such matter and (iii) the Surviving Corporation shall not be liable for any
settlement effected without its prior written consent, which consent shall not
be unreasonably withheld; provided, however, that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party if and when a
court shall ultimately determine, and such determination shall have become
final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by Law. In no event shall the Surviving
Corporation consent to any settlement or entry of judgment that does not include
a complete release of the Indemnified Party from all liability with respect
thereto or that imposes any liability or obligation on the Indemnified party,
without the prior written consent of the Indemnified Party, which consent may be
withheld in the sole discretion of the Indemnified Party.
If the Surviving Corporation does not assume the defense of any such claim,
action, suit, proceeding or investigation, the Indemnified Party may defend
against such claim or legal proceeding (with the Surviving Corporation
responsible for the reasonable fees and expenses of counsel for the Indemnified
Party) in such manner as it may reasonably deem appropriate, including, but not
limited to, settling such claim, action, suit, proceeding or investigation on
such terms as the Indemnifying Party deems appropriate (subject to clauses (ii)
and (iii) above).
(d) Parent and the Surviving Corporation shall maintain the Company's and
its Subsidiaries' existing officers' and directors' liability insurance ("D&O
Insurance") for a period of six (6) years after the Effective Time so long as
the annual premium therefor is not in excess of 200% of the last annual premium
paid prior to the date hereof (the "Current Premium"); provided, however, that
if the existing D&O Insurance expires, is terminated or canceled during such
six-year period, the Surviving Corporation will obtain as much D&O Insurance as
can be obtained for the remainder of such period for a premium not in excess (on
an annualized basis) of 200% of the Current Premium; provided further, that, in
lieu of maintaining such existing D&O Insurance as provided above, Parent may
cause coverage to be provided under any policy maintained for the benefit of
Parent or any of its Subsidiaries, so long as the terms are no less advantageous
to the intended beneficiaries thereof than the existing D&O Insurance. In lieu
of the purchase of such insurance by Parent or the Surviving Corporation, the
Company may purchase a six-year extended reporting period endorsement
("reporting tail coverage") under its existing directors' and liability
insurance coverage, provided that the total cost of the reporting tail coverage
shall not exceed $400,000, and provided that such reporting tail coverage shall
extend the director and officer liability coverage in force as of the date
hereof for a period of six (6) years from the Effective Time for any claims
based upon, arising out of, directly or indirectly resulting from, in
consequence of, or in any way involving wrongful acts or omissions occurring on
or prior to the Effective Time, including without limitation all claims based
upon, arising out of, directly or indirectly resulting from, in consequence of,
or in any way involving the Merger and any and all related transactions or
related events.
(e) The provisions of this Section 5.8 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties and their
respective heirs and estates, each of whom shall have third party beneficiary
rights under this Section 5.8. Nothing in this Section 5.8 shall limit in any
way any other rights to indemnification that any current or former director or
officer of the Company may have by contract or otherwise.
(f) From and after the Effective Time, the Surviving Corporation shall
fulfill, assume and honor in all respects the obligations of the Company
pursuant to the Company's articles of organization, by-laws and any
indemnification agreement between the Company and any of the Company's directors
and officers existing and in force as of the Effective Time. The Company agrees
that the indemnification obligations set forth in the Company's articles of
organization and by-laws, in each case as of the date of this Agreement, shall
survive the Merger (and, as of or prior to the Effective Time, Parent shall
cause the by-laws of Merger Sub to reflect such provisions) and shall not be
amended, repealed or otherwise modified for a period of six (6) years after the
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Effective Time in any manner that would materially adversely affect the rights
thereunder of the Indemnified Parties; provided, however, that this sentence
shall not preclude the reincorporation of the Surviving Corporation in Delaware,
provided that (i) the certificate of incorporation and by-laws of such Delaware
corporation provide for indemnification of the Indemnified Parties to the
fullest extent permitted by Delaware law and (ii) the Surviving Corporation
complies with paragraph (g) below.
(g) If the Surviving Corporation or any of its successors or assigns (i)
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation or Person of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
Person, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation shall assume all of the
obligations set forth in this Section 5.8.
5.9. Rights Agreement. Prior to the Effective Time, the Board of
Directors of the Company shall take all necessary action to ensure that the
representation and warranty in Section 4.1(c)(iv) is true and correct.
5.10 Product Return Procedures. The Company shall institute formal
procedures related to the segregation and testing of those products that have
been returned by customers.
5.11 Manufacturing Costs and Supplies Verified. The Company shall provide
Parent with a list of all material component items used or acquired by the
Company in the ordinary course of its business ordered from third-party
suppliers together with a schedule showing the average lead time required for
such items and the suppliers from which such items are routinely obtained, which
list shall be true and complete in all material respects.
5.12. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use reasonable best efforts to
promptly 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,
including, without limitation, using all reasonable best efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings. Without limiting the foregoing, the parties hereto
shall make promptly their respective filings, if any, and thereafter make any
other required submissions under the HSR Act with respect to the transactions
contemplated hereby, and shall, if requested by Purchaser, seek early
termination of the applicable waiting period under the HSR Act. Without limiting
the foregoing, each of the parties shall use its reasonable best efforts to
take, or cause to be taken, all appropriate actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
herein, including, without limitation, using its reasonable best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any governmental authority and parties to contracts
with the Company or the Subsidiaries as are necessary for the consummation of
the transactions contemplated hereby. Each of the parties shall make on a prompt
and timely basis all governmental or regulatory notifications and filings
required to be made by it for the consummation of the transactions contemplated
hereby.
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligation to Effect Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) Stockholder Approval. This Agreement, the Merger and the
transactions contemplated hereby shall have been duly approved by holders
of at least a majority of Shares outstanding and entitled to vote thereon
(the "Company Requisite Vote").
(b) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and, other than filing the Articles of Merger, all filings with
any Governmental Entity required to be made prior to the Effective Time by
the Company
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or Parent or any of their respective subsidiaries, and all Government
Consents required to be obtained prior to the Effective Time by the Company
or Parent or any of their respective Subsidiaries in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company, Parent and Merger Sub,
shall have been made or obtained (as the case may be), except where the
failure to so make or obtain will not result in either a Company Material
Adverse Effect or a Parent Material Adverse Effect.
(c) Litigation. No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement (collectively, an "Order"), and no
Governmental Entity shall have instituted any proceeding, or given written
notice to any of the parties hereto that it intends to institute any
proceeding, seeking any such Order and such proceeding remains unresolved.
6.2. Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement and qualified by
materiality or a certain dollar threshold shall be true and correct (except
to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date.
All other representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except to
the extent that any failure to comply with the condition set forth in this
sentence, individually or in the aggregate, would not have, or could not
reasonably be interpreted as reflecting, 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 Closing Date.
(c) Officer's Certificate. The Chief Executive Officer of the Company
shall have executed and delivered to the Purchaser a certificate, in form
reasonably acceptable to Parent, certifying as to the matters set forth in
clauses (a) and (b) above; and
(d) Opinion of Counsel. The Parent shall have received an opinion of
Hale and Dorr LLP, counsel to the Company, setting forth those conclusions
set forth in Schedule 6.2(d), dated as of the Effective Time.
6.3. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement and
qualified by materiality shall be true and correct (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. All other
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct in all material respects (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except to
the extent that any failure to comply with the condition set forth in this
sentence, individually or in the aggregate, would not have, or could not
reasonably be interpreted as reflecting, a Parent Material Adverse Effect.
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(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date.
(c) Officer's Certificate. The President of each of Parent and Merger
Sub shall have executed and delivered to the Company a certificate, in form
reasonably acceptable to the Company, certifying as to the matters set
forth in clauses (a) and (b) with respect to Parent or Merger Sub, as the
case may be.
ARTICLE VII
TERMINATION
7.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after its approval by the Company Requisite Vote, by mutual action of
the Boards of Directors of the Company, Parent and Merger Sub.
7.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by either Parent or the Company if (i) any Order permanently restraining,
enjoining or otherwise prohibiting the Merger shall be entered (whether before
or after the approval by the stockholders of the Company) and such Order is or
shall have become nonappealable or (ii) the stockholders of the Company fail to
approve the Merger at a duly held meeting of the stockholders of the Company.
7.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after its approval by the Company Requisite Vote, by the Company if:
(a) if the Merger shall not have been consummated by March 31, 1999;
provided, however, that the right to terminate this Agreement pursuant to
this subsection (a) shall not be available to the Company if it has
breached in any material respects its obligations under this Agreement that
in any manner shall have proximately contributed to the failure referenced
in this subsection;
(b)(i) the Company enters into a binding written agreement concerning
a Superior Proposal after complying with the procedures set forth in
Section 5.2 and (ii) the Company shall promptly pay to Parent in
immediately available funds all expense reimbursements due Parent pursuant
to Section 7.5(a) and the termination fee pursuant to Section 7.5(b); or
(c) there has been a breach by Parent or Merger Sub of this Agreement
that is not curable or, if curable, is not cured within ten (10) days after
written notice of such breach is given by the Company to Parent and which
is likely to have a Parent Material Adverse Effect.
7.4. Termination by Parent and Merger Sub. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after its approval by the Company Requisite Vote, by
Parent and Merger Sub if:
(a) the Merger shall not have been consummated by March 31, 1999;
provided, however, that the right to terminate this Agreement pursuant to
this subsection (a) shall not be available to Parent and Merger Sub if
either of them has breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in this subsection;
(b) the Board of Directors of the Company shall have withdrawn or
adversely modified its approval or recommendation of this Agreement; or
(c) there has been a breach by the Company of this Agreement that is
not curable or, if curable, is not cured within ten (10) days after written
notice of such breach is given by Parent to the Company and which is likely
to have a Company Material Adverse Effect.
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7.5. Effect of Termination and Abandonment.
(a) If this Agreement is terminated and the Merger abandoned pursuant to
this Article VII, this Agreement (other than as set forth in Section 8.1) shall
become void and of no further effect with no liability of any party hereto (or
any of its directors, officers, employees, agents, stockholders, legal,
accounting and financial advisers or other representatives); provided, however,
that, except as otherwise provided herein, no such termination shall relieve any
party hereto of any liability or damages resulting from any willful breach of
this Agreement; provided further, that the Company shall reimburse Parent for
all of its out of pocket costs and expenses in connection with this Agreement
and the Merger unless: (i) the Agreement has been terminated by the parties
pursuant to Section 7.1 or by either party pursuant to Section 7.2, (ii) the
Company has terminated this Agreement pursuant to Sections 7.3(a) or 7.3(c) or
(iii) the Parent has terminated this Agreement pursuant to Section 7.4(a) and,
further, the Company has not breached in any material respect its obligations
under this Agreement in any manner which proximately contributed to the failure
to close the Merger.
(b)(i) In lieu of any liability or obligation to pay damages (other than
the obligation to reimburse Parent for expenses pursuant to Section 7.5(a)), if
(A) there shall be a proposal by a Third Party for a Third Party Acquisition
existing at the time of termination of the Agreement by Parent and Merger Sub
and (B) Parent and Merger Sub shall have terminated this Agreement pursuant to
Section 7.4(b), the Company shall pay to Parent within two (2) business days
after such termination $5,450,000.
(ii) In lieu of any liability or obligation to pay damages (other than the
obligation to reimburse Parent for expenses pursuant to Section 7.5(a)), (A) if
there shall not have been a material breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub and (B) the Company
shall have terminated this Agreement pursuant to Section 7.3(b), the Company
shall pay to Parent concurrently with such termination $5,450,000.
(c) The Company acknowledges that the agreements contained in Section 7.5
are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails promptly to pay the amounts
required pursuant to Section 7.5 and, in order to obtain such payment Parent or
Merger Sub commences a suit which results in a final nonappealable judgment
against the Company for such amounts, the Company shall pay to Parent or Merger
Sub (i) its costs and expenses (including attorneys' fees) in connection with
such suit and (ii) if (and only if) this Agreement has been terminated pursuant
to Section 7.3(b) or 7.4(c), interest on the amount at the rate announced by
Bank of America, NT & SA as its "reference rate" in effect on the date such
payment was required to be made.
7.6. Procedure for Termination. A termination of this Agreement pursuant
to this Article VII shall, in order to be effective, require in the case of
Parent, Merger Sub or the Company, action by its Board of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1. Survival. This Article VIII and the agreements of the Company,
Parent and Merger Sub contained in Sections 5.6 (Benefits), 5.7 (Expenses), 5.8
(Indemnification; Directors' and Officers' Insurance) and those provisions
contained in Annex A hereto as so provided shall survive the consummation of the
Merger. This Article VIII and the agreements of the Company, Parent and Merger
Sub contained in Section 5.7 (Expenses) and Section 7.5 (Effect of Termination
and Abandonment) shall survive the termination of this Agreement. All other
representations, warranties, agreements and covenants in this Agreement and in
any certificate or schedule delivered pursuant hereto shall not survive the
consummation of the Merger or the termination of this Agreement.
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8.2. Certain Definitions. For the purposes of this Agreement each of the
following terms shall have the meanings set forth below:
(a) "Affiliate" means a Person that, directly or indirectly, through
one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned Person.
(b) "Business Day" means any day other than a day on which banks in
the State of California are authorized to close or the Nasdaq National
Market is closed.
(c) "Capital Stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
(d) "Company Material Adverse Effect" means a material adverse effect
on the financial condition, properties, business or results of operations
of the Company and its Subsidiaries, taken as a whole; it being understood,
that the occurrence of one or more of the following events, without the
occurrence of any other material adverse event, shall not be deemed by
itself to constitute a Company Material Adverse Effect: (i) a change in the
market price or trading volume of the Company Common Stock, (ii) a failure
by the Company to meet internal earnings or revenue projections or the
revenue or earnings predictions of equity analysts as reflected in the
First Call consensus estimate, or any other revenue or earnings predictions
or expectations, for any period ending (or for which earnings are released)
on or after the date of this Agreement and prior to the Effective Date,
(iii) conditions affecting the telecommunications, remote access and data
networking industry as a whole or the U.S. economy as a whole, (iv) any
disruption of customer or supplier relationships arising primarily out of
or resulting primarily from actions contemplated by the parties in
connection with, or which is primarily attributable to, the announcement of
this Agreement and the transactions contemplated hereby, to the extent so
attributable, or (v) any ruling, judgment or other development in
connection with those cases set forth on Schedule 8.2(d) hereto.
(e) "Knowledge" means, with respect to the Company, knowledge of the
members of the Board of Directors, officers, senior directors and
facilities manager of the Company.
(f) "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, encumbrance, hypothecation, title defect
or adverse claim of any kind in respect of such asset.
(g) "Parent Material Adverse Effect" means a material adverse effect
on the ability of Parent or Merger Sub to or consummate the Merger or any
of the other material transactions contemplated by this Agreement.
(h) "Permitted Liens" means (i) Liens for Taxes or other governmental
assessments, charges or claims the payment of which is not yet due, (ii)
statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other similar Persons and other liens imposed by
applicable Law incurred in the ordinary course of business for sums not yet
delinquent or immaterial in amount and being contested in good faith, (iii)
liens specifically identified as such in the Balance Sheet or the notes
thereto, (iv) liens constituting or securing executory obligations under
any lease that constitutes an "operating lease" under GAAP and (v) any
other Lien arising in the ordinary course of business, the imposition of
which would not constitute a Company Material Adverse Effect; provided,
however, that, with respect to each of the foregoing clauses (i) through
(iv), to the extent that any such lien arose prior to the Audit Date and
relates to, or secures the payment of, a liability that is required to be
accrued on the Balance Sheet under GAAP, such lien shall not be a Permitted
Lien unless accruals for such liability have been established therefor on
the Balance Sheet in conformity with GAAP. Notwithstanding the foregoing,
no lien arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Compensation and Benefit Plan
sponsored by, maintained by or contributed to by the Company or any of its
ERISA Affiliates or arising in connection with any excise tax or penalty
tax with respect to such Compensation and Benefit Plan shall be a Permitted
Lien.
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(i) "Person" means an individual, corporation (including
not-for-profit), partnership, limited liability company, association,
trust, unincorporated organization, joint venture, estate, Governmental
Entity or other legal entity.
(j) "Subsidiary" or "Subsidiaries" of the Company, Parent, the
Surviving Corporation or any other Person means any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, Parent, the
Surviving Corporation or any such other Person, as the case may be, either
alone or through or together with any other Subsidiary, owns, directly or
indirectly, 50% or more of the Capital Stock, the holders of which are
generally entitled to vote for the election of the Board of Directors or
other governing body of such corporation or other legal entity.
8.3. No Personal Liability. This Agreement shall not create or be deemed
to create any personal liability or obligation on the part of any direct or
indirect stockholder of the Company, Merger Sub or Parent, or any of their
respective officers, directors, employees, agents or representatives.
8.4. Modification or Amendment. Subject to the provisions of applicable
Law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
8.5. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Law. The failure of any party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon strict compliance by any other party hereto
with its obligations hereunder, and any custom or practice of the parties at
variance with the terms hereof, shall not constitute a waiver by such party of
its rights to exercise any such or other right, power or remedy or to demand
such compliance.
8.6. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
8.7. Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the jurisdiction of the courts
of the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 8.8 or in such other manner as may be permitted by applicable Law, shall
be valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
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(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.7.
8.8. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be deemed given if in writing
and delivered personally or sent by registered or certified mail (return receipt
requested) or overnight courier (providing proof of delivery), postage prepaid,
or by facsimile (which is confirmed):
If to Parent or Merger Sub:
Intel Corporation
2200 Mission College Blvd.
Mail Stop SC4-203
Santa Clara, CA 95052
Attention: General Counsel
Fax: (408) 765-1859
with a copy to:
William D. Sherman, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 942104-1018
Fax: (650) 494-0792 or (650) 813-5993
and a copy to:
Mark L. Mandel, Esq. and
Allen L. Weingarten, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104-0012
Fax: (212) 468-7900
If to the Company:
Shiva Corporation
28 Crosby Drive
Bedford, MA 01730
Attention: General Counsel
Fax: (781) 687-1999
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with a copy to:
Mark G. Borden, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Fax: (617) 526-5000
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
8.9. Entire Agreement. This Agreement (including any schedules, exhibits
or annexes hereto) and the Confidentiality Agreement hereto constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
8.10. No Third Party Beneficiaries. Except as provided in Section 5.8
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
8.11. Obligations of the Company and Surviving Corporation. Whenever this
Agreement requires a Subsidiary of the Company to take any action, such
requirement shall be deemed to include and undertaking on the part of the
Company to cause such Subsidiary to take such action and, after the Effective
Time, on the part of the Surviving Corporation to cause such Subsidiary to take
such action.
8.12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is illegal, invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
8.13. Interpretation. The table of contents and Article, Section and
subsection headings herein are for convenience of reference only, do not
constitute a part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Schedule or Annex or Exhibit, such reference
shall be to a Section of, or Schedule or Annex to, this Agreement, unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns and, in
the case of an individual, to his or her heirs and estate, as applicable.
8.14. Assignment. This Agreement shall not be assignable by operation of
Law or otherwise and any attempted assignment of this Agreement in violation of
this sentence shall be void; provided, however, that Parent may designate, by
written notice to the Company, another wholly owned, direct subsidiary to be a
Constituent Corporation in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to such other
Subsidiary except that all representations and warranties made herein with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
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IN WITNESS WHEREOF, this AGREEMENT AND PLAN OF MERGER has been duly
executed and delivered by duly authorized officers of the parties hereto as of
the date hereof.
SHIVA CORPORATION
By: /s/ JAMES L. ZUCCO, JR.
------------------------------------
Name: James L. Zucco, Jr.
Title: President, Chief Executive
Officer
By: /s/ JOSEPH P. HURLEY
------------------------------------
Name: Joseph P. Hurley
Title: Treasurer
INTEL CORPORATION
By: /s/ ARVIND SODHANI
------------------------------------
Name: Arvind Sodhani
Title: Vice President and Treasurer
INTEL NETWORKS, INCORPORATED
By: /s/ ARVIND SODHANI
------------------------------------
Name: Arvind Sodhani
Title: Vice President and Treasurer
By: /s/ CARY KLAFTER
------------------------------------
Name: Cary Klafter
Title: President
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
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ANNEX A
TO MERGER AGREEMENT
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF COMPANY
SECTION 1.1. Employee Benefits.
(a) For purposes of this Agreement, "Compensation and Benefit Plans" means,
collectively, each bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, severance,
compensation, medical, health, or other plan, agreement, policy or arrangement,
whether written or oral, that covers employees or directors of the Company or
any of its Subsidiaries, or pursuant to which former employees or directors of
the Company or any of its Subsidiaries are entitled to current or future
benefits. The Company has made available to Parent copies of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as "Pension Plans"), "employee welfare benefit plans" (as defined in Section
3(l) of ERISA) and all other Compensation and Benefit Plans maintained, or
contributed to, by the Company or of its Subsidiaries or any person or entity
that, together with the Company and its Subsidiaries, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended (the "Code") (the Company and each such other person or entity,
a "Commonly Controlled Entity") for the benefit of any current employees,
officers or directors of the Company or any of its Subsidiaries. The Company has
also made available to Parent true, complete and correct copies of (1) the most
recent annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Compensation and Benefit Plan (if any such report was required),
(2) the most recent summary plan description for each Compensation and Benefit
Plan for which such summary plan description is required and (3) each trust
agreement and group annuity contract related to any Compensation and Benefit
Plan. Except as would not have a Company Material Adverse Effect, each
Compensation and Benefit Plan has been administered in accordance with its
terms. Except as would not have a Company Material Adverse Effect, each of its
Subsidiaries and all the Compensation and Benefit Plans are all in compliance
with applicable provisions of ERISA and the Code.
(b) All Pension Plans have been the subject of determination letters from
the Internal Revenue Service to the effect that such Pension Plans are qualified
and exempt from Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked nor
has any event occurred since the date of its most recent determination letter or
application therefor that would materially adversely affect its qualification or
materially increase its costs.
(c) Neither the Company, nor any of its Subsidiaries, nor any Commonly
Controlled Entity has maintained, contributed or been obligated to contribute to
any Compensation and Benefit Plan that is subject to Title IV of ERISA.
(d) Schedule I.1(d) lists all outstanding Stock Options as of October 13,
1998, showing for each such option: (1) the number of shares issuable, (2) the
number of vested shares, (3) the date of expiration and (4) the exercise price.
(e) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made.
(f) Except as provided by this Agreement or in Schedule I.1(f), no employee
of the Company or any of its Subsidiaries will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or vesting
of any compensation or benefits under any Compensation and Benefit Plan as a
result of the transactions contemplated by this Agreement.
(g) All Compensation and Benefit Plans covering current or former non-U.S.
employees of the Company or any of its Subsidiaries comply in all material
respects with applicable local Laws. Except as set forth in
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Schedule I.1(g), the Company and its Subsidiaries have no unfunded liabilities
with respect to any Pension Plan that covers such non-U.S. employees.
(h) Each Compensation and Benefit Plan complies in all material respects
with all applicable requirements of (i) the Age Discrimination in Employment Act
of 1967, as amended, and the regulations thereunder and (ii) Title VII of the
Civil Rights Act of 1964, as amended, and the regulations thereunder and all
other applicable laws. All material amendments and actions required to bring
each of the Compensation and Benefit Plans into conformity with all of the
applicable provisions of ERISA and other applicable laws have been made or taken
except to the extent that such amendments or actions are not required by law to
be made or taken until a date after the Effective Time and are disclosed on
Schedule I.1(h).
(i) Each group medical plan sponsored by the Company materially complies
with the health care continuation provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as set forth in Section 4980B of the
Code and Part 6 of Title of ERISA ("COBRA") and (ii) the Medicare Secondary
Payor Provisions of Section 1826 (b) of the Social Security Act, and the
regulations promulgated thereunder.
SECTION 1.2. Labor and Employment Matters. Except as set forth on
Schedule I.2:
(a) No collective bargaining agreement exists that is binding on the
Company, and the Company has not been officially apprised that any petition
has been filed or proceeding instituted by an employee or group of
employees of the Company with the National Labor Relations Board seeking
recognition of a bargaining representative.
(b)(i) To the Company's Knowledge, there is no labor strike, dispute,
slow down or stoppage pending or threatened against the Company; and
(ii) The Company has not received any demand letters, civil rights
charges, suits or drafts of suits with respect to claims made by or
obligations to, any of its employees.
(c) Except as would not have a Company Material Adverse Effect, all
individuals who are performing services for the Company or any of its
Subsidiaries are or were classified by the Company as "independent
contractors" and, at the Closing Date, will qualify for such
classification.
(d) The Company is in compliance in all material respects with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees.
(e) The Company has in all material respects withheld and reported all
amounts required by law or by agreement to be withheld and reported with
respect to wages, salaries and other payments to employees.
(f) To the Knowledge of the Company, there are no pending or
threatened or reasonably anticipated claims or actions against the Company
under any worker's compensation policy or long-term disability policy.
(g) Except as set forth in Schedule I.2, to the knowledge of the Vice
Presidents and Senior Vice Presidents of the Company (who have executed
Severance Agreements) and the Chief Executive Officer of the Company, as of
the date of this Agreement, no non-clerical sales or engineering employee
of the Company has given oral or written notice that he or she plans to
terminate employment with the Company during the next 12 months.
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ARTICLE II
COVENANTS
SECTION 2.1. Retention of Employees. The Company will continue to do the
following:
(a) Maintain all current compensation programs and other programs that
are intended to assist in retaining employees; provided, however, that the
Company shall not be prohibited from adjusting an individual's compensation
as it deems appropriate either in the ordinary course of business or in a
manner which is consistent with past practices;
(b) Assist Parent in communicating with employees regarding such
matters as general education about Parent, Parent's culture and Parent's
compensation and benefit programs, and distributing compensation profiles
which provide detail concerning employees' compensation following the
Closing Date; and
(c) Communicate to Parent concerning new executive agreements, offers
of employment to employees by another employer or concerning voluntary
termination of employment by an employee.
Provided, that nothing contained herein shall prohibit the Company from (i)
terminating or disciplining any individual who the Company believes should
be terminated or disciplined, in a manner consistent with past practices,
policies and procedures, or (ii) terminating any individual for the needs
of the business of the Company.
SECTION 2.2. Disclosure of Information. The Company has provided Parent
with a list of all employees who are on Company's payroll regardless of whether
such individuals are actively at work, identifying each individual by title,
location, and supervisor, and agrees to update such list at reasonable intervals
through the Effective Time. Such update shall include new hires of employees and
leased employees, changes in immigration status and information necessary for
Parent to prepare its compensation profiles. Prior to the Closing Date, the
Company will allow Parent to review all personnel files of current and past
employees.
SECTION 2.3. Management of Workforce. Prior to the Closing Date, the
Company shall be free to manage the employees in whatever manner it chooses
provided that the following actions require notice to Parent prior to taking the
actions:
(a) Making offers of employment other than in the ordinary course of
business; and
(b) Promotions or increases in compensation or grants of stock options
other than in the ordinary course of business.
ARTICLE III
CONDITIONS
SECTION 3.1. Employee Agreements. The Company shall use its best efforts
to ensure that all past and current Company employees shall have executed the
form of severance agreement as set forth on Schedule III.1 or a form of
severance or employee agreement that in Parent's discretion, is substantially
similar.
ARTICLE IV
PARENT'S PRE-CLOSING OBLIGATIONS
SECTION 4.1. Immigration, Visas. Parent shall be responsible for
obtaining any required visas or other immigration approvals to allow Transferred
Employees (defined below) to become employed by Parent at whatever location is
specified by Parent.
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ARTICLE V
OFFERS OF CONTINUED EMPLOYMENT
SECTION 5.1. Company's Employees.
(a) Parent shall offer to continue the employment of certain of the
Company's employees conditioned upon the occurrence of the Closing and the
absence of all legal, regulatory, or contractual impediments to transferring the
employment of employees in the respective country of residence from the Company
to Parent, of those employees who reside in each respective country. Parent
shall continue the employment of those employees to whom offers of continued
employment are extended and who accept such offers of continued employment (such
employees hired by Parent being hereinafter referred to as the "Transferred
Employees"). The terms and conditions of Parent's offer of continued employment
of employees shall be made in writing at least 10 days (but no fewer than is
required by applicable law) prior to the Closing Date. Parent's offer of
continued employment shall include the following:
(i) Parent shall maintain the compensation of Transferred Employees
who are participants in the Company's Sales Bonus Plan ("Transferred Sales
Employees") at substantially the same levels as existed as of the Closing
Date through Calendar Year 1999; provided, however, that Parent may
proportionately adjust the compensation of such Transferred Sales Employees
in the event that sales quotas in existence at the time of the signing of
this Agreement are reduced;
(ii) All other Transferred Employees shall be offered compensation at
levels at least substantially equal to similarly situated Parent employees;
(iii) To the maximum extent permitted or allowed by applicable law the
Parent shall employ such Transferred Employees on an at-will basis;
(iv) Parent shall have sole discretion to determine the job
description, reporting status, organization, and shift of each Transferred
Employee;
(v) Parent shall have sole discretion to determine the work location
of Transferred Employees;
(vi) Without limiting any other provision hereof, Parent and the
Company acknowledge that if Parent elects to continue employment to some
but not all employees located in particular non-U.S. jurisdictions, or if
requisite notice prior to the Closing Date is not given to certain non-U.S.
employees or non-U.S. government agencies regarding possible employment
transitions to Parent of certain employees or if certain terms and
conditions of employment with the Company are not continued by Parent,
certain non-U.S. laws, rules or regulations may be violated or may not be
complied with, possibly resulting in liability including a need to pay or
accrue severance, a need for Parent or a Subsidiary to continue employing
non-U.S. employees that Parent does not wish to employ ("Mandated
Employees"), a need for Parent to pay salary to Mandated Employees and then
severance to them upon terminating them as soon as legally permissible, an
obligation of Parent to honor non-U.S. employees' pension obligations, and
fines, sanctions and penalties and liabilities associated with claims
brought against the Company or Parent or related parties by non-U.S.
employees or non-U.S. governmental agencies or Mandated Employees with
respect to any of the foregoing including, without limitation, the
undertakings laws in the U.K., France, Sweden, Germany and Singapore
(collectively, "Foreign Employee Liabilities"). The Company agrees to take
reasonably feasible actions as requested by Parent in order to avoid (where
possible) or minimize such Foreign Employee Liabilities; and
(vii) U.S. Transferred Employees shall be eligible to participate in
the same benefit plans as Parent provides to its other similarly situated
employees.
(b) Notwithstanding anything to the contrary, an employee who does not
report to work on the first work day for such Transferred Employee because the
process of updating his or her H-1 or L-1 visa to reflect Parent as the
Transferred Employee's new employer has not been completed, such employee shall
be treated as a Transferred Employee on the day as of which the application for
such visa is approved.
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(c) During a reasonable period after the execution of this Agreement and
prior to the Closing Date, Parent may contact Company employees to provide them
with information about Parent and its operations and an explanation of the terms
and conditions of the offer letters of continued employment (including
specifically the amount of salary (cash and non-cash) and benefits to be offered
by Parent); provided, however, that such contact shall be at times, and under
such circumstances, that are mutually agreeable to Parent and the Company and
that the content of communications shall be consistent with all communications
that Parent and/or the Company have with any governmental agency or works
council or any other public disclosure.
ARTICLE VI
STOCK PLANS
SECTION 6.1. Company's Stock Options. At the Effective Time, each
outstanding option to purchase shares of Company Common Stock under the Stock
Option Plans, excluding the 1994 Non-Employee Director Stock Option Plan,
whether vested or unvested will be assumed by Parent. Schedule VI.1, attached
sets forth a true and complete list as of the date hereof of all holders of
outstanding Company Options, the exercise or vesting schedule, the exercise
price per share, the term of each such Company Option and any restrictions on
exercise or sale of the option or underlying shares. On the Closing Date, the
Company shall deliver to Parent an updated Schedule VI.1. Each such option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in such option and, if applicable,
in the Stock Option Plans, immediately prior to the Effective Time, including
provisions with respect to vesting, except that (i) such option will be
exercisable for that number of whole shares of Parent common stock, par value
$.01 per share ("Parent Common Stock"), equal to the product (rounded down to
the nearest whole share) of the number of shares of Company Common Stock that
were issuable upon exercise of such option immediately prior to the Effective
Time multiplied by the Exchange Ratio (as hereinafter defined), and rounding to
the nearest whole share, (ii) the per share exercise price under each such
Company option shall be adjusted by dividing the per share exercise price of
each such Company option by the Exchange Ratio, and rounding up to the nearest
cent. The terms of each Company option shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split, stock
dividend, recapitalization or other similar transaction with respect to Parent
Common Stock on or subsequent to the Effective Date. The "Exchange Ratio" is
$6.00 divided by the last sale price for a share of Parent Common Stock on the
trading day immediately preceding the Closing Date, as reported on the Nasdaq
National Market. Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
the exercise of the options assumed by Parent. Parent will use its best efforts
to file, within thirty (30) days following the Effective Date of the Merger, a
registration statement on Form S-8 (or any successor to Form S-8) so as to
register the Parent Common Stock subject to the options assumed by Parent
pursuant to this Section 6.1 and shall use its best efforts to effect such
registration and to maintain the effectiveness of such registration statement
(and the current status of the prospectus contained therein) for so long as such
options remain outstanding. Options to purchase Parent Company Stock under this
Section 6.1 shall be referred to as the "Assumed Options."
SECTION 6.2. Waiver of Company Options. Notwithstanding the provisions of
Section 6.1, the individuals described in Schedule VI.2, who as a condition of
closing are executing new severance agreements, shall agree to waive all rights
with respect to any Company Options which would otherwise be assumed under
Section 6.1.
SECTION 6.3. Parent Stock Options. After taking into account the
provisions of Sections 6.1 and 6.2, Parent shall grant to Transferred Employees
an additional number of options to purchase Parent Common Stock such that the
total number of options to purchase Parent Common Stock under this Article VI
shall be equal to 518,000. Options under this Section 6.3 shall be granted no
later than the last Tuesday of the calendar month following the Closing Date.
SECTION 6.4. Company's Stock Purchase Plan. On or prior to the last
business day prior to the Effective Date, the Company will discontinue its stock
purchase plan pursuant to the terms thereof.
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SECTION 6.5. Exercise Price of Options. The exercise price of all Assumed
Options shall be no greater than the fair market value of Parent Common Stock on
the Closing Date.
ARTICLE VII
SEVERANCE PROGRAM
SECTION 7.1. Severance Program. Parent agrees to implement a special
severance program (the "Severance Program") effective as of the Parent Plan
Start Date which will provide severance benefits for Company employees who
remain employed up to and through the Closing Date and whose employment is
terminated by Parent within six (6) months following the Closing Date, other
than for cause. For purposes of this Section 7.1, "cause" shall mean that the
employee has intentionally engaged in misconduct that violates the law, Parent's
Corporate Business Principles, or Parent's Human Resources Guidelines. Benefits
under the Severance Program shall be equal to six months of the base pay of a
terminated employee.
ARTICLE VIII
WELFARE PLANS
SECTION 8.1. Cessation of Participation in Company U.S. Welfare
Plans. Except as otherwise provided in this Agreement or as required by the
terms of any of the Company's Welfare Plans or by law, Transferred Employees'
participation in all of the Company's U.S. Welfare Plans will cease as of the
Effective Time of the Merger (such applicable date hereinafter referred to as
the "Company Plan End Date".). For purposes hereof, "Welfare Plan" means any
employee welfare benefit plan as defined in Section 3(1) of ERISA, without
regard to Sections 4(b)(4) or 4(b)(5) thereof, including but not limited to any
plan, fund or program which was established or is maintained for the purpose of
providing for its participants or their beneficiaries, through the purchase of
insurance or otherwise, medical, surgical, or hospital care or benefits, or
benefits in the event of sickness, accident, disability (short- and long-term),
death or unemployment or vacation benefits.
SECTION 8.2. U.S. Welfare Plans for Transferred Employees. Commencing on
12:01 a.m. of the Company Plan End Date (such date hereinafter referred to as
the "Parent Plan Start Date"), Transferred Employees and their eligible
dependents shall be eligible to participate in those U.S. Welfare Plans that
Parent has in effect for its similarly situated existing employees as of the
Parent Plan Start Date. Any waiting period, pre-existing condition limitation,
or physical examination requirement applicable to eligibility for enrollment of
new employees or their dependents under any of the Parent's Welfare Plans shall
be waived. Such Plans shall also credit each Transferred Employee with the
amount, if any, paid during the plan year or calendar year, as applicable, by
such Transferred Employee (or dependent) for all deductible payments made by
each of them provided that the information relating to such payments in a format
acceptable to Parent has been provided.
SECTION 8.3. Flexible Spending Arrangements. The Company agrees to
terminate its flexible spending arrangement components of its cafeteria plan on
the earlier of the Effective Date of the Merger or December 31, 1998.
ARTICLE IX
OTHER MATTERS
SECTION 9.1. Tuition Aid. Transferred Employees shall be eligible for
payments of tuition reimbursement pursuant to the Company's tuition aid program
for approved courses which commence prior to the Company Plan End Date.
SECTION 9.2. Vacation. On or before the Company Plan End Date, the
Company shall pay to each Transferred Employee the cash equivalent of his or her
accumulated but unused vacation days. From and after
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the Parent Plan Start Date, Transferred Employees shall receive annual vacation
benefits pursuant to Parent's vacation policy.
SECTION 9.3. Service Credit.
(a) Transferred Employees shall be given credit for service performed for
the Company ("Service Credit") for purposes of the following Parent benefits:
(i) 401(k)/Profit Sharing Plan (participation and vesting only, not
benefit accrual);
(ii) Vacation;
(iii) Short Term Disability Plan;
(iv) Service Awards;
(v) Service component of any retirement definition (early retirement,
rule of 75);
(vi) Defined Benefit Plan (participation and vesting only);
(vii) Supplemental Employee Medical Account Plan ("SERMA")
(participation only).
(b) Transferred Employees shall not be given Service Credit for the
following Parent benefits:
(i) Sabbatical;
(ii) Parent Stock Option Plan (acceleration of vesting upon
retirement);
(iii) Benefit accrual under Parent's Defined Benefit Plan;
(iv) Benefit accrual under Parent's SERMA;
(v) Benefit accrual under Parent's 401(k)/Profit Sharing Plan.
With respect to the foregoing Parent benefits, service credit shall be
counted as of the Parent's Plan Start Date.
ARTICLE X
TAX QUALIFIED PLANS
SECTION 10.1. Defined Contribution Pension Plan.
(a) Prior to the Effective Date, the Company will take such as is necessary
to terminate the Shiva Corporation 401(k) Plan (the "Company 401(k) Plan")
effective as of the Company Plan End Date.
(b) As of the Company Plan End Date, each Transferred Employee will cease
contributing to the Company 401(k) Plan and Company shall take all necessary
action to ensure that each Transferred Employee is fully vested in his or her
account balance under the Company 401(k) Plan.
(c) Each U.S. Transferred Employee shall be eligible to participate in the
Parent 401(k)/Profit Sharing Retirement Plan (the "Parent Savings Plan") as of
the Parent Plan Start Date or such later date as the Parent Savings Plan may
provide.
(d) As soon as practicable following IRS approval of the termination of the
Company 401(k) Plan the assets thereof shall be distributed and Parent shall
permit Transferred Employees to roll such distributions over into the Parent
Savings Plan.
ARTICLE XI
NO THIRD PARTY BENEFICIARIES
SECTION 11.1. No Third Party Beneficiaries. No Company employee (or any
respective spouses or beneficiaries of such persons), or any other person not a
named party to this Agreement, shall be entitled to
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assert any claim hereunder. This Agreement shall be binding upon and inure to
the benefit only of the named parties hereto and their respective successors.
Notwithstanding any other provisions to the contrary except with respect to such
successors, it is not intended and shall not be construed for the benefit of any
third party or any person not a signatory hereto. In no event shall this
Agreement constitute a third party beneficiary contract.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Further Assurances. The Company and Parent agree to
cooperate to carry out the duties and responsibilities set forth in this Annex
to the Agreement. In addition, the Company agrees to make available to Parent
such information as Parent may reasonably request to facilitate the
determination of (i) the period of service of any Transferred Employee with the
Company or any of its Subsidiaries prior to the Effective Time of the Merger,
(ii) individual service accruals and salary histories of Transferred Employees,
and (iii) such other information as Parent may reasonably request to carry out
any provision of this Agreement.
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ANNEX B
TO MERGER AGREEMENT
AMENDMENT NO. 1
TO
RIGHTS AGREEMENT
This AMENDMENT NO. 1 (the "Amendment") to the Rights Agreement (the "Rights
Agreement") dated as of September 29, 1995 between Shiva Corporation, a
Massachusetts corporation (the "Company"), and American Stock Transfer & Trust
Company (the "Rights Agent"), is entered into as of the 19th day of October,
1998. Capitalized terms not otherwise defined herein shall have the respective
meanings given to them in the Rights Agreement by and between the parties
hereto.
RECITALS
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Company to amend the Rights Agreement as set forth herein in
connection with the execution of that certain Agreement and Plan of Merger dated
as of October 19, 1998, as the same may be amended from time to time (the
"Merger Agreement"), among the Company, Intel Corporation, a Delaware
corporation ("Intel"), and Intel Networks, Incorporated, a Massachusetts
corporation and a direct, wholly-owned subsidiary of Intel ("Merger Sub")
(pursuant to which Merger Agreement, among other things, Merger Sub shall merge
with and into the Company (the "Merger")).
WHEREAS, the Company has requested that the Rights Agreement be amended in
accordance with Section 27 of the Rights Agreement, as set forth herein, and the
Rights Agent is willing to amend the Rights Agreement as set forth herein.
AGREEMENT
NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as
follows:
1. Section 7(a) of the Rights Agreement is hereby amended to read in
its entirety as follows:
"(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section
11(a)(iii) and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the reverse
side thereof duly executed, to the Rights Agent at the office of the
Rights Agent designated for such purpose, together with payment of the
aggregate Purchase Price with respect to the total number of one
one-hundredths of a share of Preferred Stock (or other securities, cash
or other assets, as the case may be) as to which such surrendered Rights
are then exercisable, at or prior to the earlier of (i) the Final
Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof, (iii) the time at which the Rights expire
pursuant to Section 13(d) hereof, (iv) the time at which such Rights are
exchanged as provided in Section 24 hereof, or (v) immediately prior to
the Effective Time, as defined in the Agreement and Plan of Merger dated
as of October 19, 1998, as the same may be amended from time to time,
between the Company, Intel Corporation, a Delaware corporation
("Intel"), and Intel Networks, Incorporated, a Massachusetts corporation
and a direct, wholly-owned subsidiary of Intel ("Merger Sub"), pursuant
to which Merger Agreement, among other things, the Merger Sub shall
merge with and into the Company (the "Merger") (the earlier of (i),
(ii), (iii), (iv) and (v) being herein referred to as the "Expiration
Date")."
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2. Section 35 of the Rights Agreement is hereby added as follows:
"Section 35. Intel Transaction. Notwithstanding any provision of
this Rights Agreement to the contrary, no Distribution Date, Stock
Acquisition Date or Triggering Event shall be deemed to have occurred,
neither Intel nor any Affiliate or Associate of Intel (including without
limitation the Merger Sub) shall be deemed to have become an Acquiring
Person and no holder of Rights shall be entitled to exercise such Rights
under or be entitled to any rights pursuant to Section 7(a), 11(a) or
13(a) of this Rights Agreement by reason of (x) the approval, execution,
delivery or effectiveness of the Merger Agreement or (y) the
consummation of the transactions contemplated under the Merger Agreement
in accordance with the terms thereof (including, without limitation, the
consummation of the Merger)."
3. Except as amended hereby, the Rights Agreement shall remain
unchanged and shall remain in full force and effect.
4. This Amendment may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall
constitute one instrument.
[signatures on following page]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective duly authorized representatives as of the date first above
written.
SHIVA CORPORATION
By:
------------------------------
Name:
Title:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
------------------------------
Name:
Title:
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<PAGE> 82
ANNEX B
TO PROXY STATEMENT
OPINION OF LAZARD FRERES & CO. LLC,
INVESTMENT BANKER TO THE COMPANY
Lazard Freres & Co. LLC
Four Embarcadero Center
San Francisco, CA 94111
Telephone (415) 623-5000 San Francisco
Facsimile (415) 421-5050
October 18, 1998
The Board of Directors
Shiva Corporation
28 Crosby Drive
Bedford, MA 01730-1437
Dear Members of the Board:
We understand that Shiva Corporation (the "Company"), Intel Corporation
("Intel") and Intel Networks, Incorporated, a wholly owned subsidiary of Intel
("Merger Sub"), intend to enter into an Agreement and Plan of Merger, to be
dated as of October 19, 1998, pursuant to which Merger Sub will be merged with
and into the Company in a transaction (the "Merger") in which each issued and
outstanding share of the Company's common stock, $.01 par value per share, other
than shares held in treasury or by stockholders exercising appraisal rights,
will be converted into the right to receive, without interest, an amount in cash
equal to $6.00 (the "Consideration"). The terms and conditions of the Merger are
more fully set forth in the agreement.
You have requested our opinion as to the fairness, from a financial
point of view, to the Company's stockholders of the Consideration. In connection
with this opinion, we have:
(i) Reviewed the financial terms and conditions of an October 17, 1998
draft of the agreement (the "Agreement");
(ii) Analyzed certain publicly available historical business and financial
information relating to the Company;
(iii) Reviewed various financial forecasts and other data provided to us by
the Company relating to its business;
(iv) Held discussions with members of the senior management of the Company
with respect to the businesses, prospects and strategic objectives of
the Company;
<PAGE> 83
Lazard Freres & Co. LLC
Board of Directors
Shiva Corporation
October 18, 1998
Page 2
(v) Reviewed the historical market prices and trading activity of the
Company's common stock;
(vi) Reviewed available information with respect to the financial
performance and stock prices and trading activity of certain other
companies in lines of business we believe to be generally comparable to
those of the Company and compared such information to corresponding
information with respect to the Company and its common stock;
(vii) Reviewed the financial terms, to the extent publicly available, of
certain business combinations involving companies in lines of business
we believe to be generally comparable to those of the Company;
(viii) Participated in discussions and negotiations among representatives of
the Company and Intel and their advisors; and
(ix) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
We have relied with your consent upon the accuracy and completeness of
the foregoing information and have not assumed any responsibility for any
independent verification of such information. We have also relied upon, without
independent verification, the assessment by the management of the Company of the
Company's products and services and the validity of, and risks associated with,
the Company's existing and anticipated future products and services. With
respect to financial forecasts and any financial or operating information
furnished by, or during discussions with the management of, the Company, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of management of the Company as to
the competitive, operating and regulatory environment and the related future
financial performance of the Company. We assume no responsibility for and
express no view as to such forecasts or the assumptions on which they are based.
We have not undertaken to make any independent valuation or appraisal of any of
the assets or liabilities of the Company or concerning the solvency or fair
value of the Company.
Further, our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
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<PAGE> 84
Lazard Freres & Co. LLC
Board of Directors
Shiva Corporation
October 18, 1998
Page 3
In rendering our opinion, we have assumed that: (i) the agreement in
the form in which it is executed will not differ in any material respect from
the Agreement; (ii) the Merger will be consummated on the terms described in the
Agreement, without any waiver of any material terms or conditions by the
Company; and (iii) obtaining the necessary regulatory approvals for the Merger
will not have an adverse effect on the Company.
Lazard Freres & Co. LLC is acting as investment banker to the Company
in connection with the Merger and will receive a fee for our services, a
substantial portion of which is contingent upon the consummation of the Merger.
In the past, we have provided financial advisory services to Intel.
Our engagement and the opinion expressed herein are for the benefit of
the Company's Board of Directors. Our opinion does not address the underlying
decision by the Company to engage in the Merger or the prices at which the
Company's common stock will actually trade at any time, and we express no
recommendation or opinion to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger. It is understood that this
letter is for the information of the Board of Directors of the Company and may
not be used for any other purpose or be disclosed or otherwise referred to
without our prior consent, except for the reproduction of this letter in full in
any filing with the Securities and Exchange Commission with respect to the
transactions contemplated by the Agreement or as may otherwise be required by
law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
Consideration is fair to the Company's stockholders from a financial point of
view.
Very truly yours,
Lazard Freres & Co. LLC
By: /s/ Richard P. Emerson
-----------------------------
Richard P. Emerson
Managing Director
3
<PAGE> 85
ANNEX C
TO PROXY STATEMENT
SECTIONS 85 -- 98 OF CHAPTER 156B OF
THE MASSACHUSETTS GENERAL LAWS
SEC. 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SEC. 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SEC. 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his shares and
an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts."
SEC. 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the
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<PAGE> 86
corporation of which he is a stockholder has become effective. The giving of
such notice shall not be deemed to create any rights in any stockholder
receiving the same to demand payment for his stock. The notice shall be sent by
registered or certified mail, addressed to the stockholder at his last known
address as it appears in the records of the corporation.
SEC. 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
SEC. 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SEC. 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
SEC. 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
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<PAGE> 87
SEC. 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SEC. 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SEC. 95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SEC. 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections
to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SEC. 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SEC. 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
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<PAGE> 88
APPENDIX A
SHIVA CORPORATION
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, FEBRUARY 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE
The undersigned, having received notice of the Special Meeting of
Stockholders and the Board of Directors' proxy statement therefor, and revoking
all prior proxies, hereby appoint(s) James L. Zucco, Jr., Robert P. Cirrone and
M. Elizabeth Potthoff, and each of them, attorneys or attorney of the
undersigned (with full power of substitution in them and each of them) for and
in the name(s) of the undersigned to attend the Special Meeting of Stockholders
of SHIVA CORPORATION (the "Company") to be held on Friday, February 26, 1999 at
9:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, and any adjournments thereof, and there to vote and act
upon the following matters in respect of all shares of Common Stock of the
Company which the undersigned may be entitled to vote or act upon, with all the
powers the undersigned would possess if personally present.
In their discretion, the proxy holders are authorized to vote upon such
other matters as may properly come before the meeting or any adjournments
thereof. The shares represented by this proxy will be voted as directed by the
undersigned. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY PROPOSAL, THIS PROXY
WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS. Attendance of the
undersigned at the meeting or at any adjournment thereof will not be deemed to
revoke this proxy unless the undersigned shall revoke this proxy in writing.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN IN THE ACCOMPANYING ENVELOPE THIS PROXY.
A VOTE "FOR" PROPOSAL NUMBER 1 IS RECOMMENDED BY THE BOARD OF
DIRECTORS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENT
THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE
PROXIES SHALL VOTE "FOR" PROPOSAL NUMBER 1.
<PAGE> 89
1. To approve and adopt the Agreement and Plan of Merger, dated as of
October 19, 1998, by and among the Company, Intel Corporation and Intel
Networks, Incorporated and the Merger of Intel Networks, Incorporated
with and into the Company whereupon the Company will become a
subsidiary of Intel Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please mark your votes
as indicated in this example [X]
MARK HERE MARK HERE IF
FOR ADDRESS YOU PLAN TO
CHANGE AND ATTEND THE
NOTE AT LEFT [ ] MEETING [ ]
Dated: ______________________, 1999
___________________________________
Signature
___________________________________
Signature if held jointly
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. WHEN SHARES ARE HELD BY JOINT
OWNERS, BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY AUTHORIZED OFFICER, GIVING
FULL TITLE. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON,
GIVING FULL TITLE.
-2-
<PAGE> 90
APPENDIX B
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Shiva Corporation
In our opinion, based upon our audits and the report of other auditors,
the accompanying consolidated balance sheet and related consolidated statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Shiva Corporation
and its subsidiaries at January 3, 1998 and December 28, 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended January 3, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
AirSoft, Inc., a wholly-owned subsidiary, which statements reflect total
revenues of $860,000 and a net loss of $1,973,000 for the year ended December
31, 1995. Those statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for AirSoft, Inc. as of and for the period
described above, is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 27, 1998, except
as to Note 16 which is
as of February 19, 1998
<PAGE> 91
APPENDIX C
Report of Independent Accountants on
Financial Statements Schedule
To the Stockholders and Board of Directors
of Shiva Corporation:
Our audits of the consolidated financial statements referred to in our
report dated January 27, 1998, except as to Note 16 which is as of February 19,
1998, appearing in the 1997 Annual Report to Shareholders of Shiva Corporation
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our
opinion, the Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 27, 1998, except
as to Note 16 which is
as of February 19, 1998
<PAGE> 92
APPENDIX D
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of AirSoft, Inc.:
We have audited the statements of operations, stockholders' equity and
cash flows of AirSoft, Inc. (the "Company"), for the year ended December 31,
1995 (none of which are presented herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements of AirSoft, Inc. present
fairly, in all material respects, the results of its operations and its cash
flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
March 28, 1996
(June 16, 1996 as to Note 8)
<PAGE> 93
APPENDIX E
AUDITORS' REPORT
The Board of Directors of Isolation Systems Limited
We have audited the consolidated balance sheets of Isolation Systems
Limited as at August 31, 1997 and 1996 and the consolidated statements of
earnings and deficit and changes in financial position for the years then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the company as at August 31,
1997 and 1996 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles in Canada.
/s/ KPMG
KPMG
Chartered Accountants
Toronto, Canada
October 3, 1997 (except as to Note 10 which is as of March 26, 1998)
