Pursuant to Rule 424(b)(3)
Registration No. 333-67630
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, Massachusetts 01876
(978) 858-2300
September 10, 2001
Dear RiverDelta Stockholders:
You are cordially invited to attend a special meeting of stockholders of
RiverDelta Networks, Inc. which we will hold at 10:00 a.m., local time, on
Thursday, October 11, 2001, at the offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts 02111.
RiverDelta Networks, Inc. has signed a merger agreement with Motorola, Inc.
If the merger is completed, RiverDelta will become a wholly-owned subsidiary of
Motorola.
At the special meeting, we will ask you to vote on three proposals, including
the merger agreement and the merger of RiverDelta and Motorola. Your board of
directors has unanimously approved the merger agreement and the merger, has
unanimously determined that the merger is advisable and fair to you and in your
best interests and unanimously recommends that you approve and adopt the merger
agreement and the merger at the special meeting.
If RiverDelta's stockholders approve the merger agreement and the merger,
then RiverDelta stockholders will, in the aggregate, receive Motorola common
stock valued at $300 million, subject to certain purchase price adjustments
(including a deduction for indebtedness of RiverDelta, which currently is
approximately $27 million but may increase to as much as $45 million, plus
accrued interest thereon), to be apportioned according to the number and class
of shares that each RiverDelta stockholder owns.
Under the merger agreement and an escrow agreement, 10% of the Motorola
common stock that you would otherwise be entitled to receive in the merger will
be deposited in an escrow account and may be used to compensate Motorola in the
event that it is entitled to indemnification under the merger agreement or to
the extent that there is a reduction in the purchase price based on a post-
closing audit adjustment. To the extent that some or all of the escrowed shares
are not required to indemnify Motorola or to be delivered to Motorola based on
the post-closing audit adjustment, the escrowed shares will be distributed
within five business days following the eighteen-month anniversary of the
merger. Motorola common stock is listed on the New York Stock Exchange under the
trading symbol "MOT" and on September 7, 2001, Motorola common stock closed at
$14.29 per share. You will receive cash instead of any fractional share of
Motorola common stock which you would otherwise receive in the merger.
In order to complete the merger, RiverDelta's restated certificate of
incorporation requires that the merger agreement and the merger be approved by
the holders of a majority of the outstanding shares of RiverDelta common stock
and RiverDelta Series A and Series B preferred stock on the record date on an as
converted basis, voting together as a single class.
In addition, and as a second proposal, it is proposed that the restated
certificate of incorporation of RiverDelta be amended in order to increase the
total number of shares of authorized capital stock of RiverDelta to 85,860,000
by increasing the number of authorized shares of RiverDelta preferred stock to
13,860,000, and to designate 6,500,000 shares of preferred stock as Series B
preferred stock. This approval of the amendment to RiverDelta's restated
certificate of incorporation requires the approval of a majority of the
outstanding shares of RiverDelta common stock and RiverDelta Series A and Series
B preferred stock on the record date on an as converted basis, voting together
as a single class.
Finally, in order to complete the merger, the holders of Series A preferred
stock must elect to treat the merger as a deemed conversion of their shares,
which election pursuant to RiverDelta's restated certificate of incorporation
requires the approval of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of RiverDelta Series A preferred
stock on the record date, voting as a separate class.
I, together with other stockholders of RiverDelta, holding in the aggregate
approximately 64.9% of the outstanding RiverDelta common stock and Series A and
Series B preferred stock on an as converted basis, voting together as a single
class, and approximately 90% of the outstanding RiverDelta Series A preferred
stock, voting as a separate class, have agreed to vote all of my shares in favor
of the approval of the merger agreement, the merger and otherwise in such manner
as may be necessary to consummate the merger. Consequently, approval of (i) the
merger agreement and the merger, (ii) the proposal to amend RiverDelta's
restated certificate of incorporation and (iii) the proposal for the holders of
Series A preferred stock to elect to be deemed to have converted all shares of
Series A preferred stock into common stock immediately prior to the merger is
assured.
RiverDelta stockholders who properly preserve their rights are entitled to an
appraisal of their shares of RiverDelta stock under Delaware law if the merger
is completed.
Only stockholders who hold shares of RiverDelta stock at the close of
business on September 7, 2001, the record date for the special meeting, will be
entitled to vote at the special meeting of RiverDelta stockholders. A list of
stockholders entitled to vote will be kept at the offices of RiverDelta, 3
Highwood Drive East, Tewksbury, Massachusetts, 01876, for the ten days prior to
the special meeting.
You should consider the matters discussed under "Risk Factors" commencing on
page 15 of the enclosed proxy statement/prospectus before voting. Please review
carefully the entire proxy statement/prospectus.
It is important that your shares be represented and voted at the special
meeting, whether or not you are able to attend personally. If you do not return
your proxy card, the effect will be a vote against the merger and the other
proposals. You are therefore urged to complete, sign, date and return the
enclosed proxy card promptly in the accompanying envelope, which requires no
postage if mailed in the United States. You are, of course, welcome to attend
the meeting and vote in person, even if you have previously returned your proxy
card.
I look forward to your support.
Sincerely,
/s/ David F. Callan
-------------------------------------
David F. Callan
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction or the Motorola
common stock to be issued in the merger, or determined that this proxy
statement/prospectus is accurate or complete. Any person who tells you otherwise
is committing a crime.
This proxy statement/prospectus is dated September 10, 2001 and is first
being mailed to RiverDelta stockholders on or about September 12, 2001.
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, Massachusetts 01876
(978) 858-2300
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On October 11, 2001
A special meeting of stockholders of RiverDelta Networks, Inc. will be held
on Thursday, October 11, 2001, at 10:00 a.m., local time, at the offices of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, Massachusetts 02111.
The special meeting will be conducted:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of July 11, 2001, by and among Motorola, Bayou Merger Sub,
Inc., a wholly-owned subsidiary of Motorola, and RiverDelta, pursuant to
which, among other things, Bayou Merger Sub, Inc. will merge with and into
RiverDelta, as a result of which RiverDelta will become a wholly-owned
subsidiary of Motorola, and Todd Dagres will be appointed as the stockholders'
representative under the merger agreement.
2. To consider and vote upon a proposal to amend the restated certificate
of incorporation of RiverDelta in order to increase the total number of shares
of authorized capital stock of RiverDelta to 85,860,000 by increasing the
number of authorized shares of RiverDelta preferred stock to 13,860,000, and
to designate 6,500,000 shares of preferred stock as Series B preferred stock.
3. To consider and vote upon a proposal for the holders of Series A
preferred stock to elect to be deemed to have converted all shares of Series A
preferred stock into shares of RiverDelta common stock immediately prior to
the effective time of the merger.
4. To transact such other business as may properly come before the
meeting.
If RiverDelta's stockholders approve the merger agreement and the merger,
then RiverDelta stockholders will, in the aggregate, receive Motorola common
stock valued at $300 million, subject to certain purchase price adjustments
(including a deduction for indebtedness of RiverDelta, which currently is
approximately $27 million but may increase to as much as $45 million, plus
accrued interest thereon), to be apportioned according to the number and class
of shares that each RiverDelta stockholder owns.
In order to complete the merger, RiverDelta's restated certificate of
incorporation requires that the merger agreement and the merger be approved by
the holders of a majority of the outstanding shares of RiverDelta common stock
and RiverDelta Series A and Series B preferred stock on the record date on an as
converted basis, voting together as a single class.
In addition, in order to complete the merger, RiverDelta must amend its
restated certificate of incorporation to increase the total number of shares of
authorized capital stock of RiverDelta and to designate additional shares of
preferred stock as Series B preferred stock. The approval of the amendment to
RiverDelta's restated certificate of incorporation requires the approval of a
majority of the outstanding shares of RiverDelta common stock and RiverDelta
Series A and Series B preferred stock on the record date on an as converted
basis, voting together as a single class.
Finally, in order to complete the merger, the holders of Series A preferred
stock must elect to treat the merger as a deemed conversion of their shares,
which election pursuant to RiverDelta's restated certificate of
incorporation requires the approval of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of RiverDelta Series A
preferred stock on the record date, voting as a separate class.
Stockholders of RiverDelta holding in the aggregate approximately 64.9% of
the outstanding RiverDelta common and Series A and Series B preferred stock on
an as converted basis, voting together as a single class, and approximately 90%
of the outstanding RiverDelta Series A preferred stock, voting as a separate
class, have agreed to vote all of their shares in favor of the adoption of the
merger agreement, the merger and otherwise in such manner as may be necessary to
consummate the merger. Consequently, approval of (i) the merger agreement and
the merger, (ii) the proposal to amend RiverDelta's restated certificate of
incorporation and (iii) the proposal for the holders of Series A preferred stock
to elect to be deemed to have converted all shares of Series A preferred stock
into common stock immediately prior to the merger is assured.
RiverDelta stockholders who properly preserve their rights are entitled to an
appraisal of their shares of RiverDelta stock under Delaware law if the merger
is completed.
Only stockholders who hold shares of RiverDelta stock at the close of
business on September 7, 2001, the record date for the special meeting, will be
entitled to vote at the special meeting of RiverDelta stockholders. A list of
stockholders entitled to vote will be kept at the offices of RiverDelta, 3
Highwood Drive East, Tewksbury, Massachusetts, 01876, for the ten days prior the
special meeting.
You should consider the matters discussed under "Risk Factors" commencing on
page 15 of the enclosed proxy statement/prospectus before voting. Please review
carefully the entire proxy statement/prospectus and the merger agreement
attached as Appendix A-1.
Your board of directors unanimously recommends that you vote "FOR" approval
and adoption of the merger agreement and the merger and each other proposal, as
described in detail in the accompanying proxy statement/prospectus.
For the Board of Directors,
/s/ David F. Callan
David F. Callan
President and Chief Executive Officer
Tewksbury, Massachusetts
September 10, 2001
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and promptly return it in the accompanying envelope,
which requires no postage if mailed in the United States. You may revoke your
proxy at any time before it is voted by delivering to RiverDelta a subsequently
executed proxy card or a written notice of revocation or by voting in person at
the special meeting.
You should not send stock certificates with your proxy card. A transmittal
letter for your stock will be sent to you by the exchange agent after the
merger.
Motorola is a Delaware corporation and its shares of common stock trade on
the New York Stock Exchange under the symbol "MOT." This proxy
statement/prospectus incorporates by reference important business and financial
information about Motorola that is not included in, or delivered with, this
proxy statement/prospectus. Motorola will provide you with copies of the
information relating to Motorola that has been incorporated by reference,
without charge, upon written or oral request to:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Tel: (800) 762-8509
Attn: Investor Relations
You may also obtain information from Motorola's website:
www.motorola.com/investor.
For additional information concerning how you can obtain additional
information on Motorola, see "Where You Can Find More Information" beginning on
page 72.
If you would like to request documents, please do so by October 3, 2001 in
order to obtain them before the special meeting of RiverDelta stockholders.
RiverDelta is a privately held corporation with fewer than 300 stockholders
that is not subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended, and therefore does not incorporate information in this
proxy statement/prospectus by reference unless such information appears in an
Appendix to this proxy statement/prospectus.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MERGER ...................................... 1
SUMMARY...................................................................... 5
The Companies.............................................................. 5
Risk Factors............................................................... 5
The RiverDelta Special Meeting............................................. 6
Record Date; Stockholders Entitled to Vote................................. 6
Vote Required.............................................................. 6
Voting Agreement........................................................... 7
Recommendation of the RiverDelta Board of Directors........................ 7
Accounting Treatment....................................................... 7
Interests of RiverDelta Directors and Executive Officers in the Merger..... 7
Material Federal Income Tax Consequences of the RiverDelta Merger.......... 7
Regulatory Matters......................................................... 8
Statutory Appraisal Rights................................................. 8
Management and Operations of RiverDelta after the Merger................... 8
What You Will Receive in the Merger........................................ 8
Ownership of Shares after the Merger....................................... 9
The Merger................................................................. 9
Effects of the Merger on the Rights of RiverDelta Stockholders............. 9
Listing of Motorola Common Stock........................................... 9
Conditions to the Merger................................................... 9
Termination................................................................ 10
Fees and Expenses.......................................................... 10
Appointment of Stockholders' Representative................................ 10
Indemnification of Motorola; Escrow Agreement.............................. 10
Credit Agreement........................................................... 11
Original Equipment Manufacturer Agreement.................................. 11
Additional Proposals....................................................... 11
Forward-Looking Statements................................................. 11
SUMMARY SELECTED FINANCIAL INFORMATION....................................... 12
Motorola Selected Historical Consolidated Financial Data................... 12
Motorola Per Share Data.................................................... 13
Market Price and Dividend Information...................................... 13
RISK FACTORS................................................................. 15
Risks Relating to the Merger............................................... 15
Risks Related to RiverDelta................................................ 16
THE COMPANIES................................................................ 18
Motorola................................................................... 18
RiverDelta................................................................. 18
THE RIVERDELTA SPECIAL MEETING............................................... 20
Date, Time and Place....................................................... 20
Matters to be Considered at the Special Meeting............................ 20
Board of Directors Recommendation.......................................... 20
Record Date................................................................ 20
Quorum..................................................................... 20
Stockholders Entitled to Vote.............................................. 21
i
Page
----
Vote Required ........................................................... 21
Voting Agreement ........................................................ 21
Proxies ................................................................. 22
Revocability of Proxies ................................................. 22
Solicitation of Proxies and Expenses .................................... 22
Dissenters' Rights to Appraisal ......................................... 22
THE MERGER ................................................................ 24
Structure of the Merger ................................................. 24
Background .............................................................. 24
Motorola's Reasons for the Merger ....................................... 25
RiverDelta's Reasons for the Merger ..................................... 25
Recommendation of the RiverDelta Board of Directors ..................... 27
Accounting Treatment .................................................... 27
Effectiveness of Merger ................................................. 27
Merger Consideration .................................................... 28
Interests of RiverDelta Directors and Executive Officers in the Merger .. 28
Material Federal Income Tax Consequences of the RiverDelta Merger ....... 30
Regulatory Matters ...................................................... 33
Statutory Appraisal Rights .............................................. 33
Appraisal Rights Procedures ............................................. 33
Resale of Motorola Common Stock ......................................... 36
Management and Operations of RiverDelta after the Merger ................ 36
THE MERGER AGREEMENT ...................................................... 37
The Merger .............................................................. 37
Merger Consideration .................................................... 37
Post-Closing Adjustment ................................................. 38
Treatment of RiverDelta Stock Generally ................................. 39
Treatment of RiverDelta Series B Preferred Stock ........................ 40
Treatment of RiverDelta Common Stock .................................... 40
Treatment of RiverDelta Series A Preferred Stock ........................ 40
Treatment of RiverDelta Stock Options and Restricted Shares ............. 41
Fractional Shares ....................................................... 42
Exchange of Certificates ................................................ 42
Listing of Motorola Common Stock ........................................ 43
Representations and Warranties of RiverDelta ............................ 43
Representations and Warranties of Motorola and Bayou Merger Sub, Inc. ... 44
Certain Covenants and Agreements ........................................ 44
Conditions to the Merger ................................................ 47
Conditions to the Obligations of Motorola and Bayou Merger Sub, Inc. .... 48
Conditions to the Obligations of RiverDelta ............................. 48
Termination ............................................................. 49
Effect of Termination ................................................... 49
Fees and Expenses ....................................................... 49
Amendment ............................................................... 49
Waiver .................................................................. 50
Voting Agreement ........................................................ 50
Appointment of Stockholders' Representative ............................. 51
Indemnification of Motorola; Escrow Agreement ........................... 51
Letter of Transmittal ................................................... 52
Bridge Holders Agreement ................................................ 53
Credit Agreement ........................................................ 54
Original Equipment Manufacturer (OEM) Agreement ......................... 55
ii
Page
----
ADDITIONAL PROPOSALS .................................................... 56
Amendment to Certificate of Incorporation ............................. 56
Deemed Conversion of Series A Preferred Stock ......................... 57
DESCRIPTION OF MOTOROLA CAPITAL STOCK ................................... 58
Motorola Common Stock ................................................. 58
Motorola Preferred Stock .............................................. 58
Motorola Rights Plan .................................................. 59
Transfer Agent; Registrar and Exchange Agent .......................... 60
COMPARISON OF CERTAIN RIGHTS OF COMMON STOCKHOLDERS OF MOTOROLA AND
STOCKHOLDERS OF RIVERDELTA ............................................. 61
Capitalization ........................................................ 61
Voting Stock .......................................................... 61
Number of Directors ................................................... 61
Classification of Board of Directors .................................. 61
Quorum for Meeting of Directors ....................................... 62
Election of Directors ................................................. 62
Removal of Directors .................................................. 62
Amendments to Charter ................................................. 62
Filling Vacancies on the Board of Directors ........................... 62
Amendments to By-Laws ................................................. 63
Rights Plan ........................................................... 63
Special Stockholder Meetings .......................................... 63
Stockholder Action by Written Consent ................................. 63
Limitation of Personal Liability of Directors and Indemnification ..... 63
Dividends ............................................................. 64
Liquidation ........................................................... 65
Conversion ............................................................ 65
CERTAIN INFORMATION CONCERNING RIVERDELTA ............................... 67
Security Ownership of Directors, Executive Officers and Principal
Stockholders of RiverDelta ........................................... 67
EXPERTS ................................................................. 71
LEGAL AND TAX MATTERS ................................................... 71
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ....................... 71
WHERE YOU CAN FIND MORE INFORMATION ..................................... 72
APPENDICES TO THE PROXY STATEMENT/PROSPECTUS
Appendix A-1--Agreement and Plan of Merger .............................. A-1
Appendix A-2--Amendment No. 1 to the Merger Agreement ................... A-2-1
Appendix B--Voting Agreement ............................................ B-1
Appendix C--Section 262 of the Delaware General Corporation Law ......... C-1
Appendix D--Form of Escrow Agreement .................................... D-1
Appendix E-1--Agreement to Amend Subordinated Convertible Promissory
Notes and to Cancel Series C Convertible Preferred Stock
Purchase Warrants ......................................... E-1
Appendix E-2--Agreement to Further Amend Subordinated Convertible
Promissory Notes .......................................... E-2-1
Appendix F--Form of Company Affiliate Letter ............................ F-1
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the proposed transaction?
A: A wholly-owned subsidiary of Motorola, Inc. will merge with and into
RiverDelta Networks, Inc. As a result, RiverDelta will become a wholly-owned
subsidiary of Motorola, and RiverDelta stockholders will gain the right to
exchange their RiverDelta shares for shares of Motorola common stock.
Q: Why are the companies proposing the merger?
A: The merger will combine RiverDelta's integrated routing technology with
Motorola's established Cable Modem Termination System business and broadband
network operator sales and support channel. Combining the two organizations'
resources and collective expertise is expected to result in a more efficient
carrier-class Cable Modem Termination System solution with integrated routing
capabilities for broadband network operators. The merger will allow the combined
businesses to offer broadband network operators a more comprehensive solution,
which will benefit both parties.
Q: What will I receive in the merger?
A: The merger agreement provides that RiverDelta stockholders will, in the
aggregate, receive $300 million, subject to certain purchase price adjustments
(including a deduction for indebtedness of RiverDelta, which currently is
approximately $27 million but may increase to as much as $45 million, plus
accrued interest thereon). The purchase price will be paid in shares of Motorola
common stock in exchange for your RiverDelta stock, based on the number and
class of RiverDelta shares that you own. The number of shares of Motorola common
stock you will receive will depend on the value of such shares. Motorola common
stock will be valued based on its average market price over a 20-day trading
period ending two days prior to the closing date of the merger. We encourage you
to obtain current market price quotations for Motorola common shares.
Assuming the merger closes on October 12, 2001, holders of Series B preferred
stock will receive approximately the first $62.7 million of consideration. The
remaining consideration will be paid to the holders of RiverDelta Series A
preferred stock and common stock. The holders of Series A preferred stock will
receive the same consideration that they would receive if they had converted to
common stock.
Under the merger agreement and an escrow agreement, 10% of the shares of
Motorola common stock that you would otherwise be entitled to receive in the
merger will be deposited in an escrow account and may be used to compensate
Motorola in the event that it is entitled to indemnification under the merger
agreement or to the extent that there is a reduction in the purchase price based
on a post-closing audit adjustment.
In addition, as no fractional shares of Motorola common stock will be issued,
you will receive cash payments instead of any fractional shares of Motorola
common stock that you would have otherwise received. After giving effect to the
merger, we expect that former RiverDelta stockholders will hold less than 1% of
the outstanding shares of Motorola common stock.
Q: What is the escrow fund and how does it work?
A: If the merger is completed, Motorola will deposit 10% of the Motorola
common shares to be issued in the merger into an escrow account.
The escrowed shares will be available to compensate Motorola in the event
that it is entitled to indemnification from the RiverDelta stockholders under
the merger agreement or to the extent that there is a reduction in the purchase
price based on the post-closing audit adjustment. To the extent that some or all
of the escrowed shares are not required to indemnify Motorola or to be delivered
to Motorola based on the post-closing audit adjustment, those escrowed shares
will be distributed to the RiverDelta stockholders entitled to receive those
shares within five business days following the eighteen-month anniversary of the
merger.
1
Q: Who must approve the merger?
A: In addition to the approvals by the Motorola board of directors and the
RiverDelta board of directors, each of which has already been obtained, and
governmental and other regulatory approvals, the merger agreement and the merger
must be approved by RiverDelta's stockholders.
Q: What stockholder vote is required to approve the merger agreement and the
merger?
A: A majority of the outstanding shares of RiverDelta common stock entitled
to vote constitutes a quorum for the RiverDelta special meeting. The affirmative
vote of the holders of a majority of the outstanding shares of RiverDelta common
stock and Series A and Series B preferred stock on the record date on an as
converted basis, voting together as a single class, and the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
RiverDelta Series A preferred stock on the record date, voting as a separate
class, are required to approve the merger agreement and the merger. Certain
stockholders of RiverDelta holding in the aggregate enough shares to approve the
merger agreement and the merger have entered into a voting agreement under which
they have agreed to vote all of their shares of RiverDelta stock in favor of the
merger agreement and the merger. Consequently, approval of the merger agreement
and the merger is assured.
Q: Does the RiverDelta board of directors recommend approval of the merger
agreement and the merger?
A: Yes. After careful consideration, the RiverDelta board of directors
unanimously recommends that its stockholders vote in favor of the merger
agreement and the merger. For a more complete description of the recommendation
of the RiverDelta board of directors, see the section entitled "The Merger--
RiverDelta's Reasons for the Merger" on page 25 and "The Merger--Recommendation
of the RiverDelta Board of Directors" on page 27.
Q: Are there any conditions to the merger being completed?
A: Yes. The obligation of RiverDelta and Motorola to complete the merger is
subject to satisfaction of several conditions including, without limitation,
that certain RiverDelta employees continue to be employed by RiverDelta, that
they sign retention agreements and that they not be in breach of those retention
agreements. For a more complete description of the conditions to completion of
the merger, see the section entitled "The Merger Agreement--Conditions to the
Merger" on page 47.
Q: What if the merger is not completed?
A: It is possible the merger will not be completed. That might happen if, for
example, a required condition to the closing of the merger set forth in the
merger agreement is not satisfied. Should that occur, none of Motorola,
RiverDelta or any third party is under any obligation to make or consider any
alternative proposals regarding the purchase of your shares of RiverDelta stock.
Q: What stockholder vote is required to approve the amendment to the
RiverDelta restated certificate of incorporation and the deemed conversion of
RiverDelta Series A preferred stock?
A: The approval of the amendment to RiverDelta's restated certificate of
incorporation requires the approval of a majority of the outstanding shares of
RiverDelta common stock and RiverDelta Series A and Series B preferred stock on
the record date on an as converted basis, voting together as a single class. The
approval of the election by the holders of the shares of RiverDelta Series A
preferred stock to be deemed to have converted all shares of RiverDelta Series A
preferred stock into RiverDelta common stock immediately prior to the closing of
the merger will require the approval of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of RiverDelta Series A
preferred stock on the record date, voting as a separate class.
2
Q: Does the RiverDelta board of directors recommend approval of the amendment
to the RiverDelta restated certificate of incorporation and the deemed
conversion of RiverDelta Series A preferred stock?
A: Yes. After careful consideration, the RiverDelta board of directors
unanimously recommends that its stockholders vote in favor of the amendment to
the RiverDelta restated certificate of incorporation and the deemed conversion
of RiverDelta Series A preferred stock. For a more complete description of the
recommendation of the RiverDelta board of directors, see the section entitled
"Additional Proposals--Amendment to Certificate of Incorporation" on page 56 and
"Additional Proposals--Deemed Conversion of Series A Preferred Stock" on page
57.
Q: What do I need to do now?
A: We urge you to read this proxy statement/prospectus, including the
appendices, carefully, and to consider how the merger will affect you as a
stockholder of RiverDelta. You also may want to review the documents referenced
under "Where You Can Find More Information" on page 72.
Q: How do I vote?
A: You may vote by mailing a signed proxy card in the enclosed return
envelope as soon as possible so that those shares may be represented at the
special meeting. You may also attend the special meeting and vote in person.
Q: Can I change my vote?
A: Yes. You may change your vote by delivering a later-dated, signed proxy
card to RiverDelta's secretary before the special meeting of RiverDelta
stockholders, or by attending the special meeting and voting in person.
Q: Is the merger taxable?
A: It is a condition of the merger that RiverDelta receive an opinion from
its tax counsel stating that the merger will qualify as a reorganization for
U.S. federal income tax purposes. Motorola is obligated to use its reasonable
best efforts to obtain such an opinion from its tax advisor prior to the closing
of the merger. As a result of the merger qualifying as a reorganization for U.S.
federal income tax purposes, RiverDelta stockholders will generally not
recognize any gain or loss for U.S. federal income tax purposes on the exchange
of their RiverDelta shares solely for Motorola common stock in the merger,
except for cash received in lieu of fractional shares of Motorola common stock.
We describe the material U.S. federal income tax consequences of the merger
in more detail beginning on page 30. The tax consequences to you will depend on
the facts of your own situation. Please consult your tax advisor for a full
understanding of the tax consequences to you of the merger.
Q: Am I entitled to appraisal rights?
A: Yes. You will be entitled to appraisal rights in connection with the
merger provided that you give written demand for appraisal and comply with all
relevant provisions of Section 262 of the Delaware General Corporation Law
explained beginning on page 33 and attached as Appendix C to this proxy
statement/prospectus.
Q: When do you expect to complete the merger?
A: We expect to complete the merger on or about Friday, October 12, 2001.
3
Q: Should I send in my RiverDelta stock certificates now?
A: No. After we complete the merger, Motorola's exchange agent will send
instructions to you regarding your RiverDelta shares that were converted in the
merger. These instructions will explain how to exchange your RiverDelta share
certificates for Motorola share certificates and, if applicable, cash instead of
any fractional shares of Motorola common stock that you would otherwise receive
in the merger. Please do not send in your RiverDelta stock certificates with
your proxy card.
Q: When and where is the special meeting?
A: The special meeting will be held at 10:00 a.m., local time, on Thursday,
October 11, 2001 at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., One Financial Center, Boston, Massachusetts 02111.
Q: What else will happen at the meeting?
A: We know of no other matters that are expected to come before the special
meeting.
Q: Whom can I call with questions?
A: If you have any questions about the merger or any related transactions,
please call RiverDelta at (978) 858-2300 (and ask for Michael Brown) or call
Motorola's Investor Relations Department at (800) 262-8509.
If you would like copies of any of the documents we refer to in this proxy
statement/prospectus, you should call Motorola at (800) 262-8509.
4
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To better understand the merger, and for a more complete
description of the legal terms of the transaction, you should read this entire
proxy statement/prospectus carefully, as well as those additional documents to
which we refer you. In particular, you should read the documents attached to
this proxy statement/prospectus, including the merger agreement, which is
attached as Appendix A-1 (as amended by Amendment No. 1 to the Agreement and
Plan of Merger, which is attached as Appendix A-2), the voting agreement, which
is attached as Appendix B, the form of escrow agreement, which is attached as
Appendix D, the bridge holders agreement, which is attached as Appendix E-1 (as
amended by the Agreement to Further Amend Subordinated Convertible Promissory
Notes, which is attached as Appendix E-2), and the company affiliate letter,
which is attached as Appendix F. Also see "Where You Can Find More Information"
on page 72. We have included page references parenthetically to direct you to a
more complete description of the topics presented in this summary.
The Companies (see page 18)
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Tel: (847) 576-5000
website: www.motorola.com
Motorola is a global leader in providing integrated communications solutions
and embedded electronic solutions. These include:
. software-enhanced wireless telephone, two-way radio and messaging products
and systems, as well as networking and Internet-access products, for
consumers, network operators and commercial, government and industrial
customers;
. end-to-end systems for the delivery of interactive digital video, voice
and high-speed data solutions for broadband operators;
. embedded semiconductor solutions for customers in the networking and
computing, transportation, wireless communications and digital consumer/home
networking markets; and
. embedded electronic systems for automotive, industrial, transportation,
navigation, communications and energy systems markets.
Motorola is a corporation organized under the laws of the State of Delaware.
Motorola's sales in 2000 were $37.6 billion. Shares of Motorola common stock
primarily trade on the New York Stock Exchange under the symbol "MOT".
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, Massachusetts 01876
Tel: (978) 858-2300
RiverDelta designs, develops and markets Internet Protocol, or IP, edge
routing, aggregation and service delivery solutions for broadband, or cable,
service providers. RiverDelta's products enable broadband service providers to
offer high-quality voice, high-speed data and enhanced broadband services to
their business and residential customers.
Risk Factors (see page 15)
See "Risk Factors" for a discussion of certain risks that should be
considered by RiverDelta stockholders in evaluating whether to approve the
merger and the merger agreement and thereby become holders of Motorola common
stock.
5
The RiverDelta Special Meeting (see page 20)
The special meeting of the RiverDelta stockholders will be held on Thursday,
October 11, 2001, at 10:00 a.m., local time, at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston,
Massachusetts 02111.
At the special meeting, RiverDelta stockholders will be asked:
. to approve the merger agreement and the merger and, in so doing, to appoint
Todd Dagres as stockholders' representative under the merger agreement;
. to approve the amendment to the restated certificate of incorporation of
RiverDelta in order to increase the total number of shares of authorized
capital stock of RiverDelta common stock to 85,860,000 by increasing the
number of authorized shares of RiverDelta preferred stock to 13,860,000 and
to designate 6,500,000 shares of preferred stock as Series B preferred
stock;
. to approve the proposal for the holders of Series A preferred stock to elect
to be deemed to have converted all shares of Series A preferred stock into
shares of RiverDelta common stock immediately prior to the effective time of
the merger; and
. to act on other matters that may be properly submitted to a vote at the
RiverDelta special meeting.
Record Date (see page 20); Stockholders Entitled to Vote (see page 21)
You can vote at the special meeting if you owned RiverDelta shares at the
close of business on September 7, 2001, the record date.
On the record date, there were 34,177,840 shares of RiverDelta common stock,
7,358,358 shares of RiverDelta Series A preferred stock and 2,956,988 shares of
RiverDelta Series B preferred stock outstanding and entitled to vote at the
special meeting. RiverDelta stockholders will have one vote at the special
meeting for each share of RiverDelta common stock that they owned on the record
date, and will have the number of votes equal to the number of shares of
RiverDelta common stock into which each share of RiverDelta preferred stock that
they owned on the record date was convertible.
As of September 7, 2001, each share of RiverDelta Series A preferred stock
was convertible into three shares of RiverDelta common stock, and each share of
RiverDelta Series B preferred stock was convertible into one and one-half shares
of RiverDelta common stock. Under a voting agreement, holders of 90% of the
issued and outstanding shares of RiverDelta Series A preferred stock agreed to
elect to be deemed to have converted all shares of Series A preferred stock into
shares of common stock immediately prior to the effective time of the merger.
Vote Required (see page 21)
The affirmative vote of a majority of the outstanding shares of RiverDelta
common stock and RiverDelta Series A and Series B preferred stock on the record
date on an as converted basis, voting together as a single class, is required to
approve the merger agreement and the merger.
The approval of the amendment to RiverDelta's restated certificate of
incorporation requires the approval of a majority of the outstanding shares of
RiverDelta common stock and RiverDelta Series A and Series B preferred stock on
the record date on an as converted basis, voting together as a single class.
The approval of the election by the holders of Series A preferred stock to be
deemed to have converted all of their shares of RiverDelta Series A preferred
stock into RiverDelta common stock immediately prior to the closing of the
merger will require the approval of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of RiverDelta Series A
preferred stock on the record date, voting as a separate class.
6
At the close of business on the record date, 64.9% of the outstanding shares
of RiverDelta common stock and Series A and Series B preferred stock on an as
converted basis, and 90% of the outstanding shares of RiverDelta Series A
preferred stock were held by directors and officers of RiverDelta and their
affiliates. All of the shares beneficially owned by the directors of RiverDelta,
two of whom are executive officers, are subject to a voting agreement to vote
the shares in favor of the approval and adoption of the merger agreement.
Voting Agreement (see page 21)
Certain officers, directors and stockholders of RiverDelta have entered into
a voting agreement with Motorola, pursuant to which they have agreed, among
other things, to vote the shares of RiverDelta stock they own "FOR" approval of
the merger agreement and the merger. Each of these stockholders has also granted
an irrevocable proxy and a power of attorney to Motorola representatives to vote
such stockholder's shares of RiverDelta stock "FOR" approval of the merger
agreement and the merger.
On the record date, these RiverDelta stockholders collectively owned and were
entitled to vote approximately:
. 64.9% of the outstanding shares of RiverDelta common stock and Series A and
Series B preferred stock on an as converted basis, voting together as a
single class; and
. 90% of the outstanding shares of RiverDelta Series A preferred stock, voting
as a separate class.
Recommendation of the RiverDelta Board of Directors (see page 20)
After careful consideration, the RiverDelta board of directors unanimously
recommends that the stockholders vote in favor of the merger agreement, the
merger and each other proposal presented at the special meeting. For a more
complete description of the recommendation of the RiverDelta board of directors,
see the section entitled "The Merger--RiverDelta's Reasons for the Merger" on
page 25 and "The Merger--Recommendation of the RiverDelta Board of Directors" on
page 27.
Accounting Treatment (see page 27)
Motorola will account for the merger as a purchase of a business, which means
that the assets and liabilities of RiverDelta, including intangible assets, will
be recorded at their fair value with the remaining purchase price over the fair
value of net identifiable assets and liabilities and in process research and
development reflected as goodwill, and the results of operations and cash flows
of RiverDelta will be included in Motorola's results prospectively after the
merger.
Interests of RiverDelta Directors and Executive Officers in the Merger (see
page 28)
RiverDelta stockholders should note that a number of directors and executive
officers of RiverDelta have interests in the merger as directors or executive
officers that are different from, or in addition to, those of a stockholder
generally. If RiverDelta completes the merger, certain indemnification
arrangements for current directors and executive officers of RiverDelta will be
continued, and it is anticipated that certain employees of RiverDelta will be
retained as employees of Motorola or will otherwise continue their relationship
with Motorola and RiverDelta. As a result of the merger, the vesting of unvested
stock options and the lapsing of RiverDelta's right to repurchase restricted
stock held by certain executive officers of RiverDelta will be accelerated
pursuant to the terms of existing stock option and stock repurchase agreements.
It is a condition of the merger that certain executives and employees will enter
into retention agreements with Motorola. It is expected that the retention
agreements will provide for further acceleration of vesting, or of lapsing, of
repurchase rights, the grant of Motorola stock options and the payment of cash
retention bonuses and other consideration.
Material Federal Income Tax Consequences of the RiverDelta Merger (see page 30)
The merger is intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code. It is a condition of the merger that
RiverDelta receive an opinion from its tax counsel stating
7
that the merger will qualify as a reorganization for U.S. federal income tax
purposes. Motorola is obligated to use its reasonable best efforts to obtain
such an opinion from its tax advisor prior to the closing of the merger. As a
result of the merger qualifying as a reorganization for U.S. federal income tax
purposes, RiverDelta stockholders generally will not recognize any gain or loss
for U.S. federal income tax purposes on the exchange of their RiverDelta shares
solely for Motorola common stock in the merger, except for cash received in lieu
of fractional shares of Motorola common stock.
Regulatory Matters (see page 33)
Motorola and RiverDelta made certain filings and took other actions necessary
to obtain approvals from U.S. governmental authorities in connection with the
merger, including filing premerger notifications with the U.S. antitrust
authorities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
The U.S. antitrust authorities have granted early termination of the waiting
period during which the U.S. antitrust authorities review the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. However, the
Antitrust Division of the Department of Justice or the Federal Trade Commission
may challenge the merger on antitrust grounds even after expiration of the
waiting period. Accordingly, at any time after the completion of the merger,
either the Antitrust Division of the Department of Justice or the Federal Trade
Commission could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, or certain other persons could take action
under the antitrust laws, including seeking to enjoin the merger. Additionally,
at any time before or after the completion of the merger, notwithstanding that
the applicable waiting period expired or ended, any state could take action
under the antitrust laws as it deems necessary or desirable in the public
interest. There can be no assurance that a challenge to the merger will not be
made or that, if a challenge is made, we will prevail.
Statutory Appraisal Rights (see page 33)
Appraisal rights are provided for under Delaware law. RiverDelta stockholders
who do not vote for the merger and who satisfy certain other conditions
described beginning on page 33 and in Appendix C to this proxy
statement/prospectus are entitled to be paid the "fair value" of their shares of
RiverDelta common or preferred stock, as determined by the Delaware Chancery
Court. Since appraisal rights are available only to RiverDelta stockholders who
satisfy certain conditions, you should carefully review the section of this
proxy statement/prospectus titled "The Merger--Appraisal Rights Procedures"
beginning on page 33 and the copy of the Delaware appraisal rights statute
attached as Appendix C to this proxy statement/prospectus.
Management and Operations of RiverDelta after the Merger (see page 36)
RiverDelta's products and businesses will be integrated into Motorola's
Broadband Communications Sector - specifically within Motorola Broadband's
existing Network Infrastructure Solutions business. The Network Infrastructure
Solutions business is part of Motorola Broadband's IP Systems Group. Motorola
expects that the members of RiverDelta's management will continue their
relationship with the business after the merger.
What You Will Receive in the Merger (see page 28)
The merger agreement provides that RiverDelta stockholders will, in the
aggregate, receive $300 million, subject to certain purchase price adjustments
(including a deduction for indebtedness of RiverDelta, which currently is
approximately $27 million but may increase to as much as $45 million, plus
accrued interest thereon). The purchase price will be paid in shares of Motorola
common stock in exchange for your RiverDelta stock based on the number
and class of RiverDelta shares that you own. Motorola common stock will be
valued based on its average market price over a 20-day trading period ending on
(and including) the second trading day prior to the closing date of the merger.
We encourage you to obtain current Market price quotations for Motorola common
shares.
8
Assuming the merger closes on October 12, 2001, holders of Series B preferred
stock will receive approximately the first $62.7 million of consideration. The
remaining consideration will be paid to the holders of RiverDelta Series A
preferred stock and common stock. The holders of Series A preferred stock will
receive the same consideration that they would receive if they had converted to
common stock.
Under the merger agreement and an escrow agreement, 10% of the shares of
Motorola common stock that you would otherwise be entitled to receive in the
merger will be deposited in an escrow account and may be used to compensate
Motorola in the event that it is entitled to indemnification under the merger
agreement or to the extent that there is a reduction in the purchase price based
on a post-closing audit adjustment.
In addition, as no fractional shares of Motorola common stock will be issued,
you will receive cash payments instead of any fractional shares of Motorola
common stock that you would have otherwise received.
Ownership of Shares after the Merger
After giving effect to the merger, we expect that the former RiverDelta
stockholders will hold less than 1% of the outstanding Motorola common stock as
a result of the merger, based upon the number of issued and outstanding shares
of Motorola common stock as of September 7, 2001.
The Merger (see page 24)
We propose that a wholly-owned subsidiary of Motorola formed for the purpose
of the merger merge with and into RiverDelta. As a result, RiverDelta will
become a wholly-owned subsidiary of Motorola.
We have attached the merger agreement, which is the legal document that
governs the merger, as Appendix A-1 to this proxy statement/prospectus (a minor
amendment to the merger agreement is attached as Appendix A-2 to this proxy
statement/prospectus). We encourage you to read the merger agreement. We have
also filed other related agreements as exhibits to Motorola's registration
statement on Form S-4 containing this proxy statement/prospectus. Please see the
section titled "Where You Can Find More Information" on page 72 for instructions
on how to obtain copies of these exhibits.
Effects of the Merger on the Rights of RiverDelta Stockholders (see page 61)
The rights of RiverDelta stockholders who receive Motorola common stock in
the merger will continue to be governed by Delaware law, but will also be
governed by Motorola's charter and by-laws. The rights of RiverDelta
stockholders under Motorola's charter and by-laws will differ in certain
respects from their rights under RiverDelta's restated certificate of
incorporation and by-laws. See "Comparison of Certain Rights of Common
Stockholders of Motorola and Stockholders of RiverDelta" beginning on page 61
for a discussion of the material differences between the rights of holders of
Motorola common stock and of RiverDelta stock.
Listing of Motorola Common Stock (see page 43)
It is a condition to the completion by RiverDelta of the merger that the
shares of Motorola common stock to be issued to the RiverDelta stockholders in
the merger, or upon the exercise of RiverDelta options assumed by Motorola in
connection with the merger, are authorized for listing on the New York Stock
Exchange.
Conditions to the Merger (see page 47)
We will complete the merger only if certain conditions are satisfied or
waived, including but not limited to:
. the requisite approval of the RiverDelta stockholders;
. no material adverse effect to the business of RiverDelta;
. appraisal rights must not have been perfected for more than 5% of the
aggregate shares of RiverDelta on a fully converted basis;
9
. RiverDelta's receipt of a payoff letter in connection with principal and
interest incurred under a loan and security agreement with Silicon Valley
Bank;
. certain employees must continue to be employed by RiverDelta after the
effective time of the merger, must enter into retention agreements and must
not be in breach of those retention agreements; and
. the satisfaction of other customary contractual conditions set forth in
the merger agreement.
Termination (see page 49)
Either Motorola or RiverDelta may terminate the merger agreement if:
. the merger is not completed on or before October 31, 2001 (subject to
extension to November 30, 2001 under circumstances described in the merger
agreement);
. a final and nonappealable governmental order is entered enjoining or
prohibiting the completion of the merger; or
. the other party breaches its representations, warranties or agreements in
certain circumstances and the breaching party fails to cure the breach
within 20 days of receiving written notice of the breach.
Motorola and RiverDelta may also mutually agree to terminate the merger
agreement without completing the merger.
Fees and Expenses (see page 49)
Whether or not the merger is completed, each party to the merger agreement
will pay its own fees, costs and expenses. However, at the closing of the
merger, RiverDelta will deliver to Motorola a certificate that sets forth the
amount of all fees and expenses incurred by RiverDelta for the retention of
advisors in connection with the transactions contemplated by the merger
agreement. Motorola will pay such amounts by means of wire transfers of funds at
the closing of the merger. These expenses will be deemed to be current
liabilities (without duplication of such expenses already on any balance sheet)
in the calculation of the net working capital as described in the merger
agreement and will therefore decrease the total consideration received by the
stockholders.
Appointment of Stockholders' Representative (see page 51)
As provided by the terms of the merger agreement, the approval by the
RiverDelta stockholders of the merger agreement and the merger will constitute
the approval of the appointment of Todd Dagres, a director of RiverDelta and a
beneficial owner of approximately 18% of the common stock of RiverDelta on an as
converted basis, as the stockholders' representative under the merger agreement
and will be deemed to be the approval by the RiverDelta stockholders of the
performance by the stockholders' representative of all rights and obligations
conferred on the stockholders' representative under the merger agreement and the
escrow agreement. The letter of transmittal to be executed by the RiverDelta
stockholders in order to receive the Motorola common stock to be issued in
connection with the merger will also confirm the appointment of Todd Dagres.
Indemnification of Motorola; Escrow Agreement (see page 51)
The merger agreement provides that 10% of the Motorola common stock that any
RiverDelta stockholder is otherwise entitled to receive in the merger will be
deposited in escrow with an escrow agent as soon as practicable after the
closing date of the merger.
Upon approval of the merger agreement and the merger, and upon their receipt
of the merger consideration, the RiverDelta stockholders have agreed to
indemnify Motorola and its directors, officers,
10
employees, agents and advisors from and against any and all damages and
liabilities (including reasonable legal fees) arising out of:
. any breach in any representation or warranty made by RiverDelta in the
merger agreement or in any certificate delivered pursuant to the merger
agreement;
. any breach or default by RiverDelta of any of the covenants or agreements
given or made by it in the merger agreement or in any certificate
delivered pursuant to the merger agreement; or
. certain other matters described in the disclosure schedule to the merger
agreement.
With respect to claims for indemnification, Motorola may not seek
indemnification from the RiverDelta stockholders until the aggregate amount of
all damages for which Motorola is seeking indemnification is at least $350,000
and the RiverDelta stockholders are then liable for the amount of any such
damages in excess of $250,000. The escrow fund will terminate on the
eighteenth-month anniversary of the closing date of the merger.
Credit Agreement (see page 54)
On July 11, 2001, in connection with the merger agreement, Motorola and
RiverDelta entered into a credit agreement pursuant to which Motorola will
provide RiverDelta with loans of up to $35 million to fund its working capital
requirements pending the closing of the merger. The loans extended under the
credit agreement will accrue interest at a rate of 10% per annum, but interest
is not payable in cash until the maturity of the loans.
The loans and interest are due and payable on the earlier of (a) July 11,
2002 and (b) the date of termination of Motorola's loan commitment due to an
event of default.
Original Equipment Manufacturer Agreement (see page 55)
Independent of the merger, RiverDelta and Motorola entered into an original
equipment manufacturer agreement on August 1, 2001, pursuant to which RiverDelta
will manufacture, test, deliver and sell data communications products of its
design and manufacture to Motorola and provide support for such products.
Additional Proposals (see page 56)
In connection with the merger agreement and the merger, it is proposed that
RiverDelta amend the RiverDelta restated certificate of incorporation to
increase the total number of shares of authorized capital stock of RiverDelta to
85,860,000, by increasing the number of authorized shares of RiverDelta
preferred stock to 13,860,000, and to designate 6,500,000 shares of preferred
stock as Series B preferred stock.
Holders of RiverDelta Series A preferred stock will also be asked, in lieu of
receiving their liquidation preference of $1.359 per share of Series A preferred
stock, to elect to be deemed to have converted all shares of Series A preferred
stock into shares of common stock immediately prior to the effective time of the
merger.
Forward-Looking Statements (see page 71)
Motorola and RiverDelta have made forward-looking statements in this proxy
statement/prospectus and in the documents to which we have referred you. These
statements are subject to risks and uncertainties, and therefore may not prove
to be correct. Forward-looking statements include assumptions as to how Motorola
may perform after the merger and, accordingly, it is uncertain whether any of
the events anticipated by the forward-looking statements will transpire
or occur, or, if any of them do transpire or occur, what impact they will have
on the results of operations and financial condition of Motorola or the price of
its stock. See "Special Note Regarding Forward-Looking Statements" on page 71
for further details.
When we use words like "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. For those statements,
Motorola and RiverDelta claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995.
11
SUMMARY SELECTED FINANCIAL INFORMATION
Motorola Selected Historical Consolidated Financial Data
The selected historical consolidated financial data of Motorola as of
December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and
1998 have been derived from consolidated financial statements of Motorola. These
consolidated financial statements have been audited by KPMG LLP, independent
auditors, and are incorporated by reference into this proxy
statement/prospectus. The selected historical consolidated financial data of
Motorola as of December 31, 1998 and for the year ended December 31, 1997 have
been derived from audited consolidated financial statements of Motorola
previously filed with the Securities and Exchange Commission, but are not
incorporated by reference in this proxy statement/prospectus. The selected
historical consolidated financial data of Motorola as of December 31, 1997 and
1996 and for the year ended December 31, 1996 have been derived from audited
consolidated financial statements of Motorola and General Instrument Corporation
(merged on January 5, 2000 and accounted for as a pooling of interests),
previously filed with the Securities and Exchange Commission, but are not
incorporated by reference in this proxy statement/prospectus. The selected
historical consolidated financial data as of June 30, 2001 and for the six
months ended June 30, 2001 and July 1, 2000, have been derived from unaudited
condensed consolidated financial statements filed with the SEC and are
incorporated by reference herein and, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of Motorola's financial position and results of operations as
of and for such periods. Operating results for the six months ended June 30,
2001 are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 2001. This information is qualified in its
entirety by, and should be read in conjunction with, the consolidated financial
statements, the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for Motorola incorporated by
reference in this proxy statement/prospectus.
For the Six Months Ended For the Year Ended December 31,
---------------------------- -----------------------------------------------
June 30, 2001 July 1, 2000 2000 1999 1998 1997 1996
------------- ------------ ------- ------- ------- ------- -------
(in millions, except per share data)
Consolidated Statements of Operations Data:
Net sales ....................................... $15,274 $18,023 $37,580 $33,075 $31,340 $31,498 $29,657
Cost and expenses:
Manufacturing and other costs of sales ........ 11,154 10,708 23,628 20,631 19,396 18,532 17,854
Selling, general and administrative expenses .. 1,999 2,610 5,141 5,220 5,807 5,443 4,891
Research and development expenditures ......... 2,258 2,122 4,437 3,560 3,118 2,930 2,572
Depreciation expense .......................... 1,216 1,126 2,352 2,243 2,255 2,394 2,367
Reorganization of businesses .................. 860 -- 596 (226) 1,980 327 --
Other charges ................................. 394 416 517 1,406 109 -- 249
Interest expense, net ......................... 188 101 248 138 215 136 211
Gains on sales of investments and businesses .. (1,356) (120) (1,570) (1,180) (260) (70) (113)
Total costs and expenses ...................... $16,713 $16,963 $35,349 $31,792 $32,620 $29,692 $28,031
Earnings (loss) before income taxes ........... (1,439) 1,060 2,231 1,283 (1,280) 1,806 1,626
Income tax provision (benefit) ................ (147) 408 913 392 (373) 642 568
Net earnings (loss) ........................... $(1,292) $ 652 $ 1,318 $ 891 $ (907) $ 1,164 $ 1,058
Per Share Data:
Net earnings (loss) per common share/(1)/
Basic ....................................... $ (0.59) $ 0.30 $ 0.61 $ 0.42 $ (0.44) $ 0.57 $ 0.52
Diluted ..................................... $ (0.59) $ 0.29 $ 0.58 $ 0.41 $ (0.44) $ 0.56 $ 0.51
Weighted average common shares outstanding/(1)/
Basic ....................................... 2,198.8 2,156.0 2,170.1 2,119.5 2,071.1 2,040.9 2,031.6
Diluted ..................................... 2,198.8 2,254.2 2,256.6 2,202.0 2,071.1 2,091.2 2,081.0
Dividends declared per share/(2)/ ............... $ 0.08 $ 0.08 $ 0.16 $ 0.16 $ 0.16 $ 0.16 $ 0.15
--------
/(1)/ The 1996 through 1999 amounts are restated to reflect the June 1, 2000
3-for-1 stock split.
/(2)/ Dividends declared per share for 1996 through 1999 represent dividends on
Motorola common stock outstanding prior to the General Instrument merger.
12
December 31,
June 30, July 1, -------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- ------- ------- ------- ------- ------- -------
(in millions)
Consolidated Balance Sheets:
Total assets ........................................ $38,728 $45,641 $42,343 $40,489 $30,951 $28,954 $25,665
Working capital ..................................... 6,589 5,220 3,628 4,679 2,532 4,597 3,696
Long-term debt and redeemable preferred securities .. 7,299 3,570 4,778 3,573 2,633 2,144 1,931
Total debt and redeemable preferred securities ...... 11,281 8,439 11,169 6,077 5,542 3,426 3,328
Total stockholders' equity .......................... 16,301 21,473 18,612 18,693 13,913 14,487 12,843
Motorola Per Share Data
The following table sets forth certain historical per share data of Motorola
for the six months ended June 30, 2001 and the year ended December 31, 2000.
For the
Six Months Ended For the Year Ended
June 30, 2001 December 31, 2000
---------------- ------------------
(unaudited)
Motorola historical per share data
Income (loss) per common share, basic .... $(0.59) $0.61
Income (loss) per common share, diluted .. (0.59) 0.58
Book value per share/(1)/ ................ 7.37 8.49
--------
/(1)/ Historical book value per share is computed by dividing total
stockholders' equity by the number of shares of common stock outstanding
at the end of each period.
Market Price and Dividend Information
Motorola common stock is currently traded on the New York Stock Exchange, or
NYSE, under the symbol "MOT". Motorola common stock is also listed and trades on
the Chicago, London and Tokyo stock exchanges.
The following table sets forth the high and low sale prices for a share of
Motorola common stock and the dividends declared for the periods indicated. The
prices for Motorola common stock are as reported on the NYSE Composite
Transaction Tape, based on published financial sources.
Motorola Common Stock/(1)/
------------------------------
Cash Dividend
High Low Per Share/(2)/
------ ------ --------------
Calendar Year 1999
First Quarter .............................. $25.79 $20.85 $.04
Second Quarter ............................. 33.04 24.58 .04
Third Quarter .............................. 33.83 27.33 .04
Fourth Quarter ............................. 49.83 28.33 .04
Calendar Year 2000
First Quarter .............................. $61.54 $39.26 $.04
Second Quarter ............................. 52.55 28.61 .04
Third Quarter .............................. 39.67 27.20 .04
Fourth Quarter ............................. 29.76 15.78 .04
Calendar Year 2001
First Quarter .............................. $25.06 $13.93 $.04
Second Quarter ............................. 17.00 10.50 .04
Third Quarter (through September 7, 2001) .. 19.40 13.94 .04
---------------
/(1)/ Reflects the June 1, 2000 3-for-1 stock split.
/(2)/ The 1999 amounts represent dividends per share on Motorola common stock
outstanding prior to the General Instrument merger.
13
The following table lists the closing prices per share of Motorola common
stock as reported on the NYSE on:
. July 30, 2001, the last full trading day prior to public announcement of the
merger agreement; and
. September 7, 2001, the last full trading day for which closing prices were
available at the time of the printing of this proxy statement/prospectus.
Motorola
Common Stock
------------
July 30, 2001 ..................................... $19.03
September 7, 2001 ................................. $14.29
We urge RiverDelta stockholders to obtain current market quotations for
Motorola common stock. We cannot give any assurance as to the future prices or
markets for Motorola common stock.
RiverDelta's capital stock is not listed for trading on any exchange or
automated quotation service. As of the record date, there were approximately 176
holders of record of RiverDelta capital stock. RiverDelta has never declared or
paid cash dividends on its common stock and does not plan to pay any cash
dividends prior to the merger.
14
RISK FACTORS
You should carefully consider the following important factors, in addition to
the other information included and incorporated by reference in this proxy
statement/prospectus, to determine whether to vote for the proposals relating to
the merger. See "Where You Can Find More Information" on page 72.
Risks Relating to the Merger
RiverDelta's stockholders may never receive the shares of Motorola common
stock placed in escrow. Under the merger agreement and an escrow agreement, 10%
of the Motorola common stock that RiverDelta stockholders would otherwise be
entitled to receive in the merger will be deposited in an escrow account to
secure the indemnification obligations of the RiverDelta stockholders under the
merger agreement or to be delivered to Motorola to the extent that there is a
reduction in the purchase price based on the post-closing audit adjustment. The
escrow account will terminate eighteen months after the date of the merger. If
Motorola makes no claims for indemnification, or there is no reduction in the
purchase price based on the post-closing audit adjustment, all of the shares
held in escrow will be released to the RiverDelta stockholders within five
business days after such termination date. However, Motorola may make claims
against the shares held in escrow for damages and liabilities (including
reasonable legal fees) arising out of:
. any breach in any representation or warranty made by RiverDelta in the
merger agreement or in any certificate delivered pursuant to the merger
agreement;
. any breach or default by RiverDelta of any of the covenants or agreements
given or made by it in the merger agreement or in any certificate delivered
pursuant to the merger agreement; or
. certain other matters described in the disclosure schedule to the merger
agreement.
Moreover, the purchase price paid by Motorola is subject to a purchase price
adjustment based on a post-closing audit. This may reduce the number of shares
of Motorola stock released to the RiverDelta stockholders.
There can be no assurance that the RiverDelta stockholders will receive any
of the shares held in the escrow account should they be required to indemnify
Motorola, or to satisfy the reduction in the purchase price based on the post-
closing audit adjustment, under the terms of the merger agreement.
The actual number of shares of Motorola common stock to be issued for each
share of RiverDelta common or preferred stock will be determined based on the
average trading price for the twenty trading days ending two trading days prior
to the date of the merger. Because the exchange ratios will not be adjusted
after the date of determination, the value of the Motorola common stock when
issued in the merger may be lower than the average trading value used to
calculate the exchange ratio.
These variations may be the result of various factors including:
. changes in the business, operations or prospects of Motorola;
. governmental or regulatory considerations; and
. general stock market and economic conditions.
Conditions to the merger may not be satisfied. The merger agreement contains
conditions that, if not satisfied or waived, would result in the merger not
occurring, even though the RiverDelta stockholders may have approved it. We
cannot assure you that all of the closing conditions to the merger will be
satisfied, that any unsatisfied conditions will be waived or that the merger
will occur. If the merger does not occur, expenses incurred by RiverDelta that
are not reimbursed by Motorola could have a material adverse effect on the
financial and operating results of RiverDelta.
15
RiverDelta may lose an opportunity to enter into a merger or business
combination with another party on more favorable terms because of provisions in
the merger agreement that prohibit RiverDelta from entering into such
transactions or soliciting such proposals. While the merger agreement is in
effect, RiverDelta is prohibited from entering into or soliciting, initiating or
encouraging any inquiries or proposals that may lead to a proposal or offer to
enter into certain transactions, such as a merger, sale of assets or other
business combination, with any person other than Motorola. As a result of this
prohibition, RiverDelta may lose an opportunity to enter into a transaction with
another potential partner on more favorable terms.
If the merger is not completed, RiverDelta may be unable to attract another
strategic partner on equivalent or more attractive terms than those being
offered by Motorola. If the merger agreement is terminated and the RiverDelta
board of directors determines that it is in the best interests of the RiverDelta
stockholders to seek a merger or business combination with another strategic
partner, RiverDelta cannot assure you that it will be able to find a partner
offering terms equivalent to or more attractive than the price and terms offered
by Motorola in the merger.
The price of Motorola common stock may be affected by factors different from
those affecting the value of RiverDelta stock. Upon completion of the merger,
RiverDelta stockholders will become Motorola common stockholders. Motorola's
business differs from that of RiverDelta, and Motorola's results of operations,
as well as the price of Motorola common stock, may be affected by factors
different from those affecting RiverDelta's results of operations and the value
of RiverDelta stock. For a discussion of Motorola's business and certain factors
to consider in connection with its business, see Motorola's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 and Motorola's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2001, each of which is
incorporated by reference in this proxy statement/prospectus.
Some of RiverDelta's directors and officers have interests that differ in
several respects from RiverDelta stockholders. In considering the recommendation
of the RiverDelta board of directors to approve the merger agreement and the
merger, you should consider that some of RiverDelta's directors and officers
have interests that differ from, or are in addition to, their interests as
RiverDelta stockholders generally. These interests include benefits provided to
them by Motorola under retention agreements, the continuation of certain
indemnification arrangements and the ownership of certain subordinated
convertible promissory notes.
Clients of Motorola and/or RiverDelta may delay or cancel contracts as a
result of concerns over the merger. The announcement and closing of the merger
could cause clients and potential clients of Motorola and RiverDelta to delay or
cancel contracts as a result of client concerns and uncertainty over the
combined company's offerings, personnel or services. Such a delay or
cancellation could have a material adverse effect on the business, operating
results and financial condition of Motorola and RiverDelta.
Risks Related to RiverDelta
As a stand-alone company, RiverDelta's business is subject to numerous risks
and uncertainties, including those described below. RiverDelta's stockholders
should understand that these and other risks will continue to apply to
RiverDelta's business if the merger is not consummated.
RiverDelta has a history of losses and expects to incur future losses. Since
its inception in March 1999, RiverDelta has not achieved profitability. As
RiverDelta only began to recognize revenues during the fourth quarter of 2000,
RiverDelta cannot assure you that its revenue will continue to grow or that it
will realize sufficient revenue to achieve profitability. RiverDelta has
incurred cumulative net losses of approximately $76.3 million from inception
through June 30, 2001, including losses of approximately $7.3 million for fiscal
year 1999, $41.7 million for fiscal year 2000 and $27.3 million for the six
months ended June 30, 2001. If the merger with Motorola is not consummated,
RiverDelta would expect to increase its operating expenses to expand its sales
and marketing activities, develop new distribution channels, fund increased
levels of research and development and build its operational infrastructure. If
RiverDelta's future revenue does not increase substantially, these increased
expenditures would have a materially adverse effect on RiverDelta's future
business, results of operations and financial condition.
16
RiverDelta will need additional financing. If the merger with Motorola is not
consummated and RiverDelta continues as a stand-alone company, RiverDelta will
not have sufficient cash resources to continue its business operations as they
are now being conducted without obtaining significant additional debt and/or
equity funds to provide working capital for RiverDelta's continuing operations.
While RiverDelta believes that it would be able to raise the funds required to
finance its operations as a stand-alone company, it cannot assure you that the
required funds would be available when needed or that they can be obtained on
terms favorable to RiverDelta. If the required funds cannot be obtained,
RiverDelta could be forced to revise its business plans, including possible
curtailment of its future business operations, reduction of its planned future
growth or a combination with another company on terms less favorable than the
terms governing RiverDelta's merger with Motorola.
Market acceptance of RiverDelta's broadband and optical services routers and
platform is not assured and may not be achieved. If RiverDelta's broadband and
optical services routers and platform do not achieve market acceptance, or if
market acceptance occurs more slowly than expected, RiverDelta's ability to
increase its revenues and achieve profitability could be harmed. The success of
RiverDelta's product depends, in part, on the ability to make potential
customers recognize the advantages and cost-effectiveness of the products. In
addition, many of RiverDelta's customers and potential customers have long-
standing relationships with suppliers of competing technologies and network
architectures that have already achieved a degree of market acceptance. If
RiverDelta's broadband and optical services routers and platform do not quickly
achieve sufficient customer acceptance, RiverDelta may be unable to attract
additional users to generate the volume of business necessary for widespread
acceptance of its products.
17
THE COMPANIES
Motorola
Motorola is a global leader in providing integrated communications solutions
and embedded electronic solutions. These include:
. software-enhanced wireless telephone, two-way radio and messaging products
and systems, as well as networking and Internet-access products, for
consumers, network operators and commercial, government and industrial
customers;
. end-to-end systems for the delivery of interactive digital video, voice
and high-speed data solutions for broadband operators;
. embedded semiconductor solutions for customers in the networking and
computing, transportation, wireless communications and digital consumer/home
networking markets; and
. embedded electronic systems for automotive, industrial, transportation,
navigation, communications and energy systems markets.
Motorola's worldwide sales in 2000 were $37.6 billion.
Motorola's Broadband Communications Sector designs, manufactures and sells
digital and analog systems and set-top terminals for wired and wireless cable
television networks; high speed data products, including DOCSIS cable modems, as
well as emerging Internet Protocol (IP)-based telephony products; hybrid
fiber/coaxial network transmission systems used by cable television operators;
digital satellite television systems for programmers; direct-to-home (DTH)
satellite networks and private networks for business communications, and high-
definition digital broadcast products for the cable and broadcast industries.
The Broadband Communications Sector's products are marketed primarily to
cable television operators, satellite television programmers, and other
communications providers worldwide. Motorola is a Delaware corporation and the
shares of Motorola common stock primarily trade on the New York Stock Exchange
under the symbol "MOT".
Motorola's principal executive offices are located at 1303 East Algonquin
Road, Schaumburg, Illinois 60196, and its telephone number is (847) 576-5000.
Additional information regarding Motorola is included in Motorola's reports
filed under the Securities Exchange Act of 1934 that are incorporated by
reference in this document. See "Where You Can Find More Information" on page
72. Additional information concerning Motorola can also be found at Motorola's
website at www.motorola.com.
RiverDelta
RiverDelta designs, develops and markets Internet Protocol, or IP, edge
routing, aggregation and service delivery solutions for broadband, or cable,
service providers. RiverDelta's products enable broadband service providers to
offer high-quality voice, high-speed data and enhanced broadband services to
their business and residential customers.
RiverDelta sells its products to broadband service providers, broadband
equipment manufacturers and systems integrators. RiverDelta is in customer
trials with leading broadband service providers such as Adelphia, Armstrong
Cable, Comcast, Cox Communications, Insight Communications and Time Warner. As
of September 7, 2001, customers deploying RiverDelta's products included
Armstrong Cable, Conway Corporation, Cox Communications and Insight
Communications.
18
RiverDelta provides an end-to-end solution comprised of multiple next-
generation products designed to address the requirements of broadband service
providers. RiverDelta's broadband services router, or BSR 64000, provides a
flexible, high capacity, fully redundant platform for broadband service delivery
through a full suite of high-speed access and transport interfaces, including
DOCSIS, ATM/Packet-Over-SONET (ATM/POS) and Gigabit-Ethernet. RiverDelta's BSR
1000 broadband services router provides a medium capacity DOCSIS cable modem
termination system and IP edge router that connects business and residential
customers to the Internet using cable broadband access technologies.
RiverDelta's optical services router, or OSR 2000, is a compact, cost-effective,
high-performance, IP edge routing solution that connects optical regional and
metropolitan area networks with high-performance access and local area networks.
RiverDelta's RiverGuide Service Creation Environment (SCE) platform integrates
with its BSR 64000, BSR 1000 and OSR 2000 to define and deploy managed IP
services.
RiverDelta currently has approximately 207 employees. RiverDelta has two
facilities located in Tewksbury, Massachusetts, one with executive offices and
research and development laboratories and the other with manufacturing
facilities, administrative offices and a sales office. RiverDelta also has sales
offices located in Englewood, Colorado, Newport Beach, California, Freehold, New
Jersey, and Basingstoke, United Kingdom. RiverDelta leases all of its
facilities.
RiverDelta Networks, Inc. was incorporated in Delaware as Packet View, Inc.
on July 23, 1998. RiverDelta is a privately held corporation with approximately
176 stockholders and one wholly-owned subsidiary, RiverDelta Networks
International, Inc.
RiverDelta's principal executive offices are located at 3 Highwood Drive
East, Tewksbury, Massachusetts 01876, and its telephone number is (978) 858-
2300.
19
THE RIVERDELTA SPECIAL MEETING
We are furnishing this proxy statement/prospectus to RiverDelta stockholders
in connection with the solicitation of proxies from RiverDelta stockholders for
use at the special meeting of RiverDelta stockholders to be held on Thursday,
October 11, 2001 and at any adjournment or postponement of the meeting. We are
also furnishing this proxy statement/prospectus to RiverDelta stockholders as a
prospectus in connection with the issuance by Motorola of shares of Motorola
common stock in the merger.
Date, Time and Place
The special meeting will be held on Thursday, October 11, 2001, at 10:00
a.m. local time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., One Financial Center, Boston, Massachusetts 02111.
Matters to be Considered at the Special Meeting
At the special meeting of RiverDelta stockholders, and any adjournment of the
special meeting, RiverDelta stockholders will be asked:
. to consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger by and among Motorola, Bayou Merger Sub, Inc. and RiverDelta,
dated as of July 11, 2001, and the merger under which RiverDelta will become
a wholly-owned subsidiary of Motorola, as a result of which Todd Dagres will
be appointed as the stockholders' representative under the merger agreement;
. to consider and vote upon a proposal to amend the restated certificate of
incorporation of RiverDelta in order to increase the total number of shares
of authorized capital stock of RiverDelta to 85,860,000 by increasing the
number of authorized shares of RiverDelta preferred stock to 13,860,000, and
to designate 6,500,000 shares of preferred stock as Series B preferred
stock;
. to consider and vote upon a proposal for the holders of Series A preferred
stock to elect to be deemed to have converted all shares of Series A
preferred stock into shares of RiverDelta common stock immediately prior to
the effective time of the merger; and
. to consider and transact such other matters which may properly come before
the special meeting or any and all adjournments thereof.
Board of Directors Recommendation
The RiverDelta board of directors has unanimously approved the merger and the
merger agreement and determined that the terms of the merger and the merger
agreement are advisable and fair to, and in the best interests of, RiverDelta
and its stockholders. The RiverDelta board of directors unanimously recommends a
vote "FOR" approval of the merger agreement and the merger and "FOR" approval of
each other proposal to be considered at the special meeting.
Record Date
The RiverDelta board of directors fixed the close of business on September 7,
2001 as the record date for the special meeting. Accordingly, only stockholders
of record of RiverDelta stock at the close of business on September 7, 2001 are
entitled to notice of and to vote at the special meeting.
Quorum
The presence at the special meeting, either in person or by proxy, of a
majority of the RiverDelta shares issued and outstanding on the record date is
necessary to constitute a quorum to transact business at that meeting. If a
quorum is not present, it is expected that the special meeting will be adjourned
or postponed in order to solicit additional proxies. Abstentions will be counted
for the purpose of determining whether a quorum is present. Because certain
officers, directors and stockholders of RiverDelta have entered into a voting
agreement (see page 50) with Motorola, a quorum will be present.
20
Stockholders Entitled to Vote
At the close of business on the record date, September 7, 2001, there were
34,177,840 shares of RiverDelta common stock outstanding and entitled to vote
held by 151 stockholders of record. At the close of business on the record date,
there were 7,358,358 shares of RiverDelta Series A preferred stock outstanding
and entitled to vote held by 15 stockholders of record. At the close of business
on the record date, there were 2,956,988 of RiverDelta Series B preferred stock
outstanding and entitled to vote held by 13 stockholders of record.
The holders of RiverDelta common stock are entitled to cast one vote for each
share of common stock they hold on each matter submitted to the common
stockholders for a vote at the special meeting. The holders of RiverDelta Series
A preferred stock are entitled to cast three votes for each share of RiverDelta
Series A preferred stock that they hold. The holders of RiverDelta Series B
preferred stock are entitled to cast one and one-half votes for each share of
Series B preferred stock that they hold.
Vote Required
Approval and adoption of the merger agreement and the merger requires the
affirmative vote of the holders of a majority of the RiverDelta common stock and
Series A and Series B preferred stock outstanding on the record date on an as
converted basis, voting together as a single class.
The approval of the amendment to RiverDelta's restated certificate of
incorporation requires the approval of a majority of the outstanding shares of
RiverDelta common stock and RiverDelta Series A and Series B preferred stock on
the record date on an as converted basis, voting together as a single class. The
approval of the election by the holders of shares of RiverDelta Series A
preferred stock to be deemed to have converted all shares of RiverDelta Series A
preferred stock into RiverDelta common stock immediately prior to the closing of
the merger will require the approval of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of RiverDelta Series A
preferred stock on the record date, voting as a separate class.
At the close of business on the record date, 64.9% of the outstanding shares
of RiverDelta common stock and Series A and Series B preferred stock on an as
converted basis, and 90% of the outstanding shares of RiverDelta Series A
preferred stock were held by directors and officers of RiverDelta and their
affiliates. All of the shares beneficially owned by the directors of RiverDelta,
two of whom are executive officers, are subject to a voting agreement to vote
the shares in favor of the approval and adoption of the merger agreement.
Failure to vote and abstentions will not be deemed to be cast either "FOR" or
"AGAINST" the merger agreement and the merger or any other proposal. However,
because approval and adoption of the merger agreement and the merger and each
other proposal requires the affirmative vote of the holders of the requisite
majority or supermajority of the outstanding RiverDelta shares, the
failure to vote and abstentions will have the same effect as a vote "AGAINST"
the merger agreement and the merger and each other proposal.
Voting Agreement
On July 11, 2001, certain stockholders of RiverDelta, including certain
officers and directors of RiverDelta, entered into a voting agreement, pursuant
to which, among other things, they agreed to vote their shares of RiverDelta
stock "FOR" approval of the merger agreement and the merger and otherwise in
such manner as may be necessary to consummate the merger. A copy of the voting
agreement is attached as Appendix B to this proxy statement/prospectus. Each of
these stockholders has also granted an irrevocable proxy and a power of attorney
to Motorola representatives to vote his, her or its shares of RiverDelta stock
"FOR" approval of the merger agreement and the merger and in such other manner
as may be necessary to consummate the merger. On the record date, the RiverDelta
stockholders that are parties to the voting agreement collectively owned and
were entitled to vote approximately:
. 64.9% of the outstanding shares of RiverDelta common stock and Series A and
Series B preferred stock on an as converted basis, voting together as a
single class; and
. 90% of the shares of outstanding RiverDelta Series A preferred stock, voting
as a separate class.
21
Proxies
All shares represented by properly executed proxy cards received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders. Properly executed proxy cards that do not contain voting
instructions with respect to approval of the merger agreement and the merger and
each other proposal presented at the special meeting will be voted "FOR"
approval of the merger agreement and the merger and each other proposal.
Shares of RiverDelta stock represented at the special meeting but not voting,
including shares of RiverDelta stock for which proxy cards have been received
but for which holders of shares have abstained, will be treated as present at
the special meeting for purposes of determining the presence or absence of a
quorum for the transaction of all business.
Only shares affirmatively voted for approval of the merger agreement and the
merger and each other proposal presented at the special meeting, including
properly executed proxy cards that do not contain voting instructions, will be
counted as favorable votes for such proposals.
The persons named as proxies by a stockholder may propose and vote for one or
more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposals to be
presented at the special meeting will be voted in favor of any adjournment or
postponement.
Revocability of Proxies
You may revoke your proxy at any time prior to its use:
. by delivering to the secretary of RiverDelta at the address set forth below
a signed notice of revocation or a later-dated, signed proxy card; or
. by attending the special meeting and voting in person.
Attendance at the special meeting is not in itself sufficient to revoke a
proxy.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to RiverDelta Networks, Inc., 3
Highwood Drive East, Tewksbury, Massachusetts 01876, Attention: Secretary. A
proxy appointment will not be revoked by death or incapacity of the RiverDelta
stockholder executing the proxy card unless, before the shares are voted, notice
of such death or incapacity is filed with RiverDelta's secretary or other person
responsible for tabulating votes on RiverDelta's behalf.
Solicitation of Proxies and Expenses
RiverDelta will pay the cost of soliciting proxies from its stockholders. In
addition to solicitation by mail, RiverDelta's directors, officers and employees
may solicit proxies by telephone, fax, e-mail, telegram or in person.
Please do not send stock certificates with your proxy card. A transmittal
form with instructions concerning the surrender of RiverDelta stock certificates
will be mailed to you by Motorola's exchange agent promptly after completion of
the merger.
Dissenters' Rights to Appraisal
If you do not wish to accept Motorola common stock in the merger, you have
the right under Delaware law to have the fair value of your RiverDelta shares
determined by the Delaware Chancery Court. This right to
22
appraisal is subject to a number of restrictions and technical requirements.
Generally, in order to exercise your appraisal rights:
. you must send a written demand to RiverDelta for appraisal in compliance
with Delaware law before the vote on the merger;
. you must not vote in favor of the merger; and
. you must continuously hold your RiverDelta stock from the date you make the
demand for appraisal through the closing of the merger.
Merely voting against the merger will not protect your rights to an
appraisal. Appendix C to this proxy statement/prospectus contains a copy of the
Delaware statute governing appraisal rights. Failure to follow all the steps
required by Delaware law will result in the loss of your rights to appraisal.
The Delaware law requirements for exercising appraisal rights are described in
further detail beginning on page 33. See "The Merger--Statutory Appraisal
Rights" on page 33 and "The Merger--Appraisal Rights Procedures" on page 33.
23
THE MERGER
This section of the proxy statement/prospectus, as well as the next section
titled "The Merger Agreement" beginning on page 37, describes certain aspects of
the proposed merger. These sections highlight key information about the merger
agreement and the merger, but they may not include all the information that a
stockholder would like to or should know. The merger agreement is attached as
Appendix A-1 to this proxy statement/prospectus (a minor amendment to the merger
agreement is attached as Appendix A-2 to this proxy statement/prospectus). We
urge you to read the merger agreement in its entirety.
Structure of the Merger
If the merger is adopted by the holders of a majority of the outstanding
RiverDelta common and Series A and Series B preferred shares on an as converted
basis, voting together as a single class, and by sixty-six and two-thirds
(66 2/3%) of the outstanding RiverDelta Series A preferred shares, voting as a
separate class, and the other conditions to the merger are satisfied, Bayou
Merger Sub, Inc., a wholly-owned subsidiary of Motorola, formed for the purpose
of the merger, will merge with and into RiverDelta, with RiverDelta being the
surviving corporation in the merger and becoming a wholly-owned subsidiary of
Motorola.
Background
In April of 2000, representatives of Motorola and RiverDelta had preliminary
discussions concerning a possible relationship between the two companies.
Between April 2000 and September 2000, RiverDelta had preliminary discussions
with several large broadband network equipment manufacturers about a possible
acquisition of RiverDelta.
In two separate meetings in July 2000 and August 2000, representatives from
Motorola and RiverDelta held preliminary discussions regarding a potential
transaction between the two companies.
In September of 2000, Richard C. Smith and Daniel Moloney, of Motorola, met
with David Callan, Mike Brown and Todd Dagres, a director of RiverDelta and a
general partner of Battery Ventures, in Tewksbury, Massachusetts, to discuss a
possible acquisition of RiverDelta by Motorola. These discussions did not lead
to agreement on the terms of a potential acquisition, and discussions were
terminated.
On September 28, 2000, RiverDelta retained Credit Suisse First Boston as its
financial advisor with respect to a possible acquisition of RiverDelta.
In December of 2000, Richard C. Smith, Daniel Moloney and Ed Breen, of
Motorola, met with David Callan and Mike Brown, of RiverDelta, in Horsham,
Pennsylvania, to discuss a possible acquisition of RiverDelta by Motorola. These
discussions did not lead to agreement on the terms of a potential acquisition.
In April of 2001, as part of a review of the strategic plan for Motorola's
Broadband Communications Sector, the board of directors of Motorola discussed
RiverDelta as a potential acquisition candidate.
In April of 2001, representatives of the parties met in Horsham,
Pennsylvania, to re-engage in discussions regarding a possible acquisition of
RiverDelta by Motorola. Over the next several weeks, the parties held periodic
discussions regarding the possible combination.
On May 22, 2001, Motorola presented RiverDelta with term sheets outlining the
general terms of a proposed acquisition, together with proposed terms regarding
a bridge credit facility. Detailed due diligence and discussions regarding the
term sheets continued periodically thereafter.
On June 18, 2001, Motorola provided a draft definitive merger agreement to
RiverDelta, and, on June 19, 2001, Motorola provided a draft definitive credit
agreement. Over the next several weeks, Motorola and RiverDelta and their
representatives negotiated the terms of the merger agreement and credit
agreement.
On June 21, 2001, the RiverDelta board of directors held a special meeting at
which the board discussed the terms of the proposed merger with representatives
of RiverDelta's counsel.
24
On July 9, 2001, the RiverDelta board of directors had two special meetings
via teleconference. At each of the two meetings, representatives of RiverDelta's
counsel and Credit Suisse First Boston discussed the terms and conditions of the
merger and the status of the Motorola negotiations. Counsel also answered
questions from the board at each of the meetings.
On July 10, 2001, the RiverDelta board of directors again held a special
meeting via teleconference with RiverDelta's counsel and Credit Suisse First
Boston participating. At that meeting, the RiverDelta board of directors
reviewed discussion materials prepared by Credit Suisse First Boston with regard
to Motorola's offer and engaged in a detailed discussion of the merits of the
proposed transaction to RiverDelta's stockholders, including the reasons set
forth under "RiverDelta's Reasons for the Merger" below. Counsel also answered
questions from the board. Following the discussion, RiverDelta's board
authorized management to execute a definitive merger agreement, credit agreement
and related agreements.
On July 11, 2001, the merger agreement was executed by Motorola, Bayou Merger
Sub, Inc. and RiverDelta. In connection with the execution of the merger
agreement, certain stockholders entered into a voting agreement, pursuant to
which they agreed, among other things, to vote their shares of RiverDelta stock
in favor of the merger. Additionally, RiverDelta and Motorola executed a
definitive credit agreement.
Shortly after execution of the merger agreement, Motorola formally solicited
the unanimous written consent of the Motorola board of directors to approve the
merger agreement and the merger. This approval was obtained during the week
ending July 29, 2001.
On July 30, 2001, after the close of trading on the New York Stock Exchange,
Motorola issued a press release announcing the proposed merger.
Motorola's Reasons for the Merger
Motorola is making the acquisition to enhance its current Cable Modem
Termination Systems (CMTS) product line. Motorola currently provides a modular
CMTS product line that is very well-suited for small to medium headends, with
emphasis on advanced VoIP protocols and high-availability capabilities. Right
now, Motorola's broadband operator customers deploy CMTSs across their regions
and tie them together with additional routers. RiverDelta provides a platform
that addresses the needs of large, high-density headends, and more importantly,
supports an extensive suite of routing protocols and Wide-Area-Network
interfaces. The acquisition of RiverDelta is expected to broaden Motorola's
product line coverage across all system sizes and into regional IP network
applications.
RiverDelta's Reasons for the Merger
In reaching its decision to approve the merger agreement and the merger and
to recommend approval of the merger agreement by RiverDelta stockholders, the
RiverDelta board of directors consulted with its management team and advisors
and independently considered the proposed merger agreement and the transactions
contemplated by the merger agreement. The following discussion of the factors
considered by the RiverDelta board of directors in making its decision is not
intended to be exhaustive but includes all material factors considered by the
RiverDelta board of directors.
The RiverDelta board of directors considered and reviewed with management the
following factors as reasons that the merger will be beneficial to RiverDelta
and its stockholders:
. the belief that the merger would enable RiverDelta to capitalize on
Motorola's extensive international and domestic sales, marketing, and
distribution expertise and resources, thereby increasing the visibility and
accessibility of RiverDelta's products;
. the belief that the merger would permit RiverDelta to utilize Motorola's
research and development resources and complementary hardware and software
technology to enable RiverDelta to accelerate its development activities;
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. the strategic fit of combining RiverDelta's broadband services routing
expertise with that of Motorola's as well as Motorola's extensive product
lines in transmission systems and set-top terminals for wired and wireless
cable television networks and in high speed data products, such as DOCSIS
cable modems, providing RiverDelta's OEM customers an easier design
capability for their products and providing RiverDelta's service provider
customers a complete broadband solution;
. the expected qualification of the merger as a reorganization under
Section 368(a) of the Internal Revenue Code; and
. the liquidity that the transaction would provide in light of the
consideration being shares of Motorola common stock, which are publicly
traded securities on the New York Stock Exchange and are more readily
marketable than shares of RiverDelta stock (see "Risk Factors" on page 15
and "The Merger--Resale of Motorola Common Stock" on page 36).
In the course of its deliberations, the RiverDelta board of directors
reviewed with RiverDelta management and RiverDelta's legal and financial
advisors a number of additional factors that the RiverDelta board of directors
deemed relevant to the merger, including, but not limited to:
. the strategic importance to RiverDelta of the proposed merger;
. the terms of the merger agreement, including the form and amount of the
consideration to be received by the RiverDelta stockholders, the terms and
structure of the merger, the size and nature of the escrow and the closing
conditions;
. information concerning RiverDelta's and Motorola's respective businesses,
prospects, strategic business plans, financial performance and condition,
results of operations, technology positions, management and competitive
positions;
. RiverDelta management's view as to the financial condition, results of
operations and business of RiverDelta before and after giving effect to the
merger;
. RiverDelta management's view as to the prospects of RiverDelta's
continuing as an independent company;
. RiverDelta management's view as to RiverDelta's ability to gain access to
the necessary capital to meet its strategic business goals in both the near
term and the long term as well as the relative costs associated with
obtaining the capital;
. current financial conditions and historical market prices, volatility and
trading information with respect to Motorola common stock;
. RiverDelta management's view as to the effect of the merger on the core
business of RiverDelta, including its research and development efforts,
potential synergy of Motorola's technologies with RiverDelta's technologies,
the breadth of Motorola's product offerings, and sales and marketing
infrastructure;
. the impact of the merger on RiverDelta's strategic marketing partners,
employees and customers; and
. the compatibility of the managements of RiverDelta and Motorola.
During the course of its deliberations concerning the merger, the RiverDelta
board of directors also identified and considered a variety of potentially
negative factors that could materialize as a result of the merger, including,
but not limited to:
. the risk that the potential benefits sought in the merger might not be
fully realized;
. the transaction costs involved in connection with closing the merger;
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. the possibility that the merger might not be consummated and the effect of
the public announcement of the merger on RiverDelta's partners, customers
and employees;
. the risk that, despite the efforts of RiverDelta and Motorola, key
personnel might leave RiverDelta;
. the risks associated with obtaining the necessary approvals required to
complete the merger;
. the effects of the diversion of management resources necessary to respond
to due diligence inquiries and the negotiation and consummation of the
merger; and
. the other risks described beginning on page 15 above under "Risk Factors."
The RiverDelta board of directors believed that certain of these risks were
unlikely to occur, that RiverDelta could avoid or mitigate others, and that,
overall, these risks were outweighed by the potential benefits of the merger.
The foregoing factors are not intended to be an exhaustive list of all
factors considered. In view of the variety of factors considered, the RiverDelta
board found it impractical to and did not quantify or otherwise assign relative
weights to the specific factors discussed above.
Recommendation of the RiverDelta Board of Directors
After extensive discussion among the members of the board of directors, the
RiverDelta board of directors unanimously determined that the terms of the
merger agreement and the merger are advisable and fair to, and in the best
interests of, RiverDelta and its stockholders and has unanimously approved the
merger agreement and the merger. The RiverDelta board of directors unanimously
recommends that the stockholders of RiverDelta vote "FOR" adoption of the merger
agreement. Some directors of RiverDelta may be deemed to have a conflict of
interest in the RiverDelta board of directors' approval of the merger and its
recommendation that the RiverDelta stockholders approve the merger. See "The
Merger--Interests of RiverDelta Directors and Executive Officers in the Merger"
on page 28.
Accounting Treatment
We anticipate that the merger will be accounted for as a purchase business
combination for financial reporting and accounting purposes, under accounting
principles generally accepted in the United States of America. Under the
purchase method of accounting, the purchase price paid by Motorola for
RiverDelta (including direct costs of the merger) will be allocated to the
identifiable assets and liabilities of RiverDelta based upon the fair value of
RiverDelta's identifiable assets and liabilities as of the effective date of the
merger and in-process research and development, with the excess of the purchase
price over the fair value of net identifiable assets and in-process research and
development being allocated to goodwill. After consummation of the merger, the
financial condition and results of operations of RiverDelta will be included
(but not separately reported) in the consolidated financial condition and
results of operations of Motorola.
Effectiveness of Merger
The merger will become effective upon the filing of a certificate of merger
with the Delaware secretary of state, or at such later time as is stated in the
certificate of merger. The filing of a certificate of merger will occur as soon
as practicable, but no later than the third business day after satisfaction or
waiver of the conditions to the completion of the merger described in the merger
agreement or another date agreed to by Motorola and RiverDelta.
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Merger Consideration
If RiverDelta's stockholders approve the merger agreement and the merger,
then RiverDelta stockholders will, in the aggregate, receive Motorola common
stock valued at $300 million, subject to certain purchase price adjustments
(including a deduction for indebtedness of RiverDelta, which currently is
approximately $27 million but may increase to as much as $45 million, plus
accrued interest thereon), to be apportioned according to the number and class
of shares that each RiverDelta stockholder owns.
Interests of RiverDelta Directors and Executive Officers in the Merger
In considering the recommendation of the RiverDelta board of directors in
favor of the merger agreement and the merger, you should be aware that certain
directors and executive officers of RiverDelta and their affiliates have
interests in the merger that are different from or in addition to, the interests
of stockholders of RiverDelta. These interests relate to or arise from, among
other things:
. the continued indemnification of current directors and executive officers
of RiverDelta;
. the existence of subordinated convertible promissory notes held by certain
directors and executive officers of RiverDelta and their affiliates;
. the acceleration of the vesting of stock options and restricted stock held
by certain executive officers of RiverDelta pursuant to existing stock
option and stock purchase agreements;
. the retention agreements that certain executive officers of RiverDelta are
expected to enter into with Motorola, which will provide for the
acceleration of the vesting of unvested stock options and restricted stock
in addition to the accelerated vesting provided by the terms of existing
stock option and stock purchase agreements, the grant of Motorola stock
options and the payment of cash retention bonuses and other consideration;
and
. the employee benefits plans, agreements, programs, policies and arrangements
and appropriate employment positions that will be provided to certain
employees who continue with RiverDelta following the effective date of the
merger.
These interests are described below, to the extent material, and except as
described below, those persons have, to the knowledge of RiverDelta, no material
interest in the merger apart from those of stockholders generally. The
RiverDelta board of directors was aware of, and considered the interests of,
itself and RiverDelta's executive officers in approving the merger agreement and
the merger. You should also read the section entitled "Certain Information
Concerning RiverDelta" beginning on page 67.
Indemnification. The merger agreement provides that Motorola will, for a
period of three years following the effective date of the merger, fulfill and
honor in all respects the obligations of RiverDelta to indemnify each person who
is or was a director or officer of RiverDelta pursuant to any indemnification
provision contained in RiverDelta's restated certificate of incorporation or
by-laws, each as amended and as in effect on the date of the merger agreement.
Ownership and Voting of RiverDelta Stock. As of September 7, 2001, the
directors and executive officers of RiverDelta collectively owned directly
approximately 17,362,832 shares of RiverDelta common stock, no shares of
RiverDelta Series A preferred stock, and 413,565 shares of RiverDelta Series B
preferred stock. As of September 7, 2001, directors and officers of RiverDelta
and their affiliates may be deemed to have beneficial ownership of approximately
17,362,832 shares of RiverDelta's common stock, 6,622,516 shares of RiverDelta's
Series A preferred stock, and 5,098,162 shares of RiverDelta's Series B
preferred stock. These officers and directors may be deemed to have beneficial
ownership either by themselves or with others. See "Certain Information
Concerning RiverDelta--Security Ownership of Directors, Executive Officers and
Principal Stockholders of RiverDelta" beginning on page 67. Scott E. Morrisse,
who served as a director and executive officer of RiverDelta during the last
fiscal year, owns 1,500,000 shares of RiverDelta common stock and 41,356
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shares of RiverDelta Series B preferred stock. All of the RiverDelta directors,
two of whom are executive officers, and one former director of RiverDelta have
agreed to vote the issued and outstanding shares over which they have voting
control in favor of the merger agreement and the merger. See also "The
RiverDelta Special Meeting--Voting Agreement" beginning on page 21.
12% Subordinated Convertible Promissory Notes. Certain directors and
executive officers of RiverDelta and their affiliates hold 12% Subordinated
Convertible Promissory Notes issued by RiverDelta. See "Certain Information
Concerning RiverDelta--Security Ownership of Directors, Executive Officers and
Principal Stockholders of RiverDelta" beginning on page 67. On July 11, 2001,
the subordinated convertible promissory notes were amended to provide that the
notes will be converted into shares of Series B preferred stock of RiverDelta
immediately prior to the merger. The conversion rate is one share of Series B
preferred stock for each $12.09 of principal and accrued interest. David F.
Callan, a director and the President and CEO of RiverDelta, holds subordinated
convertible promissory notes in the aggregate principal amount of $4,700,000.
Assuming the merger occurs on October 12, 2001, the aggregate principal amount
of Mr. Callan's subordinated convertible promissory notes, plus accrued interest
thereon of $306,082, will convert into approximately 414,068 shares of Series B
preferred stock. Bruce I. Sachs, a director of RiverDelta, is also a
principal of Charles River Ventures and may be deemed to share beneficial
ownership of the shares of Series B preferred stock issuable to certain funds
affiliated with Charles River Ventures upon conversion of subordinated
convertible promissory notes in the aggregate principal amount of $5,000,000
held by such funds. Assuming the merger occurs on October 12, 2001, the
aggregate principal amount of the subordinated convertible promissory notes held
by the funds affiliated with Charles River Ventures, plus accrued interest
thereon of $407,671, will convert into approximately 447,285 shares of Series B
preferred stock. Todd Dagres, a director of RiverDelta, is also a general
partner of Battery Ventures and may be deemed to share beneficial ownership of
the shares of Series B preferred stock issuable to funds affiliated with Battery
Ventures upon conversion of subordinated convertible promissory notes in the
aggregate principal amount of $5,000,000 held by such funds. Assuming the merger
occurs on October 12, 2001, the aggregate principal amount of the subordinated
convertible promissory notes held by the funds affiliated with Battery Ventures,
plus accrued interest thereon of $407,671, will convert into approximately
447,285 shares of Series B preferred stock. Michael Karfopoulos, a director of
RiverDelta, is also a principal of Pequot Capital Management, Inc. and may be
deemed to share beneficial ownership of the shares of Series B preferred stock
issuable to Pequot Private Equity Fund II, L.P. upon conversion of subordinated
convertible promissory notes in the aggregate principal amount of $10,000,000
held by the fund. Assuming the merger occurs on October 12, 2001, the aggregate
principal amount of the subordinated convertible promissory notes held by Pequot
Private Equity Fund II, L.P., plus accrued interest thereon of $815,342, will
convert into approximately 894,569 shares of Series B preferred stock. Scott E.
Morrisse, who served as a director of RiverDelta during the last fiscal year,
holds a subordinated convertible promissory note in the aggregate principal
amount of $300,000. Assuming the merger occurs on October 12, 2001, the
aggregate principal amount of Mr. Morrisse's subordinated convertible promissory
note, plus accrued interest thereon of $31,167, will convert into approximately
27,392 shares of Series B preferred stock. If the merger occurs after October
12, 2001, the aggregate amount of accrued interest on the subordinated
convertible promissory notes held by certain directors and executive officers of
RiverDelta and their affiliates will increase at a rate of approximately $8,219
per day, thereby increasing the number of shares of Series B preferred stock
issuable to the holders of the subordinated convertible promissory notes by
approximately 680 shares of Series B preferred for each day after October 12,
2001. See "Certain Information Concerning RiverDelta--Security Ownership of
Directors, Executive Officers and Principal Stockholders of RiverDelta"
beginning on page 67.
Accelerated Vesting of RiverDelta Stock Options and Accelerated Lapsing of
RiverDelta's Repurchase Rights. As a result of the merger, the vesting of
unvested stock options and the lapsing of RiverDelta's right to repurchase
restricted stock held by certain executive officers of RiverDelta will be
accelerated pursuant to the terms of existing stock option and stock purchase
agreements. See "Certain Information Concerning RiverDelta--Security Ownership
of Directors, Executive Officers and Principal Stockholders of RiverDelta"
beginning on page 67.
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Retention Agreements. Certain executive officers of RiverDelta have entered
into retention agreements with Motorola that provide for accelerated lapsing of
RiverDelta's rights to repurchase restricted stock they currently hold, provided
by the terms of existing stock option and stock purchase agreements, the grant
of Motorola stock options, the payment of cash retention bonuses and other
consideration. The retention agreements entered into with Joseph Cozzolino, Vice
President of Worldwide Sales and Customer Service, Jeffrey Walker, Vice
President of Marketing, and Gerard White, Vice President and Chief Technical
Officer, have the following general terms:
. the executive officer will receive accelerated lapsing of RiverDelta's
repurchase right with respect to 50% of the shares of restricted stock held
by such officer, in addition to the accelerated lapsing provided by the
terms of existing stock option and stock purchase agreements;
. the executive officer will receive stock options to purchase Motorola common
stock following the merger, which is currently expected to be 42,821 stock
options for Mr. Cozzolino, 27,039 stock options for Mr. Walker and 33,798
stock options for Mr. White; and
. the executive officer will receive a cash bonus upon the second anniversary
of the completion of the merger equal to such executive officer's base
salary multiplied by a factor of two.
It is expected that David F. Callan, a director and the President and Chief
Executive Officer of RiverDelta, and Michael Brown, Chief Operating Officer and
Vice President of Business Development of RiverDelta, will each enter into a
retention agreement with Motorola, the terms of which have yet to be determined.
See "Certain Information Concerning RiverDelta--Security Ownership of Directors,
Executive Officers and Principal Stockholders of RiverDelta" on page 67.
It is expected that Mr. Cozzolino, who borrowed from RiverDelta on May 9,
2000 to purchase RiverDelta common stock, will receive a waiver of the
requirement in his promissory note that the principal and interest would become
payable on the closing of the merger.
So that any benefits and compensation which certain executive officers of
RiverDelta will receive pursuant to the terms of existing stock options and
stock purchase agreements and upon execution of their respective retention
agreements will not be deemed "parachute payments", pursuant to section 280G of
the United States Internal Revenue Code of 1986, as amended, a vote of more than
75% of the outstanding shares of RiverDelta common stock and RiverDelta Series A
and Series B preferred stock immediately prior to the merger on an as converted
basis, voting together as a single class, will be required. For purposes of the
75% vote, shares of RiverDelta stock actually or constructively owned by the
recipients of the benefits and compensation are disregarded. RiverDelta is
conducting this vote through a separate information statement that is being
mailed to RiverDelta stockholders on or after the date of this proxy
statement/prospectus. If the requisite stockholder approval is not obtained, the
executive officers will not be entitled to receive any such benefits or
compensation.
Employee Benefits. For a period of twelve months following the effective date
of the merger, employees of RiverDelta who continue their employment will be
provided with compensation and benefits (including salary and fringe benefits),
employee benefits plans, agreements, programs, policies and arrangements which
are no less favorable in the aggregate than those in effect immediately prior to
the merger. It is expected that, as part of the retention agreements, effective
immediately prior to the merger, RiverDelta will reduce the exercise price of
all outstanding stock options with exercise prices greater than $1.60 per share
to equal $1.60 per share. See "The Merger Agreement--Certain Covenants and
Agreements" on page 44.
You should also read the matters described under "Certain Information
Concerning RiverDelta" on page 67.
Material Federal Income Tax Consequences of the RiverDelta Merger
In the opinions of KPMG LLP, tax advisor to Motorola, and Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., tax counsel to RiverDelta, the following is a
summary of the material United States federal income
30
tax consequences of the merger to RiverDelta stockholders who exchange their
RiverDelta shares for Motorola common stock and, as applicable, cash in lieu of
fractional shares of Motorola common stock pursuant to the merger agreement.
This discussion addresses only stockholders who hold their RiverDelta shares as
a capital asset and does not address all of the United States federal income tax
consequences that may be relevant to particular stockholders in light of their
individual circumstances or to stockholders who are subject to special rules
(including, without limitation, financial institutions, tax-exempt
organizations, insurance companies, dealers in securities or foreign currencies,
foreign holders, persons who hold their RiverDelta shares as a hedge against
currency risk, a constructive sale, or conversion transaction, holders who
acquired their shares pursuant to the exercise of an employee stock option or
otherwise as compensation, or holders whose shares are subject to repurchase
rights and/or are subject to a substantial risk of forfeiture). The following
summary is not binding on the Internal Revenue Service or a court. It is based
upon the Internal Revenue Code, laws, regulations, rulings, and decisions in
effect on the date hereof, all of which are subject to change, possibly with
retroactive effect. Tax consequences under state, local, and foreign laws are
not addressed.
The following discussion is not intended to be a complete analysis or
description of all potential United States federal income tax consequences or
any other tax consequences of the merger. In addition, the discussion does not
address tax consequences which may vary with, or are contingent on, your
individual circumstances. RiverDelta stockholders are strongly urged to consult
their own tax advisors as to the specific tax consequences to them of the
merger, including the applicability and effect of federal, state, local, and
foreign income and other tax laws on their particular circumstances.
No ruling has been, or will be, sought from the Internal Revenue Service as
to the United States federal income tax consequences of the merger. It is a
condition to the consummation of the merger that RiverDelta receive an opinion
from its counsel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. stating
that the merger will qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code and that each of Motorola, Bayou
Merger Sub, Inc. and RiverDelta will be a party to a reorganization within the
meaning of Section 368(b) of the Internal Revenue Code. Motorola is obligated to
use its reasonable best efforts to obtain such an opinion from its tax advisor,
KPMG LLP. The issuance of such opinions will be conditioned on customary
assumptions and representations made by Motorola, Bayou Merger Sub, Inc. and
RiverDelta. An opinion of counsel is not binding on the Internal Revenue Service
or a court. As a result, neither Motorola nor RiverDelta can assure you that the
tax considerations and opinions contained in this discussion will not be
challenged by the Internal Revenue Service or sustained by a court if challenged
by the Internal Revenue Service.
As a result of the merger qualifying as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, RiverDelta stockholders who
exchange their RiverDelta shares for Motorola common stock will not recognize
gain or loss for United States federal income tax purposes, except with respect
to cash, if any, they receive in lieu of fractional shares of Motorola common
stock. The aggregate tax basis of a RiverDelta stockholder in the Motorola
common stock received in exchange for RiverDelta shares pursuant to the merger
will be the same as such holder's aggregate tax basis in the RiverDelta shares
surrendered in the merger, decreased by the amount of any tax basis allocable to
any fractional share interest for which cash is received. The holding period of
the Motorola common stock received in the merger by a RiverDelta stockholder
will include the holding period of the RiverDelta shares surrendered in the
merger.
RiverDelta stockholders who receive cash in lieu of fractional shares of
Motorola common stock in the merger generally will recognize gain or loss equal
to the difference between the amount of cash received and their tax basis in
RiverDelta shares that is allocable to the fractional shares. The gain or loss
generally will be capital gain or loss. In the case of an individual
stockholder, capital gain is subject to a maximum tax rate of 20% if the
individual held his or her RiverDelta shares for more than 12 months at the
effective time of the merger. The deductibility of capital losses is subject to
limitations for both individuals and corporations.
RiverDelta stockholders who exchange RiverDelta shares for Motorola common
stock could be treated as receiving the escrowed Motorola common stock at the
time of the merger and could be treated as owners of the
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escrowed shares of Motorola common stock for United States federal income tax
purposes. As owners of the escrowed Motorola common stock, the former RiverDelta
stockholders would be taxed currently on any dividends paid by Motorola on the
escrowed shares of Motorola common stock during the life of the escrow even
though no cash will be distributed from the escrow to pay such tax. No federal
income tax consequences should then result from the receipt of any shares upon
the termination of the escrow. Under the tax characterization of the escrowed
shares of Motorola common stock described above, until the final distribution of
the Motorola common stock from the escrow, the interim basis of the Motorola
common stock received by a RiverDelta stockholder will be determined as if such
stockholder received the maximum number of shares of Motorola common stock
(including the escrowed shares of Motorola common stock) to be issued to such
stockholder. Alternatively, the Internal Revenue Service might take the position
that the RiverDelta stockholders did not receive the escrowed shares of Motorola
common stock at the time of the merger and that the stockholders are not the
owners of the escrowed shares of Motorola common stock for United States federal
income tax purposes. In that case, a portion of the escrowed shares of Motorola
common stock, as well as any dividends paid by Motorola on the escrowed shares
of Motorola common stock during the life of the escrow, that the former
RiverDelta stockholders receive upon termination of the escrow would be treated
as taxed to the RiverDelta stockholders as interest income.
To the extent the former RiverDelta stockholders are treated as owners of the
escrowed shares of Motorola common stock for United States federal income tax
purposes and shares of escrowed Motorola common stock are used to satisfy a
claim, the former RiverDelta stockholders should recognize capital gain or loss.
The amount of the gain or loss recognized should equal the difference between
the stockholder's basis in the shares of escrowed Motorola common stock used to
satisfy the claim and the fair market value of those shares. The value of such
returned shares will be added back to the tax basis of the Motorola common stock
retained by the stockholder.
If the Internal Revenue Service were to successfully challenge the
"reorganization" status of the merger, each RiverDelta stockholder would
recognize taxable gain (or loss) with respect to the RiverDelta stock
surrendered, measured by the difference between (i) the fair market value, as of
the time of the merger, of the Motorola common stock received in the merger, and
(ii) the stockholder's tax basis in the RiverDelta stock surrendered therefor in
the merger. In such event, a stockholder's aggregate basis in the Motorola
common stock so received would equal its fair market value as of the time of the
merger and the holding period for such stock would begin the day after the
merger.
RiverDelta stockholders will be required to attach a statement to their tax
returns for the year of the merger that contains the information listed in
Treasury Regulation Section 1.368-3(b). Such statement must include the
stockholder's tax basis in the stockholder's RiverDelta stock and a description
of the Motorola common stock received therefor. RiverDelta stockholders are
urged to consult their tax advisors with respect to this statement and any other
tax reporting requirements.
The opinions described above do not apply to stockholders who exercise
appraisal rights. A RiverDelta stockholder who exercises appraisal rights with
respect to the merger and receives cash for shares of RiverDelta stock will
generally recognize capital gain (or loss) measured by the difference between
the amount of cash received and the stockholder's basis in those shares,
provided that the payment is not treated as a dividend pursuant to Section 302
of the Internal Revenue Code or otherwise. A sale of shares based on an exercise
of appraisal rights will not be treated as a dividend if the stockholder
exercising appraisal rights owns no shares of RiverDelta immediately after the
merger, after giving effect to the constructive ownership rules pursuant to the
Internal Revenue Code. The capital gain or loss will be long-term capital gain
or loss if the holder's holding period for the RiverDelta shares surrendered is
more than one year.
A noncorporate RiverDelta stockholder may be subject to backup withholding at
a rate of 30.5% on cash payments received in lieu of a fractional share of
Motorola common stock or upon the exercise of appraisal rights. Backup
withholding will not apply, however, to a stockholder who (1) furnishes a
correct taxpayer identification number and certifies that it is not subject to
backup withholding on the substitute Form W-9 or
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successor form included in the letter of transmittal to be delivered to
RiverDelta stockholders following the completion of the merger, (2) provides a
certification of foreign status on Form W-8BEN or successor form, or (3) is
otherwise exempt from backup withholding.
Regulatory Matters
Motorola and RiverDelta made certain filings and took other actions necessary
to obtain approvals from U.S. governmental authorities in connection with the
merger, including filing premerger notifications with the U.S. antitrust
authorities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
The U.S. antitrust authorities have granted early termination of the waiting
period during which the U.S. antitrust authorities review the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. However, the
Antitrust Division of the Department of Justice or the Federal Trade Commission
may challenge the merger on antitrust grounds even after expiration of the
waiting period. Accordingly, at any time after the completion of the merger,
either the Antitrust Division of the Department of Justice or the Federal Trade
Commission could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, or certain other persons could take action
under the antitrust laws, including seeking to enjoin the merger. Additionally,
at any time before or after the completion of the merger, notwithstanding that
the applicable waiting period expired or ended, any state could take action
under the antitrust laws as it deems necessary or desirable in the public
interest. There can be no assurance that a challenge to the merger will not be
made or that, if a challenge is made, we will prevail.
Statutory Appraisal Rights
The Delaware General Corporation Law grants appraisal rights in the merger to
the holders of RiverDelta common stock, Series A preferred stock and Series B
preferred stock. Under Section 262 of the Delaware General Corporation Law,
RiverDelta stockholders may object to the merger and demand in writing that
RiverDelta pay to them the fair value of their shares of RiverDelta stock. Fair
value takes into account all relevant factors but excludes any appreciation or
depreciation in anticipation of the applicable merger. Stockholders who elect to
exercise appraisal rights must comply with all of the procedures set forth in
Section 262 to preserve their appraisal rights. We have attached a copy of
Section 262 of the Delaware General Corporation Law (which sets forth the
appraisal rights) as Appendix C to this proxy statement/prospectus.
Section 262 sets forth the required procedure a stockholder requesting
appraisal must follow. Making sure that you actually perfect your appraisal
rights can be complicated. The procedural rules are specific and must be
followed completely. Failure to comply with the procedure set forth in Section
262 may cause a termination of your appraisal rights. We are providing you only
with a summary of your appraisal rights and the procedure. The following
information is qualified in its entirety by the provisions of Section 262, a
copy of which is attached as Appendix C to this proxy statement/prospectus.
Please review Section 262 carefully for the complete procedure. RiverDelta will
not give you any notice other than as described in this proxy
statement/prospectus and as required by the Delaware General Corporation Law.
Appraisal Rights Procedures
If you are a RiverDelta stockholder and you wish to exercise your appraisal
rights, you must satisfy the provisions of Section 262 of the Delaware General
Corporation Law. Section 262 requires the following:
You Must Make a Written Demand for Appraisal. You must deliver a written
demand for appraisal to RiverDelta before the vote on the merger agreement and
the merger is taken at the special meeting. This written demand for appraisal
must be provided to RiverDelta separately from your proxy. In other words, a
vote against the RiverDelta merger agreement and the merger will not alone
constitute a valid demand for appraisal. Additionally, this written demand
must reasonably inform the corporation of your identity and of your intention
to demand the appraisal of your shares of RiverDelta stock.
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You Must Refrain from Voting for Approval of the Merger. You must not vote
for approval of the merger agreement and the merger. If you vote, by proxy or
in person, in favor of the merger agreement and the merger, this will
terminate your right to appraisal. You can also terminate your right to
appraisal if you return a signed proxy and (1) fail to vote against approval
of the merger agreement and the merger or (2) fail to note that you are
abstaining from voting. Your appraisal rights will be terminated even if you
previously filed a written demand for appraisal.
You Must Continuously Hold Your RiverDelta Shares. You must continuously
hold your shares of RiverDelta stock, from the date you make the demand for
appraisal through the effective date of the merger. If you are the record
holder of RiverDelta stock on the date the written demand for appraisal is
made but thereafter transfer the shares prior to the effective date of the
merger, you will lose any right to appraisal in respect of those shares. You
should read the paragraphs below for more details on making a demand for
appraisal.
A written demand for appraisal of RiverDelta stock is effective only if it is
signed by, or for, the stockholder of record who owns such shares at the time
the demand is made. The demand must be signed as the stockholder's name appears
on his/her/its stock certificate(s). If you are the beneficial owner of
RiverDelta stock, but not the stockholder of record, you must have the
stockholder of record sign a demand for appraisal.
If you own RiverDelta stock in a fiduciary capacity, such as a trustee,
guardian or custodian, you must disclose the fact that you are signing the
demand for appraisal in that capacity.
If you own RiverDelta stock with more than one person, such as in a joint
tenancy or tenancy in common, all of the owners must sign, or have signed for
them, the demand for appraisal. An authorized agent, which could include one or
more of the joint owners, may sign the demand for appraisal for a stockholder of
record; however, the agent must expressly disclose the identity of the
stockholder of record and the fact that the agent is signing the demand as that
stockholder's agent.
If you are a RiverDelta stockholder who elects to exercise appraisal rights,
you should mail or deliver a written demand to:
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, Massachusetts 01876
Attention: Secretary
It is important that RiverDelta receive all written demands for appraisal
before the vote concerning the merger agreement and the merger is taken at the
special meeting. As explained above, this written demand should be signed by, or
on behalf of, the stockholder of record. The written demand for appraisal should
specify the stockholder's name and mailing address, the number of shares of
stock owned, and that the stockholder is thereby demanding appraisal of that
stockholder's shares.
If you fail to comply with any of these conditions and the merger becomes
effective, you will only be entitled to receive the merger consideration
provided in the merger agreement.
Written Notice. Within ten days after the effective date of the merger,
RiverDelta must give written notice that the merger has become effective to
each stockholder who has fully complied with the conditions of Section 262.
Petition with the Chancery Court. Within 120 days after the effective date
of the merger, either the surviving corporation or any stockholder who has
complied with the conditions of Section 262, may file a petition in the
Delaware Court of Chancery. This petition should request that the chancery
court determine
34
the value of the shares of stock held by all of the stockholders who are
entitled to appraisal rights. If you intend to exercise your rights of
appraisal, you should file such a petition in the chancery court. RiverDelta
has no intention at this time to file such a petition. Because RiverDelta has
no obligation to file such a petition, if you do not file such a petition
within 120 days after the effective date of the merger, you will lose your
rights of appraisal.
Withdrawal of Demand. If you change your mind and decide you no longer want
appraisal rights, you may withdraw your demand for appraisal rights at any
time within 60 days after the effective date of the merger. You may also
withdraw your demand for appraisal rights after 60 days after the effective
date of the merger, but only with the written consent of RiverDelta. If you
effectively withdraw your demand for appraisal rights, you will receive the
merger consideration provided in the merger agreement.
Request for Appraisal Rights Statement. If you have complied with the
conditions of Section 262, you are entitled to receive a statement from
RiverDelta. This statement will set forth the number of shares that have
demanded appraisal rights, and the number of stockholders who own those
shares. In order to receive this statement, you must send a written request to
RiverDelta within 120 days after the effective date of the merger. After the
merger, RiverDelta has 10 days after receiving a request to mail the statement
to you.
Chancery Court Procedures. If you properly file a petition for appraisal in
the chancery court and deliver a copy to RiverDelta, RiverDelta will then have
20 days to provide the chancery court with a list of the names and addresses
of all stockholders who have demanded appraisal rights and have not reached an
agreement with RiverDelta as to the value of their shares. The chancery court
will then send notice to all of the stockholders who have demanded appraisal
rights. If the chancery court thinks it is appropriate, it has the power to
conduct a hearing to determine whether the stockholders have fully complied
with Section 262 of the Delaware General Corporation Law and whether they are
entitled to appraisal rights under that section. The chancery court may also
require you to submit your stock certificates to the Registry in Chancery so
that it can note on the certificates that an appraisal proceeding is pending.
If you do not follow the chancery court's directions, you may be dismissed
from the proceeding.
Appraisal of Shares. After the chancery court determines which stockholders
are entitled to appraisal rights, the chancery court will appraise the shares
of stock. To determine the fair value of the shares, the chancery court will
consider all relevant factors except for any appreciation or depreciation due
to the anticipation or accomplishment of the merger. After the chancery court
determines the fair value of the shares, it will direct RiverDelta to pay that
value to the stockholders who are entitled to appraisal rights. The chancery
court can also direct RiverDelta to pay interest, simple or compound, on that
value if the chancery court determines that the payment of interest is
appropriate. In order to receive the fair value of your shares, you must then
surrender your RiverDelta stock certificates to RiverDelta.
The chancery court could determine that the fair value of your shares of
RiverDelta stock is more than, the same as, or less than the merger
consideration. In other words, if you demand appraisal rights, you could receive
less consideration than you would under the merger agreement. You should also be
aware that an opinion of an investment banking firm that the merger is fair is
not an opinion that the merger consideration is the same as the fair value under
Section 262.
Costs and Expenses of Appraisal Proceeding. The costs and expenses of the
appraisal proceeding may be assessed against RiverDelta and the stockholders
participating in the appraisal proceeding, as the chancery court deems
equitable under the circumstances. You can request that the chancery court
determine the amount of interest, if any, RiverDelta should pay on the value
of stock owned by stockholders entitled to the payment of interest. You may
also request that the chancery court allocate the expenses of the appraisal
action incurred by any stockholder pro rata against the value of all of the
shares entitled to appraisal.
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Loss of Stockholder's Rights. If you demand appraisal rights, from and
after the effective date of the merger you will not be entitled to:
. vote your shares of RiverDelta stock, for any purpose, for which you
have demanded appraisal rights;
. receive payment of dividends or any other distribution with respect to
such shares, except for dividends or distributions, if any, that are
payable to holders of record as of a record date prior to the effective
time of the merger; or
. receive the payment of the consideration provided for in the merger
agreement (unless you properly withdraw your demand for appraisal).
If no petition for an appraisal is filed within 120 days after the effective
date of the merger, your right to an appraisal will cease. You may withdraw your
demand for appraisal and accept the merger consideration by delivering to
RiverDelta a written withdrawal of your demand, except that (1) any attempt to
withdraw your demand for appraisal made more than 60 days after the effective
date of the merger will require the written approval of RiverDelta, and (2) an
appraisal proceeding in the chancery court cannot be dismissed unless the
chancery court approves such dismissal.
If you fail to comply strictly with the procedures described above you will
lose your appraisal rights. Consequently, if you wish to exercise your appraisal
rights, we strongly urge you to consult a legal advisor before attempting to
exercise your appraisal rights.
If you do not vote in favor of the merger and fail to properly demand
appraisal rights, or if for some reason your right to appraisal is withdrawn or
lost, your shares will, upon surrender as described above at the effective time
of the merger, be converted into the right to receive the applicable merger
consideration as described above, subject to the deposit of 10% of the shares of
Motorola common stock payable to RiverDelta stockholders into escrow to be used
in the event that Motorola is entitled to indemnification under the merger
agreement or to the extent that there is a reduction in the purchase price based
on a post-closing audit adjustment.
Resale of Motorola Common Stock
The issuance of the shares of Motorola common stock to RiverDelta
stockholders in the merger will have been registered under the Securities Act of
1933, as amended. Upon issuance, these shares may be traded freely and without
restriction by those stockholders not deemed to be "affiliates" of RiverDelta as
that term is defined for purposes of Rule 145 under the Securities Act. An
"affiliate" of RiverDelta for this purpose is a person or entity that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, RiverDelta. Any subsequent transfer by an
affiliate of RiverDelta must be one permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 promulgated under the
Securities Act, in the case of any persons who become affiliates of Motorola) or
as otherwise permitted under the Securities Act. These restrictions are expected
to apply to the directors, executive officers and holders of 10% or more of the
RiverDelta shares (as well as to certain other related individuals or entities).
This proxy statement/prospectus does not cover resales of Motorola common
stock to be received by the stockholders of RiverDelta in the merger, and no
person is authorized to make any use of this proxy statement/prospectus in
connection with any such resale.
Management and Operations of RiverDelta after the Merger
RiverDelta's products and businesses will be integrated into Motorola's
Broadband Communications Sector - specifically within Motorola Broadband's
existing Network Infrastructure Solutions business. The Network Infrastructure
Solutions business is part of Motorola Broadband's IP Systems Group. Motorola
expects that the members of RiverDelta's management will continue their
relationship with the business after the merger.
36
THE MERGER AGREEMENT
The following is a summary, and is qualified in its entirety by, the terms of
the merger agreement. The following does not purport to describe all the terms
of the merger agreement. The full text of the merger agreement is attached as
Appendix A-1 to this proxy statement/prospectus and is incorporated herein by
reference (a minor amendment to the merger agreement is attached as Appendix A-2
to this proxy statement/prospectus). We urge you to read the merger agreement in
its entirety.
The Merger
Following the adoption of the merger agreement and approval of the merger by
RiverDelta stockholders and the satisfaction or waiver of the other conditions
to the merger, Bayou Merger Sub, Inc., a wholly-owned subsidiary of Motorola,
will merge with and into RiverDelta. RiverDelta will survive the merger as a
wholly-owned subsidiary of Motorola. If all conditions to the merger are
satisfied or waived, the merger will become effective at the time of the filing
by the surviving corporation of a duly executed certificate of merger with the
Delaware secretary of state or at such other time as may be specified in the
certificate of merger or as mutually agreed by the parties.
In addition, at the effective time of the merger:
. RiverDelta's restated certificate of incorporation will be amended and
restated to contain the provisions set forth in the charter of Bayou Merger
Sub, Inc., and such amended and restated charter will become the charter of
RiverDelta;
. the by-laws of Bayou Merger Sub, Inc. will become the charter and by-laws
of RiverDelta; and
. the directors and officers of Bayou Merger Sub, Inc. will become the
directors and officers of RiverDelta.
Merger Consideration
Generally, at the effective time of the merger, the outstanding shares of
RiverDelta common and preferred stock will be converted into the right to
receive Motorola common stock. Subject to the post-closing adjustment described
below, the aggregate merger consideration for the outstanding shares of
RiverDelta common and preferred stock will be Motorola common stock valued at
$300 million:
(i) less the amount of RiverDelta's estimated debt as of the earlier of
October 15 and the closing date of the merger;
(ii) plus the estimated capital expenditures by RiverDelta between July 11,
2001 and the closing date of the merger (not to exceed $1 million);
(iii) plus the estimated cash balance of RiverDelta as of the earlier of
October 15, 2001 and the closing date of the merger;
(iv) plus the estimated amount owed to RiverDelta by certain of its
employees pursuant to certain secured loans as of the earlier of October 15,
2001 and the closing date of the merger;
(v) plus the amount of the estimated aggregate exercise price of vested and
unvested options to purchase common stock of RiverDelta that have an exercise
price less than the value of the consideration to be received in the merger by
holders of RiverDelta common stock for each share of common stock;
(vi) plus the amount of expenses incurred by RiverDelta in connection with
the retention plan (as defined in the merger agreement) and the integration of
RiverDelta and Motorola; and
(vii) less an amount equal to the amount by which RiverDelta's net working
capital on April 30, 2001 minus $1 million exceeds the net working capital
reflected on the estimated balance sheet as of the closing date (which will
take into account, among other things, fees and expenses incurred by
RiverDelta in the merger), or plus the amount by which RiverDelta's net
working capital reflected on the estimated balance sheet as of the closing
date exceeds the net working capital on April 30, 2001 minus $1 million.
37
The estimated amounts described above will be contained in an estimated
balance sheet as of the closing date but delivered by RiverDelta to Motorola at
least 5 business days prior to the scheduled closing date.
The valuation of the Motorola common stock for this purpose, and for the
purpose of determining the exchange ratio applicable to shares of RiverDelta
common and preferred stock, will be made on the basis of the average of the per
share closing prices of the Motorola common stock on the New York Stock Exchange
over each of the 20 consecutive trading days ending on (and including) the
second trading day immediately preceding the date of the closing of the merger.
Assuming the merger closes on October 12, 2001, holders of Series B preferred
stock will receive approximately the first $62.7 million of consideration. If
the merger occurs after October 12, 2001, additional shares of Series B
preferred stock will be required to be issued to the holders of the subordinated
convertible promissory notes in order to convert the additional accrued
interest, which accrues at the rate of $8,219 per day, into Series B preferred
stock upon conversion of the notes.
The remaining consideration will be paid to the holders of RiverDelta Series
A preferred stock and common stock. Pursuant to the merger agreement, upon the
approval of the proposal for the holders of the Series A preferred stock to
elect to be deemed to have converted all shares of Series A preferred stock into
shares of RiverDelta common stock immediately prior to the effective time of the
merger, the holders of Series A preferred stock will receive the same
consideration that they would receive if they had converted to common stock.
In addition, as no fractional shares of Motorola common stock will be issued,
you will receive cash payments instead of any fractional shares of Motorola
common stock that you would have otherwise received.
Post-Closing Adjustment
The merger agreement provides for post-closing adjustments to the aggregate
purchase price paid by Motorola based on variations between the amounts on the
estimated balance sheet, dated as of the closing date and delivered by
RiverDelta to Motorola at least 5 days prior to the closing date, and the
closing balance sheet, audited by KPMG LLP and delivered by Motorola to the
stockholders' representative within 90 days of the closing date. Both the
estimated and the audited closing balance sheets will include cash capital
expenditures and the aggregate exercise price of certain options. Pursuant to
the post-closing adjustment mechanism, the aggregate purchase price paid by
Motorola:
(i) will be reduced by the amount that RiverDelta's indebtedness contained
in the audited balance sheet is more than the indebtedness contained in the
estimated balance sheet, or increased by the amount that RiverDelta's
indebtedness contained in the audited balance sheet is less than the
indebtedness contained in the estimated balance sheet;
(ii) will be reduced by the amount that RiverDelta's cash balance contained
in the audited balance sheet is less than the cash balance contained in the
estimated balance sheet, or increased by the amount that RiverDelta's cash
balance contained in the audited balance sheet is more than the cash balance
contained in the estimated balance sheet;
(iii) will be reduced by the amount that RiverDelta's net working capital
contained in the audited balance sheet is less than the net working capital
contained in the estimated balance sheet, or increased by the amount that
RiverDelta's net working capital contained in the audited balance sheet is
more than the net working capital contained in the closing balance sheet;
(iv) will be reduced by the amount that RiverDelta's cash capital
expenditures between July 11, 2001 and the effective time of the merger (not
to exceed $1 million) contained in the audited balance sheet are more than the
capital expenditures for that period contained in the estimated balance sheet,
or increased by the amount that RiverDelta's cash capital expenditures between
July 11, 2001 and the effective time of the merger (not to exceed $1 million)
contained in the estimated balance sheet are less than the capital
expenditures for that period contained in the audited balance sheet; and
38
(v) will be reduced by the amount that the aggregate exercise price of
vested and unvested RiverDelta options assumed by Motorola at an exercise
price less than the per share price paid to RiverDelta stockholders pursuant
to the merger agreement contained in the audited balance sheet is less than
the aggregate exercise price for such options contained in the estimated
balance sheet, or increased by the amount that the aggregate exercise price of
vested and unvested RiverDelta options assumed by Motorola at an exercise
price less than the per share price paid to RiverDelta stockholders pursuant
to the merger agreement contained in the audited balance sheet is more than
the aggregate exercise price for such options contained in the estimated
balance sheet.
The stockholders' representative may dispute any discrepancy in the amount of
RiverDelta's cash, indebtedness, cash capital expenditures or aggregate exercise
price of options described above. The merger agreement provides for an
independent accounting firm to render a final and binding determination of any
such dispute.
If the aggregate purchase price paid by Motorola is reduced as a result of
the post-closing purchase price adjustments as determined following any such
dispute, the number of shares in the escrow account will be reduced by an amount
equal to the post-closing adjustment divided by the 20-day average closing price
of Motorola common stock. If the aggregate purchase price paid by Motorola is
increased as a result of the post-closing purchase price adjustments, Motorola
will transfer 90% of the additional shares of Motorola common stock to the
transfer agent for distribution to holders of RiverDelta Series A preferred
stock and common stock, and the remaining 10% of the shares will be deposited
with the escrow agent on behalf of holders of RiverDelta Series A preferred
stock and common stock.
Treatment of RiverDelta Stock Generally
At the effective time of the merger, all shares of RiverDelta stock will no
longer be outstanding, will automatically be cancelled and will cease to exist.
At that time, each holder of a certificate representing shares of RiverDelta
stock (other than shares as to which dissenters' rights to appraisal have been
perfected) will cease to have any rights as a stockholder except the right to
receive Motorola common stock, the right to any dividends or other distributions
in accordance with the merger agreement and the right to receive cash for any
fractional share of Motorola common stock otherwise issuable in the merger.
Holders who exercise and perfect appraisal rights will be paid cash in an amount
determined as described in "The Merger--Statutory Appraisal Rights" on page 33,
and will not receive a portion of the merger consideration.
Shares of treasury stock held by RiverDelta and shares owned by Motorola or
any direct or indirect wholly-owned subsidiary of Motorola or RiverDelta will be
cancelled. Former RiverDelta stockholders will receive cash for any fractional
shares of Motorola common stock which they would have otherwise received in the
merger.
Motorola will adjust the exchange ratio to provide for any reclassification,
stock split, stock dividend, reorganization or other similar exchange with
respect to Motorola common stock or RiverDelta common or preferred stock
occurring before the merger.
Following the merger, former RiverDelta stockholders will own less than 1%
of Motorola's outstanding common stock.
The precise number of shares of Motorola common stock that you will be
entitled to receive at the effective time of the merger depends on:
. whether you currently hold shares of RiverDelta common, Series A preferred,
or Series B preferred stock;
. the aggregate merger consideration paid by Motorola pursuant to the
merger agreement;
39
. the number of fully diluted shares, which is calculated by reference to:
. the number of shares of RiverDelta common stock and Series A
preferred stock, on an as converted basis, outstanding immediately
prior to the effective time;
. the number of shares of common stock issuable immediately prior to
the effective time upon exercise of vested and unvested options to
purchase RiverDelta common stock at an exercise price per share
less than the price per share payable to holders of RiverDelta
common stock at the effective time, without giving effect to any
option repricing or cancellation as part of the retention
agreements to be signed with Motorola or otherwise in connection
with the retention plan, as defined in the merger agreement;
. the date of the effective time, as the number of shares of Series B
preferred stock issuable upon conversion of RiverDelta's 12% subordinated
convertible promissory notes increases by approximately 680 shares each day
as the interest thereon continues to accrue; and
. the average of the per share closing prices on the NYSE of Motorola common
stock during the 20 consecutive trading days ending on (and including) the
second trading day immediately preceding the closing of the merger.
Some of the factors described above will be calculated immediately prior to
(and thus cannot be precisely determined before) the effective date of the
merger. The information below describes how the exchange ratio for shares of
RiverDelta common and preferred stock will be calculated at the effective time
of the merger and provides an approximation of the value of Motorola common
stock to which each of your shares of RiverDelta stock will entitle you.
Treatment of RiverDelta Series B Preferred Stock
The merger agreement provides that at the effective time of the merger, each
issued and outstanding share of RiverDelta Series B preferred stock (excluding
treasury shares cancelled pursuant to the merger agreement and dissenting
shares) will be converted into the right to receive that number of shares of
Motorola common stock equal to the quotient of $12.09 (the liquidation
preference of the Series B preferred stock as provided in RiverDelta's restated
certificate of incorporation) divided by the 20-day average closing price of
Motorola common stock.
Treatment of RiverDelta Common Stock
The merger agreement provides that at the effective time of the merger, each
issued and outstanding share of RiverDelta common stock (excluding treasury
shares cancelled pursuant to the merger agreement and dissenting shares) will be
converted into the right to receive that number of shares of Motorola common
stock equal to (a)(i) the aggregate consideration to be paid by Motorola for
RiverDelta stock minus the amounts paid to the holders of Series B preferred
stock divided by (ii) the total fully diluted shares of common stock outstanding
(this quotient is referred to below as the share price), divided by (b) the
20-day average closing price of Motorola common stock.
Treatment of RiverDelta Series A Preferred Stock
The merger agreement provides that at the effective time of the merger, each
issued and outstanding share of RiverDelta Series A preferred stock (excluding
treasury shares cancelled pursuant to the merger agreement and dissenting
shares) will be converted into the right to receive that number of shares of
Motorola common stock equal to the per share price multiplied by three (the
number of shares of RiverDelta common stock that each Series A preferred share
is convertible into as provided in RiverDelta's restated certificate of
incorporation), divided by the 20-day average closing price of Motorola common
stock.
40
As the aggregate consideration to be paid by Motorola is subject to
adjustment (see "The Merger--Merger Consideration" on page 28), the amount of
shares of Motorola common stock that holders of RiverDelta common stock and
Series A preferred stock will be entitled to receive may be less than as
described above. In particular, there will certainly be an adjustment for
indebtedness of RiverDelta, which is currently approximately $27 million but may
increase to as much as $45 million, plus accrued interest thereon. The following
table illustrates how the adjustment in the aggregate merger consideration to be
paid by Motorola would affect the amount of Motorola common stock that holders
of RiverDelta common stock and Series A preferred stock would be entitled to
receive. The table assumes that the effective time is October 12, 2001, that the
aggregate liquidation preference of the Series B preferred stock is $62.7
million and that there are 58,069,032 fully diluted shares (calculated as
described in "The Merger Agreement--Treatment of RiverDelta Stock Generally" on
page 39).
$ Amount of Motorola $ Amount of Motorola
$ Amount of Motorola common stock holders common stock holders
Aggregate Merger common stock holders of RiverDelta Series A of RiverDelta Series B
Consideration, of RiverDelta common preferred stock would preferred stock would
after adjustment stock would be entitled be entitled to receive be entitled to receive
at closing to receive (per share) (per share) (per share)
---------------- ----------------------- ---------------------- ----------------------
$280,000,000 $3.74 $11.23 $12.09
$270,000,000 $3.57 $10.71 $12.09
$260,000,000 $3.40 $10.19 $12.09
$250,000,000 $3.23 $ 9.76 $12.09
Note: These are examples only. The aggregate merger consideration, after
adjustment, may be different from the amounts set forth in the table.
Treatment of RiverDelta Stock Options and Restricted Shares
The merger agreement provides that all options outstanding at the effective
time of the merger, whether or not exercisable or vested, under RiverDelta's
1999 employee, director and consultant stock option plan or under any other
stock option plans or agreements to which RiverDelta is a party will remain
outstanding following the effective time of merger. The merger agreement also
provides that at the effective time of the merger, Motorola and RiverDelta will
take all actions necessary to enable Motorola to assume each such option. The
merger agreement also provides that Motorola will assume RiverDelta's option
plan. Each option assumed by Motorola will be exercisable upon the same terms
and conditions as under the applicable stock option plan (and applicable stock
option agreement) of RiverDelta. The number of shares of Motorola common stock
rounded down to the nearest whole share to be subject to each RiverDelta stock
option assumed by Motorola will be equal to the number of shares of RiverDelta
common stock subject to the RiverDelta stock option immediately prior to the
merger multiplied by the exchange ratio applicable to RiverDelta's common stock.
Additionally, the exercise price per share of Motorola common stock issuable
under each RiverDelta stock option will equal the per share exercise price of
the RiverDelta common stock specified under the RiverDelta option divided by the
exchange ratio applicable to RiverDelta's common stock. The exercise price per
share of Motorola common stock will be rounded up to the nearest whole cent.
Options described above will be subject to any adjustments provided for in any
retention agreement between the holder of such option and Motorola. All shares
of common stock acquired upon the exercise of a RiverDelta option assumed by
Motorola and/or that may be repurchased by RiverDelta will be converted into
Motorola common stock in the same manner as RiverDelta common stock (described
above) subject to the same repurchase rights (unless otherwise agreed by the
holder and Motorola). Motorola will also adjust this exchange ratio to provide
for any reclassification, stock split, stock dividend, reorganization or other
similar exchange with respect to Motorola or RiverDelta common stock occurring
before the merger. Except as provided in the retention agreement (as defined in
the merger agreement), Motorola intends that its assumption of the options that
are "incentive stock options" as defined in Section 422 of the Internal Revenue
Code will be effected in a manner to preserve the benefits of such "incentive
stock options".
The merger agreement provides that no later than fifteen days following the
effective time of the merger, Motorola will prepare and file with the SEC a
registration statement on Form S-8 registering the shares of
41
Motorola common stock subject to the assumed RiverDelta stock options. That
registration statement will be kept effective (and the current status of the
prospectus required by that registration statement will be maintained in
accordance with the relevant requirements of the Securities Act and the Exchange
Act) at least for so long as any assumed RiverDelta stock options remain
outstanding.
Notwithstanding the provisions of the merger agreement providing for the
assumption of the RiverDelta options by Motorola, it is currently expected that
the holders of RiverDelta options will have entered into retention agreements
with Motorola prior to closing pursuant to which, among other things, the
RiverDelta options then held by such holders of RiverDelta options will be
converted into Motorola options.
Fractional Shares
Motorola will not issue any fractional shares in the merger. In lieu of any
fractional shares of Motorola common stock, each RiverDelta stockholder who
would otherwise have been entitled to a fraction of a share of Motorola common
stock pursuant to the merger agreement will be paid an amount in cash, without
interest, equal to such holder's proportionate interest in the net proceeds from
the sale or sales in the open market of the aggregate fractional shares of
Motorola common stock, if any, that would have been issued in the merger.
ComputerShare Investor Services LLC, as Motorola's exchange agent, will sell
such aggregate fractional shares at the then prevailing prices on the New York
Stock Exchange. These sales will be executed through one or more member firms of
the New York Stock Exchange and will be executed in round lots to the extent
practicable. Motorola will pay all commissions, transfer taxes and other out-
of-pocket transaction costs of Motorola's exchange agent, including the expenses
and compensation of Motorola's exchange agent, incurred in connection with the
sale of fractional shares.
Exchange of Certificates
Within five business days after the merger, ComputerShare Investor Services LLC,
Motorola's exchange agent, will mail to each holder of record of certificates
that immediately prior to the merger represented outstanding RiverDelta shares
of capital stock both a letter of transmittal and instructions for surrendering
their RiverDelta stock certificates. The letter of transmittal and instructions
are for use by each holder of record in surrendering RiverDelta stock
certificates in exchange for certificates representing that number of shares of
Motorola common stock, reduced by the number of shares that will be delivered as
part of the escrow fund, and cash for any fractional shares thereof to which
such holder would otherwise be entitled. We request that you not surrender your
RiverDelta stock certificates for exchange until you receive the letter of
transmittal and instructions. At and after the merger and until so surrendered,
the RiverDelta stock certificates will represent only the right to receive the
consideration described above. No dividends or other distributions declared or
made after the merger with respect to Motorola common stock will be paid to the
holder of record of any unsurrendered RiverDelta stock certificates. However,
following surrender of any such RiverDelta stock certificates (subject to the
effect of escheat, tax or any other applicable laws), the holder of record will
be paid, without interest, with respect to each whole share of Motorola common
stock which such person is entitled to receive in the merger, (1) the amount of
any cash payable with respect to a fractional share of Motorola common stock to
which such holder is entitled and the amount of any dividends or other
distributions with a record date after the merger but a payment prior to
surrender of such RiverDelta stock certificates and (2) at the appropriate
payment date, the amount of dividends or distributions with a record date after
the merger but prior to surrender of such RiverDelta stock certificates and a
payment after the surrender of such RiverDelta stock certificates. No transfers
of RiverDelta shares shall be made after the merger.
If any RiverDelta stock certificate is lost, stolen or destroyed, a
RiverDelta stockholder must provide an appropriate affidavit of that fact.
Motorola may require a RiverDelta stockholder to deliver a bond in a reasonable
amount as indemnity against any claim that may be made against Motorola with
respect to any lost, stolen or destroyed certificate.
42
Listing of Motorola Common Stock
Motorola has agreed to promptly prepare and submit to the New York Stock
Exchange a listing application covering the shares of Motorola common stock to
be issued in the merger or issuable upon the exercise of assumed options and to
use reasonable best efforts to cause such shares to be approved for listing on
such exchange, subject to official notice of issuance, prior to the effective
time of the merger. Approval for listing on the New York Stock Exchange of the
Motorola common stock issuable to the RiverDelta stockholders in the merger,
subject only to official notice of issuance, is a condition to the obligations
of RiverDelta to complete the merger. See "The Merger Agreement--Conditions to
the Merger" on page 47.
Representations and Warranties of RiverDelta
The merger agreement includes customary representations and warranties by
RiverDelta to Motorola, including representations and warranties as to:
. corporate organization, qualification standing and power;
. subsidiaries;
. compliance with its charter and by-laws;
. capitalization;
. power and authority of RiverDelta to execute and deliver the merger
agreement and to perform its obligations under, and to complete the
transactions contemplated by, the merger agreement;
. no conflict with its charter or by-laws, laws and orders and required
consents and authorizations of governmental entities and third parties;
. possession and validity of necessary government permits and compliance
with applicable laws;
. RiverDelta's financial statements;
. the absence of certain changes in RiverDelta's business since April 31,
2001;
. real property matters;
. personal property matters;
. RiverDelta's employee benefit plans and labor matters;
. contracts, leases, agreements or understandings of RiverDelta;
. customers;
. pending or threatened litigation;
. insurance matters;
. environmental, health and safety matters;
. intellectual property matters;
. taxes;
. the required vote of RiverDelta stockholders;
. brokers, finders or investment bankers employed by RiverDelta;
. software products; and
. related party transactions.
43
Representations and Warranties of Motorola and Bayou Merger Sub, Inc.
The merger agreement also contains customary representations and warranties
by Motorola to RiverDelta, including representations and warranties as to:
. corporate organization, standing and power of Motorola and Bayou Merger Sub,
Inc.;
. compliance with the charter and by-laws of Motorola and Bayou Merger Sub,
Inc.;
. capitalization of Motorola;
. power and authority of Motorola and Bayou Merger Sub, Inc. to execute and
deliver the merger agreement and to perform its obligations under, and to
complete the transactions contemplated by, the merger agreement;
. authorization and validity of the shares of Motorola common stock to be
issued pursuant to the merger agreement;
. no conflict with Motorola and Bayou Merger Sub, Inc. organization
documents, laws and orders and required consents and authorizations of
governmental entities and third parties;
. Motorola's financial statements and reports filed with the SEC;
. brokers, finders or investment bankers employed by Motorola; and
. New York Stock Exchange requirements.
Certain Covenants and Agreements
Conduct of Business of RiverDelta Pending the Merger. RiverDelta has agreed
that, except in certain well defined and limited circumstances or as otherwise
consented to by Motorola, RiverDelta will conduct its business in the ordinary
course consistent with past practice and use its reasonable best efforts to keep
available the services of its current officers, consultants and employees and
preserve its and its subsidiary's current relationships with customers,
suppliers and others having significant business relations as is reasonably
necessary in order to preserve substantially intact its business organization.
RiverDelta has also agreed to apply a portion of the proceeds of its initial
drawing under its credit agreement with Motorola to repay a portion of the
amounts owed to various vendors. RiverDelta has also agreed with Motorola that
prior to the effective time of the merger it will not, in general terms, do any
of the following without Motorola's consent:
. amend or change its restated certificate of incorporation or by-laws (other
than the amendment being voted on by RiverDelta stockholders at the special
meeting);
. sell or issue new securities or borrow against its stock, other than the
issuance of RiverDelta common stock upon the exercise of existing options or
warrants or the issuance of Series B preferred stock pursuant to the bridge
holders agreement;
. sell, lease or license any material property or assets, or pledge them as
security;
. pay dividends or other distributions on, split, repurchase or redeem its
stock other than the repurchase of shares of capital stock of employees or
consultants upon termination of their employment pursuant to agreements in
effect as of the date of the merger agreement for a purchase price not to
exceed $100,000 per employee or consultant;
. engage in any business combination or acquire any interest in a business;
. borrow money, guaranty an obligation or make a loan or advance or enter into
any capital lease with an aggregate capitalized value of $25,000;
. enter into any contract or agreement, lease or license involving more than
$250,000 or terminate, cancel or agree to any material change in, a material
contract, except in the ordinary course of business consistent with past
practice;
44
. except as may be required by certain contractual commitments or corporate
policies of RiverDelta with respect to severance or termination pay;
--increase the compensation payable or to become payable to its officers
or employees;
--grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any of its directors, officers or
other employees;
--hire any employees or establish, adopt, enter into or amend any
collective bargaining agreement or employee benefit arrangement;
. make any pledge to make any charitable or other capital contribution
outside the ordinary course of business;
. materially change its accounting policies other than as required by GAAP
or a governmental entity;
. make any material tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
. waive, release, assign, settle or compromise any material claims, or any
material litigation or arbitration except where such release or settlement
involves a payment of damages in an amount less than $50,000 individually or
$250,000 in the aggregate;
. delay or postpone payment of accounts payable and/or other liabilities
(unless Motorola refuses to extend a loan pursuant to the credit agreement);
. grant any license with respect to its or its subsidiary's intellectual
property (except for non-exclusive use licenses granted in the ordinary
course of business), develop any intellectual property jointly with any
third party or disclose any confidential information except in the ordinary
course of business subject to past practice;
. amend or change the terms of any options or restricted stock, or reprice
options granted under any of its stock option plans or authorize cash
payments in exchange for any options granted under such plans;
. authorize any capital expenditures in excess of $1,000,000 in the
aggregate; or
. authorize or enter into any agreement or otherwise make any commitment to
do any of the foregoing.
No Solicitation. The merger agreement provides that RiverDelta will not,
directly or indirectly, and will not authorize or permit any of its
representatives or affiliates to solicit, initiate or knowingly encourage, or
take any other action knowingly to facilitate any inquiries or the making of any
proposal or offer that constitutes or may reasonably be expected to lead to any
competing transaction (defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries. RiverDelta will promptly notify Motorola if any proposal or offer, or
any inquiry or contact with any person regarding a competing transaction is
made. RiverDelta shall immediately cease all existing discussions or
negotiations with any parties conducted heretofore with respect to a competing
transaction. RiverDelta agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which it is a
party. A "competing transaction" is any of the following involving RiverDelta
(other than the merger and the other transactions contemplated by the merger
agreement):
. a merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or other similar transaction;
. any sale, lease, exchange, transfer or other disposition of 20% or more
of the assets of RiverDelta and its subsidiaries; or
. an acquisition of 20% or more of the outstanding voting securities of the
RiverDelta.
45
Employee Benefits Matters. For a period of twelve months following the
effective time of the merger, employees of RiverDelta who continue their
employment after such time (including those on vacation, leave of absence, or
short-term disability who return to active employment within six months after
the merger) will be provided with compensation, benefits (including salary and
fringe benefits) and employee benefits plans, agreements, programs, policies and
arrangements, on no less favorable terms, in the aggregate, than what was
provided immediately preceding the closing of the merger and with appropriate
employment positions taking into consideration their respective prior experience
and the best interests of RiverDelta following the merger. RiverDelta will,
subject to certain exceptions, recognize such employee's service with RiverDelta
prior to the merger as service with RiverDelta after the merger for eligibility
and vesting purposes, but not for purposes of calculating most benefits.
Motorola may terminate RiverDelta's 401(k) plan if Motorola determines that a
merger of RiverDelta's 401(k) plan with Motorola's 401(k) plan will require
Motorola to amend its 401(k) plan. Upon termination of RiverDelta's 401(k) plan,
Motorola will take necessary action to obtain any necessary or advisable
governmental approvals, and provide for the transfer of electing participants'
account balances under RiverDelta's 401(k) plan to Motorola's 401(k) plan.
Proxy Statement and Registration Statement. Motorola and RiverDelta have
agreed to prepare, file and mail a proxy statement relating to the RiverDelta
special meeting of stockholders which will include the recommendation of the
RiverDelta board of directors to its stockholders to vote in favor of the merger
agreement and the merger.
Stockholders' Meeting. RiverDelta has agreed to call and hold a meeting of
its stockholders for the purpose of voting upon the approval of the merger as
promptly as practicable after the Motorola registration statement of which this
proxy statement/prospectus is a part becomes effective.
Indemnification. For three years after the effective date of the merger,
Motorola will indemnify each present or former director or officer of
RiverDelta pursuant to RiverDelta's restated certificate of incorporation and
by-laws as in effect on the date of the merger agreement.
Registration Statement on Form S-8. Motorola will file a registration
statement on Form S-8 for the shares of Motorola common stock issuable with
respect to RiverDelta options assumed by Motorola in connection with the merger
no later than 15 days after the effective time.
Further Action; Consents and Filings. The merger agreement provides that
RiverDelta and Motorola will use their reasonable best efforts to:
. take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary, proper or advisable under applicable law or
otherwise to complete the transactions contemplated by the merger agreement;
. obtain any consents, licenses, approvals or other items from any
governmental entities or third parties that are required to be obtained in
connection with the merger agreement and the completion of the transactions
contemplated by the merger agreement;
. make all necessary filings with respect to the merger agreement and the
merger required under applicable law; and
. provide all required notices to third parties.
The merger agreement also provides that Motorola and RiverDelta will file as
soon as practicable notifications under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and will respond as promptly as
practicable to all inquiries or requests received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for additional
information and to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
RiverDelta and Motorola have also agreed to cooperate in connection with the
making of all such filings or responses.
Motorola and RiverDelta filed under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, on August 13, 2001 and received early
termination of the waiting period for the merger on August 24, 2001.
46
Regardless of the agreements described above, Motorola is not obligated under
the merger agreement to agree to the imposition of conditions, the requirement
of divestiture, or the requirement of expenditure of money by Motorola to a
third party in exchange for any such consent that, in any case, would be
materially adverse to Motorola, RiverDelta and their subsidiaries, taken as a
whole.
Public Announcements. Motorola and RiverDelta have agreed to use their
reasonable best efforts to consult with each other before issuing any press
release or otherwise making any public statements regarding the merger
agreement.
Plan of Reorganization. Each of Motorola, Bayou Merger Sub, Inc. and
RiverDelta has agreed to use its reasonable best efforts to cause the merger to
qualify, and will not knowingly take any action or cause any action to be taken
that could reasonably be expected to prevent the merger from qualifying, as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code. After the effective time of the merger, Motorola, the surviving
corporation in the merger and their affiliates will not knowingly take any
action or knowingly cause any action to be taken that could reasonably be
expected to cause the merger to fail to qualify as a reorganization under
Section 368(a) of the Internal Revenue Code. RiverDelta, Motorola and Bayou
Merger Sub, Inc. will deliver to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. and KPMG LLP, on or about the closing date of the merger, certain
certificates substantially in compliance with IRS published advance ruling
guidelines. Motorola will use reasonable best efforts to cause KPMG LLP to
render an opinion to the effect that the merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code and that each party to the
merger will be a party to such reorganization.
Conduct of Business of Motorola Pending the Merger. Motorola has agreed to
cause Bayou Merger Sub, Inc. to perform its obligations under the merger
agreement (unless required by applicable laws or New York Stock Exchange
regulations) to take, between the date of the merger agreement and the effective
time of the merger, directly or indirectly any action, without the consent of
RiverDelta, that is intended or could reasonably be expected to result in any of
the conditions to the merger not being satisfied.
Motorola Board Approval. In the merger agreement, Motorola agreed to present
the merger agreement to its board of directors for its approval prior to July
31, 2001.
The Motorola board of directors approved the merger agreement the week ending
July 29, 2001.
Restrictive Legend. Following the effective time of the merger, upon notice
from a holder of shares of Motorola common stock issued in connection with the
merger, or an agent of such stockholder, of a proposed transfer or request to
remove a restrictive legend, Motorola must use reasonable efforts to provide a
legal opinion regarding such transfer within two business days of Motorola's
receipt of the request.
Affiliate Letters. RiverDelta has agreed to use its reasonable best efforts
to cause the affiliate letter attached as Appendix F to be executed by each of
its affiliates and delivered to Motorola.
Conditions to the Merger
Neither Motorola nor RiverDelta will be obligated to complete the merger
unless certain conditions are satisfied or are waived, including the following:
. the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, must have become effective under the
Securities Act of 1933 and must not be the subject of any stop order or
proceedings seeking a stop order;
. approval of the merger agreement and the merger by the requisite vote of
the RiverDelta stockholders; and
. no order, writ, judgment, injunction, award, decree, stipulation or
determination entered by any government body may be in effect for either
party that prevents or prohibits the merger.
47
Conditions to the Obligations of Motorola and Bayou Merger Sub, Inc.
Neither Motorola nor Bayou Merger Sub, Inc. is obligated to complete the
merger unless the following additional conditions are satisfied by RiverDelta
or waived by Motorola:
. RiverDelta's representations and warranties must remain true and correct in
all material respects on the closing date of the merger (unless inaccuracies
do not have a material adverse effect on RiverDelta's business, and
RiverDelta must have delivered an officer's certificate to such effect);
. RiverDelta must have performed in all material respects all of its
obligations and covenants required to be performed prior to the effective
time of the merger and must have delivered a certificate to such effect
signed by its chief executive officer; and
. no event or change that is or is reasonably expected to be materially
adverse to the business, operations, assets or liabilities, or results of
operations of RiverDelta and its subsidiary (other than changes that result
from economic factors affecting the economy as a whole or changes that are
the result of factors generally affecting the industries in which Motorola
and RiverDelta operate) and losses of customers, suppliers, or distribution
channel partners (as defined in the merger agreement resulting from the
announcement of the merger) must have occurred;
. appraisal rights under Delaware law must not have been perfected, asserted
or demanded with respect to more than 5% of the aggregate number of shares
of RiverDelta stock on a fully converted basis;
. RiverDelta must have received a payoff letter in form and substance
reasonably acceptable to Motorola in connection with the Loan and Security
Agreement between Silicon Valley Bank and RiverDelta dated as of June 30,
2000 and amended as of November 29, 2000 and as of May 31, 2001;
. the stockholders' representative must have executed and delivered the
escrow agreement; and
. at the effective time of the merger, certain of RiverDelta's employees must
continue to be employed by RiverDelta, must have entered into a retention
agreement (as defined in the merger agreement), and must not be in breach of
the retention agreement.
Conditions to the Obligations of RiverDelta
RiverDelta is not obligated to complete the merger unless the following
additional conditions are satisfied by Motorola or waived by RiverDelta:
. the representations and warranties of Motorola and Bayou Merger Sub, Inc.
must remain true and correct in all material respects on the closing date of
the merger (unless inaccuracies do not have a material adverse effect on
Motorola's business, and Motorola must have delivered an officer's
certificate to such effect);
. Motorola and Bayou Merger Sub, Inc. must have performed in all material
respects all of their obligations and covenants required to be performed
prior to the effective time of the merger, and Motorola must have delivered
an officer's certificate to such effect;
. RiverDelta must have received the opinion of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., based upon representations of Motorola, Bayou
Merger Sub, Inc. and RiverDelta, and customary assumptions, that the merger
will qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code, and that each will be a party to the
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code;
. the escrow agreement must have been executed by all the parties thereto;
and
. all shares of Motorola common stock issuable in the merger or upon the
exercise of assumed options to the stockholders of RiverDelta shall have
been approved for listing on the NYSE.
Each of the foregoing conditions is waivable by Motorola or RiverDelta, as
the case may be, to the extent legally permissible.
48
Termination
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after approval of the merger agreement and
the merger by the RiverDelta stockholders, in any of the following ways,
including by mutual written consent of Motorola and RiverDelta:
by either RiverDelta or Motorola if:
. the merger does not occur before October 31, 2001. However, either party may
extend such date until November 30, 2001 if the failure to consummate the
merger resulted from the failure of the conditions to the obligations of
each party (see "The Merger Agreement--Conditions to the Obligations of
Motorola and Bayou Merger Sub, Inc." on page 48 and "The Merger
Agreement--Conditions to the Obligations of RiverDelta" on page 48),
excluding achievement of the requisite vote of the stockholders of
RiverDelta, to be satisfied. In the event any party is in material breach of
its obligations under the merger agreement and such material breach has
resulted in failure of the merger to occur, such party will not be able to
terminate the merger agreement until December 31, 2001; or
. there is any governmental order that is final and nonappealable making
the merger illegal;
by Motorola if:
. there has been a breach or failure to perform by RiverDelta of any of its
representations, warranties, covenants or agreements contained in the merger
agreement, or if any of its representations or warranties becomes untrue and
such breach has not been cured within 20 business days following receipt by
RiverDelta of written notice of its breach;
by RiverDelta if:
. there has been a breach or failure to perform by Motorola of any of its
representations, warranties, covenants or agreements contained in the merger
agreement, or if any of its representations or warranties becomes untrue and
such breach has not been cured within 20 business days following receipt by
Motorola of written notice of its breach; or
. the transactions contemplated by the merger agreement are not approved by
Motorola's board of directors prior to July 31, 2001 or if Motorola's board
of directors rejects a proposal to approve the merger agreement.
Effect of Termination
The merger agreement provides that no termination of the merger agreement
will release any party of any liabilities for any breaches of any of its
representations, warranties, covenants or agreements set forth in the merger
agreement.
Fees and Expenses
Whether or not the merger is completed, each party to the merger agreement
will pay its own fees, costs and expenses. However, at the closing of the
merger, RiverDelta will deliver to Motorola a certificate that sets forth the
amount of all fees and expenses incurred by RiverDelta for the retention of
advisors in connection with the transactions contemplated by the merger
agreement. Motorola will pay such amount by means of wire transfer of funds at
the closing of the merger. These expenses will be deemed to be current
liabilities (without duplication of such expenses already on any balance sheet)
in the calculation of the net working capital as described in the merger
agreement.
Amendment
The merger agreement may not be amended except by an instrument in writing
signed by Motorola, RiverDelta and Bayou Merger Sub, Inc. or by a waiver as
described below.
49
Waiver
Any party to the merger agreement may:
. extend the time for the performance of any obligation or other act of any
other party to the merger agreement;
. waive any inaccuracy in the representations and warranties contained in
the merger agreement or in any document delivered pursuant to the merger
agreement; and
. waive compliance with any agreement or condition contained in the merger
agreement.
Any such extension or waiver will be valid only if set forth in an instrument
in writing signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of the merger agreement.
Voting Agreement
On July 11, 2001, in connection with the merger agreement, Pequot Private
Equity Fund II, L.P., Battery Ventures V, L.P., Battery Investment Partners V,
LLC, Battery Ventures Convergence Fund, L.P., Charles River Partnership X, a
Limited Partnership, Charles River Partnership X-A, a Limited Partnership,
Charles River Friends X-B, LLC, Charles River Friends X-C, LLC, David Callan,
Scott E. Morrisse, Michael Brown, Bayou Merger Sub, Inc. and Motorola entered
into a voting agreement pursuant to which the RiverDelta stockholders parties to
the voting agreement agreed to vote all of the shares that they will
beneficially own at the record date of the special meeting of RiverDelta
stockholders for the approval and adoption of the merger agreement, the merger
and the other transactions contemplated by the merger agreement, including the
appointment of Todd Dagres as stockholders' representative under the merger
agreement. The signatories who are holders of the Series A preferred stock also
agreed to vote in favor of the deemed conversion of the Series A preferred stock
immediately prior to the merger. As of the date of the voting agreement, the
RiverDelta stockholders that entered into the voting agreement represented that
they collectively held approximately 14,630,853 shares of RiverDelta common
stock, 6,622,516 shares of RiverDelta Series A preferred stock, and 2,936,311
shares of RiverDelta Series B preferred stock, representing approximately 64.9%
of the RiverDelta common and Series A and Series B preferred stock on an as
converted basis, voting together as a single class, and approximately 90% of the
outstanding RiverDelta Series A preferred stock, voting as a separate class.
In the voting agreement, a copy of which is attached as Appendix B to this
proxy statement/prospectus, such RiverDelta stockholders agreed to use
reasonable best efforts to cooperate fully with Motorola and RiverDelta in
connection with implementing the voting agreement. The stockholders also agreed
not to initiate, solicit or facilitate any discussions, inquiries or proposals
with any third party that constitute or may reasonably be expected to lead to an
acquisition of RiverDelta.
The voting agreement also provides that each stockholder that is a party to
it will not, and will not agree to, contract to or sell or otherwise transfer or
dispose of any of his, her or its shares of RiverDelta stock, or any interest in
those shares, or convertible securities, or any shares obtained upon the
exercise of convertible securities, or any other securities convertible into or
exchangeable for RiverDelta common stock or any voting rights with respect
thereto, other than:
. pursuant to the merger; or
. pursuant to certain limited agreements scheduled in the voting agreement.
The voting agreement is intended to bind each stockholder that is a party to
it only with respect to the specific matters set forth in the voting agreement,
and shall not prohibit such stockholders from acting in accordance with their
fiduciary duties as officers and/or directors of RiverDelta.
50
The voting agreement terminates upon the earlier of:
. the termination of the merger agreement; and
. the effective time of the merger.
Appointment of Stockholders' Representative
Pursuant to the terms of the merger agreement, each holder of shares of
RiverDelta who votes in favor of the merger or who receives or accepts shares of
Motorola common stock as the merger consideration will be deemed to have
appointed Todd Dagres as stockholders' representative and will be deemed to have
consented to the performance by the stockholders' representative of all rights
and obligations conferred on the stockholders' representative under the merger
agreement and the escrow agreement. The stockholders' representative is not
liable to the RiverDelta stockholders with respect to any action or inaction
taken or suffered by him, in the absence of willful misconduct or gross
negligence on the part of the stockholders' representative. For more information
on the escrow agreement, see "The Merger Agreement--Indemnification of Motorola;
Escrow Agreement" on page 51.
Indemnification of Motorola; Escrow Agreement
The merger agreement provides that 10% of the shares of Motorola common stock
that would otherwise be issued to RiverDelta stockholders in connection with the
merger will be deposited in escrow with an escrow agent as soon as practicable
after the closing date of the merger. The escrow account is the only source
available to compensate Motorola for the indemnification obligations of each
RiverDelta stockholder under the merger agreement, except that each stockholder
is also personally liable up to the amount of the merger consideration with
respect to representations relating to the capitalization of RiverDelta and the
stockholders' title to shares.
The RiverDelta stockholders have agreed to indemnify Motorola and its
directors, officers, employees, agents and advisors, from and against any and
all damages and liabilities (including reasonable legal fees) arising out of:
. any breach in any representation or warranty made by RiverDelta in the
merger agreement or in any certificate delivered pursuant to the merger
agreement;
. any breach or default by RiverDelta of any of the covenants or agreements
given or made by it in the merger agreement or in any certificate delivered
pursuant to the merger agreement; or
. certain other matters described in the disclosure schedule to the merger
agreement.
With respect to claims for indemnification, Motorola may not seek
indemnification from the RiverDelta stockholders until the aggregate amount of
all damages for which Motorola is seeking indemnification is at least $350,000,
and the RiverDelta stockholders are then liable for the amount of any such
damages in excess of $250,000.
Upon written notice to the stockholders' representative in accordance with
the instructions of the letter of transmittal sent to RiverDelta after the
effective date of the merger, any RiverDelta stockholder may elect to substitute
for some or all of the escrowed shares, cash in an amount equal to the share
price paid to holders of RiverDelta common stock, as described on page 40 under
the heading "The Merger Agreement--Treatment of RiverDelta Common Stock", for
each escrowed share being substituted. Moreover, if the stockholders'
representative receives notice of a claim made against the stockholders for
indemnification, the RiverDelta stockholders may elect to substitute cash for an
amount of escrowed shares of Motorola common stock equal to such claim. In this
case, the cash substituted for each escrowed share shall be an amount equal to
the average closing price of the Motorola common stock on the New York Stock
Exchange during the five business days ending on the last business day prior to
the distribution of the escrowed shares.
51
All property held in escrow is available to be applied to claims by Motorola
for indemnification. In the event that any escrowed shares are removed from
escrow and transferred to Motorola to satisfy any indemnification claims, such
shares will be valued for such purpose at their fair market value based on
trading prices on the five days prior to the date the claim is paid. Therefore,
in the event that some stockholders elect to substitute cash for escrowed shares
while others do not, stockholders that substitute cash are at risk that the
escrowed shares may decline in value and that, in the event of substantial
indemnity payments, the value of the escrowed shares will be exhausted prior to
the escrowed cash. This would result in any additional claims being satisfied
solely from the remaining cash substituted by shareholders that chose to do so.
The escrow fund will terminate on the eighteenth-month anniversary of the
closing date of the merger. Within five business days after the eighteenth-
month anniversary of the closing date of the merger, all shares of Motorola
common stock remaining in the escrow fund will be released, except for shares as
to which Motorola has made a claim and which claim is unresolved. If Motorola
has made a claim for indemnification prior to such date, the escrow agent will
retain in escrow shares and dividends that have a value equal to the claimed
amount. Escrowed shares that are released from the escrow fund will be promptly
delivered by the escrow agent to the RiverDelta stockholders in accordance with
each stockholder's percentage of the escrow fund.
The merger agreement provides that Todd Dagres is appointed as
representative of, for and on behalf of RiverDelta stockholders to take all
actions necessary or appropriate in his judgment for the accomplishment of the
terms of the merger agreement. Notices of communications to or from the
stockholders' representative will constitute notice to or from each of the
RiverDelta stockholders. If the stockholders' representative dies or is
otherwise no longer able or willing to serve as the stockholders'
representative, a new stockholders' representative will be chosen by RiverDelta
stockholders holding a majority of RiverDelta common stock immediately prior to
the merger after having given effect to the provisions of the bridge holders
agreement (see "The Merger Agreement--Bridge Holders Agreement" on page 53).
The stockholders' representative will not be liable for any act done or
omitted in the absence of willful misconduct or gross negligence pursuant to the
advice of counsel.
The stockholders' representative has full power and authority to represent
the RiverDelta stockholders and their successors with respect to all matters
under the escrow agreement. All actions taken by the stockholders'
representative under the escrow agreement will be binding upon the RiverDelta
stockholders and their successors. The escrow agent may rely on the
stockholders' representative as the exclusive agent of the RiverDelta
Stockholders under the escrow agreement and will not incur any liability to any
party in so relying.
Any dividends distributed on the escrowed shares are to be held in the escrow
fund. Additionally, the stockholders' representative has the right to direct the
escrow agent to exercise the voting rights of the escrow shares in his sole
discretion.
The value of the escrowed shares is the average of the last reported sale
price per share of Motorola common stock over the five consecutive trading days
preceding the date of distribution of the escrow shares.
Motorola will pay the fees and expenses of the escrow agent.
Letter of Transmittal
Each RiverDelta stockholder must use a specified letter of transmittal to
receive the RiverDelta common stock to be issued in connection with the merger.
In this letter of transmittal, each RiverDelta stockholder will make
representations and warranties as to certain matters, including as to title of
their respective RiverDelta shares, and their authority, capacity and legal
right to participate in the transaction. The letter of transmittal also
includes:
. an instruction to the exchange agent to deliver 10% of the shares of
Motorola common stock which will be received in the merger to the escrow
agent;
52
. an agreement to be bound by the terms of the indemnification provisions
of the merger agreement; and
. the appointment of Todd Dagres as stockholders' representative for all
RiverDelta stockholders for purposes of taking all necessary action on
behalf of all RiverDelta stockholders in connection with the post- closing
audit and indemnification provisions in the merger agreement.
Bridge Holders Agreement
On July 11, 2001, in connection with the merger agreement, RiverDelta,
Pequot Private Equity Fund II, L.P., Battery Ventures V, L.P., Battery
Investment Partners V, LLC, Battery Ventures Convergence Fund, L.P., Charles
River Partnership X, a Limited Partnership, Charles River Partnership X-A, a
Limited Partnership, Charles River Friends X-B, LLC, Charles River Friends X-C,
LLC, David Callan and Scott E. Morrisse, the holders of subordinated convertible
promissory notes of RiverDelta dated as of February 7, 2001 and May 16, 2001,
and Battery Management Corp., Charles River Partnership X, a Limited
Partnership, Charles River Partnership X-A, a Limited Partnership, Charles River
Friends X-B, LLC, Charles River Friends X-C, LLC and David Callan, the holders
of Series C convertible preferred stock purchase warrants of RiverDelta dated as
of December 12, 2000, entered into a bridge holders agreement with Motorola
under which they agreed to amend such subordinated convertible promissory notes
and cancel such preferred stock purchase warrants. The aggregate principal
amount of the subordinated convertible promissory note is $25,000,000 and
interest accrues at the rate of 12% per year. The preferred stock purchase
warrants entitle the holder to purchase an aggregate total of 198,538 shares of
a newly issued series of RiverDelta preferred stock.
Pursuant to the bridge holders agreement, a copy of which is attached as
Appendix E-1 to this proxy statement/prospectus (together with an amendment to
the bridge holders agreement, a copy of which is attached as Appendix E-2 to
this proxy statement/prospectus), each of the subordinated convertible
promissory notes dated as of February 7, 2001, which was due and payable on
demand on or after May 1, 2001, was amended to be due and payable on or after
the closing date of the merger, and the subordinated convertible promissory note
dated as of May 16, 2001, which was due and payable on the earlier of July 1,
2001 and the date of demand for payment by the holder of subordinated
convertible promissory notes dated as of February 7, 2001, was amended to be due
and payable on or after the closing date of the merger.
Each of the subordinated convertible promissory notes, which provided for
optional conversion of all or part of the balance due thereon into shares of
Series B preferred stock prior to an acquisition of RiverDelta, was amended to
provide for the automatic conversion, immediately prior to the merger
contemplated by the merger agreement, of the balance due on such subordinated
convertible promissory notes into fully paid and non-assessable shares of
RiverDelta Series B preferred stock. Upon such conversion, the holders of the
subordinated convertible promissory notes will be entitled to a number of shares
of Series B preferred stock rounded to the nearest whole share, determined by
dividing the aggregate principal amount of the subordinated convertible
promissory notes plus accrued interest thereon by $12.09 per share (subject to
equitable adjustment in the event of any stock split, stock dividend,
combination, reclassification or similar event after the date of the bridge
holders agreement). Assuming the merger occurs on October 12, 2001, the
aggregate principal amount of the subordinated convertible promissory notes plus
interest thereon will be converted into 2,230,598 shares of Series B preferred
stock.
Under the bridge holders agreement, the holders of the subordinated
convertible promissory notes agreed and elected to receive, upon conversion of
the balance due thereon, the Series B preferred stock consideration described in
the preceding paragraph.
The bridge holders agreement also provides that, immediately prior to the
effective time, each of the preferred stock purchase warrants, which were
exercisable from their date of issue to December 12, 2003, will be cancelled
without any payment in respect thereof by RiverDelta or any other person.
53
Furthermore, the bridge holders agreement provides that each securityholder
that is a party to it will not, and will not agree to, contract to or sell or
otherwise transfer or dispose of any of his, her or its RiverDelta subordinated
convertible promissory notes or preferred stock purchase warrants, or any
interest in those securities other than pursuant to the merger agreement, the
bridge holders agreement or the investor rights agreement.
Credit Agreement
On July 11, 2001, in connection with the merger agreement, Motorola and
RiverDelta entered into a credit agreement pursuant to which Motorola will
provide RiverDelta with loans of up to $35 million to fund its working capital
requirements from and after the execution of the merger agreement. The loans
extended under the credit agreement will accrue interest at a rate of 10% per
annum. The interest will be capitalized at the end of each fiscal quarter but is
not payable until the maturity of the loans.
The loans and interest are due and payable on the earlier of (a) July 11,
2002 and (b) the date of termination of Motorola's loan commitment due to an
event of default.
RiverDelta borrowed $10 million on July 11, 2001, $3.5 million on August 7,
2001 and a further $3.5 million on September 5, 2001.
Security Agreement. In connection with the credit agreement, RiverDelta
executed a security agreement in favor of Motorola on July 11, 2001, pursuant to
which RiverDelta granted to Motorola a lien and security interest in all of
RiverDelta's assets (hereinafter referred to as the "Collateral") in order to
secure the loans.
Subordination. RiverDelta's obligations to Motorola under the credit
agreement and Motorola's lien on RiverDelta's assets are subordinate to the
claims and liens of Silicon Valley Bank arising under the loan and security
agreement dated as of June 30, 2000 (as amended) between Silicon Valley Bank and
RiverDelta. RiverDelta's obligations to Motorola under the credit agreement and
Motorola's lien on RiverDelta's assets are senior to and have priority over the
claims of all of RiverDelta's other creditors.
Representations; Covenants of RiverDelta and Motorola. The credit agreement
contains customary representations, warranties and covenants.
Events of Default. The credit agreement provides for limited events of
default subject to, in certain circumstances, grace periods, relating to the
following:
. RiverDelta's failure to pay the loans or interest due on the loans when
due and payable;
. RiverDelta's breach of representations, warranties and covenants contained
in the credit agreement and the documents related thereto;
. RiverDelta's failure to pay principal or interest on debt in a principal
amount of at least $5,000,000 when due and payable or if any such debt is
accelerated;
. insolvency events related to RiverDelta;
. if any judgment or order is entered against RiverDelta and enforcement
proceedings are commenced for payment of more than $1 million;
. if any provision of the credit agreement or any document related thereto
ceases to be valid and binding on or enforceable against RiverDelta (unless
cured as provided in the credit agreement); or
. if a "change of control" occurs, other than a "qualified financing" (meaning
the first closing after July 11, 2001 of an equity financing by RiverDelta
in which the gross proceeds received by it are equal to or greater than $20
million; a "change of control" means (a) any person or persons other than
holders of equity interests in RiverDelta (hereinafter referred to as the
"Equity Holders"), Motorola or any of its subsidiaries acquires beneficial
ownership of more than 15% of the voting interests of RiverDelta, or (b) at
any time individuals who on July 11, 2001 were directors of RiverDelta cease
to constitute a majority
54
of the board of directors, or (c) any person or persons other than Motorola
or any of its subsidiaries and other than pursuant to the merger agreement
has acquired or has entered into a contract that will result in the
acquisition of the power to exercise a controlling influence over the
management or policies of RiverDelta, or (d) the Equity Holders, or any other
person controlled by them creates, incurs, assumes or suffers to exist liens
on equity interests in RiverDelta in an aggregate amount in excess of such
equity interests that if otherwise sold, transferred or otherwise disposed of
would cause a change of control).
If an event of default occurs, Motorola may, with notice to RiverDelta,
terminate Motorola's commitment to make loans to RiverDelta and declare the
loans, all interest on the loans and all other amounts payable under the credit
agreement and the loan documents to be due and payable and may, subject to the
provisions described above under "subordination", exercise its rights under the
security agreement to foreclose on the Collateral.
Further, upon such event of default, if the merger agreement is terminated,
and then only in certain circumstances, either Motorola or RiverDelta may elect
to convert all or part of the aggregate principal and interest of the loans then
outstanding under the credit agreement into stock of RiverDelta, as provided in
the promissory note, which is attached as Exhibit A to the credit agreement.
Original Equipment Manufacturer (OEM) Agreement
Independent of the merger RiverDelta and Motorola entered into an original
equipment manufacturer agreement (hereinafter referred to as the "OEM
agreement") on August 1, 2001. Pursuant to the OEM agreement, RiverDelta will,
as an original equipment manufacturer, manufacture, test, deliver, and sell
data communications products of its design and manufacture to Motorola, and
provide support for such products. The term of the OEM agreement commenced on
August 1, 2001 and will continue in effect until July 31, 2002. Motorola has the
right to extend the term for up to twelve months, subject to the parties' mutual
agreement on pricing and discount terms for the renewal period.
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ADDITIONAL PROPOSALS
In connection with the merger, RiverDelta stockholders have been asked to
vote on two other proposals. These proposals are as follows:
Amendment to Certificate of Incorporation
At the RiverDelta special meeting, holders of RiverDelta common stock, Series
A preferred stock and Series B preferred stock will be asked to approve the
amendment of RiverDelta's restated certificate of incorporation. The amendment
will increase the total number of shares of authorized capital stock of
RiverDelta to 85,860,000 by increasing the number of authorized shares of
RiverDelta preferred stock to 13,860,000, and will designate 6,500,000 shares of
preferred stock as Series B preferred stock.
RiverDelta's restated certificate of incorporation currently authorizes
79,360,000 shares of capital stock consisting of 72,000,000 shares of common
stock, 12,000,000 shares of preferred stock, of which 7,360,000 shares are
designated as Series A preferred stock and 2,980,000 shares are designated as
Series B preferred stock. On July 10, 2001, RiverDelta's board of directors
adopted a resolution approving an amendment to the restated certificate of
incorporation to increase the authorized capital stock of RiverDelta to
85,860,000 by increasing the number of authorized shares of RiverDelta preferred
stock to 13,860,000, and designating 6,500,000 shares of preferred stock as
Series B preferred stock.
On September 7, 2001, 34,177,840 shares of common stock, 7,358,358 shares of
Series A preferred stock and 2,956,988 shares of Series B preferred stock were
issued and outstanding and 34,149,459 shares of common stock were reserved for
issuance upon the conversion of all outstanding shares of Series A preferred
stock and Series B preferred stock and the exercise of stock options granted or
reserved for issuance pursuant to RiverDelta's 1999 Employee, Director and
Consultant Stock Option Plan. Accordingly, RiverDelta has 3,672,701 shares of
common stock, 1,660,000 shares of undesignated preferred stock and 23,012 shares
of Series B preferred stock available for issuance.
On July 11, 2001, in connection with the merger agreement, RiverDelta, Pequot
Private Equity Fund II, L.P., Battery Ventures V, L.P., Battery Investment
Partners V, LLC, Battery Ventures Convergence Fund, L.P., Charles River
Partnership X, a Limited Partnership, Charles River Partnership X-A, a Limited
Partnership, Charles River Friends X-B, LLC, Charles River Friends X-C, LLC,
David Callan and Scott E. Morrisse, the holders of subordinated convertible
promissory notes of RiverDelta dated as of February 7, 2001 and May 16, 2001,
entered into a bridge holders agreement with Motorola under which they agreed to
amend such subordinated convertible promissory notes to provide for the
automatic conversion, immediately prior to the merger contemplated by the merger
agreement, of the aggregate amount of principal and accrued interest
thereon of the subordinated convertible promissory notes into fully paid and
non-assessable shares of RiverDelta Series B preferred stock.
RiverDelta expects that approximately 2,230,598 shares of Series B preferred
stock will be required to be issued to the holders of the subordinated
convertible promissory notes upon the automatic conversion of the notes
immediately prior to the merger, assuming the merger occurs on October 12, 2001.
If the merger occurs after October 12, 2001, additional shares of Series B
preferred stock will be required to be issued to the holders of the subordinated
convertible promissory notes in order to convert the additional accrued
interest, which accrues at the rate of $8,219 per day, into Series B preferred
stock upon conversion of the notes.
Presently, RiverDelta has 1,660,000 shares of undesignated preferred stock
and 23,012 shares of Series B preferred stock available for issuance. For this
reason, RiverDelta does not presently have a sufficient number of shares of
undesignated preferred stock or Series B preferred stock available for such
issuance to the holders of the subordinated convertible promissory notes upon
the automatic conversion of the notes. Accordingly, RiverDelta needs to
authorize approximately 1,860,000 additional shares of undesignated preferred
stock and to designate approximately 6,500,000 shares as Series B preferred
stock.
56
Approval by the RiverDelta stockholders of the foregoing amendment to the
restated certificate of incorporation requires the affirmative vote of a
majority of the outstanding shares of RiverDelta common stock, Series A
preferred stock and Series B preferred stock, on an as converted basis, voting
together as a single class.
RiverDelta's board of directors has determined that the amendment to the
restated certificate of incorporation is in the best interests of RiverDelta and
its stockholders and unanimously recommends that RiverDelta stockholders vote
"FOR" the amendment to RiverDelta's restated certificate of incorporation.
Proxies solicited by the board of directors will be voted in favor of the
amendment unless a stockholder has indicated otherwise on the proxy.
Deemed Conversion of Series A Preferred Stock
In order to complete the merger, the holders of Series A preferred stock must
elect to treat the merger as a deemed conversion of their shares. Pursuant to
Article IV, Section B.1(a)(i) of RiverDelta's restated certificate of
incorporation, the holders of RiverDelta Series A preferred stock are entitled
to receive an amount equal to $1.359 per share of Series A preferred stock upon
the occurrence of a liquidation, dissolution or winding up of RiverDelta,
including a capital reorganization, a consolidation or merger, or a sale of all
or substantially all of RiverDelta's assets.
Pursuant to Article IV, Section B.2(d)(vii)(A) of RiverDelta's restated
certificate of incorporation, the holders of at least sixty-six and two-thirds
percent (66 2/3%) of RiverDelta's Series A preferred stock may elect to receive
the per share consideration that they would have been entitled to receive if
such holders had converted their shares of Series A preferred stock into shares
of common stock immediately prior to the effective time of the merger in lieu of
receiving the payment in liquidation, dissolution or winding up discussed above.
On July 11, 2001, holders of 90% of the shares of RiverDelta Series A
preferred stock entered into a voting agreement, dated as of July 11, 2001,
among Motorola, Bayou Merger Sub, Inc., and certain stockholders of RiverDelta
pursuant to which such holders of Series A preferred stock have agreed to
receive the per share consideration that they would have received if their
shares of Series A preferred stock had been converted into shares of RiverDelta
common stock immediately prior to the merger.
Approval by the RiverDelta stockholders of the foregoing deemed conversion of
the Series A preferred stock requires the affirmative vote of holders of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
Series A preferred stock, voting as a separate class.
RiverDelta's board of directors has determined that the deemed conversion of
the Series A preferred stock immediately prior to the merger is in the best
interest of RiverDelta and its stockholders and unanimously recommends that
holders of the RiverDelta Series A preferred stock vote "FOR" such deemed
conversion. Proxies solicited by the board of directors will be voted in favor
of the amendment unless a stockholder has indicated otherwise on the proxy.
57
DESCRIPTION OF MOTOROLA CAPITAL STOCK
The following description of Motorola's capital stock is subject to the
detailed provisions of Motorola's restated certificate of incorporation, as
amended, and by-laws, as amended, and to the rights agreement described below.
The following description of certain terms of the capital stock of Motorola does
not purport to be complete and is qualified in its entirety by reference to the
restated certificate of incorporation, the by-laws and the rights agreement,
which are filed as exhibits to the registration statement. See "Where You Can
Find More Information" on page 72.
Motorola Common Stock
The Motorola charter authorizes Motorola to issue up to 4.2 billion shares
of Motorola common stock, par value $3.00 per share. Each Motorola share is
entitled to one vote, in person or by proxy, at any and all meetings of the
Motorola stockholders on all propositions before such meetings and on all
elections of directors of Motorola. The Motorola charter does not provide for
cumulative voting in the election of directors. The shares of Motorola common
stock have no preemptive or conversion rights, redemption provisions or sinking
fund provisions. Subject to any preferential rights of any outstanding series of
Motorola preferred stock created by the Motorola board of directors from time to
time, the holders of Motorola common stock are entitled to dividends only if,
when and as the dividends are declared by the Motorola board of directors and as
may be permitted by law, and, upon liquidation, will be entitled to receive pro
rata all assets of Motorola available for distribution to such holders. As of
September 9, 2001, approximately 2,226,306,765 shares of Motorola common stock
were issued and outstanding, held by approximately 109,674 holders of record.
For a description of voting requirements and change of control restrictions, see
"Description of Motorola Capital Stock--Motorola Rights Plan" beginning on page
59 and "Comparison of Certain Rights of Common Stockholders of Motorola and
Stockholders of RiverDelta" beginning on page 61.
Motorola Preferred Stock
Motorola is also authorized to issue up to 500,000 shares of preferred stock,
par value $100 per share, from time to time, in one or more series and with such
designation for each such series as determined by the Motorola board of
directors. The Motorola board of directors may, without further action by the
Motorola stockholders, issue a series of Motorola preferred stock and state and
fix the rights and preferences of those shares, including:
. the voting powers, if any, of the holders of stock of such series;
. the rate per annum and the times at and conditions upon which the holders of
stock of such series will be entitled to receive dividends, and whether such
dividends will be cumulative or non-cumulative and, if cumulative, the terms
upon which such dividends will be cumulative;
. the price or prices and the time or times at and the manner in which the
stock of such series will be redeemable;
. the right to which the holders of the shares of stock of such series shall
be entitled upon any voluntary or involuntary liquidation, dissolution or
winding-up of Motorola;
. the terms, if any, upon which shares of stock of such series shall be
convertible into, or exchangeable for, shares of any stock of any other
class or classes or of any other series of the same or any other class or
classes, including the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any; and
. any other designations, preferences, and relative, participating, optional
or other special rights and qualifications, limitations or restrictions
thereof so far as they are not inconsistent with the provisions of the
Motorola certificate of incorporation, as amended, and to the full extent
now or hereafter permitted by the laws of Delaware.
58
On November 5, 1998, the Motorola board of directors designated a series of
Motorola preferred stock, Junior Participating Preferred Stock, Series B
(hereinafter referred to as "Motorola Series B Preferred Stock") and authorized
250,000 shares for issuance in connection with the adoption of the Motorola
rights plan. As of August 14, 2001, no shares of Motorola preferred stock of any
series were outstanding.
Motorola Rights Plan
On November 5, 1998, the Motorola board of directors authorized the
issuance of one preferred share purchase right (hereinafter referred to as a
"Right") for each outstanding share of Motorola common stock, pursuant to a
Rights Agreement between Motorola and Harris Trust and Savings Bank, as Rights
Agent. Each Right entitles the registered holder to purchase from Motorola one
thirty- thousandth of a share of Motorola Series B Preferred Stock at an
exercise price of $66.66 per one thirty-thousandth of a share of Motorola Series
B Preferred Stock, subject to adjustment. The Rights become exercisable on the
earlier of:
. the tenth day after a public announcement that a person or group of
affiliated or associated persons has acquired or obtained the right to
acquire 10% or more of the outstanding shares of Motorola common stock
(thereby becoming an "Acquiring Person"); and
. the tenth business day after the commencement or public disclosure of an
intention to commence a tender offer or exchange offer by a person other
than an exempt person, if, upon completion of the offer, such person could
become an Acquiring Person.
A majority of the Motorola board of directors may elect to defer the date on
which the Rights become exercisable. The Rights expire on November 20, 2008
unless earlier redeemed or exchanged by Motorola as described below.
If a person or group becomes an Acquiring Person, each holder of a Right
(except those held by the Acquiring Person and its affiliates and associates)
will have the right to purchase, upon exercise, Motorola common stock (or, in
certain circumstances, shares of Motorola Series B Preferred Stock, common stock
equivalents or cash) having a value equal to two times the exercise price of the
Right. In addition, in the event that, at the time or after a person becomes an
Acquiring Person, Motorola is involved in a merger or other business combination
in which (1) Motorola is not the surviving corporation, (2) Motorola common
stock is changed or exchanged, or (3) 50% or more of Motorola's consolidated
assets or earning power are sold, then each Right (other than Rights that are or
were owned by the Acquiring Person and certain related persons and transferees,
which will thereafter be void) will thereafter be exercisable for a number of
shares of common stock of the acquiring company having a market value of two
times the exercise price of the Right. In addition, at any time after any person
or group becomes an Acquiring Person and before any person acquires 50% or more
of the outstanding Motorola common stock and before a business combination
occurs, the Motorola board of directors may exchange the Rights (other than
Rights owned by the Acquiring Person which will have become void), in whole or
in part, at an exchange ratio of one share of Motorola common stock, or one
thirty-thousandth of a share of Motorola Series B Preferred Stock (or a common
stock equivalent), per Right (subject to adjustment).
The Motorola board of directors may redeem all, but not less than all, Rights
at a redemption price of $.0033 per Right at any time prior to the time that a
person or a group has become an Acquiring Person. Immediately upon redemption,
the right to exercise will terminate, and the only right of holders will be to
receive the redemption price. As long as the Rights are redeemable, the terms of
the Rights may be amended by the Motorola board of directors in its discretion
without the consent of the Rights holders. After that time, no amendment may
adversely affect the interests of the Rights holder (other than the Acquiring
Person).
The Rights will not prevent a takeover of Motorola. The Rights, however, may
have certain antitakeover effects. The Rights may cause substantial dilution to
a person or group that attempts to acquire Motorola on terms not approved by the
Motorola board of directors or make the acquisition of Motorola substantially
more costly, unless the Motorola board of directors redeems the Rights prior to
the person becoming an Acquiring
59
Person. The Rights should not interfere with any merger or other business
combination approved by the Motorola board of directors because of the board's
ability to redeem the Rights or amend the Motorola rights plan. A description of
the Motorola rights plan specifying the terms of the Rights and the Motorola
Series B Preferred Stock has been included in reports filed by Motorola under
the Securities Exchange Act. See "Where You Can Find More Information" on page
72. This summary description is qualified in its entirety by reference to the
Motorola rights plan.
Each share of Motorola common stock issued in the merger will have a
corresponding Right attached to it.
Transfer Agent; Registrar and Exchange Agent
ComputerShare Investor Services LLC is the transfer agent and registrar for
the Motorola common stock. ComputerShare Investor Services LLC is also the
exchange agent.
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COMPARISON OF CERTAIN RIGHTS OF COMMON STOCKHOLDERS OF MOTOROLA AND
STOCKHOLDERS OF RIVERDELTA
The rights of Motorola and RiverDelta stockholders are currently governed by
the Delaware General Corporation Law, and the respective charter and by-laws of
Motorola and RiverDelta. Upon completion of the merger, the rights of RiverDelta
stockholders who become stockholders of Motorola in the merger will be governed
by the Delaware General Corporation Law, Motorola's charter and Motorola's
by-laws.
The following description summarizes the material provisions and certain
material differences that may affect the rights of stockholders of Motorola and
stockholders of RiverDelta but does not purport to be a complete statement of
all those differences, or a complete description of the specific provisions
referred to in this summary. The identification of specific differences is not
intended to indicate that other equally or more significant differences do not
exist. You should read carefully the relevant provisions of the Delaware General
Corporation Law, Motorola's charter, Motorola's by-laws, RiverDelta's restated
certificate of incorporation and RiverDelta's by-laws.
Capitalization
As discussed in "Description of Motorola Capital Stock" beginning on page 58,
Motorola's authorized capital stock consists of 4.2 billion shares of common
stock and 500,000 shares of preferred stock. The authorized capital stock of
RiverDelta consists of 72,000,000 shares of common stock, par value $0.01 per
share, and 12,000,000 shares of preferred stock, par value $0.01 per share. As
of September 7, 2001, 34,177,840 shares of RiverDelta common stock, 7,358,358
shares of RiverDelta Series A preferred stock and 2,956,988 shares of RiverDelta
Series B preferred stock are issued and outstanding.
Voting Stock
Each holder of Motorola common stock is entitled to one vote for each share
held at all meetings of stockholders. Motorola's charter does not provide for
cumulative voting.
Each holder of RiverDelta common stock is entitled to one vote for each share
held at all meetings of stockholders and written actions in lieu of meetings.
Each holder of RiverDelta preferred stock is entitled to that number of votes
equal to the largest number of whole shares of common stock into which the
shares of preferred stock held are then convertible. Except as provided by law,
and in certain situations set forth in RiverDelta's restated certificate of
incorporation, holders of preferred stock vote together with the holders of
common stock as a single class. RiverDelta's restated certificate of
incorporation does not provide for cumulative voting.
Number of Directors
The Motorola by-laws provide that the Motorola board of directors shall
consist of 16 directors or such other number that the Motorola board of
directors may fix. The Motorola board currently consists of 13 directors.
RiverDelta's by-laws provide that the RiverDelta board of directors shall
have that number of directors as determined by resolution of the board of
directors or the stockholders at the annual meeting or any special meeting. The
RiverDelta board of directors currently consists of 5 directors.
Classification of Board of Directors
Motorola does not have a classified board of directors.
RiverDelta does not have a classified board of directors.
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Quorum for Meeting of Directors
The Motorola by-laws provide that one-third of the number of directors fixed
in accordance with the provisions of the Motorola by-laws shall constitute a
quorum at all meetings of the board of directors.
RiverDelta's by-laws provide that a majority of the total number of members
of the board of directors shall constitute a quorum at any meeting of the board
of directors.
Election of Directors
The Motorola by-laws provide that directors shall be elected by the
affirmative vote of a plurality of the shares of Motorola common stock
represented at the meeting and entitled to vote on the election of directors.
RiverDelta's restated certificate of incorporation provides that as long as
at least 1,600,000 shares of Series A preferred stock remain outstanding, the
holders of such shares of Series A preferred stock, voting as a separate class,
will be entitled to elect two directors of RiverDelta. Subject to an investor
rights agreement among RiverDelta and the stockholders of RiverDelta parties
thereto, the holders of the Series A preferred stock, Series B preferred stock
and common stock of RiverDelta, voting together as a single class, will be
entitled to elect any remaining directors of RiverDelta.
Removal of Directors
The Motorola charter and the Motorola by-laws contain no specific provision
regarding removal. Delaware law provides that in the absence of such a
provision, directors of a corporation may be removed with or without cause by
the holders of a majority of the shares entitled to vote in the election of
directors.
RiverDelta's by-laws provide that directors may be removed with or without
cause, at any time, by the holders of a majority of the shares then entitled to
vote at an election of directors. Additionally, RiverDelta's restated
certificate of incorporation provides that any director elected by the holders
of a class or series of stock may be removed from office with or without cause
by an affirmative vote of the holders of the shares of the class or series of
stock entitled to elect such director at a special meeting called for that
purpose or pursuant to a written consent of stockholders.
Amendments to Charter
Motorola's charter may be amended in any manner provided for by law.
RiverDelta's restated certificate of incorporation may be amended in any
manner provided for by law, except that the restated certificate of
incorporation may not, without the prior written consent or affirmative vote of
at least two-thirds of the then outstanding shares of Series A preferred stock
and Series B preferred stock, respectively, each voting as a separate class, be
amended, altered, repealed or added to if such action would adversely affect the
preferences of such preferred stock.
Filling Vacancies on the Board of Directors
Motorola's by-laws provide that a vacancy on the board of directors, however
occurring, may be filled by the board of directors for the unexpired portion of
the term.
RiverDelta's by-laws provide that, subject to the rights of holders of
preferred stock of RiverDelta to elect directors, a vacancy on the board of
directors, however occurring, including a vacancy resulting from an enlargement
of the board, may be filled only by a majority vote of the directors then in
office, although less than a quorum, or by the sole remaining director.
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Amendments to By-Laws
Motorola's by-laws authorize the board of directors to alter, amend or repeal
Motorola's by-laws, and to adopt new by-laws. Delaware law provides that
stockholders entitled to vote also have the power to adopt, amend or repeal the
by-laws. Amendment of the Motorola by-laws by the Motorola stockholders requires
the affirmative vote of holders of a majority of the shares of voting
stock represented at the meeting and entitled to vote on that subject matter.
RiverDelta's restated certificate of incorporation authorizes the board of
directors to adopt, amend or repeal RiverDelta's by-laws.
Rights Plan
As discussed in "Description of Motorola Capital Stock--Motorola Rights Plan"
beginning on page 59, each share of Motorola common stock has attached to it one
Right issued under the Motorola rights plan.
RiverDelta has not adopted a rights plan.
Special Stockholder Meetings
The Motorola by-laws provide that either the Motorola board of directors or
its chairman may call a special meeting.
RiverDelta's by-laws provide that the RiverDelta board of directors may call
a special meeting pursuant to a resolution adopted by a majority of the total
number of directors authorized.
Stockholder Action by Written Consent
Motorola's by-laws do not provide for stockholder action by written consent
instead of a stockholder meeting.
RiverDelta's by-laws provide for stockholder action by written consent
instead of a stockholder meeting, provided that such written consent is signed
and dated by the holders of the outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and that such consent is delivered to RiverDelta within 60 days of the earliest
dated consent.
Limitation of Personal Liability of Directors and Indemnification
Motorola's charter provides that a director will not be personally liable to
the corporation or to its stockholders for monetary damages for a breach of
fiduciary duty as a director, except, if required by law, for liability:
. for any breach of the director's duty of loyalty to the corporation or
its stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law regarding unlawful
payment of dividends or unlawful stock purchases or redemptions; and
. for any transaction from which the director derived an improper personal
benefit.
Motorola's charter provides a right to indemnification to directors and
officers of Motorola to the fullest extent permitted by the Delaware General
Corporation Law.
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In addition, Motorola must indemnify any present or former director or
officer of the corporation who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation who
has been successful on the merits or otherwise in the defense of any claim or
proceeding for expenses (including attorneys' fees) actually and reasonably
incurred. Motorola will indemnify in connection with a proceeding initiated by
such indemnitee only if such proceeding was authorized by Motorola's board of
directors.
RiverDelta's restated certificate of incorporation provides that a director
will not be personally liable to RiverDelta or its stockholders for monetary
damages for breach of fiduciary duty as a director, except if required by law.
RiverDelta's by-laws provide that RiverDelta will indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of RiverDelta) by reason
of the fact that he or she is or was a director, officer, employee or agent of
RiverDelta, or is or was serving at the request of RiverDelta as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of RiverDelta and, with respect to any
criminal action or proceedings, had no reasonable cause to believe his or her
conduct was unlawful.
Under RiverDelta's restated certificate of incorporation, RiverDelta agreed
to indemnify and advance expenses to any person who was or is a party to any
suit by or in the right of RiverDelta by reason of the fact that he or she is or
was, or has agreed to become, a director, officer, employee or agent of
RiverDelta or is serving at the request of RiverDelta as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise only if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of RiverDelta,
except that no indemnification will be made if the person is held to be liable
to RiverDelta, unless and to the extent the Delaware Court of Chancery
determines that despite such liability, he or she is fairly and reasonably
entitled to such indemnity. RiverDelta's by-laws further provide that if an
indemnitee is successful, on the merits or otherwise, of a suit, he or she will
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her.
Any indemnification above (unless ordered by a court) will be made by
RiverDelta only as authorized in the specific case upon a determination that
indemnification of any person described above is proper in the circumstances
because he or she has met the applicable standard of conduct set forth above.
This determination will be made (1) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders of RiverDelta.
Dividends
Motorola's charter provides that the board of directors may, by resolution,
state the conditions upon which the holders of preferred stock shall be entitled
to receive dividends. The common stockholders shall be entitled to dividends
only if the board of directors declares dividends and as may be permitted by
law.
RiverDelta's restated certificate of incorporation provides that dividends
may be declared and paid on the common stock from funds lawfully available
therefor as and when determined by the board of directors, subject to provisions
of law and to any preferential dividend rights of any then outstanding preferred
stock.
The holders of the preferred stock are entitled, when, as and if declared by
the board of directors of RiverDelta, to dividends out of the corporation's
assets legally available therefor at the annual rate of $.1087 per share of
Series A preferred stock and $.9672 per share of Series B preferred stock,
provided that no
64
dividend may be declared or paid on the Series A preferred stock unless
RiverDelta simultaneously declares and pays a dividend on the Series B preferred
stock, and vice-versa.
The rights to receive dividends on the preferred stock are non-cumulative,
and holders of preferred stock will not have any rights to dividends by reason
of the fact that no dividend has been declared on the preferred stock in any
prior year. RiverDelta may not declare or pay any cash dividends on shares of
common stock unless the holders of the preferred stock then outstanding have
first received a dividend at the rates specified above.
Liquidation
Motorola's charter provides that the board of directors may, by resolution,
state the right to which the preferred stockholders shall be entitled upon any
voluntary or involuntary liquidation, dissolution or winding up of the
corporation. Holders of Motorola common stock have no preferential rights with
respect to liquidation.
RiverDelta's restated certificate of incorporation provides that in the event
of any voluntary or involuntary liquidation, dissolution or winding up of
RiverDelta, the holders of shares of RiverDelta preferred stock then outstanding
are entitled to be paid first out of RiverDelta's assets available for
distribution to its stockholders before any payment may be made to the holders
of RiverDelta common stock by reason of their ownership thereof:
. an amount equal to $1.359 for each share of Series A preferred stock then
held by them; and
. an amount equal to $12.09 for each share of Series B preferred stock then
held by them,
in each case subject to appropriate adjustment in the event of any stock
dividend, stock split, combination, reclassification or other similar event
affecting such preferred shares, plus any dividends declared and unpaid on such
preferred shares. If the assets of RiverDelta are insufficient to permit the
payment in full of the above amounts to holders of preferred stock, then the
entire assets of RiverDelta available for distribution will be distributed
ratably among holders of preferred stock in proportion to the respective amounts
that would otherwise be payable in respect of the shares held by them upon such
distributions if all amounts payable on or with respect to such shares were paid
in full. In addition, after payment in full of the above amounts to the holders
of preferred stock, the remaining assets of RiverDelta available for
distribution to holders of RiverDelta's capital stock will be distributed on a
pro rata basis among the holders of common stock.
RiverDelta's restated certificate of incorporation also provides that a
reorganization, consolidation, merger or sale of assets will be regarded as a
liquidation, dissolution or winding up of the affairs of RiverDelta. In the
event of reorganization, consolidation, merger or sale of assets, then the
holders of at least two-thirds of each of the outstanding shares of Series A
preferred stock and Series B preferred stock, respectively, will have the option
to elect the following benefits instead of receiving payment as provided in the
preceding paragraph: the holders of preferred stock will be entitled to receive
upon conversion of the shares of the preferred stock the same kind and amount of
stock or other securities or property of RiverDelta or any successor corporation
to which they would have been entitled had such holders converted their shares
immediately prior to such reorganization, consolidation, merger or sale of
assets.
Conversion
Motorola's charter provides that the board of directors may, by resolution,
state the terms upon which shares of preferred stock shall be convertible into,
or exchangeable for, shares of stock of any other class or classes of any other
series, including the price, the rate of conversion and the terms of adjustment.
Holders of Motorola common stock have no rights to convert their shares into any
other securities.
Holders of RiverDelta common stock have no rights to convert their shares
into any other securities. Subject to certain terms, conditions, limitations and
adjustments set forth in RiverDelta's restated certificate of
65
incorporation, holders of Series A and Series B preferred stock have the right
at their option to convert any such shares, without the payment of additional
consideration, into the number of fully paid and nonassessable shares of
RiverDelta common stock as is determined by the formulae set forth in the
restated certificate of incorporation. Based on the formulae contained in
RiverDelta's restated certificate of incorporation, each share of RiverDelta
Series A preferred stock is currently convertible into three shares of
RiverDelta common stock and each share of RiverDelta Series B preferred stock is
convertible into one and one-half shares of RiverDelta common stock.
RiverDelta's restated certificate of incorporation also provides that each
share of preferred stock will be automatically converted into the number of
shares of common stock into which such shares are convertible at the then
effective conversion rate upon the occurrence of certain events.
66
CERTAIN INFORMATION CONCERNING RIVERDELTA
Security Ownership of Directors, Executive Officers and Principal Stockholders
of RiverDelta
The following table sets forth information regarding the beneficial ownership
of RiverDelta's common stock as of September 7, 2001, by:
. each person that beneficially owns more than 5% of the outstanding shares of
RiverDelta common stock or preferred stock;
. each director of RiverDelta;
. each executive officer of RiverDelta; and
. all executive officers and directors of RiverDelta as a group.
To the knowledge of RiverDelta and unless otherwise indicated, each person
named in the table has sole voting power and investment power, or shares such
power with his or her spouse, with respect to all shares of capital stock listed
as owned by such person. The address of each RiverDelta officer and director is
c/o RiverDelta Corporation, 3 Highwood Drive East, Tewksbury, Massachusetts
01876.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the SEC. The information is not necessarily
indicative of beneficial ownership for any other purpose. Under these rules,
beneficial ownership includes any shares as to which the individual has sole or
shared voting power or investment power and any shares as to which the
individual has the right to acquire beneficial ownership within 60 days after
September 7, 2001 through the exercise of any stock option, warrant or other
right. The inclusion in the following table of those shares, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares. The vesting and promissory note conversion
information set forth below has been calculated assuming a closing date of the
merger on October 12, 2001. Restricted stock described below is subject to
repurchase by RiverDelta if the owner ceases to be employed by RiverDelta.
Number of Shares Beneficially Owned
Series A Series B
Common Stock Preferred Stock Preferred Stock Percent of
Name (% of Class) /(1)/ (% of Class) /(2)/ (% of Class) /(3)/ Total Voting Power /(4)/
---- ------------------ ------------------ ------------------ ------------------------
5% STOCKHOLDERS
Battery Ventures/(5)/ .... 0 3,311,258 860,850 18.3%
20 William St. (45.0%) (25.3%)
Wellesley, MA 02481
Charles River
Partners/(6)/ ........... 0 3,311,258 860,850 18.3%
100 Winter Street, Suite (45.0%) (25.3%)
3300
Waltham, MA 02451
Pequot Capital
Management, Inc./(7)/ ... 0 0 2,548,829 6.2%
500 Nyala Farm Road (66.2%)
Westport, CT 06880
67
Series A Series B
Common Stock Preferred Stock Preferred Stock Percent of
Name (% of Class) /(1)/ (% of Class) /(2)/ (% of Class) /(3)/ Total Voting Power /(4)/
---- ------------------ ------------------ ------------------ ------------------------
EXECUTIVE OFFICERS AND DIRECTORS
Michael Brown/(8)/ ........ 1,655,853 0 0 2.7%
(4.9%)
David F. Callan/(9)/ ...... 11,475,000 0 827,633 20.7%
(33.9%) (24.6%)
Joseph A. Cozzolino/(10)/ . 1,748,201 0 0 2.9%
(5.2%)
Jeffrey A. Walker/(11)/ ... 1,103,901 0 0 1.8%
(3.3%)
Gerard White/(12)/ ........ 1,379,877 0 0 2.2%
(4.1%)
Todd Dagres/(13)/ ......... 0 3,311,258 860,850 18.3%
(45.0%) (25.3%)
Michael Karfopoulos/(14)/ . 0 0 2,548,829 6.2%
(66.2%)
Bruce I. Sachs/(15)/ ...... 0 3,311,258 860,850 18.3%
(45.0%) (25.3%)
All executive officers
and directors as a
group (8 persons) ........ 17,362,832 6,622,516 5,098,162/(16)/ 70.1%
(47.6%) (90%) (98.8%)
--------
(1) Based on 34,177,840 shares of common stock issued and outstanding as of
September 7, 2001.
(2) Based on 7,358,358 shares of Series A preferred stock issued and
outstanding as of September 7, 2001.
(3) Based on 2,956,988 shares of Series B preferred stock issued and
outstanding as of September 7, 2001.
(4) Based on 60,688,400 shares of RiverDelta capital stock issued and
outstanding, on an as-converted basis, as of September 7, 2001. Each share
of common stock is entitled to one vote. Each share of Series A preferred
stock is convertible into three shares of common stock and therefore is
entitled to three votes. Each share of Series B preferred stock is
convertible into one and one-half shares of common stock and therefore is
entitled to one and one-half votes.
(5) Includes 2,945,447 shares of Series A preferred stock held directly by
Battery Ventures V, L.P., 298,013 shares of Series A preferred stock held
directly by Battery Ventures Convergence Fund, L.P., and 67,798 shares of
Series A preferred stock held directly by Battery Investment Partners V,
LLC. Includes 367,876 shares of Series B preferred stock held directly by
Battery Ventures V, L.P., 37,221 shares of Series B preferred stock held
directly by Battery Ventures Convergence Fund, L.P., and 8,468 shares of
Series B preferred stock held directly by Battery Investment Partners V,
LLC. Also includes 397,870 shares of Series B preferred stock issuable to
Battery Ventures V, L.P., 40,256 shares of Series B preferred stock
issuable to Battery Convergence Fund, L.P., and 9,159 shares of Series B
preferred stock issuable to Battery Investment Partners V, LLC upon
conversion of the principal amount of the subordinated convertible
promissory notes, and accrued interest thereon, immediately prior to the
merger, assuming the merger occurs on October 12, 2001. Todd Dagres is a
director of RiverDelta. Mr. Dagres is also a managing member of Battery
Partners V, LLC, the sole general partner of Battery Ventures V, L.P., and
thus may be deemed to share beneficial ownership of the shares of Series A
preferred stock and Series B preferred stock held by Battery Ventures V,
L.P. Battery Investment Partners V, LLC coinvests with Battery Ventures V,
L.P. in all portfolio companies. Accordingly, Mr. Dagres may be deemed to
share beneficial ownership of the shares of Series A preferred stock and
Series B preferred stock held by Battery Investment Partners V, LLC. Mr.
Dagres is also a managing member of Battery Convergence Partners, LLC, the
sole general partner of Battery Ventures Convergence Fund, L.P., and thus
may be
68
deemed to share beneficial ownership of the shares of Series A preferred
stock and Series B preferred stock held by Battery Ventures Convergence
Fund, L.P. Mr. Dagres disclaims beneficial ownership of the shares held by
Battery Ventures V, L.P., Battery Investment Partners V, LLC and Battery
Ventures Convergence Fund, L.P., in each case except to the extent of his
proportionate pecuniary interest therein.
(6) Includes 2,996,835 shares of Series A preferred stock held directly by
Charles River Partnership X, a Limited Partnership, 82,223 shares of Series
A preferred stock held directly by Charles River Partnership X-A, a Limited
Partnership, 197,594 shares of Series A preferred stock held directly by
Charles River Friends X-B, LLC and 34,606 shares of Series A preferred
stock held directly by Charles River Friends X-C, LLC. Includes 374,295
shares of Series B preferred stock held directly by Charles River
Partnership X, a Limited Partnership, 10,269 shares of Series B preferred
stock held directly by Charles River Partnership X-A, a Limited
Partnership, 24,679 shares of Series B preferred stock held directly by
Charles River Friends X-B, LLC and 4,322 shares of Series B preferred stock
held directly by Charles River Friends X-C, LLC. Also includes 404,812
shares of Series B preferred stock issuable to Charles River Partnership X,
a Limited Partnership, 11,107 shares of Series B preferred stock issuable
to Charles River Partnership X-A, a Limited Partnership, 26,691 shares of
Series B preferred stock issuable to Charles River Friends X-B, LLC and
4,675 shares of Series B preferred stock issuable to Charles River Friends,
X-C, LLC upon conversion of the principal amount of subordinated
convertible promissory notes, and the accrued interest thereon, immediately
prior to the merger, assuming the merger occurs on October 12, 2001. Bruce
Sachs is a director of RiverDelta. Mr. Sachs is also a managing member of
Charles River X GP, LLC, which is the general partner of Charles River
Partnership X, a Limited Partnership, and Charles River Partnership X-A, a
Limited Partnership, and thus may be deemed to share beneficial ownership
of the shares of Series A preferred stock and Series B preferred stock held
of record by or issuable to Charles River Partnership X, a Limited
Partnership, and Charles River Partnership X-A, a Limited Partnership. Mr.
Sachs is also a limited partner of both Charles River Partnership X, a
Limited Partnership, and Charles River Partnership X-A, a Limited
Partnership. Mr. Sachs disclaims beneficial ownership of the shares held of
record by or issuable to Charles River Partnership X, a Limited
Partnership, and Charles River Partnership X-A, a Limited Partnership, in
each case except to the extent of his proportionate pecuniary interest
therein. Mr. Sachs is neither an officer nor director of Charles River
Friends VII, Inc., which is the general partner of Charles River
Partnership X-B, LLC and Charles River Partnership X-C, LLC, but because
Charles River Partnership X, a Limited Partnership, Charles River
Partnership X-A, a Limited Partnership, Charles River Partnership X-B, LLC
and Charles River Partnership X-C, LLC coinvest, Mr. Sachs may be deemed to
share beneficial ownership of the shares of Series A preferred stock and
Series B preferred stock held of record by or issuable to Charles River
Partnership X-B, LLC and Charles River Partnership X-C, LLC. Mr. Sachs
disclaims beneficial ownership of the shares of Series A preferred stock
and Series B preferred stock held of record by or issuable to Charles River
Partnership X-B, LLC and Charles River Partnership X-C, LLC.
(7) Shares consist of 1,654,260 shares of Series B preferred stock held of
record by Pequot Private Equity Fund II, L.P. and 894,569 shares of Series
B preferred stock issuable to Pequot Private Equity Fund II, L.P. upon
conversion of the principal amount of a subordinated convertible promissory
note, and the accrued interest thereon, immediately prior to the merger,
assuming the merger occurs on October 12, 2001. Michael Karfopoulos is a
director of RiverDelta and a principal of Pequot Capital Management, Inc.,
which serves as the investment manager for Pequot Private Equity Fund II,
L.P. Mr. Karfopoulos may be deemed to share beneficial ownership of the
shares of Series B preferred stock held of record by or issuable to Pequot
Private Equity Fund II, L.P. Mr. Karfopoulos disclaims beneficial ownership
of the shares held of record by or issuable to Pequot Private Equity Fund
II, L.P., except to the extent of his proportionate pecuniary interest
therein.
(8) Shares consist of restricted stock held of record by Mr. Brown, 1,034,908
shares of which were vested as of September 7, 2001, the remainder of which
will vest in accordance with accelerated vesting provisions upon completion
of the merger assuming Mr. Brown enters into the expected retention
agreement with Motorola.
(9) Includes 11,475,00 shares of common stock held directly by Mr. Callan. Also
includes 413,565 shares of Series B preferred stock held of record by Mr.
Callan and 414,068 shares of Series B preferred stock issuable to Mr.
Callan upon conversion of the principal amount of a subordinated
convertible promissory note, and accrued interest thereon, immediately
prior to the merger.
69
(10) Shares consist of restricted stock held of record by Mr. Cozzolino, 546,313
shares of which were vested as of September 7, 2001, 36,421 shares of which
will vest prior to the merger in accordance with normal vesting
provisions, and 728,417 shares of which will vest in accordance with
accelerated vesting provisions upon completion of the merger. 437,050
shares will remain unvested after the acquisition.
(11) Shares consist of restricted stock held of record jointly by Mr. Walker and
his wife, 439,961 shares of which were vested as of September 7, 2001 and
471,457 shares of which will vest in accordance with accelerated vesting
provisions upon completion of the merger. 195,482 shares will remain
unvested after the acquisition.
(12) Shares consist of restricted stock held of record jointly by Mr. White and
his wife, 661,191 shares of which were vested as of September 7, 2001 and
539,014 shares of which will vest in accordance with accelerated vesting
provisions upon completion of the merger. 179,671 shares will remain
unvested after the acquisition.
(13) Mr. Dagres is a director of RiverDelta. Mr. Dagres is also a managing
member of Battery Partners V, LLC, the sole general partner of Battery
Ventures V, L.P., and thus may be deemed to share beneficial ownership of
the shares of Series A preferred stock and Series B preferred stock held of
record by or issuable to Battery Ventures V, L.P. Battery Investment
Partners V, LLC coinvests with Battery Ventures V, L.P. in all portfolio
companies. Accordingly, Mr. Dagres may be deemed to share beneficial
ownership of the shares of Series A preferred stock and Series B preferred
stock held of record by or issuable to Battery Investment Partners V, LLC.
Mr. Dagres is also a managing member of Battery Convergence Partners, LLC,
the sole general partner of Battery Ventures Convergence Fund, L.P., and
thus may be deemed to share beneficial ownership of the shares of Series A
preferred stock and Series B preferred stock held of record by or issuable
to Battery Ventures Convergence Fund, L.P. Mr. Dagres disclaims beneficial
ownership of the shares held of record by or issuable to Battery Ventures
V, L.P., Battery Investment Partners V, LLC and Battery Ventures
Convergence Fund, L.P., in each case except to the extent of his
proportionate pecuniary interest therein.
(14) Mr. Karfopoulos is a director of RiverDelta. Mr. Karfopoulos is also a
principal of Pequot Capital Management, Inc., which serves as the
investment manager for Pequot Private Equity Fund II, L.P. Mr. Karfopoulos
may be deemed to share beneficial ownership of the shares of Series B
preferred stock held of record by or issuable to Pequot Private Equity
Fund II, L.P. Mr. Karfopoulos disclaims beneficial ownership of the shares
held of record by or issuable to Pequot Private Equity Fund II, L.P.,
except to the extent of his proportionate pecuniary interest therein.
(15) Mr. Sachs is a director of RiverDelta. Mr. Sachs is also a managing member
of Charles River X GP, LLC, which is the general partner of Charles River
Partnership X, a Limited Partnership, and Charles River Partnership X-A, a
Limited Partnership, and thus may be deemed to share beneficial ownership
of the shares of Series A preferred stock and Series B preferred stock held
of record by or issuable to Charles River Partnership X, a Limited
Partnership, and Charles River Partnership X-A, a Limited Partnership. Mr.
Sachs is also a limited partner of both Charles River Partnership X, a
Limited Partnership, and Charles River Partnership X-A, a Limited
Partnership. Mr. Sachs disclaims beneficial ownership of the shares held of
record by or issuable to Charles River Partnership X, a Limited
Partnership, and Charles River Partnership X-A, a Limited Partnership, in
each case except to the extent of his proportionate pecuniary interest
therein. Mr. Sachs is neither an officer nor director of Charles River
Friends VII, Inc., which is the general partner of Charles River
Partnership X-B, LLC and Charles River Partnership X-C, LLC, but does share
voting and investment power with respect to Charles River Partnership X-B,
LLC and Charles River Partnership X-C, LLC, and thus may be deemed to share
beneficial ownership of the shares of Series A preferred stock and Series B
preferred stock held of record by or issuable to Charles River Partnership
X-B, LLC and Charles River Partnership X-C, LLC. Mr. Sachs disclaims
beneficial ownership of the shares of Series A preferred stock and Series B
preferred stock held of record by or issuable to Charles River Partnership
X-B, LLC and Charles River Partnership X-C, LLC.
(16) Includes 2,230,598 shares of Series B preferred stock issuable upon
conversion of the principal amount of subordinated convertible promissory
notes, and accrued interest thereon, immediately prior to the merger,
assuming the merger occurs on October 12, 2001.
70
EXPERTS
The consolidated financial statements and schedule of Motorola, Inc. and
subsidiaries as of December 31, 2000 and 1999, and for each of the years in the
three-year period ended December 31, 2000, incorporated by reference herein,
have been audited by KPMG LLP, independent certified public accountants. Such
financial statements and schedule have been incorporated by reference herein in
reliance upon the reports with respect thereto of KPMG LLP, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
LEGAL AND TAX MATTERS
The validity of the shares of Motorola common stock to be issued in
connection with the merger is being passed upon for Motorola by Jeffrey A.
Brown, Esq., Senior Corporate Counsel, Corporate Law Department. As of August 1,
2001, Mr. Brown owned 1,500 shares of Motorola common stock and held options to
purchase an additional 27,400 shares of Motorola common stock (of which 5,375
were exercisable).
Certain of the tax consequences of the merger will be passed upon at the
effective time of the merger by KPMG LLP, tax advisor to Motorola, and by Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to RiverDelta. See "The
Merger Agreement--Conditions to the Merger" on page 47. A member of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. owns 600,000 shares of RiverDelta
common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. Such statements are identified by the use of forward-
looking words or phrases including, but not limited to, "intended," "will be
positioned," "expects," "expected," "anticipates," and "anticipated." These
forward-looking statements are based on current expectations of Motorola or
RiverDelta, as the case may be. All statements other than statements of
historical facts included in this proxy statement/prospectus, including those
regarding the financial position, results of operations, cash flows, business
strategy, projected costs, growth opportunities for existing products, benefits
from new technology and plans and objectives of management for future operations
of Motorola or RiverDelta, as the case may be, are forward-looking statements.
Although Motorola or RiverDelta believes that the expectations of Motorola or
RiverDelta, as the case may be, reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations will prove to have
been correct. Because forward-looking statements involve risks and
uncertainties, the actual results of Motorola and RiverDelta, as the case may
be, could differ materially. Important factors that could cause actual results
to differ materially from the expectations of Motorola or RiverDelta, as the
case may be ("Cautionary Statements"), are disclosed under "Risk Factors--Risks
Relating to the Merger," on page 15, "The Merger--Motorola's Reasons for the
Merger," on page 25, "The Merger--RiverDelta's Reasons for the Merger," on page
25, and elsewhere in this proxy statement/prospectus and in the SEC filings by
Motorola listed on page 72. These forward-looking statements represent the
judgment of Motorola or RiverDelta, as the case may be, as of the date of this
proxy statement/prospectus. All subsequent written and oral forward-looking
statements attributable to Motorola or RiverDelta or persons acting on behalf of
Motorola or RiverDelta are expressly qualified in their entirety by the
Cautionary Statements. Motorola and RiverDelta disclaim, however, any intent or
obligation to update their respective forward-looking statements.
71
WHERE YOU CAN FIND MORE INFORMATION
Motorola files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information Motorola files at the SEC's public reference rooms at the
following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Motorola's SEC filings are also available to the public from
commercial document retrieval services and at the website maintained by the SEC
at www.sec.gov.
Motorola filed a registration statement on Form S-4 to register with the SEC
the Motorola common stock to be issued to RiverDelta stockholders in the
merger. This proxy statement/prospectus is a part of the Motorola registration
statement and constitutes both a prospectus of Motorola and a proxy statement of
RiverDelta for its special meeting.
As allowed by SEC rules, this proxy statement/prospectus does not contain all
the information you can find in the Motorola registration statement or the
exhibits to the Motorola registration statement. You may obtain copies of the
registration statement in the manner described above.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/ prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC.
These documents contain important information about Motorola and its
financial condition.
Motorola SEC Filings (File No. 1-07221) Period
--------------------------------------- ----------------------------
Annual Report on Form 10-K .............. Year ended December 31, 2000
Quarterly Report on Form 10-Q ........... Quarter Ended March 31, 2001
Quarterly Report on Form 10-Q ........... Quarter Ended June 30, 2001
Current Report on Form 8-K .............. Dated April 3, 2001
Proxy Statement ......................... Dated March 30, 2001
The description of Motorola's common stock contained in its Registration
Statement on Form 8-B dated July 2, 1973, including any amendments or
reports filed for the purpose of updating such description.
The description of the Rights contained in its Registration Statement on
Form 8-A dated November 5, 1998, including any amendment or report filed
for the purpose of updating such description.
72
Motorola also incorporates by reference into this proxy statement/prospectus
additional documents that may be filed with the SEC from the date of this proxy
statement/prospectus to the date of the special meeting of RiverDelta
stockholders under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act. These
include periodic reports, such as Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
Motorola has supplied all information contained or incorporated by reference
in this proxy statement/ prospectus relating to Motorola, and RiverDelta has
supplied all such information relating to RiverDelta.
If you are already a Motorola stockholder, we may already have sent you some
of the documents incorporated by reference, but you can obtain any of them
through us, the SEC or the SEC's website as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this proxy statement/prospectus. Stockholders may obtain documents incorporated
by reference in this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Tel: (800) 262-8509
Attn.: Investor Relations
You may also obtain information from Motorola's website:
www.motorola.com/investor.
If you would like to request documents from us, please do so by October 3,
2001 to receive them before the RiverDelta special meeting.
RiverDelta is a privately held corporation that is not subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, and
therefore does not incorporate information in this proxy statement/ prospectus
by reference unless such information appears in an Appendix to this proxy
statement/prospectus.
You should rely only on the information contained or incorporated by
reference in this proxy statement/ prospectus to vote on the transactions. We
have not authorized anyone to provide you with information that is different
from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated September 10, 2001. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any
date other than that date, and neither the mailing of this proxy
statement/prospectus to stockholders nor the issuance of Motorola common stock
in the merger shall create any implication to the contrary.
73
Appendix A-1
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
MOTOROLA, INC.,
BAYOU MERGER SUB, INC.
and
RIVERDELTA NETWORKS, INC.
Dated as of July 11, 2001
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Certain Defined Terms ...................................... A-1
Section 1.02. Additional Defined Terms ................................... A-7
ARTICLE II
The Merger
Section 2.01. The Merger ................................................. A-9
Section 2.02. Effective Time ............................................. A-9
Section 2.03. Effect of the Merger ....................................... A-9
Section 2.04. Certificate of Incorporation; By-laws ...................... A-9
Section 2.05. Directors and Officers ..................................... A-9
ARTICLE III
Closing; Conversion of Securities; Exchange of Certificates
Section 3.01. Closing .................................................... A-9
Section 3.02. Closing Transactions ....................................... A-9
Section 3.03. Conversion of Securities ................................... A-10
Section 3.04. Exchange of Certificates ................................... A-11
Section 3.05. Stock Transfer Books ....................................... A-13
Section 3.06. Company Options and Restricted Shares ...................... A-13
Section 3.07. Dissenting Shares .......................................... A-14
Section 3.08. Parent Rights Plan ......................................... A-14
Section 3.09. Adjustment of Merger Consideration ......................... A-14
ARTICLE IV
Representations and Warranties of the Company
Section 4.01. Organization and Qualification ............................. A-17
Section 4.02. Subsidiaries ............................................... A-17
Section 4.03. Authority; No Conflict; Required Filings and Consents ...... A-17
Section 4.04. Capitalization ............................................. A-18
Section 4.05. Financial Statements ....................................... A-19
Section 4.06. Absence of Certain Changes or Events ....................... A-19
Section 4.07. Properties ................................................. A-20
Section 4.08. Permits; Compliance ........................................ A-21
Section 4.09. Contracts and Commitments .................................. A-21
Section 4.10. Intellectual Property ...................................... A-23
Section 4.11. Absence of Litigation and Products Liability ............... A-27
Section 4.12. Customers .................................................. A-27
Section 4.13. Employee Benefit Plans; Labor Matters ...................... A-27
Section 4.14. Insurance .................................................. A-29
Section 4.15. Taxes ...................................................... A-30
Section 4.16. Environmental, Health and Safety Matters ................... A-31
Section 4.17. Related Party Transactions ................................. A-33
Section 4.18. Software Products .......................................... A-33
A-i
Page
----
Section 4.19. Stockholder Approval .................................... A-33
Section 4.20. Brokers ................................................. A-33
ARTICLE V
Representations and Warranties of Parent
Section 5.01. Organization and Qualification .......................... A-34
Section 5.02. Merger Sub .............................................. A-34
Section 5.03. Authority; No Conflict; Required Filings and Consents ... A-34
Section 5.04. Capitalization .......................................... A-35
Section 5.05. SEC Filings; Financial Statements ....................... A-35
Section 5.06. NYSE Requirements ....................................... A-35
ARTICLE VI
Conduct of Businesses Pending the Merger
Section 6.01. Conduct of Business by the Company Pending the Merger ... A-36
Section 6.02. Notification of Certain Matters ......................... A-38
ARTICLE VII
Additional Agreements
Section 7.01. Access to Information ................................... A-38
Section 7.02. No Solicitation of Transactions ......................... A-38
Section 7.03. Employee Benefits Matters ............................... A-39
Section 7.04. Obligations of Merger Sub ............................... A-40
Section 7.05. Plan of Reorganization .................................. A-40
Section 7.06. Further Action; Consents; Filings ....................... A-40
Section 7.07. Public Announcements .................................... A-41
Section 7.08. Registration Statement; Proxy Statement ................. A-41
Section 7.09. Company Stockholders' Meeting ........................... A-42
Section 7.10. Stock Exchange Listing .................................. A-42
Section 7.11. Indemnification ......................................... A-42
Section 7.12. Registration Statement on Form S-8 ...................... A-42
Section 7.13. Parent Board Approval ................................... A-42
Section 7.14. Affiliate Letters ....................................... A-42
ARTICLE VIII
Conditions to the Merger
Section 8.01. Conditions to the Obligations of Each Party ............. A-43
Section 8.02. Conditions to the Obligations of Parent and Merger Sub .. A-43
Section 8.03. Conditions to the Obligations of the Company ............ A-44
ARTICLE IX
Indemnification
Section 9.01. Survival of Representations and Warranties .............. A-44
Section 9.02. Indemnification by the Stockholders ..................... A-44
Section 9.03. Indemnification by Parent ............................... A-45
Section 9.04. Indemnification Procedures .............................. A-45
Section 9.05. Distributions from the Escrow Fund ...................... A-46
Section 9.06. Stockholder Representative; Approval of Stockholders .... A-46
A-ii
ARTICLE X
Termination, Amendment and Waiver
Page
----
Section 10.01. Termination ............................................ A-47
Section 10.02. Effect of Termination .................................. A-48
Section 10.03. Amendment .............................................. A-48
Section 10.04. Waiver ................................................. A-48
ARTICLE XI
General Provisions
Section 11.01. Expenses ............................................... A-48
Section 11.02. Notices ................................................ A-48
Section 11.03. Third-Party Beneficiaries .............................. A-50
Section 11.04. Severability ........................................... A-50
Section 11.05. Assignment; Binding Effect ............................. A-50
Section 11.06. Incorporation of Disclosure Schedule ................... A-50
Section 11.07. Specific Performance ................................... A-50
Section 11.08. Governing Law .......................................... A-50
Section 11.09. Headings ............................................... A-50
Section 11.10. Counterparts ........................................... A-50
Section 11.11. Entire Agreement ....................................... A-50
Section 11.12. Waiver of Jury Trial ................................... A-50
EXHIBITS
Exhibit A Voting Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Bridge Holders Agreement
Exhibit D Form of Transmittal Letter
Exhibit 3.02 Form of Escrow Agreement
A-iii
AGREEMENT AND PLAN OF MERGER, dated as of July 11, 2001 (this "Agreement"),
among MOTOROLA, INC., a Delaware corporation ("Parent"), BAYOU MERGER SUB, INC.,
a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"),
and RIVERDELTA NETWORKS, INC. a Delaware corporation (the "Company").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("Delaware Law"), Parent, Merger Sub and the Company will consummate a business
combination transaction pursuant to which Merger Sub will merge with and into
the Company (the "Merger");
WHEREAS, the Board of Directors of the Company (i) has determined that the
Merger is fair to, and in the best interests of, the Company and its
stockholders and has approved and declared advisable this Agreement, the Merger
and the other transactions contemplated by this Agreement and (ii) has
recommended the adoption of this Agreement by the stockholders of the Company;
WHEREAS, the Board of Directors of Merger Sub has approved this Agreement,
the Merger and the other transactions contemplated by this Agreement;
WHEREAS, certain of the Stockholders (as defined in Section 1.01 below) have,
on the date hereof, entered into the Voting Agreement attached hereto as Exhibit
A pursuant to which they have, among other things, granted to Parent an
irrevocable proxy with respect to the Company Shares (as defined in Section 1.01
below) for purposes of signing a written consent or voting at any meeting to
approve this Agreement and in favor of any matter relating to the consummation
of the transactions contemplated by this Agreement;
WHEREAS, the holders of Convertible Promissory Notes and Warrants (each as
defined in Section 1.01 below) have agreed pursuant to an agreement in the form
attached as Exhibit C hereto (the "Bridge Holders Agreement"), dated as of the
date hereof, that immediately prior to the Effective Time the Convertible
Promissory Notes will be converted into Series B Preferred Shares (as defined in
Section 3.03) in the manner set forth in the Bridge Holders Agreement and that
the related Warrants shall be cancelled without any payment due thereunder;
WHEREAS, as fully described herein and in the Escrow Agreement (as defined in
Section 3.02), a specified percentage of the shares of Parent Common Stock to be
received by the Stockholders shall be placed in escrow to satisfy any
indemnification claims arising after the Effective Time; and
WHEREAS, for United States federal income tax purposes, the Merger is
intended to qualify as a reorganization under the provisions of section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the rules and regulations promulgated thereunder (the "Reorganization").
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein set forth, and intending to be legally bound hereby, the
parties to this Agreement hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, litigation, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"affiliate" of a specified person means a person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified person.
A-1
"Aggregate Consideration" means (a) $300 million minus (b) the sum of (i)
the liquidation preference of each share of Series B Preferred Stock
determined in accordance with Article Fourth (B)(1)(a)(i)(2) of the
Certificate of Incorporation of the Company multiplied by the total number of
issued and outstanding shares of Series B Preferred Stock immediately prior to
the Effective Time and (ii) the Company Debt on the Cut-Off Date, plus (c) the
Surplus, if any, plus (d) Cash Capital Expenditures in an amount not to exceed
$1,000,000 minus (e) the Deficiency, if any, plus (f) Cash on the Cut-Off
Date, plus (g) the aggregate exercise price of vested and unvested "in the
money" Company Options without giving effect to any repricing or option
cancellation in connection with the Retention Plan (the "Exercise Amount")
plus (h) the amount of Retention/Integration Expenses actually paid from the
date hereof through the Closing Date.
"April 30, 2001 Balance Sheet" means the unaudited consolidated balance
sheet of the Company and the Company Subsidiaries, dated as of April 30, 2001,
a copy of which is set forth in Section 4.05 of the Disclosure Schedule.
"Average Closing Price" means the average of the per share closing prices
on the NYSE Composite Tape of shares of Parent Common Stock during the 20
consecutive trading days ending on (and including) the second trading day
immediately preceding the Closing Date.
"business day" means any day on which banks are not required or authorized
to close in The City of New York.
"Cash" means cash, cash equivalents, deposits for collateral on letters of
credit and the principal and interest owed on loans to stockholders secured by
the Stock Pledge Agreements.
"Cash Capital Expenditures" means, from the date hereof through the Closing
Date, the amount of any capital expenditures by the Company as would be
recorded on a cash flow statement prepared in accordance with U.S. GAAP,
except to the extent the purchase price of such capital expenditures are
included in the accounts payable balance on the date of Closing and except to
the extent such capital expenditures are funded through capital leases.
"Closing Balance Sheet" means the audited consolidated balance sheet of the
Company and the Company Subsidiaries dated as of the Closing Date.
"Company Accountants" means Arthur Andersen LLP or after the Effective Time
an accounting firm selected by the Stockholders' Representative.
"Company Debt" means, as of any given date, the amount of any indebtedness
for borrowed money of the Company and the Company Subsidiaries, including,
without limitation, the Company Loan Amount and the principal and accrued
interest outstanding under the Credit Agreement.
"Company Employees" means the employees of the Company listed in Section
1.01(a)(i), Section 1.01(a)(ii) or Section 1.01(a)(iii) of the Disclosure
Schedule.
"Company Expenses" means fees and expenses incurred by the Company or any
Company Subsidiary for the retention of advisors in connection with the
transactions contemplated by this Agreement, including, without limitation,
the fees and expenses of CSFB, Company's counsel and accountants.
"Company Loan Amount" means the principal and accrued interest under the
Loan and Security Agreement between Silicon Valley Bank and the Company dated
as of June 30, 2000 and amended as of November 29, 2000 and as of May 31,
2001.
"Company Material Adverse Effect" means any event, circumstance, change or
effect that, individually or in the aggregate with all other events,
circumstances, changes or effects, is or is reasonably expected to be
materially adverse to the business, operations, assets or liabilities, or
results of operations of the Company and the Company Subsidiaries taken as a
whole (other than changes that result from economic factors affecting the
economy as a whole or changes that are the result of factors generally
A-2
affecting the industries in which Parent and the Company operate); provided,
however, that Company Material Adverse Effect does not include losses of
customers, suppliers, or Distribution Channel Partners of the Company
resulting from the announcement of this Agreement.
"Company Shares" means, collectively, the Company Common Shares, the
Series A Preferred Shares and the Series B Preferred Shares.
"Competing Transaction" means any of the following involving the Company
(other than the Merger and the other transactions contemplated by this
Agreement): (a) a merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or other similar transaction; (b)
any sale, lease, exchange, transfer or other disposition of 20% or more of the
assets of the Company and the Company Subsidiaries, taken as a whole; or (c)
an acquisition of 20% or more of the outstanding voting securities of the
Company.
"Confidentiality Agreement" means the Confidentiality Agreement dated May
1, 2000 between the Company and Parent.
"control" (including the terms "controlling", "controlled by" and "under
common control with") means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, as trustee or executor, by
contract or credit arrangement or otherwise.
"Convertible Promissory Notes" means the Subordinated Convertible
Promissory Notes of the Company dated February 7, 2001 and the Subordinated
Convertible Promissory Note of the Company dated May 16, 2001.
"Credit Agreement" means the credit agreement dated as of the date hereof
between Parent and the Company.
"Credit Agreement Note" means the promissory note issued by the Company to
Parent under the Credit Agreement.
"Cut-Off Date" means the earlier of October 15, 2001 and the Closing Date.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, and forming a part of this Agreement.
"Distribution Channel Partner" means a person that is a party to an
agreement with the Company providing for the marketing, distribution, sale or
resale of the Company's products by such other person, regardless of whether
such product is a component or a separate product, including, but not limited
to, OEM, VAR, distributor, sales agency, sales representative and co-marketing
agreements.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, local and non-United States statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution
or protection of the environment, including, without limitation, all those
relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or by-products, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
A-3
"Escrow Agent" means Harris Trust and Savings Bank.
"Escrow Fund" means the number of shares of Parent Common Stock that Parent
will deposit with the Escrow Agent at Closing in accordance with this
Agreement and the Escrow Agreement equal to 10% of the total number of shares
of Parent Common Stock to be issued to the holders of each of Company Common
Shares, Series A Preferred Shares and Series B Preferred Shares including,
without limitation, Series B Preferred Shares issued pursuant to the Bridge
Holders Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fully Diluted Shares" means (a) the total number of Company Common Shares
outstanding immediately prior to the Effective Time (excluding treasury stock)
plus (b) the total number of Company Common Shares that the Series A Preferred
Shares are convertible into in accordance with the Certificate of
Incorporation plus (c) the number of Company Common Shares that are issuable
upon the exercise of the "in the money" Company Options without giving effect
to any repricing of options, grant of restricted stock or unrestricted stock
or options, or option cancellation in connection with the Retention Plan.
"Governmental Authority" means any United States federal, state or local or
any non-United States government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or
arbitral body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Material" means (a) petroleum and petroleum products, by-
products or breakdown products, radioactive materials, radon, asbestos-
containing materials and polychlorinated biphenyls and (b) any other
chemicals, materials or substances defined or regulated as toxic or hazardous
or as a pollutant, contaminant or waste under any applicable Environmental
Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"in the money" means at an exercise price less than Per Share Price.
"Indebtedness" means (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, notes, debentures or other similar instruments or by
letters of credit, including purchase money obligations or other obligations
relating to the deferred purchase price of property (other than trade payables
incurred in the ordinary course of business), (c) obligations as lessee under
leases that have been or should have been, in accordance with U.S. GAAP,
recorded as capital leases, (d) obligations under direct or indirect
guaranties in respect of Liabilities of others and (e) accrued interest, if
any, on and all other amounts owed in respect of any of the foregoing.
"Investor Rights Agreement" means the First Amended and Restated Investor
Rights Agreement dated March 22, 2000 among the Company and certain
Stockholders, as amended pursuant to the amendment dated February 7, 2001.
"knowledge" means, when used with respect to the Company, the actual
knowledge, after reasonable inquiry, of Jon Benett, Michael Brown, David
Callan, Weidong Chen, Joe Cozzolino, Raj Duggal, Jerry Guo, Bob Kelly, Zhao
Liu, Swarup Sahoo, Jeff Walker, and Gerry White.
"Law" means any United States federal, state, local or non-United States
statute, law, ordinance, regulation, rule, code, Governmental Order or other
requirement or rule of law.
"Leased Real Property" means the real property and interests in real
property leased or subleased by the Company or any Company Subsidiary, as
tenant, together with, to the extent leased by the Company or any Company
Subsidiary, all buildings and other structures, facilities or improvements
currently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property of the Company or any Company Subsidiary attached
or appurtenant thereto, and all easements, licenses, rights and appurtenances
relating to the foregoing.
A-4
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined
or determinable, including, without limitation, those arising under any Law,
Action or Governmental Order, and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Net Working Capital" means the current assets minus current liabilities
(including Company Expenses) of the Company and the Company Subsidiaries,
shown on any specified balance sheet of the Company and the Company
Subsidiaries; provided, however, the foregoing amount shall not include
principal and accrued interest under the Convertible Promissory Notes, the
Company Debt, Cash, the accrued or incurred and unpaid Retention/Integration
Expenses, in each case as of the date of such balance sheet.
"NYSE" means New York Stock Exchange, Inc.
"Owned Real Property" means the real property and interests in real
property owned in fee by the Company or any Company Subsidiary, together with
all buildings and other structures, facilities or improvements
currently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property of the Company or any Company Subsidiary attached
or appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Parent Accountants" means KPMG LLP.
"Parent Material Adverse Effect" means any event, circumstance, change or
effect that, individually or in the aggregate with all other events,
circumstances, changes or effects, is or is reasonably expected to be
materially adverse to the business, operations, assets or liabilities or
results of operations of Parent and the Parent Subsidiaries taken as a whole
(other than changes that result from economic factors affecting the economy as
a whole or changes that are the result of factors generally affecting the
industries in which Parent and the Company operate).
"Parent Subsidiary" means each Significant Subsidiary (as defined in Rule
405 promulgated under the Securities Act) of Parent.
"Per Share Price" means (i) the Aggregate Consideration divided by (ii) the
Fully Diluted Shares.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and
other similar liens arising in the ordinary course of business securing
obligations that (i) are not overdue for a period of more than 30 days and
(ii) are not in excess of $50,000 in the case of a single property or $100,000
in the aggregate at any time; (c) pledges or deposits to secure obligations
under worker's compensation laws or similar legislation or to secure public or
statutory obligations; and (d) minor survey exceptions, reciprocal easement
agreements and other customary encumbrances on title to real property that (i)
were not incurred in connection with any Indebtedness, (ii) do not render
title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current and anticipated purposes.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, group, trust, association
or other organization or entity or government, political subdivision, agency
or instrumentality of a government.
"Post-Closing Adjustment" means the sum of the adjustments provided for in
Section 3.09(d)(i)-(v).
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment.
A-5
"Remedial Action" means all action to (a) clean up, remove, treat or handle
in any other way Hazardous Materials in the environment, (b) restore or
reclaim the environment or natural resources, (c) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or the environment, or (d) perform remedial
investigations, feasibility studies, corrective actions, closures and post-
remedial or post-closure studies, investigations, operations, maintenance and
monitoring on, about or in any Real Property.
"Retention Agreements" means written agreements between the Company and the
Company Employees relating to the employment and compensation of the Company
Employees that are mutually acceptable to Parent and the Company and the
affected Company Employee and consistent with the Retention Plan.
"Retention/Integration Expenses" means expenses incurred by the Company
upon the written request of Parent in connection with the Retention Plan or
the integration of the Company and Parent.
"Retention Plan" means those actions, arrangements and agreements related
to the employment and compensation of the Company Employees and the other
employees of the Company as are mutually and reasonably agreed to be
implemented by the Company and Parent, as promptly as practicable after the
date hereof, including, but not limited to, (i) any option or restricted stock
agreement (ii) any retention bonuses (iii) any repricing, acceleration or
other amendment of any option or restricted stock agreement, (iv) any
termination of employment or other action related to employment outside of the
ordinary course of business that is authorized by Parent in writing, and (v)
the Retention Agreements; provided, however, that the Retention Plan shall not
include any arrangement or agreement that would disqualify the Reorganization
or prevent the issuances of the opinions referred to in Section 7.05 of this
Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Software" means all computer software (a) material to the business of the
Company and the Company Subsidiaries or (b) distributed, sold, licensed or
marketed by the Company or any Company Subsidiary.
"Stockholders" means holders of Company Shares after giving effect to the
conversion of the Convertible Promissory Notes into Series B Preferred Stock.
"Stockholders' Representative" means Todd Dagres.
"Stock Option Agreements" means the various agreements between the Company
and certain of its employees, consultants and advisors pursuant to which such
persons have received restricted shares of Company Stock and options to
acquire shares of Company Stock, in each case listed on Section 4.03(b) of the
Disclosure Schedule.
"Stock Pledge Agreements" means the Stock Pledge Agreements between the
Company and Joseph Cozzolino dated May 9, 2000, between the Company and Sal
Turnello dated July 12, 2000, and between the Company and Brian Bentley
dated as June 12, 2000.
"Stock Repurchase Rights" means the right of the Company to repurchase
restricted shares of Company Stock pursuant to various Stock Option Agreements
between the Company and various employees.
"subsidiary" of any person has the meaning set forth in Rule 405
promulgated under the Securities Act.
"Tax" or "Taxes" means any federal, state, local or non-United States net
or gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium (including taxes under Code (S) 59A),
customs duties, capital stock, franchise, profits, withholding, social
security (or National Insurance Contribution or similar), unemployment,
disability, real property, personal property,
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sales, use, transfer, gains, capital gains, registration, goods and services,
value-added, alternative or add-on minimum, windfall profits, estimated or
other tax, governmental fee or like assessment or charge of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not, imposed by any Governmental Authority or other Tax authority
or arising under any Tax law or agreement, including, without limitation, any
joint venture or partnership agreement. For purposes of the definition of Tax,
any interest, penalties, additions to tax or additional amounts that relate to
taxes for any period, or a portion of any period, ended on or before the
Closing Date shall include any interest, penalties, additions to tax, or
additional amounts relating to taxes for such periods, regardless of whether
such items are incurred, accrued, assessed or similarly charged on, before or
after the Closing Date.
"Tax Return" shall mean any return, declaration, report, claim for refund,
form, or information or return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
"Transaction Documents" means this Agreement, the Disclosure Schedule, the
Transmittal Letter, the Company Affiliate Agreement, the Voting Agreement, the
Bridge Holders Agreement, the Credit Agreement, the Credit Agreement Note and
the Escrow Agreement.
"U.S. GAAP" means United States generally accepted accounting principles
and practices applied consistently throughout the periods involved.
"Warrants" means the Warrants dated December 12, 2000 to purchase shares of
Series C Convertible Preferred Stock of the Company.
Section 1.02. Additional Defined Terms. The following terms have the
meanings set forth in the Sections set forth below:
Definition Location
---------- ---------
Agreement Preamble
Assumed Company Options (S)3.06(a)
Blue Sky Laws (S)5.03(c)
Bridge Holders Agreement Recitals
CERCLA (S)4.16(a)
Certificate (S)3.04(a)
Certificate of Merger (S)3.02(a)
Certificates (S)3.04(a)
Closing (S)3.01
Closing Date (S)3.01
Code Recitals
Common Stock Exchange Ratio (S)3.03(a)
Common Stock Merger Consideration (S)3.03(a)
Company Preamble
Company Affiliate Agreement Recitals
Company Common Stock (S)3.03(a)
Company Common Shares (S)3.03(a)
Company Employment Agreements Recitals
Company Intellectual Property (S)4.10(a)
Company Licenses (S)4.10(l)
Company Options (S)3.06
Company Permits (S)4.08
Company Software (S)4.10(a)
Company Stock Option Plans (S)3.06
Company Subsidiary (S)4.02
CSFB (S)4.21
Customers (S)4.12
Deficiency (S)3.09(a)
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Definition Location
---------- ---------
Delaware Law Recitals
Disclosure Documents (S)7.09(d)
Dissenting Shares (S)3.07
Effective Time (S)2.02
Escrow Agreement (S)3.02(d)
Estimated Balance Sheet (S)3.09(a)
Excess Shares (S)3.04(d)
Exchange Agent (S)3.04(a)
Exchange Agreement (S)3.04(a)
Exchange Fund (S)3.04(a)
Excluded Licenses (S)4.10(a)
Financial Statements (S)4.05(a)
Indemnified Party (S)9.02(a)
Indemnifying Parties (S)9.02(a)
Independent Accounting Firm (S)3.09(c)
Intellectual Property (S)4.10(a)
IRS (S)4.15(b)
Leases (S)4.07(b)
Losses (S)9.02(a)
Material Contracts (S)4.09(a)
Merger Recitals
Merger Sub Preamble
Non-U.S. Benefit Plan (S)4.13(f)
Option Spread (S)3.06(b)
Parent Preamble
Parent Common Stock Recitals
Parent Preferred Stock (S)5.04
Parent Rights Plan (S)3.08
Parent SEC Reports (S)5.05(a)
Plans (S)4.13(a)
Pro Rata Factor (S)9.02(f)
Proprietary Rights Agreement (S)4.13(h)
Ratable Share (S)9.02(f)
RCRA (S)4.16(a)
Registered Intellectual Property (S)4.10(a)
Registration Statement (S)7.09(a)
Requisite Stockholder Approval (S)4.19
Reorganization Recitals
SEC (S)7.08(a)
Series A Preferred Shares (S)3.03(b)
Series A Preferred Stock (S)3.03(b)
Series A Preferred Stock Exchange Ratio (S)3.03(b)
Series A Preferred Stock Merger Consideration (S)3.03(b)
Series B Preferred Shares (S)3.03(c)
Series B Preferred Stock (S)3.03(c)
Series B Preferred Stock Exchange Ratio (S)3.03(c)
Series B Preferred Stock Merger Consideration (S)3.03(c)
Surplus (S)3.09(a)
Surviving Corporation (S)2.01
SWDA (S)4.16(a)
2001 Budget (S)6.01(b)
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ARTICLE II
The Merger
Section 2.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VIII, and in accordance with Delaware Law, at the Effective
Time, Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
Section 2.02. Effective Time. The Merger shall become effective on such date
and at such time as the Certificate of Merger is duly filed with the Secretary
of State of the State of Delaware or at such later time as may be agreed in
writing by each of the parties hereto and specified in the Certificate of Merger
(the "Effective Time").
Section 2.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
each of the Company and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities, obligations, restrictions, disabilities and duties of
each of the Company and Merger Sub shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
Section 2.04. Certificate of Incorporation; By-laws. (a) At the Effective
Time, the Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be amended and restated to contain the
provisions set forth in the Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time. Such Certificate of
Incorporation, as so amended, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation.
(b) At the Effective Time, the By-laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
Section 2.05. Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the persons whose
names and titles are set forth on Schedule 2.05 shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE III
Closing; Conversion of Securities; Exchange of Certificates
Section 3.01. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York at 10:00 a.m. on the third
business day following satisfaction or waiver of all of the closing conditions
set forth in Article VIII hereof (other than those conditions that will be
satisfied at the Closing) or on such other date as may be mutually agreed by
Parent and the Company. The date and time of the Closing are herein referred to
as the "Closing Date".
Section 3.02. Closing Transactions. At the Closing,
(a) the Company and Merger Sub shall cause a certificate of merger (the
"Certificate of Merger") to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware in such form and such
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manner as is required by the relevant provisions of Delaware Law and make all
other filings or recordings required by Delaware Law in connection with the
Merger;
(b) Parent and the Company shall deliver to each other the certificates
required by Article VIII and, unless delivered prior to Closing, other
documents required to be delivered hereunder prior to the Effective Time; and
(c) Parent and the Stockholders' Representative shall enter into an Escrow
Agreement with the Escrow Agent substantially in the form of Exhibit 3.02 (the
"Escrow Agreement"), and, in accordance with the terms of the Escrow Agreement,
Parent shall deposit the Escrow Fund with the Escrow Agent to be managed and
distributed by the Escrow Agent in accordance with the Escrow Agreement.
Section 3.03. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders thereof:
(a) each share of common stock, par value $.01 per share, of the Company
issued and outstanding immediately prior to the Effective Time, other than
shares to be cancelled pursuant to Section 3.03(d) (the "Company Common Stock";
all such issued and outstanding shares of the Company Common Stock, other than
shares of Company Common Stock to be cancelled pursuant to Section 3.03(d),
being collectively referred to as the "Company Common Shares") and other than
any Dissenting Shares, shall be cancelled and shall be converted, subject to
Section 3.04(d), into the right to receive such number of shares of Parent
Common Stock (the "Common Stock Exchange Ratio") as shall equal the quotient of
(i) the Per Share Price divided by (ii) the Average Closing Price (the "Common
Stock Merger Consideration");
(b) each share of Series A preferred stock, par value $.01 per share, of the
Company issued and outstanding immediately prior to the Effective Time, other
than shares to be cancelled pursuant to Section 3.03(d) (the "Series A Preferred
Stock"; all such issued and outstanding shares of the Series A Preferred Stock
being collectively referred to as the "Series A Preferred Shares") and other
than any Dissenting Shares, shall be converted into the right to receive such
number of shares of Parent Common Stock (the number of shares of Parent Common
Stock to be issued with respect to each Series A Preferred Share, being the
"Series A Preferred Stock Exchange Ratio") as shall equal the quotient of (i)
(A) the Per Share Price multiplied by (B) the number of Company Common Shares
that each Series A Preferred Share is convertible into in accordance with the
Certificate of Incorporation of the Company divided by (ii) the Average Closing
Price (the "Series A Preferred Stock Merger Consideration");
(c) each share of Series B preferred stock, par value $.01 per share, of the
Company issued and outstanding immediately prior to the Effective Time,
including, without limitation, shares issued pursuant to the Bridge Holders
Agreement, other than shares to be cancelled pursuant to Section 3.03(d) (the
"Series B Preferred Stock"; all such issued and outstanding shares of the Series
B Preferred Stock being collectively referred to as the "Series B Preferred
Shares") and other than any Dissenting Shares, shall be converted into the right
to receive such number of shares of Parent Common Stock (the number of shares of
Parent Common Stock to be issued with respect to each Series B Preferred Share,
being the "Series B Preferred Stock Exchange Ratio") as shall equal the quotient
of (i) the liquidation preference of each Series B Preferred Share determined in
accordance with Article Fourth (B)(1)(a)(i)(2) of the Certificate of
Incorporation of the Company divided by (ii) the Average Closing Price (the
"Series B Preferred Stock Merger Consideration");
(d) each Company Share held in the treasury of the Company and each Company
Share owned by Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company immediately prior to the Effective Time shall be
cancelled and retired and shall cease to exist without any conversion thereof
and no payment or distribution shall be made with respect thereto; and
(e) each share of common stock, par value $.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
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If between the date of this Agreement and the Effective Time the outstanding
shares of Parent Common Stock shall have been changed into a different number of
shares or a different class by reason of any stock dividend (including dividends
or distributions of securities convertible into shares of Parent Common Stock),
subdivision, reorganization, reclassification, recapitalization, split,
combination or exchange of shares, the Common Stock Exchange Ratio, the Series A
Preferred Stock Exchange Ratio and the Series B Preferred Stock Exchange Ratio
shall be correspondingly adjusted to the extent appropriate to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
Section 3.04. Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent shall deposit, or shall cause to be deposited, with
Harris Trust and Savings Bank or another bank or trust company designated by
Parent and reasonably satisfactory to the Company (the "Exchange Agent"), for
the benefit of the Stockholders for exchange in accordance with this Article III
certificates representing the shares of Parent Common Stock issuable pursuant to
Section 3.03 as of the Effective Time, and any dividends or distributions with
respect thereto (such dividends and certificates for shares of Parent Common
Stock, being hereinafter referred to as the "Exchange Fund"). The Exchange Agent
shall deliver the Parent Common Stock contemplated to be issued pursuant to
Section 3.03 out of the Exchange Fund in accordance with the terms of the
Exchange Agreement to be entered into on the Effective Date between Parent and
the Exchange Agent in a form reasonably acceptable to the Stockholder
Representative (the "Exchange Agreement"). Parent shall cause the Exchange Agent
to mail, within five business days after the Effective Time, to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding Company Shares (other than Company Shares that
shall be cancelled pursuant to Section 3.03(d)) (each, a "Certificate" and,
collectively, the "Certificates"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) substantially in the form of Exhibit D with such changes as
proposed by Parent and approved by the Stockholder Representative, such approval
not to be unreasonably withheld and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and such
other documents as may be required pursuant to such instructions, the holder of
such Certificate shall be entitled to receive in exchange therefor (x) a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive in respect of the Company Shares
formerly owned by such holder reduced by the number of shares of Parent Common
Stock that will be delivered to the Escrow Agent as part of the Escrow Fund in
accordance with the terms of this Agreement and the Escrow Agreement, (y) cash
in lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 3.04(d), and (z) any dividends or other
distributions to which such holder is entitled pursuant to Section 3.04(b), and
the Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on any cash in lieu of fractional shares or on any unpaid
dividends and distributions payable to holders of Certificates. In the event of
a transfer of ownership of Company Shares which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a transferee if the Certificate
representing such Company Shares is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 3.04, each Certificate shall be deemed at all times
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock to which
such Stockholder is entitled hereunder, cash in lieu of any fractional shares of
Parent Common Stock to which such Stockholder is entitled pursuant to Section
3.04(d) and any dividends or other distributions to which such holder is
entitled to pursuant to Section 3.04(b).
(b) Distributions with Respect to Unexchanged Shares of Parent Common Stock.
No dividends or other distributions declared or made after the Effective Time
with respect to the Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock represented thereby, and no cash payment in
lieu of any fractional shares shall be paid to any such holder pursuant to
Section 3.04(d), until the holder of such Certificate shall surrender such
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Certificate. Subject to the effect of escheat, tax or other applicable Laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 3.04(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(c) No Further Rights in Company Common Stock. All shares of Parent Common
Stock issued upon conversion of the Company Shares in accordance with the terms
hereof (including any cash paid pursuant to Section 3.04(b) or (d) and any
additional shares of Parent Common Stock issued pursuant to Section 3.09) shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such Company Shares.
(d) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to Parent
Common Stock shall be payable on or with respect to any fractional share and
such fractional share interests will not entitle the owner thereof to vote or to
any other rights of a stockholder of Parent.
(ii) As promptly as practicable after the Effective Time, the Exchange
Agent shall determine the excess of (A) the number of full shares of Parent
Common Stock delivered to the Exchange Agent by Parent pursuant to Section
3.04(a) over (B) the aggregate number of full shares of Parent Common Stock to
be distributed to holders of Company Shares pursuant to Section 3.04(a) (such
excess being herein called the "Excess Shares"). As soon as practicable after
the Effective Time, the Exchange Agent, as agent for such holders of Parent
Common Stock, shall sell the Excess Shares at then prevailing prices on the
NYSE, all in the manner provided in paragraph (iii) of this Section 3.04(d).
(iii) The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more member firms of the NYSE and shall be executed
in round lots to the extent practicable. Until the net proceeds of any such
sale or sales have been distributed to such holders of Company Shares, the
Exchange Agent will hold such proceeds in trust for such holders of Company
Shares as part of the Exchange Fund. Parent shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs of the Exchange Agent
incurred in connection with such sale or sales of Excess Shares. In addition,
Parent shall pay the Exchange Agent's compensation and expenses in connection
with such sale or sales. The Exchange Agent shall determine the portion of
such net proceeds to which each holder of Company Share shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds by a fraction,
the numerator of which is the amount of the fractional share interest to which
such holder of Company Shares is entitled (after taking into account all
shares of Parent Common Stock to be issued to such holder) and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of Company Shares are entitled.
(iv) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Company Shares with respect to any fractional
share interests, the Exchange Agent shall promptly pay such amounts to such
holders of Company Shares subject to and in accordance with the terms of
Section 3.04(b).
(e) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Company Shares for nine months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Company Common Stock who have not theretofore complied with this Article III
shall thereafter look only to Parent for the shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock to which they are
entitled pursuant to Section 3.04(d) and any dividends or other distributions
with respect to Parent Common Stock to which they are entitled pursuant to
Section 3.04(b), in each case, without any interest thereon.
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(f) No Liability. Neither Parent nor the Company shall be liable to any
holder of Company Shares for any such shares of Parent Common Stock (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any abandoned property, escheat or
similar Law.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond, in such reasonable amount as Parent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Parent Common Stock, any cash in
lieu of fractional shares of Parent Common Stock to which the holders thereof
are entitled pursuant to Section 3.04(d) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
3.04(b), in each case, without any interest thereon.
(h) Withholding Rights. Each of the Surviving Corporation, Parent or the
Exchange Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any Stockholder such amounts as
it is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or non-United States Tax Law.
To the extent that amounts are so withheld by the Surviving Corporation, Parent
or the Exchange Agent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Stockholder in respect of which such deduction and withholding was made by the
Surviving Corporation, Parent or the Exchange Agent, as the case may be.
Section 3.05. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of Company Shares thereafter on the records of the Company. From
and after the Effective Time, the holders of Certificates representing Company
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Company Shares, except as otherwise provided in
this Agreement or by Law. On or after the Effective Time, any Certificates
presented to Parent for any reason shall be converted into the applicable shares
of Parent Common Stock and any cash in lieu of fractional shares of Parent
Common Stock to which the holders thereof are entitled pursuant to Section
3.04(d).
Section 3.06. Company Options and Restricted Shares. All options
outstanding at the Effective Time (the "Company Options"), whether or not
exercisable and whether or not vested, under the 1999 Employee, Director and
Consultant Stock Option Plan or under any other stock option plans or agreements
to which the Company is a party (the "Company Stock Option Plans") (the "Assumed
Company Options") shall remain outstanding following the Effective Time. The
Company Options and the Company Stock Option Plans are listed on Section 3.06(a)
of the Disclosure Schedule. At the Effective Time, Parent and the Company shall
take all actions necessary to provide for the assumption of the Assumed Company
Options by Parent. From and after the Effective Time, all references to the
Company in the Company Stock Option Plans and the applicable stock option
agreements issued thereunder shall be deemed to refer to Parent, which shall
have assumed the Company Stock Option Plans as of the Effective Time by virtue
of this Agreement and without any further action. Each Assumed Company Option
shall be exercisable upon the same terms and conditions (including, without
limitation, all provisions related to acceleration of vesting) as under the
applicable Company Stock Option Plan and the applicable option agreement issued
thereunder, except that (A) each such Assumed Company Option shall be
exercisable for, and represent the right to acquire, that whole number of shares
of the Parent Common Stock (rounded down to the nearest whole share) equal to
the number of shares of the Company Common Stock subject to such Assumed Company
Option multiplied by the Common Stock Exchange Ratio and (B) the exercise price
per share of the Parent Common Stock shall be an amount equal to the exercise
price per share of the Company Common Stock subject to such Assumed Company
Option in effect immediately prior to the Effective Time divided by the Common
Stock Exchange Ratio (the exercise price per share, as so determined, being
rounded upward to the nearest full cent); provided any such option shall be
subject to any adjustments provided for in any Retention Agreement agreed be a
holder of such option and Parent. All shares of common stock that were acquired
upon the exercise of a Company Option and/or
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which are subject to repurchase rights shall be converted as of the Effective
Time into shares of Parent Common Stock in accordance with Section 3.03(a)
subject to the same repurchase rights, unless otherwise agreed by a holder of
such Company shares and Parent. Except to the extent agreed in any Retention
Agreement, the assumption of any Company Options that are "incentive stock
options" as defined in Section 422 of the Code at the Effective Time shall be
and are intended to be effected in a manner that is consistent with Section
424(a) of the Code so as to preserve the benefits of such "incentive stock
options."
Section 3.07. Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, Company Shares that are outstanding immediately prior
to the Effective Time and which are held by Stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Company Shares in accordance
with Section 262 of Delaware Law (collectively, the "Dissenting Shares") shall
not be converted into or represent the right to receive the Common Stock Merger
Consideration, the Series A Preferred Stock Merger Consideration or the Series B
Preferred Stock Merger Consideration, as applicable. Such Stockholders shall be
entitled to receive payment of the appraised value of such Company Shares held
by them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by Stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Company Shares under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Common Stock Merger Consideration, the Series A
Preferred Stock Merger Consideration or the Series B Preferred Stock Merger
Consideration, as applicable, less 10% of the total number of shares of Parent
Common Stock issuable to such holder (the "Escrow Shares") without any interest
thereon, upon surrender, in the manner provided in Section 3.04, of the
Certificate or Certificates that formerly evidenced such Company Shares.
Promptly following such event, Parent shall deliver to the Exchange Agent a
certificate representing shares of Parent Common Stock issuable to such holder
and shall deliver to the Escrow Agent a certificate representing the Escrow
Shares (which shares shall be considered Escrow Fund for purposes of this
Agreement). All consideration paid in accordance with section 262 of DGCL to the
holders of Dissenting Shares shall be paid by the Company out of the Company's
own assets. Such payments will not be considered to be current liabilities for
purposes of the adjustments provided for in Section 3.09.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
Section 3.08. Parent Rights Plan. Each person entitled to receive shares of
Parent Common Stock pursuant to this Article III shall receive together with
such shares of Parent Common Stock the number of Parent preferred share purchase
rights (pursuant to the Rights Agreement dated as of November 5, 1998 between
Parent and Harris Trust and Savings Bank (the "Parent Rights Plan")) per share
of Parent Common Stock equal to the number of Parent preferred share purchase
rights associated with one share of Parent Common Stock at the Effective Time.
Section 3.09. Adjustment of Merger Consideration. (a) At least five business
days prior to the scheduled Closing Date, the Company shall deliver to Parent an
unaudited estimated balance sheet of the Company, as of the Closing Date (the
"Estimated Balance Sheet"), prepared in conformity with U.S. GAAP applied on a
basis consistent with the preparation of the April 30, 2001 Balance Sheet and
certified by the Chief Operating Officer of the Company as a good faith estimate
of the Closing Balance Sheet and, for purposes of calculating Aggregate
Consideration, estimates of the Cash and Company Debt as of the Cut- Off Date,
Cash Capital Expenditures (which shall not exceed $1,000,000) and
Retention/Integration Expenses, in each case from the date hereof through the
Closing Date and the Exercise Amount. In the event that the remainder of (i) Net
Working Capital reflected on the April 30, 2001 Balance Sheet minus (ii)
$1,000,000 exceeds the Net Working Capital reflected on the Estimated Balance
Sheet, then the Aggregate Consideration
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shall be adjusted downward in an amount equal to such excess (the "Deficiency").
In the event that Net Working Capital reflected on the Estimated Balance Sheet
exceeds the remainder of (x) the Net Working Capital reflected on the April 30,
2001 Balance Sheet minus (y) $1,000,000, then the Aggregate Consideration shall
be adjusted upward in an amount equal to such excess (the "Surplus").
(b) As promptly as practicable, but in any event within ninety calendar days
following the Closing Date, Parent shall deliver to the Stockholder
Representative (i) the Closing Balance Sheet, together with an unqualified
report thereon of the Parent's Accountants stating that the Closing Balance
Sheet fairly presents in all material respects the consolidated financial
position of the Company at the Closing Date in conformity with U.S. GAAP applied
on a basis consistent with the preparation of the April 30, 2001 Balance Sheet,
and (ii) notice of any discrepancy in the amount of Cash, Company Debt, Cash
Capital Expenditures or the Exercise Amount (the "Other Disputed Amounts").
(c) (i) Subject to clause (ii) of this Section 3.09(c), the Closing Balance
Sheet and the Other Disputed Amounts delivered by Parent to the Stockholder
Representative shall be deemed to be and shall be final, binding and conclusive
on the parties hereto.
(ii) The Stockholder Representative may dispute any amounts (A)
reflected on the Closing Balance Sheet but only on the basis that the amounts
reflected on the Closing Balance Sheet were not arrived at in accordance with
U.S. GAAP applied on a basis consistent with the preparation of the April 30,
2001 Balance Sheet and as adjusted in accordance with this Agreement and (B)
reflected in the calculation of the Other Disputed Amounts; provided,
however, that the Stockholder Representative shall have notified Parent and
Parent's Accountants in writing of each disputed item, specifying the amount
thereof in dispute and setting forth, in reasonable detail, the basis for
such dispute, within thirty business days of Parent's delivery of the Closing
Balance Sheet and the Other Disputed Amounts to the Stockholder
Representative. In the event of such a dispute, Parent's Accountants and the
Company's Accountants shall attempt to reconcile their differences, and any
written resolution by them as to any disputed amounts shall be final, binding
and conclusive on the parties hereto. If the Company's Accountants and
Parent's Accountants are unable to reach a resolution within thirty business
days after receipt by Parent and Parent's Accountants of the Stockholder
Representative's written notice of dispute, the Company's Accountants and
Parent's Accountants shall submit the items remaining in dispute for
resolution to an independent accounting firm of international reputation
mutually acceptable to the Stockholder Representative and Parent (such
accounting firm being referred to herein as the "Independent Accounting
Firm"), which shall, within thirty business days after such submission,
determine and report to the Stockholder Representative and Parent upon such
remaining disputed items, and such written report shall be final, binding and
conclusive on the Stockholder Representative and Parent. The fees and
disbursements of the Independent Accounting Firm shall be allocated between
the Stockholder Representative (whose portion thereof shall be paid by the
release of property from the Escrow Fund) and Parent in the same proportion
that the aggregate amount of such remaining disputed items so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by each such
party (as finally determined by the Independent Accounting Firm) bears to the
total amount of such remaining disputed items so submitted.
(iii) In acting under this Agreement, the Company's Accountants, Parent's
Accountants and the Independent Accounting Firm shall be entitled to the
privileges and immunities of arbitrators.
(iv) During any period of review or dispute within the contemplation of
Section 3.09 or Article IX of this Agreement or of the Escrow Agreement,
Parent, the Surviving Corporation and the Stockholder Representative shall
provide to each other and their respective authorized representatives,
reasonable access to such books, records and employees of the Company or the
Stockholder Representative, if any, as the case may be, relating to the
Company and any dispute under this Agreement or the Escrow Agreement, to the
extent such materials or persons are within their possession or control.
Subject to providing an appropriate waiver to Parent's Accountants, the
Company's Accountants shall be permitted to review the relevant work papers
of Parent's Accountants.
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(d) The Closing Balance Sheet and Other Disputed Amounts shall be deemed
final for the purposes of this Section 3.09 upon the earliest of (A) the failure
of the Stockholder Representative to notify Parent of a dispute within thirty
business days of Parent's delivery of the Closing Balance Sheet and Other
Disputed Amounts to the Stockholder Representative, (B) the written resolution
of all disputes, pursuant to Section 3.09(c)(ii), by the Company's Accountants
and Parent's Accountants and (C) the written resolution of all disputes,
pursuant to Section 3.09(c)(ii), by the Independent Accounting Firm. Within
three business days of the Closing Balance Sheet and the Other Disputed Amounts
being deemed final, a Post-Closing Adjustment shall be made as follows:
(i) if final Company Debt as of the Cut-Off Date (A) is more than Company
Debt estimated pursuant to Section 3.09(a), the Post-Closing Adjustment will
be reduced by the amount of such difference, or (B) is less than the Company
Debt estimated pursuant to Section 3.09(a), the Post- Closing Adjustment will
be increased by such difference;
(ii) if final Cash as of the Cut-Off Date (A) is more than Cash estimated
pursuant to Section 3.09(a), the Post-Closing Adjustment will be increased by
the amount of such difference, or (B) is less than Cash estimated pursuant to
Section 3.09(a), the Post-Closing Adjustment will be reduced by such
difference; and
(iii) if final Net Working Capital on the Closing Balance Sheet (A) is more
than Net Working Capital on the Estimated Balance Sheet, the Post- Closing
Adjustment will be increased by the amount of such difference, or (B) is less
than Net Working Capital on the Estimated Balance Sheet, the Post-Closing
Adjustment will be reduced by such difference.
(iv) if final Cash Capital Expenditures, (which in no event may exceed
$1,000,000) (A) are more than the Cash Capital Expenditures estimated pursuant
to Section 3.09(a), the Post-Closing Adjustment will be increased by such
difference, or (B) are less than the Cash Capital Expenditures estimated
pursuant to Section 3.09(a), the Post-Closing Adjustment will be decreased by
such difference; and
(v) if the final Exercise Amount (A) is more than the Exercise Amount
estimated pursuant to Section 3.09(a), the Post-Closing Adjustment will be
increased by such difference, or (B) is less than the Exercise Amount
estimated pursuant to Section 3.09(a), the Post-Closing Adjustment will be
decreased by such difference.
(e) (i) if the aggregate net amount of the Post-Closing Adjustment referred
to in paragraph (d) above is a negative amount, then Parent shall deliver
written notice to the Escrow Agent and the Stockholders' Representative
specifying the amount of such Post-Closing Adjustment, and the Escrow Agent
shall, in accordance with the terms of the Escrow Agreement, deliver to Parent
out of the Escrow Fund that number of shares of Parent Common Stock as shall
equal the quotient of (i) the amount of such Post-Closing Adjustment divided by
(ii) the Average Closing Price; and
(ii) if the net amount of the Post-Closing Adjustment referred to in
paragraph (d) above is a positive amount, additional shares of Parent Common
Stock will be transferred to Exchange Agent for distribution to the holders of
Company Common Shares and Series A Preferred Shares and the Escrow Agent in
accordance with Paragraph (f) below.
(f) in the event there is to be a distribution of shares of Parent Common
Stock pursuant to Section 3.09(e)(ii), such additional shares of Parent Common
Stock will be distributed as follows:
(i) each Stockholder that, as of the Effective Time held Company Common
Shares shall receive with respect to each such Company Common Share, other
than Dissenting Shares, such number of shares of Parent Common Stock as shall
equal the quotient of (A) the Per Share Adjustment (as defined below) divided
by (B) the Average Closing Price;
(ii) each Stockholder that, as of the Effective Time held Series A
Preferred Shares shall receive with respect to each such Series A Share, other
than Dissenting Shares, such number of shares of Parent
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Common Stock as shall equal the quotient of (A) the Per Share Adjustment
multiplied by the number of Company Common Shares that each Series A Preferred
Share was convertible into immediately prior to the Effective Time divided by
(B) the Average Closing Price;
(iii) Parent shall deposit with the Escrow Agent such number of shares of
Parent Common Stock as shall equal the quotient of (A) 10% of the net
Post-Closing Adjustment, divided by (B) the Average Closing Price;
(iv) as used herein, the "Per Share Adjustment" means an amount equal to
the quotient of (A) 90% of the net Post-Closing Adjustment divided by (B) (1)
the number of Company Common Shares outstanding as of the Effective Time plus
(2) an amount equal to the product of (x) the number of Series A Preferred
Shares outstanding as of the Effective Time multiplied by (y) the number of
Company Common Shares that each Series A Preferred Share was convertible into
immediately prior to the Effective Time.
(g) No fractional shares of Parent Common Stock will be issued in connection
with the adjustment described in this Section 3.09. Any fractional shares that
would otherwise be issuable under this Section 3.09 will be converted into cash
in accordance with the procedures described in Section 3.04.
ARTICLE IV
Representations and Warranties of the Company
As an inducement to Parent to enter into this Agreement, the Company
represents and warrants to Parent and Merger Sub, except as set forth on the
Disclosure Schedule (whether or not a representation states that there is an
exception), which identifies exceptions by specific section references, as
follows:
Section 4.01. Organization and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not have a Company
Material Adverse Effect. The Company has heretofore made available to Parent a
complete and correct copy of the Certificate of Incorporation and the By-laws of
the Company. Such Certificate of Incorporation and By-laws are in full force and
effect. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-laws.
Section 4.02. Subsidiaries. Section 4.02 of the Disclosure Schedule lists
each subsidiary of the Company (each, a "Company Subsidiary"). Except for the
Company Subsidiaries, and except as set forth in Section 4.02 of the Disclosure
Schedule, neither the Company nor any Company Subsidiary owns, or holds the
right to acquire, any stock, partnership interest, joint venture interest or
other equity interest in any other person. Each Company Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be in good
standing or to have such power and authority would not have a Company Material
Adverse Effect. Each Company Subsidiary is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing as would not have a Company Material Adverse Effect. Each Company
Subsidiary's Certificate of Incorporation and By-laws are in full force and
effect. None of the Company Subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or By-laws.
Section 4.03. Authority; No Conflict; Required Filings and Consents. (a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations
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hereunder and to consummate the Merger and the other transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the Merger and the other transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Merger
and the other transactions contemplated hereby (other than, with respect to the
Merger, the Requisite Stockholder Approval and the filing and recordation of
such appropriate merger documents as required by Delaware Law). This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and the Merger Sub,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles of
equity.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws of the Company or any
equivalent organizational documents of any Company Subsidiary, (ii) assuming
that all consents, approvals, authorizations and other actions described in
Section 4.03(c) have been obtained and all filings and obligations described in
Section 4.03(c) have been made, conflict with or violate in any material
respect any Law applicable to the Company or any Company Subsidiary or by which
any property or asset of the Company or any Company Subsidiary is bound or
affected, or (iii) result in any material breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any property or
asset of the Company or any Company Subsidiary pursuant to, any Material
Contract.
(c) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, except for the pre-merger notification requirements of
the HSR Act and the filing and recordation of appropriate merger documents as
required by Delaware Law.
Section 4.04. Capitalization. The authorized capital stock of the Company
consists of (a) 72,000,000 shares of Company Common Stock and (b) 12,000,000
shares of preferred stock, of which 7,360,000 shares are designated as Series A
Preferred Stock and 2,980,000 shares are designated as Series B Preferred Stock.
As of the date hereof, (i) 33,841,200 shares of Company Common Stock, 7,358,358
shares of Series A Preferred Stock and 2,956,988 shares of Series B Preferred
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable and are owned of record and beneficially by the Stockholders
in the amounts set forth in Section 4.04(a) of the Disclosure Schedule, (ii)
3,643,112 shares of Company Common Stock are held in the treasury of the Company
or by the Company Subsidiaries and (iii) 7,777,002 shares of Company Common
Stock are reserved for future issuance pursuant to the Company Options. Except
for the Company Shares, the Company Options and the Warrants and the Convertible
Promissory Notes there are no other shares of capital stock or securities
convertible into or exercisable for shares of capital stock of the Company
issued and outstanding. Except for the Company Options granted pursuant to the
Company Stock Option Plan or pursuant to agreements or arrangements described in
Section 4.04(b) of the Disclosure Schedule, the Warrants and the Convertible
Promissory Notes, there are no options, warrants, notes, convertible securities
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to issue or sell
any shares of capital stock, options, warrants or convertible securities of, or
other equity interests in, the Company or any Company Subsidiary. All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any Company Subsidiary. Each outstanding share of
capital stock of each Company Subsidiary is duly authorized, validly issued,
fully paid and
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nonassessable and each such share owned by the Company or another Company
Subsidiary is free and clear of any Encumbrances of any nature whatsoever. There
are no material outstanding contractual obligations of the Company or any
Company Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Company Subsidiary or any other
person.
Section 4.05. Financial Statements. (a) True and complete copies of (i) the
April 30, 2001 Balance Sheet, (ii) the unaudited balance sheet of the Company
and the Company Subsidiaries for the fiscal year ended as of December 31, 2000,
and the related unaudited statements of income, retained earnings, stockholders'
equity and cash flow of the Company and the Company Subsidiaries together with
all related notes and schedules thereto, and (iii) the audited balance sheet of
the Company and the Company Subsidiaries for the fiscal year ended as of
December 31, 1999, and the related audited statements of income, retained
earnings, stockholders' equity and cash flow of the Company and the Company
Subsidiaries together with all related notes and schedules thereto, accompanied
by the reports thereon of the Company Accountants (collectively, the "Financial
Statements") have been delivered by the Company to Parent. The Company has no
subsidiaries the financial results of which are required by U.S. GAAP to be
consolidated with the Company. The Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the Company
and the Company Subsidiaries, (ii) present fairly the financial condition and
results of operations of the Company and the Company Subsidiaries as at the
respective dates thereof or for the respective periods indicated therein, (iii)
have been prepared in accordance with U.S. GAAP applied on a basis consistent
with the past practices of the Company and the Company Subsidiaries (except in
the case of interim Financial Statements that such statements do not contain
footnotes and are subject to normal year-end adjustments) and (iv) include all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the financial condition of the Company and the
Company Subsidiaries and the results of the operations of the Company and the
Company Subsidiaries as of the dates thereof or for the periods covered thereby.
(b) The books of account and other financial records of the Company and the
Company Subsidiaries: (i) reflect all items of income and expense and all assets
and liabilities required to be reflected therein in accordance with U.S. GAAP
applied on a basis consistent with the past practices of the Company and the
Company Subsidiaries, respectively, and (ii) are in all material respects
complete and correct, and do not contain or reflect any material inaccuracies or
discrepancies.
(c) There are no Liabilities of the Company or any Company Subsidiary other
than Liabilities (i) reflected or reserved against on the April 30, 2001 Balance
Sheet, (ii) disclosed in Section 4.05 of the Disclosure Schedule or (iii)
incurred since April 30, 2001 in the ordinary course of business consistent with
past practice that would not have a Company Material Adverse Effect.
Section 4.06. Absence of Certain Changes or Events. Since April 30, 2001,
except as set forth in Section 4.06 of the Disclosure Schedule, the Company and
the Company Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice. As amplification and not
limitation of the foregoing, except as set forth in Section 4.06 of the
Disclosure Schedule, since April 30, 2001, there has not been (a) any Company
Material Adverse Effect, (b) any change by the Company in its accounting
methods, principles or practices, whether for general financial or tax purposes,
or any change in depreciation or amortization policies or rates adopted therein
other than changes required by changes in U.S. GAAP, (c) any declaration,
setting aside or payment of any dividend or distribution in respect of the
Company Common Shares or any redemption, purchase or other acquisition of any of
the Company's securities (other than repurchases from terminated employees and
consultants), or (d) any increase in or establishment, amendment, modification
or termination of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, incentive, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable or to become
payable to any directors, officers and employees of the Company or any Company
Subsidiary, except in the ordinary course of business consistent with past
practice. Since April 30, 2001, except as set forth in Section 4.06 of the
Disclosure Schedule, neither
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the Company nor any Company Subsidiary has taken any action that, if taken after
the date of this Agreement, would constitute a breach of any of the covenants
set forth in clauses (i), (ii), (iv), (v), (xiii) and (xiv) of Subsection (b) of
Section 6.01.
Section 4.07. Properties. (a) The Company owns good and valid title to all
of the personal property shown on the April 30, 2001 Balance Sheet and
thereafter acquired, free and clear of all Encumbrances, except for Permitted
Encumbrances.
(b) Section 4.07(b) of the Disclosure Schedule contains a full and complete
list of the Leased Real Property. The leases or subleases, as modified or
amended, for the Leased Real Property listed in Section 4.07(b) of the
Disclosure Schedule (the "Leases") are in full force and effect, and the Company
or a Company Subsidiary holds a good and valid and existing leasehold or
subleasehold interest under each of the Leases for the term set forth in Section
4.07(b) of the Disclosure Schedule. The Company has delivered to Parent complete
and accurate copies of each of the Leases, and none of the Leases has been
modified in any material respect.
(c) Subject to laws of general application relating to public policy,
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief and other equitable remedies and subject
further to receipt of any required consent of the landlords of such premises as
listed in Section 4.07(c) of the Disclosure Schedule, the landlord of any
premises leased or subleased to the Company will not be entitled to recapture
such leased or subleased space upon the consummation of the Merger.
(d) The Company is not and, to the knowledge of the Company, no other party
to the lease or sublease is in material breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a material breach
or default or permit termination, modification, or acceleration
thereunder.
(e) The Company has not and, to the knowledge of the Company, no other party
to the lease or sublease has, repudiated in writing any provision thereof.
(f) To the knowledge of the Company, there are no material disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease.
(g) To the knowledge of the Company, with respect to each sublease, the
representations and warranties set forth in subsections (a) through (f) above
are true and correct with respect to the underlying lease.
(h) The Company has not subleased, licensed, assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
(i) With respect to the Company's leased facilities located in Tewksbury,
Massachusetts, the monthly rent and all other charges due under such leases are
current and will have been paid in full through Closing.
(j) To the knowledge of the Company, all facilities leased or subleased
pursuant to the Leases have received all approvals of Governmental Authorities
(including licenses and permits) required in connection with the use of the
facilities of the Company and have been operated and maintained in accordance
with applicable laws, rules, and regulations.
(k) To the knowledge of the Company, all facilities leased or subleased
pursuant to the Leases are supplied with utilities and other services necessary
for the operation of said facilities.
(l) There are no parties (other than the Company) in possession of the Leased
Real Property, other than tenants under any leases disclosed in Section 4.07 of
the Disclosure Schedule, who are in possession of space to which they are
entitled.
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(m) The Company has received no written notice of any pending condemnation
proceedings, lawsuits, or administrative actions relating to the Leased Real
Property or other matters affecting materially and adversely the current use,
occupancy, or value thereof and, to the knowledge of the Company, none are
threatened.
(n) None of the Company or any Company Subsidiary has any Owned Real
Property.
Section 4.08. Permits; Compliance. (a) Except as disclosed in Section 4.08(a)
of the Disclosure Schedule, each of the Company and the Company Subsidiaries is
in possession of all material franchises, grants, authorizations, licenses,
certifications, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
the Company or any Company Subsidiary to own, lease and operate its properties
or to carry on its business as it is now being conducted (the "Company Permits")
except for such authorizations, licenses, permits and approvals, the absence of
which would not have a Company Material Adverse Effect, and no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened.
(b) Except as disclosed in Section 4.08(b) of the Disclosure Schedule,
neither the Company nor any Company Subsidiary is, or has since July 28, 1998
been, in conflict with, or in default or violation of, (i) any Law applicable to
the Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected, (ii) any Material
Contract to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary or any property or asset of the Company
or any Company Subsidiary is bound or affected or (iii) any Company Permits,
except in the case of clause (i) for any such conflicts, defaults or violations
that would not have a Company Material Adverse Effect.
(c) Except as disclosed in Section 4.08(c) of the Disclosure Schedule, since
July 23, 1998, there have been no written notices, citations or decisions by any
Governmental Authority that the Company or any Company Subsidiary fails to meet
any applicable standards promulgated by any such Governmental Authority, and to
the knowledge of the Company there are no such failures.
(d) None of the Company or any Company Subsidiary, or, to the Company's
knowledge, any other person purporting to act on behalf of the Company, has made
any payment to, or conferred any benefit, directly or indirectly, on, suppliers,
customers, employees, or agents of suppliers or customers, or officials or
employees of any Government Authority or any political parties or candidates for
office, which is or was unlawful under any applicable law, including without
limitation the United States Foreign Corrupt Practices Act, as amended.
Section 4.09. Contracts and Commitments. (a) Section 4.09(a) of the
Disclosure Schedule lists each of the following contracts and agreements,
whether written or oral, to which the Company or any Company Subsidiary is a
party (such contracts and agreements, together with the Leases and the Licenses,
being "Material Contracts"):
(i) any contract or agreement which (A) is likely to involve consideration
in excess of $25,000 during the fiscal year ending December 31, 2001 or (B) is
likely to involve consideration in excess of $50,000 over the remaining term
of such contract or agreement;
(ii) any management contract or agreement or contract or agreement with
independent contractors or consultants (or similar arrangements) that is not
cancelable without penalty or further payment and without more than 30 days'
notice;
(iii) any contract or agreement relating to Indebtedness and the
respective principal amounts outstanding thereunder as of the date of this
Agreement;
(iv) any contract or agreement with any Governmental Authority;
(v) any contract or agreement that limits or purports to limit the ability
of the Company or any Company Subsidiary, or, to the Company's knowledge, any
employees of the Company or any Company
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Subsidiary, to compete in any line of business or with any person or in any
geographic area or during any period of time, other than any such agreement
between the Company and any employee restricting the ability of any employee
to compete against the Company;
(vi) any agreement that contains restrictions with respect to payment of
dividends or any other distribution in respect of the equity of the Company or
any Company Subsidiary;
(vii) any letters of credit or similar arrangements relating to the
Company or any Company Subsidiary;
(viii) any agreement concerning a partnership or joint venture;
(ix) any employment agreement (other than offer letter and other employment
arrangements providing for at-will employment, copies of which have been
provided to Parent), or management, consulting or advisory agreements with any
employee, consultant or advisor of the Company or any Company Subsidiary or
other person;
(x) any severance (including early retirement and redundancy) plans or
arrangements for any current or former employee of the Company or any
Company Subsidiary;
(xi) to the Company's knowledge, any non-disclosure agreements and non-
compete agreements or other agreements containing confidentiality provisions
or restrictive covenants binding a current or former employee of the Company
or any Company Subsidiary, other than any such agreements between the Company
and any current or former employee, substantially in the form attached in
Section 4.09(a)(xi) of the Disclosure Schedule;
(xii) any agreement under which the Company or any Company Subsidiary is
lessee of or holds or operates (A) any real property or (B) any personal
property providing for payments in excess of $25,000 annually;
(xiii) any agreement under which the Company or any Company Subsidiary is
lessor of or permits any third party to hold or operate any property, real or
personal;
(xiv) other than the Stock Repurchase Rights, any agreement relating to the
acquisition or divestiture of the capital stock or other equity securities,
assets or business of any person involving the Company or any Company
Subsidiary or pursuant to which the Company or any Company Subsidiary has any
Liability in excess of $25,000, contingent or otherwise;
(xv) any powers of attorney granted by or on behalf of the Company or
any Company Subsidiary;
(xvi) any agreement, other than agreements entered into in the ordinary
course of business, which prevents the Company or any Company Subsidiary from
disclosing confidential information;
(xvii) any sales or distribution agreements, franchise agreements and
advertising agreements relating to the Company or any Company Subsidiary;
(xviii) any warranty, guaranty or other similar undertaking with respect to
a contractual performance extended by the Company or any Company Subsidiary;
(xix) other than employment arrangements, any agreement with any of the
stockholders of the Company or affiliates of the Company or any such
stockholders;
(xx) any agreement under which the Company or any Company Subsidiary has
advanced or loaned any amount to any of its directors, officers and employees
outside the ordinary course of business;
(xxi) any agreement pursuant to which the Company or any Company Subsidiary
has agreed to defend, indemnify or hold harmless any other person;
(xxii) any agreement pursuant to which the Company or any Company
Subsidiary has agreed to settle any Liability for Taxes;
A-22
(xxiii) any agreement pursuant to which the Company or any Company
Subsidiary has agreed to shift or allocate the Liability of the Company or any
Company Subsidiary or any other person for Taxes;
(xxiv) any agreement whereby the Company or any Company Subsidiary has
entered into an escrow agreement for Company Software; and
(xxv) any other contract or agreement, whether or not made in the
ordinary course of business, which is material to the Company, any Company
Subsidiary or the conduct of the business.
(b) Except as disclosed in Section 4.09(b) of the Disclosure Schedule, each
Material Contract: (i) is legal, valid, binding and enforceable on the Company
or a Company Subsidiary, as the case may be, and, to the knowledge of the
Company, the other parties thereto, and is in full force and effect and (ii)
upon consummation of the transactions contemplated by this Agreement shall
continue in full force and effect and shall not give rise to any termination,
amendment, acceleration, cancellation or penalty. None of the Company or any
Company Subsidiary or, to the knowledge of the Company, any other party thereto
is in material breach of, or material default under (nor does there exist any
condition which upon the passage of time or the giving of notice would cause
such a breach of or default under), or has repudiated in writing any provision
of any Material Contract.
(c) Parent either has been supplied with, or has been given access to, a true
and correct copy of all written Material Contracts, together with all material
amendments, waivers or other changes thereto, and has been given a written
description of all Material Contracts that are oral agreements.
(d) None of the Company or any Company Subsidiary is a party to: (A)
contracts with Governmental Authority (the "Direct Contracts"); (B) contracts
with a non-Governmental Authority in support of a contract with a Governmental
Authority (the "Subcontracts"); (C) Direct Contracts or Subcontracts in which
the Company or any Company Subsidiary was subject to the requirements of the
Truth in Negotiations Act ("TINA"), 10 U.S.C. (S) 2306(f), or claimed an
exemption from TINA based upon any reason other than adequate price competition;
(D) Direct Contracts or Subcontracts in which the Company or any Company
Subsidiary applied for payments based upon representations of cost incurred; or
(E) Direct Contracts or Subcontracts in which the Company or any Company
Subsidiary agreed to provide "most favored" or other preferential treatment with
regard to prices.
Section 4.10. Intellectual Property. (a) For purposes of this Section 4.10,
the following terms shall have the following meanings:
(i) "Company Intellectual Property" means (A) the Registered Intellectual
Property; (B) any and all other Intellectual Property that is owned by the
Company, including the Company Software and the Unregistered Intellectual
Property; and (C) any and all Intellectual Property of third parties that is
exclusively licensed to the Company or any Company Subsidiary.
(ii) "Company Software" means all computer software, databases and data
collections and all rights thereto, including all enhancements, versions,
releases and updates of such computer software, developed by or for the
Company as of the Closing Date, and any other computer software regardless of
the computer software's stage of development used by the Company as of the
Closing Date. Company Software includes all source code, object code,
firmware, development tools, files, records and data, and all media on which
any of the foregoing is recorded. For purposes of clarification, Company
Software does not include computer software that is licensed under the
Excluded Licenses.
(iii) "Excluded Licenses" means contracts, licenses, or other agreements
currently in effect relating to any Intellectual Property that constitutes:
(A) "shrink wrap" software; or (B) third party software generally available to
the public at a cost of less than Ten Thousand Dollars ($10,000).
(iv) "Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith, whether registered or
unregistered, as applicable: (A) United States and non-United States patents
and applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (B) inventions
and discoveries (whether or not patentable
A-23
and whether disclosed or undisclosed), disclosures on inventions, trade
secrets, proprietary information, know-how, technical data and customer lists,
and all documentation relating to any of the foregoing; (C) copyrights,
copyright registrations and applications therefor and all other corresponding
rights thereto throughout the world; (D) industrial designs and any
registrations and applications therefor throughout the world; (E) trade names,
logos, trademarks and service marks, and trademark and service mark
registrations and applications therefor and all goodwill associated with the
foregoing throughout the world; (F) all domain names; (G) computer software;
(H) any similar corresponding or equivalent rights to any one of the
foregoing; and (I) all documentation directly related to any of the foregoing.
(v) "Registered Intellectual Property" means all of the following items of
Intellectual Property owned by the Company: (A) United States and non- United
States patents, patent applications (including provisional applications); (B)
registered trademarks, applications to register trademarks, intent to use
applications or other registrations related to trade identity and trademarks;
(C) registered copyrights and applications for copyright registration; (D)
mask work registrations and applications to register mask works; (E) all Web
addresses, sites and domain names; and (F) any other Intellectual Property
that is the subject of an application, certificate or registration filed with,
issued by, or recorded by, any state, government, or other public legal
authority.
(b) Schedule 4.10(b) contains a complete list and description (showing in
each case the registered or other owner, registration, application or issue date
and number, if any) of all Registered Intellectual Property.
(c) Schedule 4.10(c) contains a list of all Company Intellectual Property,
other than the Registered Intellectual Property and Company Software, that is
material to conducting the business of the Company as it is now being conducted
including: (i) disclosures on inventions; (ii) documented proprietary
information relevant to conducting the business of the Company; (iii)
unregistered trademarks; and (iv) all unregistered Web sites and domain names
(collectively the "Unregistered Intellectual Property").
(d) Except as set forth in Section 4.10(d) of the Disclosure Schedule, the
Company (i) owns all rights, title, and interest in all Company Intellectual
Property free and clear of any Encumbrance, including ownership of pending and
accrued causes of action for patent, trademark, or copyright infringement,
misappropriation, and unfair business practice and has the sole and exclusive
right to bring actions for infringement and misappropriation of such Company
Intellectual Property, and (ii) owns free and clear of any Encumbrances or
otherwise has the right to all material Intellectual Property necessary to
conduct the business of the Company as it is currently conducted, including its
design, development, manufacture, and sale of its products, services and Company
Software (including those products, services and Company Software currently
under development).
(e) Each item of Registered Intellectual Property is valid and subsisting;
all necessary registration, maintenance or annuity, and renewal fees in
connection with such item of Registered Intellectual Property have been made;
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or non-United States
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property; and all patent, trademark, service mark and
copyright applications set forth on Schedule 4.10(b) have been duly filed.
(f) All employees, agents, consultants, contractors, or other persons who
have contributed to or participated in the creation or development of any
Company Intellectual Property, including Computer Software: (i) made such
contribution pursuant to and within the scope of employment with the Company as
an employee or otherwise as a party to a "work-for-hire" agreement under which
the Company is deemed to be the owner and/or author, as applicable, of all
right, title, and interest therein; or (ii) have executed a written assignment
or other agreement to assign in favor of the Company legally transferring to the
Company all right, title and interest in such Company Intellectual Property and
ownership of all pending and accrued causes of action relating thereto.
A-24
(g) Except as set forth on Schedule 4.10(g), all employees and non-employees
(including interns, trainees, independent contractors to the Company, vendors,
customers, joint-venturers, and other potential claimants) who have had access
to any Company Intellectual Property, including Company Software, have executed
a confidentiality agreement substantially in the form attached hereto in Section
4.09(a)(xi) of the Disclosure Schedule, prior to receipt of the Company
confidential/proprietary information.
(h) Schedule 4.10(h) contains a list of the Company Software that is material
to conducting the business of the Company as it is now being conducted. Except
as set forth on Schedule 4.10(h): (i) the Company has developed the Company
Software through its own efforts and for its own account without the aid or use
of any consultants, agents, independent contractors or persons (other than
persons that are employees of the Company); (ii) the Company has complete and
exclusive right, title and interest in and to the Company Software; (iii) no
third party has any interest in, or right to compensation from the Company by
reason of, the use, exploitation, or sale of the Company Software; (iv) none of
the Company Software contains any source code or portions of source code
(including any "canned program" or "free-ware") created by any party other than
the authors of the Company Software on behalf of the Company; (v) the Company
Software is not subject by agreement to any transfer, assignment, site,
equipment, or other operational limitation, and no situation, matter, or
agreement exists that would prevent the Company or the Surviving Corporation
from making any change to the Company Software or combining it with other
software in a lawful manner; (vi) the Company has maintained and protected the
Company Software with appropriate proprietary notices (including, without
limitation, the notice of copyright in accordance with the requirements of 17
U.S.C. (S) 401), confidentiality and non-disclosure agreements and such other
measures as are reasonably necessary to protect the proprietary, trade secret or
confidential information contained therein; (vii) the Company Software has been
registered or is eligible for protection and registration under applicable U.S.
copyright law and has not been forfeited to the public domain; (viii) the
Company has copies of all releases or separate versions of the Company Software
so that the same may be subject to registration in the United States Copyright
Office; (ix) to the knowledge of Company without further inquiry, the Company
Software does not infringe any copyright or other Intellectual Property rights
of any other person; (x) any Company Software includes the source code, system
documentation, statements of principles of operation and schematics, as well as
any pertinent commentary, explanation, program (including compilers),
workbenches, tools, and higher level (or "proprietary") language used for the
development, maintenance, implementation and use thereof, so that a trained
computer programmer could develop, maintain, support, compile and use all
releases or separate versions of the same that are currently subject to
maintenance obligations by Company; (xi) there are no agreements or arrangements
in effect with respect to the marketing, distribution, licensing or promotion of
the Company Software by any other person; and (xii) Company does not have any
source code for the Company Software or other Company Intellectual Property in
escrow; and (xiii) the Company has received no notice of, and the Company has no
knowledge of, any complaint, assertion, threat, or allegation inconsistent with
the preceding statements in this paragraph.
(i) No claims of any kind have been made by the Company against any third
party that, and the Company has no knowledge that, any third party infringes, or
has previously infringed, misappropriates, or has previously misappropriated any
Company Intellectual Property.
(j) No claims of any kind have been made or asserted by any party against the
Company, or against, or to, the employees, agents or contractors, customers,
vendors, suppliers, or distributors claiming or alleging that the Company or any
of its products (including products currently under development), services, or
methods of operation infringe, have infringed, contribute to the infringement or
induce the infringement of, misappropriate the Intellectual Property of any
third party, violate the right of any Person (including rights of privacy or
publicity), or constitute unfair competition, nor is the Company or any of the
Company Subsidiaries aware of or on notice of any such infringement,
misappropriation or violation. The Company has not infringed any Intellectual
Property right of any third party or breached any obligation of confidentiality
owed to a third party, and to the knowledge of the Company the continued
operation of the Company's business consistent with past practices will not
infringe any Intellectual Property rights of a third party.
A-25
(k) No Company Intellectual Property or product or service of the Company is
subject to any outstanding decree, order, judgment, or stipulation restricting
in any manner the use or licensing thereof by the Company or its Subsidiaries.
(l) Schedule 4.10(l) contains a list (showing in each case the parties
thereto and the material terms thereof) of all material contracts, licenses,
assignments, software escrows, and other agreements to which the Company is a
party relating to any Intellectual Property licensed or assigned to the Company
(collectively the "Company Licenses") other than Excluded Licenses. The Company
Licenses listed on Schedule 4.10(m) represent all contracts, licenses, software
escrows, and other agreements to which the Company is a party relating to any
Intellectual Property licensed or assigned to the Company, except for the
Excluded Licenses. Except as set forth on Schedule 4.10(l): (i) the Company
Licenses listed on Schedule 4.10(l) are in full force and effect; (ii) the
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or
suspension of the Company Licenses listed on Schedule 4.10(l) under the terms
thereof; (iii) the Company is in compliance with and has not breached any term
of, the Company Licenses listed on Schedule 4.10(l); and (iv) all other parties
to the Company Licenses listed on Schedule 4.10(l) are in compliance with, and
have not breached any term of such Company Licenses. Except as disclosed on
Schedule 4.10(l), following the Closing Date, the Surviving Corporation will be
permitted to exercise all of its rights under the Company Licenses listed on
Schedule 4.10(l) without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments that the Company would otherwise
be required to pay.
(m) Except as set forth on Schedule 4.10(m) and other than end-user licenses,
the Company has not: (i) licensed, or otherwise authorized any third party
reseller, or original equipment manufacturer (OEM) to make, have made, use or
sell, copy, distribute, modify, reverse engineer, decompile, prepare derivatives
of, or disclose, any Company Intellectual Property including the Company
Software; (ii) conveyed, disclosed, or licensed to any third party any
proprietary or trade secret information (as "trade secret" is defined in the
Uniform Trade Secrets Act), under circumstances that could cause a Company
Material Adverse Effect; and (iii) by any of its acts or omissions (or by acts
or omissions of its directors, officers, employees, or agents) caused any
proprietary rights in the Company Intellectual Property, including the Company
Software, to be diminished, or adversely affected to any material extent.
(n) Schedule 4.10(n) lists all contracts, licenses, software escrows, and
other agreements between the Company and any other person wherein or whereby the
Company has agreed to assume, or assumed, any obligation or duty to indemnify,
hold harmless or otherwise assume or incur any obligation or liability with
respect to the infringement by the Company or such other person of the
Intellectual Property rights of any other person; provided, however, that the
foregoing only applies to agreements for which the Company's obligations are
continuing as of the date of this Agreement and where compliance with such
obligations could cause a Company Material Adverse Effect.
(o) Except as set forth in Schedule 4.10(o), there are no contracts,
licenses, software escrows, and other agreements between the Company and any
other person with respect to the Company Intellectual Property with respect to
which the Company has received notice of any dispute that could be reasonably
considered to be a material dispute regarding the scope of such agreement, or
performance under such agreement including with respect to any payments to be
made or received by the Company thereunder.
(p) No government funding or university or college facilities were used in
the development of any Company Intellectual Property in a manner that would give
such government or university or college any interest in the Company
Intellectual Property.
(q) To the knowledge of the Company, (i) no product, service, or publication
of the Company, (ii) no material published or distributed by the Company, and
(iii) no conduct or statement of the Company, constitutes obscene material, a
defamatory statement or material, or violates any rights, including rights of
publicity or privacy, of any person.
A-26
Section 4.11. Absence of Litigation and Products Liability. (a) Except as
disclosed in Section 4.11(b) or 4.11(c) of the Disclosure Schedule, there is no
Action pending or, to the knowledge of the Company, threatened against the
Company or any Company Subsidiary, or any property or asset of the Company or
any Company Subsidiary, before any Governmental Authority. Except as set forth
in Section 4.11(a) of the Disclosure Schedule, neither the Company nor any
Company Subsidiary nor any material property or asset of the Company or any
Company Subsidiary is subject to any Governmental Order or any continuing order
of, judgment, award, consent decree, injunction, rule, order or settlement
agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority.
(b) Neither the Company nor any Company Subsidiary has any Liability (and, to
the Company's Knowledge, there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the license, possession, or use of any
product of the Company or any Company Subsidiary that would have a Company
Material Adverse Effect.
Section 4.12 Customers. Section 4.12 of the Disclosure Schedule lists the
seven largest customers of the Company and the Company Subsidiaries by revenue
during the 12-month period ended December 31, 2000 (the "Customers") and the
amount of gross revenue (net of setoffs, chargebacks and credits) received by
the Company and the Company Subsidiaries as a result of orders by each of the
Customers during such period. As of the date hereof, to the knowledge of the
Company, the Company has not received any written notice that any of the
Customers is materially reducing the amount or size of orders placed with the
Company or any Company Subsidiary.
Section 4.13 Employee Benefit Plans; Labor Matters. (a) Section 4.13(a) of
the Disclosure Schedule lists each employee benefit plan, program, arrangement
or contract (including, without limitation, any "employee benefit plan", as
defined in section 3(3) of ERISA) maintained or contributed to by the Company or
any Company Subsidiary, or with respect to which the Company or any Company
Subsidiary could reasonably be expected to incur liability under section 4069,
4201 or 4212(c) of ERISA (the "Plans"). With respect to each Plan, the Company
has made available to Parent a true and correct copy of (i) the three most
recent annual reports (Form 5500) filed by the Company for each Plan, (ii) a
complete copy of each such Plan, (iii) each trust agreement, insurance contract
or funding agreement relating to each such Plan, (iv) the most recent summary
plan description for each Plan for which a summary plan description is required,
summaries of material modification that have not yet been incorporated into the
summary plan descriptions, award agreements, summaries of outstanding awards,
(v) the most recent actuarial report or valuation relating to each Plan subject
to Title IV of ERISA, if any, (vi) a report of current premium costs, with the
employer- and employee-paid portions identified, and (vii) all correspondence
from any Governmental Authority regarding the Plans, including the most recent
determination letter, if any, issued by the IRS with respect to any Plan
qualified under section 401(a) of the Code.
(b) With respect to the Plans, no event has occurred and, to the knowledge of
the Company, there exists no condition or set of circumstances in connection
with which the Company could be reasonably expected to be subject to any
material liability under the terms of such Plans, ERISA, the Code or any other
applicable law. Each of the Plans has been operated and administered in all
material respects in accordance with applicable Laws and administrative or
governmental rules and regulations, including, but not limited to, ERISA
(including the requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code section 4980B) and the Code. Each Plan intended to be "qualified" within
the meaning of section 401(a) of the Code has received or is the subject of a
favorable determination letter as to such qualification from the IRS, and no
event has occurred, either by reason of any action or failure to act, which
could be reasonably expected to cause the loss of any such qualification. The
Company has no actual or contingent material liability under Title IV of ERISA
(other than the payment of premiums to the Pension Benefit Guaranty Corporation
in the ordinary course).
A-27
(c) The Company is not a party to any collective bargaining or other labor
union contract applicable to persons employed by the Company or any Company
Subsidiary, and no collective bargaining agreement is being negotiated by the
Company or any Company Subsidiary. As of the date of this Agreement, there is no
labor dispute, strike, work stoppage or other industrial action against the
Company or any Company Subsidiary pending, to the knowledge of the Company, or
threatened which may interfere with the respective business activities of the
Company or any Company Subsidiary. As of the date of this Agreement, to the
knowledge of the Company, neither the Company, any Company Subsidiary, nor its
representatives or employees, has committed any unfair labor practices or
violated any applicable laws, including non-United States laws, relating to
employment or employment practices or termination of employment, including those
relating to prices, wages and hours, discrimination in employment, collective
bargaining and the payment of social security and taxes, nor is the Company or
any Company Subsidiary liable for any arrears of wages or any tax or any penalty
for failure to comply with any of the foregoing. There is no charge or complaint
against the Company or any Company Subsidiary by the National Labor Relations
Board or any comparable state agency pending or to the knowledge of the Company,
threatened, including any claim against the Company or any Company Subsidiary
based on actual or alleged wrongful termination or any claim of unlawful
dismissal or unfair dismissal or any claim on the basis of race, age, sex,
disability or other harassment or discrimination, nor, to the knowledge of the
Company, any reasonable basis for any such claim. There have been no "Prohibited
Transactions" (as set forth in ERISA section 406 and Code section 4975) with
respect to the Plans. No fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of the Plans. No claim, action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand with respect to the
administration or the investment of the assets of the Plans is pending or, to
the knowledge of the Company, threatened. The Company has no knowledge of any
basis for any such claim, action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand. There is no pending claim, threatened claim
in writing delivered to the Company or, to the knowledge of the Company, any
other threatened claim against or under any Plans, other than claims for
benefits in the ordinary course of business.
(d) All contributions (including all employer contributions and employee
salary reduction contributions or other contributions) which are due have been
paid to each Plan, and all contributions for any period ending on or before the
Effective Time which are not yet due have been paid to each Plan or accrued in
accordance with the past custom and practice of the Company. All required
premiums or other payments for all periods ending on or before the Effective
Time have been paid with respect to each Plan.
(e) The Company has made available to Parent prior to the date of this
Agreement (i) copies of all employment agreements with officers or key employees
of the Company and the Company Subsidiaries; (ii) copies of all severance
agreements, programs and policies of the Company and the Company Subsidiaries
with or relating to its employees; and (iii) copies of all plans, programs,
agreements and other arrangements of the Company and the Company Subsidiaries
with or relating to its employees which contain change of control provisions.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation, "golden
parachute" or otherwise) becoming due to any director, officer or employee of
the Company or any Company Subsidiary under any of the Plans or otherwise, (ii)
materially increase any benefits otherwise payable under any of the Plans or
(iii) result in any acceleration of the time of payment or vesting of any
material benefits. None of the Plans in effect on the date hereof would result,
separately or in the aggregate (including, without limitation, as a result of
this Agreement or the transactions contemplated hereby), in the payment of any
"excess parachute payment" within the meaning of section 280G of the Code.
(f) No Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company or any Company Subsidiary beyond their retirement or
other termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits or retirement benefits under any "employee pension
benefit plan" (as such term is defined in section
A-28
3(2) of ERISA), (iii) deferred compensation benefits accrued as liabilities on
the books of the Company or (iv) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
(g) In addition to the foregoing, (i) the Company has not incurred any
material liability with respect to and has adequately reserved for each Plan
that is not subject to United States law (a "Non-U.S. Benefit Plan"), (ii) each
Non-U.S. Benefit Plan required to be registered has been registered and has been
maintained in good standing with applicable regulatory authorities and (iii)
each Non-U.S. Benefit Plan is now and has always been operated in material
compliance with all applicable non-United States laws.
(h) Section 4.13(h) of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee and independent
contractor of the Company and each Company Subsidiary, including each employee
on leave of absence or layoff status: name; job title; current compensation or
remuneration paid or payable; employer (if other than the Company); vacation
accrued; and initial service dates. To the Company's knowledge, no current or
former employee or current or former officer or director of the Company or any
Company Subsidiary is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, non-competition or proprietary
rights agreement (which includes any agreement containing any confidentiality
provisions or restrictive covenants), between such employee or officer or
director and any other person ("Proprietary Rights Agreement") that in any way
adversely affected, affects, or will affect (A) the performance of his or her
duties as an employee or officer or director of the Company or any Company
Subsidiary, (B) the ability of the Company or any Company Subsidiary to conduct
its business, or (C) the ability of the Company or any Company Subsidiary to
enforce or enjoy the benefits of any Proprietary Rights Agreement between the
Company or any Company Subsidiary and any employee or director.
(i) The Company and each Company Subsidiary has timely filed, for all years
prior to the year in which the Closing occurs, all Forms 1099 (including
corrected or amended forms) and any comparable form required to be filed under
the applicable law of any state or non-United States jurisdiction, for all
workers which the Company or any Company Subsidiary has classified and treated
as independent contractors.
(j) Except as set forth in written offer letters and employment agreements of
the Company employees and in the Stock Option Agreements (copies of each of
which have been provided to Parent), neither the Company nor any Company
Subsidiary has made any promises for the payment of any bonuses, backpay or
other remuneration to any employees, contractors, interns or other persons for
their work on behalf of such entity.
Section 4.14. Insurance. Section 4.14 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy and/or self-
insurance plan, including, without limitation, property, casualty, employers
liability insurance, workers compensation insurance programs and surety, to
which the Company and each Company Subsidiary has been a party, a named insured,
established claim reserves, qualified as a "self-insurer," joined a state fund
or risk sharing pool or is otherwise the beneficiary of coverage at any time:
(i) the name, address, and telephone number of each broker, agent or
other representative providing policies and/or services;
(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured; and
(iii) the policy number, the period of coverage and type, i.e.
occurrence, claims made or other basis.
With respect to each such insurance policy and self-insurance plan described
in Section 4.14 of the Disclosure Schedule: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the Merger; (C) neither the
Company nor any Company Subsidiary nor, to the knowledge of the Company, any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of
A-29
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) none of the Company,
any Company Subsidiary, or, to the knowledge of the Company, any other party to
the policy has repudiated any provision thereof. To the knowledge of the
Company, no claim by any third party against the Company or any Company
Subsidiary is being handled by an insurer of the Company which has a significant
settlement or judgment value in excess of $100,000.
Section 4.15. Taxes. (a) (i) The Company, each of the Company Subsidiaries,
and any affiliated group, within the meaning of section 1504(a) of the Code, or
"any predecessor of the Company, or any person or entity from which the Company
incurs a liability for Taxes as a result of transferee liability, joint and
several liability, contract or otherwise", of which the Company or such Company
Subsidiary is or has been a member has filed or caused to be filed in a timely
manner (within any applicable extension periods) for all years and all periods
(and portions thereof) all Tax Returns or estimates, all prepared in accordance
with applicable laws, required to be filed by the Code or by applicable state,
local or non-United States Tax laws; (ii) all Taxes shown to be due on such Tax
Returns or estimates have been timely paid in full or will be timely paid in
full by the due date thereof; and all Taxes not yet due and payable have been
fully accrued on the books of the Company and adequate reserves have been
established therefor; (iii) all such Tax Returns are true, correct and complete;
(iv) there are no proposed adjustments or pending or threatened Actions for the
assessment or collection of Taxes against the Company or any Company Subsidiary
and there is no basis therefor; (v) neither the Company nor any Company
Subsidiary has been at any time a member of any partnership or joint venture or
other arrangement that could be reported as a partnership for federal income Tax
purposes for any period for which the statute of limitations for any Tax has not
expired; (vi) there are no proposed reassessments by Tax authorities of any real
property owned by the Company or any Company Subsidiary that could increase any
Tax to which the Company or any Company Subsidiary would be subject; (vii)
neither the Company nor any Company Subsidiary is a party to, is bound by, or
has any obligation under any Tax sharing or allocation agreement or similar
agreement; and (viii) neither the Company nor any Company Subsidiary has any
liability for the Taxes of any corporation (other than members of the affiliated
group of which the Company is the common parent) under Treasury Regulations
section 1.1502-6 (or any similar provision of state, local or non-United States
law), or as a transferee or successor.
(b) Neither the Company nor any Company Subsidiary has made any consent under
section 341 of the Code and none of the Company and the Company Subsidiaries is
a corporation described in section 341(b) of the Code; (ii) neither the Company
nor any Company Subsidiary (A) is or was a "controlled foreign corporation" or a
"United States Shareholder" as defined in the Code, (B) has an unrecaptured
overall foreign loss within the meaning of section 904(f) of the Code or (C)
files, has filed or is required to file Tax Returns in jurisdictions outside the
United States; (iii) neither the Company nor any Company Subsidiary has any
income reportable for a period ending after the Closing Date that is
attributable to an activity or a transaction (e.g., an installment sale)
occurring in, or a change in accounting method made for, a period ending on or
prior to the Closing Date that resulted in a deferred reporting of income from
such transaction or from such change in accounting method; neither the IRS nor
any other agency has proposed any such adjustment or change in accounting
methods that affects any taxable year ending after the Closing Date; neither the
Company nor any Company Subsidiary has any application pending with any Taxing
authority requesting permission for any changes in accounting methods that
relate to its business or operations and that affects any taxable year ending
after the Closing Date; and (iv) no material Tax liens exist or have been filed
on any assets of the Company or any Company Subsidiary (other than liens for
Taxes not yet due and payable). The federal consolidated income Tax Returns in
which the Company and the Company Subsidiaries have joined have never been
examined by the Internal Revenue Service.
(c) The Company and each Company Subsidiary has (A) withheld all required
amounts from its employees, agents, contractors and nonresidents and remitted
such amounts to the proper agencies; (B) paid all employer contributions and
premiums; and (C) filed all federal, state, local and foreign returns and
reports with respect to employee income Tax withholding, social security
unemployment Taxes and premiums, all in compliance with the withholding Tax
provisions of the Code as in effect for the applicable year and other applicable
federal, state, local or non-United States laws.
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(d) No federal, state, local or foreign Tax audits or other administrative
proceedings, discussions or court proceedings are presently pending with regard
to any Taxes or Tax Returns of the Company or any Company Subsidiary and no
additional issues are being asserted against the Company or any Company
Subsidiary in connection with any existing audits of the Company.
(e) Neither the Company nor any Company Subsidiary has entered into any
agreement relating to Taxes which affects any taxable year ending after the
Closing Date.
(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company or any Company Subsidiary that,
individually or collectively, could give rise to the payment by the Company or
any Company Subsidiary of any amount that would not be deductible by reason of
Code section 280G.
(g) No asset of the Company or any Company Subsidiary is tax-exempt use
property under Code section 168(h).
(h) No portion of the cost of any asset of the Company or any Company
Subsidiary has been financed directly or indirectly from the proceeds of any
tax-exempt state or local government obligation described in Code section
103(a).
(i) None of the assets of the Company or any Company Subsidiary is property
that the Company or any Company Subsidiary is required to treat as being owned
by any other person pursuant to the safe harbor lease provision of former Code
section 168(f)(8).
(j) In the past five years, neither the Company nor any Company Subsidiary
has been a party to a transaction that is reported to qualify as a
reorganization within the meaning of Code section 368, distributed a corporation
in a transaction that is reported to qualify under Code section 355, or been
distributed in a transaction that is reported to qualify under Code section 355.
(k) The Company Shares are not United States real property interests within
the meaning of Code section 897(c). There are no outstanding agreements or
waivers extending or having the effect of extending the statutory period of
limitation for assessment, reassessment or collection of Tax applicable to any
material Tax Returns required to be filed with respect to the Company or any
Company Subsidiary; and none of the Company, the Company Subsidiaries, or any
affiliated group, within the meaning of section 1504(a) of the Code, of which
the Company or any Company Subsidiary is or has been a member, has requested any
extension of time within which to file any material Tax Return, which return has
not yet been filed, and no power of attorney granted by the Company or any
Company Subsidiary with respect to Taxes is currently in force.
(l) The Company has delivered to Parent correct and complete copies of all
material federal, state, local and foreign income and franchise Tax Returns of
the Company and the Company Subsidiaries for the fiscal years ended December 31,
1998 and 1999 and thereafter and IRS Revenue Agent Reports and similar reports
issued by any state, local or foreign Tax authority for such returns, and
statements of material Tax deficiencies assessed against or agreed to by the
Company or any Company Subsidiary since the date of the incorporation of the
Company.
Section 4.16. Environmental, Health and Safety Matters. (a)
(i) Solely with respect to the business conducted by the Company and each
Company Subsidiary, each of the Company, the Company Subsidiaries and their
respective predecessors and affiliates has complied in all material respects
and is in material compliance with all Environmental, Health, and Safety
Requirements.
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(ii) Without limiting the generality of the foregoing, each of the Company,
the Company Subsidiaries and their respective affiliates has obtained and
complied with, and is in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental, Health, and Safety
Requirements for the occupation of its facilities and leased locations and the
operation of its business; a list of all such permits, licenses and other
authorizations is set forth in Section 4.16(a) of the Disclosure Schedule.
(iii) Neither the Company nor any Company Subsidiary has received any
written notice, written report or other written information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements,
or any Liabilities or potential Liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory or
corrective obligations or Remedial Action, relating to any of them or its
facilities or any third party facilities arising under Environmental, Health,
and Safety Requirements.
(iv) Neither the Company nor any Company Subsidiary has caused the
following to exist or be operated at any property or facility leased or
subleased by the Company, any Company Subsidiary or their respective
predecessors and to the knowledge of the Company none of the following exists
at any property or facility leased or subleased by the Company, any Company
Subsidiary or their respective predecessors: (A) underground storage tanks,
(B) asbestos-containing material in any form or condition, (C) materials or
equipment containing polychlorinated biphenyls, or (D) landfills, surface
impoundments, or disposal areas.
(v) Neither the Company nor any Company Subsidiary, nor their respective
predecessors or affiliates, has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or Released any substance,
including without limitation any Hazardous Materials except in material
compliance with all applicable Environmental, Health and Safety Requirements,
or owned or operated any property or facility in a manner that has given or
would give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Resource Conservation and Recovery Act, as amended ("RCRA"), the Solid Waste
Disposal Act, as amended ("SWDA"), or any other Environmental, Health, and
Safety Requirements.
(vi) Neither this Agreement nor the consummation of the transaction that is
the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health, and Safety
Requirements.
(vii) Neither the Company nor any Company Subsidiary has, either expressly
or to the knowledge of the Company, by operation of law, assumed or undertaken
any Liability, including without limitation any obligation for corrective or
Remedial Action, of any other person relating to Environmental, Health, and
Safety Requirements.
(viii) To the Company's knowledge, no facts, events or conditions relating
to the past or present facilities, properties or operations of the Company or
any Company Subsidiary will prevent, materially hinder or materially limit
continued compliance with Environmental, Health, and Safety Requirements, give
rise to any investigatory or corrective obligations or Remedial Action
pursuant to Environmental, Health, and Safety Requirements, or give rise to
any material Liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite Releases or
threatened Releases of Hazardous Materials, substances or wastes, personal
injury, property damage or natural resources damage.
(ix) The Company and the Company Subsidiaries can maintain present
production levels or any planned expansion of production levels upon which
financial projections provided to Parent have been based in material
compliance with applicable Environmental, Health and Safety Requirements
without a material increase in capital or operating expenditures and without
modifying any Environmental Permits or obtaining any additional Environmental
Permits.
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(b) The Company has provided Parent with copies of (i) any environmental
assessment or audit reports or other similar studies or analyses relating to the
Real Property, the Company, the Company Subsidiaries and their business and (ii)
all insurance policies issued at any time that may provide coverage to the
Company or any Company Subsidiary or their business for environmental matters.
Section 4.17. Related Party Transactions. Except as set forth in Section 4.17
of the Disclosure Schedule, no officer, director, stockholder or affiliate of
the Company or any Company Subsidiary nor any relative or affiliate of such
officer, director or stockholder is a party to any agreement, contract,
commitment, arrangement or transaction with the Company or any Company
Subsidiary or is entitled to any payment or transfer of any assets from the
Company or any Company Subsidiary or has any material interest in any material
property used by the Company or any Company Subsidiary or has an interest in any
Customer, supplier of the Company or any Company Subsidiary or provider of any
services to the Company or any Company Subsidiary.
Section 4.18. Software Products. (a) The Company is in conformity with all
applicable material contractual commitments and all material express and implied
warranties with regard to all the Company Software sold or licensed and all
warranty/maintenance service that the Company has agreed to provide. Other than
the Company Software, the Company has not sold or licensed any software
products.
(b) No claim has been made or asserted in writing by any third party against
the Company or, to the knowledge of the Company, against any customer of the
Company related to any breach of any such commitment or warranty, other than
claims that would be the subject of routine warranty/maintenance items with
respect to the Company Software.
(c) There are no material defects in the Company Software provided to a
licensee or customer, which defects or errors would in any material respect
affect such licensee's or customer's use of such software or the functioning of
such software in accordance with the published specifications for such software,
other than defects or errors that would be the subject of routine
warranty/maintenance items.
(d) The Company Software does not intentionally contain any back door, time
bomb, Trojan horse, worm, drop-dead device, virus (as these terms are commonly
used in the computer software industry), or other software routines or hardware
components designed to permit unauthorized access, to disable or erase software,
hardware, or data, or to perform any other similar type of functions.
Section 4.19. Stockholder Approval. Except for the approval of the
stockholders of the Company representing at least a majority of the voting power
of the outstanding Company shares, voting as a single class and 66 2/3% of the
Series A Preferred Shares, voting as a single class (the "Requisite Stockholder
Approval"), no other approval of the holders of any class or series of capital
stock of the Company is necessary to approve this Agreement, the Merger and the
other transactions contemplated by this Agreement.
Section 4.20. Brokers. No broker, finder, investment banker nor any affiliate
of the Company (other than Credit Suisse First Boston "CSFB") is entitled to any
brokerage, finder's, consulting or other fee or commission in connection with
the Merger or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has heretofore
made available to Parent a complete and correct copy of all agreements between
the Company and CSFB pursuant to which such firm would be entitled to any
payment relating to the Merger or any other transactions.
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ARTICLE V
Representations and Warranties of Parent
As an inducement to the Company to enter into this Agreement, Parent
represents and warrants to the Company as follows:
Section 5.01. Organization and Qualification. (a) Each of Parent and Merger
Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each of Parent and Merger
Sub is duly qualified or licensed as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing as would not have a Parent Material
Adverse Effect.
(b) The copies of Parent's Certificate of Incorporation and By-laws that are
set forth or incorporated by reference as exhibits to Parent's Form 10-K for the
year ended December 31, 2000 are complete and correct copies thereof as in
effect on the date hereof.
Section 5.02. Merger Sub. Merger Sub is a direct, wholly owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this Agreement.
Section 5.03. Authority; No Conflict; Required Filings and Consents. (a) Each
of Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the Merger and the other transactions contemplated by this
Agreement. Each of (i) the execution and delivery of this Agreement by Parent
and Merger Sub and the consummation by Parent and Merger Sub of the Merger and
the other transactions contemplated by this Agreement and (ii) the issuance of
shares of Parent Common Stock in the Merger has been duly and validly authorized
by all necessary corporate action and, other than approval of the board of
directors of Parent, no other corporate proceedings on the part of Parent and
Merger Sub are necessary to authorize this Agreement or to consummate the Merger
and the other transactions contemplated by this Agreement (other than, with
respect to the Merger, the Requisite Stockholder Approval, the filing and
recordation of appropriate merger documents as required by Delaware Law). This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity.
(b) The execution and delivery of this Agreement by Parent and Merger Sub and
the performance of this Agreement by Parent and Merger Sub do not and will not
(i) assuming the approval of the board of directors of Parent, conflict with or
violate the Certificate of Incorporation or By-laws of either Parent or Merger
Sub, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 5.03(c) have been obtained and all filings and
obligations described in Section 5.03(c) have been made, conflict with or
violate any Law applicable to either Parent or Merger Sub or by which any
property or asset of Parent is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any property or asset of Parent pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation.
(c) The execution and delivery of this Agreement by Parent and Merger Sub and
the performance of this Agreement by Parent and Merger Sub do not and will not
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) the filing of the
Registration
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Statement, (ii) for applicable requirements, if any, of the Exchange Act, the
state securities or "blue sky" laws ("Blue Sky Laws"), the NYSE, the pre-merger
notification requirements of the HSR Act, and the filing and recordation of
appropriate merger documents as required by Delaware Law and (iii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not have a Parent Material Adverse Effect and
could not reasonably be expected to prevent or materially delay the consummation
of the transactions contemplated by this Agreement.
Section 5.04. Capitalization. The authorized capital stock of Parent consists
of 4,200,000,000 shares of Parent Common Stock and 500,000 shares of preferred
stock, par value $100 per share (the "Parent Preferred Stock"). As of June 30,
2001, (i) 2,217,657,645 shares of Parent Common Stock and no shares of Parent
Preferred Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable, (ii) 193,729 shares of Parent Common Stock are
held in the treasury of Parent or by the Parent Subsidiaries and (iii)
294,263,732 shares of Parent Common Stock are reserved for future issuance
pursuant to Parent's employee stock option plans. All shares of Parent Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no outstanding contractual obligations of Parent or any Parent Subsidiary to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock,
Parent Preferred Stock or any capital stock of any Parent Subsidiary. The shares
of Parent Common Stock to be issued in connection with the Merger have been duly
authorized and, when issued as contemplated herein, will be validly issued,
fully paid and nonassessable and will not be issued in violation of any
preemptive rights.
Section 5.05. SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed by it with the SEC from
January 1, 1998 through the date of this Agreement (collectively, the "Parent
SEC Reports"). As of the respective dates they were filed, (i) the Parent SEC
Reports were prepared, and all forms, reports and documents filed with the SEC
after the date of this Agreement and prior to the Effective Time will be
prepared, in all material respects in accordance with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and (ii) none of the
Parent SEC Reports contained, nor will any forms, reports and documents filed
after the date of this Agreement and prior to the Effective Time contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent SEC Reports and in any form, report
or document filed after the date of this Agreement and prior to the Effective
Time was, or will be, as the case may be, prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and each presented or will present fairly, in
all material respects, the consolidated financial condition and results of
operations of Parent and the Parent Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which did not and would not have a Parent
Material Adverse Effect).
(c) Parent has no Liabilities, other than Liabilities (i) reflected in the
Parent SEC Reports or (ii) incurred since the date of the most recent balance
sheet contained in the Parent SEC Reports in the ordinary course of business
consistent with past practice that would not have a Parent Material Adverse
Effect.
(d) No broker, finder, investment banker or any affiliate of Parent is
entitled to any brokerage, finder's, consulting or other fee or commission in
connection with the Merger or the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent other than
brokerage, finder's, consulting or other fees or commissions for which Parent is
exclusively responsible.
Section 5.06. NYSE Requirements. Parent is not required to obtain stockholder
approval of this Agreement or the transactions contemplated hereby pursuant to
the rules of the NYSE applicable to listed companies.
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ARTICLE VI
Conduct of Businesses Pending the Merger
Section 6.01. Conduct of Business by the Company Pending the Merger. (a) The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 6.01 of the Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement or any of the Transaction
Documents, unless Parent shall otherwise consent in writing:
(i) the businesses of the Company and the Company Subsidiaries shall be
conducted only in, and the Company and the Company Subsidiaries shall not take
any action except in, the ordinary course of business and in a manner
consistent with past practice;
(ii) the Company shall use its reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of the current officers, employees and consultants of the Company and the
Company Subsidiaries and to preserve the current relationships of the Company
and the Company Subsidiaries with customers, suppliers and other persons with
which the Company or any Company Subsidiary has significant business
relations; and
(iii) the Company will apply a portion of the proceeds of the initial
drawing under the Credit Agreement to repay a portion of the amounts owed to
various vendors, including, without limitation, those vendors that have
asserted claims against the Company which are described in Section 4.11(b) of
the Disclosure Schedule.
(b) By way of amplification and not limitation of Section 6.01(a), except as
contemplated by this Agreement or any of the Transaction Documents or as set
forth in Section 6.01 of the Disclosure Schedule, neither the Company nor any
Company Subsidiary shall, between the date of this Agreement and the Effective
Time, directly or indirectly, do, or propose to do, any of the following without
the prior written consent of Parent:
(i) amend or otherwise change its Certificate of Incorporation or By- laws,
except to increase the authorized amount of Preferred Stock and Company Common
Stock to effect the conversion of the Convertible Promissory Notes into Series
B Preferred Shares and to have shares of Company Common Stock reserved for
issuance upon the conversion of such Preferred Stock and as otherwise
appropriate to implement the Retention Plan;
(ii) (A) issue, sell, pledge, dispose of, or grant an Encumbrance on, or
authorize the issuance, sale, pledge, disposition, or grant of an Encumbrance
on, any shares of its capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company or any Company Subsidiary,
other than (I) the issuance of Company Common Stock upon the exercise of
Company Options or Company Warrants in accordance with their terms or in
accordance with the terms of Section 6.01(c) below or (II) the issuance of
Series B Preferred Stock pursuant to the Bridge Holders Agreement or (B) sell,
pledge, dispose of, transfer, lease or grant an encumbrance on or authorize
the issuance, sale, pledge, disposition, grant of an encumbrance on any
material assets of the Company, or any Company Subsidiary, except for sales of
inventory in the ordinary course of business and in a manner consistent with
past practice;
(iii) authorize, declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock;
(iv) except for the repurchase of shares of capital stock of employees or
consultants upon termination of their employment or engagement with the
Company pursuant to agreements in effect on the date hereof for a purchase
price not to exceed a maximum amount of $100,000 per employee or consultant,
reclassify, combine, split, subdivide or redeem, change material terms,
purchase or otherwise acquire, directly or indirectly, any of its capital
stock or any security exercisable for or convertible into any of its capital
stock;
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(v) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) (I) any interest in any corporation,
partnership, other business organization or any division thereof or (II) any
assets other than acquisitions of assets in the ordinary course of business;
(vi) incur any indebtedness for borrowed money or issue any note, bond or
other debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person for
borrowed money, or make any loans or advances or enter into any capital leases
with an aggregate capitalized value of $25,000;
(vii) enter into any contract or agreement, lease or license involving
consideration in excess of $250,000 or outside the ordinary course of
business, or cancel, terminate, or agree to any material change in, any
Material Contract, other than acceleration, cancellation, modification,
amendments or terminations in the ordinary course of business, consistent with
past practice; or
(viii) authorize any capital expenditures, in the aggregate, in excess
of $1,000,000 for the Company and the Company Subsidiaries taken as a
whole;
(ix) except as set forth on Section 6.01(a)(ix) of the Disclosure Schedule,
increase the compensation payable or to become payable to its officers or
employees, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of the Company or any Company Subsidiary, hire any employees, or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee except to the extent required by applicable law;
(x) make or pledge to make any charitable or other capital contribution
outside the ordinary course of business;
(xi) materially change the Company's accounting policies, other than as
required by U.S. GAAP;
(xii) unless Parent shall have refused to extend a loan to the Company
under the Credit Agreement in violation thereof, delay or postpone the payment
of accounts payable or other Liabilities outside the ordinary
course of business;
(xiii) except for non-exclusive "use" licenses granted in the ordinary
course of business, (A) grant any license in respect of any Intellectual
Property of the Company or any Company Subsidiary, (B) develop any
Intellectual Property jointly with any third party, or (C) disclose any
confidential Intellectual Property or other confidential information of the
Company or any Company Subsidiary, unless such disclosure is made in the
ordinary course of business consistent with past practice and the disclosed
confidential Intellectual Property or other confidential information is
subject to a confidentiality agreement prohibiting any further disclosure and
unauthorized use thereof;
(xiv) amend or change the terms of any options or restricted stock, or
reprice options granted under the Company Stock Option Plans or authorize cash
payments in exchange for any options granted under any such plans;
(xv) cancel, compromise, waive, release or settle any material Action,
except with respect to any cancellation, compromise, waiver, release or
settlement which involves only the payment of damages in an amount less than
$50,000 individually or in an aggregate amount of less than $250,000 and does
not involve any other relief;
(xvi) other than as required by a Tax regulation, make or revoke any
material Tax election, change any tax accounting methods, or settle or
compromise any material federal, state, local or non-United States Tax
liability or take any material action with respect to the computation of Taxes
or the preparation of Tax Returns that is inconsistent with past practice; or
(xvii) authorize or enter into any agreement to do any of the foregoing or
otherwise make any commitment to do any of the foregoing.
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(c) If the Company wishes to obtain the consent of the Parent to take actions
for which prior consent is required pursuant to this Section 6.01, the Company
shall request such consent in writing by facsimile to the attention of Richard
C. Smith and Dan Maloney of Parent at the telecopy number specified in Section
11.02(a) with a copy to the other persons specified therein at least five
business days prior to the date that such consent is required. A consent signed
by an authorized officer of the Company shall be deemed sufficient for purposes
hereof. In addition, if neither of the persons receiving such a request does not
respond in writing (which may include an e-mailed response) to such request
within five business days after the date the request is faxed, the receiving
party shall be deemed to have consented to the requested action for all purposes
of this Agreement. The request of the Company shall state the date upon which
this five business day period will expire.
Section 6.02. Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of Parent or the Company, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.02 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
ARTICLE VII
Additional Agreements
Section 7.01. Access to Information. From the date hereof until the Closing,
upon reasonable notice, the Company shall cause its affiliates, officers,
directors, employees, agents, representatives, accountants and counsel, and
shall cause each Company Subsidiary and its officers, directors, employees,
agents, representatives, accountants and counsel to: (i) afford the officers,
employees, agents, accountants, counsel and representatives of Parent reasonable
access, during normal business hours, to the offices, properties, plants, other
facilities, books and records of the Company and the Company Subsidiaries and to
those officers, directors, employees, agents, accountants and counsel of the
Company and of each Company Subsidiary who have any knowledge relating to the
Company or any Company Subsidiary, (ii) furnish to the officers, employees,
agents, accountants, counsel and representatives of Parent such additional
financial and operating data and other information regarding the assets,
properties, liabilities and goodwill of the Company and the Company Subsidiaries
(or legible copies thereof) as Parent may from time to time reasonably request
and (iii) cooperate in such other way as may be reasonably necessary for the
consummation of the transactions contemplated hereby. The information provided
under this Section 7.01 shall be subject to the terms and conditions of the
Confidentiality Agreement.
Section 7.02. No Solicitation of Transactions. The Company shall not,
directly or indirectly, and shall instruct its stockholders, affiliates,
officers, directors, employees, agents, advisors or other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) not to, directly or indirectly, solicit, initiate or knowingly
encourage (including, without limitation, by way of furnishing any nonpublic
information with respect to the Company, any Company Subsidiary, this Agreement
or the transactions contemplated hereby), or take any other action knowingly to
facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain a Competing Transaction, or agree
to or endorse any Competing Transaction, or authorize or permit any of the
officers, directors or employees of such party or any of its subsidiaries, or
any investment banker, financial advisor, attorney, accountant or other
representative retained by such party or any of such party's subsidiaries, to
take any such action. The Company shall notify Parent promptly if any proposal
or offer, or any inquiry or contact with any person with respect thereto,
regarding a Competing Transaction is made. The Company shall
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immediately cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to a Competing
Transaction. The Company agrees not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which it is a
party. The Company shall be liable for any action prohibited by this Section
7.02 taken by any of its stockholders, affiliates, officers, directors,
employees, agents, advisors or other representatives.
Section 7.03. Employee Benefits Matters. (a) For a period of twelve (12)
months following the Effective Time, employees of the Company who continue their
employment after the Effective Time with the Surviving Corporation (including
those on vacation, leave of absence, or short-term disability who return to
active employment within six (6) months after the Effective Time) ("Transferred
Employees") shall be provided with compensation and benefits (including salary
and fringe benefits) which, in the aggregate, are no less favorable than those
provided to such employees immediately preceding the Effective Time, and with
appropriate employment positions taking into consideration their respective
prior experience and the best interests of the Surviving Corporation and Parent.
(b) For a period of twelve (12) months following the Effective Time, Parent
shall cause the Surviving Corporation to provide the Transferred Employees with
employee benefit plans, agreements, programs, policies and arrangements that are
no less favorable, in the aggregate, than the Plans (as defined in Section
4.13(a)) in effect immediately prior to the Effective Time. Nothing provided
herein shall limit the Parent or the Surviving Corporation from offering
Transferred Employees benefits under Parent employee benefit plans or
arrangements; provided, that, such plans shall provide at the Effective Time
employee benefits that, in the aggregate, are no less favorable than those in
effect immediately prior to the Effective Time under the comparable Plans.
Notwithstanding anything contained herein to the contrary, those Transferred
Employees identified on Schedule 7.03(b) shall at all times be entitled to
vacation equivalent to the greater of (i) the number of days listed on such
schedule or (ii) the number of days available under the Surviving Corporation's
vacation policy, taking into consideration the service allocation provided for
in subsection (c) next following.
(c) The Surviving Corporation shall recognize each Transferred Employee's
service with the Company as of the Effective Time ("Prior Service") as service
with the Surviving Corporation for eligibility and vesting purposes, but not for
purposes of calculating benefits, as applicable in the "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA), disability, fringe benefits and
other employee benefit plans or policies that cover the employees of the
Surviving Corporation ("Surviving Corporation Plans"), other than retiree
medical and pension plans and employer matching contributions under the 401(k)
plan; provided that, Prior Service of Transferred Employees shall be counted for
purposes of determining vacation accrual and severance benefits under any
Surviving Corporation Plan; and further provided, that, with respect to any
Surviving Corporation Plan that is a welfare benefit plan, or any plan that
would be a welfare benefit plan if it were subject to ERISA, for purposes of the
Transferred Employees (their spouses and eligible dependants), Surviving
Corporation shall (i) cause there to be waived any pre-existing condition, (ii)
give effect, in determining any deductible and maximum out-of-pocket
limitations, to claims incurred and amounts paid by, and amounts reimbursed to,
such employees with respect to similar plans maintained by the Company
immediately prior to the Effective Time and (iii) (other than under any
Surviving Corporation Plan which is a retiree medical plan) recognize all
credited service with the Company.
(d) As soon as practicable after the execution of this Agreement, the Company
shall have provided Parent with all of the documentation and information
(including the applicable documentation and information described in Section
4.13(a) of this Agreement) reasonably necessary for Parent to determine whether
a merger of the Company's 401(k) plan into the Parent's 401(k) plan would
require amendment of the Parent's 401(k) plan in order to satisfy Section
411(d)(6) of the Code and the IRS regulations and rulings issued pursuant
thereto. If Parent determines that such amendment would be required, then as
soon as practicable after that determination but in any event at least three
days prior to the Effective Time, the Board of Directors of the Company shall
adopt resolutions terminating the Company's 401(k) plan effective as of the date
those resolutions are adopted and authorizing the officers of the Company to
take such actions as they reasonably deem necessary or advisable to implement
the termination of the plan, secure any necessary or advisable
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governmental approvals, and (subject to said approvals and any other reasonable
conditions) provide for the transfer of electing participants' account balances
thereunder to the Parent's 401(k) plan.
Section 7.04. Obligations of Merger Sub. Parent shall take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to the conditions set
forth in this Agreement.
Section 7.05. Plan of Reorganization. (a) This Agreement is a "plan of
reorganization" within the meaning of section 1.368-2(g) of the income tax
regulations promulgated under the Code. From and after the date of this
Agreement and until the Effective Time, each party hereto shall use its
reasonable best efforts to cause the Merger to qualify as a reorganization under
the provisions of section 368(a) of the Code. Following the Effective Time,
neither the Surviving Corporation, Parent nor any of their affiliates shall
knowingly take any action that could cause the Merger to fail to qualify as a
reorganization under section 368(a) of the Code.
(b) The Company will deliver to Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., counsel to the Company, and KPMG LLP, on or about the Closing Date,
certificates substantially in compliance with IRS published advance ruling
guidelines, with customary exceptions and modifications thereto, to enable such
firms to deliver the legal opinions contemplated by Sections 7.05(d) and
8.03(c).
(c) Parent and Merger Sub will deliver to Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. and KPMG LLP, on or about the Closing Date, certificates
substantially in compliance with IRS published advance ruling guidelines, with
customary exceptions and modifications thereto, to enable such firms to deliver
the legal opinions contemplated by Sections 7.05(d) and 8.03(c).
(d) Parent shall use its reasonable best efforts to cause KPMG LLP to render
an opinion to the effect that the Merger will qualify as a reorganization under
the provisions of Section 368(a) of the Code and that each of Parent, Merger Sub
and the Company will be a party to a reorganization within the meaning of
Section 368(b) of the Code. In the event that KPMG LLP is unable to render such
an opinion, the parties agree that appropriate disclosure will be required to
discuss such situation in the Registration Statement.
Section 7.06. Further Action; Consents; Filings. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, (ii) obtain from
Governmental Authorities and third parties any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Parent or the Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated by this Agreement, (iii) make
all necessary filings, and thereafter make any other required submissions, with
respect to this Agreement, the Merger and the other transactions contemplated by
this Agreement required under the HSR Act and any other applicable Law and (iv)
provide all required notices to third parties, including those notices required
to be given to persons or pursuant to agreements described in Sections 4.03(b)
and 4.07(c) of the Disclosure Schedule. The parties hereto shall cooperate with
each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling party and its advisors
prior to filing and, if requested, by accepting all reasonable additions,
deletions or changes suggested in connection therewith.
(b) Parent and the Company shall file as soon as practicable after the date
of this Agreement notifications under the HSR Act and shall respond as promptly
as practicable to all inquiries or requests received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for additional
information or documentation and shall respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
Governmental Authority in connection with antitrust matters. The parties shall
cooperate with each other in connection with the making of all such filings or
responses, including providing copies of all such documents to the other party
and its advisors prior to filing or responding. Notwithstanding
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anything to the contrary contained herein, nothing contained in this Section
7.06 shall require Parent to agree to (i) the imposition of conditions, (ii) the
requirement of divestiture or (iii) the requirement of expenditure of money by
Parent or the Company to a third party in exchange for any such consent that, in
any such case, (x) would have a Company Material Adverse Effect or (y) if such
action relates to Parent or any of its Subsidiaries, would, if taken by the
Company or with respect to a comparable amount of assets, businesses or product
lines of the Company would have a Company Material Adverse Effect.
Section 7.07. Public Announcements. The initial press release relating to
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company and which initial press release shall not
be issued unless and until the board of directors of Parent shall have approved
this Agreement. Thereafter, unless otherwise required by applicable Law or the
requirements of the NYSE, each of Parent and the Company shall use its
reasonable best efforts to consult with each other before issuing any press
release or otherwise making any public statements with respect to this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement.
Section 7.08. Registration Statement; Proxy Statement. (a) As promptly as
practicable after the execution of this Agreement and in any event prior to 30
days from the date hereof, Parent and the Company shall prepare and file with
the Securities and Exchange Commission (the "SEC") a proxy statement relating to
the meeting of the Company's stockholders to be held in connection with the
Merger (together with any amendments thereof or supplements thereto, the "Proxy
Statement") and Parent shall prepare and file with the SEC a registration
statement on Form S-4 (together with all amendments thereto, the "Registration
Statement") in which the Proxy Statement shall be included as a prospectus, in
connection with the registration under the Securities Act of the shares of
Parent Common Stock to be issued to the stockholders of the Company pursuant to
the Merger. Each of Parent and the Company will use all reasonable best efforts
to cause the Registration Statement to become effective as promptly as
practicable, and, prior to the effective date of the Registration Statement,
Parent shall take all or any action required under any applicable federal or
state securities laws in connection with the issuance of shares of Parent Common
Stock in the Merger. Each of Parent and the Company shall furnish all
information concerning it and the holders of its capital stock as the other may
reasonably request in connection with such actions and the preparation of the
Registration Statement and Proxy Statement. As promptly as practicable after the
Registration Statement shall have become effective, the Company shall mail the
Proxy Statement to its stockholders and the holders of Convertible Promissory
Notes. The Proxy Statement shall include the recommendation of the Board of
Directors of the Company in favor of the Merger. No amendment or supplement to
the Proxy Statement or the Registration Statement will be made by Parent or the
Company without the approval of the other party (which approval shall not be
unreasonably withheld or delayed). Parent will advise the Company, promptly
after it receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order, the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy Statement or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
(b) The information supplied by Parent and Merger Sub for inclusion in the
Registration Statement and the Proxy Statement shall not, at (1) the time the
Registration Statement is declared effective, (2) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company, (3) if applicable, the time the Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to stockholders of
Parent, (4) the time of the Company Stockholders' Meeting, and (5) the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If at any time prior to the Effective Time
any event or circumstance relating to Parent or any Parent subsidiary, or their
respective officers or directors, should be discovered by Parent which should be
set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company. All documents that Parent
is responsible for filing with the SEC in connection with the transactions
contemplated herein will
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comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(c) The information supplied by the Company for inclusion in the Registration
Statement and the Proxy Statement shall not, at (1) the time the Registration
Statement is declared effective, (2) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company, (3) if applicable, the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to stockholders of Parent, (4)
the time of the Company Stockholders' Meeting, and (5) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Company, or its officers or directors, should be
discovered by the Company which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement, the Company shall
promptly inform Parent.
(d) Following the Effective Time, upon notice from a Stockholder or a
Stockholder's agent of a proposed transfer or request to remove a restrictive
legend, the Parent shall use reasonable efforts to provide a legal opinion
regarding such within two business days of Parent's receipt thereof.
Section 7.09. Company Stockholders' Meeting. The Company shall call and hold
a meeting of its stockholders (the "Company Stockholders' Meeting") as promptly
as practicable after the Registration Statement shall become effective for the
purpose of voting upon the approval of the Merger, and the Company shall use its
best efforts to hold the Company Stockholders' Meeting as soon as practicable
for the purpose of voting upon the approval of the Merger, and the Company shall
use its best efforts to hold the Company Stockholders' Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective.
Section 7.10. Stock Exchange Listing. Parent shall promptly prepare and
submit to the NYSE a listing application covering the shares of Parent Common
Stock to be issued in the Merger or issuable upon the exercise of the Assumed
Options and shall use reasonable best efforts to cause such shares to be
approved for listing on such exchange, subject to official notice of issuance,
prior to the Effective Time.
Section 7.11. Indemnification. From and after the Effective Time for a period
of three years, Parent shall fulfill and honor in all respects the obligations
of the Company to indemnify each person who is or was a director or officer of
the Company pursuant to any indemnification provision contained in the Company's
Certificate of Incorporation or By-laws, each as amended and as in effect on the
date hereof.
Section 7.12. Registration Statement on Form S-8. Parent agrees to file a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to Assumed Options no later than fifteen days after the
Closing Date.
Section 7.13. Parent Board Approval. Prior to July 31, 2001, Parent shall
present to the board of directors of Parent, for its consideration and approval,
this Agreement, the issuance of shares of Parent Common Stock hereunder and the
other transactions contemplated hereby. Parent shall notify the Company in
writing on or prior to July 31, 2001 as to whether the board of Parent has acted
to approve unconditionally or disapprove the Merger and the
other transactions referred to in the preceding sentence.
Section 7.14. Affiliate Letters. The Company shall use reasonable best
efforts to cause to be delivered to Parent prior to the Effective Time, an
affiliate letter in the form attached hereto as Exhibit B (the "Company
Affiliate Agreement") executed by each of the affiliates of the Company.
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ARTICLE VIII
Conditions to the Merger
Section 8.01. Conditions to the Obligations of Each Party. The obligations of
the Company, Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver of the following conditions:
(a) The Registration Statement shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings for
that purpose shall have been initiated or, to the knowledge of Parent,
threatened by the SEC;
(b) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Governmental Order which is then in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger;
(c) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; and
(d) the Requisite Stockholder Approval shall have been obtained.
Section 8.02. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver of the following additional conditions:
(a) each of the representations and warranties of the Company contained in
this Agreement shall have been true and correct when made and shall be true and
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date, except that those representations and warranties which
address matters only as of a particular date shall be true and correct in all
material respects as of such date and except that the failure to be true and
correct (without regard to materiality or Company Material Adverse Effect
qualifications contained therein), have not had a Company Material Adverse
Effect and Parent shall have received a certificate of the Company to such
effect signed by the Chief Executive Officer of the Company;
(b) the Company shall have performed or complied, in all material respects,
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, and Parent shall have
received a certificate of the Company to that effect signed by the Chief
Executive Officer of the Company;
(c) Intentionally Omitted;
(d) Intentionally Omitted;
(e) no Company Material Adverse Effect shall have occurred;
(f) appraisal rights under Delaware Law shall not have been perfected,
asserted or demanded with respect to more than 5% of the aggregate number of
Company Shares on a fully converted basis;
(g) the Company shall have received a pay off letter in form and substance
reasonably acceptable to Parent in respect of the Company Loan Amount;
(h) the Stockholder Representative shall have executed and delivered the
Escrow Agreement;
(i) the transactions contemplated by this Agreement shall have been approved
by the board of directors of Parent and Parent shall have delivered to the
Company a certificate of an officer of Parent to such effect (it being agreed by
the parties hereto that this condition will be satisfied notwithstanding any
subsequent revocation of such approval); and
(j) as of the Effective Time, (i) all Company Employees listed in Section
1.01(a)(i) of the Disclosure Schedule, 50% of the Company Employees listed in
Section 1.01(a)(ii) and 75% of all Company Employees listed in Section
1.01(a)(iii) shall continue to be employed by the Company, (ii) Retention
Agreements shall
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have been entered into by the specified percentages of Company Employees and
shall be in full force and effect, and (iii) the specified percentages of
Company Employees shall not be in breach or violation of, or default under, such
Retention Agreement.
Section 8.03. Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction or
waiver of the following additional conditions:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall have been true and correct when made and shall
be true and correct in all material respects as of the Closing Date, as though
made on and as of the Closing Date, except that those representations and
warranties which address matters only as of a particular date shall be true and
correct as of such date and except that the failure to be true and correct
(without regard to materiality or Parent Material Adverse Effect qualifications
contained therein), have not had a Parent Material Adverse Effect, and the
Company shall have received a certificate of Parent to such effect signed by a
duly authorized officer thereof;
(b) each of Parent and Merger Sub shall have performed or complied, in all
material respects, with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date, and the
Company shall have received a certificate of Parent to that effect signed by a
duly authorized officer thereof;
(c) the Company shall have received the opinion of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., dated on or about the Closing Date, based upon
representations of Parent, Merger Sub and the Company, and customary
assumptions, to the effect that the Merger will qualify as a reorganization
under the provisions of section 368(a) of the Code and that each of Parent,
Merger Sub and the Company will be a party to the reorganization within the
meaning of section 368(b) of the Code. The issuance of such opinion shall be
conditioned upon receipt by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
of representation letters from each of Parent and the Company as contemplated in
Section 7.05 and each such letter shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect as
of the Effective Time; and
(d) Parent and the Escrow Agent shall have executed and delivered the Escrow
Agreement.
(e) the shares of Parent Common Stock issuable in the Merger or upon the
exercise of the Assumed Options shall have been approved for listing on the
NYSE, subject to official notice of issuance.
ARTICLE IX
Indemnification
Section 9.01. Survival of Representations and Warranties. Subject to the
limitations and other provisions of this Agreement, the representations and
warranties of the parties hereto contained in this Agreement shall survive the
Closing and shall remain in full force and effect for a period of 18 months
after the Closing Date; provided, however, that the representations and
warranties contained in Sections 4.04 and 5.04 shall survive the Closing
indefinitely.
Section 9.02. Indemnification by the Stockholders. (a) The Stockholders
agree, from and after the Effective Time, severally and not jointly and subject
to the limitations contained in this Section 9.02, to indemnify Parent, Merger
Sub and their affiliates (including, without limitation, from and after the
Effective Time, the Surviving Corporation), and their officers, directors,
employees, members, agents, successors and assigns (as used in this Article IX,
each, a "Parent Indemnified Party") against and hold them harmless, from all
Liabilities, losses, damages, claims, costs and expenses (including reasonable
attorney's fees) (collectively, "Losses") actually incurred by them arising out
of (i) the breach of any representation or warranty of the Company contained in
this Agreement or in any certificate delivered pursuant to this Agreement, it
being understood and agreed that for all purposes of this Section 9.02, such
representations and warranties shall be
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interpreted without giving effect to any limitations or qualifications as to
"materiality" (including the word "material") or "Company Material Adverse
Effect", (ii) the breach of any covenant or agreement of the Company contained
in this Agreement or in any certificate delivered pursuant to this Agreement and
(iii) those matters described in Section 4.11(c) of the Disclosure Schedule.
(b) No claim may be made against the Stockholders for indemnification
pursuant to this Section 9.02 unless the aggregate of all Losses of the Parent
Indemnified Parties with respect to this Section 9.02 shall exceed an amount
equal to $350,000 (the "Threshold"), and the Stockholders shall then be liable
for the amount of any such Losses in excess of $250,000; provided, however, that
payments in respect of Losses from the Escrow Fund shall be made only in
increments of at least $100,000 with the exception of any payments owed in
respect of Losses upon the date of the final distribution of the Escrow Fund;
provided further that, notwithstanding anything to the contrary in this
Agreement, from and after the Effective Time, the indemnification obligation of
the Stockholders under this Agreement (other than with respect to the
representations and warranties set forth in Section 4.04, which shall be limited
to the Aggregate Consideration although claims for Losses thereunder will be
first satisfied from the Escrow Fund until it is exhausted) shall be limited to,
and the sole and exclusive recourse of the Parent Indemnified Parties with
respect thereto shall be limited to, the Escrow Fund. The Stockholders agree
that all Escrow Shares, Cash and other property contained in the Escrow Fund
shall be available to indemnify the Parent Indemnified Parties in accordance
with this Section regardless of the identity of the Stockholder that would be
entitled to receive such Escrow Shares, cash or other property upon the
termination of the escrow.
Section 9.03. Indemnification by Parent. (a) Parent agrees, subject to the
limitations contained in this Section 9.03, to indemnify the Stockholders
against and hold them harmless from Losses actually incurred by them arising out
of (i) the breach of any representation or warranty of Parent contained in this
Agreement or in any certificate delivered pursuant to this Agreement, it being
understood and agreed that for all purposes of this Section 9.03, such
representations and warranties shall be interpreted without giving effect to any
limitations or qualifications as to "materiality" (including the word
"material") or "Parent Material Adverse Effect", and (ii) the breach of any
covenant or agreement of Parent contained in this Agreement or in any
certificate delivered pursuant to this Agreement.
(b) No claim may be made against Parent for indemnification pursuant to this
Section 9.03 unless the aggregate of all Losses of the Stockholders with respect
to this Section 9.03 shall exceed an amount equal to $350,000, and Parent shall
then be liable for the amount of any such Losses in excess of $250,000;
provided, however, that, notwithstanding anything to the contrary in this
Agreement, from and after the Effective Time, the indemnification obligation of
Parent for Losses under Article IX of this Agreement (other than with respect to
the representations and warranties set forth in Section 5.04 and the covenants
and agreements in Article III, which shall be limited to the Aggregate
Consideration) shall be limited to, and the sole and exclusive recourse of the
Company Indemnified Parties' indemnification obligation shall be limited to an
amount in cash equal to the product of (x) the Average Closing Price multiplied
by (y) the number of shares of Parent Common Stock delivered to the Escrow Agent
at the Closing.
Section 9.04. Indemnification Procedures. For purposes of this Section 9.04,
a party against whom indemnification may be sought (which for purposes of this
Agreement shall include the Stockholder Representative) is referred to as the
"Indemnifying Party" and the party which may be entitled to indemnification
(which for purposes of this Agreement shall include the Stockholder
Representative) is referred to as the "Indemnified Party". An Indemnified Party
shall give the Indemnifying Parties prompt written notice in accordance with
Section 11.02 of any claim, assertion, event or proceeding by or in respect of a
third party of which such Indemnified Party has knowledge concerning any Loss as
to which such Indemnified Party may request indemnification hereunder. The
Indemnifying Parties shall have the right to direct, through counsel of their
own choosing, which counsel shall be reasonably satisfactory to the Indemnified
Party, the defense or settlement of any claim or proceeding the subject of
indemnification hereunder at its own expense. If the Indemnifying Parties elect
to assume the defense of any such claim or proceeding, the Indemnified Party may
A-45
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall
provide the Indemnifying Parties with access to its records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Indemnifying Parties in
the defense or settlement thereof, and the Indemnifying Parties shall reimburse
the Indemnified Party for all its reasonable out-of-pocket expenses in
connection therewith. If the Indemnifying Parties elect to direct the defense of
any such claim or proceeding, the Indemnified Party shall not pay, or permit to
be paid, any part of any claim or demand arising from such asserted liability
unless the Indemnifying Parties consent in writing to such payment or unless the
Indemnifying Party withdraws from the defense of such asserted liability or
unless a final judgment from which no appeal may be taken by or on behalf of the
Indemnifying Parties is entered against the Indemnified Party for such
liability. No settlement in respect of any third-party claim may be effected by
the Indemnifying Parties without the Indemnified Party's prior written consent
unless the settlement involves a full and unconditional release of the
Indemnified Party, provided, however, that, in the event that the settlement
involves payment to a third party of an amount, that together with the aggregate
amounts of all other claims for indemnity hereunder, exceeds the amounts
remaining in the Escrow Fund, no settlement with respect to a claim involving
such payment shall be effected without the prior written consent of the
Indemnified Party. If the Indemnifying Parties shall fail to undertake any such
defense, the Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the Indemnifying Parties' expense. If the Indemnified
Party assumes the defense of any such claim or proceeding pursuant to this
Section 9.04 and proposes to settle such claim or proceeding prior to a final
judgment thereon or to forgo any appeal with respect thereto, then the
Indemnified Party shall give the Indemnifying Parties prompt written notice
thereof and the Indemnifying Parties shall have the right to participate in the
settlement or assume or reassume the defense of such claim or proceeding in the
event the Indemnifying Parties agree to assume liability for any Losses arising
from such claim or proceeding. All notices required to be sent by the
Indemnified Party to any of the Indemnifying Parties, all notices required to be
sent by such Indemnifying Party to the Indemnified Party and all decisions or
actions required to be taken by any of the Indemnifying Parties shall be sent
to, sent by and taken by the Stockholders' Representative on behalf of any such
Indemnifying Party.
Section 9.05. Distributions from the Escrow Fund. Distributions from the
Escrow Fund shall be made pursuant to the Escrow Agreement.
Section 9.06. Stockholder Representative; Approval of Stockholders. (a) The
Stockholder Representative shall be constituted and appointed as agent for and
on behalf of the Stockholders to give and receive notices and communications, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Stockholder Representative for the accomplishment of the
foregoing. Such agency may be changed by a majority vote or by the written
consent of the majority of the Stockholders from time to time upon not less than
ten business days' prior written notice to Parent. In the event of the death or
disability (for more than 15 business days) of the Stockholder Representative or
his resignation as Stockholder Representative and until a successor Stockholder
Representative shall be appointed as provided above or in Section 7(b) of the
Escrow Agreement, David Callan shall act as the Stockholder Representative
pending the appointment of the successor Stockholder Representative. No bond
shall be required of the Stockholder Representative, and the Stockholder
Representative shall receive no compensation for his/her services. Notices or
communications to or from the Stockholder Representative shall constitute notice
to or from each of the Stockholders. In connection with this Agreement, the
Escrow Agreement, and any instrument, agreement or document relating hereto or
thereto, and in exercising or failing to exercise all or any of the powers
conferred upon the Stockholder Representative hereunder or thereunder, the
Stockholder Representative shall incur no responsibility whatsoever to any
Stockholder by reason of any error in judgment or other act or omission
performed or omitted hereunder or thereunder or any other agreement, instrument
or document, excepting the only responsibility for any act or failure to act
which represents willful misconduct. The Stockholder Representative shall be
indemnified by the Stockholders, but only from any amounts remaining from the
Escrow Fund after the payment of all claims
A-46
successfully asserted against the Escrow Fund by all Parent Indemnified Parties
and the retention of any portion of the Escrow Fund by the Escrow Agent due to
any Claim Notice, after the 18 month anniversary of the Closing Date and
thereafter from any amounts no longer retained by the Escrow Agent (except to
the extent delivered to any Parent Indemnified Party), against all Losses of any
nature whatsoever, arising out of or in connection with any claim or proceeding
relating to the acts or omissions of the Stockholder Representative hereunder or
pursuant to the Escrow Agreement.
(b) The approval of the Stockholders of the Merger shall be deemed to be
approval of the terms of the provisions of this Article IX, including the
appointment of the Stockholder Representative.
(c) A decision, act, consent or instruction of the Stockholder Representative
shall constitute a decision of all Stockholders and shall be final, binding and
conclusive upon each such Stockholder, and Parent may rely upon any such
decision, act, consent, or instruction of the Stockholder Representative as
being the decision, act, consent or instruction of each Stockholder. Parent is
hereby relieved from any liability to any person for any acts done by it in
accordance with such decision, act, consent or instruction of the Stockholder
Representative.
(d) The Parent and the Company agree that, after the Effective Time, the
reasonable administrative expenses of Stockholder Representative, but not any
fees or expenses of attorneys or other advisors, shall be paid from time to time
from the Escrow Fund; provided, that, such fees and expenses of attorneys and
other advisors may be paid only out of, and prior to, any final distribution
from the Escrow Fund to the Stockholders.
ARTICLE X
Termination, Amendment and Waiver
Section 10.01. Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated by this Agreement may be abandoned at
any time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall not have
occurred on or before October 31, 2001; provided, however, that either party
may, by written notice to the other party delivered on or prior to October 31,
2001, extend such date until November 30, 2001 if the failure to consummate the
Merger on or prior to October 31, 2001 shall have resulted from the failure of
the conditions set forth in Section 8.01(a), (b) or (c) to be satisfied;
provided, however, that in the event any party is in material breach of its
obligations under this Agreement, and such material breach has been the cause
of, or resulted in, the failure of the Effective Time to occur, such party may
not terminate this Agreement pursuant to this Section 10.01(b) until December
31, 2001.
(c) by either Parent or the Company if there shall be any Governmental Order
that is final and nonappealable having the effect of making the Merger illegal
or otherwise prohibiting consummation of the Merger;
(d) by Parent upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 8.02(a) and Section 8.02(b)
would not be satisfied, if such breach is not cured within 20 business days from
the date of notice thereof;
(e) by the Company upon a breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 8.03(a) and Section 8.03(b) would
not be satisfied, if such breach is not cured within 20 business days from the
date of notice thereof; or
A-47
(f) by the Company if (i) the condition to Parent's obligations contained in
Section 8.02(i) is not satisfied on or prior to July 31, 2001 or (ii) if the
board of directors of Parent rejects a proposal to approve this Agreement.
Section 10.02. Effect of Termination. In the event of termination of this
Agreement pursuant to Section 10.01, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Parent, Merger
Sub or the Company or any of their respective officers or directors, and all
rights and obligations of each party hereto shall cease; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement; and provided further that Section 11.01 shall survive
termination of this Agreement.
Section 10.03. Amendment. This Agreement may not be amended except (a) by an
instrument in writing signed by each of the parties hereto or (b) by a waiver
in accordance with Section 10.04.
Section 10.04. Waiver. Any party hereto may (a) extend the time for the
performance of any obligation or other act of any other party hereto, (b) waive
any inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition of this Agreement.
ARTICLE XI
General Provisions
Section 11.01. Expenses. Except as otherwise expressly provided in this
Agreement, all costs and expenses (including, without limitation, all fees and
disbursements of counsel, accountants, financial advisors, experts and
consultants to a party hereto and its affiliates) incurred by a party hereto or
on its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, the filing of any required notices under the HSR Act or
other similar regulations and all other matters related to the closing of the
Merger and the other transactions contemplated by this Agreement shall be paid
by the party incurring such expenses, whether or not the Merger or any other
transaction is consummated. Notwithstanding the preceding sentence, at the
Closing, the Company shall deliver to Parent a certificate setting forth the
amount of all Company Expenses, which amount shall be paid by Parent by means of
wire transfer of funds at Closing. Such Company Expenses shall be deemed to be
current liabilities (without duplication of any such Company Expenses already on
any such balance sheet) in the calculation of the Net Working Capital on the
Estimated Balance Sheet and the Closing Balance Sheet.
Section 11.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by telecopy or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 11.02):
(a) if to Parent or Merger Sub:
Motorola, Inc.
1303 East Algonquin Road
Schaumberg, IL 60196
Telephone: (847) 576-3482
Telecopy: (847) 576-3628
Attention: General Counsel
A-48
with a copy to:
Motorola, Inc.
Broadband Communications Sector
101 Tournament Drive
Horsham, PA 19044
Telephone: (215) 323-2885
Telecopy: (215) 323-1300
Attention: Paul Fleck, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
(b) if to the Company:
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, MA 01876
Telephone: (978) 858-2300
Telecopy: (978) 858-2399
Attention: David F. Callan, President
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Telecopy: (617) 542-2241
Attention: Joseph P. Curtin, Esq.
(c) if to the Stockholders' Representative:
Todd Dagres
Battery Ventures
20 William Street
Wellesley, MA
Telephone: (781) 237-1001
Telecopy: (781) 577-1001
with a copy to:
Testa Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02111
Telephone: (617) 248-7000
Telecopy: (617) 248-7100
Attention: Howard Rosenblum
A-49
Section 11.03. Third-Party Beneficiaries. Except for the provisions contained
in Article III and Section 7.11, nothing in this Agreement shall be construed as
giving any person other than the parties hereto any legal or equitable right,
remedy or claim under or with respect to this Agreement.
Section 11.04. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
Section 11.05. Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
Section 11.06. Incorporation of Disclosure Schedule. The Disclosure Schedule
attached hereto and referred to herein are hereby incorporated herein by
reference and made a part of this Agreement for all purposes as if fully set
forth herein.
Section 11.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 11.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in any New York state or federal court sitting in the
County of New York, New York.
Section 11.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 11.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 11.11. Entire Agreement. This Agreement (including the Transaction
Documents) and the Confidentiality Agreement constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings among the parties with respect thereto.
Section 11.12. Waiver of Jury Trial. Each of the parties hereto irrevocably
and unconditionally waives all right to trial by jury in any action, proceeding
or counterclaim (whether based in contract, tort or otherwise) arising out of or
relating to this Agreement or the Actions of the parties hereto in the
negotiation, administration, performance and enforcement thereof.
A-50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Motorola, Inc.
/s/ Richard C. Smith
By: __________________________________
Name: Richard C. Smith
Title: Corporate Vice President &
Director Business
Development
RiverDelta Networks, Inc.
/s/ David F. Callan
By: __________________________________
Name: David F. Callan
Title: President
Bayou Merger Sub, Inc.
/s/ Paul P. Fleck
By: __________________________________
Name: Paul P. Fleck
Title: Assistant Secretary
A-51
Appendix A-2
AMENDMENT NO. 1
TO THE MERGER AGREEMENT
THIS AMENDMENT NO. 1, dated August 13, 2001 (this "Amendment"), to the
AGREEMENT AND PLAN OF MERGER, dated as of July 11, 2001 (the "Merger
Agreement"), among MOTOROLA, INC., a Delaware corporation ("Parent"), BAYOU
MERGER SUB, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and RIVERDELTA NETWORKS, INC. a Delaware corporation
(the "Company"), is made pursuant to Section 10.03 of the Merger Agreement;
WHEREAS, the parties desire to amend the Merger Agreement to correct certain
matters as provided in this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in the Merger Agreement and herein, the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used but not defined herein are
used as defined in the Merger Agreement.
SECTION 2. Amendment to Merger Agreement. The Merger Agreement is hereby
amended by: (i) in Section 1.01, replacing the words "Harris Trust and Savings
Bank" in the defined term "Escrow Agent" with the words "Bank One Trust Company,
N.A. or another bank or trust company designated by Parent and reasonably
satisfactory to the Company"; and (ii) in Section 3.04(a), replacing the words
"Harris Trust and Savings Bank" in each case with the words "ComputerShare
Investor Services LLC".
SECTION 3. Effect of Amendment. Except as otherwise provided in this
Amendment, all terms and conditions of the Merger Agreement remain in full
force and effect.
SECTION 4. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, and all shall
constitute one and the same Amendment.
SECTION 5. Governing Law. This Amendment shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State. All actions and proceedings
arising out of or relating to this Amendment shall be heard and determined
exclusively in any New York state or federal court sitting in the County of New
York, New York.
IN WITNESS WHEREOF, this Amendment is signed by duly authorized
representatives of the parties on the date mentioned on the first page of this
Amendment.
Motorola, Inc.
/s/ Richard C. Smith
By: _________________________________
Name: Richard C. Smith
Title: Corporate Vice President
Riverdelta Networks, Inc.
/s/ David F. Callan
By: _________________________________
Name: David F. Callan
Title: President
Bayou Merger Sub, Inc.
/s/ Paul P. Fleck
By: _________________________________
Name: Paul P. Fleck
Title: Assistant Secretary
A-2-1
Appendix B
--------------------------------------------------------------------------------
VOTING AGREEMENT
Dated as of July 11, 2001
By and Among
MOTOROLA, INC.
BAYOU MERGER SUB, INC.
and
THE STOCKHOLDERS SIGNATORY HERETO
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I
Voting Agreement
Section 1.01. Preferred Stock Consent ................................... B-1
Section 1.02. Voting Agreement .......................................... B-1
Section 1.03. Irrevocable Proxy ......................................... B-2
Section 1.04. Conflicts ................................................. B-2
Section 1.05. No Ownership Interest ..................................... B-2
ARTICLE II
Representations and Warranties of the Stockholders
Section 2.01. Organization, Qualification ............................... B-2
Section 2.02. Authority Relative to this Agreement ...................... B-3
Section 2.03. No Conflict ............................................... B-3
Section 2.04. Title to the Shares ....................................... B-3
Section 2.05. Required Majority of Stockholders ......................... B-3
Section 2.06. Accredited Investor ....................................... B-4
Section 2.07. Intermediary Fees ......................................... B-4
ARTICLE III
Representations and Warranties of Parent and Merger Sub
Section 3.01. Corporate Organization .................................... B-4
Section 3.02. Authority Relative to this Agreement ...................... B-4
Section 3.03. No Conflict; Required Filings and Consents ................ B-4
ARTICLE IV
Covenants of the Stockholders
Section 4.01. No Disposition or Encumbrance of Shares ................... B-5
Section 4.02. No Solicitation of Transactions ........................... B-5
Section 4.03. Further Action; Reasonable Best Efforts ................... B-5
Section 4.04. Termination of Investor Rights Agreement .................. B-5
Section 4.05. Release ................................................... B-5
ARTICLE V
Termination
Section 5.01. Termination ............................................... B-5
B-i
Page
----
ARTICLE VI
Miscellaneous
Section 6.01. Notices ................................................... B-5
Section 6.02. Severability .............................................. B-6
Section 6.03. Assignment ................................................ B-6
Section 6.04. Parties in Interest ....................................... B-6
Section 6.05. Specific Performance ...................................... B-6
Section 6.06. Governing Law ............................................. B-7
Section 6.07. Waiver of Jury Trial ...................................... B-7
Section 6.08. Headings .................................................. B-7
Section 6.09. Counterparts .............................................. B-7
Section 6.10. Amendment ................................................. B-7
Section 6.11. Waiver .................................................... B-7
Section 6.12. Expenses .................................................. B-7
Section 6.13. Adjustments ............................................... B-7
Section 6.14. Entire Agreement .......................................... B-7
Schedule I -- Stockholders
Schedule II -- Permitted Encumbrances
B-ii
VOTING AGREEMENT
VOTING AGREEMENT dated as of July 11, 2001 (this "Agreement"), among
MOTOROLA, INC., a Delaware corporation ("Parent"), BAYOU MERGER SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub") and
each of the parties identified on Schedule I hereto (each, a "Stockholder" and,
collectively, the "Stockholders"), as stockholders of RIVERDELTA NETWORKS, INC.,
a Delaware corporation (the "Company").
WHEREAS, Parent and Merger Sub are entering into an Agreement and Plan of
Merger dated as of the date hereof (as amended from time to time, the "Merger
Agreement"; capitalized terms used but not defined in this Agreement have the
meanings attributed to such terms in the Merger Agreement), with the Company,
pursuant to which Merger Sub shall merge with and into the Company (the
"Merger");
WHEREAS, each Stockholder is the record or beneficial owner of the number of
shares of Common Stock, Series A Preferred Stock and/or Series B Preferred Stock
(together with any shares of Common Stock, Series A Preferred Stock and Series B
Preferred Stock acquired after the date hereof, such Stockholder's "Shares") set
forth on Schedule I hereto;
WHEREAS, the holders of (i) 66 2/3% of the issued and outstanding shares of
Series A Preferred Stock and (ii) Shares having a majority of the voting power
of all classes of Company Shares voting as a single class, are signatories to
this Agreement;
WHEREAS, as a condition to entering into the Merger Agreement and incurring
the obligations set forth therein, Parent and Merger Sub have required that the
Stockholders agree to enter into this Agreement and thereby agree to vote in
favor of the approval and adoption of the Merger Agreement, and each of the
Stockholders is willing to enter into this Agreement;
WHEREAS, the Stockholders are willing to enter into this Agreement to induce
Parent and Merger Sub to enter into the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
Voting Agreement
Section 1.01. Preferred Stock Consent. Each Stockholder who is a party hereto
and who is a record or beneficial owner of shares of Series A Preferred Stock
hereby agrees and elects to receive the Series A Preferred Stock Consideration
pursuant to Section 3.03 of the Merger Agreement in lieu of (x) receiving
payments set forth in Article Fourth (B)(1)(a)(i)(1) of the Certificate of
Incorporation of the Company or (y) electing the benefits of Article Fourth
(B)(2)(d)(vii) of the Certificate of Incorporation of the Company.
Section 1.02. Voting Agreement. Each Stockholder hereby agrees that, from and
after the date hereof and until the close of business on the day of the
termination of the Merger Agreement, at any meeting of the stockholders of the
Company, however called, or in connection with any written consent of the
stockholders of the Company, such Stockholder shall vote (or cause to be voted),
or act by written consent with respect to, such Stockholder's Shares (i) in
favor of approval of the Merger, adoption of the Merger Agreement and approval
of all the transactions contemplated by the Merger Agreement and this Agreement
and otherwise in such manner as may be necessary to consummate the Merger, (ii)
against any action, agreement, transaction (other than the Merger Agreement or
the transactions contemplated thereby) or proposal (including any Competing
Transaction) that could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled or that is intended,
or could reasonably be expected, to impede, interfere, delay,
B-1
discourage or adversely affect the Merger Agreement, the Merger or this
Agreement. Any vote, or written consent, by such Stockholder that is not in
accordance with this Section 1.02 shall be considered null and void.
Section 1.03. Irrevocable Proxy. Each Stockholder hereby irrevocably appoints
Parent and its Secretary, Assistant Secretary and Assistant Treasurer as such
Stockholder's attorney, agent and proxy, with full power of substitution, (a) to
vote and otherwise act with respect to such Stockholder's Shares at any meeting
of stockholders of the Company (whether annual or special and whether or not an
adjourned or postponed meeting) and (b) to act by written consent (if authorized
by the Company's board of directors) with respect to such Stockholder's Shares,
on the matters and in the manner specified in Section 1.02. THIS PROXY AND POWER
OF ATTORNEY ARE IRREVOCABLE AND COUPLED WITH AN INTEREST AND, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, SHALL BE VALID AND BINDING ON ANY PERSON TO WHOM
A STOCKHOLDER MAY TRANSFER ANY OF HIS OR HER SHARES, AND THE STOCKHOLDER WILL
TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY
TO EFFECTUATE THE INTENT OF THIS PROXY. Each Stockholder hereby revokes all
other proxies and powers of attorney with respect to such Stockholder's Shares
that may have heretofore been appointed or granted, and no subsequent proxy or
power of attorney shall be given by any Stockholder with respect thereto. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of any Stockholder and the termination of any previously appointed
proxy and any obligation of the Stockholder under this Agreement shall be
binding upon the heirs, personal representatives, successors and assigns of such
Stockholder. Parent hereby agrees that it will cause its Secretary, Assistant
Secretary and Assistant Treasurer to vote the Shares at any such meeting or in
any such written consent in favor of the Merger on the terms set forth in the
Merger Agreement as executed (with such changes as are not materially adverse to
the rights of the Stockholders in the Merger) and with respect to other matters
in connection therewith.
Section 1.04. Conflicts. In the case of any Stockholder who is or becomes an
officer or director of the Company, such Stockholder makes no agreement or
understanding herein in his capacity as such director or officer. Each of the
Stockholders signs solely in his or her capacity as the record and beneficial
owner of the Stockholder's Shares.
Section 1.05. No Ownership Interest. Except as set forth in this Agreement,
all rights, ownership and economic benefits of and relating to the Shares shall
remain and belong to such Stockholder, and Parent shall have no authority to
manage, direct, restrict, regulate, govern or administer any of the policies or
operations of the Company.
ARTICLE II
Representations and Warranties of the Stockholders
Each Stockholder, severally and not jointly, hereby represents and warrants
(with respect to such Stockholder only and not with respect to each other
Stockholder) to Parent and to Merger Sub in respect of such Stockholder as
follows:
Section 2.01. Organization, Qualification. (a) Such Stockholder, if he or
she is an individual, has all legal capacity to enter into this Agreement, to
carry out his or her obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Such Stockholder, if it is a corporation or other legal entity, (i) is
duly organized, validly existing and, if applicable, in good standing under the
laws of the jurisdiction of its incorporation or formation and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or, if
applicable, in good standing or to have such power, authority and governmental
approvals would not
B-2
prevent or materially delay consummation of the transactions contemplated by
this Agreement or otherwise prevent or materially delay such Stockholder from
performing its obligations under this Agreement.
Section 2.02. Authority Relative to this Agreement. Such Stockholder has all
necessary right, power and authority to execute and deliver this Agreement, to
perform such Stockholder's obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by such Stockholder, if it is a corporation, and the performance of its
obligations hereunder have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of such
Stockholder is necessary to authorize this Agreement. This Agreement has been
duly and validly executed and delivered by such Stockholder and, assuming due
authorization, execution and delivery by Parent and Merger Sub, constitutes a
legal, valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms.
Section 2.03. No Conflict. (a) The execution and delivery of this Agreement
by such Stockholder do not, and the performance of this Agreement by such
Stockholder shall not, (i) conflict with or violate the certificate of
incorporation or by-laws of each such Stockholder that is a corporation, (ii)
conflict with or violate the terms of any trust agreements or equivalent
organizational documents of any Stockholder that is a trust, (iii) assuming
satisfaction of the requirements set forth in Section 2.03(b) below, conflict
with or violate any Law applicable to such Stockholder or by which the Shares
owned by such Stockholder are bound or affected or (iv) result in any breach of,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or except as contemplated by this
Agreement, result in the creation of an Encumbrance on any of the Shares owned
by such Stockholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such Stockholder or the Shares
owned by such Stockholder are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences that would not prevent or
materially delay consummation of the transactions contemplated by this Agreement
or otherwise prevent or materially delay such Stockholder from performing its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by such Stockholder do not,
and the performance of this Agreement by such Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws, state takeover laws and
the pre-merger notification requirements of the HSR Act and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated by this Agreement, or otherwise
prevent such Stockholder from performing its obligations under this Agreement.
Section 2.04. Title to the Shares. As of the date hereof, such Stockholder is
the record or beneficial owner of, and has good title to, the number of Shares
set forth beneath such Stockholder's name on Schedule I hereto. Such Shares are
all the shares of capital stock of the Company owned, either of record or
beneficially, by such Stockholder. The Shares owned by such Stockholder are
owned free and clear of all Encumbrances, other than any Encumbrances created by
this Agreement, the Stock Repurchase Rights, the Stock Pledge Agreements, the
Investor Rights Agreement or Stock Option Agreements with the Company. Except as
provided in this Agreement, such Stockholder has not appointed or granted any
proxy, which appointment or grant is still effective, with respect to the Shares
owned by such Stockholder. At the Closing, such Stockholder shall deliver, and
upon such delivery and payment of the Merger Consideration therefor, as
applicable, Merger Sub shall receive good, valid and marketable title to such
Stockholder's Shares free and clear of any Encumbrances, other than pursuant to
this Agreement.
Section 2.05. Required Majority of Stockholders. The Stockholders signatory
hereto constitute: (a) holders of a number of shares of Company Stock
sufficient to provide the Requisite Stockholder Approval; and
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(b) holders of the amount and type of shares of Company Stock necessary to
approve the amendment to the Investor Rights Agreement provided for in Section
5.01 of this Agreement, including without limitation (i) David F. Callan and
Scott E. Morrisse (the Founders referred to in the Investor Rights Agreement)
and (ii) holders of at least two thirds of the shares of Company Common Stock
issued or issuable upon conversion of all outstanding shares of Company
Preferred Stock.
Section 2.06. Accredited Investor. Each Stockholder is an "Accredited
Investor" (as such term is defined in Rule 501 of Regulation D promulgated
under the Securities Act).
Section 2.07. Intermediary Fees. No investment banker, broker, finder or
other intermediary is, or shall be, entitled to a fee or commission in respect
of this Agreement based on any arrangement or agreement made by or on behalf of
such Stockholder in this Agreement or otherwise in his or her capacity as a
stockholder of the Company.
ARTICLE III
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub hereby, jointly and severally, represent and warrant to
each Stockholder as follows:
Section 3.01. Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or otherwise
prevent or materially delay Parent or Merger Sub from performing its obligations
under this Agreement.
Section 3.02. Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by Parent and Merger Sub and the performance by Parent and
Merger Sub of their obligations hereunder have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the part
of Parent or Merger Sub is necessary to authorize this Agreement. This Agreement
has been duly and validly executed and delivered by Parent and Merger Sub and,
assuming due authorization, execution and delivery by the Stockholders,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub enforceable against each of Parent and Merger Sub in accordance with its
terms.
Section 3.03. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, (i) conflict
with or violate the certificate of incorporation or by-laws of Parent or Merger
Sub and (ii) assuming satisfaction of the requirements set forth in 3.03(b)
below, conflict with or violate any Law applicable to Parent or Merger Sub,
except for any such conflicts or violations that would not prevent or materially
delay consummation of the transactions contemplated by this Agreement or
otherwise prevent or materially delay Parent or Merger Sub from performing its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws and
state takeover laws and the pre-merger notification requirements of the HSR Act,
and (ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the transactions contemplated by this Agreement
or otherwise prevent Parent or Merger Sub from performing their obligations
under this Agreement.
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ARTICLE IV
Covenants of the Stockholders
Section 4.01. No Disposition or Encumbrance of Shares. Each Stockholder,
severally and not jointly, hereby agrees that, except as contemplated by this
Agreement or the Merger Agreement and except as otherwise set forth in Schedule
II hereto, such Stockholder shall not (i) sell, transfer, tender, pledge,
assign, contribute to the capital of any entity, hypothecate, give or otherwise
dispose of, grant a proxy or power of attorney with respect to, deposit into any
voting trust, enter into any voting agreement, or create or permit to exist any
Encumbrance of any nature whatsoever with respect to, any of such Stockholder's
Shares (or agree or consent to, or offer to do, any of the foregoing), or (ii)
take any action that would make any representation or warranty of such
Stockholder herein untrue or incorrect in any material respect or have the
effect of preventing or disabling such Stockholder from performing such
Stockholder's obligations hereunder.
Section 4.02. No Solicitation of Transactions. Each Stockholder, severally
and not jointly, agrees to comply with and be bound by Section 7.02 of the
Merger Agreement as if such Stockholder were a party thereto and shall be
restricted by the provisions thereof.
Section 4.03. Further Action; Reasonable Best Efforts. Upon the terms and
subject to the conditions hereof, Parent, Merger Sub and each Stockholder shall
use their reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
this Agreement.
Section 4.04. Termination of Investor Rights Agreement. Each Stockholder
party hereto and the Company hereby authorize and approve an amendment to the
Investor Rights Agreement, amending such agreement by inserting the following
sentence at the end of Section 7.11 thereof:
"This Agreement shall terminate in its entirety
immediately prior to the effective time of the merger
provided for in the Agreement and Plan of Merger
dated as of July 11, 2001 among Motorola, Inc.,
RiverDelta Networks, Inc. and Bayou Merger Sub, Inc."
Section 4.05. Release. Each Stockholder hereby releases any claims such
Stockholder may have against the Company, its directors and officers in its
capacity as a Stockholder of the Company arising prior to the Effective Time,
other than any claims arising under the Merger Agreement and the Transaction
Documents. Nothing contained in this Section 4.05 shall be deemed to be a
release or waiver by any Stockholder that is a director, officer, employee or
agent of the Company of any claims such Stockholder may have against the Company
in such capacity.
ARTICLE V
Termination
Section 5.01. Termination. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the earliest of (i) the effective time
of the Merger and (ii) the termination of the Merger Agreement. Nothing in this
Section 5.01 shall relieve any party of liability for any willful breach of this
Agreement.
ARTICLE VI
Miscellaneous
Section 6.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon
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receipt) by delivery in person, by overnight courier service, by telecopy or by
registered or certified mail (postage prepaid, return receipt requested) (i) to
the Stockholders at the address indicated on the signature pages hereto and (ii)
to the respective parties listed below at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 7.01):
if to Parent or Merger Sub:
Motorola, Inc.
1303 East Algonquin Road
Schaumberg, IL 60196
Telephone: (847) 576-3482
Telecopy: (847) 576-3628
Attention: General Counsel
with a copy to:
Motorola, Inc.
Broadband Communications Sector
101 Tournament Drive
Horsham, PA 19044
Telephone: (215) 323-2885
Telecopy: (215) 323-1300
Attention: Paul Fleck, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
Section 6.02. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
Section 6.03. Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Merger Sub may assign all or any of its rights
and obligations hereunder to any wholly-owned direct or indirect subsidiary of
Parent, provided that no such assignment shall relieve Merger Sub of its
obligations hereunder if such assignee does not perform such obligations.
Section 6.04. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their respective
successors and assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
Section 6.05. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
were not performed in accordance with the terms hereof and that the
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parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
Section 6.06. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in any New York state or federal court sitting in the
County of New York, New York.
Section 6.07. Waiver of Jury Trial. Each of the parties hereto irrevocably
and unconditionally waives all right to trial by jury in any action, proceeding
or counterclaim (whether based in contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of the parties hereto in the
negotiation, administration, performance and enforcement thereof.
Section 6.08. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 6.09. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 6.10. Amendment. This Agreement may not be amended except (a) by an
instrument in writing signed by all the parties hereto or (b) by a waiver in
accordance with Section 6.11.
Section 6.11. Waiver. No provision of this Agreement may be waived, except by
written consent of the party or parties against which enforcement of the waiver
is sought. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition of this Agreement.
Section 6.12. Expenses. Except as otherwise specified in this Agreement or
the Merger Agreement, all costs and expenses, including, without limitation,
fees and disbursements of counsel, financial advisors, accountants, experts and
consultants incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
Section 6.13. Adjustments. (a) In the event of (i) any increase or decrease
or other change in the Shares by reason of stock dividend, stock split,
recapitalizations, combinations, exchanges of shares or the like or (ii) a
Stockholder becomes the beneficial owner of any additional Shares or other
securities of the Company, then the terms of this Agreement, including the term
"Shares" as defined herein, shall apply to the shares of capital stock and other
securities of the Company held by such Stockholder immediately following the
effectiveness of the events described in clause (i), or such Stockholder
becoming the beneficial owner thereof pursuant to clause (ii).
(b) Each Stockholder hereby agrees to promptly notify Parent and Merger Sub
of the number of any new Shares acquired by such Stockholder, if any, after the
date hereof.
Section 6.14. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect thereto.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
STOCKHOLDERS:
Pequot Private Equity Fund II, L.P.
By: Pequot Capital Management, Inc.
Its Investment Manager
/s/ Kevin E. O'Brien
By: _________________________________
Name: Kevin E. O'Brien
Title: General Counsel
Address: 500 Nyala Farm Road
Westport, CT 06880
Battery Ventures V, L.P.
By: Battery Partners V, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Address: 20 William Street
Wellesley, MA 02181
Battery Investment Partners V, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Address: 20 William Street
Wellesley, MA 02181
Battery Ventures Convergence Fund,
L.P.
By: Battery Convergence Partners,
LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Address: 20 William Street
Wellesley, MA 02181
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Charles River Partnership X,
a Limited Partnership
By: Charles River X GP, LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Address: 100 Winter Street, Suite
3300
Waltham, MA 02451
Charles River Partnership X-A,
a Limited Partnership
By: Charles River X GP LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Address: 100 Winter Street, Suite
3300
Waltham, MA 02451
Charles River Friends X-B, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Address: 100 Winter Street, Suite
3300
Waltham, MA 02451
Charles River Friends X-C, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Address: 100 Winter Street, Suite
3300
Waltham, MA 02451
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/s/ David Callan
-------------------------------------
David Callan
Address: 67 Spinnaker Way
Portsmouth, NH 03801
/s/ Scott E. Morrisse
-------------------------------------
Scott E. Morrisse
Address: 69 Spinnaker Way
Portsmouth, NH 03801
/s/ Michael Brown
-------------------------------------
Michael Brown
Address: 3 Indian Hill Lane
Melrose, MA 02176
Motorola, Inc.
/s/ Richard C. Smith
By: _________________________________
Name: Richard C. Smith
Title: Corporate Vice President &
Director
Business Development
Bayou Merger Sub, Inc.
/s/ Paul P. Fleck
By: _________________________________
Name: Paul P. Fleck
Title: Assistant Secretary
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SCHEDULE I
Series A Series B
Common Preferred Preferred
Name Stock Stock Stock
---- ---------- --------- ---------
PEQUOT PRIVATE EQUITY FUND II, L.P. -- -- 1,654,260
BATTERY VENTURES V, L.P. -- 2,945,447 367,876
BATTERY INVESTMENT PARTNERS V, LLC -- 67,798 8,468
BATTERY VENTURES CONVERGENCE FUND, L.P. -- 298,013 37,221
CHARLES RIVER PARTNERSHIP X, A LIMITED
PARTNERSHIP -- 2,996,835 374,295
CHARLES RIVER PARTNERSHIP X-A, A LIMITED
PARTNERSHIP -- 82,223 10,269
CHARLES RIVER FRIENDS X-B, LLC -- 197,594 24,679
CHARLES RIVER FRIENDS X-C, LLC -- 34,606 4,322
David Callan 11,475,000 -- 413,565
Scott E. Morrisse 1,500,000 -- 41,356
Michael Brown 1,500,000 -- --
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SCHEDULE II
Encumbrances created or existing under the following agreements:
1. Stock Purchase and Repurchase Agreement between RiverDelta Networks, Inc.
and Michael R. Brown dated May 8, 1999, as amended by letter agreement dated
May 21, 1999.
2. Incentive Stock Option Agreement between RiverDelta Networks, Inc. and
Michael R. Brown dated November 15, 1999.
3. First Amended and Restated Investor Rights Agreement between RiverDelta
Networks, Inc. and the Stockholders (as defined therein) dated March 22, 2000,
as amended by the First Amendment dated as of February 7, 2001.
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Appendix C
DELAWARE GENERAL CORPORATION LAW
(S)262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to (S)228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
(S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to (S)(S)251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall
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be such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 339, L.
`98, eff. 7-1-98.)
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Appendix D
FORM OF ESCROW AGREEMENT
This Escrow Agreement is entered into as of [ ], 2001 (this "Agreement")
by and among Motorola, Inc., a Delaware corporation ("Parent"), Todd Dagres
(the "Stockholder Representative"), and Bank One Trust Company N.A. (the
"Escrow Agent").
WHEREAS, Parent, RiverDelta Networks, Inc. (the "Company") and Bayou Merger
Sub, Inc., a Delaware corporation and a subsidiary of Parent ("Merger Sub") have
entered into an Agreement and Plan of Merger dated as of July [ ], 2001 (the
"Merger Agreement"), pursuant to which Merger Sub will be merged (the "Merger")
with and into the Company which, as the surviving corporation (the "Surviving
Corporation"), will become a wholly-owned subsidiary of Parent (the defined
terms used but not defined herein shall have the meaning ascribed to such terms
in the Merger Agreement);
WHEREAS, the Merger Agreement provides that the Escrow Fund (as defined in
Section 2(a) below) will be established to secure certain indemnification and
expense obligations of the Stockholders to Parent;
WHEREAS, the Escrow Agent is willing to act in the capacity of Escrow Agent
hereunder subject to, and upon the terms and conditions of, this Agreement; and
WHEREAS, the parties hereto desire to establish the terms and conditions
pursuant to which the Escrow Fund will be established and maintained;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Consent of Stockholders; Designation of Escrow Agent. The Stockholders
have by virtue of their approval of the Merger Agreement consented to: (a) the
establishment of the Escrow Fund (as defined below) to secure the Stockholders'
indemnification obligations under Article IX of the Merger Agreement in the
manner set forth herein and the post-closing adjustment obligations under
Section 3.09 of the Merger Agreement (b) the appointment of the Stockholder
Representative as their representative for purposes of this Agreement and as
attorney-in-fact and agent for and on behalf of each Stockholder, and the taking
by the Stockholder Representative of any and all actions and the making of any
decisions required or permitted to be taken or made by them under this Agreement
and (c) all of the other terms, conditions and limitations contained in this
Agreement. Parent and the Stockholder Representative, on behalf of the
Stockholders, hereby mutually designate and appoint Bank One Trust Company, N.A.
to serve as Escrow Agent for the purposes set forth herein. The Escrow Agent
hereby accepts such appointment and agrees to act in furtherance of the terms
and conditions herein.
2. Escrow and Indemnification.
(a) Escrow of Shares. As of the Effective Time, Parent shall deposit with
the Escrow Agent a certificate for [ ] shares of Parent Common Stock (the
"Escrow Shares") issued in the name of the Escrow Agent or its nominee. Parent
may deposit with the Escrow Agent additional shares of Parent Common Stock
pursuant to the terms of the Merger Agreement. The Escrow Shares, any cash
substituted therefor in accordance with the provisions of Section 3 or Section
4 hereof (the "Escrow Cash") and any Dividends (as defined below) shall be
held as a trust fund (the "Escrow Fund") and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of
any party hereto. The Escrow Agent agrees to hold the Escrow Fund subject to
the terms and conditions of this Agreement.
(b) Indemnification. The Stockholders have agreed in Article IX of the
Merger Agreement to indemnify and hold harmless Parent Indemnified Parties to
the extent set forth therein. The Escrow Fund shall secure such indemnity and
payment obligations of the Stockholders, subject to the limitations, and in
the manner provided, in the Merger Agreement and this Agreement. It is further
acknowledged and agreed
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that the Escrow Fund is established hereunder to secure the indemnity and
payment obligations of the Stockholders under Article IX of the Merger
Agreement and the post-closing adjustment in Section 3.09 of the Merger
Agreement.
(c) Dividends, Etc. Any cash dividends or property or any securities
distributed in respect of or in exchange for any of the Escrow Shares, whether
by way of stock dividends, stock splits or otherwise and any interest earned
on any investment of the Escrow Cash (collectively, the "Dividends"), shall be
delivered to or issued in the name of the Escrow Agent or its nominee, and the
Escrow Agent shall hold the Dividends in the Escrow Fund. Such securities
shall be considered Escrow Shares for purposes hereof and such cash or other
property shall be considered part of the Escrow Fund.
(d) Voting of Shares. The Stockholder Representative shall have the right,
in its sole discretion, on behalf of the Stockholders, to direct the Escrow
Agent in writing as to the exercise of any voting rights pertaining to the
Escrow Shares, and the Escrow Agent shall comply with any such written
instructions. In the absence of such instructions, the Escrow Agent shall not
vote any of the Escrow Shares. The Stockholder Representative shall have no
obligation to solicit consents or proxies from the Stockholders for purposes
of any such vote.
(e) Transferability. The respective interests of the Stockholders in the
Escrow Fund shall not be assignable or transferable, other than by operation
of law. Notice of any such assignment or transfer by operation of law shall be
given to the Escrow Agent and Parent, and no such assignment or transfer shall
be valid until such notice is given.
(f) Investments. (i) If requested in writing by the Stockholder
Representative, the Escrow Agent shall invest any cash held in the Escrow
Fund. If the Escrow Agent shall have received specific written investment
instruction from the Stockholder Representative (which shall include
instruction as to term to maturity, if applicable), on a timely basis, the
Escrow Agent shall invest the Escrow Cash in Eligible Investments, pursuant to
and as directed in such instruction.
(ii) Eligible Investments means (A) obligations issued or guaranteed by
the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof); (B) obligations (including certificates of deposit and
banker's acceptances) of any domestic commercial bank having capital and
surplus in excess of $500,000,000; (C) repurchase obligations for underlying
securities of the type described in clause (A); (D) investment in the Escrow
Agent's "Insured Money Market Fund" (IMMA). Income from any such investment
shall be held by the Escrow Agent, shall be reinvested in accordance with
this Section 2(f) and shall be considered part of Escrow Cash.
3. Distribution of the Escrow Fund.
(a) The Escrow Agent shall distribute the Escrow Fund only in accordance
with (i) a written instrument delivered to the Escrow Agent that is executed
by both Parent and the Stockholder Representative and that instructs the
Escrow Agent as to the distribution of some or all of the Escrow Fund, (ii) an
order of a court of competent jurisdiction, a copy of which is delivered to
the Escrow Agent by either Parent or the Stockholder Representative, that
instructs the Escrow Agent as to the distribution of some or all of the Escrow
Fund, (iii) the provisions of Section 3(b) hereof, (iv) the provisions of
Section 3(c) hereof or (v) a written notice from the Stockholder
Representative of a claim for reimbursement of reasonable administrative
expenses (not to include fees or expenses of attorneys or other advisors) with
a description in reasonable detail of the asserted claim for expense
reimbursement; provided that such fees and expenses of attorneys and other
advisors may be paid only out of, and prior to, any final distribution from
the Escrow Fund to Stockholders. All distributions under this Agreement shall
first come from a Stockholder's Escrow Cash, if any, then from such
Stockholder's Escrow Shares.
(b) Within five business days after the eighteenth month anniversary hereof
(the "Termination Date"), the Escrow Agent shall distribute to the
Stockholders all of the Escrow Shares, Escrow Cash, cash
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and other property from the Escrow Fund, registered, in the case of the Escrow
Shares, in the name of the Stockholders in accordance with the percentages set
forth opposite such holders' respective names on Attachment A (as such
attachment may be supplemented from time to time in accordance with Section
3(d)). Notwithstanding the foregoing, if Parent has previously delivered to
the Escrow Agent a copy of the written notice delivered by an Indemnified
Party pursuant to the second sentence of Section 9.04 of the Merger Agreement
(the "Claim Notice") and the Escrow Agent has not received written notice of
the resolution of the claim covered thereby, the Escrow Agent shall retain in
escrow after the Termination Date such amount of property from the Escrow Fund
as has a Value (as defined in Section 5 below) equal to the amount covered by
such Claim Notice. Any portion of the Escrow Fund so retained in escrow shall
be distributed only in accordance with the terms of clauses (i) or (ii) of
Section 3(a) hereof.
(c) (i) If at any time Parent determines the existence of a cause of action
with respect to matters set forth in Section 9.02 of the Merger Agreement,
Parent shall notify the Stockholder Representative and the Escrow Agent by
delivery to the Stockholder Representative and the Escrow Agent of a Claim
Notice.
(ii) The determination of Parent as set forth in the Claim Notice shall
be deemed final and binding upon the Stockholder Representative and the
Escrow Agent, and the Escrow Agent shall deliver the amount of Escrow
Shares, Escrow Cash, cash and other property from the Escrow Fund as has a
Value equal to the amount set forth in the Claim Notice pursuant to the
instructions set forth in the Claim Notice on the twentieth (20th) Business
Day after its receipt of the Claim Notice unless within twenty (20) Business
Days after delivery of the Claim Notice to the Escrow Agent a written notice
("Notice of Objection") is given by the Stockholder Representative to Parent
and the Escrow Agent of the Stockholder Representative's objection to the
Claim Notice setting forth the basis of its objection to the Claim Notice.
(iii) If the Notice of Objection is given as provided above, the Escrow
Agent shall keep the amount of Escrow Shares, cash and other property as has
a Value equal to the amount set forth in the Claim Notice until the Escrow
Agent receives written joint instructions from the Stockholder
Representative and Parent. The Stockholder Representative and Parent shall
promptly consult with each other with respect to their disagreement for
purposes of prompt and amicable resolution of the dispute.
(iv) If the Stockholder Representative and Parent are able to resolve the
dispute, Parent and the Stockholder Representative shall promptly provide
the Escrow Agent with joint written instructions executed by the Stockholder
Representative and Parent with respect to the distribution of the Escrow
Fund subject to the dispute. If the instructions are not precise, the Escrow
Agent, in its sole and absolute discretion, shall (i) request additional
instructions and (ii) keep the Escrow Fund until receipt of such additional
instructions. The Escrow Agent shall disburse the Escrow Fund in accordance
with the joint written instructions on the fifth business day after its
receipt thereof.
(v) If the Stockholder Representative and Parent are unable to reach
agreement within the thirty (30) days after the Notice of Objection has been
given to Parent and the Escrow Agent, the dispute shall be referred for
resolution to a court of competent jurisdiction pursuant to Section 11. When
such court issues a final judgment, decree or order (which judgment, decree
or order is no longer subject to appeal), the Stockholder Representative and
Parent shall deliver to the Escrow Agent joint written instructions executed
by the Stockholder Representative and Parent pursuant to the terms of the
decision. Upon receipt of such instructions, the Escrow Agent shall promptly
release the Escrow Fund subject to the dispute pursuant to such
instructions.
(d) Any distribution of all or a portion of the Escrow Fund to the
Stockholders shall be made by delivery of (i) stock certificates issued in the
name of the Stockholders covering such percentage of the Escrow Shares,
including, for purposes hereof, the Dividends in the form of shares of Parent
Common Stock, being distributed as is calculated in accordance with the
percentages set forth opposite such holders' respective names on Attachment A
attached hereto and (ii) checks for cash, if any; provided,
D-3
however, that such Attachment A shall be appropriately revised by Parent to
reflect changes in the interests of the holders of shares of Company Common
Stock, Series A Preferred Stock and Series B Preferred Stock in the Escrow
Fund in the event (A) Parent deposits additional Escrow Shares, cash or other
property with the Escrow Agent following the date of this Agreement due to an
adjustment of the Aggregate Consideration pursuant to Section 3.09 of the
Merger Agreement (such revisions to include among other things a list showing
the number of shares added for each Stockholder) (B) Stockholders elect to
substitute cash for Escrow Shares in accordance with Section 3 or Section 4 or
(C) distributions are made from the Escrow Fund. No fractional Escrow Shares
shall be distributed to Stockholders pursuant to this Agreement. Instead, the
number of shares that each Stockholder shall receive shall be rounded up or
down to the nearest whole number (the Stockholder Representative shall have
the authority to effect such rounding in such a manner that the total number
of whole Escrow Shares to be distributed equals the number of Escrow Shares
then held in the Escrow Fund).
(e) (i) Notwithstanding anything to the contrary contained herein, if any
Escrow Shares are to be delivered to Parent pursuant to Section 3(c), each
Stockholder may substitute cash with a Value equal to such Stockholder's
portion of such Escrow Shares in accordance with the percentages set forth
opposite such Stockholder's name on Attachment A.
(ii) As promptly as practicable, but in no event later than five business
days) after, (x) the date of delivery of joint instructions of Parent and
the Stockholder Representative pursuant to Section 3(c) or (y) the
expiration of the 20 business day period in Section 3(c)(ii) during which
the Stockholder Representative may deliver a Notice of Objection, the
Stockholder Representative shall mail a notice to all the Stockholders
notifying the Stockholders that they may substitute cash as set forth in
Section 3(e)(i) above and specifying that if any Stockholder desires to
substitute cash, it may do so by delivering the required amount of funds in
the form of (A) a wire transfer of immediately available funds or (B) in the
case of payments of less than $500,000, a wire transfer or a certified
check, in each case to the Escrow Agent, within five business days from the
date of such notice to Parent at the address set forth in such notice. All
instructions provided to the Escrow Agent pursuant to Section 3(a) will be
subject to the notice and timing requirements of Section 3(e) and Section 4
relating to the substitution of Cash for Escrow Shares.
(iii) If any Stockholder desires to substitute cash for Escrow Shares as
set forth in Section 3(e)(i) above, the Stockholder Representative shall
deliver the aggregate cash amount by wire transfer to Parent as promptly as
practicable (but in no event later than seven business days) after the date
of delivery of joint instructions of Parent and the Stockholder
Representative pursuant to Section 3(c). Immediately after the delivery of
cash to Parent, Parent and the Stockholder Representative shall jointly
instruct the Escrow Agent to distribute such number of Escrow Shares to the
Stockholder Representative as shall have a Value equal to the cash amount
substituted therefore. The Stockholder Representative shall promptly
thereafter distribute such Escrow Shares to the Stockholders who opted to
substitute cash for Escrow Shares pursuant to Section 3(e)(ii).
(f) The Escrow Agent and Parent shall acknowledge such elections in writing
to the Stockholder Representative who shall notify the various Stockholders
and direct such Stockholders to remit the Escrow Cash to the Escrow Agent.
Promptly upon receipt of the Escrow Cash the Escrow Agent shall distribute the
corresponding Escrow Shares to the appropriate Stockholders.
4. Substitution of Cash for Shares Near the Beginning of the Escrow Period.
(a) Upon written notice delivered to the Stockholder Representative in
accordance with the instructions provided in the Letter of Transmittal, each
Stockholder may elect to substitute for some or all of the Escrow Shares
attributed to such Stockholder on Attachment A, cash in an amount equal to the
Per Share Price multiplied by the number of Escrow Shares such Stockholder
desires to remove from the Escrow Fund.
(b) Upon receipt of the notice described in clause (a) above, the
Stockholder Representative shall notify the Escrow Agent and Parent promptly
and in any event within five business days of the receipt of elections made by
the various Stockholders.
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(c) The Escrow Agent and Parent shall acknowledge such elections in writing
to the Stockholder Representative. The Escrow Agent shall notify the various
Stockholders of wiring or certified check delivery instructions to remit the
Escrow Cash to the Escrow Agent. Promptly upon receipt of the Escrow Cash the
Escrow Agent shall distribute the corresponding Escrow Shares to the
appropriate Stockholders. If any Stockholder shall fail to remit the amount of
cash specified in the notice referred to in this first sentence of this
paragraph (c) their right to so substitute cash pursuant to Section 4(a) shall
expire.
5. Valuation of Escrow Shares. For purposes of this Agreement, the "Value"
per Escrow Share or other securities shall be the average of the last reported
sale price per share of (a) the common stock of Parent Common Stock on the NYSE
(in the case of Escrow Shares) or (b) such other securities on the principal
exchange on which they are listed, over the five consecutive trading days ending
on the last business day immediately preceding (x) the date of the distribution
of the applicable Escrow Shares pursuant to Section 3 or 4 hereof or (y) the
Termination Date (for purposes of determining the amount of Escrow Shares,
Escrow Cash, Cash and other property to be retained in the Escrow Fund by the
Escrow Agent). Any securities not publicly traded or other property shall be
valued at the fair market value thereof as of the last business day preceding
the dates referred to in clauses (x) and (y) above.
6. Fees and Expenses of Escrow Agent. Parent shall pay all of the fees and
expenses of the Escrow Agent (including reasonable legal fees and expenses) for
the services to be rendered by the Escrow Agent hereunder.
7. Limitation of Escrow Agent's Liability.
(a) The Escrow Agent shall incur no liability with respect to any action
taken or suffered by it in reliance upon any notice, direction, instruction,
consent, statement or other documents (whether in original or facsimile form)
believed by it to be genuine and duly authorized, nor for other action or
inaction except its own willful misconduct or gross negligence. The Escrow
Agent shall not be responsible for the validity or sufficiency of this
Agreement (including the form, execution, validity, value or genuineness of
Escrow Shares or other property deposited hereunder, or for the identity,
authority or rights of persons executing or delivering or purporting to
execute and deliver any such Escrow Shares or other property). In all
questions arising under the Escrow Agreement, the Escrow Agent may consult
with counsel of its own selection and may rely conclusively on the advice of
such counsel, and the Escrow Agent shall not be liable to anyone for anything
done, omitted or suffered in good faith by the Escrow Agent based on such
advice. The Escrow Agent shall not be required to take any action hereunder
involving any expense unless the payment of such expense is made or provided
for in a manner reasonably satisfactory to it. In no event shall the Escrow
Agent be liable for indirect, punitive, special or consequential damages.
(b) Parent and the Stockholders hereby, severally and not jointly, agree to
fully indemnify the Escrow Agent for, and hold it harmless against, any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) incurred without gross negligence or willful misconduct on the part
of Escrow Agent, arising out of or in connection with its carrying out of its
duties hereunder. The obligation of the Stockholders under this Section 7(b)
shall be paid from the Escrow Fund, provided that such amounts may be paid
only out of and prior to any final distribution from the Escrow Fund to the
Stockholders. Parent, on the one hand, and the Stockholders, on the other
hand, shall each be liable for one-half of such amounts.
8. Liability and Authority of Stockholder Representative; Successors and
Assignees.
(a) The Stockholder Representative shall incur no liability to the
Stockholders with respect to any action taken or suffered by them in reliance
upon any note, direction, instruction, consent, statement or other documents
believed by them to be genuinely and duly authorized, nor for other action or
inaction except his or her own willful misconduct or gross negligence. The
Stockholder Representative may, in all questions arising under the Escrow
Agreement, rely on the advice of counsel and the Stockholder Representative
shall not be liable to the Stockholders of anything done, omitted or suffered
in good faith
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by the Stockholder Representative based on such advice. The Stockholder
Representative shall be indemnified by the Stockholders, but only from any
amounts remaining from the Escrow Fund after the payment of all claims
successfully asserted against the Escrow Fund by all Parent Indemnified
Parties and the retention of any portion of the Escrow Fund by the Escrow
Agent due to any Claim Notice, after the 18 month anniversary of the Closing
Date and thereafter from any amounts no longer retained by the Escrow Agent
(except to the extent delivered to any Parent Indemnified Party), against all
Losses of any nature whatsoever, arising out of or in connection with any
claim or proceeding relating to the acts or omissions of the Stockholder
Representative hereunder or pursuant to the Merger Agreement.
(b) In the event of the death or disability (for more than fifteen (15)
Business Days) of the Stockholder Representative, his resignation as the
Stockholder Representative or otherwise, a successor Stockholder
Representative shall be elected by a majority vote or written consent of the
Stockholders upon not less than ten (10) Business Days prior written notice to
Parent, with each such Stockholder (or his, her or its successors or assigns)
to be given a vote equal to the number of votes represented by the shares of
stock of the Company held by such Stockholder immediately prior to the
Effective Time (after giving effect to the provisions of the Bridge Holders
Agreement); provided, however, that David Callan shall act as the Stockholder
Representative pending the appointment of a successor Stockholder
Representative. Each successor Stockholder Representative shall have all of
the power, authority, rights and privileges conferred by this Agreement upon
the original Stockholder Representative, and the term "Stockholder
Representative" as used herein shall be deemed to include successor
Stockholder Representative.
(c) The Stockholder Representative shall have full power and authority to
represent the Stockholders and their successors, with respect to all matters
arising under this Agreement and all actions taken by any Stockholder
Representative hereunder shall be binding upon the Stockholders and their
successors, as if expressly confirmed and ratified in writing by each of them.
Without limiting the generality of the foregoing, the Stockholder
Representative shall have full power and authority to interpret all of the
terms and provisions of this Agreement, to compromise any claims asserted
hereunder and to authorize any release of the Escrow Fund to be made with
respect thereto, on behalf of the Stockholders and their successors.
(d) The Escrow Agent may rely on the Stockholder Representative as the
exclusive agent of the Stockholders under this Agreement and shall incur no
liability to any party with respect to any action taken or suffered by it in
reliance thereon.
9. Termination. This Agreement shall terminate upon the distribution by the
Escrow Agent of all of the Escrow Fund in accordance with this Agreement;
provided that the provisions of Sections 7 and 8 shall survive such
termination.
10. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service.
If to Parent or Merger Sub:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, IL 60196
Telephone No.: (847) 576-3628
Telecopier No.: (847) 576-3482
Attention: General Counsel
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with a copy to:
Motorola, Inc.
Broadband Communications Sector
101 Tournament Drive
Horsham, PA 19044
Telephone No.: (215) 323-2885
Telecopier No.: (215) 323-1300
Attention: Paul Fleck, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone No.: (212) 848-4000
Telecopier No.: (212) 848-7179
Attention: Clare O'Brien, Esq.
If to the Stockholder Representative:
Todd Dagres
Battery Ventures
20 William Street
Wellesley, MA [ ]
Telephone No.: (781) 237-1001
Telecopier No.: (781) 577-1001
www.battery.com
with a copy to:
Testa Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02111
Telephone No.: (617) 248-7000
Telecopier No.: (617) 248-7100
Attention: Howard Rosenblum
If to the Escrow Agent:
Bank One Trust Company, N.A.
[ ]
[ ]
[ ]
Telephone No.: [ ]
Telecopier No.: [ ]
Attention: [ ]
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 9.
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11. Successor Escrow Agent. In the event the Escrow Agent becomes unavailable
or unwilling to continue in its capacity herewith, the Escrow Agent may resign
and be discharged from its duties or obligations hereunder by delivering a
resignation to the parties to this Escrow Agreement, not less than sixty (60)
days prior to the date when such resignation shall take effect. Parent may
appoint a successor Escrow Agent (i) without the consent of the Stockholder
Representative so long as such successor is a bank with assets of at least $500
million, and (ii) and in all other cases with the consent of the Stockholder
Representative, which shall not be unreasonably withheld. If, within such notice
period, Parent and the Stockholder Representative provide to the Escrow Agent
written instructions with respect to the appointment of a successor Escrow Agent
and directions for the transfer of any Escrow Shares and any Escrow Cash then
held by the Escrow Agent to such successor, the Escrow Agent shall act in
accordance with such instructions and promptly transfer such Escrow Shares to
such designated successor. If no successor Escrow Agent is named as provided in
this Section 10 prior to the date on which the resignation of the Escrow Agent
is to properly take effect, the Escrow Agent may apply to a court of competent
jurisdiction for appointment of a successor Escrow Agent.
12. General.
(a) Governing Law; Assigns. This Agreement shall be interpreted, construed,
enforced and administered in accordance with the internal substantive laws
(and not the choice of law rules) of the State of New York, and shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. Each of the signatories to this Agreement
hereby submits to the personal jurisdiction of and each agrees that all
proceedings relating hereto shall be brought in courts located within the City
and State of New York. Each of Parent and the Stockholder Representative
hereby waives the right to trial by jury and to assert counterclaims in any
such proceedings. To the extent that in any jurisdiction any signatory to the
Agreement may be entitled to claim, for itself or its assets, immunity from
suit, execution, attachment (whether before or after judgment) or other legal
process, each hereby irrevocably agrees not to claim, and hereby waives, such
immunity. Each of Parent and the Stockholder Representative waives personal
service of process and consents to service of process by certified or
registered mail, return receipt requested, directed to it at the address last
specified for notices hereunder, and such service shall be deemed completed
ten (10) calendar days after the same is so mailed.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. This Agreement and the attachment hereto constitute
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement and supersedes all prior agreements or
understandings, written or oral, between the parties with respect to the
subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of Parent, the Escrow Agent and the Stockholder Representative.
[SIGNATURE PAGE FOLLOWS]
D-8
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
Motorola, Inc.
By: _________________________________
Name:
Title:
_____________________________________
Todd Dagres, not in his individual
capacity but solely as the
Stockholder Representative
hereunder
Bank One Trust Company, N.A.
By: _________________________________
Name:
Title:
D-9
ATTACHMENT A
Stockholder
Name Percentage Interest No. of Shares held Amount of Cash held
and Address in Escrow Fund in Escrow in Escrow
----------- ------------------- ------------------ -------------------
D-10
Appendix E-1
AGREEMENT TO AMEND SUBORDINATED
CONVERTIBLE PROMISSORY NOTES
AND TO CANCEL SERIES C CONVERTIBLE
PREFERRED STOCK PURCHASE WARRANTS
AGREEMENT to amend Subordinated Convertible Promissory Notes and to cancel
Series C Convertible Preferred Stock Purchase Warrants, dated as of July 11,
2001, among RiverDelta Networks, Inc., a Delaware corporation (the "Company"),
the holders (the "Noteholders") of Subordinated Convertible Promissory Notes of
the Company (the "Notes") dated as of February 7, 2001 and May 16, 2001, the
holders (the "Warrantholders") of the Series C Convertible Preferred Stock
Purchase Warrants (the "Warrants") of the Company dated as of December 12, 2001
and Motorola, Inc., a Delaware corporation ("Parent").
WHEREAS, Parent and Bayou Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), are entering into an Agreement and Plan of Merger dated as of the date
hereof (as amended from time to time, the "Merger Agreement"; capitalized terms
used but not defined in this Agreement have the meanings attributed to such
terms in the Merger Agreement), with the Company, pursuant to which Merger Sub
shall merge with and into the Company (the "Merger");
WHEREAS, each Noteholder and Warrantholder is the record or beneficial owner
of (i) the principal amount of Notes and/or (ii) Warrants to purchase the number
of shares of Series C Convertible Preferred Stock set forth on the signature
pages hereto; and
WHEREAS, as a condition to entering into the Merger Agreement and incurring
the obligations set forth therein, Parent and Merger Sub have required that the
Noteholders and Warrantholders enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
Amendment to Notes and Cancellation of Warrants
Section 1.01 Amendment of Notes.
(a) Each of the Notes dated February 7, 2001 is hereby amended by deleting
the phrase "on or after May 1, 2001" in the first paragraph thereof and
inserting in place thereof the phrase "on or after the Closing Date (as defined
under that certain Merger Agreement by and between Motorola, Inc. and RiverDelta
Networks, Inc. dated July 11, 2001)."
(b) The Note dated May 16, 2001 is hereby amended by deleting the phrase "on
or after the earlier of (i) July 1, 2001 and (ii) the date of the demand for
payment by the holder of any of the other Notes (as defined in Section 7
hereof)" and inserting in place thereof the phrase "on or after the Closing Date
(as defined under that certain Merger Agreement by and between Motorola, Inc.
and RiverDelta Networks, Inc. dated July 11, 2001)."
(c) Effective immediately prior to the Merger, each of the Notes is hereby
amended by deleting in its entirety Section 4(ii) thereof and inserting in place
thereof the following:
(ii) Automatic Conversion Immediately Prior to the Merger contemplated
by the Merger Agreement.
(a) Immediately prior to the closing of the merger as contemplated by
that certain Merger Agreement among Motorola, Inc., Bayou Merger Sub,
Inc. and RiverDelta Networks, Inc. dated
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July 11, 2001 (the "Acquisition"), the Note Balance shall be automatically
converted into fully paid and non-assessable shares of the Company's Series
B Convertible Preferred Stock, par value $.01 per share (the "Series B
Stock").
(b) Upon the conversion of this Note immediately prior to the
Acquisition, the Holder shall be entitled to a number of shares of Series B
Stock rounded to the nearest whole share, determined by dividing (A) the
amount of the Note Balance by (B) the Acquisition Conversion Price (as
defined below). The price per share of the Series B Stock issued to the
Holder upon conversion in connection with an Acquisition (the "Acquisition
Conversion Price") shall equal $8.06 per share (subject to equitable
adjustment in the event of any stock split, stock dividend, combination,
reclassification or similar event after the date of this Amendment).
(c) The Company shall cause notice of the Closing Date to be mailed to
the Holder at least ten (10) days prior to the Closing Date. On or before
the Closing Date, the Holder shall surrender this Note for conversion at the
place designated in such notice. Such notice by the Holder shall state the
Holder's name or names in which the Holder wishes the certificate or
certificates for shares of the Series B Stock to be issued. If required by
the Company, the Note surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of surrender, in form
satisfactory to the Company, duly executed by the Holder.
(d) The Company shall, prior to the consummation of the Acquisition, for
the purpose of effecting the conversion of this Note, authorize a sufficient
additional number of shares of Series B Stock to effect the conversion of
the Note Balance.
(e) The Company shall pay any and all issue and other taxes that may be
payable in respect of any issuance or delivery of shares of the Series B
Stock, upon conversion of this Note. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares in a name other than that of
the Holder and no such issuance or delivery shall be made unless and until
the person or entity requesting such issuance has paid to the Company the
amount of any such tax or has established, to the satisfaction of the
Company, that such tax has been paid.
Section 1.02 Noteholder Consent. Upon the conversion of the Note Balance into
Series B Stock as set forth in Section 1.01, each Noteholder further agrees and
elects to receive the Series B Preferred Stock Consideration pursuant to Section
3.03 of the Merger Agreement in lieu of (x) receiving payments set forth in
Article Fourth (B)(1)(b)(i)(2) of the Certificate of Incorporation of the
Company or (y) electing the benefits of Article Fourth (B)(2)(d)(vii) of the
Certificate of Incorporation of the Company.
Section 1.03 Cancellation of Warrants. Effective upon the Closing Date, each
of the Warrants shall be cancelled without any payment in respect thereof by the
Company or any other person. Each Warrantholder shall surrender the Warrants
held by such Warrantholder to the Company on the Closing Date.
ARTICLE II
Representations and Warranties of the Noteholders and Warrantholders
Each Noteholder and Warrantholder (hereinafter collectively referred to as
"Securityholders"), severally and not jointly, hereby represents and warrants to
the Company and Parent in respect of such Securityholder as follows:
Section 2.01 Organization, Qualification. (a) Such Securityholder, if it is
an individual, has all legal capacity to enter into this Agreement, to carry
out his or her obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Such Securityholder, if it is a corporation or other legal entity, is
duly organized, validly existing and, if applicable, in good standing under the
laws of the jurisdiction of its incorporation or formation and has the
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requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or, if
applicable, in good standing or to have such power, authority and governmental
approvals would not prevent or materially delay consummation of the transactions
contemplated by this Agreement or otherwise prevent or materially delay such
Securityholder from performing its obligations under this Agreement.
Section 2.02 Authority Relative to this Agreement. Such Securityholder has
all necessary right, power and authority to execute and deliver this Agreement,
to perform such Securityholder's obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by such Securityholder, if it is a corporation, and the performance of its
obligations hereunder have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of such
Securityholder is necessary to authorize this Agreement. This Agreement has been
duly and validly executed and delivered by such Securityholder and, assuming due
authorization, execution and delivery by each of Parent and the Company,
constitutes a legal, valid and binding obligation of such Securityholder,
enforceable against such Securityholder in accordance with its terms.
Section 2.03 No Conflict. (a) The execution and delivery of this Agreement by
such Securityholder do not, and the performance of this Agreement by such
Securityholder shall not, (i) conflict with or violate the certificate of
incorporation or by-laws of each such Securityholder that is a corporation, (ii)
assuming satisfaction of the requirements set forth in Section 2.03(b) below,
conflict with or violate the terms of any trust agreements or equivalent
organizational documents of any Securityholder that is a trust, (iii) conflict
with or violate any Law applicable to such Securityholder or by which the Notes
or Warrants owned by such Securityholder are bound or affected or (iv) result in
any breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Notes or Warrants owned by such
Securityholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Securityholder is a party or by which such Securityholder or the
Notes or Warrants owned by such Securityholder are bound or affected, except for
any such conflicts, violations, breaches, defaults or other occurrences that
would not prevent or materially delay consummation of the transactions
contemplated by this Agreement or otherwise prevent or materially delay such
Securityholder from performing its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such Securityholder do
not, and the performance of this Agreement by such Securityholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws, state takeover laws
and the pre-merger notification requirements of the HSR Act and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated by this Agreement, or otherwise
prevent such Securityholder from performing its obligations under this
Agreement.
Section 2.04 Title to the Notes or Warrants. As of the date hereof, such
Securityholder is the record or beneficial owner of, and has good title to, (a)
the principal amount of Notes and/or (b) Warrants to purchase the number of
shares of Series C Convertible Preferred Stock set forth beneath such
Securityholder's name on the signature pages hereto. Such Notes and Warrants are
all the Notes and Warrants of the Company owned, either of record or
beneficially, by such Securityholder and such Securityholder does not have any
option or other right to acquire any other Notes or Warrants of the Company. The
Notes and Warrants owned by such Securityholder are owned free and clear of all
Encumbrances except those arising under the Investor Rights Agreement. Except as
provided in this Agreement, such Securityholder has not appointed or granted any
proxy, which appointment or grant is still effective, with respect to the Notes
and Warrants owned by such Securityholder.
E-3
ARTICLE III
Representations and Warranties of Parent and the Company
Parent and the Company hereby, severally and not jointly, represent and
warrant, each as to itself, to each Securityholder as follows:
Section 3.01 Corporate Organization. Each of Parent and the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or otherwise
prevent or materially delay Parent or the Company from performing its
obligations under this Agreement.
Section 3.02 Authority Relative to this Agreement. Each of Parent and the
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by Parent and the Company and the performance by
Parent and the Company of their obligations hereunder have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent or the Company is necessary to authorize this Agreement.
This Agreement has been duly and validly executed and delivered by Parent and
the Company and, assuming due authorization, execution and delivery by the
Securityholders, constitutes a legal, valid and binding obligation of each of
Parent and the Company enforceable against each of Parent and the Company in
accordance with its terms.
Section 3.03 No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and the Company do not, and the
performance of this Agreement by Parent and the Company shall not, (i) conflict
with or violate the certificate of incorporation or by-laws of Parent or the
Company and (ii) assuming satisfaction of the requirements set forth in 3.03(b)
below, conflict with or violate any Law applicable to Parent or the Company,
except any such conflicts or violations that would not prevent or materially
delay consummation of the transactions contemplated by this Agreement or
otherwise prevent or materially delay Parent or the Company from performing its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and the Company do
not, and the performance of this Agreement by Parent and the Company shall not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover laws
and the pre-merger notification requirements of the HSR Act, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or otherwise
prevent Parent or the Company from performing their obligations under this
Agreement.
ARTICLE IV
Covenants of the Securityholders
Section 4.01 No Disposition or Encumbrance of Notes and Warrants. Each
Securityholder, severally and not jointly, hereby agrees that, except as
contemplated by this Agreement, the Investor Rights Agreement, or the Merger
Agreement, such Securityholder shall not (i) sell, transfer, tender, pledge,
assign, contribute to the capital of any entity, hypothecate, give or otherwise
dispose of, grant a proxy or power of attorney with respect to, deposit into any
voting trust, enter into any voting agreement, or create or permit to exist any
Encumbrances of any nature whatsoever with respect to, any of such
Securityholder's Notes or Warrants (or agree or consent to, or offer to do, any
of the foregoing).
E-4
Section 4.02 Further Action. Upon the terms and subject to the conditions
hereof, Parent, the Company and each Securityholder shall use their reasonable
best efforts to take, or cause to be taken, all appropriate action, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective this Agreement.
ARTICLE V
Termination
Section 5.01 Termination. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the termination of the Merger
Agreement. Nothing in this Section 5.01 shall relieve any party of liability for
any breach of this Agreement.
ARTICLE VI
Miscellaneous
Section 6.01 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by telecopy or by registered or certified
mail (postage prepaid, return receipt requested) (i) to the Securityholders at
the address indicated on the signature pages hereto and (ii) to the respective
parties listed below at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
6.01):
if to Parent:
Motorola, Inc.
1303 East Algonquin Road
Schaumberg, IL 60196
Telephone: (847) 576-3482
Telecopier: (847) 576-3628
Attention: General Counsel
with a copy to:
Motorola, Inc.
Broadband Communications Sector
101 Tournament Drive
Horsham, PA 19044
Telephone: (215) 323-2885
Telecopy: (215) 323-1300
Attention: Paul Fleck, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
E-5
if to the Company:
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, MA 01876
Telephone: (978) 858-2300
Telecopy: (978) 858-2399
Attention: David F. Callan, President
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Telecopy: (617) 542-2241
Attention: Joseph P. Curtin, Esq.
Section 6.02 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
Section 6.03 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
Section 6.04 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
Section 6.05 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 6.06 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the General Corporation Law of the State of
Delaware as to matters within the scope thereof and, as to all other matters,
shall be governed by and construed and enforced in accordance with the internal
law of The Commonwealth of Massachusetts without giving effect to the conflicts
of laws principles thereof. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any New
York state or federal court sitting in the County of New York, New York.
Section 6.07 Waiver of Jury Trial. Each of the parties hereto irrevocably and
unconditionally waives all right to trial by jury in any action, proceeding or
counterclaim (whether based in contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of the parties hereto in the
negotiation, administration, performance and enforcement thereof.
Section 6.08 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 6.09 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of
E-6
which when executed and delivered shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
Section 6.10 Amendment. This Agreement may not be amended except (a) by an
instrument in writing signed by all the parties hereto or (b) by a waiver in
accordance with Section 6.11.
Section 6.11 Waiver. No provision of this Agreement may be waived, except by
written consent of the party or parties against which enforcement of the waiver
is sought. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition of this Agreement.
Section 6.12 Expenses. Except as otherwise specified in this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors, accountants, experts and consultants incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
NOTEHOLDERS:
Pequot Private Equity Fund II, L.P.
By: Pequot Capital Management, Inc.
Its Investment Manager
/s/ Kevin E. O'Brien
By: _________________________________
Name: Kevin E. O'Brien
Title: General Counsel
Principal Amount: $10,000,000.00
Address: 500 Nyala Farm Road
Westport, CT 06880
Battery Ventures V, L.P.
By: Battery Partners V, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Principal Amount: $4,447,620.00
Address: 20 Williams Street
Wellesley, MA 02181
Battery Investment Partners V, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Principal Amount: $102,380.00
Address: 20 Williams Street
Wellesley, MA 02181
Battery Ventures Convergence Fund,
L.P.
By: Battery Convergence Partners,
LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Principal Amount: $450,000.00
Address: 20 William Street
Wellesley, MA 02181
E-8
Charles River Partnership X,
a Limited Partnership
By: Charles River X GP, LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Principal Amount: $4,525,221.70
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
Charles River Partnership X-A,
a Limited Partnership
By: Charles River X GP LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Principal Amount: $124,156.50
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
Charles River Friends X-B, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Principal Amount: $298,366.30
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
Charles River Friends X-C, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Principal Amount: $52,255.50
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
E-9
/s/ David Callan
___________________________________
David Callan
Principal Amounts: $3,000,000.00 and
$1,700,000.00
Address: 67 Spinnaker Way
Portsmouth, NH 03801
/s/ Scott E. Morrisse
___________________________________
Scott E. Morrisse
Principal Amount: $300,000.00
Address: 69 Spinnaker Way
Portsmouth, NH 03801
WARRANTHOLDERS:
Battery Management Corp.
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Amount of Warrants: 63,099 shares
of Series C
Preferred Stock
Address: 20 William Street
Wellesley, MA 02181
Charles River Partnership X,
a Limited Partnership
By: Charles River X GP, LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Amount of Warrants: 57,132 shares
of Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
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Charles River Partnership X-A,
a Limited Partnership
By: Charles River X GP LLC
Its General Partner
/s/ Bruce I. Sachs
By: ___________________________________
Name: Bruce I. Sachs
Title: General Partner
Amount of Warrants: 1,567 shares
of Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
Charles River Friends X-B, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: ___________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Amount of Warrants: 3,767 shares
of Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
Charles River Friends X-C, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: ___________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Amount of Warrants: 660 shares of
Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
/s/ David Callan
___________________________________
David Callan
Amount of Warrants: 72,313 shares
of Series C
Preferred Stock
Address: 67 Spinnaker Way
Portsmouth, NH 03801
E-11
Motorola, Inc.
/s/ Richard C. Smith
By: _________________________________
Name: Richard C. Smith
Title: Corporate Vice President &
Director
Business Development
RiverDelta Networks, Inc.
/s/ David F. Callan
By: _________________________________
Name: David F. Callan
Title: President
E-12
Appendix E-2
AGREEMENT TO FURTHER AMEND SUBORDINATED
CONVERTIBLE PROMISSORY NOTES
AGREEMENT to further amend Subordinated Convertible Promissory Notes dated
as of August 10, 2001, among RiverDelta Networks, Inc., a Delaware corporation
(the "Company"), the holders (the "Noteholders") of Subordinated Convertible
Promissory Notes of the Company, as amended by the July Agreement (as defined
below) (as amended, the "Notes") dated as of February 7, 2001 and May 16, 2001,
the holders (the "Warrantholders") of the Series C Convertible Preferred Stock
Purchase Warrants (the "Warrants") of the Company dated as of December 12, 2000
and Motorola, Inc., a Delaware corporation ("Parent").
WHEREAS, Parent and Bayou Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), have entered into an Agreement and Plan of Merger dated as of July 11,
2001 (as amended from time to time, the "Merger Agreement"; capitalized terms
used but not defined in this Agreement have the meanings attributed to such
terms in the Merger Agreement), with the Company, pursuant to which Merger Sub
shall merge with and into the Company (the "Merger");
WHEREAS, each Noteholder and Warrantholder is the record or beneficial owner
of (i) the principal amount of Notes and/or (ii) Warrants to purchase the number
of shares of Series C Convertible Preferred Stock set forth on the signature
pages hereto;
WHEREAS, as a condition to entering into the Merger Agreement and incurring
the obligations set forth therein, Parent and Merger Sub required that the
Noteholders and Warrantholders enter into the Agreement to Amend Subordinated
Convertible Promissory Notes and to Cancel Series C Convertible Preferred Stock
Purchase Warrants, dated as of July 11 2001, among the Company, the Noteholders,
the Warrantholders and Parent (the "July Agreement"); and
WHEREAS, the Company, the Noteholders, the Warrantholders and Parent wish to
further amend the Notes as set forth herein to reflect the intent of the parties
by correcting an inadvertent error in the July Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
FURTHER AMENDMENT TO NOTES
SECTION 1.01 Further Amendment of Notes. Each of the Notes is hereby further
amended by deleting the amount "$8.06" in Section 4(ii)(b) thereof and inserting
in place thereof the amount "$12.09."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDERS AND WARRANTHOLDERS
Each Noteholder and Warrantholder (hereinafter collectively referred to as
"Securityholders"), severally and not jointly, hereby represents and warrants to
the Company and Parent in respect of such Securityholder as follows:
SECTION 2.01 Organization, Qualification. (a) Such Securityholder, if it is
an individual, has all legal capacity to enter into this Agreement, to carry out
his or her obligations hereunder and to consummate the transactions contemplated
hereby.
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(b) Such Securityholder, if it is a corporation or other legal entity, is
duly organized, validly existing and, if applicable, in good standing under the
laws of the jurisdiction of its incorporation or formation and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or, if
applicable, in good standing or to have such power, authority and governmental
approvals would not prevent or materially delay consummation of the
transactions contemplated by this Agreement or otherwise prevent or materially
delay such Securityholder from performing its obligations under this Agreement.
SECTION 2.02 Authority Relative to this Agreement. Such Securityholder has
all necessary right, power and authority to execute and deliver this Agreement,
to perform such Securityholder's obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by such Securityholder, if it is a corporation, and the performance of its
obligations hereunder have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of such
Securityholder is necessary to authorize this Agreement. This Agreement has been
duly and validly executed and delivered by such Securityholder and, assuming due
authorization, execution and delivery by each of Parent and the Company,
constitutes a legal, valid and binding obligation of such Securityholder,
enforceable against such Securityholder in accordance with its terms.
SECTION 2.03 No Conflict. (a) The execution and delivery of this Agreement by
such Securityholder do not, and the performance of this Agreement by such
Securityholder shall not, (i) conflict with or violate the certificate of
incorporation or by-laws of each such Securityholder that is a corporation, (ii)
assuming satisfaction of the requirements set forth in Section 2.03(b) below,
conflict with or violate the terms of any trust agreements or equivalent
organizational documents of any Securityholder that is a trust, (iii) conflict
with or violate any Law applicable to such Securityholder or by which the Notes
or Warrants owned by such Securityholder are bound or affected or (iv) result in
any breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Notes or Warrants owned by such
Securityholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Securityholder is a party or by which such Securityholder or the
Notes or Warrants owned by such Securityholder are bound or affected, except for
any such conflicts, violations, breaches, defaults or other occurrences that
would not prevent or materially delay consummation of the transactions
contemplated by this Agreement or otherwise prevent or materially delay such
Securityholder from performing its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such Securityholder do
not, and the performance of this Agreement by such Securityholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws, state takeover laws
and the pre-merger notification requirements of the HSR Act and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated by this Agreement, or otherwise
prevent such Securityholder from performing its obligations under this
Agreement.
SECTION 2.04 Title to the Notes or Warrants. As of the date hereof, such
Securityholder is the record or beneficial owner of, and has good title to, (a)
the principal amount of Notes and/or (b) Warrants to purchase the number of
shares of Series C Convertible Preferred Stock set forth beneath such
Securityholder's name on the signature pages hereto. Such Notes and Warrants are
all the Notes and Warrants of the Company owned, either of record or
beneficially, by such Securityholder and such Securityholder does not have any
option or other right to acquire any other Notes or Warrants of the Company. The
Notes and Warrants owned by such Securityholder are owned free and clear of all
Encumbrances except those arising under the Investor Rights Agreement. Except as
provided in this Agreement, such Securityholder has not appointed or granted any
proxy, which appointment or grant is still effective, with respect to the Notes
and Warrants owned by such Securityholder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE COMPANY
Parent and the Company hereby, severally and not jointly, represent and
warrant, each as to itself, to each Securityholder as follows:
SECTION 3.01 Corporate Organization. Each of Parent and the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or otherwise
prevent or materially delay Parent or the Company from performing its
obligations under this Agreement.
SECTION 3.02 Authority Relative to this Agreement. Each of Parent and the
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by Parent and the Company and the performance by
Parent and the Company of their obligations hereunder have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent or the Company is necessary to authorize this Agreement.
This Agreement has been duly and validly executed and delivered by Parent and
the Company and, assuming due authorization, execution and delivery by the
Securityholders, constitutes a legal, valid and binding obligation of each of
Parent and the Company enforceable against each of Parent and the Company in
accordance with its terms.
SECTION 3.03 No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and the Company do not, and the
performance of this Agreement by Parent and the Company shall not, (i) conflict
with or violate the certificate of incorporation or by-laws of Parent or the
Company and (ii) assuming satisfaction of the requirements set forth in 3.03(b)
below, conflict with or violate any Law applicable to Parent or the Company,
except any such conflicts or violations that would not prevent or materially
delay consummation of the transactions contemplated by this Agreement or
otherwise prevent or materially delay Parent or the Company from performing its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and the Company do
not, and the performance of this Agreement by Parent and the Company shall not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover laws
and the pre-merger notification requirements of the HSR Act, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or otherwise
prevent Parent or the Company from performing their obligations under this
Agreement.
ARTICLE IV
COVENANTS OF THE SECURITYHOLDERS
SECTION 4.01 No Disposition or Encumbrance of Notes and Warrants. Each
Securityholder, severally and not jointly, hereby agrees that, except as
contemplated by this Agreement, the Investor Rights Agreement, or the Merger
Agreement, such Securityholder shall not (i) sell, transfer, tender, pledge,
assign, contribute to the capital of any entity, hypothecate, give or otherwise
dispose of, grant a proxy or power of attorney with respect to, deposit into any
voting trust, enter into any voting agreement, or create or permit to exist any
Encumbrances of any nature whatsoever with respect to, any of such
Securityholder's Notes or Warrants (or agree or consent to, or offer to do, any
of the foregoing).
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SECTION 4.02 Further Action. Upon the terms and subject to the conditions
hereof, Parent, the Company and each Securityholder shall use their reasonable
best efforts to take, or cause to be taken, all appropriate action, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective this Agreement.
ARTICLE V
TERMINATION
SECTION 5.01 Termination. This Agreement shall terminate, and no party shall
have any rights or obligations hereunder and this Agreement shall become null
and void and have no further effect upon the termination of the Merger
Agreement. Nothing in this Section 5.01 shall relieve any party of liability for
any breach of this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by telecopy or by registered or certified
mail (postage prepaid, return receipt requested) (i) to the Securityholders at
the address indicated on the signature pages hereto and (ii) to the respective
parties listed below at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
6.01):
if to Parent:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, IL 60196
Telephone: (847) 576-3482
Telecopier: (847) 576-3628
Attention: General Counsel
with a copy to:
Motorola, Inc.
Broadband Communications Sector
101 Tournament Drive
Horsham, PA 19044
Telephone: (215) 323-2885
Telecopy: (215) 323-1300
Attention: Paul Fleck, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
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if to the Company:
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, MA 01876
Telephone: (978) 858-2300
Telecopy: (978) 858-2399
Attention: David F. Callan, President
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Telecopy: (617) 542-2241
Attention: Joseph P. Curtin, Esq.
SECTION 6.02 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
SECTION 6.03 Assignment. This Agreement shall not be assigned by operation of
law or otherwise.
SECTION 6.04 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 6.05 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 6.06 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the General Corporation Law of the State of
Delaware as to matters within the scope thereof and, as to all other matters,
shall be governed by and construed and enforced in accordance with the internal
law of The Commonwealth of Massachusetts without giving effect to the conflicts
of laws principles thereof. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any New
York state or federal court sitting in the County of New York, New York.
SECTION 6.07 Waiver of Jury Trial. Each of the parties hereto irrevocably and
unconditionally waives all right to trial by jury in any action, proceeding or
counterclaim (whether based in contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of the parties hereto in the
negotiation, administration, performance and enforcement thereof.
SECTION 6.08 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
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SECTION 6.09 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 6.10 Amendment. This Agreement may not be amended except (a) by an
instrument in writing signed by all the parties hereto or (b) by a waiver in
accordance with Section 6.11.
SECTION 6.11 Waiver. No provision of this Agreement may be waived, except by
written consent of the party or parties against which enforcement of the waiver
is sought. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition of this Agreement.
SECTION 6.12 Expenses. Except as otherwise specified in this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors, accountants, experts and consultants incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
NOTEHOLDERS:
PEQUOT PRIVATE EQUITY FUND II, L.P.
By: Pequot Capital Management, Inc.
Its Investment Manager
/s/ Kevin E. O'Brien
By: _________________________________
Name: Kevin E. O'Brien
Title: General Counsel
Principal Amount: $10,000,000.00
Address: 500 Nyala Farm Road
Westport, CT 06880
BATTERY VENTURES V, L.P.
By: Battery Partners V, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: Managing Partner
Principal Amount: $4,447,620.00
Address: 20 Williams Street
Wellesley, MA 02181
BATTERY INVESTMENT PARTNERS V, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: Managing Partner
Principal Amount: $102,380.00
Address: 20 Williams Street
Wellesley, MA 02181
BATTERY VENTURES CONVERGENCE
FUND, L.P.
By: Battery Convergence
Partners, LLC
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: Managing Partner
Principal Amount: $450,000.00
Address: 20 William Street
Wellesley, MA 02181
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CHARLES RIVER PARTNERSHIP X,
A LIMITED PARTNERSHIP
By: Charles River X GP, LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Principal Amount: $4,525,221.70
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
CHARLES RIVER PARTNERSHIP X-A,
A LIMITED PARTNERSHIP
By: Charles River X GP LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: General Partner
Principal Amount: $124,156.50
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
CHARLES RIVER FRIENDS X-B, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Principal Amount: $298,366.30
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
CHARLES RIVER FRIENDS X-C, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Principal Amount: $52,255.50
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
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/s/ David Callan
_____________________________________
David Callan
Principal Amounts: $3,000,000.00
and
$1,700,000.00
Address: 67 Spinnaker Way
Portsmouth, NH 03801
/s/ Scott E. Morrissee
_____________________________________
Scott E. Morrisse
Principal Amount: $300,000.00
Address: 69 Spinnaker Way
Portsmouth, NH 03801
WARRANTHOLDERS:
BATTERY MANAGEMENT CORP.
/s/ Todd Dagres
By: _________________________________
Name: Todd Dagres
Title: General Partner
Amount of Warrants: 63,099 shares
of Series C
Preferred Stock
Address: 20 William Street
Wellesley, MA 02181
CHARLES RIVER PARTNERSHIP X,
A LIMITED PARTNERSHIP
By: Charles River X GP, LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Managing Member
Amount of Warrants: 57,132 shares
of Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
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CHARLES RIVER PARTNERSHIP X-A,
A LIMITED PARTNERSHIP
By: Charles River X GP LLC
Its General Partner
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Managing Member
Amount of Warrants: 1,567 shares
of Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
CHARLES RIVER FRIENDS X-B, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Amount of Warrants: 3,767 shares
of Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
CHARLES RIVER FRIENDS X-C, LLC
By: Charles River Friends VII, Inc.
Its Manager
/s/ Bruce I. Sachs
By: _________________________________
Name: Bruce I. Sachs
Title: Authorized Manager
Amount of Warrants: 660 shares of
Series C
Preferred Stock
Address: 100 Winter Street,
Suite 3300
Waltham, MA 02451
/s/ David Callan
_____________________________________
David Callan
Amount of Warrants: 72,313 shares
of Series C
Preferred Stock
Address: 67 Spinnaker Way
Portsmouth, NH 03801
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MOTOROLA, INC.
/s/ Richard C. Smith
By: _________________________________
Name: Richard C. Smith
Title: Corporate Vice President
RIVERDELTA NETWORKS, INC.
/s/ David F. Callan
By: _________________________________
Name: David F. Callan
Title: President
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Appendix F
FORM OF COMPANY AFFILIATE LETTER
Motorola, Inc.
101 Tournament Drive
Horsham, PA 19044
Attention: General Counsel
Ladies and Gentlemen:
The undersigned, a holder of shares of common stock, par value $0.01 per
share ("Company Common Stock"), of RiverDelta Networks, Inc., a Delaware
corporation (the "Company"), is entitled to receive in connection with the
merger (the "Merger") of a subsidiary of Motorola, Inc., a Delaware corporation
("Parent"), with and into the Company shares of common stock, par value $3.00
per share ("Parent Common Stock"), of Parent. The undersigned acknowledges that
the undersigned may be deemed an "affiliate" of the Company within the meaning
of Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), by the Securities and Exchange Commission (the
"SEC"), although nothing contained herein should be construed as an admission of
such fact, nor as a waiver of any right the undersigned may have to object to
any claim that the undersigned is such an affiliate on or after date of this
letter.
If, in fact, the undersigned were such an affiliate under the Securities Act,
the undersigned's ability to sell, assign or transfer the shares of Parent
Common Stock received by the undersigned in the Merger may be restricted unless
such transaction is registered under the Securities Act or an exemption from
such registration is available. The undersigned understands that such exemptions
are limited and, to the extent the undersigned felt or feels necessary, the
undersigned has obtained or will obtain advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d) promulgated
under the Securities Act. The undersigned understands that Parent is under no
obligation to register Parent Common Stock for sale, transfer or other
disposition by the undersigned or take any action (other than as provided in the
penultimate paragraph of this letter) to make compliance with an exemption from
registration available to the undersigned.
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign, transfer or otherwise dispose of any of the
Parent Common Stock received (including through a cashless exercise of stock
options) by the undersigned in the Merger except (i) pursuant to an effective
registration statement under the Securities Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in the
opinion of the general counsel of Parent, Shearman & Sterling, or other counsel
reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the SEC specifically issued with respect
to a transaction to be engaged in by the undersigned, is not required to be
registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of Parent
Common Stock pursuant to Rule 145, the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in form and
substance reasonably satisfactory to Parent and, to the extent required by the
preceding paragraph, the opinion of counsel or no-action letter referred to in
such paragraph. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any shares of Parent Common Stock
disposed of by the undersigned, but that (provided such transfer is not
prohibited by any other provision of this letter agreement) upon receipt of such
evidence of compliance, Parent shall cause the transfer agent to
effectuate the transfer of the Parent Common Stock sold as indicated in such
letter. Notwithstanding the foregoing, Parent shall revoke the stop transfer
instructions with respect to any shares of Parent Common Stock held by the
undersigned or a transferee of the undersigned as to which the legend referred
to below has been removed.
The undersigned acknowledges and agrees that the legend set forth below will
be placed on certificates representing any Parent Common Stock received by the
undersigned in connection with the Merger or held by
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a transferee thereof, which legend will be removed by delivery of substitute
certificates (A) upon the transfer by the undersigned of Parent Common Stock in
a sale made in conformity within the provisions of Rule 145(d) or pursuant to an
effective registration statement under the Securities Act or (B) upon receipt of
an opinion in form and substance reasonably satisfactory to Parent from
independent counsel reasonably satisfactory to Parent (which may be Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.) to the effect that such legends
are no longer required for purposes of the Securities Act.
There will be placed on the certificates for Parent Common Stock issued to
the undersigned, or, except as otherwise provided herein, any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction to
which Rule 145 promulgated under the Securities Act of 1933, as amended,
applies. The shares have not been acquired by the holder with a view to, or
for resale in connection with, any distribution thereof within the meaning of
the Securities Act of 1933, as amended. The shares may not be sold, pledged or
otherwise disposed of except pursuant to a registration statement under, or in
accordance with an exemption from the registration requirements of, the
Securities Act of 1933."
It is understood and agreed that certificates with the legend set forth in
the preceding paragraph will be substituted by delivery of certificates without
such legend if:
(i) one year shall have elapsed from the date the undersigned acquired the
Parent Common Stock received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned;
(ii) two years shall have elapsed from the date the undersigned acquired
the Parent Common Stock received in the Merger and the provisions of Rule
145(d)(3) are then applicable to the undersigned;
(iii) Parent has received either an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Parent, or a "no action" letter
obtained by the undersigned from the staff of the SEC, to the effect that the
restrictions imposed by Rule 145 under the Securities Act no longer apply to
the undersigned; or
(iv) any registration statement registering the resale of Parent Common
Stock issued to the undersigned is declared effective by the SEC or
automatically becomes effective.
For so long as and to the extent necessary to permit the undersigned to sell
its shares of the Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act, Parent shall take all such
actions as reasonably available to file, on a timely basis, all reports and data
required to be filed with the SEC by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), referred to in paragraph
(c)(1) of Rule 144 (or, if applicable, Parent shall use reasonable efforts to
make publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144), furnish to the undersigned upon request a written
statement as to whether Parent has complied with such reporting requirements
during the twelve months preceding any proposed sale under Rule 145 and
otherwise take all such actions as reasonably available to permit such sales
pursuant to Rule 145 and Rule 144. Parent has filed, on a timely basis, all
reports required to be filed with the SEC under Section 13 of the Exchange Act
during the preceding twelve months.
The undersigned acknowledges that (i) the undersigned has carefully read this
letter and understands the requirements hereof and the limitations imposed upon
the distribution, sale, transfer or other disposition of shares of Company
Common Stock and Parent Common Stock and (ii) the receipt by Parent of this
letter is an inducement to Parent's obligations to consummate the Merger.
Very truly yours,
[NAME]
Dated: ,
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