OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIALOGIC CORPORATION
AT
$44 NET PER SHARE
BY
INTEL LMH ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
INTEL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JULY 2, 1999 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN A NUMBER OF SHARES OF THE
COMMON STOCK OF DIALOGIC CORPORATION, A NEW JERSEY CORPORATION (THE "COMPANY"),
REPRESENTING AT LEAST A MAJORITY OF THE SHARES ISSUED AND OUTSTANDING ON A
FULLY-DILUTED BASIS AND (2) THE SATISFACTION OR WAIVER OF CERTAIN CONDITIONS TO
THE OBLIGATIONS OF INTEL LMH ACQUISITION CORPORATION (THE "PURCHASER") AND THE
COMPANY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING RECEIPT BY PURCHASER AND THE COMPANY OF CERTAIN GOVERNMENTAL AND
REGULATORY APPROVALS.
AT A MEETING HELD ON MAY 31, 1999, THE BOARD OF DIRECTORS OF THE COMPANY
UNANIMOUSLY (A) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR, ADEQUATE AND
IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, (B) ADOPTED AND
APPROVED THE MERGER AGREEMENT AND AUTHORIZED THE EXECUTION THEREOF BY THE
COMPANY AND (C) RECOMMENDED THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES HEREUNDER.
------------------------
IMPORTANT
Any shareholder of the Company desiring to tender all or a portion of his
Shares (as defined herein) should either (1) complete and sign the Letter of
Transmittal, or a facsimile copy thereof, in accordance with the instructions in
the Letter of Transmittal, mail or deliver it and any other required documents
to the Depositary (as defined herein) and either deliver the certificates for
such Shares to the Depositary along with the Letter of Transmittal or tender
such Shares pursuant to the procedure for book-entry transfer set forth in this
Offer to Purchase under the caption "THE TENDER OFFER -- 2. Procedure for
Accepting the Offer and Tendering Shares" or (2) request such shareholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for the shareholder. Shareholders 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 their Shares.
A shareholder of the Company who desires to tender Shares and whose
certificates for Shares are not immediately available, or who cannot comply with
the procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedure for guaranteed
delivery set forth in this Offer to Purchase under the caption "THE TENDER
OFFER -- 2. Procedure for Accepting the Offer and Tendering Shares."
Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent at its address and telephone numbers
set forth on the back cover of this Offer to Purchase. Holders of Shares may
also contact brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------------------
The Information Agent for the Offer is:
D.F. KING & CO., INC.
The date of this Offer to Purchase is June 7, 1999
TABLE OF CONTENTS
PAGE
INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 4
1. Terms of the Offer; Expiration Date..................... 4
2. Procedure for Accepting the Offer and Tendering
Shares.................................................. 5
3. Withdrawal Rights....................................... 8
4. Acceptance for Payment and Payment for Shares........... 8
5. Certain Federal Income Tax Consequences................. 9
6. Price Range of the Shares............................... 10
7. Certain Information Concerning the Company.............. 10
8. Certain Information Concerning Intel and Purchaser...... 12
9. Source and Amount of Funds.............................. 14
10. Certain Transactions Between Intel and the Company...... 14
11. Contacts with the Company; Background of the Offer and
the Merger.............................................. 15
12. Purpose of the Offer and The Merger Agreement........... 17
13. The Merger Agreement, the Stock Option Agreement and the
Voting Agreements....................................... 18
14. Interests of Certain Persons in the Merger.............. 31
15. Going Private Transactions.............................. 32
16. Dividends and Distributions............................. 32
17. Effects of the Offer on the Market For Shares; Nasdaq
National Market and Exchange Act Registration........... 33
18. Certain Conditions of the Offer......................... 34
19. Certain Legal Matters; Regulatory Approvals............. 35
20. Fees and Expenses....................................... 37
21. Miscellaneous........................................... 37
SCHEDULE I.................................................. I-1
i
To the Holders of Common Stock of Dialogic Corporation:
INTRODUCTION
Intel LMH Acquisition Corporation, a New Jersey corporation ("Purchaser"),
which is a newly formed, wholly owned subsidiary of Intel Corporation, a
Delaware corporation ("Intel"), hereby offers to purchase all of the issued and
outstanding shares (the "Shares") of common stock, no par value (the "Company
Common Stock"), of Dialogic Corporation, a New Jersey corporation (the
"Company"), upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which together constitute
the "Offer"), at the purchase price of $44 per Share (the "Offer Price"), net to
the tendering shareholder in cash. NO DISSENTERS' OR APPRAISAL RIGHTS ARE
AVAILABLE TO THE COMPANY'S SHAREHOLDERS IN CONNECTION WITH THE OFFER OR THE
MERGER.
The Offer is being made pursuant to the terms of the Agreement and Plan of
Merger, dated as of May 31, 1999 (the "Merger Agreement"), by and among the
Company, Purchaser and Intel. Among other things, the Merger Agreement provides
for the making of the Offer and that, following the purchase of Shares pursuant
to the Offer and promptly after the satisfaction or waiver of certain other
conditions, Purchaser will be merged with and into the Company (the "Merger").
The Company will continue as the surviving corporation and a wholly owned
subsidiary of Intel after the Merger (the "Surviving Corporation"). At the
effective time of the Merger, each outstanding Share (except for Shares owned by
the Company or Intel, or by any subsidiary of the Company or Intel (the
"Excluded Shares")) will be converted into the right to receive the Offer Price,
net to the holder in cash, without interest.
AT A MEETING HELD ON MAY 31, 1999, THE BOARD OF DIRECTORS OF THE COMPANY
(THE "COMPANY BOARD") UNANIMOUSLY (a) DETERMINED THAT THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE
FAIR, ADEQUATE AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, (b)
ADOPTED AND APPROVED THE MERGER AGREEMENT AND AUTHORIZED THE EXECUTION THEREOF
BY THE COMPANY, AND (c) RECOMMENDED THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT
THE OFFER AND TENDER THEIR SHARES HEREUNDER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER, INTEL AND THE
COMPANY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING (1) THERE BEING VALIDLY TENDERED BY THE EXPIRATION DATE AND NOT
WITHDRAWN A NUMBER OF SHARES REPRESENTING AT LEAST A MAJORITY OF THE SHARES ON A
FULLY-DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) RECEIPT BY PURCHASER,
INTEL AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY APPROVALS. SEE "THE
TENDER OFFER -- 18. CERTAIN CONDITIONS OF THE OFFER."
THE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JULY 2,
1999, UNLESS EXTENDED.
Consummation of the Merger is subject to receipt of certain regulatory
approvals and satisfaction of a number of other conditions, including approval
by the shareholders of the Company if such approval is required by applicable
law. See "THE TENDER OFFER -- 19. Certain Legal Matters; Regulatory Approvals."
If Purchaser acquires a majority of the outstanding Shares, it will have
sufficient voting power to approve and adopt the Merger Agreement and the Merger
without the vote of any other shareholder of the Company. If Purchaser acquires
at least ninety percent (90%) of the outstanding Shares, Purchaser intends to
approve and consummate the Merger without any action by, or any further prior
notice to, the other shareholders of the Company pursuant to the short-form
merger provisions of the New Jersey Business Corporation Act (the "NJBCA"). In
addition, Intel and the Company have entered into a Stock Option Agreement dated
as of May 31, 1999 (the "Stock Option Agreement") that permits Intel to
purchase, under certain circumstances, up to 3,400,000 shares of Company Common
Stock at an exercise price of $44 per share. Among other circumstances
permitting Intel to exercise its option, Intel may exercise its option to the
extent necessary so that the number of Shares to be acquired pursuant to the
option plus the number of tendered Shares will, upon issuance of the option
shares, equal at least ninety percent (90%) of the issued and outstanding shares
of Company Common Stock. The option is also exercisable upon a termination of
the
1
Merger Agreement in a manner obligating the Company to pay Intel liquidated
damages (see "THE TENDER OFFER -- 13. The Merger Agreement, the Stock Option
Agreement and the Voting Agreements").
Intel and Purchaser have entered into five separate Tender and Voting
Agreements and Irrevocable Proxies (the "Voting Agreements") with the following
five shareholders of the Company (the "Proxy Grantors") who own in the aggregate
5,573,586 Shares, representing approximately 32.6% of the issued and outstanding
Shares: (a) Nicholas Zwick, a director of the Company, who beneficially owns
2,876,899 Shares, (b) James Shinn, a director of the Company, who beneficially
owns 1,070,137 Shares, (c) Masako H. Shinn, as trustee for Kiyoshi H. Shinn and
Hiroshi R. Shinn, who beneficially owns 80,000 Shares, (d) Kenneth J. Burkhardt,
a director of the Company, who beneficially owns 1,443,050 Shares and (e) Joanne
Burkhardt, as trustee for Kenneth John Burkhardt, Christopher L. Burkhardt and
Julianne N. Burkhardt, who beneficially owns 103,500 Shares. Pursuant to the
Voting Agreements, upon the terms and subject to the conditions therein, each
Proxy Grantor has agreed, provided the Merger Agreement has not been terminated,
promptly to tender to Purchaser substantially all Shares beneficially owned by
such Proxy Grantor (except for charitable contributions of up to 5% of such
Shares), has agreed to vote such Shares in favor of approval of the Merger
Agreement and the transactions contemplated thereby and has granted an
irrevocable proxy to Purchaser with respect to such Shares.
Each holder (other than holders of Excluded Shares) of a certificate
representing any Shares will, from and after the consummation of the Merger,
cease to have any rights with respect to such Shares, except the right to
receive the Offer Price. From and after the consummation of the Merger, each
Excluded Share will be canceled and extinguished and cease to exist without any
conversion thereof, and no payment will be made with respect thereto.
HAMBRECHT & QUIST LLC ("HAMBRECHT & QUIST"), FINANCIAL ADVISOR TO THE
COMPANY, HAS DELIVERED A WRITTEN OPINION TO THE COMPANY BOARD, DATED MAY 31,
1999 (THE "HAMBRECHT & QUIST OPINION"), TO THE EFFECT THAT, AS OF THAT DATE, THE
CONSIDERATION TO BE RECEIVED BY THE SHAREHOLDERS OF THE COMPANY PURSUANT TO THE
MERGER AGREEMENT IS FAIR FROM A FINANCIAL POINT OF VIEW. THE FULL TEXT OF THE
HAMBRECHT & QUIST OPINION IS ATTACHED TO THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WHICH IS BEING MAILED TO
SHAREHOLDERS OF THE COMPANY HEREWITH. SHAREHOLDERS ARE URGED TO READ SUCH
OPINION CAREFULLY AND IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS OF THE REVIEW OF HAMBRECHT & QUIST.
The Company has informed Purchaser that as of June 3, 1999 there were
approximately 17,100,000 Shares issued and outstanding and vested options
covering approximately 1,300,000 Shares. As of the date hereof, Intel and its
affiliates beneficially own no Shares. The Minimum Condition should therefore be
satisfied if at least approximately 9,200,000 Shares are validly tendered and
not withdrawn prior to the Expiration Date (up to 5,573,586 Shares will be
tendered to Purchaser pursuant to the Voting Agreements).
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S SHAREHOLDERS. ANY SUCH SOLICITATION WOULD BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the sale of Shares pursuant to the Offer. However, any
tendering shareholder or other payee who fails to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be subject
to a required backup federal income tax withholding of 31% of the gross proceeds
payable to such shareholder or other payee pursuant to the Offer. See "THE
TENDER OFFER -- 5. Certain Federal Income Tax Consequences." Intel will pay all
charges and expenses of Citibank, N.A., as Depositary (in such capacity, the
"Depositary"), and D.F. King & Co., Inc., as Information Agent (in such
capacity, the "Information Agent"), incurred in connection with the Offer. For a
description of the fees and expenses to be paid by Purchaser, see "THE TENDER
OFFER -- 20. Fees and Expenses."
The information contained in this Offer to Purchase concerning the Company
was supplied by the Company. Neither Intel nor Purchaser takes any
responsibility for the completeness or accuracy of such
2
information. The information contained in this Offer to Purchase concerning the
Offer, the Merger, Intel and Purchaser was supplied by Intel and Purchaser. The
Company takes no responsibility for the completeness or accuracy of such
information.
THIS 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. ALSO SEE "THE TENDER OFFER -- 21. MISCELLANEOUS" FOR
INFORMATION REGARDING CERTAIN ADDITIONAL DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE OFFER.
References herein to Intel will, unless the context indicates otherwise,
include Intel and all of its subsidiaries, including Purchaser.
3
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE
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 pay for all Shares validly
tendered on or prior to the Expiration Date and not theretofore withdrawn in
accordance with the terms set forth in this Offer to Purchase under the caption
"TENDER OFFER -- 3. Withdrawal Rights." The term "Expiration Date" means
midnight, New York City time, on Friday, July 2, 1999, unless and until
Purchaser, subject to restrictions contained in the Merger Agreement, has
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" means the latest time and date at which the Offer, as so
extended by Purchaser, will expire.
Purchaser expressly reserves the right to waive any conditions of the Offer
(except as otherwise provided in the Merger Agreement), to increase the Offer
Price or to make any other changes in the terms and conditions of the Offer,
provided that, unless previously approved by the Company in writing, Purchaser
may not (i) decrease the Offer Price, (ii) change the form of consideration
payable in the Offer, (iii) decrease the number of Shares sought pursuant to the
Offer, (iv) add additional conditions to the Offer, (v) amend the conditions to
the Offer set forth in Annex A to the Merger Agreement to broaden their scope,
(vi) extend the Offer except as permitted by the terms of the Merger Agreement,
or (vii) amend the Minimum Condition.
Purchaser may, without the consent of the Company Board, (i) from time to
time extend the Offer if at the scheduled Expiration Date any conditions of the
Offer have not been satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
applicable to the Offer or (iii) extend the Offer for any reason on one or more
occasions for an aggregate period of not more than twenty business days beyond
the latest Expiration Date that would otherwise be permitted under clause (i) or
(ii) of this sentence if, on such Expiration Date, there have not been tendered
at least 90% of the outstanding Shares. In addition, if at the time of any
scheduled Expiration Date any one or more of the conditions to the Offer set
forth on Annex A to the Merger Agreement are not satisfied and none of the
events set forth in paragraphs (a) through (f) of Annex A to the Merger
Agreement that would permit Purchaser not to accept tendered Shares for payment
has occurred and is continuing, then, provided, that such conditions are
reasonably capable of being satisfied and no such event has occurred on or prior
to (and is continuing on) September 15, 1999, Purchaser will extend the Offer
from time to time unless any such condition is no longer reasonably capable of
being satisfied or any such event has occurred. In no event, however, will
Purchaser be required to extend the Offer beyond September 15, 1999. As used in
this Offer to Purchase, "business day" means any day, other than a day on which
the Nasdaq National Market is closed.
Subject to the applicable rules and regulations of the Commission,
Purchaser expressly reserves the right, subject to the terms and conditions of
the Merger Agreement, at any time and from time to time, upon the failure to be
satisfied of any of the conditions to the Offer, to (i) terminate or amend the
Offer, (ii) extend the Offer and postpone acceptance for payment of any Shares
or (iii) waive any condition, by giving oral or written notice of such
termination, amendment, extension or waiver to the Depositary. During any such
extension, all Shares previously tendered and not properly withdrawn will remain
subject to any such extension and will remain tendered, subject to the right of
a tendering shareholder to withdraw such shareholder's Shares. The ability of
Purchaser to delay payment for Shares that it has accepted for payment is
limited by Rule 14e-1(c) under the Exchange Act, which requires that an offeror
either pay the consideration offered or return the tendered securities promptly
after the termination or withdrawal of a tender offer. If Intel or Purchaser
waives any of the conditions set forth in this Offer to Purchase under the
caption "THE TENDER OFFER -- 18. Certain Conditions of the Offer," the
Commission may, if the waiver is deemed to constitute a material change to the
information previously provided to Company shareholders, require that the Offer
remain open for an additional period of time and/or that Purchaser disseminate
information concerning such waiver.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition to the Offer,
Purchaser will disseminate additional tender offer materials
4
(including by public announcement as set forth above) and extend the Offer to
the extent required by Rules 14d-4(c), 14d-6(d) and l4e-1 under the Exchange
Act. These rules generally provide that the minimum period during which a tender
offer must remain open following a material change in the terms of the offer or
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 changes in the terms or information.
In the Commission's view, an offer should remain open for a minimum of five
business days from the date a material change is first published, sent or given
to securityholders, and, if material changes are made with respect to
information that approaches the significance of price and share levels, a
minimum of ten business days may be required to allow for adequate dissemination
and investor response. 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 shareholders and for investor
response.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement in accordance with the public
announcement requirements of Rule 14e-l(d) under the Exchange Act. Subject to
applicable law (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 shareholders in connection with the Offer be promptly disseminated to
them in a manner reasonably designed to inform shareholders of such change), and
without limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser has no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
The Company has provided Purchaser with the Company shareholder list, a
nonobjecting beneficial owners list and security position listings for the
purpose of disseminating the Offer to holders of Shares. This Offer to Purchase
and the Letter of Transmittal and other relevant materials will be mailed to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list 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. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES
Valid Tender of Shares
For a shareholder to validly tender Shares pursuant to the Offer, either:
(a)(i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or an
Agent's Message (as defined herein) in connection with a book-entry delivery of
Shares, 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, and
(ii) either certificates for tendered Shares ("Share Certificates") must be
received by the Depositary at one of such addresses or such tendered Shares must
be delivered pursuant to the procedure for book-entry transfer described below
(and a Book-Entry Confirmation (as defined herein) received by the Depositary),
in each case prior to the Expiration Date; or (b) the tendering shareholder must
comply with the guaranteed delivery procedures described below.
Book-Entry Transfers
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (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
may make book-entry delivery of the Shares by causing the book-entry transfer
system to transfer such Shares into the Depositary's account at the Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedure for such transfer. Although delivery of Shares may be effected through
book-entry transfer at the Book-Entry Transfer Facility, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message (as defined herein) 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
5
prior to the Expiration Date, or the tendering shareholder must comply with the
guaranteed delivery procedures described below. The confirmation of a book-entry
transfer of Shares into the Depositary's account at the Book-Entry Transfer
Facility as described above is referred to herein as a "Book-Entry
Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH ITS BOOK-ENTRY PROCEDURES DOES NOT CONSTITUTE VALID DELIVERY TO
THE DEPOSITARY.
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 the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares, that such participant has received the
Letter of Transmittal and agrees to be bound by the terms of the Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING
SHAREHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED AT THE
DEPOSITARY. IF DELIVERY IS BY MAIL, THEN INSURED OR REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees
No signature guarantee on the Letter of Transmittal is required if (i) the
Letter of Transmittal is signed by the registered holder of the Shares (which
term, for purposes of this Section, includes any participant in the Book-Entry
Transfer Facility system whose name appears on a security position listing as
the owner of the Shares) tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on such Letter of Transmittal or (ii)
such Shares are tendered for the account of a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing of
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the Share Certificates are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made to, or Share Certificates not validly
tendered, not accepted for payment or not purchased are to be issued or returned
to, a person other than the registered holder of the Share Certificates, the
tendered Share Certificates must be endorsed in blank or accompanied by
appropriate stock powers, signed exactly as the name of the registered holder
appears on the Share Certificates with the signature on such Share Certificates
or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5
to the Letter of Transmittal.
Guaranteed Delivery
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's Share Certificates are not immediately available or the procedures
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such Shares may nevertheless be tendered provided that all of the
following guaranteed delivery procedures are duly complied with:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser; and
(c) the Share Certificates representing all tendered Shares, in proper
form for transfer (or Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three Nasdaq trading
days after the date of such
6
Notice of Guaranteed Delivery. A "Nasdaq trading day" is any day on which
securities are traded on the Nasdaq National Market.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, facsimile transmission or mail, to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding anything else described in this Offer to Purchase, 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) Share Certificates for (or a
timely Book-Entry Confirmation with respect to) such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) or, in
the case of book-entry transfer, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal. Accordingly, tendering
shareholders may be paid at different times depending upon when Share
Certificates, Book-Entry Confirmations and such other documents are actually
received by the Depositary. Under no circumstances will interest be paid by
Purchaser on the purchase price of the Shares to any tendering shareholders,
regardless of any extension of the Offer or any delay in making such payment.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination will be final and
binding. Purchaser reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or the acceptance for payment
of or payment for which may, in the opinion of Purchaser's counsel, 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 with respect to
any particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. Neither Purchaser, Intel, the
Depositary, the Information Agent nor any other person will be under any duty to
give notice of any defects or irregularities in tenders or incur any liability
for failure to give any such notice. Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Other Requirements
By executing the Letter of Transmittal, a tendering shareholder irrevocably
appoints designees of Purchaser as such shareholder's proxies, each with full
power of substitution, in the manner set forth in the Letter of Transmittal, to
the full extent of such shareholder's rights with respect to the Shares tendered
by such shareholder and accepted for payment by Purchaser (and with respect to
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after the Expiration Date), effective when, if and
to the extent that Purchaser accepts such Shares for payment pursuant to the
Offer. All such proxies will be considered coupled with an interest in the
tendered Shares. Upon such acceptance for payment, all prior proxies given by
such shareholder with respect to such Shares accepted for payment or other
securities or rights will, without further action, be revoked, and no subsequent
proxies may be given. Such designees of Purchaser will, with respect to such
Shares for which the appointment is effective, be empowered to exercise all
voting and other rights of such shareholder as they in their sole discretion may
deem proper in respect of any annual or special meeting of the Company's
shareholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described herein will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the conditions
of the Offer.
7
Backup Federal Income Tax Withholding
To prevent backup federal income tax withholding on payments of cash
pursuant to the Offer, a shareholder tendering Shares in the offer must provide
the Depositary with such shareholder'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 shareholder is not subject to backup
withholding. If a shareholder does not provide its correct TIN or fails to
provide the certification described herein, under federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payment made to
such shareholder pursuant to the Offer. All shareholders tendering Shares
pursuant to the Offer should complete and sign the Substitute Form W-9 included
as a part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding. Noncorporate foreign
shareholders should complete and sign a Form W-8, Certificate of Foreign Status,
a copy of which may be obtained from the Depositary, in order to avoid backup
withholding. See Instruction 10 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Tendered Shares may be withdrawn at any time prior to the Expiration Date
only by following the procedures described below.
For a withdrawal to be effective, a written, telegraphic 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 of the
registered holder of the Shares to be withdrawn as set forth on such Share
Certificates if different from the name of the person who tendered such Shares.
If Share Certificates have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates, the
serial numbers shown on such Share Certificates must be furnished 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 delivered pursuant to the procedures
for book-entry transfer described in Section 2 above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with such withdrawn Shares and otherwise comply with
such Book-Entry Transfer Facility's procedures for withdrawal, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
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. Neither Purchaser, the
Depositary, the Information Agent nor any other person will be obligated to give
notice of any defects or irregularities in any notice of withdrawal, nor will
any of them incur any liability for failure to give any such notice.
Withdrawals of tendered Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by following one of
the procedures described in Section 2 above at any time on or prior to the
Expiration Date.
4. 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 extension or
amendment), promptly after the Expiration Date Purchaser will accept for
payment, and will pay for, any and all Shares validly tendered on or prior to
the Expiration Date and not properly withdrawn in accordance with Section 3
above. Subject to applicable rules of the Commission and the terms and
conditions of the Merger Agreement, Purchaser expressly reserves the right, in
its sole discretion, to delay acceptance for payment of, or payment for, Shares
in order to comply in whole or in part with any applicable law or government
regulation.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
Share Certificates for such Shares (or timely Book-Entry
8
Confirmation of the book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures described
in Section 2 above), (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer and
(iii) any other documents required by the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. In all cases,
upon the terms and subject to the conditions of the Offer, payment for Shares so
accepted for payment will be made by the deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payment from Purchaser and transmitting payment to validly
tendering shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY
PURCHASER ON THE PURCHASE PRICE OF SHARES TENDERED PURSUANT TO THE OFFER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Upon the deposit of funds with the Depositary for the purpose of making payments
to tendering shareholders, Purchaser's obligation to make such payments will be
satisfied and tendering shareholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of Purchaser's
acceptance for payment of Shares. Purchaser will pay any stock transfer taxes
with respect to the transfer and sale to it or on its order pursuant to the
Offer, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, as well as any charges and expenses of the Depositary and the
Information Agent.
If Purchaser is delayed in its acceptance for payment of, or payment for,
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule
14e-l(c) under the Exchange Act to pay for or return the tendered Shares
promptly after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares may
not be withdrawn except to the extent tendering shareholders are entitled to
exercise, and duly exercise, withdrawal rights as described under Section 3
above.
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or for any other reason, Share Certificates for any such
Shares will be returned, without expense, to the tendering shareholder (or, in
the case of Shares delivered by book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures described in Section 2 above, such Shares will be credited to an
account maintained at such Book-Entry Transfer Facility) as promptly as
practicable following the expiration or termination of the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The summary of federal income tax consequences set forth below is for
general information only and is based on Purchaser's understanding of the law as
currently in effect. The tax consequences to each shareholder will depend in
part upon such shareholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, tax exempt organizations, persons who acquired
their shares as part of a straddle, hedge or other integrated instrument, and
shareholders who acquired their Shares through the exercise of an employee stock
option or otherwise as compensation. ALL SHAREHOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE
MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE
MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND OF
CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares pursuant to the Offer (or the Merger) will
be a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws.
Generally, a shareholder who receives cash for Shares pursuant to the Offer (or
the Merger) will recognize gain or loss for federal income tax purposes equal to
the difference between the amount of cash received in exchange for the Shares
sold and such shareholder's adjusted tax basis in such Shares. Provided that the
Shares constitute capital assets in the hands of the shareholder, such gain or
loss will be capital gain or
9
loss, and will be long-term capital gain or loss if the holder has held the
Shares for more than one year at the time of sale. Gain or loss will be
calculated and characterized separately for each block of Shares (i.e., a group
of Shares with the same tax basis and holding period) tendered pursuant to the
Offer. The maximum federal income tax rate applicable to non-corporate taxpayers
on long-term capital gain is 20%, and the use of capital losses to offset other
income is subject to limitations.
A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to 31% backup withholding unless the shareholder
provides its TIN and certifies that such number is correct or properly certifies
that it is awaiting a TIN, or unless an exemption applies. A shareholder that
does not furnish its TIN may be subject to a penalty imposed by the Internal
Revenue Service (the "IRS"). See Section 2.
If backup withholding applies to a shareholder, the Depositary is required
to withhold 31% from payments to such shareholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS on a
timely basis. If backup withholding results in an overpayment of tax, a refund
can be obtained by the shareholder upon filing an appropriate income tax return
on a timely basis.
6. PRICE RANGE OF THE SHARES
The Shares are traded on the Nasdaq National Market under the symbol
"DLGC". The following table sets forth, for the periods indicated, the high and
low sales prices of Company Common Stock as reported on the Nasdaq National
Market:
TRADING
----------------
HIGH LOW
------ ------
Fiscal Year ended December 31, 1997:
First Quarter............................................... $36.75 $19.38
Second Quarter.............................................. $29.25 $16.06
Third Quarter............................................... $43.00 $26.87
Fourth Quarter.............................................. $49.87 $36.25
Fiscal Year ended December 31, 1998:
First Quarter............................................... $47.00 $31.75
Second Quarter.............................................. $44.38 $26.25
Third Quarter............................................... $37.69 $26.25
Fourth Quarter.............................................. $26.75 $17.88
Fiscal Year ended December 31, 1999:
First Quarter............................................... $35.81 $19.50
Second Quarter (through May 28, 1999)....................... $34.88 $27.22
On May 28, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, according to published
sources, the last reported sale price of Company Common Stock on the Nasdaq
National Market was $33.38 per Share. On June 4, 1999, the last full day of
trading before the commencement of the Offer, according to published sources,
the last reported sale price of Company Common Stock on the Nasdaq National
Market was $ 43.47 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR COMPANY COMMON STOCK.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
General
The Company is a New Jersey corporation with its principal offices located
at 1515 Route 10, Parsippany, New Jersey, 07054.
10
The Company designs, manufactures and markets hardware and software
enabling technologies for "computer telephony" systems. "Computer telephony"
(CT) is a term used to encompass a wide variety of technologies and applications
that use the information processing capabilities of a computer (often a server)
to add intelligence to telephone functions and to combine these functions with
data processing. The Company's products are used in voice, fax, data, voice
recognition, speech synthesis and call center management CT applications. The
Company's products are sold globally primarily to original equipment
manufacturers, value-added resellers, systems integrators, applications
developers and service providers through both a direct sales force and
distributors. The Company also licenses the use of various stand-alone software
products. The Company also provides various products which include third party
provided technology embedded in Company boards.
Available Information
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and, in
accordance therewith, is required to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Certain information, as of particular dates,
concerning the Company's directors and officers (including their remuneration,
stock options granted to them and shares held by them), the principal holders of
the Company's securities, and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
and annual reports distributed to the Company's shareholders and filed with the
Commission. These reports, proxy statements and other information are available
for inspection and copying at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the regional offices of the Commission located in Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of this material may
also be obtained by mail, upon payment of the Commission's customary fees from
the Commission's principal office at 450 Fifth Street. N.W., Washington, D.C.
20549. The Commission also maintains an Internet site on the World Wide Web at
that contains reports, proxy statements and other
information. In addition, such material should also be available for inspection
at The Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Copies of some of the Company's periodic reports and proxy statements may also
be obtained from the Company's Internet site on the World Wide Web at
.
Summary Financial Information
Set forth below is certain selected consolidated financial information with
respect to the Company and its consolidated subsidiaries contained in the
Company's 1998 Annual Report on Form 10-K (the "Company 1998 Annual Report") and
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 (the "Company 1999 10-Q") and March 31, 1998 (the "Company First Quarter
1998 10-Q"). More comprehensive financial information is included in the Company
1998 Annual Report, the Company 1999 10-Q and the Company First Quarter 1998
10-Q and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to the Company 1998
Annual Report, the Company 1999 10-Q and the Company First Quarter 1998 10-Q and
such other documents and all the financial information (including any related
notes) contained therein. The Company 1998 Annual Report, the Company 1999 10-Q
and the Company First Quarter 1998 10-Q are available for inspection as
described below under "Available Information."
11
THE COMPANY AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED YEAR ENDED
---------------------- --------------------------------------------
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1996
--------- --------- ------------ ------------ ------------
(UNAUDITED)
Statement of Income Data:
Revenues..................... $ 72,348 $66,388 $293,525 $261,310 $213,604
Cost of goods sold........... 25,477 24,657 108,567 98,329 84,764
-------- ------- -------- -------- --------
Gross profit................. 46,871 41,731 184,958 162,981 128,840
Research and development
expense................... 17,613 13,759 65,350 51,530 40,666
Selling, general and
administrative expenses... 22,235 18,975 80,228 79,098 60,052
Asset impairment............. -- 5,297 5,297 -- --
-------- ------- -------- -------- --------
Operating income............. 7,023 3,700 34,083 32,353 28,122
Interest income -- net....... 820 647 3,099 1,637 2,440
Net realized (losses) gains
on available for sale
securities................ -- -- 32 (4) 9,175
Gain on sale of subsidiary... -- 23,384 23,384 -- --
Income before provision for
income taxes.............. 7,843 27,731 60,598 33,986 39,737
Provision for income taxes... 2,823 12,158 23,990 12,234 14,189
-------- ------- -------- -------- --------
Net income................... 5,020 15,573 36,608 21,752 25,548
Income per share:
Basic........................ 0.31 0.97 2.29 1.37 1.63
Diluted...................... 0.30 0.93 2.21 1.31 1.56
Shares used in the calculation
of pro forma income per
share:
Basic........................ 16,252 16,061 16,010 15,931 15,654
Diluted...................... 16,899 16,825 16,558 16,598 16,417
Balance Sheet Data:
Working capital.............. 174,781 144,237 139,559 119,920 103,909
Total assets................. 250,180 214,138 216,983 182,404 147,270
Long-term obligations, net of
current maturities........ 7,394 2,376 2,475 2,481 2,926
Shareholders' equity......... 207,637 163,977 175,677 144,865 124,842
Except as otherwise noted in this Offer to Purchase, all of the information
with respect to the Company set forth in this Offer to Purchase has been derived
from publicly available information. Although Intel and Purchaser have no
knowledge that any of such information is untrue, neither Intel nor Purchaser
takes any responsibility for the accuracy or completeness of information
contained in this Offer to Purchase with respect to the Company 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.
8. CERTAIN INFORMATION CONCERNING INTEL AND PURCHASER
General
Intel is a Delaware corporation with its principal office located at 2200
Mission College Boulevard, Santa Clara, California 95052-8119. Intel and its
subsidiaries operate mainly in one industry segment. Intel designs, develops,
manufactures and markets microcomputer components and related products at
various levels of integration. Intel's principal components consist of
silicon-based semiconductors etched with complex patterns
12
of transistors. Each one of these integrated circuits can perform the functions
of thousands -- some even millions -- of individual transistors, diodes,
capacitors and resistors.
Purchaser is a New Jersey corporation with its principal executive offices
located at 2200 Mission College Boulevard, Santa Clara, California 95052-8119.
Purchaser is a wholly owned subsidiary of Intel which was organized to acquire
the Company and has not conducted any unrelated activities since its
organization.
Summary Financial Information
Set forth below is certain selected consolidated financial information with
respect to Intel and its subsidiaries contained in Intel's 1998 Annual Report to
Stockholders (the "Intel 1998 Annual Report") and Intel's Quarterly Report on
Form 10-Q for the quarter ended March 27, 1999 (the "Intel 1999 l0-Q"). More
comprehensive financial information is included in the Intel 1998 Annual Report,
the Intel 1999 10-Q and other documents filed by Intel with the Commission, and
the following summary is qualified in its entirety by reference to the Intel
1998 Annual Report, the Intel 1999 10-Q and such other documents and all the
financial information (including any related notes) contained therein. The Intel
1998 Annual Report, the Intel 1999 l0-Q and such other documents are available
for inspection as described below under "Available Information."
INTEL CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED YEAR ENDED
---------------------- --------------------------------------------
MARCH 27, MARCH 28, DECEMBER 26, DECEMBER 27, DECEMBER 26,
1999 1998 1998 1997 1996
--------- --------- ------------ ------------ ------------
(UNAUDITED)
Summary of Earnings Data:
Net revenues............... $7,103 $6,001 $26,273 $25,070 $20,847
Operating income........... 2,637 1,781 8,379 9,887 7,553
Net income................. 1,999 1,273 6,068 6,945 5,157
Basic Earnings per common
share................... 0.60 0.39 1.82 2.12 1.57
Diluted earnings per common
share................... 0.57 0.36 1.73 1.93 1.45
Weighted average common
shares outstanding...... 3,324 3,281 3,336 3,271 3,290
Weighted average common
shares outstanding,
assuming dilution....... 3,478 3,549 3,517 3,540 3,551
AT AT AT
MARCH 27, DECEMBER 26, DECEMBER 27,
1999 1998 1997
----------- ------------ ------------
(UNAUDITED)
Balance Sheet Data:
Total assets........................................ $33,093 $31,471 $28,880
Total current liabilities........................... 6,216 5,804 6,020
Total liabilities................................... 8,367 8,094 9,585
Total stockholders' equity.......................... 24,726 23,377 19,295
Available Information
Intel is subject to the information reporting requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. Information, as of particular dates, concerning Intel's directors
and officers, their remuneration, stock options and other matters, the principal
holders of Intel's securities and any material interest of such persons in
transactions with Intel is required to be disclosed in proxy statements
distributed to Intel's stockholders and filed with the Commission. These
reports,
13
proxy statements and other information should be available for inspection at the
Commission and copies thereof should be obtainable from the Commission and from
the Nasdaq Stock Market in the same manner as is described for the Company in
Section 7. Copies of some of Intel's periodic reports and proxy statements may
also be obtained from Intel's Internet site on the World Wide Web at
.
Directors and Officers
The name, business address, citizenship, present principal occupation or
employment and five-year employment history of each of the executive officers of
Intel and Purchaser are set forth in Schedule I hereto.
Except as described in this Offer to Purchase, (i) neither Intel nor
Purchaser nor, to the best of Intel's and Purchaser's knowledge, any of the
persons listed in Schedule I hereto, or any associate or subsidiary of Intel,
beneficially owns or has any right to acquire directly or indirectly any Shares
or has any contract, arrangement, understanding or relationship with any other
person with respect to any Shares, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any Shares, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss, or the giving or withholding of
proxies, and (ii) neither Intel nor Purchaser nor, to the best of Intel's and
Purchaser's knowledge, any of the other persons referred to above, or any of the
respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, since June 7, 1994, neither
Intel, Purchaser nor, to the best of Intel's and Purchaser's knowledge, any of
the persons listed on Schedule I hereto, has had any transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
June 7, 1994 there have been no contracts, negotiations or transactions between
Intel, any of its subsidiaries or, to the best of Intel's and Purchaser's
knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on
the one hand, and the Company or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition; a tender offer for or other acquisition of
securities of any class of the Company; an election of directors of the Company;
or a sale or other transfer of a material amount of assets of the Company or any
of its subsidiaries.
9. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by Purchaser to purchase the Shares will
be approximately $780 million. Purchaser plans to obtain all funds needed for
the Offer through a capital contribution, which will be made by Intel to
Purchaser at the time the Shares tendered pursuant to the Offer are accepted for
payment. Intel intends to use its available cash on hand to make this capital
contribution. Neither the Offer nor the Merger is conditioned on obtaining
financing.
10. CERTAIN TRANSACTIONS BETWEEN INTEL AND THE COMPANY
Except as set forth in this Offer to Purchase, since January 1, 1998, none
of Intel or Purchaser or, to the best knowledge of Intel and Purchaser, any of
the persons listed on Schedule I hereto, has engaged in any transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
January 1, 1998 there have been no contracts, negotiations or transactions
between Intel, or any of its subsidiaries or, to the best knowledge of Intel and
Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, on
the one hand, and the Company or any of its affiliates, on the other hand,
concerning a merger, consolidation or acquisition; a tender offer for or other
acquisition of securities of any class of the Company; an election of directors
of the Company; or a sale or other transfer of a material amount of assets of
the Company or any of its subsidiaries.
On February 17, 1999, Intel and the Company entered into a Confidential
Non-Disclosure Agreement (the "CNDA") pursuant to which they agreed to keep
confidential each party's business strategy and
14
marketing plans. On May 20, 1999, Intel and the Company entered into a CNDA
(supplemented on May 21, 1999) in contemplation of exchange of information
relating to potential merger negotiations.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER AND THE MERGER
Over a period of years, the Company has discussed from time to time with
Intel various potential strategic relationships.
In the Fall of 1998, Anant Das, Strategic Manager in Intel's Enterprise
Server Group ("ESG"), called Howard Bubb, CEO of the Company, to discuss
possible relationships between the two companies. In October 1998, Mr. Bubb and
John Landau, Strategic Marketing VP of the Company, met in Portland, Oregon,
with John Miner, Vice President and General Manager of ESG, Scott Richardson,
Director, Communication and Internet Server Division of ESG, Mr. Das and Elliot
Swan, Director of Business Development for ESG. At this meeting, Messrs. Bubb
and Landau presented an overview of the Company and its business. Messrs. Bubb
and Miner then discussed relationships between the companies in general terms,
including the possibility of either a development or strategic relationship
agreement, with a possible strategic minority investment by Intel in the
Company.
In early February of 1999, Mr. Miner telephoned Mr. Bubb and suggested
additional meetings to discuss possible relationships between Intel and the
Company.
On February 17, 1999, Messrs. Bubb and Landau met with Messrs. Miner and
Swan at the Dallas airport. At this meeting, Messrs. Miner and Swan raised the
possibility of Intel's acquiring the Company. Mr. Bubb noted that, in order to
proceed, he would expect that the Company needed to satisfy itself as to
strategic compatibility, cultural fit and fair economic value. The parties
agreed to further discussions. That same day the parties entered into the CNDA
in contemplation of the exchange of information.
Between February 17, 1999 and March 4, 1999, the parties held a number of
telephone conferences covering high level discovery and due diligence issues.
Participants included Messrs. Tom Amato, CFO of the Company, Swan, Landau and
Guy Anthony, Assistant Treasurer of Intel.
On March 4, 1999, Mr. Miner spoke with Mr. Bubb by telephone about the
process within Intel for pursuing an acquisition. On March 11 and 12, Mr. Amato
and Steve Krupinski, Human Resources VP of the Company, met with Messrs. Swan,
Anthony, Richardson, Adam Lane, Finance Manager of ESG, Arun Chetty, Senior
Treasury Manager of Intel, and Sean Fitzgerald, ESG Senior Counsel of Intel, in
Portland, Oregon. Theodore Weitz, VP and General Counsel of the Company,
participated by telephone on March 12.
On March 12, 1999, during a scheduled internal meeting at Intel involving
Messrs. Arvind Sodhani, VP and Treasurer of Intel, Miner, Anthony, Swan,
Richardson, Les Vadasz, Senior VP of Intel, Craig Barrett, Chief Executive
Officer of Intel, Andy Grove, Chairman of Intel, and Andy Bryant, CFO of Intel,
agreement was reached to continue discussions with the Company and to seek Intel
board approval for an acquisition.
On March 16, 1999, Mr. Bubb met with Mr. Miner at Newark Airport in New
Jersey to further discuss strategic and cultural issues, and on March 17 Mr.
Bubb met with Mr. Barrett in Washington, D.C. That afternoon, Mr. Anthony
visited the Company in New Jersey and met with Messrs. Bubb, Amato and Weitz and
began to discuss valuation. Mr. Anthony stated that the results of the
discounted cash flow analysis and stock market comparable analysis performed by
Intel indicated a value of mid to upper $30 per Share. On March 18, 1999, Mr.
Amato called Mr. Anthony and reported that this value was insufficient to
present to the Company Board, but indicated a willingness to continue
discussions.
On March 19, 1999, Messrs. Anthony and Sodhani called Mr. Amato and
suggested a value of $41 per Share, in cash, contingent on due diligence,
negotiation of definitive agreements and Intel board approval.
On March 24, 1999, Messrs. Bubb, Amato and Landau met by telephone with
Messrs. Miner, Swan, Sodhani, Chetty and David Johnson, Treasury Manager of
Intel, and presented the Company's view of strategic synergies and value.
15
On March 25, 1999, a presentation was made by Intel management to Intel's
Board of Directors proposing an acquisition of the Company. The board approved a
resolution authorizing an acquisition for either cash or stock within specified
parameters.
On March 26, Mr. Anthony called Mr. Amato to communicate that the Intel
board had approved proceeding with the acquisition discussions, contingent on
due diligence. Mr. Amato called Mr. Anthony back the same day and indicated that
the Company Board considered a value of $41 per share to be insufficient. Mr.
Anthony and Mr. Amato agreed to continue their discussions.
On March 30, 1999, Messrs. Anthony, Richardson, Lane, Swan and Johnson
called Messrs. Bubb, Amato and Landau to give the Company feedback concerning
valuation at the March 24, 1999 conference call.
On March 31, 1999, Messrs. Anthony and Sodhani met with Mr. Amato by
telephone to further discuss valuation. Mr. Amato indicated that the Company
Board was unwilling to engage in formal negotiations at a $41 valuation by
Intel, but that they might consider a valuation in the high $40's.
On April 2, 1999, Messrs. Bubb, Amato and Landau met by telephone with
Messrs. Miner, Swan, Lane, Anthony and Roger Erwin, ESG HR Manager of Intel, to
further discuss synergy, value and management retention issues in a possible
acquisition.
On April 9, the Company Board discussed the status of negotiations.
From April 9 through 24, valuation discussions continued by telephone, led
primarily by Mr. Amato for the Company and Messrs. Sodhani and Anthony for
Intel, and with some participation by Messrs. Weitz, Bubb and Swan. Intel
continued to express unwillingness to consider a higher valuation, and the
Company expressed its unwillingness to move lower. The Company Board was kept
apprised of events through regular updates.
On April 24, 1999, Messrs. Anthony and Sodhani called Messrs. Amato and
Bubb and indicated a willingness to consider an acquisition of the Company for
Intel stock, but at a value of $37 per Share rather than $41 per Share.
On May 1, 1999, Messrs. Anthony and Sodhani called Mr. Amato and advised
him that Intel would consider a valuation of $41 per Share for either a cash or
stock acquisition.
On May 3 and 4, 1999, Messrs. Anthony and Sodhani held several discussions
with Messrs. Amato and Bubb about the alternative merits of a cash versus stock
transaction.
After a discussion at a Company Board meeting on May 6, 1999, the Company
Board authorized management to retain Hambrecht & Quist as investment bankers to
assist in valuation discussions. Messrs. Amato and Weitz spoke to Mark Zanoli of
Hambrecht & Quist on May 6 1999, completed an agreement with Hambrecht & Quist
on May 7, 1999, and that afternoon Mr. Amato informed Mr. Anthony that Mr.
Zanoli would be acting on the Company's behalf in the transaction.
On May 7, 1999, during a scheduled internal meeting at Intel involving
Messrs. Sodhani, Miner, Anthony, Vadasz, Barrett, Grove, Bryant and Suzan
Miller, senior attorney at Intel, the status of negotiations with the Company
was discussed.
On May 10, Mr. Zanoli presented the Company's position to Messrs. Anthony
and Sodhani. Discussions continued almost daily among Messrs. Sodhani, Anthony,
Zanoli, Amato and Weitz over the next week and, on May 17, Mr. Zanoli conveyed
the information to Messrs. Anthony and Sodhani that the Company would consider
reducing its valuation to $44 per Share for a transaction involving Intel stock.
On May 18, Messrs. Anthony and Sodhani informed Mr. Zanoli that Intel would
be willing to consider an increase in its proposed valuation to $44 per Share
for an all-cash tender offer. That proposal was presented to the Company Board
in a special telephonic board meeting on May 18, 1999 attended by all board
members, and Messrs. Weitz, Amato and Zanoli, at which Mr. Zanoli analyzed
Intel's proposal, reviewed the
16
discussions with Intel to date and generally advised the Company Board that he
believed Hambrecht & Quist could render its fairness opinion at that level and
that he did not expect alternative bidders at a higher price.
On May 19, in a telephone conversation involving Messrs. Bubb, Amato,
Weitz, Zanoli, Sodhani, Miner and Anthony, the parties agreed to discuss the
detailed terms of a transaction based on the latest all-cash valuation, subject
to signing a definitive agreement, due diligence and no change in market
conditions.
The parties immediately began intensive due diligence and the negotiation
of a definitive agreement. Between May 25 and May 31, 1999, numerous meetings
were held by telephone and at the offices of Gibson, Dunn & Crutcher LLP,
outside counsel to Intel, in New York, New York, among representatives of Intel,
the Company, Gibson, Dunn & Crutcher LLP, Lowenstein Sandler PC, outside counsel
to the Company, and Winthrop Stimson Putnam & Roberts, special outside counsel
to the Company, to negotiate the Merger Agreement and related agreements.
On May 29, 1999, the Company Board reviewed the then-current draft of the
definitive Merger Agreement in a special telephonic meeting, all board members
having received the contract draft prior to the meeting. This meeting was
attended by all Company Board members, and Messrs. Zanoli (by telephone), Bubb,
Amato, Weitz, Ronald Prague, Esq. corporate counsel at the Company, Peter
Ehrenberg, Esq. and Alan Wovsaniker, Esq. of Lowenstein Sandler PC, and Stephen
R. Rusmisel, Esq. of Winthrop Stimson Putnam & Roberts. Mr. Zanoli expressed his
view that Hambrecht & Quist would be able to render its fairness opinion
assuming successful completion of the negotiation of certain open issues.
Counsel performed a detailed analysis of the agreements and negotiations to
date, and discussed the specific terms of the proposed Merger Agreement and the
proposed Stock Option Agreement, and the agreements from certain shareholders on
which, in part, Intel's offer was conditioned. The Company Board requested that
the Company's representatives continue negotiations, and focus particularly on
removing impediments to the Company's ability to consider alternative
transactions consistent with the Company Board's fiduciary responsibilities.
The parties negotiated intensively through May 29, 30 and 31.
On May 30, 1999, the status of negotiations was reviewed with Messrs.
Vadasz, Barrett and Miner by Messrs. Sodhani, Anthony, Swan, Peter Cizik,
Business Development Manager of Intel, and Ms. Miller and Kirby Dyess, Vice
President and Director, New Business Development at Intel. Dr. Barrett approved
the current Intel position in the negotiations within specified parameters.
The Company Board met telephonically at 7:00 p.m. on Monday, May 31, 1999.
All board members attended, as did Messrs. Zanoli, Bubb, Amato, Weitz, Prague,
Ehrenberg, Wovsaniker and Rusmisel. The Company Board was apprised of the
progress since the prior meeting, given a detailed analysis of the changes in
the proposed Merger Agreement, the proposed Stock Option Agreement and the
agreements from certain shareholders, including improvements in the "fiduciary
out" provisions, a reduction in the proposed breakup fee, and the fact that
those restrictions that remained were conditions of the transaction that Intel
would not remove. Mr. Zanoli then rendered Hambrecht & Quist's opinion that the
transaction is fair to shareholders of the Company from a financial point of
view. Next, counsel analyzed certain legal aspects of the transaction. The
Company Board then adjourned as final negotiations continued.
The Company Board reconvened at approximately midnight on May 31, and
unanimously (a) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair, adequate,
and in the best interests of the Company's shareholders, (b) adopted and
approved the Merger Agreement and authorized the execution thereof by the
Company, and (c) recommended that the Company's shareholders accept the Offer
and tender their Shares hereunder.
12. PURPOSE OF THE OFFER AND THE MERGER AGREEMENT
The purpose of the Offer is for Intel to acquire, indirectly, the entire
equity interest in the Company. The purpose of the Merger is for Intel to
acquire all of the equity interest in the Company not acquired pursuant to the
Offer. Upon consummation of the Merger, the Company will become a direct, wholly
owned subsidiary of Intel. The acquisition of the entire equity interest in the
Company has been structured as a cash tender offer
17
followed by a cash merger in order to provide a prompt transfer of ownership of
the equity interest in the Company from the Company's shareholders to Intel and
to provide them with cash for all of their Shares.
Under the NJBCA, the approval of the Company Board and, under certain
circumstances, the affirmative vote of the holders of a majority of the Shares
present at a duly constituted meeting are required to approve and adopt the
Merger Agreement and the transactions contemplated thereby. If a vote of the
shareholders is required, the Company has agreed in the Merger Agreement to take
all actions necessary to convene and hold a meeting of its shareholders (the
"Shareholders' Meeting"), as promptly as practicable after the acceptance for
payment of Shares pursuant to the Offer, to consider and vote upon the adoption
and approval of the Merger Agreement and the transactions contemplated thereby.
A proxy statement containing detailed information concerning the Merger will be
furnished to shareholders of the Company in connection with any Shareholders'
Meeting. Notwithstanding the foregoing, if Intel, Purchaser and/or any other
subsidiary of Intel has acquired at least 90% of the outstanding Shares, the
parties will take all necessary and appropriate actions to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a Shareholders' Meeting in accordance with Section 14A:10-5.1 of the
NJBCA.
At a meeting held on May 31, 1999, the Company Board unanimously (a)
determined that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are fair, adequate, and in the best
interests of the Company's shareholders, (b) adopted and approved the Merger
Agreement and authorized the execution thereof by the Company and (c)
recommended that the Company's shareholders accept the Offer and tender their
shares hereunder. As described above, the only remaining corporate action of the
Company that may be required is the approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the holders of a majority
of the Shares. If the Minimum Condition is satisfied, Intel will have sufficient
voting power to cause the approval and adoption of the Merger Agreement and the
transactions contemplated thereby without the affirmative vote of any other
shareholder of the Company. Under the Merger Agreement, Intel has agreed to
vote, or cause to be voted, at any such meeting all Shares owned by it,
Purchaser or any other subsidiary of Intel in favor of the Merger. If Intel
acquires at least 90% of the Shares in the Offer, under the NJBCA, it will be
able to consummate the Merger without a vote of the Company's shareholders.
Furthermore, the Stock Option Agreement permits Intel to purchase up to
3,400,000 shares of Company Common Stock at an exercise price of $44 per share
under certain specified circumstances. Among other circumstances permitting
Intel to exercise its option, Intel may exercise its option to the extent
necessary so that the number of shares to be acquired pursuant to the option
plus the number of tendered Shares will, upon issuance of the option shares,
equal at least ninety percent (90%) of the issued and outstanding Shares of the
Company. The purchase of Shares pursuant to its option may, under certain
circumstances, allow Intel to increase its ownership of Shares above 90% in
order to consummate the Merger without a vote of the shareholders of the
Company. The option is also exercisable upon a termination of the Merger
Agreement in a manner obligating the Company to pay Intel $25 million as
liquidated damages (see "THE TENDER OFFER -- 13. The Merger Agreement, the Stock
Option Agreement and the Voting Agreements"). In addition, Intel reserves the
right to purchase additional Shares in the open market.
13. THE MERGER AGREEMENT, THE STOCK OPTION AGREEMENT AND THE VOTING AGREEMENTS
THE MERGER AGREEMENT
The following is only a summary of certain provisions of the Merger
Agreement. Company shareholders should read the Merger Agreement in its
entirety. A copy of the Merger Agreement is filed with the Commission as an
exhibit to Intel's and Purchaser's Tender Offer Statement on Schedule 14D-l.
The Offer. The Merger Agreement provides for the making of the Offer.
Pursuant to the Offer, each tendering shareholder will receive the Offer Price
for each Share tendered in the Offer. Purchaser's obligation to accept for
payment or pay for Shares is subject to the satisfaction of the conditions that
are described in "THE TENDER OFFER -- 18. Certain Conditions of the Offer,"
including the Minimum Condition. Pursuant to the Merger Agreement, Purchaser
expressly reserves the right to waive any of the conditions to
18
the Offer (except as otherwise provided in the Merger Agreement), and to make
any change in the terms or conditions of the Offer; provided that, without the
written consent of the Company, Purchaser may not (i) decrease the Offer Price,
(ii) change the form of consideration payable in the Offer, (iii) decrease the
number of Shares sought pursuant to the Offer, (iv) add additional conditions to
the Offer, (v) amend the conditions to the Offer set forth in Annex A to the
Merger Agreement to broaden their scope, (vi) extend the Offer except as
permitted by the terms of the Merger Agreement, or (vii) amend the Minimum
Condition.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company Board, (i) from time to time extend the Offer if at the scheduled
Expiration Date of the Offer any conditions to the Offer shall not have been
satisfied or waived, (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Commission applicable to the Offer
and (iii) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than twenty business days beyond the latest
Expiration Date that would otherwise be permitted under clauses (i) or (ii) of
this sentence if on such Expiration Date there shall not have been tendered at
least 90% of the outstanding Shares. In addition, if at the time of any
scheduled Expiration Date any one or more of the conditions to the Offer set
forth on Annex A to the Merger Agreement are not satisfied and none of the
events set forth in paragraphs (a) through (f) of Annex A to the Merger
Agreement that would permit Purchaser not to accept tendered Shares for payment
has occurred and is continuing, then, provided, that such conditions are
reasonably capable of being satisfied and no such event has occurred on or prior
to (and is continuing on) September 15, 1999, Purchaser will extend the Offer
from time to time unless any such condition is no longer reasonably capable of
being satisfied or any such event has occurred. In no event, however, will
Purchaser be required to extend the Offer beyond September 15, 1999.
Board Representation. Promptly upon the purchase by Purchaser of the Shares
pursuant to the Offer and if the Minimum Condition has been met, Intel will be
entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board as is equal to the product of the total number of
directors on the Company Board (determined after giving effect to the directors
elected pursuant to this sentence) and the percentage that the aggregate number
of Shares so purchased bears to the total number of Shares then outstanding on a
fully diluted basis. Notwithstanding the foregoing, the Company will use its
best efforts to ensure that three of the members of the Company Board as of May
31, 1999 (the "Continuing Directors") will remain members of the Company Board
until the effective time of the Merger (the "Effective Time"). If a Continuing
Director resigns from the Company Board, Intel, Purchaser and the Company will
permit the remaining Continuing Director or Directors to appoint the resigning
Director's successor who will be deemed to be a Continuing Director. Following
the election or appointment of Intel's designees to the Company Board pursuant
to the Merger Agreement and prior to the Effective Time, if there are any
Continuing Directors, any amendment of the Merger Agreement, any termination of
the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of Intel or
Purchaser or any waiver of any of the Company's rights under the Merger
Agreement or any other determination with respect to any action to be taken or
not to be taken by the Company relating to the Merger Agreement, will require
the concurrence of a majority of such Continuing Directors. The Company's
obligation to appoint designees of Intel to the Company Board will be subject to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Purchaser will be merged with and into the Company, as
a result of which the separate corporate existence of Purchaser will cease and
the Company will continue as the Surviving Corporation and a wholly owned
subsidiary of Intel. The Effective Time will occur at the date and time that a
certificate of merger in such form as is required by the NJBCA (the "Certificate
of Merger") is filed with the Department of Treasury, Division of Commercial
Recording of the State of New Jersey, or such later time as Intel and the
Company may agree upon and as may be set forth in the Certificate of Merger. The
Surviving Corporation will continue its corporate existence under the laws of
the State of New Jersey. The Certificate of Incorporation of Purchaser in effect
at the Effective Time will be the Certificate of Incorporation of the Surviving
Corporation. The bylaws of Purchaser in effect at the Effective Time will be the
bylaws of the Surviving Corporation. The directors of Purchaser at the Effective
Time will be the directors of the Surviving Corporation until their
19
successors are duly elected and qualified, and the officers of Purchaser at the
Effective Time will be the officers of the Surviving Corporation until their
successors are duly elected and qualified.
Consideration to be Paid in the Merger. In the Merger, each outstanding
Share (except for Shares owned by the Company or Intel or by any subsidiary of
the Company or Intel, which will be canceled and retired without any payment
with respect thereto) will be converted into the right to receive the Offer
Price, without interest thereon (the "Merger Consideration"). Each share of
common stock of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into one share of common stock of the Surviving
Corporation.
Options. At the Effective Time, options to purchase Shares under the
Company's Amended and Restated 1997 Incentive Benefit Plan, 1988 Incentive
Compensation Plan, the Company's Employee Stock Purchase Plan, the GammaLink
Stock Option Plans assumed by the Company, the Spectron Microsystems, Inc. Stock
Option Plan assumed by the Company and the DianaTel Corporation Stock Plan
assumed by the Company (collectively, the "Option Plans"), which are then
outstanding and unexercised, will be converted automatically into options to
purchase shares of common stock, par value $.001 per share, of Intel ("Intel
Common Stock") and Intel will assume each such Option Plan, subject to the terms
of the applicable Option Plans. In each case, the number of shares of Intel
Common Stock purchasable upon exercise of an assumed option will be equal to the
number of Shares that were purchasable under such assumed option immediately
prior to the Effective Time multiplied by the Exchange Ratio (as defined below),
and rounded down to the nearest whole share. Further, the per share exercise
price under each such assumed option will be adjusted by dividing the per share
exercise price of each such assumed option by the Exchange Ratio, and rounding
up to the nearest cent. The terms of each assumed option will, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction with
respect to Intel Common Stock on or subsequent to the Effective Time. The
"Exchange Ratio" shall be equal to the ratio obtained by dividing the Offer
Price by the closing price of one share of Intel Common Stock on the Nasdaq
National Market on the trading day immediately preceding the closing date of the
Merger.
Pursuant to the Merger Agreement, the beneficiaries of the Company's 1993
Non-Employee Director Stock Option Plan and the Company's 1997 Director Stock
Election/Deferral Plan will receive all economic benefits thereunder. Consistent
with the terms of the Company's Common Stock and Warrant Purchase Agreement with
Microsoft Corporation ("Microsoft") dated as of March 1, 1999, the Merger
Agreement recognizes the right of Microsoft, upon exercise of the warrant in
accordance with its terms, to receive an amount in cash equal to the Merger
Consideration multiplied by the number of Shares immediately theretofore
purchasable upon exercise of the warrant, as if such Shares were outstanding
immediately prior to the Effective Time, as set forth in Section 5.15 of the
Merger Agreement.
Representations and Warranties. The Merger Agreement contains
representations and warranties by the Company, on the one hand, and Intel and
Purchaser, on the other hand. These include:
- due organization, existence, good standing and qualification to do
business and, in the case of the Company, its subsidiaries and its equity
investments.
- corporate power and authority to enter into the Merger Agreement and
perform its obligations under the Merger Agreement and, in the case of
the Company, the stock option agreement; proper execution, delivery and
enforceability of the Merger Agreement and, in the case of the Company,
the stock option agreement.
- accuracy of the information about the Company in the proxy statement and
accuracy of the information about Intel and Purchaser in the offer
documents and the proxy statement.
- governmental and third-party approvals.
- compliance of the Merger Agreement with each party's charter documents,
material agreements and applicable law.
- absence of material legal proceedings and injunctions.
20
- absence of broker's fees arising from the transactions contemplated by
the Merger Agreement.
- in the case of Intel and Purchaser, that they will have the funds
necessary to acquire the Shares and that, as of May 31, 1999, neither of
them owned any shares of Company Common Stock.
The Merger Agreement contains additional representations and warranties of
the Company. These include:
- capitalization of the Company and its subsidiaries.
- approval of the Merger and the stock option agreement by the Company
Board.
- absence of existing defaults under its charter documents, material
agreements and applicable law.
- filings with the Commission and accuracy of financial statements.
- absence of undisclosed liabilities of the Company and its subsidiaries
and since March 31, 1999, absence of material changes in the business of
the Company and its subsidiaries.
- the Company's and its subsidiaries' compliance with applicable laws.
- employee benefit plans, labor, employment and related matters.
- absence of material environmental liabilities.
- payment of taxes and filing of tax returns.
- intellectual property.
- "Year 2000" capability.
- foundry agreements.
- insurance.
- certain business practices.
- product warranties and guaranties.
- customers.
No representations or warranties made by the Company, Intel or Purchaser
will survive beyond the Effective Time.
Conduct of Business Before the Merger. Each of the Company, Intel and
Purchaser has agreed to do certain things before the Merger occurs. These
include the Company and its subsidiaries each:
- conducting its business in the ordinary course.
- using all commercially reasonable efforts to preserve intact its business
organization.
- using all commercially reasonable efforts to keep available the services
of its current officers and employees.
- using all commercially reasonable efforts to preserve its relationships
with customers, suppliers, distributors, lessors, creditors, employees,
contractors and others having business dealings with it.
Intel and the Company have also agreed to:
- cooperate with each other and use all reasonable efforts to make all
filings, and to obtain consents and approvals of all third parties and
governmental authorities, necessary to complete the transactions
contemplated by the Merger Agreement, and to comply with the terms and
conditions of all these consents and approvals.
- not issue any press release or make any other public statements without
the prior approval of the other party.
21
- promptly tell the other party about any events or circumstances that
would cause any representations or warranties to not be true or any
obligations not to have been fulfilled.
Subject to certain agreed exceptions, the Company has agreed for itself and
on behalf of its subsidiaries not to:
- amend its charter documents.
- issue or agree to issue any stock of any class or any other securities or
equity equivalents, except for shares of the Company's Common Stock
issued under options granted prior to the date of the Merger and grants
of options in the ordinary course of its business consistent with past
practice.
- split, combine or reclassify any shares of its capital stock or declare,
set aside or pay any dividend or other distribution of any kind in
respect of its capital stock.
- adopt a plan of complete or partial liquidation, dissolution, merger or
other reorganization other than the Merger.
- alter any subsidiary's corporate structure or ownership.
- incur or assume any debt, except under existing lines of credit in the
ordinary course of business or materially change the terms of any
existing debt.
- become responsible for the obligations of any other person except for
third party guarantees and lease agreements not to exceed $500,000 in the
aggregate, and obligations of the Company's subsidiaries incurred in the
ordinary course of business.
- make any loans to or investments in any other person, except its
subsidiaries or for customary loans or advances to employees in the
ordinary course of business consistent with its past practices.
- encumber its capital stock.
- mortgage or pledge any of its material assets or create or permit any
material lien on these assets.
- except as required by law, enter into, adopt, modify or terminate any
employee compensation, benefit or similar plan or increase in any
compensation or fringe benefits.
- grant any severance or termination pay, except as required by law or by
any written agreements existing on May 31, 1999.
- voluntarily accelerate the vesting of any stock options.
- sell, license or dispose of any assets in any single transaction or
series of related transactions having a fair market value in excess of
$300,000 in the aggregate, except for sales of its products and licenses
of its software in the ordinary course of business consistent with its
past practices.
- enter into any exclusive license, distribution, marketing, sales or other
agreements.
- license any source code to any third party.
- except as required as a result of a change in law or in generally
accepted accounting principles, change any of its accounting principles,
practices or methods.
- revalue in any material respect any of its assets other than in the
ordinary course of business.
- acquire any other business or entity.
- enter into any material agreement.
- modify or waive any material right under any material contracts.
- modify its standard product warranty terms or modify any existing product
warranties in any material and adverse manner.
- authorize any new or additional capital expenditure(s) in excess of
$500,000.
22
- authorize any new or additional manufacturing capacity expenditure or
expenditures for any manufacturing capacity contracts or arrangements.
- acquire any other asset or related group of assets in a single
transaction or series of related transactions with a cost in excess of
$300,000 or permit all such acquisitions taken together to exceed
$1,000,000.
- make any material tax election or settle or compromise any material
income tax liability.
- permit any insurance policy naming it as a beneficiary or loss payable to
expire, be canceled or be terminated, except if a comparable insurance
policy is obtained and in effect.
- fail to file any tax returns when due or fail to cause such tax returns
when filed to be complete and accurate in all material respects.
- fail to pay any taxes or other material debts when due.
- settle or compromise any legal proceeding that relates to the Merger
Agreement, involves more than $300,000 or would otherwise be material to
the Company, or relates to any intellectual property matters.
- take or fail to take any action that could reasonably be expected to
limit the use of any net operating losses, built-in losses, tax credits
or other similar items.
- take or fail to take any action that could reasonably be expected to
cause any transaction intended by the Company or its subsidiaries to be a
reorganization under Section 368(a) under the Internal Revenue Code to
fail to qualify as such a reorganization.
- take or agree in writing or otherwise to take any of the actions
described above.
The Company also has agreed that it will:
- provide Intel with reasonable access to the Company's employees to, among
other things, deliver offers of continued employment and provide
information to the employees about Intel.
- provide Intel with reasonable access to the Company's books and records,
offices and facilities.
- take all necessary action to amend, merge, freeze or terminate all of its
compensation and benefit plans, effective at the closing date of the
Merger, as requested in writing by Intel.
- provide Intel with periodic financial information.
- obtain a "Letter of Non-Applicability" from the New Jersey Department of
Environmental Protection (the "NJDEP") that the transactions contemplated
by the Merger Agreement are exempt from the requirements of the New
Jersey Industrial Site Recovery Act ("ISRA") or attain compliance with
the requirements of the ISRA.
Acquisition Proposals.
The term "Third Party Acquisition" is used herein to mean any of the
following:
- an acquisition of the Company by anyone other than Intel, Purchaser or
any of their affiliates.
- the acquisition of any material portion (which includes 15% or more) of
the assets of the Company and its subsidiaries, other than the sale of
its products in the ordinary course of business consistent with its past
practices.
- an acquisition of 15% or more of the outstanding shares of Company Common
Stock.
- the Company's adoption of a plan of liquidation or declaration or payment
of an extraordinary dividend.
- the Company's or any of its subsidiary's repurchase of more than 10% of
the outstanding Shares.
23
- the Company's or any of its subsidiary's acquisition of any interest or
investment in any business whose annual revenue, net income or assets is
equal to or greater than 10% of the annual revenue, net income or assets
of the Company.
The Company has agreed that it will:
- cease any discussions or negotiations with any other persons with respect
to any Third Party Acquisition.
- request each person that has executed a confidentiality agreement in
connection with its consideration of acquiring the Company or any of its
subsidiaries to return all confidential information heretofore furnished
to such person by or on behalf of the Company or any of its subsidiaries.
- not encourage, solicit, participate or initiate discussions with, or
provide any information to anyone except Intel and Purchaser concerning,
any Third Party Acquisition; provided, however, that if the Company Board
determines in good faith, after consultation will legal counsel, that it
is necessary to do so in order to comply with its fiduciary obligations
to the Company's shareholders under the NJBCA, the Company may, in
response to a proposal or offer for a Third Party Acquisition that was
not solicited and that the Company Board determines, based on
consultation with Hambrecht & Quist or another financial advisor of
nationally-recognized standing, is from a third party that is capable of
consummating a Superior Proposal and only for so long as the Company
Board so determines that its actions are likely to lead to a Superior
Proposal, (i) furnish information only of the type and scope with respect
to the Company that the Company provided to Intel prior to May 31, 1999
to any such person pursuant to a customary confidentiality agreement as
was executed by Intel, and (ii) participate in the discussions and
negotiations regarding such proposal or offer. In addition, the Merger
Agreement does not prohibit the Company Board from taking and disclosing
to Company shareholders a position contemplated by Rules 14d-9 and 14e-2
under the Exchange Act with regard to a tender or exchange offer made by
someone other than Intel or any of its subsidiaries.
- notify Intel if the Company or any of its subsidiaries receives any
communication regarding a Third Party Acquisition.
- provide a copy of any written agreements, proposals, or other materials
the Company receives about a Third Party Acquisition.
- advise Intel from time to time of the status and any developments
concerning any Third Party Acquisition.
Except as described below, the Company Board may not withdraw or modify its
recommendation of the Offer or the Merger. It also may not approve, recommend,
cause or permit the Company to enter into any agreement or obligation relating
to any Third Party Acquisition. However, if the Company Board determines in its
good faith judgment, after consultation with and based upon the advice of legal
counsel, that its fiduciary duties require it to do so, the Company Board may
withdraw its recommendation of the Offer or the Merger or approve or recommend
any bona fide proposal:
- to acquire, directly or indirectly, solely for cash and/or securities,
all Company Common Stock then outstanding, or all or substantially all of
the Company's assets; and
- that is fully financed or is financeable and contains terms that the
Company Board by a majority vote determines in good faith, based as to
the financial terms, on the written advice of the Company's financial
advisor or another financial advisor of nationally recognized reputation,
to be more favorable to the Company's shareholders than the Merger; and
- that the Company Board by a majority vote determines in its good faith
judgment (following and based on consultation with the company financial
adviser or another financial advisor of nationally recognized reputation
and its legal or other advisers) to be reasonably capable of being
completed (taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal; and
24
- that does not contain a right of first refusal or right of first offer
with respect to any proposal that Intel may make; and
- that does not contain any "due diligence" condition.
An offer that has all of these characteristics is sometimes referred to
herein as a "Superior Proposal."
The Company Board may only withdraw its recommendation of the Offer or the
Merger or approve or recommend any Superior Proposal (a) after providing written
notice to Intel advising Intel that the Company Board has received a Superior
Proposal, specifying the material terms and conditions and identifying the
person making the Superior Proposal, and (b) if Intel does not, within five
business days of receipt of such proposal, make an offer that the Company Board
by a majority vote determines in good faith, based on the written advice of a
financial advisor of nationally recognized reputation, to be at least as
favorable to the Company shareholders as the Superior Proposal. If Intel fails
to make this offer, the Company may enter into an agreement with respect to the
Superior Proposal only if the Merger Agreement is concurrently terminated in
accordance with its terms and the Company has paid all of the $25 million
liquidated damages and any expense reimbursement due to Intel under the Merger
Agreement (as described below under "-- Termination of the Merger
Agreement -- Liquidated Damages and Expenses").
Conditions to the Merger. The obligation of each of the Company, Intel and
Purchaser to consummate the Merger is subject to the satisfaction of each of the
following conditions:
- the Merger Agreement has been approved and adopted by the requisite vote
of the Company's shareholders, if such vote is required by applicable
law.
- no law or order by any United States federal or state court or
governmental authority prohibits, enjoins or restricts the Merger.
- the parties have obtained all governmental approvals or other
requirements necessary to complete the Merger and to operate the
Company's business after the Merger as it was operated prior to the
Merger (other than under the Hart-Scott-Rodino Antitrust Improvements
Act).
- the proxy statement, if required to be prepared and disseminated to the
Company's shareholders, has been cleared by the SEC and is not the
subject of any stop order.
The Company will not be required to complete the Merger unless:
- Intel's and Purchaser's representations and warranties in the Merger
Agreement are true on the closing date of the Merger (except to the
extent that the aggregate of all breaches thereof do not materially and
adversely affect the ability of Intel and/or Purchaser to consummate the
Offer or the Merger).
- Intel and Purchaser have performed in all material respects each of its
covenants and obligations to be performed before the Merger is to occur.
Intel and Purchaser will not be required to complete the Merger unless:
- the Company's representations and warranties in the Merger Agreement are
true on the closing date of the Merger (except to the extent that the
aggregate of all breaches thereof do not, or are not reasonably likely in
the foreseeable future to be, materially adverse to the operations,
financial condition, earnings or results of operations, or the business
(financial or otherwise), of the Company and its subsidiaries, taken as a
whole (a "Material Adverse Effect on the Company"); provided, however,
that none of the following will be deemed, either alone or in
combination, to constitute a Material Adverse Effect on the Company: (i)
a change in the market price or trading volume of Company Common Stock,
(ii) conditions affecting the computer-related communications equipment
and services industry as a whole, or (iii) a failure by the Company to
meet internal earnings or revenue projections or the earnings or revenue
projections of equity analysts, provided that clause (iii) does not
exclude any underlying change, effect, event, occurrence, state of facts
or developments that resulted in such failure to meet such projections).
25
- the Company has performed in all material respects each of its covenants
and obligations to be performed before the Merger is to occur.
- since March 31, 1999, there have been no events, individually or in the
aggregate, with respect to the Company or its subsidiaries that
constitute a Material Adverse Effect on the Company.
- in connection with complying with any applicable law or obtaining any
requisite consent, Intel will not be required to sell or divest any
assets or business or to restrict any business operations or prohibited
from owning any material portion of the Company's business or assets.
Assurances cannot be given that all of the conditions to completing the
Merger will be satisfied.
Termination. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the completion of the Merger, before or after it
has been approved by the Company's shareholders. This termination may occur in
the following ways:
- Intel, Purchaser and the Company mutually agree to terminate it.
- Intel and Purchaser, or the Company, decides to terminate it because:
1. any state or federal court or other governmental authority has issued
a non-appealable, final ruling prohibiting the Merger; or
2. the Merger is not completed by December 15, 1999, unless the failure
to complete it by that date is due to the failure of the party
seeking to terminate the Merger Agreement to perform its agreements
in the Merger Agreement.
- The Company decides to terminate it because:
1. Intel's and Purchaser's representations or warranties in the Merger
Agreement are untrue such that the conditions to the Company's
obligation to complete the Merger could not be satisfied by December
15, 1999, so long as the Company has not seriously breached its own
obligations under the Merger Agreement;
2. Intel or Purchaser fails to perform its agreements in the Merger
Agreement, and this failure has a Material Adverse Effect on
Purchaser or materially adversely affects (or materially delays) the
ability of the Company to consummate the Merger, and Intel and
Purchaser, as the case may be, has not cured such breach within 5
business days after notice by the Company thereof and provided that
the Company has not seriously breached its own obligations in the
Merger Agreement;
3. the Company has failed to obtain its shareholders' approval of the
Merger Agreement;
4. the Company Board has received a Superior Proposal and responded in a
way that permitted termination of the Merger Agreement, including the
payment of liquidated damages and expenses to Intel; or
5. Purchaser fails to pay for Shares pursuant to the Offer by December
15, 1999; so long as such failure does not result from the Company
breaching in any material respect its obligations in the Merger
Agreement.
- Intel or Purchaser decides to terminate it because:
1. the Company's representations or warranties in the Merger Agreement
are untrue such that the conditions to Intel's and Purchaser's
obligations to complete the Merger could not be satisfied by December
15, 1999, so long as neither Intel nor Purchaser has seriously
breached its own obligations in the Merger Agreement;
2. the Company has failed to perform its agreements in the Merger
Agreement, and this failure has a Material Adverse Effect on the
Company or the ability of Intel, Purchaser or the Company to
consummate the Merger, and the Company has not cured such breach
within 5 business days
26
after notice by Intel or Purchaser thereof and provided that neither
Intel nor Purchaser has seriously breached its own obligations in the
Merger Agreement;
3. the Company Board has recommended a Superior Proposal to the
Company's shareholders;
4. the Company Board has withdrawn or adversely modified its
recommendation of the Merger;
5. the Company Board has stopped using all reasonable efforts to hold a
shareholders' meeting to vote on the Merger;
6. the Company convened a meeting of the Company shareholders to vote on
the Merger but did not obtain their approval of the Merger; or
7. Purchaser has terminated the Offer because of the occurrence of any
of the events, or the failure to be satisfied of any of the
conditions, described below in "THE TENDER OFFER -- 18. Certain
Conditions of the Offer"; so long as such termination does not result
from Intel's or Purchaser's seriously breaching its own obligations
in the Merger Agreement.
Effect of Termination. Even after the Merger Agreement has been terminated,
its confidentiality and fees and expenses provisions will remain in effect.
Also, termination will not relieve either party from liability for any breach by
it of the Merger Agreement before it was terminated. However, no representations
or warranties made by the Company, Intel or Purchaser shall survive beyond a
termination of the Merger Agreement.
Liquidated Damages and Expenses. The Company has agreed to pay Intel $25
million as liquidated damages if the Merger Agreement is terminated as follows:
- It is terminated by the Company because the Company Board received a
Superior Proposal and responded in a way that permitted its termination.
- It is terminated by Intel and Purchaser because the Company Board
recommended that Company shareholders approve a Superior Proposal; the
Company Board withdrew or adversely modified its recommendation of the
Offer or the Merger; or if, after Purchaser's acceptance for payment of
shares tendered pursuant to the Offer, the Company Board stops using all
reasonable efforts to convene a shareholders meeting to approve the
Merger.
- It is terminated by Intel and Purchaser because of a significant breach
by the Company of its representations, warranties or agreements, and, (a)
an offer by a third party to consummate a Third Party Acquisition is
outstanding or has been publicly announced (and not withdrawn), and such
Third Party Acquisition occurs, or (b) within a year after termination,
the Company enters into an agreement with respect to a Third Party
Acquisition or such an acquisition otherwise occurs.
- It is terminated by either the Company or Intel and Purchaser because the
Company held a shareholders meeting and failed to obtain the required
vote for the Merger and, at the time of the meeting, an offer by a third
party to consummate a Third Party Acquisition is outstanding or has been
publicly announced.
In addition, the Company has agreed to pay Intel up to $3 million as
reimbursement of its fees and expenses if the Merger Agreement is terminated as
follows:
- It is terminated by the Company because either:
1. the Company held a shareholders meeting to vote on the Merger but did
not obtain shareholder approval; or
2. the Company Board received a Superior Proposal and responded in a way
that permitted its termination.
27
- It is terminated by Intel and Purchaser for any of the following reasons:
1. The Company's representations or warranties in the Merger Agreement
are untrue such that the conditions to Intel's obligations to
complete the Merger could not be satisfied by December 15, 1999 so
long as neither Intel nor Purchaser has seriously breached its own
obligations under the Merger Agreement.
2. The Company failed to perform its agreements in the Merger Agreement,
and this failure has a Material Adverse Effect on the Company or
materially adversely affects (or materially delays) the ability of
Purchaser to consummate the Offer or the ability of Intel, Purchaser
or the Company to consummate the Merger, and the Company has not
cured such breach within five (5) business days after notice by Intel
or Purchaser thereof, so long as neither Intel nor Purchaser has
seriously breached its own obligations in the Merger Agreement.
3. The Company Board recommended that Company shareholders approve a
Superior Proposal.
4. The Company Board withdrew or adversely modified its recommendation
of the Offer or the Merger.
5. If, after Purchaser's acceptance for payment of shares tendered
pursuant to the Offer, the Company stopped using all reasonable
efforts to hold a shareholders' meeting to vote on the Merger.
6. The Company held a shareholders meeting to vote on the Merger but did
not obtain shareholder approval.
Further, Intel has agreed to pay the Company up to $3 million as
reimbursement of its fees and expenses if the Merger Agreement is terminated by
the Company because:
- Intel's and Purchaser's representations or warranties in the Merger
Agreement are untrue such that the conditions to the Company's obligation
to complete the Merger could not be satisfied by December 15, 1999, so
long as the Company has not seriously breached its own obligations under
the Merger Agreement.
- Intel or Purchaser fails to perform its agreements in the Merger
Agreement, and this failure has a Material Adverse Effect on Purchaser or
materially adversely affects the ability of the Company to complete the
Merger, so long as the Company has not seriously breached its own
obligations in the Merger Agreement.
Except as described above, whether or not the Merger occurs, the parties to
the Merger Agreement have agreed to pay their own fees and expenses incurred in
connection with the Merger Agreement.
Extension and Waiver. At any time prior to the Merger, Intel, Purchaser and
the Company may agree to:
- extend the time for the performance of any of the obligations or other
acts of the other party.
- waive any inaccuracies in the other's representations and warranties.
- waive the other's compliance with any of the agreements or conditions in
the Merger Agreement.
Amendment. The Merger Agreement may be changed by the parties at any time
before or after the Company's shareholders approve the Merger. However, any
change which by law requires the approval of the Company's shareholders will
require their subsequent approval to be effective.
DISSENTERS' RIGHTS IN THE MERGER
No dissenters' or appraisal rights are available in connection with the
Offer or the Merger.
28
STOCK OPTION AGREEMENT
The following is only a summary of certain provisions of the Stock Option
Agreement. Company shareholders should read the Stock Option Agreement in its
entirety. A copy of the Stock Option Agreement is filed with the Commission as
an exhibit to Intel's and Purchaser's Tender Offer Statement on Schedule 14D-l.
The Stock Option Agreement permits Intel to purchase up to 3,400,000 shares
of Company Common Stock at an exercise price of $44 per share. The total number
of shares issuable upon exercise of the option represents approximately 19.99%
of Company Common Stock outstanding on April 30, 1999 (and approximately 16.6%
of the shares of Company Common Stock after exercise of such option).
Intel may exercise the option, in whole or in part, upon the earlier to
occur of (a) termination of the Merger Agreement in a manner obligating the
Company to pay Intel the $25 million liquidated damages (see "-- Termination of
the Merger Agreement -- Liquidated Damages and Expenses"), and (b) the date on
which Purchaser has accepted tendered Shares for payment, so long as the number
of shares to be acquired pursuant to the option plus the number of tendered
Shares will, upon issuance of the option shares, equal at least ninety percent
(90%) of the issued and outstanding shares of the Company. Such option expires
upon the earlier of (a) the Effective Time and (b) the one year anniversary of
the date on which the Merger Agreement has been terminated.
If after the option becomes exercisable and before the option expires, any
third party acquires 15% or more of the outstanding shares of Company Common
Stock, or the Company enters into an agreement with any person other than Intel
providing for an acquisition of the Company or any significant part of its
assets, then Intel, instead of exercising the option, will have the right to
receive in cancellation of the option, cash equal to the lesser of:
(a) an amount determined as follows:
1. the excess over $44 of the greater of:
- the last sale price of a share of Company Common Stock on the
trading day preceding exercise and
- the highest price per share paid in connection with a third party
acquisition, or the fair market value equivalent of a share of
Company Common Stock in connection with a third party acquisition
of the Company's assets
2. multiplied by the number of shares of Company Common Stock covered by
the option and
(b) $5,000,000.
If Intel has acquired Company Common Stock upon exercise of the option and
no third party has acquired or agreed to acquire 15% or more of the outstanding
shares of Company Common Stock, nor has the Company entered into an agreement
with any person other than Intel and Purchaser providing for an acquisition of
the Company or any significant part of its assets on or before May 31, 2000,
then, at any time during the period that begins on June 30, 2000 and ends 19
months after the exercise by which Intel acquired its Company Common Stock, the
Company may require Intel to sell to the Company any of these shares still held
by Intel. The per share purchase price will be the exercise price of the option,
less any dividends paid on the option shares to be repurchased by the Company.
Intel may request that the Company register under the Securities Act of
1933, as amended (the "Securities Act"), the offering and sale of the shares of
Company Common Stock that have been acquired by or are issuable to Intel upon
exercise of the option, if requested by Intel within two years after an event
permitting exercise of the option. Any registration request must be for at least
20% of the option shares or, if for less than 20% of the originally issuable
option shares, all of Intel's remaining option shares. Intel may make up to two
demands for registration. Intel's registration rights terminate when Intel
becomes entitled to sell all of its option shares under Rule 144(k) of the
Securities Act. The Company may include any other securities in any registration
demanded by Intel only with Intel's prior written consent. The Company will use
all
29
reasonable efforts to cause each registration statement to become effective and
remain so for 90 days and to obtain all consents or waivers required from third
parties. The Company's obligation to file a registration statement and to
maintain its effectiveness may be suspended for up to 90 days if the Company
Board determines this registration would seriously and adversely affect the
Company, or financial statements required to be included in the registration
statement are not yet available. If the Company proposes to register the
offering and sale of the Company Common Stock for cash for itself or any other
Company shareholder in an underwriting, it will generally allow Intel to
participate in the registration so long as Intel agrees to participate in the
underwriting.
The expenses of preparing and filing any registration statement for these
shares of Company Common Stock and any sale covered by it will generally be paid
by the Company, except for underwriting discounts or commissions or brokers'
fees, and the fees and disbursements of Intel's counsel.
For each registration of option shares, the Company and Intel have agreed
to customary indemnification provisions for losses and liabilities under the
Securities Act and otherwise. However, Intel will not be required to indemnify
the Company beyond Intel's proceeds from the offering of its option shares.
Upon the issuance of option shares, the Company will promptly list the
shares on the Nasdaq National Market or on any other exchange on which the
Company Common Stock is then listed.
Because the rights and obligations of Intel and the Company under the
option agreement are subject to compliance with the Hart-Scott-Rodino Act, Intel
will include in its merger notifications to be filed with the Department of
Justice and Federal Trade Commission a description of its rights under the
option agreement. See "-- Regulatory Approvals Required for the Merger."
VOTING AGREEMENTS
The following is only a summary of certain provisions of the Tender and
Voting Agreements and Irrevocable Proxy (the "Voting Agreements"). Company
shareholders should read the Voting Agreements in their entirety. Copies of the
Voting Agreements are filed with the Commission as an exhibit to Intel's and
Purchaser's Tender Offer Statement on Schedule 14D-l.
Tender of Shares. In connection with the execution of the Merger Agreement,
Intel and Purchaser have entered into the Voting Agreements with the following
five shareholders of the Company (the "Proxy Grantors") who own in the aggregate
5,573,586 Shares, representing approximately 32.6% of the issued and outstanding
Shares: (a) Nicholas Zwick, a director of the Company, who beneficially owns
2,876,899 Shares, (b) James Shinn, a director of the Company, who beneficially
owns 1,070,137 Shares, (c) Masako H. Shinn, as trustee for Kiyoshi H. Shinn and
Hiroshi R. Shinn, who beneficially owns 80,000 Shares, (d) Kenneth J. Burkhardt,
a director of the Company, who beneficially owns 1,443,050 Shares and (e) Joanne
Burkhardt, as trustee for Kenneth John Burkhardt, Christopher L. Burkhardt and
Julianne N. Burkhardt, who beneficially owns 103,500 Shares. Pursuant to the
Voting Agreements, upon the terms and subject to the conditions therein, each
Proxy Grantor has agreed, provided the Merger Agreement has not been terminated,
to promptly after the date of commencement of the Offer (but in all events not
later than five (5) business days thereafter) tender to Purchaser substantially
all Shares beneficially owned by such Proxy Grantor (except for charitable
contributions of up to 5% of such Shares).
Voting of Shares. Each Proxy Grantor has also agreed, provided the Merger
Agreement has not been terminated, to vote all of the Shares beneficially owned
by such Proxy Grantor (except for charitable contributions of up to 5% of such
Shares) in accordance with the Voting Agreement, including (i) in favor of
approval of the Merger Agreement, the transactions contemplated by the Merger
Agreement, and any actions required in furtherance thereof and hereof (including
the election of designees of Intel as directors of the Company); (ii) against
any action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement; and (iii) except as otherwise agreed to in
writing in advance by Intel, against: (A) any Third Party Acquisition, (B) any
change in a majority of the individuals who, as of May 31, 1999, constitute the
Company Board (other than as contemplated by the Merger Agreement), (C) any
extraordinary corporate
30
transaction, such as a merger, consolidation or other business combination
involving the Company or any of its subsidiaries and any Third Party, (D) a
sale, lease, transfer or disposition of any assets of the Company's or any of
its subsidiaries' business outside the ordinary course of business, (E) any
change in the present capitalization of the Company or any amendment of the
Company's Certificate of Incorporation or bylaws, (F) any other material change
in the Company's corporate structure or affecting its business, or (G) any other
action which is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone or materially adversely affect the Offer, the Merger or
any of the other transactions contemplated by the Merger Agreement, the Stock
Option Agreement, or the Voting Agreement.
Irrevocable Proxy. Each Proxy Grantor has also, provided the Merger
Agreement has not been terminated, appointed Purchaser and certain designees of
Purchaser, in their respective capacities as designees of Purchaser, as such
Proxy Grantor's true and lawful irrevocable (until the Termination Date) proxy
and attorney-in-fact to vote all of the Shares beneficially owned by such Proxy
Grantor (except for charitable contributions of up to 5% of such Shares) at any
Shareholders' Meeting called for purposes of considering whether to approve the
Merger Agreement, the Merger or any of the other transactions contemplated by
the Merger Agreement, or any Third Party Acquisition, or to execute a written
consent of shareholders in lieu of any such meeting.
Restriction on Transfer, Proxies and Non-Interference. Each Proxy Grantor
has agreed not to, directly or indirectly: (i) except as contemplated by the
Voting Agreements, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, assignment or other disposition of,
any or all of such Proxy Grantor's Shares or any interest therein; (ii) grant
any proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) take any
action that would make any representation or warranty made by such Proxy Grantor
untrue or incorrect or have the effect of preventing or disabling such Proxy
Grantor from performing such Proxy Grantor's obligations under the applicable
Voting Agreement. Notwithstanding the foregoing, each Proxy Grantor has the
right to transfer, assign, pledge or otherwise dispose of any or all of its
option shares to a corporation duly and validly organized and existing under the
laws of the United States and controlled by such Proxy Grantor (a "Permitted
Transferee"), provided such Permitted Transferee executes an agreement
substantially similar to the Voting Agreement.
Other Potential Acquirers. Each Proxy Grantor (i) is required to
immediately cease any existing discussions or negotiations with any parties with
respect to any acquisition of all or any material portion of the assets of, or
any equity interest in, the Company or any of its subsidiaries or any business
combination with the Company or any of its subsidiaries, in his, her or its
capacity as such; (ii) has agreed, from and after the date of the Voting
Agreements until termination of the Merger Agreement, in such capacity, directly
or indirectly, not to initiate, solicit or knowingly encourage (including by way
of furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any Third Party
Acquisition; and (iii) has agreed to promptly notify Intel of any proposals for,
or inquiries with respect to, a potential Third Party Acquisition received by
the Proxy Grantor or of which such Proxy Grantor otherwise has knowledge.
Representations and Warranties. The Proxy Agreements contain certain
customary representations and warranties of the parties thereto, including,
without limitation, representations and warranties by the Proxy Grantors as to
ownership of Shares and power and authority.
Termination. Generally, the Voting Agreements expire upon the earlier of
(a) the date on which the Merger Agreement terminates in accordance with its
terms, (b) the date on which Purchaser has accepted tendered shares for payment,
and (c) June 30, 2000.
14. INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreement. At the time it entered into the Merger Agreement,
Intel, the Company, and Howard G. Bubb, the President and Chief Executive
Officer of the Company, also entered into an employment agreement with Howard
Bubb (the "New Agreement") which replaces an earlier employment
31
agreement. The New Agreement is for an initial one-year term, commencing on the
closing of the Merger, and is automatically renewed for an additional one-year
period. The New Agreement is terminable by either party upon not less than
three-months' notice prior to the first anniversary of the closing of the
Merger. From the closing of the Merger through December 31, 1999 (the
"Transition Period"), Mr. Bubb will receive a base salary of $315,000. Beginning
January 1, 2000, Mr. Bubb will receive a base salary of $200,000, subject to
annual increase. During the Transition Period, Mr. Bubb is entitled to receive
cash bonuses under his current bonus schedule based on the Company's and his
individual performance. Beginning January 1, 2000, Mr. Bubb will be eligible for
a bonus under Intel's Employee Bonus and Employee Cash Bonus Plans. Mr. Bubb
also receives acceleration of all unvested restricted stock awards and stock
options under the Company's incentive compensation plans, a lump sum cash
payment of $315,000 plus one year's bonus payment calculated under his prior
employment agreement with the Company, a lump sum cash payment of $40,481,
representing fringe benefits that would have been payable under his prior
agreement and a performance bonus of up to $350,000 based on the achievement of
the Company of certain metrics, in each of 2000 and 2001, provided Mr. Bubb is
employed by the Company on December 31 of such year. The New Agreement also
provides for a two-year non-solicitation of customers in the event Mr. Bubb is
no longer working for the Company, for which Mr. Bubb will receive a monthly
payment of $42,083 for up to two years.
Indemnification; Directors' and Officers' Insurance. Pursuant to the Merger
Agreement, the Surviving Corporation (or any successor) will, to the fullest
extent permitted by law and to the extent not covered by insurance, indemnify
the present and former officers and directors of the Company and its
subsidiaries who suffer liabilities or losses from any threatened or actual
claim or proceeding based on the fact that the person was a director or officer
of the Company or one of its subsidiaries or based on the Merger Agreement. The
Merger Agreement further provides that Intel will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its directors
and officers as of or prior to May 31, 1999 (or indemnification agreements in
the Company's customary form for directors joining the Company Board prior to
the Effective Time) and any indemnification provisions under the Company's
certificate of incorporation or bylaws as in effect immediately prior to the
Effective Time. The Surviving Corporation's aggregate obligation to indemnify
and hold harmless all indemnified persons for all matters to which such
indemnified persons may be entitled to be indemnified or held harmless as
described above shall in no event exceed the Company's net worth as of March 31,
1999. In addition, for not less than six years after the Effective Time, Intel
or the Surviving Corporation will maintain the Company's existing officers' and
directors' liability insurance (subject to certain maximum premium payments) or
Intel may, subject to certain limitations, cause coverage to be provided under
any policy maintained for the benefit of Intel or any of its subsidiaries.
15. GOING PRIVATE TRANSACTIONS
The Merger must comply with any applicable Federal law at the time of its
consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going
private" transactions. Intel and Purchaser do not believe that Rule 13e-3 will
be applicable to the Merger unless the Merger is consummated more than one year
after the Offer. If applicable, Rule 13e-3 requires, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the Merger and the consideration offered to minority
shareholders be filed with the Commission and disclosed to minority shareholders
prior to the consummation of the Merger.
16. DIVIDENDS AND DISTRIBUTIONS
According to the Company's 1998 Annual Report on Form 10-K, the Company has
not paid cash dividends since its initial public offering and intends to retain
any future earnings for use in its business. Pursuant to the terms of the Merger
Agreement, the Company is not permitted, without the prior written consent of
Intel, to split, combine or reclassify the outstanding Shares or declare, set
aside or pay any dividend payable in cash, stock or property with respect to the
Shares, or redeem or otherwise acquire any of the Shares or any securities of
any of its subsidiaries.
32
17. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; NASDAQ NATIONAL MARKET AND
EXCHANGE ACT REGISTRATION
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES
The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and the number of holders
of Shares, and could thereby adversely affect the liquidity and market value of
the remaining publicly held Shares. It is expected that, following the Offer, a
large percentage of the Shares will be owned by Purchaser. Purchaser cannot
predict whether the reduction in the number of Shares that might otherwise trade
publicly 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 therefor.
STOCK QUOTATION
Depending upon the number of Shares purchased pursuant to the offer, the
Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq
National Market. The maintenance for continued inclusion requires the Company to
substantially meet one of two maintenance standards. The Company must have
either (a)(i) at least 750,000 publicly held shares, (ii) at least 400
shareholders of round lots, (iii) a market value of at least $5 million, (iv) a
minimum bid price per Share of $1.00, (v) at least two registered and active
market makers for its Shares and (vi) net tangible assets of at least $4
million, or (b)(i) at least, 1,100,000 publicly held shares, (ii) at least 400
shareholders of round lots, (iii) a market value of at least $15 million, and
(v) either (x) a market capitalization of at least $50 million or (y) total
assets and total revenue of at least $50 million each for the most recently
completed fiscal year or two of the last three most recently completed fiscal
years, (v) a minimum bid price per Share of $5.00 and (vi) at least four
registered and active market makers. Shares held directly or indirectly by
directors, officers or beneficial owners or more than 10% of the Shares are not
considered as being publicly held for this purpose.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock
Market, and the Shares are, in fact, no longer included in the Nasdaq National
Market or in any other tier of the Nasdaq Stock Market, the market for Shares
could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD
for continued inclusion in any tier of the Nasdaq Stock Market, it may be
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 upon the number of the holders of Shares remaining at such time,
the interest in maintaining a market in Shares on the part of the securities
firms, the possible termination of registration of the Shares under the Exchange
Act, as described below, and other factors.
EXCHANGE ACT REGISTRATION
The Shares are currently registered under the Exchange Act. Registration
under the Exchange Act may be terminated upon application by the Company to the
Commission if the Shares are not listed on a national securities exchange and
there are fewer than 300 record holders. Termination of the Exchange Act
registration of the Shares would substantially reduce the information required
to be furnished by the Company to holders of Shares and to the Commission and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirements of furnishing a
proxy statement in connection with shareholders' meetings and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions, no longer applicable to the Shares. In addition, "affiliates" of
the Company and persons holding "restricted securities" of the Company may be
deprived of the ability to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for Nasdaq market reporting. Intel currently intends to seek to
cause the Company to terminate the registration of
33
the Shares under the Exchange Act as soon after consummation of the Offer as the
requirements for termination of registration are met.
MARGIN REGULATIONS
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares for the purpose of buying, carrying or trading
in securities ("Purpose Loans"). Depending upon factors similar to those
described above regarding the continued listing, public trading and market
quotations of the Shares, it is possible that, following the purchase of the
Shares pursuant to the Offer, the Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for Purpose Loans made
by brokers.
18. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or the Merger Agreement,
and subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) relating to Intel's obligation to pay for or return tendered
Shares after termination of the Offer, Intel will not be required to accept for
payment or pay for any Shares, may delay the acceptance for payment of any
Shares pursuant to Section 1.1(b) of the Merger Agreement, may extend the Offer
by one or more times, and may terminate the Offer at any time after September
15, 1999 if (a) the Minimum Condition is not satisfied by the Expiration Date,
(b) any applicable waiting period under the HSR Act has not expired or
terminated prior to the Expiration Date, (c) approval of all necessary
government officials and agencies have not been obtained on terms and conditions
reasonably satisfactory to Intel, or (d) at any time after May 31, 1999 and
before acceptance for payment of any Shares, any of the following events has
occurred and is continuing:
(a)(1) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger which
directly or indirectly prohibits or makes illegal consummation of the Offer
or the Merger or the other transactions contemplated by the Merger
Agreement, renders Intel unable to accept for payment, pay for or purchase
some or all of the Shares, imposes material limitations on the ability of
Intel effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased on
all matters properly presented to the Company's shareholders, or otherwise
has a Material Adverse Effect on the Company, or (2) in connection with
complying with any applicable law or obtaining any requisite consent, Intel
will be required to sell or divest any assets or business or prohibited
from owning any material portion of the Company's business or assets;
(b)(i) the representations and warranties of the Company set forth in
the Merger Agreement are not true and correct (except to the extent that
the aggregate of all breaches thereof do not constitute a Material Adverse
Effect on the Company) as of the date of the Merger Agreement and as of
consummation of the Offer, (ii) the Company has failed to perform in all
material respects its covenants and agreements under the Merger Agreement
or (iii) there has occurred since March 31, 1999, any events or changes
which constitute a Material Adverse Effect on the Company;
(c) it shall have been publicly disclosed or Intel shall have
otherwise learned that (i) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have acquired or entered into a
definitive agreement or agreement in principle to acquire beneficial
ownership of more than 20% of the Shares or any other class of capital
stock of the Company, through the acquisition of stock, the formation of a
group or otherwise, or has been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 20%
of the Shares, and (ii) such person or group has not tendered such Shares
pursuant to the Offer;
(d) the Company Board has withdrawn, modified or changed in a manner
adverse to Intel (including by amendment of the Schedule 14D-9) its
recommendation of the Offer, the Merger
34
Agreement, or the Merger, or recommended another proposal or offer, or the
Company Board has resolved to do any of the foregoing;
(e) the Merger Agreement has been terminated in accordance with its
terms; or
(f) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange or the
Nasdaq National Market, for a period in excess of 24 hours, (ii) the
commencement of a war, armed hostilities or other national or international
calamity directly or indirectly involving the United States that
constitutes a Material Adverse Effect on the Company or materially
adversely affects or delays the consummation of the Offer, (iii) the
average of the closing prices of the Standard & Poor's 500 Index for any
twenty (20) consecutive trading days shall be 25% or more below the closing
price of such index on any trading day on or after the date hereof that
precedes the commencement of such 20-trading day period, or (iv) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof;
which in the good faith judgement of Intel, in any such case and regardless of
the circumstances giving rise to such condition, makes it inadvisable to proceed
with the Offer or the acceptance for payment of the Shares.
The foregoing conditions (the "Offer Conditions"), other than the Minimum
Condition, are for the benefit of Intel and Purchaser and may be waived by Intel
and Purchaser, in whole or in part at any time and from time to time in the sole
discretion of Intel and Purchaser. The failure by Intel or Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
19. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
General
Except as described below, neither Intel nor Purchaser 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 the acquisition of Shares pursuant to the Offer, or of any approval or other
action by any governmental, administrative or regulatory agency or authority or
public body, domestic or foreign, that would be required for the acquisition or
ownership of Shares pursuant to the Offer (except from the NJDEP under ISRA).
Should any such approval or other action be required, it is presently
contemplated that such approval or action would be sought except as described
below in this Section under "State Takeover Statutes." While, except as
otherwise expressly described herein, Purchaser does not currently intend to
delay acceptance for payment of Shares tendered pursuant to the Offer pending
the outcome of any such matter, there can be no assurance that any such approval
or other action, if needed, 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 in the
event that such approvals were not obtained or such other actions were not taken
or in order to obtain any such approval or other action, any of which could
cause Intel to decline to accept for payment or pay for any Shares tendered.
Intel's obligation under the Offer to accept for payment and pay for Shares is
subject to the Offer Conditions, including conditions relating to legal matters
discussed in this Section 19.
Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission ("FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to these requirements.
Intel expects to file a Notification and Report Form with respect to the
Offer under the HSR Act as soon as practicable following commencement of the
Offer. The waiting period under the HSR Act with respect to the Offer will
expire at 11:59 p.m., Washington, D.C. time, on the 15th day after the date such
form is filed, unless early termination of the waiting period is granted. In
addition, the Antitrust Division or the FTC may
35
extend such waiting period by requesting additional information or documentary
material from Intel. If such a request is made with respect to the Offer, the
waiting period related to the Offer will expire at 11:59 p.m., Washington, D.C.
time, on the 10th day after substantial compliance by Intel with such request.
With respect to each acquisition, the Antitrust Division or the FTC may issue
only one request for additional information. In practice, complying with a
request for additional information or material can take a significant amount of
time. In addition, if the Antitrust Division or the FTC raises substantive
issues in connection with a proposed transaction, the parties may engage in
negotiations with the relevant governmental agency concerning possible means of
addressing those issues and may agree to delay consummation of the transaction
while such negotiations continue. Expiration or termination of applicable
waiting periods under the HSR Act is a condition to Purchaser's obligation to
accept for payment and pay for Shares tendered pursuant to the Offer.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
pursuant to the Offer. At any time before or after such purchase, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
transaction or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Intel or the Company. Litigation seeking similar relief
could be brought by private parties.
Intel does not believe that consummation of the Offer and the other
transactions contemplated by the Merger Agreement will result in the violation
of any applicable antitrust laws. However, there can be no assurance that a
challenge to the Offer and the other transactions contemplated by the Merger
Agreement on antitrust grounds will not be made, or if such a challenge is made,
what the result will be. See Section 18 of this Offer to Purchase for certain
conditions to the purchase of the Shares pursuant to the Offer, including
conditions with respect to litigation and certain governmental actions.
State Takeover Statutes
The Company is incorporated under the laws of the State of New Jersey. In
general, Section 14A:10A-4 of the NJBCA prevents an "interested stockholder"
(generally, a person who owns or has the right to acquire 10% or more of a
corporation's outstanding voting stock, or an affiliate or associate thereof)
from engaging in a "business combination" (defined to include mergers and
certain other transactions) with a New Jersey corporation for a period of five
years following the date such person became an interested stockholder unless
prior to such date the board of directors of the corporation approved the
business combination. Neither Intel nor Purchaser is an interested stockholder
and the Company Board has approved both the Offer and the Merger. Accordingly,
Section 14A:10A-4 is inapplicable to the Offer and the Merger.
A number of states have adopted "takeover" statutes that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act, which,
as a matter of state securities law, made takeovers of corporations meeting
certain requirements more difficult. However, in CTS Corp. v. Dynamics Corp. of
America, the Supreme Court 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, in particular, that the
corporation has a substantial number of stockholders in the state and is
incorporated there.
Based on information supplied by the Company, Intel and Purchaser do not
believe that any state takeover statutes (other than Section 14A:10A-4 of the
NJBCA) purport to apply to the Offer or the Merger. Neither Purchaser nor Intel
has currently complied with any other state takeover statute or regulation.
Intel reserves the right to challenge the applicability or validity of any other
state law purportedly applicable to the Offer or the Merger and nothing in this
Offer to Purchase or any action taken in connection with the Offer or the Merger
is intended as a waiver of such right. If it is asserted that any other state
takeover statute is
36
applicable to the Offer or the Merger and if an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Intel might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Intel might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer or the Merger. In such case, Intel may not be
obliged to accept for payment or pay for any shares tendered pursuant to the
Offer.
20. FEES AND EXPENSES
Intel has retained D.F. King & Co., Inc. to act as the Information Agent
and Citibank, N.A. to serve as the Depositary in connection with the Offer. The
Information Agent and the Depositary each will receive reasonable and customary
compensation for their services and be reimbursed for certain reasonable out-of-
pocket expenses. Intel has also agreed to indemnify the Information Agent and
the Depositary against certain liabilities and expenses in connection with the
Offer, including certain liabilities under the federal securities laws.
Intel will not pay any fees or commissions to any broker or dealer or any
other person for soliciting tenders of Shares pursuant to the Offer (other than
to the Information Agent). Brokers, dealers, commercial banks, trust companies
and other nominees will, upon request, be reimbursed by Intel for customary
mailing and handling expenses incurred by them in forwarding offering materials
to their customers.
21. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities,
blue sky or other laws of such jurisdiction. Purchaser may, in its discretion,
however, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in any such jurisdiction.
Except for the Depositary's authorization to enter into agreements or
arrangements with the Book-Entry Transfer Facility, no person has been
authorized to give any information or to make any representation on behalf of
Purchaser or Intel not contained herein or in the Letter of Transmittal and, if
given or made, such information or representation must not be relied upon as
having been authorized by Intel and Purchaser. Neither the delivery of this
Offer to Purchase nor any purchase pursuant to the Offer shall, under any
circumstances, create any implication that there has been no change in the
affairs of Purchaser, Intel or the Company since the date as of which
information is furnished or the date of this Offer to Purchase.
Purchaser and Intel have filed with the Commission a Tender Offer Statement
on Schedule 14D-l, together with exhibits, pursuant to Rule 14d-3 under the
Exchange Act, furnishing certain additional information with respect to the
Offer. In addition, the Company has filed with the Commission a Solicitation/
Recommendation Statement on Schedule 14D-9, together with exhibits, pursuant to
Rule 14d-9 under the Exchange Act, setting forth the recommendations of the
Company Board with respect to the Offer and the reasons for such recommendations
and furnishing certain additional related information. Such Schedules and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained from the Commission in the manner set forth in Section 7 of this Offer
to Purchase (except that they will not be available at the regional offices of
the Commission).
INTEL LMH ACQUISITION CORPORATION
June 7, 1999
37
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF INTEL AND PURCHASER
The following table sets forth the name, age, business or residence
address, principal occupation or employment at the present time and during the
last five years, and the name of any corporation or other organization in which
such employment is conducted or was conducted of each executive officer or
director of Intel. Except as otherwise indicated, all of the persons listed
below are citizens of the United States of America. Each occupation set forth
opposite a person's name, unless otherwise indicated, refers to employment with
Intel. Unless otherwise indicated, the principal business address of each
director or executive officer is Intel Corporation, 2200 Mission College
Boulevard, Santa Clara, California 95052.
NAME, AGE, CITIZENSHIP AND OTHER MATERIAL POSITIONS
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT HELD DURING THE PAST FIVE YEARS
-------------------------- -------------------------------- -------------------------------
Craig R. Barrett, 59 President since 1997; Chief Chief Operating Officer from
Executive Officer since 1998; 1993-1998; Executive Vice
Director -- Intel since 1992 President from 1990-1997;
Director -- Komag, Incorporated
from 1990-1999; Director --
U.S. West, Inc. since 1998
John Browne, 51 Group Chief Executive -- BP Director -- SmithKline Beecham
British Citizenship Amoco p.l.c. (formerly the since 1996; Trustee -- British
BP Amoco p.l.c. British Petroleum Company p.l.c. Museum since 1995; Director --
Britannic House since 1995; Director -- Intel Redland PLC from 1993-1996
1 Finsbury Circus since 1997
London EC2M 7BA England
Winston H. Chen, 57 Chairman -- Paramitas Foundation President, Chief Executive
Paramitas Foundation since 1992; Director -- Intel Officer and
3945 Freedom Circle, since 1993 Chairman -- Solectron
Suite 760 Corporation from 1978-1994;
Santa Clara, CA 95054 Director -- Solectron
Corporation since 1978; Member
of Board of
Trustees -- Stanford University
since 1994; Member of Board of
Trustees -- Santa Clara
University since 1992;
Director -- Edison
International since 1994
Andrew S. Grove, 62 Chairman since 1997; Chief Executive Officer from
Director -- Intel since 1974 1987-1998; President from
1979-1997
D. James Guzy, 63 Chairman -- The Arbor Company Director -- Cirrus Logic, Inc.
The Arbor Company since 1969; Director -- Intel since 1984; Director -- Micro
P.O. Box 128 since 1969 Component Technology, Inc.
Glenbrook, NV 89413 since 1993; Director
-- Novellus Systems, Inc.
since 1990; Director -- Davis
Selected Group of Mutual Funds
since 1980;
Director -- Alliance Capital
Management Technology Fund;
Chairman, President and Chief
Executive Officer -- SRC
Computers Inc. since 1997;
Director -- PLX Technology,
Inc. since 1986
I-1
NAME, AGE, CITIZENSHIP AND OTHER MATERIAL POSITIONS
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT HELD DURING THE PAST FIVE YEARS
-------------------------- -------------------------------- -------------------------------
Gordon E. Moore, 70 Chairman Emeritus -- Intel since Chairman from 1979 to 1997;
1997; Director -- Intel since Director -- Gilead Sciences,
1968 Inc. since 1996; Director --
Transamerica Corporation since
1996; Chairman, Board of
Trustees -- California
Institute of Technology since
1994; Director -- Conservation
International since 1990
David S. Pottruck, 50 President and Co-Chief Executive Director -- McKesson
Officer -- The Charles Schwab Corporation;
Corporation; Director -- Intel Director -- Preview Travel,
since 1998 Inc.; Director -- Bay Area
Sports Organizing Committee;
Director -- U.S. Ski and
SnowBoard Team Foundation;
Trustee -- University of
Pennsylvania
Jane E. Shaw, 60 Chairman and Chief Executive Founder -- The Stable Network
1310 Orleans Drive Officer -- AeroGen, Inc. since since 1995; President and Chief
Sunnyvale, CA 94089 1998; Director -- Intel since Operating Officer -- ALZA
1993 Corporation from 1987 to 1994;
Chairman of the Board --
IntraBiotics Pharmaceuticals
since 1995; Director -- Aviron
since 1995;
Director -- McKesson
Corporation since 1992;
Director -- Boise Cascade
Corporation since 1994;
Director -- Point Biomedical
Corporation since 1996
Leslie L. Vadasz, 62 Senior Vice President, Corporate N/A
Business Development since 1991;
Director -- Intel since 1988
David B. Yoffie, 44 Professor of Business Director -- Bion, Inc. since
Harvard Business School Administration -- Harvard 1994
Morgan Hall 215 Business School since 1990 (Max
Boston, MA 02163 and Doris Starr Professor of
International Business
Administration since 1993);
Director -- Intel since 1989
Charles E. Young, 67 Chancellor Chancellor -- University of
296 W. Stafford Road, Emeritus -- University of California, Los Angeles from
Thousand Oaks, CA 91361 California, Los Angeles since 1968 to 1997; Chairman of the
1997; Director -- Intel since Board of Governors
1974 Foundation -- International
Exchange of Scientific and
Cultural Information by
Telecommunications since 1987;
Trustee -- Nicholas-Applegate
Mutual Funds from 1991 to 1997;
Director -- Nicholas-Applegate
Fund, Inc. from 1993-1997;
Director -- Canada/United
States Fulbright Commission
since 1996; Director
-- University Net since 1998
I-2
NAME, AGE, CITIZENSHIP AND OTHER MATERIAL POSITIONS
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT HELD DURING THE PAST FIVE YEARS
-------------------------- -------------------------------- -------------------------------
Arthur Rock, 72 Principal -- Arthur Rock & Director -- AirTouch
Arthur Rock & Company Company since 1969; Director -- Communications, Inc. since
One Maritime Plaza, Intel 1968-1999; Director 1994; Director -- Echelon
Suite 1220 Emeritus -- Intel since 1999 Corporation since 1989;
San Francisco, CA 94111 Trustee -- California Institute
of Technology since 1988;
Member -- Board of Governors of
NASD since 1998
Paul S. Otellini, 48 Executive Vice President; Executive Vice President from
General Manager, Intel 1996 to 1998; Vice President
Architecture Business Group from 1992 to 1996
since 1998
Gerhard H. Parker, 55 Executive Vice President, Executive Vice President and
General Manager, New Business General Manager, Technology and
Group since 1998 Manufacturing Group from 1996
to 1998; Senior Vice President
and General Manager, Technology
and Manufacturing Group from
1992-1996
Sean M. Maloney, 42 Senior Vice President, Director, Vice President, Sales and
Sales and Marketing Group since General Manager, Asia-Pacific
1998 Operations from 1995-1998;
Technical Assistant to the
Chairman and Chief Executive
Officer from 1992-1995
Albert Y.C. Yu, 58 Senior Vice President and Director -- Power One since
General Manager, Microprocessor 1997
Products Group since 1993
Andy D. Bryant, 49 Senior Vice President since Vice President, Intel Products
1999; Chief Financial Officer Group from 1990-1994
since 1994
F. Thomas Dunlap, Jr., 48 Vice President, General Counsel N/A
and Secretary since 1987
Arvind Sodhani, 45 Vice President and Treasurer N/A
since 1988
Michael R. Splinter, 48 Senior Vice President from 1999 N/A
to current; General Manager,
Technology and Manufacturing
Group since 1998
Max Palevsky, 74 Self-employed Director from 1968-1997;
Director Emeritus since 1997
Richard Hodgson, 82 Self-employed Director from 1974-1993;
Director Emeritus from
1993-1999
Sanford Kaplan, 83 Self-employed Director from 1974-1993;
Director Emeritus from
1993-1999
I-3
The following table sets forth the name, age business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Purchaser. Except as otherwise indicated, all of the person listed below are
citizens of the United States of America. Each occupation set forth opposite a
person's name, unless otherwise indicated, refers to employment with Intel.
Unless otherwise indicated, the principal business address of each director or
executive officer is Intel Corporation, 2200 Mission College Boulevard, Santa
Clara, California 95052.
NAME, AGE, CITIZENSHIP AND MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT DURING THE PAST FIVE YEARS
- -------------------------- -------------------------------- --------------------------
Cary I. Klafter, 50 Director of Corporate Affairs Partner, Morrison & Foerster from
since 1996; Vice President, prior to 1994 to 1996.
Secretary and Director -- Intel
LMH Acquisition Corporation since
1999
Suzan A. Miller, 35 Senior Counsel since 1999; Senior N/A
Attorney from 1991-1999;
President and Director -- Intel
LMH Acquisition Corporation since
1999
Arvind Sodhani, 45 Vice President and Treasurer N/A
since 1988; Vice President and
Treasurer -- Intel LMH
Acquisition Corporation since
1999
I-4
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each shareholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
CITIBANK, N.A.
By Mail: By Overnight Courier: By Hand:
Citibank, N.A.
Citibank, N.A. Corporate Trust Window
P.O. Box 685 Citibank, N.A. 111 Wall Street, 5th
Old Chelsea Station 915 Broadway, 5th Floor Floor
New York, New York 10113 New York, New York 10010 New York, New York 10043
By Facsimile Transmission: Confirm Receipt of Facsimile
(For Eligible Institutions Only) by Telephone Only:
(212) 505-2248 (800) 270-0808
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may be
directed to the Information Agent or the Depositary. Shareholders may also
contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495
Bankers and Brokers Call Collect: (212) 425-1685
All Others Call Toll-Free: (800) 758-5378