<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
PREMISYS COMMUNICATIONS, INC.
(Name of Subject Company)
ZHONE TECHNOLOGIES, INC.
ZHONE ACQUISITION CORP.
(Bidders)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
740584107
(CUSIP Number of Class of Securities)
------------------------
MORY EJABAT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ZHONE TECHNOLOGIES, INC.
7677 OAKPORT STREET, SUITE 1040
OAKLAND, CALIFORNIA 94621
(510) 777-7000
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
SCOTT N. WOLFE, ESQ.
LATHAM & WATKINS
701 "B" STREET, SUITE 2100
SAN DIEGO, CALIFORNIA 92101
TELEPHONE: (619) 236-1234
CALCULATION OF FILING FEE:
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$256,474,930 $51,295
</TABLE>
* For the purpose of calculating the fee only, this amount assumes the
purchase of 25,647,493 shares of Common Stock, par value $.01 per share, of
Premisys Communications, Inc. at $10.00 per share. Such number of shares
consists of (i) 24,215,117 shares issued and outstanding as of October 15,
1999 and (ii) 1,432,376 shares reserved for issuance upon the exercise of
outstanding options that were vested and exercisable with exercise prices
less than $10.00 per share as of such date.
** The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934 equals 1/50th of 1% of the
value of the shares to be purchased.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
</TABLE>
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 740584107 Page 2 of 7 Pages
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(1) Name of Reporting Persons: Zhone Technologies, Inc.
I.R.S. Identification No. of above persons (Entities Only):
94-3333763
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(2) Check the appropriate box if a member of a group (See instructions):
(a) / /
(b) / /
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(3) SEC Use Only
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(4) Source of funds (See instructions):
See Item 4.
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(5) Check box if disclosure of legal proceedings is required pursuant to Item
2(d) or 2(e)
/ /
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(6) Citizenship or place of organization:
Delaware
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(7) Aggregate amount beneficially owned by each reporting person:
See Item 6 and Item 7.
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(8) Check box if the aggregate amount in row (7) excludes certain shares (See
instructions):
/ /
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(9) Percent of class represented by amount in row (7):
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(10) Type of reporting person (See instructions):
CO
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 740584107 Page 3 of 7 Pages
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(1) Name of Reporting Persons: Zhone Acquisition Corp.
I.R.S. Identification No. of above persons (Entities Only):
94-3343245
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(2) Check the appropriate box if a member of a group (See instructions):
(a) / /
(b) / /
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(3) SEC Use Only
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(4) Source of funds (See instructions):
See Item 4.
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(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(d) or 2(e)
/ /
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(6) Citizenship or place of organization:
Texas
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(7) Aggregate amount beneficially owned by each reporting person:
See Item 6 and Item 7.
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(8) Check box if the aggregate amount in row (7) excludes certain shares (See
instructions):
/ /
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(9) Percent of class represented to amount in row (7):
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(10) Type of reporting person (See instructions):
CO
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<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") relates
to a tender offer by Zhone Acquisition Corp., a Texas corporation ("Purchaser")
and a wholly owned subsidiary of Zhone Technologies, Inc., a Delaware
corporation ("Parent"), to purchase any and all outstanding shares of common
stock, par value $.01 per share (the "Common Stock"), of Premisys
Communications, Inc., a Delaware corporation (the "Company"), and all associated
rights issued pursuant to the Rights Agreement dated September 18, 1998 between
the Company and ChaseMellon Shareholder Services, L.L.C. (the Associated
Rights), not currently directly or indirectly owned by Purchaser or Parent, for
a purchase price of $10.00 per share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated October 27, 1999 (the "Offer to Purchase") and in the
related Letter of Transmittal (the "Letter of Transmittal" which, together with
the Offer to Purchase, as each may be amended and supplemented from time to
time, constitute the "Offer"), and is intended to satisfy the reporting
requirements of Section 14(d) of the Securities Exchange Act of 1934. Copies of
the Offer to Purchase and the related Letter of Transmittal are filed with this
Schedule 14D-1 as Exhibits (a)(1) and (a)(2) hereto, respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Premisys Communications, Inc. The
information set forth in Section 8 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference.
(b) The class of securities to which this statement relates is the Company's
Common Stock, par value $.01 per share and the Associated Rights (together, the
"Shares"), and the Offer is for any and all outstanding Shares at a price of
$10.00 per Share, net to the seller in cash, without interest thereon. The
information set forth in the "INTRODUCTION" (the "Introduction") to the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed jointly by Purchaser and
Parent. The information set forth in the Introduction, in Section 9 ("Certain
Information Concerning Parent and Purchaser") of the Offer to Purchase and in
Annex I to the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five (5) years, none of Parent, Purchaser or, to
the best of knowledge of Purchaser and Parent, any executive officer or director
of Purchaser or Parent has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining future violations of, or, prohibiting or mandating activities
subject to federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent and Purchaser"), Section 11 ("Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 13 ("Merger Agreement, Company Option Agreement and Stockholders
Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 11
("Background of the Offer; Contacts, Transactions or Negotiations with the
Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") and Section 13 ("Merger Agreement, Company Option Agreement and
Stockholders Agreement") of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in Section 7 ("Effects of the Offer on
the Market for the Shares; Stock Quotations; Restrictions Under the Exchange
Act") and Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent and Purchaser") and Section 13 ("Merger Agreement,
Company Option Agreement and Stockholders Agreement") of the Offer to Purchase
and in Annex I to the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent and Purchaser"), Section 11 ("Background of the
Offer; Past Contracts, Transactions or Negotiations with the Company"), Section
12 ("Purpose of the Offer and the Merger; Plans for the Company") and Section 13
("Merger Agreement, Company Option Agreement and Stockholders Agreement") of the
Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
Parent and Purchaser") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 9 ("Certain Information
Concerning Parent and Purchaser") and Section 13 ("Merger Agreement, Company
Option Agreement and Stockholders Agreement") of the Offer to Purchase is
incorporated herein by reference.
(b)-(c) The information set forth in Section 16 ("Certain Regulatory and
Legal Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effects of the Offer on the
Market for the Shares; Stock Quotations; Restrictions Under the Exchange Act")
and Section 16 ("Certain Regulatory and Legal Matters") of the Offer to Purchase
is incorporated herein by reference.
(e) None.
(f) The information set forth in the entire Offer to Purchase and the
Letter of Transmittal, copies of which are filed with this Schedule 14D-1 as
Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
<PAGE>
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release issued jointly by Parent, Purchaser and by the
Company, dated October 21, 1999.*
(a)(8) Summary Advertisement, dated October 27, 1999.
(b) Commitment Letter dated October 20, 1999 from Credit Suisse First
Boston to Parent.
(c)(1) Agreement and Plan of Merger by and among Parent, Purchaser and the
Company, dated as of October 20, 1999.*
(c)(2) Stockholders Agreement by and among Parent, Purchaser and certain
stockholders of the Company, dated as of October 20, 1999.*
(c)(3) Company Option Agreement by and among Parent, Purchaser and the
Company, dated as of October 20, 1999.*
(d) Not applicable.
(e)-(f) Not applicable.
- ------------------------
* Incorporated by reference to the Current Report on Form 8-K filed
October 26, 1999 by Premisys Communications, Inc.
<PAGE>
SIGNATURE
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
Dated: October 27, 1999 ZHONE ACQUISITION CORP.
By: /s/ MORY EJABAT
--------------------------------------
Name: Mory Ejabat
Title: President and Chief Executive
Officer
ZHONE TECHNOLOGIES, INC.
By: /s/ MORY EJABAT
--------------------------------------
Name: Mory Ejabat
Title: President and Chief Executive
Officer
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<S> <C>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Text of Press Release issued jointly by Parent, Purchaser
and by the Company, dated October 21, 1999.*
(a)(8) Summary Advertisement, dated October 27, 1999.
(b) Commitment Letter dated October 20, 1999 from Credit Suisse
First Boston to Parent.
(c)(1) Agreement and Plan of Merger by and among Parent, Purchaser
and the Company, dated as of October 20, 1999.*
(c)(2) Stockholders Agreement by and among Parent, Purchaser and
certain stockholders of the Company, dated as of
October 20, 1999.*
(c)(3) Company Option Agreement by and among Parent, Purchaser and
the Company, dated as of October 20, 1999.*
(d) Not applicable.
(e)-(f) Not applicable.
</TABLE>
- ------------------------
* Incorporated by reference to the Current Report on Form 8-K filed
October 26, 1999 by Premisys Communications, Inc.
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
Premisys Communications, Inc.
at
$10.00 Net Per Share
by
Zhone Acquisition Corp.
a wholly owned subsidiary of
Zhone Technologies, Inc.
- -------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 29, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE HAVING BEEN
VALIDLY TENDERED PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.01
PER SHARE, INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS (THE
"SHARES"), OF PREMISYS COMMUNICATIONS, INC. (THE "COMPANY"), REPRESENTING AT
LEAST 75% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM
CONDITION"), (2) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED AND
(3) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE THE INTRODUCTION
AND SECTIONS 1 AND 15.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF OCTOBER 20, 1999, BY AND AMONG ZHONE TECHNOLOGIES, INC. ("PARENT"), ZHONE
ACQUISITION CORP. ("PURCHASER") AND THE COMPANY. THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER, THE MERGER AGREEMENT,
THE COMPANY OPTION AGREEMENT AND THE STOCKHOLDERS AGREEMENT (EACH AS DEFINED
HEREIN), HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
manually signed facsimile thereof) in accordance with the instructions in the
Letter of Transmittal, have such stockholder's signature thereon guaranteed if
required by Instruction 1 to the Letter of Transmittal and mail or deliver the
Letter of Transmittal (or such facsimile) and any other required documents to
the Depositary (as defined herein), and either deliver the certificates
evidencing the tendered Shares and any other required documents to the
Depositary or tender such Shares pursuant to the procedure for book-entry
transfer set forth in Section 3 or (2) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer on a timely basis, may tender such Shares by
following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be directed to the Dealer Manager or to the
Information Agent at their respective addresses and telephone numbers set forth
on the back cover of this Offer to Purchase.
The Dealer Manager for the Offer is:
[CREDIT SUISSE FIRST BOSTON LOGO]
October 27, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
INTRODUCTION..................................................... 1
1. Terms of the Offer.......................................... 3
2. Acceptance for Payment and Payment for Shares............... 5
3. Procedure for Tendering Shares.............................. 6
4. Withdrawal Rights........................................... 9
5. Certain United States Federal Income Tax Consequences....... 10
6. Price Range of Shares; Dividends............................ 11
7. Effects of the Offer on the Market for the Shares; Stock
Quotations; Registration Under the Exchange Act........... 11
8. Certain Information Concerning the Company.................. 12
9. Certain Information Concerning Parent and Purchaser......... 15
10. Source and Amount of Funds.................................. 16
11. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company............................. 17
12. Purpose of the Offer and the Merger; Plans for the
Company................................................... 19
13. Merger Agreement, Company Option Agreement and Stockholders
Agreement................................................. 22
14. Dividends and Distributions................................. 32
15. Certain Conditions of the Offer............................. 33
16. Certain Regulatory and Legal Matters........................ 35
17. Fees and Expenses........................................... 37
18. Miscellaneous............................................... 37
</TABLE>
ANNEX I-- Certain Information Concerning the Directors and Executive Officers of
Parent and Purchaser
ANNEX II--Section 262 of the General Corporation Law of the State of Delaware
<PAGE>
To the Holders of Common Stock of
Premisys Communications, Inc.:
INTRODUCTION
Zhone Acquisition Corp., a Texas corporation ("Purchaser") and a wholly
owned subsidiary of Zhone Technologies, Inc., a Delaware corporation ("Parent"),
hereby offers to purchase all outstanding shares of common stock, par value $.01
per share (the "Shares"), of Premisys Communications, Inc., a Delaware
corporation (the "Company"), at a purchase price of $10.00 per Share (the "Offer
Price"), net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, as amended and supplemented from time to time,
together constitute the "Offer"). All references to the Shares in this Offer to
Purchase include the associated preferred stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement (the "Rights Agreement"), dated as of
September 18, 1998, as amended on October 20, 1999, between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
Tendering stockholders who have Shares registered in their own name and who
tender directly to the Depositary will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer and sale of Shares pursuant to
the Offer. Stockholders who hold shares through their bank or broker should
consult with them as to whether they charge any service fees. Purchaser will pay
all fees and expenses of Credit Suisse First Boston Corporation ("CSFBC"), which
is acting as the Dealer Manager for the Offer (in such capacity, the "Dealer
Manager"), D.F. King & Co., Inc., as the Information Agent (the "Information
Agent"), and ChaseMellon Shareholder Services, L.L.C., as the Depositary (the
"Depositary"), incurred in connection with the Offer. See Section 17 of this
Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER, THE MERGER (AS HEREINAFTER DEFINED), THE MERGER AGREEMENT
(AS HEREINAFTER DEFINED), THE COMPANY OPTION AGREEMENT (AS HEREINAFTER DEFINED)
AND THE STOCKHOLDERS AGREEMENT (AS HEREINAFTER DEFINED), HAS DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE HAVING BEEN
VALIDLY TENDERED PURSUANT TO THE OFFER, AND NOT PROPERLY WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES REPRESENTING AT LEAST 75% OF THE
OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), (II) THE
EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
ACT"), AND (III) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTIONS 1 AND 15 OF THIS OFFER TO PURCHASE.
IN ORDER TO INDUCE PARENT AND PURCHASER TO ENTER INTO THE MERGER AGREEMENT,
RAYMOND C. LIN, THE CHAIRMAN OF THE COMPANY BOARD, NICHOLAS J. WILLIAMS, THE
COMPANY'S PRESIDENT AND CHIEF EXECUTIVE OFFICER, AND BORIS J. AUERBUCH, THE
COMPANY'S FORMER CHIEF TECHNICAL OFFICER (THE "SELLING STOCKHOLDERS"),
BENEFICIALLY OWNING IN THE AGGREGATE 1,178,869 SHARES (INCLUDING 548,605 SHARES
SUBJECT TO OPTIONS EXERCISABLE WITHIN 60 DAYS AFTER OCTOBER 20, 1999),
REPRESENTING APPROXIMATELY 4.7% OF THE SHARES, HAVE ENTERED INTO A STOCKHOLDERS
AGREEMENT DATED AS OF OCTOBER 20, 1999 (THE "STOCKHOLDERS AGREEMENT") WITH
PARENT AND PURCHASER PURSUANT TO WHICH THE SELLING STOCKHOLDERS HAVE AGREED TO
TENDER AND SELL ALL OF THEIR SHARES TO PURCHASER PURSUANT TO THE OFFER.
Broadview International LLC ("Broadview") has delivered to the Company Board
its opinion that, as of the date of such opinion, the Offer Price was fair to
such stockholders from a financial point of view. A copy of such opinion is
contained in the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Company's Schedule 14D-9") which is being distributed to
the Company's stockholders. Stockholders are urged to read the written opinion
of Broadview dated October 20, 1999 in its entirety and the discussion thereof
in the Company's Schedule 14D-9, which sets forth the procedures followed,
assumptions and qualifications made, matters considered and limitations of the
review undertaken by Broadview in connection with the opinion.
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 20, 1999 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides that, among other things, as soon
as practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the Texas Business Corporation Act
(the "TBCA") and the General Corporation Law of the State of Delaware (the
"DGCL"), the Company will be merged with and into Purchaser (the "Merger").
Following consummation of the Merger, Purchaser will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned subsidiary
of Parent. Notwithstanding the foregoing, the Merger Agreement provides that
Parent may elect at any time prior to the Merger to merge Purchaser with and
into the Company instead of merging the Company with and into Purchaser as
provided above, in which case the Company would be the Surviving Corporation.
See Section 13 of this Offer to Purchase.
At the effective time of the Merger (the "Effective Time"), by virtue of the
Merger and without any action on the part of the Company, Parent or Purchaser,
each issued and outstanding Share (other than Shares owned directly or
indirectly by the Company, Parent or Purchaser, any subsidiary of Parent, any
wholly owned subsidiary of the Company or Shares with respect to which appraisal
rights are properly exercised under Delaware law ("Dissenting Shares")) will be
converted into and represent the right to receive $10.00 (or such other price
that may be paid for each Share pursuant to the Offer, if amended) in cash,
without interest thereon (the "Merger Consideration"). As of the Effective Time,
all such converted Shares shall no longer be outstanding and will automatically
be canceled and retired and will cease to exist, and each holder of a
certificate representing any such Shares will, to the extent such certificate
represents such Shares, cease to have any rights with respect thereto, except
the right to receive in cash the Merger Consideration upon the surrender of the
certificate representing such Shares. Pursuant to the Merger Agreement, the
Company will not tender Shares held by the Company in the Offer. All Shares that
are owned directly or indirectly by the Company, Parent, Purchaser or any
subsidiary of Parent at the Effective Time will be canceled, and no
consideration will be delivered in exchange therefor. See Section 5 of this
Offer to Purchase for a description of certain tax consequences of the Offer and
the Merger and Section 13 of this Offer to Purchase with respect to the Merger.
The Company has advised Parent and Purchaser that, as of October 15, 1999,
(i) 24,215,117 Shares were validly issued and outstanding, fully paid and
non-assessable and (ii) 4,948,500 Shares were reserved for issuance upon the
exercise of outstanding Options (as defined below). Of such Options, 1,432,376
will be exercisable prior to the Expiration Date (as defined below) with
exercise prices less than $10.00 per share. See Section 13 of this Offer to
Purchase. As of the date hereof, neither Parent nor Purchaser beneficially owns
any Shares.
Based on the foregoing and the expected tender of 630,264 Shares pursuant to
the Stockholders Agreement (not including up to 488,605 Shares issuable upon the
exercise of Options covered by the Stockholders Agreement), the Minimum
Condition will be satisfied if 18,605,356 additional Shares are validly tendered
and not withdrawn prior to the Expiration Date. The number of Shares required to
be validly tendered and not withdrawn in order to satisfy the Minimum Condition
will increase to the extent additional Shares are deemed to be outstanding on a
fully diluted basis under the Merger Agreement. For purposes of the Merger
Agreement, "on a fully diluted basis" means, as of any date, the number of
Shares outstanding, together with the Shares issuable upon the exercise of all
outstanding options, rights and other securities which are then exercisable into
Shares ("Options"), but only to the extent that any such Options are exercisable
into Shares at a price per share less than $10.00.
Upon the satisfaction of the Minimum Condition, Purchaser will have the
ability to acquire and control a majority of the outstanding Shares and will
thus be able to approve the Merger without the vote of any other stockholder. In
the event Purchaser acquires 90% or more of the outstanding Shares through the
Offer or otherwise, Purchaser and Parent will be able to effect the Merger
pursuant to the
2
<PAGE>
"short-form" merger provisions of the TBCA and the DGCL, without prior notice
to, or any action by, any other stockholder of the Company. See Section 12 of
this Offer to Purchase.
Purchaser is not offering to acquire outstanding Options in the Offer.
Pursuant to the Merger Agreement, all Options will be canceled and each holder
of any vested Options will be paid an amount equal to the excess, if any, of the
Offer Price over the exercise price for such vested Options.
THIS OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not previously withdrawn in accordance
with Section 4 of this Offer to Purchase as soon as legally permitted and
practicable. The term "Expiration Date" means 12:00 Midnight, New York City
time, on November 29, 1999, unless Purchaser shall have extended the period of
time for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date as of which the Offer, as so extended by
Purchaser, shall expire. UNDER NO CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE
OFFER PRICE FOR TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION. SEE SECTIONS 13 AND 15 OF THIS OFFER TO PURCHASE. THE OFFER
IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS, INCLUDING THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE WAITING PERIODS UNDER THE HSR ACT. SEE SECTION 16
OF THIS OFFER TO PURCHASE.
Purchaser expressly reserves the right to modify the terms of the Offer and
to waive any condition of the Offer, except that, without the prior written
consent of the Company, Purchaser will not (and Parent will not cause Purchaser
to) (i) decrease the price per Share payable in the Offer, (ii) decrease the
number of Shares sought pursuant to the Offer below a majority of the total
issued and outstanding Shares on a fully diluted basis or change the form of
consideration payable in the Offer, (iii) change or amend the conditions to the
Offer or impose additional conditions to the Offer, (iv) except as provided
below, change the Expiration Date of the Offer, or (v) otherwise amend, add or
waive any term or condition of the Offer in any manner adverse to the holders of
Shares. So long as the Merger Agreement is in effect and the conditions to the
Offer have not been satisfied or waived, Purchaser may, from time to time,
extend the expiration of the Offer for up to ten additional business days (but
in no event shall such extensions exceed, in the aggregate, 30 business days
without the Company's prior written consent, and in no event shall Purchaser be
required to extend the Offer beyond March 31, 2000). Additionally, so long as
the Merger Agreement is in effect and the conditions to the Offer (other than
the Minimum Condition) have been satisfied or waived and if the number of Shares
that have been validly tendered and not properly withdrawn represent at least a
majority of the then issued and outstanding Shares on a fully diluted basis and
Purchaser does not elect to reduce the Minimum Condition and consummate the
Offer, Purchaser shall, at the Company's request on up to three occasions,
extend the expiration date of the Offer for up to ten additional business days
(but in no event shall such extensions exceed, in the aggregate 30 business
days, and in no event shall Purchaser be required to extend the Offer beyond
March 31, 2000). Moreover, so long as the Merger Agreement is in effect and the
conditions to the Offer have been satisfied or waived, Purchaser may, without
the consent of the Company, extend the Offer for an aggregate period of not more
than ten business days (for all such extensions) beyond the originally scheduled
Expiration Date of the Offer if the number of Shares that have been validly
tendered and not withdrawn represent less than 90% of the then issued and
outstanding Shares. Notwithstanding the foregoing, Purchaser may, without the
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consent of the Company, extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "Commission") or the staff thereof applicable to the Offer.
If by 12:00 Midnight, New York City time, on November 29, 1999 (or any other
date or time then set as the Expiration Date), any or all conditions to the
Offer have not been satisfied or waived, Purchaser reserves the right (but shall
not be obligated), subject to the terms and conditions contained in the Merger
Agreement and to the applicable rules and regulations of the Commission, to
(i) terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders, (ii) waive all unsatisfied conditions
and, subject to complying with the terms of the Merger Agreement and the
applicable rules and regulations of the Commission, accept for payment and pay
for all Shares validly tendered prior to the Expiration Date and not previously
properly withdrawn, (iii) extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended, or (iv) amend the Offer.
There can be no assurance that Purchaser will exercise its right to extend
the Offer. Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement, in the case of an extension, to be issued not later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c), 14d-6(d) and 14e-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change). Without limiting the obligation of
Purchaser under such rules or the manner in which Purchaser may choose to make
any public announcement, Purchaser currently intends to make announcements by
issuing a press release to the PR Newswire and making any appropriate filing
with the Commission. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 of the Exchange Act.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, Purchaser also
expressly reserves the right, at any time and from time to time, in its sole
discretion, to delay payment for any Shares regardless of whether such Shares
were theretofore accepted for payment or, with the written consent of the
Company, to terminate the Offer and not to accept for payment or pay for any
Shares not theretofore accepted for payment or paid for, upon the occurrence of
any of the conditions set forth in Section 15 of this Offer to Purchase, by
giving oral or written notice of such delay or termination to the Depositary.
Purchaser's right to delay payment for any Shares or not to pay for any Shares
theretofore accepted for payment is subject to the applicable rules and
regulations of the Commission, including Rule 14e-1(c) of the Exchange Act,
relating to Purchaser's obligation to pay for or return tendered Shares promptly
after the termination or withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act or otherwise. The minimum period during which a tender
offer must remain open following material changes in the terms of the Offer or
the information concerning the offer, other than a change in price or a change
in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the terms or information
changes. With respect to a change in price or a change in percentage of
securities sought, a minimum ten business day period is generally required to
allow for adequate dissemination to stockholders and for investor response.
The Company has provided Purchaser with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
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commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the list of stockholders or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of this Offer to Purchase promptly after the later to
occur of (a) the Expiration Date and (b) subject to compliance with the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, the satisfaction or waiver of the conditions set forth
in Section 15 of this Offer to Purchase. Subject to such compliance, Purchaser
expressly reserves the right to delay payment for Shares in order to comply in
whole or in part with any applicable law. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility"), pursuant to the procedures set forth in
Section 3 of this Offer to Purchase, (ii) a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with all required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message transmitted by the Book-Entry Transfer
Facility to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has received
an express acknowledgment from the participant in such Book-Entry Transfer
Facility tendering the Shares that are the subject of the Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against the participant. See Section 3 of this Offer to Purchase.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from Purchaser and transmitting such payment to
tendering stockholders. Upon the deposit of funds with the Depositary for the
purpose of making payments to tendering stockholders, Purchaser's obligation to
make such payment shall be satisfied, and tendering stockholders must thereafter
look solely to the Depositary for payment of amounts owed to them by reason of
the acceptance for payment of Shares pursuant to the Offer. If, for any reason
whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer
is delayed, or Purchaser is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to Purchaser's rights under this
Offer to Purchase, the Depositary may nevertheless, on behalf of Purchaser,
retain tendered Shares, and, subject to compliance with the applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act,
such Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to withdrawal rights as described in Section 4 of this
Offer to Purchase. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
representing more Shares than are tendered, certificates representing such
unpurchased or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares delivered by book-entry
transfer to the Book-Entry Transfer Facility, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
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If, prior to the Expiration Date, Purchaser increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
VALID TENDERS. Except as set forth below, for Shares to be validly tendered
pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the tendering stockholder must comply with the
guaranteed delivery procedure set forth below. In addition, either
(i) certificates representing such Shares must be received by the Depositary
along with the Letter of Transmittal or such Shares must be tendered pursuant to
the procedure for book-entry transfer set forth below, and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the guaranteed delivery procedure set forth below must
be complied with. No alternative, conditional or contingent tenders will be
accepted.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at the Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date or (ii) the guaranteed delivery
procedures described below must be complied with.
SIGNATURE GUARANTEE. No signature guarantee is required on the Letter of
Transmittal in cases where Shares are tendered (i) by a registered holder of
Shares who has not completed either the box labeled "Special Delivery
Instructions" or the box labeled "Special Payment Instructions" on the Letter of
Transmittal or (ii) for the account of any Eligible Institution (as defined
below). In all other cases, signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"). See Instructions 1 and 5 of the Letter of Transmittal.
If the certificates evidencing Shares are registered in the name of a person or
persons other than the signer of the Letter of Transmittal, or if payment is to
be made, or delivered to, or certificates for unpurchased Shares are to be
issued or returned to, a person other than the registered owner or owners, then
the tendered certificates must be
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endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 to the Letter of Transmittal. If the Share certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) must accompany
each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other documents required by
the Letter of Transmittal are received by the Depositary within three Nasdaq
National Market trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National
Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution and a representation that the stockholder
owns the Shares tendered within the meaning of, and that the tender of the
Shares effected thereby complies with, Rule 14e-4 under the Exchange Act, each
in the form set forth in the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE STOCKHOLDER TENDERING SUCH SHARES. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message and
(iii) any other documents required by the Letter of Transmittal.
UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING AND SUBSTITUTE
FORM W-9. Under the "backup withholding" provisions of United States federal
income tax law, the Depositary may be required to withhold 31% of the amount of
any payments of cash pursuant to the Offer. In order to avoid backup
withholding, each stockholder surrendering Shares in the Offer must, unless an
exemption applies, provide the payor of such cash with such stockholder's
correct taxpayer identification number ("TIN") on a substitute Form W-9 and
certify, under penalties of perjury, that such TIN is correct and that such
stockholder is not subject to backup withholding. If a stockholder does not
provide its correct TIN or fails to provide the certifications described above,
the Internal Revenue Service ("IRS") may impose a penalty on such stockholder
and may subject the payment of cash to such stockholder pursuant to the Offer to
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backup withholding of 31%. All stockholders surrendering shares pursuant to the
Offer should complete and sign the substitute Form W-9 included in the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to the Depositary). Certain stockholders (including, among
others, all corporations and Non-U.S. Holders (as defined in Section 5 herein))
are not subject to backup withholding. Non-U.S. Holders should complete and sign
a Form W-8 Certificate of Foreign Status or a substitute Form W-8, a copy of
which may be obtained from the Depositary, in order to avoid backup withholding.
See Instruction 9 of the Letter of Transmittal.
TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31%
OF THE GROSS PAYMENTS MADE TO STOCKHOLDERS FOR SHARES PURCHASED PURSUANT TO THE
OFFER, EACH STOCKHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH
BACKUP WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE STOCKHOLDER'S CORRECT
TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF
TRANSMITTAL.
WITHHOLDING FOR NON-U.S. HOLDERS. Even if a Non-U.S. Holder has provided
the required certification to avoid backup withholding, the Depositary will
withhold United States federal income taxes equal to 30% of the gross payments
payable to a Non-U.S. Holder or his agent unless the Depositary determines that
a reduced rate of withholding is available pursuant to a tax treaty or that an
exemption from withholding is applicable because the gross proceeds are
effectively connected with the conduct of a trade or business within the United
States. In order to obtain a reduced rate of withholding pursuant to a tax
treaty, a Non-U.S. Holder must deliver to the Depositary before the payment a
properly completed and executed IRS Form 1001. In order to obtain an exemption
from withholding on the grounds that the gross proceeds paid pursuant to the
Offer are effectively connected with the conduct of a trade or business within
the United States, a Non-U.S. Holder must deliver to the Depositary a properly
completed and executed IRS Form 4224. The Depositary will determine a
stockholder's status as a Non-U.S. Holder and eligibility for a reduced rate of,
or exemption from, withholding by reference to any outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts and
circumstances indicate that such reliance is not warranted. A Non-U.S. Holder
may be eligible to obtain a refund of all or a portion of any tax withheld if
such Non-U.S. Holder meets those tests described in Section 5 that would
characterize the exchange as a sale (as opposed to a dividend) or is otherwise
able to establish that no tax or a reduced amount of tax is due.
NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING, INCLUDING
ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE REFUND
PROCEDURE.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. Purchaser
reserves the absolute right to reject any or all tenders of any Shares that are
determined by it not to be in proper form or the acceptance of or payment for
which may, in the opinion of Purchaser, be unlawful. Purchaser also reserves the
absolute right to waive any of the conditions of the Offer, or any defect or
irregularity in the tender of any Shares. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions to the Letter of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. None of Purchaser, Parent,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
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APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's right with respect to the Shares tendered by such stockholder and
accepted for payment by Purchaser (and any and all other Shares or other
securities or rights issued or issuable in respect of such Shares on or after
October 27, 1999). All such powers of attorney and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment is effective
upon the acceptance for payment of the Shares by Purchaser. Upon acceptance for
payment, all prior powers of attorney and proxies given by the stockholder with
respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent proxies may be given or written consent
executed (and, if given or executed, will not be deemed effective). The
designees of Purchaser will, with respect to the Shares and other securities or
rights, be empowered to exercise all voting and other rights of such stockholder
as they in their sole judgment deem proper in respect of any annual or special
meeting of the Company's stockholders, any adjournment or postponement thereof,
actions by written consent in lieu of such meeting or otherwise. Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon Purchaser's acceptance for payment of such Shares,
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and the other securities or rights issued or issuable in
respect of such Shares, including voting at any meeting of stockholders (whether
annual or special or whether or not adjourned) or acting by written consent
without a meeting in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after October 27, 1999) and (ii) when the same are accepted for payment by
Purchaser, Purchaser will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and Purchaser upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this section, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time on
or after December 27, 1999. If purchase of or payment for Shares is delayed for
any reason or if Purchaser is unable to purchase or pay for Shares for any
reason, then, without prejudice to Purchaser's rights under the Offer, tendered
Shares may be retained by the Depositary on behalf of Purchaser and may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth in this section, subject to Rule 14e-1(c) under
the Exchange Act, which provides that no person who makes a tender offer shall
fail to pay the consideration offered or return the securities deposited by or
on behalf of security holders promptly after the termination or withdrawal of
the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name in which the
certificates representing such Shares are registered, if different from that of
the person who tendered the Shares. If certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
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tendered pursuant to the procedure for book-entry transfer set forth in
Section 3 of this Offer to Purchase, any notice of withdrawal must also specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by
Purchaser, in its sole discretion, and its determination will be final and
binding on all parties. None of Purchaser, Parent, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
A withdrawal of Shares may not be rescinded. Any Shares properly withdrawn
will be deemed not validly tendered for purposes of the Offer, but may be
retendered at any subsequent time prior to the Expiration Date by following any
of the procedures described in Section 3 of this Offer to Purchase.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain United States federal
income tax consequences of the receipt of cash by a holder of Shares pursuant to
the Offer or the Merger.
This summary is based upon the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), existing and proposed United States Treasury
Regulations promulgated thereunder, published rulings, administrative
pronouncements and judicial decisions, changes to which could affect the tax
consequences described herein (possibly on a retroactive basis).
This summary addresses only Shares held as capital assets. It does not
address all of the tax consequences that may be relevant to particular
stockholders in light of their personal circumstances, or to certain types of
stockholders (such as certain financial institutions, dealers or traders in
securities or commodities, insurance companies, "S" corporations, expatriates,
tax-exempt organizations, Non-U.S. Holders (as defined below), persons who are
subject to alternative minimum tax, or persons who hold Shares as a position in
a "straddle" or as part of a "hedging" or "conversion" transaction or that have
a functional currency other than the United States dollar). This summary may not
be applicable with respect to Shares acquired as compensation (including Shares
acquired upon the exercise of stock options or which were or are subject to
forfeiture restrictions). This summary also does not address the state, local or
foreign tax consequences of participating in the Offer or the Merger. EACH
HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH HOLDER (INCLUDING THE APPLICATION AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF PARTICIPATION IN THE OFFER
OR THE MERGER.
A "U.S. Holder" means a holder of Shares that for United States federal
income tax purposes is (a) a citizen or resident of the United States, (b) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof or therein, (c) an estate the
income of which is subject to United States federal income taxation regardless
of its source, or (d) a trust if (i) a court within the United States is able to
exercise primary supervision over the administration of the trust and (ii) one
or more United States fiduciaries have the authority to control all substantial
decisions of the trust, and other types of trusts considered U.S. Holders for
federal income tax purposes. A "Non-U.S. Holder" is a holder of Shares other
than a U.S. Holder.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for United States federal income tax purposes under the Code
and may also be a taxable transaction under applicable state, local or foreign
income or other tax laws. Generally, for United States federal income tax
purposes, a U.S. Holder will recognize gain or loss equal to the difference
between the amount of cash received by the U.S. Holder pursuant to the Offer or
the Merger and the aggregate tax basis in the Shares purchased pursuant to the
Offer (or canceled pursuant to the Merger). Such gain or loss will be calculated
separately for each block of Shares purchased pursuant to the Offer (or canceled
pursuant to the Merger).
Gain (or loss) will be capital gain (or loss), assuming that such Shares are
held as a capital asset, except to the extent that the amount of cash received
includes dividends that have been declared by the
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<PAGE>
Board of Directors of the Company prior to the exchange. Capital gains of
individuals, estates and trusts generally are subject to a maximum United States
federal income tax rate of (i) 39.6% if, at the time Purchaser accepts the
Shares for payment (or the Shares are canceled pursuant to the Merger) the U.S.
Holder held the Shares for one year or less and (ii) 20% if the U.S. Holder held
such Shares for more than one year at such time. Capital gains of corporations
generally are taxed at the United States federal income tax rates applicable to
corporate ordinary income. In addition, under present law, the ability to use
capital losses to offset ordinary income is limited.
BACKUP WITHHOLDING. See Section 3 concerning the potential application of
United States federal backup withholding to payments made to Non-U.S. Holders
and the backup withholding tax requirements.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are listed and quoted on the Nasdaq National Market under the
symbol "PRMS." The following table sets forth, for the calendar quarters
indicated, the range of high and low sale prices per Share as reported by the
Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
----------- ------------
<S> <C> <C>
1999:
First Quarter............................................. $12 1/8 $ 6 1/4
Second Quarter............................................ 10 1/2 6 31/32
Third Quarter............................................. 9 3/16 6 5/16
Fourth Quarter (through October 20, 1999)................. 8 15/16 7 3/8
1998:
First Quarter............................................. $29 3/4 $18 13/16
Second Quarter............................................ 32 1/4 22 1/2
Third Quarter............................................. 25 7/8 8
Fourth Quarter............................................ 15 3/8 5 5/8
</TABLE>
On October 20, 1999, the last full trading day prior to the date of the
public announcement of the Merger Agreement, the closing sale price per Share
was $8 7/8. HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE SHARES.
The Company has publicly stated it has not paid, and does not intend to pay,
any cash dividends on the Shares. See Section 14 of this Offer to Purchase.
7. EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATIONS;
REGISTRATION UNDER THE EXCHANGE ACT
The purchase of the Shares by Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by holders of Shares other than
Purchaser. According to the Company, as of October 20, 1999 there were
approximately 229 holders of record of the Shares.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of The Nasdaq Stock Market, Inc.
("Nasdaq") for continued inclusion in the Nasdaq National Market, which requires
that for each class of shares listed by an issuer, there must be (i) at least
750,000 publicly held shares, held by at least 400 stockholders of round lots,
with a market value of at least $1,000,000 and the issuer must have net tangible
assets of at least $4,000,000 or (ii) at least 1,100,000 publicly held shares,
held by at least 400 stockholders of round lots, with a market value of
$5,000,000 and the issuer must have a market capitalization of at least
$50,000,000 or total assets and total revenue of $50,000,000 each for the most
recently completed fiscal year or two of the last three most recently completed
fiscal years and at least four registered and active market makers. If these
standards are not met, the Shares would no longer meet the requirements for
continued Nasdaq National Market reporting and Nasdaq could cease to provide any
quotations with respect thereto. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10% of the outstanding
Shares are not considered as being publicly held for this purpose.
11
<PAGE>
To the extent the Shares are delisted from the Nasdaq National Market, the
market for Shares could be adversely affected. If Nasdaq were to delist the
Shares, it is possible that the Shares would continue to trade on another
exchange or in the over-the-counter market and that price quotations for the
Shares would be reported by other sources. The extent of the public market for
the Shares and the availability of such quotations would, however, depend on the
number of holders of Shares remaining at such time, the interest in maintaining
a market in the Shares on the part of securities firms, the possible termination
of registration of the Shares under the Exchange Act, as described below, and
other factors. Purchaser cannot predict whether the reduction in the number of
Shares as a result of the consummation of the Offer would have an adverse or
beneficial effect on the market price for, or marketability of, the Shares or
whether it would cause future market prices to be greater or less than the Offer
Price.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 holders of record of Shares. It is the intention of
Purchaser to seek to cause an application for such termination to be made as
soon after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such registration were terminated, the
Company would no longer legally be required to disclose publicly in proxy
materials distributed to stockholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act, and the executive officers and directors of
the Company and beneficial owners of more than 10% of the Shares would no longer
be subject to the "short-swing" insider trading reporting and profit recovery
provisions of Section 16(b) of the Exchange Act. Furthermore, if such
registration were terminated, persons holding "restricted securities" of the
Company may be deprived of their ability to dispose of such securities under
Rule 144 promulgated under the Securities Act of 1933, as amended.
If registration of the Shares is not terminated and the Shares are not
delisted prior to the Merger, then the Shares will cease to be listed on the
Nasdaq National Market and the registration of the Shares under the Exchange Act
will be terminated following the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
Although neither Parent nor Purchaser has any knowledge that would indicate that
statements contained herein based upon such documents are untrue, neither Parent
nor Purchaser assumes any responsibility for the accuracy or completeness of the
information concerning the Company, furnished by the Company or contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent or Purchaser.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended June 25, 1999 (the "Company's 10-K"), the Company designs, manufactures
and markets integrated access products for telecommunications service providers.
The Company entered the integrated access device ("IAD") equipment market in
December 1991 with the introduction of the first of a family of integrated
multiple access communications systems ("IMACS") products. The IMACS products
are designed to enable public carriers to provide their business customers with
flexible, cost-effective and reliable access to telecommunications services. The
IMACS products provide access to numerous services, including plain old
telephone service ("POTS"), Centrex, digital data networks ("DDN"), integrated
services digital networks ("ISDN"), frame relay, and asynchronous transfer mode
("ATM") services. The IMACS platform allows carriers to offer a variety of
value-added services, switching technologies and transmission technologies to
their business customers through a single access device. In fiscal 1998, the
Company introduced two new integrated access products, the SlimLine and the
StreamLine, which address simpler, single T1 access applications, and, in fiscal
1999, the Company introduced the Q-155 broadband IAD that combines
12
<PAGE>
Synchronous Optical Network ("SONET")/Synchronous Digital Hierarchy ("SDH"),
time division multiplexing ("TDM") and ATM technologies in a single platform.
The Company's products are distributed and serviced worldwide primarily through
strategic distribution relationships with significant telecommunications
equipment vendors. The Company considers its relationships with these
telecommunications equipment suppliers to be strategic in that they enable the
Company to gain access to public carriers worldwide, to establish the Company's
products as essential value added elements of the public carriers' business
communications solutions and, in some cases, to incorporate proprietary
technology into the IMACS products. The Company's products are typically sold as
access components of the suppliers' communications equipment solutions. The
Company's strategic distribution relationships, from which the Company has
derived most of its revenues to date, include ADC Telecommunications, AT&T Local
Services (formerly Teleport Communications Group), Motorola, Inc., Paradyne
Networks, Inc. and XEL Communications, Inc. To a lesser degree the Company also
sells its products directly to carriers and end user customers and through
value-added reseller relationships.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's 10-K and in its quarterly earnings release for the quarter ended
September 24, 1999. More comprehensive financial information is included in the
reports and other documents filed by the Company with the Commission. For the
periods covered by such reports, the following summary is qualified in its
entirety by reference to such reports and such other documents and all the
financial information (including any related notes) contained therein. Such
reports and other documents should be available for inspection and copies
thereof should be obtainable in the manner set forth below.
PREMISYS COMMUNICATIONS, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, JUNE 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................. $21,676 $25,011 $92,423 $102,298
Cost of Revenues..................................... 9,802 8,388 36,660 35,586
------- ------- ------- --------
Gross Profit......................................... 11,874 16,623 55,763 66,712
Operating Expenses................................... 11,833 11,241 48,128 48,341
------- ------- ------- --------
Income from Operations............................... 41 5,382 7,635 18,371
Interest and Other Income, Net....................... 719 988 3,573 3,399
------- ------- ------- --------
Income before Income Taxes........................... 760 6,370 11,208 21,770
Provision for Income Taxes........................... 243 2,357 3,587 8,055
------- ------- ------- --------
Net Income........................................... $ 517 $ 4,013 $ 7,621 $ 13,715
======= ======= ======= ========
PER SHARE DATA:
Net Income per Share
Basic.............................................. $ 0.02 $ 0.16 $ 0.31 $ 0.54
Diluted............................................ $ 0.02 $ 0.15 $ 0.30 $ 0.50
Shares Used in Computing Net Income per Share
Basic.............................................. 24,165 25,888 24,600 25,569
Diluted............................................ 24,820 27,004 25,384 27,495
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
AT SEPTEMBER 30, -------------------
1999 1999 1998
---------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets........................................... $121,137 $126,624 $138,757
Total Liabilities...................................... 14,003 27,419 17,981
Stockholders' Equity................................... 107,134 99,205 120,776
</TABLE>
13
<PAGE>
According to the Company's 10-K, the Company uses a 52/53 week accounting
year that ends on the Friday closest to June 30. For purposes of financial
statement presentation, each fiscal year is considered to have ended on June 30
and the first fiscal quarter of each year is considered to have ended on
September 30.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy statements
certain information, as of particular dates, concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interests of such persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60601. The Commission also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports and other information regarding registrants that file
electronically with the Commission.
CERTAIN COMPANY PROJECTIONS. During the course of the discussions among
Parent, Purchaser and the Company that led to the execution of the Merger
Agreement, the Company provided Parent or its representatives with certain
information about the Company and its financial performance which is not
publicly available. The information provided included financial projections for
the Company as an independent company (i.e., without regard to the impact to the
Company of a transaction with Purchaser). The following is a summary of selected
projected financial information provided by the Company.
PREMISYS COMMUNICATIONS, INC.
SELECTED PROJECTED CONSOLIDATED FINANCIAL DATA
(MILLIONS)
<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER
ENDING ENDING ENDING
DECEMBER 31, 1999 MARCH 31, 2000 JUNE 30, 2000
----------------- -------------- -------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... $21.7 $32.0 $37.0
Cost of Revenues................................. 12.7 15.5 18.7
----- ----- -----
Gross Profit..................................... 15.3 16.5 18.3
Operating Expenses............................... 12.3 12.7 13.2
----- ----- -----
Income from Operations........................... 3.0 3.8 5.1
Interest and Other Income, Net................... 0.9 1.0 1.0
----- ----- -----
Income before Income Taxes....................... 3.9 4.8 6.1
Provision for Income Taxes....................... 1.2 1.5 1.9
----- ----- -----
Net Income....................................... $ 2.7 $ 3.2 $ 4.1
===== ===== =====
</TABLE>
The Company has advised Purchaser and Parent that it does not as a matter of
course make public any projections as to future performance or earnings, and the
projections set forth above are included in this Offer to Purchase only because
the information was provided to representatives of Parent. The projections were
not prepared with a view to public disclosure or compliance with the published
guidelines of the Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding projections or forecasts.
The Company's internal operating projections are, in general, prepared solely
for internal use and capital budgeting and other management decisions and are
subjective in many
14
<PAGE>
respects and thus susceptible to various interpretations and periodic revision
based on actual experience and business developments.
The projections were based on a number of assumptions that are beyond the
control of the Company, Purchaser or Parent or their respective financial
advisors, including economic forecasting (both general and specific to the
Company's business), which is inherently uncertain and subjective. Among the
assumptions made by the Company in preparing the projections, the Company
assumed that it would be able to derive substantial revenues in each of the last
three quarters of fiscal 2000 from sales of the Company's newly introduced
SlimLine, StreamLine and Q-155 products. Through the first quarter of fiscal
2000, revenues from these products did not comprise a substantial portion of the
Company's revenues. Therefore, these projections are subject to risks associated
with the Company's ability to achieve market acceptance of these products and to
complete additional development with respect to these products. The foregoing
projections are forward-looking statements subject to material risks and
uncertainties that could cause actual results to differ substantially from those
estimated, such as the Company's ability to retain market share in an
environment of increasing competition, the ability to improve its products and
introduce new products on a timely basis, the ability to retain employees and
customers and other business and competitive factors, as well as the effects on
the Company's business of the Offer and the Merger. Accordingly, there can be no
assurance that these projections will be realized and actual results may differ
materially from those expressed in the projections.
None of Purchaser, Parent or their financial advisors assumes any
responsibility for the accuracy of any of the projections. The inclusion of the
foregoing projections should not be regarded as an indication that the Company,
Purchaser or Parent or any other person who received such information considers
it an accurate prediction of future events and this information should not be
relied on as such. None of the Company, Purchaser or Parent intends to update,
revise or correct such projections if they become inaccurate (even in the short
term).
9. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER
PURCHASER. Purchaser is a Texas corporation and presently a wholly owned
subsidiary of Parent. To date, Purchaser has not conducted any business other
than that incident to its formation and the commencement of the Offer. The
principal executive offices of Purchaser are located at 7677 Oakport St., Suite
1040, Oakland, California 94621.
PARENT. Parent is a Delaware corporation. Parent is seeking to pioneer the
development of next generation communication equipment that will enable carriers
and service providers to cost-effectively offer high bandwidth services
independent of the local loop communications infrastructure currently in place.
Parent's technology is intended to support and enhance existing local loop
technologies, including DSL, cable modem, ATM and broadband wireless. As a
result, Parent's products will allow high-speed data, voice, video and
entertainment services across existing fiber, copper and wireless-based
networks. Founded in June 1999 by former senior executives of Ascend
Communications, Inc., Parent intends to both develop and acquire new
technologies and apply existing technologies in innovative ways in order to
solve major problems that exist today in the local loop due to bandwidth
constraints and multiple delivery technologies. The principal executive offices
of Parent are located at 7677 Oakport St., Suite 1040, Oakland, California
94621. Parent is not subject to the informational requirements of the Exchange
Act.
Except as otherwise set forth in this Offer to Purchase, neither Parent nor
Purchaser, nor, to the best knowledge of Parent and Purchaser, any of the
persons listed in Annex I hereto owns or has any right to acquire any Shares and
none of them has effected any transaction in the Shares during the past
60 days.
Except as set forth in this Offer to Purchase, neither Parent nor Purchaser,
nor, to the best knowledge of Parent and Purchaser, any of the persons listed in
Annex I hereto has any contract, arrangement, understanding or relationship with
any other person with respect to any securities of the Company, including,
without limitation, any contract, arrangement, understanding or relationship
concerning the
15
<PAGE>
transfer or the voting of any securities of the Company, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against loss
or the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, neither Parent nor Purchaser, nor, to the best knowledge of Parent and
Purchaser, any of the persons listed in Annex I hereto has had any transactions
with the Company, or any of its executive officers, directors or affiliates that
would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between any of Parent or Purchaser, or their
respective subsidiaries, or, to the best knowledge of Parent and Purchaser, any
of the persons listed in Annex I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Purchaser to purchase all of the
Shares pursuant to the Offer is estimated to be approximately $255,000,000. Fees
and expenses related to the Offer and the Merger payable by Purchaser are
estimated not to exceed an additional $5,500,000.
Parent has received equity commitments from investors in amounts sufficient
to provide Purchaser with all of the funds necessary to consummate the Offer and
the Merger. Parent intends to make such funds available to Purchaser, as
necessary, in the form of capital contributions. In addition, Purchaser has
entered into a commitment letter (the "Commitment Letter") with Credit Suisse
First Boston ("CSFB"), an affiliate of the Dealer Manager, pursuant to which
CSFB has agreed to act as exclusive advisor and lead arranger for senior secured
credit facilities in an aggregate amount of up to $130,000,000 (the
"Facilities") and has committed to provide the entire amount of the Facilities
upon the terms and subject to the conditions set forth in the Commitment Letter.
Purchaser intends to use a combination of equity capital to be provided by
Parent and borrowings under the Facilities to fund the Offer and the Merger, but
it has not yet determined the exact amounts it will use from each source of
financing.
The Commitment Letter contemplates two senior secured term loan facilities.
The first such facility is expected to be a five-year senior, secured term loan
facility in the amount of up to $50,000,000 (the "Term Loan Facility"), which
would be repayable in quarterly installments. The second such facility is
expected to be a six-month senior secured term loan facility in the amount of up
to $80,000,000 (the "Acquisition Facility"). The Acquisition Facility would be
available in up to six drawings and would mature in a single installment on the
date upon which the Merger is consummated. Loans under the Facilities would bear
interest at a rate per annum equal to, at Purchaser's option, (i) the higher of
the federal funds effective rate from time to time plus 0.5% and CSFB's prime
rate or (ii) the Eurodollar rate plus 1% per annum. The Commitment Letter
contemplates that the Facilities will be secured by pledges of the equity
interests in entities which hold certain of the assets to be acquired pursuant
to the Offer and the Merger and will be guaranteed by the domestic subsidiaries
of such entities. Additionally, the Term Loan Facility will be secured by
certain capital call rights against third parties.
Purchaser intends to repay the Acquisition Facility upon the closing of the
Merger out of the Company's available cash and short-term investments. Although
no definitive plan or arrangement for repayment of borrowings under the Term
Loan Facility has been made, Purchaser anticipates such borrowings will be
repaid with internally generated funds and from other sources which may include
the proceeds of future bank refinancings or the public or private sale of debt
or equity securities. Purchaser's decision concerning the method to be used to
repay the borrowings under the Term Loan Facility will be made based on
Purchaser's review from time to time of the advisability of particular actions,
as well as prevailing interest rates, financial and other economic conditions
and such other factors as Purchaser may deem appropriate.
16
<PAGE>
The Offer is not subject to any financing contingency.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY
BACKGROUND OF THE OFFER. On June 16, 1999, Mory Ejabat, who later became
Parent's President and Chief Executive Officer, met with Nicholas Williams, the
Company's President and Chief Executive Officer, at the Company's offices to
discuss Mr. Ejabat's intention to resign as President and Chief Executive
Officer of Ascend Communications, Inc. ("Ascend") following its then-pending
acquisition by Lucent Technologies, Inc. At this meeting, Mr. Ejabat expressed
an interest in the Company's technology and product offerings.
Mr. Ejabat, Robert Dahl, Director and former Chief Financial Officer of
Ascend, and Jeanette Symons, Executive Vice President and Chief Technical
Officer of Ascend, subsequently resigned from Ascend and formed Parent in
June 1999. Mr. Dahl became Vice President, Finance, Chief Financial Officer and
Secretary of Parent, and Ms. Symons became Vice President, Research and
Development, and Chief Technical Officer of Parent.
On July 13, 1999, Mr. Ejabat received a telephone call from Broadview in
which Broadview informed Mr. Ejabat of its representation of the Company and
inquired as to Mr. Ejabat's interest in pursuing discussions with the Company
regarding a possible business combination. During this conversation, Mr. Ejabat
indicated an interest in starting a dialogue with Mr. Williams and recommended
that Broadview contact Parent's financial advisor, CSFBC.
On July 16, 1999, Mr. Ejabat, Mr. Williams, Ms. Symons and a representative
of Broadview met at Broadview's offices. The parties exchanged information on
the Company's financial condition, the strategies and prospects of their
respective businesses and the possibility of a business combination. Based on
the discussions at this meeting, the parties agreed to continue discussions. A
subsequent telephone conversation was held on July 19, 1999 involving
Mr. Ejabat, Ms. Symons and a representative of Broadview to discuss the
synergies between the companies and the possibility of a business combination.
From July 19 to September 2, 1999, Mr. Ejabat, Mr. Williams, and
representatives of CSFBC and Broadview held multiple meetings and telephone
conversations to discuss a possible business combination between the two
companies.
On September 2, 1999, members of Parent's technical staff met with members
of the Company's technical staff at the Company's offices to conduct due
diligence and to discuss issues related to the Company's organization,
technology and product offerings.
From September 2 to September 20, 1999, Parent continued to conduct its due
diligence investigation of the Company. In the course of this investigation,
representatives of Parent reviewed documentation and conducted discussions with
the Company's management and other representatives concerning the Company's
financial condition, operations, technology, products and other business and
legal matters. Also during this period, discussions were held between
Mr. Ejabat and CSFBC, on the one hand, and Mr. Williams and Broadview, on the
other hand, regarding parameters and terms of a potential transaction, including
price and the structure of a possible transaction.
On September 20, 1999, Parent and the Company executed a confidentiality
agreement pursuant to which Parent agreed, among other things, to keep the
existence of the parties' discussions confidential, not to disclose financial,
technical and other business information of the Company, and not to solicit or
hire employees of the Company for a period of six months.
Also on September 20, 1999, Mr. Ejabat, Mr. Williams, and representatives of
CSFBC and Broadview held a meeting to discuss the possible business combination
between the two companies. At this meeting, the parties discussed the terms of a
potential transaction including price, but did not reach any agreement.
17
<PAGE>
On September 22, 1999, at the direction of Parent, representatives of CSFBC
and Broadview discussed the agenda for a meeting of the Company Board scheduled
for September 23, 1999. Broadview indicated that the Board meeting would be held
to allow Broadview to update the Company Board on Broadview's process of
evaluating possible acquisition transactions, including Parent's proposal.
On September 24, 1999, Broadview reported back to Parent, through CSFBC,
that the Company Board meeting had been postponed, but that Broadview had
inquired of Board members' interest in a business combination with Parent.
According to Broadview, the Company Board was not prepared to respond to
Parent's proposal and needed more time to analyze the Company's revised business
plan. On the same day, Parent received additional due diligence materials from
the Company, including fiscal 2000 financial projections.
On September 27, 1999, Broadview reported to Parent, through CSFBC, that the
Company's management would be holding a weekend meeting to update the Company
Board on discussions with all parties, including the opportunity to enter into a
transaction with Parent.
On September 28, 1999, at the direction of Parent and the Company, their
respective advisors discussed the proposed terms of an exclusivity agreement
pursuant to which the Company would agree to not solicit proposals from other
potential buyers. From September 28 to October 3, 1999, the parties and their
respective advisors continued to negotiate the terms of a potential transaction
including price, but did not reach any agreement. During this period, Parent
proposed an acquisition of the Company for $10.00 per share in cash, which was
characterized as Parent's "best and final" offer price, subject to the
satisfactory completion of due diligence, execution of definitive agreements, as
well as other customary conditions.
On October 3, 1999, Parent and the Company signed the exclusivity agreement,
which provided for a 21-day period during which the Company would not solicit
proposals from other potential buyers.
From October 4 to October 11, 1999, Parent's representatives conducted
on-site financial, accounting and legal due diligence at the Company. They
reported their findings to Parent and its potential investors at a meeting held
on October 11, 1999. Parent continued its due diligence process during the
following week, making due diligence calls to certain customers of the Company.
Also during this period (and continuing until the signing), Parent and the
Company actively negotiated the definitive agreements, drafts of which were
prepared by Parent's counsel.
On October 15, 1999, Parent and the Company and their respective advisors,
as well as certain potential investors in Parent, held a business due diligence
meeting at Broadview's offices. At this meeting, the Company provided further
information on its financial condition, the strategy and prospects for its
business, and synergies between the companies.
From October 15 to October 20, 1999, Parent and its representatives
continued their due diligence investigation of the Company, and Parent and the
Company continued negotiating the definitive agreements.
On October 20, 1999, the Board of Directors of Parent met and approved the
acquisition of the Company at an offer price of $10.00 per share in cash, as
well as the other terms of the Merger Agreement, the Company Option Agreement
and the Stockholders Agreement. On the same day, the Company Board also met to
review the agreements and the terms of the proposed transaction. After much
discussion, the Company Board instructed Broadview to continue negotiating the
proposed offer price. Broadview contacted Parent, through its financial advisor,
to inform Parent of the Company Board's desire to increase the price.
Mr. Ejabat subsequently contacted Mr. Williams to inform him that Parent was not
willing to increase the offer price beyond $10.00 per share. Later that evening,
the Company Board again met and approved the transaction with a price of $10.00
per share, as well as the other terms of the Merger Agreement, the Company
Option Agreement and the Stockholders Agreement.
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Following the approval of the transaction, Parent and the Company finalized,
executed and delivered the Merger Agreement, the Company Option Agreement and
the Stockholders Agreement.
On October 21, 1999, Parent and the Company issued a joint press release
announcing the execution of the Merger Agreement, the Company Option Agreement
and the Stockholders Agreement and the terms of the Offer and the Merger.
CERTAIN BUSINESS RELATIONSHIPS. The Company has a strategic relationship
with Paradyne Networks, Inc. ("Paradyne") that involves the joint marketing and
sale of the Company's IMACS products by Paradyne. According to the Company's
10-K, sales to Paradyne accounted for 30%, 15% and 29%, respectively, of the
Company's revenue for fiscal years 1997, 1998 and 1999. Paradyne's largest
stockholder is Texas Pacific Group, which together with certain affiliates,
beneficially owns more than 40% of Paradyne's outstanding common stock. Funds
affiliated with Texas Pacific Group also have made significant equity
commitments to Parent and have designated two directors to serve on Parent's
Board of Directors.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY
PURPOSE. The Offer is being made pursuant to the Merger Agreement. The
purpose of the Offer, the Merger and the Merger Agreement is to enable Parent to
acquire control of, and to own the entire equity interest in, the Company. Upon
consummation of the Merger, the Company will be merged with and into Purchaser
and the Surviving Corporation will become a wholly owned subsidiary of Parent.
VOTE REQUIRED TO APPROVE THE MERGER. Under the TBCA, the DGCL and the
Company's Certificate of Incorporation, the approval of the Company Board and
the affirmative vote of the holders of a majority of the outstanding Shares are
required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. Section 203 of the DGCL prevents
certain "business combinations" with an "interested stockholder" (generally, any
person who owns or has the right to acquire 15% or more of a corporation's
outstanding voting stock) for a period of three years following the time such
person became an interested stockholder unless, among other things, prior to the
time the interested stockholder became such, the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became such.
The Company Board is comprised of six members. The Company Board has
unanimously approved the Offer, the Merger, the Merger Agreement, the Company
Option Agreement and the Stockholders Agreement and the transactions
contemplated thereby for the purposes of Section 203 of the DGCL. Unless the
Merger is consummated pursuant to the "short-form" merger provisions under the
TBCA and the DGCL described below (in which case no further corporate action by
the stockholders of the Company will be required to complete the Merger), the
only remaining required corporate action of the Company will be the approval of
the Merger by the affirmative vote of the holders of a majority of the Shares.
If the Minimum Condition is satisfied, Purchaser will have the ability to
approve and adopt the Merger Agreement by virtue of its ownership of more than a
majority of the Shares without the affirmative vote of any other stockholder of
the Company.
PLANS FOR THE COMPANY AFTER THE OFFER. Once the Offer is consummated, if
permitted by Nasdaq and the Exchange Act, it is the intention of Purchaser and
Parent to seek to cause the Company to file applications to withdraw the Shares
from listing on the Nasdaq National Market and to terminate the registration of
the Shares under the Exchange Act. See Section 7 of this Offer to Purchase. In
the event that the Shares are no longer included in Nasdaq it is possible that
the Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend on
the number of holders of Shares remaining at such time, the interests in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of Shares under the Exchange Act, as
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described below, and other factors. To the extent the Shares are delisted from
the Nasdaq National Market, the market for Shares could be adversely affected.
Further, neither Parent nor Purchaser can predict whether the reduction in the
number of Shares as a result of the consummation of the Offer would have an
adverse or beneficial effect on the market price for, or marketability of, the
Shares or whether it would cause future market prices to be greater or less than
the Offer Price. See Section 7 of this Offer to Purchase.
If, following consummation of the Offer, Purchaser owns 90% or more of the
outstanding Shares, Purchaser intends, and Parent intends to cause Purchaser, to
consummate the Merger as a "short form" merger pursuant to the TBCA and the
DGCL. Under such circumstances, neither the approval of any holder of Shares
other than Purchaser, or of the Company Board, would be required. Assuming
outstanding Options are, pursuant to the Merger Agreement, converted to cash
rather than exercised and tendered, upon the tender of Shares owned by the
Selling Stockholders, Purchaser will need to acquire an additional
21,163,342 Shares pursuant to the Offer to reach the 90% ownership level
necessary to effect such a "short-form" merger.
Promptly upon the purchase of Shares by Purchaser pursuant to the Offer and
the option granted pursuant to the Company Option Agreement (the "Company
Option"), Purchaser shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as will give Purchaser
representation on the Company Board equal to the product of the number of
directors on the Company Board (determined after giving effect to the directors
elected pursuant to this provision) and the percentage that such number of
Shares so purchased bears to the number of Shares outstanding, and the Company
shall, upon request by Purchaser, promptly increase the size of the Company
Board or use its best efforts to secure the resignations of such number of
directors as is necessary to provide Parent with such level of representation
and shall cause Parent's designees to be so elected.
Ten business days following completion or termination of the Offer,
Purchaser reserves the right, but has no current intention, to acquire Shares in
open market or negotiated transactions. If Purchaser elects to purchase Shares
in this manner following completion of the Offer, Purchaser will purchase such
Shares, if at all, at varying prices but in no event at prices less than the
Offer Price. There can be no assurance that Purchaser will acquire such
additional Shares in such circumstances or over what period of time such
additional Shares, if any, might be acquired. As a consequence, no assurance can
be given as to when Purchaser will cause the Merger to be consummated, and
similarly no assurance can be given as to when the Merger Consideration will be
paid to stockholders who do not tender their Shares in the Offer.
Pursuant to the Merger, each then outstanding Share (other than Shares owned
by either Parent or Purchaser, Shares held in the treasury of the Company and
Dissenting Shares) shall be converted into the right to receive an amount in
cash equal to the Merger Consideration, without interest thereon. Each share of
common stock of Purchaser issued and outstanding at the Effective Time shall
continue to represent one share of common stock of the Surviving Corporation.
All Shares that are owned directly or indirectly by the Company, Parent,
Purchaser or any subsidiary of Parent at the Effective Time shall be canceled,
and no consideration shall be delivered in exchange therefor.
Purchaser is not offering to acquire outstanding Options in the Offer.
Pursuant to the Merger Agreement, all vested Options will be canceled in
exchange for the payment of the excess, if any, of the Offer Price over the
exercise price for such Options, less applicable income and employment taxes
required to be withheld.
Following the Merger, the Surviving Corporation will be a wholly owned
subsidiary of Parent. Pursuant to the Merger Agreement, the directors and
officers of Purchaser immediately prior to the Effective Time shall be the
initial directors and officers of the Surviving Corporation. Except as set forth
herein, neither Parent nor Purchaser has discussed with the Company's key
management personnel, nor reached any agreement with respect to, the terms of
such individuals' continued employment.
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Following the Merger, Parent may cause the Surviving Corporation to
restructure its operations, resulting in a division of the Company's product
lines. The Company's IMACS products business would be separated from the
Company's research and development and Q products business, with each business
being operated in a separate corporation following the restructuring.
Except as otherwise described in this Offer to Purchase, Purchaser has no
current plans or proposals which relate to or would result in: (a) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company; (b) a sale or transfer of a material amount
of assets of the Company; (c) any change in the Company Board or management of
the Company, including, but not limited to, any plan or proposal to change the
number or term of directors, to fill any existing vacancy on the Company Board
or to change any material term of the employment contract of any executive
officer; (d) any material change in the present dividend rate or policy or
indebtedness or capitalization of the Company; (e) any other material change in
the Company's corporate structure or business; (f) a class of equity securities
of the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (g) the suspension of the Company's
obligation to file reports pursuant to Section 15(d) of the Exchange Act.
DISSENTERS' RIGHTS. No dissenters' rights are available in connection with
the Offer. However, if the Merger is consummated, stockholders of the Company
may have certain rights under the DGCL to dissent, and demand appraisal of, and
to obtain payment for the fair value of their Shares. Such rights, if the
statutory procedures were complied with, could lead to a judicial determination
of the fair value of the Shares (excluding any element of value arising from the
accomplishment or expectation of the Merger) to be required to be paid in cash
to such dissenting holders for their Shares. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, a
Delaware court would be required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset value and earning capacity. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Therefore, the value so determined in any appraisal
proceeding could be different from the price being paid in the Offer.
GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any
applicable federal law operative at the time. The Commission has adopted
Rule 13e-3 under the Exchange Act which is applicable to certain "going private"
transactions and which may under certain circumstances be applicable to the
Merger or another business combination following the purchase of Shares pursuant
to the Offer in which Purchaser seeks to acquire the remaining Shares not held
by it. Purchaser believes that Rule 13e-3 will not be applicable to the Merger.
However, in the event that Purchaser is deemed to have acquired control of the
Company pursuant to the Offer and if the Merger is consummated more than one
year after completion of the Offer or an alternative acquisition transaction is
effected whereby stockholders of the Company receive consideration less than
that paid pursuant to the Offer, in either case at a time when the Shares are
still registered under the Exchange Act, Purchaser may be required to comply
with Rule 13e-3 under the Exchange Act. If applicable, Rule 13e-3 would require,
among other things, that certain financial information concerning the Company
and certain information relating to the fairness of the Merger or such
alternative transaction and the consideration offered to minority stockholders
in the Merger or such alternative transaction be filed with the Commission and
disclosed to stockholders prior to consummation of the Merger or such
alternative transaction. The purchase of a substantial number of Shares pursuant
to the Offer may result in the Company being able to terminate its Exchange Act
registration. See Section 7 of this Offer to Purchase. If such registration were
terminated, Rule 13e-13 would be inapplicable to the Merger or any such
alternative transaction.
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13. MERGER AGREEMENT, COMPANY OPTION AGREEMENT AND STOCKHOLDERS AGREEMENT
The following is a summary of the material terms of the Merger Agreement,
the Company Option Agreement and the Stockholders Agreement. Such summary is not
a complete description of these agreements and is qualified in its entirety by
reference to the complete texts of the agreements, copies of which are filed as
exhibits to the Tender Offer Statement on Schedule 14D-1 filed jointly with the
Commission by Parent and Purchaser, and are incorporated by reference herein.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the agreements.
THE MERGER AGREEMENT
GENERAL. The purpose of the Offer, the Company Option Agreement and the
Stockholders Agreement is to enable Purchaser to acquire, in one or more
transactions, control of, and the entire equity interest in, the Company. The
purpose of the Merger is for Purchaser to acquire all Shares not purchased
pursuant to the Offer and the Company Option. The acquisition of the entire
equity interest in the Company is structured as a cash tender offer followed by
a merger in order to provide a prompt and orderly transfer of ownership of the
Company from the public stockholders to Purchaser.
If the Offer is consummated with Purchaser owning at least 90% of the then
outstanding Shares, Purchaser will be able to approve the Merger Agreement and
the Merger and to effect the Merger pursuant to the "short-form" merger
provisions of the TBCA and the DGCL without prior notice to, or any action by,
any other stockholder of the Company. If the Minimum Condition is satisfied,
Purchaser will own at least 75% of the then outstanding Shares on a fully
diluted basis and will be able to cast sufficient votes to approve the Merger at
a special stockholders' meeting called for such purpose. See Introduction,
Section 12 and Section 15 of this Offer to Purchase.
Upon consummation of the Merger, the Surviving Corporation will be a
wholly-owned subsidiary of Parent. The Offer is being made pursuant to the
Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer,
in connection with which Parent and Purchaser have expressly reserved the right
to waive conditions of the Offer (except as set forth below with respect to the
Minimum Condition), in whole or in part, at any time and from time to time in
their sole discretion. Purchaser has agreed that it will not, without the prior
written consent of the Company, (i) decrease the price per Share payable in the
Offer, (ii) decrease the number of Shares sought pursuant to the Offer below a
majority of the total issued and outstanding Shares on a fully diluted basis or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer or impose additional conditions to the Offer,
(iv) except as provided below, change the Expiration Date of the Offer, or
(v) otherwise amend, add or waive any term or condition of the Offer in any
manner adverse to the holders of Shares. The obligation of Purchaser to
consummate the Offer and to accept for payment and to pay for any Shares
tendered pursuant to the Offer will be subject only to the conditions set forth
in Section 15.
So long as the Merger Agreement is in effect and the conditions to the Offer
have not been satisfied or waived, Purchaser may, from time to time, extend the
expiration of the Offer for up to ten additional business days (but in no event
shall such extensions exceed, in the aggregate, 30 business days without the
Company's prior written consent, and in no event shall Purchaser be required to
extend the Offer beyond March 31, 2000). Additionally, so long as the Merger
Agreement is in effect and the conditions to the Offer (other than the Minimum
Condition) have been satisfied or waived and if the number of Shares that have
been validly tendered and not withdrawn represent at least a majority of the
then issued and outstanding Shares on a fully diluted basis and Purchaser does
not elect to reduce the Minimum Condition and consummate the Offer, Purchaser
shall, at the Company's request on up to three occasions, extend the Expiration
Date of the Offer for up to ten additional business days (but in no event shall
such extensions exceed, in the aggregate 30 business days, and in no event shall
Purchaser be required to extend the offer beyond March 31, 2000). Moreover, so
long as the Merger Agreement is in effect and the conditions to the
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Offer have been satisfied or waived, Purchaser may, without the consent of the
Company, extend the Offer for an aggregate period of not more than ten business
days (for all such extensions) beyond the originally scheduled Expiration Date
of the Offer if the number of Shares that have been validly tendered and not
withdrawn represent less than 90% of the then issued and outstanding Shares.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer.
BOARD REPRESENTATION. Promptly upon the purchase by Purchaser pursuant to
the Offer and the Company Option of a number of Shares at least equal to the
Minimum Condition, Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as will
give Purchaser representation on the Company Board equal to the product of the
number of directors on the Company Board (determined after giving effect to the
directors elected pursuant to this provision) and the percentage that such
number of Shares so purchased bears to the number of Shares outstanding, and the
Company shall, upon request by Purchaser, promptly increase the size of the
Company Board or use its best efforts to secure the resignations of such number
of directors as is necessary to provide Purchaser with such level of
representation and shall cause Purchaser's designees to be so elected. The
Company's obligations to appoint designees to the Company Board shall be subject
to Section 14(f) of the Exchange Act. The Company shall take all actions
necessary to effect any such election or appointment of Purchaser's designees,
including mailing to its stockholders the information required by Section 14(f)
of the Exchange Act and Rule 14f-l promulgated thereunder together with the
Schedule 14D-9.
Notwithstanding the foregoing, neither Parent nor Purchaser will take any
action to prevent at least one person who is a director of the Company on the
date hereof from remaining as a director of the Company (each a " Continuing
Director") until the Effective Time. Following the election or appointment of
Purchaser's designees pursuant to the preceding paragraph and prior to the
Effective Time, and so long as there shall be at least one Continuing Director,
the approval of a majority of the Continuing Directors shall be required to
authorize any resolution with respect to any amendment or termination of the
Merger Agreement by the Company.
THE MERGER. The Merger Agreement provides that upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the relevant
provisions of the TBCA and the DGCL, the Company shall be merged with and into
Purchaser as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions to the Merger. Purchaser shall be the Surviving
Corporation and shall continue its existence under the laws of Texas, and the
Articles of Incorporation and the Bylaws of Purchaser as in effect immediately
prior to the Effective Time shall be the Articles of Incorporation and Bylaws of
the Surviving Corporation (except that the name of the Surviving Corporation may
be Premisys Communications, Inc.). Notwithstanding the foregoing, the Merger
Agreement provides that Parent may elect at any time prior to the Merger to
merge Purchaser with and into the Company instead of merging the Company with
and into Purchaser as provided above. The directors and officers of Purchaser
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their death, permanent
disability, resignation or removal or until their respective successors are duly
elected and qualified. All Shares issued and outstanding immediately prior to
the Effective Time (other than Shares owned by Parent, Purchaser or any
subsidiary of Parent, Purchaser or the Company or held in the treasury of the
Company, all of which shall be canceled, and other than Dissenting Shares)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive in cash the Merger
Consideration, upon the surrender of the certificates representing such Shares.
To effect the Merger, Purchaser and the Company shall file (i) with the
Secretary of State of the State of Delaware, a Certificate of Merger or other
appropriate documents executed in accordance with the relevant provisions of the
DGCL and shall make all other filings, recordings or publications required under
the DGCL in connection with the Merger and (ii) with the
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Secretary of State of the State of Texas, Articles of Merger or other
appropriate documents executed in accordance with the relevant provisions of the
TBCA and shall make all other filings, recordings or publications required under
the TBCA in connection with the Merger. The Merger shall become effective at
such time as the Certificate of Merger and the Articles of Merger are duly filed
with the Delaware and Texas Secretaries of State, respectively, or at such other
time as the parties may agree and specify in the Certificate of Merger and the
Articles of Merger.
TERMINATION OF STOCK OPTIONS, STOCK OPTION PLANS AND STOCK PURCHASE
PLAN. Simultaneously with the Merger, each outstanding option to purchase a
Share under the Company's stock option plans shall be canceled, and each holder
of any such vested option shall be paid by the Surviving Corporation promptly
after the Effective Time for each such vested option an amount determined by
multiplying (a) the excess, if any, of the Merger Consideration over the
applicable exercise price of such option by (b) the number of Shares such holder
could have purchased had such holder exercised such option immediately prior to
the Effective Time. Any such payment shall be subject to all applicable federal,
state and local tax withholding requirements. No unvested options shall be
accelerated or otherwise become exercisable as a result of the Offer or the
Merger, except to the extent that the Company's 1995 Directors Stock Option Plan
or any of the employment or severance agreements listed on a schedule to the
Merger Agreement provide otherwise. Except as otherwise agreed to by the
parties, the Company's stock option plans and the Company's employee qualified
stock purchase plan shall terminate as of the Effective Time and any and all
rights under any provisions in any other plan, program or arrangement providing
for the issuance or grant of any interest in respect of the capital stock of the
Company or any of its subsidiaries shall be canceled as of the Effective Time.
The Company has agreed that prior to the Effective Time, the Company will
take all actions necessary to (a) shorten the offering period under the
Company's employee qualified stock purchase plan in which the Effective Time
occurs so that such offering period terminates on the day immediately prior to
the Effective Time and (b) terminate the stock purchase plan effective as of the
Effective Time. Participants in the stock purchase plan will have the
opportunity to exercise their rights to purchase Shares under the stock purchase
plan prior to the termination of the plan.
STOCKHOLDER MEETING; RECOMMENDATION TO STOCKHOLDERS. Unless the Merger is
consummated in accordance with the "short-form" merger provisions under the TBCA
or the DGCL, the Company, acting through the Company Board, shall, in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as soon as practicable
following the consummation of the Offer for the purpose of adopting the
agreement and plan of merger set forth in the Merger Agreement, and subject to
the fiduciary duties of the Company Board under applicable law as determined in
good faith by the Company Board, include in the Company's proxy statement for
the Special Meeting the recommendation of the Company Board that stockholders of
the Company vote in favor of the adoption of the plan of merger set forth in the
Merger Agreement. Parent and Purchaser have agreed that, at the Special Meeting,
all of the Shares acquired pursuant to the Offer or otherwise by Parent or
Purchaser or any of their affiliates will be voted in favor of the Merger.
If Purchaser or any other direct or indirect subsidiary of Parent shall
acquire at least 90% of the outstanding shares of each class of capital stock of
the Company, each of Parent, Purchaser and the Company shall take all necessary
and appropriate action to cause the Merger to become effective, as soon as
practicable after the consummation of the Offer, without a meeting of
stockholders of the Company, in accordance with the TBCA and the DGCL.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and good standing, subsidiaries, capital structure, authority and no
conflicts, Commission reports and financial statements, information supplied,
title to and condition of assets, real property, compliance with applicable
laws, regulatory matters, litigation, taxes, absence of certain changes
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or events, vote required, state takeover statutes, intellectual property,
contracts, insurance, employee benefit plans, labor matters, environmental
matters, Year 2000 compliance, brokers or finders, opinion of financial advisor
and other matters.
Purchaser and Parent have also made certain representations and warranties
with respect to corporate existence and good standing, authority and no
conflicts, information supplied, brokers or finders, availability of funds,
litigation and other matters.
CONDUCT OF BUSINESS AND OTHER COVENANTS PENDING THE MERGER. The Company has
agreed that during the period from the date of the Merger Agreement until the
Effective Time, the Company will conduct, and will cause each of its
subsidiaries to conduct, its operations according to its ordinary and usual
course of business and consistent with past practice (except as expressly
permitted by the Merger Agreement), and the Company will use, and will cause
each of its subsidiaries to use, its best efforts to preserve intact its
business organization, to keep available the services of its current officers
and employees and to preserve the goodwill of, and maintain satisfactory
relationships with, those having business relationships with the Company and its
subsidiaries. The Company has agreed to promptly advise Parent and Purchaser in
writing of any change in the Company's or any of its subsidiaries' condition
(financial or otherwise), properties, customer or supplier relationships,
assets, liabilities, business prospects or results of operations which may
reasonably be likely to have a material adverse effect on the Company.
In addition, without limiting the generality of the foregoing and except as
otherwise expressly provided in or contemplated by the Merger Agreement, during
the period specified in the first sentence of the preceding paragraph, the
Company has agreed that, without the prior written consent of Parent, it will
not (and will not permit any of its subsidiaries to): (a) amend or otherwise
change its certificate of incorporation or bylaws; (b) except as contemplated by
the Merger Agreement, amend the Rights Agreement or take any action with respect
to, or make any determination under, the Rights Agreement, including a
redemption of the Rights to facilitate an Alternative Transaction (as defined
below); (c) issue or sell or authorize for issuance or sale (other than any
issuance of Shares upon the exercise of any outstanding option to purchase
Shares which option was issued prior to the date hereof in accordance with the
terms of the relevant stock option agreement), or grant any options or make
other agreements with respect to, any shares of its capital stock or any other
of its securities; (d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to any
of its capital stock; (e) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(f) incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except (i) short-term borrowings incurred in the ordinary course of business
consistent with past practice and (ii) intercompany indebtedness between the
Company and any of its subsidiaries or among any of the Company's subsidiaries;
(g) (i) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof or any material amount of assets;
(ii) enter into any contract or agreement other than in the ordinary course of
business consistent with past practice; (iii) authorize any capital commitment
which is in excess of $100,000 or capital expenditures which are, in the
aggregate, in excess of $250,000; or (iv) enter into or amend any contract,
agreement, commitment or arrangement with respect to any indebtedness or
responsibility for the obligations of any person or any matter referenced in
this clause (g); (h) sell, lease, license, mortgage, pledge or otherwise
encumber or subject to any lien or otherwise dispose of any of its properties or
assets, other than sales or licenses of products in the ordinary course of
business consistent with past practice; (i) take any action, other than in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable); (j) make any tax election or settle or compromise any federal,
state, local or foreign tax liability; (k) settle or compromise any pending or
threatened suit, action or claim which is material or which relates to any of
the transactions contemplated by the Merger Agreement; (l) pay,
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discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice, of liabilities reflected or reserved against in the Company's
most recent quarterly balance sheet or subsequently incurred in the ordinary
course of business consistent with past practice; (m) except in connection with
the sale or license of the Company's products in the ordinary course of business
consistent with past practice, sell, assign, transfer, license, sublicense,
pledge or otherwise encumber any of the Company's intellectual property rights;
(n) except as required by law or as contemplated on a schedule to the Merger
Agreement, enter into, adopt, amend or terminate any Company benefit plan or any
other agreement, arrangement, plan or policy involving the Company or any of its
subsidiaries, and one or more of its directors, officers, employees or
consultants, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any pension plan, or change the
manner in which contributions to any pension plan are made or the basis on which
such contributions are determined; provided, however, that the Company shall be
permitted to submit to its stockholders for their consideration the amendments
to the Company's stock option plan and the Company's employee qualified stock
purchase plan described on a schedule to the Merger Agreement if the Offer has
not been consummated within 50 business days after the commencement date of the
Offer; (o) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially increase
benefits or compensation expenses of the Company or its subsidiaries, or as
contemplated hereby or by the terms of any employment agreement in existence on
the date hereof, increase the cash compensation of any director, officer or
other key employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of the Merger Agreement to any such person;
except that the Company may hire up to 20 persons (none of whom shall be
officers of the Company) on an at will basis (with no employment, severance or
similar agreements) and grant to such persons options to purchase up to 200,000
Shares in the aggregate; provided that no portion of any such options shall vest
or otherwise become exercisable (including, without limitation, as a result of
the Offer or the Merger) within one year of the date of hire; provided further
that the Company shall notify each such person prior to hiring that the options
being granted shall be canceled for no value upon the consummation of the
transactions contemplated by the Merger Agreement; and provided further that any
such hiring at an annual salary in excess of $110,000 shall be subject to the
prior approval of Parent, which approval shall not be unreasonably withheld; or
(p) announce an intention, commit or agree to do any of the foregoing.
In addition, the Company has agreed that it will not take any action that
would reasonably be expected to result in (i) any of the representations and
warranties of the Company set forth in the Merger Agreement that are qualified
as to materiality becoming untrue, (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material respect or
(iii) any of the conditions to the Offer or the Merger not being satisfied.
NO SOLICITATION. The Merger Agreement provides that the Company and the
Company's subsidiaries and their respective directors and officers shall not,
and the Company shall direct and use its best efforts to cause the employees,
representatives and agents of the Company and the Company's subsidiaries not to,
directly or indirectly, solicit or encourage the initiation of (including by way
of furnishing information) any inquiries or proposals regarding any merger, sale
of assets, sale of shares of capital stock (including without limitation by way
of a tender offer) or similar transactions involving the Company or any of its
subsidiaries that if consummated would constitute an Alternative Transaction (as
defined below) (any of the foregoing inquiries or proposals being referred to
herein as a "Company Takeover Proposal"). Nothing contained in the Merger
Agreement shall prevent the Company Board from (i) furnishing information to a
third party which has made a bona fide Company Takeover Proposal that is a
Superior Proposal (as defined below) not solicited in violation of the Merger
Agreement, provided that such third party has executed an agreement with
confidentiality provisions substantially similar to those then in effect between
the Company and Parent or (ii) subject to compliance with the other terms of the
"no solicitation" section of the Merger Agreement, considering and negotiating a
bona fide Company Takeover Proposal that is a
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Superior Proposal not solicited in violation of the Merger Agreement; provided
that, as to each of clauses (i) and (ii), the Company Board reasonably
determines in good faith (after due consultation with independent counsel) that
it is or is reasonably likely to be required to do so in order to discharge
properly its fiduciary duties. For purposes of the Merger Agreement, a "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, all of the
equity securities of the Company entitled to vote generally in the election of
directors or all or substantially all the assets of the Company, on terms which
the Company Board reasonably believes (after consultation with a financial
advisor of nationally recognized reputation) to be more favorable from a
financial point of view to its stockholders than the Offer and the Merger taking
into account at the time of determination all factors relating to such proposed
transaction deemed relevant by the Company Board, including, without limitation,
the financing thereof, the proposed timing thereof and all other conditions
thereto and any changes to the financial terms of the Merger Agreement proposed
by Parent and Purchaser. "Alternative Transaction" means any of (i) a
transaction pursuant to which any person (or group of persons) other than Parent
or its affiliates (a "Third Party") acquires or would acquire more than 10% of
the outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 10% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, (iii) any transaction pursuant to which any Third Party acquires or
would acquire control of assets (including for this purpose the outstanding
equity securities of subsidiaries of the Company and securities of the entity
surviving any merger or business combination including any of the subsidiaries
of the Company) of the Company or any of its subsidiaries having a fair market
value (as determined by the Company Board in good faith) equal to more than 10%
of the fair market value of all the assets of the Company and its subsidiaries,
taken as a whole, immediately prior to such transaction, or (iv) any other
consolidation, business combination, recapitalization or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.
The Company shall immediately notify Parent and Purchaser after receipt of
any Company Takeover Proposal, or any modification of or amendment to any
Company Takeover Proposal, or any request for nonpublic information relating to
the Company or any of its subsidiaries in connection with a Company Takeover
Proposal or for access to the properties, books or records of the Company or any
subsidiary by any person or entity that informs the Company Board or such
subsidiary that it is considering making, or has made, a Company Takeover
Proposal. Such notice to Parent and Purchaser shall be made orally and in
writing, and shall indicate the identity of the person making the Company
Takeover Proposal or intending to make the Company Takeover Proposal or
requesting non-public information or access to the books and records of the
Company, the terms of any such Company Takeover Proposal or modification or
amendment to a Company Takeover Proposal, and whether the Company is providing
or intends to provide the person making the Company Takeover Proposal with
access to information concerning the Company as provided in the preceding
paragraph. The Company shall also immediately notify Parent and Purchaser,
orally and in writing, if it enters into negotiations concerning any Company
Takeover Proposal.
Except as set forth in the "no solicitation" section of the Merger
Agreement, neither the Company Board nor any committee thereof shall
(i) withdraw or modify, or indicate publicly its intention to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by the
Company Board or such committee of the Offer or the Merger and related
transactions, (ii) approve or recommend, or indicate publicly its intention to
approve or recommend, any Company Takeover Proposal or (iii) cause the Company
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Company Acquisition Agreement")
related to any Company Takeover Proposal. Notwithstanding the foregoing, in the
event that prior to the Effective Time the Company Board determines in good
faith, with the advice of outside counsel, that the failure to do so could
reasonably be determined to be a breach of its fiduciary duties to the Company's
stockholders under applicable law, the Company Board may (subject to this and
the following sentences) approve or recommend a Superior
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Proposal and, in connection therewith, withdraw or modify its approval or
recommendation of the Offer or the Merger and related transactions and/or
terminate the Merger Agreement (and concurrently with or after such termination,
if it so chooses, cause the Company to enter into any Company Acquisition
Agreement with respect to any Superior Proposal); provided that (i) the Company
gives Parent at least five business days advance notice of its intent to take
any of the foregoing actions and (ii) during such five business day period, the
Company, if requested by Parent, negotiates in good faith with Parent to make
such adjustments to the terms and conditions of the Merger Agreement as would
enable the Company to proceed with the Offer and the Merger on such adjusted
terms. After such five business day period, the Company Board may then (and only
then) withdraw or modify its approval or recommendation of the Offer or the
Merger and/or terminate the Merger Agreement.
For so long as the Merger Agreement shall not have been terminated in
accordance with its terms, the Company Board shall not redeem the Rights or
waive or amend any provision of the Rights Agreement, in any such case to permit
or facilitate the consummation of any Company Takeover Proposal or Alternative
Transaction.
RIGHTS AGREEMENT. The Merger Agreement provides that the Company Board
shall take all further action, if any, necessary to render the Rights
inapplicable to the Offer, the Merger and the other transactions contemplated by
the Merger Agreement, the Company Option Agreement and the Stockholders
Agreement in addition to having taken all actions necessary such that under the
Rights Agreement neither Parent nor Purchaser shall become an "Acquiring Person"
(as defined in the Rights Agreement) and no "Distribution Date" (as defined in
the Rights Agreement) shall be deemed to occur, and the Rights will not separate
from the Shares by reason of the approval, execution, or delivery of the Merger
Agreement or the transactions contemplated thereby and having taken all
necessary action with respect to all of the outstanding Rights so that, as of
immediately prior to the Effective Time and immediately prior to the
consummation of the Offer, the Company will not have any obligations under the
Rights or the Rights Agreement with respect to the Offer, the Merger and/or the
other transactions contemplated hereby or thereby and the holders of Rights will
have no rights under the Rights or the Rights Agreement with respect to the
Offer, the Merger and/or the other transactions contemplated hereby or thereby.
SHORT-TERM INVESTMENTS. The Merger Agreement provides that not later than
five days prior to the earliest expiration date of the Offer, the Company shall
open an account in the name of the Company at CSFB and shall deposit at least
$75 million into such account consisting of cash and all of the short-term
investments of the Company and its subsidiaries (including, without limitation,
municipal bonds and other securities) (collectively, "Short-Term Investments").
The assets held in the CSFB account shall remain the property of the Company,
and the Company shall have absolute control over such account and shall be
entitled to all interest earned on the Short-Term Investments held in the such
account. The Company shall take all actions necessary to convert all of the
Short-Term Investments into cash or liquid investments readily convertible into
cash on demand not later than the first business day following the expiration
date of the Offer. To the extent that any Short-Term Investments mature prior to
the expiration date of the Offer, the Company shall deposit the funds obtained
thereby into the CSFB account in the form of cash or liquid investments readily
convertible into cash on demand.
FEES AND EXPENSES. The Merger Agreement provides that all fees and expenses
incurred in connection with the Merger Agreement, the Company Option Agreement,
the Stockholders Agreement and the transactions contemplated by the Merger
Agreement, the Company Option Agreement and the Stockholders Agreement shall be
paid by the party incurring such fees and expenses, except that under certain
circumstances described in "Termination of the Merger Agreement" below, the
Company may be required to pay a termination fee and except that, promptly
following the Effective Time, Parent shall cause the Surviving Corporation to
pay all reasonable legal, accounting and investment banker fees incurred by the
Company in connection with the Merger Agreement and the transactions
contemplated thereby.
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CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, where permissible, prior to the closing date of the Merger, of the
following conditions: (a) the Company shall have obtained all approvals of
holders of shares of capital stock of the Company necessary to approve the
Merger Agreement and all of the transactions contemplated hereby (including the
Merger); provided that this condition shall be deemed satisfied upon the
consummation of the Offer; (b) the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired; (c) no temporary restraining order, preliminary or permanent
injunction or other order issued by a court or other governmental entity of
competent jurisdiction shall be in effect and have the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger; provided,
however, that the provisions of this clause shall not be available to any party
whose failure to fulfill its obligations to obtain approvals and consents shall
have been the cause of, or shall have resulted in, such order or injunction;
(d) all authorizations, consents, orders and approvals of, and declarations and
filings with, and all expirations of waiting periods imposed by, any
governmental entity which, if not obtained in connection with the consummation
of the transactions contemplated hereby, could reasonably be expected to have a
material adverse effect on the Company, shall have been obtained, have been
declared or filed or have occurred, as the case may be, and all such required
regulatory approvals shall be in full force and effect; (e) Purchaser shall have
consummated the Offer; provided, however, that neither Parent nor Purchaser
shall be entitled to rely on this condition if either of them shall have failed
to purchase Shares pursuant to the Offer in breach of their obligations under
the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time, by action taken or authorized by the
board of directors of the terminating party or parties, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company: (a) by mutual written consent of Parent and the
Company; (b) by either Parent or the Company if the Merger shall not have been
consummated by March 31, 2000; provided, however, that the right to terminate
the Merger Agreement under this clause shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of, or resulted in, the failure of the Merger to occur on or before such date;
(c) by either Parent or the Company if any governmental entity shall have issued
an order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties shall have used their best efforts to resist,
resolve or lift, as applicable) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement, the Company
Option Agreement or the Stockholders Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; (d) by either Parent or
the Company if any approval by the stockholders of the Company required for the
consummation of the Merger or the other transactions contemplated hereby shall
not have been obtained at a meeting of the Company's stockholders called for
such purpose or any adjournment thereof by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any adjournment
thereof; (e) by Parent, prior to the acceptance for payment of the number of
Shares equal to the Minimum Condition (the "Minimum Shares") pursuant to the
Offer, if (i) the Company Board or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent its approval or recommendation of the
Offer or the Merger, (ii) the Company Board or any committee thereof shall have
approved or recommended to the stockholders of the Company any Company Takeover
Proposal or Alternative Transaction, (iii) the Company Board or any committee
thereof shall have approved or recommended that the stockholders of the Company
tender their Shares in any tender or exchange offer that is an Alternative
Transaction, (iv) the Company Board or any committee thereof shall have resolved
to take any of the foregoing actions, or (v) the Company Board or any committee
thereof shall have redeemed the Rights, or waived or amended any provision of
the Rights Agreement, in any such case to permit or facilitate the consummation
of any Company Takeover Proposal or Alternative Transaction; (f) by the Company,
prior to the acceptance for payment of the Minimum Shares pursuant to the Offer,
in accordance with the provisions of the Merger Agreement described above under
"No Solicitation"; provided, however, that the right to
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terminate the Merger Agreement pursuant to this clause shall not be available
(i) if the Company has breached in any material respect its obligations under
the provisions of the Merger Agreement relating to "no solicitation" or (ii) if
the Company fails to pay when due the cash fee described in the next paragraph;
(g) by Parent, prior to the acceptance for payment of the Minimum Shares
pursuant to the Offer, upon a breach of any covenant or agreement on the part of
the Company set forth in the Merger Agreement which could reasonably be expected
to have a material adverse effect on the Company or a material adverse effect on
the consummation of the Offer or the Merger, or if any representation or
warranty of the Company shall have become inaccurate and such inaccuracy could
reasonably be expected to have a material adverse effect on the Company or a
material adverse effect on the consummation of the Offer or the Merger; (h) by
the Company, upon a breach of any covenant or agreement on the part of Parent or
Purchaser set forth in the Merger Agreement which could reasonably be expected
to have a material adverse effect on Parent or a material adverse effect on the
consummation of the Offer or the Merger, or if any representation or warranty of
Parent or Purchaser shall have become inaccurate and such inaccuracy could
reasonably be expected to have a material adverse effect on Parent or a material
adverse effect on the consummation of the Offer or the Merger; or (i) by Parent
or the Company, if the Offer terminates or expires on account of the failure of
any condition specified in Section 15 without Purchaser having purchased any
Shares thereunder (provided that the right to terminate the Merger Agreement
pursuant to this clause shall not be available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of any such condition).
In the event of termination of the Merger Agreement by either Parent or the
Company, the Merger Agreement shall become void and there shall be no liability
or obligation on the part of Parent or the Company or their respective officers
or directors except (i) with respect to the requirement that the parties pay
certain fees and expenses, including, as applicable, the cash fee described
below, (ii) with respect to any liabilities or damages incurred or suffered by a
party as a result of the willful breach by the other party of any of its
covenants or other agreements set forth in the Merger Agreement and (iii) the
Confidentiality Agreement between Parent and the Company will remain in full
force and effect. In the event that (i) the Merger Agreement is terminated
pursuant to clause (e) or (f) in the preceding paragraph, or pursuant to
clause (g) in the preceding paragraph in the case of a material breach of the
Company's obligations under the "no solicitation" provisions of the Merger
Agreement, or (ii)(A) any Third Party makes a Company Takeover Proposal to the
Company or its stockholders and thereafter the Merger Agreement is terminated by
either party pursuant to the provisions of the Merger Agreement described in
clause (b) or (d) above and (B)(x) within 12 months after the termination of the
Merger Agreement any Alternative Transaction is consummated or the Company
enters into any Company Acquisition Agreement, in either case with the Third
Party (or any affiliate of the Third Party) that made the Company Takeover
Proposal to the Company or its stockholders or (y) within nine months after the
termination of the Merger Agreement any Alternative Transaction is consummated
or the Company enters into any Company Acquisition Agreement, in either case
with any other Third Party, then the Company shall pay Parent a cash fee of
$10,000,000, which amount shall be payable by wire transfer of immediately
available funds no later than (1) two business days after such termination in
the case of a termination described in clause (i) above or (2) the date of
consummation of such Alternative Transaction in the case of a termination
described in clause (ii) above.
For a description of the conditions of the Offer, see Section 15.
AMENDMENT. The Merger Agreement may be amended by the parties, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. The Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
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OTHER AGREEMENTS. The Company and Parent have agreed to cooperate with each
other and use (and shall cause their respective subsidiaries to use) their best
efforts to take or cause to be taken all actions, and do or cause to be done all
things, necessary, proper or advisable on their part under the Merger Agreement
and applicable laws to consummate and make effective the Merger and the other
transactions contemplated by the Merger Agreement, the Company Option Agreement
and the Stockholders Agreement as soon as practicable, including (i) preparing
and filing as promptly as practicable all documentation to effect all necessary
applications, notices, petitions, filings, tax ruling requests and other
documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be obtained from any third party and/or
any governmental entity in order to consummate the Merger or any of the other
transactions contemplated by the Merger Agreement, the Company Option Agreement
or the Stockholders Agreement and (ii) taking all reasonable steps as may be
necessary to obtain all such consents, waivers, licenses, registrations,
permits, authorizations, tax rulings, orders and approvals.
TIMING. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Parent has agreed to cause
the Merger to be consummated on the terms and subject to the conditions set
forth above, there can be no assurance as to the timing of the Merger.
THE COMPANY OPTION AGREEMENT
Pursuant to a Company Option Agreement dated as of October 20, 1999, among
Parent, Purchaser and the Company (the "Company Option Agreement"), the Company
has granted to Purchaser the Company Option to purchase that number of Shares
(the "Company Option Shares") equal to the lowest number of Shares that, when
added to the number of Shares owned by Purchaser at the time of such exercise,
shall constitute one share more than 90% of the Shares then outstanding
(assuming issuance of the Company Option Shares) at a price equal to $10.00 per
share. Purchaser may not exercise the Company Option unless and until it has
accepted for payment pursuant to the Offer Shares constituting more than 85% but
less than 90% of the Shares then outstanding. In addition, Purchaser may not
exercise the Company Option unless immediately after such exercise Purchaser
would own more than 90% of the Shares then outstanding. Moreover, Purchaser may
not exercise the Company Option after the earliest to occur of (i) the Effective
Time, (ii) the date which is ten business days after the occurrence of the
Company Option Exercise Event (or such later date on which the closing of a
purchase of Shares pursuant to the Company Option Agreement may be consummated),
or (iii) the termination of the Merger Agreement.
THE STOCKHOLDERS AGREEMENT
Prior to the execution of the Merger Agreement, Purchaser and Parent entered
into a Stockholders Agreement with the Selling Stockholders. The Selling
Stockholders beneficially own an aggregate of 1,178,869 Shares (including
548,605 Shares subject to options exercisable within 60 days after October 20,
1999). Pursuant to the Stockholders Agreement, each Selling Stockholder has
agreed to tender all of his Shares pursuant to and in accordance with the terms
of the Offer not later than the tenth business day after commencement of the
Offer.
During the term of the Stockholders Agreement, no Selling Stockholder may
(a) except pursuant to the Stockholders Agreement, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of any of such
Selling Stockholder's Shares, (b) except as contemplated by the Stockholders
Agreement, grant any proxies or powers of attorney, deposit any Shares into a
voting trust or enter into a voting agreement with respect to such Selling
Stockholder's Shares, or (c) take any action that would reasonably be expected
to make any representation or warranty of such Selling Stockholder contained in
the Stockholders Agreement untrue or incorrect in any material respect or have
the effect of preventing or disabling such Selling Stockholder from performing
his obligations under the Stockholders Agreement.
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During the term of the Stockholders Agreement, each Selling Stockholder has
agreed not to directly or indirectly, solicit or encourage the initiation of
(including by way of furnishing information) any inquiries or proposals
regarding any merger, sale of assets, sale of shares of capital stock or similar
transaction involving the Company or any of its subsidiaries that if consummated
would constitute an Alternative Transaction.
During the term of the Stockholders Agreement, each Selling Stockholder has
agreed to vote each of his Shares at any annual, special or adjourned meeting of
the stockholders of the Company (a) in favor of the Merger Agreement and the
transactions contemplated thereby, and (b) against (i) any Alternative
Transaction, (ii) any proposal or action that would reasonably be expected to
result in a breach of any covenant, representation or warranty of the Company
set forth in the Merger Agreement, or (iii) any proposal or action that is
intended or would reasonably be expected to impede, interfere with, delay or
materially and adversely affect the Merger or any of the other transactions
contemplated by the Merger Agreement or the Stockholders Agreement. Each Selling
Stockholder also has given Parent an irrevocable proxy with respect to his
Shares.
The Stockholders Agreement will terminate on the earlier of (a) the date on
which the Merger Agreement is terminated in accordance with its terms, and
(b) the Effective Time.
CONFIDENTIALITY AGREEMENT
The Company entered into an agreement (the "Confidentiality Agreement") with
Parent, dated as of September 20, 1999, which contains customary provisions
pursuant to which, among other matters, Parent agreed to hold the Company's
confidential information in strict confidence, not to disclose such information
to any third parties (other than Parent's representatives who sign separate
agreements agreeing to be bound by the Confidentiality Agreement), and to use
such material solely in connection with evaluating a possible business
transaction between the Company and Parent. In addition, the parties also agreed
that they would not, except with the prior written consent of the other party,
disclose the fact that confidential information was disclosed under the
Confidentiality Agreement or that discussions or negotiations were taking place
concerning a possible transaction involving the Company or the status thereof;
provided that the Confidentiality Agreement allows either party to make such
disclosure if, in the reasonable opinion of counsel for such party, such
disclosure is required by law, regulation or any stock exchange or the Nasdaq
National Market. Parent also agreed that beginning on the effective date of the
Confidentiality Agreement and continuing for a period of six months thereafter,
Parent would not, for itself or any other person or entity, directly or
indirectly, solicit, induce or attempt to induce any employee of the Company to
terminate his or her employment with the Company. Finally, unless specifically
requested to do so in writing in advance by the Company Board, Parent agreed not
to, for one year after the date of the Confidentiality Agreement, (a) acquire or
agree, offer, seek or propose to acquire, or cause to be acquired, ownership
(including beneficial ownership) of any of the Company's assets or businesses or
any securities issued by the Company, or any rights or options to acquire such
ownership, including from a third party; (b) make, or in any way participate, in
any solicitation of proxies or consents with respect to any securities of the
Company which are, or may be, entitled to vote in the election of the Company's
directors, become a "participant" in any "election contest" (within the meaning
of Rule 14a-11 under the Exchange Act) with respect to the Company, seek to
advise, encourage or influence any person or entity with respect to the voting
of any of the Company's voting securities, or demand a copy of the Company's
stock ledger, list of its stockholders or other books and records, or call or
attempt to call any meeting of the stockholders of the Company; or (c) form,
join or in any way participate, directly or indirectly, in a "group" as defined
in Section 13(d)(3) of the Exchange Act with respect to any securities of the
Company.
14. DIVIDENDS AND DISTRIBUTIONS
The Company has not paid and does not intend to pay dividends on the Shares.
The Merger Agreement provides that, unless Parent consents in writing, the
Company will not, among other things:
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(a) issue, sell, pledge or register for issuance or sale any shares of capital
stock or other ownership interest in the Company (other than issuances of Shares
in respect of any exercise of Options outstanding on the date of the Merger
Agreement) or grant any options or make other agreements with respect to, any
shares of its capital stock or any other of its securities; (b) declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise with respect to any of its capital stock; or
(c) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock.
15. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Merger Agreement or the Offer,
Purchaser will not be required to accept for payment, purchase or pay for any
Shares tendered and may terminate or (subject to the terms of the Merger
Agreement) amend the Offer and may postpone the acceptance for payment of and
payment for any Shares, if prior to the Expiration Date and if pursuant to the
Offer (whether or not any Shares have theretofore been accepted for payment or
paid for pursuant to the Offer) (i) the Minimum Condition shall not have been
satisfied, (ii) any waiting period under the HSR Act shall not have expired or
been terminated, or (iii) any of the following shall occur:
(a) there shall be instituted or pending by any governmental entity any
suit, action or proceeding (i) challenging the acquisition by Parent or
Purchaser of any Shares pursuant to the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, the Company Option Agreement or the Stockholders Agreement or
seeking to obtain from the Company, Parent or Purchaser any damages that are
material in relation to the Company or Parent, (ii) seeking to prohibit or
materially limit the ownership or operation by the Company or Parent of a
material portion of the business or assets of the Company or Parent, or to
compel the Company or Parent to dispose of or hold separate a material
portion of the business or assets of the Company or Parent, in each case as
a result of the Offer or any of the other transactions contemplated by the
Merger Agreement, the Company Option Agreement or the Stockholders
Agreement, (iii) seeking to impose material limitations on the ability of
Parent or Purchaser to acquire or hold, or exercise full rights of ownership
of, any Shares to be accepted for payment pursuant to the Offer including,
without limitation, the right to vote such shares on all matters properly
presented to the stockholders of the Company, (iv) seeking to prohibit
Parent or Purchaser from effectively controlling in any material respect any
material portion of the business or operations of the Company, (v) that
could reasonably be expected to require the divestiture by Parent or
Purchaser of any Shares, or (vi) that could reasonably be expected to result
in a material adverse effect on the Company or Parent;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, by any governmental entity or court, that would
result in any of the consequences referred to in clauses (i) through
(vi) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National
Market, (ii) a declaration of a banking moratorium or any general suspension
of payments in respect of banks in the United States or (iii) in the case of
any of the foregoing existing at the time of the execution of the Merger
Agreement, a material acceleration or worsening thereof;
(d) there shall have occurred any event or change since September 24,
1999 that could reasonably be expected to have a material adverse effect on
the Company, other than any event or change specifically set forth in the
Company's disclosure schedule attached to the Merger Agreement;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct at the date of the
Merger Agreement and at the scheduled or
33
<PAGE>
extended expiration of the Offer, unless the effect of all such failures to
be true and correct could not reasonably be expected to have a material
adverse effect on the Company or a material adverse effect on the
consummation of the Offer or the Merger;
(f) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant of the Company to be performed or complied
with by it under the Merger Agreement or the Company Option Agreement,
unless the effect of all such failures to perform or comply could not
reasonably be expected to have a material adverse effect on the Company or a
material adverse effect on the consummation of the Offer or the Merger;
(g) any required regulatory approval or other third party consent,
authorization or approval which, if not obtained in connection with the
consummation of the transactions contemplated hereby, could reasonably be
expected to have a material adverse effect on the Company, shall not have
been obtained, declared or filed or have occurred, as the case may be, or
any such required regulatory approval or other third party consent,
authorization or approval shall not be in full force and effect;
(h) the Company Board (i) shall have withdrawn, or modified or changed
in a manner adverse to Parent or Purchaser (including by amendment of the
Schedule 14D-9) its recommendation of the Offer, the Merger Agreement or the
Merger, (ii) shall have recommended a Company Takeover Proposal or
Alternative Transaction, (iii) shall have adopted any resolution to effect
any of the foregoing or (iv) upon the request of Parent or Purchaser, shall
have failed to reaffirm its approval or recommendation of the Offer, the
Merger Agreement or the Merger within two business days;
(i) any person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any group
of which any of them is a member, shall have acquired or announced its
intention to acquire beneficial ownership (as determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of 10% or more of the Shares
and, in the good faith judgment of Parent or Purchaser in its sole
discretion, made it inadvisable to proceed with such acceptance of shares
for payment or the payment therefor; provided that this condition shall not
apply upon satisfaction and maintenance of the Minimum Condition;
(j) the Company shall have commenced a case under any chapter of Title
XI of the United States Code or any similar law or regulation; or a petition
under any chapter of Title XI of the United States Code or any similar law
or regulation shall have been filed against the Company which is not
dismissed within two days;
(k) the Stockholders Agreement shall not have been executed by each of
the parties thereto other than Parent and Purchaser;
(l) a Distribution Date shall have occurred under the Rights Agreement;
or
(m) the Merger Agreement shall have been terminated by Parent or the
Company pursuant to its terms.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent and Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by Parent and Purchaser in
whole or in part at any time and from time to time; provided, however, that
Purchaser shall not reduce the Minimum Condition below a majority of the
outstanding Shares on a fully diluted basis without the prior written consent of
the Company. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
34
<PAGE>
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering stockholders.
16. CERTAIN REGULATORY AND LEGAL MATTERS
Except as set forth in this Section 16, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, as well as certain representations
made to Purchaser and Parent in the Merger Agreement by the Company, neither
Purchaser nor Parent is aware of any license or regulatory permit that appears
to be material to the business of the Company and its subsidiaries, taken as a
whole, that might be adversely affected by Purchaser's acquisition of Shares as
contemplated herein or of any approval or other action by any governmental
entity that would be required for the acquisition or ownership of Shares by
Purchaser as contemplated herein. Should any such approval or other action be
required, Purchaser and Parent currently contemplate that such approval or other
action will be sought, except as described below under "State Takeover Laws."
Except as specified in this Section 16, Purchaser has no current intention to
delay the purchase of Shares tendered pursuant to the Offer pending the outcome
of any such matter, subject, however, to Purchaser's right to decline to
purchase Shares if any of the conditions specified in Section 15 of this Offer
to Purchase shall have occurred. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions, or that adverse consequences might not result to
the Company's business or that certain parts of the Company's business might not
have to be disposed of if any such approvals were not obtained or other action
taken. If certain types of adverse action are taken with respect to the matters
discussed below, Purchaser could decline to accept for payment or pay for any
Shares tendered. See Section 15 of this Offer to Purchase for certain conditions
of the Offer.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware and operations are conducted throughout the United States. A
number of states throughout the United States have enacted takeover statutes
that purport, in varying degrees, to be applicable to attempts to acquire
securities of corporations that are incorporated or have assets, stockholders,
executive offices or principal places of business in such states. In EDGAR V.
MITE CORP., the Supreme Court of the United States held that the Illinois
Business Takeover Act, which involved state securities laws that made the
takeover of certain corporations more difficult, imposed a substantial burden on
interstate commerce and therefore was unconstitutional. In CTS CORP. V. DYNAMICS
CORP. OF AMERICA, however, the Supreme Court of the United States held that a
state may, as a matter of corporate law and, in particular, those laws
concerning corporate governance, constitutionally disqualify a potential
acquirer from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, a number of federal courts ruled
that various state takeover statutes were unconstitutional insofar as they apply
to corporations incorporated outside the state of enactment.
The Company is subject to the provisions of Section 203 of the DGCL with
respect to restrictions upon business combinations involving the Company. In
general, Section 203 of the DGCL prevents an "interested stockholder" (e.g., a
person who owns or has the right to acquire 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (defined to
include mergers and certain other transactions) with a Delaware corporation for
a period of three years following the time such person became an interested
stockholder unless, among other things, the corporation's board of directors
approves such business combination or the transaction in which the interested
stockholder becomes such prior to the time the interested stockholder becomes
such. The Company Board has approved the Offer, the Merger, the Merger
Agreement, the Company Option Agreement and the Stockholders Agreement for the
purposes of Section 203 of the DGCL. Except as described above with respect to
Section 203 of the DGCL, Parent and Purchaser have not attempted to comply with
any other
35
<PAGE>
state takeover laws in connection with the Offer and believe none of such laws
to be applicable to the Offer. Should any person seek to apply any state
takeover law, Parent and Purchaser reserve the right to take such action as then
appears desirable, which may include challenging the validity or applicability
of any such statute allegedly applicable to the Offer in appropriate court
proceedings. Nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of that right. In the event it is
asserted that one or more state takeover laws is applicable to the Offer or the
Merger, and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer, Parent and Purchaser might be required to file
certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment or pay for any Shares tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer and the Merger. In such case, Purchaser may
not be obligated to accept for payment or pay for any Shares tendered. See
Section 15 of this Offer to Purchase.
ANTITRUST. Under the provisions of the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), the
acquisition of Shares under the Offer may be consummated only following the
expiration or early termination of the applicable waiting period under the HSR
Act.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
Report Form under the HSR Act by Parent, which Parent intends to submit on
October 28, 1999. Accordingly, the waiting period under the HSR Act will expire
at 11:59 P.M., New York City time, on November 11, 1999 unless early termination
of the waiting period is granted by the FTC and the Department of Justice,
Antitrust Division (the "Antitrust Division") or Parent receives a request for
additional information or documentary material prior thereto. If either the FTC
or the Antitrust Division issues a request for additional information or
documentary material from Parent prior to the expiration of the 15-day waiting
period, the waiting period will be extended and will expire at 11:59 P.M., New
York City time, on the tenth calendar day after the date of substantial
compliance by Parent with such request unless terminated earlier by the FTC and
the Antitrust Division. If such a request is issued, the purchase of and payment
for Shares pursuant to the Offer will be deferred until the additional waiting
period expires or is terminated. Only one extension of such waiting period
pursuant to a request for additional information or documentary material is
authorized by the rules promulgated under the HSR Act. Thereafter, the waiting
period can be extended only by court order or by consent of Parent. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer, neither the
Company's failure to make such filings nor a request to the Company from the
Antitrust Division or the FTC for additional information or documentary material
will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of the
Company pursuant to the Offer. At any time before or after Purchaser's
acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as either deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by Purchaser or the divestiture of substantial
assets of the Company or its subsidiaries or Parent or its subsidiaries. Private
parties and states Attorneys General may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or, if such a
challenge is made, of the result thereof.
If the Antitrust Division, the FTC, a state or a private party raises
antitrust concerns in connection with a proposed transaction, Parent and
Purchaser may engage in negotiations with the relevant governmental agency or
party concerning possible means of addressing these issues and may delay
consummation
36
<PAGE>
of the Offer or the Merger while such discussions are ongoing. Parent and the
Company have agreed to use their respective best efforts to resolve any
antitrust issues.
LEGAL PROCEEDINGS. Parent and Purchaser are not aware of any pending or
overtly threatened legal proceedings which would affect the Offer or the Merger.
If any such matters were to arise, Purchaser could decline to accept for payment
or pay for any Shares tendered in the Offer. See Section 15 of this Offer to
Purchase.
17. FEES AND EXPENSES
CSFBC is acting as Dealer Manager in connection with the Offer and as
financial advisor to Parent and Purchaser in connection with the Merger, for
which services CSFBC will receive customary compensation. Parent has also agreed
to reimburse CSFBC for all out-of-pocket expenses incurred in connection with
its engagement, including the fees and expenses of its legal counsel and to
indemnify CSFBC and certain related persons against certain liabilities and
expenses in connection with its engagement, including certain liabilities under
the federal securities laws. In the past, CSFBC has provided investment banking
services to Parent for which services CSFBC has received customary compensation.
In the ordinary course of business, CSFBC and its affiliates may actively trade
the equity securities of the Company for their own account and for the accounts
of customers and, accordingly may at any time hold a long or short position in
such securities.
Parent and Purchaser have retained D.F. King & Co., Inc., as Information
Agent, and ChaseMellon Shareholder Services, L.L.C., as Depositary, in
connection with the Offer. The Information Agent and the Depositary will receive
customary compensation for their services hereunder and reimbursement for their
reasonable out-of-pocket expenses. The Information Agent and the Depositary will
also be indemnified by Purchaser against certain liabilities in connection with
the Offer.
Neither Purchaser nor Parent, nor any officer, director, stockholder, agent
or other representative of Purchaser or Parent, will pay any fees or commissions
to any broker, dealer or other person (other than the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial
banks and trust companies and other nominees will, upon request, be reimbursed
by Purchaser for customary mailing and handling expenses incurred by them in
forwarding materials to their customers.
18. MISCELLANEOUS
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will
make a good faith effort to comply with such state statute. If, after such good
faith effort, Purchaser cannot comply with such state statute, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OTHER THAN AS CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF ANY SUCH INFORMATION OR
REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY PURCHASER.
Purchaser and Parent have jointly filed a Tender Offer Statement on
Schedule 14D-1 with the Commission, pursuant to Rule 14d-1 of the Exchange Act,
together with exhibits furnishing certain information with respect to the Offer.
Such Schedule 14D-1 and any amendments thereto, including all exhibits, may be
examined and copies may be obtained at the same places and in the same manner as
set forth with respect to the Company in Section 8 of this Offer to Purchase
(except that they may not be available at the regional offices of the
Commission).
37
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The names, present principal
occupation or employment, and material occupations, positions, offices, or
employments during the last five years of each director and executive officer of
Parent are set forth below. Unless otherwise noted, the officers and directors
have held the positions indicated below with Parent for the last five years or
have served Parent in various administrative or executive capacities for at
least that long. All persons listed below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATION, POSITIONS OR EMPLOYMENT
NAME AND ADDRESS TITLE HELD DURING THE LAST FIVE YEARS
- ---------------------------- ------------------------------- ----------------------------------------------
<S> <C> <C>
Mory Ejabat President, Chief Executive Mr. Ejabat has served as President, Chief
7677 Oakport St. Officer and Director Executive Officer and director of Parent since
Suite 1040 June 1999. Mr. Ejabat previously served as
Oakland, CA 94621 President, Chief Executive Officer and
director of Ascend Communications, Inc.
("Ascend") from June 1995 until June 1999.
Prior to that, Mr. Ejabat served as Ascend's
President, Chief Operating Officer and
director from March 1994 to June 1995, as
Executive Vice President from December 1992 to
March 1994 and as Vice President, Operations
from January 1990 to December 1992.
Robert K. Dahl Vice President, Finance, Chief Mr. Dahl has served as Vice President,
7677 Oakport St. Financial Officer, Secretary Finance, Chief Financial Officer, Secretary
Suite 1040 and Director and as a director of Parent since June 1999.
Oakland, CA 94621 Prior to that time, Mr. Dahl served as a
director of Ascend from July 1995 to June
1999. In addition, Mr. Dahl served as
Executive Vice President, Planning of Ascend
from October 1997 to January 1998 and as Vice
President of Finance and Chief Financial
Officer of Ascend from January 1994 to October
1997. Mr. Dahl also serves on the Board of
Directors of the Bank of Alameda, Timesink,
Inc., Spear Technologies, Inc. and Northpoint
Communications, Inc.
Jeanette A. Symons Vice President, Research and Ms. Symons has served as Vice President,
7677 Oakport St. Development, and Chief Research and Development, Chief Technical
Suite 1040 Technical Officer Officer and as a director of Parent since June
Oakland, CA 94621 1999. Prior to that time, Ms. Symons served as
Executive Vice President of Advanced Products
and Chief Technical Officer of Ascend from
June 1995 to June 1999, as Vice President of
Engineering for Ascend from January 1994 to
June 1995 and in various other management
positions with Ascend from 1989 to 1993.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATION, POSITIONS OR EMPLOYMENT
NAME AND ADDRESS TITLE HELD DURING THE LAST FIVE YEARS
- ---------------------------- ------------------------------- ----------------------------------------------
<S> <C> <C>
James G. Coulter Director Mr. Coulter has served as a director of Parent
345 California St. since October 1999. Mr. Coulter was a founding
Suite 3300 partner of Texas Pacific Group ("TPG") in 1992
San Francisco, CA 94104 and continues to hold that position.
Mr. Coulter serves on the boards of directors
of Beringer Wine Estates Holdings, Inc.,
Genesis ElderCare Corporation, GlobeSpan,
Inc., Northwest Airlines, Inc., Oxford Health
Plans Inc. and Virgin Entertainment Group
Limited.
James H. Greene, Jr. Director Mr. Greene has served as a director of Parent
2800 Sand Hill Road since October 1999. Mr. Greene is a member of
Suite 200 KKR & Co., LLC, the limited liability company
Menlo Park, CA 94025 which serves as the General Partner of
Kohlberg Kravis Roberts & Co., L.P. ("KKR").
From January 1, 1993 until January 1, 1996, he
was a general partner of KKR. Mr. Greene also
is a director of Accuride Corporation, Birch
Telecom, Inc., Owens-Illinois, Inc. and
Safeway Inc.
Alexander Navab, Jr. Director Mr. Navab has served as a director of Parent
9 West 57th Street since October 1999. Mr. Navab has been an
Suite 4200 Executive of KKR since 1993. Mr. Navab is a
New York, NY 10019 director of Borden, Inc., Corning Consumer
Products, KSL Recreation Corporation, Birch
Telecom, Inc. and Regal Cinemas.
Robert K. Packard Director Mr. Packard has served as a director of Parent
345 California St. since October 1999. Mr. Packard has served as
Suite 3300 a partner of TPG since June 1999. Prior to
San Francisco, CA 94104 joining TPG, Mr. Packard was at BT Alex. Brown
Inc. from July 1989 to June 1999, most
recently as a managing director and co-head of
its global technology investment banking
group.
John W. Sidgemore Director Mr. Sidgemore has served as a director of
3060 Williams Dr. Parent since October 1999. Since June 1994,
6th Floor Mr. Sidgemore has served as President and
Fairfax, VA 22301 Chief Executive Officer of UUNET Technologies,
Inc., which is now a subsidiary of MCI
WorldCom.
</TABLE>
I-2
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, business address, present principal occupation or employment and
five-year employment history and position with Purchaser of each director and
executive officer of Purchaser.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATION, POSITIONS OR EMPLOYMENT
NAME AND ADDRESS TITLE HELD DURING THE LAST FIVE YEARS
- ---------------------------- ------------------------------- ----------------------------------------------
<S> <C> <C>
Mory Ejabat President, Chief Executive Mr. Ejabat has served as President, Chief
7677 Oakport St. Officer and Director Executive Officer and director of Purchaser
Suite 1040 since October 1999 and has held the same
Oakland, CA 94621 positions at Parent since June 1999.
Mr. Ejabat previously served as President,
Chief Executive Officer and director of Ascend
from June 1995 until June 1999. Prior to that,
Mr. Ejabat served as Ascend's President, Chief
Operating Officer and director from March 1994
to June 1995, as Executive Vice President from
December 1992 to March 1994 and as Vice
President, Operations from January 1990 to
December 1992.
Robert K. Dahl Vice President, Finance, Chief Mr. Dahl has served as Vice President,
7677 Oakport St. Financial Officer, Secretary Finance, Chief Financial Officer, Secretary
Suite 1040 and Director and as a director of Purchaser since October
Oakland, CA 94621 1999 and has held the same positions with
Parent since June 1999. Prior to that time,
Mr. Dahl served as a director of Ascend from
July 1995 to June 1999. Mr. Dahl served as
Executive Vice President, Planning of Ascend
from October 1997 to January 1998 and as Vice
President of Finance and Chief Financial
Officer of Ascend from January 1994 to October
1997. Mr. Dahl also serves on the Board of
Directors of the Bank of Alameda, Timesink,
Inc., Spear Technologies, Inc. and Northpoint
Communications, Inc.
Jeanette A. Symons Vice President, Research and Ms. Symons has served as Vice President,
7677 Oakport St. Development, Chief Technical Research and Development, Chief Technical
Suite 1040 Officer and Director Officer and as a director of Purchaser since
Oakland, CA 94621 October 1999 and has held the same positions
with Parent since June 1999. Prior to that
time, Ms. Symons served as Executive Vice
President of Advanced Products and Chief
Technical Officer of Ascend from June 1995 to
June 1999, and as Vice President of
Engineering for Ascend from January 1994 to
June 1995 and served in various other
management positions with Ascend from 1989 to
1993.
</TABLE>
I-3
<PAGE>
ANNEX II
Set forth below is Section 262 of the General Corporation Law of the State
of Delaware regarding appraisal rights, which rights will only be available in
connection with the Merger.
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Section 262 APPRAISAL RIGHTS--(a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (OR DEPOSITORY RECEIPTS IN
RESPECT THEREOF) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
II-1
<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section,
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice
II-2
<PAGE>
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account
II-3
<PAGE>
all relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money during
the pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
II-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly signed, will be accepted. The Letter of Transmittal,
certificates evidencing Shares and any other required documents should be sent
or delivered by each holder of Shares or such holder's broker, dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BY FACSIMILE
BY MAIL: TRANSMISSION (FOR BY OVERNIGHT COURIER: BY HAND:
ELIGIBLE INSTITUTIONS
Reorganization Dept. ONLY): Reorganization Dept.
P.O. Box 3301 (201) 296-4293 85 Challenger Road Reorganization Dept.
So. Hackensack, NJ CONFIRM RECEIPT OF Mail Stop--Reorg 120 Broadway, 13th Floor
07606 FACSIMILE BY TELEPHONE Ridgefield Park, NJ New York, NY 10271
ONLY: 07660
(201) 296-4860
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or the Dealer Manager and will be furnished promptly at
Purchaser's expense. A holder of Shares may also contact his or her broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 487-4870
The Dealer Manager for the Offer is:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PREMISYS COMMUNICATIONS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 27, 1999
BY
ZHONE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ZHONE TECHNOLOGIES, INC.
-----------------------------------------------------------------------------
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 29, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C> <C>
BY MAIL: BY FACSIMILE BY OVERNIGHT BY HAND:
Reorganization Dept. TRANSMISSION (FOR COURIER: Reorganization Dept.
P.O. Box 3301 ELIGIBLE INSTITUTIONS Reorganization Dept. 120 Broadway, 13th Floor
So. Hackensack, NJ ONLY): 85 Challenger Road New York, NY 10271
07606 (201) 296-4293 Mail Stop--Reorg
CONFIRM RECEIPT OF Ridgefield Park, NJ
FACSIMILE BY TELEPHONE 07660
ONLY:
(201) 296-4860
</TABLE>
YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The names and addresses of the registered holders should be printed, if not
already below, exactly as they appear on the certificates evidencing Shares
("Share Certificates") tendered hereby. The Share Certificates and the Shares
(as defined below) that the undersigned wishes to tender should be indicated in
the appropriate boxes.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Name(s) & Address(es) of Registered
Holder(s) (Please fill in, if blank, exactly
as name(s) appear(s) on Share Certificate(s) and Share(s) Tendered
Certificate(s)) (Attach additional signed list, if necessary)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<CAPTION>
Total Number
of Shares
Share Evidenced by Number of
Certificate Share Shares
Number(s)* Certificate(s)* Tendered**
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Total Shares
- ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by book-entry transfer through the depository.
** Unless otherwise indicated, all Shares evidenced by Share Certificates delivered to the Depositary will be
deemed to have been tendered hereby. See Instruction 4.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
This Letter of Transmittal is to be completed by stockholders of Premisys
Communications, Inc. (the "Company") either if certificates representing Shares
(as defined below) ("Share Certificates") are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
delivery of Shares is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Holders of Shares whose Share Certificates are not immediately available or
who cannot deliver their Share Certificates and all other documents required
hereby to the Depositary prior to the Expiration Date (as defined in Section 1
of the Offer to Purchase), or who cannot comply with the book-entry transfer
procedures on a timely basis, may nevertheless tender their Shares pursuant to
the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
/ / CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE
FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER
SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
/ / CHECK HERE IF ANY OF YOUR SHARE CERTIFICATES HAS BEEN LOST, DESTROYED OR
STOLEN. SEE INSTRUCTION 11.
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be issued in the name of someone other than the
undersigned, or if Shares tendered hereby and delivered by book-entry
transfer which are not purchased are to be returned by credit to an account
at the Book-Entry Transfer Facility other than that designated above.
Issue: / / Check / / Share Certificate(s) to:
Name _______________________________________________________________________
(Please Print)
Address ____________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
__________________________________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or to the
undersigned at an address other than that shown under the undersigned's
signature.
Mail: / / Check / / Share Certificate(s) to:
Name _______________________________________________________________________
(Please Print)
Address ____________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
__________________________________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9)
- -----------------------------------------------------
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Zhone Acquisition Corp., a Texas
corporation ("Purchaser") and a wholly owned subsidiary of Zhone Technologies,
Inc., a Delaware corporation ("Parent"), the above-described shares of common
stock, par value $.01 per share (the "Common Stock"), and the associated rights
issued pursuant to the Rights Agreement between the Company and ChaseMellon
Shareholder Services, L.L.C., dated September 18, 1998, as amended October 20,
1999 (the "Associated Rights") (the Common Stock and Associated Rights are
referred to herein as the "Shares"), of the Company, pursuant to Purchaser's
offer to purchase any and all outstanding Shares at a purchase price of $10.00
per Share (the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated October 27, 1999 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with the
Offer to Purchase, as each may be amended and supplemented from time to time,
constitute the "Offer"). The undersigned understands that Purchaser reserves the
right to transfer or assign, in whole or from time to time in part, to Parent or
to one or more affiliates of Parent, the right to purchase Shares tendered
pursuant to the offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, the undersigned hereby sells, assigns and transfers to, or
upon the order of, Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after October 27, 1999 (a
"Distribution")) and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any Distributions), or transfer ownership of such Shares
(and any Distributions) on the account books maintained by the Book-Entry
Transfer Facility, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of Purchaser, (b) present
such Shares (and any Distributions) for transfer on the books of the Company,
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any Distributions), all in accordance with the
terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints designees of Purchaser as the
attorneys and proxies of the undersigned, each with full power of substitution,
to exercise all voting and other rights of the undersigned in such manner as
each such attorney and proxy or his substitute shall in his sole judgment deem
proper, with respect to all of the Shares tendered hereby which have been
accepted for payment by Purchaser prior to the time of any vote or other action
(and any Distributions), at any meeting of stockholders of the Company (whether
annual or special and whether or not an adjourned meeting) or otherwise. This
power of attorney and proxy are irrevocable, are coupled with an interest in the
Shares tendered hereby, and are granted in consideration of, and effective upon,
the acceptance for payment of such Shares by Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and any Distributions), and no subsequent proxies will be given or
written consents executed by the undersigned (and if given or executed, will not
be deemed effective).
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distributions) and (b) when the same are accepted for
payment by Purchaser, Purchaser will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distributions). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of Purchaser
any and all Distributions in respect of the Shares tendered hereby, accompanied
by appropriate documentation of transfer, and pending such remittance or
appropriate assurance thereof, Purchaser will be, subject to applicable law,
entitled to all rights and privileges as owner of any such Distribution and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Offer to Purchase) and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
at any time on or after December 27, 1999. See Section 4 of the Offer to
Purchase.
4
<PAGE>
The undersigned understands that the tender of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
Purchaser upon the terms and subject to the conditions of the Offer, including
the undersigned's representation that the undersigned owns the Shares being
tendered. The undersigned acknowledges that no interest will be paid on the
Offer Price for tendered Shares regardless of any extension of the Offer or any
delay in making such payment.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing any Shares not tendered
or not purchased, in the name(s) of the undersigned (and, in the case of Shares
tendered by book-entry transfer, by credit to the account at the Book-Entry
Transfer Facility). Similarly, unless otherwise indicated in the box entitled
"Special Delivery Instructions," please mail the check for the purchase price of
any Shares purchased and return any Share Certificates evidencing any Shares not
tendered or not purchased (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that the boxes entitled "Special Payment Instructions" and "Special
Delivery Instructions" are both completed, please issue the check for the
purchase price of any Shares purchased and return any Share Certificates
evidencing any Shares not tendered or not purchased in the name(s) of, and mail
said check and Share Certificates to, the person(s) so indicated. The
undersigned acknowledges that Purchaser has no obligation, pursuant to the
"Special Payment Instructions," to transfer any Shares from the name of the
registered holder(s) thereof if Purchaser does not accept for payment any of the
Shares so tendered.
- --------------------------------------------------------------------------------
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9
X __________________________________________________________________________
X __________________________________________________________________________
Signature(s) of Holder(s)
Dated ______________, 1999
(Must be signed by the registered holder(s) exactly as such holder(s)
name(s) appear(s) on the Share Certificate(s) or on a security position
listing or by a person(s) authorized to become the registered holder(s) of
such Share Certificate(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 5.)
Name(s) ____________________________________________________________________
____________________________________________________________________________
(Please Print)
Capacity (full title) ______________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No. ( )___________________________________________
Taxpayer Identification or Social Security No. _____________________________
(Complete Substitute Form
W-9 below)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _______________________________________________________
Name(s) ____________________________________________________________________
(Please Type or Print)
Title ______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone No. ________________________________________________
Dated ______________, 1999
- --------------------------------------------------------------------------------
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal if the Shares tendered thereby are tendered (i) by a
registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) for the account of a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined in
Rule 17Ad-5 under the Securities Exchange Act of 1934, as amended (each of the
foregoing constituting an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5. If Share Certificates are registered in the name
of a person or persons other than the signer of this Letter of Transmittal, or
if payment is to be made or delivered to, or certificates evidencing unpurchased
Shares are to be issued or returned to, a person other than the registered owner
or owners, then the tendered Share Certificates must be endorsed or accompanied
by duly executed stock powers, in either case signed exactly as the name or
names of the registered owner or owners appear on the Share Certificates, with
the signatures on the Share Certificates or stock powers guaranteed by an
Eligible Institution as provided herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used if Share Certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if the delivery of Shares is to be
made by book-entry transfer pursuant to the procedures set forth in Section 3 of
the Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) and any other documents required by this Letter of
Transmittal, or an Agent's Message in the case of a book-entry transfer, must be
received by the Depositary at one of its addresses set forth on the front page
of this Letter of Transmittal by the Expiration Date (as defined in the Offer to
Purchase).
Stockholders who cannot deliver their Share Certificates and all other
required documents to the Depositary by the Expiration Date must tender their
Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made
by or through an Eligible Institution; (b) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(c) Share Certificates for all tendered Shares, in proper form for tender, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three Nasdaq National
Market trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION (AS DEFINED IN
SECTION 2 OF THE OFFER TO PURCHASE)). IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), all tendering stockholders waive any right to receive any notice of
the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the Share
Certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS). If fewer
than all of the Shares represented by any Share Certificate delivered to the
Depositary are to be tendered, fill in the number of Shares that are to be
tendered in the box entitled "Number of Shares Tendered." In such case, a new
Share Certificate for the remainder of the Shares represented by the old Share
Certificate will be sent to the person(s) signing this Letter of Transmittal,
unless otherwise provided in the box entitled "Special Delivery Instructions,"
as promptly as practicable following the expiration or termination of the Offer.
All Shares represented by Share Certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
6
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificate(s) without alteration, enlargement or any
other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different Share Certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
Share Certificates.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to Purchaser of the authority of such person to so act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share Certificate(s) or
separate stock powers are required, unless payment of the purchase price is to
be made, or Share Certificate(s) evidencing Shares not tendered or not purchased
are to be returned, in the name of any person other than the registered
holder(s). Signatures on any such Share Certificate(s) or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signature(s) on any
such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this
Instruction 6, Purchaser will pay any stock transfer taxes with respect to the
sale and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be returned in the name
of, any person other than the registered holder(s) of such Shares, then the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Share Certificate(s) listed in this
Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued, or any Share
Certificate(s) evidencing Shares not tendered or not purchased are to be
returned, in the name of a person other than the person(s) signing this Letter
of Transmittal or if the check or any Share Certificate(s) evidencing Shares not
tendered or not purchased are to be mailed to someone other than the person(s)
signing this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal at an address other than that shown above, the appropriate boxes on
this Letter of Transmittal should be completed. Stockholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited to such
account at the Book-Entry Transfer Facility as such stockholder may designate in
the box entitled "Special Payment Instructions." If no such instructions are
given, any such Shares not purchased will be returned by crediting the account
at the Book-Entry Transfer Facility.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Purchaser, in whole or in part, at any time and from time to time at Purchaser's
sole discretion (subject to the provisions of the Merger Agreement referred to
in the Offer to Purchase), in the case of any Shares tendered.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under the federal income
tax law, a holder of Shares whose tendered Shares are accepted for payment is
required by law to provide the Depositary (as payer) with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 below. The holder
of Shares must also state that (i) such holder is exempt from back-up
withholding, (ii) such holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of a
failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified such holder that such holder is no longer subject to backup
withholding. If the Depositary is not provided with the correct TIN or an
adequate basis for an exemption, the holder of Shares may be subject to
penalties imposed by the Internal Revenue Service and backup withholding in an
amount equal to 31% of the gross proceeds received pursuant to the Offer.
7
<PAGE>
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a completed IRS From W-8
Certificate of Foreign Status or a Substitute Form W-8, signed under penalties
of perjury, attesting to such individual's exempt status. Such form can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the employer
identification number of the record holder of the Shares tendered hereby. If the
Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
If the tendering holder of Shares has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, the holder should
check the box in Part III of the Substitute Form W-9, and sign and date the
Substitute Form W-9, and sign and date the "Certificate of Awaiting Taxpayer
Identification Number." If the box in Part III of the Substitute Form W-9 is
checked and the Depositary is not provided with a TIN within sixty (60) days,
the Depositary may withhold 31% of all payments of the purchase price to such
holder until a TIN is provided to the Depositary.
The tendering holder of Shares is required to provide the Depositary with
such holder's correct TIN on Substitute Form W-9, which is provided below,
unless an exemption applies. In the case of any holder who has completed the box
entitled "Special Payment Instructions," however, the correct TIN on Substitute
Form W-9 should be provided for the recipient of the payment pursuant to such
instructions. Failure to provide the information on the Substitute Form W-9 may
subject the tendering holder of Shares to penalties and to backup withholding in
an amount equal to 31% of the gross proceeds received pursuant to the Offer.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth on
the back cover of the Offer to Purchase. Additional copies of the Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be obtained from the Information Agent, the Dealer
Manager, or from brokers, dealers, commercial banks and trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The Depositary's telephone number is
(800) 777-3674. The stockholder will then be instructed as to the steps that
must be taken in order to replace the certificate(s). This Letter of Transmittal
and related documents cannot be processed until the procedure for replacing lost
or destroyed certificates has been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE).
8
<PAGE>
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME:
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer Identification
FORM W-9 Number -- for all accounts, enter Social Security Number
taxpayer identification number in OR
Department of the Treasury the box at right. (For most Employer Identification Number
Internal Revenue Service individuals this is your social ------------------------
security number.
If you do not have a number, see
Obtaining a Number in the enclosed
GUIDELINES.) Certify by signing and
dating below.
Payer's Request for Taxpayer
Identification Number ("TIN") Note: If the account is in more
than one name, see chart in the
enclosed GUIDELINES to determine
which number to give the payer.
---------------------------------------------------------------------------
PART II--For Payees exempt from backup withholding, see the enclosed
GUIDELINES and complete as instructed therein.
- ------------------------------------------------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be
issued to me); and
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject
to backup withholding because of underreporting interest or dividends on your tax return. However, if, after being
notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that
you were no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed
GUIDELINES.)
</TABLE>
<TABLE>
<C> <S> <C>
- ----------------------------------------------------------------------------------------------------
SIGN HERE --> SIGNATURE ------------------------------ PART III--
DATE --------------------------------, 1999 Awaiting TIN / /
- ----------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART III.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office, or (2) I intend to mail or deliver an application in
the near future. I understand that, notwithstanding the information I
provided in Part III of the Substitute Form W-9 (and the fact that I have
completed this Certificate of Awaiting Taxpayer Identification Number), if I
do not provide a correct taxpayer identification number to the Depositary
within sixty (60) days, 31% of all reportable payments made to me pursuant
to the Offer and Merger may be withheld.
SIGNATURE
------------------------------------------------------------- DATE
----------------, 1999
- --------------------------------------------------------------------------------
9
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 487-4870
THE DEALER MANAGER FOR THE OFFER IS:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PREMISYS COMMUNICATIONS, INC.
As set forth in Section 3 of the Offer to Purchase described below, this
Notice of Guaranteed Delivery, or one substantially equivalent hereto, must be
used to accept the Offer (as defined below) if certificates evidencing Shares
(as defined below) are not immediately available, or the certificates for Shares
and all other required documents cannot be delivered to ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase), or if the procedure for delivery by
book-entry transfer cannot be completed on a timely basis. This instrument may
be delivered by hand or transmitted by facsimile transmission or mailed to the
Depositary. See Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C> <C>
BY MAIL: BY FACSIMILE BY OVERNIGHT BY HAND:
Reorganization Dept. TRANSMISSION (FOR COURIER: Reorganization Dept.
P.O. Box 3301 ELIGIBLE INSTITUTIONS Reorganization Dept. 120 Broadway, 13(th)
So. Hackensack, NJ ONLY): 85 Challenger Road Floor
07606 (201) 296-4293 Mail Stop--Reorg New York, NY 10271
CONFIRM RECEIPT OF Ridgefield Park, NJ
FACSIMILE BY TELEPHONE 07660
ONLY:
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE
COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT
CONSTITUTE VALID DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL
NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
(as defined in the Offer to Purchase) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in Section 3 of the Offer to Purchase) and
certificates representing the shares of common stock, par value $.01 per share,
of Premisys Communications, Inc., a Delaware corporation, and the associated
rights issued pursuant to the Rights Agreement between Premisys
Communications, Inc. and ChaseMellon Shareholder Services, L.L.C., dated
September 18, 1998 (the "Associated Rights") (the Common Stock and Associated
Rights are together referred to as the "Shares"), to the Depositary within the
time period specified herein. Failure to do so could result in a financial loss
to the Eligible Institution.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to Zhone Acquisition Corp., a Texas
corporation and a wholly owned subsidiary of Zhone Technologies, Inc., a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase and the related Letter of Transmittal (which, together
with the Offer to Purchase, as each may be amended and supplemented from time to
time, constitute the "Offer"), receipt of which is hereby acknowledged, the
number of Shares specified below pursuant to the guaranteed delivery procedures
described in Section 3 of the Offer to Purchase.
- --------------------------------------------------------------------------------
Signature(s) _______________________________________________________________
Name(s) of Record Holders
____________________________________________________________________________
Please Type or Print
Address(es) ________________________________________________________________
____________________________________________________________________________
Zip Code
Area Code and Tel. No(s). __________________________________________________
Number of Shares ___________________________________________________________
Certificate No(s). (if available)
____________________________________________________________________________
____________________________________________________________________________
Dated _______, 1999
/ / Check if Shares will be tendered by book-entry transfer.
Account Number _____________________________________________________________
____________________________________________________________________________
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other equity which is a member in good standing of
the Security Transfer Agent's Medallion Program or a bank, broker, dealer,
credit union, savings association or other entity which is an "Eligible
Guarantor Institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, (a) represents that the above named
person(s) own(s) the Shares tendered hereby within the meaning of
Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (b) represents that such tender of Shares complies
with Rule 14e-4 under the Exchange Act, and (c) guarantees delivery to the
Depositary, at one of its addresses set forth above, of certificates
representing the Shares tendered hereby in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
accounts at The Depository Trust Company, in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry transfer, and any other required documents, within three Nasdaq
National Market trading days after the date hereof.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Name
Address Please Type or Print
Title
Zip Code
Dated , 1999
Area Code and Tel. No.
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED
DELIVERY.
CERTIFICATES REPRESENTING SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
- --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[LOGO] [LOGO]
</TABLE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PREMISYS COMMUNICATIONS, INC.
AT
$10.00 NET PER SHARE
BY
ZHONE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ZHONE TECHNOLOGIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 29, 1999, UNLESS THE OFFER IS EXTENDED.
October 27, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Zhone Acquisition Corp., a Texas corporation
("Purchaser") and a wholly owned subsidiary of Zhone Technologies, Inc., a
Delaware corporation ("Parent"), to act as Dealer Manager in connection with
Purchaser's offer to purchase for cash any and all outstanding shares of common
stock, par value $.01 per share (the "Common Stock"), and the associated rights
issued pursuant to the Rights Agreement between Premisys Communications, Inc.
and ChaseMellon Shareholder Services, L.L.C., dated September 18, 1998 (the
"Associated Rights") (the Common Stock and Associated Rights together are
referred to as "Shares"), of Premisys Communications, Inc., a Delaware
corporation (the "Company"), at a purchase price of $10.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 27, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, as
amended and supplemented from time to time, together constitute the "Offer")
enclosed herewith. All capitalized terms used but not defined herein shall have
the meaning ascribed to them in the Offer to Purchase. Holders of Shares whose
certificates for such Shares (the "Share Certificates") are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary (as defined below) or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in the Offer to
Purchase), must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Please bring the Offer to their attention as promptly as possible.
<PAGE>
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated October 27, 1999.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if certificates representing Shares are not immediately available
or if time will not permit all required documents to reach ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") by the Expiration Date or if
the procedures for book-entry transfer cannot be completed on a timely
basis.
4. The letter to stockholders of the Company from the Chairman of the
Company's Board of Directors, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange
Commission by the Company and mailed to the stockholders of the Company,
each recommending that the Company's stockholders accept the Offer and
tender their Shares.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to ChaseMellon Shareholder
Services, L.L.C., the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, NOVEMBER 29, 1999, UNLESS THE
OFFER IS EXTENDED.
Please note the following:
1. The tender price is $10.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined below) and the transactions contemplated
thereby, including the Offer and the Merger (as defined below), has
determined that the Offer and the Merger are fair to, and in the best
interests of, the Company and its stockholders, and RECOMMENDS that the
holders of Shares accept the Offer and tender their Shares pursuant to the
Offer.
4. The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of October 20, 1999, by and among Parent, Purchaser and the
Company (the "Merger Agreement"), which provides that subsequent to the
consummation of the Offer, the Company will merge with and into Purchaser
(the "Merger"). Notwithstanding the foregoing, the Merger Agreement provides
that Parent may elect at any time prior to the Merger to merge Purchaser
with and into the Company instead of merging the Company with and into
Purchaser as provided above. At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company
and each Share owned by Parent, Purchaser, or any direct or indirect
subsidiary of Parent or of the Company and other than Shares, if any, held
by stockholders who have not voted in favor of or consented to the Merger
and who have delivered a written demand for appraisal of such Shares in
accordance with the Delaware
2
<PAGE>
law ("Dissenting Shares")) will be cancelled, extinguished and converted
into and represent the right to receive $10.00 (or such other price that may
be paid for each Share pursuant to the Offer, if amended) in cash, without
interest thereon (the "Merger Consideration").
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on November 29, 1999, unless the Offer is extended.
6. The Offer is conditioned upon, among other things, (i) there having
been validly tendered, and not properly withdrawn, that number of Shares
representing at least 75% of all outstanding Shares on a fully diluted
basis, (ii) the expiration or termination of any applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and (iii) the satisfaction of certain other terms and conditions set forth
in the Offer to Purchase.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares, and other required documents should be sent to
the Depositary and (ii) either Share Certificates, representing the tendered
Shares should be delivered to the Depositary, or such Shares should be tendered
by book-entry transfer into the Depositary's account maintained at the
Book-Entry Transfer Facility (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and
D.F. King & Co., Inc. (the "Information Agent") (as described in the Offer to
Purchase)) for soliciting tenders of Shares pursuant to the Offer. Purchaser
will, however, upon request, reimburse you for customary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. Purchaser will pay or cause to be paid any stock transfer taxes payable
on the transfer of Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent or the undersigned, at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the Information
Agent.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PREMISYS COMMUNICATIONS, INC.
AT
$10.00 NET PER SHARE
BY
ZHONE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ZHONE TECHNOLOGIES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 29, 1999, UNLESS THE OFFER IS EXTENDED.
October 27, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated October 27,
1999 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with the Offer to Purchase, as each may be amended and supplemented
from time to time, constitute the "Offer") relating to an offer by Zhone
Acquisition Corp., a Texas corporation ("Purchaser") and a wholly owned
subsidiary of Zhone Technologies, Inc., a Delaware corporation ("Parent"), to
purchase any and all outstanding shares of common stock, par value $.01 per
share (the "Common Stock"), and the associated rights issued pursuant to the
Rights Agreement between Premisys Communications, Inc. and ChaseMellon
Shareholder Services, L.L.C., dated September 18, 1998 (the "Associated Rights")
(the Common Stock and Associated Rights are together referred to as the
"Shares"), of Premisys Communications, Inc., a Delaware corporation (the
"Company"), at a purchase price of $10.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer. Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") prior to the Expiration Date (as defined in
the Offer to Purchase), or who cannot complete the procedures for book-entry
transfer on a timely basis, must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD (DIRECTLY OR INDIRECTLY) OF SHARES HELD BY US
FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER
OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
<PAGE>
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer to Purchase.
Your attention is directed to the following:
1. The tender price is $10.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined below) and the transactions contemplated
thereby, including the Offer and the Merger (as defined below), has
determined that the Offer and the Merger are fair to, and in the best
interests of, the Company's stockholders, and RECOMMENDS that the holders of
Shares accept the Offer and tender their Shares pursuant to the Offer.
4. The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of October 20, 1999, by and among Parent, Purchaser and the
Company (the "Merger Agreement"), which provides that subsequent to the
consummation of the Offer, the Company will merge with and into Purchaser
(the "Merger"). Notwithstanding the foregoing, the Merger Agreement provides
that Parent may elect at any time prior to the Merger to merge Purchaser
with and into the Company instead of merging the Company with and into
Purchaser as provided above. At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company
and each Share owned by Parent, Purchaser, or any direct or indirect
subsidiary of Parent or of the Company and other than Shares, if any held by
stockholders who have not voted in favor of or consented to the Merger and
who have delivered a written demand for appraisal of such Shares in
accordance with the Delaware law ("Dissenting Shares")) will be cancelled,
extinguished and converted into and represent the right to receive $10.00
(or such other price that may be paid for each Share pursuant to the Offer,
if amended) in cash, without interest thereon (the "Merger Consideration").
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Monday, November 29, 1999, unless the Offer is extended.
6. The Offer is conditioned upon, among other things, (i) there having
been validly tendered, and not properly withdrawn, pursuant to the Offer
that number of Shares representing at least 75% of all outstanding Shares on
a fully diluted basis, (ii) the expiration or termination of any applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and (iii) the satisfaction of certain other terms and
conditions set forth in the Offer to Purchase.
The Offer is made solely pursuant to the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto. Purchaser is
not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with any such state statute or seek to have each statute
declared inapplicable to the Offer. If, after such good faith effort, Purchaser
cannot comply with any such state statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares in such
state. In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of Purchaser by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PREMISYS COMMUNICATIONS, INC.
BY
ZHONE ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated October 29, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with the Offer to Purchase, as each may
be amended and supplemented from time to time, constitute the "Offer") relating
to an offer by Zhone Acquisition Corp., a Texas corporation ("Purchaser") and a
wholly owned subsidiary of Zhone Technologies, Inc., a Delaware corporation
("Parent"), to purchase any and all outstanding shares of common stock, par
value $.01 per share (the "Common Stock"), and the associated rights issued
pursuant to the Rights Agreement between Premisys Communications, Inc. and
ChaseMellon Shareholder Services, L.L.C., dated September 18, 1998 (the
"Associated Rights") (the Common Stock and Associated Rights are together
referred to as the "Shares"), of Premisys Communications, Inc., a Delaware
corporation (the "Company"), at a purchase price of $10.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
This will instruct you to tender to Purchaser the number of Shares indicated
below (or if no number is indicated below, all Shares) which are held by you for
the account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and the related Letter of Transmittal.
- -------------------------------------------
Number of Shares to be Tendered*
_____________________________________________________________________ Shares
Dated _______________________________________________________________ , 1999
- -------------------------------------------
- -------------------------------------------
SIGN HERE
____________________________________________________________________________
____________________________________________________________________________
Signature(s)
__________________________________________________________________________
Please print name(s)
__________________________________________________________________________
Address
__________________________________________________________________________
Area Code and Telephone Number
__________________________________________________________________________
Tax Identification or Social Security Number
- -----------------------------------------------------
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF THE
TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
THIS FORM MUST BE RETURNED TO THE BROKERAGE FIRM MAINTAINING YOUR ACCOUNT.
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE
(YOU) TO GIVE THE PAYER.--Social security numbers have nine digits separated by
two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer. All "Section" references are to the
Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
<TABLE>
- -------------------------------------------
GIVE THE
FOR THIS TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF--
- -------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more The actual owner
individuals (joint of the account or,
account) if combined funds,
the first
individual on the
account (1)
3. Custodian account The minor(2)
of a minor
(Uniform Gift to
Minors Act)
4. a. The usual The grantor-
revocable trustee(1)
savings trust
account
(grantor is
also trustee)
b. So-called The actual
trust account owner(1)
that is not a
legal or valid
trust under
state law
5. Sole The owner(3)
proprietorship
- -------------------------------------------
- -------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF IDENTIFICATION
ACCOUNT: NUMBER OF--
<S> <C> <C>
- -------------------------------------------
6. Sole The owner(3)
proprietorship
7. A valid trust, The legal
estate, or pension entity(4)
trust
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization
account
10. Partnership The partnership
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or
prison) that
receives
agricultural
program payments
- -------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Card, at the local
Social Administration office, or Form SS-4, Application for Employer
Identification Number, by calling 1 (800) TAX-FORM, and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from withholding include:
- - An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7), if
the account satisfies the requirements of Section 401(f)(2).
- - The United States, or a political subdivision or wholly-owned agency or
instrumentality of any one or more of the foregoing.
- - An international organization or any agency or instrumentality thereof.
- - A foreign government and any political subdivision, agency or
instrumentality thereof.
Payees that may be exempt from backup withholding include:
- - A corporation.
- - A financial institution.
- - A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a).
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends generally exempt from backup
withholding include:
- - Payments to nonresident aliens subject to withholding under Section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.--Payments of
patronage dividends not paid in money.--Payments made by certain foreign
organizations.--Section 404(k) payments made by an ESOP.
Payments of interest generally exempt from backup withholding include:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and you have
not provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- - Payments described in Section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under Section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid to you.
- - Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, see the regulations under sections 6041,
6041A, 6042, 6044, 6045, 6049, 6050A and 6050N.
EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 3 OF THE
FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PRIVACY ACT NOTICE--Section 6109 requires you to provide your correct taxpayer
identification number to payers, who must report the payments to the IRS. The
IRS uses the number for identification purposes and may also provide this
information to various government agencies for tax enforcement or litigation
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty of
$50 for each such failure unless your failure is due to reasonable cause and not
to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE>
Exhibit (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer (as defined below) is made solely by the Offer to
Purchase, dated October 27, 1999, and the related Letter of Transmittal, and any
amendments or supplements thereto, and is being made to all holders of Shares.
The Offer is not being made to (nor will tenders be accepted from or on behalf
of) holders of Shares residing in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Purchaser (as defined below) may in its discretion take
such actions as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction
where securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by Credit Suisse First Boston Corporation ("Credit Suisse First
Boston" or the "Dealer Manager") or one or more registered brokers or dealers
licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
PREMISYS COMMUNICATIONS, INC.
AT
$10.00 NET PER SHARE
BY
ZHONE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
ZHONE TECHNOLOGIES, INC.
Zhone Acquisition Corp., a Texas corporation ("Purchaser") and a wholly
owned subsidiary of Zhone Technologies, Inc., a Delaware corporation
("Parent"), is offering to purchase all of the outstanding common shares,
including the associated preferred stock purchase rights (the "Shares") of
Premisys Communications, Inc., a Delaware corporation (the "Company") at
$10.00 per Share, net to the seller in cash, without interest thereon, on the
terms and subject to the conditions set forth in the Offer to Purchase dated
October 27, 1999 (the "Offer to Purchase") and in the related Letter of
Transmittal (which together, as either may be amended or supplemented from
time to time, constitute the "Offer"). Tendering stockholders who have Shares
registered in their name and who tender directly to the Depositary (as
defined in the Offer to Purchase) will not be charged brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal,
transfer taxes on the purchase of Shares pursuant to the Offer. Stockholders
holding Shares through their broker or bank are urged to consult them as to
whether they charge any service fees. Following the Offer, the Purchaser
intends to effect the Merger described below.
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, NOVEMBER 29, 1999, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED
BELOW) THAT NUMBER OF SHARES REPRESENTING AT LEAST SEVENTY-FIVE PERCENT OF THE
OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE
"MINIMUM
<PAGE>
CONDITION") AND (ii) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING
PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED. FOR PURPOSES OF THE MERGER AGREEMENT (AS DEFINED BELOW), THE SHARES
OUTSTANDING ON A "FULLY DILUTED BASIS" MEANS ALL OUTSTANDING SHARES AFTER
GIVING EFFECT TO THE EXERCISE OR CONVERSION OF ALL OUTSTANDING OPTIONS,
RIGHTS AND OTHER SECURITIES WHICH ARE THEN EXERCISABLE OR CONVERTIBLE INTO
SHARES, BUT ONLY TO THE EXTENT THAT ANY SUCH OPTIONS, RIGHTS OR OTHER
SECURITIES ARE EXERCISABLE OR CONVERTIBLE INTO SHARES AT A PER SHARE PRICE
LESS THAN $10.00 PER SHARE. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS SET FORTH IN THE OFFER TO PURCHASE. SEE THE INTRODUCTION AND
SECTIONS 1 AND 15 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of October 20, 1999 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that, among other
things, Purchaser will make the Offer and, as promptly as practicable following
the consummation of the Offer and the satisfaction or waiver of certain
conditions set forth in the Merger Agreement and in accordance with relevant
provisions of the Texas Business Corporation Act ("TBCA") and the Delaware
General Corporation Law ("DGCL"), the Company will be merged with and into
Purchaser (the "Merger"). On consummation of the Merger and except as provided
below, Purchaser will continue as the surviving corporation and will be a wholly
owned subsidiary of Parent. Notwithstanding the foregoing, the Merger Agreement
provides that Parent may elect at any time prior to the Merger to merge
Purchaser with and into the Company instead of merging the Company with and into
Purchaser as provided above, in which case the Company would continue as the
surviving corporation and as a wholly owned subsidiary of Parent. At the
effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
the Company as treasury stock or by any subsidiary of the Company or Parent or
Purchaser and other than Shares held by stockholders who have properly exercised
their dissenters' rights under the DGCL) will be converted into the right to
receive cash in an amount equal to the price per Share paid pursuant to the
Offer, without interest (and less any required withholding taxes). The Merger
Agreement is more fully described in Section 13 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, THE COMPANY'S
STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
Purchaser may, and may be required to, subject to the terms of the Merger
Agreement, extend the Offer. Any such extension will be followed as promptly as
practicable by public announcement thereof no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Offer is subject to certain conditions set forth in the Offer to
Purchase. If any such condition is not satisfied, Purchaser may, subject to
certain terms of the Merger Agreement and to the applicable rules and
regulations of the Commission, (i) terminate the Offer and not accept for
payment any Shares and return all tendered Shares to tendering stockholders,
(ii) waive all the unsatisfied conditions and, subject to complying with the
terms of the Merger Agreement and the applicable rules and regulations of the
Commission, accept for payment and pay for all Shares validly tendered prior to
the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and,
subject to the right of stockholders to withdraw Shares until the Expiration
Date, retain the Shares that have been tendered during the period or periods for
which the Offer is extended, or (iv) amend the Offer.
For purposes of the Offer, Purchaser shall be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to
Depositary of its acceptance of such Shares for payment pursuant to the
Offer. In all cases, on the terms and subject to the conditions of the Offer,
payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser
and transmitting payment to validly tendering stockholders. Payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents, or the tendering stockholder must comply with the guaranteed
delivery procedure described in the Offer to Purchase. In addition, either
(i) certificates representing such Shares must be received by the Depositary
along with the Letter of
<PAGE>
Transmittal or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a book-entry confirmation must be
received by the Depositary, in each case prior to the Expiration Date or (ii)
the guaranteed delivery procedure set forth in the Offer to Purchase must be
complied with.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Monday, November 29, 1999, unless and until Purchaser shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions set forth in the Merger Agreement, including, if required,
the approval of the Merger by the requisite vote of the stockholders of the
Company. The stockholder vote necessary to approve the Merger is the affirmative
vote of the holders of a majority of the issued and outstanding Shares, voting
as a single class. If the Minimum Condition is satisfied and Purchaser purchases
Shares pursuant to the Offer, Purchaser will be able to effect the Merger
without the affirmative vote of any other stockholder. If Purchaser acquires at
least 90% of the outstanding Shares pursuant to the Offer or otherwise,
Purchaser will be able to effect the Merger pursuant to the "short-form" merger
provisions of Section 253 of the DGCL and Section 5.16 of the TBCA, without any
action by any other stockholder. In that event, Purchaser intends to effect the
Merger as promptly as practicable following the purchase of Shares in the Offer.
Under no circumstances will interest be paid on the purchase price to be
paid for the Shares pursuant to the Offer, regardless of any extension of the
Offer or any delay in making such payment. No interest will be paid on the
consideration to be paid in the Merger to stockholders who fail to tender their
Shares pursuant to the Offer, regardless of any delay in effecting the Merger or
making such payment.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission, the Purchaser may, under
certain circumstances, (i) extend the period of time during which the Offer is
open and thereby delay acceptance for payment of and the payment for any Shares
by giving oral or written notice of such extension to the Depositary and (ii)
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. Any extension, delay, waiver, amendment or
termination of the Offer will be followed as promptly as practicable by a public
announcement thereof, the announcement in the case of an extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not properly withdrawn will remain subject to the Offer,
subject to the right of a tendering stockholder to withdraw such stockholder's
Shares.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they also may be withdrawn at any time on or after December 27, 1999,
unless theretofore accepted for payment as provided in the Offer to Purchase.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth in the Offer to Purchase and must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holders of the Shares, if
different from the person who tendered the Shares. If certificates evidencing
the Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution (as defined in the Offer to Purchase) must be submitted
prior to the release of such Shares (except in the case of Shares tendered by an
Eligible Institution). In addition, such notice must specify, in the case of
Shares tendered by delivery of certificates, the name of the registered holder
(if different from that of the tendering stockholder) and the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn or,
in the case of Shares tendered by book-entry transfer, the name and number of
the account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase) to be credited with the withdrawn Shares.
The information required to be disclosed by paragraph (e)(l)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for
<PAGE>
the purpose of disseminating the Offer to holders of Shares. The Offer to
Purchase and the related Letter of Transmittal will be mailed to record
holders of Shares whose names appear on the Company's stockholder lists and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder list or, if applicable,
who are listed as participants in a clearing agency's security position
listing for subsequent transmittal to beneficial Share owners.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Any questions or requests for assistance or for additional copies of the
Offer to Purchase, the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below, and copies will be furnished promptly at Purchaser's expense.
Neither Parent nor Purchaser will pay any fees or commissions to any broker or
dealer or any other person (other than the Dealer Manager, the Depositary and
the Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 848-2998
The Dealer Manager for the Offer is:
[Credit Suisse First Boston Corporation logo]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
October 27, 1999
<PAGE>
EXHIBIT (b)
CREDIT | FIRST
SUISSE | BOSTON CREDIT SUISSE FIRST BOSTON
Eleven Madison Avenue
New York, NY 10010-3629
October 20, 1999
Zhone Technologies, Inc.
7677 Oakport Street - Suite 1040
Oakland, California 94621
Attention: Mory Ejabat/Jeanette Symons
$130,000,000 Credit Facility
COMMITMENT LETTER
----------------------------
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB") that a
Texas corporation organized by you ("ACQUISITIONCO") intends, directly or
indirectly, to acquire all of the issued and outstanding capital stock of
Premisys Communications, Inc., a Delaware corporation (the "TARGET"), pursuant
to a merger agreement which has not yet been reviewed by us, for aggregate
consideration of approximately $255,000,000. We understand that such acquisition
will take the form of a tender offer (the "TENDER OFFER") by AcquisitionCo for
all of the issued and outstanding shares of capital stock of the Target (all of
such capital stock collectively, the "SHARES") and the purchase of the portion
of the Shares tendered pursuant to the Tender Offer (the "TENDERED SHARES"). You
have informed us that the Board of Directors of the Target is prepared to
recommend to shareholders of the Target that they tender their Shares pursuant
to the Tender Offer. We further understand that:
(a) as promptly as is practicable following the consummation of the Tender
Offer and the acquisition of the Tendered Shares (and, if necessary,
any proxy solicitation), the Target will be merged with and into
AcquisitionCo, with AcquisitionCo being the surviving entity (the
"MERGER"); and
(b) following the Merger, the Investors (as defined in the Term Sheet
described below) will organize a Texas corporation ("LEGACYCO"), which
will enter into a series of transactions resulting in the acquisition
of certain existing product lines of AcquisitionCo by a limited
liability company which is a direct subsidiary of LegacyCo and the
assumption by LegacyCo of the Term Loans (as defined in the Term Sheet
described below) (the "REORGANIZATION").
For purposes hereof, the Tender Offer, the Merger and the Reorganization shall
be referred to collectively as the "TRANSACTION" and the term "BORROWER" shall
mean (x) prior to the Reorganization, AcquisitionCo and (y) from and after the
Reorganization, LegacyCo. Notwithstanding the foregoing, at your option, the
Target may be the survivor of the Merger, in which case the Target will
reincorporate as a Texas corporation and then consummate the Reorganization.
<PAGE>
2
In connection with the Transaction, you have requested that
CSFB agree to structure, arrange and syndicate senior secured credit facilities
in an aggregate amount of up to $130,000,000 (the "FACILITIES"), and that CSFB
commit to provide the entire principal amount of the Facilities and to serve as
administrative agent for the Facilities. CSFB is pleased to advise you (x) that
it is willing to act as exclusive advisor and lead arranger for the Facilities
and (y) of the commitment of CSFB to provide the entire amount of the Facilities
upon the terms and subject to the conditions set forth or referred to in this
commitment letter (the "COMMITMENT LETTER") and in the Summary of Terms and
Conditions attached hereto as Exhibit A (the "TERM SHEET").
It is agreed that CSFB will act as the sole and exclusive
administrative agent, advisor, lead arranger and book manager in respect of the
Facilities, and will, in such capacities, perform the duties and exercise the
authority customarily performed and exercised by it in such roles. You agree
that no other agents, co-agents or arrangers will be appointed, no other titles
will be awarded and no compensation (other than that expressly contemplated by
the Term Sheet and Fee Letter referred to below) will be paid in connection with
the Facilities unless you and we shall so agree. Notwithstanding the foregoing,
CSFB reserves the right to employ the services of Credit Suisse First Boston
Corporation ("CSFBC") in providing services incidental to the provision of the
Facilities and the syndication thereof. You agree that, in the provision of the
services contemplated hereby, CSFB and CSFBC may share with each other and their
respective affiliates any confidential or other information relating to Zhone,
AcquisitionCo, LegacyCo, the Target, their respective affiliates and
subsidiaries, and the Transaction as they may from time to time possess.
We intend to syndicate the Facilities to a group of financial
institutions (together with CSFB, the "LENDERS") identified by us in
consultation with you; PROVIDED that CSFB reserves the right (in its sole
discretion) not to syndicate the Acquisition Facility. CSFB intends to commence
syndication efforts promptly, and you agree actively to assist CSFB in
completing a syndication satisfactory to it. Such assistance shall include (a)
your using commercially reasonable efforts to ensure that the syndication
efforts benefit materially from your existing lending relationships and any such
relationships of the Target, (b) direct contact between senior management and
advisors of Zhone, the Borrower, the Target and the proposed Lenders, (c)
assistance in the preparation of a Confidential Information Memorandum and other
marketing materials to be used in connection with the syndication and (d) the
hosting, with CSFB, of one or more meetings of prospective Lenders.
CSFB will manage all aspects of the syndication, including
decisions as to the selection of institutions to be approached and when they
will be approached, when their commitments will be accepted, which institutions
will participate, the allocations of the commitments among the Lenders and the
amount and distribution of fees among the Lenders. To assist CSFB in its
syndication efforts, you agree promptly to prepare and provide to CSFB all
information with respect to Zhone, AcquisitionCo, LegacyCo, the Target and its
subsidiaries, the businesses to be owned by LegacyCo, the Transaction and the
other transactions contemplated hereby, including all financial information and
projections (the "PROJECTIONS"), as we may reasonably request in connection with
the arrangement and syndication of the Facilities. You hereby represent and
covenant that:
<PAGE>
3
(a) to your knowledge, all information other than the Projections (the
"INFORMATION") that has been or will be made available to CSFB by you
or any of your representatives is or will be, when furnished, complete
and correct in all material respects and does not or will not, when
furnished, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the
circumstances under which such statements are made; and
(b) the Projections that have been or will be made available to CSFB by you
or any of your representatives have been or will be prepared in good
faith based upon reasonable assumptions.
You understand that in arranging and syndicating the Facilities we may use and
rely on the Information and Projections without independent verification
thereof. Additionally, you understand that the definitive credit agreement
governing the Facilities will contain a representation and warranty with respect
to the accuracy and completeness of the Information which is not subject to a
"knowledge" qualification.
As consideration for CSFB's commitment hereunder and its
agreement to perform the services described herein, you agree to pay to CSFB the
nonrefundable fees set forth in the Term Sheet and in the fee letter dated the
date hereof and delivered herewith (the "FEE LETTER").
CSFB's commitment hereunder and its agreement to perform the
services described herein are subject to (a) our completion of and satisfaction
in all respects with our continuing due diligence investigation of you and your
subsidiaries and the Target and its subsidiaries (including, without limitation,
(i) the terms of the capital commitments obtained by you from your investors and
(ii) the assets to be held directly by, and the projected cash flow of, LegacyCo
following the consummation of the Transaction), (b) there not occurring or
becoming known to us any change, occurrence or development that could reasonably
be expected to have a material adverse effect on (i) the ability of the Borrower
to draw upon the capital commitments provided by your investors or (ii) the
business, operations, property or condition (financial or otherwise) of the
Zhone and its subsidiaries taken as a whole, the Borrower and its subsidiaries
taken as a whole or the Target and its subsidiaries taken as a whole, (c) our
not becoming aware after the date hereof of any information or other matter
(including any matter relating to financial models and underlying assumptions
relating to the Projections) which in our judgment is inconsistent in a material
and adverse manner with any information or other matter disclosed to us prior to
the date hereof, (d) there not having occurred a material disruption of or
material adverse change in financial, banking or capital market conditions that,
in our judgment, could materially impair the syndication of the Facilities, (e)
our satisfaction that prior to and during the syndication of the Facilities
there shall be no competing offering, placement or arrangement of any debt
securities or bank financing by or on behalf of Zhone, LegacyCo, AcquisitionCo,
the Target or any of their respective affiliates or subsidiaries, (f) the
negotiation, execution and delivery on or before December 31, 1999 of definitive
documentation with respect to the Facilities satisfactory to CSFB and its
counsel, (g) the deposit by the Target with CSFB of cash and acceptable
securities having an aggregate market value at least equal to the amount of the
Acquisition Facility described in the Term Sheet (which securities shall have
been deposited by the Target with CSFB prior to the Closing Date, but which
shall remain the
<PAGE>
4
property of the Target until the escrow arrangement described in the Term Sheet
becomes effective on the Closing Date) and (h) the other conditions set forth or
referred to in the Term Sheet. The terms and conditions of CSFB's commitment
hereunder and of the Facilities are not limited to those set forth herein and in
the Term Sheet. Those matters that are not covered by the provisions hereof and
of the Term Sheet are subject to our mutual agreement and approval.
You agree (a) to indemnify and hold harmless CSFB, its
affiliates and their respective officers, directors, employees, advisors, and
agents (each, an "indemnified person") from and against any and all losses,
claims, damages and liabilities to which any such indemnified person may become
subject arising out of or in connection with this Commitment Letter, the
Facilities, the use of the proceeds thereof, the Transaction or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any indemnified person is a party
thereto, and to reimburse each indemnified person upon demand for any legal or
other expenses incurred in connection with investigating or defending any of the
foregoing, PROVIDED that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found by a final, non-appealable judgment of a court to arise
from the willful misconduct or gross negligence of such indemnified person, and
(b) to reimburse CSFB and its affiliates on demand for all out-of-pocket
expenses (including due diligence expenses, syndication expenses, consultant's
fees and expenses, travel expenses, and reasonable fees, charges and
disbursements of counsel) incurred in connection with the Facilities and any
related documentation (including this Commitment Letter and the definitive
financing documentation) or the administration, amendment, modification or
waiver thereof. No indemnified person shall be liable for any indirect or
consequential damages in connection with its activities related to the
Facilities.
You acknowledge that CSFB and its affiliates (the term "CSFB"
as used below in this paragraph being understood to include such affiliates) may
be providing debt financing, equity capital or other services (including
financial advisory services) to other companies in respect of which you and/or
the Borrower may have conflicting interests regarding the transactions described
herein and otherwise. CSFB will not use confidential information obtained from
you or the Borrower by virtue of the transactions contemplated by this
Commitment Letter or its other relationships with you or the Borrower (as the
case may be) in connection with the performance by CSFB of services for other
companies, and CSFB will not furnish any such information to other companies.
You also acknowledge that CSFB has no obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you or the
Borrower, confidential information obtained from other companies.
This Commitment Letter shall not be assignable by you without
the prior written consent of CSFB (and any purported assignment without such
consent shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
you and CSFB. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter and
the Fee Letter are the only agreements that have been entered into
<PAGE>
5
among us with respect to the Facilities and set forth the entire understanding
of the parties with respect thereto. THIS COMMITMENT LETTER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Commitment Letter is delivered to you on the
understanding that neither this Commitment Letter, the Term Sheet or the Fee
Letter nor any of their terms or substance shall be disclosed, directly or
indirectly, to any other person except (a) to your officers, agents and advisors
who are directly involved in the consideration of this matter, (b) the Target
and such of its agents, advisors and equityholders who are directly involved in
the consideration of this matter or (c) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law (in which case you
agree to inform us promptly thereof), PROVIDED, that the foregoing restrictions
shall cease to apply (except in respect of the Fee Letter and its terms and
substance) after this Commitment Letter has been accepted by you.
The compensation, reimbursement, indemnification and
confidentiality provisions contained herein and in the Fee Letter shall remain
in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or CSFB's commitment hereunder; PROVIDED,
that your obligations under this Commitment Letter (other than (i) provisions
relating to titles awarded in connection with the Facilities and assistance to
be provided by you in connection with the syndication thereof and (ii) the
confidentiality provisions set forth above) shall automatically terminate and be
superseded by the provisions of the definitive documentation relating to the
Facilities upon the initial funding thereunder, and you shall automatically be
released from all liability in connection therewith at such time.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Term Sheet and the Fee
Letter by returning to us executed counterparts hereof and of the Fee Letter,
together with the amounts agreed upon pursuant to the Fee Letter to be payable
upon the acceptance hereof, not later than 5:00 p.m., New York City time, on
Thursday, October 21, 1999. CSFB's commitment and its agreements
<PAGE>
6
herein will expire at such time in the event we have not received such executed
counterparts in accordance with the immediately preceding sentence.
We are pleased to have been given the opportunity to assist
you in connection with this important financing.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By /s/ Robert Hetu By /s/ Chris Horgan
---------------------------- -----------------------
Name: Robert Hetu Name: Chris T. Horgan
Title: Vice President Title: Vice President
Accepted and agreed to as of
the date first written above by:
ZHONE TECHNOLOGIES, INC.
By /s/ Jeanette Symons
-----------------------------------
Name: Jeanette Symons
Title: CTO, Vice President
<PAGE>
EXHIBIT A
$130,000,000 CREDIT FACILITY
Summary of Terms and Conditions
October 20, 1999
A Texas corporation ("ACQUISITIONCO") organized by Zhone Technologies, Inc.
("ZHONE") intends, directly or indirectly, to acquire all of the issued and
outstanding capital stock of Premisys Communications, Inc., a Delaware
corporation (the "TARGET"), for aggregate consideration of approximately
$255,000,000. Such acquisition will take the form of a tender offer (the "TENDER
OFFER") by AcquisitionCo for all of the issued and outstanding shares of capital
stock of the Target (all of such capital stock collectively, the "SHARES") and
the purchase of the portion of the Shares tendered pursuant to the Tender Offer
(the "TENDERED SHARES"). Following the consummation of the Tender Offer and the
acquisition of the Tendered Shares, the Target will be merged with and into
AcquisitionCo, with AcquisitionCo being the surviving entity (the "MERGER").
Thereafter, the Investors described below will organize a Texas corporation
("LEGACYCO"), which will enter into a series of transactions resulting in the
acquisition of certain existing product lines of AcquisitionCo by a limited
liability company which is a direct subsidiary of LegacyCo and the assumption by
LegacyCo of the Term Loans described below (such transactions, the
"REORGANIZATION"; together with the Tender Offer and the Merger, the
"TRANSACTION").1 For purposes hereof, the term "BORROWER" shall mean (x) prior
to the consummation of the Reorganization, AcquisitionCo and (y) from and after
the Reorganization, LegacyCo. The Borrower requires senior, secured credit
facilities in an aggregate principal amount of up to $130,000,000 (the
"FACILITIES") in order to consummate the Transaction. Set forth below are the
principal terms of such facilities:
I. PARTIES
Borrower: The Borrower.
Administrative Agent, Lead
Arranger and Book Manager: CSFB (in such capacity, the
"ADMINISTRATIVE AGENT").
II. TYPE AND AMOUNT OF CREDIT FACILITIES
A. TERM LOAN FACILITY
Type of Facility: Five-year senior, secured, term loan
facility in the amount of up to
$50,000,000 (the "TERM LOAN FACILITY").
- --------
(1) In lieu of the structure described above, Zhone may elect to
structure the Merger such that the Target is the survivor thereof, in which case
the Target will reincorporate as a Texas corporation and then consummate the
Reorganization.
<PAGE>
2
Availability: The Term Loan Facility shall be available in
a single drawing on the date upon which the
conditions precedent to borrowing are
satisfied (the "CLOSING DATE").
Lenders: The banks, financial institutions and other
entities, including Credit Suisse First
Boston ("CSFB"), selected in the syndication
effort (collectively, the "LENDERS").
Amortization: The loans under the Term Loan Facility (the
"TERM LOANS") shall be repayable in
quarterly installments, with each such
installment to be in an amount to be
mutually agreed upon.
Use of Proceeds: To finance the Transaction and to pay
related fees and expenses.
B. ACQUISITION LOAN FACILITY
Type of Facility: Six-month senior, secured, multi-draw, term
loan facility in the amount of up to
$80,000,000 (the "ACQUISITION FACILITY";
together with the Term Loan Facility, the
"FACILITIES").
Availability: The Acquisition Facility shall be available
in up to six drawings; PROVIDED that the
Acquisition Facility shall be available on
the Closing Date only to the extent that all
other amounts described in the Table of
Sources and Uses attached as Annex I hereto
have previously been utilized to finance the
purchase of the Tendered Shares and to pay
fees and expense relating to the
Transaction.
Lenders: CSFB or, in its sole discretion, the
Lenders.
Amortization: The loans under the Acquisition Facility
shall mature in a single installment on the
date upon which the Merger is consummated.
Use of Proceeds: To finance the purchase of Shares, pay
related fees and expenses and to finance
interest payments on account of the loans
under the Facilities.
III. GENERAL PAYMENT PROVISIONS
Fees and Interest Rates: As set forth on Annex II.
Optional Prepayments: Loans under the Facilities may be prepaid
and commitments may be reduced by the
Borrower in minimum amounts to be agreed
upon; PROVIDED that no optional prepayments
shall be made to the Term Loans prior to the
date upon which the Acquisition Loans have
been paid in full. Optional prepayments of
the Term Loans shall be applied to the
remaining installments thereof in such order
as the Borrower shall elect.
<PAGE>
3
Mandatory Prepayments: The loans under the Facilities shall be
prepaid with:
(a) 100% of the net proceeds of any sale or
issuance of equity or incurrence of
certain indebtedness after the Closing
Date by the Borrower or any of its
subsidiaries;
(b) 100% of the net proceeds of any sale or
other disposition (including as a
result of casualty or condemnation) by
the Borrower or any of its subsidiaries
of any assets (except for the
Reorganization, the sale of inventory
in the ordinary course of business and
certain other dispositions to be agreed
on); and
(c) 75% of excess cash flow (to be defined
in a mutually satisfactory manner) for
each fiscal year of the Borrower
(commencing with the fiscal year
following the fiscal year in which the
Closing Date occurs).
Any such prepayment shall be applied, FIRST,
to the Acquisition Loans which are then
outstanding and, SECOND, to the Term Loans
which are then outstanding, with prepayments
of the Term Loans being applied ratably to
the remaining installments thereof. Amounts
which have been prepaid may not be
reborrowed.
IV. CREDIT SUPPORT AND COLLATERAL
Credit Support: Each direct investor in Zhone (the
"INVESTORS") shall enter into a stock
purchase agreement (each, a "CAPITAL CALL
AGREEMENT"), pursuant to which each such
Investor will unconditionally and
irrevocably agree to make additional equity
investments in Zhone (subject to a maximum
amount in the case of each such Investor
which is reasonably acceptable to the
Administrative Agent) upon the occurrence of
any event of default. Zhone will irrevocably
and unconditionally assign to LegacyCo (and,
as a precautionary measure, grant to the
Administrative Agent a first priority,
perfected security interest in) not less
than a portion of the obligations of the
Investors under the Capital Call Agreements
(the "ASSIGNED CALL RIGHTS") equal to 120%
of the amount of the Term Loans from time to
time outstanding, pursuant to documentation
reasonably satisfactory to the
Administrative Agent.
Guarantees: The Facilities (together with interest and
other amounts owing on account thereof)
shall be guaranteed by each domestic
subsidiary (including each after-acquired
domestic subsidiary) of the Borrower
(together with the Investors, the
"GUARANTORS"; and, together with the
Borrower, the "CREDIT PARTIES").
<PAGE>
4
Collateral: The Facilities shall be secured by (a) 100%
of the equity interests in each domestic
subsidiary of the Borrower and (b) 65% (or
such higher percentage as may be pledged
without the incurrence of material adverse
legal or tax consequences) of each foreign
subsidiary the equity interests of which is
owned directly by the Borrower or a domestic
subsidiary thereof (subject to exceptions to
be mutually agreed upon based upon
uneconomic transaction costs and/or adverse
tax consequences).
In addition, LegacyCo shall (x) grant to the
Administrative Agent a first priority
perfected security interest in all of the
Assigned Call Rights (including, without
limitation, the assignment of the exclusive
right to make the capital call upon the
Investors), (y) deliver to the
Administrative Agent the stock certificates
to be issued upon exercise of such call
right and (z) cause all proceeds of capital
calls pursuant to the Assigned Call Rights
to be paid into an account maintained by
LegacyCo with CSFB and in which the
Administrative Agent holds a perfected
security interest.
During the period between the Closing Date
and the consummation of the Merger, the
Borrower shall (to the extent permitted
under Regulation U and other applicable law)
grant to the Administrative Agent a first
priority perfected security interest in all
Shares owned by it.
V. CERTAIN CONDITIONS
The availability of the Facilities shall be conditioned upon satisfaction
(on or prior to December 31, 1999) of, among other things (the date upon
which all such conditions precedent shall be satisfied, the "CLOSING
DATE"):
(a) Zhone shall have consummated the private placement of not less
than $400,000,000 in irrevocable equity commitments to the
Investors, of which not less than $80,000,000 shall have been
received, in cash, by it. The terms of the Capital Call Agreements
shall be reasonably satisfactory to the Administrative Agent and
the Administrative Agent shall be reasonably satisfied that funds
will be made available by the Investors to make prompt payment of
amounts payable thereunder.
(b) The Target shall have placed in escrow with CSFB an amount of cash
and acceptable securities having a market value at least equal to
the amount of the Acquisition Facility then in effect, with such
cash and securities to be released from escrow only upon (i) the
consummation of the Merger, in which case the escrowed funds shall
be paid to the Administrative Agent and applied to the payment of
the Acquisition Loans (with any excess escrowed funds being paid
to AcquisitionCo) or (ii) the payment in full of the Acquisition
Loans, in which case the escrowed funds shall be paid to the
Borrower; such escrowed funds shall be invested only in cash
equivalents.
<PAGE>
5
(c) The Transaction shall have been consummated pursuant to, and in
accordance with, satisfactory documentation, and no provision
thereof shall have been waived, amended, supplemented or otherwise
modified in any material respect without the prior written consent
of the Required Lenders; the aggregate purchase price for the
Transaction (net of fees and expenses) shall not exceed
$255,000,000 (except to the extent that such excess is funded with
additional equity from the Investors) and the aggregate amount of
fees and expenses to be incurred in connection with the
Transaction and the financing thereof shall not exceed
$10,000,000; the Board of Directors of the Target shall recommend
to shareholders of the Target that they tender their Shares
pursuant to the Tender Offer; and AcquisitionCo shall have
acquired at least the number of Shares of the Target needed to
consummate the Merger without the affirmative vote of any other
Person and there shall not have been any material change in the
common stock of the Target outstanding as of June 25, 1999. The
capital structure, projected cash flow and assets of each Credit
Party after the Transaction shall be satisfactory in all respects
and, immediately after giving effect to the occurrence of the
Closing Date, the Target shall have cash and acceptable securities
having a fair market value at least equal to the amount of the
Acquisition Facility on such date.
(d) The Lenders and the Administrative Agent shall have received all
fees required to be paid, and all expenses for which invoices have
been presented, on or before the Closing Date.
(e) All governmental and third party approvals necessary in connection
with the Transaction, the financing contemplated hereby and the
continuing operations of the Borrower (after giving effect to the
consummation of the Transaction) shall have been obtained and be
in full force and effect, and all applicable waiting periods shall
have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise
impose adverse conditions on the Transaction or the financing
thereof.
(f) The Lenders shall have received (i) satisfactory audited
consolidated financial statements of the Target for the two most
recent fiscal years ended prior to the Closing Date as to which
such financial statements are available and (ii) satisfactory
unaudited interim consolidated financial statements of the Target
for each quarterly period ended subsequent to the date of the
latest financial statements delivered pursuant to clause (i) of
this paragraph as to which such financial statements are
available. The Lenders also shall have received satisfactory
financial reports with respect to the assets, liabilities and
historical financial performance of the businesses to be held by
LegacyCo and its subsidiaries after the consummation of the
Reorganization.
(g) The Lenders shall have received a satisfactory PRO FORMA
consolidated balance sheet, as at the date of the most recent
consolidated balance sheet delivered pursuant to paragraph (f)
above, of each of (i) AcquisitionCo, adjusted to give effect to
the consummation of the Tender Offer, the Merger and the
financings contemplated hereby and (ii) LegacyCo, adjusted to give
effect to the consummation of the Transaction and the financings
contemplated hereby, (in each such case) as if such transactions
had occurred on such date.
<PAGE>
6
(h) The Lenders shall have received a satisfactory PRO FORMA summary
cash flow statement of LegacyCo, demonstrating that LegacyCo would
have had positive cash flow (after, among other things, payment of
debt service) if the Transaction had occurred on the first day of
the period covered by the most recent financial statements
delivered pursuant to paragraph (f) above.
(i) The Lenders shall have received a business plan for each fiscal
year of LegacyCo and its subsidiaries through the scheduled final
maturity date of the Term Loans, which business plan shall be
consistent in all material respects with that reviewed by CSFB
prior to the date of this Term Sheet.
(j) The Lenders shall have received the satisfactory results of a
recent lien search in each relevant jurisdiction with respect to
Zhone, AcquisitionCo, LegacyCo, the Target and their respective
subsidiaries. Such search shall reveal no liens on any of the
assets of AcquisitionCo, LegacyCo, the Target or any of their
respective subsidiaries, except for liens permitted by the Credit
Documentation or liens to be discharged on or prior to the Closing
Date pursuant to documentation satisfactory to the Administrative
Agent.
(k) The Lenders shall be satisfied with the availability of funds to
meet the ongoing working capital needs of LegacyCo and its
subsidiaries following the Transaction and the consummation of the
other transactions contemplated hereby.
(l) The Lenders shall have received such legal opinions (including
opinions (i) from counsel to the Credit Parties and their
subsidiaries and (ii) from such special and local counsel as may
be required by the Administrative Agent), documents and other
instruments as are customary for transactions of this type or as
they may reasonably request.
VI. Representations, Warranties,
COVENANTS AND EVENTS OF DEFAULT
The Credit Documentation shall contain representations, warranties,
covenants and events of default which are customary for financings of
this type and other terms deemed appropriate by the Lenders, including,
without limitation:
Representations and
Warranties: Financial statements (including pro forma
financial statements); absence of
undisclosed liabilities; no material adverse
change; corporate existence; compliance with
law; corporate power and authority;
enforceability of Credit Documentation; no
conflict with law or contractual
obligations; no material litigation; no
default; ownership of property; liens;
intellectual property; no burdensome
restrictions; taxes; Federal Reserve
regulations; ERISA; Investment Company Act;
subsidiaries; environmental matters;
solvency; accuracy of disclosure; and
creation and perfection of security
interests.
<PAGE>
7
For purposes of the definitive credit
documentation, the term "material adverse
change" shall mean any event, development or
circumstance that has had or could
reasonably be expected to have a material
adverse effect on (a) the Transaction, (b)
the business, assets, property or condition
(financial or otherwise) of the Borrower and
its subsidiaries taken as a whole (after
giving effect to the consummation of the
Tender Offer or the Transaction, as then
relevant), (c) the validity or
enforceability of any of the Credit
Documentation or the rights and remedies of
the Administrative Agent and the Lenders
thereunder or (d) the ability of the
Administrative Agent to draw upon the
capital commitments provided by the
Investors or the ability of any Investor to
perform its respective obligations under the
Capital Call Agreement provided by it.
Affirmative Covenants: Delivery of financial statements, reports,
accountants' letters, projections, officers'
certificates and other information requested
by the Lenders (including, without
limitation, a quarterly report of the
expiration date of each Capital Call
Agreement); payment of other obligations;
continuation of business and maintenance of
existence and material rights and
privileges; compliance with laws and
material contractual obligations;
maintenance of property and insurance;
maintenance of books and records; right of
the Lenders to inspect property and books
and records; notices of defaults, litigation
and other material events; compliance with
environmental laws; and further assurances
(including, without limitation, with respect
to security interests in after-acquired
property).
Financial Covenants: To include minimum interest coverage ratio
and maximum leverage ratio, with relevant
definitions and covenant levels to be
mutually agreed upon.
Negative Covenants: Limitations on: indebtedness (including
preferred stock of the Borrower and its
subsidiaries); liens; guarantee obligations;
mergers, consolidations, liquidations and
dissolutions; sales of assets; leases;
dividends and other payments in respect of
capital stock; capital expenditures;
investments, loans and advances; optional
payments and modifications of subordinated
and other debt instruments; transactions
with affiliates; sale and leasebacks;
changes in fiscal year; negative pledge
clauses; changes in lines of business.
Events of Default: Nonpayment of principal when due; nonpayment
of interest, fees or other amounts after a
grace period to be agreed upon; material
inaccuracy of representations and
warranties; violation of covenants (subject,
in the case of certain affirmative
covenants, to a grace period to be agreed
upon); cross-default; bankruptcy events;
certain ERISA events; material judgments;
actual or
<PAGE>
8
asserted invalidity of any guarantee or
security document or security interest; a
change of control (the definition of which
is to be mutually agreed upon); incurrence
by LegacyCo of any material liabilities
(other than the Loans and any liabilities
customary for a passive holding company) or
other changes in its passive holding company
status; and the failure of any Capital Call
Agreement to have a remaining term of at
least 45 days.
Special Provisions applicable
to Investors: Each Investor shall provide representations
and warranties and covenants customary for a
transaction of this nature, including,
without limitation:
(a) a covenant to maintain on each day
an irrevocable commitment to provide
an amount of cash equity to the
Borrower which is not less than the
amount equal to 120% of the
aggregate then-outstanding principal
amount of the Term Loans;
(b) covenants not to amend the terms of
(i) the organizational documents of
such Investor in any manner adverse
to the interests of Administrative
Agent or the Lenders or (ii) other
than extensions of the term thereof,
the Capital Call Agreement with such
Investor; and
(d) limitations on indebtedness, liens
and contingent obligations (it being
understood that such limitations
shall apply only to the Investors,
and not to any direct or indirect
equityholders in the Investors).
Each of Zhone and the Borrower shall deliver
to the Administrative Agent a copy of each
capital call made by it under any Capital
Call Agreement.
VII. CERTAIN OTHER TERMS
Voting: Amendments and waivers with respect to the
Credit Documentation shall require the
approval of Lenders holding commitments
representing not less than a majority of the
aggregate amount of the commitments under
the Facilities (the "REQUIRED LENDERS"),
except that (a) the consent of each Lender
directly affected thereby shall be required
with respect to (i) reductions in the
principal amount of the loans or other
extensions of credit (absent an actual
repayment thereof) or extensions of the
scheduled final maturity date of the
Acquisition Loans or the Term Loans, (ii)
reductions in the rate of interest or any
fee or extensions of any due date thereof,
(iii) increases in the amount of any
Lender's commitment and (b) the consent of
100% of the Lenders shall be required with
respect to (i) releases of all
<PAGE>
9
or substantially all of the collateral and
subsidiary guarantees, (ii) releases of the
Capital Call Agreement from any Investor and
(iii) modifications to any of the voting
percentages.
Assignments
and Participations: The Lenders shall be permitted to assign and
sell participations in their extensions of
credit and commitments, subject, in the case
of assignments (other than assignments to
Lenders or affiliates thereof), to the
consent of the Administrative Agent and the
Borrower (which consent in each case shall
not be unreasonably withheld); PROVIDED that
no such consent shall be required from the
Borrower for any assignment which is
consummated when a default or an event of
default is continuing. Assignments also
shall be subject to the payment to the
Administrative Agent of a registration and
processing fee of $3,500. Non-pro rata
assignments shall be permitted. In the case
of partial assignments (other than to
another Lender or to an affiliate of a
Lender), the minimum assignment amount shall
be $2,500,000, and, after giving effect
thereto, the assigning Lender (if it has
retained any commitments or Loans) shall
have commitments and Loans aggregating at
least $2,500,000, in each case unless
otherwise agreed by the Borrower and the
Administrative Agent. Participants shall
have the same benefits as the Lenders with
respect to yield protection and increased
cost provisions. Voting rights of
participants shall be limited to the
customary those matters with respect to
which the affirmative vote of the Lender
from which it purchased its participation
would be required as described under
"Voting" above. Pledges of Loans in
accordance with applicable law shall be
permitted without restriction. Promissory
notes shall be issued under the Facilities
only upon request.
Yield Protection: The Credit Documentation shall contain
customary provisions (a) protecting the
Lenders against loss of yield resulting from
changes in reserve, tax, capital adequacy
and other requirements of law and from the
imposition of withholding or other taxes and
(b) indemnifying the Lenders for "breakage
costs" incurred in connection with, among
other things, prepayment of a Eurodollar
Loan (as defined in Annex I) on a day other
than the last day of an interest period with
respect thereto.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Administrative
Agent associated with the syndication of the
Facilities and the preparation, execution,
delivery and administration of the Credit
Documentation and any amendment or waiver
with respect thereto (including the
reasonable fees, disbursements and other
charges of counsel) and (b) all
out-of-pocket expenses of the Administrative
Agent and the Lenders
<PAGE>
10
(including the fees, disbursements and other
charges of counsel) in connection with the
enforcement of the Credit Documentation.
The Administrative Agent and the Lenders
(and their affiliates and their respective
officers, directors, employees, advisors and
agents) will have no liability for, and will
be indemnified and held harmless against,
any loss, liability, cost or expense
incurred in respect of the financing
contemplated hereby or the use or the
proposed use of proceeds thereof (except to
the extent resulting from the gross
negligence or willful misconduct of the
indemnified party).
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent: Simpson Thacher & Bartlett.
Documentation: At the option of CSFB (in its sole
discretion), the Term Loan Facility and the
Acquisition Facility may be documented in
two separate definitive credit agreements.
Commitment
Termination Date: The Credit Documentation must have been
entered into on or before December 31, 1999.
<PAGE>
ANNEX I
TABLE OF SOURCES AND USES
($ in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Sources Uses
- ------------------------------------------------------ ------------------------------------------
<S> <C> <C> <C>
Term Loans $50.0 Purchase of Shares $ 255.0
Acquisition Loans 80.0 Fees and Expenses 10.0
------
Equity 135.0 $265.0
------ ======
$265.0
======
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX II
INTEREST AND CERTAIN FEES
Interest Rate Options: The Borrower may elect that all or a portion
of the loans borrowed by it bear interest at
a rate PER ANNUM equal to (a) the ABR PLUS the
Applicable Margin with respect thereto or
(b) the Eurodollar Rate PLUS the Applicable
Margin with respect thereto. For purposes
hereof:
"ABR" means the higher of (i) the rate
of interest publicly announced by CSFB as
its prime rate in effect at its principal
office in New York City (the "PRIME RATE")
and (ii) the federal funds effective rate
from time to time PLUS 0.5%;
"EURODOLLAR RATE" means the rate
(grossed-up for maximum statutory reserve
requirements for eurodollar liabilities)
reflected on the Telerate service (other
similar service) as the "British Bankers'
Association Settlement Rate" for
eurodollar deposits in the relevant
denomination currency for one, two, three,
six or (subject to availability) nine
months (as selected by the Borrower).
Applicable Margin: 0% per annum, in the case of ABR Loans, and 1%
per annum, in the case of Eurodollar Loans.
Interest Payment Dates: In the case of loans bearing interest based upon
the ABR ("ABR LOANS"), in arrears on the last
business day of each calendar quarter.
In the case of loans bearing interest based upon
the Eurodollar Rate ("EURODOLLAR LOANS"), on the
last day of each relevant interest period and,
in the case of any interest period longer than
three months, on each successive date three
months after the first day of such interest
period.
Commitment Fee: The Borrower shall pay a commitment fee
calculated at the rate of 3/8 of 1% per annum on
the average daily unused portion of the
Acquisition Facility, payable quarterly in
arrears and on the date upon which the Merger is
consummated.
Default Rate: At any time when the Borrower is in default in
the payment of any amount due under the
Facilities, the principal of all loans under
the Facilities shall bear interest at 2% above
the rate otherwise applicable thereto. Overdue
interest, fees and other amounts shall bear
interest at 2% above the rate applicable to ABR
Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of ABR Loans the interest rate payable
on which is then based on the Prime Rate) for
actual days elapsed.
