As filed with the Securities and Exchange Commission on August 15, 2001
Registration No. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
MOTOROLA, INC.
(Exact name of registrant as specified in its charter)
Delaware 3663 36-1115800
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
--------------
1303 East Algonquin Road
Schaumburg, Illinois 60196
(847) 576-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Carl F. Koenemann
Executive Vice President and Chief Financial Officer
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
(847) 576-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
With copies to:
Paul P. Fleck, Esq. Peter J. Rooney, Esq. John R. Pomerance, Esq.
Motorola, Inc. Shearman & Sterling Mintz, Levin, Cohn,
101 Tournament Drive 599 Lexington Avenue Ferris,
Horsham, Pennsylvania New York, New York 10022 Glovsky and Popeo, P.C.
19044 (212) 848-4000 One Financial Center
(215) 323-1000 Boston, Massachusetts
02111
(617) 542-6000
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective time of the merger of a wholly-owned subsidiary
of the registrant with and into RiverDelta Networks, Inc., which shall occur as
soon as practicable after the effective date of this registration statement and
the satisfaction of all conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
Proposed
Proposed maximum
Title of each class of maximum aggregate Amount of
securities to be Amount to be offering price offering registration
registered registered(/2/) per share(/2/) price(/3/) fee(/4/)
---------------------- --------------- -------------- ---------- ------------
Common Stock, par value
$3 per share (and
associated preferred
stock purchase
price)(/1/)........... Not applicable Not applicable $242,362 $60.59
(/1/Each)share of Motorola common stock is accompanied by a right to purchase
Junior Participating Preferred Stock, Series B of Motorola. Prior to the
occurrence of certain events, none of which has occurred as of this date,
the rights will not be exercisable or evidenced separately from the common
stock.
-------
(/2/Pursuant)to Securities Act Rule 457(o), this information is not included.
(/3/Estimated)solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, and
calculated pursuant to Rule 457(f) thereunder. RiverDelta is a privately
held corporation and there is no market for its securities. In addition,
RiverDelta has an accumulated capital deficit. Therefore, pursuant to Rule
457(f)(2) under the Securities Act, the proposed maximum aggregate offering
price is based upon one-third of the par value of the securities of
RiverDelta being acquired in the proposed merger, which is $242,362,
computed as of the last practicable date prior to the date of filing this
registration statement.
(/4/Calculated)by multiplying .00025 by the proposed maximum aggregate offering
price.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this proxy statement/prospectus is not complete and may be +
+changed. We may not offer or sell these securities until the registration +
+statement filed with the Securities and Exchange Commission is effective. +
+This proxy statement/prospectus is not an offer to sell these securities and +
+it is not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated August 15, 2001
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, Massachusetts 01876
(978) 858-2300
[ ], 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
[ ], [ ], 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 $23.5 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 August 14, 2001, Motorola common stock closed
at $18.41 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 64.2% 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 [ ], 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,
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 [ ], 2001 and is first being
mailed to RiverDelta stockholders on or about [ ], 2001.
RiverDelta Networks, Inc.
3 Highwood Drive East
Tewksbury, Massachusetts 01876
(978) 858-2300
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [ ], 2001
A special meeting of stockholders of RiverDelta Networks, Inc. will be held
on [ ], [ ], 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 $23.5 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 64.2% 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 [ ], 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,
David F. Callan
President and Chief Executive
Officer
Tewksbury, Massachusetts
[ ], 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 73.
If you would like to request documents, please do so by [ ], 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 (see page 18)............................................. 5
Risk Factors (see page 15).............................................. 5
The RiverDelta Special Meeting (see page 20)............................ 6
Record Date (see page 20); Stockholders Entitled to Vote (see page 21).. 6
Vote Required (see page 21)............................................. 6
Voting Agreement (see page 21).......................................... 7
Recommendation of the RiverDelta Board of Directors (see page 20)....... 7
Accounting Treatment (see page 27)...................................... 7
Interests of RiverDelta Directors and Executive Officers in the Merger
(see page 28).......................................................... 7
Material Federal Income Tax Consequences of the RiverDelta Merger (see
page 30)............................................................... 7
Regulatory Matters (see page 33)........................................ 8
Statutory Appraisal Rights (see page 33)................................ 8
Management and Operations of RiverDelta after the Merger (see page 36).. 8
What You Will Receive in the Merger (see page 27)....................... 8
Ownership of Shares after the Merger.................................... 9
The Merger (see page 24)................................................ 9
Effects of the Merger on the Rights of RiverDelta Stockholders (see page
61).................................................................... 9
Listing of Motorola Common Stock (see page 43).......................... 9
Conditions to the Merger (see page 47).................................. 9
Termination (see page 49)............................................... 10
Fees and Expenses (see page 49)......................................... 10
Appointment of Stockholders' Representative (see page 51)............... 10
Indemnification of Motorola; Escrow Agreement (see page 51)............. 10
Credit Agreement (see page 54).......................................... 11
Original Equipment Manufacturer Agreement (see page 55)................. 11
Additional Proposals (see page 56)...................................... 11
Forward-Looking Statements (see page 72)................................ 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..................................................... 27
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.................................................................. 72
LEGAL AND TAX MATTERS.................................................... 72
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........................ 72
WHERE YOU CAN FIND MORE INFORMATION...................................... 73
APPENDICES TO THE PROXY STATEMENT/PROSPECTUS
Appendix A-1--Agreement and Plan of Merger.............................. A-1
Appendix A-2--Amendment No. 1 to the Agreement and Plan of Merger....... 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--Bridge Holders Agreement.................................. 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 $23.5 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 September 25, 2001, holders of Series B
preferred stock will receive approximately the first $62.6 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 73.
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 during the late third or early fourth
quarter of this year. Because the merger is subject to governmental approvals,
however, we cannot predict the exact timing. We are awaiting the expiration of
the waiting period under the Hart-Scott-Rodino Act.
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 [ ],
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 73. 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
[ ], [ ], 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 [ ], 2001, the record date.
On the record date, there were [ ] shares of RiverDelta common stock,
[ ] shares of RiverDelta Series A preferred stock and [ ] 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 [ ], 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, [ ]% of the outstanding shares
of RiverDelta common stock and Series A and Series B preferred stock on an as
converted basis, and [ ]% 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:
. 64.2% 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 must make certain filings and take other actions
necessary to obtain approvals from U.S. governmental authorities in connection
with the merger, including antitrust authorities. Both parties will use
reasonable best efforts to make all necessary filings with respect to the
merger required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, or other applicable law. However, Motorola is not required to agree
to any conditions, divestitures or expenditures of money to a third party in
exchange for any consent that, in any such case:
. would have a material adverse effect on RiverDelta; or
. if such action relates to Motorola or its subsidiaries, would, if taken
by RiverDelta or with respect to a comparable amount of assets,
businesses or product lines of RiverDelta, have a material adverse effect
on RiverDelta.
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, will expire on September 13, 2001 unless the antitrust authorities
grant early termination of the period or extend the period indefinitely by the
issuance of a request for additional information. We expect to obtain all other
material required governmental approvals and, if all other conditions to the
merger are satisfied, complete the merger in the late third or early fourth
quarter of 2001. We cannot be certain, however, that Motorola and RiverDelta
will obtain all required governmental approvals, or that we will obtain these
approvals without conditions that would be detrimental to Motorola or
RiverDelta.
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 27)
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 $23.5 million but may increase to as much as $45 million, plus
accrued interest
8
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.
Assuming the merger closes on September 25, 2001, holders of Series B
preferred stock will receive approximately the first $62.6 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 August 14, 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 73
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;
9
. the expiration or termination of all applicable waiting periods and any
extensions of these periods, under the Hart-Scott-Rodino Act;
. 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;
. 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 72)
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
72 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, 2001 July 1, 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
Per
High Low 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 August 14, 2001).... 19.40 15.37 .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
. August 14, 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
August 14, 2001.............................................. $18.41
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
[ ] 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 73.
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
73. 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 July 27, 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 206 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
158 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 [ ],
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 [ ], 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 [ ],
2001 as the record date for the special meeting. Accordingly, only stockholders
of record of RiverDelta stock at the close of business on [ ], 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, [ ], 2001, there were
[ ] shares of RiverDelta common stock outstanding and entitled to vote
held by [ ] 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, [ ]% of the outstanding shares
of RiverDelta common stock and Series A and Series B preferred stock on an as
converted basis, and [ ]% 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:
. 64.2% 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
21
. 90% of the shares of outstanding RiverDelta Series A preferred stock,
voting as a separate class.
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;
25
. 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;
26
. 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.
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
27
adjustments (including a deduction for indebtedness of RiverDelta, which
currently is approximately $23.5 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 July 27, 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 July 27, 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 5,085,688 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 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.
28
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 September 25, 2001, the aggregate principal
amount of Mr. Callan's subordinated convertible promissory notes, plus accrued
interest thereon of $267,071, will convert into approximately 410,841 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 September 25, 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 $379,726, will convert into approximately 444,972 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 September 25, 2001, the aggregate principal amount of the
subordinated convertible promissory notes held by the funds affiliated with
Battery Ventures, plus accrued interest thereon of $379,726, will convert into
approximately 444,973 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 September 25,
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 $759,452, will convert into approximately 889,946 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
September 25, 2001, the aggregate principal amount of Mr. Morrisse's
subordinated convertible promissory note, plus accrued interest thereon of
$22,784, will convert into approximately 26,698 shares of Series B preferred
stock. If the merger occurs after September 25, 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 September 25, 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.
Retention Agreements. It is expected that certain executive officers of
RiverDelta will enter into retention agreements with Motorola and RiverDelta
that will provide for the accelerated vesting of unvested RiverDelta stock
options they currently hold and accelerated lapsing of RiverDelta's rights to
repurchase restricted stock, 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. These retention agreements are
29
currently the subject of negotiation among Motorola, RiverDelta and such
executive officers and therefore it is not possible at this time to describe
the particular terms thereof. It is anticipated, however, that the retention
agreements to be entered into will have the following general terms:
. the executive officer will receive accelerated vesting of 50% of his
unvested stock options and 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 vesting and 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; 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.
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. It is
expected that RiverDelta will conduct this vote through a separate information
statement once all of the retention agreements with the executive officers and
other employees who may be deemed to be receiving parachute payments have been
signed. 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 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,
30
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 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
31
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 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.
32
Regulatory Matters
Motorola and RiverDelta must make certain filings and take other actions
necessary to obtain approvals from U.S. governmental authorities in connection
with the merger, including antitrust authorities. Both parties will use
reasonable best efforts to make all necessary filings with respect to the
merger required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, or other applicable law. However, Motorola is not required to agree
to any conditions, divestitures or expenditures of money to a third party in
exchange for any consent that, in any such case:
. would have a material adverse effect on RiverDelta; or
. if any such action relates to Motorola or its subsidiaries, would, if
taken by RiverDelta or with respect to a comparable amount of assets,
businesses or product lines of RiverDelta, have a material adverse effect
on RiverDelta.
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, will expire on September 13, 2001 unless the antitrust authorities
grant early termination of the period or extend the period indefinitely by the
issuance of a request for additional information. We expect to obtain all other
material required governmental approvals and, if all other conditions to the
merger are satisfied, complete the merger in the late third or early fourth
quarter of 2001. We cannot be certain, however, that Motorola and RiverDelta
will obtain all required governmental approvals, or that we will obtain these
approvals without conditions that would be detrimental to Motorola or
RiverDelta.
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.
33
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 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
34
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.
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;
35
. 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 September 25, 2001, holders of Series B
preferred stock will receive approximately the first $62.6 million of
consideration. If the merger occurs after September 25, 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 27), 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 $23.5 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
September 25, 2001, that the aggregate liquidation preference of the Series B
preferred stock is $62.6 million and that there are 58,075,541 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 of common stock holders of
Aggregate Merger common stock holders of RiverDelta Series A RiverDelta Series B
Consideration, RiverDelta common preferred stock would preferred stock would
after adjustment stock would be entitled to be entitled to receive be entitled to receive
at closing receive (per share) (per share) (per share)
---------------- -------------------------- ----------------------- -----------------------
$280,000,000 $3.74 $11.22 $12.09
$270,000,000 $3.57 $10.71 $12.09
$260,000,000 $3.40 $10.20 $12.09
$250,000,000 $3.23 $ 9.69 $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 enter into retention agreements with
Motorola 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.
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 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;
. 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; and
. the waiting period under applicable federal antitrust laws and any
extension must have expired or been terminated.
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 64.2% 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 September 25, 2001,
the aggregate principal amount of the subordinated convertible promissory notes
plus interest thereon will be converted into 2,217,432 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 and a further $3.5 million
on August 7, 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.
55
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 July 27, 2001, 33,841,200 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 34,287,558 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
pursuant to RiverDelta's 1999 Employee, Director and Consultant Stock Option
Plan. Accordingly, RiverDelta has 3,871,242 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 2,217,432 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 September 25,
2001. If the merger occurs after September 25, 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 73.
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 June 30, 2001, approximately 2,212,943,842 shares of
Motorola common stock were issued and outstanding, held by approximately
111,836 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 73. 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.
60
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 August 8, 2001, 34,043,181 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.
61
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.
62
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.
63
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 July 27, 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
July 27, 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 September 25, 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 3,311,258 858,538 18.4%
20 William St. (44.9%) (25.2%)
Wellesley, MA 02481
Charles River
Partners(/6/).......... 0 3,311,258 858,538 18.4%
100 Winter Street, Suite
3300 (44.9%) (25.2%)
Waltham, MA 02451
Pequot Capital
Management, Inc.(/7/).. 0 0 2,544,206 6.2%
500 Nyala Farm Road (66.1%)
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%
(4.8%)
David F. Callan(/9/).... 11,475,000 0 824,406 21.0%
(33.9%) (24.5%)
Joseph A.
Cozzolino(/10/)........ 1,748,201 0 0 2.9%
(5.1%)
Jeffrey A.
Walker(/11/)........... 1,103,901 0 0 1.8%
(3.2%)
Gerard White(/12/)...... 1,379,877 0 0 2.2%
(4.0%)
Todd Dagres(/13/)....... 0 3,311,258 858,538 18.4%
(44.9%) (25.2%)
Michael
Karfopoulos(/14/)...... 0 0 2,544,206 6.2%
(66.1%)
Bruce I. Sachs(/15/).... 0 3,311,258 858,538 18.4%
(44.9%) (25.2%)
All executive officers
and directors as a
group (8 persons)...... 17,362,832 6,622,516 5,085,688(/16/) 70.5%
(47.6%) (90%) (98.8%)
--------
(1) Based on 33,841,200 shares of common stock issued and outstanding as of
July 27, 2001.
(2) Based on 7,358,358 shares of Series A preferred stock issued and
outstanding as of July 27, 2001.
(3) Based on 2,956,988 shares of Series B preferred stock issued and
outstanding as of July 27, 2001.
(4) Based on 60,351,756 shares of RiverDelta capital stock issued and
outstanding, on an as-converted basis, as of July 27, 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 395,814 shares of Series B preferred stock issuable to
Battery Ventures V, L.P., 40,047 shares of Series B preferred stock
issuable to Battery Convergence Fund, L.P., and 9,111 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 September 25, 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
68
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 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
402,720 shares of Series B preferred stock issuable to Charles River
Partnership X, a Limited Partnership, 11,049 shares of Series B preferred
stock issuable to Charles River Partnership X-A, a Limited Partnership,
26,553 shares of Series B preferred stock issuable to Charles River
Friends X-B, LLC and 4,650 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
September 25, 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 889,946 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 September 25, 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) Includes 1,500,000 shares of restricted stock issued to Mr. Brown as
founder's shares, 875,000 shares of which were vested as of July 27,
2001, 62,500 shares which will vest within 60 days of July 27, 2001, in
accordance with normal vesting provisions, and 281,250 shares which will
vest in accordance with
69
accelerated vesting provisions upon completion of the merger. 281,250
shares will remain unvested after the acquisition. Also includes 155,853
shares of restricted stock issued to Mr. Brown upon the exercise of stock
options, 90,914 shares of which were vested as of July 27, 2001, 6,494
shares which will vest within 60 days of July 27, 2001, in accordance with
normal vesting provisions, and 29,222 shares which will vest in accordance
with accelerated vesting provisions upon completion of the merger.
(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 410,841 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.
(10) Shares consist of restricted stock held of record by Mr. Cozzolino,
509,892 shares of which were vested as of July 27, 2001, 72,842 shares
which will vest within 60 days of July 27, 2001, in accordance with
normal vesting provisions, and 291,367 shares which will vest in
accordance with accelerated vesting provisions upon completion of the
merger. 874,100 shares will remain unvested after the acquisition. It is
anticipated that Mr. Cozzolino will enter into a retention agreement with
Motorola that will provide for additional accelerated vesting of 50% of
his unvested shares of restricted stock upon completion of the merger.
(11) Shares consist of restricted stock held of record jointly by Mr. Walker
and his wife, 390,965 shares of which were vested as of July 27, 2001,
45,996 shares which will vest within 60 days of July 27, 2001, in
accordance with normal vesting provisions, and 275,975 shares which will
vest in accordance with accelerated vesting provisions upon completion of
the merger. 390,965 shares will remain unvested after the acquisition. It
is anticipated that Mr. Walker will enter into a retention agreement with
Motorola that will provide for additional accelerated vesting of 50% of
his unvested shares of restricted stock upon completion of the merger.
(12) Shares consist of restricted stock held of record jointly by Mr. White
and his wife, 603,696 shares of which were vested as of July 27, 2001,
57,495 shares which will vest within 60 days of July 27, 2001, in
accordance with normal vesting provisions, and 359,343 shares which will
vest in accordance with accelerated vesting provisions upon completion of
the merger. 359,343 shares will remain unvested after the acquisition. It
is anticipated that Mr. White will enter into a retention agreement with
Motorola that will provide for additional accelerated vesting of 50% of
his unvested shares of restricted stock upon completion of the merger.
(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
70
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 2,190,733 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 September 25, 2001.
71
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 73. 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.
72
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 450 Fifth Street, N.W. Room 1024 Washington, D.C.
20549
New York Regional Office 7 World Trade Center
Suite 1300 New York, NY 10048
Chicago Regional
Office Citicorp
Center 500 West
Madison Street
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.
73
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 [ ],
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 August 15, 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.
74
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-36
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-43
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-51
EXHIBITS
Exhibit AVoting Agreement
Exhibit BForm of Company Affiliate Agreement
Exhibit CBridge Holders Agreement
Exhibit DForm of Transmittal Letter
Exhibit 3.02Form 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,
A-6
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)
A-7
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)
A-8
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
A-9
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.
A-10
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
A-11
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.
A-12
(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
A-13
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
A-14
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.
A-15
(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
A-16
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
A-17
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
A-18
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
A-19
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.
A-20
(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
A-21
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.
A-30
(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.
A-31
(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.
A-32
(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.
A-33
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
A-34
permit of, or filing with or notification to, any Governmental Authority,
except (i) the filing of the Registration 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.
A-35
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.
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;
A-36
(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;
(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;
A-37
(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.
(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
A-38
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 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
A-39
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 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.
A-40
(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 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
A-41
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 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.
A-42
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.
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
A-43
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 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
A-44
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 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
A-45
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 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
A-46
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 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;
A-47
(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
(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-48
(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
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
A-49
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
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.
A-50
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.
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
EXHIBIT A
VOTING AGREEMENT
A-52
EXHIBIT B
FORM OF COMPANY AFFILIATE AGREEMENT
A-53
EXHIBIT C
FORM OF BRIDGE HOLDERS AGREEMENT
A-54
EXHIBIT D
FORM OF TRANSMITTAL LETTER
A-55
EXHIBIT 3.02
FORM OF ESCROW AGREEMENT
A-56
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
B-3
(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.
B-4
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
B-5
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
B-6
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.
B-7
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
B-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
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
B-9
/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
B-10
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 -- --
B-11
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.
B-12
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.
C-1
(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
C-2
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.
C-3
(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.)
C-4
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
D-1
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
D-2
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.
D-4
(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
D-5
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
D-6
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.
D-7
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
E-1
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
E-2
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.
E-7
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
E-10
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.
E-2-1
(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.
E-2-2
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-2-3
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.
E-2-4
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.
E-2-5
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.
E-2-6
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
E-2-7
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-2-8
/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
E-2-9
CHARLES RIVER PARTNERSHIP X-A,
A LIMITED PARTNERSHIP
By: Charles River X GP LLCIts
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
E-2-10
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
E-2-11
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
F-1
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: ,
F-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation has the power to indemnify its officers, directors, employees and
agents (or persons serving in such positions in another entity at the request
of the corporation) against the expenses, including attorneys' fees, judgments,
fines or settlement amounts actually and reasonably incurred by them in
connection with the defense of any action by reason of being or having been
directors or officers, if such person shall have acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation (and, with respect to any criminal action, had no reasonable cause
to believe the person's conduct was unlawful), except that, if such action
shall be by or in the right of the corporation, no such indemnification shall
be provided as to any claim, issue or matter as to which such person shall have
been judged to have been liable to the corporation unless and to the extent
that the Court of Chancery of the State of Delaware, or another court in which
the suit was brought, shall determine upon application that, in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity.
As permitted by Section 102 of the DGCL, the registrant's Restated
Certificate of Incorporation provides that no director shall be personally
liable to the registrant or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability (i) for breaches
of the director's duty of loyalty to the registrant or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for the unlawful payment of dividends or
unlawful stock purchases or redemptions under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit.
The registrant's Restated Certificate of Incorporation further provides that
the registrant must indemnify and hold harmless, to the fullest extent
authorized by the DGCL, as the same exists or may be hereafter amended (but, in
the case of any such amendment, only to the extent that the amendment permits
the registrant to provide broader indemnification rights than the DGCL
permitted the registrant to provide prior to such amendment), each person who
was or is made a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
registrant or is or was serving (at such time as such person is or was a
director or officer of the registrant) at the request of the registrant as a
director, officer, employee or agent of another entity, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee
or agent, against all expense, liability and loss reasonably incurred or
suffered by such indemnitee in connection therewith. This right to
indemnification will continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and will inure to the benefit of the
indemnitee's heirs, executors and administrators. However, except as provided
below with respect to proceedings to enforce rights to indemnification, the
registrant will indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by that indemnitee only if the proceeding was
authorized by the registrant's Board of Directors.
The Restated Certificate of Incorporation provides that the right to
indemnification is a contract right and includes the right to be paid by the
registrant the expenses incurred in defending any such proceeding in advance of
its final disposition. However, if and to the extent that the DGCL requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) will be made only upon delivery to the registrant of an
undertaking, by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision that
II-1
such indemnitee is not entitled to be indemnified for such expenses. The
registrant's Restated Certificate of Incorporation also provides that the
registrant may, by action of the registrant's Board of Directors or by action
of any person to whom the registrant's Board of Directors has delegated such
authority, provide indemnification to employees and agents of the registrant
with the same scope and effect as the indemnification of the registrant's
officers and directors. The rights to indemnification and to the advancement of
expenses conferred in the Restated Certificate of Incorporation will not be
exclusive of any other right which any person may have or hereafter acquire
under the Restated Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145 of the DGCL also provides that a corporation has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation (or who was serving at
the request of the corporation in such position at another entity) against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the DGCL. The Restated Certificate of Incorporation provides
that the registrant may maintain insurance, at its own expense, to protect
itself and any director, officer, employee or agent of the registrant or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the registrant would
have the power to indemnify such person against such expense, liability or loss
under the DGCL. All of the directors and officers of the registrant are covered
by insurance policies maintained and held in effect by the registrant against
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933, as amended, subject to certain exclusions.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger, dated as of July 11, 2001, among the
registrant, Bayou Merger Sub, Inc. and RiverDelta Networks, Inc.
(included as Appendix A to the prospectus incorporated as part of
this registration statement).
4.1 Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3(i)(b) to the registrant's Quarterly Report
on Form 10-Q for the quarter ended April 1, 2000 (File No. 1-
07221)).
4.2 Certificate of Designations, Preferences and Rights of Junior
Participating Preferred Stock, Series B (incorporated by reference
to Exhibit 3.3 to the registrant's Registration Statement on Form
S-3 dated January 20, 1999 (Registration No. 333-70827)).
4.3 By-laws, as amended through March 9, 2001 (incorporated by
reference to Exhibit 3.3 to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 2000 (File No. 1-
07221)).
4.4 Rights Agreement, dated as of November 5, 1998, between the
registrant and Harris Trust and Savings Bank, as Rights Agent
(incorporated by reference to Exhibit 1.1 to the registrant's
Amendment No. 1 to Registration Statement on Form 8-A/A dated
March 16, 1999 (File No. 1-07221)).
5.1 Opinion of Jeffrey A. Brown, Esq., Senior Corporate Counsel,
Corporate Law Department, Motorola, Inc. as to the legality of the
shares being issued.
8.1 Opinion of KPMG LLP regarding the federal income tax consequences
of the Merger.
8.2 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding the federal income tax consequences of the Merger.
II-2
Exhibit
Number Description
------- -----------
21.1 Subsidiaries of registrant (incorporated by reference to Exhibit
21 to the registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000
(File No. 1-07221)).
23.1 Consent of KPMG LLP.
23.2 Consent of Jeffrey A. Brown, Esq., Senior Corporate Counsel,
Corporate Law Department, Motorola, Inc. (included in Exhibit No.
5.1).
23.3 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in
Exhibit No. 8.2).
23.4 Consent of KPMG LLP (included in Exhibit 8.1).
99.1 Form of Proxy Card for RiverDelta Networks, Inc. Special Meeting
of Stockholders.
99.2 Voting Agreement, dated as of July 11, 2001, among 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 the registrant
(included as Appendix B to the prospectus incorporated as part of
this registration statement).
99.3 Form of Escrow Agreement by and among the registrant, Todd Dagres,
as Stockholder Representative, and Bank One Trust Company, N.A.
(included as Appendix D to the prospectus incorporated as part of
this registration statement).
99.4 Bridge Holders Agreement, dated as of July 11, 2001, among
RiverDelta Networks, Inc., 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, Battery Management Corp., David Callan and Scott E.
Morrisse (included as Appendix E to the prospectus incorporated as
part of this registration statement).
99.5 Credit Agreement, dated as of July 11, 2001, between RiverDelta
Networks, Inc. and the registrant.
99.6 Original Equipment Manufacturing (OEM) Agreement, dated as of
August 1, 2001, between RiverDelta Networks, Inc. and the
registrant.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this registration statement through
the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in Schaumburg, Illinois, on August
14, 2001.
Motorola, Inc.
/s/ Christopher B. Galvin
By: _________________________________
Christopher B. Galvin
Chairman of the Board and
Chief Executive Officer
Each of the undersigned hereby constitutes and appoints Christopher B.
Galvin, Robert L. Growney, Carl F. Koenemann and Anthony M. Knapp, and each of
them, as attorneys for him or her and in his or her name, place and stead, and
in any and all capacities, to execute and file any amendments, supplements or
statements with respect thereto, hereby giving and granting to said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing whatsoever requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes, as he or she might or could do
if personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys, or any of them, or their or his or her substitute or
substitutes, may or shall lawfully do, or cause to be done, by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Christopher B. Galvin Chairman of the Board and August 14, 2001
____________________________________ Chief Executive Officer
Christopher B. Galvin (Principal Executive
Officer)
/s/ Carl F. Koenemann Executive Vice President and August 14, 2001
____________________________________ Chief Financial Officer
Carl F. Koenemann (Principal Financial
Officer)
/s/ Anthony M. Knapp Senior Vice President and August 14, 2001
____________________________________ Controller (Principal
Anthony M. Knapp Accounting Officer)
/s/ Ronnie C. Chan Director August 14, 2001
____________________________________
Ronnie C. Chan
/s/ H. Laurence Fuller Director August 14, 2001
____________________________________
H. Laurence Fuller
/s/ Robert L. Growney Director August 14, 2001
____________________________________
Robert L. Growney
II-5
Signature Title Date
--------- ----- ----
/s/ Anne P. Jones Director August 14, 2001
____________________________________
Anne P. Jones
/s/ Judy C. Lewent Director August 14, 2001
____________________________________
Judy C. Lewent
/s/ Dr. Walter E. Massey Director August 14, 2001
____________________________________
Dr. Walter E. Massey
/s/ Nicholas Negroponte Director August 14, 2001
____________________________________
Nicholas Negroponte
/s/ John E. Pepper, Jr. Director August 14, 2001
____________________________________
John E. Pepper, Jr.
/s/ Samuel C. Scott III Director August 14, 2001
____________________________________
Samuel C. Scott III
/s/ B. Kenneth West Director August 14, 2001
____________________________________
B. Kenneth West
/s/ Dr. John A. White Director August 14, 2001
____________________________________
Dr. John A. White
II-6