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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
INTEGRATED SENSOR SOLUTIONS, INC.
(Name of Subject Company)
INTEGRATED SENSOR SOLUTIONS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK $0.001 PAR VALUE
(Title of Class of Securities)
45814M102
(CUSIP Number of Class of Securities)
MANHER D. NAIK
CHIEF EXECUTIVE OFFICER
INTEGRATED SENSOR SOLUTIONS, INC.
625 RIVER OAKS PARKWAY
SAN JOSE, CALIFORNIA 95134
(408) 324-1044
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of person(s) filing statement)
Copy to:
SCOTT M. STANTON, ESQ.
JOSEPH F. DANIELS, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121-2189
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by Sensor Acquisition Corporation, a
Delaware corporation ("Purchaser") and a direct wholly-owned subsidiary of Texas
Instruments Incorporated, a Delaware corporation ("TI" or "Parent"), to purchase
all of the Shares (as defined below) of Integrated Sensor Solutions, Inc., a
Delaware corporation.
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Integrated Sensor Solutions, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
office of the Company is 625 River Oaks Parkway, San Jose, California 95134. The
title of the class of equity securities to which this Schedule 14D-9 relates is
the common stock, par value $0.001 per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
the Tender Offer Statement on Schedule 14D-1, dated May 7, 1999 (as amended or
supplemented, the "Schedule 14D-1"), filed with the Securities and Exchange
Commission (the "Commission") by TI and Purchaser, relating to an offer by the
Purchaser, to purchase all outstanding Shares at a price of $8.05 per Share, net
to the seller in cash (the "Offer Price"), without interest thereon, upon the
terms and subject to the conditions set forth therein. The principal executive
offices of each of Parent and the Purchaser are located at 8505 Forest Lane,
Dallas, Texas 75243.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of May 3, 1999 (the "Merger Agreement") by and among the Company, Parent and
the Purchaser. A copy of the Merger Agreement is filed as Exhibit (c)(1) to this
Schedule 14D-9 and is hereby incorporated by reference. The Merger Agreement
provides that, among other things, as soon as practicable after the purchase of
Shares validly tendered and not withdrawn pursuant to the Offer, and the
satisfaction of the other conditions set forth in the Merger Agreement, and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law" or the "DGCL"), Purchaser will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving Corporation")
and will become a wholly-owned subsidiary of Parent. At the effective time of
the Merger (the "Effective Time"), each Share issued and outstanding immediately
prior to the Effective Time (other than Shares owned by the Purchaser, by
Parent, or any of their respective affiliates or Shares held by stockholders who
shall have demanded and perfected dissenters' rights, if any, under Delaware
Law) will be canceled and converted automatically into the right to receive the
Offer Price in cash, without interest (the "Merger Consideration"). The Merger
Agreement is summarized in Item 3 of this Schedule 14D-9. Although Purchaser is
offering to purchase the Shares pursuant to the Offer, TI has agreed to take all
action necessary to cause Purchaser to fulfill all its obligations with respect
to the Offer and otherwise under the Merger Agreement, including without
limitation the obligation to make payment for the Shares.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Schedule 14D-9 are to the
Company and its subsidiaries, viewed as a single entity.
(b) Certain contracts, agreements, arrangements or understandings known to
the Company between the Company or its affiliates and (i) certain of the
Company's executive officers, directors or affiliates or (ii) certain of
Parent's executive officers, directors or affiliates are described in the
Information Statement pursuant to Section 14(f) of the Securities Exchange Act
of 1934, as amended and Rule 14f-1 thereunder of the Company dated May 7, 1999
attached to this Schedule 14D-9 as Annex A (the "Information Statement"). Other
such contracts, arrangements and understandings known to the Company are
described below. The Information Statement is being furnished to the Company's
stockholders pursuant to Sec-
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tion 14(f) of the Securities Exchange Act of 1934 as amended (the "Exchange
Act"), and Rule 14f-1 issued under the Exchange Act in connection with the
Parent's right (upon the acquisition by Purchaser of Shares pursuant to the
Offer) to designate that number of persons to be appointed to the Board of
Directors of the Company (the "Company Board" or the "Board") constituting a
majority of the directors of the Company without a meeting of the stockholders
of the Company. The Information Statement is hereby incorporated by reference.
INDEMNIFICATION AGREEMENTS
The Company is party to indemnification agreements with each person who, as
of April 30, 1999, was a director of the Company, and Manher D. Naik, Ramesh
Sirsi, Donald E. Paulus and David Satterfield, who are executive officers of the
Company. The indemnification agreements generally provide for indemnification
against all costs and expenses (including attorneys' fees) actually and
reasonably incurred by the indemnitee if the indemnitee is or was a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that such indemnitee is or was serving the Company (or a subsidiary
of the Company) as a director, officer, employee or agent, or by reason of any
action or inaction on the part of indemnitee while serving in such capacity, and
any and all judgments, fines and amounts paid in settlement of any claim,
provided that indemnitee acted in good faith and in a manner indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
and its stockholders, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe indemnitee's conduct was unlawful, unless it
is determined that such indemnification is not permitted under applicable law.
The indemnification agreements also provide for the prompt advancement of
expenses to an indemnitee as well as the reimbursement by such indemnitee of any
such advances to the Company if it is determined that the indemnitee is not
entitled to such indemnification. The indemnification agreements also provide
that the Company will maintain in full force and effect directors' and officers'
liability insurance in reasonable amounts from established and reputable
insurers ("D & O Insurance"), with each director receiving such rights and
benefits under policies of D & O Insurance accorded to the most favorably
insured of the Company's directors and officers, respectively, subject to
certain limitations. Indemnitees' rights under the indemnification agreements
are not exclusive of any other rights they may have under Delaware Law, the
Company's Certificate of Incorporation, the Company's Bylaws or otherwise. The
form of indemnification agreement has been filed as Exhibit (c)(2) to this
Schedule 14D-9 and is hereby incorporated by reference.
The Certification of Incorporation of the Company, as amended to date (the
"Certificate of Incorporation"), provides that, to the fullest extent permitted
by Delaware Law, no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director. The Certificate of Incorporation of the Company has been filed as
Exhibit (c)(3) to this Schedule 14D-9 and is hereby incorporated by reference.
Article VIII of the Bylaws of the Company also provides for indemnification of
officers and directors of the Company. The Bylaws of the Company have been filed
as Exhibit (c)(4) to this Schedule 14D-9 and are hereby incorporated by
reference.
THE MERGER AGREEMENT
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is filed as Exhibit (c)(1) to this Schedule
14D-9.
The Offer. The Merger Agreement provides for the commencement of the Offer
no later than five business days after the public announcement of the execution
of the Merger Agreement. The Merger Agreement provides that, without the
Company's prior written consent, the Purchaser cannot (i) decrease the Offer
Price, (ii) decrease the number of Shares sought or otherwise amend or waive the
Minimum Condition, (iii) change the form of consideration offered for the
Shares, (iv) amend any other condition of the Offer in any manner adverse to the
holders of the Shares (other than in respect of insignificant changes or
amendments), (v) impose additional conditions to the Offer, or (vi) extend the
Offer. Notwithstanding the foregoing, Parent and the Purchaser have agreed that
if all the conditions to the Offer are not satisfied or
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waived on the initial expiration date of the Offer, or any extension thereof,
then, provided that all such conditions are reasonably capable of being
satisfied prior to October 31, 1999, Parent and the Purchaser shall extend the
Offer from time to time until such conditions are satisfied or waived, provided
that Parent and the Purchaser shall not be required to extend the Offer beyond
October 31, 1999. In addition, the Offer Price may be increased and the Offer
may be extended to the extent required by law in connection with such increase,
in each case without the consent of the Company.
The obligation of the Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to certain conditions. The Purchaser
has agreed to accept for payment and pay for any and all Shares validly tendered
as promptly as practicable after the satisfaction or waiver of the conditions to
the Offer; provided that, if, immediately prior to the latest expiration date of
the Offer permitted by the Merger Agreement, the number of shares validly
tendered and not withdrawn pursuant to the Offer is less than 90% of the
outstanding Shares, the Purchaser may extend the Offer for a period not to
exceed 20 business days, and, on the terms of, and subject to the satisfaction
or waiver of the conditions to, the Offer, shall accept for payment and pay for
Shares validly tendered as promptly as practicable after the expiration of such
period.
Directors. The Merger Agreement provides that promptly after (i) the
purchase of and payment for Shares by the Purchaser and its affiliates as a
result of which the Purchaser and its affiliates beneficially own at least a
majority of the outstanding Shares and (ii) compliance with Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, whichever occurs later,
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Company Board as will give Parent representation
on the Company Board equal to the product of the total number of directors on
the Company Board (giving effect to the increase in the size of the Company
Board pursuant to this sentence) multiplied by the percentage that the number of
Shares beneficially owned by the Purchaser, Parent and any of their affiliates
(including Shares accepted for payment) bears to the total number of Shares then
outstanding. The Company shall, upon request of Parent, use its best efforts
promptly either to increase the size of the Company Board or secure the
resignations of such number of its incumbent directors, or both, as is necessary
to enable Parent's designees to be elected to the Company Board, and shall cause
Parent's designees to be so elected. Notwithstanding the foregoing, the Company,
the Purchaser and Parent have agreed to use their respective reasonable best
efforts to ensure that, until the Effective Time, the Company shall retain as
members of the Company Board at least two Continuing Directors, defined as (i)
any member of the Company Board as of the date of the Merger Agreement, (ii) any
successor of a Continuing Director who is (A) unaffiliated with, and not a
designee or nominee, of Parent or the Purchaser, and (B) recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on the
Company Board, and in each case under clauses (i) and (ii), who is not an
employee of the Company.
The Merger Agreement also provides that from and after the time, if any,
that Parent's designees constitute a majority of the Company Board, any
amendment or modification of the Merger Agreement, any amendment to the
Company's certificate of incorporation or bylaws inconsistent with the Merger
Agreement, any termination of the Merger Agreement by the Company, any extension
of time for performance of any of the obligations of Parent or the Purchaser
under the Merger Agreement, and any waiver of any condition or any of the
Company's rights under the Merger Agreement or other action by the Company in
connection with the rights of the Company under the Merger Agreement may be
effected only by the action of a majority of the Continuing Directors, which
action shall be deemed to constitute the action of any committee specifically
designated by the Company Board to approve the actions contemplated by the
Merger Agreement and the full Company Board; provided, that if there are no
Continuing Directors, such actions may be effected by a majority vote of the
entire Company Board.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, the Purchaser will be merged with and into the Company, with
the Company continuing as the Surviving Corporation (the "Surviving
Corporation") and a direct wholly-owned subsidiary of Parent. At the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares, each issued and outstanding Share (other than Shares owned by
Parent, the Purchaser or any of their affiliates and Shares held by shareholders
who properly exercise their dissenters' rights under the DGCL) shall be
converted into the right to receive the Offer Price in cash, without interest.
Each issued and outstanding share of common stock,
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par value $.01 per share, of the Purchaser shall be converted into and become
one fully paid and non-assessable share of common stock of the Surviving
Corporation. The Merger Agreement also provides that (i) the directors of the
Purchaser immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation and the officers of the Purchaser immediately prior
to the Effective Time will be the initial officers of the Surviving Corporation;
(ii) the Certificate of Incorporation of the Company as in effect immediately
prior to the Effective Time (the "Certificate of Incorporation"), will be the
initial Certificate of Incorporation of the Surviving Corporation; and (iii) the
By-laws of the Company as in effect immediately prior to the Effective Time (the
"By-laws"), will be the initial By-laws of the Surviving Corporation.
Treatment of Options and Warrants. The Merger Agreement provides that,
prior to the Effective Time, the Company (or, if appropriate, any committee of
the Company Board administering the Company's 1989 Stock Option Plan and 1997
Stock Option Plan (each, a "Company Option Plan")) shall (i) obtain all
necessary consents from, and provide (in a form acceptable to Parent) any
required notices to, holders of Company Stock Options (as defined below) and
(ii) amend the terms of the applicable Company Option Plan, in each case as is
necessary to give effect to the following:
(i) Subject to the provisions of Section 16 of the Exchange Act, at
the Effective Time each outstanding option to purchase Shares pursuant to
the Company Option Plans (a "Company Stock Option") that is then vested
pursuant to the terms of the relevant Company Option Plan (including
Company Stock Options that vest at the Effective Time) shall be cancelled
in exchange for the right to receive an amount in cash equal to the product
of (A) the excess, if any, of the Offer Price over the per share exercise
price for one Share subject to such Company Stock Option multiplied by (B)
the number of vested Shares subject to such Company Stock Option.
(ii) In respect of each outstanding Company Stock Option that shall
not vest by its terms (without any further action by the Company in respect
of any Company Option Plan) at or prior to the Effective Time, Parent shall
notify the Company no later than the Effective Time whether such Company
Stock Option shall be subject to clause (A) or (B) below.
(A) Subject to the provisions of Section 16 of the Exchange Act, at
the Effective Time each outstanding Company Stock Option which is
designated by Parent to be subject to this clause (A) as provided above
shall immediately vest and shall be cancelled in exchange for the right
to receive an amount in cash equal to the product of (A) the excess, if
any, of the Offer Price over the per share exercise price for one Share
subject to such Company Stock Option multiplied by (B) the number of
Shares subject to such Company Stock Option that vest in the manner
provided above.
(B) Subject to the provisions of Section 16 of the Exchange Act, at
the Effective Time each outstanding Company Stock Option that is
designated by Parent to be subject to this clause (B) as provided above
shall be exchanged by Parent and converted into a non-qualified stock
option (i.e., does not qualify under Section 422 of the Code) (a
"Substitute Option") to purchase the number of shares of fully paid and
non-assessable shares of common stock, par value $1.00 per share, of
Parent ("Parent Common Stock") (rounded up to the nearest whole share)
equal to (x) the number of non-vested Shares subject to such option
multiplied by (y) the Substitute Option Exchange Ratio (as defined
below), at an exercise price per share of Parent Common Stock (rounded
down to the nearest penny) equal to (i) the former exercise price per
share of Company Common Stock under such option immediately prior to the
Effective Time divided by (ii) the Substitute Option Exchange Ratio.
"Substitute Option Exchange Ratio" shall mean the Offer Price divided by
the average closing price of one share of Parent Common Stock (rounded
to the nearest thousandth) as reported in the New York City edition of
The Wall Street Journal during the five consecutive trading days
beginning on the date of the Merger Agreement. Each Substitute Option
shall be granted pursuant to and subject to the terms and conditions of
the Parent's stock option plans and, in addition, shall be for a term of
no less than ten years from the original grant date of the applicable
Company Stock Option and shall have vesting provisions at least as
favorable as were applicable to the converted Company Stock Option
immediately prior to the Effective Time.
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The Merger Agreement provides that, at the Effective Time, each outstanding
warrant or similar right to purchase or otherwise acquire Shares (a "Company
Warrant") shall be converted into and be exchangeable for the right to receive,
in lieu of the Shares theretofore purchasable upon the exercise of the Company
Warrant, an amount in cash equal to the product of (i) the excess, if any, of
the Offer Price over the per share exercise price for one Share subject to such
Company Warrant multiplied by (ii) the number of Shares subject to such Company
Warrant. Each Company Warrant with an exercise price equal to or greater than
the Offer Price shall be terminated without payment of any consideration. The
Merger Agreement provides that the Company shall obtain the necessary consents
of each holder of a Company Warrant to the transactions contemplated by the
Merger Agreement in a form acceptable to Parent, no later than the final
expiration date of the Offer.
All Company Option Plans, Company Stock Options, and Company Warrants shall
terminate (subject only to the rights to receive the consideration specified
above) at and as of the Effective Time and the provisions in any other plan,
program, or arrangement providing for the issuance or grant of any Company Stock
Options, Company Warrants, or similar instruments shall be canceled at and as of
the Effective Time and the Merger Agreement provides that the Company shall take
all action necessary to ensure that following the Effective Time no participant
in any Company Option Plan or other plans, programs, or arrangements or holder
of any Company Warrant shall have any right thereunder to acquire equity
securities of the Company, the Surviving Corporation, or any subsidiary thereof
and to terminate all such plans, programs, and arrangements.
Stockholders' Meeting. Pursuant to the Merger Agreement, if the Company
owns less than 90% of the Shares following the purchase of Shares by the
Purchaser pursuant to the Offer, the Company Board shall, in accordance with
applicable law, the Certificate of Incorporation and the Bylaws, duly call, give
notice of, convene and hold a special meeting of its stockholders as promptly as
practicable following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking action
upon the approval of the Merger and the approval and adoption of the Merger
Agreement.
The Merger Agreement also provides that the Company shall prepare and file
with the Commission a preliminary proxy or information statement relating to the
Merger and the Merger Agreement, obtain and furnish the information required to
be included by the Commission in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, respond promptly to any comments made by
the Commission with respect to the preliminary proxy or information statement
and cause a definitive proxy or information statement (the "Proxy Statement") to
be mailed to its stockholders and use its reasonable best efforts to obtain the
necessary approvals of the Merger and the Merger Agreement by its stockholders.
The Merger Agreement also provides that the Company shall, subject to the
fiduciary obligations of the Company Board under applicable law as advised by
the Company's outside counsel, include in the Proxy Statement the recommendation
of the Company Board that stockholders of the Company vote in favor of the
approval of the Merger and the approval and adoption of the Merger Agreement. In
the event that Parent, the Purchaser, and any of its other subsidiaries shall
acquire at least 90% of the outstanding shares of each class of capital stock of
the Company, pursuant to the Offer or otherwise, the parties shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the consummation of such acquisition, without a meeting of
the Company's stockholders in accordance with Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains
representations and warranties of the Company with respect to, among other
things (i) organization and qualification, (ii) capitalization and ownership of
subsidiaries, (iii) authorization, validity of the Merger Agreement and Company
action, (iv) consents and approvals and absence of violations, (v) Commission
reports and financial statements, (vi) no undisclosed liabilities, (vii) absence
of certain changes, (viii) material contracts, (ix) employee benefit plans and
ERISA, (x) litigation, (xi) permits, absence of defaults and compliance with
applicable laws, (xii) tax matters, (xiii) certain property, (xiv) intellectual
property and software, (xv) environmental matters, (xvi) employee and labor
matters, (xvii) information in tender offer documents and Proxy Statement,
(xviii) brokers and finders, (xix) insurance, (xx) absence of questionable
payments, (xxi) certain subsidies, (xxii) Year 2000 matters, (xxiii) product
liability and recalls, (xxiv) customer and suppliers, (xxv) state takeover
statutes, and (xxvi) opinion of financial advisor.
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The Merger Agreement contains joint and several representations and
warranties of Parent and the Purchaser with respect to, among other things (i)
organization, (ii) authorization, validity of the Merger Agreement and necessary
action, (iii) consents and approvals and absence of violations, (iv) information
in tender offer documents and Proxy Statement, (v) brokers and finders, and (vi)
the Purchaser's operations.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, among other things, between the date of the Merger Agreement and
prior to the Effective Time, (i) the business of the Company and its
subsidiaries shall be conducted only in the ordinary and usual course of
business consistent with past practice and, to the extent consistent therewith,
each of the Company and its subsidiaries shall seek to preserve intact its
current business organizations, keep available the service of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with the Company to the end that goodwill
and ongoing businesses shall be unimpaired at the Effective Time; and (ii)
except as otherwise expressly provided in the Merger Agreement, neither the
Company nor any of its subsidiaries shall, without the prior written consent of
Parent, (a) amend its certificate of incorporation or bylaws or similar
organizational documents; (b) authorize, issue or sell any stock of any class,
or securities convertible into or exchangeable for any stock or equity
equivalents other than pursuant to outstanding Company Stock Options or Company
Warrants or the Company's employee stock purchase plan; (c) split, combine or
reclassify its capital stock, make any distribution in respect of its capital
stock, or redeem, repurchase or otherwise acquire any of its securities; (d)
adopt any plan or liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization; (e) alter the corporate
structure or ownership of any subsidiary of the Company; (f) incur or assume
additional debt or issue debt securities, guarantee or become liable for
obligations of any other person, make loans, advances or capital contributions
to or investments in any other person (other than to wholly owned subsidiaries
or immaterial loans or advances to employees in the ordinary course of
business), pledge or encumber shares of capital stock of the Company or its
subsidiaries, or mortgage or pledge any material assets or create any lien
thereon; (g) acquire, sell, lease or dispose of any material amount of assets,
enter into any transactions outside the ordinary course of business, grant any
exclusive distribution rights, grant any license, right to use or covenant not
to sue in respect of any intellectual property, or disclose any trade secrets or
confidential proprietary information; (h) change any accounting practices or
principles except as required by laws or generally accepted accounting
principles ("GAAP"); (i) revalue any assets except as required by GAAP; (j)
acquire any entity or division thereof, enter or amend any material contract or
agreement, authorize any new capital expenditures in excess of $250,000
individually or $1,000,000 in the aggregate, or enter into any contract,
agreement or arrangement for any action prohibited by the Merger Agreement; (k)
make or resolve any tax election, settle or compromise any tax liability, or
change its accounting methods for tax purposes; (l) pay, discharge or satisfy
any material claim, obligations or liabilities (other than in the ordinary
course of business with respect to claims, reflected in the Company's
consolidated financial statements or claims incurred in the ordinary course of
business) or waive or modify any confidentiality, standstill or similar
agreements; (m) settle or compromise any claim, action, suit or proceeding
relating to the transactions contemplated by the Merger Agreement (including,
without limitation, the Offer and the Merger) (the "Transactions"); (n) enter
into any noncompetition agreement or arrangement restricting the Company, its
subsidiaries or any successor thereto; (o) fail to comply in any material
respect with any applicable law; (p) amend, modify, alter or terminate the stock
purchase agreement between the Company and Nagano Keiki Co., Ltd. (the
"Subsidiary Stock Purchase Agreement") pursuant to which the Company will
purchase the stock of its subsidiary, ISS-Nagano GmbH (the "German Subsidiary"),
not owned by the Company, or amend any supply arrangements between the Company
or any of its subsidiaries and Nagano Keiki Co., Ltd.; (q) enter into any
financial or other subsidies with any foreign or domestic governmental entity or
other person; (r) change or amend the contracts, salaries or compensation of any
officer, director, employee, agent or similar representative except in the
ordinary course of business and that do not increase, in the aggregate, such
person's salary, wages and compensation by more than five percent; (s) adopt,
enter, amend, alter or terminate any employee benefit plan or arrangement unless
required by applicable law or the Merger Agreement; (t) enter into any contract
with an officer, director, employee, agent, or similar representative not
terminable, without penalty or other liability, upon not more than 60 calendar
days' notice; or (u) take or agree to take any action that would make any of the
representations and warranties of the Company contained in the Merger Agreement
untrue or incorrect.
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Approvals and Consents; Notification. Parent, the Purchaser and the Company
have agreed to use their reasonable best efforts to take all actions and do all
things necessary, proper or advisable under applicable laws to consummate the
Offer, the Merger and the other Transactions, including, without limitation, (i)
making an appropriate filing pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), supplying any additional
information or documents requested pursuant to the HSR Act and taking all
actions necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable, (ii) making all
appropriate filings pursuant to the Act Against Restraint of Competition of the
Federal Republic of Germany (the "German Cartel Act"), supplying any additional
information or documents requested pursuant to the German Cartel Act and taking
all actions necessary to cause the expiration or termination of the applicable
waiting periods under the German Cartel Act as soon as practicable, and (iii)
obtaining all other requisite approvals and authorizations under the HSR Act,
the German Cartel Act and any other applicable antitrust or similar law. In
furtherance of the foregoing, the parties have agreed to cooperate with each
other in making filings and responding to investigations and inquiries
(including those initiated by private parties), to keep each other informed of
material communications, to use reasonable best efforts to resolve any
objections to the Transactions, and to cooperate and use reasonable efforts to
contest, resist and to have vacated, reversed or overturned any judicial or
administrative action seeking to prohibit, prevent or restrict the consummation
of the Transactions; provided, however, that such agreement between the parties
shall not (i) limit the parties rights to terminate the Merger Agreement,
subject to compliance with its terms (including the foregoing) or (ii) agree not
to compete in any geographic area or line of business.
The Company has agreed to give prompt written notice to Parent and the
Purchaser, and Parent and the Purchaser have agreed to give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in the Merger Agreement to be untrue or inaccurate at or prior to the
Effective Time, (ii) any material failure of the Company, Parent, or Purchaser,
as the case may be, to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by it under the Merger Agreement,
(iii) any notice of, or other communication relating to, a default or event
which, with notice, lapse of time, or both, would become a default which could
reasonably be expected to have a Material Adverse Effect (as defined below) on
the Company, Parent, or Purchaser, as the case may be, received by it or any of
its subsidiaries subsequent to the date of the Merger Agreement and prior to the
Effective Time, under any contract or agreement to which it or any of its
subsidiaries is a party or is subject, (iv) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the Transactions, or (v) any Material Adverse Effect
in their respective financial conditions, properties, businesses, results of
operations, or prospects, taken as a whole, other than changes resulting from
general economic conditions; provided, however, that the delivery of any such
notice shall not cure such breach or non-compliance or limit or otherwise affect
the remedies available under the Merger Agreement to the party receiving such
notice.
"Material Adverse Effect" means in respect of any entity, any change,
circumstance, or effect that, individually or in the aggregate with all other
changes, circumstances, and effects, is or is reasonably likely to be materially
adverse to (i) the assets, properties, condition (financial or otherwise), or
results of operations of such entity and its subsidiaries taken as a whole, or
(ii) the ability of such party to consummate the transactions contemplated by
the Merger Agreement; provided, however, that in respect of the Company, none of
the following shall be deemed by itself or themselves, either alone or in
combination, to constitute a Material Adverse Effect: (a) a failure by the
Company to meet internal earnings or revenue projections or the published
earnings or revenue projections of equity analysts (provided, that the foregoing
shall not prevent Parent or the Purchaser from asserting that any underlying
cause of such failure independently constitutes such a Material Adverse Effect);
(b) conditions affecting the semiconductor industry as a whole, the automotive
industry as a whole, or the U.S. economy as a whole; or (c) any disruption of
customer relationship arising directly out of or resulting directly from actions
contemplated by the parties in connection with, or which is directly
attributable to the announcement of the Merger Agreement and the Transactions.
Employee Matters. Parent has agreed that United States employees of the
Company who remain employees of the Surviving Corporation following the
Effective Time ("Continuing U.S. Employees") shall,
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from and after the Effective Time, participate in Parent's benefit plans and
that Parent and the Surviving Corporation will give Continuing U.S. Employees
full credit for purposes of eligibility and vesting under applicable Parent
benefit plans and employee arrangements to the extent each such Continuing U.S.
Employee has been credited with service with the Company or any of its
subsidiaries under each comparable benefit plan or employee arrangement
maintained by the Company immediately prior to the Effective Time. Parent and
the Surviving Corporation have agreed to use their respective reasonable efforts
to: (i) waive all limitations as to pre-existing condition exclusions and
waiting periods in respect of participation and coverage requirements applicable
to the Continuing U.S. Employees under any of Parent's benefit plans or employee
arrangements that such Continuing U.S. Employees may be eligible to participate
in after the Effective Time, other than limitations or waiting periods that are
already in effect in respect of such Continuing U.S. Employees and that have not
been satisfied as of the Effective Time under any benefit plan or employee
arrangement maintained by the Company for the Continuing U.S. Employee
immediately prior to the Effective Time, and (ii) provide each Continuing U.S.
Employee with credit for the remaining short plan year for any co-payments and
deductibles paid under each comparable benefit plan or employee arrangement
maintained by the Company immediately prior to the Effective Time in satisfying
any applicable deductible or co-payment requirements under any of Parent's
benefit plans or employee arrangements that such Continuing U.S. Employees are
eligible to participate in after the Effective Time. Parent has also agreed to
cause the Surviving Corporation to honor the obligations of the Company and its
subsidiaries under the provisions of the employment, consulting, termination,
severance, change of control, and indemnification agreements identified in the
Merger Agreement.
The Company has agreed to terminate its 1997 Employee Stock Purchase Plan
(the "Company Stock Purchase Plan"), including all employee salary deductions in
connection therewith, on or before the date on which the Merger will be
consummated (the "Closing Date"). On the Closing Date, all accumulated employee
salary deductions shall be applied to the purchase of whole shares of Company
Common Stock in accordance with the terms of the Company Stock Purchase Plan and
any remaining employee salary deductions shall be returned to participants
without interest. The shares of Company Common Stock to be delivered by the
Company pursuant to the Company Stock Purchase Plan shall be converted into cash
on the Closing Date in accordance with the provisions of the Merger Agreement,
without further action by any participant. Further, the Company has agreed to
amend, effective as of the date of the Merger Agreement, the Company Stock
Purchase Plan to suspend any new offering periods or stock purchases after the
date of the Merger Agreement (and any increases in employee salary deductions
thereunder) except that employees currently participating therein may continue
to purchase stock in the current offering period in accordance with their
current salary deduction election or may reduce the amount of their salary
deduction election through the Closing Date. The Company has agreed to promptly
notify Parent of any changes in employee salary deductions and the number of
shares of Company Common Stock hereafter acquired under the Company Stock
Purchase Plan.
Acquisition Proposals. The Company has agreed that, until the Merger
Agreement is terminated, the Company will not, nor will it permit any of its
subsidiaries to, nor will it authorize or direct any officer, director, or
employee of or any investment banker, attorney, accountant, or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate, or encourage the submission of any
Acquisition Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any information in respect
of, or take any other action to facilitate, any Acquisition Proposal or any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that the
Company Board may furnish information to, or enter into discussions or
negotiations with, any person that makes an unsolicited bona fide written
Acquisition Proposal if, and only to the extent that (A) the Company Board,
after consultation with independent legal counsel, determines in good faith that
such action is necessary for the Company Board to comply with its fiduciary
duties to the Company's stockholders under applicable law, (B) the Company Board
determines in good faith that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated taking into account all legal, financial,
regulatory, and other aspects of the proposal and the person making the
proposal, and believes in good faith, after consolation with CRI, its financial
advisor, that such Acquisition Proposal would, if consummated, result in a
transaction more favorable to the
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Company's stockholders from a financial point of view than the Offer and the
Merger (any such more favorable Acquisition Proposal being referred to herein as
a "Superior Proposal"), and (C) prior to taking such action, the Company (x)
provides reasonable notice to Parent to the effect that it is taking such action
and (y) receives from such person making the Acquisition Proposal an executed
confidentiality/standstill agreement in reasonably customary form and in any
event containing terms at least as stringent as those contained in the
Confidentiality Agreement between Parent and the Company described below.
"Acquisition Proposal" means an inquiry, offer, or proposal regarding any
of the following (other than the transactions contemplated by the Merger
Agreement) involving the Company or any of its subsidiaries: (i) any merger,
consolidation, share exchange, recapitalization, business combination, or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer,
or other disposition of all or substantially all the assets of the Company and
its subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for 20% or more of the
outstanding Shares or the filing of a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") in connection
therewith; or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
Prior to providing any information to or entering into discussions or
negotiations with any person in connection with an Acquisition Proposal by such
person, the Company shall notify Parent of any Acquisition Proposal (including
the material terms and conditions thereof and the identity of the person making
it) as promptly as practicable (but in no case later than 24 hours) after its
receipt thereof, and shall provide Parent with a copy of any written Acquisition
Proposal or amendments or supplements thereto, and shall thereafter inform
Parent on a prompt basis of the status of any discussions or negotiations with
such third party, and any material changes to the terms and conditions of such
Acquisition Proposal, and shall promptly give Parent a copy of any information
delivered to such person which has not previously been reviewed by Parent. The
Merger Agreement provides that immediately after the execution and delivery
thereof, the Company will, and will cause its subsidiaries and affiliates, and
their respective officers, directors, employees, investment bankers, attorneys,
accountants, and other agents and representatives to, cease and terminate any
existing activities, discussions, or negotiations with any parties conducted
prior to the date of the Merger Agreement in respect of any possible Acquisition
Proposal and shall notify each party that it, or any officer, director,
investment advisor, financial advisor, attorney, or other agent or
representative retained by it, has had discussions with during the 30 days prior
to the date of the Merger Agreement that the Company Board no longer seeks the
making of any Acquisition Proposal.
In addition, the Company has agreed that the Company Board will not
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent, its approval or recommendation of the Merger Agreement, the Offer, or
the Merger unless the Company Board after consultation with independent legal
counsel, determines in good faith that such action is necessary for the Company
Board to comply with the fiduciary duties to the Company's stockholders under
applicable law; provided, however, that the Company Board may not approve or
recommend (and in connection therewith, withdraw or modify its approval or
recommendation of the Merger Agreement, the Offer, or the Merger) an Acquisition
Proposal unless such an Acquisition Proposal is a Superior Proposal (and the
Company shall have first complied with its obligations described below in clause
(iv)(a) under "Termination") and unless it shall have first consulted with
independent legal counsel, and have determined that such action is necessary for
the Company Board to comply with its fiduciary duties to the Company's
stockholders. Notwithstanding the foregoing, the Company shall not be prohibited
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith reasonable judgment of the
Company Board, after consultation with independent legal counsel, is required
under applicable law; provided, however, that except as otherwise permitted in
this paragraph, the Company does not withdraw or modify, or propose to withdraw
or modify, its position in respect of the Offer or the Merger, or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
Indemnification of Directors, Officers and Employees. From and after the
Effective Time, the Surviving Corporation shall, and Parent shall cause the
Surviving Corporation to the fullest extent permitted by applicable law,
indemnify, defend, and hold harmless each person who at or prior to the date of
the Merger
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<PAGE> 11
Agreement or the Effective Time, is or was a director, officer, or employee of
the Company or any subsidiary thereof against all losses, expenses (including,
reasonable attorneys' fees and expenses), claims, damages, or liabilities or,
subject to certain restrictions, amounts paid in settlement, arising out of
actions or omissions occurring at or prior to the Effective Time and whether
asserted or claimed prior to, at, or after the Effective Time that are in whole
or in part (i) based on, or arising out of the fact that such person is or was a
director, officer, or employee of the Company or such subsidiary thereof or (ii)
based on, arising out of, or pertaining to the transactions contemplated by the
Merger Agreement. In addition, Parent and the Purchase have agreed that, to the
fullest extent permitted by law, from and after the Effective Time, all rights
to indemnification in favor of the employees, agents, directors, or officers of
the Company and its subsidiaries in respect of their activities as such prior to
the Effective Time, as provided in the Company's Certificate of Incorporation or
Bylaws, in effect on the date thereof or otherwise in effect on the date of the
Merger Agreement, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time.
Shareholder Litigation. The Merger Agreement provides that in connection
with any litigation which may be brought against the Company or its directors
relating to the transactions contemplated thereby, the Company will keep Parent,
and any counsel which Parent may retain at its own expense, informed of the
course of such litigation, to the extent Parent is not otherwise a party
thereto. The Company has also agreed that it will consult with Parent prior to
entering into any settlement or compromise of any such shareholder litigation
and will not enter into any such settlement or compromise without Parent's prior
written consent, which consent shall not be unreasonably withheld.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any or all of which may be waived in whole or in part by the party benefited
thereby, to the extent permitted by applicable law: (i) the Merger Agreement
shall have been approved and adopted by the requisite vote of the Company's
stockholders if required by applicable law; (ii) any waiting period applicable
to the Merger under the HSR Act and the German Cartel Act shall have expired or
early termination thereof shall have been granted without limitation,
restriction or condition; (iii) there shall not be in effect any law of any
governmental entity of competent jurisdiction, restraining, enjoining, or
otherwise preventing consummation of the Transactions or permitting such
consummation only subject to any condition or restriction that has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company (or an effect on Parent and its subsidiaries that,
were such effect applied to the Company and its subsidiaries, has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company) and no governmental entity shall have instituted
any proceeding which continues to be pending seeking any such law; and (iv)
Parent, the Purchaser or their affiliates shall have purchased Shares pursuant
to the Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Merger abandoned at any time prior to the Effective Time, whether before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company: (i) by mutual written consent of Parent and the
Company; provided, however, that if Parent shall then have a majority of the
directors on the Company Board, such consent of the Company may only be given if
approved by the Continuing Directors; (ii) by either of Parent or the Company if
(a) a statute, rule, or executive order shall have been enacted, entered, or
promulgated prohibiting the Transactions on the terms contemplated by the Merger
Agreement, or (b) any governmental entity shall have issued an order, decree, or
ruling or taken any other action (which order, decree, ruling, or other action
the parties hereto shall use their reasonable efforts to lift), in each case
permanently restraining, enjoining, or otherwise prohibiting the Transactions
and such order, decree, ruling, or other action shall have become final and
non-appealable; (iii) by either of Parent or the Company if the Offer has not
been consummated by October 31, 1999 (except the Purchaser may extend the
expiration date of the Offer through December 31, 1999 as required to comply
with any rule, regulation, or interpretation of the Commission) or the Effective
Time shall not have occurred on or before October 31, 1999; provided, however,
that the party seeking to terminate the Merger Agreement as described in this
clause (iii) shall not have breached in any material respect its obligations
under the Merger Agreement in any manner that shall have proximately
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<PAGE> 12
contributed to the failure to consummate the Merger on or before such date; (iv)
by the Company (a) if (1) the Company is not in breach of the provisions
described under "Acquisition Proposals" above, (2) the Merger shall not have
been approved by a majority of the Company's stockholders, (3) the Company Board
authorizes the Company, subject to complying with the terms of the Merger
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and the Company notifies Parent in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice, (4) during the five-day period after
the Company's notice, the Company shall have negotiated with, and shall have
caused its respective financial and legal advisors to negotiate with, Parent to
attempt to make such commercially reasonable adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated hereby, (5) the Company Board shall have concluded,
after considering the results of such negotiations, that any Superior Proposal
giving rise to the Company's notice continues to be a Superior Proposal and (6)
the Company contemporaneously with such termination, pays to Parent in
immediately available funds the fees described below under "Termination Fees";
provided, however, that the Company (x) will not enter into a binding agreement
referred to in clause (3) above until at least the sixth business day after it
has provided the notice to Parent required thereby and (y) will notify Parent
promptly if its intention to enter into a written agreement referred to in its
notification shall change at any time after giving such notification; (b) if
Parent or the Purchaser shall have terminated the Offer or the Offer expires
without the Purchaser purchasing any Shares pursuant thereto; provided, however,
that the Company may not terminate the Merger Agreement as described in this
clause (b) if the Company is in material breach of the Merger Agreement; (c) if
Parent, the Purchaser, or any of their affiliates shall have failed to commence
the Offer on or prior to five business days following the date of the initial
public announcement of the Offer; provided, however, that the Company may not
terminate the Merger Agreement as described in this clause (c) if the Company is
in material breach of the Merger Agreement; or (d) if there is a material breach
by Parent or the Purchaser of any of their representations, warranties,
covenants, or agreements contained in the Merger Agreement; or (v) by Parent or
the Purchaser (a) if prior to the purchase of the Shares pursuant to the Offer,
(1) the Company Board shall have withdrawn, modified, or changed in a manner
adverse to Parent or the Purchaser its approval or recommendation of the Offer,
the Merger Agreement, or the Merger or shall have recommended or approved an
Acquisition Proposal, or (2) the Company shall have materially breached any of
the provisions described under "Acquisition Proposals" above; (b) if Parent or
the Purchaser shall have terminated the Offer without Parent or the Purchaser
purchasing any Shares thereunder in accordance with the terms and subject to the
conditions of the Offer; provided, however, that Parent or the Purchaser may not
terminate the Merger Agreement pursuant to this clause (b) if Parent or the
Purchaser is in material breach of the Merger Agreement; (c) if the Company
receives an Acquisition Proposal from any person (other than Parent or Merger
Sub), and the Company Board takes a neutral position or makes no recommendation
in respect of such Acquisition Proposal after a reasonable amount of time (and
in no event more than five business days following such receipt) has elapsed for
the Company Board to review and make a recommendation in respect of such
Acquisition Proposal; (d) if there is a breach by the Company of any of its
representations, warranties, covenants, or agreements contained in the Merger
Agreement which breach is not curable or, if curable, is not cured within ten
calendar days after written notice of such breach is given by Parent to the
Company and which is reasonably likely to have a Material Adverse Effect on the
Company; or (e) if the audited financial statements of the Company for the
fiscal year ended March 31, 1999 shall differ materially from the unaudited
financial statements delivered to Parent simultaneously with the execution of
the Merger Agreement.
Termination Fee. If (x) Parent or the Purchaser terminates the Merger
Agreement as described in clauses (v)(a) or (v)(c) under "Termination" above or
(y) the Company terminates the Merger Agreement as described in clause (iv)(a)
under "Termination" above, then in each case, the Company shall pay, or cause to
be paid to Parent, or the Purchaser, at the time of termination, an amount equal
to $2,000,000 (the "Termination Fee") plus an amount equal to Parent's and the
Purchaser's actual and reasonably documented out-of-pocket expenses incurred by
Parent or the Purchaser in connection with the Offer, the Merger, the Merger
Agreement, and the consummation of the Transactions, up to an aggregate of
$500,000 (the "Expenses"). In addition, if the Merger Agreement is terminated by
Parent or the Purchaser as described in clauses (v)(b), (v)(d) (other than by
reason of a breach of the provisions described under "Acquisition
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Proposals" above), or (v)(e) under "Termination" above, or, prior to
consummation of the Offer, by reason of a breach of the condition to the Offer
relating to the accuracy of the representations and warranties and covenants of
the Company in the Merger Agreement, or by the Company as described in clause
(iv)(b) under "Termination" above and at the time of such termination, neither
Parent nor the Purchaser is in material breach of the Merger Agreement, then the
Company shall pay to Parent, at the time of termination, the Expenses, and, if
the Company shall thereafter, within 12 months after such termination, announce
its intention to enter into an agreement in respect of an Acquisition Proposal
and the Company subsequently consummates the transaction(s) contemplated by such
agreement, then the Company shall pay the Termination Fee concurrently with such
consummation.
Amendment. The Merger Agreement may be amended by action taken by the
Company, Parent and the Purchaser at any time before or after approval of the
Merger by the stockholders of the Company, but after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval.
STOCKHOLDERS AGREEMENT
The following is a summary of certain provisions of the Stockholders
Agreement. This summary is qualified in its entirety by reference to the
Stockholders Agreement, which is incorporated herein by reference and a copy of
which has been filed as an exhibit to this Schedule 14D-9.
Voting. Pursuant to the Stockholders Agreement, the Selling Stockholders
have agreed to vote all Shares that such Selling Stockholder is entitled to vote
at the time of any vote to approve and adopt the Merger Agreement, the Merger,
and all agreements related to the Merger and any actions related thereto at any
meeting of the stockholders of the Company, and at any adjournment thereof, at
which such Merger Agreement and other related agreements (or any amended version
thereof), or such other actions, are submitted for the consideration and vote of
the stockholders of the Company. Each Selling Stockholder has also agreed that
it will not vote any Shares in favor of the approval of any (i) Acquisition
Proposal or (ii) reorganization, recapitalization, liquidation, or winding up of
the Company or any other extraordinary transaction involving the Company.
Grant of Proxy. Pursuant to the Stockholders Agreement, each Selling
Stockholder has granted an irrevocable proxy appointing the Purchaser as such
Selling Stockholder's attorney-in-fact and proxy, with full power of
substitution, for and in such Selling Stockholder's name, to vote, express,
consent, or dissent or otherwise to utilize such voting power in the manner
described in the foregoing paragraph as the Purchaser or its proxy or substitute
shall, in the Purchaser's sole discretion, deem proper in respect of the Shares;
provided, however, that such proxy shall be revoked upon termination of the
Stockholders Agreement in accordance with its terms. Each Selling Stockholder
has also agreed to use its best effort to cause any record owner of Shares
beneficially owned by such Selling Stockholder to grant to the Purchaser a proxy
to the same effect as described above.
Tender of Shares. Pursuant to the Stockholders Agreement, each Selling
Stockholder has agreed to tender, upon the request of the Purchaser (and agrees
that it will not withdraw), pursuant to and in accordance with the terms of the
Offer, all Shares beneficially owned by such Selling Stockholder. In furtherance
of the above agreement, each Selling Stockholder shall, within five business
days after the commencement of the Offer, deliver to the Depositary (i) a Letter
of Transmittal in respect of the Shares complying with the terms of the Offer,
(ii) certificates representing the Shares tendered by such Selling Stockholder,
and (iii) all other documents or instruments required to be delivered pursuant
to the terms of the Offer.
Other Agreements. Each Selling Stockholder has also agreed that:
(a) Except pursuant to the terms of the Stockholders Agreement, such
Selling Stockholder shall not, without the prior written consent of the
Purchaser, directly or indirectly, (i) grant any proxies or enter into any
voting trust or other agreement or arrangement in respect of the voting of
any Shares in respect of the matters described in the second paragraph
under this description of the Stockholders
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Agreement or (ii) acquire, sell, assign, transfer, encumber, or otherwise
dispose of, or enter into any contract, option, or other arrangement or
understanding in respect of the direct or indirect acquisition or sale,
assignment, transfer, encumbrance, or other disposition of, any Shares
during the term of the Stockholders Agreement. In addition, each Selling
Stockholder has agreed not to seek or solicit any such acquisition or sale,
assignment, transfer, encumbrance, or other disposition or any such
contract, option, or other arrangement or understanding and to notify the
Purchaser promptly, and to provide all details requested by the Purchaser,
if such Selling Stockholder shall be approached or solicited, directly or
indirectly, by any person in respect of any of the foregoing.
(b) Such Selling Stockholder shall not, and will use such Selling
Stockholder's reasonable best efforts to cause his or its agents not to,
directly or indirectly, (i) take any action to solicit or initiate any
Acquisition Proposal or (ii) engage in negotiations with, or disclose any
nonpublic information relating to the Company or any of its subsidiaries or
afford access to the properties, books, or records of the Company or any of
its subsidiaries to, any person that may be considering making, or has
made, an Acquisition Proposal or has agreed to endorse an Acquisition
Proposal. Each Selling Stockholder has agreed that it will promptly notify
Buyer after receipt of an Acquisition Proposal or any indication that any
person is considering making an Acquisition Proposal or any request for
nonpublic information relating to the Company or any of its subsidiaries or
for access to the properties, books, or records of the Company or any of
its subsidiaries by any person that may be considering making, or has made,
an Acquisition Proposal and will keep the Purchaser fully informed of the
status and details of any such Acquisition Proposal, indication, or
request. The Stockholders Agreement provides that the provisions described
in this paragraph shall not impose any additional limitations upon the
ability of a Selling Stockholder to exercise his fiduciary duties as a
director of the Company provided that such Selling Stockholder acts in
accordance with provisions described under "Acquisition Proposals" above in
respect of the Merger Agreement.
(c) Such Selling Stockholder will not exercise any rights (including,
without limitation, under Section 262 of the DGCL) to demand appraisal of
any Shares which may arise in respect of the Merger.
The term of the Stockholders Agreement commenced on May 3, 1999 and will
end on the earlier of (i) the Effective Time, (ii) the date that is 120 days
after the termination of the Merger Agreement in accordance with the provisions
described in clauses (iv)(a), (v)(a), or (v)(c) under "Termination" in the
description of the Merger Agreement above and payment in full of all amounts (if
any) payable to Parent or the Purchaser pursuant to the provisions described
under "Termination Fee" in the description of the Merger Agreement above, and
(iii) the date of the termination of the Merger Agreement for any other reason.
THE CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement, dated as of March 2, 1999 between Parent and the Company (the
"Confidentiality Agreement"). This summary is qualified in its entirety by
reference to the Confidentiality Agreement, which is incorporated herein by
reference and a copy of which has been filed with the Commission as an exhibit
to this Schedule 14D-9.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, each of Parent and the Company agreed to keep
confidential, for a period of three years from the effective date of the
Confidentiality Agreement, all information furnished to it by the other party
(from and after February 17, 1999) and deemed proprietary by the disclosing
party (the "Confidential Information"), subject to certain exceptions, and to
use the Confidential Information solely for the purpose of evaluating a possible
transaction involving the Company and Parent. Pursuant to the Confidentiality
Agreement, each of Parent and Company agreed to use the same degree of care to
avoid disclosure or use of the Confidential Information as such party employs
with respect to its own proprietary information of like importance. Parent and
the Company further agreed that, for a period ending January 15, 2000, or a date
six months after either party notifies the other in writing that negotiations
regarding the possible transactions have concluded, whichever date comes sooner,
neither party shall, directly or indirectly, solicit or encourage any employee
of the other party to leave the employ of the other party for the benefit of the
first party; provided that such restriction shall
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not apply to general solicitations conducted through general circulation
newspapers, the trade press or the Internet.
THE MANAGEMENT BONUSES
The Compensation Committee has approved a bonus upon completion of the
transactions contemplated by the Merger Agreement to Mr. Naik and other members
of the management team in the aggregate amount of up to $300,000 payable
immediately prior to the Closing.
RIGHTS OF STOCKHOLDERS IN THE MERGER
No appraisal rights are available by virtue of the Offer. If the Merger is
consummated, however, holders of record of common stock of the Company who (i)
make a proper demand for appraisal, (ii) continue to hold their Shares through
the Effective Time, (iii) have not voted their Shares in favor of the Merger,
and (iv) strictly comply with the procedures set forth under Section 262 of the
DGCL will be entitled to have their Shares appraised by the Delaware Court of
Chancery and to receive payment of the "fair value" of such Shares in lieu of
the Merger Consideration.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262 OF THE
DGCL. THE PERFECTION AND EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company Board has unanimously determined that each of the Merger
Agreement, the Offer and the Merger are advisable and fair to, and in the best
interests of, the stockholders of the Company and unanimously recommends that
stockholders of the Company accept the Offer and tender their Shares to
Purchaser thereunder.
STOCKHOLDERS CONSIDERING NOT TENDERING THEIR SHARES IN ORDER TO WAIT FOR
THE MERGER SHOULD NOTE THAT IF THE MINIMUM CONDITION IS NOT SATISFIED OR ANY OF
THE OTHER CONDITIONS TO THE OFFER ARE NOT SATISFIED, THE PURCHASER IS NOT
OBLIGATED TO PURCHASE ANY SHARES AND, SUBJECT TO CERTAIN LIMITATIONS, CAN
TERMINATE THE OFFER AND THE MERGER AGREEMENT AND NOT PROCEED WITH THE MERGER.
BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION
(a) Background of the Offer. In late 1997 and early 1998, representatives
of TI's Materials and Controls group contacted the Company to discuss the
formation of a joint venture to develop complementary products and technologies.
The Company decided not to pursue such discussions at that time in order to
focus on other initiatives.
On August 13, 1998, at a meeting of the Board, the Board considered
challenges facing the Company and determined to explore the sale of the Company
as a means to address those challenges. The Board authorized management to
interview and select a financial advisory firm to assist the Company with
negotiations regarding a potential sale of the Company. Acting pursuant to the
Board's direction, management interviewed select investment banking firms and
retained Cruttenden Roth Incorporated ("CRI") to act as financial advisor to the
Company.
On November 2, 1998, the Board of Directors met to discuss various
strategic alternatives, including pursuing a sale of the Company. Management
presented its analysis of the Company's long term prospects and recommended that
the Company seek a combination with a larger company with a complementary
technology and market position. Representatives of Gray Cary Ware & Freidenrich
("GCWF"), the Company's outside counsel, made a detailed presentation regarding
the Board's fiduciary duties when considering a sale of the Company.
Representatives of CRI then made a presentation to the Board regarding valuation
issues. After considering the various presentations, the Board concurred with
management's recommendation that it pursue
14
<PAGE> 16
a sale of the Company. The Board directed management to contact select companies
with complementary technologies and/or market positions to inquire about their
interest in acquiring the Company.
During November and December of 1998, the Company and its representatives
held confidential discussions with five companies (which did not include
Parent). In each case, the potential acquiror indicated that either (i) it was
not interested in acquiring the Company on a schedule acceptable to the Company
or (ii) it was not interested in acquiring the Company at a valuation acceptable
to the Company. The Company continued to pursue discussions with one of the
parties until April 1999, but the Company and that party could not reach
agreement on an appropriate valuation or structure.
On January 14 and 15, 1999, representatives of TI's Materials and Controls
group again contacted the Company to discuss the formation of a joint venture to
develop complementary products and technologies. At the request of TI, Manher
Naik, the Company's Chief Executive Officer, met in Chicago, Illinois with Gary
Baker, Marketing Manager of TI's Materials and Controls group.
On January 22, 1999, Mr. Naik again met in Boston, Massachusetts, with Mr.
Baker and Martha Sullivan, Vice President and Global Business Manager of TI's
Automotive Sensors and Controls business unit. The parties continued to discuss
the potential joint venture and the two companies' strategic visions for sensor
products in the automotive industry.
On February 11, 1999, Jean-Louis Trochu, TI's Project Director, Corporate
Development, contacted Mr. Naik via telephone to inquire whether the Company
would entertain discussions regarding an acquisition of the Company by TI. Mr.
Naik indicated that the Company would entertain such discussions provided that
TI was willing to proceed rapidly.
On February 17, 1999, Ms. Sullivan, Mr. Trochu and Mr. Baker visited the
Company in San Jose, California to meet with Mr. Naik, David Satterfield, the
Company's Vice President, Finance and Administration and Michael Dunbar, the
Company's Marketing Director. The Company's management made a presentation to
the TI representatives consisting solely of publicly available information and
subsequently provided limited confidential information to Parent. After the
meeting, Mr. Naik indicated to the TI representatives that the Company would not
provide any further confidential information to TI unless TI executed a suitable
confidentiality agreement and provided an indication of valuation that would
support continued discussion.
On February 19, 1999, Ms. Sullivan contacted Mr. Naik via telephone to
communicate a valuation range for an acquisition of the Company. Mr. Naik
responded that the range was too broad to permit him to continue discussions,
and Ms. Sullivan agreed to reconsider the range.
On February 22, 1999, Ms. Sullivan contacted Mr. Naik via telephone to
communicate a narrower valuation range for an acquisition of the Company. Mr.
Naik agreed that the revised valuation range supported further discussions and
requested that TI send a confidentiality agreement.
On February 23, 1999, TI sent a draft confidentiality agreement to the
Company. Both parties executed the confidentiality agreement on March 2, 1999.
On March 2, 1999, representatives of TI met with representatives of Ernst &
Young ("EY"), the Company's independent auditors, to review EY's work papers
relating to the Company's historical financial statements.
On March 8, 1999, in response to TI's written request, the Company, through
GCWF, provided certain non-public information. The Company did not provide
non-public customer or supplier information at this time.
On March 23, 1999, at a meeting of the Company Board, the Company's
management briefed the Board regarding the status of discussions with TI,
including the preliminary indication of valuation. The Board provided management
with guidance regarding methodologies for determining valuation and negotiating
valuation issues. The Board instructed Mr. Naik to continue negotiations with
TI.
15
<PAGE> 17
On April 7, 1999, representatives of TI, including Ms. Sullivan, Mr. Trochu
and Russel Bauman and Steve Reynolds, both TI Materials and Controls legal
counsel, met in San Jose California, with representatives of the Company
including Mr. Naik, Donald Paulus, the Company's Chief Operating Officer, Ramesh
Sirsi, the Company's Executive Vice President, Marketing and Sales, Mr.
Satterfield and a representative of GCWF. The parties agreed that EY would
review the Company's customer contracts to confirm certain assumptions TI had
made in its analysis of the Company's prospects. The parties also agreed that
the full copies of the customer contracts would not be made available to TI
until such time as the parties had reached agreement on the principal terms of a
definitive agreement. Also at this meeting, the TI representatives made a
presentation regarding the Materials and Controls Division and then conducted
further due diligence. In a separate meeting on April 9 among Mr. Naik, Ms.
Sullivan and Mr. Trochu, Ms. Sullivan informed Mr. Naik that TI believed the
appropriate value for the Company was between $58.0 million and $63.0 million.
Mr. Naik responded that such values were insufficient. Mr. Naik, Ms. Sullivan
and Mr. Trochu discussed valuation issues at length but did not reach agreement.
On April 8 and 9, 1999, Mr. Naik, Mr. Paulus and Mr. Sirsi held additional
meetings in San Jose California, with Ms. Sullivan, Mr. Trochu and Ken Broker,
Vice President of TI's Automotive Sensors and Controls business unit, to discuss
integration issues.
On April 15, 1999, Ms. Sullivan sent a letter to Mr. Naik reaffirming TI's
interest in proceeding with an acquisition of the Company, setting forth the
principal terms on which TI was willing to proceed and requesting that the
Company agree to negotiate exclusively with TI until May 15, 1999. The letter
and the exclusivity agreement were distributed to the Company Board. Through
GCWF, the Company requested that the exclusivity period end May 7, 1999, and
that TI agree to refrain from purchasing any of the Company's securities for a
period of three months from the date of the letter.
Over the weekend of April 16, 1999, Mr. Naik and Mr. Trochu discussed
valuation issues via telephone but did not reach agreement. Mr. Naik also spoke
with each member of the Board regarding the proposed terms and the status of
negotiations with respect to valuation. As a result of those communications, Mr.
Naik was authorized to execute the exclusive dealing agreement pending agreement
on valuation and thereafter to commence negotiations with respect to a
definitive agreement, subject to Board approval.
On April 19, 1999, TI agreed to the requested revisions and provided a
revised exclusive dealing agreement executed by Ms. Sullivan. Also on April 19,
1999, Mr. Naik and Ms. Sullivan discussed valuation issues via telephone but did
not reach agreement.
On April 20, Mr. Naik and Ms. Sullivan discussed valuation issues via
telephone. At the end of the day, Mr. Naik and Ms. Sullivan each agreed to
recommend to their respective boards of directors that the parties proceed with
the proposed transaction at an aggregate value of approximately $66.0 million in
cash.
On April 21, 1999, Mr. Naik delivered the executed agreement regarding
exclusive dealing to Mr. Trochu, to be effective April 19, 1999.
On April 23, 1999, TI provided the initial draft of the Merger Agreement to
GCWF. The Merger Agreement was distributed to each member of the Company Board
and Mr. Naik called a Board meeting to be held in San Jose California, on
Monday, April 26, 1999.
On the morning of April 26, 1999, GCWF contacted Mr. Reynolds to raise
certain issues presented by the draft Merger Agreement. Later that day, Mr.
Trochu and Mr. Reynolds contacted GCWF to communicate TI's responses to the
issues raised.
In the evening of April 26, 1999, the Company Board held a meeting in San
Jose, California. Mr. Naik informed the Board that TI had agreed that, if
negotiation of the Merger Agreement proceeded as planned, TI was prepared to pay
an aggregate of approximately $66.0 million in cash for all outstanding shares,
options and warrants of the Company. A representative of GCWF discussed with the
Board its fiduciary duties in connection with a potential transaction and made a
detailed presentation regarding the terms and conditions of the Merger Agreement
as well as the status of the items negotiated earlier that day. The Board
instructed
16
<PAGE> 18
management to continue with negotiations and to report back at a teleconference
Board meeting scheduled for Friday, April 30, 1999.
On April 28 and 29, 1999, representatives of TI, including Mr. Trochu, Mr.
Reynolds and others met with representatives of GCWF in Palo Alto, California,
to negotiate the Merger Agreement and the other transaction documents. Mr. Naik
and Ms. Sullivan joined the negotiations on April 29, 1999 to resolve open
issues in the Merger Agreement. On April 29, 1999, the Company allowed Ms.
Sullivan and Mr. Reynolds to review full copies of the Company's customer and
supplier agreements in the presence of Mr. Sirsi.
The revised Merger Agreement reflecting the negotiations held in Palo Alto,
California was distributed to the Company Board on the morning of April 30,
1999. In the afternoon of April 30, 1999, the Board held a teleconference
meeting. At the meeting, a representative of GCWF reported on the negotiations
and the terms and conditions of the Merger Agreement that had been revised since
distribution of the initial draft to the Board, including that the price per
share had been proposed to be $8.05. A representative of CRI then presented the
oral opinion of CRI that, as of the date thereof, the consideration to be
received by the Company's stockholders in the Offer and the Merger, at $8.05 per
share, was fair from a financial point of view. Following a discussion of the
Offer and the Merger, the Board unanimously approved the Offer and the Merger
and unanimously resolved to recommend that the stockholders of the Company
accept the Offer and tender their Shares in the Offer. The parties worked over
the weekend of May 1, 1999, to finalize minor issues in the Merger Agreement as
well as communications and integration issues. On May 3, 1999, at approximately
1:00 p.m., California time, the parties exchanged signature pages to the Merger
Agreement and, at approximately 1:30 p.m., California time, made a joint public
announcement of the execution of the Merger Agreement.
(b)Reasons for the Recommendation. In reaching its determination described
in paragraph (a) above, the Board considered a number of factors, including, but
not limited to the following:
(i) historical information concerning the Company's business
prospects, financial performance and condition, operations, technology,
management and competitive position;
(ii) the financial condition, results of operations, business and
strategic objectives of the Company as well as the risks involved in
achieving those objectives;
(iii) current financial market conditions and historical market
prices, volatility and trading information with respect to the Common Stock
of the Company;
(iv) the consideration to be received by the Company stockholders in
the Merger and a comparison of merger transactions deemed to be comparable
to the Merger;
(v) the terms of the Merger Agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations;
(vi) the performance of the Company on a historical basis and the
prospects and risks of the Company going forward as an independent company;
(vii) the potential for other third parties with sufficient resources
and complementary technology to acquire the Company;
(viii) a review of the possible alternatives to the Offer and the
Merger (including the possibility of continuing to operate the Company as
an independent entity), the range of possible benefits and risks to the
Company's stockholders of such alternative and the timing and the
likelihood of actually accomplishing any of such alternatives;
(ix) the presentation to the Board by CRI at the April 30, 1999 Board
meeting;
(x) the written opinion of CRI to the effect that, as of the date of
the opinion, the $8.05 in cash to be received by holders of Shares in the
Offer and the Merger is fair to such holders from a financial point of
view. The full text of this written opinion, which sets forth assumptions
made, matters considered and
17
<PAGE> 19
limitations on the review undertaken in connection with the opinion, is
attached as Annex B. STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THIS
OPINION IN ITS ENTIRETY;
(xi) the fact that pursuant to the Merger Agreement, the Company is
not prohibited from responding to any unsolicited Superior Proposal as
defined in the Merger Agreement to acquire the Company, and the Company may
terminate the Merger Agreement and accept any such Superior Proposal
subject to the Company's obligation to pay the Termination Fee as defined
in the Merger Agreement;
(xii) the relationship of the Offer price to historical market prices
of the Company's Common Stock and to the Company's book value and
liquidation value per share, and the fact that the Offer price of $8.05
represented a premium of 20.4% over the last sale price of the Company's
Common Stock on May 3, 1999 (the last trading day before the announcement
of the Merger Agreement), which was $6.688 and a premium of approximately
67.7% over the average of the last sale prices of the Company's Common
Stock on the trading days during the 12 month period ending May 3, 1999,
which is $4.800;
(xiii) the likelihood that the proposed acquisition would be
consummated, including the experience, reputation and financial condition
of Parent and the risks to the Company if the acquisition were not
consummated, including (a) the Company's sales and operating results, (b)
progress of certain development projects and products, and (c) the
Company's stock price; and
(xiv) the availability of appraisal rights in the Merger under
applicable law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable,
and did not quantify or otherwise attempt to assign relative weights to the
factors it considered.
THE FULL TEXT OF THE WRITTEN FAIRNESS OPINION OF CRI IS FILED AS EXHIBIT
(a)(2) TO THIS SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX B.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. SUCH
OPINION WAS PRESENTED FOR THE INFORMATION OF THE BOARD IN CONNECTION WITH ITS
CONSIDERATION OF THE MERGER AGREEMENT AND IS DIRECTED ONLY TO THE FAIRNESS FROM
A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF
THE SHARES (OTHER THAN PARENT) PURSUANT TO THE OFFER AND THE MERGER. SUCH
OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO
TENDER SHARES IN THE OFFER OR HOW TO VOTE WITH RESPECT TO THE MERGER.
IN LIGHT OF ALL THE FACTORS SET FORTH ABOVE, THE BOARD DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER IS ADVISABLE AND FAIR TO, AND
IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND RESOLVED
UNANIMOUSLY TO APPROVE THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND TO
RECOMMEND THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR
SHARES IN THE OFFER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement dated August 26, 1998 between the Company
and CRI, the Company agreed to retain CRI to provide certain financial advisory
services to the Company, including preparation of CRI's opinion that the Offer
Price to be received by holders of Shares pursuant to the Offer and the Merger
Consideration pursuant to the Merger is fair to the Company's stockholders from
a financial point of view. As compensation for CRI's services in connection with
the transactions contemplated by the Merger Agreement, the Company has agreed to
pay CRI a transaction fee of approximately $800,000 upon the closing of the
Merger. The Company has also agreed to reimburse CRI for its reasonable
out-of-pocket expenses incurred in connection with rendering financial advisory
services and to indemnify CRI and its directors, officers, agents, employees and
controlling persons for certain costs, expenses and liabilities, including
certain liabilities under the federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer, except that such solicitations or
18
<PAGE> 20
recommendations may be made by directors, officers or employees of the Company,
for which services no additional compensation will be paid.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the Company's knowledge, by any of its executive officers,
directors, affiliates or subsidiaries, except as follows:
On March 31, 1999, David Satterfield, the Company's Vice President,
Finance and Administration, exercised an option to purchase 30,000 shares
of the Company's Common Stock at an exercise price of $1.125 per share.
On March 31, 1999, Donald E. Paulus, the Company's Chief Operating
Officer, exercised an option to purchase 61,500 shares of the Company's
Common Stock at an exercise price of $1.125 per share.
(b) To the Company's knowledge, to the extent permitted by applicable
securities laws, all of the Company's executive officers and directors who own
Shares currently intend to tender all of their Shares pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer or a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition or securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, Board resolution,
agreement in principle or signed contract in response to the Offer that relates
to or would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached hereto as Annex A is being furnished
pursuant to Rule 14f-1 under the Exchange Act in connection with the possible
designation by TI, pursuant to the Merger Agreement, of certain persons to be
appointed to the Board other than at a meeting of the Company's stockholders.
19
<PAGE> 21
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
99(a)(1) -- Joint press release issued on May 3, 1999.
99(a)(2) -- Opinion of CRI dated May 6, 1999.(1)*
99(a)(4) -- Letter to Stockholders dated May 7, 1999 from Manher D.
Naik, Chief Executive Officer of the Company.*
99(c)(1) -- Agreement and Plan of Merger, dated as of May 3, 1999,
among Parent, the Purchaser and the Company.(2)
99(c)(2) -- Form of Indemnification Agreement.(3)
99(c)(3) -- Certificate of Incorporation of the Company.(4)
99(c)(4) -- Bylaws of the Company.(3)
99(c)(6) -- The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.(5)*
99(c)(7) -- Stockholder Agreement dated as of May 3, 1999 among
Purchaser and the Selling Stockholders.(2)
99(c)(8) -- Confidentiality Agreement dated March 2, 1999 between
Parent and the Company.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Incorporated by reference to an exhibit to the Company's Form 8-K, as filed
with the Commission on May 5, 1999.
(3) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form SB-2 (File No. 333-41351), as filed with the Commission on
December 2, 1997.
(4) Incorporated by reference to an exhibit to the Company's Amendment No. 1 to
Registration Statement SB-2 (File No. 333-41351), as filed with the
Commission on February 5, 1998.
(5) Attached hereto as Annex A.
20
<PAGE> 22
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
Dated: May 7, 1999
INTEGRATED SENSOR SOLUTIONS, INC.
By: /s/ MANHER D. NAIK
----------------------------------
Manher D. Naik
Chief Executive Officer
21
<PAGE> 23
ANNEX A
INTEGRATED SENSOR SOLUTIONS, INC.
625 RIVER OAKS PARKWAY
SAN JOSE, CALIFORNIA 95134
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about May 7, 1999 as a
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Integrated Sensor Solutions, Inc. (the "Company") to the
holders of record of shares of Common Stock, par value $0.001 per share, of the
Company (the "Shares") at the close of business on or about May 7, 1999. You are
receiving this Information Statement in connection with the possible appointment
of persons designated by the Parent (as defined below) to the Board of Directors
of the Company (the "Board").
On May 3, 1999, the Company, Texas Instruments Incorporated, a Delaware
corporation ("TI" or "Parent"), and Sensor Acquisition Corporation, a Delaware
corporation and a direct wholly-owned subsidiary of Parent (the "Purchaser"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") in
accordance with the terms and subject to the conditions of which (i) Parent will
cause the Purchaser to commence a tender offer (the "Offer") for all outstanding
Shares at a price of $8.05 per Share, net to the seller in cash and without
interest thereon, and (ii) the Purchaser will be merged with and into the
Company (the "Merger"). As a result of the Merger, the Company will become a
wholly owned subsidiary of Parent.
The Merger Agreement requires the Company to use its best efforts either to
increase the size of the Board or to secure the resignation of such number of
its incumbent directors, or both, as is necessary to enable certain directors
designated by Parent to be elected or appointed to the Board under the
circumstances described therein. See "Board of Directors and Executive Officers
of the Company."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time. Capitalized terms used
herein and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
7, 1999. The Offer is scheduled to expire at 12:00 Midnight, New York City time,
on Friday, June 4, 1999, unless the Offer is extended pursuant to the Merger
Agreement.
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of May 7, 1999, there were 7,713,082
shares outstanding. The Board currently consists of three classes, each
consisting of two directors, or a total of six authorized members. At each
annual meeting of the Company's stockholders, directors are elected for a full
term of three years to succeed those directors who are members of one of the
three classes and whose terms expire on these annual meeting dates. The officers
of the Company serve at the discretion of the Board.
RIGHT TO DESIGNATE DIRECTORS
The Merger Agreement provides that promptly after (i) the purchase of and
payment for any Shares by Purchaser or any of its affiliates which represent at
least a majority of the then outstanding Shares and (ii) compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, whichever
occurs later, TI shall be entitled to designate such number of directors,
rounded up to the next whole number, as will give TI representation on the Board
equal to the product of the total number of directors on the Board (giving
effect to any increase in the number of directors pursuant to the Merger
Agreement) multiplied by the percentage that such aggregate number of Shares so
purchased or otherwise beneficially owned by Purchaser (including Shares
tendered for payment) bears to the total number of outstanding Shares. The
Company
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<PAGE> 24
shall, upon request by TI, increase the size of the Board, or secure the
resignations of such number of directors, or both, as is necessary to enable
TI's designees to be elected or appointed to the Board and will cause TI's
designees to be so elected or appointed.
IN THE EVENT THAT PURCHASER AND ITS AFFILIATES DO NOT ACQUIRE ANY SHARES
PURSUANT TO THE OFFER, OR TERMINATES THE OFFER, OR IF THE MERGER AGREEMENT IS
TERMINATED PURSUANT TO ITS TERMS PRIOR TO THE ELECTION OR APPOINTMENT OF TI'S
DESIGNEES, PURCHASER AND TI WILL NOT HAVE ANY RIGHT, UNDER THE MERGER AGREEMENT
TO HAVE TI'S DESIGNEES ELECTED OR APPOINTED TO THE BOARD.
The information contained in this Information Statement concerning TI and
TI's designees has been furnished to the Company by TI, and the Company assumes
no responsibility for the accuracy or completeness of such information.
THE TI DESIGNEES
TI's designees to the Company's Board of Directors, and certain information
about each, are described below. Each of TI's designees has been employed in
some capacity with TI during the previous five years. TI has advised the Company
that all such persons have consented to act as directors of the Company if so
designated. TI has informed the Company that none of the designees (i) is
currently a director of, or holds any position with, the Company; (ii) has any
familial relationship with any of the directors or executive officers of the
Company; or (iii) to the best knowledge of TI and the Purchaser, beneficially
owns any securities (or rights to acquire any securities) of the Company. The
Company has been advised by TI and Purchaser that, to the best of TI's and
Purchaser's knowledge, none of the designees has been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed in the Schedule 14D-9.
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT AGE
- ------------------------ -------------------------------- ---
<S> <C> <C>
William A. Aylesworth........ Senior Vice President, Treasurer and Chief Financial Officer of 56
Texas Instruments Incorporated
M. Samuel Self............... Senior Vice President and Controller (Chief Accounting Officer) of 59
Texas Instruments Incorporated
Richard K. Templeton......... Executive Vice President (President, Semiconductor) of Texas 40
Instruments Incorporated
Thomas Wroe.................. Senior Vice President (President, Materials & Controls) of Texas 48
Instruments Incorporated
Martha N. Sullivan........... Vice President of Texas Instruments Incorporated; Global Business 42
Manager for Material and Controls Group of Texas Instruments
Incorporated
</TABLE>
2
<PAGE> 25
CURRENT BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Biographical information concerning each of the Company's current directors
and executive officers as of May 7, 1999 is as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE DIRECTOR SINCE
- ---- ------------------------- --- --------------
<S> <C> <C> <C>
Manher D. Naik(1)............... President, Chief Executive 55 1989
Officer and Chairman of the
Board of Directors
Vinod K. Sood(1)................ Director 62 1989
Shigeru Miyashita(2)............ Director 63 1997
Stuart D. Boyd(2)............... Director 43 1997
Gerald F. Taylor(3)............. Director 58 1998
Donald E. Paulus................ Chief Operating Officer 42 N/A
Ramesh Sirsi, Ph.D.............. Executive Vice President, 54 N/A
Marketing and Sales
David Satterfield............... Vice President, Finance and 47 N/A
Administration
</TABLE>
- ---------------
(1) Class I director whose term will expire at the 2001 Annual Meeting of
Stockholders.
(2) Class II directors whose terms will expire at the 1999 Annual Meeting of
Stockholders.
(3) Class III director whose term will expire at the 2000 Annual Meeting of
Stockholders.
Manher D. Naik founded the Company in March 1989 and has served as
President, Chief Executive Officer and Chairman of the Board of Directors since
March 1989. From August 1979 through March 1989 Mr. Naik served as Vice
President of Strategic Marketing of National Semiconductor Corporation, a
semiconductor manufacturer. Mr. Naik received a BS in Mechanical Engineering
from the Indian Institute of Technology, an MS degree in Industrial Engineering
from Cornell University, and an MBA degree from Pepperdine University.
Vinod K. Sood has served as a director of the Company since March 1989. Mr.
Sood has been self employed as an advisor and director to technology and
telecommunication companies since 1992. From 1969 to 1992, Mr. Sood was the
Project Administrator/Principal Engineer of the Overseas Projects Division at
General Electric Nuclear. Mr. Sood is also currently a director at a privately
held software company.
Shigeru Miyashita has served as a director of the Company since February
1997. Mr. Miyashita has been the General Corporate Manager at Nagano Keiki Co.,
Ltd. since April 1992.
Stuart D. Boyd has served as a director of the Company since June 1997. Mr.
Boyd has been the Vice President, Associate General Counsel and Assistant
Secretary at Breed Technologies, Inc., an automotive safety system and component
manufacturer, since March 1992.
Gerald "Jerry" F. Taylor has served as a director of the Company since June
1998. Mr. Taylor is currently a senior advisor to the Chief Executive Officer at
Applied Materials, Inc. From June 1984 to January 1998 Mr. Taylor served as
Chief Financial Officer of Applied Materials, Inc. and from October 1991 to
January 1998 Mr. Taylor also served as Senior Vice President of Applied
Materials. Prior to working at Applied Materials, Mr. Taylor spent 20 years in a
broad range of international and domestic controllership positions at
Schlumberger, Fairchild Semiconductor and Instrument Corporation and Honeywell.
Donald E. Paulus joined the Company as Vice President of Engineering
Operations in December 1990 and currently serves as Chief Operating Officer.
Prior to joining the Company, beginning in January 1989, Mr. Paulus served as
Product Line Director at Sierra Semiconductor Corporation, now known as
PMC-Sierra, Inc., a company specializing in mixed signal integrated circuits.
From December 1984 to January 1989, Mr. Paulus served as a Design Manager with
Honeywell Inc.'s Solid State Electronics Division. From
3
<PAGE> 26
June 1979 to December 1984, Mr. Paulus served as a Member of the Technical Staff
and as an Engineering Supervisor at AT&T Bell Laboratories. Mr. Paulus received
a BSEE degree from Lehigh University, an MSEE degree from Stanford University
and an MBA from the University of Colorado.
Ramesh Sirsi, Ph.D. joined the Company in September 1994 and has served as
Executive Vice President, Marketing and Sales since September 1994. Prior to
joining the Company, beginning in March 1989, Dr. Sirsi served as Director of
Marketing at Siemens Components, Inc., an electronic component manufacturer.
From October 1984 to July 1988, Dr. Sirsi served as a Product Line Director at
Honeywell Inc. From January 1978 to October 1984, Dr. Sirsi served as Director
of Telecommunications IC product development at Harris Corporation. From June
1973 to December 1977, he was employed by Bell Northern Research as a Member of
the Technical Staff. Dr. Sirsi received his BSEE degree from Bangalore
University and his MSEE and Ph.D. degrees from Carleton University.
David Satterfield joined the Company in April 1994 and has served as Vice
President, Finance and Administration and Secretary since April 1994. Prior to
joining the Company, beginning in June 1992, Mr. Satterfield served as Corporate
Controller of Austek Microsystems Limited, Inc., a semiconductor manufacturer.
From April 1991 to June 1992, Mr. Satterfield served as Corporate Controller of
Free Flow Packaging Corporation, a packaging company. From June 1985 to April
1991, Mr. Satterfield served as Corporate Controller of Micro Power Systems,
Inc., a semiconductor manufacturer. Mr. Satterfield holds a BS degree in
accounting from San Jose State University.
BOARD OF DIRECTORS' MEETING AND COMMITTEES
During the fiscal year ended March 31, 1999, the Board held five meetings.
In addition to the regularly scheduled Board Meetings, the Board approved items
by Unanimous Written Consent on three occasions. During the fiscal year ended
March 31, 1999, the Audit Committee of the Board held three meetings and the
Compensation Committee of the Board held two meetings. The Company has no
standing nominating committee of the Board. Only Y.S. Fu, a former director,
attended fewer than 75% of the total number of meetings of the Board and all of
the committees of the Board on which such director served during that period.
The members of the Audit Committee during fiscal 1999 were Gerald Taylor,
Vinod K. Sood and Stuart D. Boyd. The functions of the Audit Committee include,
among others: recommending to the Board the retention of independent public
auditors, subject to stockholder approval; reviewing and approving the planned
scope, proposed fee arrangements and results of the Company's annual audit;
reviewing the adequacy of accounting and financial controls; and reviewing the
independence of the Company's auditors.
The members of the Compensation Committee during fiscal 1999 were Y.S. Fu,
Gerald Taylor and Vinod K. Sood. The Compensation Committee reviews and
determines the salary and bonus criteria of and stock option grants to all
executive officers.
DIRECTOR COMPENSATION
The directors generally do not receive cash compensation for their services
as directors. However, Vinod K. Sood has historically received compensation of
$150 per Board meeting. In March 1999, the Board increased the compensation of
Mr. Sood for attendance at meetings of the Board of Directors and the
Compensation Committee from $150 per meeting to $500 per meeting. Gerald Taylor
receives $500 for each Board meeting he attends and $500 for each Audit
Committee meeting he attends. In connection with Mr. Taylor's appointment to the
Board, he was granted an option to purchase 15,000 shares of Common Stock. In
addition, in consideration for his services on the Board, Mr. Taylor received
$5,000 in 1998 and is due to receive $10,000 in 1999. Both Mr. Sood and Mr.
Taylor are reimbursed for all expenses incurred in order to attend the meetings.
In addition, the Company's directors are eligible to receive option grants under
the Company's 1997 Stock Plan.
4
<PAGE> 27
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation paid
or accrued by the Company during the fiscal year ended March 31, 1999 to the
Company's chief executive officer and each of the two other executive officers
whose total compensation for services in all capacities to the Company exceeded
$100,000 during such year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES UNDERLYING OPTIONS
-------------------- -----------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS LONG TERM COMPENSATION
- --------------------------- ---- --------- -------- -----------------------------
<S> <C> <C> <C> <C>
Manher D. Naik........................... 1999 $214,447 $250,000 85,000
President and Chief Executive Officer 1998 $155,000 -- 40,000
1997 $136,667 -- 40,000
Donald E. Paulus......................... 1999 $145,331 -- 16,000
Chief Operating Officer 1998 $133,400 -- --
1997 $116,400 -- 14,000
Ramesh M. Sirsi.......................... 1999 $126,444 -- 17,000
Executive Vice President, Marketing and 1998 $120,000 -- --
Business Development 1997 $104,850 -- 32,000
</TABLE>
- ---------------
(1) Includes amounts deferred at the election of the Named Executive Officer
pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended.
STOCK OPTION INFORMATION
The following table sets forth certain information with respect to grants
of options to purchase the Company's Common Stock made during the fiscal year
ended March 31, 1998 to the Named Executive Officers:
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR(2) PER SHARE(3) DATE
- ---- ------------------ -------------------- -------------- ----------
<S> <C> <C> <C> <C>
Manher D. Naik............. 10,000 2.0 8.313 5/21/03
25,000 5.0 5.250 8/13/03
50,000 10.1 3.125 3/23/04
Donald E. Paulus........... 7,000 1.4 8.313 5/21/03
9,000 1.8 3.125 3/23/04
Ramesh M. Sirsi............ 7,000 1.4 8.313 5/21/03
10,000 2.0 3.125 3/23/04
</TABLE>
- ---------------
(1) Options granted in fiscal 1999 generally vest over a four year period: 1/8
of the total number of shares subject to each option vest and become
exercisable six months after the vesting start date, which is stated in the
option agreement; and 1/48 vest and become exercisable monthly thereafter.
Each option may be terminated earlier upon the cessation of the individual's
employment with the Company.
(2) The Company granted options to purchase 495,750 shares of Common Stock
during fiscal 1999.
(3) All options were granted at an exercise price equal to the fair market value
of the Company's Common Stock as determined by the Board of Directors of the
Company on the date of grant.
5
<PAGE> 28
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR END OPTION
VALUES
The following table sets forth for each of the Named Executive Officers
certain information concerning options exercised during the fiscal year ended
March 31, 1999 and the number of shares subject to both exercisable and
unexercisable stock options as of March 31, 1999. Also reported are values for
"in the money" options that represent the positive spread between the respective
exercise prices of outstanding options and the fair market value of the
Company's Common Stock as of March 31, 1999. No options or stock appreciation
rights were exercised during the fiscal year ended March 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(2)
-------------------------------------- ----------------------------------
NAME EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Manher D. Naik............. 76,666 83,334 $212,498 $132,502
Donald E. Paulus........... 7,000 16,000 $ 14,875 $ 23,875
Ramesh M. Sirsi............ 56,750 25,250 $161,500 $ 47,000
</TABLE>
- ---------------
(1) Exercisable in accordance with the vesting provisions described above in
Note 1 to the table entitled "Option Grants in Fiscal Year 1999."
(2) Calculated by determining the difference between the fair market value of
the securities underlying the option at March 31, 1999 ($4.125 which was the
closing sale price of the Company's Common Stock as reported on the Nasdaq
National Market on March 31, 1999) and the exercise price of the Named
Executive Officer's option.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS.
Options granted under the Company's 1997 Stock Option Plan and the
Company's 1989 Stock Option Plan (the "Option Plans") contain provisions
pursuant to which, under certain circumstances, all outstanding options granted
under such plans shall become fully vested and immediately exercisable upon a
"transfer of control" as defined in such plans. The Company has agreed in the
Merger Agreement to obtain all necessary consents from and provide any required
notices to holders of options and other rights granted under the Option Plan and
to amend the Option Plans as necessary such that each outstanding stock option
(collectively, "Options") granted under the Option Plans that is then fully
vested pursuant to the terms of the relevant plan will be automatically
cancelled in exchange for the right to receive an amount in cash equal to the
product of (i) the excess, if any, of the Offer Price over the per share
exercise price for one Share subject to such Company Stock Option multiplied by
(ii) the number of vested Shares subject to such Company Stock Option (the
"Option Offer Price").
Each of the Options that is not fully vested pursuant to the terms of the
relevant plan will automatically, as determined by Parent, and subject to the
provisions of Section 16 of the Exchange Act, either (i) immediately vest and be
cancelled in exchange for the right to receive an amount in cash equal to the
Option Offer Price, or (ii) be exchanged by Parent and converted into a
non-qualified stock option (i.e., does not qualify under Section 422 or the
Code) (a "Substitute Option") to purchase the number of shares of fully paid and
non-assessable shares of common stock, par value $1.00 per share, of Parent
("Parent Common Stock") (rounded up to the nearest whole share) equal to (x) the
number of non-vested Shares subject to such option multiplied by (y) the
Substitute Option Exchange Ratio, at an exercise price per share of Parent
Common Stock (rounded down to the nearest penny) equal to (a) the former
exercise price per share of Company Common Stock under such option immediately
prior to the Effective Time divided by (b) the Substitute Option Exchange Ratio.
The "Substitute Option Exchange Ratio" is defined in the Merger Agreement to
mean the Offer Price divided by the average closing price of one share of Parent
Common Stock (rounded to the nearest thousandth) as reported in the New York
City edition of The Wall Street Journal during the five consecutive trading days
beginning on May 3, 1999 (the "Parent Common Stock Price"). Each Substitute
Option will be granted pursuant to and subject to the terms and conditions of
the Parent's stock option plans and be for the terms of no less than ten years
from the original grant date of the applicable Options, and will have vesting
provisions at least as favorable as were applicable to the converted Options
immediately prior to the Effective Time.
6
<PAGE> 29
In addition, it is anticipated that Mr. Naik, Mr. Paulus, and Mr. Sirsi,
each of whom are executive officers of the Company and other key personnel of
the Company will enter into employment and non-competition agreements with TI,
which may include severance benefits. Such agreements are currently under
negotiation.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1999 and as adjusted to
reflect the sale of the shares offered hereby (i) by each person who is known by
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
by each of the Named Executive Officers and (iii) by all officers and directors
as a group. Except pursuant to applicable community property laws or as
indicated in the footnotes to this table, each stockholder identified in the
table possesses sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by such stockholder. Unless otherwise
noted, the address for the individuals listed below is: c/o Integrated Sensor
Solutions, Inc., 625 River Oaks Parkway, San Jose, CA 95134.
<TABLE>
<CAPTION>
NUMBER
SHARES
BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT SHARES(1)
- ---------------- ------------ -----------------
<S> <C> <C>
Breed Technologies, Inc.(2)................................. 530,038 6.9%
Stuart A Boyd
5300 Old Tampa Highway
P.O. Box 33050
Lakewood, FL 33807-3050
WK Technology Fund(3)....................................... 483,043 6.3
10th Floor, 115, Sec. 3
Ming Sheng E. Road
Taipei, Taiwan, R.O.C.
TDK Semiconductor Corporation............................... 445,524 5.8
14351 Myford Road
Tustin, CA 92780-7068
Nagano Keiki Co., Ltd.(4)................................... 291,007 3.8
Shigeru Miyashita
1-30-4 Higashimagome
Ohta-ku
Tokyo 162
JAPAN
Vinod K. Sood(5)............................................ 181,954 2.4
Manher D. Naik(6)........................................... 278,046 3.6
Donald E. Paulus(7)......................................... 156,854 2.0
Ramesh Sirsi(8)............................................. 88,555 1.1
Gerald F. Taylor(9)......................................... 6,625 0.1
All directors and executive officers as a group (10
persons)(10).............................................. 2,669,219 33.8
</TABLE>
- ---------------
(1) Percentage ownership is based on: 7,713,082 shares of Common Stock
outstanding plus any shares issuable pursuant to options held by the person
in question which may be exercised within 60 days of April 30, 1999.
(2) Includes 530,038 shares held by Breed Technologies, Inc. Stuart Boyd, a
director of the Company, is an officer of Breed Technologies, Inc. with
certain voting and investment power over such shares. Although Mr. Boyd may
be deemed to be a beneficial owner of such shares, he disclaims all such
beneficial ownership except to the extent of any pecuniary interest therein
which he may have.
(3) Includes 483,043 shares held by WK Technology Fund and affiliated funds.
7
<PAGE> 30
(4) Includes 291,007 shares held by Nagano Keiki Co., Ltd. Shigeru Miyashita, a
director of the Company, is an officer of Nagano Keiki Co., Ltd. Although
Mr. Miyashita may be deemed to be a beneficial owner of such shares, he
disclaims all such beneficial ownership except to the extent of any
pecuniary interest therein which he may have.
(5) Includes 178,704 shares held by the Sood Family Trust and 3,250 shares
subject to options which are exercisable within 60 days of April 30, 1999.
(6) Includes 193,360 shares held by the Manher & Gita M. Naik Family Trust and
93,125 shares subject to options which are exercisable within 60 days of
April 30, 1999.
(7) Includes 9,479 shares subject to options which are exercisable within 60
days of April 30, 1999.
(8) Includes 62,666 shares subject to options which are exercisable within 60
days of April 30, 1999.
(9) Includes 6,625 shares subject to options which are exercisable within 60
days of April 30, 1999.
(10) Includes 177,893 shares subject to options which are exercisable within 60
days of April 30, 1999.
CERTAIN TRANSACTIONS
Since April 1, 1997, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or is
to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or beneficial holder of more than 5% of any class of
voting securities of the Company or members of such person's immediate family
had or will have a direct or indirect material interest other than the
transactions described below.
In December 1996 and October 1997, the Company sold 249,616 and 12,111
shares of Series E Preferred Stock, respectively, at a price of $3.78 per share.
In addition, in December 1996, the Company issued warrants to purchase shares of
Series F Preferred Stock at $6.38 per share. In December 1996, February 1997 and
June 1997, the Company sold 766,818 shares of Series F Preferred Stock at a
price of $6.13 per share. All outstanding and issuable shares of Preferred Stock
converted into shares of Common Stock in connection with the closing of the
Company's initial public offering. The following executive officers, directors,
beneficial holders of more than 5% of a class of the Company's capital stock and
immediate family members of such persons purchased Series E and Series F
Preferred Stock:
<TABLE>
<CAPTION>
WARRANTS TO
PURCHASE
SERIES E SERIES F SERIES F
EXECUTIVE OFFICERS, DIRECTORS AND 5% STOCKHOLDERS(1) PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
- ---------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Nagano Keiki Co., Ltd.(2)....................... 131,007(3)
TDK Semiconductor Corporation(2)................ 17,978(4)
WK Technology Fund(2)........................... 48,978(5) 453,057(6)
Vinod K. Sood(7)................................ 34,493(8)
</TABLE>
- ---------------
(1) See notes to table of beneficial ownership in "Principal Stockholders" for
information relating to the beneficial ownership of such shares.
(2) A beneficial holder of more than 5% of a class of the Company's capital
stock.
(3) Represents shares issued in exchange for the cancellation of indebtedness.
(4) Represents shares issued in exchange for the cancellation of indebtedness.
(5) Represents warrants to purchase 13,714 shares held by WK Technology Fund,
10,285 shares held by WK Technology Fund II, 18,612 shares held by WK
Technology Fund III and 6,367 shares held by WK Technology Fund IV. These
warrants were exercised in November 1997.
(6) Represents 123,591 shares held by WK Technology Fund, 103,306 shares held
by WK Technology Fund II, 155,836 shares held by WK Technology Fund III and
70,326 shares held by WK Technology Fund IV.
(7) A director of the Company.
8
<PAGE> 31
(8) Represents shares issued in exchange for the cancellation of the Company's
Promissory Note dated June 15, 1996 in the amount of $211,268.75 payable to
the Sood Family Trust.
During fiscal year 1998, the Company designed and manufactured specific
products for Breed Technologies, Inc. which resulted in sales of approximately
$0 to Breed Technologies, Inc. of which approximately $0 is included in the
accounts receivable balance at March 31, 1998.
During fiscal year 1998, the Company purchased goods and services from TDK
Semiconductor Corporation resulting in payments of $375,000. At March 31, 1998,
the accounts payable balance included approximately $138,000 payable to TDK
Semiconductor Corporation. Included in the notes payable balance at March 31,
1997, was approximately $679,000 payable to TDK. On December 15, 1995, the
Company issued a promissory note to TDK Semiconductor Corporation in the amount
of $679,000 with an interest rate of 10% per year. As of February 1, 1998, the
Company and TDK have amended and restated the December 15, 1995 promissory note
to capitalize all interest due and to specify a new maturity date. The principal
amount of the amended and restated promissory note is $760,000, which bears
interest at 10% per year, and all amounts thereunder were paid in full in June
1998.
During fiscal 1998 and 1999, the Company performed development services for
and sold ASICs to Nagano resulting in approximately $1,776,000 and $2,733,000 of
revenues in those periods, of which approximately $802,000 and $969,000 are
included in the accounts receivable balance at March 31, 1998 and 1999,
respectively. Included in the accounts payable balance at March 31 1998, and
1999 are approximately $988,000 and $2,300,000, respectively, payable to Nagano
for purchases of sensing elements of $2,136,000 and $5,000,000 during fiscal
1998 and 1999, respectively. In addition, included in the notes payable balance
at March 31, 1997 is approximately $437,000 payable to Nagano. In August 1995,
the Company issued a promissory note to Nagano in the amount of $453,000 with an
interest rate of 9.5% per year. In December 1996 and October 1997, the Company
issued Series E Preferred Stock to Nagano in exchange for the cancellation of
interest and principal amounts due and payable on the August 1995 promissory
note. On November 1, 1996, the Company issued a promissory note to Nagano in the
amount of $437,000 with an interest rate of 10% per year. The Company repaid all
interest and principal on the November 1996 promissory note on May 30, 1997. On
July 31, 1997, the Company entered into an agreement to increase its ownership
of ISS-Nagano by converting approximately $1.0 million in long term intercompany
indebtedness owed by ISS-Nagano into an increased equity interest. Accordingly,
the Company now owns 74% of the equity of ISS-Nagano. For periods subsequent to
July 1997, 26% of ISS-Nagano's net income (loss) has been attributed to the
minority shareholders' interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the year ended March 31, 1999, all reporting
persons complied with Section 16(a) filing requirements applicable to them.
9
<PAGE> 32
ANNEX B
May 3, 1999
Board of Directors
Integrated Sensor Solutions, Inc.
625 River Oaks Parkway
San Jose, California 95134
Gentlemen:
We understand that Texas Instruments Incorporated, a Delaware corporation
("Parent"), Sensor Acquisition Corporation, a Delaware corporation and a direct
wholly-owned subsidiary of Parent ("Merger Subsidiary"), and Integrated Sensor
Solutions, Inc., a Delaware corporation ("Company"), have entered into an
Agreement and Plan of Merger, dated as of May 3, 1999, (the "Merger Agreement"),
pursuant to which the Merger Subsidiary will offer to purchase (the "Offer") all
of the outstanding shares of Company common stock, par value $0.001 per share,
for $8.05 cash per share (the "Consideration") and subsequently merge with and
into the Company (the "Merger"). Pursuant to the Merger, each issued and
outstanding share of Company common stock not acquired in the Offer will be
converted into the right to receive an amount of cash equal to the
Consideration. The terms and conditions of the Merger are set forth in more
detail in the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the Company's stockholders pursuant to the
Merger Agreement is fair to the stockholders of the Company from a financial
point of view.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company,
including the consolidated financial statements for recent years and interim
periods, and certain other relevant financial and operating data relating to the
Company made available to us from published sources and from the internal
records of the Company; (ii) reviewed the financial terms and conditions of the
Merger Agreement; (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, the Company common stock;
(iv) compared the Company from a financial point of view with certain other
companies in the automotive component and technology industries which we deemed
to be relevant; (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations of companies which we deemed
to be comparable, in whole or in part, to the Offer and the Merger; (vi)
considered the premiums paid in comparable public market acquisitions of
selected businesses within the technology industry; (vii) reviewed and discussed
with representatives of the management of the Company certain information of a
business and financial nature regarding the Company, furnished to us by them,
including financial forecasts and related assumptions of the Company; (viii)
made inquiries regarding and discussed the Merger and the Merger Agreement and
other matters related thereto with the Company's counsel; and, (ix) performed
such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for the Company provided to us by the Company's management, upon its
advice and with your consent we have assumed for purposes of our opinion that
the forecasts have been reasonably prepared on bases reflecting the best
available estimates and judgments of the Company's management at the time of
preparation as to the future financial performance of the Company and that they
provide a reasonable basis upon which we can form our opinion. The Company does
not publicly disclose internal management forecasts of the type provided to us
by the management of the Company in connection with our review of the Offer and
the Merger. Such forecasts were not prepared with a view toward public
disclosure. In addition, such forecasts were based upon numerous variables and
assumptions that are inherently uncertain including, without limitation, factors
related to general economic and competitive conditions. Accordingly, actual
results could vary significantly from those set forth in such forecasts. We have
assumed no liability for such forecasts. We have also assumed that there have
been no material changes in the Company's, financial condition, results of
<PAGE> 33
operations, business or prospects since the dates of its last financial
statements made available to us. We have relied on advice of counsel and
independent accountants to the Company as to all legal and financial reporting
matters with respect to the Company, the Offer and the Merger and the Merger
Agreement. We have assumed that the Offer and the Merger will be consummated in
a manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes, rules
and regulations. In addition, we have not assumed responsibility for making an
independent evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of the Company or the Parent, nor have we
been furnished with any such appraisals. Finally, our opinion is based on
economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Accordingly, although
subsequent developments may affect this opinion, we have not assumed any
obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Offer and the Merger
will be consummated in accordance with the terms described in the Merger
Agreement, without any further amendments thereto, and without waiver by the
Company of any of the conditions to its obligations thereunder.
In the ordinary course of our business, we actively trade the equity
securities of the Company for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities. We have also acted as an underwriter in connection with the initial
public offering of the Company common stock.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration is fair to the stockholders of the
Company from a financial point of view, pursuant to the Offer and the Merger and
as of the date hereof.
This opinion is directed to the Board of Directors of the Company in its
consideration of the Offer and the Merger and is not a recommendation to any
stockholder as to how such stockholder should vote with respect to the Offer and
the Merger. Further, this opinion addresses only the financial fairness of the
Consideration to be received by the stockholders of the Company and does not
address the relative merits of the Offer and the Merger and any alternatives to
the Offer and the Merger, the Company's underlying decision to proceed with or
effect the Offer and the Merger or any other aspect of the Offer and the Merger.
This opinion may not be used or referred to by the Company, or quoted or
disclosed to any person in any manner, without our prior written consent, which
consent is hereby given to the inclusion of this opinion in any
solicitation/recommendation statement, proxy statement or prospectus filed with
the Securities and Exchange Commission in connection with the Offer and the
Merger. In furnishing this opinion, we do not admit that we are experts within
the meaning of the term "experts" as used in the Securities Act and the rules
and regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
CRUTTENDEN ROTH, INCORPORATED
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
99(a)(1) -- Joint press release issued on May 3, 1999.
99(a)(2) -- Opinion of CRI dated May 6, 1999.(1)*
99(a)(4) -- Letter to Stockholders dated May 7, 1999 from Manher D.
Naik, Chief Executive Officer of the Company.*
99(c)(1) -- Agreement and Plan of Merger, dated as of May 3, 1999,
among Parent, the Purchaser and the Company.(2)
99(c)(2) -- Form of Indemnification Agreement.(3)
99(c)(3) -- Certificate of Incorporation of the Company.(4)
99(c)(4) -- Bylaws of the Company.(3)
99(c)(6) -- The Company's Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder.(5)*
99(c)(7) -- Stockholder Agreement dated as of May 3, 1999 among
Purchaser and the Selling Stockholders.(2)
99(c)(8) -- Confidentiality Agreement dated March 2, 1999 between
Parent and the Company.
</TABLE>
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* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Incorporated by reference to an exhibit to the Company's Form 8-K, as filed
with the Commission on May 5, 1999.
(3) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form SB-2 (File No. 333-41351), as filed with the Commission on
December 2, 1997.
(4) Incorporated by reference to an exhibit to the Company's Amendment No. 1 to
Registration Statement SB-2 (File No. 333-41351), as filed with the
Commission on February 5, 1998.
(5) Attached hereto as Annex A.
<PAGE> 1
EXHIBIT 99(a)(1)
NEWS RELEASE
C-99021
Media Contacts:
Kim Quirk Texas Instruments 972-480-6878
Mike Dunbar Integrated Sensor Solutions 408-324-1044
(Please do not publish these numbers.)
TEXAS INSTRUMENTS AND INTEGRATED SENSOR SOLUTIONS ENTER
INTO AGREEMENT FOR TI TO ACQUIRE ISS
TRANSACTION TO STRENGTHEN TI'S MATERIALS & CONTROLS BUSINESS UNIT
DALLAS (May 3, 1999) - Texas Instruments (TI) and Integrated Sensor
Solutions, Inc. (ISS) today announced that they have entered into an agreement
for TI to acquire ISS, further strengthening the company's presence in the
high-growth automotive sensors market. The acquisition will provide TI's
Materials & Controls (M&C) business with added expertise and a broadened product
portfolio to complement its leading position in pressure sensors.
The agreement is for an all-cash tender offer for all outstanding
shares of ISS's common stock at $8.05 per share, or about $62 million.
Integrated Sensor Solutions designs, manufactures and markets high
performance intelligent sensor products that are used in electronic control
systems by customers in the automotive and industrial markets. Applications
include new generation low emission engines and advanced vehicle stability
systems, such as common rail diesel fuel injection (CRI), gasoline direct
injection (GDI) and vehicle dynamic control (VDC). Their solutions are used by
some of the world's leading automotive suppliers including Robert Bosch GmbH,
Cummins Engine Company, Inc., Honda R&D Co. Ltd., Automotive Controls Corp.,
Knorr-Bremse Systems GmbH, Nagano Keiki Co., Ltd., and Michelin North America,
Inc.
<PAGE> 2
"The acquisition of ISS significantly strengthens our ability to serve
the high-growth markets for automotive and industrial sensors," said Tom Wroe,
president of TI's Materials & Controls (M&C) business. "By supporting ISS's
strong customer positions and product portfolio with TI's sensor technologies,
operational excellence and global presence, we expect to achieve major growth in
this key area."
The company will become part of the Automotive Sensors & Controls group
of TI's M&C business based in Attleboro, Massachusetts. M&C is a market leader
in sensors and controls used in the transportation, appliance, HVAC,
industrial/commercial, and electronic/communication markets.
"The merging of Integrated Sensor Solutions and M&C provides a unique
position of strength to fully exploit market opportunities," said Manher Naik,
President, Chairman and CEO of Integrated Sensor Solutions. "With TI's global
presence, we will be able to address and support a worldwide customer base."
TI will, subject to satisfaction of certain conditions, commence the
all-cash tender offer on May 7, 1999, and the tender offer is scheduled to
expire at midnight EDT on June 4, 1999, unless extended. TI intends to acquire
the ISS common stock through a wholly-owned subsidiary of TI. Any shares not
purchased in the tender offer will be acquired for the tender offer price in
cash in a second-step merger.
The boards of directors of both companies have unanimously approved the
acquisition, and the ISS board of directors has recommended that ISS's
stockholders accept TI's all cash tender offer. Consummation of the acquisition
is contingent upon the tender of a majority of ISS's outstanding common stock on
a fully-diluted basis, antitrust agency approvals in the United States and
Germany and certain other conditions.
Integrated Sensor Solutions was founded in 1989 and became publicly
traded in 1998. The stock trades under the symbol ISNR (Nasdaq). With locations
in San Jose, California, and
<PAGE> 3
Dresden, Germany, the company has approximately 170 employees and had sales of
$15.2 million for its fiscal year ending March 31, 1998, and unaudited sales of
$16.8 million for the nine months ending December 31, 1998.
# # #
NOTE TO EDITORS: Texas Instruments Incorporated is a global semiconductor
company and the world's leading designer and supplier of digital signal
processing and analog technologies, the engines driving the digitization of
electronics. Headquartered in Dallas, Texas, the company's businesses also
include materials and controls, educational and productivity solutions, and
digital imaging. The company has manufacturing or sales operations in more than
25 countries.
Texas Instruments is traded on the New York Stock Exchange under the symbol TXN.
More information is located on the World Wide Web at http://www.ti.com
TI's Materials & Controls business is a leading supplier of engineered
materials, sensors, and control devices that are used in aircraft, appliance,
automotive, industrial, military, and telecommunications markets. Currently, the
business is combining its traditional electro-mechanical and metallurgical
capabilities with TI's microelectronic skills to capitalize on rapidly growing
electronic opportunities such as sensors, interconnection and radio frequency
identification systems.
Integrated Sensor Solutions Inc. manufactures and markets high performance,
intelligent sensor products that are used in electronic control systems by
customers in the automotive and industrial markets. The Company's products are
application specific integrated circuits ("ASICs") and integrated sensor devices
("ISDs"). The Company's initial focus on automotive applications has resulted in
its products being designed into a broad range of electronic control systems
such as fuel injection, tire pressure, engine control, air bag, suspension and
brake systems. While continuing its efforts to further penetrate the automotive
market, the Company has leveraged its technology to develop products that
address high volume industrial applications including utility gas meters,
refrigeration, air conditioning and process control systems.
<PAGE> 1
ISS LOGO EXHIBIT 99(a)(4)
May 7, 1999
Dear Stockholders:
I am pleased to inform you that on May 3, 1999, Integrated Sensor
Solutions, ("ISS" or the "Company"), Inc. entered into an Agreement and Plan of
Merger with Texas Instruments Incorporated ("Texas Instruments"). Pursuant to
this merger agreement, a subsidiary of Texas Instruments is commencing a cash
tender offer to purchase all of the outstanding shares of ISS' Common Stock at a
price of $8.05 per share. Following completion of the tender offer, upon the
terms and subject to the conditions of the merger agreement, the Texas
Instruments subsidiary will be merged with and into ISS, and each share of ISS
Common Stock not purchased in the tender offer (other than any shares owned by
ISS or any of its subsidiaries, Texas Instruments or any of its subsidiaries and
any dissenting stockholders) will be converted into the right to receive $8.05
per share in cash, without interest. Upon consummation of these transactions,
Texas Instruments and its affiliates will own the entire equity interest in ISS.
THE BOARD OF DIRECTORS OF ISS HAS DETERMINED THAT THE TENDER OFFER AND THE
MERGER ARE FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF ISS STOCKHOLDERS AND
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE TENDER OFFER AND THE MERGER, AND UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS OF ISS ACCEPT THE TEXAS INSTRUMENTS TENDER OFFER AND
TENDER THEIR SHARES THEREUNDER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today by the Company with the Securities and Exchange Commission,
including the written opinion, dated May 3, 1999 of Cruttenden Roth
Incorporated, the Company's financial advisor, to the effect that, as of such
date and based upon and subject to certain matters stated therein, the cash
consideration to be paid for the shares of Common Stock of the Company in the
tender offer and the merger is fair from a financial point of view to such
holder.
Accompanying this letter, in addition to the attached Schedule 14D-9
relating to the tender offer, is the Offer to Purchase, dated May 7, 1999, of
the Texas Instruments subsidiary making the tender offer together with related
materials including a Letter of Transmittal to be used for tendering your
shares. These documents set forth the terms and conditions of the offer and the
merger, provide detailed information about the transactions and include
instructions as to how to tender your shares. I urge you to read the enclosed
materials carefully.
Very truly yours,
/s/ Manher D. Naik
Manher D. Naik
President and Chief Executive
Officer
Chairman of the Board
<PAGE> 1
EXHIBIT 99 (c)(8)
AGREEMENT
WHEREAS, INTEGRATED SENSOR SOLUTIONS, INC. (hereinafter designated as
"ISS") and TEXAS INSTRUMENTS INCORPORATED (hereinafter designated as "TI") wish
to hold discussions about certain strategic matters during the period of
February 17, 1999 through July 16, 1999, and that either party may desire to
disclose certain information deemed proprietary by the disclosing party
("Disclosing Party") to the receiving party ("Receiving Party");
WHEREAS, TI and ISS wish to receive this information, and therefore become
a Receiving Party, for the purpose of evaluating a potential business
relationship.
NOW, THEREFORE, the parties agree as follows:
For a period of three (3) years from the effective date of this Agreement,
Receiving Party shall not disclose any information it receives from Disclosing
Party that is marked PROPRIETARY (or comparable legend) to any other person,
firm, or corporation, except to advisors retained for purposes of the potential
transactions described above, or use the information for its own benefit, except
for the purpose described above. Receiving Party shall use the same degree of
care to avoid disclosure or use of the information as Receiving Party employs
with respect to its own proprietary information of like importance.
Information shall not be deemed proprietary, and Receiving Party shall have
no obligation with respect to any such information that:
(1) is already known to Receiving Party; or
(2) is or becomes publicly known through no wrongful act of Receiving
Party; or
(3) is rightfully received from a third party without restriction and
without breach of this Agreement; or
(4) is independently developed by Receiving Party; or
(5) is furnished to a third party by Disclosing Party without a similar
restriction on the third party's rights; or
1
<PAGE> 2
(6) is approved for release by written authorization of Disclosing Party;
or
(7) is disclosed pursuant to the requirement of a Governmental agency or
disclosure is permitted by operation of law.
Receiving Party shall not be liable for (1) inadvertent disclosure of the
PROPRIETARY information provided that (a) it uses the same degree of care in
safeguarding the PROPRIETARY information as it uses for its own proprietary
information of like importance, and (b) upon discovery of the inadvertent
disclosure or use of the PROPRIETARY information, it shall endeavor to prevent
any further inadvertent disclosure or use, and (2) unauthorized disclosure or
use of PROPRIETARY information by persons who are or who have been in its
employ, unless it fails to safeguard the PROPRIETARY information with the same
degree of care as it uses for its own proprietary information of like
importance.
TI appoints the person listed below as its Data Control Coordinator to
receive, on its behalf, all ISS PROPRIETARY information pursuant to this
Agreement. TI may change its Data Control Coordinator by giving ISS
written notice of the name and address of its newly appointed Data Control
Coordinator.
Jean-Louis Trochu
Corporate Development
Texas Instruments Incorporated
P.O. Box 650311 M/S 3995
Dallas, Texas 75265
ISS appoints the person listed below as its Data Control Coordinator to
receive, on its behalf, all TI PROPRIETARY information pursuant to this
Agreement. ISS may change its Data Control Coordinator by giving TI written
notice of the name and address of its newly appointed Data Control Coordinator.
David Satterfield
Vice President, Finance and Administration
Integrated Sensor Solutions Inc.
625 River Oaks Parkway
San Jose, CA 95134
2
<PAGE> 3
In the event Disclosing Party orally discloses its PROPRIETARY information
to Receiving Party, Disclosing Party shall notify the Receiving Party's Data
Control Coordinator in writing of the oral disclosure within thirty (30) days
following the disclosure, identifying the place and date of oral disclosure and
the names of the Receiving Party employees to whom the disclosure was made, and
describing the information disclosed.
All written data delivered by Disclosing Party to Receiving Party pursuant
to this Agreement shall be and remain the property of Disclosing Party, and the
written data, and any copies thereof, shall upon written request, be returned to
Disclosing Party or destroyed at the Disclosing Party's option as promptly as
possible.
Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise, expressly, impliedly, or
otherwise, for any invention, discovery, or improvement made, conceived, or
acquired prior to or after the date of this Agreement.
The parties hereby represent each to the other that they have not retained
any broker or paid or agreed to pay any brokerage fee or commission to any
broker or agent on account of this Agreement or any transaction between the
parties that may occur, and each agrees to indemnify the other against any claim
for a brokerage fee or commission on account of this Agreement or any
transaction between the parties that may occur, based upon arrangements or
agreements made or claimed by third parties to have been made by or on behalf of
the indemnifying party.
Disclosing Party understand that Receiving Party may currently or in the
future be developing information internally, or receiving information from other
parties, that may be similar to Disclosing Party's information. Accordingly,
nothing in this Agreement shall be construed as a representation or inference
that Receiving Party will not develop products, for itself or for others, that
compete with the products or systems contemplated by Disclosing Party's
information.
For a period ending January 15, 2000, or a date six months after either
party notifies the other in writing that negotiations have concluded, which ever
date comes sooner, neither party shall directly, or indirectly, solicit or
encourage any employee of the other party to leave the employ of the other party
for the benefit of the first party. This restriction shall not apply to general
solicitations conducted through general circulation newspapers, the trade press
or Internet.
3
<PAGE> 4
Neither party shall (a) publicly announce or disclose the existence or the
terms and conditions of this Agreement or the fact that discussions or
negotiations are taking place concerning a possible transaction between the
parties, or (b) advertise or release any publicity regarding this Agreement,
without the prior written consent of the other party. This provision shall
survive the expiration, termination or cancellation of this Agreement.
TEXAS INSTRUMENTS INCORPORATED INTEGRATED SENSOR SOLUTIONS, INC.
/s/ CHARLES D. TOBIN /s/ MANHER D. NAIK
- ----------------------------------- ---------------------------------
Charles D. Tobin Manher D. Naik
Vice President President, CEO &
Manager, Corporate Development Chairman of the Board
Date 3/2/99 Date
------------------------------ ----------------------------
4
