As filed with the Securities and Exchange Commission on May 25, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MICREL, INCORPORATED
(Exact name of registrant as specified in its charter)
California 94-2526744
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1849 Fortune Drive
San Jose, California 95131
(408) 570-8000
(Address, including zip code, and telephone number, including
area code, of registrar's principal executive offices)
Raymond D. Zinn
Chairman, President and Chief Executive Officer
1849 Fortune Drive
San Jose, California 95131
(408) 944-0800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Stephen J. Schrader, Esq.
Stephanie J. Millet, Esq.
Mary Anne Becking, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
(650) 813-5600
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
securities offering aggregate amount of
to be Amount to be price per offering registration
registered registered share price fee
- ------------ -------------- -------------- ------------- ------------
Common Stock,
no par value 76,117 $ 64.625(1) $ 4,919,061(1) $ 1,298.63(1)
- ------------ -------------- -------------- ------------- ------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) based on the average of the high and low
reported sales prices on the Nasdaq National Market on May 23, 2000.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file an amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the commission, acting pursuant to said
Section 8(a), may determine.
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[The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.]
Subject to Completion, dated May 25, 2000
Prospectus
Micrel, Incorporated
76,117 Shares of Common Stock
76,117 shares of our common stock were issued to certain former shareholders
of Electronic Technology Corporation pursuant to the acquisition by us of
Electronic Technology Corporation. Some of these shareholders may wish to
sell these shares in the future, and this prospectus allows them to do so. We
will not receive any of the proceeds from any sale of shares by these
shareholders, but we have agreed to bear the expenses of registration of the
shares by this prospectus.
Nasdaq National Market symbol:
MCRL
The last sale price of the common stock on the Nasdaq National Market on May
23, 2000 was $ 59.5625 per share.
_______________________________
The shares registered hereby involve a high level of investment risk. You
should invest only if you can afford a complete loss. See "Risk Factors"
beginning on page 6 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer of sale is not permitted.
_______________________________
May 25, 2000
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TABLE OF CONTENTS
Page
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Available Information 4
Incorporation of Certain Documents by Reference 4
The Company 5
Recent Events 5
Use of Proceeds 5
Risk Factors 6
Selling Shareholders 13
Plan of Distribution 13
Experts 14
Legal Matters 14
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No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this prospectus
in connection with the offer described in this prospectus and, if given or
made, such information and representations must not be relied upon as having
been authorized by us or the selling shareholders. Neither the delivery of
this prospectus nor any sale made under this prospectus shall under any
circumstances create any implication that there has been no change in our
affairs since the date hereof or since the date of any documents incorporated
herein by reference. This prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any securities other than the securities to
which it relates, or an offer or solicitation in any state to any person to
whom it is unlawful to make such offer in such state.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith we
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed can be inspected and copied at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C., 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) containing reports, proxy and
information statements and other information of registrants, including us,
that file electronically with the Commission. In addition, the common stock
is listed on the Nasdaq National Market and similar information concerning us
can be inspected and copied at the offices of the National Association of
Securities Dealers, Inc., 9513 Key West Avenue, Rockville, Maryland 20850.
We have filed with the Commission a registration statement on Form S-3 (the
"Registration Statement") (of which this prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares. This prospectus does not contain all of the information set forth
in the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements
contained in this prospectus as to the contents of any contract or other
documents are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference and the exhibits and schedules thereto. For
further information regarding us and the shares, reference is hereby made to
the Registration Statement and such exhibits and schedules which may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by us under the Exchange Act with
the Commission and are incorporated herein by reference:
a. Our Annual Report on Form 10-K for the year ended December 31, 1999;
b. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
and
c. The description of our common stock contained our Registration Statement
on Form 8-A (File No. 0-25236).
Each document filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this prospectus and to be part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained herein (or in the applicable prospectus Supplement) or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
prospectus is delivered upon written or oral request. Requests should be
directed to Investor Relations, 1849 Fortune Drive, San Jose 95131,
telephone number: (408) 944-0800.
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THE COMPANY
Micrel, Incorporated, or Micrel, designs, develops, manufactures and markets
a range of high-performance analog power integrated circuits and mixed-signal
and digital integrated circuits. We currently ship over 1,200 standard
products and have derived the majority of our product revenue for the year
ended December 31, 1999 from sales of standard analog integrated circuits for
power management. These analog power circuits are used in a wide variety of
electronic products, including those in the computer, telecommunications and
industrial markets. In addition, we manufacture custom analog and mixed-
signal circuits and provide wafer foundry services for a diverse range of
customers who produce electronic systems for communications, consumer and
military applications. With our acquisition of Synergy Semiconductor in
November 1998, we broadened our standard product offerings to include high
performance bipolar integrated circuits sold to customers within the
communications, industrial and computing markets. Our product portfolio is
comprised of more than 200 products including communication transceivers,
clock generators, distribution/clock recovery circuits as well as high-speed
logic and memory.
Continuing trends in the communications and computing markets have created
increased demand for power analog circuits, which control, regulate, convert
and route voltage and current in electronic systems. This demand for power
analog circuits has been fueled by the tremendous growth of battery powered
cellular telephones and computing devices and the emergence of lower voltage
microprocessors and Personal Computer Memory Card International Association,
commonly referred to as PCMCIA, standards for peripheral devices. Our
standard analog products business is focused on addressing this demand for
high-performance power analog circuits. We sell a wide range of regulators,
references and switches designed for cellular telephones and laptop
computers. We were one of the first companies to offer analog products for
the PCMCIA Card and universal serial bus, or USB, market and believe that we
currently provide a majority of the power analog circuits used in PC Card and
USB systems. We also offer standard analog products that address other
markets, including power supplies and industrial, defense, avionics, and
automotive electronics.
Our standard mixed-signal and digital integrated circuits also experienced
increased demand in 1999. These products are used primarily in the wide area
network infrastructure and fiber optic communications marketplaces, both of
which have grown significantly in recent years due to the expansion in
capacity required in the Internet backbone.
In addition to standard analog and mixed signal products, we offer customers
various combinations of design, process and foundry services. Through
interaction with customers in our custom and foundry business, we have
enhanced our design and process technology capabilities, which in turn
provides engineering and marketing benefits to our standard products
business.
We were incorporated in California in July 1978. References herein to
"Micrel" or the "Company" refer to Micrel, Incorporated and its subsidiaries.
We also do business as "Micrel Semiconductor." Our headquarters are located
at 1849 Fortune Drive, San Jose, California 95131. Our telephone number is
(408) 944-0800.
RECENT EVENTS
Acquisition of Electronic Technology Corporation
Pursuant to the terms of an Agreement and Plan of Merger and Reorganization,
referred to in this prospectus as the Merger Agreement, dated as of April 4,
2000 between and among us, Electronic Technology Corporation, or ETC, and ETC
Acquisition Sub, Inc., or Merger Sub, we completed the merger of Merger Sub,
our wholly-owned subsidiary, with and into ETC. The transaction was accounted
for using the pooling of interests method. As consideration for the
transaction, .0969006 of a share of our common stock was issued for each
outstanding share of ETC common stock, subject to adjustment for cash paid in
lieu of fractional shares. We issued 76,117 shares of common stock in
exchange for the outstanding shares of ETC common stock, subject to
withholding of approximately 10% of these shares in escrow in accordance with
certain conditions in the Merger Agreement. Outstanding options to acquire
shares of ETC common stock were automatically converted into options to
purchase our common stock at the same exchange ratio.
The shares of our common stock issued in this merger were issued pursuant to
an exemption from registration under the Securities Act of 1993, as amended.
In accordance with the Merger Agreement, we filed the registration statement
of which this prospectus is a part to register shares of our common stock
issued in connection with this merger.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares sold pursuant
to this prospectus by the selling shareholders. We have agreed to bear
certain expenses of registration of these shares under federal and state
securities laws. The registration of these shares is intended to satisfy
certain of our obligations under the Merger Agreement.
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RISK FACTORS
Investors should carefully consider the following risk factors in evaluating
an investment in the common stock offered hereby. This prospectus includes
"forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements in this
prospectus and statements incorporated by reference into this prospectus,
other than statements of historical fact are "forward-looking statements" for
purposes of these provisions, including any projections of earnings, revenues
or other financial items, any statements of the plans and objectives of
management for future operations, any statements concerning proposed new
products or services, any statements regarding future economic conditions or
performance, and any statement of assumptions underlying any of the
foregoing. In some cases, forward-looking statements contain words an be
identified by the use of terminology such as "may," "will," "expects,"
"plans," "anticipates," "estimates," "potential," or "continue," or the
negative thereof or other comparable terminology. Our actual results could
differ materially from those projected, assumed or implied in these forward-
looking statements because of risks and uncertainties, including risks and
uncertainties described in the risk factors below and elsewhere in this
prospectus. Micrel assumes no obligation to update any such forward-looking
statement or reason why actual results might differ.
Our operating results may fluctuate because of a number of factors, many of
which are beyond our control.
If our operating results are below the expectations of public market analysts
or investors, then the market price of our common stock could decline. Some
of the factors that affect our quarterly and annual results, but which are
difficult to control or predict are:
- the volume and timing of orders received;
- changes in the mix of products sold;
- market acceptance our products and our customers' products;
- competitive pricing pressures;
- our ability to timely acquire and install capital equipment to expand
manufacturing capacity to meet increasing demand;
- availability of production capacity at assembly subcontractors;
- our ability to introduce new products on a timely basis;
- the timing of new product announcements and introductions by us or our
competitors;
- the timing and extent of research and development expenses;
- fluctuations in manufacturing yields;
- cyclical semiconductor industry conditions;
- our ability to hire and retain key technical and management personnel;
- our access to advanced process technologies; and
- the timing and extent of process development costs.
Our stock price is volatile.
The market price of our common stock has fluctuated significantly to date. In
the future, the market price of our common stock could be subject to
significant fluctuations due to general market conditions and in response to
quarter-to-quarter variations in:
- our anticipated or actual operating results;
- announcements or introductions of new products;
- technological innovations or setbacks by us or our competitors;
- conditions in the semiconductor, telecommunications, data communications,
ATE, high-speed computing or military markets;
- the commencement of litigation;
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- changes in estimates of our performance by securities analysts; and
- announcements of merger or acquisition transactions.
In addition, the stock market in recent years has experienced extreme price
and volume fluctuations that have affected the market prices of many high
technology companies, particularly semiconductor companies, and that have
often been unrelated or disproportionate to the operating performance of
companies. These fluctuations, as well as general economic and market
conditions, may harm the market price of our common stock.
Our industry is highly competitive.
The semiconductor industry is highly competitive and subject to rapid
technological change, price-erosion and increased international competition.
Significant competitive factors include:
- product features;
- performance;
- price;
- timing of product introductions;
- emergence of new computer and communications standards; and
- quality and customer support.
Because the standard products market for integrated circuits is diverse and
highly fragmented, we encounter different competitors in our various market
areas. Most of these competitors have substantially greater technical,
financial and marketing resources and greater name recognition than we do.
Due to the increasing demands for integrated circuits, we expect intensified
competition from existing integrated circuit suppliers and the entry of new
competition. Increased competition could adversely affect our financial
condition or results of operations. There can be no assurance that we will be
able to compete successfully in either the standard products or custom and
foundry products business in the future or that competitive pressures will
not adversely affect our financial condition, results of operations, or cash
flows.
Our current and prospective competitors include many large companies that
have substantially greater marketing, financial, technical and manufacturing
resources than we have.
Competition in the markets that we serve is primarily based on the price,
performance and quality of products and the ability to deliver products in a
timely fashion. Product qualification is typically a lengthy process and some
prospective customers may be unwilling to invest the time or expense
necessary to qualify suppliers like us. Further, customers may also be
concerned about relying on a relatively small company for a critical sole-
sourced component. To the extent we fail to overcome these challenges, there
could be material and adverse effects on our business and financial results.
Our customers are concentrated, so the loss of one or more key customers
could significantly reduce our revenues and profits.
Historically, a relatively small number of customers has accounted for a
significant portion of our revenues in any particular period. However, we
have no long-term volume purchase commitments from any of our major
customers. We anticipate that sales of products to relatively few customers
will continue to account for a significant portion of our revenues. If a
significant customer overstocked our products, additional orders for our
products could be harmed. A reduction, delay or cancellation of orders from
one or more significant customers or the loss of one or more key customers
could significantly reduce our order rates, revenues and profits. We cannot
assure you that our current customers will continue to place orders with us,
that orders by existing customers will continue at current or historical
levels or that we will be able to obtain orders from new customers.
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Our product offering is concentrated and a reduction in demand for one of our
significant products could reduce our revenues and results of operations.
We currently derive the majority of our product revenues from sales of
standard analog and mixed-signal integrated circuits and we expect these
products to continue to account for the majority of our revenues for the
foreseeable future. As a result, factors adversely affecting the pricing of
or demand for standard analog integrated and mixed-signal circuits, such as
competition, product performance or technological change, could have a
material adverse effect on our business and consolidated results of
operations and financial condition.
Sales of our products are highly dependent on certain select end markets.
We currently sell a significant portion of our products in the computer and
wireless handset markets. These markets are characterized by short product
life cycles, rapidly changing customer demand, evolving and competing
industry standards and seasonal demand trends. Additionally, there can be no
assurance that these markets will continue to grow. If the markets for
computers or wireless handsets that we serve fail to grow, or grow more
slowly than we currently anticipate, or if we experience increased
competition in these markets, our business, results of operations and
financial condition will be adversely affected.
An important part of our strategy is to continue our focus on the market for
high-speed communications integrated circuits, or ICs. If we are unable to
penetrate these markets further, our revenues could stop growing and may
decline.
Our markets frequently undergo transitions in which products rapidly
incorporate new features and performance standards on an industry-wide basis.
If our products are unable to support the new features or performance levels
required by OEMs in these markets, we would likely lose business from
existing or potential customers and would not have the opportunity to compete
for new design wins until the next product transition. If we fail to develop
products with required features or performance standards, or if we experience
even a short delay in bringing a new product to market, or if our customers
fail to achieve market acceptance of their products, our revenues could be
significantly reduced for a substantial period of time.
A significant portion of our revenues in recent periods has been, and is
expected to continue to be, derived from sales of products based on SONET,
SDH and ATM transmission standards. If the communications market evolves to
new standards, we may not be able to successfully design and manufacture new
products that address the needs of our customers or gain substantial market
acceptance. Although we have developed products for the Gigabit Ethernet and
Fibre Channel communications standards, volume sales of these products are
modest, and we may not be successful in addressing other market opportunities
for products based on these standards.
If we do not successfully expand our manufacturing capacity on time, we may
face serious capacity constraints.
We currently manufacture a majority of our integrated circuit products at our
wafer fabrication facilities located in San Jose and Santa Clara, California,
and we are currently expanding these facilities. We believe that when the
expansion is completed we will be able to satisfy our production needs from
these fabrication facilities through fiscal 2001, although this date may vary
depending on, among other things, the strength of customer demand for our
products. We will be required to hire, train and manage additional
production personnel in order to increase production capacity as scheduled.
In addition, to further expand our capacity to fabricate wafers using various
processes, including advanced CMOS, we have entered into foundry agreements
with third party wafer fabrication providers. We will have to design our
products utilizing the fabrication processes at these foundries, qualify our
products and then ramp our production volumes at these foundry fabrication
facilities. If we cannot expand our capacity on a timely basis or
successfully utilize our foundry arrangements, we could experience
significant capacity constraints that could render us unable to meet customer
demand or force us to spend more to meet demand. In addition, the
depreciation and other expenses that we will incur in connection with the
expansion of our manufacturing capacity may harm our gross margin in any
future fiscal period.
We encounter risks associated with our international operations.
We have generated a substantial portion of our net revenues from export
sales. We believe that a substantial portion of our future net revenues will
depend on export sales to customers in international markets, including Asia.
International markets are subject to a variety of risks, including changes in
policy by foreign governments, social conditions such as civil unrest, and
economic conditions including high levels of inflation, fluctuation in the
value of foreign currencies and currency exchange rates and trade
restrictions or prohibitions. In addition, we sell to domestic customers that
do business worldwide and cannot predict how the businesses of these
customers may be affected by economic conditions in Asia or elsewhere. Such
factors could adversely affect our future revenues, financial condition,
results of operations or cash flows.
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Historically, we have not experienced significant individual product gross
margin differences on export sales compared to domestic sales. However, as a
result of the international market risks discussed above or other factors,
there can be no assurance that we will not experience material gross margin
fluctuations in the future, which could materially and adversely affect our
business, financial condition, results of operations or cash flows.
Our international sales are primarily denominated in U.S. currency.
Consequently, changes in exchange rates that strengthen the U.S. dollar could
increase the price of our products in the local currencies of the foreign
markets we serve. This would result in making our products relatively more
expensive than our competitors' products that are denominated in local
currencies, leading to a reduction in sales or profitability in those foreign
markets. We have not taken any protective measures against exchange rate
fluctuations, such as purchasing hedging instruments.
Our operating results substantially depend on manufacturing output and
yields, which may not meet expectations.
We manufacture most of our semiconductors at our San Jose and Santa Clara,
California fabrication facilities. Manufacturing semiconductors requires
manufacturing tools which are unique to each product being produced. If one
of these unique manufacturing tools was damaged or destroyed, then our
ability to manufacture the related product would be impaired and our business
would suffer until the tool was repaired or replaced. Additionally, the
fabrication of integrated circuits is a highly complex and precise process.
Small impurities, contaminants in the manufacturing environment, difficulties
in the fabrication process, defects in the masks used to print circuits on a
wafer, manufacturing equipment failures, wafer breakage or other factors can
cause a substantial percentage of wafers to be rejected or numerous die on
each wafer to be nonfunctional.
The ongoing expansion of the manufacturing capacity of our existing wafer
fabrication facilities could increase the risk of contaminants in the
facilities. In addition, many of these problems are difficult to diagnose,
and are time consuming and expensive to remedy and can result in lower output
and yields and shipment delays.
Because the majority of our costs of manufacturing are relatively fixed,
output and yield decreases can result in substantially higher unit costs and
may result in reduced gross profit and net income. In addition, output and
yield decreases could force us to allocate available product supply among
customers, which could potentially harm customer relationships.
Our dependence on third-party manufacturing and supply relationships
increases the risk that we will not have an adequate supply of products to
meet demand or that our cost of materials will be higher than expected.
We face many risks associated with our dependence upon third parties which
manufacture, assemble or package certain of our products. These risks
include:
- reduced control over our delivery schedules and quality;
- risks of inadequate manufacturing yields and excessive costs;
- the potential lack of adequate capacity during periods of excess demand;
- difficulties selecting and integrating new subcontractors;
- limited warranties on wafers or products supplied to us;
- potential increases in prices; and
- potential misappropriation of our intellectual property.
Any of these risks may lead to increased costs or delay delivery of our
products, which would harm our profitability and customer relationships. We
may encounter similar risks if we hire subcontractors to test our products in
the future.
Additionally, wafer and product requirements typically represent a very small
portion of the total production of the third-party foundries and outside
assembly, testing and packaging contractors. As a result, we are subject to
the risk that a foundry will cease production on an older or lower volume
process that it uses to produce our parts. We cannot be certain our outside
manufacturers will continue to devote resources to the production of our
products or continue to advance the process design technologies on which the
manufacturing of our products are based. Each of these events could increase
our costs and harm our ability to deliver our products on time.
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Our future success depends in part on the continued service of our key design
engineering, sales, marketing and executive personnel and our ability to
identify, hire and retain additional personnel.
There is intense competition for qualified personnel in the semiconductor
industry, in particular design engineers, and we may not be able to continue
to attract and train engineers or other qualified personnel necessary for the
development of our business or to replace engineers or other qualified
personnel who may leave our employ in the future. Our anticipated growth is
expected to place increased demands on our resources and will likely require
the addition of new management personnel and the development of additional
expertise by existing management personnel. Loss of the services of, or
failure to recruit, key design engineers or other technical and management
personnel could be significantly detrimental to our product and process
development programs.
Because our markets are subject to rapid technological change, our success
depends heavily on our ability to develop and introduce new products.
The markets for our products are characterized by:
- rapidly changing technologies;
- evolving and competing industry standards;
- short product life cycles;
- changing customer needs;
- emerging competition;
- frequent new product introductions and enhancements;
- increased integration with other functions; and
- rapid product obsolescence.
To develop new products for the computer and communications markets, we must
develop, gain access to and use leading technologies in a cost-effective and
timely manner and continue to develop technical and design expertise. We must
maintain close working relationships with key customers in order to develop
new products that meet customers' changing needs. We also must respond to
changing industry standards, trends towards increased integration and other
technological changes on a timely and cost-effective basis. Further, if we
fail to achieve design wins with our key customers or potential customers our
business will face significant harm because once a customer designs a
supplier's product into its system, the customer typically is reluctant to
change its supply source because of the high costs associated with qualifying
a new supplier.
Products for communications applications, as well as for computing
applications, are based on industry standards that are continually evolving.
Our ability to compete in the future will depend on our ability to identify
and ensure compliance with these evolving industry standards. The emergence
of new industry standards could render our products incompatible with
products developed by major systems manufacturers. As a result, we could be
required to invest significant time and effort and to incur significant
expense to redesign our products to ensure compliance with relevant
standards. If our products are not in compliance with prevailing industry
standards for a significant period of time, we could miss opportunities to
achieve crucial design wins. In addition, we may not be successful in
developing or using new technologies or in developing new products or product
enhancements that achieve market acceptance. Our pursuit of necessary
technological advances may require substantial time and expense.
We may not be able to protect our intellectual property adequately, or we
could be harmed by litigation involving our patents and proprietary rights.
Our future success depends in part upon our intellectual property, including
patents, trade secrets, know-how and continuing technology innovation. There
can be no assurance that the steps taken by us to protect our intellectual
property will be adequate to prevent misappropriation or that others will not
develop competitive technologies or products. There can be no assurance that
any patent owned by us will not be invalidated, circumvented or challenged,
that the rights granted thereunder will provide competitive advantages to us
or that any of our pending or future patent applications will be issued with
the scope of the claims sought by us, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or
superior to our technology, duplicate our technology or design around the
patents owned by us.
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Additionally, the semiconductor industry is characterized by frequent
litigation regarding patent and other intellectual property rights. There can
be no assurance that existing claims or any other assertions or claims for
indemnity resulting from infringement claims will not adversely affect our
business, financial condition, results of operations, or cash flows.
We face risks associated with recent acquisitions and will face risks
associated with any future acquisitions.
We have recently made three strategic acquisitions: Synergy Semiconductor in
November 1998, Altos Semiconductor Inc. in December 1999 and Electronic
Technology Corporation in April 2000. The risks involved with acquisitions
include:
- diversion of management's attention;
- failure to retain key personnel;
- amortization of acquired intangible assets;
- customer dissatisfaction or performance problems with the acquired
company;
- the cost associated with acquisitions and the integration of acquired
operations; and
- assumption of unknown liabilities.
Any of these risks could materially harm our business, financial condition
and results of operations. Additionally, there can be no assurance that any
of the companies that we acquired or any business that we may acquire in the
future will achieve anticipated revenues and operating results.
In addition, acquisitions accounted for using the pooling of interest methods
of accounting are subject to rules established by the Financial Accounting
Standards Board and the Securities and Exchange Commission. These rules are
complex and the interpretation of them is subject to change. Additionally,
the availability of pooling of interests accounting treatment for a business
combination depends in part upon circumstances and events occurring after the
acquisition. The failure of a past business combination or a future potential
business combination that has been accounted for under the pooling of
interests accounting method to qualify for this accounting treatment would
materially harm our reported and future earnings and likely, the price of our
common stock.
We are exploring alternatives for the further expansion of our manufacturing
capacity which would likely occur after fiscal year 2001.
We are exploring alternatives for the further expansion of our manufacturing
capacity which would likely occur after fiscal year 2001, including entering
into strategic relationships to obtain additional capacity; building a new
wafer fabrication facility; or purchasing a wafer fabrication facility. Any
of these alternatives could require a significant investment by us. There can
be no assurance that any of the alternatives for expansion of our
manufacturing capacity will be available on a timely basis or that we will be
able to manage our growth and effectively integrate our expansion into our
current operations. Additionally, the cost of any investment we may have to
make to expand our manufacturing capacity is expected to be funded through a
combination of available cash, cash equivalents and short-term investments,
cash from operations and additional debt, lease or equity financing. We may
not be able to obtain the additional financing necessary to fund the
construction and completion of the new manufacturing facility.
Expanding our current wafer fabrication facility, building a new wafer
fabrication facility or purchasing a wafer fabrication facility also entails
significant risks, including:
- shortages of materials and skilled labor;
- unforeseen environmental or engineering problems;
- work stoppages;
- weather interference; and
- unanticipated cost increases.
Any one of these risks could have a material adverse effect on the building,
equipping and production start-up of a new facility or the expansion of our
existing facilities. In addition, unexpected changes or concessions required
by local, state or federal regulatory agencies with respect to necessary
licenses, land use permits, site approvals and building permits could involve
significant additional costs and delay the scheduled opening of the expansion
of our facilities or a new facility and could reduce our anticipated
11
<PAGE>
revenues. Also, the timing of commencement of operation of our expanded
facilities or a new facility will depend upon the availability, timely
delivery, successful installation and testing of the necessary process
equipment. As a result of the foregoing and other factors, our expanded or
new facility may not be completed and in volume production within its current
budget or within the period currently scheduled. Furthermore, we may be
unable to achieve adequate manufacturing yields in our expanded facilities or
a new facility in a timely manner, and our revenues may not increase
commensurate with the anticipated increase in manufacturing capacity
associated with these facilities. In addition, in the future, we may be
required for competitive reasons to make additional capital investments in
our existing wafer fabrication facilities or to accelerate the timing of the
construction of a new wafer fabrication facility in order to expedite the
manufacture of products based on more advanced manufacturing processes.
Periods of rapid growth and expansion could continue to place a significant
strain on our limited personnel and other resources.
To manage expanded operations effectively, we will be required to continue to
improve our operational, financial and management systems and to successfully
hire, train, motivate and manage our employees. In addition, the integration
of past and future potential acquisitions and the expansion of our
manufacturing capacity will require significant additional management,
technical and administrative resources. We cannot be certain that we will be
able to manage our growth or effectively integrate the expansion of our
current wafer fabrication facilities, or a new manufacturing facility, into
our current operations.
Our ability to manufacture sufficient wafers to meet demand could be severely
hampered by natural disasters.
Our existing wafer fabrication facilities are, and potential new wafer
fabrication facilities may be, located in Northern California and these
facilities may be subject to natural disasters such as earthquakes. A
significant natural disaster, such as an earthquake, could have a material
adverse impact on our business, financial condition and operating results.
We could incur substantial fines or litigation costs associated with our
storage, use and disposal of hazardous materials.
We are subject to a variety of federal, state and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in our manufacturing process.
Any failure to comply with present or future regulations could result in the
imposition of fines, the suspension of production or a cessation of
operations. In addition, these regulations could restrict our ability to
expand our facilities at their present locations or construct or operate a
new wafer fabrication facility or could require us to acquire costly
equipment or incur other significant expenses to comply with environmental
regulations or clean up prior discharges.
Our business could be impacted by year 2000 issues.
The Year 2000 issue refers to whether computer systems will properly
recognize two-digit year values as the year 2000 versus the year 1900.
Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. During 1999, we implemented a Year
2000 project designed to identify and assess the risks associated with our
information systems, products, operations and infrastructure, suppliers and
customers that are not Year 2000 compliant, and to develop, implement and
test remediation and contingency plans to mitigate these risks. To date, we
have not experienced any significant disruptions related to the Year 2000
issue and have not been informed of any failures of our products related to
the year 2000 issue.
The concentration of our capital stock ownership amongst insiders may limit
your ability to influence corporate matters.
As of May 23, 2000, our officers and directors and their affiliates, in the
aggregate, had voting control over approximately 28 percent of our voting
common stock and such concentration of ownership may limit your ability to
influence corporate matters. These shareholders acting together would be able
to significantly influence matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions.
The voting power of our officers and directors under certain circumstances
also could have the effect of delaying or preventing a change in control of
Micrel.
12
<PAGE>
SELLING SHAREHOLDERS
The following table provides the names of and the number of shares of common
stock beneficially owned by each selling shareholder, and the number of
shares of common stock beneficially owned by each selling shareholder upon
completion of the offering or offerings pursuant to this prospectus, assuming
each selling shareholder offers and sells all of its or his/her respective
shares registered pursuant to the registration statement of which this
prospectus is a part. Selling shareholders may, however, offer and sell all,
or some or none of their shares. The respective donees, pledgees and
transferees or other successors in interest of the selling shareholders may
also sell the shares listed below as being held by the selling shareholders.
<TABLE>
<CAPTION>
Beneficial Percentage Beneficial Percentage
Ownership Prior Ownership After
Prior to to the Offered After the the
Offering Offering Number Offering Offering
- -------------------------- ---------------- ---------- ---------------- ----------
Number of Shares % of Shares Number of Shares %
---------------- ---------- --------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
David J. Andersen 4,069 * 4,069 0 *
William A. Burkland 45,307 * 45,307 0 *
Jonathan S. McCalmont (1) 1,549 * 511 1,038 *
Gary J. Roling 10,171 * 10,171 0 *
Katherine T. Vitzthum 1,040 * 1,040 0 *
Scott P. Yeager 15,019 * 15,019 0 *
* Less than 1%
(1) Includes 1,038 shares of our common stock issuable upon exercise of
options that are exercisable within sixty days of this prospectus.
</TABLE>
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
holders of up to 76,117 shares of common stock. The shares were issued in
connection with the Merger Agreement. This prospectus has been prepared in
connection with registering the shares to allow for sales of shares by the
applicable selling shareholders to the public in accordance with the terms of
the Merger Agreement. We have registered the shares for sale pursuant to the
terms of the Merger Agreement, but registration of such shares does not
necessarily mean that any of such shares will be offered and sold by the
holders thereof.
We will not receive any proceeds from the offering by the selling
shareholders. The shares may be sold from time to time to purchasers directly
by any of the selling shareholders, or donees, pledgees, transferees or other
successors in interest thereof. Alternatively, the selling shareholders, or
transferees thereof, may from time to time offer the shares through dealers
or agents, who may receive compensation in the form of commissions from the
selling shareholders, or transferees thereof, and/or the purchasers of shares
for whom they may act as agent. The selling shareholders, or transferees
thereof, and any dealers or agents that participate in the distribution of
shares may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of shares by them and any
commissions received by any such dealers or agents might be deemed to be
underwriting commissions under the Securities Act.
At a time a particular offer of shares is made, a prospectus supplement, if
required, will be distributed that will set forth the name and names of any
dealers or agents and any commissions and other terms constituting
compensation from the selling shareholders, or transferees thereof, and any
other required information. The shares may be sold from time to time at
varying prices determined at the time of sale or at negotiated prices.
13
<PAGE>
In order to comply with the securities laws of certain states, if applicable,
the shares may be sold only through registered or licensed brokers or
dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is
complied with.
The shares may also be sold in one or more of the following transactions: (a)
block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all
or a portion of the block as principal to facilitate the transaction; (b)
purchases by any such broker-dealer as principal and resale by such broker-
dealer for its own account pursuant to a prospectus supplement; (c) ordinary
brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (d) sales "at the market" to or through a market maker
or into an existing trading market, on an exchange or otherwise, for such
shares; and (e) sales in other ways not involving market makers or
established trading markets, including direct sales to purchasers. In
effecting sales, broker-dealers engaged by the selling shareholders may
arrange for other broker-dealers to participate.
EXPERTS
The consolidated financial statements and the related consolidated financial
statement schedule incorporated by reference in this Registration Statement
from Micrel's Annual Report on Form 10-K for the year ended December 31, 1999
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are incorporated herein by reference, and have been so
incorporated by reference in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered pursuant
to this prospectus will be passed upon for us by Morrison & Foerster LLP,
Palo Alto, California.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other expenses of Issuance and Distribution
The following table sets forth the estimated fees and expenses payable by us
in connection with the issuance and distribution of the common stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee.
<TABLE>
<S> <C>
Securities Act Registration Fee $ 1,300
Printing and duplicating fees 10,000
Legal fees and expenses 15,000
Accounting fees and expenses 12,000
Miscellaneous expenses 5,000
--------
*Total $ 43,300
</TABLE
*None of the expenses listed above will be borne by the selling shareholders.
Item 15. Indemnification of Directors and Officers
Our Bylaws provide that we will indemnify its directors and executive
officers and may indemnify our other officers, employees and other agents to
the fullest extent permitted by California law. We are also empowered under
our Bylaws to enter into indemnification agreements with our directors and
officers and to purchase insurance on behalf of any person whom we are
required or permitted to indemnify. We have entered into indemnification
agreements with each of our directors and executive officers.
In addition, our Restated Articles of Incorporation provide that the
liability of our directors for monetary damages shall be eliminated to the
fullest extent permissible under California law. This provision in the
Restated Articles of Incorporation does not eliminate a director's duty of
care, and in appropriate circumstances equitable remedies such as an
injunction or other forms of non-monetary relief will remain available under
California law. Each director will continue to be subject to liability for
breach of the director's duty of loyalty to us, for acts or omission not in
good faith or involving intentional misconduct or knowing violations of law,
for acts or omissions that the director believes to be contrary to the best
interests of us or our shareholders, for any transaction from which the
director derived an improper personal benefit, for improper transactions
between the director and us and for improper distributions to shareholders
and loans to directors and officers. This provision also does not affect a
director's responsibilities under any laws, such as the federal securities
laws or state or federal environmental laws.
We have entered into agreements with our directors and certain of our
executive officers that require us to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person
may be made a party by reason of the fact that such person is or was our
director or officer or any of our affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to our best interests and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreement also sets forth certain procedures
that will apply in the event of a claim for indemnification thereunder.
ITEM 16. Exhibits
5.1 - Opinion of Morrison & Foerster LLP
10.1 - Agreement and Plan of Merger and Reorganization among Micrel,
Incorporated, Electronic Technology Corporation and ETC
Acquisition Sub, Inc., dated as of April 4, 2000
23.1 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
23.2 - Independent Auditors' Consent
24.1 - Power of Attorney (included on signature page hereto)
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
15
<PAGE>
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering price
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
these securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance under Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4),
or 497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise (other than
insurance), the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements
for filing on Form S-3 and have duly caused this registration statement to be
signed on our behalf by the undersigned, thereunto duly authorized, in the
City of San Jose, State of California on May 25, 2000.
MICREL, INCORPORATED
By: /s/ Raymond D. Zinn
------------------------
Raymond D. Zinn
President, Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Raymond D. Zinn and Richard
D. Crowley, Jr. as his true and lawful attorneys-in-fact and agents, jointly
and severally, with full power of substitution and resubstitution, for and in
his stead, in any and all capacities, to sign on his behalf the Registration
Statement on Form S-3 in connection with the sale by Micrel, Incorporated of
shares of offered securities, and to execute any amendments thereto
(including post-effective amendments) or certificates that may be required in
connection with this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission and granting unto said attorneys-in-fact
and agents, jointly and severally, the full power and authority to do and
perform each and every act and thing necessary or advisable to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, jointly and severally,
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-3 has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Raymond D. Zinn President, Chief Executive May 25, 2000
- --------------------------- Officer and Chairman of the
Raymond D. Zinn Board of Directors (Principal
Executive Officer)
/s/ Richard D. Crowley, Jr. Vice President, Finance and May 25, 2000
- --------------------------- Chief Financial Officer
Richard D. Crowley, Jr. (Principal Financial and
Accounting Officer)
/s/ Warren H. Muller Chief Technical Officer, May 25, 2000
- --------------------------- Secretary and Director
Warren H. Muller
/s/ George Kelly Director May 25, 2000
- ---------------------------
George Kelly
/s/ Dale L. Peterson Director May 25, 2000
- -------------------------
Dale L. Peterson
/s/ Larry L. Hansen Director May 25, 2000
- -------------------------
Larry L. Hansen
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Document
5.1 Opinion of Morrison & Foerster LLP
10.1 Agreement and Plan of Merger and Reorganization among
Micrel, Incorporated, Electronic Technology Corporation and ETC
Acquisition Sub, Inc., dated as of April 4, 2000
23.1 Consent of Counsel (included in Exhibit 5.1)
23.2 Independent Auditors' Consent
25.1 Power of Attorney (included on signature page hereto)
<PAGE>
EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
May 25, 2000
Micrel, Incorporated
1849 Fortune Drive
San Jose, CA 95113
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
filed by Micrel, Incorporated, a California corporation (the "Company"), with
the Securities and Exchange Commission on May 25, 2000 (the "Registration
Statement") relating to the registration under the Securities Act of 1933, as
amended, of up to 76,117 shares of the Company's common stock, no par value
(the "Stock"), being offered by certain selling shareholders specified
therein (the "Selling Shareholders").
As counsel to the Company, we have examined the proceedings taken by the
Company and the Selling Shareholders in connection with the sale by the
Selling Shareholders of up to 76,117 shares of Stock.
It is our opinion that the 76,117 shares of Stock that may be sold are
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
Exhibit 10.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND BETWEEN
MICREL INCORPORATED
ETC ACQUISITION SUB INC.
ELECTRONIC TECHNOLOGY CORPORATION
AND
GARY J. ROLING
AS SHAREHOLDERS' AGENT
April 4, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 2
1.1 The Merger. 2
1.2 Closing; Effective Time. 2
1.3 Effect of the Merger. 2
1.4 Articles of Incorporation; Bylaws. 2
1.5 Directors and Officers. 3
1.6 Effect on Capital Stock. 3
1.7 Surrender of Certificates. 5
1.8 No Further Ownership Rights in ETC Capital Stock. 7
1.9 Tax and Accounting Consequences. 8
1.10 Exemption from Registration. 8
1.11 Taking of Necessary Action; Further Action 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ETC 8
2.1 Organization, Standing and Power. 9
2.2 Capital Structure. 9
2.3 Authority. 10
2.4 Financial Statements. 11
2.5 Absence of Certain Changes. 11
2.6 Absence of Undisclosed Liabilities. 11
2.7 Litigation. 12
2.8 Restrictions on Business Activities. 12
2.9 Governmental Authorization. 12
2.10 Title to Personal Property. 12
2.11 Intellectual Property. 13
2.12 Environmental Matters. 14
2.13 Taxes. 15
2.14 Employee Benefit Plans. 17
2.15 Certain Agreements Affected by the Merger. 19
2.16 Employee Matters. 19
2.17 Interested Party Transactions. 20
2.18 Insurance. 20
2.19 Compliance With Laws. 20
2.20 Minute Books. 21
2.21 Complete Copies of Materials. 21
2.22 Brokers' and Finders' Fees. 21
2.23 Shareholder Agreements; Irrevocable Proxies. 21
2.24 Vote Required. 21
2.25 Board Approval. 21
i
<PAGE>
2.26 Inventory. 22
2.27 Accounts Receivable. 22
2.28 Customers and Suppliers. 22
2.29 Material Contracts. 23
2.30 No Breach of Material Contracts. 23
2.31 Material Third Party Consents. 24
2.32 Real Property. 24
2.33 Product Releases. 25
2.34 Year 2000. 25
2.35 Information Statement. 25
2.36 Accounting and Tax Matters. 26
2.37 Export Control Laws. 26
2.38 Representations Complete. 26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MICREL AND MERGER SUB 27
3.1 Organization, Standing and Power. 27
3.2 Capital Structure. 27
3.3 Authority. 27
3.4 SEC Documents; Financial Statements. 28
3.5 Litigation. 28
3.6 Complete Copies of Materials. 29
3.7 Broker's and Finders' Fees. 29
3.8 Representations Complete. 29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME 29
4.1 Conduct of Business of ETC. 29
4.2 Restriction on Conduct of Business of ETC. 30
4.3 No Solicitation. 32
ARTICLE V ADDITIONAL AGREEMENTS 33
5.1 Information Statement. 33
5.2 Meeting of Shareholders. 33
5.3 Access to Information. 33
5.4 Confidentiality. 34
5.5 Public Disclosure. 34
5.6 Consents; Cooperation. 34
5.7 Shareholder Voting Agreement and Proxies; Shareholder
Representation Agreement. 35
5.8 Legal Requirements. 36
5.9 Blue Sky Laws. 36
5.10 Employee Benefit Plans. 36
5.11 Escrow Agreement. 37
ii
<PAGE>
5.12 Form S-8. 37
5.13 Listing of Additional Shares. 38
5.14 Employees and Non-Compete Agreements. 38
5.15 Expenses. 38
5.16 Treatment as Reorganization. 38
5.17 Best Efforts and Further Assurances. 38
5.18 Pooling Accounting. 39
5.19 Pooling Letter. 39
5.20 Notices. 39
5.21 Real Property and Title Matters. 39
5.22 Shareholder Waivers and Terminations. 40
ARTICLE VI CONDITIONS TO THE MERGER 41
6.1 Conditions to Obligations of Each Party to Effect the Merger. 41
6.2 Additional Conditions to Obligations of ETC. 42
6.3 Additional Conditions to the Obligations of Micrel. 42
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 44
7.1 Termination. 44
7.2 Effect of Termination. 45
7.3 Amendment. 46
7.4 Extension; Waiver. 46
ARTICLE VIII ESCROW AND INDEMNIFICATION 46
8.1 Escrow Fund. 46
8.2 Indemnification. 46
8.3 Payment for Micrel Damages. 48
8.4 Escrow Period. 48
8.5 Claims upon Escrow Fund. 48
8.6 Objections to Claims. 48
8.7 Resolution of Conflicts; Arbitration. 49
8.8 Shareholders' Agent. 50
8.9 Actions of the Shareholders' Agent. 51
8.10 Third-Party Claims. 51
8.11 Voting Rights and Cash Distributions With Respect to
Escrow Shares. 51
ARTICLE IX GENERAL PROVISIONS 51
9.1 Non-Survival at Effective Time. 51
9.2 Notices. 52
9.3 Interpretation. 53
9.4 Counterparts; Facsimile Delivery. 53
9.5 Entire Agreement; Nonassignability; Parties in Interest. 54
9.6 Severability. 54
iii
<PAGE>
9.7 Remedies Cumulative. 54
9.8 Governing Law. 54
9.9 Rules of Construction. 54
SCHEDULES
Schedule 2.1 - ETC Equity Interests
Schedule 2.2 - ETC Securityholders
Schedule 2.3 - Authority
Schedule 2.4 ETC Financial Statements
Schedule 2.5 - Absence of Certain Changes
Schedule 2.6 - Undisclosed Liabilities
Schedule 2.7 - ETC Litigation
Schedule 2.8 - Restrictions on Business Activities
Schedule 2.9 - Governmental Authorizations
Schedule 2.10 - ETC Assets
Schedule 2.11 - ETC Intellectual Property
Schedule 2.12 - Environmental Matters
Schedule 2.13 ETC Tax Returns
Schedule 2.14 - ETC Employee Plans
Schedule 2.15 - Certain Agreements Affected By the Merger
Schedule 2.16 - Employee Matters
Schedule 2.17 - Interested Party Transactions
Schedule 2.18 - Insurance
Schedule 2.26 - Inventory
Schedule 2.27 - Accounts Receivable
Schedule 2.28 - Customers and Suppliers
Schedule 2.29 - List of Material Contracts
Schedule 2.31 - Material Third Party Consents
Schedule 2.32 - Owned Real Property
Schedule 2.33 - Product Releases
Schedule 2.37 - Export Control Laws
Schedule 5.7 - List of Affiliates
Schedule 5.10 - Holders of Outstanding ETC Options
Schedule 5.12(a) - S-8 Participants
Schedule 5.12(b) - Ineligible S-8 Participants
Schedule 5.14 - List of Persons Entering Into Non-Competition Agreements
iv
<PAGE>
EXHIBITS
Exhibit A - Articles of Merger
Exhibit B - Shareholder Voting Agreement
Exhibit C - Confidentiality Agreement
Exhibit D - Shareholder Representation Agreement
Exhibit E - Escrow Agreement
Exhibit F - Non-Competition and Non-Disclosure Agreement
Exhibit G - ETC's Legal Opinion
Exhibit H - FIRPTA Notice
Exhibit I - IRS Notice
Exhibit J ETC Disclosure Schedule
Exhibit K Release and Waiver and Consent to Assumption of ETC Stock
Option Plans
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement") is
made as of April 4, 2000 (the "Execution Date") by and among MICREL,
INCORPORATED, a California corporation ("Micrel"), ETC ACQUISITION SUB, INC.,
an Iowa corporation ("Merger Sub"), ELECTRONIC TECHNOLOGY CORPORATION, an
Iowa corporation ("ETC"), and Gary J. Roling as Shareholders' Agent (as
defined in Section 8.8).
RECITALS
A. The Boards of Directors of Micrel, Merger Sub and ETC each have
determined that the acquisition of ETC by Micrel through the merger of Merger
Sub with and into ETC pursuant to the terms and subject to the conditions set
forth herein (the "Merger") is in the best interests of their respective
companies and shareholders.
B. Merger Sub is a wholly-owned subsidiary of Micrel.
C. Pursuant to the Merger, among other things, each outstanding share of
capital stock of ETC ("ETC Capital Stock") shall be converted into shares of
common stock of Micrel, at the rate set forth herein.
D. ETC and Micrel desire to make certain representations, warranties,
covenants and other agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code.
F. The parties intend that for financial accounting purposes the Merger
shall be accounted for as a pooling-of-interests.
G. As an inducement to Micrel to enter into this Agreement, the officers
and directors and certain of the shareholders of ETC have previously entered
into an agreement to vote the shares of ETC's Capital Stock owned by such
person to approve the Merger.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to and in accordance with the terms and
conditions set forth in this Agreement, at the "Effective Time" (as defined in
Section 1.2 hereof), Merger Sub shall be merged with and into ETC, which shall
be the surviving corporation (the "Surviving Corporation") in the Merger, and
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the separate existence of Merger Sub shall thereupon cease. The name of the
Surviving Corporation shall remain "Electronic Technology Corporation." The
Merger shall have the effects set forth in the applicable provisions of the Iowa
Business Corporation Act ("Iowa Law").
1.2 Closing; Effective Time.
The closing of the transactions contemplated hereby (the "Closing") shall
take place as soon as practicable after the satisfaction or waiver of each of
the conditions set forth in Article VI hereof or at such other time as the
parties hereto agree (the "Closing Date"). The Closing shall take place at
the offices of Morrison & Foerster, LLP, 755 Page Mill Road, Palo Alto,
California, or at such other location as the parties hereto agree. In
connection with the Closing, the parties hereto shall cause the Merger to be
consummated by filing the articles of merger, in the form attached hereto as
Exhibit A (the "Articles of Merger"), together with the required officers'
certificates, with the Secretary of State of the State of Iowa, in accordance
with the relevant provisions of Iowa Law (the time of such filing with the
Secretary of State of Iowa being the "Effective Time").
1.3 Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement, the Articles of Merger and the applicable provisions of Iowa
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of ETC and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of ETC and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation
of ETC, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by Iowa Law and such Articles of Incorporation; provided
that such Articles of Incorporation shall be amended and restated as of the
Effective Time in form and substance reasonably satisfactory to Micrel.
(b) The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 Directors and Officers.
At the Effective Time, the directors of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the directors of the
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified. The officers of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the officers of the
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
1.6 Effect on Capital Stock.
(a) Definitions.
ETC Common Stock shall mean shares of the common stock of ETC.
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ETC Options shall mean any and all options, warrants, rights or
other convertible securities to purchase or otherwise acquire shares of ETC
Common Stock, whether or not presently exercisable or subject to additional
conditions prior to exercise.
Exchange Ratio shall mean a number equal to the quotient obtained
by dividing (i) the Total Consideration by (ii) the Total Outstanding Shares.
Micrel Common Stock shall mean unregistered shares of the common
stock of Micrel, no par value.
Micrel Stock Price shall mean the average of the closing prices
for a share of Micrel Common Stock as quoted on the Nasdaq Stock Market for
the ten (10) trading days immediately preceding and ending on the trading day
that is one (1) calendar day prior to the Execution Date.
Total Consideration shall mean that number of unregistered shares
of Micrel Common Stock obtained by dividing (i) $8,618,095 by (ii) the Micrel
Stock Price.
Total Outstanding Shares shall mean the aggregate number of
shares of ETC Common Stock outstanding immediately prior to the Effective
Time, assuming exercise or conversion of all ETC Options.
(b) Conversion of ETC Capital Stock. By virtue of the
Merger and without any action on the part of Micrel, ETC, Merger Sub or the
holders of any of ETC's securities, at the Effective Time, each share of ETC
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding any shares cancelled pursuant to Section 1.6(c) and excluding any
Dissenting Shares (as defined in Section 1.6(g) below)) will be cancelled and
extinguished and automatically converted into the right to receive that
number of shares of (or fraction thereof) Micrel Common Stock equal to the
Exchange Ratio; provided that the maximum number of shares of Micrel Common
Stock to be issued (including Micrel Common Stock to be reserved for issuance
upon exercise of ETC Options assumed by Micrel) in exchange for the
acquisition by Micrel of all outstanding ETC Capital Stock and all unexpired
and unexercised outstanding options and warrants to acquire ETC Capital Stock
shall not be more than $8,618,095 divided by the Micrel Stock Price, reduced
as a result of any Dissenting Shares (as defined below). No adjustment shall
be made in the number of shares of Micrel Common Stock issued in the Merger
as a result of (x) any increase or decrease in the market price of Micrel
Common Stock prior to the Effective Time, or (y) any cash proceeds received
by ETC from the date hereof to the Closing Date pursuant to the exercise of
currently outstanding ETC Options.
(c) Cancellation of ETC Capital Stock Owned by ETC. At
the Effective Time, all shares of ETC Capital Stock that are owned by ETC
shall be cancelled and extinguished without any conversion thereof.
(d) ETC Stock Option Plans. At the Effective Time, ETC's
1997 Stock Incentive Plan, Incentive Stock Option Plan of 1996 and Incentive
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Stock Option Plan of 1995 (the "ETC Stock Option Plans") and all ETC Options
then outstanding under the ETC Stock Option Plans shall be assumed by Micrel
in accordance with Section 5.10.
(e) Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Micrel Common Stock or ETC Capital Stock), reorganization,
recapitalization or other like change with respect to Micrel Common Stock or
ETC Capital Stock occurring after the date hereof and prior to the Effective
Time.
(f) Fractional Shares. No fraction of a share of Micrel
Common Stock will be issued, but in lieu thereof each holder of shares of ETC
Capital Stock who would otherwise be entitled to a fraction of a share of
Micrel Common Stock (after aggregating all fractional shares of Micrel Common
Stock to be received by such holder) shall receive from Micrel an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Micrel Stock Price, less any amount required
to be withheld under foreign, federal, state or local tax laws.
(g) Dissenters' Rights. Notwithstanding any provisions
of this Agreement to the contrary, any shares of ETC Common Stock held by a
holder who has exercised such holder's dissenters' rights in accordance with
Iowa Law and who, as of the Effective Time, has not effectively withdrawn or
lost such dissenters' rights ("Dissenting Shares"), shall not be converted
into or represent a right to receive the consideration described in Section
3.1, but the holder of the Dissenting Shares shall only be entitled to such
rights as are granted by Iowa Law. Notwithstanding the above, if any holder
of shares of ETC Common Stock who demands dissenters' rights with respect to
such shares shall effectively withdraw or lose (through the failure to
perfect or otherwise) such holder's dissenters' rights pursuant to Iowa Law,
then, as of the Effective Time or the occurrence of such withdrawal or loss
event, such holder's shares shall automatically be converted into and
represent only the right to receive the consideration described in Section
1.6(b) hereof upon surrender of the applicable certificates as provided
herein. ETC agrees that, except with the prior written consent of Micrel, or
as required under Iowa Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each
holder of Dissenting Shares ("Dissenting Shareholder") who, pursuant to the
provisions of Iowa Law, becomes entitled to payment of the fair value for
shares of ETC Capital Stock shall receive payment therefor (but only after
the value therefor shall have been agreed upon or finally determined pursuant
to such provisions). If, after the Effective Time, any Dissenting Shares
shall lose their status as Dissenting Shares, Micrel shall issue and deliver,
upon surrender by such shareholder of the certificate or certificates
representing shares of ETC Capital Stock, the number of shares of Micrel
Common Stock to which such shareholder would otherwise be entitled under this
Section 1.6 and the Articles of Merger less the number of shares allocable to
such shareholder that have been deposited in the Escrow Fund (as defined
below) in respect of such shares of Micrel Common Stock pursuant to Section
1.7(c) and Article VIII hereof.
(h) Capital Stock of Merger Sub. Each share of common
stock of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one (1) validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
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Each stock certificate of Merger Sub evidencing ownership of any such shares
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.7 Surrender of Certificates.
(a) Exchange Agent. Micrel's transfer agent, ChaseMellon
Shareholder Services, shall act as exchange agent (the "Exchange Agent") in
the Merger.
(b) Micrel to Provide Common Stock and Cash. Promptly
after the Effective Time, Micrel shall make available to the Exchange Agent
for exchange in accordance with this Article I, through such reasonable
procedures as Micrel may adopt, (i) the shares of Micrel Common Stock
issuable pursuant to Section 1.6(b) (provided that delivery of any shares
that are subject to vesting shall be in book entry form only until such
vesting restrictions have lapsed) in exchange for shares of ETC Capital Stock
outstanding immediately prior to the Effective Time less the number of shares
of Micrel Common Stock equal to ten percent (10%) of the Total Consideration
to be deposited into an escrow fund (the "Escrow Fund") pursuant to the
requirements of Article VIII, and (ii) cash in an amount sufficient to permit
payment of cash in lieu of fractional shares pursuant to Section 1.6(f), less
any amount required to be withheld from such cash under foreign, federal,
state or local tax laws.
(c) Exchange Procedures.
(i) Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of ETC Capital Stock, whose
shares were converted into the right to receive shares of Micrel Common Stock
(and cash in lieu of fractional shares, less any amount required to be
withheld under foreign, federal, state or local tax laws) pursuant to Section
1.6, (1) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon receipt of the Certificates by the Exchange Agent, and shall be in such
form and have such other provisions as Micrel may reasonably specify), and
(2) instructions for use in effecting the surrender of the Certificates in
exchange for certificates (or book entries in the case of shares that have
not yet vested) representing shares of Micrel Common Stock (and cash in lieu
of fractional shares, less any amount required to be withheld from such cash
under foreign, federal, state or local tax laws).
(ii) Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Micrel, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate (or a book entry in the case of shares that have not yet vested
in full) representing the number of whole shares of Micrel Common Stock less
the number of shares of Micrel Common Stock to be deposited in the Escrow
Fund on such holder's behalf pursuant to Article VIII hereof and payment in
lieu of fractional shares which such holder has the right to receive pursuant
to Section 1.6, and the Certificate so surrendered shall forthwith be
cancelled.
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(iii) As soon as practicable after the Effective
Time, and subject to and in accordance with the provisions of Article VIII
hereof, Micrel shall cause to be distributed to the Escrow Agent (as defined
in Article VIII hereof) a certificate or certificates representing ten
percent (10%) of the shares of Micrel Common Stock issued in the Merger (the
"Escrow Shares") which shall be registered in the name of the Escrow Agent as
nominee for the holders of Certificates cancelled pursuant to this Section
1.7. The Escrow Shares shall be vested shares not subject to any repurchase
rights, shall be held in escrow and shall be available to compensate Micrel
for certain damages as provided in Article VIII. To the extent not used for
such purposes, such shares shall be released, all as provided in Article VIII
hereof.
(iv) In the event that any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or destroyed, the
Exchange Agent will issue or cause to be issued in exchange for such lost,
stolen or destroyed Certificate, a new certificate into which the shares of
such shareholder's ETC Capital Stock are converted on the Effective Date
and/or a check in respect of any fractional share interests or dividends or
distributions which such person shall be entitled to receive pursuant to
Section 1.6 to be delivered to such shareholder. When authorizing such
issuance in exchange therefor, Micrel and/or the Exchange Agent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to give Micrel and/or the
Exchange Agent a reasonable form of indemnity, as it shall direct, against
any claim that may be made against Micrel or the Exchange Agent with respect
to the Certificate alleged to have been lost, stolen or destroyed.
(v) If any new certificate is to be issued in a
name other than the name in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the
shareholder requesting such exchange shall (i) pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of new certificate
in a name other than that of the registered holder of the Certificate
surrendered, or (ii) establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Micrel Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Micrel Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificate representing whole shares of Micrel Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the
amount of any such dividends or other distributions with a record date after
the Effective Time theretofore payable (but for the provisions of this
Section 1.7(d)) with respect to such shares of Micrel Common Stock.
(e) Transfers of Ownership. If any certificate for
shares of Micrel Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that the Certificate so surrendered
will be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange will have paid to Micrel or any agent
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designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Micrel Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Micrel or any agent designated by it that
such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.7, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to any person for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section
1.7 shall also apply to Dissenting Shares that lose their status as such,
except that the obligations of Micrel under this Section 1.7 shall commence
on the date of loss of such status and the holder of such shares shall be
entitled to receive in exchange for such shares the number of shares of
Micrel Common Stock and cash in lieu of any fractional shares to which such
holder is entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in ETC Capital Stock.
All shares of Micrel Common Stock issued upon the surrender for exchange of
shares of ETC Capital Stock in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of ETC
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of ETC Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Article
I.
1.9 Tax and Accounting Consequences.
It is intended by the parties hereto that the Merger shall (a) constitute a
reorganization within the meaning of Section 368 of the Code and (b) qualify
for accounting treatment as a pooling-of-interests.
1.10 Exemption from Registration.
The shares of Micrel Common Stock to be issued in connection with the
Merger will be issued in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), by reason of
Section 4(2) thereof. Micrel shall use commercially reasonable efforts to
prepare and file, as promptly as practicable, and, in any event, within
forty-five (45) business days following the Closing, a registration statement
(the "Registration Statement") with the Securities and Exchange Commission
(the "SEC") covering the resale of such shares of Micrel Common Stock issued
in connection with the Merger and Micrel shall use commercially reasonable
efforts to cause such Registration Statement to become effective as promptly
as practicable after filing and to keep such Registration Statement effective
until two (2) years after the Effective Time. Micrel's obligations in the
preceding sentence are subject to the condition that the holders of ETC
Capital Stock provide Micrel promptly, but in no event more than five (5)
business days after the Closing, all information relating to them for
inclusion in the Registration Statement.
1.11 Taking of Necessary Action; Further Action
If, at any time after the Effective Time, any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
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Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of ETC, the officers and
directors of ETC, Micrel and the Surviving Corporation are fully authorized
in the name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action, so long as such action is not
inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ETC
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, prospects, operations or results of operations of such
entity or group of entities. In this Agreement, any reference to a "Material
Adverse Effect" with respect to any entity or group of entities means any
event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business,
prospects, operations or results of operations of such entity and its
subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "knowledge" means actual
knowledge of such party's officers and directors and provided that such
persons shall have made due and diligent inquiry of those employees of such
party whom such officers and directors reasonably believe would have actual
knowledge of the matters represented.
Except as disclosed in a document of even date herewith attached as Exhibit J
to this Agreement and delivered by ETC to Micrel prior to the execution and
delivery of this Agreement and referring by section number to the
representations and warranties in this Agreement (the "ETC Disclosure
Schedule"), ETC represents and warrants to Micrel as follows:
2.1 Organization, Standing and Power.
ETC is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. ETC has the corporate
power to own its properties and to carry on its business as now being
conducted and as currently proposed to be conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which the failure
to be so qualified and in good standing would have a Material Adverse Effect
on ETC. ETC has delivered a true and correct copy of the Articles of
Incorporation and Bylaws or other charter documents, as applicable, of ETC,
each as amended to date, to Micrel. ETC is not in violation of any of the
provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents. Except as set forth on Schedule 2.1 to the ETC
Disclosure Schedule, ETC does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
2.2 Capital Structure.
The authorized capital stock of ETC consists of 2,000,000 shares of Common
Stock, no par value, of which 785,547 shares are issued and outstanding.
There are no other outstanding shares of capital stock or voting securities
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and no outstanding commitments to issue any shares of capital stock or voting
securities, other than pursuant to the exercise of options outstanding as of
such date under the ETC Stock Option Plans. Attached to or as set forth in
Schedule 2.2 to the ETC Disclosure Schedule is a true and correct list of
ETC's shareholders and any persons with rights to acquire ETC securities,
which list will be promptly updated from time to time prior to Closing to
reflect any changes thereto (which changes are in any event subject to the
restrictions imposed under Section 4.2 below). All outstanding shares of ETC
Capital Stock are duly authorized, validly issued, fully paid and non-
assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and, except as
disclosed on Schedule 2.2 hereof, are not subject to preemptive rights or
rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of ETC or any agreement to which ETC is a party or by which it is
bound. ETC has reserved 86,000 shares of Common Stock for issuance to
employees and consultants pursuant to the ETC Stock Option Plans, of which
5,280 shares have been issued pursuant to option exercises or direct stock
purchases, 67,970 shares are subject to outstanding, unexercised options, and
12,750 shares are available for issuance thereunder. Except for (i) the
rights created pursuant to this Agreement and (ii) ETC's right to repurchase
any unvested shares under the ETC Stock Option Plans, there are no other
options, warrants, calls, rights, commitments or agreements of any character
to which ETC is a party or by which it is bound, obligating ETC to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of ETC or obligating ETC
to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. Except for the agreements contemplated by this
Agreement and the agreements set forth on Schedule 2.2 to the ETC Disclosure
Schedule, there are no contracts, commitments or agreements relating to
voting, purchase or sale of ETC Capital Stock (i) between or among ETC and
any of its securityholders and (ii) to ETC's knowledge, between or among any
of ETC's securityholders. As of the Effective Time, the current holders of
ETC Options shall have consented to the assumption of the ETC Stock Option
Plans and the ETC Options and the substitution of options to purchase Micrel
Common Stock as provided for in this Agreement. Except as set forth on
Schedule 2.2, none of the outstanding options permit any accelerated vesting
or exercisability of those options by reason of the Merger or any other
transactions contemplated by this Agreement. True and complete copies of all
agreements and instruments relating to or issued under the ETC Stock Option
Plans have been provided to Micrel and such agreements and instruments have
not been amended, modified or supplemented, and, except as otherwise
expressly contemplated herein, there are no agreements to amend, modify or
supplement such agreements or instruments in any case from the form provided
to Micrel. All outstanding shares of ETC Capital Stock were issued in
compliance with all applicable federal and state securities laws.
2.3 Authority.
ETC has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of ETC. This Agreement has been duly executed
and delivered by ETC and constitutes the valid and binding obligation of ETC
enforceable against ETC in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditors'
rights generally and by general principles of equity. Except as disclosed on
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Schedule 2.3, the execution and delivery of this Agreement by ETC does not,
and the execution of the agreements contemplated by this Agreement and the
consummation of the transactions contemplated hereby will not, conflict with,
or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any benefit under (i) any
provision of the Articles of Incorporation or Bylaws of ETC, as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to ETC or any of its properties
or assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to ETC in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the Articles of
Merger, together with the required officers' certificates, as provided in
Section 1.2; (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; (iii)
such filings as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR"); and (iv) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or made, would not have a Material Adverse Effect on ETC and would not
prevent, or materially alter or delay any of the transactions contemplated by
this Agreement.
2.4 Financial Statements.
ETC has delivered to Micrel its unaudited financial statements as at and
for the twelve-month periods ended December 31, 1998 and December 31, 1999
(balance sheet and statement of income) (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles, except that the Financial Statements do not have notes
thereto, applied on a consistent basis throughout the periods indicated and
with each other. The Financial Statements were complete and correct in all
material respects as of their respective dates, and fairly present the
financial condition and operating results of ETC as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments.
ETC maintains and will continue to maintain an adequate system of internal
controls established and administered in accordance with generally accepted
accounting principles.
2.5 Absence of Certain Changes.
Except as disclosed on Schedule 2.5, since December 31, 1999 (the "ETC
Balance Sheet Date"), ETC has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change,
event or condition (whether or not covered by insurance) that has resulted
in, or might reasonably be expected to result in, a Material Adverse Effect
to ETC; (ii) any acquisition, sale or transfer of any material asset of ETC;
(iii) any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by ETC or any revaluation by
ETC of any of its assets; (iv) any declaration, setting aside, or payment of
a dividend or other distribution with respect to the shares of ETC, or any
direct or indirect redemption, purchase or other acquisition by ETC of any of
its shares of capital stock, other than repurchases of stock as a result of
termination of employees in accordance with the ETC Stock Option Plans; (v)
any material contract entered into by ETC, or any material amendment or
termination of, or default under, any material contract to which ETC is a
party or by which it is bound; (vi) any amendment or change to the Articles
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of Incorporation or Bylaws of ETC; (vii) any increase in or modification of
the compensation or benefits payable or to become payable by ETC to any of
its directors or employees or (viii) any negotiation or agreement by ETC to
do any of the things described in the preceding clauses (i) through (vii)
(other than negotiations with Micrel and its representatives regarding the
transactions contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities.
ETC has no material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the Balance Sheet included in the Financial Statements as of
December 31, 1999 (the "ETC Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the ETC
Balance Sheet under generally accepted accounting principles, (iii) those
incurred in the ordinary course of business since the ETC Balance Sheet Date
and consistent with past practice; (iv) those incurred in connection with the
execution of this Agreement; and (v) those disclosed on Schedule 2.6.
2.7 Litigation.
Except as set forth in Schedule 2.7 of the ETC Disclosure Schedule, there
is no private or governmental action, suit, proceeding, claim, arbitration or
investigation pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of ETC, threatened against ETC or any of its
properties or officers or directors (in their capacities as such). There is
no judgment, decree or order against ETC, or, to the knowledge of ETC, any of
its directors or officers (in their capacities as such), that could prevent,
enjoin, or materially alter or delay any of the transactions contemplated by
this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on ETC. Schedule 2.7 of the ETC Disclosure Schedule also
lists all litigation that ETC has pending against other parties.
2.8 Restrictions on Business Activities.
Except as disclosed on Schedule 2.8, ETC is not a party to, nor does ETC
have any knowledge of, any agreement, judgment, injunction, order or decree
binding upon ETC which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any current or future business
practice of ETC, any acquisition of property by ETC or the conduct of
business by ETC as currently conducted or as proposed to be conducted by ETC.
2.9 Governmental Authorization.
Except as disclosed on Schedule 2.9, ETC has obtained each federal, state,
county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which ETC
currently operates or holds any interest in any of its properties or (ii)
that is required for the operation of ETC's business or the holding of any
such interest ((i) and (ii) herein collectively called "ETC Authorizations"),
and all of such ETC Authorizations are in full force and effect, except where
the failure to obtain or have any such ETC Authorizations could not
reasonably be expected to have a Material Adverse Effect on ETC.
2.10 Title to Personal Property.
ETC has good and marketable title to all of its personal properties,
interests in personal properties and assets, reflected in the ETC Balance
Sheet or acquired after the ETC Balance Sheet Date, which assets are listed
on Schedule 2.10 (except properties, interests in properties and assets sold
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or otherwise disposed of since the ETC Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of
current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby,
or otherwise materially impair business operations involving such properties
and (iii) liens securing debt which is reflected on the ETC Balance Sheet.
The plants, property and equipment of ETC that are used in the operations of
its business are in good operating condition and repair, subject to normal
wear and tear. All personal properties used in the operations of ETC are
reflected in the ETC Balance Sheet to the extent generally accepted
accounting principles require the same to be reflected.
2.11 Intellectual Property.
(a) ETC owns, licenses or has valid and marketable title
in and rights to all the U.S. or foreign patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, domain name, fictitious business name, service mark (whether registered
or unregistered), service mark application, copyright (whether registered or
unregistered and whether or not relating to a published work), copyright
registration application, maskwork, maskwork registration application, trade
secret, know how, rights in data or databases, invention, or other
proprietary right, all licenses, sublicenses and agreements related to the
foregoing, and any other intellectual property right or intangible asset
("Intellectual Property") that are used, proposed to be used, or necessary
for the conduct of the business of ETC as currently conducted or as proposed
to be conducted by ETC, free and clear of all liens and encumbrances. Except
as disclosed on Schedule 2.11, ETC has not (i) licensed any of its
Intellectual Property in source code form to any party; (ii) entered into any
exclusive agreements relating to its Intellectual Property with any party; or
(iii) entered into any source code escrow agreements. The source code and
system documentation relating to any software included in the Intellectual
Property have at all times been maintained in confidence and have been
disclosed only to employees and consultants having a "need to know" of the
contents thereof in connection with their duties to ETC. Such employees and
consultants have executed appropriate confidentiality agreements in
connection therewith.
(b) Schedule 2.11 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks,
included in the Intellectual Property, including the jurisdictions in which
each such Intellectual Property right has been issued or registered or in
which any application for such issuance and registration has been filed, (ii)
all licenses, sublicenses and other agreements as to which ETC is a party and
pursuant to which any person is authorized to use any Intellectual Property,
and (iii) all licenses, sublicenses and other agreements as to which ETC is a
party and pursuant to which ETC is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of any ETC
product.
(c) To the knowledge of ETC, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual
Property rights of ETC, or any Third Party Intellectual Property Rights, by
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any third party, including any employee or former employee of ETC. Except as
disclosed on Schedule 2.11, ETC has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
purchase orders or license agreements arising in the ordinary course of
business.
(d) ETC is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or
other agreement to which it is a party relating to the Intellectual Property
or Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks and
copyrights held by ETC are valid and subsisting. Except as disclosed on
Schedule 2.11, ETC has conducted its business without infringement or claim
of infringement of any license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property rights of others. To
the knowledge of ETC and except as disclosed on Schedule 2.11, ETC is not
infringing and has not at any time infringed or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement of any Intellectual Property or other proprietary
right owned or used by any other person or third party. ETC has not been
sued in any suit, action or proceeding which involves a claim of infringement
of any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party. To the knowledge
of ETC and except as disclosed on Schedule 2.11, the manufacturing,
marketing, licensing or sale of ETC's products do not infringe any patent,
trademark, service mark, copyright, trade secret or other proprietary right
of any third party. ETC has not brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party.
(f) ETC has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that ETC does not
already own by operation of law.
(g) ETC has taken necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by ETC by or to a third party has been
pursuant to the terms of a written agreement between ETC and such third
party. All use, disclosure or appropriation of Confidential Information not
owned by ETC has been pursuant to the terms of a written agreement between
ETC and the owner of such Confidential Information, or is otherwise lawful.
(h) Except as set forth on Schedule 2.11 of the
Disclosure Schedule, ETC knows of no actions that must be taken by ETC within
sixty (60) days of the Closing Date that, if not taken, will result in the
loss of any Intellectual Property, including the payment of any registration,
maintenance or renewal fees or the filing of any responses to Patent and
Trademark Office office actions, documents, applications or certificates for
the purposes of obtaining, maintaining, perfecting or preserving or renewing
any Intellectual Property.
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2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous
or toxic substances, materials, wastes, pollutants or contaminants, or which
are intended to assure the safety of employees, workers or other persons,
including the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without
limitation, those substances, materials and wastes defined in or regulated
under any Environmental and Safety Laws.
(iii) "Property" shall mean all real property owned
by ETC currently, including the ETC Property, (as defined in Section 2.32).
(iv) "Facilities" shall mean all buildings and
improvements on the Property of ETC.
(b) ETC represents and warrants as follows: (i) no
methylene chloride or asbestos is contained in or has been used at or
released from the Facilities; (ii) all Hazardous Materials and wastes have
been disposed of in accordance with all Environmental and Safety Laws; and
(iii) ETC has received no notice (verbal or written) of any noncompliance of
the Facilities or its past or present operations with Environmental and
Safety Laws; (iv) no notices, administrative actions or suits are pending or
threatened relating to a violation of any Environmental and Safety Laws; (v)
ETC is not a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), or state
analog statute, arising out of events occurring prior to the Closing Date;
(vi) there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii)
there have not been in the past, and are not now, any underground tanks or
underground improvements at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil wells;
(viii) there are no polychlorinated biphenyls (PCBs) deposited, stored,
disposed of or located on the Property or Facilities or any equipment on the
Property containing PCBs at levels in excess of 50 parts per million; (ix)
there is no formaldehyde on the Property or in the Facilities, nor any
insulating material containing urea formaldehyde in the Facilities; (x) the
Facilities and ETC's uses and activities therein have at all times complied
with all Environmental and Safety Laws; and (xi) ETC has all the permits and
licenses required to be issued under Federal, State or local laws regarding
Environmental and Safety Laws and are in full compliance with the terms and
conditions of those permits. Schedule 2.12 discloses the Phase I study
conducted at the Facilities from December 29, 1997 to January 16, 1998.
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2.13 Taxes.
(a) ETC has timely filed all Tax Returns (as defined
below) that it was required to file, and such Tax Returns are true, correct
and complete in all material respects. All Taxes (as defined below) shown to
be payable on such Tax Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and no other Taxes are
payable by ETC with respect to any period ending prior to the date of this
Agreement, whether or not shown due or reportable on such Tax Returns, other
than Taxes for which adequate accruals have been provided in its Financial
Statements. ETC has no material liability for unpaid Taxes accruing after
the date of its latest Financial Statements except for Taxes incurred in the
ordinary course of business. There are no liens for Taxes on the properties
of ETC, other than liens for Taxes not yet due and payable.
(b) Schedule 2.13 of the ETC Disclosure Schedule lists
all Tax Returns filed by ETC for taxable periods ending on or after December
31, 1995, indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are subject of audit. ETC has delivered or
made available to Micrel correct and complete copies of all Tax Returns
filed, examination reports, and statements of deficiencies assessed or agreed
to by ETC since its inception. ETC has not waived any statute of limitations
in respect of any Tax or agreed to an extension of time with respect to any
Tax assessment or deficiency.
(c) ETC is not a party to or bound by any tax indemnity
agreement, tax sharing agreement or similar contract. ETC is not a party to
any joint venture, partnership, or other arrangement or contract which could
be treated as a partnership or "disregarded entity" for United States federal
income tax purposes.
(d) ETC is not obligated under any agreement, contract or
arrangement that may result in the payment of any amount that would not be
deductible by reason of Section 280G or Section 404 of the Code.
(e) ETC has not been and will not be required to include
any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events
or accounting methods employed prior to the Merger. ETC has not filed or
will not file any consent to have the provisions of paragraph 341(f)(2) of
the Code (or comparable provisions of any state Tax laws) apply to ETC. ETC
has not filed any disclosures under Section 6662 or comparable provisions of
state, local or foreign law to prevent the imposition of penalties with
respect to any Tax reporting position taken on any Tax Return. ETC is not
currently and has not been a United States real property holding corporation
(within the meaning of Section 897(c)(2) of the Code) during the applicable
periods specified in Section 897(c)(1)(A)(ii) of the Code.
(f) For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
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occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any governmental entity (a "Tax Authority")
responsible for the imposition of any such tax (domestic or foreign), (ii)
any liability for the payment of any amounts of the type described in (i) as
a result of being a member of an affiliated, consolidated, combined or
unitary group for any Taxable period, and (iii) any liability for the payment
of any amounts of the type described in (i) or (ii) as a result of being a
transferee of or successor to any person or as a result of any express or
implied obligation to indemnify any other person. As used herein, "Tax
Return" shall mean any return, statement, report or form (including, without
limitation, estimated tax returns and reports, withholding tax returns and
reports and information reports and returns) required to be filed with
respect to Taxes.
(g) ETC has had in effect at all times since December 28,
1996 through the date immediately preceding the Effective Time a valid
election under Section 1361 of the Code (and any predecessor provision and
any similar provision of applicable state, local or other Tax law). ETC has
not incurred any liability for Taxes pursuant to Section 1374 or 1375 of the
Code (and any predecessor provision and any similar provision of applicable
state, local or other Tax law).
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to ETC and any
trade or business (whether or not incorporated) which is treated as a single
employer with ETC (an "ERISA Affiliate") within the meaning of Section
414(b), (c), (m) or (o) of the Code, (i) all material employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) each loan to a non-officer employee in
excess of $10,000, loans to officers and directors and any stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe
or employee benefit plans, programs or arrangements that apply to senior
management of ETC and that do not generally apply to all employees, and (v)
any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of ETC
of greater than $10,000 remain for the benefit of, or relating to, any
present or former employee, consultant or director of ETC (together, the "ETC
Employee Plans").
(b) ETC has furnished to Micrel a copy of each of the ETC
Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and any material employee communications
relating thereto) and has, with respect to each ETC Employee Plan which is
subject to ERISA reporting requirements, provided copies of the Form 5500
reports filed for the last three (3) plan years. Any ETC Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its
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qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
applied (or has time remaining in which to apply) to the Internal Revenue
Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination or has been
established under a standardized prototype plan for which an Internal Revenue
Service opinion letter has been obtained by the plan sponsor and is valid as
to the adopting employer. ETC has also furnished Micrel with the most recent
Internal Revenue Service determination or opinion letter issued with respect
to each such ETC Employee Plan, and nothing has occurred since the issuance
of each such letter which could reasonably be expected to cause the loss of
the tax-qualified status of any ETC Employee Plan subject to Code Section
401(a). ETC has also furnished Micrel with all registration statements and
prospectuses prepared in connection with each ETC Employee Plan. Any ETC
Employee Plan that is intended to be a simplified employee pension plan or
program has been established and maintained in a manner that entitles those
employees' individual retirement accounts to which ETC has made contributions
to the benefits of Section 408(k) of the Code.
(c) (i) None of the ETC Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person
other than as required under the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"); (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code,
with respect to any ETC Employee Plan, which could reasonably be expected to
have, in the aggregate, a Material Adverse Effect on ETC; (iii) each ETC
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules
and regulations (including ERISA and the Code), except as would not have, in
the aggregate, a Material Adverse Effect on ETC, and ETC or ERISA Affiliate
have performed all obligations required to be performed by them under, are
not in any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to, any of
the ETC Employee Plans; (iv) neither ETC nor any ERISA Affiliate is subject
to any liability or penalty under Sections 4976 through 4980 of the Code or
Title I of ERISA with respect to any of the ETC Employee Plans; (v) all
material contributions required to be made by ETC or ERISA Affiliate to any
ETC Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each ETC Employee
Plan for the current plan years; (vi) with respect to each ETC Employee Plan,
no "reportable event" within the meaning of Section 4043 of ERISA (excluding
any such event for which the thirty (30) day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no ETC
Employee Plan is covered by, and neither ETC nor any ERISA Affiliate has
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code; and (viii) each ETC Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance
with its terms, without liability to Micrel (other than ordinary
administrative expenses typically incurred in a termination event). With
respect to each ETC Employee Plan subject to ERISA as either an employee
pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, ETC has
prepared in good faith and timely filed all requisite governmental reports
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(which were true and correct as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such ETC
Employee Plan. No suit, administrative proceeding, action or other
litigation has been brought, or to the best knowledge of ETC is threatened,
against or with respect to any such ETC Employee Plan, including any audit or
inquiry by the IRS or United States Department of Labor. No payment or
benefit which will or may be made by ETC to any Employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(d) With respect to each ETC Employee Plan, ETC has
complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the regulations (including proposed regulations) thereunder
except to the extent that such failure to comply would not, in the aggregate,
have a Material Adverse Effect on ETC, (ii) the applicable requirements of
the Family Medical and Leave Act of 1993 and the regulations thereunder,
except to the extent that such failure to comply would not, in the aggregate,
have a Material Adverse Effect on ETC, and (iii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 and the
regulations (including proposed regulations) thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material
Adverse Effect on ETC.
(e) There has been no amendment to, written
interpretation or announcement (whether or not written) by ETC, any ERISA
Affiliate relating to, or change in participation or coverage under, any ETC
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in ETC's financial statements.
(f) ETC does not currently maintain, sponsor, participate
in or contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 4.12 of the Code.
(g) Neither ETC nor any ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(h) Neither ETC nor any ERISA Affiliate has any liability or is
threatened with any liability (whether joint or several) (i) for any excise
tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (ii)
for a fine under Section 502 of ERISA.
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2.15 Certain Agreements Affected by the Merger.
Except as disclosed on Schedule 2.15, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any director, officer, agent or employee of ETC or any other third party,
(ii) materially increase any benefits otherwise payable by ETC, or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits except as required under Code Section 411(d)(3).
2.16 Employee Matters.
ETC is in compliance in all material respects with all currently applicable
laws and regulations respecting employment, discrimination in employment,
terms and conditions of employment, wages, hours and occupational safety and
health and employment practices, and is not engaged in any unfair labor
practice. ETC has withheld all amounts required by law or by agreement to be
withheld from wages, salaries, and other payments to employees; and is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing. ETC is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other
benefits or obligations for employees (other than routine payments to be made
in the normal course of business and consistent with past practice). Except
as disclosed on Schedule 2.16, there are no pending claims against ETC under
any workers compensation plan or policy or for long term disability. There
are no controversies pending or, to the knowledge of ETC, threatened, between
ETC and any of its employees, which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic. ETC
is not a party to any collective bargaining agreement or other labor union
contract nor does ETC know of any activities or proceedings of any labor
union or organize any such employees. To ETC's knowledge, no employees of
ETC are in violation of any term of any employment contract, patent
disclosure agreement, enforceable noncompetition agreement, or any
enforceable restrictive covenant to a former employer relating to the right
of any such employee to be employed by ETC because of the nature of the
business conducted or presently proposed to be conducted by ETC or to the use
of trade secrets or proprietary information of others. No employees of ETC
have given notice to ETC, nor is ETC otherwise aware that any such employee
intends to terminate his or her employment with ETC.
2.17 Interested Party Transactions.
Except as disclosed on Schedule 2.17, ETC is not indebted to any director,
officer, employee or agent of ETC (except for amounts due as normal salaries
and bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to ETC.
2.18 Insurance.
ETC has policies of insurance and bonds of the type and in amounts
customarily carried by persons conducting businesses or owning assets similar
to those of ETC which policies are listed on Schedule 2.18. There is no
material claim pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and ETC is otherwise in compliance with the terms of
such policies and bonds. ETC has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
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2.19 Compliance With Laws.
ETC has complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its business or the
ownership or operation of its business, except for such violations or
failures to comply as could not be reasonably expected to have a Material
Adverse Effect on ETC.
2.20 Minute Books.
All minute books of ETC have been made available to Micrel and the minute
books contain a complete and accurate summary of all meetings of directors
and shareholders or actions by written consent since the time of
incorporation of ETC through the date of this Agreement, and reflect all
transactions referred to in such minutes accurately in all material respects.
There are no material actions taken by ETC or its board of directors or
shareholders which are not summarized or described in the minutes of ETC
provided to Micrel.
2.21 Complete Copies of Materials.
ETC has delivered true and complete copies of each document which has been
requested by Micrel or its counsel in connection with their legal and
accounting review of ETC.
2.22 Brokers' and Finders' Fees.
ETC has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.23 Shareholder Agreements; Irrevocable Proxies.
All of the persons and/or entities deemed "Affiliates" of ETC within the
meaning of Rule 145 and as defined in Rule 501 promulgated under the
Securities Act, and certain shareholders of ETC who collectively hold more
than fifty percent (50%) of the outstanding ETC Capital Stock have agreed in
writing to vote for approval of the Merger pursuant to voting agreements
attached hereto as Exhibit B ("Shareholder Voting Agreement"), and pursuant
to Irrevocable Proxies attached thereto as Exhibit A ("Irrevocable Proxies").
2.24 Vote Required.
The affirmative vote of the holders of a majority of the ETC Capital Stock
outstanding on the record date set for the ETC Shareholders Meeting is the
only vote of the holders of any of ETC's Capital Stock necessary to approve
this Agreement and the transactions contemplated thereby and hereby.
2.25 Board Approval.
The Board of Directors of ETC has (i) approved this Agreement and the
Merger, (ii) determined that the Merger is in the best interests of the
shareholders of ETC and is on terms that are fair to such shareholders and
(iii) recommended that the shareholders of ETC approve this Agreement and the
Merger.
2.26 Inventory.
The inventories shown on the Financial Statements or thereafter acquired by
ETC, consisted of items of a quantity and quality usable or salable in the
ordinary course of business. Since ETC Balance Sheet Date, ETC has continued
to replenish inventories in a normal and customary manner consistent with
past practices. ETC has not received written or oral notice that it will
experience in the foreseeable future any difficulty in obtaining, in the
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desired quantity and quality and at a reasonable price and upon reasonable
terms and conditions, the raw materials, supplies or component products
required for the manufacture, assembly or production of its products. The
values at which inventories are carried reflect the inventory valuation
policy of ETC, which is consistent with its past practice and in accordance
with generally accepted accounting principles applied on a consistent basis.
Since the Balance Sheet Date, due provision was made on the books of ETC in
the ordinary course of business consistent with past practices to provide for
all slow-moving, obsolete, or unusable inventories to their estimated useful
or scrap values and such inventory reserves are adequate to provide for such
slow-moving, obsolete or unusable inventory and inventory shrinkage. Except
as disclosed on Schedule 2.26, , ETC has no inventory in the distribution
channel and ETC has no commitments to purchase inventory.
2.27 Accounts Receivable.
Subject to any reserves set forth in the Financial Statements, the accounts
receivable shown on the Financial Statements represent bona fide claims
against debtors for sales and other charges, and are not subject to discount
except for normal cash and immaterial trade discounts. The amount carried
for doubtful accounts and allowances disclosed in the Financial Statements
was calculated in accordance with generally accepted accounting principles
and in a manner consistent with prior periods is sufficient to provide for
any losses which may be sustained on realization of the receivables.
Schedule 2.27 sets forth the amount of accounts receivable of ETC as of March
23, 2000.
2.28 Customers and Suppliers.
Except as disclosed on Schedule 2.28, no customer which individually
accounted for more than ten percent (10%) of ETC's gross revenues during the
twelve (12) months prior to the Execution Date, and no supplier of ETC has
cancelled or otherwise terminated, or made any written threat to ETC to
cancel or otherwise terminate its relationship with ETC, or has decreased
materially its services or supplies to ETC in the case of any such supplier,
or its usage of the services or products of ETC in the case of such customer,
and to ETC's knowledge, no such supplier or customer intends to cancel or
otherwise terminate its relationship with ETC or to decrease materially its
services or supplies to ETC or its usage of the services or products of ETC,
as the case may be. ETC has not knowingly breached, so as to provide a
benefit to ETC that was not intended by the parties, any agreement with, or
engaged in any fraudulent conduct with respect to, any customer or supplier
of ETC.
2.29 Material Contracts.
Except for the contracts and agreements described in Schedule 2.29
(collectively, the "Material Contracts"), ETC is not a party to or bound by
any material contract, including without limitation:
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(b) any continuing contract for the purchase of
materials, supplies, equipment or services involving in the case of any such
contact more than $50,000 over the life of the contract;
(c) any contract that expires or may be renewed at the
option of any person other than ETC so as to expire more than one (1) year
after the date of this Agreement;
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(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing transaction
of the type required to be capitalized in accordance with generally accepted
accounting principles;
(e) any contract for capital expenditures in excess of
$50,000 in the aggregate;
(f) any contract limiting the freedom of ETC to engage in
any line of business or to compete with any other Person as that term is
defined in the Exchange Act, as defined herein, or any confidentiality,
secrecy or non-disclosure contract;
(g) any contract pursuant to which ETC is a lessor of
real property or any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property;
(h) any contract with any person with whom ETC does not
deal at arm's length; or
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise)
or indebtedness of any other Person.
2.30 No Breach of Material Contracts.
All Material Contracts are in written form. ETC has performed all of the
obligations required to be performed by it and is entitled to all benefits
under, and is not alleged to be in default in respect of any Material
Contract. Each of the Material Contracts is in full force and effect,
unamended, and there exists no default or event of default or event,
occurrence, condition or act, with respect to ETC or to ETC's knowledge with
respect to the other contracting party, which, with the giving of notice, the
lapse of the time or the happening of any other event or conditions, would
become a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been delivered to
Micrel.
2.31 Material Third Party Consents.
Schedule 2.31 lists all contracts that require a novation or consent to the
Merger or change of control, as the case may be, prior to the Effective Time
so that such contracts may remain in full force and effect after the Closing
(the "Contracts Requiring Novation or Consent to Change of Control") and sets
forth every Contract Requiring Novation or Consent to Change of Control
which, if no novation occurs or if no consent to the Merger or change of
control is obtained, would have a Material Adverse Effect on Micrel's ability
to operate the business in the same manner as the business was operated by
ETC prior to the Effective Time.
2.32 Real Property.
(a) Schedule 2.32(a) contains the legal descriptions and
street addresses of all real property or any interest therein owned by ETC
(the parcels of real property identified on Schedule 2.32(a) are referred to
herein collectively as the "ETC Property"). Except for the ETC Property, ETC
has not owned any real property or any interest therein during the prior five
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(5) years. With respect to each such parcel of ETC Property: (i) ETC has good
and marketable title, free and clear of any covenants, conditions, easements
and exceptions other than the Permitted Exceptions (as defined in Section
5.22), and of any lien other than liens for real estate taxes not yet due and
payable, and (ii) the legal descriptions for the ETC Property contained in
the deeds thereof describe such parcels fully and adequately.
(b) ETC is not a party to any lease, license or similar
agreement for the use or occupancy of real estate.
(c) With respect to the ETC Property, (i) there are no
pending or, to the knowledge of ETC, threatened condemnation proceedings,
suits or administrative actions relating to any such parcel or other matters
affecting adversely the current use, occupancy or value thereof, (ii) no work
has been performed or is in progress by ETC or any third parties on any such
parcel, (iii) no materials have been furnished to any such parcel or any
portion thereof which might give rise to mechanic's, materialman's or other
liens against such property or any portion thereof, (iv) all improvements,
buildings and systems on any such parcel are in good repair and safe for
their current occupancy and use; (v) there are no contracts or agreements
(whether oral or written) relating to service, management or similar matters
which affect any such parcel, (vi) the buildings and improvements located on
each such parcel are located within the boundary lines of such parcel and are
not in violation of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and no such parcel or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval, regulation or
restrictions by any Governmental Entity, and do not encroach on any easement
which may burden the land; (vii) the land does not serve any adjoining
property for any purpose inconsistent with the use of the land; (viii) all
facilities located on each such parcel have received all approvals of
Governmental Entities (including licenses and permits) required in connection
with the ownership, operation or use thereof and have been operated and
maintained in accordance with applicable laws, ordinances, rules and
regulations; (ix) there are no contracts or agreements (whether oral or
written) granting to any party or parties the right of use or occupancy of
any such parcel, and there are no parties (other than ETC) in possession of
any such parcel; (x) there are no outstanding options or rights of first
refusal or similar rights to purchase any such parcel or any portion thereof
or interest therein, (xi) all facilities located on each such parcel are
supplied with utilities and other services necessary for their ownership,
operation or use, all of which services are adequate in accordance with all
applicable laws, ordinances, rules and regulations, and are provided via
public roads or via permanent, irrevocable, appurtenant easements benefiting
each such parcel, and (xii) each such parcel abuts on and has adequate direct
vehicular access to a public road and there is no pending or, to the
knowledge of ETC, threatened termination of such access.
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2.33 Product Releases.
ETC has provided Micrel a Schedule of Product Releases, which Schedule is
attached hereto as Schedule 2.33. ETC has a good faith reasonable belief
that it can achieve the release of products on the schedule described in
Schedule 2.33 and is not currently aware of any change in its circumstances
or other fact that has occurred that would cause it to believe that it will
be unable to meet such release schedule.
2.34 Year 2000.
None of the products and services sold, licensed, rendered, or otherwise
provided by ETC in the conduct of its businesses have malfunctioned, ceased
to function, generated materially incorrect data or produced materially
incorrect results (nor has ETC received any notice or other communication
regarding such a malfunction) when processing, providing or receiving (i)
date-related data from, into and between the Twentieth (20th) and Twenty-
First (21st) centuries, or (ii) date-related data in connection with any
valid date in the Twentieth (20th) and Twenty-First (21st) centuries, causing
a Material Adverse Effect on ETC.
2.35 Information Statement.
The information relating to ETC included in the information statement
mailed to shareholders of ETC in connection with the transactions
contemplated hereby (the "Information Statement") shall not, at the time the
Information Statement is mailed to shareholders of ETC and at all times
subsequent thereto (through and including the Effective Date), contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If, at any time prior to the Effective Time, any event or
information should be discovered by ETC which should be set forth in an
amendment to the Information Statement, ETC shall promptly inform Micrel.
Notwithstanding the foregoing, ETC makes no representation, warranty or
covenant with respect to any information supplied by Micrel which is
contained in the Information Statement.
2.36 Accounting and Tax Matters.
To ETC's knowledge, neither ETC nor any of its Affiliates has taken or
agreed to take any action, nor does ETC have knowledge of any fact or
circumstance, that would prevent Micrel from accounting for the business
combination to be effected by the Merger as a pooling-of-interests or prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
2.37 Export Control Laws.
ETC has conducted its export transactions in accordance with applicable
provisions of United States export control laws and regulations, including
but not limited to the Export Administration Act and implementing Export
Administration Regulations. Without limiting the foregoing, ETC represents
and warrants that:
(a) ETC has obtained all export licenses and other
approvals required for its exports of products, software and technologies
from the United States;
(b) ETC is in compliance with the terms of all applicable
export licenses or other approvals;
(c) There are no pending or, to ETC's knowledge,
threatened claims against ETC with respect to such export licenses or other
approvals;
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(d) To ETC's knowledge, there are no actions, conditions
or circumstances pertaining to ETC's export transactions that may give rise
to any future claims; and
(e) No consents or approvals for the transfer of export
licenses to Micrel are required, or such consents and approvals can be
obtained expeditiously without material cost.
2.38 Representations Complete.
None of the representations or warranties made by ETC herein or in any
Schedule hereto, including the ETC Disclosure Schedule, or in any certificate
furnished by ETC pursuant to this Agreement, when all such documents are
read together in their entirety, contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MICREL AND MERGER SUB
Micrel represents and warrants to ETC as follows:
3.1 Organization, Standing and Power.
Micrel and Merger Sub are corporations duly organized, validly existing and
in good standing under the laws of their respective jurisdictions of
organization. Micrel and Merger Sub each have the corporate power to own
their respective properties and to carry on their respective businesses as
now being conducted and as proposed to be conducted and are each duly
qualified to do business and are in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a
Material Adverse Effect on Micrel or Merger Sub. Neither Micrel nor Merger
Sub is in violation of any of the provisions of its respective Articles of
Incorporation or Bylaws or equivalent organizational documents.
3.2 Capital Structure.
The authorized capital stock of Micrel consists of 100,000,000 shares of
Common Stock with no par value, of which 41,600,091 shares were issued and
outstanding as of the close of business on March 9, 2000 and 5,000,000 shares
of Preferred Stock with no par value, of which no shares are issued and
outstanding. The shares of Micrel Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, and non-
assessable.
3.3 Authority.
Micrel and Merger Sub each have all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of each of Micrel and Merger Sub.
This Agreement has been duly executed and delivered by each of Micrel and
Merger Sub and constitutes the valid and binding obligations of Micrel and
Merger Sub enforceable against each in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium and
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other similar laws and equitable principles relating to or limiting
creditors' rights generally and by general principles of equity. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a benefit under (i) any provision of the
Articles of Incorporation or Bylaws of Micrel or Merger Sub, as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Micrel, Merger Sub
or their respective properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to Micrel or Merger Sub
in connection with the execution and delivery of this Agreement by Micrel and
Merger Sub or the consummation by Micrel and Merger Sub of the transactions
contemplated hereby, except for (i) the filing of the Articles of Merger,
together with the required officers' certificates, as provided in Section
1.2, (ii) the filing of a Form 8-K with the SEC and National Association of
Securities Dealers ("NASD") within 15 days after the Closing Date, (iii) the
filing of a registration statement on Form S-3 with the SEC within 45 days
after the Closing Date covering the resale of the shares of Micrel Common
Stock issued in the Merger, (iv) any filings as may be required under
applicable federal, state and local securities laws and the securities laws
of any foreign country, (v) such filings as may be required under HSR, (vi)
the filing with the Nasdaq Stock Market of a Notification Form for Listing of
Additional Shares with respect to the shares of Micrel Common Stock issuable
upon conversion of the ETC Common Stock in the Merger and upon exercise of
the options under the ETC Stock Option Plans assumed by Micrel, (vii) the
filing of a registration statement on Form S-8 with the SEC, or other
applicable form covering the shares of Micrel Common Stock issuable pursuant
to outstanding options under the ETC Stock Option Plans assumed by Micrel,
and (viii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material
Adverse Effect on Micrel and would not prevent, materially alter or delay any
of the transactions contemplated by this Agreement.
3.4 SEC Documents; Financial Statements.
Micrel has made available to ETC each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of
the Securities Act), definitive proxy statement, and other filings filed with
the SEC by Micrel since March 31, 1999 (collectively, the "Micrel SEC
Documents"). In addition, Micrel has made available to ETC all exhibits to
the Micrel SEC Documents filed prior to the date hereof, and will promptly
make available to ETC all exhibits to any additional Micrel SEC Documents
filed prior to the Effective Time. As of their respective filing dates, the
Micrel SEC Documents complied in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the Securities Act. The financial statements of Micrel, including the notes
thereto, included in the Micrel SEC Documents (the "Micrel Financial
Statements") were complete and correct in all material respects as of their
respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto as of their respective dates, and
have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto
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or, in the case of unaudited statements included in Quarterly Reports on Form
10-Qs, as permitted by Form 10-Q of the SEC). The Micrel Financial
Statements fairly present the consolidated financial condition and operating
results of Micrel as of the dates and for the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments).
3.5 Litigation.
Except as set forth in the Micrel SEC Documents, there is no private or
governmental action, suit, proceeding, claim, arbitration or investigation
pending before any agency, court or tribunal, foreign or domestic, or to
Micrel's knowledge, threatened, against Micrel or any of its properties or
officers or directors (in their capacities as such) that could reasonably be
expected to have a Material Adverse Effect on Micrel. There is no judgment,
decree or order against Micrel or any of its directors or officers (in their
capacities as such), that could prevent, enjoin, or materially alter or delay
any of the transactions contemplated by this Agreement, or that could
reasonably be expected to have a Material Adverse Effect on Micrel.
3.6 Complete Copies of Materials.
Micrel has delivered or made available true and complete copies of each
document which has been requested by ETC or its counsel in connection with
their legal and accounting review of Micrel and Merger Sub.
3.7 Broker's and Finders' Fees.
Micrel has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.8 Representations Complete.
None of the representations or warranties made by Micrel herein or in any
Schedule hereto, or any certificate furnished by Micrel pursuant to this
Agreement, when all such documents are read together in their entirety,
contains or will contain at the Effective Time any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of ETC.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, ETC
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by Micrel), to carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted. ETC further agrees to pay all debts and Taxes when due subject
(i) to good faith disputes over such debts or Taxes, and (ii) to Micrel's
consent to the filing of material Tax Returns (which consent shall not be
unreasonably withheld or delayed), to pay or perform other obligations when
due, and to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organizations, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end that its
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goodwill and ongoing businesses shall be unimpaired at the Effective Time.
ETC agrees to promptly notify Micrel of any event or occurrence not in the
ordinary course of its business, and of any event which could have a Material
Adverse Effect on ETC.
4.2 Restriction on Conduct of Business of ETC.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, except as
set forth in the ETC Disclosure Schedule and as expressly contemplated by
this Agreement, ETC shall not do, cause or permit any of the following,
without the prior written consent of Micrel:
(a) Charter Documents. Cause or permit any amendments to
its Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay
any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it;
(c) Stock Option Plans, Etc. Accelerate, amend or change
the period of exercisability or vesting of options or other rights granted
under its stock plans or authorize cash payments in exchange for any options
or other rights granted under any of such plans;
(d) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify or waive any of the
terms of any of its material contracts; provided however, that ETC shall not
enter into any agreement or commitment for the purchase of products or
supplies, except purchase orders for wafers in the ordinary course of
business, in an amount in excess of $25,000 in any one (1) case or $75,000 in
the aggregate;
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire,
or other agreements or commitments of any character obligating it to issue
any such shares or other convertible securities, other than the issuance of
shares of ETC Common Stock pursuant to the exercise of stock options,
warrants or other rights therefor outstanding as of the date of this
Agreement;
(f) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than in the ordinary
course of business consistent with past practice; provided that ETC will
promptly disclose any such transfer to Micrel;
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(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(h) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets which are material,
individually or in the aggregate, to its business, taken as a whole except
for sales of products in the ordinary course;
(i) Indebtedness. Incur any indebtedness for borrowed
money under existing credit lines or otherwise, except as reasonably
necessary for the operation of its business in a manner, and in amounts,
consistent with past practices, or guarantee any such indebtedness or issue
or sell any debt securities or guarantee any debt securities of others;
(j) Leases. Enter into any operating lease in excess of
$20,000;
(k) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of $10,000 in any one (1) case or $25,000 in the
aggregate, any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise) arising other than in the ordinary
course of business other than the payment, discharge or satisfaction of
liabilities reflected or reserved against in the ETC Financial Statements;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(m) Insurance. Materially reduce the amount of any
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right
of substantial value;
(o) Employee Benefit Plans; New Hires; Pay Increases.
Adopt or amend any employee benefit or stock purchase or option plan, except
as required under ERISA or except as necessary to maintain the qualified
status of such plan under the Code, or hire any new director level or officer
level employee, or increase the annual level of compensation of any employee,
or grant any unusual or extraordinary bonuses, benefits or other forms of
direct or indirect compensation to any employee, officer, director or
consultant, except in the ordinary course of business and in amounts
consistent with past practices;
(p) Severance Arrangements. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other employee
except payments made pursuant to written agreements outstanding on the date
hereof;
(q) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it consults
with Micrel prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
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(r) Acquisitions. Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its business, taken as a whole;
(s) Taxes. Other than in the ordinary course of
business, make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material Tax
Return or any amendment to a material Tax Return, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(t) Revaluation. Revalue any of its assets, including
without limitation writing down the value of inventory or writing off notes
or accounts receivable other than in the ordinary course of business; or
(u) Other. Take or agree in writing or otherwise to
take, any of the actions described in Sections 4.2(a) through (t) above, or
any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect or prevent it from performing
or cause it not to perform its covenants hereunder.
For the purposes of this Section 4.2, Robert Barker shall be the contact
person at Micrel and shall respond promptly to all requests by ETC for
Micrel's written consent hereunder.
4.3 No Solicitation.
ETC shall not, and shall use best commercial efforts to cause its officers,
directors, employees or other agents to not, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Takeover Proposal (as
defined in Section 7.1(c)) or (ii) engage in negotiations with, or disclose
any nonpublic information relating to ETC, or afford access to the
properties, books or records of ETC, to any person that has advised ETC that
it may be considering making, or that has made, a Takeover Proposal. ETC
shall not, and shall use best commercial efforts not to permit any of its
officers, directors, employees or other representatives to agree to or
endorse any Takeover Proposal. ETC will promptly notify Micrel after receipt
of any Takeover Proposal or any notice that any person is considering making
a Takeover Proposal or any request for nonpublic information relating to ETC
or for access to the properties, books or records of ETC by any person that
has advised ETC that it may be considering making, or that has made, a
Takeover Proposal and will keep Micrel fully informed of the status and
details of any such Takeover Proposal notice, request or any correspondence
or communications related thereto and shall provide Micrel with a true and
complete copy of such Takeover Proposal notice or request or correspondence
or communications related thereto, if it is in writing, or a written summary
thereof, if it is not in writing.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Information Statement.
As promptly as practicable after the execution of this Agreement, ETC shall
prepare, with the cooperation of Micrel, the Information Statement in form
and substance reasonably satisfactory to Micrel. ETC shall mail the
Information Statement to all shareholders of ETC entitled to receive such
notice under Iowa Law. The Information Statement shall constitute a
disclosure document for the offer and issuance of the shares of Micrel Common
Stock to be received by the holders of ETC Capital Stock in the Merger and a
proxy statement for solicitation of shareholder approval of the Merger.
Whenever any event occurs that is required to be set forth in an amendment or
supplement to the Information Statement, ETC shall promptly inform Micrel of
such occurrence, and Micrel shall cooperate in mailing such amendment or
supplement to the shareholders of ETC. The Information Statement shall
include the recommendation of the Board of Directors of ETC in favor of the
Articles of Merger and the Merger and the conclusion of the Board of
Directors that the terms and conditions of the Merger are fair and reasonable
to the shareholders of ETC. Anything to the contrary contained herein
notwithstanding, ETC shall not include in the Information Statement any
information with respect to Micrel or its affiliates or associates, the form
and content of which information shall not have been approved by Micrel prior
to such inclusion.
5.2 Meeting of Shareholders.
ETC shall promptly after the date hereof take all action necessary in
accordance with Iowa Law and its Articles of Incorporation and Bylaws to
convene the ETC Shareholders Meeting or to secure the written consent of its
shareholders within thirty (30) days of the date of this Agreement. ETC
shall consult with Micrel regarding the date of the ETC Shareholders Meeting
and shall not postpone or adjourn (other than for the absence of a quorum)
the ETC Shareholders Meeting without the consent of Micrel. ETC shall use
its best efforts to solicit from shareholders of ETC proxies in favor of the
Merger and shall take all other action necessary or advisable to secure the
vote or consent of shareholders required to effect the Merger. In connection
with the above, ETC shall also solicit the ETC shareholders' approval and
ratification of the adoption of each of the ETC Stock Option Plans.
5.3 Access to Information.
(a) ETC shall afford Micrel and its accountants, counsel
and other representatives, reasonable access during normal business hours
during the period prior to the Effective Time to (i) all of ETC's properties,
books, contracts, commitments and records, and (ii) all other information
concerning the business, properties and personnel of ETC as Micrel may
reasonably request. ETC agrees to provide to Micrel and its accountants,
counsel and other representatives copies of internal financial statements
promptly upon request.
(b) Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Micrel and ETC shall confer on
a regular and frequent basis with one (1) or more representatives of the
other party to report operational matters of materiality and the general
status of ongoing operations.
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(c) No information or knowledge obtained in any
investigation after the Execution Date pursuant to this Section 5.3 shall
affect or be deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to consummate the Merger;
provided, however that Micrel shall promptly inform ETC of any such
information or knowledge obtained in its investigation which could reasonably
be likely to have a Material Adverse Effect on ETC.
(d) ETC shall provide Micrel and its accountants, counsel
and other representatives reasonable access, during normal business hours
during the period prior to the Effective Time, to all of ETC's Tax Returns
and other records and workpapers relating to Taxes, including the following:
(i) the types of Tax Returns being filed by ETC in each taxing jurisdiction,
(ii) the year of the commencement of the filing of each such type of Tax
Return, (iii) all closed years with respect to each such type of Tax Return
filed in each jurisdiction, (iv) all material Tax elections filed in each
jurisdiction by ETC, (v) any deferred intercompany gain with respect to
transactions to which ETC has been a party, and (vi) receipts for any Taxes
paid to foreign Tax authorities.
5.4 Confidentiality.
The parties acknowledge that Micrel and ETC have previously executed a non-
disclosure agreement dated January 6, 2000 (the "Confidentiality Agreement"),
a copy of which is attached hereto as Exhibit C, which Confidentiality
Agreement shall continue in full force and effect in accordance with its
terms.
5.5 Public Disclosure.
ETC, without Micrel's prior consent, may not issue press releases or
otherwise make any public statements or make any other public (or non-
confidential) disclosures (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated
hereby (which consent shall not be unreasonably withheld), except as may be
required by law or by obligations pursuant to any listing agreement with any
national securities exchange or with the NASD.
5.6 Consents; Cooperation.
(a) Each of Micrel and ETC shall promptly apply for or
otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR. ETC shall use its commercially
reasonable efforts to obtain all necessary consents, waivers and approvals
under any of its material contracts in connection with the Merger for the
assignment thereof or otherwise. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one
another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or
on behalf of any party hereto in connection with proceedings under or
relating to HSR or any other federal or state antitrust or fair trade law.
(b) Each of Micrel and ETC shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by
any Governmental Entity with respect to the transactions contemplated by this
Agreement under the HSR, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
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state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade (collectively, "Antitrust
Laws"). In connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Antitrust Law,
each of Micrel and ETC shall cooperate and use all commercially reasonable
efforts vigorously to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent (each
an "Order"), that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any such other transactions, unless by mutual
agreement Micrel and ETC decide that litigation is not in their respective
best interests. Notwithstanding the provisions of the immediately preceding
sentence, it is expressly understood and agreed that neither party shall have
any obligation to litigate or contest any administrative or judicial action
or proceeding or any Order beyond the date of a ruling preliminarily
enjoining the Merger issued by a court of competent jurisdiction. Each of
Micrel and ETC shall use all commercially reasonable efforts to take such
action as may be required to cause the expiration of the notice periods under
the HSR or other Antitrust Laws with respect to such transactions as promptly
as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary in Section
5.6(a) or (b), (i) Micrel shall not be required to divest any of its or its
subsidiaries businesses, product lines or assets, or to take or agree to take
any other action or agree to any limitation that could reasonably be expected
to have a Material Adverse Effect on Micrel or of the Surviving Corporation
after the Effective Time, and (ii) ETC shall not be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect on ETC.
5.7 Shareholder Voting Agreement and Proxies; Shareholder
Representation Agreement.
(a) Schedule 5.7 sets forth those persons who may be deemed "Affiliates"
of ETC within the meaning of Rule 145 and as defined in Rule 501 promulgated
under the Securities Act ("Rule 145"). ETC shall provide Micrel such
information and documents as Micrel shall reasonably request for purposes of
reviewing such list. Micrel shall be entitled to place appropriate legends
on the certificates evidencing any Micrel Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement and to issue appropriate
stock transfer instructions to the transfer agent for Micrel Common Stock.
(b) ETC shall use its best efforts, on behalf of Micrel, and pursuant to
the request of Micrel, to cause all "Affiliates" of ETC and certain
shareholders of ETC who collectively hold more than fifty percent (50%) of
the outstanding ETC Capital Stock to execute and deliver to Micrel a
Shareholder Voting Agreement substantially in the form of Exhibit B and an
Irrevocable Proxy substantially in the form of Exhibit A attached thereto
concurrently with the execution of this Agreement and in any event prior to
the time that the Information Statement is mailed to the shareholders of ETC.
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(c) ETC shall use its commercially reasonable efforts to deliver or
cause to be delivered to Micrel at or prior to the Closing from each of the
shareholders of ETC, an executed Shareholder Representation Agreement (the
"Shareholder Representation Agreement") in the form attached hereto as
Exhibit D.
5.8 Legal Requirements.
Each of Micrel and ETC shall take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any
party hereto necessary in connection with any such requirements imposed upon
such other party in connection with the consummation of the transactions
contemplated by this Agreement and will take all reasonable actions necessary
to obtain (and will cooperate with the other parties hereto in obtaining) any
consent, approval, order or authorization of, or any registration,
declaration or filing with, any Governmental Entity or other person, required
to be obtained or made in connection with the taking of any action
contemplated by this Agreement.
5.9 Blue Sky Laws.
Micrel shall take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of the Micrel Common Stock in connection with the Merger. ETC shall
use its best efforts to assist Micrel as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Micrel Common Stock in connection with the
Merger.
5.10 Employee Benefit Plans.
(a) Assumption of Options. At the Effective Time, the
ETC Stock Option Plans, and each outstanding option to purchase shares of ETC
Common Stock under the ETC Stock Option Plans, whether vested or unvested,
will be assumed by Micrel. Schedule 5.10 hereto sets forth a true and
complete list as of the date hereof of all holders of outstanding options
under the ETC Stock Option Plans, including the number of shares of ETC
Capital Stock subject to each such option, the exercise or vesting schedule,
the exercise price per share and the term of each such option. On the
Closing Date, ETC shall deliver to Micrel an updated Schedule 5.10 hereto
current as of such date. Each such option so assumed by Micrel under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the ETC Stock Option Plans and the applicable stock
option agreement immediately prior to the Effective Time, except that
(i) such option will be exercisable for that number of whole shares of Micrel
Common Stock equal to the product of the number of shares of ETC Common Stock
that were issuable upon exercise of such option immediately prior to the
Effective Time multiplied by the Exchange Ratio and rounded down to the
nearest whole number of shares of Micrel Common Stock, and (ii) the per share
exercise price for the shares of Micrel Common Stock issuable upon exercise
of such assumed option will be equal to the quotient determined by dividing
the exercise price per share of ETC Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent. Consistent with the terms of the ETC
Stock Option Plans and the documents governing the outstanding options under
such Plans, the Merger will not terminate any of the outstanding options
under the ETC Stock Option Plans upon the Micrel's assumption of the options
in the Merger. It is the intention of the parties that the options so
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assumed by Micrel qualify, to the maximum extent permissible, following the
Effective Time as incentive stock options as defined in Section 422 of the
Code to the extent such options qualified as incentive stock options prior to
the Effective Time. Within thirty (30) business days after the Effective
Time, Micrel will issue to each person who, immediately prior to the
Effective Time was a holder of an outstanding option under the ETC Stock
Option Plans a document in form and substance satisfactory to ETC evidencing
the foregoing assumption of such option by Micrel.
(b) Assignment of Repurchase Options. All outstanding
rights of ETC which it may hold immediately prior to the Effective Time to
repurchase unvested shares of ETC Common Stock (the "Repurchase Options")
shall be assigned to Micrel in the Merger and shall thereafter be exercisable
by Micrel upon the same terms and conditions in effect immediately prior to
the Effective Time, except that the shares purchasable pursuant to the
Repurchase Options and the purchase price per shall be adjusted to reflect
the Exchange Ratio.
5.11 Escrow Agreement.
On or before the Effective Time, the Escrow Agent, the Shareholders' Agent
(as defined in Article VIII hereto), ETC and Micrel will execute the Escrow
Agreement contemplated by Article VIII in substantially the form attached
hereto as Exhibit E ("Escrow Agreement").
5.12 Form S-8.
Micrel agrees to use best efforts to file, no later than 45 business days
after the Closing (provided that Micrel has received within 10 business days
after the Closing all option documentation relating to the outstanding
options), (i) a registration statement on Form S-8 under the Securities Act
covering the shares of Micrel Common Stock issuable pursuant to outstanding
options granted to individuals currently providing services to ETC as
employees or consultants and listed on Schedule 5.12(a), and (ii) a
registration statement on Form S-3 (which registration statement shall be
subject to the provisions of Section 1.11 hereof) under the Securities Act
covering the shares of Micrel Common Stock issuable pursuant to outstanding
options granted to entitles or to individuals not currently providing
services to ETC as employees or consultants under the ETC Stock Option Plans
assumed by Micrel or otherwise issued in compensatory transactions to
entities or to individuals not currently providing services to ETC as
employees or consultants and listed on Schedule 5.12(b). ETC shall cooperate
with and assist Micrel in the preparation of such registration statements.
5.13 Listing of Additional Shares.
Prior to the Effective Time, Micrel shall file with the Nasdaq Market a
Notification Form for Listing of Additional Shares with respect to the shares
of Micrel Common Stock issuable upon conversion of the ETC Common Stock in
the Merger and upon exercise of the options under the ETC Stock Option Plans
assumed by Micrel.
5.14 Employees and Non-Compete Agreements.
Micrel shall make a good-faith offer of employment to all employees of ETC,
upon such commercially reasonable terms as may be determined by Micrel, in
its sole discretion. Micrel will negotiate in good faith to enter into such
employment relationships with each employee. ETC shall assist and cooperate
with Micrel in entering into such employment arrangements. Micrel shall make
the offers of employment to such employees within the week prior to the
Closing; provided that Micrel's offer of employment and any such employees'
acceptance thereof shall become effective only at the Effective Time. Micrel
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shall have no obligation to make an offer of employment to any employee of
ETC except as set forth above. Set forth on Schedule 5.14 is a list of
employees and shareholders of ETC who will enter into Non-Competition
Agreements, substantially in the form of Exhibit F hereto.
5.15 Expenses.
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with this Agreement, the Articles of Merger and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expense. If the Merger is consummated, Micrel shall pay the
actual expenses incurred by ETC in connection herewith upon the presentment
of an itemized bill for the same (including any fees and expenses of legal
counsel, financial advisors and accountants); provided that any such expenses
in excess of $50,000 shall remain an obligation of ETC's shareholders.
Subsequent to the closing of the Merger, if ETC receives any invoices for
amounts in excess of $50,000, it may, with Micrel's written approval, pay
such fees directly; provided, however, that such excess payment shall, if not
promptly reimbursed by the shareholders of ETC at Micrel's request,
constitute "Micrel Damages" recoverable under the Escrow Agreement.
5.16 Treatment as Reorganization.
Neither ETC nor Micrel shall take any action prior to or following the
Closing that would cause the merger to fail to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code.
5.17 Best Efforts and Further Assurances.
Each of the parties to this Agreement shall use its reasonable best efforts
to effectuate the transactions contemplated hereby and to fulfill and cause
to be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
5.18 Pooling Accounting.
Micrel and ETC shall each use reasonable efforts to cause the business
combination to be effected by the Merger to be accounted for as a pooling-of-
interests. Each of Micrel and ETC shall use its reasonable efforts to cause
its "Affiliates" (as defined in Section 5.7) not to take any action that
would adversely affect the ability of Micrel to account for the business
combination to be effected by the Merger as a pooling-of-interests.
5.19 Pooling Letter.
Micrel shall use all reasonable efforts to cause to be delivered to Micrel
a letter of Deloitte & Touche LLP, Micrel's independent accountants, dated
the Closing Date to the effect that the Merger qualifies for pooling-of-
interests accounting treatment if consummated in accordance with this
Agreement. Such letter shall be in a form reasonably satisfactory to Micrel
and customary in scope and substance for letters delivered by independent
public accountants in connection with transactions of this type. ETC shall
provide appropriate representations as reasonably requested by Deloitte &
Touche LLP customary in scope and substance for such letters.
5.20 Notices.
ETC shall give all notices and other information required to be given to
the employees of ETC, any collective bargaining unit representing any group
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of employees of ETC, and any applicable government authority under the WARN
Act, the National Labor Relations Act, the Internal Revenue Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable law in
connection with the transactions provided for in this Agreement.
5.21 Real Property and Title Matters.
(a) Prior to the Closing, ETC shall deliver to Micrel
an opinion of Davis, Brown, Kohen, Shors & Roberts, P.C. (the "Title
Opinion"), which Title Opinion shall show fee simple title to the ETC
Property vested in ETC at or immediately prior to the Closing, subject only
to current real estate Taxes not yet due and payable as of the Closing Date
and such liens, covenants, conditions, easements and exceptions to title as
Micrel may agree to in writing (collectively, the "Permitted Exceptions").
The Title Opinion shall also attach either (a) an Affidavit Explanatory of
Title to the effect that only Huxley Development Corporation, Inc. owned Lot
8 of the ETC Property at the time ETC purchased the ETC Property from Newell
Enterprises, Inc., or (b) a valid conveyance of title from both Snyder and
Associates, Inc. and Tubaugh Enterprises, Inc. for Lot 8.
(b) If the Title Opinion discloses (i) a title exception
other than a Permitted Exception (an "Unpermitted Exception") or (ii) any
encroachment, overlap, boundary dispute, or gap or any other matter which
renders title to the ETC Property unmarketable or reflects that any utility
service to the improvements or access thereto does not lie wholly within the
applicable parcel of real property, or within an encumbered easement for the
benefit of such parcel of real property, or reflects any other matter
adversely affecting the use or improvements of such parcel of real property
(a "Defect"), then ETC, prior to the Closing, shall have the Unpermitted
Exception removed from such Title Opinion or the Defect corrected or insured
over by an appropriate title insurance endorsement, all in a manner
satisfactory to Micrel.
5.22 Shareholder Waivers and Terminations.
(a) ETC shall waive, and shall cause any ETC shareholders or other
parties with rights of first refusal, preemptive rights, rights of first
offer, co-sale rights, or other similar rights with respect to the ETC
Capital Stock, to waive such rights prior to the Closing, including, without
limitation, all parties' rights under the (i) Contract of Right of Co-Sale
and Right of First Refusal dated December 18, 1992 between ETC and certain
shareholders of ETC and (ii) Contract of Right of Co-Sale and Right of First
Refusal dated January 29, 1998 between ETC and certain shareholders of ETC.
ETC shall also terminate such agreements, effective as of the Effective Time
(collectively, the "Co-Sale Agreements"). ETC shall provide to Micrel
reasonable evidence of such waivers and termination at the Closing.
(b) ETC shall waive, and shall cause any ETC shareholders or other
parties to that certain Investment Agreement dated December 18, 1992 between
ETC and certain shareholders of ETC to waive their rights under such
agreement, effective as of the Effective Time. ETC shall also terminate such
agreement, effective as of the Effective Time. ETC shall provide to Micrel
reasonable evidence of such waivers and termination at the Closing.
5.23 Employee Benefit Plans. After the date of this Agreement,
the ETC Salary Reduction Simplified Employee Pension Program (the "SEP")
shall remain in full force and effect and shall be in full force and effect
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as of the Closing. ETC agrees to cooperate with Micrel in taking such steps
as may be necessary to allow ETC's employees to become eligible to
participate in Micrel's 401(k) plan as soon as reasonably possible following
the Closing Date. Upon the request of Micrel, and after the ETC employees
are eligible to participate in the Micrel plans, ETC shall provide to Micrel
(i) executed resolutions by the Board of Directors of ETC authorizing the
termination and (ii) a copy of the notice to each employee covered by the SEP
notifying the employee of the SEP termination and discontinuance of
contributions, (iii) a copy of the notice to its payroll processor giving
instructions to discontinue salary reductions, and such other evidence of the
termination of the SEP as Micrel shall reasonably request.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the ETC and
Merger Sub shareholders and the adoption of the ETC Stock Option Plans shall
have been approved and ratified by the requisite vote of the shareholders of
ETC.
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the Merger
shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; nor shall there
be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal. In the event an injunction or other
order shall have been issued, each party agrees to use its reasonable efforts
to have such injunction or other order lifted.
(c) Governmental Approval. Micrel and ETC shall have
timely obtained from each Governmental Entity all approvals, waivers and
consents, if any, necessary for consummation of or in connection with the
Merger and the several transactions contemplated hereby, including such
approvals, waivers and consents as may be required under the Securities Act,
under state Blue Sky laws, and under HSR.
(d) Tax Opinion. Micrel and ETC shall have received
written opinions of Micrel's legal counsel and ETC's legal counsel,
respectively, in form and substance reasonably satisfactory to them, and
dated on or about the Closing Date to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
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and such opinions shall not have been withdrawn; provided, however, that if
ETC's legal counsel does not render such opinion, this condition shall
nevertheless be deemed satisfied with respect to ETC if Micrel's legal
counsel renders such opinion to Micrel. The parties to this Agreement agree
to make such reasonable representations as requested by the legal counsel of
Micrel and/or ETC for the purpose of rendering such opinions.
(e) Escrow Agreement. Micrel, ETC, Escrow Agent and the
Shareholder's Agent (as defined in Article VIII hereto) shall have entered
into an Escrow Agreement substantially in the form attached hereto as
Exhibit E.
6.2 Additional Conditions to Obligations of ETC.
The obligations of ETC to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by ETC:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Micrel Disclosure Schedule dated the date of this Agreement,
(i) the representations and warranties of Micrel in this Agreement shall be
true and correct in all material respects (except for such representations
and warranties that are qualified by their terms by a reference to
materiality which representations and warranties as so qualified shall be
true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time and
(ii) Micrel shall have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them as of the Effective Time.
(b) Certificate of Micrel. ETC shall have been provided
with a certificate executed on behalf of Micrel by an authorized officer to
the effect set forth in Section 6.2(a).
(c) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations or prospects of Micrel, taken as
a whole.
6.3 Additional Conditions to the Obligations of Micrel.
The obligations of Micrel to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Micrel:
(a) Representations, Warranties and Covenants. Except as
disclosed in the ETC Disclosure Schedule dated the date of this Agreement
(i) the representations and warranties of ETC in this Agreement shall be true
and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) ETC shall have performed
and complied in all material respects with all covenants, obligations and
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conditions of this Agreement required to be performed and complied with by it
as of the Effective Time.
(b) Certificate of ETC. Micrel shall have been provided
with a certificate executed on behalf of ETC by its President to the effect
set forth in Section 6.3(a).
(c) Third Party Consents and Waivers and Terminations.
Micrel shall have been furnished with evidence satisfactory to it of (i) the
consent or approval of those persons whose consent or approval shall be
required in connection with the Merger under the contracts of ETC set forth,
or required to be set forth, on Schedule 2.32 hereto; and (ii) the waiver of
rights under and the termination of the Co-Sale Agreements, pursuant to
Section 5.22 hereof.
(d) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting Micrel's conduct or
operation of the business of ETC, following the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission or
other Governmental Entity, domestic or foreign, seeking the foregoing be
pending.
(e) Opinions. Micrel shall have received a legal opinion
from ETC's legal counsel, in substantially the form of Exhibit G. Micrel
shall also have received the Title Opinion.
(f) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition, (financial or
otherwise) properties, assets (including intangible assets), liabilities,
business, operations, results of operations or prospects of ETC, taken as a
whole.
(g) Shareholder Voting Agreements. Micrel shall have
received from each of the Affiliates of ETC and from shareholders of ETC who
collectively hold more than fifty percent (50%) of the outstanding ETC
Capital Stock, an executed Shareholder Voting Agreement in substantially the
form attached hereto as Exhibit B.
(h) FIRPTA Certificate. ETC shall, prior to the Closing
Date, provide Micrel with a properly executed FIRPTA Notification Letter,
substantially in the form of Exhibit H attached hereto, which states that
shares of capital stock of ETC do not constitute "United States real property
interests" under Section 897(c) of the Code, for purposes of satisfying
Micrel's obligations under Treasury Regulation Section 1.1445-2(c)(3). In
addition, simultaneously with delivery of such Notification Letter, ETC shall
have provided to Micrel, as agent for ETC, a form of notice to the Internal
Revenue Service in accordance with the requirements of Treasury Regulation
Section 1.897-2(h)(2) and substantially in the form of Exhibit I attached
hereto along with written authorization for Micrel to deliver such notice
form to the Internal Revenue Service on behalf of ETC upon the Closing of the
Merger.
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(i) Resignation of Directors and Officers. The directors
and officers of ETC in office immediately prior to the Effective Time shall
have resigned as directors and officers, as applicable, of ETC effective as
of the Effective Time.
(j) Employment and Non-Competition Agreements. Wm.
Andrew Burkland shall have accepted employment with Micrel and the persons
set forth on Schedule 5.14 shall have entered into a Non-Competition
Agreement substantially in the form attached hereto as Exhibit F.
(k) Certificates of Good Standing. ETC shall, prior to
the Closing Date, provide Micrel a certificate from the Secretary of State of
Iowa as to ETC's good standing and payment of all applicable taxes.
(l) Shareholder Representation Agreement. ETC shall,
prior to the Closing Date, provide Micrel with an executed Shareholder
Representation Agreement in the form attached hereto as Exhibit D, from each
of the shareholders of ETC.
(m) Letter of Accountants. Micrel shall have received a
letter from Deloitte & Touche LLP, Micrel's independent accountants, dated
the Closing date, to the effect that the Merger qualifies for pooling-of-
interests accounting treatment if consummated in accordance with this
Agreement.
(n) Optionholder Release and Consent. Each holder of ETC
Options as of the Effective Time and each Shareholder, to the extent that
such Shareholder shall also hold as of the Effective Time, or have held at
any time prior to the Effective Time, ETC Options, shall have executed a
Release and Waiver and Consent to the Assumption of the ETC Stock Option
Plans, in the form of Exhibit K attached hereto, releasing Micrel, ETC and
the Surviving Corporation from any and all claims relating to the ETC Stock
Option Plans and consenting to the assumption of the ETC Stock Option Plans
pursuant to this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.
(a) At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the
Merger by the shareholders of ETC, this Agreement may be terminated:
(i) by mutual consent duly authorized by each
party's Board of Directors in accordance with this Agreement;
(ii) by either Micrel or ETC, if the Closing shall
not have occurred on or before June 1, 2000 (provided, a later date may be
agreed upon in writing by the parties hereto, and provided further that the
right to terminate this Agreement under this Section 7.1(a)(ii) shall not be
available to any party whose action or failure to act has been the cause or
resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement);
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(iii) by Micrel, if (i) ETC shall materially breach
any representation, warranty, obligation or agreement hereunder and such
breach shall not have been cured within five (5) business days of receipt by
ETC of written notice of such breach provided that the right to terminate
this Agreement by Micrel under this Section 7.1(a)(iii) shall not be
available to Micrel where Micrel is at that time in breach of this Agreement,
(ii) the Board of Directors of ETC shall have withdrawn or modified its
recommendation of this Agreement or the Merger in a manner adverse to Micrel
or recommended, endorsed, accepted or agreed to a Takeover Proposal or shall
have resolved to do any of the foregoing, (iii) ETC or any of its officers,
directors or other agents shall have failed to comply with Section 4.3, or
(iv) for any reason ETC fails to call and hold the ETC Shareholders Meeting
by April 30, 2000;
(iv) by ETC, if Micrel shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within five (5) days following receipt by Micrel of
written notice of such breach, provided that the right to terminate this
Agreement by ETC under this Section 7.1(a)(iv) shall not be available to ETC
where ETC is at that time in breach of this Agreement;
(v) by Micrel if a Trigger Event (as defined in
Section 7.1(b)) or Takeover Proposal (as defined in Section 7.1(c)) shall
have occurred and the Board of Directors of ETC in connection therewith, does
not within five (5) business days of such occurrence (i) reconfirm its
approval and recommendation of this Agreement and the transactions
contemplated hereby, and (ii) reject such Takeover Proposal or Trigger Event;
(vi) by Micrel if (i) any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable, or (ii)
if any required approval of the shareholders of ETC shall not have been
obtained by reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of shareholders or at any adjournment thereof; or
(vii) by ETC if (i) any permanent injunction or other
order of a court or other competent authority preventing the consummation of
the Merger shall have become final and nonappealable, or (ii) if any required
approval of the shareholders of ETC shall not have been obtained by reason of
the failure to obtain the required vote upon a vote held at a duly held
meeting of shareholders or at any adjournment thereof (provided that the
right to terminate this Agreement under this Section 7.1(a)(vii) shall not be
available to ETC where the failure to obtain ETC shareholder approval shall
have been caused by the action or failure to act of ETC and such action or
failure to act constitutes a breach by ETC of this Agreement).
(b) As used herein, a "Trigger Event" shall occur if any
Person (as that term is defined in Section 13(d) of the Exchange Act and the
regulations promulgated thereunder) acquires securities representing ten
percent (10%) or more, or commences a tender or exchange offer following the
successful consummation of which the offeror and its affiliate would
beneficially own securities representing ten percent (10%) or more of the
voting power of ETC.
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(c) For purposes of this Agreement, "Takeover Proposal"
means any offer or proposal for, or any indication of interest in, a merger
or other business combination involving ETC or the acquisition of twenty
percent (20%) or more of the outstanding shares of capital stock of ETC, or a
significant portion of the assets of, ETC, other than the transactions
contemplated by this Agreement.
7.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Micrel or ETC or their respective officers,
directors, shareholders or affiliates, except to the extent that such
termination results from the breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement;
provided that the provisions of Section 5.4 (Confidentiality), Section 5.15
(Expenses) and this Section 7.2 and of Article IX shall remain in full force
and effect and survive any termination of this Agreement.
7.3 Amendment.
The boards of directors of the parties hereto may cause this Agreement to
be amended at any time by execution of an instrument in writing signed on
behalf of each of the parties hereto; provided that an amendment made
subsequent to adoption of the Agreement by the shareholders of ETC shall not
(i) alter or change the amount or kind of consideration to be received on
conversion of the ETC Capital Stock, (ii) alter or change any term of the
Articles of Incorporation of the Surviving Corporation to be effected by the
Merger, or (iii) alter or change any of the terms and conditions of the
Agreement if such alteration or change would materially adversely affect the
holders of ETC Capital Stock.
7.4 Extension; Waiver.
At any time prior to the Effective Time any party hereto may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 Escrow Fund.
As soon as practicable after the Effective Time, the Escrow Shares shall be
registered in the name of, and be deposited with US Bank Trust, National
Association (or other institution selected by Micrel with the reasonable
consent of ETC) as escrow agent (the "Escrow Agent"), such deposit (together
with interest and other income thereon) to constitute the Escrow Fund and to
be governed by the terms set forth herein and in the Escrow Agreement
attached hereto as Exhibit E. The Escrow Fund shall be available to
compensate Micrel pursuant to the indemnification obligations of the
shareholders of ETC.
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8.2 Indemnification.
(a) Subject to the limitations set forth in this Article
VIII, the shareholders of ETC will indemnify and hold harmless Micrel and its
officers, directors, agents and employees, and each person, if any, who
controls or may control Micrel within the meaning of the Securities Act
(hereinafter referred to individually as a "Micrel Indemnified Person" and
collectively as "Micrel Indemnified Persons") from and against any and all
losses, costs, damages, liabilities and expenses arising from claims,
demands, actions and causes of action, including, without limitation,
reasonable legal fees, net of any recoveries by Micrel under existing
insurance policies or indemnities from third parties (collectively, "Micrel
Damages") arising out of (i) any misrepresentation or breach of or default in
connection with any of the representations, warranties, covenants and
agreements given or made by ETC in this Agreement, the ETC Disclosure
Schedules or any exhibit or schedule to this Agreement, or (ii) any liability
for Taxes for any period ending on or prior to the Effective Time. It is the
intent of the parties that all indemnification obligations of the
shareholders of ETC set forth in this Agreement shall apply without regard to
whether or not (y) the shareholders of ETC are negligent or otherwise at
fault in any respect with regard to the existence or occurrence of any of the
matters covered by any such indemnification obligation, and (ii) the
shareholders of ETC otherwise caused or created, or are claimed to have
caused or created, the existence or occurrence of any of the matters covered
by any such indemnification obligation, whether through their own acts or
omissions or otherwise. The Escrow Fund shall be security for this indemnity
obligation of the Shareholders of ETC subject to the limitations in this
Agreement. If the Merger is consummated, recovery from the Escrow Fund shall
be Micrel's exclusive remedy under this Agreement for any breach or default
in connection with any of the representations, warranties, covenants or
agreements given or made by ETC in this Agreement, the ETC Disclosure
Schedule or any exhibit or schedule to this Agreement or any exhibit thereto,
absent fraud or intentional misrepresentation.
(b) Subject to the limitations set forth in this Article
VIII, Micrel will indemnify and hold harmless the shareholders, officers,
directors, employees and agents of ETC (hereinafter referred to individually
as an "ETC Indemnified Person" and collectively as "ETC Indemnified Persons")
from and against any and all losses, costs, damages, liabilities and expenses
arising from claims, demands, actions, causes of action, including, without
limitation, reasonable legal fees, net of any recoveries by the ETC
shareholders under existing insurance policies or indemnities from third
parties (collectively, "ETC Damages") arising out of any misrepresentation or
breach of or default in connection with any of the representations,
warranties, covenants and agreements given or made by Micrel in this
Agreement, the Micrel Disclosure Schedules or any exhibit or schedule to this
Agreement. It is the intent of the parties that all indemnification
obligations of Micrel set forth in this Agreement shall apply without regard
to whether or not (y) Micrel is negligent or otherwise at fault in any
respect with regard to the existence or occurrence of any of the matters
covered by any such indemnification obligation, and (ii) Micrel otherwise
caused or created, or is claimed to have caused or created, the existence or
occurrence of any of the matters covered by any such indemnification
obligation, whether through its own acts or omissions or otherwise.
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(c) Notwithstanding anything herein to the contrary,
nothing in this Agreement shall limit the liability (i) of ETC or Micrel for
any breach of any representation, warranty or covenant if the Merger does not
close, or (ii) of any ETC shareholder in connection with any breach by such
shareholder of the Shareholder Voting Agreement or the Shareholder
Representation Agreement.
8.3 Payment for Micrel Damages.
Upon Micrel's delivery of an Officer's Certificate or Certificates (as
defined in Section 8.5 below) identifying Micrel Damages to the Escrow Agent,
as provided in Section 8.5 below, and the determination that such amount is
payable pursuant to this Article VIII, Micrel shall receive shares from the
Escrow Fund equal in value to the full amount of Micrel Damages; provided,
however, that in no event shall Micrel receive more than the number of shares
of Micrel Common Stock originally placed in the Escrow Fund.
8.4 Escrow Period.
The Escrow Period shall terminate for all matters at the earlier of the one
(1) year anniversary of the Effective Time or the date of issuance of the
audited consolidated financial statements of Micrel for the fiscal year
ending December 31, 2000 which include the results of ETC; provided, however,
that a portion of the Escrow Shares, which is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate theretofore
delivered to the Escrow Agent prior to termination of the Escrow Period with
respect to facts and circumstances existing prior to expiration of the Escrow
Period, shall remain in the Escrow Fund until such claims have been resolved.
Micrel shall deliver to the Escrow Agent a certificate specifying the
Effective Time. Any amounts remaining in the Escrow Fund after the Escrow
Period that are not in dispute relating to the indemnification obligations of
the ETC shareholders arising under the Merger Agreement and this Escrow
Agreement shall be promptly distributed to the ETC shareholders, subject to
the Shareholders' Agent's right to reimbursement for unpaid Shareholders'
Fees pursuant to Section 8.7(c) hereof. As soon as all such disputed claims
have been resolved and the Shareholders' Agent has been reimbursed, the
Escrow Agent shall deliver to the ETC shareholders all of the Escrow Shares
and other property remaining in the Escrow Fund and not required to satisfy
such claims and expenses. Each ETC shareholder shall receive that number of
Escrow Shares equivalent to such ETC shareholder's percentage interest in the
Escrow Fund as set forth in the Escrow Agreement.
8.5 Claims upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the
last day of the Escrow Period of a certificate signed by any officer of
Micrel (an "Officer's Certificate") stating that Micrel Damages exist and
specifying in reasonable detail the individual items of such Micrel Damages
included in the amount so stated, the date each such item was paid, or
properly accrued or arose, the nature of the misrepresentation, breach of
warranty or claim to which such item is related, the Escrow Agent shall,
subject to the provisions of Section 8.6 and 8.7 below, deliver to Micrel out
of the Escrow Fund, as promptly as practicable, Micrel Common Stock or other
assets held in the Escrow Fund having a value equal to such Micrel Damages.
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(b) For the purpose of compensating Micrel for its Micrel Damages
pursuant to this Agreement, the Micrel Common Stock in the Escrow Fund shall
be valued at the Micrel Stock Price.
8.6 Objections to Claims.
At the time of delivery of any Officer's Certificate to the Escrow Agent, a
duplicate copy of such Officer's Certificate shall be delivered to the
Shareholders' Agent (defined in Section 8.8 below) and for a period of forty-
five (45) days after such delivery to the Escrow Agent of such Officer's
Certificate, the Escrow Agent shall make no delivery of Micrel Common Stock
or other property pursuant to Section 8.5 hereof unless the Escrow Agent
shall have received written authorization from the Shareholders' Agent to
make such delivery. After the expiration of such forty-five (45) day period,
the Escrow Agent shall make delivery of the Micrel Common Stock or other
property in the Escrow Fund in accordance with Section 8.5 hereof, provided
that no such payment or delivery may be made if the Shareholders' Agent shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Escrow Agent and to
Micrel prior to the expiration of such forty-five (45) day period.
8.7 Resolution of Conflicts; Arbitration.
(a) In case the Shareholders' Agent shall so object in
writing to any claim or claims by Micrel made in any Officer's Certificate,
Micrel shall have forty-five (45) days after receipt by the Escrow Agent of
an objection by the Shareholders' Agent to respond in a written statement to
the objection of the Shareholders' Agent. If after such forty-five (45) day
period there remains a dispute as to any claims, the Shareholders' Agent and
Micrel shall attempt in good faith for sixty (60) days to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholders' Agent and Micrel should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and shall distribute the Micrel Common Stock or other
property from the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Micrel or the Shareholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the
damage or loss is at issue in pending litigation with a third party, in which
event arbitration shall not be commenced until such amount is ascertained or
both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by three (3) arbitrators. Within fifteen
(15) days after such written notice is sent, Micrel and the Shareholders'
Agent shall each select one (1) arbitrator, and the two (2) arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as
to the validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 8.6 hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall
be held in either Santa Clara or San Jose County, California, under the
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commercial rules then in effect of the American Arbitration Association. For
purposes of this Section 8.7(c), in any arbitration hereunder in which any
claim or the amount thereof stated in the Officer's Certificate is at issue,
Micrel shall be deemed to be the Non-Prevailing Party unless the arbitrators
award Micrel more than one-half (1/2) of the amount in dispute, plus any
amounts not in dispute; otherwise, the ETC shareholders for whom shares of
ETC Common Stock otherwise issuable to them have been deposited in the Escrow
Fund shall be deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees of each
arbitrator, the administrative fee of the American Arbitration Association,
and the expenses, including without limitation, attorneys' fees and costs,
reasonably incurred by the other party to the arbitration. If the ETC
shareholders are deemed to be the Non-Prevailing Party, pursuant to a
separate agreement to be entered into between the Shareholders and the
Shareholders' Agent, Shareholders' Agent shall have the right to
reimbursement of such expenses and fees (the "Shareholders' Fees") from any
remaining Escrow Shares at the end of the Escrow Period. Shareholders' Agent
shall present to the Escrow Agent, at the end of the Escrow Period, a
certificate setting forth the amount of the Shareholders' Fees, if any, owed
by each Shareholder to the Shareholders' Agent, and signed by Micrel (which
signature shall not be unreasonably withheld or delayed). Upon the Escrow
Agent's receipt of such certificate, the Escrow Agent shall disburse to the
Shareholders' Agent Escrow Shares equal to such Shareholders' Fees (using the
fair market value of such Escrow Shares as of the last day of the Escrow
Period), prior to the distribution of the remainder of the Escrow Shares to
the Shareholders pursuant to Section 8.4 hereof.
8.8 Shareholders' Agent.
(a) Gary J. Roling shall be constituted and appointed,
pursuant to the Shareholder Representation Agreement, as agent
("Shareholders' Agent") for and on behalf of the ETC shareholders to give and
receive notices and communications, to authorize delivery to Micrel of the
Micrel Common Stock or other property from the Escrow Fund in satisfaction of
claims by Micrel, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and
to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may
be changed by the holders of a majority in interest of the Escrow Fund from
time to time upon not less than ten (10) days' prior written notice to
Micrel. No bond shall be required of the Shareholders' Agent, and the
Shareholders' Agent shall receive no compensation for his services. Notices
or communications to or from the Shareholders' Agent shall constitute notice
to or from each of the ETC shareholders.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good
faith and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The ETC shareholders shall severally indemnify the Shareholders'
Agent and hold him harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Shareholders' Agent
and arising out of or in connection with the acceptance or administration of
his duties hereunder.
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(c) The Shareholders' Agent shall have reasonable access
to information about ETC and the reasonable assistance of ETC's officers and
employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Shareholders' Agent shall treat confidentially
and not disclose any nonpublic information from or about ETC to anyone
(except on a need to know basis to individuals who agree to treat such
information confidentially).
8.9 Actions of the Shareholders' Agent.
A decision, act, consent or instruction of the Shareholders' Agent shall
constitute a decision of all ETC shareholders for whom shares of Micrel
Common Stock otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each such ETC shareholder, and
the Escrow Agent and Micrel may rely upon any decision, act, consent or
instruction of the Shareholders' Agent as being the decision, act, consent or
instruction of each and every such ETC shareholder. To the extent that
either the Escrow Agent or Micrel act in accordance with a decision, act,
consent or instruction of the Shareholders' Agent, Escrow Agent and Micrel
are hereby relieved from any liability with respect to such act, to any
person, including the ETC shareholders.
8.10 Third-Party Claims.
In the event Micrel becomes aware of a third-party claim which Micrel
believes may result in a demand against the Escrow Fund, Micrel shall
promptly notify the Shareholders' Agent of such claim, and the Shareholders'
Agent and the ETC shareholders for whom shares of Micrel Common Stock
otherwise issuable to them are deposited in the Escrow Fund shall be
entitled, at their expense, to participate in any defense of such claim.
Micrel shall have the right in its sole discretion to settle any such claim;
provided, however, that Micrel may not effect the settlement of any such
claim without the consent of the Shareholders' Agent, which consent shall not
be unreasonably withheld. In the event that the Shareholders' Agent has
consented to any such settlement, the Shareholders' Agent shall have no power
or authority to object under Section 8.6 or any other provision of this
Article VIII to the amount of any claim by Micrel against the Escrow Fund for
indemnity with respect to such settlement.
8.11 Voting Rights and Cash Distributions With Respect to Escrow Shares.
The shareholders of ETC shall retain full voting power over all Escrow
Shares. Any cash dividends, dividends payable in securities or other
distributions of any kind (but excluding any shares of Micrel capital stock
received upon a stock split or stock dividend) shall be promptly distributed
by the Escrow Agent to the beneficial holder of the Escrow Shares to which
such distribution relates, by check mailed via first class mail, to the
Shareholders at their addresses, and in the percentage interests, set forth
in the Escrow Agreement. Any shares of Micrel Common Stock received by the
Escrow Agent upon a stock split made in respect of any securities in the
Escrow Fund shall be added to the Escrow Fund and become a part thereof. The
provisions of Article VIII shall be adjusted to appropriately reflect any
stock split or reverse stock split.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival at Effective Time.
The representations and warranties set forth in Articles II and III will
survive until the first anniversary of the Closing. The agreements set forth
in this Agreement shall terminate at the Effective Time, except that the
agreements set forth in Article I, Section 5.4 (Confidentiality), 5.7
(Shareholder Voting Agreement and Proxies; Shareholder Representation
Agreement), 5.10 (Employee Benefit Plans), 5.14 (Employees), 5.17 (Best
Efforts and Further Assurances), 7.3 (Amendment), Article VIII and this
Article IX shall survive the Effective Date and the Closing until the first
anniversary of the Closing.
9.2 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery
service, or mailed by registered or certified mail (return receipt requested)
or sent via facsimile (with confirmation of receipt) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Micrel, to:
Micrel, Incorporated
1849 Fortune Drive
San Jose, CA 95131
Attention: Robert Barker
Facsimile No.: (408) 944-0970
Telephone No.: (408) 435-3447
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304-1018
Attention: Stephen J. Schrader, Esq.
Facsimile No.: (650) 494-0792
Telephone No.: (650) 813-5642
(b) if to ETC, to:
Electronic Technology Corporation
402 Campus Drive
Huxley, IA 50124-9762
Attn: Wm. Andrew Burkland
Facsimile No.: (515) 597-7001
Telephone No.: (515) 597-7000
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with a copy to:
Davis, Brown, Kohen, Shors & Roberts, P.C.
The Financial Center
666 Walnut Street, Suite 2500
Des Moines, IA 50309
Attn: Beverly Evans, Esq.
Facsimile No.: (515) 243-0654
Telephone No.: (515) 288-2500
(c) if to Shareholders' Agent, to:
Gary J. Roling
4413 Wendy Lee Lane NW
Cedar Rapids, IA 52405
with a copy to:
Davis, Brown, Kohen, Shors & Roberts, P.C.
The Financial Center
666 Walnut Street, Suite 2500
Des Moines, IA 50309
Attn: Beverly Evans, Esq.
Facsimile No.: (515) 243-0654
Telephone No.: (515) 288-2500
9.3 Interpretation.
When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The
words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred
to has been made available if requested by the party to whom such information
is to be made available. The phrases "the date of this Agreement", "the date
hereof", and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the Execution Date. The table of contents and
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
9.4 Counterparts; Facsimile Delivery.
This Agreement may be executed in one (1) or more counterparts and
delivered by facsimile, all of which shall be considered one and the same
agreement and shall become effective when one (1) or more counterparts have
been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart.
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9.5 Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the ETC Disclosure Schedule and the Micrel
Disclosure Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof, except for the Confidentiality Agreement, which
shall continue in full force and effect, and shall survive any termination of
this Agreement or the Closing, in accordance with its terms (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth in Sections 1.6(a), (b) and (d)-(f), 1.7, 1.9-1.11 and
5.10; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
9.6 Severability.
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue
in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business
and other purposes of such void or unenforceable provision.
9.7 Remedies Cumulative.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of
any other remedy conferred hereby, or by law or equity upon such party, and
the exercise by a party of any one (1) remedy will not preclude the exercise
of any other remedy.
9.8 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of California without reference to such state's principles of conflicts
of law. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any court located within the State of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in
any manner authorized by the laws of the State of California for such persons
and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
9.9 Rules of Construction.
The parties hereto agree that they have been represented by counsel during
the negotiation, preparation and execution of this Agreement and, therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be
construed against the party drafting such agreement or document.
[Signature page follows]
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IN WITNESS WHEREOF, ETC and Micrel have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized, all as
of the date first written above.
ELECTRONIC TECHNOLOGY CORPORATION
By: /s/ Wm. Andrew Burkland
-----------------------------
Wm. Andrew Burkland
President
MICREL, INCORPORATED
By: /s/ Raymond D. Zinn
-----------------------------
Raymond D. Zinn
President and CEO
ETC ACQUISITION SUB INC.
By: /s/ Raymond D. Zinn
-----------------------------
Raymond D. Zinn
President
SHAREHOLDERS' AGENT
By: /s/ Gary J. Roling
-----------------------------
Gary J. Roling
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE>
Schedule 5.7
List of Affiliates
The following are officers and/or directors and/or shareholders owning at
least 10% of ETC outstanding stock:
1. William A. Burkland - Officer, director, & shareholder owning at least 10%
of ETC stock.
2. Mike Priebe - Director
3. Gary J. Roling - Officer, director, & shareholder owning at least 10% of
ETC stock.
4. Scott P. Yeager - Officer, director & shareholder owing at least 10% of
ETC stock.
<PAGE>
Schedule 5.10
Holders of Outstanding ETC Options
See also ETC Disclosure Schedule Exhibit E, F, and X, which lists the ETC
option holders, the number of shares of ETC Capital Stock subject to each
such option, the exercise or vesting schedule, the exercise price per share,
and the term of each option. Below is a summary of information contained in
these exhibits:
Employee Shares Date Exercisable Price Per Share
-------------------- ------- ---------------- ---------------
1. Douglas Anderson 6,600 3/20/98-2/29/08 $0.75
6,600 3/20/99-2/29/08
6,800 3/20/00-2/29/08
-------
Total 20,000
2. Scott McCalmont 5,280 1/15/00-1/15/09 $0.93
5,440 1/15/01-1/15/09
-------
Total 10,720
3. L. Edward Boylston, Jr. 750 5/03/02-5/03/09 $2.50
750 5/03/03-5/03/09
750 5/03/04-5/03/09
-------
Total 2,250
4. Bernard Brafman 5,000 8/09/02-8/09/09 $2.50
5,000 8/09/03-8/09/09
5,000 8/09/04-8/09/09
-------
15,000
5. Mike Priebe 20,000 Immediately $2.50
exercisable
<PAGE>
Schedule 5.12(a)
S-8 Participants
1. Douglas P. Anderson
2. Latinus Edward Boylston, Jr.
3. Bernard Brafman
4. Jonathan Scott McCalmont
<PAGE>
Schedule 5.12(b)
Ineligible S-8 Participants
1. Mike Priebe
<PAGE>
Schedule 5.14
List of Persons Entering Into Non-Competition Agreements
Wm. Andrew Burkland
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Micrel, Incorporated on Form S-3 of our reports dated January 24, 2000,
appearing in the Annual Report on Form 10-K of Micrel, Incorporated for the
year ended December 31, 1999. We also consent to the reference to us under
the heading "Experts" in such Registration Statement.
San Jose, California
May 24, 2000
/s/ Deloitte & Touche, LLP
</TABLE>
