prem14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
þ Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by Rule14a-6(e)(2))
o Definitive Proxy
Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
Section 240.14a-12
3COM CORPORATION
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
o
|
No fee required.
|
|
þ
|
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
|
|
|
|
|
(1)
|
Title of each class of securities to which transaction applies:
|
Common Stock, par value $0.01 per share of 3Com Corporation (the
Common Stock).
|
|
|
|
(2)
|
Aggregate number of securities to which transaction applies:
|
401,995,350 shares of Common Stock; 48,842,182 options to
purchase Common Stock; and restricted stock units with respect
to 6,602,618 shares of Common Stock.
|
|
|
|
(3)
|
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
|
The maximum aggregate value was determined based upon the sum of
(A) 401,995,350 shares of Common Stock multiplied by $5.30
per share; (B) options to purchase 48,842,182 shares of
Common Stock multiplied by $.0746 (which is the difference
between $5.30 and the weighted average exercise price of $5.2254
per share); and (C) restricted stock units with respect to
6,602,618 shares of Common Stock multiplied by $5.30 per
share. In accordance with Section 14(g) of the Securities
Exchange Act of 1934, as amended, the filing fee was determined
by multiplying 0.0000307 by the sum of the preceding sentence.
|
|
|
|
(4)
|
Proposed maximum aggregate value of transaction:
|
$2,169,212,857
$66,595
|
|
o
|
Fee paid previously with preliminary materials.
|
|
o
|
Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
|
|
(1)
|
Amount Previously Paid:
|
|
|
|
|
(2)
|
Form, Schedule or Registration Statement No.:
|
3Com
Corporation
350 Campus Drive
Marlborough, Massachusetts
01752-3064
,
2007
Dear Stockholder:
The board of directors of 3Com Corporation, a Delaware
corporation, has unanimously approved a merger agreement
providing for the acquisition of 3Com by Diamond II
Holdings, Inc., an entity formed by investment vehicles
sponsored by Bain Capital Partners, LLC. If the merger
contemplated by the merger agreement is completed, you will be
entitled to receive $5.30 in cash, without interest and less any
applicable withholding tax, for each share of 3Com common stock
owned by you immediately prior to completion of the merger
(unless you have properly and validly perfected your statutory
rights of appraisal with respect to the merger).
At a special meeting of our stockholders, you will be asked to
consider and vote on a proposal to adopt the merger agreement.
After careful consideration, our board of directors has
unanimously approved the merger agreement, the merger and the
other transactions contemplated by the merger agreement and
determined that the merger is fair to and in the best interests
of 3Com and its stockholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO ADOPT THE MERGER AGREEMENT.
The special meeting will be held
on ,
at a.m. local time, at our
headquarters, 350 Campus Drive, Marlborough, Massachusetts
01752-3064.
Notice of the special meeting and the related proxy statement
are enclosed.
The attached proxy statement provides you with detailed
information about the special meeting, the merger agreement and
the merger. A copy of the merger agreement is attached as
Annex A to the proxy statement. We encourage you to read
the entire proxy statement and the merger agreement carefully.
You may also obtain more information about 3Com from documents
we have filed with the Securities and Exchange Commission.
Your vote is very important regardless of the number of
shares you own. We cannot complete the merger unless the
holders of a majority of outstanding shares of common stock that
are entitled to vote at the special meeting vote in favor of the
proposal to adopt the merger agreement. The failure of any
stockholder to vote on the proposal to adopt the merger
agreement will have the same effect as a vote against the
proposal to adopt the merger agreement.
Whether or not you plan to attend the special meeting, please
complete, date, sign and return, as promptly as possible, the
attached proxy in the accompanying reply envelope, or submit
your proxy by telephone or the Internet. If you have
Internet access, we encourage you to record your vote via the
Internet. If you attend the special meeting and vote in person,
your vote by ballot will revoke any proxy previously submitted.
If you hold your shares through a broker or other nominee, you
should follow the procedures provided by your broker or nominee.
Thank you in advance for your cooperation and continued support.
Sincerely,
Edgar Masri
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
The proxy statement is
dated ,
2007, and is first being mailed to stockholders on or
about ,
2007.
3Com
Corporation
350 Campus Drive
Marlborough, Massachusetts
01752-3064
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held
On ,
2007
To the Stockholders of 3Com Corporation:
A special meeting of stockholders of 3Com Corporation, a
Delaware corporation (the Company), will be held
on ,
at a.m. local time, at the
Companys headquarters, 350 Campus Drive, Marlborough,
Massachusetts
01752-3064,
for the following purposes:
1. Adoption of the Merger Agreement. To
consider and vote on a proposal to adopt the Agreement and Plan
of Merger (the Merger Agreement), dated as of
September 28, 2007, by and among the Company,
Diamond II Holdings, Inc., (Newco) and
Diamond II Acquisition Corp., an indirect wholly-owned
subsidiary of Newco (Merger Sub). A copy of the
Merger Agreement is attached as Annex A to the attached
proxy statement. Pursuant to the terms of the Merger Agreement,
Merger Sub will merge with and into the Company (the
Merger) and each outstanding share of the
Companys common stock, par value $0.01 per share (the
Common Stock) (other than shares owned by Newco,
Merger Sub or the Company, or by any direct or indirect
wholly-owned subsidiary of Newco, Merger Sub or the Company, in
each case immediately prior to the effective time of the Merger,
and shares held by stockholders, if any, who have properly and
validly perfected statutory rights of appraisal with respect to
the Merger), will be converted into the right to receive $5.30
in cash, without interest and less any applicable withholding
tax.
2. Adjournment or Postponement of the Special
Meeting. To approve the proposal to adjourn or
postpone the special meeting, if necessary or appropriate, to
solicit additional proxies if there are insufficient votes at
the time of the special meeting to adopt the Merger Agreement.
Only stockholders of record of the Companys Common Stock
as of the close of business
on ,
2007 are entitled to notice of and to vote at the special
meeting or at any adjournment or postponement of the special
meeting. All stockholders of record are cordially invited to
attend the special meeting in person.
Your vote is very important, regardless of the number of
shares of Common Stock you own. Adoption of the
Merger Agreement requires the affirmative vote of the holders of
a majority of the shares of Common Stock outstanding
on ,
the record date of the special meeting. Even if you plan to
attend the special meeting in person, we request that you
complete, sign, date and return the enclosed proxy or submit
your proxy by telephone or the Internet prior to the special
meeting to ensure that your shares will be represented at the
special meeting if you are unable to attend. If you sign, date
and mail your proxy card without indicating how you wish to
vote, your vote will be counted as a vote FOR
the adoption of the Merger Agreement.
If you fail to vote by proxy or in person, the effect will be
that your shares will not be counted for purposes of determining
whether a quorum is present at the special meeting and, if a
quorum is present, will have the same effect as a vote against
the adoption of the Merger Agreement. If you are
a stockholder of record, voting in person at the special meeting
will revoke any proxy previously submitted. If you hold your
shares through a bank, broker or other custodian, you must
obtain a legal proxy from such custodian in order to vote in
person at the special meeting. If your shares are held by a bank
or broker, please bring to the special meeting your statement
evidencing your beneficial ownership of Common Stock and photo
identification.
Stockholders of the Company who do not vote in favor of the
proposal to adopt the Merger Agreement will have the right to
seek appraisal of the fair value of their shares of Common Stock
if the Merger is completed, but only if they properly and
validly perfect statutory rights of appraisal before the vote is
taken on the Merger Agreement and comply with all requirements
of Delaware law, which are summarized in the attached proxy
statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE
ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE, OR SUBMIT
YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU HAVE INTERNET
ACCESS, WE ENCOURAGE YOU TO RECORD YOUR VOTE VIA THE INTERNET.
STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR
PROXIES AND VOTE IN PERSON.
By Order of the Board of Directors,
Neal D. Goldman
Executive Vice President, Chief Administrative and Legal
Officer and Secretary
Marlborough, Massachusetts
,
2007
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
9
|
|
|
|
|
13
|
|
|
|
|
14
|
|
|
|
|
15
|
|
|
|
|
15
|
|
|
|
|
15
|
|
|
|
|
15
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
16
|
|
|
|
|
17
|
|
|
|
|
17
|
|
|
|
|
17
|
|
|
|
|
18
|
|
|
|
|
18
|
|
|
|
|
25
|
|
|
|
|
27
|
|
|
|
|
33
|
|
|
|
|
35
|
|
|
|
|
38
|
|
|
|
|
38
|
|
|
|
|
44
|
|
|
|
|
45
|
|
|
|
|
45
|
|
|
|
|
46
|
|
|
|
|
46
|
|
|
|
|
47
|
|
|
|
|
47
|
|
|
|
|
47
|
|
|
|
|
48
|
|
|
|
|
48
|
|
|
|
|
49
|
|
|
|
|
49
|
|
|
|
|
51
|
|
|
|
|
53
|
|
|
|
|
54
|
|
|
|
|
56
|
|
|
|
|
57
|
|
|
|
|
59
|
|
|
|
|
59
|
|
|
|
|
61
|
|
|
|
|
63
|
|
i
|
|
|
|
|
|
|
Page
|
|
|
|
|
63
|
|
|
|
|
64
|
|
|
|
|
65
|
|
|
|
|
66
|
|
|
|
|
68
|
|
|
|
|
71
|
|
|
|
|
71
|
|
|
|
|
72
|
|
|
|
|
|
|
Annex A Agreement
and Plan of Merger
|
|
|
|
|
Annex B Opinion
of Goldman, Sachs & Co.
|
|
|
|
|
Annex C Section 262
of the Delaware General Corporation Law
|
|
|
|
|
ii
PROXY
STATEMENT
References to 3Com, the Company,
we, our or us in this proxy
statement refer to 3Com Corporation and its subsidiaries unless
otherwise indicated by context.
The following summary highlights selected information in this
proxy statement and may not contain all the information that may
be important to you. Accordingly, we encourage you to read
carefully this entire proxy statement, its annexes and the
documents referred to or incorporated by reference in this proxy
statement. Each item in this summary includes a page reference
directing you to a more complete description of that topic. See
Where You Can Find More Information beginning on
page 72.
Proposal
You are being asked to vote on a proposal to adopt the Agreement
and Plan of Merger, dated September 28, 2007 (the
Merger Agreement), by and among the Company,
Diamond II Holdings, Inc. (Newco) and
Diamond II Acquisition Corp. (Merger Sub).
Pursuant to the Merger Agreement, Merger Sub will merge with and
into 3Com and 3Com will be the surviving corporation and an
indirect wholly-owned subsidiary of Newco (the
Merger). In the event that there are not sufficient
votes at the time of the special meeting to adopt the Merger
Agreement, the stockholders may be asked to vote on a proposal
to adjourn or postpone the special meeting to solicit additional
proxies. See The Special Meeting beginning on
page 15.
The
Parties to the Merger (Page 14)
3Com is a Delaware corporation with its headquarters in
Marlborough, Massachusetts. 3Com was incorporated in California
on June 4, 1979 and reincorporated in Delaware on
June 12, 1997. 3Com is a provider of secure, converged
voice and data networking solutions for enterprises of all
sizes. 3Com offers a broad line of products backed by world
class sales, service and support, which excel at delivering
business value for its customers. 3Com also includes H3C
Technologies Co., Limited (H3C), a China-based
provider of network infrastructure products that provides
cost-effective product development. Through its TippingPoint
division, 3Com is a provider of network-based intrusion
prevention systems that deliver in-depth application protection,
infrastructure protection and performance protection. 3Com is
organized into three primary business groups: H3C, the data and
voice business unit (DVBU) and TippingPoint.
Newco was formed in anticipation of the Merger by investment
vehicles sponsored by Bain Capital Partners, LLC (Bain
Capital). Newco was formed solely for the purpose of
acquiring 3Com and has not engaged in any business except for
activities incidental to its formation and as contemplated by
the Merger Agreement. At the effective time of the Merger, Newco
will be majority-owned and controlled by investment vehicles
sponsored by Bain Capital. Bain Capital is part of Bain Capital,
LLC, a
U.S.-based,
global private investment firm whose affiliates manage several
pools of capital including private equity, venture capital
public equity and leverage debt assets with more than
$60 billion in assets under management. Since its inception
in 1984, Bain Capital has made private equity investments and
add-on acquisitions in over 300 companies around the world,
including numerous investments in the software and technology
sectors such as Ameritrade, Applied Systems, Aspect Development,
Chip PAC, DoubleClick, Epsilon Data Management, Experian,
Gartner Group, Integrated Circuit Systems, MCI, NXP, SunGard
Data Systems, U.S. Internetworking and UGS. At the
effective time of the merger, an affiliate of Huawei
Technologies Co. Ltd. will make a non-controlling, minority
investment in Newco (the affiliate of Huawei Technologies Co.
Ltd. together with Bain Capital, the Investors).
Merger Sub was formed by investment vehicles sponsored by Bain
Capital solely for the purpose of completing the proposed
Merger. Merger Sub is an indirect, wholly-owned subsidiary of
Newco and has not engaged in any business except for activities
incidental to its formation and as contemplated by the Merger
Agreement. Subject to the terms of the Merger Agreement, at the
effective time, Merger Sub will merge with
and into 3Com. Upon the consummation of the proposed Merger,
Merger Sub will cease to exist, 3Com will continue as the
Surviving Corporation and will become an indirect wholly-owned
subsidiary of Newco.
The
Merger (Page 18)
The Merger Agreement provides that Merger Sub will merge with
and into 3Com. In the Merger, each outstanding share of 3Com
common stock, par value $0.01 per share (the Common
Stock) that is outstanding immediately prior to the
effective time of the Merger, (other than shares owned by Newco,
Merger Sub or 3Com, or by any direct or indirect wholly-owned
subsidiary of Newco, Merger Sub or 3Com, and shares held by
stockholders, if any, who have properly and validly perfected
statutory rights of appraisal with respect to the Merger) will
be converted into the right to receive $5.30 in cash, without
interest and less any applicable withholding tax, which we refer
to in this proxy statement as the merger consideration.
Effects
of the Merger (Page 48)
If the Merger is completed, you will be entitled to receive
$5.30 in cash, without interest and less any applicable
withholding taxes, for each share of Common Stock that you own
immediately prior to the completion of the Merger, unless you
have properly and validly perfected your statutory rights of
appraisal with respect to the Merger. As a result of the Merger,
3Com will cease to be an independent, publicly traded company.
You will not own any shares of the Surviving Corporation and
will not have any rights as a stockholder.
The
Special Meeting (Page 15)
Time,
Place and Date (Page 15)
The special meeting will be held
on ,
at a.m. local time, at the Companys
headquarters, 350 Campus Drive, Marlborough, Massachusetts
01752-3064.
Purpose
(Page 15)
You will be asked to consider and vote upon a proposal to adopt
the Merger Agreement, pursuant to which Merger Sub will merge
with and into the Company.
Record
Date and Quorum (Page 15)
You are entitled to vote at the special meeting if you owned
shares of Common Stock at the close of business
on ,
the record date for the special meeting. You will have one vote
for each share of Common Stock that you owned as of the close of
business on the record date. As of the close of business on the
record date, there
were shares
of Common Stock outstanding and entitled to vote. A majority of
the shares of Common Stock issued and outstanding on the record
date represented at the special meeting in person or by a duly
authorized and properly completed proxy constitutes a quorum for
the purpose of considering the proposals.
Vote
Required (Page 15)
Completion of the Merger requires the adoption of the Merger
Agreement by the affirmative vote of the holders of a majority
of shares of Common Stock outstanding
on ,
the record date for special meeting. Failure to vote your
shares of Common Stock by proxy or in person or an abstention
will have the same effect as voting against approval of the
Merger Agreement. Approval of the proposal to adjourn or
postpone the special meeting, if necessary or appropriate, for
the purpose of soliciting additional proxies requires the
affirmative vote of a majority of the votes cast by the holders
of all Common Stock present in person or represented by proxy at
the special meeting and entitled to vote on the matter. Failure
to vote your shares of our Common Stock or an abstention will
have no effect on the approval of the proposal to adjourn or
postpone the special meeting.
2
Common
Stock Ownership of Directors and Executive Officers
(Page 15)
As of the close of business on the record date, the directors
and executive officers of 3Com held in the aggregate
approximately % of the shares of
Common Stock entitled to be voted at the special meeting. In the
aggregate, these shares represent %
of the votes necessary to approve the proposal to adopt the
Merger Agreement at the special meeting.
Voting
and Proxies (Page 16)
Any stockholder of record entitled to vote at the special
meeting may submit a proxy by telephone, the Internet, by
returning the enclosed proxy card by mail, or by voting in
person by appearing at the special meeting. If your shares of
Common Stock are held in street name by your broker,
you should instruct your broker on how to vote your shares of
Common Stock using the instructions provided by your broker. If
you do not provide your broker with instructions, your shares of
Common Stock will not be voted and that will have the same
effect as a vote AGAINST the proposal to
adopt the Merger Agreement. The persons named in the attached
proxy will also have discretionary authority to vote on any
proposals to adjourn or postpone the special meeting.
Revocability
of Proxy (Page 16)
Any stockholder of record who executes and returns a proxy card
(or submits a proxy via telephone or the Internet) may revoke
the proxy at any time before it is voted at the special meeting
in any one of the following ways:
|
|
|
|
|
by notifying our Secretary, Neal D. Goldman, at 350 Campus
Drive, Marlborough, Massachusetts
01752-3064;
|
|
|
|
by attending the special meeting and voting in person (your
attendance at the special meeting will not, by itself, revoke
your proxy; you must vote in person at the special meeting);
|
|
|
|
by submitting a later-dated proxy card; or
|
|
|
|
if you voted by telephone or the Internet, by voting a second
time by telephone or Internet.
|
If you hold your shares through a broker, bank or other nominee
and you have instructed a broker, bank or other nominee to vote
your shares of Common Stock, follow the directions received from
your broker, bank or other nominee to change your vote.
Treatment
of Options and Other Awards (Page 48)
Stock Options. Immediately prior to the
effective time of the Merger, except as otherwise agreed to by
the holder and Newco, all outstanding options to purchase Common
Stock under the Companys equity incentive plans will
become fully vested. All such options not exercised prior to the
Merger will be cancelled and converted into the right to receive
a cash payment equal to the number of shares of Common Stock
underlying the options multiplied by the amount (if any) by
which $5.30 exceeds the exercise price, without interest and
less any applicable withholding taxes.
Restricted Stock. Immediately prior to
the effective time of the Merger, except as otherwise agreed by
a holder and Newco, all shares of restricted stock will vest and
those shares will be cancelled and converted into the right to
receive a cash payment equal to the number of shares of
restricted stock multiplied by $5.30, without interest and less
any applicable withholding taxes.
Restricted Stock Units. Immediately
prior to the effective time of the Merger, except as otherwise
agreed by a holder and Newco, all restricted stock units will
vest and settle through the issuance of shares of Common Stock
and thereafter be treated in the same manner as restricted stock.
Employee Stock Purchase Plan. Prior to
the consummation of the Merger, the then-current offering period
under our Employee Stock Purchase Plan will be terminated and
all funds in each participants account will be applied
toward the purchase of shares of Common Stock on the terms and
conditions set forth under
3
our Employee Stock Purchase Plan. Thereafter, those shares will
be entitled to receive the merger consideration on the same
basis as other shares of Common Stock. All amounts withheld by
us on behalf of participants in our Employee Stock Purchase Plan
that have not been used to purchase Common Stock prior to the
effective time of the Merger will be returned to the
participants without interest pursuant to the terms of our
Employee Stock Purchase Plan.
Recommendation
of Our Board of Directors (Page 25)
Our board of directors, at a meeting duly called and held at
which all directors were present, unanimously
(i) determined that the terms of the Merger are fair and in
the best interests of the Company and its stockholders and
declared it advisable to enter into the Merger Agreement
providing for the merger of Merger Sub with and into the
Company, in accordance with the Delaware General Corporation Law
(DGCL), upon the terms and subject to the conditions
set forth in the Merger Agreement, (ii) approved the
execution, delivery and performance of the Merger Agreement and
the consummation of the transactions contemplated thereby, in
accordance with the DGCL, upon the terms and conditions
contained in the Merger Agreement and (iii) resolved to
recommend that the stockholders of the Company adopt the Merger
Agreement, in accordance with the applicable provisions of the
DGCL. The board of directors unanimously recommends that our
stockholders vote FOR the proposal to adopt the
Merger Agreement and FOR the proposal to adjourn or
postpone the special meeting, if necessary or appropriate, to
solicit additional proxies.
In reaching its decision, our board of directors evaluated a
variety of business, financial and market factors and consulted
with our management team and legal and financial advisors. See
The Merger Reasons for the Merger;
Recommendation of Our Board of Directors beginning on
page 25.
Interests
of the Companys Directors and Executive Officers in the
Merger (Page 38)
In considering the recommendation of the board of directors, you
should be aware that our directors and executive officers may
have interests in the Merger that are different from, or in
addition to, your interests as a stockholder and that may
present actual or potential conflicts of interest, including the
following:
|
|
|
|
|
our directors and executive officers will receive cash
consideration for their vested and unvested stock options,
restricted stock and restricted stock units in connection with
the Merger;
|
|
|
|
each of our current executive officers is a party to a
management retention agreement (or with respect to
Mr. Masri, his employment agreement) that provides certain
severance payments and benefits in the case of the executive
officers termination of employment under certain
circumstances following a change of control;
|
|
|
|
the Merger Agreement provides for indemnification arrangements
for each of our current and former directors and executive
officers that will continue for six (6) years following the
effective time of the Merger as well as insurance coverage
covering such director or executive officers service to
the Company as a director or executive officer; and
|
|
|
|
although no agreements have been entered into as of the date of
this proxy statement, it is expected that a number of our
executive officers will remain after the Merger is completed and
such executive officers may enter into new arrangements with the
Investors or their affiliates regarding employment with the
Surviving Corporation or the right to purchase or participate in
the equity of the Surviving Corporation.
|
The board of directors was aware of these potential conflicts of
interest and considered them, among other matters, in reaching
its decision to approve the Merger Agreement and the Merger and
the recommendation that our stockholders vote in favor of the
proposal to adopt the Merger Agreement.
Opinion
of Goldman, Sachs & Co. (Page 27)
Our board of directors considered the financial analyses and
opinion of Goldman, Sachs & Co. (Goldman
Sachs), delivered orally to our board of directors and
subsequently confirmed in writing, to the
4
effect that, as of September 28, 2007, and based upon and
subject to the factors and assumptions set forth therein, the
$5.30 per share in cash to be received by the holders of shares
of Common Stock pursuant to the Merger Agreement was fair from a
financial point of view to such holders. The full text of the
written opinion of Goldman Sachs, dated September 28, 2007,
which sets forth assumptions made, procedures followed, matters
considered and limitations on the review undertaken in
connection with the opinion, is attached as Annex B and is
incorporated in this proxy statement by reference. Goldman
Sachs provided its opinion for the information and assistance of
our board of directors in connection with its consideration of
the Merger. The Goldman Sachs opinion does not constitute a
recommendation as to how any holder of shares of Common Stock
should vote with respect to the adoption of the Merger Agreement
or any other matter. Pursuant to an engagement letter
between 3Com and Goldman Sachs, 3Com has agreed to pay Goldman
Sachs a transaction fee equal to approximately $24 million, the
principal portion of which is payable upon completion of the
Merger.
Financing
(Page 35)
The aggregate amount of funds necessary to complete the Merger
is anticipated to be approximately $2.54 billion. These
payments are expected to be funded by Newco and Merger Sub with
a combination of equity contributions by the Investors, debt
financing obtained by Merger Sub and made available to Merger
Sub and certain newly formed wholly-owned subsidiaries of 3Com,
and, to the extent available, cash of 3Com. Newco and Merger Sub
have obtained equity and debt financing commitments described
below in connection with the transactions contemplated by the
Merger Agreement.
Merger Sub has obtained debt financing commitments of up to an
aggregate of $1.2 billion consisting of
(i) commitments from Citibank N.A., Hong Kong Branch, UBS
AG, Singapore Branch, The Hongkong and Shanghai Banking
Corporation Limited, ABN Amro Bank N.V. and Bank of China (Hong
Kong) Limited to provide debt financing in the form of senior
secured facilities consisting of (A) a term loan facility
in the aggregate principal amount of up to $750 million and
(B) a revolving facility in an aggregate principal amount
of $50 million and (ii) commitments from UBS AG,
Singapore Branch, Citibank, N.A. and The Hongkong and Shanghai
Banking Corporation Limited to provide debt financing in the
form of a bridge loan facility with a maturity of one year in an
aggregate principal amount of up to $400 million.
Regulatory
Approvals (Page 45)
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), and the rules promulgated thereunder by the Federal
Trade Commission (FTC), provides that transactions
such as the Merger may not be completed until notification and
report forms have been filed with the FTC and the Antitrust
Division of the Department of Justice (DOJ) and the
applicable waiting period has expired or been terminated. 3Com
and Newco have filed notification and report forms under the HSR
Act with the FTC and the Antitrust Division of the DOJ, and the
applicable waiting period has not yet expired or been terminated.
The Merger is also subject to review by the governmental
authorities of various other jurisdictions under the antitrust
laws of those jurisdictions.
The parties have agreed to make a joint voluntary filing of the
transaction with the Committee on Foreign Investment in the
United States (CFIUS).
Except for these filings and the filing of a certificate of
merger in Delaware at or before the effective date of the
Merger, we are unaware of any material federal, state or foreign
regulatory requirements or approvals required for the execution
of the Merger Agreement or completion of the Merger.
Procedure
for Receiving Merger Consideration (Page 49)
Promptly following the effective time of the Merger, a payment
agent will mail a letter of transmittal and instructions to you
and the other 3Com stockholders. The letter of transmittal will
tell you how to surrender your stock certificates in exchange
for the merger consideration. You should not return your
stock
5
certificates with the proxy card, and you should return your
stock certificates with the letter of transmittal.
Material
United States Federal Income Tax Consequences
(Page 44)
The exchange of shares of Common Stock for cash pursuant to the
Merger Agreement generally will be a taxable transaction for
U.S. federal income tax purposes. Stockholders who exchange
their shares of Common Stock in the Merger will generally
recognize gain or loss in an amount equal to the difference, if
any, between the cash received in the Merger and their adjusted
tax basis in their shares of Common Stock surrendered. Because
individual circumstances may differ, we urge you to consult your
tax advisor for a complete analysis of the effect of the Merger
on your federal, state and local
and/or
foreign taxes.
Conditions
to the Merger (Page 56)
Before we can complete the Merger, a number of conditions must
be satisfied. These include:
|
|
|
|
|
the adoption of the Merger Agreement by our stockholders;
|
|
|
|
the expiration or termination of the waiting periods under the
HSR Act and the antitrust laws of various other jurisdictions;
|
|
|
|
the absence of laws, governmental judgments or orders that have
the effect of enjoining or otherwise prohibiting the
consummation of the Merger;
|
|
|
|
performance by each of the parties of material obligations under
the Merger Agreement in all material respects;
|
|
|
|
the accuracy of the representations and warranties of each of
the parties to the Merger Agreement, subject to the materiality
standards set forth in the Merger Agreement and described in
The Merger Agreement Conditions to the
Merger beginning on page 56;
|
|
|
|
the delivery of closing certificates by each of the parties with
respect to the satisfaction of the conditions relating to its
representations and warranties and material obligations; and
|
|
|
|
the absence of an event or occurrence following the execution of
the Merger Agreement that is continuing that has had or is
reasonably expected to have a Material Adverse
Effect.
|
Restrictions
on Solicitations of Other Offers (Page 57)
The Merger Agreement restricts our ability to solicit, engage in
or encourage discussions or negotiations with a third party
regarding specified transactions regarding the Company and to
provide information about the Company to any third party.
Notwithstanding these restrictions, under certain limited
circumstances required for our board to comply with its
fiduciary duties, our board may respond to a bona fide
unsolicited alternative acquisition proposal or terminate the
Merger Agreement and enter into an agreement with respect to a
superior proposal after paying a termination fee.
Termination
of the Merger Agreement (Page 59)
The Merger Agreement may be terminated at any time prior to the
consummation of the Merger, whether before or after stockholder
approval has been obtained:
|
|
|
|
|
By mutual agreement of 3Com and Newco;
|
|
|
|
By either 3Com or Newco if:
|
|
|
|
|
|
the Merger is not consummated by April 28, 2008 (the
Termination Date), provided that the terminating
party has not taken any action or failed to take any action in
breach of the Merger Agreement which was the principal cause of
or resulted in the failure of any of the conditions of the
Merger to be satisfied by such date;
|
6
|
|
|
|
|
a final, non-appealable law, governmental judgments or order has
been enacted, issued, promulgated or granted and is in effect
that prohibits or enjoins or otherwise prevents the consummation
of the Merger and the terminating party has used reasonable best
efforts to appeal such order, is not in breach of the Merger
Agreement and has not taken or failed to take any action in
breach of the Merger Agreement that was the principal cause of,
or resulted in, the passage of such law or issuance of such
order;
|
|
|
|
our stockholders do not adopt the Merger Agreement at the
special meeting or any adjournment or postponement thereof,
provided that the Company may not terminate the Merger Agreement
if it has materially violated its obligations under certain
provisions of the Merger Agreement as described more fully in
The Merger Agreement Termination of the Merger
Agreement beginning on page 59; and
|
|
|
|
there is a breach or violation by the non-terminating party of
any covenant, agreement or obligations or an inaccuracy of any
of the non-terminating parties representations or warranties set
forth in the Merger Agreement such that the closing conditions
would not be satisfied on the Termination Date and the
terminating party is not itself in breach of its
representations, warranties, covenants or agreements such that
the closing conditions would not be satisfied;
|
|
|
|
|
|
By Newco if our board of directors withdraws or adversely
modifies its recommendation or approval of the Merger Agreement;
within five (5) business days of the commencement of a
tender offer that constitutes an acquisition proposal, the board
fails to publicly reaffirm the recommendation and recommend that
the stockholders vote against such acquisition proposal and not
tender any shares in such tender or exchange offer; fails to
hold the stockholder meeting within thirty (30) days of the
mailing of this proxy statement; or fails to reconfirm the
recommendation within the time frames and under the
circumstances described in the Merger Agreement; and
|
|
|
|
By 3Com if all of the conditions to the obligations of Newco and
Merger Sub to consummate the Merger have been satisfied or
waived, but Newco and Merger Sub have breached their obligations
to cause the Merger to be consummated.
|
The Merger Agreement may also be terminated by 3Com prior to the
special meeting in order to enter into a definitive agreement
for a superior proposal, provided that 3Com subsequently pay
Newco a termination fee, as described in further detail in
The Merger Agreement Recommendation
Withdrawal/Termination in Connection with a Superior
Proposal beginning on page 59.
Termination
Fees (Page 61)
Under certain circumstances, in connection with the termination
of the Merger Agreement, we will be required to pay to Newco a
termination fee of $66 million. We also may be required to
pay Newco their out of pocket fees and expenses (not to exceed
$20 million) in connection with the Merger. In
circumstances where we are required to pay such fees and
expenses, if we are subsequently required to pay a termination
fee, any fees and expenses previously reimbursed will be
deducted from the termination fee owed. See The Merger
Agreement Termination Fees and Expenses
beginning on page 61 for a detailed discussion of the
termination fees.
Newco has agreed to pay the Company a termination fee of
$66 million if we terminate the Merger Agreement in
circumstances under which the conditions to the Merger are
satisfied but (i) Newco and Merger Sub have not received
the proceeds of the debt financing or (ii) a
U.S. federal regulatory agency (that is not an antitrust
regulatory agency) has informed Newco, Merger Sub or the Company
(or any of their representatives) that it intends to take action
to prevent the Merger. In the event that (i) all of the
conditions to the Merger are satisfied, (ii) the debt
financing has been funded or would be funded upon funding of the
equity financing and (iii) no U.S. federal regulatory
agency has informed Newco, Merger Sub or the Company (or any of
their representatives) that it intends to take action to prevent
the Merger, and (iv) Newco and Merger Sub fail to
consummate the Merger, Newco has agreed to pay the Company a
termination fee of $110 million. See The Merger
Agreement Termination Fees and Expenses
beginning on page 61 for a detailed discussion of the
termination fees.
7
Remedies
(Page 63)
In the event that the Company or Newco receive a termination fee
as described above, such fee shall be deemed to be liquidated
damages for any and all damages incurred by the party receiving
such fee in connection with the matter forming the basis for
such termination and no other claims may be brought with respect
to such matters. Except in the case of fraud, the Companys
right to receive the termination fee as described above is the
sole and exclusive remedy of the Company and its subsidiaries
against Newco, Merger Sub, the Investors and any of their
affiliates for any damages suffered as a result of a failure of
the Merger to be consummated, or for a breach or failure to
perform under the Merger Agreement or otherwise. Except in the
case of fraud, Newcos right to receive the termination fee
as described above in circumstances that such fee is payable, or
to recover damages from the Company in circumstances that such
fee is not payable, is the sole and exclusive remedy of Newco,
Merger Sub and their affiliates against the Company, its
subsidiaries and any of their affiliates for any damages
suffered as a result of a failure of the Merger to be
consummated, or for a breach or failure to perform under the
Merger Agreement or otherwise. In addition, Newco and Merger Sub
are entitled to seek specific performance of the terms and
provisions of the Merger Agreement with respect to the
obligations of the Company, including seeking an injunction to
prevent or restrain breaches or threatened breaches of the
Merger Agreement by the Company and enforcing compliance with
the covenants and obligations of the Company under the Merger
Agreement. The Company is not entitled to seek specific
performance with respect to the obligations of Newco and Merger
Sub, including an injunction to prevent breaches of the Merger
Agreement by Newco or Merger Sub.
Limited
Guarantee (Page 38)
In connection with the Merger Agreement, certain investment
vehicles advised by Bain Capital and an affiliate of Huawei
Technologies Co. Ltd. entered into a limited guarantee for the
benefit of the Company, pursuant to which each party has agreed
to guaranty the obligations of Newco up to a maximum amount
equal to its pro rata share of any termination fee payable by
Newco to the Company pursuant to the terms of the Merger
Agreement (which fee will be $66 million or
$110 million depending on the circumstances of termination,
as described more fully in The Merger
Agreement Termination Fees and Expenses
beginning on page 61). The limited guarantee is the
Companys sole recourse against each Investor as a
guarantor, except for claims arising out of fraud against a
person that committed such fraud.
Appraisal
Rights (Page 68)
Under Delaware law, holders of Common Stock who do not vote in
favor of the proposal to adopt the Merger Agreement will have
the right to seek appraisal of the fair value of their shares of
Common Stock as determined by the Delaware Court of Chancery if
the Merger is completed, but only if they comply with all
requirements of Delaware law, which are summarized in this proxy
statement. The judicially determined appraisal amount could be
more than, the same as or less than the merger consideration.
Any holder of Common Stock intending to exercise appraisal
rights, among other things, must submit a written demand for an
appraisal to us prior to the vote on the proposal to adopt the
Merger Agreement and must not vote or otherwise submit a proxy
in favor of adoption of the Merger Agreement and must otherwise
strictly comply with all of the procedures required by Delaware
law. Your failure to follow exactly the procedures specified
under Delaware law will result in the loss of your appraisal
rights. A copy of the relevant section of Delaware law is
attached hereto as Annex C.
Market
Price of Common Stock (Page 65)
Our Common Stock is listed on the Nasdaq Global Select Market
(Nasdaq) under the trading symbol COMS.
The closing sale price of Common Stock on Nasdaq on
September 27, 2007, the last trading day prior to the
execution of the Merger Agreement, was $3.68. The $5.30 per
share to be paid for each share of Common Stock in the Merger
represents a premium of approximately 44.0% to the closing price
on September 27, 2007, and a premium of approximately 43.8%
to the average closing share price during the thirty
(30) trading days ended September 27, 2007. The
closing sale price of our common stock on Nasdaq
on ,
2007, the last trading day before the date of this proxy
statement, was $ .
8
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address
briefly some commonly asked questions regarding the Merger, the
Merger Agreement and the special meeting. These questions and
answers may not address all questions that may be important to
you as a 3Com stockholder. Please refer to the
Summary and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement, which you should read
carefully. See Where You Can Find More Information
beginning on page 72.
|
|
|
Q. |
|
What is the proposed transaction? |
|
A. |
|
The proposed transaction is the acquisition of the Company by
Newco, an entity formed by investment vehicles sponsored by Bain
Capital Partners, LLC pursuant to the Merger Agreement. Once the
Merger Agreement has been adopted by the stockholders and other
closing conditions under the Merger Agreement have been
satisfied or waived, Merger Sub, an indirect, wholly-owned
subsidiary of Newco, will merge with and into 3Com. 3Com will be
the Surviving Corporation and an indirect, wholly-owned
subsidiary of Newco. On the effective date of the Merger, Newco
will be majority-owned by and controlled by investment vehicles
sponsored by Bain Capital, and an affiliate of Huawei
Technologies Co. Ltd. will make a non-controlling, minority
investment, directly or indirectly, in Newco. |
|
Q. |
|
What will I receive in the Merger? |
|
A. |
|
Upon completion of the Merger, you will be entitled to receive
$5.30 in cash, without interest and less any applicable
withholding tax, for each share of Common Stock that you own
immediately prior to completion of the Merger, unless you have
properly and validly perfected your statutory rights of
appraisal with respect to the Merger. For example, if you own
100 shares of Common Stock, you will receive $530.00 in
cash in exchange for your shares of Common Stock, less any
applicable withholding tax. You will not own any shares in the
Surviving Corporation. |
|
Q. |
|
When and where is the special meeting? |
|
A. |
|
The special meeting of stockholders of 3Com will be held
on ,
at a.m. local time, at the Companys
headquarters, 350 Campus Drive, Marlborough, Massachusetts
01752-3064. |
|
Q. |
|
What vote is required for 3Coms stockholders to approve
the proposal to adopt the Merger Agreement? |
|
A. |
|
An affirmative vote of the holders of a majority of the shares
of Common Stock outstanding and entitled to vote at the special
meeting is required to approve the proposal to adopt the Merger
Agreement. Accordingly, failure to vote in person or by proxy or
an abstention will have the same affect as a vote
AGAINST the Merger Agreement. |
|
Q: |
|
What vote of our stockholders is required to approve the
proposal to adjourn or postpone the special meeting, if
necessary or appropriate, to solicit additional proxies? |
|
A. |
|
Approval of the proposal to adjourn or postpone the special
meeting, if necessary or appropriate, for the purpose of
soliciting additional proxies requires the affirmative vote of a
majority of the votes cast by the holders of all Common Stock
present in person or represented by proxy at the special meeting
and entitled to vote on the matter. |
|
Q. |
|
How does 3Coms board of directors recommend that I
vote? |
|
A. |
|
The board of directors unanimously recommends that you vote
FOR the proposal to adopt the Merger
Agreement and FOR the proposal to adjourn or
postpone the special meeting, if necessary or appropriate, to
solicit additional proxies if there are insufficient votes at
the time of the special meeting to adopt the Merger Agreement.
You should read The Merger Reasons for the
Merger; Recommendation of our Board of Directors beginning
on page 25 for a discussion of the factors that the board of
directors considered in deciding to recommend the adoption of
the Merger Agreement. |
9
|
|
|
Q. |
|
What effects will the proposed Merger have on 3Com? |
|
A. |
|
As a result of the proposed Merger, 3Com will cease to be a
publicly-traded company and will be
wholly-owned
by Newco. You will no longer have any interest in our future
earnings or growth. Following consummation of the Merger, the
registration of our Common Stock and our reporting obligations
with respect to our Common Stock under the Exchange Act of 1934,
as amended (the Exchange Act) will be terminated
upon application to the Securities and Exchange Commission (the
SEC). In addition, upon completion of the proposed
Merger, shares of our Common Stock will no longer be listed on
any stock exchange or quotation system, including Nasdaq. |
|
Q. |
|
What happens if the Merger is not consummated? |
|
A. |
|
If the Merger Agreement is not adopted by stockholders or if the
Merger is not completed for any other reason, stockholders will
not receive any payment for their shares in connection with the
Merger. Instead, 3Com will remain an independent public company
and the Common Stock will continue to be listed and traded on
Nasdaq. Under specified circumstances, 3Com may be required to
pay Newco a termination fee or reimburse Newco for its
out-of-pocket expenses as described under the caption The
Merger Agreement Termination Fees and Expenses
beginning on page 61. |
|
Q. |
|
What do I need to do now? |
|
A. |
|
We urge you to read the proxy statement carefully, including the
annexes and to consider how the Merger affects you. If you are a
stockholder of record, you can ensure your shares are voted at
the special meeting by completing, signing, and dating and
mailing the enclosed proxy card or voting by telephone or
internet. Even if you plan to attend the special meeting, we
encourage you to return the enclosed proxy card. If you hold
your shares in street name, you can ensure that your
shares are voted at the special meeting by instructing your
broker or nominee how to vote, as discussed below. Do NOT
return your stock certificate(s) with your proxy. |
|
Q. |
|
How do I vote? |
|
A. |
|
You may vote by: |
|
|
|
signing and dating each proxy card you receive and
returning it in the enclosed prepaid envelope;
|
|
|
|
using the telephone number printed on your proxy
card;
|
|
|
|
using the Internet voting instructions printed on
your proxy card; or
|
|
|
|
if you hold your shares in street name,
follow the procedures provided by your broker, bank or other
nominee.
|
|
|
|
If you return your signed proxy card, but do not mark the boxes
showing how you wish to vote, your shares will be voted
FOR the proposal to adopt the Merger
Agreement and FOR the proposal to adjourn or
postpone the special meeting, if necessary or appropriate, to
solicit additional proxies. |
|
Q. |
|
If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me? |
|
A. |
|
Yes, but only if you instruct your broker, bank or other nominee
how to vote. You should follow the procedures provided by your
broker, bank or other nominee regarding the voting of your
shares. If you do not instruct your broker, bank or other
nominee to vote your shares, your shares will not be voted and
the effect will be the same as a vote AGAINST
the proposal to adopt the Merger Agreement, but will not have an
effect on the proposal to adjourn or postpone the special
meeting. |
10
|
|
|
Q. |
|
How can I change or revoke my vote? |
|
A. |
|
You have the right to change or revoke your proxy at any time
before the vote taken at the special meeting: |
|
|
|
by notifying our Secretary, Neal D. Goldman, at 350
Campus Drive, Marlborough, Massachusetts
01752-3064;
|
|
|
|
by attending the special meeting and voting in
person (your attendance at the special meeting will not, by
itself, revoke your proxy; you must vote in person at the
special meeting);
|
|
|
|
by submitting a later-dated proxy card; or
|
|
|
|
if you voted by telephone or the Internet, by voting
a second time by telephone or Internet.
|
|
|
|
If you have instructed a broker, bank or other nominee to vote
your shares, the above instructions do not apply and instead you
must follow the directions received from your broker, bank or
other nominee to change those instructions. |
|
Q. |
|
What do I do if I receive more than one proxy or set of
voting instructions? |
|
A. |
|
If your shares are registered differently or are in more than
one account, you may receive more than one proxy and/or set of
voting instructions relating to the special meeting. These
should each be completed, signed and/or returned separately as
described elsewhere in this proxy statement in order to ensure
that all of your shares are voted. |
|
Q. |
|
What happens if I sell my shares before the special
meeting? |
|
A. |
|
The record date of the special meeting is earlier than the
special meeting and the date that the Merger is expected to be
completed. If you transfer your shares of Common Stock after the
record date but before the special meeting, you will retain your
right to vote at the special meeting, but will have transferred
the right to receive $5.30 per share in cash to be received by
our stockholders in the Merger. In order to receive the $5.30
per share, you must hold your shares through completion of the
Merger. |
|
Q. |
|
Am I entitled to exercise appraisal rights instead of
receiving the merger consideration for my shares? |
|
A. |
|
Yes. As a holder of Common Stock, you are entitled to appraisal
rights under Delaware law in connection with the Merger if you
meet certain conditions. See Dissenters Rights of
Appraisal beginning on page 68. |
|
Q. |
|
When is the Merger expected to be completed? What is the
Marketing Period? |
|
A. |
|
We are working toward completing the Merger as quickly as
possible, and we anticipate that it will be completed by the
first calendar quarter of 2008. However, the exact timing of the
completion of the Merger cannot be predicted. In order to
complete the Merger, we must obtain stockholder approval and the
other closing conditions under the Merger Agreement must be
satisfied or waived (as permitted by law). In addition, Newco is
not obligated to complete the Merger until the expiration of a
twenty (20) business day Marketing Period that
it may use to complete its financing for the Merger. The
Marketing Period begins to run after we have provided certain
financial information to Newco pursuant to the terms of the
Merger Agreement; provided that the Marketing Period will not
begin prior to thirteen (13) days before the special
meeting. See The Merger Agreement Effective
Time; Marketing Period and The Merger
Agreement Conditions to the Merger beginning
on pages 47 and 56, respectively. |
|
Q. |
|
Will a proxy solicitor be used? |
|
A. |
|
Yes. The Company has engaged Georgeson Shareholder
Communications, Inc. (Georgeson) to assist in the
solicitation of proxies for the special meeting and the Company
estimates it will pay Georgeson a fee of approximately $20,000.
The Company has also agreed to reimburse Georgeson for
reasonable administrative and out-of-pocket expenses incurred in
connection with the proxy solicitation and indemnify Georgeson
against certain losses, costs and expenses. |
11
|
|
|
Q. |
|
Should I send in my stock certificates now? |
|
A. |
|
No. After the Merger is completed, you will be sent a
letter of transmittal with detailed written instructions for
exchanging your Common Stock certificates for the merger
consideration. If your shares are held in street
name by your broker, bank or other nominee you will
receive instructions from your broker, bank or other nominee as
to how to effect the surrender of your street name
shares in exchange for the merger consideration. Please do
not send your certificates in now. |
|
Q. |
|
Who can help answer my other questions? |
|
A. |
|
If you have additional questions about the Merger, need
assistance in submitting your proxy or voting your shares of
Common Stock or need additional copies of the proxy statement or
the enclosed proxy card, please (1) mail your request to
3Com Corporation, 350 Campus Drive, Marlborough, Massachusetts
01752-3064,
Attn: Investor Relations or (2) call our Investor Relations
department at
(508) 323-1198.
If your broker holds your shares, you should call your broker
for additional information. |
12
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement and the documents to which we refer you in
this proxy statement include forward-looking statements based on
estimates and assumptions. There are forward-looking statements
throughout this proxy statement, including, without limitation,
under the headings Summary, Questions and
Answers about the Special Meeting and the Merger,
The Merger, Opinion of Financial
Advisor, Regulatory Approvals and
Litigation Related to the Merger and in statements
containing words such as believes,
estimates, anticipates,
continues, contemplates,
expects, may, will,
could, should or would or
other similar words or phrases. These statements, which are
based on information currently available to us, are not
guarantees of future performance and may involve risks and
uncertainties that could cause our actual growth, results of
operations, performance and business prospects, and
opportunities to materially differ from those expressed in, or
implied by, these statements. These forward-looking statements
speak only as of the date on which the statements were made and
we expressly disclaim any obligation to release publicly any
updates or revisions to any forward-looking statement included
in this proxy statement or elsewhere. In addition to other
factors and matters contained or incorporated in this document,
these statements are subject to risks, uncertainties and other
factors, including, among others:
|
|
|
|
|
the occurrence of any event, change or other circumstances that
could give rise to the termination of the Merger Agreement that
could require us to pay a $66 million termination fee;
|
|
|
|
the outcome of any legal proceedings that have been or may be
instituted against 3Com and others relating to the Merger
Agreement;
|
|
|
|
the inability to complete the Merger due to the failure to
obtain stockholder approval or the failure to satisfy other
conditions to consummation of the Merger, including the
expiration of the waiting period under the HSR Act;
|
|
|
|
the inability to complete the Merger due to other regulatory
matters, such as CFIUS mitigation requirements or our inability
to satisfy CFIUS that the transaction does not result in foreign
control of the Company or pose a threat to U.S. national or
homeland security, resulting in a recommendation by CFIUS and
action by the President to block the transaction on national
security grounds;
|
|
|
|
the failure to obtain the necessary debt financing arrangements
set forth in commitment letters received in connection with the
Merger;
|
|
|
|
the failure of the Merger to close for any other reason;
|
|
|
|
risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention
as a result of the Merger;
|
|
|
|
the effect of the announcement of the Merger on our business and
customer relationships, operating results and business
generally, including our ability to retain key employees;
|
|
|
|
the ability to recognize the benefits of the Merger;
|
|
|
|
the amount of the costs, fees, expenses and charges related to
the Merger and the actual terms of certain financings that will
be obtained for the Merger;
|
|
|
|
the impact of the substantial indebtedness incurred to finance
the consummation of the Merger;
|
and other risks detailed in our current filings with the SEC,
including our most recent filings on
Forms 8-K,
10-Q and
10-K,
including but not limited to the risks detailed in the sections
entitled Risk Factors. See Where You Can Find
More Information beginning on page 72. Many of the
factors that will determine our future results are beyond our
ability to control or predict. In light of the significant
uncertainties inherent in the forward-looking statements
contained herein, readers should not place undue reliance on
forward-looking statements, which reflect managements
views only as of the date hereof. We cannot guarantee any future
results, levels of activity, performance or achievements. The
statements made in this proxy statement represent our views as
of the date of this proxy statement, and it should not be
assumed that the statements made herein remain accurate as of
any future date. Moreover, we assume no obligation to update
forward-looking statements or update the reasons that actual
results could differ materially from those anticipated in
forward-looking statements, except as required by law.
13
THE
PARTIES TO THE MERGER
3Com
3Com is a Delaware corporation with its headquarters in
Marlborough, Massachusetts. 3Com was incorporated in California
on June 4, 1979 and reincorporated in Delaware on
June 12, 1997. 3Com is a provider of secure, converged
voice and data networking solutions for enterprises of all
sizes. 3Com offers a broad line of products backed by world
class sales, service and support, which excel at delivering
business value for its customers. 3Com also includes H3C
Technologies Co., Limited (H3C), a China-based
provider of network infrastructure products that provides
cost-effective product development. Through its TippingPoint
division, 3Com is a provider of network-based intrusion
prevention systems that deliver in-depth application protection,
infrastructure protection and performance protection. 3Com is
organized into three primary business groups: H3C, the data and
voice business unit (DVBU) and TippingPoint.
For more information about 3Com, please visit our website at
www.3Com.com. Our website address is provided as an inactive
textual reference only. The information provided on our website
is not part of this proxy statement and therefore is not
incorporated by reference. See also Where You Can Find
More Information beginning on page 72. Our Common
Stock is publicly traded on the Nasdaq Global Select Market
under the symbol COMS.
3Coms principal executive offices are located at 350
Campus Drive, Marlborough, Massachusetts
01752-3064
and the telephone number is
(508) 323-1000.
Newco
Diamond II Holding, Inc. (Newco) was formed by
investment vehicles sponsored by Bain Capital Partners, LLC
(Bain Capital) in anticipation of the Merger.
Diamond II Acquisition Corp. (Merger Sub) was
organized by investment vehicles sponsored by Bain Capital in
anticipation of the Merger. Both Newco and Merger Sub were
formed solely for the purpose of the Merger and, prior to the
effective time of the Merger, will have de minimis assets and
operations. Prior to the effective time of the Merger, neither
Newco nor Merger Sub, has engaged in any business except for
activities incidental to their formation and as contemplated by
the Merger Agreement.
At the effective time of the Merger, Newco will be
majority-owned and controlled by investment vehicles sponsored
by Bain Capital and an affiliate of Huawei Technologies Co. Ltd.
(Huawei) will make a non-controlling, minority
investment, directly or indirectly, in Newco (the affiliate of
Huawei Technologies Co. Ltd. together with Bain Capital,
the Investors) and Merger Sub will be indirectly
wholly-owned subsidiary of Newco. Both Newco and Merger Sub have
their principle executive office at 111 Huntington Avenue,
Boston, Massachusetts 02199 and their telephone number is
(617) 516-2000.
Bain Capital is a part of Bain Capital, LLC, a
U.S.-based,
global private investment firm whose affiliates manage several
pools of capital including private equity, venture capital
public equity and leverage debt assets with more than
$60 billion in assets under management. Since its inception
in 1984, Bain Capital has made private equity investments and
add-on acquisitions in over 300 companies around the world,
including numerous investments in the software and technology
sectors such as Ameritrade, Applied Systems, Aspect Development,
Chip PAC, DoubleClick, Epsilon Data Management, Experian,
Gartner Group, Integrated Circuit Systems, MCI, NXP, SunGard
Data Systems, U.S. Internetworking and UGS.
14
Time,
Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as
part of the solicitation of proxies by our board of directors
for use at the special meeting to be held
on ,
at a.m., at the Companys headquarters, 350
Campus Drive, Marlborough, Massachusetts
01752-3064,
or at any adjournment or postponement thereof. The purpose of
the special meeting is for our stockholders to consider and vote
upon a proposal to adopt the Merger Agreement (and to approve
the proposal to adjourn or postpone the special meeting, if
necessary or appropriate to solicit additional proxies). Our
stockholders must adopt the Merger Agreement in order for the
Merger to occur. If the stockholders fail to adopt the Merger
Agreement, the Merger will not occur. A copy of the Merger
Agreement is attached to this proxy statement as Annex A.
This proxy statement and the enclosed form of proxy are first
being mailed to our stockholders on or
about ,2007.
We have fixed the close of business
on ,
2007 as the record date for the special meeting, and only
holders of record of Common Stock on the record date are
entitled to receive notice of and vote at the special meeting.
As of the close of business on the record date, there
were shares
of Common Stock outstanding and entitled to vote. Each share of
Common Stock entitles its holder to one vote on all matters
properly coming before the special meeting.
A majority of the shares of Common Stock issued and outstanding
on the record date represented at the special meeting in person
or by a duly authorized and properly completed proxy constitutes
a quorum for the purpose of considering the proposals. Shares of
Common Stock represented at the special meeting but not voted,
including shares of Common Stock for which proxies have been
received but for which stockholders 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. Although the law in Delaware is
unclear on the proper treatment of abstentions, we believe that
abstentions should be counted for purposes of determining
whether a quorum is present. Without controlling precedent to
the contrary, we intend to treat abstentions in this manner.
Accordingly, abstentions will be counted for the purpose of
determining whether a quorum is present. In the event that a
quorum is not present at the special meeting, it is expected
that the special meeting will be adjourned or postpone to
solicit additional proxies.
Vote
Required for Approval
Approval of the proposal to adopt the Merger Agreement requires
the affirmative vote of the holders of a majority of shares of
Common Stock outstanding that are entitled to vote at the
special meeting. Approval of the proposal to adjourn or postpone
the special meeting, if necessary or appropriate, for the
purpose of soliciting additional proxies requires the
affirmative vote of a majority of the votes cast by the holders
of all Common Stock present in person or represented by proxy at
the special meeting and entitled to vote on the matter. If you
do not submit a proxy by telephone or the Internet or return a
signed proxy card by mail or vote your shares in person, it has
the same effect as a vote AGAINST the
proposal to adopt the Merger Agreement but it will have no
effect on the proposal to adjourn or postpone the special
meeting, if necessary or appropriate, to solicit additional
proxies. If you sign your proxy card without indicating your
vote, your shares will be voted FOR the
proposal to adopt the Merger Agreement and
FOR the proposal to adjourn or postpone the
special meeting, if necessary or appropriate, to solicit
additional proxies.
If your shares of Common Stock are held in street name, you will
receive instructions from your broker, bank or other nominee
that you must follow in order to have your shares voted. If
you do not instruct your broker to vote your shares, it has the
same effect as a vote AGAINST the proposal to adopt
the Merger Agreement. As of the close of business
on ,
2007, the record date, the directors and executive officers of
3Com held and are entitled to vote, in the
aggregate, shares
of Common Stock, representing
approximately % of the outstanding
Common Stock.
15
If you submit a proxy by telephone or the Internet or by
returning a signed proxy card by mail, your shares will be voted
at the special meeting as you indicate on your proxy card or by
such other method. If you sign your proxy card without
indicating your vote, your shares will be voted
FOR the proposal to adopt the Merger
Agreement and FOR the proposal to adjourn or
postpone the special meeting, if necessary or appropriate, to
solicit additional proxies.
Proxies received at any time before the special meeting and not
revoked or superseded before being voted will be voted at the
special meeting. You have the right to change or revoke your
proxy at any time before the vote taken at the special meeting:
|
|
|
|
|
by notifying our Secretary, Neal D. Goldman, at 350 Campus
Drive, Marlborough, Massachusetts
01752-3064;
|
|
|
|
by attending the special meeting and voting in person (your
attendance at the special meeting will not, by itself, revoke
your proxy; you must vote in person at the special meeting);
|
|
|
|
by submitting a later-dated proxy card; or
|
|
|
|
if you voted by telephone or the Internet, by voting a second
time by telephone or Internet.
|
If you hold your shares through a broker, bank or other nominee
and you have instructed a broker, bank or other nominee to vote
your shares of Common Stock, the above instructions do not apply
and, instead, you must follow the directions received from your
broker, bank or other nominee to change those instructions.
Please do not send in your stock certificates with your proxy
card. When the Merger is completed, a separate letter of
transmittal will be mailed to you that will enable you to
receive the merger consideration in exchange for your stock
certificates.
Adjournments
and Postponements
Although it is not currently expected, the special meeting may
be adjourned or postponed for the purpose of soliciting
additional proxies. Any adjournment may be made without notice
(if the adjournment is not for more than thirty (30) days),
other than by an announcement made at the special meeting of the
time, date and place of the adjourned meeting. Whether or not a
quorum exists, holders of a majority of the shares of Common
Stock present in person or represented by proxy at the special
meeting and entitled to vote thereat may adjourn the special
meeting. Any signed proxies received by 3Com in which no voting
instructions are provided on such matter will be voted
FOR the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies. Any adjournment of the special meeting for the purpose
of soliciting additional proxies will allow 3Coms
stockholders who have already sent in their proxies to revoke
them at any time prior to their use at the special meeting as
adjourned.
Rights
of Stockholders Who Object to the Merger
Stockholders are entitled to statutory appraisal rights under
Delaware law in connection with the Merger. This means that you
are entitled to have the value of your shares determined by the
Delaware Court of Chancery and to receive payment based on that
valuation. The ultimate amount you receive as a dissenting
stockholder in an appraisal proceeding may be more than, the
same as or less than the amount you would have received under
the Merger Agreement.
To exercise your appraisal rights, you must submit a written
demand for appraisal to the Company before the vote is taken on
the Merger Agreement and you must not vote in favor of the
proposal to adopt the Merger Agreement. Your failure to follow
exactly the procedures specified under Delaware law will result
in the loss of your appraisal rights. See Dissenters
Rights of Appraisal beginning on page 68 and the text
of the Delaware appraisal rights statute reproduced in its
entirety as Annex C.
16
This proxy solicitation is being made and paid for by 3Com on
behalf of its board of directors. In addition, we have retained
Georgeson Shareholder Communications, Inc.
(Georgeson) to assist in the solicitation. We will
pay Georgeson approximately $20,000 plus reasonable
out-of-pocket expenses for their assistance. Our directors,
officers and employees may also solicit proxies by personal
interview, mail,
e-mail,
telephone, facsimile or other means of communication. These
persons will not be paid additional or special remuneration for
their efforts. We will also request brokers and other
fiduciaries to forward proxy solicitation material to the
beneficial owners of shares of Common Stock that the brokers and
fiduciaries hold of record and obtain such holders voting
instructions. Upon request, we will reimburse such brokers and
fiduciaries for their reasonable out-of-pocket expenses. In
addition, we will indemnify Georgeson against any losses arising
out of that firms proxy soliciting services on our behalf.
Questions
and Additional Information
If you have more questions about the Merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please (1) mail your request to 3Com Corporation, 350
Campus Drive, Marlborough, Massachusetts
01752-3064,
Attn: Investor Relations, or (2) call our Investor
Relations department at
(508) 323-1198.
Availability
of Documents
The reports, opinions or appraisals referenced in this proxy
statement will be made available for inspection and copying at
the principal executive offices of the Company during its
regular business hours by any interested holder of Common Stock.
17
This discussion of the Merger is qualified in its entirety by
reference to the Merger Agreement, which is attached to this
proxy statement as Annex A. You should read the entire
Merger Agreement carefully as it is the legal document that
governs the Merger.
In November 2003, we formed a China-based joint venture named
Huawei-3Com Co., Limited (now known as H3C Technologies Co.,
Limited, or H3C) with an affiliate of Huawei whereby we held a
49% interest and Huawei held a 51% interest in H3C. The purpose
of the joint venture was to provide us with a significant
presence in China, Japan, Hong Kong and certain other developing
markets, an expanded product line and access to lower cost and
highly effective engineering talent. In addition, we believed
that this investment would contribute to our turn-around plans
aimed at restoring growth and profitability.
H3Cs performance was strong during its first two years in
operation. At the same time, our historical business, known as
DVBU, continued to confront increased competition and execution
challenges. Because H3C had become increasingly important to
3Coms turn-around efforts, including as a source of
cost-effective engineering talent, the possibility of
consolidating its results became attractive to us. More
specifically, by this time H3C had developed significant Chinese
intellectual property and we were sourcing a large portion of
our enterprise switches from H3C. Accordingly, in November 2005,
we exercised a contractual right under our H3C
shareholders agreement with Huawei to purchase an
additional 2% interest in H3C from Huawei, resulting in 3Com
holding a 51% interest in H3C. We were granted regulatory
approval by China, and subsequently completed this transaction
on January 27, 2006 and began fully consolidating its
results.
H3C continued its strong growth during its third year in
operation. While our results and cash flows benefited from the
consolidation of H3Cs financials and a continued focus on
cost containment in the historical DVBU business, DVBU was not
successful in restoring revenue growth to support its cost
structure. In August 2006, after an extensive internal review,
including participation of external consultants, our board of
directors determined that acquiring the remaining 49% interest
in H3C was an important element of our plan to successfully
turn-around 3Com. We desired to own 100% of the engineering
talent and Chinese technology H3C had developed which was
important to our efforts to continue to build our enterprise
router and switch business. In late August 2006, therefore, we
began a series of negotiations with Huawei regarding the
possibility of acquiring Huaweis remaining 49% interest in
H3C outside of the bidding process contemplated by the
shareholders agreement between 3Com and Huawei. At the
same time, Huawei had discussions with Bain Capital, among
others, concerning the prospect of making a proposal under which
Huawei would acquire our 51% interest in H3C and investment
vehicles advised by Bain Capital and others would then acquire a
controlling interest in H3C. While we had conversations with
several private equity firms who were interested in partnering
with us to acquire H3C, we ultimately determined to seek to
acquire H3C without a financial partner. We were unable to reach
a negotiated agreement with Huawei regarding our acquisition of
Huaweis 49% interest in H3C outside the bidding process,
so we ultimately made a formal bid for Huaweis 49%
interest in H3C on November 15, 2006. After several rounds
of competing bids, on November 27, 2006, Huawei accepted
our final bid of $882 million.
Shortly after we agreed to acquire 100% ownership of H3C,
several private equity firms (including Bain Capital) and
several strategic industry participants contacted us to discuss
the state of the networking industry and the possibility of
partnering with 3Com. Members of our board and management team
had high level discussions with several of these parties
(including Bain Capital) throughout the early part of 2007, but
none of these conversations progressed to the point of
discussing a specific transaction.
On January 10, 2007, during the pendency of our acquisition
of Huaweis 49% interest in H3C, the Chairman of our board
of directors, Eric Benhamou, and our President and Chief
Executive Officer, Edgar Masri, received a qualified expression
of interest to acquire 3Com from a strategic industry
participant (Strategic Party One). Our board of
directors discussed this indication of interest at a regularly
scheduled meeting on January 18 and 19, 2007. Representatives of
Goldman, Sachs & Co. and the Companys outside
legal counsel, Wilson Sonsini Goodrich & Rosati,
Professional Corporation also attended this meeting. During
18
the meeting, the board and representatives of Goldman Sachs and
Wilson Sonsini Goodrich & Rosati, discussed the
proposed transaction, including the conditionality of the
indication of interest, the ability of Strategic Party One to
finance the transaction and the possible impact that such a
transaction could have on our pending acquisition of
Huaweis remaining 49% interest in H3C. The board also
discussed the Companys business plans and prospects for
growth in light of its acquisition of 100% ownership of H3C, as
well as other strategic initiatives then under consideration.
After these discussions, the board of directors determined not
to pursue the acquisition proposal in order to focus on
consummating our pending acquisition of the remaining interest
in H3C, integrating H3C into our global operations and
continuing our general turn-around efforts.
On February 27, 2007, our board of directors held a
regularly scheduled meeting, which representatives of Goldman
Sachs and Wilson Sonsini Goodrich & Rosati also
attended. During this meeting, the board of directors and our
management team conducted a thorough review of each of our
business units and their future prospects and business plans and
noted in particular the challenges the Company continued to face
in turning around the DVBU business and the demands of the H3C
integration efforts. The board of directors also received an
update on our pending acquisition of Huaweis remaining 49%
interest in H3C, as well as various high level discussions that
members of our board of directors and management team continued
to have with private equity firms and strategic industry
participants regarding 3Com. Again, the board of directors
determined not to pursue discussions with any third parties at
this time in order to focus management and the Company on our
pending acquisition of Huaweis remaining 49% interest in
H3C, our H3C integration efforts and our business turn-around
efforts generally.
We completed our acquisition of Huaweis remaining 49%
interest in H3C on March 29, 2007, as a result of which we
came to own 100% of H3C.
On May 17, 2007, our board of directors received a letter
from two private equity firms, including Bain Capital and
another private equity firm (Private Equity Party
One), indicating their desire to conduct due diligence on
3Com with a view toward making an offer to acquire the Company.
Bain Capital indicated that it had engaged in discussions with
Huawei and that Huawei was also interested in exploring a
transaction involving 3Com, Bain Capital and Private Equity
Party One. Our board of directors convened a conference call on
May 18, 2007 to discuss the indication of interest, decided
to consider it more fully at a future meeting and asked
management to use the intervening period to refresh its
standalone business plan.
On May 29, 2007, our board of directors convened a meeting
to review managements three-year business plan and
consider the recently received indication of interest from Bain
Capital and Private Equity Party One. Representatives of Goldman
Sachs and Wilson Sonsini Goodrich & Rosati also
attended this meeting. Management began the meeting by
presenting a refreshed three-year business plan and budget for
the Company, highlighting the opportunities and challenges that
we now faced by owning 100% of H3C and doing business in China
and explaining the recently experienced slow-down in the growth
rate of the H3C division and the ongoing difficulties and
challenges in our DVBU business. Goldman Sachs then presented a
preliminary financial analysis of the Company. After discussion
of Goldman Sachs analysis, the board considered the
indication of interest that it had received from Bain Capital
and Private Equity Party One. In connection with this
discussion, Neal Goldman, the Companys Executive Vice
President and Chief Administrative and Legal Officer, informed
the board that Strategic Party One had requested a meeting with
management to discuss a potential transaction. Wilson Sonsini
Goodrich & Rosati then advised the board regarding
legal and fiduciary aspects of considering Bain Capital and
Private Equity Party Ones indication of interest and the
request that the Company had received from Strategic Party One.
The board then discussed these matters and instructed management
to meet with Bain Capital, Private Equity Party One and
Strategic Party One. The board did not determine, however, to
pursue a transaction at this point.
On June 4, 2007, members of our management team met with
representatives of Strategic Party One at our headquarters to
discuss a potential transaction. At this meeting, Strategic
Party One expressed its desire to commence due diligence on 3Com
and explore a potential strategic transaction with the Company.
On June 4, 2007, our management team also contacted
representatives of Bain Capital and Private Equity Party One to
express our willingness to discuss a possible transaction with
them.
19
On June 11, 2007, another private equity firm
(Private Equity Party Two) contacted members of our
management team and expressed a desire to discuss a potential
transaction with us.
On June 12, 2007, our board of directors convened a
meeting, joined by Goldman Sachs and Wilson Sonsini
Goodrich & Rosati, to discuss the status of our
discussions with Bain Capital, Private Equity Party One and
Strategic Party One. At the outset of the meeting, our
management team presented its revised standalone business plan
and Goldman Sachs presented a revised preliminary financial
analysis of the Company. Our management team and Goldman Sachs
then updated the board on their preliminary discussions with
Bain Capital, Private Equity Party One and Strategic Party One
and informed the board that Private Equity Party Two had
contacted the Company to express its desire to discuss a
transaction with the Company. The board of directors instructed
management to initiate discussions with Private Equity Party Two
and to continue its discussions with Bain Capital, Private
Equity Party One and Strategic Party One. The board also
authorized management to assemble and make due diligence
documents and materials on the Company available to all of these
parties in support of their efforts to more fully understand the
Company and its business plans, operations and prospects.
In furtherance of these due diligence efforts, the Company
executed a non-disclosure agreement with Bain Capital and
Private Equity Party One on June 13, 2007 and with
Strategic Party One on June 18, 2007. Private Equity Party
Two executed a non-disclosure agreement with 3Com on
June 15, 2007.
On June 15, 2007, our management team met with Bain Capital
and Private Equity Party One to make a presentation regarding
the Companys business plans and operations. Our management
made a similar presentation to Private Equity Party Two later
that same day. On June 18, 2007, members of our management
team met with Strategic Party One to make the same presentation.
On June 22, 2007, our board of directors received a
non-binding indication of interest from Bain Capital and Private
Equity Party One to acquire 3Com at a valuation in the range of
$5.25-5.85 per share, subject to obtaining financing and
conducting comprehensive due diligence. The proposal included an
alternate valuation methodology for a purchase of 3Com which
excluded our TippingPoint division. The indication of interest
also indicated that Bain Capital and Private Equity Party One
had entered into a strategic alliance agreement with Huawei,
which among other things provided that if Bain Capital and
Private Equity Partner One acquired 3Com, Huawei would become a
stockholder of Newco and extend and expand its OEM arrangements
with 3Com. In addition, the indication of interest stated that
the strategic alliance agreement among Bain Capital, Private
Equity Partner One and Huawei provided for a period of
exclusivity lasting until May 17, 2008 (or, if earlier,
when Bain Capital and Huawei abandon the acquisition of 3Com),
during which time Bain Capital, Private Equity Party One and
Huawei agreed not to solicit, initiate, consider, encourage or
accept any proposal or offer from or to any third party to
engage in any transaction similar to the acquisition of 3Com.
On June 25 and 26, 2007, our board of directors held a
regularly-scheduled meeting. At this meeting, Goldman Sachs and
management updated the board on their ongoing discussions with
all of the third parties with whom they had been discussing a
possible transaction. The board discussed the indication of
interest received from Bain Capital and Private Equity Party One
on June 22, 2007. Wilson Sonsini Goodrich &
Rosati advised the board on its fiduciary duties in considering
and responding to all of the third party interest in a potential
transaction with the Company. Goldman Sachs informed the board
that, while Strategic Party One indicated an interest in a
potential transaction subject to diligence and other conditions,
it was not willing to give the Company a preliminary non-binding
offer or valuation indication at that time. Goldman Sachs also
informed the board that Private Equity Party Two indicated that
it had elected not to continue discussions with the Company. The
board discussed the alternatives to organically grow our
business, including the risks and challenges, and the
possibility of partnering with other companies. The board then
instructed management and Goldman Sachs to continue their
discussions with all of the interested third parties. Also at
this meeting, the board discussed whether to form a special
committee of the board in connection with the evaluation of
potential transactions. In considering whether to form such
special committee, the board considered the fact that none of
the members of the board were interested parties
with respect to any of the transactions then being considered.
After discussion, the board determined to create an oversight
committee rather than a special committee. The board approved
the formation of a Strategic Transaction Oversight Committee
(the STOC),
20
consisting of Mr. Benhamou, Gary T. DiCamillo and Paul G.
Yovovich, none of whom were members of management. The STOC was
formed to oversee management in assessing a potential
transaction, to provide direction to management and 3Coms
advisers and to liaise with the board regarding a potential
transaction.
On June 28, 2007, the Company announced its intention to
execute an initial public offering of its TippingPoint division.
On July 2, 2007, the STOC convened a meeting to discuss the
status of managements conversations with Strategic Party
One, as well as Bain Capital and Private Equity Party One, the
initial due diligence efforts and progress on the efforts of the
Company and Goldman Sachs to identify additional third parties
who might be interested in exploring a transaction with the
Company. Management also reported on the status of their refined
stand-alone strategic plan. After discussion, the STOC
authorized Goldman Sachs and management to contact additional
third parties regarding a potential transaction with the
Company. One of the strategic industry participants that they
contacted (Strategic Party Two) indicated that it
would be interested in discussing a transaction with the Company
and subsequently executed a non-disclosure agreement with the
Company to facilitate further discussions. On July 19,
2007, members of our management team made a presentation on our
business plans and operations to representatives of Strategic
Party Two. Subsequently, Strategic Party Two informed Goldman
Sachs that it was not interested in pursuing further discussions
with 3Com regarding a transaction with the Company. None of the
other third parties that Goldman Sachs and management contacted
expressed any interest in discussing a transaction with 3Com.
On July 23, 2007, members of the STOC met with
representatives of Goldman Sachs regarding the status of their
efforts to identify third parties who might be interested in a
transaction with the Company. On the same day, our board of
directors convened a meeting, which representatives of Goldman
Sachs and Wilson Sonsini Goodrich & Rosati also
attended. During this meeting, Goldman Sachs and members of our
management team provided an update on the progress of their
discussions with third parties, including Strategic Party One,
Strategic Party Two, as well as Bain Capital and Private Equity
Party One.
On July 27, 2007, the Company received a letter from Bain
Capital and Private Equity Party One reconfirming a preliminary
non-binding indication of interest in acquiring 3Com for a
purchase price in the range of $5.25-5.85 per share, which was
the same range outlined in its June 22, 2007 indication of
interest. The indication of interest also indicated that the
proposal described therein was subject to due diligence and
financing arrangements.
On July 28, 2007, the STOC held a meeting to discuss the
indication of interest from Bain Capital and Private Equity
Party One. At this meeting, representatives of Goldman Sachs
reported that, while Bain Capital had reconfirmed its bidding
range, its offer was likely to be at the lower end of its stated
range. Further, Goldman Sachs indicated that the then current
credit market conditions could make financing Bain
Capitals proposed transaction more challenging. In
addition, Goldman Sachs reported on the ongoing discussions with
Strategic Party One.
On July 31, 2007, members of our management team made
another presentation to representatives of Strategic Party One
regarding our business and operations. On August 1 and 2, 2007,
members of our management team made another presentation to
representatives of Bain Capital and Private Equity Party One
regarding the same matters. During the month of August and the
first week of September 2007, Bain Capital conducted an
extensive due diligence investigation of the Company, including
review of due diligence materials in our on-line electronic data
room and conducting extensive due diligence conference calls and
in-person sessions among members of management and Bain Capital
and Private Equity Party One along with their advisors and
proposed lenders. During this same period, Strategic Party One,
through its management and its advisors, continued to express
interest in acquiring 3Com, but did not make any meaningful
progress in its due diligence efforts.
Following the meetings with Bain Capital in early August 2007,
Bain Capital and Private Equity Party One lowered the range of
purchase prices they were tentatively prepared to offer for the
Company to $5.25-5.75 per share from $5.25-5.85 per share. On
August 6, 2007, our board convened a meeting to discuss
strategic matters and discuss the risks and challenges of the
standalone strategic plan. Representatives of
21
Goldman Sachs reported on the latest discussions with Strategic
Party One, as well as Bain Capital and Private Equity Party One,
and updated the board on the then current credit market
conditions and their likely impact on Bain Capital and Private
Equity Party Ones ability to finance a transaction. The
board also discussed managements stand-alone plan and
instructed management to continue discussions with all of the
third parties currently discussing a transaction with the
Company.
On August 4, 2007, the STOC met with representatives of
Goldman Sachs during which Goldman Sachs updated the STOC on the
latest discussions with Strategic Party One, as well as Bain
Capital and Private Equity Party One.
During late July 2007 and early August 2007, Wilson Sonsini
Goodrich & Rosati and 3Com management prepared a draft
merger agreement. On August 8, 2007, Wilson Sonsini
Goodrich & Rosati delivered an initial draft of the
Merger Agreement to Ropes & Gray, LLP
(Ropes & Gray), counsel to Bain Capital.
Diligence efforts continued during the remainder of August.
On August 16 and 17, 2007, representatives of Bain Capital and
our management team met for further management presentations as
part of Bain Capitals ongoing due diligence process. On
August 17, 2007, the STOC convened another meeting to
receive an update on the due diligence sessions with Bain
Capital and discussions with Strategic Party One. Management and
Goldman Sachs communicated to the STOC that Bain Capital
remained very interested in pursuing a potential transaction
within the valuation range previously indicated but Private
Equity Party One had determined not to participate in the
transaction in the indicated valuation range. Further, Goldman
Sachs reported to the STOC that Strategic Party One was
continuing to work internally on preparations to potentially
submit a non-binding offer.
On or about August 17, 2007, at the direction of members of
the board of directors, Goldman Sachs also contacted another
strategic industry participant (Strategic Party
Three) to determine its interest in exploring a
transaction with the Company. Drafts of non-disclosure
agreements were exchanged between the parties, but Strategic
Party Three did not pursue discussions with the Company and
never executed the Companys non-disclosure agreement.
For the remainder of August 2007, Bain Capital continued its due
diligence review of the Company.
On September 4, 2007, our board of directors met to discuss
the Companys stand-alone company plan and receive an
update on other strategic matters. Representatives of Goldman
Sachs reported that Bain Capital was almost complete with its
due diligence review of the Company and was pursuing financing
options. Goldman Sachs also reported that Strategic Party Three
had determined not to pursue a transaction with 3Com. The board
instructed management and Goldman Sachs to continue discussions
with Bain Capital, Private Equity Party One and Strategic Party
One.
In early September, in anticipation of making a revised
non-binding offer to buy 3Com, Bain Capital confirmed that an
affiliate of Huawei would be a direct minority equity investor
in the acquiring entity, provided that it receive limited access
to due diligence materials. Our management team approved limited
due diligence access for Huawei, as would be appropriate for an
existing important customer and potential competitor. No
technology of the Company was provided to Huawei or its
affiliates in connection with this due diligence process.
Moreover, no direct access to due diligence materials was
provided to Huawei. Huawei relied solely on its prior knowledge
of H3C (based on Huaweis previous status as a shareholder
in H3C) and secondary source material compiled by Bain Capital
and its advisors, such as due diligence memoranda prepared by
PricewaterhouseCoopers and Ropes & Gray, advisors to
Bain Capital. With these conditions in place, Huawei and 3Com
executed a non-disclosure agreement on September 13, 2007.
On September 15, 2007, Bain Capital delivered to our board
of directors and management a non-binding offer to acquire 3Com
for $5.10 per share, to be financed with approximately
$1.2 billion of debt and almost $1.3 billion of equity
(which represented a 42% premium to the market price of 3Com
stock at the time). The non-binding offer included signed equity
and debt commitment letters without due diligence or financing
conditions, or outs, and a pro rata guarantee by the
equity investors of the reverse
break-up fee
to be agreed in the Merger Agreement. Bain Capital indicated
that it had completed its due diligence and it had received all
internal approvals necessary to proceed with a transaction. Bain
Capital also indicated that it had reached
22
general agreement with Huawei with respect to the strategic
alliance with Huawei following the successful consummation of
the acquisition of 3Com. Finally, Bain Capital indicated a
desire to execute a merger agreement quickly.
On September 16, 2007, our board of directors met to
consider the latest Bain Capital non-binding offer. Goldman
Sachs reported on discussions with Bain Capital on its
non-binding offer, during which Bain Capital indicated that its
offer was lower than the low end of its previously provided
price range due to risks with 3Coms business identified
during the diligence process and the impact of the then current
credit markets. Wilson Sonsini Goodrich & Rosati
presented to the board of directors an overview of the changes
to the terms of the Merger Agreement proposed by Bain Capital
that accompanied its September 15, 2007 indication of
interest. Goldman Sachs then presented its financial analysis of
3Coms stand-alone prospects and the status of discussions
with other third parties regarding a transaction with the
Company. After discussion, the board instructed management and
Goldman Sachs to continue discussions with all of the third
parties with whom the Company was in discussions. The board also
instructed Goldman Sachs to contact Strategic Party One to
re-assess its current level of interest in a transaction with
3Com.
During the period between September 16 and 19, 2007, Goldman
Sachs and management engaged in extensive discussions and
negotiations with Bain Capital and its advisors. As a result of
these discussions, on September 20, 2007, Bain Capital sent
a letter to our board of directors and management in which,
among other things, Bain Capital increased its original
non-binding offer from $5.10 per share to $5.20 per share and
improved certain terms proposed in the Merger Agreement.
On September 20, 2007, 3Com reported its first quarter
fiscal 2008 results, including guidance on its H3C business for
the next fiscal quarter.
On September 21, 2007, the STOC met to receive an update
from Goldman Sachs and management on the ongoing negotiations
with Bain Capital and the status of interest from Strategic
Party One and to discuss the revised indication of interest from
Bain Capital received the day before. Goldman Sachs discussed
the increase in Bain Capitals offer price from $5.10 to
$5.20 per share. Wilson Sonsini Goodrich & Rosati
presented a summary of the negotiations on the material terms in
the Merger Agreement and reviewed the fiduciary duties of the
board of directors.
Between September 22 and 23, 2007, representatives of Goldman
Sachs continued negotiations relating to price and deal terms
with Bain Capital.
During the period between September 24 and 27, 2007, the parties
convened at the offices of Ropes & Gray to conduct
negotiations of the Merger Agreement and the related
documentation, including the limited guarantees and the debt and
equity commitment letters. Management and representatives of
Goldman Sachs consulted with the STOC on an informal basis
during this period and the STOC provided instructional direction
to management and Goldman Sachs.
On September 25, 2007, our board of directors held a
meeting to discuss the status of the transaction.
Representatives of Goldman Sachs and Wilson Sonsini
Goodrich & Rosati were also present at this meeting.
Goldman Sachs reviewed the extensive process it had undertaken
to contact potentially interested parties, including the status
of discussions with other parties who had at one point in time
expressed an interest in acquiring the Company or making a
strategic investment in the Company. Mr. Masri reported
that Strategic Party One had advised that it was not in a
position to move forward. Goldman Sachs presented to the board
preliminary financial analyses of the Company. Wilson Sonsini
Goodrich & Rosati provided an update to the board of
directors on the status of negotiations with Bain Capital on the
terms of the Merger Agreement, including an overview of the
financing commitments and a discussion of key unresolved issues,
which included the Companys ability to specifically
enforce the terms of the Merger Agreement, the Companys
recourse against Bain Capital if Bain Capital failed to close
the transaction in breach of the Merger Agreement and various
aspects of the definition of Material Adverse Effect
bearing on the certainty that the transaction would ultimately
close. Wilson Sonsini Goodrich & Rosati also advised
the board of directors on its fiduciary duties relating to the
potential transaction with Bain Capital. The board directed
management to continue the negotiations with Bain Capital and
instructed Goldman Sachs to continue price negotiations with
Bain Capital.
23
On the evening of September 25, 2007, Goldman Sachs engaged
in further price negotiations with Bain Capital. The parties
also continued to negotiate the terms of the Merger Agreement,
including the Companys ability to specifically enforce the
Merger Agreement and the Companys recourse against Bain
Capital if Bain Capital failed to close the transaction in
breach of the Merger Agreement.
On September 26, 2007, the Company held its annual
shareholders meeting, followed by a regularly-scheduled
annual board of directors meeting. At this board meeting,
Mr. Goldman updated the board of directors on negotiations
with Bain Capital. Goldman Sachs and Wilson Sonsini
Goodrich & Rosati reported on unresolved transaction
issues, including the purchase price, the availability of
specific performance and the Companys remedies for
breaches of the Merger Agreement by Bain Capital. The board of
directors provided guidance to management and its advisors in
conducting further negotiations. A representative of Goldman
Sachs left the board meeting and contacted Bain Capital to
continue discussions regarding the price, at which time Bain
Capital increased its offer to $5.25 per share. Goldman Sachs
reported the price increase to the board, but the board
instructed Goldman Sachs to request a price of $5.30 per share
and to report back on final deal terms. During a break in the
board meeting in the mid-afternoon, members of the board and
representatives of Goldman Sachs continued to negotiate the per
share purchase price with Bain Capital. As a result of these
negotiations, Bain Capital agreed to increase the per share
purchase price to $5.30 from $5.25 and improve certain terms
relating to the Companys remedies if Bain Capital failed
to close the transaction in breach of the Merger Agreement. Bain
Capital, however, insisted that the Company could not
specifically enforce the terms of the Merger Agreement, but
would only have recourse to money damages for any breach of the
Merger Agreement by Bain Capital.
When the board meeting reconvened on September 26, 2007,
Goldman Sachs and Wilson Sonsini Goodrich & Rosati
updated the board on the negotiations with Bain Capital. Goldman
Sachs then presented its updated financial analysis of the
Company based on the $5.30 per share price offered by Bain
Capital. Goldman Sachs then delivered an oral opinion to the
effect that, based upon and subject to the limitations,
qualifications and assumptions to be set forth in its written
opinion, the $5.30 per share in cash to be received by the
holders of shares of Common Stock pursuant to the Merger
Agreement was fair from a financial point of view to such
holders of Common Stock. The full text of the written opinion of
Goldman Sachs, dated September 28, 2007, which sets forth
the assumptions made, procedures followed, matters considered
and limitations on the review undertaken in connection with the
opinion, is attached as Annex B to this proxy statement.
The parties continued negotiations throughout the remainder of
the day and evening.
On September 27, 2007, the parties engaged in negotiations
to finalize the Merger Agreement and the related agreements,
including the debt and equity commitment letters and the
guarantees. During the evening of September 27, 2007, the
board of directors convened a meeting to review the status and
resolution of the final issues. Representatives of Goldman Sachs
and Wilson Sonsini Goodrich & Rosati also attended
this meeting. Wilson Sonsini Goodrich & Rosati
provided an overview of the remaining issues to be finalized.
After considering (i) the certainty of the transaction with
Bain Capital, (ii) the revised price (which represented a
premium of approximately 44% over our closing price of $3.68 on
September 27, 2007), (iii) a variety of business,
financial and market factors, (iv) the updated financial
analyses of Goldman Sachs, including the opinion of Goldman
Sachs, (v) the boards belief that no other bids were
forthcoming, (vi) the fact that 3Com, with the assistance
of Goldman Sachs, had extensively marketed the Company and
(vii) each of the factors described below in
Reasons for the Merger; Recommendation of Our
Board of Directors beginning on page 25, it was in
the best interests of the Company and its stockholders to enter
into the Merger Agreement with Bain Capital. Accordingly, the
board of directors unanimously (i) determined that the
terms of the Merger were fair and in the best interests of the
Company and its stockholders and declared it advisable to enter
into the Merger Agreement providing for the merger of Merger Sub
with and into the Company in accordance with the DGCL, upon the
terms and subject to the conditions set forth in the Merger
Agreement, (ii) approved the execution, delivery and
performance of the Merger Agreement and the consummation of the
transactions contemplated thereby in accordance with the DGCL
upon the terms and conditions contained in the Merger Agreement,
and (iii) resolved to recommend that the stockholders of
the Company adopt the Merger Agreement in accordance with the
applicable provisions of the DGCL.
24
After the board meeting adjourned, the parties finalized the
Merger Agreement and related documents. On the morning of
September 28, 2007, prior to the opening of the market, the
parties entered into the Merger Agreement, the Investors
delivered their equity commitment letters and guarantees and the
Investors debt financing sources delivered their debt
commitment letters. Shortly thereafter, the Company announced
the transaction by a press release dated September 28, 2007.
Reasons
for the Merger; Recommendation of Our Board of
Directors
Our board of directors, acting with the advice and assistance of
the Companys independent legal and financial advisors,
evaluated and negotiated the Merger proposal, including the
terms and conditions of the Merger Agreement, with Newco and
Merger Sub. The board of directors (i) determined that the
terms of the Merger are fair and in the best interests of the
Company and its stockholders and declared it advisable to enter
into the Merger Agreement providing for the merger of Merger Sub
with and into the Company, in accordance with the DGCL, upon the
terms and subject to the conditions set forth in the Merger
Agreement, (ii) approved the execution, delivery and
performance of the Merger Agreement and the consummation of the
transactions contemplated thereby, in accordance with the DGCL,
upon the terms and conditions contained in the Merger Agreement
and (iii) resolved to recommend that the stockholders of
the Company adopt the Merger Agreement, in accordance with the
applicable provisions of the DGCL.
In the course of reaching its determination, the board of
directors considered a number of positive factors and potential
benefits of the Merger, each of which the members of the board
of directors believed supported its decision. The factors the
board of directors considered included the following material
factors:
|
|
|
|
|
the current and historical market prices of Common Stock and the
fact that the price of $5.30 per share represented a premium to
those historical prices, a premium of approximately 44.0% to the
closing share price of Common Stock on September 27, 2007,
the last trading day prior to the execution of the Merger
Agreement, and a premium of approximately 43.8% to the average
closing price for the thirty (30) trading days prior to
September 27, 2007;
|
|
|
|
the possible alternatives to the sale of 3Com, including
continuing to operate 3Com on a stand-alone basis, and the risks
and uncertainties associated with such alternatives, compared to
the certainty of realizing in cash a fair value for their
investment provided to our stockholders by the Merger;
|
|
|
|
the extensive sale process conducted by us, with the assistance
of our financial and legal advisors;
|
|
|
|
the price proposed by the Investors reflected extensive
negotiations between the parties and represented the highest
price we had received for the acquisition of the Company;
|
|
|
|
the terms of the Merger Agreement and the related agreements,
including:
|
|
|
|
|
|
the limited number and nature of the conditions to the
Investors obligation to consummate the Merger;
|
|
|
|
our ability, under certain limited circumstances, to furnish
information to and conduct negotiations with third parties
regarding other proposals;
|
|
|
|
our ability to terminate the Merger Agreement in order to accept
a superior proposal, subject to paying Newco a termination fee
of $66 million; and
|
|
|
|
the limited number and nature of the conditions to funding set
forth in the debt financing commitment letters and the
obligation of Newco and Merger Sub to use their reasonable best
efforts to obtain the debt financing, and if Newco and Merger
Sub fail to effect the closing because of a failure to obtain
the proceeds of the debt financing, to pay us a $66 million
termination fee;
|
|
|
|
|
|
the fact that the merger consideration is all cash, allowing the
Companys stockholders to immediately realize a fair value
for their investment, while also providing such stockholders
certainty of value for their shares; and
|
25
|
|
|
|
|
the availability of appraisal rights to holders of the Common
Stock who comply with all of the required procedures under
Delaware law, which allows such holders to seek appraisal of the
fair value of their shares as determined by the Delaware Court
of Chancery.
|
The board of directors also considered a variety of risks and
other potentially negative factors concerning the Merger
Agreement and the Merger, including the following:
|
|
|
|
|
the risks and costs to the Company if the Merger does not close,
including the diversion of management and employee attention,
potential employee attrition and the potential effect on the
Companys business and its relationships with customers and
suppliers;
|
|
|
|
the fact that the Companys stockholders will not
participate in any future earnings or growth of the Company and
will not benefit from any appreciation in value of the Company,
including any appreciation in value that could be realized as a
result of improvements to the Companys operations;
|
|
|
|
the requirement that we pay Newco a termination fee of
$66 million if our board of directors accepts a superior
proposal;
|
|
|
|
the fact that the Company is not entitled to seek specific
performance with respect to the obligations of Newco and Merger
Sub or an injunction to prevent breaches of the Merger Agreement
by Newco or Merger Sub;
|
|
|
|
the fact that limited guarantee is the Companys sole
recourse against the Investors for payment of any termination
fee;
|
|
|
|
the restrictions on the conduct of the Companys business
prior to the completion of the Merger, requiring the Company to
conduct its business only in the ordinary course (with various
specified exceptions), subject to specific limitations, which
may delay or prevent the Company from undertaking business
opportunities that may arise pending completion of the
Merger; and
|
|
|
|
the fact that an all cash transaction would be taxable to the
Companys stockholders that are U.S. persons for
U.S. federal income tax purposes.
|
Our board of directors also considered the financial analyses
and opinion of Goldman Sachs, delivered orally to our board of
directors and subsequently confirmed in writing, to the effect
that, as of September 28, 2007, and based upon and subject
to the factors and assumptions set forth therein, the $5.30 per
share in cash to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement was fair from a financial
point of view to such holders. The full text of the written
opinion of Goldman Sachs, dated September 28, 2007, which
sets forth assumptions made, procedures followed, matters
considered and limitations on the review undertaken in
connection with the opinion, is attached as Annex B and is
incorporated in this proxy statement by reference. Goldman
Sachs provided its opinion for the information and assistance of
our board of directors in connection with its consideration of
the Merger. The Goldman Sachs opinion does not constitute a
recommendation as to how any holder of shares of Common Stock
should vote with respect to the adoption of the Merger Agreement
or any other matter.
The foregoing discussion summarizes the material factors
considered by the board of directors in its consideration of the
Merger. After considering these factors, as well as others, the
board of directors concluded that the positive factors relating
to the Merger Agreement and the Merger outweighed the potential
negative factors. In view of the wide variety of factors
considered by the board of directors and the complexity of these
matters, the board of directors did not find it practicable to
quantify or otherwise assign relative weights to the foregoing
factors but conducted an overall analysis of the transaction. In
addition, individual members of the board of directors may have
assigned different weights to various factors. The board of
directors unanimously approved and recommends the Merger
Agreement and the Merger based upon the totality of the
information presented to and considered by it.
Our board of directors recommends that you vote
FOR the proposal to adopt the Merger Agreement and
FOR the proposal to adjourn or postpone the special
meeting, if necessary or appropriate, to solicit additional
proxies.
26
Opinion
of Financial Advisor
Goldman Sachs rendered its opinion to our board of directors
that, as of September 28, 2007 and based upon and subject
to the factors and assumptions set forth therein, the $5.30 per
share in cash to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement was fair from a financial
point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated
September 28, 2007, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex B to this proxy statement. The summary of the opinion
in this statement is qualified in its entirety by reference to
the full text of the opinion. Goldman Sachs provided its opinion
for the information and assistance of our board of directors of
in connection with its consideration of the Merger. The Goldman
Sachs opinion does not constitute a recommendation as to how any
holder of shares of Common Stock should vote with respect to the
adoption of the Merger Agreement or any other matter.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
|
|
|
|
|
the Merger Agreement;
|
|
|
|
annual reports to stockholders and Annual Reports on
Form 10-K
of 3Com for the five (5) fiscal years ended May 31,
2007;
|
|
|
|
certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of 3Com;
|
|
|
|
certain other communications from 3Com to its stockholders;
|
|
|
|
certain publicly available research analyst reports for
3Com; and
|
|
|
|
certain internal financial analyses and forecasts for 3Com
prepared by its management.
|
Goldman Sachs also held discussions with members of our senior
management regarding their assessment of the past and current
business operations, financial condition and future prospects of
3Com, including their views of the risks and uncertainties
associated with achieving the forecasts for 3Com prepared by its
management. Additionally, Goldman Sachs reviewed the reported
price and trading activity for shares of Common Stock, compared
certain financial and stock market information for 3Com with
similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the communication
technology industry specifically and in other industries
generally and performed such other studies and analyses, and
considered such other factors, as it considered appropriate.
For purposes of rendering its opinion, Goldman Sachs relied upon
and assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or reviewed by it. In
addition, Goldman Sachs did not make an independent evaluation
or appraisal of the assets and liabilities (including any
contingent, derivative or off-balance-sheet assets and
liabilities) of 3Com or any of our subsidiaries, nor was any
such evaluation or appraisal furnished to Goldman Sachs. Goldman
Sachs did not express any opinion as to the impact of the Merger
on the solvency or viability of 3Com or Newco or the ability of
3Com or Newco to pay its obligations when they become due. The
Goldman Sachs opinion did not address any legal, regulatory, tax
or accounting matters and did not address the underlying
business decision of 3Com to engage in the Merger or the
relative merits of the Merger as compared to any strategic
alternatives that may have been available to 3Com. The Goldman
Sachs opinion was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to it as of, September 28, 2007, and Goldman
Sachs assumed no responsibility for updating, revising or
reaffirming its opinion based on circumstances, developments or
events which occurred after such date. The Goldman Sachs opinion
was approved by a fairness committee of Goldman Sachs.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to our board of directors in
connection with rendering the opinion described above. The
following summary, however, does
27
not purport to be a complete description of the financial
analyses performed by Goldman Sachs, nor does the order of
analyses described represent relative importance or weight given
to those analyses by Goldman Sachs. Some of the summaries of the
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and are alone not a complete description of Goldman
Sachs financial analyses. Except as otherwise noted, the
following quantitative information, to the extent that it is
based on market data, is based on market data as it existed on
or before September 27, 2007 and is not necessarily
indicative of current market conditions.
Historical Stock Trading and Premium
Analysis. Goldman Sachs analyzed the $5.30
merger consideration to be received by holders of shares of
Common Stock in relation to the closing price of Common Stock as
of September 27, 2007, the 52 week high closing price
of Common Stock and the average closing price of Common Stock
for the 5, 10, 20, 30, 60 and 90 trading day periods ending
September 27, 2007. This analysis indicated that the $5.30
per share in cash to be received by the holders of shares of
Common Stock pursuant to the Merger Agreement represented:
|
|
|
|
|
a premium of 44.0% based on the closing price of $3.680 per
share on September 27, 2007;
|
|
|
|
a premium of 2.3% based on the 52 week high closing price
of $5.180 per share on November 14, 2006;
|
|
|
|
a premium of 51.8% based on the average closing price of $3.492
per share for the 5 trading day period ended September 27,
2007;
|
|
|
|
a premium of 49.8% based on the average closing price of $3.539
per share for the 10 trading day period ended September 27,
2007;
|
|
|
|
a premium of 43.9% based on the average closing price of $3.683
per share for the 20 trading day period ended September 27,
2007;
|
|
|
|
a premium of 43.8% based on the average closing price of $3.685
per share for the 30 trading day period ended September 27,
2007;
|
|
|
|
a premium of 37.1% based on the average closing price of $3.866
per share for the 60 trading day period ended September 27,
2007; and
|
|
|
|
a premium of 30.1% based on the average closing price of $4.075
per share for the 90 trading day period ended September 27,
2007.
|
Goldman Sachs also analyzed certain information relating to all
of the completed cash-only mergers and acquisitions in the
technology industry announced between January 1, 2004 and
September 21, 2007 where both the acquiror and target were
publicly traded U.S. companies with a rank value as
reported in SDC, a collection of databases with information on
financial transactions, greater than $250 million. SDC
calculated rank value by subtracting the value of any
liabilities assumed in a transaction from the total value of
consideration paid by the acquiror (excluding fees and expenses)
and by adding the targets net debt. For these selected
transactions, Goldman Sachs calculated the median premium
represented by the consideration paid for the targets
common stock based on the closing price of the targets
common stock one week prior to the announcement date of the
transaction, based on information obtained from SDC. The
analysis resulted in a median premium of 19.5% for those
selected transactions where premium data was available. This
compared to a premium of 48.0% for the Merger based on the $5.30
merger consideration and the closing price of $3.58 per share of
Common Stock on September 21, 2007, one week prior to the
announcement date of the Merger.
Although none of the selected transactions are directly
comparable to the Merger and none of the companies party to the
selected transactions are directly comparable to 3Com or Newco,
the transactions were chosen because they involve transactions
that for purposes of analysis may be considered similar to the
Merger
and/or
involve companies with operations that for purposes of analysis
may be considered similar to certain operations of 3Com or Newco.
Selected Companies Analysis. Goldman
Sachs reviewed and compared certain financial information for
3Com to corresponding financial information, ratios and public
market multiples for the following publicly
28
traded companies in the enterprise/data networking industry,
which Goldman Sachs refers to collectively as the networking
comparables:
|
|
|
|
|
Avaya Inc.
|
|
|
|
Cisco Systems, Inc.
|
|
|
|
Extreme Networks, Inc.
|
|
|
|
F5 Networks, Inc.
|
|
|
|
Foundry Networks, Inc.
|
|
|
|
Netgear, Inc.
|
|
|
|
Polycom, Inc.
|
|
|
|
ZTE Corporation
|
Although none of the selected companies is directly comparable
to 3Com, the companies included were chosen because they are
publicly traded companies with operations that for purposes of
analysis may be considered similar to certain operations of 3Com.
Goldman Sachs also calculated and compared various financial
multiples based on information it obtained from the SEC filings
and estimates provided by Institutional Brokers Estimate
System, a data service that compiles estimates issued by
securities analysts (IBES). The multiples of 3Com
were calculated using the 3Com closing price on
September 27, 2007, and the multiples of each of the
selected companies were calculated using the closing price of
each such selected companys common stock on
September 27, 2007, except that for Avaya Inc., the
multiples were calculated based on the closing price of Avaya
Inc.s common stock on May 25, 2007, representing the
undisturbed price prior to the announcement of a going private
transaction involving Avaya Inc. The multiples of 3Com were
based on IBES estimates and estimates provided by 3Coms
management including and excluding the impact of an operating
subsidy from the Chinese value added tax (VAT)
authorities in the form of a partial refund of VAT taxes
expected to be collected by a subsidiary of 3Com that is a
wholly-owned foreign enterprise (WOFE) in the
Peoples Republic of China through calendar year 2010 from
purchasers of software products (the SWOFE) given
the non-recurring nature of the SWOFE. When calculating
multiples excluding the SWOFE, the following adjustments were
made:
|
|
|
|
|
subtraction of $0.25, representing the per share present value
of the SWOFE through calendar year 2010, from the share price,
in the price to earnings or P/E, multiple; and
|
|
|
|
subtraction of $101 million, representing the present value
of the SWOFE through calendar year 2010, from the enterprise
value, which is the market value of common equity plus the book
value of debt and minority interests, less cash, in the
enterprise value to revenue multiple.
|
The multiples for each of the selected companies were based on
the most recent publicly available information. With respect to
3Com and each of the selected companies, Goldman Sachs
calculated:
|
|
|
|
|
the closing price per share on September 27, 2007 as a
multiple of estimated calendar year 2008 earnings per share and
estimated calendar year 2009 earnings per share;
|
|
|
|
enterprise value as a multiple of estimated calendar year 2008
revenue and estimated calendar year 2009 revenue; and
|
|
|
|
the estimated 2008 price to earnings ratio as a multiple of the
estimated five-year compounded annual earnings per share growth
rate.
|
29
The results of these analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/E to 5-yr
|
|
|
Price/Earnings (P/E)
|
|
Enterprise Value/Revenue
|
|
EPS Growth
|
|
|
Estimated
|
|
Estimated
|
|
Estimated
|
|
Estimated
|
|
Estimated
|
Company
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
3Com at $3.68 as of September 27, 2007
|
|
|
|
|
|
|
|
|
|
|
Street
|
|
17.9x
|
|
12.5x
|
|
1.1x
|
|
1.0x
|
|
2.6x
|
Management (ex-SWOFE)
|
|
17.1
|
|
9.6
|
|
0.9
|
|
0.8
|
|
NA
|
Management (inc-SWOFE)
|
|
13.1
|
|
8.5
|
|
NA
|
|
NA
|
|
NA
|
3Com at merger consideration of $5.30
|
|
|
|
|
|
|
|
|
|
|
Street
|
|
25.7
|
|
18.0
|
|
1.6
|
|
1.5
|
|
NA
|
Management (ex-SWOFE)
|
|
25.1
|
|
14.2
|
|
1.4
|
|
1.2
|
|
NA
|
Management (inc-SWOFE)
|
|
18.9
|
|
12.3
|
|
NA
|
|
NA
|
|
NA
|
Networking Comparables
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
15.5 - 31.4x
|
|
13.0 - 25.3x
|
|
0.6 - 4.7x
|
|
0.5 - 4.0x
|
|
0.6 - 1.9x
|
Mean
|
|
23.2
|
|
19.6
|
|
2.2
|
|
2.0
|
|
1.3
|
Median
|
|
23.2
|
|
20.6
|
|
1.7
|
|
1.7
|
|
1.3
|
Using the same management projections and the $5.30 merger
consideration per share, Goldman Sachs also performed an
illustrative sensitivity analysis to calculate the effect of
adjustments to annual revenue growth rates and adjustments to
annual earnings before interest and taxes (EBIT),
margins on the range of price to earnings multiples and
enterprise value to revenue multiples for calendar years 2008
and 2009. This analysis utilized a range of movements in annual
revenue growth rates of (5.0%) to 2.5% and annual EBIT margins
of (2.0%) to 1.0%, in each case as compared to 3Com
managements projections for fiscal years 2008 through
2012. The results of this analysis were as follows:
|
|
|
|
|
|
|
|
|
|
|
Price/Earnings
|
|
Enterprise Value/Revenue
|
Estimated 2008
|
|
Estimated 2009
|
|
Estimated 2008
|
|
Estimated 2009
|
|
|
|
|
(ex. SWOFE)
|
|
(ex. SWOFE)
|
|
(in. SWOFE)
|
|
(in. SWOFE)
|
|
Estimated 2008
|
|
Estimated 2009
|
|
20.3x - 44.6x
|
|
11.9x - 21.5x
|
|
16.2x - 27.6x
|
|
10.6x - 17.1x
|
|
1.3x - 1.5x
|
|
1.1x - 1.3x
|
Illustrative Present Value of Future Share Price
Analysis. Goldman Sachs performed an
illustrative analysis of the implied present value of the
hypothetical future price per share of Common Stock, which was
designed to provide an indication of the present value of a
hypothetical future value of 3Coms equity as a function of
its estimated future earnings and its assumed
price-to-future-earnings per share multiple. For this analysis,
Goldman Sachs used the financial projections for 3Com prepared
by its management. Goldman Sachs calculated the hypothetical
future share price, by applying price to earnings per share
multiples ranging from 16.0x to 20.0x to earnings per share
estimates excluding the present value of the SWOFE, for calendar
year 2009, prepared by 3Coms management. Goldman Sachs
then calculated the implied present value per share of Common
Stock by discounting back using annual discount rates ranging
from 12.5% to 14.5% (cost of equity), and then adding the
present value of the SWOFE on a per share of Common Stock basis
at a discount rate of 12.5%. This analysis resulted in a range
of implied present values of $5.01 to $6.34 per share of Common
Stock.
Using the same projections and an assumed annual discount rate
of 13.5% (cost of equity), Goldman Sachs performed an
illustrative sensitivity analysis to determine a range of
implied present values per share of Common Stock based on a
range of adjustments to annual revenue growth rates of (5.0%) to
2.5% and a range of adjustments to annual EBIT margins of (2.0%)
to 1.0%, in each case as compared to 3Com managements
30
projections, applying the different assumed price to earnings
multiples. The results of this analysis were as follows:
|
|
|
Price to Earnings Multiple
|
|
Range of Implied Present Value
|
|
16x
|
|
$3.43 - $5.99
|
18
|
|
$3.83 - $6.71
|
20
|
|
$4.23 - $7.43
|
Illustrative Discounted Cash Flow
Analysis. Goldman Sachs performed an
illustrative discounted cash flow analysis on 3Com using 3Com
managements projections. Goldman Sachs calculated
indications of present values of unlevered free cash flows for
3Com for fiscal years 2008 through 2012 using annual discount
rates ranging from 11.5% to 13.5%. Goldman Sachs calculated
indications of values of perpetual unlevered free cash flows
based on perpetuity growth rates ranging from 2.0% to 4.0%.
These illustrative terminal values were then discounted to
calculate indications of implied present values using discount
rates ranging from 11.5% to 13.5%. This analysis resulted in a
range of implied present values of $4.05 to $5.75 per share of
Common Stock.
Using the same projections and an assumed discount rate of 12.5%
and a perpetuity growth rate of 3.0%, Goldman Sachs performed an
illustrative sensitivity analysis to determine a range of
implied present values per share of Common Stock based on a
range of adjustments to annual revenue growth rates of (5.0%) to
2.5% and a range of adjustments to annual EBIT margins of (2.0%)
to 1.0%, in each case as compared to 3Com managements
projections. This analysis resulted in a range of implied
present values of $3.19 to $5.64 per share of Common Stock.
Selected Transactions Analysis. Goldman
Sachs analyzed certain information relating to selected leverage
buy-out transactions involving the following target companies in
the hardware and communication technology industry since
February 1997:
|
|
|
Date
|
|
Target
|
|
February 1997
|
|
Fairchild Semiconductor Corp.
|
May 1999
|
|
Integrated Circuit Systems, Inc.
|
June 1999
|
|
Intersil Corporation
|
June 1999
|
|
Anam Semiconductor, Inc.
|
July 1999
|
|
ON Semiconductor Corporation
|
September 1999
|
|
Stats Chip
|
December 2000
|
|
AMI Semiconductor
|
December 2004
|
|
MagnaChip Semiconductor Ltd.
|
November 2005
|
|
Avago Technologies (formerly the semiconductor business of
Agilent Technologies)
|
August 2006
|
|
NXP (formerly the semiconductor business of Royal Philips
Electronics)
|
September 2006
|
|
Freescale Semiconductor, Inc.
|
June 2007
|
|
Avaya Inc.
|
For the Merger and each of the selected transactions, Goldman
Sachs calculated and compared enterprise value as a multiple of
last-twelve months earnings before interest, taxes, depreciation
and amortization (EBITDA). The multiples for each of
the selected transactions were based on the SEC filings and
press releases. The multiples for the Merger were based on
estimates provided by 3Coms management including and
excluding the impact of the SWOFE. The following table presents
the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Transactions
|
|
Merger
|
Multiple
|
|
Median
|
|
Inc. SWOFE
|
|
Ex. SWOFE
|
|
Enterprise Value/LTM EBITDA
|
|
|
6.9
|
x
|
|
|
23.0
|
x
|
|
|
40.4x
|
|
31
Although none of the selected transactions are directly
comparable to the Merger and none of the companies party to the
selected transactions are directly comparable to 3Com or Newco,
the transactions were chosen because they involve transactions
that for purposes of analysis may be considered similar to the
Merger
and/or
involve companies with operations that for purposes of analysis
may be considered similar to certain operations of 3Com or Newco.
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying the Goldman Sachs opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
3Com or Newco or the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to our board of directors as
to the fairness from a financial point of view to the holders of
the shares of Common Stock of the $5.30 per share in cash to be
received by such holders pursuant to the Merger Agreement. These
analyses do not purport to be appraisals nor do they necessarily
reflect the prices at which businesses or securities actually
may be sold. Analyses based upon forecasts of future results are
not necessarily indicative of actual future results, which may
be significantly more or less favorable than suggested by these
analyses. Because these analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
3Com, Newco, Goldman Sachs or any other person assumes
responsibility if future results are materially different from
those forecast.
The merger consideration to be paid pursuant to the Merger
Agreement was determined through arms length negotiations
between 3Com and Newco and was approved by our board of
directors. Goldman Sachs provided advice to 3Com during these
negotiations. Goldman Sachs did not, however, recommend any
specific amount of consideration to 3Com or our board of
directors or that any specific amount of consideration
constituted the only appropriate consideration for the Merger.
As described above, the Goldman Sachs opinion to our board of
directors was one of many factors taken into consideration by
our board of directors in making its determination to approve
the Merger Agreement. The foregoing summary does not purport to
be a complete description of the analyses performed by Goldman
Sachs in connection with the fairness opinion and is qualified
in its entirety by reference to the written opinion of Goldman
Sachs attached as Annex B.
Goldman Sachs and its affiliates, as part of their investment
banking business, are continually engaged in performing
financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. Goldman Sachs has acted as
financial advisor to 3Com in connection with, and has
participated in certain of the negotiations leading to, the
Merger. In addition, Goldman Sachs has provided and is currently
providing certain investment banking and other financial
services to 3Com and its affiliates, including having acted as
financial advisor to 3Com in connection with its acquisition of
TippingPoint Technologies Inc. in December 2004 and a minority
interest in Huawei-3Com Co. Ltd. in November 2006; and as lead
arranger with respect to secured term loan facilities provided
to H3C Holdings Limited, an affiliate of 3Com (aggregate
principal amount $430,000,000), in May 2007. Goldman Sachs has
also provided and is currently providing certain investment
banking services to Bain Capital and its affiliates and
portfolio companies, including having acted as joint lead
arranger in connection with the provision of a committed
financing package consisting of senior secured facilities, a
mezzanine facility and a PIK loan facility (aggregate principal
amount 799,500,000) in connection with the acquisition by
Bain Capital of FCI SA in December 2005; as lead arranger in
connection with the leveraged recapitalization of Brenntag AG, a
former portfolio company of Bain Capital, in January 2006; as
co-financial advisor to Brenntag AG in connection with its sale
in September 2006; as financial advisor to Bain Capital in
connection with its sale of Houghton Mifflin Holding Company,
Inc. to HM Rivergroup PLC in
32
December 2006; and as financial advisor to Bain Capital in
connection with its sale of Front Line Management to
IAC/InteractiveCorp in June 2007. Goldman Sachs also may provide
investment banking and other financial services to 3Com, Huawei,
Bain Capital and its portfolio companies, and their respective
affiliates in the future. In connection with the above-described
services Goldman Sachs has received, and may receive,
compensation. In addition, affiliates of Goldman Sachs have
co-invested with Bain Capital and its affiliates from time to
time and may do so in the future, and such affiliates of Goldman
Sachs also have invested and may invest in the future in limited
partnership interests of affiliates of Bain Capital including
those that may be involved in the Merger.
Goldman Sachs is a full service securities firm engaged, either
directly or through its affiliates, in securities trading,
investment management, principal investment, financial planning,
benefits counseling, risk management, hedging, financing,
brokerage activities and other financial and non-financial
activities and services for various persons and entities. In the
ordinary course of these activities and services, Goldman Sachs
and its affiliates may at any time make or hold long or short
positions and investments, as well as actively trade or effect
transactions, in the equity, debt and other securities (or
related derivative securities) and financial instruments
(including bank loans and other obligations) of 3Com, Huawei,
portfolio companies of Bain Capital and any of their respective
affiliates or any currency or commodity that may be involved in
the Merger for their own account and for the accounts of their
customers.
Our board of directors selected Goldman Sachs as its financial
advisor because it is an internationally recognized investment
banking firm that has substantial experience in transactions
similar to the Merger. Pursuant to a letter agreement dated
June 27, 2007, 3Com engaged Goldman Sachs to act as its
financial advisor in connection with the contemplated
transaction. Pursuant to the terms of this engagement letter,
3Com has agreed to pay Goldman Sachs a transaction fee equal to
approximately $24 million, a principal portion of which is
payable upon completion of the Merger. In addition, 3Com has
agreed to reimburse Goldman Sachs for its expenses, including
attorneys fees and disbursements, and to indemnify Goldman
Sachs and related persons against and exculpate Goldman Sachs
and related persons from various liabilities, including certain
liabilities under the federal securities laws.
Projected
Financial Information
We do not as a matter of course make public projections as to
future performance or earnings. However, certain prospective
financial information prepared by our management team was made
available to our board of directors, to Goldman Sachs, to the
Investors and their advisors and financing sources in connection
with the Investors consideration of the Merger and to
other parties who had executed non-disclosure agreements in
connection with their consideration of a transaction with the
Company. We have included the material portions of this
prospective financial information below in order to give our
stockholders access to this information as well. The prospective
financial information set forth below was prepared for purposes
of the boards consideration and evaluation of the Merger,
to facilitate Goldman Sachs financial analysis in
connection with the Merger and to facilitate the due diligence
review of the Investors and their advisors and financing sources
and other parties who had expressed interest in a transaction
with the Company. The inclusion of the prospective financial
information below should not be regarded as an indication that
our management team, our board of directors, Goldman Sachs, the
Investors or any other recipient of this information considered,
or now considers, it to be predictive of actual future results.
Our management team advised our board of directors, Goldman
Sachs, the Investors and the other recipients of the prospective
financial information that its internal financial forecasts,
upon which the following prospective financial information was
based, was subjective in many respects. The prospective
financial information set forth below reflects numerous
assumptions with respect to industry performance, general
business, economic, market and financial conditions and other
matters, all of which are difficult to predict and beyond the
Companys control. The prospective financial information
set forth below also reflects numerous estimates and assumptions
related to our business that are inherently subject to
significant economic, political and competitive uncertainties,
all of which are difficult to predict and many of which are
beyond the Companys control. As a result, although the
prospective financial information set forth below was prepared
in good faith based on assumptions believed to be reasonable at
the time the information was
33
prepared, there can be no assurance that the assumptions made in
preparing such information will prove accurate or that the
projected results reflected therein will be realized.
The prospective financial information set forth below was
prepared for 3Coms internal use, for use by Goldman Sachs
in preparing its financial analysis in connection with the
Merger and for use by the Investors and other potential
purchasers of the Company and not with a view toward public
disclosure or toward complying with U.S. generally accepted
accounting principles (GAAP), the published
guidelines of the SEC regarding projections or the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information. Our independent registered public
accounting firm has not examined or compiled any of the
prospective financial information set forth below, expressed any
conclusion or provided any form of assurance with respect to
such information and, accordingly, assumes no responsibility for
such information. The prospective financial information set
forth below does not take into account any circumstances or
events occurring since the date such information was prepared or
which may occur in the future, and, in particular, does not take
into account or give effect to the Merger or the proposed
financing of the Merger any revised prospects of our business,
changes in general business or economic conditions or any other
transaction or event that has occurred since the date on which
such information was prepared or which may occur in the future.
Prospective financial information of this type is based on
estimates and assumptions that are inherently subject to factors
such as industry performance, general business, economic,
regulatory, market and financial conditions, as well as changes
to the business, financial condition or results of operation of
the Company, including the factors described under
Cautionary Statement Concerning Forward-Looking
Information beginning on page 13. Since the
prospective financial information set forth below covers
multiple years, such information by its nature is subject to
greater uncertainty with each successive year.
We have made publicly available our actual results for the first
quarter of the 2008 fiscal year ended August 31, 2007. You
should review our Quarterly Report on
Form 10-Q
for the quarter ended August 31, 2007 to obtain this
information. See Where You Can Find More Information
beginning on page 72. You are cautioned not to place undue
reliance on the specific portions of the prospective financial
information set forth below. No one has made or makes any
representation to any stockholder regarding the information
included in the prospective financial information set forth
below.
For the foregoing reasons, as well as the bases and assumptions
on which the prospective financial information set forth below
was compiled, the inclusion of the prospective financial
information in this proxy statement should not be regarded as an
indication that such information will be predictive of actual
future results or events, and it should not be relied on as
such. Except as required by applicable securities laws, we
have not updated nor do we intend to update or otherwise revise
the prospective financial information set forth below,
including, without limitation, to reflect circumstances existing
after the date such information was prepared or to reflect the
occurrence of future events, including, without limitation,
changes in general economic or industry conditions, even in the
event that any or all of the assumptions underlying the
prospective financial information is shown to be in error.
The prospective financial information set forth below for fiscal
years 2008 through 2010, which was provided to our board of
directors, Goldman Sachs, the Investors and their advisors and
financing sources and other parties who expressed interest in a
transaction with the Company, included the following estimates
of the Companys future financial performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year ending May 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
($ in millions)
|
|
|
Revenue
|
|
$
|
1,407
|
|
|
$
|
1,625
|
|
|
$
|
1,913
|
|
Gross profit (non-GAAP)(1)
|
|
$
|
670
|
|
|
$
|
791
|
|
|
$
|
943
|
|
Gross profit margin (non-GAAP)(1)
|
|
|
47.6
|
%
|
|
|
48.7
|
%
|
|
|
49.3
|
%
|
Operating profit (non-GAAP)(2)
|
|
$
|
69
|
|
|
$
|
123
|
|
|
$
|
197
|
|
34
|
|
|
(1) |
|
Defined to exclude the following charges from GAAP gross profit
and GAAP gross profit margin: stock-based compensation expense
and the inventory-related adjustment portion of the purchase
accounting effects of the Companys acquisition of 49% of
H3C. We are unable to provide a quantitative reconciliation
because the information is not available without unreasonable
effort. |
|
(2) |
|
Defined to exclude the following charges from GAAP operating
loss or profit: restructuring, amortization, stock-based
compensation expense and the inventory-related adjustment
portion of the purchase accounting effects of the Companys
acquisition of 49% of H3C. We are unable to provide a
quantitative reconciliation because the information is not
available without unreasonable effort. |
In developing the prospective financial information for fiscal
years 2008 through 2010, we made numerous assumptions about our
industry, markets, products and services and ability to execute
on our business plans. In particular, we have assumed that
growth in the China market for networking and other technology
products and services would continue to be robust. Among the
other more significant assumptions are the following:
|
|
|
|
|
The prospective financial information assumes that our business
would be operated on an organic basis and does not anticipate
any acquisitions or divestitures during the periods covered by
such information. We do, however, assume integration activities
undertaken in connection with our H3C acquisition are successful.
|
|
|
|
The prospective financial information assumes that overall
consolidated sales would grow at a compound annual growth rate
(CAGR) for the fiscal
2008-2010
planning period of 15.2% over the revenue for fiscal 2007. (For
this purpose, the revenue for fiscal 2007 excludes revenue from
our connectivity division; as we decided to exit all product
lines from this division, we do not assume any future revenue
from it.) The consolidated CAGR over the planning period assumes
the following for each of our business units: a CAGR of 16.4%
for DVBU, a CAGR of 14.3% for H3C and a CAGR of 31.1% for
TippingPoint. The consolidated CAGR includes the effect of
eliminations for inter-company sales between the business units,
whereas the business unit CAGRs described above assume sales for
each business unit on a standalone basis.
|
|
|
|
With respect to gross profit margins (non-GAAP), the prospective
financial information anticipates an expansion of 260 basis
points for the planning period over the gross profit margin rate
(non-GAAP) for fiscal 2007. The projected increases are
primarily driven by the following assumptions: growth in H3C and
TippingPoint revenue, which generally generate higher margins
than DVBU revenue, partially offset by an assumed increase in
competition expected to be faced by the H3C unit during the
planning period.
|
|
|
|
With respect to operating profit (non-GAAP), supporting the
projected increases are the following key assumption drivers:
increased revenue and gross margin coupled with decreased
operating expenses as a percentage of total revenue
(substantially due to reduced general and administrative
expenses). More specifically, key assumptions regarding
components of operating expenses include: (1) assumed
growth in absolute dollars of research and development spending
over the planning period equating to approximately 13% of
revenue in each of fiscal years
2008-2010;
(2) assumed growth in absolute dollars of sales and
marketing spending over the planning period equating to
approximately 22% of revenue in each of fiscal years
2008-2010;
and (3) planned significant integration (and, to a lesser
extent, restructuring) actions assumed to be taken primarily
during fiscal 2008, which are projected to have favorable
impacts on general and administrative expenses in fiscal 2009
and fiscal 2010.
|
The aggregate amount of funds necessary to complete the Merger
is anticipated to be approximately $2.54 billion,
consisting of (i) approximately $2.2 billion to pay
3Coms stockholders, option holders and holders of
restricted stock and restricted stock units the amounts due to
them under the Merger Agreement, assuming that no 3Com
stockholder validly exercises and perfects its appraisal rights,
(ii) approximately $110 million to pay related fees
and expenses in connection with the Merger and
(iii) approximately
35
$230 million to repay the Companys net debt. These
payments are expected to be funded by Newco and Merger Sub with
a combination of equity contributions by investors in Newco,
debt financing obtained by Merger Sub and made available to
Merger Sub and certain wholly-owned subsidiaries of 3Com, and,
to the extent available, cash of 3Com. Merger Sub has obtained
equity and debt financing commitments described below in
connection with the transactions contemplated by the Merger
Agreement.
Debt
Financing
In connection with the execution and delivery of the Merger
Agreement, Merger Sub has obtained debt financing commitments of
up to an aggregate of $1.2 billion consisting of
(i) commitments from Citibank N.A., Hong Kong Branch, UBS
AG, Singapore Branch, The Hongkong and Shanghai Banking
Corporation Limited, ABN Amro Bank N.V. and Bank of China (Hong
Kong) Limited to provide debt financing in the form of senior
secured facilities consisting of (A) a term loan facility
in the aggregate principal amount of up to $750 million and
(B) a revolving facility in an aggregate principal amount
of $50 million and (ii) commitments from UBS AG,
Singapore Branch, Citibank, N.A. and The Hongkong and Shanghai
Banking Corporation Limited to provide debt financing in the
form of a bridge loan facility with a maturity of one year in an
aggregate principal amount of up to $400 million. Either
Merger Sub or a newly created wholly-owned indirect subsidiary
of 3Com will be the borrower under the senior secured facilities
(in either case, the Senior Secured Borrower) and a
newly created wholly-owned indirect subsidiary of Newco will be
the borrower under the bridge loan facility (the Bridge
Borrower). The proceeds under the term loan facility and a
portion of the proceeds of the bridge loan facility will be
dividended up to Newco and then contributed as common equity to
3Com to be used by 3Com to finance, in part, the payment of the
amounts payable under the Merger Agreement, the refinancing of
existing indebtedness and the payment of fees and expenses in
connection with the Merger. The remaining portion of the
proceeds of the bridge loan facility will be escrowed in a
deposit account to finance interest payments under the bridge
loan facility. The revolving facility will be used by the Senior
Secured Borrower to finance interest payments under the senior
secured facilities and to pay Equity Appreciation Rights Plan
obligations incurred in connection with the previous acquisition
of H3C Technologies Co., Limited and its subsidiaries by 3Com.
The facilities contemplated by the debt financing commitments
are conditioned on the consummation of the Merger as well as
other customary conditions, including, but not limited to:
|
|
|
|
|
satisfaction that since June 1, 2007, there shall not have
occurred any Company Material Adverse Effect (as
defined in the Merger Agreement);
|
|
|
|
the negotiation, execution and delivery of definitive
documentation (which, for the senior secured facilities, must
occur by December 31, 2007 which may be prior to the
consummation of the Merger, with availability of the senior
secured facilities under such definitive documentation to extend
through the earlier of April 30, 2008 and the date the
Merger Agreement terminates, expires or lapses);
|
|
|
|
receipt of cash equity contributions in an amount equal to
greater than 50% of the total amounts funded under the term loan
facility and cash equity contributions from the Investors, their
affiliates and other investors, the result of which is
(i) the equity held by funds advised by Bain Capital and
its affiliates is equal to at least 50.1% of the issued and
outstanding equity of Newco immediately after the Merger and
(ii) the equity held by Huawei and its wholly-owned
subsidiary is equal to at least 16.5% (and the cash equity
contributions made by such parties is at least 7.5%) of the
issued and outstanding equity of Newco immediately after the
Merger;
|
|
|
|
for the senior secured facilities, the execution and delivery of
certain license and OEM agreements, and the shareholders
agreement in substantially the forms provided to the lead
arrangers prior to signing of the Merger Agreement, with the
absence of any amendments or modifications to such agreements
that would be material and adverse to the lenders without the
reasonable consent of the lead arrangers (it being understood
that any waiver, amendment or modification reducing the equity
held by Huawei or its wholly-owned subsidiary to below 16.5% of
the issued and outstanding equity of Newco is material and
adverse to the lenders);
|
36
|
|
|
|
|
for the bridge loan facility, the execution and delivery of an
equity commitment letter from Bain Capital Fund IX, L.P.
and Bain Capital Asia Fund, L.P. (the Bain Funds) to
Newco, in addition to a letter of undertaking by Newco in favor
of the Bridge Borrower, both such letters substantially in the
form attached to the debt commitment letter for the bridge loan
facility without any amendment or waiver; and
|
|
|
|
the absence of any amendments to or waivers of the Merger
Agreement to the extent material and adverse to the lenders
without the reasonable consent of the lead arrangers.
|
Although the debt financing described in this proxy statement is
not subject to the lenders satisfaction with their due
diligence or to a market out condition, such
financing may not be considered assured. As of the date of this
proxy statement, no alternative financing arrangements or
alternative financing plans have been made in the event the debt
financing described herein is not available as anticipated. The
documentation governing the senior secured facilities and the
bridge loan facility has not been finalized and, accordingly,
their actual terms may differ from those described in this proxy
statement.
Senior
Secured Facilities
The senior secured credit facilities consist of a term loan
facility and a revolving facility. The senior secured facilities
will be guaranteed jointly and severally by the immediate parent
corporation of the Senior Secured Borrower and certain
wholly-owned subsidiaries and each subsequently acquired or
organized direct or indirect wholly-owned subsidiary (subject to
certain exceptions and qualifications, including an exception
for any subsidiary organized under the laws of the Peoples
Republic of China and a qualification to permit a period of time
to complete any applicable whitewash procedures, the
guarantors) and will be secured by substantially all
of the assets of the Senior Secured Borrower and each guarantor,
including a charge of all the issued share capital of the Senior
Secured Borrower and certain material subsidiaries held by the
Senior Secured Borrower and the guarantors (subject to certain
exceptions and qualifications, including limitations related to
applicable law).
Bridge
Loan Facility
The bridge loan facility consists of a single facility to be
drawn in full on the closing date of the Merger. The bridge loan
facility will be guaranteed jointly and severally by the
immediate parent corporation of the Bridge Borrower and certain
wholly-owned subsidiaries of the Bridge Borrower (subject to
certain exceptions) and will be secured by substantially all of
the assets of the Bridge Borrower and each guarantor of the
bridge loan facility, including but not limited to: (i) a
charge on all of the issued share capital held by the Bridge
Borrower and the guarantors, (ii) a floating charge over
all assets and undertakings of the Bridge Borrower and
(iii) a fixed charge over the deposit account related to
the escrowed proceeds from the bridge loan facility borrowing.
Equity
Financing
The Bain Funds and an affiliate of Huawei delivered an equity
commitment letter to Newco pursuant to which the Bain Funds
agreed to contribute equity to Newco in the amount of
$1,310,000,000 and an affiliate of Huawei agreed to contribute
equity to Newco in the amount of $106,000,000. These commitments
constitute all of the equity portion of the merger financing.
Each of the equity commitment letters provides that the equity
funds will be contributed to fund, and only to the extent
necessary to fund, the Merger and the other transactions
contemplated by the Merger Agreement, including the repayment of
the Companys debt and for no other purposes. Each of the
equity commitments is generally subject to certain other terms
contained therein, including the satisfaction or waiver at the
closing of the conditions precedent to the obligations of Newco
and Merger Sub to consummate the Merger. The terms of the equity
commitment letters will automatically expire on the earliest to
occur of (i) termination of the Merger Agreement, (ii) any
of the Company or its affiliates asserting a claim or proceeding
against any equity investor or related person under the
guarantee.
37
Pursuant to the terms of the Merger Agreement and the equity
commitment letter, the equity investors have limited rights to
syndicate their equity investments to other investors.
Pursuant to limited guarantees, each of the Bain Funds and
Huawei has agreed to guarantee the obligations of Newco under
the Merger Agreement with respect to the payment of any
termination fee owed by Newco in the following amounts
(x) $61,050,000 less the amount of any equity which is
funded or has been funded by the guarantors or their assignees
to Newco (provided that, in the limited circumstances under
which Newco is required to pay a termination fee of
$110,000,000, $61,050,000 will be increased to $101,750,000 for
purposes of calculating the cap) and (y) $4,950,000 less
the amount of any equity which is funded or has been funded by
the Guarantor or its assignees to Newco (provided that, in the
limited circumstances under which Newco is required to pay a
termination fee of $110,000,000, $4,950,000 will be increased to
$8,250,000 for purposes of calculating the cap). The
Companys recourse against the guarantors and their related
parties are limited to such amounts and the limited guarantees
are the sole recourse against such parties except in the case of
fraud. The guarantees will terminate upon consummation of the
Merger and, except that if the Company or any of its affiliates
assert a claim other than as permitted under the limited
guarantee the limited guarantee will immediately terminated and
become null and void.
Interests
of the Companys Directors and Executive Officers in the
Merger
In considering the recommendation of the board of directors to
vote FOR the proposal to adopt the Merger
Agreement, 3Coms stockholders should be aware that certain
of 3Coms directors and executive officers have interests
in the transaction that are different from, or in addition to,
the interests of 3Coms stockholders generally. These
interests may present them with actual or potential conflicts of
interest, and these interests, to the extent material, are
described below. The board of directors was aware of these
potential conflicts of interest and considered them, among other
matters, in reaching its decision to approve the Merger
Agreement and the Merger and the recommendation that our
stockholders vote in favor of proposal to adopt the Merger
Agreement.
Treatment
of Stock Options
As of the close of business on the record date, there were
approximately
options to purchase shares of Common Stock granted under our
equity incentive plans to our current executive officers and
directors and each of our former directors and executive
officers who served since June 1, 2006, the beginning of
our last fiscal year. Under the terms of the Merger Agreement,
except as otherwise agreed to by Newco and a holder of an
option, each outstanding option that is unexercised as of the
effective time of the Merger will become fully vested, cancelled
and converted into the right to receive a cash payment equal to
the number of shares of Common Stock underlying the outstanding
option multiplied by the amount (if any) by which $5.30 exceeds
the option exercise price, without interest and less any
applicable withholding taxes.
The following table identifies, for each of our current
directors and executive officers and each of our former
directors and executive officers who served since June 1,
2006, the beginning of our last fiscal year, the aggregate
number of shares of Common Stock subject to his or her
outstanding vested and unvested options as of September 28,
2007, the aggregate number of shares of Common Stock subject to
his or her outstanding unvested options with an exercise price
less than $5.30 per share that will become fully vested in
connection with the Merger, the weighted average exercise price
and value of such unvested options with an exercise price less
than $5.30 per share, and the weighted average exercise price
and value of his or her
38
collective vested and unvested options with an exercise price
less than $5.30 per share. The information in the table assumes
that all options included therein remain outstanding on the
closing date of the Merger.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Shares
|
|
|
Exercise
|
|
|
|
|
|
Price of
|
|
|
Value of
|
|
|
|
|
|
|
Shares
|
|
|
Underlying
|
|
|
Price of
|
|
|
Value of
|
|
|
Vested and
|
|
|
Vested and
|
|
|
|
Aggregate
|
|
|
Subject to
|
|
|
Unvested
|
|
|
Unvested
|
|
|
Unvested
|
|
|
Unvested
|
|
|
Unvested
|
|
|
|
Shares
|
|
|
Options with
|
|
|
Options with
|
|
|
Options
|
|
|
Options with
|
|
|
Options with
|
|
|
Options with
|
|
|
|
Subject to
|
|
|
Exercise
|
|
|
Exercise
|
|
|
with Exercise
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Exercise
|
|
|
|
Outstanding
|
|
|
Price Less
|
|
|
Price Less
|
|
|
Price Less
|
|
|
Price Less
|
|
|
Price: Less
|
|
|
Price Less
|
|
Name
|
|
Options*
|
|
|
than $5.30
|
|
|
than $5.30
|
|
|
than $5.30
|
|
|
than $5.30**
|
|
|
than $5.30
|
|
|
than $5.30***
|
|
|
Non-Employee Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Eric A. Benhamou
|
|
|
4,222,395
|
|
|
|
681,713
|
|
|
|
47,000
|
|
|
|
4.4100
|
|
|
|
41,830
|
|
|
|
4.8267
|
|
|
|
322,654
|
|
Gary T. DiCamillo
|
|
|
377,470
|
|
|
|
226,500
|
|
|
|
33,750
|
|
|
|
4.4100
|
|
|
|
30,038
|
|
|
|
4.1941
|
|
|
|
250,478
|
|
James R. Long
|
|
|
283,350
|
|
|
|
209,000
|
|
|
|
25,000
|
|
|
|
4.4100
|
|
|
|
22,250
|
|
|
|
4.1761
|
|
|
|
234,903
|
|
Robert Y. L. Mao(1)
|
|
|
104,500
|
|
|
|
104,500
|
|
|
|
104,500
|
|
|
|
3.9200
|
|
|
|
144,210
|
|
|
|
3.9200
|
|
|
|
144,210
|
|
Raj Reddy
|
|
|
354,750
|
|
|
|
209,000
|
|
|
|
25,000
|
|
|
|
4.4100
|
|
|
|
22,250
|
|
|
|
4.1761
|
|
|
|
234,903
|
|
Dominique Trempont
|
|
|
125,333
|
|
|
|
125,333
|
|
|
|
125,333
|
|
|
|
4.9000
|
|
|
|
50,133
|
|
|
|
4.9000
|
|
|
|
50,133
|
|
Paul G. Yovovich(2)
|
|
|
331,250
|
|
|
|
237,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1765
|
|
|
|
266,823
|
|
Julie St. John(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Wajsgras(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Edgar Masri(5)
|
|
|
12,000,000
|
|
|
|
6,000,000
|
|
|
|
4,500,000
|
|
|
|
4.4500
|
|
|
|
3,825,000
|
|
|
|
4.4500
|
|
|
|
5,100,000
|
|
Neal D. Goldman
|
|
|
1,275,000
|
|
|
|
945,000
|
|
|
|
611,250
|
|
|
|
4.2323
|
|
|
|
652,613
|
|
|
|
4.2620
|
|
|
|
980,950
|
|
James Hamilton
|
|
|
1,525,000
|
|
|
|
1,525,000
|
|
|
|
1,131,250
|
|
|
|
4.1141
|
|
|
|
1,341,563
|
|
|
|
4.1090
|
|
|
|
1,816,250
|
|
Dr. Shusheng Zheng
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay Zager
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
4.2800
|
|
|
|
510,000
|
|
|
|
4.2800
|
|
|
|
510,000
|
|
Robert Dechant
|
|
|
900,000
|
|
|
|
300,000
|
|
|
|
225,000
|
|
|
|
4.4500
|
|
|
|
191,250
|
|
|
|
4.4500
|
|
|
|
255,000
|
|
Dr. Marc Willebeek- LeMair(6)
|
|
|
1,246,495
|
|
|
|
1,246,495
|
|
|
|
731,250
|
|
|
|
4.2038
|
|
|
|
801,563
|
|
|
|
4.0389
|
|
|
|
1,572,016
|
|
Donald M. Halsted, III(7)
|
|
|
550,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5850
|
|
|
|
393,250
|
|
R. Scott Murray(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes all options, regardless of exercise price greater than
or less than $5.30, to the extent held by a particular director
or executive officer. |
** |
|
Illustrates the economic value of all unvested options that will
become fully vested and cashed out in connection with the
Merger. Calculated for each individual by multiplying the number
of shares underlying unvested options by the difference, if any,
between $5.30 (the per share amount of merger consideration) and
the weighted average exercise price of the unvested options. |
*** |
|
Illustrates the economic value of all options to be cancelled
and cashed out in connection with the Merger. Calculated for
each individual by multiplying the aggregate number of shares
subject to options by the difference between $5.30 (the per
share amount of merger consideration) and the weighted average
exercise price of all such options. |
(1) |
|
Mr. Maos employment as Executive Vice President,
Corporate Development terminated on March 23, 2007, upon
his appointment to our board of directors. |
(2) |
|
Mr. Yovovich was a member of our board of directors until
September 26, 2007, the date of our annual meeting of
stockholders. |
(3) |
|
Ms. St. John resigned from our board of directors on
September 29, 2006. |
(4) |
|
Mr. Wajsgras was a member of our board of directors until
September 20, 2006, the date of our annual meeting of
stockholders. |
(5) |
|
Mr. Masri is our President and Chief Executive Officer as
well as a member of the board of directors. |
(6) |
|
Dr. Willebeek-LeMair (while still currently a 3Com officer)
ceased to be an executive officer on March 28, 2007. |
39
|
|
|
(7) |
|
Mr. Halsted is the Companys former Executive Vice
President and Chief Financial Officer. He resigned from those
positions as of June 22, 2007 and his employment with the
Company terminated July 27, 2007. |
(8) |
|
Mr. Murray is the Companys former President and Chief
Executive Officer. He resigned from those positions as of the
close of business on August 17, 2006. |
Treatment
of Restricted Stock
As of the close of business on the record date, there
were shares
of restricted stock granted under our equity incentive plans to
each of our current directors and executive officers and each of
our former directors and executive officers who served since
June 1, 2006, the beginning of our last fiscal year. Under
the terms of the Merger Agreement, except as otherwise agreed to
by Newco and a holder of restricted stock, all outstanding
shares of restricted stock that are outstanding immediately
prior to the effective time of the Merger will become fully
vested and those shares will be cancelled and converted into the
right to receive a cash payment equal to the number of
outstanding shares of restricted stock multiplied by $5.30,
without interest and less any applicable withholding tax.
The following table identifies the aggregate number of shares of
unvested restricted stock outstanding as of September 28,
2007 and the value of such shares of unvested restricted stock
that will become fully vested in connection with the Merger. The
information in the table assumes that all such shares of
restricted stock remain outstanding on the closing date of the
Merger.
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Value of Shares
|
|
|
|
Shares of
|
|
|
of Unvested
|
|
|
|
Unvested
|
|
|
Restricted Stock
|
|
Name
|
|
Restricted Stock
|
|
|
(1)
|
|
|
Non-Employee Directors
|
|
|
|
|
|
$
|
|
|
Eric A. Benhamou
|
|
|
|
|
|
|
|
|
Gary T. DiCamillo
|
|
|
|
|
|
|
|
|
James R. Long
|
|
|
|
|
|
|
|
|
Robert Y. L. Mao
|
|
|
|
|
|
|
|
|
Raj Reddy
|
|
|
|
|
|
|
|
|
Dominique Trempont
|
|
|
|
|
|
|
|
|
Paul G. Yovovich
|
|
|
|
|
|
|
|
|
Julie St. John
|
|
|
|
|
|
|
|
|
David Wajsgras
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
Edgar Masri
|
|
|
333,333
|
|
|
|
1,766,665
|
|
Neal D. Goldman
|
|
|
438,333
|
|
|
|
2,323,165
|
|
James Hamilton
|
|
|
250,000
|
|
|
|
1,325,000
|
|
Dr. Shusheng Zheng
|
|
|
|
|
|
|
|
|
Jay Zager
|
|
|
300,000
|
|
|
|
1,590,000
|
|
Robert Dechant
|
|
|
280,000
|
|
|
|
1,484,000
|
|
Dr. Marc Willebeek-LeMair
|
|
|
330,000
|
|
|
|
1,749,000
|
|
Donald M. Halsted, III
|
|
|
|
|
|
|
|
|
R. Scott Murray
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Illustrates the economic value of all unvested shares of
restricted stock that will become fully vested and cashed out in
connection with the Merger. Calculated for each individual by
multiplying the aggregate number of shares of unvested
restricted stock by $5.30 (the per share amount of merger
consideration). |
40
Treatment
of Restricted Stock Units
As of the close of business on the record date, there were
200,000 unvested restricted stock units granted under our equity
incentive plans to Dr. Shusheng Zheng. No restricted stock
units were held by our current directors and executive officers
or our former directors and executive officers who served since
June 1, 2006, the beginning of our last fiscal year, other
than Dr. Zheng. Under the terms of the Merger Agreement,
except as otherwise agreed to by Newco and a holder of a
restricted stock unit, each outstanding restricted stock unit
that is outstanding as of the effective time of the Merger will
be treated as shares of Common Stock entitled to receive a cash
payment equal to $5.30 per share, without interest and less any
applicable withholding tax.
The following table identifies the aggregate number of shares of
Common Stock subject to outstanding unvested restricted stock
units as of September 28, 2007 and the value of such
unvested restricted stock units that will become fully vested in
connection with the Merger. The information in the table assumes
that all such restricted stock units remain outstanding on the
closing date of the Merger.
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
Shares Subject
|
|
Value of
|
|
|
to Restricted
|
|
Restricted
|
Name
|
|
Stock Units
|
|
Stock Units(1)
|
|
Dr. Shusheng Zheng
|
|
|
200,000
|
|
|
$
|
1,060,000
|
|
|
|
|
(1) |
|
Illustrates the economic value of all unvested restricted stock
units that will become fully vested and cashed out in connection
with the Merger. Calculated by multiplying the aggregate number
of unvested restricted stock units by $5.30 (the per share
amount of merger consideration). |
New
Employment Arrangements
As of the date of this proxy statement, no member of our
management or our board of directors has entered into any
amendments or modifications to existing employment agreements
with us or our subsidiaries in anticipation of the Merger, nor
has any executive officer who has plans or is expected to remain
with the Surviving Corporation entered into any agreement,
arrangement or understanding with the Investors or their
affiliates regarding employment with, or the right to purchase
or participate in the equity of, the Surviving Corporation.
Although no such agreement, arrangement or understanding
currently exists, it is generally expected that a number of our
executive officers will remain after the Merger is completed,
which means that such executive officers may, prior to the
closing of the Merger, enter into new arrangements with the
Investors or their affiliates regarding employment with, or the
right to purchase or participate in the equity of, the Surviving
Corporation.
Change
of Control Benefits
We have entered into individual management retention agreements
with our executive officers, pursuant to which each such
executive officer will be entitled to receive the severance and
other benefits described below if at any time within three
(3) months prior to or twelve (12) months following a
change of control (as described below) such
executive officer is terminated without cause (as
described below) or such executive officer voluntarily
terminates for good reason (as described below)
during such time period. We have approved two forms of
management retention agreements which are described below. The
first form applies to Mr. Goldman, Mr. Hamilton and
Dr. Willebeek-LeMair. The second form applies to
Mr. Dechant, Mr. Zager and Dr. Zheng.
Mr. Masri has change of control benefits in his employment
agreement and such benefits are described below.
Following a qualifying event involving a change of control,
benefits include:
|
|
|
|
|
A payment equal to 100% of such executive officers annual
base salary and target annual bonus. Under the first form, the
payment is in a lump sum; under the second form, the payments
are payable in accordance with regular payroll practices;
|
|
|
|
A pro-rated bonus payment for the year in which the change of
control occurs. Under the first form, the payment is paid in a
lump sum and it is pro rated based on days in the year prior to
the change of
|
41
|
|
|
|
|
control event. Under the second form, the payment is made in
accordance with regular payroll practices, is payable only on
earned incentive bonus for the bonus period in which the
termination date occurs (based on attainment of actual
performance metrics) and is pro-rated based on days in the bonus
period prior to the termination (unless the termination occurs
prior to the change of control, in which case the pro-ration is
based on the days in the bonus period prior to the change of
control);
|
|
|
|
|
|
Continued coverage of employee benefits until the earlier of two
(2) years from the date of termination or when such
executive officer receives comparable benefits from another
employer;
|
|
|
|
Full accelerated vesting of equity compensation; and
|
|
|
|
Extension of the post-termination exercise period on stock
options to the lesser of the original term of the option and one
(1) year (in the case of the first form) and one hundred
sixty-five (165) days (in the case of the second form).
|
Cause is defined to mean: (i) an act of theft,
embezzlement or intentional dishonesty by the executive in
connection with
his/her
employment; (ii) the executive being convicted of a felony;
(iii) a willful act by the executive officer which
constitutes gross misconduct and which is injurious to the
Company; or (iv) following delivery to the executive
officer of a written demand for performance from the Company
which describes the basis for the Companys reasonable
belief that the executive officer has not substantially
performed
his/her
duties, continued violations by the executive officer of the
executive officers obligations to the Company which are
demonstrably willful and deliberate on the executive
officers part.
Good reason, while defined differently between the
forms, generally includes material reductions in duties, title,
authority, responsibilities, facilities or perquisites,
reduction of base salary, material reduction in aggregate level
of employee benefits, relocation or constructive termination.
A change of control means: (i) the acquisition
by any person of 50% or more of the total voting power of our
then outstanding securities; (ii) the consummation of the
sale or disposition of all or substantially all company assets;
(iii) the consummation of a merger or consolidation of us
where the outstanding securities immediately prior thereto no
longer represent at least 50% of the voting power immediately
after such merger or consolidation; and solely in the case of
the first form, (iv) a change in the composition of the
Board during any two consecutive years, such that a majority
consists of persons who are not either directors who were in
office when the agreement was entered into or whose nominations
were approved by a majority of the directors who were in office
not in connection with a transaction described in
(i) through (iii) above.
If the benefits provided constitute a parachute payment under
Section 280G of the Internal Revenue Code and would be
subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code, then, provided the excise tax is at least
3.59 times the base amount under Section 280G,
the executive officer shall receive (i) a payment
sufficient to pay such excise tax and (ii) an additional
payment sufficient to pay the taxes arising as a result of such
payment. If the tax is less than 3.59 times the base amount, we
may reduce the benefits to the extent necessary to avoid such
tax. Solely with respect to the second form, if additional taxes
would result due to Internal Revenue Code Section 409A, the
Company will modify the payment schedule described above so that
payments do not occur until the date that is six (6) months
and one (1) day after the termination date.
The benefits described above are conditioned on the executive
officer signing a release of claims and a one-year
non-solicitation clause. With respect to the second form, the
executive officer must also sign a one-year non-competition
agreement and abide by a non-disparagement clause.
Under the terms of Mr. Masris employment agreement,
if Mr. Masris employment is terminated without cause
or he resigns for good reason in connection with a change of
control, he is entitled to the payment of two years of base
salary plus the payment of two (2) times his target annual
incentive for the year in which the termination occurs, full
vesting of outstanding equity awards (other than
performance-based awards), up to eighteen (18) months of
reimbursement for premiums paid for coverage under the
Consolidated Omnibus Budget Reconciliation Act, an extension of
the period in which to exercise his stock options after
termination, from the earlier of the expiration of the stock
option by its terms or one hundred sixty-five (165) days,
42
continuation for up to one year of the $10,000,000 term life
insurance policy in effect at the time of his termination, and
excise tax
gross-up
payments.
Assuming that each current executive officer (including
Dr. Willebeek-LeMair, who ceased to be an executive officer
on March 28, 2007) is involuntarily terminated for any
reason other than cause or such executive officer terminates his
employment for good reason following the Merger, based on a
theoretical termination date of February 1, 2008, the
amount of severance benefits (based on the executive
officers current salary and target incentive bonus) that
would be payable is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Potential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
Benefits
|
|
|
Excise Tax
|
|
|
Control
|
|
Name
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Continuation ($)
|
|
|
Gross-up ($)
|
|
|
Benefits ($)
|
|
|
Edgar Masri
|
|
|
1,300,000
|
(1)
|
|
|
1,300,000
|
(2)
|
|
|
50,643
|
(3)
|
|
|
1,374,473(4
|
)
|
|
|
4,025,116
|
|
Neal D. Goldman
|
|
|
375,000
|
(5)
|
|
|
285,154
|
(6)
|
|
|
124,886
|
(7)
|
|
|
|
|
|
|
785,040
|
|
James Hamilton
|
|
|
350,000
|
(5)
|
|
|
266,144
|
(6)
|
|
|
80,535
|
(7)
|
|
|
|
|
|
|
696,679
|
|
Dr. Shusheng Zheng
|
|
|
412,914
|
(8)
|
|
|
1,831,129
|
(9)
|
|
|
6,980
|
(10)
|
|
|
|
|
|
|
2,251,023
|
|
Jay Zager
|
|
|
400,000
|
(5)
|
|
|
304,164
|
(6)
|
|
|
152,157
|
(7)
|
|
|
569,368(4
|
)
|
|
|
1,425,689
|
|
Robert Dechant
|
|
|
365,000
|
(5)
|
|
|
277,550
|
(6)
|
|
|
77,433
|
(7)
|
|
|
|
|
|
|
719,983
|
|
Dr. Marc Willebeek-LeMair
|
|
|
350,000
|
(5)
|
|
|
266,144
|
(6)
|
|
|
82,985
|
(7)
|
|
|
|
|
|
|
699,129
|
|
|
|
|
(1) |
|
Represents two years of Mr. Masris current salary. |
(2) |
|
Represents two times Mr. Masris current target annual
incentive bonus. |
(3) |
|
Reflects Company paid benefits continuation for 18 months
and payments for the continuation of
Mr. Masris $10,000,000 term life insurance
policy for 12 months pursuant to his employment agreement. |
(4) |
|
Represents the additional amount estimated to be payable to
Mr. Masri and Mr. Zager to make them whole for the
federal excise tax on excess parachute payments (including
payment of the taxes on the additional amount itself). This
excise tax is payable if the value of certain payments that are
contingent upon a change of control, referred to as parachute
payments, exceeds a safe harbor amount. The computation of the
excise tax is complex, is subject to various questions of
interpretation and depends upon a number of variables that
cannot be known at this time. 3Com engaged a third-party to
assist it in preparing the excise tax calculation based upon
information that we supplied regarding current and historical
compensation and the provisions of our compensation and benefits
arrangements. |
(5) |
|
Represents one year of such executive officers current
salary. |
(6) |
|
Represents one year of such executive officers current
target incentive bonus and 2 months pro-rated bonus
assuming 100% attainment for 2H FY 2008. |
(7) |
|
Reflects Company paid benefits continuation for 24 months
and basic term life insurance conversion pursuant to such
executive officers employment arrangement. |
(8) |
|
Represents one year of salary and one month of salary per year
of Dr. Zhengs service for a total of
16.18 months of salary. |
(9) |
|
Represents payments earned, but not yet paid, of $1,609,920
under H3Cs Equity Appreciation Rights Plan, one hundred
percent of Dr. Zhengs target annual bonus of $204,193
and pro-rated bonus payment of one month equal to $17,016 for
the year in which the change of control occurs (H3C operates on
a calendar year). |
|
|
|
(10) |
|
Represents estimated two year contribution for Chinese
Compulsory Social Insurance. |
Indemnification
and Insurance
The Surviving Corporation has agreed to indemnify for a period
of six (6) years each of our present and former officers
and directors against all expenses, losses and liabilities
incurred in connection with any claim, action, suit proceeding
or investigation arising out of, relating to, or in connection
with, any act or omission in their capacity as an officer,
director or employee occurring on or before the effective time
of the Merger.
The Merger Agreement provides that we may purchase tail
coverage directors and officers liability
insurance policies containing the same coverage and in the same
amount as the Companys existing policies
43
and with a claims period of six (6) years from the
effective time of the Merger for claims arising from facts or
events that occurred on or prior to the effective time of the
Merger. If we choose to purchase such tail coverage, the
Surviving Corporation will maintain such tail coverage for the
six (6) year period.
Material
U.S. Federal Income Tax Consequences of the Merger to Our
Stockholders
The following is a summary of the material U.S. federal
income tax consequences of the Merger to U.S. persons (as
defined below) whose shares of Common Stock are converted into
the right to receive cash in the Merger. This summary does not
purport to consider all aspects of U.S. federal income
taxation that might be relevant to our stockholders. For
purposes of this discussion, we use the term
U.S. person to mean a beneficial owner of
shares of Common Stock that is, for U.S. federal income tax
purposes:
|
|
|
|
|
a citizen or resident of the United States;
|
|
|
|
a corporation created or organized under the laws of the United
States or any of its political subdivisions;
|
|
|
|
a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person; or
|
|
|
|
an estate that is subject to U.S. federal income tax on its
income regardless of its source.
|
If a partnership (including an entity treated as a partnership
for U.S. federal income tax purposes) holds Common Stock,
the tax treatment of a partner generally will depend on the
status of the partners and the activities of the partnership. A
partner of a partnership holding Common Stock should consult its
tax advisor.
This discussion is based on current law, which is subject to
change, possibly with retroactive effect. It applies only to
beneficial owners who hold shares of Common Stock as capital
assets, and may not apply to shares of Common Stock received in
connection with the exercise of employee stock options or
otherwise as compensation, stockholders who validly exercise
their rights under Delaware law to object to the Merger or to
certain types of beneficial owners who may be subject to special
rules (such as insurance companies, banks, tax-exempt
organizations, financial institutions, broker-dealers,
partnerships, S corporations or other pass-through
entities, mutual funds, traders in securities who elect the
mark-to-market method of accounting, stockholders subject to the
alternative minimum tax, stockholders that have a functional
currency other than the U.S. dollar or stockholders who
hold Common Stock as part of a hedge, straddle or a constructive
sale or conversion transaction). This discussion does not
address the receipt of cash in connection with the cancellation
of shares of stock appreciation rights, restricted stock units
or options to purchase shares of Common Stock, or any other
matters relating to equity compensation or benefit plans. This
discussion also does not address the U.S. tax consequences
to any stockholder who, for U.S. federal income tax
purposes, is a non-resident alien individual, foreign
corporation, foreign partnership or foreign estate or trust, and
it does not address any aspect of state, local or foreign tax
laws.
Exchange of Shares of Common Stock for Cash Pursuant to the
Merger Agreement. The exchange of shares of
Common Stock for cash in the Merger will be a taxable
transaction for U.S. federal income tax purposes. In
general, a stockholder whose shares of Common Stock are
converted into the right to receive cash in the Merger will
recognize capital gain or loss for U.S. federal income tax
purposes equal to the difference, if any, between the amount of
cash received with respect to such shares and the
stockholders adjusted tax basis in such shares. Gain or
loss will be determined separately for each block of shares
(i.e., shares acquired at the same cost in a single
transaction). Such gain or loss will be long-term capital gain
or loss provided that a stockholders holding period for
such shares is more than twelve (12) months at the time of
the consummation of the Merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. There
are limitations on the deductibility of capital losses.
Backup Withholding and Information
Reporting. Backup withholding of tax may apply to
cash payments to which a non-corporate stockholder is entitled
under the Merger Agreement, unless the stockholder or other
payee provides a taxpayer identification number, certifies that
such number is correct and otherwise
44
complies with the backup withholding rules. Each of our
stockholders should complete and sign the Substitute
Form W-9
that will be included as part of the letter of transmittal and
return it to the payment agent, in order to provide the
information and certification necessary to avoid backup
withholding, unless an exemption applies and is established in a
manner satisfactory to the payment agent.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowable as
a refund or a credit against a stockholders
U.S. federal income tax liability provided the required
information is timely furnished to the Internal Revenue Service.
Cash received in the Merger will also be subject to information
reporting unless an exemption applies.
The U.S. federal income tax consequences described above
are not intended to constitute a complete description of all tax
consequences relating to the Merger. Because individual
circumstances may differ, each stockholder should consult with
the stockholders tax advisor regarding the applicability
of the rules discussed above to the stockholder and the
particular tax effects to the stockholder of the Merger in light
of such stockholders particular circumstances, the
application of state, local and foreign tax laws, and, if
applicable, the tax consequences of the receipt of cash in
connection with the cancellation of options, stock appreciation
rights or restricted stock units to purchase shares of Common
Stock, including the transactions described in this proxy
statement relating to our other equity compensation and benefit
plans.
Under the HSR Act and the rules promulgated thereunder by the
FTC, the Merger cannot be completed until 3Com and Newco file a
notification and report form under the HSR Act and the
applicable waiting period has expired or been terminated. 3Com
and Newco have filed notification and report forms under the HSR
Act with the FTC and the Antitrust Division of the DOJ. The
applicable waiting period under the HSR Act has not yet expired
or been terminated. At any time before or after consummation of
the Merger, notwithstanding the early termination of the waiting
period under the HSR Act, the Antitrust Division of the DOJ or
the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including
seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of 3Com or Newco. At any time
before or after the consummation of the Merger, and
notwithstanding the early termination of the waiting period
under the HSR Act, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial
assets of 3Com or Newco. Private parties may also seek to take
legal action under the antitrust laws under certain
circumstances.
In addition, the Merger is subject to various foreign antitrust
laws. To the extent required, 3Com and Newco expect to file
notifications in certain foreign jurisdictions and to observe
the applicable waiting periods prior to completing the Merger.
While there can be no assurance that the Merger will not be
challenged by a governmental authority or private party on
antitrust grounds, 3Com, based on a review of information
provided by Newco relating to the businesses in which it and its
affiliates are engaged, believes that the Merger can be effected
in compliance with federal, state and foreign antitrust laws.
The term antitrust laws means the Sherman Act, as
amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other Federal, state
and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of
trade.
The parties have agreed to make a joint voluntary filing of the
transaction with the Committee on Foreign Investment in the
United States (CFIUS).
Delisting
and Deregistration of Common Stock
If the Merger is completed, the Common Stock will be delisted
from Nasdaq and deregistered under the Exchange Act and we will
no longer file periodic reports with the SEC on account of the
Common Stock.
45
Litigation
Related to the Merger
Between September 28, 2007 and October 10, 2007, five
putative class action complaints were filed in the Court of
Chancery of the State of Delaware in connection with the
announcement of the proposed Merger Fisk v.
3Com Corporation, et al., Civil Action
No. 3256-VCL;
Bendit v. 3Com Corporation, et al., Civil Action
No. 3258-VCL;
Litvintchouk v. Robert Y.L. Mao, et al., Civil Action
No. 3264-VCL;
Kadlec v. 3Com Corporation, et al., Civil Action
No. 3268-VCL;
and Kahn v. 3Com Corporation, et al., Civil Action
No. 3286-VCL.
On October 12, 2007, the above-referenced actions were
consolidated for all purposes and captioned: IN RE: 3COM
SHAREHOLDERS LITIGATION, Civil Action
No. 3256-VCL.
An additional two putative class action complaints were filed in
the Superior Court of Middlesex County,
Massachusetts Tansey v. 3Com Corporation, et
al., Civil Action
No. 07-3768,
and Davenport v. Benhamou, et al., Civil Action
No. 07-3973F.
On October 12 and 15, 2007, the defendants served motions
to dismiss or, in the alternative, stay the two Massachusetts
proceedings. All of the complaints name 3Com and the current
members of our board of directors as defendants. All of the
complaints except the Tansey and Kahn petitions also name Paul
G. Yovovich, a former member of our board of directors, as a
defendant. Excepting the Tansey and Davenport petitions, all of
the complaints also name Bain Capital as a defendant. The Tansey
complaint names Bain Capital, LLC as a defendant. The Davenport
complaint also names Diamond II Acquisition Corp. and
Diamond II Holdings, Inc. as defendants. Diamond II
Acquisition Corp. was also named as a defendant in the Kahn
complaint. The Bendit complaint also names Huawei Technologies
Company as a defendant, and the Tansey complaint also names
Huawei Technology Co. Ltd. as a defendant. Plaintiffs purport to
represent stockholders of 3Com who are similarly situated to
them. Among other things, the seven complaints allege that the
proposed purchase price of $5.30 per share is inadequate and
that our directors, in approving the proposed Merger, breached
fiduciary duties owed to 3Coms shareholders because they
assertedly failed to take steps to maximize the value to our
public stockholders. The complaints further allege that Bain
Capital and, in some cases, 3Com and Huawei, aided and abetted
these alleged breaches of fiduciary duty. The complaints seek
class certification, damages and certain forms of equitable
relief, including enjoining the consummation of the Merger and a
direction to our board of directors to obtain a transaction in
the best interests of 3Coms shareholders. We believe that
plaintiffs allegations are without merit, and we intend to
vigorously contest these actions. There can be no assurance,
however, that we will be successful in our defense of these
actions.
Amendment
to 3Coms Rights Plan
On September 28, 2007, the Company and American Stock
Transfer & Trust Company (the Rights
Agent) entered into Amendment No. 1 to the Third
Amended and Restated Preferred Shares Rights Agreement between
the Company and the Rights Agent, dated November 4, 2002.
The amendment permits the execution of the Merger Agreement and
the performance and consummation of the transactions
contemplated by the Merger Agreement, including the Merger,
without triggering the provisions of the rights agreement.
46
This section of the proxy statement describes the material
provisions of the Merger Agreement but does not purport to
describe all of the terms of the Merger Agreement. The following
summary is qualified in its entirety by reference to the
complete text of the Merger Agreement, which is attached as
Annex A to this proxy statement and incorporated into this
proxy statement by reference. We urge you to read the full text
of the Merger Agreement because it is the legal document that
governs the Merger. It is not intended to provide you with any
other factual information about us. Such information can be
found elsewhere in this proxy statement and in the public
filings we make with the SEC, as described in Where You
Can Find More Information beginning on page 72.
The Merger Agreement provides for the Merger of Merger Sub with
and into 3Com upon the terms, and subject to the conditions, of
the Merger Agreement. As the Surviving Corporation, 3Com will
continue to exist following the Merger. Upon consummation of the
Merger, the directors of Merger Sub will be the initial
directors of the Surviving Corporation and the officers of
Merger Sub will be the initial officers of the Surviving
Corporation. All Surviving Corporation officers will hold their
positions until their successors are duly elected and qualified
or until the earlier of their resignation or removal.
We, Newco or Merger Sub may terminate the Merger Agreement prior
to the consummation of the Merger in some circumstances, whether
before or after the adoption by our stockholders of the Merger
Agreement. Additional details on termination of the Merger
Agreement are described in Termination of the
Merger Agreement beginning on page 59.
Effective
Time; Marketing Period
The Merger will be effective at the time the certificate of
merger is filed with the Secretary of State of the State of
Delaware (or at a later time, if agreed upon by the parties and
specified in the certificate of merger). We expect to complete
the Merger as promptly as practicable after our stockholders
adopt the Merger Agreement and, if necessary, the expiration of
the Marketing Period described below.
Unless otherwise agreed by the parties to the Merger Agreement,
the parties are required to close the Merger no later than the
third (3rd) business day after the satisfaction or waiver of the
conditions described under Conditions to the
Merger beginning on page 56, except that the parties
will not be obligated to close the Merger until the earliest to
occur of a date before the end of the Marketing Period specified
by Newco on not less than three (3) days written
notice to us and the final day of the Marketing Period.
For purposes of the Merger Agreement, Marketing
Period means the first period of twenty
(20) consecutive business days throughout which Newco has
certain financial information required to be provided by the
Company under the Merger Agreement in connection with
Newcos financing of the Merger, which period will in no
event begin prior to the date that is thirteen
(13) business days before the special meeting.
The Marketing Period will not be deemed to have commenced if,
prior to the completion of the Marketing Period:
|
|
|
|
|
Deloitte & Touche LLP shall have withdrawn its audit
opinion with respect to any financial statements contained in
the required financial information provided by us to Newco until
a new audit opinion is issued;
|
|
|
|
we have publicly announced or announced to Newco or Merger Sub
(A) our intention to restate any of our financial
statements included in the financial information provided by us
to Newco or (B) that any such restatement is under
consideration or may be a possibility, in which case the
Marketing Period will not be deemed to commence until such
restatement has been completed and our SEC reports have been
amended or we have announced that we have concluded no
restatement will be required; or
|
47
|
|
|
|
|
the financial statements included in the financial information
provided by us to Newco on the first (1st) day of the twenty
(20) day period would not be sufficiently current to
fulfill the conditions of Newcos debt financing
commitments.
|
The purpose of the Marketing Period is to provide the Investors
a reasonable and appropriate period of time during which they
can market and place the permanent debt financing contemplated
by the debt financing commitments for the purpose of financing
the Merger. To the extent the Investors do not need the benefit
of the Marketing Period to market and place the debt financing,
they may, in their sole discretion, determine to waive the
Marketing Period and close the Merger prior to the expiration of
the Marketing Period if all closing conditions are otherwise
satisfied or waived.
Each share of Common Stock issued and outstanding immediately
prior to the effective time of the Merger will be converted into
the right to receive $5.30 in cash, without interest and less
any applicable withholding taxes, other than the following
shares:
|
|
|
|
|
shares held by holders who have properly and validly perfected
their statutory rights of appraisal with respect to the
Merger; and
|
|
|
|
shares held in treasury or owned by Newco or Merger Sub or any
direct or indirect wholly-owned subsidiary of Newco, Merger Sub
or the Company.
|
After the Merger is effective, each holder of a certificate
representing any shares of Common Stock (other than shares for
which appraisal rights have been properly and validly perfected)
will no longer have any rights with respect to the shares,
except for the right to receive the merger consideration. See
Dissenters Rights of Appraisal beginning on
page 68.
Treatment
of Options and Other Awards
Stock Options. Immediately prior to the
effective time of the Merger, except as otherwise agreed to by
the holder and Newco, all outstanding options to purchase Common
Stock under the Companys equity incentive plans will
become fully vested. All such options not exercised prior to the
Merger will be cancelled and converted into the right to receive
a cash payment equal to the number of shares of Common Stock
underlying the options multiplied by the amount (if any) by
which $5.30 exceeds the exercise price, without interest and
less any applicable withholding taxes.
Restricted Stock. Immediately prior to
the effective time of the Merger, except as otherwise agreed by
a holder and Newco, all shares of restricted stock will vest and
those shares will be cancelled and converted into the right to
receive a cash payment equal to the number of shares of
restricted stock multiplied by $5.30, without interest and less
any applicable withholding taxes.
Restricted Stock Units. Immediately
prior to the effective time of the Merger, except as otherwise
agreed by a holder and Newco, all restricted stock units will
vest and be settled through the issuance of shares of Common
Stock and will thereafter be treated in the same manner as
restricted stock.
Employee Stock Purchase Plan. Prior to
the consummation of the Merger, the then-current offering period
under our Employee Stock Purchase Plan will be terminated and
all funds in each participants account will be applied
toward the purchase of shares of Common Stock on the terms and
conditions set forth under our Employee Stock Purchase Plan.
Thereafter, those shares will be entitled to receive the merger
consideration on the same basis as other shares of Common Stock.
All amounts withheld by us on behalf of participants in our
Employee Stock Purchase Plan that have not been used to purchase
Common Stock prior to the effective time of the Merger will be
returned to the participants without interest pursuant to the
terms of our Employee Stock Purchase Plan.
48
Payment
for the Shares of Common Stock
Newco will designate a payment agent reasonably acceptable to us
to make payment of the merger consideration as described above.
At the closing of the Merger, Newco will deposit, or cause to be
deposited, with the payment agent, for payment to the holders of
shares of Common Stock, an amount of cash equal to the aggregate
share consideration.
Following the effective time of the Merger, we will close our
stock ledger. After that time, there will be no further transfer
of shares of Common Stock.
Promptly following the effective time of the Merger, Newco and
the Surviving Corporation will cause the payment agent to mail
to you a letter of transmittal and instructions advising you how
to surrender your certificates in exchange for the merger
consideration. The payment agent will pay you your merger
consideration after you have (i) surrendered your
certificates to the payment agent and (ii) provided to the
payment agent your signed letter of transmittal and any other
items specified by the letter of transmittal. Interest will not
be paid or accrue in respect of the merger consideration. The
payment agent will reduce the amount of any merger consideration
paid to you by any applicable withholding taxes. YOU SHOULD
NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYMENT AGENT WITHOUT
A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
If any cash deposited with the payment agent is not claimed
within twelve (12) months following the effective time of
the Merger, such cash will be returned to the Surviving
Corporation upon demand, and any holders of shares of Common
Stock who have not surrendered such shares of Common Stock for
exchange will become general creditors of the Surviving
Corporation. Any unclaimed amounts remaining immediately prior
to when such amounts would escheat to or become property of any
government entity will be returned to the Surviving Corporation
free and clear of any prior claims or interest thereto.
If the payment agent is to pay some or all of your merger
consideration to a person other than you, as the registered
owner of a stock certificate, you must have your certificates
properly endorsed and otherwise in proper form for transfer, and
you must pay any transfer or other taxes payable by reason of
the transfer or establish to the satisfaction of Newco (or any
agent designated by Newco) that the taxes have been paid or are
not required to be paid.
The transmittal instructions will tell you what to do if you
have lost your certificate, or if it has been stolen or
destroyed. You will have to provide an affidavit to that fact
and, if required by the Surviving Corporation, post a bond in an
amount that the Surviving Corporation reasonably directs as
indemnity against any claim that may be made against Newco, the
Surviving Corporation or the payment agent with respect to the
lost, stolen or destroyed certificate.
Representations
and Warranties
The Merger Agreement contains representations and warranties
made by us to Newco and Merger Sub and representations and
warranties made by Newco and Merger Sub to us. Some of those
representations and warranties may not be accurate or complete
as of any particular date because they are subject to a
contractual standard of materiality or material adverse effect
different from that generally applicable to public disclosures
to stockholders or used for the purpose of allocating risk
between the parties to the Merger Agreement rather than
establishing matters of fact. For the foregoing reasons, you
should not rely on the representations and warranties contained
in the Merger Agreement as statements of factual information.
In the Merger Agreement, 3Com, Newco and Merger Sub each made
representations and warranties relating to, among other things:
|
|
|
|
|
corporate organization and existence;
|
|
|
|
corporate power and authority to enter into and perform its
obligations under, and enforceability of, the Merger Agreement;
|
49
|
|
|
|
|
the absence of conflicts with or defaults under organizational
documents, other contracts and applicable laws;
|
|
|
|
required regulatory filings and consents and approvals of
governmental entities;
|
|
|
|
brokers and finders fees; and
|
|
|
|
information supplied for inclusion in this proxy statement.
|
In the Merger Agreement, Newco and Merger Sub also each made
representations and warranties relating to:
|
|
|
|
|
the debt and equity commitment letters relating to the financing
of their obligations under the Merger Agreement;
|
|
|
|
the operations of Newco and Merger Sub;
|
|
|
|
their ownership of Common Stock;
|
|
|
|
the absence of litigation or governmental orders that would
prevent or materially delay the Merger; and
|
|
|
|
and the solvency of the Surviving Corporation following the
Merger.
|
In the Merger Agreement, 3Com also made representations and
warranties relating to:
|
|
|
|
|
capital structure;
|
|
|
|
subsidiaries;
|
|
|
|
documents filed with the SEC;
|
|
|
|
financial statements;
|
|
|
|
undisclosed liabilities;
|
|
|
|
absence of certain changes or events since June 1, 2007
(including the absence of a Company Material Adverse
Effect);
|
|
|
|
material contracts;
|
|
|
|
title to properties;
|
|
|
|
intellectual property matters;
|
|
|
|
tax matters;
|
|
|
|
compliance with the Employee Retirement Income Securities Act of
1974, as amended, and other employee benefit matters;
|
|
|
|
labor matters;
|
|
|
|
permits;
|
|
|
|
compliance with applicable laws;
|
|
|
|
environmental matters;
|
|
|
|
litigation;
|
|
|
|
insurance;
|
|
|
|
related party transactions;
|
|
|
|
the receipt by the board of directors of a fairness opinion from
Goldman Sachs;
|
|
|
|
brokers and finders fees;
|
|
|
|
our stockholder rights plan; and
|
|
|
|
state takeover statutes.
|
50
Many of 3Coms representations and warranties are qualified
by a Company Material Adverse Effect standard. For
purposes of the Merger Agreement, Company Material Adverse
Effect is defined to mean any effect, circumstance,
change, event or development, individually or in the aggregate,
and taken with all other effects, circumstances, changes, events
or developments, that is (or are) materially adverse to the
business, operations, condition (financial or otherwise) or
results of operations of 3Com and our subsidiaries, taken as a
whole, other than:
|
|
|
|
|
general economic conditions in the United States, China or any
other country, general conditions in the financial markets in
the United States, China or any other country, or general
political conditions in the United States, China or any other
country;
|
|
|
|
general conditions in the industries in which we and our
subsidiaries conduct business;
|
|
|
|
any conditions arising out of acts of terrorism, war or armed
hostilities;
|
|
|
|
the announcement of the Merger Agreement or the pendency or
consummation of the transactions contemplated thereby, including
the impact on our relationships with our suppliers,
distributors, partners, customers or employees;
|
|
|
|
any action taken by us or our subsidiaries that is required by
the Merger Agreement, or the failure by us or our subsidiaries
to take any action that is prohibited by the Merger Agreement;
|
|
|
|
any action that is taken, or any failure to take action, by us
or our subsidiaries in either case to which Newco has approved,
consented to or requested in writing;
|
|
|
|
any changes in law or generally accepted accounting principles
or the interpretation of law or accounting principles;
|
|
|
|
changes in our stock price or change in the trading volume of
our stock, in and of itself (provided that the underlying cause
of such circumstance may be considered in determining whether is
a Company Material Adverse Effect);
|
|
|
|
any failure to meet any internal or public projections,
forecasts or estimates of revenues or earnings, in and of itself
(provided that the underlying cause of such failure may be
considered in determining whether there is a Company
Material Adverse Effect); or
|
|
|
|
any legal proceedings made or brought by any of the current or
former stockholders of the Company resulting from, relating to
or arising out of the Merger Agreement;
|
except in the case of the first three bullets above, to the
extent such changes, effects, events, conditions or developments
referred to therein affect the Company and its subsidiaries in a
disproportionate manner relative to other participants in the
industries in which the Company and its subsidiaries conduct
business.
Conduct
of Business Prior to Closing
We have agreed in the Merger Agreement that, until the
consummation of the Merger, except as contemplated by the Merger
Agreement or consented to in writing by Newco, with certain
exceptions, we and our subsidiaries will:
|
|
|
|
|
carry on our business in the ordinary course of business and in
compliance in all material respects with all applicable
laws; and
|
|
|
|
use our reasonable best efforts to keep available the services
of the current officers, key employees and consultants of the
Company and each of our subsidiaries and preserve the current
relationships of the Company and each of our subsidiaries with
each of the customers, suppliers and other persons with whom we
or any of our subsidiaries has significant business relations as
is reasonably necessary to preserve substantially intact our
business organization.
|
51
We have also agreed that, until the consummation of the Merger,
except as expressly contemplated by the Merger Agreement, with
certain exceptions, or consented to in writing by Newco and
Merger Sub, we and our subsidiaries will not:
|
|
|
|
|
amend our certificate of incorporation or bylaws or comparable
organizational documents, except in connection with the
dissolution or reorganization of a domestic wholly-owned
subsidiary in the ordinary course of business, which subsidiary
is not necessary to the operation of the business;
|
|
|
|
elect or approve any new executive officers or directors of the
Company or any significant subsidiary, except in order to
replace a previous executive officer or director;
|
|
|
|
issue, sell, deliver, pledge, dispose of, grant, encumber or
otherwise subject to any lien (other than a permitted lien), or
agree, authorize or commit to any of the foregoing any equity
interest of the Company or any subsidiary except for issuances
of shares of Common Stock to participants in our employee stock
purchase plan;
|
|
|
|
directly or indirectly acquire, repurchase, redeem or otherwise
acquire any of our or our subsidiarys equity interests,
except in connection with:
|
|
|
|
|
|
stock-based awards in the ordinary course of business; or
|
|
|
|
dissolution or reorganization of one of our wholly-owned
subsidiaries in the ordinary course of business;
|
|
|
|
|
|
split, combine, subdivide or reclassify any shares of capital
stock, or issue or authorize any other securities in respect of,
in lieu of, or in substitution for shares of our capital stock
or other equity interests;
|
|
|
|
declare, set aside or pay any dividend or other distribution
(whether in cash, shares or property or any combination thereof)
in respect of any shares of capital stock;
|
|
|
|
make any other actual, constructive or deemed distribution in
respect of the shares of capital stock or other equity
interests, except for cash dividends made by any of our direct
or indirect wholly-owned subsidiaries to us or one of our
wholly-owned subsidiaries;
|
|
|
|
propose or adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
of our subsidiaries, except for the transactions contemplated by
the Merger Agreement or the dissolution or reorganization of one
of our wholly-owned subsidiaries in the ordinary course of
business;
|
|
|
|
incur or assume any indebtedness in excess of $1,000,000
individually or $5,000,000 in the aggregate, provided that any
debt so incurred must be voluntarily prepayable without material
premium, penalties or any other material costs, except for:
|
|
|
|
|
|
debt incurred in the ordinary course of business under letters
of credit, lines of credit or other credit facilities in effect
on the date of the Merger Agreement or issuances or repayment of
commercial paper in the ordinary course of business; or
|
|
|
|
loans or advances to direct or indirect wholly-owned
subsidiaries;
|
|
|
|
|
|
assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for
the obligations of any other person in excess of $1,000,000
individually or $5,000,000 in the aggregate, except with respect
to obligations of our direct or indirect wholly-owned
subsidiaries;
|
|
|
|
make any loans, advances or capital contributions to or
investments in any other person, except for travel advances in
the ordinary course of business to our employees or employees of
any of our subsidiaries;
|
|
|
|
mortgage or pledge any of our or our subsidiaries assets,
tangible or intangible, or create or suffer to exist any lien on
those assets (other than permitted liens);
|
52
|
|
|
|
|
enter into, adopt, amend (including acceleration of vesting),
modify or terminate any bonus, profit sharing, incentive,
compensation, severance, retention, termination, option,
appreciation right, performance unit, stock equivalent, share
purchase agreement, pension, retirement, deferred compensation,
employment or other employee benefit agreement, trust, plan,
fund or other arrangement for the compensation, benefit or
welfare of any director, officer or employee in any manner,
except in any such case:
|
|
|
|
|
|
in connection with the hiring of new employees who are not
directors or executive officers in the ordinary course of
business;
|
|
|
|
in connection with the promotion of employees who are not
directors or executive officers (and who will not be directors
or executive officers after such promotion) in the ordinary
course of business; and
|
|
|
|
in connection with any amendment of an employee benefit plan
that is required by law;
|
|
|
|
|
|
increase the compensation payable or to become payable to any
director, officer or employee, pay or agree to pay any special
bonus or special remuneration to any director, officer or
employee, or pay or agree to pay any benefit not required by any
plan or arrangement as in effect as of the date of the Merger
Agreement, except in the ordinary course of business with
respect to any employee who is not a director or executive
officer;
|
|
|
|
pay, discharge, satisfy or settle any pending or threatened
legal proceeding, or any other disputed material claim,
liability or obligation, except for the payment, discharge,
satisfaction or settlement of any pending or threatened legal
proceeding or any disputed claim, liability or obligation that
does not include any material obligation (other than the payment
of money) to be performed by us or our subsidiaries following
the effective time of the Merger and is fully reserved against
in our financial statements, or involves the payment of no more
than $250,000 individually or $1,500,000 in the aggregate or
results in a payment to us or one of our subsidiaries of no more
than $1,000,000 individually or $5,000,000 in the aggregate;
|
|
|
|
except as required as a result of a change in applicable law or
generally accepted accounting principles, make any change in any
of the accounting methods, principles or practices used by us or
affecting our assets, liabilities or business;
|
|
|
|
make any change in any method of tax accounting, methods,
periods, principles, elections or practices, make, rescind or
change any material tax election, settle or compromise any
material tax liability, surrender any right to claim a material
refund of taxes, file any material amended tax return (except as
required by law), or consent to any extension or waiver of any
limitation period with respect to any claim or assessment for
material taxes;
|
|
|
|
other than in the ordinary course of business, acquire (by
merger, consolidation, acquisition, license or otherwise) any
other person or any material equity interest therein or assets
thereof in excess of $1,000,000 individually or $5,000,000 in
the aggregate or dispose of any of our or our subsidiaries
material properties or assets;
|
|
|
|
make any capital expenditures in excess of $1,000,000
individually or $5,000,000 in the aggregate for us and our
subsidiaries taken as a whole, except as budgeted on our current
plan;
|
|
|
|
other than in the ordinary course of business or as otherwise
expressly permitted pursuant to the Merger Agreement, amend or
modify in any material respect, or terminate any material
contract; or
|
|
|
|
announce an intention, enter into a formal or informal
agreement, or otherwise make a commitment to take any of the
foregoing actions.
|
Agreement
to Use Reasonable Best Efforts
Upon the terms and subject to the conditions set forth in the
Merger Agreement, each of parties has agreed to use its
reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be
53
done, and to assist and cooperate with the other party or
parties in doing, all things necessary, proper or advisable to
consummate the Merger in the most expeditious manner
practicable, including causing all the conditions to the Merger
to be satisfied, making all filings with governmental
authorities in connection with the Merger Agreement and the
consummation of the Merger and obtaining all consents under any
material contracts. The parties have also agreed to defend
against any lawsuit or other legal proceeding challenging the
Merger Agreement, the Limited Guarantees or the transactions
contemplated thereby and contest and appeal any order by any
governmental authority which has or may have the effect of
prohibiting or otherwise preventing the Merger in order to
enable the parties to consummate the Merger.
The parties have also agreed to use reasonable best efforts to
take all actions necessary so that no state takeover or other
similar statute or regulation becomes applicable to the Merger
and if any such statute or regulation does become applicable, to
use reasonable best efforts to ensure that the Merger may be
consummated as promptly as practicable on the terms contemplated
by the Merger Agreement and otherwise minimize the effect of
such statute or regulation on the Merger.
Cooperation
of 3Com
We have agreed to provide Newco and Merger Sub, and shall cause
our subsidiaries to provide, and to use reasonable best efforts
to cause our representatives to provide, all cooperation
reasonably requested by Newco or Merger Sub in connection with
the arrangement of the debt financing or any replacement,
amended, modified or alternative debt financing, including, to
the extent reasonably requested:
|
|
|
|
|
furnishing the financial information that would be sufficient to
satisfy the conditions in the debt commitment letters;
|
|
|
|
using reasonable best efforts to furnish Newco and Merger Sub
and their financing sources as promptly as practicable with such
other financial and other pertinent information regarding the
Company and our subsidiaries as may be reasonably requested in
writing by Newco, including all financial statements and other
financial data of the type and within the periods prior to the
Closing Date as reasonably required for purposes of syndication
or to otherwise consummate the available financing;
|
|
|
|
participating in a reasonable number of meetings, presentations,
road shows, due diligence sessions and sessions with rating
agencies in connection with the available financing;
|
|
|
|
assisting with the preparation of materials for rating agency
presentations, offering documents, bank information memoranda
and similar documents and marketing materials required in
connection with the syndication of or otherwise to consummate
the available financing;
|
|
|
|
using reasonable best efforts to obtain accountants
comfort letters, accountants consents for use of their
reports in any material relating to the available financing,
legal opinions, surveys and title insurance;
|
|
|
|
taking all corporate actions reasonably requested by Newco to
permit the consummation of the available financing and to permit
the proceeds thereof to be made available to the Surviving
Corporation immediately after the effective time of the Merger;
|
|
|
|
executing and delivering any pledge and security documents,
other definitive financing documents or other certificates,
legal opinions or documents as may be requested by Newco
(including certificates of the Company or any of our
subsidiaries with respect to solvency matters); and
|
|
|
|
using reasonable best efforts to facilitate the consummation and
syndication of the available financing and the direct borrowing
or incurrence of all proceeds of the available financing by the
Surviving Corporation or any of its subsidiaries immediately
following the effective time of the Merger.
|
The Merger Agreement limits our obligation to incur any fees or
liabilities with respect to the debt or equity financing prior
to the effective time of the Merger.
54
Debt
Financing
Newco has agreed to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to arrange and obtain
the debt financing on the terms and conditions described in the
debt commitment letters (or terms no less favorable to Newco and
no more conditional than the terms described therein as
determined in the reasonable judgment of Newco), including by:
|
|
|
|
|
maintaining in effect the debt commitment letters until
execution and delivery of the definitive documentation
contemplated by such debt commitment letters;
|
|
|
|
negotiating and entering into the senior secured credit
agreement and bridge agreement with respect to the debt
financing on the terms and conditions reflected in the debt
commitment letters or on other terms no less favorable, in the
aggregate, to Newco at or prior to the earlier of the expiration
of the debt commitment letters or the effective time of the
Merger;
|
|
|
|
satisfying on a timely basis all conditions applicable to Newco
and Merger Sub in the debt commitment letters and the senior
secured credit agreement and bridge agreement that are within
their control; and
|
|
|
|
enforcing its rights under the debt commitment letters, the
senior secured credit agreement and the bridge agreement.
|
Newco may amend, restate, supplement, modify or supersede the
debt commitment letters, senior secured credit agreement
and/or
bridge agreement to add one or more lenders, lead arrangers,
bookrunners, agents or similar entities which had not executed
the debt commitment letters as of the date of the Merger
Agreement, to increase the amount of indebtedness, to replace or
modify one or more facilities with one or more new facilities or
otherwise amend, supplement or modify the debt commitment
letters, senior secured credit agreement
and/or the
bridge agreement or otherwise, provided that the new debt
financing commitments:
|
|
|
|
|
do not expand or adversely amend the conditions to the debt
financing set forth in the debt commitment letters, in any
material respect;
|
|
|
|
are not reasonably be expected to delay or prevent the Closing;
|
|
|
|
do not reduce the aggregate amount of available debt financing
(unless replaced with an amount of new equity financing).
|
In the event any portion of the debt financing becomes
unavailable on the terms and conditions contemplated in the debt
commitment letters or the senior secured credit agreement or
bridge agreement for any reason, as promptly as practicable
following the occurrence of such event Newco has agreed to use
its reasonable best efforts to obtain alternative financing from
alternative sources on terms that are not less favorable, in the
aggregate, to Newco (as determined in the reasonable judgment of
Newco) than the debt financing contemplated by the debt
commitment letters.
Equity
Financing
Newco has agreed to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to obtain the equity
financing, including by:
|
|
|
|
|
maintaining in effect the equity commitment letter; and
|
|
|
|
satisfying on a timely basis all conditions applicable to Newco
in such equity commitment letter that are within its control, if
any.
|
In addition, Newco and Merger Sub may enter into arrangements
and agreements relating to the equity financing for the
transactions contemplated by the Merger Agreement to add other
equity financing sources, provided that:
|
|
|
|
|
any new sources of equity financing are limited partners of the
Guarantors or their affiliates or are not stockholders of the
Company;
|
55
|
|
|
|
|
the aggregate amount of the equity financing is not reduced;
|
|
|
|
the arrangements and agreements, in the aggregate, would not be
reasonably likely to delay or prevent the Closing (as determined
in the reasonable judgment of Newco); or
|
|
|
|
the arrangements and agreements would not diminish or release
the obligations of the Guarantors to Newco or Merger Sub under
the equity commitment letters, adversely affect the rights of
Newco or Merger Sub to enforce their rights against the
Guarantors under the equity commitment letters, or otherwise
constitute a waiver or reduction of the rights of Newco or
Merger Sub under the equity commitment letters.
|
Conditions to Each Partys
Obligations. Each partys obligation to
complete the Merger is subject to the satisfaction or waiver of
the following conditions:
|
|
|
|
|
the Merger Agreement must have been adopted by the affirmative
vote of the holders of a majority of the shares of Common Stock
outstanding
on ,
the record date for the special meeting;
|
|
|
|
any waiting period (and any extension thereof) under the HSR Act
shall have expired or been terminated, any waiting period (and
any extension thereof) under the antitrust laws of various other
jurisdictions shall have expired or been terminated, and
clearances, consents, approvals, orders and authorizations from
certain government authorities shall have been obtained; and
|
|
|
|
no court of competent jurisdiction or other governmental
authority shall have (i) enacted, issued or promulgated any
law that is in effect and has the effect of making the Merger
illegal or which has the effect of prohibiting or otherwise
preventing the consummation of the Merger or (ii) issued or
granted any order that is in effect or has the effect of making
the Merger illegal or which has the effect of prohibiting or
otherwise preventing the consummation of the Merger.
|
Conditions to Newcos and Merger Subs
Obligations. The obligations of Newco and
Merger Sub to complete the Merger are subject to the
satisfaction or waiver of the following additional conditions,
any of which may be waived exclusively by Newco:
|
|
|
|
|
our representations and warranties with respect to our authority
to complete the Merger, approval by our stockholders, our
organization and good standing, brokers, our stockholder rights
plan, and state anti-takeover laws must each be true and correct
in all material respects as of the closing date with the same
force and effect as if made on and as of such date (except for
those representations and warranties made by us that address
matters only as of a particular date which need only be true and
correct in all material respects as of such particular date);
|
|
|
|
our representations and warranties with respect to our
capitalization and our indebtedness must each be true and
correct as of the date of the closing date with the same force
and effect as if made on and as of such date (except for those
representations and warranties that address matters only as of a
particular date which need only be true and correct as of such
particular date), except for such inaccuracies that do not,
individually or in the aggregate, exceed $15,000,000;
|
|
|
|
all other representations and warranties made by us in the
Merger Agreement, must be true and correct as of the closing
date with the same force and effect as if made on and as of such
date (except for any representations made by us as of a specific
date which need only be so true and correct as of the date made
(without giving effect to any qualification as to materiality or
Company Material Adverse Effect (but not dollar
thresholds) set forth in such representations and warranties),
except as contemplated under the Merger Agreement or where the
failure to be so true and correct has not had and would not
reasonably be expected to have a Company Material Adverse
Effect;
|
|
|
|
we must have performed in all material respects all obligations
we are required to perform under the Merger Agreement at or
prior to the closing date;
|
56
|
|
|
|
|
we must deliver to Newco and Merger Sub at closing a certificate
with respect to the satisfaction of the foregoing conditions
relating to representations, warranties and obligations; and
|
|
|
|
no effect shall have arisen or occurred following the execution
of the Merger Agreement that is continuing and that has had or
is reasonably expected to have a Company Material Adverse
Effect.
|
Conditions to 3Coms
Obligations. Our obligation to complete the
Merger is subject to the satisfaction or waiver of the following
further conditions, any of which may be waived exclusively by us:
|
|
|
|
|
the representations and warranties of Newco and Merger Sub set
forth in the Merger Agreement must be true and correct on and as
of the closing date with the same force and effect as if made on
and as of such date, except where the failure of such
representations and warranties to be so true and correct would
not, individually or in the aggregate, prevent or materially
delay the consummation of the transactions contemplated by the
Merger Agreement or the ability of Newco and Merger Sub to fully
perform their respective covenants and obligations under the
Merger Agreement, provided that those representations and
warranties which address matters only as of a particular date
need only be so true and correct as of such particular date;
|
|
|
|
Newco and Merger Sub must have performed in all material
respects all obligations that are to be performed by them under
the Merger Agreement at or prior to the closing date; and
|
|
|
|
Newco and Merger Sub must deliver to us at closing a certificate
with respect to the satisfaction of the foregoing conditions
relating to representations, warranties and obligations.
|
If a failure to satisfy one of these conditions to the Merger is
not considered by our board of directors to be material to our
stockholders, the board of directors could waive compliance with
that condition. Our board of directors is not aware of any
condition to the Merger that cannot be satisfied. Under Delaware
law, after the Merger Agreement has been adopted by our
stockholders, the merger consideration cannot be changed and the
Merger Agreement cannot be altered in a manner adverse to our
stockholders without re-submitting the revisions to our
stockholders for their approval.
Restrictions
on Solicitations of Other Offers
The Merger Agreement provides that, from and after the date of
the Merger Agreement, the Company and our subsidiaries have
agreed not to directly or indirectly:
|
|
|
|
|
solicit, initiate, propose or induce the making, submission or
announcement of, or knowingly encourage, facilitate or assist,
an alternative acquisition proposal;
|
|
|
|
furnish to any person (other than Newco, Merger Sub or any
designees of Newco or Merger Sub) any non-public information
relating to the Company or any of our subsidiaries, or afford to
any person access to the business, properties, assets, books,
records or other non-public information, or to any personnel, of
the Company or any of our subsidiaries (other than Newco, Merger
Sub or any designees of Newco or Merger Sub) in any such case
(A) with the intent to induce the making, submission or
announcement of, or to encourage, facilitate or assist, an
alternative acquisition proposal or any inquiries or the making
of any proposal that would reasonably be expected to lead to an
alternative acquisition proposal or (B) outside the
ordinary course of business;
|
|
|
|
participate, engage in or continue discussions or negotiations
with any person with respect to any alternative acquisition
proposal or furnish any party (other than Newco, Merger Sub or
any designee of Newco or Merger Sub) information about such
discussions or negotiations other than in public statements or
other disclosures;
|
|
|
|
approve, endorse or recommend an acquisition or takeover
proposal other than the Merger; or
|
|
|
|
enter into, or authorize the Company or any of our subsidiaries
to enter into, any letter of intent, memorandum of understanding
or other contract or agreement in principle contemplating or
otherwise relating to an alternative acquisition transaction.
|
57
Notwithstanding the aforementioned restrictions, at any time
prior to the approval of the Merger Agreement by our
stockholders, we are permitted to participate or engage in
discussions or negotiations with,
and/or
furnish any non-public information relating to the Company or
any of our subsidiaries or afford access to the business,
properties, assets, books, records or other non-public
information, or to the personnel, of the Company or any of our
subsidiaries to any person that has made a bona fide unsolicited
written acquisition proposal, provided that our board of
directors determines in good faith (after consultation with its
independent financial advisor and outside legal counsel) that
such acquisition proposal either constitutes a superior proposal
or is reasonably likely to lead to a superior proposal.
We are required, upon receipt of such acquisition proposal,
promptly (and in any event within 48 hours) to provide
Newco a copy of any such acquisition proposal or superior
proposal made in writing, or a written summary of the material
terms of any such acquisition proposal or superior proposal not
made in writing. We will keep Newco reasonably informed of any
material developments regarding any acquisition proposal and,
upon the reasonable request of Newco, apprise Newco of the
status of such acquisition proposal.
We are required contemporaneously to provide to Newco any
non-public information concerning us or our subsidiaries
provided to such other person which was not previously provided
to Newco. We agree that we and our subsidiaries will not enter
into any confidentiality agreement with any person which will
prohibit us from complying with our obligations under the Merger
Agreement.
An acquisition proposal means any offer or proposal
(other than an offer or proposal by Newco or Merger Sub) to
engage in an acquisition transaction from any person or group as
defined in Section 13(d) of the Exchange Act.
An acquisition transaction means any transaction or
series of related transactions (other than the transactions
contemplated by the Merger Agreement) involving: (i) the
purchase or other acquisition from the Company by any person or
group (as defined in or under Section 13(d) of
the Exchange Act), directly or indirectly, of twenty percent
(20%) or more of the Common Stock outstanding as of the
consummation of such purchase or other acquisition, or any
tender offer or exchange offer by any person or
group (as defined in or under Section 13(d) of
the Exchange Act) that, if consummated in accordance with its
terms, would result in such person or group
beneficially owning twenty percent (20%) or more of the Common
Stock outstanding as of the consummation of such tender or
exchange offer; (ii) a merger, consolidation, business
combination, stock exchange, recapitalization, liquidation,
issuance of or amendment to terms of outstanding stock or other
securities, or other similar transaction involving the Company
pursuant to which the stockholders of the Company immediately
preceding such transaction (in their capacities as such) hold
eighty percent (80%) or less of the Common Stock or consolidated
assets of the Company or our subsidiaries taken as a whole
(either as measured by the fair market value thereof or by the
revenues or earnings on a consolidated basis attributable
thereto) in the surviving or resulting entity of such
transaction; (iii) a sale, transfer, acquisition or
disposition of twenty percent (20%) or more of the consolidated
assets of the Company and our subsidiaries taken as a whole
(either as measured by the fair market value thereof or by the
revenues or earnings on a consolidated basis attributable
thereto); or (iv) any combination of the foregoing.
A superior proposal means any bona fide written
acquisition proposal (provided that, for purposes of this
definition, all references in the definition of acquisition
transaction to twenty percent (20%) shall be
references to fifty percent (50%) and the reference
therein to eighty percent (80%) shall be a reference
to fifty percent (50%)) with respect to which our
board of directors shall have determined in good faith (after
consultation with its independent financial advisor and outside
legal counsel) that the acquisition transaction contemplated by
such acquisition proposal would be more favorable to the
Companys stockholders (in their capacity as such) than the
Merger, after taking into account all the terms and conditions
of such proposal (including the financial aspects of such
proposal, the likelihood, ability to finance, conditionality and
timing of consummation of such proposal) and the Merger
Agreement (including any changes to the terms of the Merger
Agreement proposed by Newco to the Company in writing in
response to such proposal or otherwise).
58
Recommendation
Withdrawal/Termination in Connection with a Superior
Proposal
The Merger Agreement requires us to duly call, give notice of,
convene and hold a meeting of our stockholders to adopt the
Merger Agreement. Our board of directors has unanimously
resolved to recommend that our stockholders adopt the Merger
Agreement. Our board of directors, however, may, at any time
prior to the adoption of the Merger Agreement by our
stockholders, withhold, withdraw, amend, change, qualify or
modify in a manner adverse to Newco, or publicly propose to
withhold, withdraw, amend, change, qualify or modify in a manner
adverse to Newco, its recommendation in favor of adoption of the
Merger Agreement, or approve, adopt or recommend to our
stockholders any acquisition proposal, or publicly propose to
approve, adopt or recommend to our stockholders any acquisition
proposal, or make any public statement in connection with a
tender offer or exchange offer that does not include a
reaffirmation of its recommendation in favor of the adoption of
the Merger Agreement or terminate the Merger Agreement and enter
into a definitive agreement with respect to a superior proposal
if we receive a bona fide written takeover proposal and if:
|
|
|
|
|
our board of directors determines in good faith (after
consultation with its independent financial advisors and outside
legal counsel) constitutes a superior proposal; and
|
|
|
|
the failure to take such action would reasonably be expected to
be a breach of its fiduciary duties.
|
To the extent the board proposes to take the foregoing actions
with regard to its recommendation, it may only do so after:
|
|
|
|
|
concurrently terminating the Merger Agreement;
|
|
|
|
giving Newco at least five (5) business days prior
written notice of its intention to take such action and
providing Newco a copy of the relevant proposed transaction
agreement and other material documents with the party making
such superior proposal; and
|
|
|
|
negotiating in good faith with Newco (if requested by Newco)
during the five (5) business day notice period to enable
Newco to propose changes to the terms of the Merger Agreement,
the financing commitment letters
and/or the
limited guarantees that would cause such superior proposal to no
longer constitute a superior proposal.
|
In addition, we are not entitled to enter into any agreement
with respect to a superior proposal unless the Merger Agreement
has been or is concurrently terminated in accordance with its
terms and we have concurrently paid to Newco the
$66 million termination fee as described in further detail
in Termination Fees and Expenses beginning on
page 61.
Termination
of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the
consummation of the Merger, whether before or after stockholder
approval has been obtained:
|
|
|
|
|
by mutual written consent of Newco and 3Com;
|
|
|
|
by either 3Com or Newco if:
|
|
|
|
|
|
the Merger is not consummated by April 28, 2008 (the
Termination Date); provided, however, that
the terminating party has not taken any action in breach of the
Merger Agreement or failed to take action in breach of the
Merger Agreement that was the principal cause of or resulted in
any of the conditions to the Merger set forth in
Article VIII of the Merger Agreement, including those
conditions described in Conditions to the
Merger beginning on page 56, having failed to be
satisfied by the Termination Date;
|
|
|
|
any court of competent jurisdiction or other governmental
authority has enacted, issued or promulgated any law or issued
or granted any order that is in effect and has the effect of
making the Merger illegal or which has the effect of prohibiting
or otherwise preventing the consummation of the Merger, and such
order has become final and non-appealable; provided,
however, that the terminating party has used its reasonable
best efforts to contest, appeal and remove such order and
|
59
|
|
|
|
|
such terminating party has not taken any action in breach of the
Merger Agreement or failed to take action in breach of the
Merger Agreement that was the principal cause of, or resulted
in, the passage of such law or the issuance of such
order; or
|
|
|
|
|
|
the Company has failed to obtain the stockholder approval at the
special meeting (or any adjournment or postponement thereof),
provided that the Company may not so terminate if it or its
representatives have materially violated their obligations
relating to (i) non-solicitation of alternative acquisition
transactions, (ii) recommending that our shareholders
approve the proposal to adopt the Merger Agreement,(iii) holding
the special meeting or (iv) this proxy statement or any
other document that is required to be filed by us with the SEC;
|
|
|
|
|
|
Newco and/or
Merger Sub has breached or otherwise violated any of their
respective covenants, agreements or other obligations under the
Merger Agreement, or any of the representations and warranties
of Newco and Merger Sub set forth in the Merger Agreement have
become inaccurate, in either case such that the conditions to
the Merger described above in the first two bullet points in
Conditions to 3Coms Obligations are not
capable of being satisfied (with or without cure of such breach
or violation) by the Termination Date, provided that 3Com is not
then in breach of any of its representations, warranties,
covenants or other agreements that would result in the closing
conditions described above in the first four bullet points in
Conditions to Newcos and Merger Subs
Obligations not being satisfied;
|
|
|
|
all of the conditions to the obligations of Newco and Merger Sub
to consummate the Merger have been satisfied or waived (to the
extent permitted under the Merger Agreement) and Newco and
Merger Sub have breached their obligation to cause the Merger to
be consummated;
|
|
|
|
(i) all of the conditions to the obligations of Newco and
Merger Sub to consummate the Merger described above in
Conditions to Each Partys Obligations and
Conditions to Newcos and Merger Subs
Obligations have been satisfied or waived (to the extent
permitted under the Merger Agreement), (ii) the debt
financing contemplated by the debt commitment letters, senior
secured credit agreement
and/or
bridge agreement (or any replacement, amended, modified or
alternative debt commitment letters, senior secured credit
agreement
and/or
bridge agreement) has funded or would be funded pursuant to the
terms and conditions set forth in such debt commitment letters,
senior secured credit agreement
and/or
bridge agreement upon funding of the equity financing
contemplated by the equity commitment letters; (iii) Newco
and Merger Sub have breached their obligation to cause the
Merger to be consummated and (iv) a U.S. Federal
regulatory agency (that is not an antitrust regulatory agency)
has not informed Newco, Merger Sub or the Company that it is
considering taking action to prevent the Merger unless the
parties or any of their affiliates agree to satisfy specified
conditions (which may but need not include divestiture of a
material portion of the Companys business), or such
regulatory agency has informed the parties that it is no longer
considering such action; or
|
|
|
|
|
|
the Company has breached or otherwise violated any of its
covenants, agreements or other obligations under the Merger
Agreement, or any of the representations and warranties of the
Company set forth in the Merger Agreement have become
inaccurate, in either case such that the conditions to the
Merger described above in the first four bullet points in
Conditions to Newcos and Merger Subs
Obligations are not capable of being satisfied (with or
without cure) by the Termination Date, provided that Newco is
not then in breach of any representations, warranties, covenants
or other agreements that would result in the closing conditions
described above in the first two bullet points in
Conditions to 3Coms Obligations not being
satisfied; or
|
|
|
|
(i) our board of directors or any committee of the board of
directors has for any reason effected a change of
recommendation; (ii) a tender offer or exchange offer for
Common Stock that constitutes an acquisition proposal (whether
or not a superior proposal) is commenced and, within five
(5) business days after the public announcement of the
commencement of such acquisition proposal, the Company has not
|
60
|
|
|
|
|
issued a public statement (and filed a
Schedule 14D-9
pursuant to
Rule 14e-2
and
Rule 14d-9
promulgated under the Exchange Act reaffirming the board of
directors recommendation in favor of the Merger and
recommending that the Companys stockholders reject such
acquisition proposal and not tender any shares of Common Stock
into such tender or exchange offer; (iii) the Company fails
to hold a stockholder vote with respect to the adoption of the
Merger Agreement in accordance with the DGCL at the Company
Stockholder Meeting within thirty (30) days of the mailing
of this proxy statement; or (iv) the board of directors has
failed to publicly reconfirm the board of directors
recommendation in favor of the Merger prior to receipt of the
stockholder approval, within two (2) business days of a
written request from Newco to do so; provided, however,
that Newco may not terminate the Merger Agreement within the
five (5) business day period contemplated by
clause (ii) above.
|
The Merger Agreement may also be terminated by 3Com prior to the
special meeting in order to enter into a definitive agreement
for a superior proposal, provided that 3Com subsequently pay
Newco a termination fee, as described in further detail in
Recommendation Withdrawal/Termination in Connection
with a Superior Proposal beginning on page 59.
Termination
Fees and Expenses
Payable
by 3Com
We have agreed to pay Newco (or its designee) a termination fee
of $66 million if:
|
|
|
|
|
we terminate the Merger Agreement prior to the special meeting
for a change of recommendation of our board of directors in
connection with a superior proposal (as such is described in
Restrictions on Solicitations of Other Offers
beginning on page 57 and Recommendation
Withdrawal/Termination in Connection with a Superior
Proposal beginning on page 59);
|
|
|
|
Newco terminates the Merger Agreement because our board of
directors:
|
|
|
|
|
|
(i) withdraws (or modifies or qualifies in a manner adverse
to Newco), or publicly proposes to withdraw (or modify or
qualify in a manner adverse to Newco), its recommendation that
our stockholders adopt the Merger Agreement, (ii) approves,
adopts or recommends to our stockholders an alternative
acquisition proposal or (iii) makes any public statement in
connection with a tender or exchange offer unless such statement
includes a reaffirmation of the boards recommendation in
favor of the Merger Agreement;
|
|
|
|
fails to include its recommendation that our stockholders adopt
the Merger Agreement in this proxy statement;
|
|
|
|
within five (5) business days following the public
announcement of a tender offer or exchange offer that
constitutes an alternative acquisition proposal fails to issue a
public statement reaffirming the boards recommendation in
favor of the Merger and recommending that the Companys
stockholders reject such alternative acquisition proposal;
|
|
|
|
fails to hold a stockholder vote with respect to adoption of the
Merger Agreement within thirty (30) days of the mailing of
this proxy statement; or
|
|
|
|
fails to publicly reconfirm its recommendation in favor of the
Merger within two (2) business days of a written request
from Newco to do so;
|
|
|
|
|
|
we or Newco terminate the Merger Agreement because the Merger is
not consummated by the Termination Date and at the time of such
termination the closing conditions relating to regulatory
approvals and the absence of legal prohibitions are capable of
being satisfied or would be capable of being satisfied, but for
a breach by the Company of its obligations under the Merger
Agreement, provided that the reason the Merger has not been
consummated by the Termination Date is not attributable to a
breach by Newco or Merger Sub of their respective obligations
under the Merger Agreement, which breach has resulted in a
failure to satisfy the closing condition relating to regulatory
|
61
|
|
|
|
|
approvals or the closing condition relating to the absence of
legal prohibitions or the closing conditions described above in
the first two bullets in Conditions to 3Coms
Obligations and provided that
|
|
|
|
|
|
prior to such termination an alternative transaction proposal
has been publicly announced or become publicly known or a person
or group has publicly disclosed an intention to make such a
proposal, and the foregoing is not withdrawn, and
|
|
|
|
within twelve (12) months after such termination, we enter
into a definitive agreement providing for a competing
acquisition transaction and such acquisition is subsequently
consummated;
|
|
|
|
|
|
we or Newco terminate the Merger Agreement because our
stockholders, at the special meeting or any adjournment or
postponement thereof at which the Merger Agreement was voted on,
fail to adopt the Merger Agreement, and
|
|
|
|
|
|
prior to the special meeting an alternative acquisition
transaction had been publicly announced or become publicly known
or a person or group had publicly disclosed an intention to make
such a proposal, and the foregoing was not withdrawn, and
|
|
|
|
within twelve (12) months after such termination, we enter
into a definitive agreement providing for a competing
acquisition transaction and such acquisition is subsequently
consummated.
|
We have also agreed to reimburse Newcos and Merger
Subs out-of-pocket fees and expenses incurred in
connection with the Merger Agreement (including in connection
with the equity and debt financing), up to an aggregate of
$20 million, if either the Company or Newco terminates the
Merger Agreement because of the failure to receive Company
stockholder approval at the special meeting or any adjournment
or postponement thereof at which the Merger Agreement was voted
on.
Payable
by Newco
Newco has agreed to pay us a termination fee of $66 million
if we terminate the Merger Agreement in the situation where:
|
|
|
|
|
all conditions to the obligations of Newco and Merger Sub to
close have been satisfied or waived (to the extent permitted
under the Merger Agreement) and Newco and Merger Sub have failed
to consummate the Merger pursuant to the terms of the Merger
Agreement; or
|
|
|
|
(i) the Merger is not consummated by the Termination Date;
(ii) all conditions to the obligations of 3Com, Newco and
Merger Sub to close have been satisfied (other than with respect
to the condition as set forth in the following clause (iii));
and (iii) a U.S. federal regulatory agency (that is
not an antitrust regulatory agency) has informed Newco, Merger
Sub or the Company (or their representatives) that it intends to
take action to prevent the Merger.
|
Newco has agreed to pay us a termination fee of
$110 million if we terminate the Merger Agreement in the
situation where: (i) all conditions to the obligations of
Newco and Merger Sub to close have been satisfied (to the extent
permitted under the Merger Agreement); (ii) the debt
financing contemplated by the debt commitment letters, senior
secured credit agreement
and/or
bridge agreement or any replacement, amended, modified or
alternative debt commitment letters, senior secured credit
agreement
and/or
bridge agreement has funded or would be funded pursuant to the
terms and conditions set forth in such debt commitment letters,
senior secured credit agreement
and/or
bridge agreement upon funding of the equity financing
contemplated by the equity commitment letters; (iii) Newco
and Merger Sub have breached their obligation to cause the
Merger to be consummated pursuant to the terms of the Merger
Agreement; and (iv) a U.S. Federal regulatory agency
(that is not an antitrust regulatory agency) has not informed
Newco, Merger Sub or the Company that it is considering taking
action to prevent the Merger unless the parties or any of their
affiliates agree to satisfy specified conditions (which may but
need not include divestiture of a material portion of the
Companys business), or such regulatory agency has informed
the parties that it is no longer considering such action.
62
In the event that the Company or Newco receive a termination fee
as described above, such fee shall be deemed to be liquidated
damages for any and all damages incurred by the party receiving
such fee in connection with the matter forming the basis for
such termination and no other claims may be brought with respect
to such matters. Except in the case of fraud, the Companys
right to receive the termination fee as described above is the
sole and exclusive remedy of the Company against Newco, Merger
Sub, the Investors and any of their affiliates for any damages
suffered as a result of a failure of the Merger to be
consummated, or for a breach or failure to perform under the
Merger Agreement or otherwise. Except in the case of fraud,
Newcos right to receive the termination fee as described
above in circumstances that such fee is payable, or to recover
damages from the Company in circumstances that such fee is not
payable, is the sole and exclusive remedy of Newco, Merger Sub
and their affiliates against the Company, its subsidiaries and
any of its affiliates for any damages suffered as a result of a
failure of the Merger to be consummated, or for a breach or
failure to perform under the Merger Agreement or otherwise. In
addition, Newco and Merger Sub are entitled to seek specific
performance of the terms and provisions of the Merger Agreement
with respect to the obligations of the Company, including
seeking an injunction to prevent or restrain breaches or
threatened breaches of the Merger Agreement by the Company and
enforcing compliance with the covenants and obligations of the
Company under the Merger Agreement. The Company is not entitled
to seek specific performance with respect to the obligations of
Newco and Merger Sub, including an injunction to prevent
breaches of the Merger Agreement by Newco or Merger Sub.
Indemnification
and Insurance
Newco shall, and shall cause the Surviving Corporation and its
subsidiaries to, honor and fulfill in all respects the
obligations of the Company and its subsidiaries under any and
all indemnification contracts between the Company or any of its
subsidiaries and any of their respective current or former
directors and officers and any person who becomes a director or
officer of the Company or any of its subsidiaries prior to the
effective time of the Merger (the Indemnified
Persons). In addition, during the period commencing at the
effective time of the Merger and ending on the sixth anniversary
of the effective time of the Merger, the Surviving Corporation
and its subsidiaries shall (and Newco shall cause the Surviving
Corporation and its subsidiaries to) cause the certificate of
incorporation and bylaws (and other similar organizational
documents) of the Surviving Corporation and its subsidiaries to
contain provisions with respect to indemnification, exculpation
and the advancement of expenses, covering acts and omissions of
directors and officers (and any other employees or agents who
otherwise would be entitled to similar benefits thereunder
pursuant to the terms thereof in effect on the date of the
Merger Agreement), in each case in their respective capacities
as such, occurring at or prior to the effective time of the
Merger, that are at least as favorable as the indemnification,
exculpation and advancement of expenses provisions contained in
the certificate of incorporation and bylaws (or other similar
organizational documents) of the Company and its subsidiaries as
of the date of the Merger Agreement, and during such six-year
period, such provisions shall not be repealed, amended or
otherwise modified in any manner except as required by
applicable law.
The Surviving Corporation and its subsidiaries shall (and Newco
shall cause the Surviving Corporation and its subsidiaries to)
indemnify and hold harmless each Indemnified Person from and
against any costs, fees and expenses (including reasonable
attorneys fees and investigation expenses), judgments,
fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, proceeding,
investigation or inquiry, whether civil, criminal,
administrative or investigative, to the extent such claim,
proceeding, investigation or inquiry arises directly or
indirectly out of or pertains directly or indirectly to
(i) any action or omission or alleged action or omission in
such Indemnified Persons capacity as a director, officer,
employee or agent of the Company or any of its subsidiaries or
other affiliates occurring at or prior to the effective time of
the Merger, or (ii) any of the transactions contemplated by
the Merger Agreement, in each case regardless of whether such
claim, proceeding, investigation or inquiry is made, occurs or
arises prior to, at or after the effective time of the Merger.
Prior to the effective time of the Merger, the Company may
purchase a six-year tail prepaid policy on the
directors and officers liability insurance. In the
event that the Company purchases such a tail policy
63
prior to the effective time of the Merger, Newco and the
Surviving Corporation shall maintain such tail
policy in full force and effect and continue to honor their
respective obligations thereunder, in lieu of all other
obligations of Newco and the Surviving Corporation for so long
as such tail policy shall be maintained in full
force and effect. In the event that the Company does not so
purchase a tail policy prior to the effective time
of the Merger, during the period commencing at the effective
time of the Merger and ending on the sixth anniversary of the
effective time of the Merger, Newco and the Surviving
Corporation shall maintain in effect the Companys current
directors and officers liability insurance in
respect of acts or omissions occurring at or prior to the
effective time of the Merger, covering each person covered by
the Companys current directors and officers
liability insurance, on terms with respect to the coverage and
amounts that are equivalent to those of the Companys
current directors and officers liability insurance.
In satisfying their obligations with respect to directors
and officers liability insurance, Newco and the Surviving
Corporation are not obligated to pay annual premiums in excess
of 300% of the amount we paid for coverage for our last full
fiscal year. If the annual premiums of such insurance coverage
exceed such amount, Newco and the Surviving Corporation are
obligated to obtain a policy with the greatest coverage
available for a cost not exceeding that 300% maximum.
Amendment,
Extension and Waiver
The parties may amend the Merger Agreement at any time, except
that after our stockholders have adopted the Merger Agreement,
there shall be no amendment that by law requires further
approval by our stockholders without such approval having been
obtained. All amendments to the Merger Agreement must be
approved by the parties respective boards of directors and
shall be in a writing signed by us, Newco and Merger Sub.
At any time before the consummation of the Merger, each of the
parties to the Merger Agreement may, by written instrument:
|
|
|
|
|
extend the time for the performance of any of the obligations or
other acts of the other parties;
|
|
|
|
waive any inaccuracies in the representations and warranties
made to such party contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement; or
|
|
|
|
waive compliance with any of the agreements or conditions for
the benefit of such party contained in the Merger Agreement.
|
64
MARKET
PRICE OF COMMON STOCK
Our Common Stock is listed for trading on Nasdaq under the
symbol COMS. The following table sets forth, for the
fiscal quarters indicated, the high and low sales prices per
share as reported on Nasdaq composite tape for the Common Stock.
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
High
|
|
|
Low
|
|
|
FISCAL YEAR ENDED JUNE 2, 2006
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
4.00
|
|
|
$
|
3.21
|
|
Second Quarter
|
|
$
|
4.30
|
|
|
$
|
3.37
|
|
Third Quarter
|
|
$
|
5.27
|
|
|
$
|
3.47
|
|
Fourth Quarter
|
|
$
|
5.70
|
|
|
$
|
4.25
|
|
FISCAL YEAR ENDED JUNE 1, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
5.31
|
|
|
$
|
3.95
|
|
Second Quarter
|
|
$
|
5.24
|
|
|
$
|
3.95
|
|
Third Quarter
|
|
$
|
4.24
|
|
|
$
|
3.73
|
|
Fourth Quarter
|
|
$
|
4.79
|
|
|
$
|
3.60
|
|
FISCAL YEAR ENDING MAY 30, 2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
4.81
|
|
|
$
|
3.24
|
|
Second Quarter (through October 19, 2007)
|
|
$
|
5.11
|
|
|
$
|
3.22
|
|
The closing sale price of the Common Stock on Nasdaq on
September 27, 2007, the last trading day prior to the
execution of the Merger Agreement, was $3.68 per share.
On ,
2007, the most recent practicable date before this proxy
statement was printed, the closing price for the Common Stock on
Nasdaq was
$
per share. You are encouraged to obtain current market
quotations for Common Stock in connection with voting your
shares.
65
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information, as of
September 28, 2007, the date we executed the Merger
Agreement, with respect to the beneficial ownership of our
common stock by:
|
|
|
|
|
each individual or entity whom we know to own beneficially more
than five percent of our common stock;
|
|
|
|
each current director;
|
|
|
|
our chief executive officer, our chief financial officer, our
three most highly compensated executive officers, one highly
compensated executive officer who is no longer an executive
officer of the Company and two highly compensated executive
officers who are no longer employed by the Company (the
Named Executive Officers); and
|
|
|
|
all of our current directors and executive officers as a group.
|
Beneficial ownership is determined in accordance with the rules
and regulations of the Securities and Exchange Commission and
generally includes those persons who have voting or investment
power with respect to the securities. Unless otherwise
indicated, all persons named as beneficial owners of common
stock have sole voting power and sole investment power with
respect to the shares indicated as beneficially owned. In
addition, unless otherwise indicated, all persons named below
can be reached at 350 Campus Drive, Marlborough, Massachusetts
01752-3064.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
Ownership
|
|
|
|
Number of
|
|
|
Underlying
|
|
|
|
|
|
Percent of
|
|
|
|
Shares of
|
|
|
Options
|
|
|
|
|
|
Common Stock
|
|
|
|
Common Stock
|
|
|
Exercisable
|
|
|
Total Beneficial
|
|
|
Beneficially
|
|
Name and Address of Beneficial Owner
|
|
Owned
|
|
|
Within 60 Days
|
|
|
Ownership
|
|
|
Owned(1)
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities and individuals related to Citadel Limited
Partnership(2)
|
|
|
39,085,937
|
|
|
|
|
|
|
|
39,085,937
|
|
|
|
9.7
|
%
|
131 S. Dearborn Street,
32nd
Floor Chicago, IL 60603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entities related to Barclays Global
Investors, N.A.(3)
|
|
|
20,274,767
|
|
|
|
|
|
|
|
20,274,767
|
|
|
|
5.0
|
%
|
45 Fremont Street
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric A. Benhamou(4)
|
|
|
708,146
|
|
|
|
4,175,395
|
|
|
|
4,883,541
|
|
|
|
1.2
|
%
|
Gary T. DiCamillo
|
|
|
1,000
|
|
|
|
343,720
|
|
|
|
344,720
|
|
|
|
|
*
|
James R. Long
|
|
|
12,800
|
|
|
|
258,350
|
|
|
|
271,150
|
|
|
|
|
*
|
Robert Y. L. Mao
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Raj Reddy
|
|
|
1,000
|
|
|
|
329,750
|
|
|
|
330,750
|
|
|
|
|
*
|
Dominique Trempont
|
|
|
|
|
|
|
42,792
|
|
|
|
42,792
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edgar Masri(5)
|
|
|
462,839
|
|
|
|
3,000,000
|
|
|
|
3,462,839
|
|
|
|
|
*
|
Jay Zager(6)
|
|
|
300,000
|
|
|
|
|
|
|
|
300,000
|
|
|
|
|
*
|
Neal D. Goldman(7)
|
|
|
690,953
|
|
|
|
713,750
|
|
|
|
1,404,703
|
|
|
|
|
*
|
James Hamilton(8)
|
|
|
321,052
|
|
|
|
643,750
|
|
|
|
964,802
|
|
|
|
|
*
|
Dr. Shusheng Zheng(9)
|
|
|
200,000
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
*
|
Dr. Marc Willebeek-LeMair(10)
|
|
|
670,187
|
|
|
|
640,245
|
|
|
|
1,310,432
|
|
|
|
|
*
|
Donald M. Halsted, III(11)
|
|
|
252,084
|
|
|
|
550,000
|
|
|
|
802,084
|
|
|
|
|
*
|
R. Scott Murray(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
All directors and current executive officers as a group
(12 persons)(13)
|
|
|
3,028,978
|
|
|
|
9,732,507
|
|
|
|
12,761,485
|
|
|
|
3.1
|
%
|
66
|
|
|
* |
|
1% or less |
(1) |
|
Percentage of beneficial ownership is based on
401,205,801 shares of common stock outstanding as of
September 28, 2007. Shares of common stock subject to
options currently exercisable, or exercisable within
60 days of September 28, 2007, are deemed outstanding
for computing the percentage of the person holding such options
but are not deemed outstanding for computing the percentage for
any other person. |
(2) |
|
Represents shares beneficially owned by Citadel Limited
Partnership, Citadel Investment Group, L.L.C., Kenneth Griffin,
Citadel Equity Fund Ltd., Citadel Derivatives Group LLC, based
on a Schedule 13D/A that was filed jointly by these
individuals and entities with the SEC on July 2, 2007. |
(3) |
|
Represents shares beneficially owned by Barclays Global
Investors, NA., Barclays Global Fund Advisors, Barclays
Global Investors, Ltd, Barclays Global Investors Japan Trust and
Banking Company Limited, Barclays Global Investors Japan
Limited, based on a Schedule 13G that was filed jointly by
these entities with the SEC on January 23, 2007. |
(4) |
|
Includes 708,146 shares of common stock held in the Eric
and Illeana Benhamou Living Trust dated September 11, 2000,
of which Mr. Benhamou is a co-trustee. |
(5) |
|
Includes 333,333 unvested shares of restricted stock issued to
Mr. Masri. |
(6) |
|
Consists of 300,000 unvested shares of restricted stock issued
to Mr. Zager. |
(7) |
|
Includes 438,333 unvested shares of restricted stock issued to
Mr. Goldman. |
(8) |
|
Includes 250,000 unvested shares of restricted stock issued to
Mr. Hamilton. |
(9) |
|
Consists of 200,000 unvested restricted stock units issued to
Dr. Zheng. |
(10) |
|
Includes 330,000 unvested shares of restricted stock issued to
Dr. Willebeek-LeMair. Dr. Willebeek-LeMair (while
still currently a 3Com officer) ceased to be an executive
officer on March 28, 2007. |
(11) |
|
Mr. Halsted is the Companys former Executive Vice
President and Chief Financial Officer. He resigned from those
positions as of June 22, 2007, and his employment with the
Company terminated July 27, 2007. |
(12) |
|
Mr. Murray is the Companys former President and Chief
Executive Officer. He resigned from those positions as of the
close of business on August 17, 2006. |
(13) |
|
Includes 1,801,666 unvested shares of restricted stock issued to
current executive officers (including 280,000 shares held
by Robert Dechant, our Senior Vice President and General
Manager, Data and Voice Business Unit). |
67
DISSENTERS
RIGHTS OF APPRAISAL
Under the General Corporation Law of the State of Delaware (the
DGCL), you have the right to dissent from the Merger
and to receive payment in cash for the fair value of your Common
Stock as determined by the Delaware Court of Chancery, together
with a fair rate of interest, if any, as determined by the
court, in lieu of the consideration you would otherwise be
entitled to pursuant to the Merger Agreement. These rights are
known as appraisal rights. The Companys stockholders
electing to exercise appraisal rights must comply with the
provisions of Section 262 of the DGCL in order to perfect
their rights. The Company will require strict compliance with
the statutory procedures.
The following is intended as a brief summary of the material
provisions of the Delaware statutory procedures required to be
followed by a stockholder in order to dissent from the Merger
and perfect appraisal rights.
This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by
reference to Section 262 of the DGCL, the full text of
which appears in Annex C to this proxy statement. Failure
to precisely follow any of the statutory procedures set forth in
Section 262 of the DGCL may result in a termination or
waiver of your appraisal rights.
Section 262 requires that stockholders be notified that
appraisal rights will be available not less than twenty
(20) days before the stockholders meeting to vote on
the Merger. A copy of Section 262 must be included with
such notice. This proxy statement constitutes the Companys
notice to its stockholders of the availability of appraisal
rights in connection with the Merger in compliance with the
requirements of Section 262. If you wish to consider
exercising your appraisal rights, you should carefully review
the text of Section 262 contained in Annex C since
failure to timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal
rights under the DGCL.
If you elect to demand appraisal of your shares, you must
satisfy each of the following conditions:
|
|
|
|
|
You must deliver to the Company a written demand for appraisal
of your shares before the vote with respect to the Merger is
taken. This written demand for appraisal must be in addition to
and separate from any proxy or vote abstaining from or voting
against the adoption of the Merger Agreement. Voting against or
failing to vote for the adoption of the Merger Agreement by
itself does not constitute a demand for appraisal within the
meaning of Section 262; and
|
|
|
|
You must not vote in favor of or consent to the adoption of the
Merger Agreement. A vote in favor of the adoption of the Merger
Agreement, by proxy, over the Internet, by telephone or in
person, will constitute a waiver of your appraisal rights and
will nullify any previously filed written demands for appraisal.
If you fail to comply with either of these conditions and the
Merger is completed, you will be entitled to receive the cash
payment for your shares of Common Stock as provided for in the
Merger Agreement, but you will have no appraisal rights with
respect to your shares of Common Stock.
|
All demands for appraisal should be addressed to 3Com
Corporation, 350 Campus Drive, Marlborough, Massachusetts
01752-3064,
Attention: Neal D. Goldman, must be delivered before the vote on
the Merger Agreement is taken at the special meeting and should
be executed by, or on behalf of, the record holder of the shares
of Common Stock. The demand must reasonably inform the Company
of the identity of the stockholder and the intention of the
stockholder to demand appraisal of his, her or its shares.
To be effective, a demand for appraisal by a holder of Common
Stock must be made by, or in the name of, such registered
stockholder, fully and correctly, as the stockholders name
appears on his or her stock certificate(s). Beneficial owners
who do not also hold the shares of record may not directly make
appraisal demands to the Company. The beneficial holder must, in
such cases, have the registered owner, such as a broker or other
nominee, submit the required demand in respect of those
shares. If shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution
of a demand for appraisal should be made by or for the
fiduciary; and if the shares are owned of record by more than
one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An
authorized agent, including an authorized agent for two or more
joint owners, may execute
68
the demand for appraisal for a stockholder of record; however,
the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, he or she is
acting as agent for the record owner. A record owner, such as a
broker, who holds shares as a nominee for others, may exercise
his or her rights of appraisal with respect to the shares held
for one or more beneficial owners, while not exercising this
right for other beneficial owners. In that case, the written
demand should state the number of shares as to which appraisal
is sought. Where no number of shares is expressly mentioned, the
demand will be presumed to cover all shares held in the name of
the record owner.
If you hold your shares of Common Stock in a brokerage
account or in other nominee form and you wish to exercise
appraisal rights, you should consult with your broker or the
other nominee to determine the appropriate procedures for the
making of a demand for appraisal by the nominee.
Within ten (10) days after the effective time of the
Merger, the Surviving Corporation must give written notice that
the Merger has become effective to each Company stockholder who
has properly filed a written demand for appraisal and who did
not vote in favor of or consent to the Merger Agreement. At any
time within sixty (60) days after the effective time of the
Merger, any stockholder who has demanded an appraisal but has
not commenced an appraisal proceeding or joined an appraisal
proceeding as a named party has the right to withdraw the demand
and to accept the cash payment specified by the Merger Agreement
for his or her shares of Common Stock. Within one hundred twenty
(120) days after the effective date of the Merger, any
stockholder who has complied with Section 262 shall, upon
written request to the Surviving Corporation, be entitled to
receive a written statement setting forth the aggregate number
of shares not voted in favor of the Merger Agreement and with
respect to which demands for appraisal rights have been received
and the aggregate number of holders of such shares. Such written
statement will be mailed to the requesting stockholder within
ten (10) days after such written request is received by the
Surviving Corporation or within ten (10) days after
expiration of the period for delivery of demands for appraisal,
whichever is later. Within one hundred twenty (120) days
after the effective time of the Merger, either the Surviving
Corporation or any stockholder who has complied with the
requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair
value of the shares held by all stockholders entitled to
appraisal. Upon the filing of the petition by a stockholder,
service of a copy of such petition shall be made upon the
Surviving Corporation. The Surviving Corporation has no
obligation to file such a petition in the event there are
dissenting stockholders. Accordingly, the failure of a
stockholder to file such a petition within the period specified
could nullify the stockholders previously written demand
for appraisal.
If a petition for appraisal is duly filed by a stockholder and a
copy of the petition is delivered to the Surviving Corporation,
the Surviving Corporation will then be obligated, within twenty
(20) days after receiving service of a copy of the
petition, to provide the Chancery Court with a duly verified
list containing the names and addresses of all stockholders who
have demanded an appraisal of their shares and with whom
agreements as to the value of their shares have not been reached
by the Surviving Corporation. After notice, if so ordered by the
Chancery Court, to dissenting stockholders who demanded
appraisal of their shares, the Chancery Court is empowered to
conduct a hearing upon the petition, and to determine those
stockholders who have complied with Section 262 and who
have become entitled to the appraisal rights provided thereby.
The Chancery Court may require the stockholders who have
demanded payment for their shares to submit their stock
certificates to the Register in Chancery for notation thereon of
the pendency of the appraisal proceedings; and if any
stockholder fails to comply with that direction, the Chancery
Court may dismiss the proceedings as to that stockholder.
After determination of the stockholders entitled to appraisal of
their shares of the Companys Common Stock, the Chancery
Court will appraise the shares, determining their fair value
exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with
interest, if any, from the effective date of the Merger through
the date of payment of the judgment, which shall be compounded
quarterly and shall accrue at a default rate 5% over the Federal
Reserve discount rate (including any surcharge) as established
from time to time during the period between the effective date
of the Merger and the date of payment of the judgment. When the
value is determined, the Chancery Court will direct the payment
of such value, with interest, if any, to the stockholders
entitled to receive the same, upon surrender by such holders of
the certificates representing those shares.
69
In determining fair value, the Chancery Court is required to
take into account all relevant factors. You should be aware
that the fair value of your shares as determined under
Section 262 could be more than, the same as, or less than
the value that you are entitled to receive under the terms of
the Merger Agreement.
Costs of the appraisal proceeding may be imposed upon the
Surviving Corporation and the stockholders participating in the
appraisal proceeding by the Chancery Court as the Chancery Court
deems equitable in the circumstances. Upon the application of a
stockholder, the Chancery Court may order all or a portion of
the expenses incurred by any stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal. Any stockholder who had demanded appraisal rights
will not, after the effective time of the Merger, be entitled to
vote shares subject to that demand for any purpose or to receive
payments of dividends or any other distribution with respect to
those shares, other than with respect to payment as of a record
date prior to the effective time of the Merger; however, if no
petition for appraisal is filed within one hundred twenty
(120) days after the effective time of the Merger, or if
the stockholder delivers a written withdrawal of his or her
demand for appraisal and an acceptance of the terms of the
Merger within sixty (60) days after the effective time of
the Merger, then the right of that stockholder to appraisal will
cease and that stockholder will be entitled to receive the cash
payment for shares of his, her or its Common Stock pursuant to
the Merger Agreement. Any withdrawal of a demand for appraisal
made more than sixty (60) days after the effective time of
the Merger may only be made with the written approval of the
Surviving Corporation. In addition, no appraisal proceeding may
be dismissed as to any stockholder without the approval of the
Chancery Court, and such approval may be conditioned upon such
terms as the Chancery Court deems just.
In view of the complexity of Section 262, the
Companys stockholders who may wish to dissent from the
Merger and pursue appraisal rights should consult their legal
advisors.
70
SUBMISSION
OF STOCKHOLDER PROPOSALS
If the Merger is consummated, we will not have public
stockholders and there will be no public participation in any
future meeting of stockholders. However, if the Merger is not
completed or if we are otherwise required to do so under
applicable law, we would hold a 2008 annual meeting of
stockholders. Any stockholder proposals to be considered timely
for inclusion in next years proxy statement must be
submitted in writing to our principal executive offices, 3Com
Corporation, 350 Campus Drive, Marlborough, Massachusetts
01752-3064,
and must be received no later than 5:00 p.m. Eastern
Time on April 19, 2008. If the date of the 2008 annual
meeting of stockholders is moved more than thirty (30) days
before or after the anniversary date of the 2007 annual meeting
of stockholders, the deadline for inclusion is instead a
reasonable time before 3Com begins to print and mail its proxy
materials. Such proposals must also comply with the SECs
rules concerning the inclusion of stockholder proposals in
company-sponsored proxy materials as set forth in
Rule 14a-8
promulgated under the Exchange Act and our bylaws.
Unless we indicate otherwise at a later date, in order for a
stockholder proposal to be raised from the floor during the 2008
annual meeting of stockholders, the stockholders written
notice must be received at our principal executive offices prior
to June 28, 2008, and must contain certain information as
required under our bylaws. You may contact our Investor
Relations Department at our headquarters for a copy of the
relevant provisions of our bylaws regarding the requirements for
making stockholder proposals. Please note that these
requirements relate only to matters a stockholder wishes to
bring before next years annual meeting and that are not to
be included in the proxy statement for next years annual
meeting.
You may nominate an individual to serve as a director by
following the procedures set forth in our bylaws, which include
sending a written notice setting forth all the information that
is required to be disclosed in solicitations of proxies for
election of directors or is otherwise required pursuant to
Regulation 14A under the Exchange Act to Neal D. Goldman,
Secretary, 3Com Corporation, 350 Campus Drive, Marlborough,
Massachusetts
01752-3064.
In addition, the notice must contain certain other information
as required under our bylaws. In order to be considered for the
2008 annual meeting, your nomination must be received no later
than April 19, 2008.
HOUSEHOLDING
OF SPECIAL MEETING MATERIALS
Some banks, brokers, and other nominee record holders may be
participating in the practice of householding proxy
statements and annual reports. This means that only one copy of
this notice and proxy statement may have been sent to multiple
stockholders in your household. If you would prefer to receive
separate copies of a proxy statement or annual report either now
or in the future, please (1) mail your request to 3Com
Corporation, 350 Campus Drive, Marlborough, Massachusetts,
01752-3064,
Attn: Investor Relations, or (2) call our Investor
Relations department at
(508) 323-1198.
Upon written or oral request, we will provide a separate copy of
the annual reports and proxy statements. In addition, security
holders sharing an address can request delivery of a single copy
of annual reports or proxy statements if you are receiving
multiple copies upon written or oral request at the address and
telephone number stated above.
71
WHERE
YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SECs public reference room located
at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to the public at the SECs
website at
http://www.sec.gov.
You also may obtain free copies of the documents 3Com files with
the SEC by going to the Investors Relations section
of our website at www.3Com.com/investor. Our website address is
provided as an inactive textual reference only. The information
provided on our website is not part of this proxy statement, and
therefore is not incorporated by reference.
Reports, proxy statements or other information concerning us may
also be inspected at Nasdaq offices located at One Liberty
Plaza, 165 Broadway, New York, NY, 10006.
We incorporate by reference into this proxy statement any
Current Reports on
Form 8-K
or Quarterly Reports on
Form 10-Q
filed by us pursuant to the Exchange Act after the date of this
proxy statement and prior to the date of the special meeting.
This means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is considered to be a part of this proxy statement,
and later information that we file with the SEC will update and
supersede that information.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of proxy statements
and any of the documents incorporated by reference in this
document or other information concerning us, without charge, by
written or telephonic request directed to 3Com Investor
Relations, 350 Campus Drive, Marlborough, Massachusetts
01752-3064,
telephone:
(508) 323-1198,
on the Companys website at www.3Com.com/investor or from
the SEC through the SECs website at the address provided
above. Documents incorporated by reference are available without
charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference into those
documents.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE
YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT
IS
DATED ,
2007. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS
DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
72
ANNEX A
AGREEMENT
AND PLAN OF MERGER
by and among
DIAMOND II HOLDINGS, INC.
DIAMOND II ACQUISITION CORP.
and
3COM CORPORATION
Dated as of September 28, 2007
A-1
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
ARTICLE I DEFINITIONS & INTERPRETATIONS
|
|
|
A-5
|
|
1.1
|
|
Certain Definitions
|
|
|
A-5
|
|
1.2
|
|
Additional Definitions
|
|
|
A-12
|
|
1.3
|
|
Certain Interpretations
|
|
|
A-14
|
|
|
|
|
|
|
ARTICLE II THE MERGER
|
|
|
A-14
|
|
2.1
|
|
The Merger
|
|
|
A-14
|
|
2.2
|
|
The Effective Time
|
|
|
A-14
|
|
2.3
|
|
The Closing
|
|
|
A-15
|
|
2.4
|
|
Effect of the Merger
|
|
|
A-15
|
|
2.5
|
|
Certificate of Incorporation and Bylaws
|
|
|
A-15
|
|
2.6
|
|
Directors and Officers
|
|
|
A-15
|
|
2.7
|
|
Effect on Capital Stock
|
|
|
A-15
|
|
2.8
|
|
Exchange of Certificates
|
|
|
A-17
|
|
2.9
|
|
No Further Ownership Rights in Company Common Stock
|
|
|
A-19
|
|
2.10
|
|
Lost, Stolen or Destroyed Certificates
|
|
|
A-19
|
|
2.11
|
|
Necessary Further Actions
|
|
|
A-20
|
|
|
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
|
A-20
|
|
3.1
|
|
Authorization
|
|
|
A-20
|
|
3.2
|
|
Requisite Stockholder Approval
|
|
|
A-20
|
|
3.3
|
|
Non-Contravention and Required Consents
|
|
|
A-20
|
|
3.4
|
|
Required Governmental Approvals
|
|
|
A-21
|
|
3.5
|
|
Organization and Standing
|
|
|
A-21
|
|
3.6
|
|
Subsidiaries
|
|
|
A-21
|
|
3.7
|
|
Capitalization
|
|
|
A-22
|
|
3.8
|
|
Company SEC Reports
|
|
|
A-23
|
|
3.9
|
|
Company Financial Statements
|
|
|
A-23
|
|
3.10
|
|
No Undisclosed Liabilities
|
|
|
A-24
|
|
3.11
|
|
Absence of Certain Changes
|
|
|
A-24
|
|
3.12
|
|
Material Contracts
|
|
|
A-25
|
|
3.13
|
|
Real Property
|
|
|
A-26
|
|
3.14
|
|
Personal Property and Assets
|
|
|
A-27
|
|
3.15
|
|
Intellectual Property
|
|
|
A-27
|
|
3.16
|
|
Tax Matters
|
|
|
A-29
|
|
3.17
|
|
Employee Plans
|
|
|
A-30
|
|
3.18
|
|
Labor Matters
|
|
|
A-32
|
|
3.19
|
|
Permits
|
|
|
A-33
|
|
3.20
|
|
Compliance with Laws
|
|
|
A-33
|
|
3.21
|
|
Environmental Matters
|
|
|
A-33
|
|
3.22
|
|
Litigation; Orders
|
|
|
A-33
|
|
3.23
|
|
Insurance
|
|
|
A-34
|
|
3.24
|
|
Related Party Transactions
|
|
|
A-34
|
|
3.25
|
|
Brokers
|
|
|
A-34
|
|
A-2
|
|
|
|
|
|
|
|
|
|
|
Page
|
3.26
|
|
Opinion of Financial Advisor
|
|
|
A-34
|
|
3.27
|
|
Company Rights Plan
|
|
|
A-34
|
|
3.28
|
|
State Anti-Takeover Statutes
|
|
|
A-35
|
|
3.29
|
|
Proxy Statement and Other Required Filings
|
|
|
A-35
|
|
|
|
|
|
|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEWCO AND
MERGER SUB
|
|
|
A-35
|
|
4.1
|
|
Organization
|
|
|
A-35
|
|
4.2
|
|
Authorization
|
|
|
A-36
|
|
4.3
|
|
Non-Contravention and Required Consents
|
|
|
A-36
|
|
4.4
|
|
Required Governmental Approvals
|
|
|
A-36
|
|
4.5
|
|
Litigation
|
|
|
A-36
|
|
4.6
|
|
Proxy Statement and Other Required Filings
|
|
|
A-37
|
|
4.7
|
|
Ownership of Company Capital Stock
|
|
|
A-37
|
|
4.8
|
|
Brokers.
|
|
|
A-37
|
|
4.9
|
|
Operations of Newco and Merger Sub
|
|
|
A-37
|
|
4.10
|
|
Financing.
|
|
|
A-37
|
|
4.11
|
|
Solvency
|
|
|
A-38
|
|
|
|
|
|
|
ARTICLE V COVENANTS OF THE COMPANY
|
|
|
A-39
|
|
5.1
|
|
Interim Conduct of Business
|
|
|
A-39
|
|
5.2
|
|
No Solicitation
|
|
|
A-42
|
|
5.3
|
|
Company Board Recommendation; Superior Proposals
|
|
|
A-43
|
|
5.4
|
|
Company Stockholder Meeting
|
|
|
A-43
|
|
5.5
|
|
Access
|
|
|
A-44
|
|
5.6
|
|
Certain Litigation
|
|
|
A-44
|
|
5.7
|
|
Section 16(b) Exemption
|
|
|
A-45
|
|
|
|
|
|
|
ARTICLE VI
|
|
|
A-45
|
|
6.1
|
|
Reasonable Best Efforts to Complete
|
|
|
A-45
|
|
6.2
|
|
Regulatory Filings
|
|
|
A-45
|
|
6.3
|
|
Proxy Statement and Other Required Company Filings
|
|
|
A-46
|
|
6.4
|
|
Financing
|
|
|
A-47
|
|
6.5
|
|
Anti-Takeover Laws
|
|
|
A-50
|
|
6.6
|
|
Notification of Certain Matters
|
|
|
A-50
|
|
6.7
|
|
Public Statements and Disclosure
|
|
|
A-51
|
|
6.8
|
|
Directors and Officers Indemnification and Insurance
|
|
|
A-51
|
|
6.9
|
|
Confidentiality
|
|
|
A-53
|
|
|
|
|
|
|
ARTICLE VII CONDITIONS TO THE MERGER
|
|
|
A-53
|
|
7.1
|
|
Conditions to Each Partys Obligations to Effect the Merger
|
|
|
A-53
|
|
7.2
|
|
Conditions to the Obligations of Newco and Merger Sub
|
|
|
A-53
|
|
7.3
|
|
Conditions to the Companys Obligations to Effect the Merger
|
|
|
A-54
|
|
|
|
|
|
|
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
|
|
|
A-54
|
|
8.1
|
|
Termination
|
|
|
A-54
|
|
8.2
|
|
Notice of Termination; Effect of Termination
|
|
|
A-56
|
|
8.3
|
|
Fees and Expenses
|
|
|
A-56
|
|
A-3
|
|
|
|
|
|
|
|
|
|
|
Page
|
8.4
|
|
Amendment
|
|
|
A-59
|
|
8.5
|
|
Extension; Waiver
|
|
|
A-59
|
|
|
|
|
|
|
ARTICLE IX GENERAL PROVISIONS
|
|
|
A-59
|
|
9.1
|
|
Survival
|
|
|
A-59
|
|
9.2
|
|
Notices
|
|
|
A-59
|
|
9.3
|
|
Assignment
|
|
|
A-60
|
|
9.4
|
|
Entire Agreement
|
|
|
A-60
|
|
9.5
|
|
Third Party Beneficiaries
|
|
|
A-61
|
|
9.6
|
|
Severability
|
|
|
A-61
|
|
9.7
|
|
Specific Performance
|
|
|
A-61
|
|
9.8
|
|
Governing Law
|
|
|
A-61
|
|
9.9
|
|
Consent to Jurisdiction
|
|
|
A-61
|
|
9.10
|
|
WAIVER OF JURY TRIAL
|
|
|
A-61
|
|
9.11
|
|
Company Disclosure Letter References
|
|
|
A-61
|
|
9.12
|
|
Counterparts
|
|
|
A-61
|
|
A-4
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) is made and entered into as of
September 28, 2007 by and among Diamond II Holdings,
Inc., a corporation organized under the laws of the Cayman
Islands (Newco), Diamond II Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of
Newco (Merger Sub), and 3Com Corporation, a
Delaware corporation (the Company). All
capitalized terms used in this Agreement shall have the
respective meanings ascribed thereto in Article I.
WITNESSETH:
WHEREAS, the Company Board has (i) determined that it is in
the best interests of the Company and its stockholders, and
declared it advisable, to enter into this Agreement providing
for the merger of Merger Sub with and into the Company in
accordance with the General Corporation Law of the State of
Delaware (the DGCL), upon the terms and
subject to the conditions set forth herein, and
(ii) approved the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby in accordance with the DGCL upon the terms
and conditions contained herein.
WHEREAS, the board of directors of Newco and the board of
directors of Merger Sub have (i) declared it advisable to
enter into this Agreement, and (ii) approved the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby in accordance with the
laws of the Cayman Islands and the DGCL, as applicable, upon the
terms and subject to the conditions set forth herein.
WHEREAS, concurrently with the execution of this Agreement, and
as a condition and inducement to the Companys willingness
to enter into this Agreement, Bain Capital Fund IX, L.P.
and Bain Capital Asia Fund, L.P. (collectively, Bain
Capital) and Shenzhen Huawei Investment &
Holding Co. Ltd. (Huawei) and, together with
Bain Capital, the Guarantors) have entered
into limited guarantees, each dated as of the date hereof and in
the form attached hereto as Exhibit A, in favor of
the Company with respect to certain obligations of Newco and
Merger Sub arising under Section 8.3 of this
Agreement (the Limited Guarantees).
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness
of Newco and Merger Sub to enter into this Agreement, the
Company and American Stock Transfer &
Trust Company are entering into an amendment, dated as of
the date hereof and in the form attached hereto as
Exhibit B (the Rights Plan
Amendment), to that certain Third Amended and Restated
Preferred Shares Rights Agreement, dated as of November 4,
2002 (the Company Rights Plan), so as to
render the rights issued thereunder inapplicable to this
Agreement and the transactions contemplated hereby.
WHEREAS, Newco, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger and to prescribe certain conditions
with respect to the consummation of the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements set
forth herein, as well as other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and
accepted, and intending to be legally bound hereby, Newco,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS &
INTERPRETATIONS
1.1 Certain Definitions. For all purposes
of and under this Agreement, the following capitalized terms
shall have the following respective meanings:
(a) Acceptable Confidentiality Agreement
shall mean (i) any confidentiality agreement between the
Company and any Person existing as of the date of this Agreement
and (ii) any confidentiality agreement entered into after
the date of this Agreement that contains provisions that are no
less favorable in the aggregate to the Company than those in the
Confidentiality Agreement.
A-5
(b) Acquisition Proposal shall mean any
offer or proposal (other than an offer or proposal by Newco or
Merger Sub) to engage in an Acquisition Transaction from any
Person or group as defined in Section 13(d) of the Exchange
Act.
(c) Acquisition Transaction shall mean
any transaction or series of related transactions (other than
the transactions contemplated by this Agreement) involving:
(i) the purchase or other acquisition from the Company by
any Person or group (as defined in or under
Section 13(d) of the Exchange Act), directly or indirectly,
of twenty percent (20%) or more of the Company Common Stock
outstanding as of the consummation of such purchase or other
acquisition, or any tender offer or exchange offer by any Person
or group (as defined in or under Section 13(d)
of the Exchange Act) that, if consummated in accordance with its
terms, would result in such Person or group
beneficially owning twenty percent (20%) or more of the Company
Common Stock outstanding as of the consummation of such tender
or exchange offer; (ii) a merger, consolidation, business
combination, stock exchange, recapitalization, liquidation,
issuance of or amendment to terms of outstanding stock or other
securities, or other similar transaction involving the Company
pursuant to which the stockholders of the Company immediately
preceding such transaction (in their capacities as such) hold
eighty percent (80%) or less of the Company Common Stock or
consolidated assets of the Company or its Subsidiaries taken as
a whole (either as measured by the fair market value thereof or
by the revenues or earnings on a consolidated basis attributable
thereto) in the surviving or resulting entity of such
transaction; (iii) a sale, transfer, acquisition or
disposition of twenty percent (20%) or more of the consolidated
assets of the Company and its Subsidiaries taken as a whole
(either as measured by the fair market value thereof or by the
revenues or earnings on a consolidated basis attributable
thereto); or (iv) any combination of the foregoing.
(d) Affiliate shall mean, with respect
to any Person, any other Person which directly or indirectly
controls, is controlled by or is under common control with such
Person provided, that, no Person shall be deemed an
Affiliate of Newco, Merger Sub or the Company (or other
specified Person) because such Person is controlled by one or
more investment funds that are shareholders of Newco. For
purposes of the immediately preceding sentence, the term
control (including, with correlative meanings, the
terms controlling, controlled by and
under common control with), as used with respect to
any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
(e) Antitrust Law means the Sherman Act,
as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Laws
that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or
restraint of trade or significant impediments or lessening of
competition or the creation or strengthening of a dominant
position through merger or acquisition, in any case that are
applicable to the transactions contemplated by this Agreement.
(f) Business Day shall mean any day,
other than a Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or is a day on
which banking institutions located in the State of New York are
authorized or required by Law or other governmental action to
close.
(g) Code shall mean the Internal Revenue
Code of 1986, as amended.
(h) Company Balance Sheet shall mean the
consolidated balance sheet of the Company and its Subsidiaries
as of June 1, 2007.
(i) Company Board shall mean the board
of directors of the Company.
(j) Company Capital Stock shall mean the
Company Common Stock and the Company Preferred Stock.
(k) Company Common Stock shall mean the
Common Stock, par value $0.01 per share, of the Company,
together with the Preferred Stock Purchase Rights appurtenant
thereto issued under the Company Rights Plan.
A-6
(l) Company ESPP shall mean the
Companys 1984 Employee Stock Purchase Plan, as amended and
restated as of September 26, 2007.
(m) Company Intellectual Property shall
mean all Intellectual Property that is owned, used or held for
use by the Company or any of its Subsidiaries in connection with
the business of the Company or any of its Subsidiaries.
(n) Company Intellectual Property Rights
shall mean all Intellectual Property Rights owned by, or filed,
registered or held in the name of, the Company or any of its
Subsidiaries.
(o) Company Material Adverse Effect
shall mean any effect, circumstance, change, event or
development (each an Effect, and
collectively, Effects), individually or in
the aggregate, and taken together with all other Effects, that
is (or are) materially adverse to the business, operations,
condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole; provided,
however, that no Effect (by itself or when aggregated or
taken together with any and all other Effects) resulting from or
arising out of any of the following shall be deemed to be or
constitute a Company Material Adverse Effect, and no
Effect (by itself or when aggregated or taken together with any
and all other such Effects) resulting from or arising out of any
of the following shall be taken into account when determining
whether a Company Material Adverse Effect has
occurred or may, would or could occur:
(i) general economic conditions in the United States, China
or any other country (or changes therein), general conditions in
the financial markets in the United States, China or any other
country (or changes therein) or general political conditions in
the United States, China or any other country (or changes
therein), in any such case to the extent that such changes,
effects, events or circumstances do not affect the Company and
its Subsidiaries in a disproportionate manner relative to other
participants in the industries in which the Company and its
Subsidiaries conduct business;
(ii) general conditions in the industries in which the
Company and its Subsidiaries conduct business (or changes
therein) to the extent that such changes, effects, events or
circumstances do not affect the Company and its Subsidiaries in
a disproportionate manner relative to other participants in the
industries in which the Company and its Subsidiaries conduct
business;
(iii) any conditions arising out of acts of terrorism, war
or armed hostilities to the extent that such conditions do not
affect the Company and its Subsidiaries in a disproportionate
manner relative to other participants in the industries in which
the Company and its Subsidiaries conduct business;
(iv) the announcement of this Agreement or the pendency or
consummation of the transactions contemplated hereby, including
the impact thereof on relationships (contractual or otherwise)
with suppliers, distributors, partners, customers or employees;
(v) any action taken by the Company or its Subsidiaries
that is required by this Agreement, or the failure by the
Company or its Subsidiaries to take any action that is
prohibited by this Agreement;
(vi) any action that is taken, or any failure to take
action, by the Company or its Subsidiaries in either case to
which Newco has approved, consented to or requested in writing;
(vii) any changes in Law or GAAP (or the interpretation
thereof);
(viii) changes in the Companys stock price or change
in the trading volume of the Companys stock, in and of
itself (it being understood that the underlying cause of, and
the facts, circumstances or occurrences giving rise or
contributing to such circumstance may be deemed to constitute a
Company Material Adverse Effect (unless otherwise
excluded) and shall not be excluded from and may be deemed to
constitute or be taken into account in determining whether there
has been, is, or would be a Company Material Adverse Effect;
(ix) any failure by the Company to meet any internal or
public projections, forecasts or estimates of revenues or
earnings in and of itself (for the avoidance of doubt, the
exception in this
A-7
clause (ix) shall not prevent or otherwise affect a
determination that the underlying cause of such failure is a
Company Material Adverse Effect); or
(x) any legal proceedings made or brought by any of the
current or former stockholders of the Company (on their own
behalf or on behalf of the Company) resulting from, relating to
or arising out of this Agreement or any of the transactions
contemplated hereby.
(p) Company Options shall mean any
options to purchase shares of Company Common Stock outstanding
under any of the Company Stock Plans.
(q) Company Preferred Stock shall mean
the Preferred Stock, par value $0.01 per share, of the Company.
(r) Company Stock-Based Award shall mean
each right of any kind, contingent or accrued, to receive shares
of Company Common Stock or benefits measured in whole or in part
by the value of a number of shares of Company Common Stock
granted under the Company Stock Plans or Employee Plans
(including performance shares, restricted stock, restricted
stock units, phantom units, deferred stock units and dividend
equivalents, but not including any 401(k) plan of the Company),
other than rights under Company Options.
(s) Company Stock Plans shall mean
(i) the Companys 1983 Stock Option Plan, as amended
and restated effective September 30, 2001, (ii) the
Companys Director Stock Option Plan, as amended,
(iii) the Companys Restricted Stock Plan, as amended
July 1, 2001, (iv) the Companys 1994 Stock
Option Plan, as amended and restated effective April 30,
2002, (v) the Companys 2003 Stock Plan, as amended,
and (vi) any other compensatory option plans or Contracts
of the Company, including option plans or Contracts assumed by
the Company pursuant to a merger, acquisition or other similar
transaction.
(t) Company Termination Fee shall mean
$66,000,000.
(u) Company Stockholders shall mean
holders of shares of Company Capital Stock, in their respective
capacities as such.
(v) Competing Acquisition Transaction
shall have the same meaning as an Acquisition
Transaction except that all references therein to
twenty percent (20%) shall be references to
fifty percent (50%) and the reference to
eighty percent (80%) shall be a reference to
fifty percent (50%).
(w) Confidentiality Agreement shall mean
those certain confidentiality agreements between the Company and
Bain Capital, dated as of June 13, 2007, and the Company
and Shenzhen Huawei Investment & Holding Co. Ltd.,
dated as of September 13, 2007.
(x) Contract shall mean any contract,
subcontract, agreement, commitment, note, bond, mortgage,
indenture, lease, license, sublicense or other instrument,
obligation or binding arrangement or understanding of any kind
or character, whether oral or in writing.
(y) Delaware Law shall mean the DGCL and
any other applicable law (including common law) of the State of
Delaware.
(z) DOJ shall mean the United States
Department of Justice or any successor thereto.
(aa) DOL shall mean the United States
Department of Labor or any successor thereto.
(bb) Domain Name shall mean any or all
of the following and all worldwide rights in, arising out of, or
associated therewith: domain names, uniform resource locators
(URLs) and other names and locators
associated with the Internet.
(cc) Environmental Law shall mean any
and all applicable laws and regulations promulgated thereunder,
relating to the protection of the environment (including ambient
air, surface water, groundwater or land) or exposure of any
individual to Hazardous Substances or otherwise relating to the
production,
A-8
use, emission, storage, treatment, transportation, recycling,
disposal, discharge, release or other handling of any Hazardous
Substances or the investigation,
clean-up or
other remediation or analysis thereof.
(dd) Equity Interests means (i) any
capital stock, share, partnership or membership interest, unit
of participation or other similar interest (however designated)
in any Person and (ii) any option, warrant, purchase right,
conversion right, exchange rights or other Contract which would
entitle any Person to acquire any such interest in such Person
or otherwise entitle any Person to share in the equity, profit,
earnings, losses or gains of such Person (including stock
appreciation, phantom stock, profit participation or other
similar rights).
(ee) ERISA shall mean the Employee
Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder, or any successor
statue, rules and regulations thereto.
(ff) Exchange Act shall mean the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, or any successor statute,
rules and regulations thereto.
(gg) Excluded Disclosures means, with
respect to the Company SEC Reports, disclosure as to risk
factors, forward-looking statements and other similarly
cautionary or generic disclosure contained or incorporated by
reference therein.
(hh) Financial Statements means the
Company Financial Statements, H3C Financial Statements and the
Tipping Point Financial Statements included in the Required
Information.
(ii) FTC shall mean the United States
Federal Trade Commission or any successor thereto.
(jj) GAAP shall mean generally accepted
accounting principles, as applied in the United States,
consistently applied.
(kk) Governmental Authority shall mean
any government, any governmental administrative or regulatory
entity or body, department, commission, board, agency or
instrumentality, and any court, tribunal, arbitral or judicial
body, in each case whether federal, state, county, provincial,
and whether local, state, foreign or multinational.
(ll) Hazardous Substance shall mean
(i) any petroleum products or byproducts, radioactive
materials, asbestos or polychlorinated biphenyls or
(ii) any substance, material or waste that is characterized
or regulated under any Environmental Law as
hazardous, pollutant,
contaminant, toxic or words of similar
meaning or effect.
(mm) HSR Act shall mean the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder, or any successor
statute, rules and regulations thereto.
(nn) Indebtedness shall mean
(i) any indebtedness for borrowed money (including the
issuances of any debt security) to any Person other than the
Company or any of its Subsidiaries, (ii) any capital lease
obligations to any Person other than the Company or any of its
Subsidiaries, (iii) any guarantee of any such indebtedness
or any debt securities of any Person other than the Company or
any of its Subsidiaries, other than letters of credit, bonds and
other similar instruments supporting performance obligations
entered into in the ordinary course of business and set forth on
Section 1.1(nn) of the Company Disclosure Letter, or
(iv) any keep well or other agreements to
maintain any financial statement condition of any Person other
than the Company or any of its Subsidiaries.
(oo) Intellectual Property shall mean
any or all of the following: (i) proprietary inventions
(whether patentable or not), invention disclosures, industrial
designs, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing;
(ii) business, technical and know-how information,
non-public information, and confidential information and rights
to limit the use or disclosure thereof by any Person including
databases and data collections and all rights therein;
(iii) works of authorship (including computer programs,
source code, object code, whether embodied in software, firmware
or otherwise), architecture, documentation, files, records,
circuit masks, schematics, verilog files, netlists, emulation
and simulation
A-9
reports, test vectors and hardware development tools and
(iv) any other technology or similar or equivalent tangible
or intangible matter of any of the foregoing (as applicable).
(pp) Intellectual Property Rights shall
mean any or all of the following and all worldwide common law
and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals,
continuations and
continuations-in-part
thereof (Patents); (ii) copyrights,
copyrights registrations and applications therefor, mask work
rights, mask work registrations, and applications therefor,
rights of privacy and publicity, and all other rights
corresponding to any of the foregoing throughout the world
including moral and economic rights of authors and inventors,
however denominated (Copyrights);
(iii) industrial designs and any registrations and
applications therefor; (iv) trade names, logos, common law
trademarks and service marks, Domain Names and registrations and
applications for any of the foregoing
(Trademarks); (v) trade secrets,
business, technical and know-how information, non-public
information, and confidential information and rights to limit
the use or disclosure thereof by any Person; including data,
databases and data collections and all rights therein
(Trade Secrets); and (vi) any similar or
equivalent rights to any of the foregoing (as applicable).
(qq) IRS shall mean the United States
Internal Revenue Service or any successor thereto.
(rr) Knowledge of the Company with
respect to any matter in question, shall mean the actual
knowledge of any directors or executive officers of the Company.
(ss) Knowledge of Newco with respect to
any matter in question, shall mean the actual knowledge of
(i) Mark Nunnelly, Jonathan Zhu or Craig Boyce of Bain
Capital and (ii) Guo Ping, Ren Zhengfei and Henry Lin of
Huawei.
(tt) Law shall mean any and all
applicable federal, state, local, municipal, foreign or other
law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or
other requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the
authority of any Governmental Authority.
(uu) Legal Proceeding shall mean any
action, claim, suit, litigation, proceeding (public or private)
or criminal prosecution by or before any Governmental Authority.
(vv) Liabilities shall mean any
liability, obligation or commitment of any kind (whether known,
unknown, incurred, consequential, accrued, unaccrued, asserted,
unasserted, determined, undeterminable, absolute, contingent,
matured, unmatured or otherwise and whether or not required to
be recorded or reflected on a balance sheet prepared in
accordance with GAAP).
(ww) Licensed Company Intellectual
Property shall mean all Company Intellectual Property
and Company Intellectual Property Rights, other than the Owned
Company Intellectual Property.
(xx) Lien shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance,
claim, option, right of first refusal, preemptive right,
community property interest or restriction of any nature
(including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any
restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
(yy) Marketing Period shall mean the
first period of twenty (20) consecutive Business Days
throughout which Newco shall have the Required Information that
the Company is required to provide to Newco pursuant to
Section 6.4(a), which period shall not in any event
begin prior to the date that is thirteen Business Days before
the date on which the Company Stockholder Meeting is duly held
and convened (at which meeting the stockholders vote on the
Merger); provided that, that the Marketing
Period shall not be deemed to have commenced if, prior to
the completion of such twenty (20) Business Day period,
(i) Deloitte & Touche LLP shall have withdrawn
its audit opinion with respect to any of the Financial
Statements, in which case the Marketing Period shall not be
deemed to commence until such time as Deloitte &
Touche LLP (or another accounting firm engaged by the Company
and reasonably acceptable to Newco) has rendered an audit
opinion with respect to such Financial Statements, (ii) the
A-10
Company shall have publicly announced or announced to Newco or
Merger Sub (A) any intention to restate any of its
financial information included in the Required Information or
(B) that any such restatement is under consideration or may
be a possibility, in which case the Marketing Period shall not
be deemed to commence until such restatement has been completed
and the Company SEC Reports have been amended or the Company has
announced that it has concluded that no restatement shall be
required or (iii) the financial statements included in the
Required Information that are available to Newco on the first
day of such 20 day period would not be sufficiently current
to fulfill the conditions set forth in paragraph (c) or
(d) of Exhibit C of each of the Debt Commitment
Letters (in each case, as in effect on the date hereof, whether
or not such Debt Commitment Letters are in effect).
(zz) Nasdaq shall mean the NASDAQ Global
Select Market, any successor inter-dealer quotation system
operated by the Nasdaq Stock Market, Inc., or any successor
thereto.
(aaa) Newco Default Fee shall mean an
amount in cash equal to $110,000,000.
(bbb) Newco Termination Fee shall mean
an amount in cash equal to $66,000,000.
(ccc) Order shall mean any order,
judgment, decision, decree, injunction, ruling, writ or
assessment of any Governmental Authority (whether temporary,
preliminary or permanent) that is binding on any Person or its
property under applicable Law.
(ddd) Owned Company Intellectual
Property shall mean that portion of the Company
Intellectual Property and Company Intellectual Property Rights
that is owned by, or registered or held in the name of, the
Company and its Subsidiaries.
(eee) Permitted Liens shall mean any of
the following: (i) Liens for Taxes, assessments and
governmental charges or levies either not yet due and payable or
the amount and validity of which are being contested in good
faith by appropriate proceedings and for which appropriate
reserves have been established on the Financial Statements in
accordance with GAAP; (ii) mechanics, carriers,
workmens, warehousemans, repairmens,
materialmens or other Liens arising in the ordinary course
of business securing obligations that are not yet due or that
are being contested in good faith and by appropriate proceedings
and for which appropriate reserves have been established on the
Financial Statements in accordance with GAAP; (iii) Liens
imposed by applicable Law (other than Tax Law) arising in the
ordinary course of business; (iv) pledges or deposits to
secure obligations under workers compensation Laws or
similar legislation or to secure public or statutory
obligations; (v) pledges and deposits to secure the
performance of bids, trade contracts (other than for borrowed
money), leases, surety and appeal bonds, performance bonds and
other obligations of a similar nature, in each case in the
ordinary course of business; (vi) defects, imperfections or
irregularities in title, easements, covenants and rights of way
(unrecorded and of record) and other similar restrictions, and
zoning, building and other similar codes or restrictions, in
each case that do not adversely affect in any material respect
the current use of the applicable property owned, leased, used
or held for use by the Company or any of its Subsidiaries;
(vii) Liens the existence of which are disclosed on the
face of the notes to the consolidated financial statements of
the Company included in the Companys Annual Report on
Form 10-K
for the fiscal year ended June 1, 2007; (viii) any
Liens disclosed on Section 1.1(eee) of the Company
Disclosure Letter; and (ix) statutory or common law liens
of landlords.
(fff) Person shall mean any individual,
corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other
enterprise, association, organization, entity or Governmental
Authority.
(ggg) Sarbanes-Oxley Act shall mean the
Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations promulgated thereunder, or any successor statute,
rules or regulations thereto.
(hhh) SEC shall mean the United States
Securities and Exchange Commission or any successor thereto.
A-11
(iii) Securities Act shall mean the
Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, or any successor statute,
rules or regulations thereto.
(jjj) Significant Subsidiary shall mean
H3C and its Subsidiaries, Tipping Point and its Subsidiaries and
each Subsidiary of the Company set forth in the Companys
Annual Report on
Form 10-K
for the fiscal year ended June 1, 2007, or in any exhibit
or schedule thereto.
(kkk) Subsidiary of any Person shall
mean (i) a corporation more than fifty percent (50%) of the
combined voting power of the outstanding voting stock or the
equity interests of which is owned, directly or indirectly, by
such Person or by one of more other Subsidiaries of such Person
or by such Person and one or more other Subsidiaries thereof,
(ii) a partnership of which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more
other Subsidiaries thereof, directly or indirectly, is the
general partner and has the power to direct the policies,
management and affairs of such partnership or owns a majority of
the equity interests, (iii) a limited liability company of
which such Person or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, is the managing member and has
the power to direct the policies, management and affairs of such
company or owns a majority of the equity interests, or
(iv) any other Person (other than a corporation,
partnership or limited liability company) in which such Person,
or one or more other Subsidiaries of such Person or such Person
and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership or power to direct
the policies, management and affairs thereof.
(lll) Superior Proposal shall mean any
bona fide written Acquisition Proposal (provided
that, for purposes of this definition, all references in the
definition of Acquisition Transaction to twenty percent
(20%) shall be references to fifty percent
(50%) and the reference therein to eighty percent
(80%) shall be a reference to fifty percent
(50%)) with respect to which the Company Board shall have
determined in good faith (after consultation with its
independent financial advisor and outside legal counsel, it
being understood and agreed that the independence of
the Company Boards independent financial advisor will be
determined by the Company Board) that the Acquisition
Transaction contemplated by such Acquisition Proposal would be
more favorable to the Company Stockholders (in their capacity as
such) than the Merger, after taking into account all the terms
and conditions of such proposal (including the financial aspects
of such proposal, the likelihood, ability to finance,
conditionality and timing of consummation of such proposal) and
this Agreement (including any changes to the terms of this
Agreement proposed by Newco to the Company in writing in
response to such proposal or otherwise).
(mmm) Tax shall mean any and all
foreign, federal, state, national, provincial, territorial,
local and other taxes, including taxes, charges, fees, imposts,
levies, duties or other assessments, including all gross
receipts, gross income, net income, capital, profits, sales,
use, occupation, value added, ad valorem, estimated, intangible,
unitary, lease, service, premium, transfer, conveyance,
franchise, branch, license, registration, withholding, backup
withholding, payroll, recapture, employment, social security,
unemployment, disability, severance, stamp, excise, occupation,
property, prohibited transactions, windfall or excess profits,
customs duties, foreign enterprise income, enterprise income,
local income, individual income, deed, business, land value
appreciation taxes, together with all interest, penalties,
fines, additions to tax or additional amounts imposed with
respect to such amounts.
(nnn) Tipping Point Financial Statements
shall mean the Tipping Point Financial Statements included in
the Required Information.
1.2 Additional Definitions. The following
capitalized terms shall have the respective meanings ascribed
thereto in the respective sections of this Agreement set forth
opposite each of the capitalized terms below:
|
|
|
Term
|
|
Section Reference
|
|
Agreement
|
|
Preamble
|
Alternative Financing
|
|
6.4(b)
|
Assets
|
|
3.14
|
A-12
|
|
|
Term
|
|
Section Reference
|
|
Bain Capital
|
|
Recitals
|
Certificates
|
|
2.8(c)
|
Certificate of Merger
|
|
2.2
|
Closing
|
|
2.3
|
Closing Date
|
|
2.3
|
Collective Bargaining Agreement
|
|
3.18(a)
|
Company
|
|
Preamble
|
Company Board Recommendation
|
|
3.1(b)
|
Company Disclosure Letter
|
|
Art. III
|
Company Intellectual Property Agreements
|
|
3.15(b)
|
Company Rights Plan
|
|
Recitals
|
Company SEC Reports
|
|
3.8
|
Company Securities
|
|
3.7(c)
|
Company Stockholder Meeting
|
|
5.4
|
Consent
|
|
3.4
|
D&O Insurance
|
|
6.8(c)
|
Debt Commitment Letters
|
|
4.10(a)
|
Debt Financing
|
|
4.10(a)
|
Delaware Secretary of State
|
|
2.2
|
DGCL
|
|
Recitals
|
Dissenting Company Shares
|
|
2.7(c)(i)
|
Effective Time
|
|
2.2
|
Employee Plans
|
|
3.17(a)
|
Equity Commitment Letter
|
|
4.10(a)
|
Equity Financing
|
|
4.10(a)
|
ERISA Affiliate
|
|
3.17(a)
|
Exchange Fund
|
|
2.8(b)
|
Financing
|
|
4.10(a)
|
Financing Commitment Letters
|
|
4.10(a)
|
Funded International Employee Plan
|
|
3.17(h)(ii)
|
Guarantors
|
|
Recitals
|
Huawei
|
|
Recitals
|
Indemnified Persons
|
|
6.8(a)
|
International Employee Plans
|
|
3.17(a)
|
Leased Real Property
|
|
3.13(b)
|
Leases
|
|
3.13(b)
|
Limited Guarantees
|
|
Recitals
|
Material Contract
|
|
3.12(a)
|
Maximum Annual Premium
|
|
6.8(c)
|
Merger
|
|
2.1
|
Merger Sub
|
|
Preamble
|
Newco
|
|
Preamble
|
Other Required Company Filings
|
|
3.29(a)
|
Other Required Newco Filings
|
|
4.6(a)
|
A-13
|
|
|
Term
|
|
Section Reference
|
|
Payment Agent
|
|
2.8(a)
|
Per Share Price
|
|
2.7(a)(i)
|
Permits
|
|
3.19
|
Proxy Statement
|
|
3.29(a)
|
Recommendation Change
|
|
5.3(a)
|
Required Information
|
|
6.4(a)
|
Requisite Stockholder Approval
|
|
3.2
|
Rights Plan Amendment
|
|
Recitals
|
Specified Person
|
|
8.3(g)
|
Subsidiary Securities
|
|
3.6(b)
|
Surviving Corporation
|
|
2.1
|
Tax Returns
|
|
3.16(a)
|
Termination Date
|
|
8.1(b)
|
1.3 Certain Interpretations.
(a) Unless otherwise indicated, all references herein to
Articles, Sections, Annexes, Exhibits or Schedules, shall be
deemed to refer to Articles, Sections, Annexes, Exhibits or
Schedules of or to this Agreement, as applicable.
(b) Unless otherwise indicated, the words
include, includes and
including, when used herein, shall be deemed in each
case to be followed by the words without limitation.
(c) The table of contents and headings set forth in this
Agreement are for convenience of reference purposes only and
shall not affect or be deemed to affect in any way the meaning
or interpretation of this Agreement or any term or provision
hereof.
(d) When reference is made herein to a Person, such
reference shall be deemed to include all direct and indirect
Subsidiaries of such Person unless otherwise indicated or the
context otherwise requires.
(e) When reference is made herein to ordinary course
of business, such reference shall be deemed to mean
ordinary course of the Companys business and
consistent with the Companys past practices.
(f) Unless otherwise indicted, all references herein to the
Subsidiaries of a Person shall be deemed to include all direct
and indirect Subsidiaries of such Person unless otherwise
indicated or the context otherwise requires.
(g) The parties hereto agree that they have been
represented by counsel during the negotiation and execution of
this Agreement and, therefore, waive the application of any Law,
holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party
drafting such agreement or document.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and
subject to the conditions set forth in this Agreement and the
applicable provisions of the DGCL, at the Effective Time, Merger
Sub shall be merged with and into the Company (the
Merger), the separate corporate existence of
Merger Sub shall thereupon cease and the Company shall continue
as the surviving corporation of the Merger. The Company, as the
surviving corporation of the Merger, is sometimes referred to
herein as the Surviving Corporation.
2.2 The Effective Time. Upon the terms
and subject to the conditions set forth in this Agreement, on
the Closing Date, Newco, Merger Sub and the Company shall cause
the Merger to be consummated under the
A-14
DGCL by filing a certificate of merger in customary form and
substance (the Certificate of Merger) with
the Secretary of State of the State of Delaware (the
Delaware Secretary of State) in accordance
with the applicable provisions of the DGCL (the time of such
filing and acceptance by the Delaware Secretary of State, or
such later time as may be agreed in writing by Newco, Merger Sub
and the Company and specified in the Certificate of Merger,
being referred to herein as the Effective
Time).
2.3 The Closing. The consummation of the
Merger (the Closing) shall take place at a
closing to occur at the offices of Ropes & Gray LLP at
1211 Avenue of the Americas, New York, New York 10036 on a date
and at a time to be agreed upon by Newco, Merger Sub and the
Company, which date shall be no later than the third (3rd)
Business Day after the satisfaction or waiver (to the extent
permitted hereunder) of the last to be satisfied or waived of
the conditions set forth in Article VII (other than
those conditions that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or waiver (to the
extent permitted hereunder and by Law) of such conditions) (the
Satisfaction Date), or at such other
location, date and time as Newco, Merger Sub and the Company
shall mutually agree upon in writing; provided that, if
the Marketing Period has not ended by the Satisfaction Date, the
Closing shall occur on the date following the Satisfaction Date
that is earliest to occur of (a) a date before the end of
the Marketing Period to be specified by Newco on not less than
three (3) days written notice to the Company and
(b) the final day of the Marketing Period. The date upon
which the Closing shall actually occur pursuant hereto is
referred to herein as the Closing Date.
2.4 Effect of the Merger. At the
Effective Time, the effect of the Merger shall be as provided in
this Agreement and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all of the property, rights,
privileges, powers and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall
become the debts, liabilities and duties of the Surviving
Corporation.
2.5 Certificate of Incorporation and Bylaws.
(a) Certificate of Incorporation. At the
Effective Time, subject to the provisions of
Section 6.8(a), the Certificate of Incorporation of
the Company shall be amended to read in its entirety in the form
of the Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time and such Certificate of
Incorporation, as amended, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the applicable provisions of the DGCL
and such Certificate of Incorporation.
(b) Bylaws. At the Effective Time,
subject to the provisions of Section 6.8(a), the
Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall become the Bylaws of the Surviving
Corporation until thereafter amended in accordance with the
applicable provisions of the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
2.6 Directors and Officers.
(a) Directors. At the Effective Time, the
initial directors of the Surviving Corporation shall be the
directors of Merger Sub immediately prior to the Effective Time,
each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until
their respective successors are duly elected or appointed and
qualified.
(b) Officers. At the Effective Time, the
initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time,
each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until
their respective successors are duly appointed.
2.7 Effect on Capital Stock.
(a) Capital Stock. Upon the terms and
subject to the conditions set forth in this Agreement, at the
Effective Time, by virtue of the Merger and without any action
on the part of Newco, Merger Sub, the Company, or the holders of
any of the following securities, the following shall occur:
(i) Company Common Stock. Each share of
Company Common Stock that is outstanding immediately prior to
the Effective Time (other than (A) shares of Company Common
Stock owned by Newco,
A-15
Merger Sub or the Company, or by any direct or indirect
wholly-owned Subsidiary of Newco, Merger Sub or the Company, in
each case immediately prior to the Effective Time, and
(B) any Dissenting Company Shares) shall be canceled and
extinguished and automatically converted into the right to
receive cash in an amount equal to $5.30 (individually, the
Per Share Price and, in the aggregate, the
Share Consideration), without interest
thereon, upon the surrender of the certificate representing such
share of Company Common Stock in the manner provided in
Section 2.8 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner provided in Section 2.10).
(ii) Owned Company Common Stock. Each
share of Company Common Stock owned by Newco, Merger Sub, or any
direct or indirect Subsidiary of Newco or Merger Sub or held in
treasury by the Company, in each case immediately prior to the
Effective Time, shall be cancelled and extinguished without any
conversion thereof or consideration paid therefor.
(iii) Capital Stock of Merger Sub. Each
share of common stock, par value $0.01 per share, of Merger Sub
that is outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and
nonassessable share of common stock par value $0.01 per share of
the Surviving Corporation. Each certificate evidencing ownership
of such shares of common stock of Merger Sub shall thereafter
evidence ownership of shares of common stock of the Surviving
Corporation.
(b) Adjustment to Per Share Price. The
Per Share Price shall be adjusted appropriately (without
duplication) to reflect the economic effect as contemplated by
this Agreement of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities
convertible into Company Common Stock), reorganization,
recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Company Common Stock
occurring on or after the date hereof and prior to the Effective
Time.
(c) Statutory Rights of Appraisal.
(i) Notwithstanding anything to the contrary set forth in
this Agreement, all shares of Company Common Stock that are
issued and outstanding immediately prior to the Effective Time
and held by Company Stockholders who shall have neither voted in
favor of the Merger nor consented thereto in writing and who
shall have properly and validly perfected their statutory rights
of appraisal in respect of such shares of Company Common Stock
in accordance with Section 262 of the DGCL (collectively,
Dissenting Company Shares) shall not be
converted into, or represent the right to receive, the Per Share
Price pursuant to Section 2.7(a). Such Company
Stockholders shall be entitled to receive payment of the
consideration that is deemed to be due for such Dissenting
Company Shares in accordance with the provisions of
Section 262 of the DGCL, except that all Dissenting Company
Shares held by Company Stockholders who shall have failed to
perfect or who shall have effectively withdrawn or lost their
rights to appraisal of such Dissenting Company Shares under such
Section 262 of the DGCL shall no longer be considered to be
Dissenting Shares and 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 Per Share Price,
without interest thereon, upon surrender of the certificate or
certificates that formerly evidenced such shares of Company
Common Stock in the manner provided in Section 2.8.
(ii) The Company shall give Newco (A) prompt notice of
any demands for appraisal received by the Company, withdrawals
of such demands, and any other instruments received by the
Company in respect of Dissenting Company Shares and (B) the
opportunity to control all negotiations and proceedings with
respect to demands for appraisal in respect of Dissenting
Company Shares. The Company shall not, except with the prior
written consent of Newco, voluntarily make any payment with
respect to any demands for appraisal, or settle or offer to
settle any such demands for payment, in respect of Dissenting
Company Shares.
(d) Company Stock-Based
Awards. Immediately prior to the Effective Time,
except as otherwise agreed to by Newco and a holder of a Company
Stock-Based Award, the Company shall take all action necessary
such that (i) all outstanding Company Stock-Based Awards
not previously vested pursuant to a Company Stock Plan shall
become free of all restrictions and limitations and become fully
vested and transferable, (ii) each
A-16
share or fractional share of Company Common Stock (if any) to be
issued in connection with a Company Stock-Based Award in
accordance with the applicable Company Stock Plan or Employee
Plan shall be treated as a share or fractional share of Company
Common Stock in accordance with Section 2.7(a)(i)
and (iii) each Company Stock Based Award shall be cancelled
and terminated as of the Effective Time. The Company shall take
all actions necessary to effect the transactions contemplated by
this Section 2.7(d) under all Company Stock Plans
and any other plan or arrangement of the Company, including
delivering all notices and making any determinations
and/or
resolutions of the Company Board or a committee thereof.
(e) Company Options. Except as otherwise
agreed by Newco and a holder of a Company Option, Newco shall
not assume any Company Options in connection with the Merger or
any other transactions contemplated by this Agreement. Upon the
terms and subject to the conditions set forth in this Agreement,
except as otherwise agreed to by Newco and a holder of a Company
Option, the Company shall take such action as may be necessary
so that immediately prior to the Effective Time by virtue of and
subject to the Merger, the vesting of each Company Option that
remains outstanding as of immediately prior to the Effective
Time shall be accelerated in full in accordance with the terms
thereof and thereupon cancelled and automatically converted into
the right to receive an amount in cash (without interest), if
any, equal to the product obtained by multiplying (x) the
aggregate number of shares of Company Common Stock that were
issuable upon exercise of such Company Option immediately prior
to the Effective Time, and (y) the Per Share Price,
less the per share exercise price of such Company Option
(the Option Consideration and, together with
the Share Consideration, the Merger
Consideration) (it being understood and agreed that
such exercise price shall not actually be paid to the Company by
the holder of a Company Option). Newco shall, or shall cause the
Company to, pay to holders of Company Options the Option
Consideration, without interest thereon, less applicable Taxes
required to be withheld with respect to such payments, as soon
as reasonably practicable following the Effective Time. To the
extent that Taxes are deducted or withheld from the Option
Consideration, such amounts shall be treated for all purposes
under this Agreement as having been paid to and received by the
Person to whom such amounts would otherwise have been paid. The
Company shall take all actions necessary to effect the
transactions contemplated by this Section 2.7(e)
under all Company Option agreements and any other plan or
arrangement of the Company, including delivering all required
notices and making any determinations
and/or
resolutions of the Company Board or a committee thereof.
(f) Company ESPP.
(i) Prior to the Effective Time, the Company shall take all
actions necessary to cause the rights of participants in the
Company ESPP with respect to any offering period then underway
to be determined by treating the last business day prior to, or
if more administratively advisable, the last payroll date of the
Company immediately prior to, the Effective Time, as the last
day of such offering period and by making such other pro-rata
adjustments as may be necessary to reflect the shortened and
final offering period but otherwise treating such shortened and
final offering period as a fully effective and completed
offering period for all purposes under the Company ESPP.
(ii) Except as otherwise agreed by Parent and a
participant, each share of Common Stock purchased under the
Company ESPP prior to the Effective Time will be treated as a
share of Common Stock in accordance with
Section 2.7(a)(i).
(iii) The Company shall take all actions necessary so that
the Company ESPP shall terminate immediately after the purchase
described in Section 2.7(f)(i). All amounts withheld
by the Company on behalf of the participants in the Company ESPP
that have not been used to purchase Common Stock prior to the
Effective Time will be returned to the participants without
interest pursuant to the terms of the Company ESPP.
(iv) The Company agrees to take any and all actions
necessary to approve and effectuate the foregoing provisions of
this Section 2.7(f) including making any
determinations
and/or
resolutions of the Company Board or a committee thereof.
2.8 Exchange of Certificates.
(a) Payment Agent. Prior to the Effective
Time, Newco shall select a bank or trust company reasonably
acceptable to the Company to act as the payment agent for the
Merger (the Payment Agent).
A-17
(b) Exchange Fund. At the Closing, Newco
shall deposit (or cause to be deposited) with the Payment Agent,
for payment to the holders of shares of Company Common Stock
pursuant to the provisions of this Article II, an
amount of cash equal to the aggregate Share Consideration (such
fund, the Exchange Fund). The Exchange Fund
shall not be used for any other purpose. Until disbursed in
accordance with the terms and conditions of this Agreement, the
Exchange Fund shall be invested by the Paying Agent, as directed
by Newco or the Surviving Corporation, in obligations of or
guaranteed by the United States of America or obligations of an
agency of the United States of America or any agency or
instrumentality thereof which are backed by the full faith and
credit of the United States of America, in commercial paper
obligations rated
A-1 or
P-1 or
better by Moodys Investors Services Inc. or
Standard & Poors Corporation, or in deposit
accounts, certificates of deposit or bankers acceptances
of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks, each
of which has capital, surplus and undivided profits aggregating
more than $500 million (based on the most recent financial
statements of the banks which are then publicly available at the
SEC or otherwise). Any interest and other income resulting from
such investments shall be paid to the Surviving Corporation. To
the extent that there are any losses with respect to any such
investments, or the Exchange Fund diminishes for any reason
below the level required for the Paying Agent to promptly pay
the cash amounts contemplated by this Article II, Newco
shall, promptly replace or restore (or cause to be replaced or
restored) the cash in the Exchange Fund so as to ensure that the
Exchange Fund is at all times maintained at a level sufficient
for the Paying Agent to pay any outstanding Share Consideration.
(c) Payment Procedures. Promptly
following the Effective Time, Newco and the Surviving
Corporation shall cause the Payment Agent to mail to each holder
of record (as of immediately prior to the Effective Time) of a
certificate or certificates (the
Certificates) which immediately prior to the
Effective Time represented outstanding shares of Company Common
Stock who is entitled to receive the Per Share Price pursuant to
Section 2.7(a)(i): (i) a letter of transmittal
in customary form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Payment
Agent), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Per Share
Price payable in respect thereof pursuant to the provisions of
this Article II. Upon surrender of Certificates for
cancellation to the Payment Agent or to such other agent or
agents as may be appointed by Newco, together with such letter
of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other
documents as may be required by the instructions, the holders of
such Certificates shall be entitled to receive in exchange
therefor an amount in cash equal to the product obtained by
multiplying (x) the aggregate number of shares of Company
Common Stock evidenced by such Certificate, by (y) the Per
Share Price (less any applicable withholding taxes payable in
respect thereof), without any interest thereon, and the
Certificates so surrendered shall forthwith be canceled. The
Payment Agent shall accept such Certificates upon compliance
with such reasonable terms and conditions as the Payment Agent
may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. No interest shall be paid or
accrued for the benefit of holders of the Certificates on the
Per Share Price payable upon the surrender of such Certificates
pursuant to this Section 2.8. Until so surrendered,
outstanding Certificates shall be deemed from and after the
Effective Time, to evidence only the right to receive the Per
Share Price (less any applicable withholding taxes payable in
respect thereof), without interest thereon, payable in respect
thereof pursuant to the provisions of this
Article II. Promptly following the Effective Time,
Newco and the Surviving Corporation shall cause the Payment
Agent to mail to each holder of record (as of immediately prior
to the Effective Time) of outstanding shares of Company Common
Stock who is entitled to receive the Per Share Price pursuant to
Section 2.7(a)(i) represented by book-entry on the
records of the Company or the Companys transfer agent on
behalf of the Company: (A) a letter of transmittal in
customary form and (B) instructions for use in effecting
the surrender of the book-entry shares in exchange for the Per
Share Price payable in respect thereof pursuant to the
provisions of Article II. Upon return of a duly completed
and validly executed letter of transmittal (in accordance with
the instructions thereto), and such other documents that may be
required by the instructions, the holders of such book-entry
shares shall be entitled to receive in exchange thereof a check
in an amount equal to the product obtained by multiplying
(x) the aggregate number of shares of Company Common Stock
held by such holder immediately prior to the Effective Time, and
(y) the Per Share Price, less any applicable
withholding taxes payable in respect thereof, without any
interest thereon.
A-18
(d) Transfers of Ownership. In the event
that a transfer of ownership of shares of Company
Common Stock is not registered in the stock transfer books
or ledger of the Company, or if the Per Share Price is to be
paid in a name other than that in which the Certificates
surrendered in exchange therefor are registered in the stock
transfer books or the ledger of the Company, the Per Share Price
may be paid to a Person other than the Person in whose name the
Certificate so surrendered is registered in the stock transfer
books or ledger of the Company only if such Certificate is
properly endorsed and otherwise in proper form for surrender and
transfer and the Person requesting such payment has paid to
Newco (or any agent designated by Newco) any transfer or other
Taxes required by reason of the payment of the Per Share Price
to a Person other than the registered holder of such
Certificate, or established to the satisfaction of Newco (or any
agent designated by Newco) that such transfer or other Taxes
have been paid or are otherwise not payable.
(e) Required Withholding. Each of the
Payment Agent, Newco and the Surviving Corporation shall be
entitled to deduct and withhold from any amounts payable
pursuant to this Agreement to any holder or former holder of
shares of Company Common Stock, Company-Based Stock Awards and
Company Options such amounts as may be required to be deducted
or withheld therefrom under all applicable Tax Laws and shall
pay such amount over to the appropriate taxing authority. To the
extent that such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement
as having been paid to and received by the Person to whom such
amounts would otherwise have been paid.
(f) No Liability. Notwithstanding
anything to the contrary set forth in this Agreement, none of
the Payment Agent, Newco, the Surviving Corporation or any other
party hereto shall be liable to a holder of shares of Company
Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or
similar Law.
(g) Distribution of Exchange Fund to the Surviving
Corporation. Any portion of the Exchange Fund
that remains undistributed to the holders of the shares of
Company Common Stock on the date that is twelve (12) months
after the Effective Time shall be delivered to the Surviving
Corporation upon demand, and any holders of shares of Company
Common Stock that were issued and outstanding immediately prior
to the Merger who have not theretofore surrendered such shares
of Company Common Stock for exchange pursuant to the provisions
of this Section 2.8 shall thereafter look for
payment of the Per Share Price payable in respect of the shares
of Company Common Stock to the Surviving Corporation, as general
creditors thereof, for any claim to the applicable Per Share
Price to which such holders may be entitled pursuant to the
provisions of this Article II. Any portion of the
Exchange Fund remaining unclaimed as of a date which is
immediately prior to such time as such amounts would otherwise
escheat to or become property of any Governmental Authority
shall, to the extent permitted by Law, become property of the
Surviving Corporation, free and clear of any claims or interest
of any Person previously entitled thereto.
2.9 No Further Ownership Rights in Company Common
Stock. From and after the Effective Time, all
shares of Company Common Stock (whether held in certificated
form or uncertificated and registered on the books of the
Company) shall no longer be outstanding and shall automatically
be cancelled, retired and cease to exist, and each holder
thereof (other than Dissenting Company Shares) shall cease to
have any rights with respect thereto, except the right to
receive the Per Share Price payable therefor upon the surrender
thereof in accordance with the provisions of
Section 2.8. The Per Share Price paid in accordance
with the terms of this Article II shall be deemed to
have been paid in full satisfaction of all rights pertaining to
such shares of the Company Common Stock. From and after the
Effective Time, there shall be no further registration of
transfers on the records of the Surviving Corporation of shares
of Company Common Stock that were issued and outstanding
immediately prior to the Effective Time, other than transfers to
reflect, in accordance with customary settlement procedures,
trades effected prior to the Effective Time. If, after the
Effective Time, shares of Common Stock of the Company are
presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this
Article II.
2.10 Lost, Stolen or Destroyed
Certificates. In the event that any Certificates
shall have been lost, stolen or destroyed, the Payment Agent
shall issue in exchange for such lost, stolen or destroyed
Certificates, upon making of an affidavit of that fact by the
holder thereof, the Per Share Price payable in respect thereof
pursuant to Section 2.7; provided, however,
that the Surviving Corporation may, in its discretion and as a
A-19
condition precedent to the payment of such Per Share Price,
require the owners of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against
Newco, the Surviving Corporation or the Payment Agent with
respect to the Certificates alleged to have been lost, stolen or
destroyed.
2.11 Necessary Further Actions. If, at
any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub,
the directors and officers of the Company and Merger Sub shall
take all such lawful and necessary action.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except (i) as set forth in the disclosure schedules
delivered by the Company to Newco on the date of this Agreement
(the Company Disclosure Letter), or
(ii) other than with respect to the representations and
warranties set forth in Section 3.7
Section 3.9(e), Section 3.9(f) and
Section 3.12(a)(vi) as set forth in the Company SEC
Reports filed and publicly available between January 1,
2007 and the date of this Agreement (excluding for purposes
hereof the exhibits thereto and the Excluded Disclosures), the
Company hereby represents and warrants to Newco and Merger Sub
as follows:
3.1 Authorization.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and subject, in
the case of the consummation of the Merger, to obtaining the
Requisite Stockholder Approval, to consummate the transactions
contemplated hereby and to perform its obligations hereunder.
The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of the Company and no additional corporate
proceedings on the part of the Company are necessary to
authorize this Agreement or the consummation of the transactions
contemplated hereby other than obtaining the Requisite
Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery by Newco and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that
such enforceability (i) may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors rights generally, and
(ii) is subject to general principles of equity.
(b) The Company Board, at a meeting duly called and held at
which all directors were present, unanimously
(i) determined that the terms of the Merger are fair and in
the best interests of the Company and its stockholders, and
declared it advisable, to enter into this Agreement providing
for the merger of Merger Sub with and into the Company in
accordance with the DGCL, upon the terms and subject to the
conditions set forth herein, (ii) approved the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby in accordance with the
DGCL upon the terms and conditions contained herein, and
(iii) resolved to recommend that the Company Stockholders
adopt this Agreement in accordance with the applicable
provisions of the DGCL (the Company Board
Recommendation).
3.2 Requisite Stockholder Approval. The
affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock (the Requisite
Stockholder Approval) is the only vote of the holders
of any class or series of Company Capital Stock that is
necessary to adopt and approve this Agreement and consummate the
transactions contemplated by this Agreement.
3.3 Non-Contravention and Required
Consents. The execution, delivery or performance
by the Company of this Agreement, the consummation by the
Company of the transactions contemplated hereby and the
compliance by the Company with any of the provisions hereof do
not and will not (a) violate or conflict with any provision
of the Companys Amended and Restated Certificate of
Incorporation and Bylaws, (b) subject to obtaining such
Consents set forth in Section 3.4, violate, conflict
with, or result in the breach of or constitute a
A-20
default (or an event which with notice or lapse of time or both
would become a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right
of termination or acceleration under, any Material Contract,
(c) assuming the Consents set forth in
Section 3.4 are obtained, in the case of the
consummation of the Merger, subject to obtaining the Requisite
Stockholder Approval, violate or conflict with any Law or Order
applicable to the Company or any of its Subsidiaries or by which
any of their properties or assets are bound, or (d) result
in the creation of any Lien upon any of the properties or assets
of the Company or any of its Subsidiaries, except in the case of
each of clauses (b), (c) and (d) above, for such
violations, conflicts, defaults, terminations, accelerations or
Liens which individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material
Adverse Effect or prevent or materially delay or impede the
consummation of the transactions contemplated by this Agreement
or the ability of the Company to perform its covenants or
obligations under this Agreement.
3.4 Required Governmental Approvals. No
consent, approval, Order or authorization of, or filing,
declaration or registration with, or notification to (any of the
foregoing being a Consent), any Governmental
Authority is required on the part of the Company in connection
with the execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the
transactions contemplated hereby, except (a) the filing and
recordation of the Certificate of Merger with the Secretary of
State of the State of Delaware, (b) such filings and
approvals as may be required by any federal or state securities
laws, including compliance with any applicable requirements of
the Exchange Act, (c) filings required under, and
compliance with any other applicable requirements of, the HSR
Act and any applicable foreign Antitrust Laws, and (d) such
other Consents, the failure of which to obtain has not had and
would not reasonably be expected to have a Company Material
Adverse Effect.
3.5 Organization and Standing. The
Company and Tipping Point Technologies, Inc. (Tipping
Point) are corporations duly organized, validly
existing and in good standing under Delaware Law. H3C
Technologies Co., Limited (H3C) is a company
duly organized and validly existing under the Companies
Ordinance (Chapter 32 of the laws of Hong Kong). Each of
the Companys Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its respective organization (to the extent the good
standing concept is applicable in the case of any
jurisdiction outside the United States), except in the case of
the Companys Subsidiaries other than H3C or Tipping Point,
where the failure to be in good standing has not had and would
not reasonably be expected to have a Company Material Adverse
Effect. Each of the Company and its Subsidiaries has the
requisite corporate power and authority to carry on its
respective business as it is presently being conducted and to
own, lease or operate its respective properties and assets. Each
of the Company and its Subsidiaries is duly qualified to do
business and is in good standing in each jurisdiction where the
character of its properties owned, leased or licensed by it, or
the nature of its activities make such qualification necessary
(to the extent the good standing concept is
applicable in the case of any jurisdiction outside the United
States), except where the failure to be so qualified or in good
standing has not had and would not reasonably be expected to
have a Company Material Adverse Effect. The Company has
delivered or made available to Newco complete and accurate
copies of the Amended and Restated Certificates of Incorporation
and Bylaws or other constituent documents, as amended to date,
of the Company and its Significant Subsidiaries. Neither the
Company nor any of its Subsidiaries is in violation of its
certificate of incorporation, bylaws or other applicable
constituent documents, except in the case of the Companys
Subsidiaries other than H3C or Tipping Point, for such
violations which have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
3.6 Subsidiaries.
(a) Section 3.6(a) of the Company Disclosure
Letter contains a complete and accurate list (in all material
respects) of the name, jurisdiction of organization and schedule
of stockholders of each Subsidiary of the Company.
(b) There are no issued, reserved for issuance, or
outstanding (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of
capital stock of, or other equity or voting interest in, any
Subsidiary of the Company, (ii) options, warrants, rights
or other commitments or agreements to acquire from the Company
or any of its Subsidiaries, or that obligate the Company or any
of its Subsidiaries
A-21
to issue, any capital stock, option, warrant, call,
subscription, or other equity or voting interest in, or any
securities convertible into or exchangeable for shares of
capital stock, options, warrants, calls, subscriptions, or other
equity or voting interest in, any Subsidiary of the Company,
(iii) obligations of the Company to grant, extend or enter
into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment
relating to any capital stock, option, warrant, call,
subscription, or other equity or voting interest (including any
voting debt) in, any Subsidiary of the Company (the items in
clauses (i), (ii) and (iii), together with the capital
stock of the Subsidiaries of the Company, being referred to
collectively as Subsidiary Securities), or
(iv) other obligations by the Company or any of its
Subsidiaries to make any payments based on the price or value of
any Subsidiary Securities.
3.7 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 990,000,000 shares of Company Common Stock,
and (ii) 10,000,000 shares of Company Preferred Stock.
As of September 25, 2007: (A) 400,406,937 shares
of Company Common Stock were issued and outstanding, of which
2,422,778 shares are unvested restricted stock subject to a
right of repurchase by the Company, (B) no shares of
Company Preferred Stock were issued and outstanding, and
(C) zero shares of Company Capital Stock held by the
Company as treasury shares. All outstanding shares of Company
Common Stock are validly authorized, validly issued, fully paid,
nonassessable and free of any preemptive rights.
(b) The Company has reserved 67,747,585 shares of
Company Common Stock for issuance under the Company Stock Plans.
As of September 25, 2007, there were outstanding Stock
Options to purchase 49,868,215 shares of Company Common
Stock, 6,608,636 shares of outstanding Company Stock-Based
Awards (which does not include the 2,422,778 shares of
unvested restricted stock described in
Section 3.7(a)) and a commitment to grant Stock
Options to purchase 34,000 shares of Company Common Stock
and 39,500 shares of Company Stock-Based Awards. Since such
date, the Company has not granted, committed to grant or
otherwise created or assumed any obligation with respect to any
Stock Options, other than as permitted by
Section 5.1(b). The Company has delivered to Newco a
complete and accurate list of all holders of Company Options and
Stock Based Awards as of September 25, 2007 and, in each
case, the number of shares subject to the Stock Option or Stock
Based Award, the date of grant and, in the case of Stock
Options, the price per share at which such option may be
exercised.
(c) Except as set forth in this Section 3.7,
there are (i) no issued, reserved for issuance, or
outstanding shares of capital stock of, or other equity or
voting interest in, the Company, (ii) no issued, reserved
for issuance, or outstanding securities of the Company
convertible into or exchangeable for shares of capital stock of,
or other equity or voting interest in, the Company,
(iii) no issued, reserved for issuance, or outstanding
options, warrants, rights or other commitments or agreements to
acquire from the Company, or that obligates the Company to
issue, any capital stock of, or other equity or voting interest
in, or any securities convertible into or exchangeable for
shares of capital stock of, or other equity or voting interest
in, the Company, (iv) no obligations of the Company to
grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement
or commitment relating to any capital stock of, or other equity
or voting interest, (including any voting debt) in, the Company
(the items in clauses (i), (ii), (iii), and (iv), together with
the capital stock of the Company, being referred to collectively
as Company Securities) and (v) no other
obligations by the Company or any of its Subsidiaries to make
any payments based on the price or value of any Company
Securities. There are no outstanding agreements of any kind
which obligate the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities,
except in connection with the repurchase or acquisition of
Company Stock-Based Awards pursuant to (A) the terms of
Company Stock Plans or (B) in the ordinary course of
business. All outstanding Company Securities are validly
authorized and validly issued.
(d) Neither the Company nor any of its Subsidiaries is a
party to any agreement relating to the voting, issuance or sale,
repurchase, redemption or disposition, or registration of any
Company Securities or Subsidiary Securities, or granting any
preemptive rights, anti-dilutive rights or rights of first
refusal or other similar rights with respect to any Company
Securities or Subsidiary Securities.
A-22
3.8 Company SEC Reports. The Company has
filed or furnished, as applicable, all forms, reports,
schedules, statements, certificates and documents with the SEC
that have been required to be filed or furnished, as applicable,
by it under applicable Laws prior to the date hereof, and the
Company will file prior to the Effective Time all forms,
reports, schedules, statements, certificates and documents with
the SEC that are required to be filed by it under applicable
Laws prior to such time (all such forms, reports, schedules,
statements, certificates and documents, together with all
exhibits thereto, the Company SEC Reports).
Each Company SEC Report complied, or will comply, as the case
may be, as of its filing date, in all material respects with the
applicable requirements of the Securities Act, the Exchange Act
and the rules and regulations of the SEC thereunder, as the case
may be, each as in effect on the date such Company SEC Report
was, or will be, filed. True and correct copies of all Company
SEC Reports filed in the three (3) years prior to the date
hereof have been furnished to Newco or are publicly available in
the Electronic Data Gathering, Analysis and Retrieval (EDGAR)
database of the SEC. As of its filing date (or, if amended or
superseded by a filing prior to the date of this Agreement, on
the date of such amended or superseded filing), each Company
SEC Report did not and will not 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 made therein, in the light of the circumstances under
which they were made, not misleading. None of the Companys
Subsidiaries is required to file any forms, reports or other
documents with the SEC. No executive officer of the Company has
failed to make the certifications required of him or her under
Section 302 or 906 of the Sarbanes-Oxley Act with respect
to any Company SEC Report, except as disclosed in certifications
filed with the Company SEC Reports. Since the enactment of
the Sarbanes-Oxley Act, the Company and each of its officers,
and, to the Knowledge of the Company each of its directors, have
been and are in compliance in all material respects with
(A) the applicable provisions of the Sarbanes-Oxley Act and
the rules and regulations promulgated thereunder and
(B) the applicable listing and corporate governance rules
and regulations of NASDAQ.
3.9 Company Financial Statements.
(a) (i) The consolidated financial statements of the
Company and its Subsidiaries filed with the Company SEC Reports
(the Company Financial Statements) and (ii)
(A) the quarterly financial statements of H3C for the
quarterly periods ended March 31, June 30 and
September 30, 2006 and March 31, 2007 and the annual
financial statements for the period ended December 31, 2006
all as set forth in Section 3.9(a)(ii) of the
Company Disclosure Letter, (B) the quarterly and annual
financial statements of H3C delivered after the date hereof
pursuant to Section 6.4(b), and (C) any other
financial statements of H3C included in the Required Information
(the H3C Financial Statements) have been or
will be, as the case may be, prepared in accordance with GAAP
consistently applied during the periods and at the dates
involved (except as may be indicated in the notes thereto or as
otherwise permitted by
Form 10-Q
with respect to any financial statements filed on
Form 10-Q),
and fairly present in all material respects, or will present in
all material respects, as the case may be, the consolidated
financial position of the Company and its Subsidiaries or the
consolidated position of H3C and its Subsidiaries, as
applicable, as of the dates thereof and the consolidated results
of operations and cash flows for the periods then ended.
(b) The Company and its Subsidiaries maintain disclosure
controls and procedures (as such terms are defined in
Rule 13a-15
under the Exchange Act) that satisfy the requirements of
Rule 13a-15
under the Exchange Act. Such disclosure controls and procedures
are effective to ensure that all material information concerning
the Company (including its Subsidiaries) is made known on a
timely basis to the individuals responsible for the preparation
of the Company SEC Reports.
(c) The Company maintains a system of internal accounting
controls (as such term is defined in
Rule 13a-15
under the Exchange Act) sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance
with managements general or specific authorizations;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and
to maintain asset accountability; (iii) access to assets is
permitted only in accordance with managements general or
specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with
respect to any differences.
A-23
(d) Except as set forth in the Company SEC Reports filed
between June 1, 2005 and the date hereof, since
June 1, 2005 the Companys principal executive officer
and its principal financial officer have disclosed to the
Companys auditors and the audit committee of the Company
Board (i) all significant deficiencies and material
weaknesses in the design or operation of internal controls over
financial reporting that are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information of the Company and its
Subsidiaries on a consolidated basis and (ii) any fraud,
whether or not material, that involves management or other
employees who have a significant role in the Company and the
Companys Subsidiaries internal controls and the
Company has provided or made available to Newco copies of any
material written materials relating to the foregoing. Since the
enactment of the Sarbanes-Oxley Act, neither the Company nor any
of its Subsidiaries has made or permitted to remain outstanding
any prohibited loans to any executive officer of the Company (as
defined in
Rule 3b-7
under the Exchange Act) or director of the Company or any of its
Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is a
party to, or has any commitment to become a party to, any joint
venture, partnership agreement or any similar Contract
(including any Contract relating to any transaction, arrangement
or relationship between or among the Company or any of its
Subsidiaries, on the one hand, and any unconsolidated affiliate,
including any structured finance, special purpose or limited
purpose entity or Person, on the other hand (such as any
arrangement described in Section 303(a)(4) of
Regulation S-K
of the SEC)) where the purpose or effect of such arrangement is
to avoid disclosure of any material transaction involving the
Company or any of its Subsidiaries in the Company Financial
Statements.
(f) Section 3.9(f) of the Company Disclosure
Letter sets forth, as of the date hereof, all of the outstanding
obligations of the Company or its Subsidiaries in respect of
Indebtedness. As of the date hereof there is not, and as of the
Effective Time there will not be, any Indebtedness of the
Company or its Subsidiaries except (i) as set forth in
Section 3.9(f) of the Company Disclosure Letter and
except as may be incurred in accordance with
Section 5.1(b)(vi) hereof.
3.10 No Undisclosed Liabilities.
(a) Neither the Company or any of its Subsidiaries, has any
Liabilities of a nature required to be reflected or reserved
against on a consolidated balance sheet prepared in accordance
with GAAP or the notes thereto, other than (i) Liabilities
reflected or otherwise reserved against in the Company Balance
Sheet and notes thereto, dated June 1, 2007 (the
Balance Sheet Date), (ii) Liabilities
arising under this Agreement or incurred in connection with the
transactions expressly contemplated by this Agreement, and
(iii) Liabilities incurred in the ordinary course of
business after the Balance Sheet Date that have not had and
would not reasonably be expected to have a Company Material
Adverse Effect.
(b) Neither H3C nor any of its Subsidiaries has any
Liabilities of a nature required to be reflected or reserved
against on a consolidated balance sheet prepared in accordance
with GAAP or the notes thereto, other than (i) Liabilities
reflected or otherwise reserved against in the financial
statements and notes thereto attached to
Section 3.10(b) of the Company Disclosure Schedule,
(ii) Liabilities arising under this Agreement or incurred
in connection with the transactions expressly contemplated by
this Agreement, and (iii) Liabilities incurred in the
ordinary course of business after the Balance Sheet Date that
have not had and would not reasonably be expected to have a
Company Material Adverse Effect.
3.11 Absence of Certain Changes. Since
June 1, 2007 through the date hereof, except for actions
expressly contemplated by this Agreement, the business of the
Company and its Significant Subsidiaries has been conducted, in
all material respects, in the ordinary course of business, and
with respect to the Company and its Subsidiaries there has not
been (a) any change or event that has had or would
reasonably be expected to have a Company Material Adverse
Effect, (b) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital
stock or other equity interest or any redemption, purchase or
other acquisition of any of its capital stock or other equity
interest, other than in connection with (i) Company
Stock-Based Awards, (ii) an intra-company transaction
between the Company and one of its Subsidiaries or
(iii) dissolution of a wholly owned Subsidiary of the
Company, in each case, in the ordinary course of business,
(c) any split, combination or reclassification of any of
its capital stock or other equity interest or any
A-24
issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock or other equity interest, other than
in connection with (i) Company Stock-Based Awards,
(ii) an intra-company transaction between the Company and
one of its Subsidiaries or (iii) dissolution of a wholly
owned Subsidiary of the Company, in each case, in the ordinary
course of business, (d) any material change in accounting
methods, principles or practices used by the Company affecting
its assets, liabilities or business, except insofar as may have
been required by a change in GAAP, (e) any amendments or
changes in the charter documents or other organizational
documents of the Company or any of its Significant Subsidiaries,
(f) any change in any material method of Tax accounting,
method, periods, principles, elections or practices,
(g) any change or rescission of any material Tax election,
(h) any material acquisitions or dispositions (of assets or
equity) other than in the ordinary course of business,
(i) any material capital expenditures outside of the
ordinary course of business, (j) entry into any
arrangements regarding material Indebtedness of the Company or
any of its Subsidiaries, (k) the settlement, waiver or
compromise of any material Legal Proceeding that was not fully
reserved against on the Company Balance Sheet, and (l) the
entry into any agreement or contract (whether oral or written)
to do any of the foregoing.
3.12 Material Contracts.
(a) For all purposes of and under this Agreement, a
Material Contract shall mean:
(i) any material contract (as such term is
defined in Item 601(b)(10) of
Regulation S-K
of the SEC);
(ii) any employment or consulting Contract (in each case,
under which the Company has continuing obligations as of the
date hereof) that carries an aggregate annual base salary and
target bonus in excess of $300,000;
(iii) any Contract containing any covenant
(A) limiting the right of the Company or any of its
Subsidiaries to engage in any line of business, to make use of
any material Intellectual Property or to compete with any Person
in any line of business or in any location or (B) otherwise
prohibiting or limiting the right of the Company or its
Subsidiaries to sell, distribute or manufacture any material
products or services or to purchase or otherwise obtain any
material software, components, parts or subassemblies, or to
exploit any material tangible or intangible property or assets;
(iv) any Contract entered into after December 31,
2006, (A) relating to the license, disposition acquisition
(directly or indirectly) by the Company or any of its
Subsidiaries of a material amount of assets or any material
assets, in each case, other than in the ordinary course of
business, or (B) pursuant to which the Company or any of
its Subsidiaries will acquire any material interest in any other
Person or other business enterprise other than the
Companys Subsidiaries, or (C) for the acquisition or
disposition of any business containing any profit sharing
arrangements or earn-out arrangements,
indemnification obligations or other contingent payment
obligations in each case in an amount in excess of $2,000,000;
(v) any Company Intellectual Property Agreements set forth
in Section 3.15(b) of the Company Disclosure Letter;
(vi) any Contract, or group of Contracts with a Person (or
group of affiliated Persons) related to the Indebtedness of the
Company or its Subsidiaries and having an outstanding principal
amount in excess of $500,000 individually or $2,000,000 in the
aggregate;
(vii) any sales Contract, or group of sales Contracts with
a Person (or group of affiliated Persons) that accounted for
aggregate revenue to the Company or any of its Subsidiaries of
more than $20,000,000 during the Companys 2007 fiscal year;
(viii) any Contract, or group of Contracts with a Person
(or group of affiliated Persons) that prohibits the payment of
dividends or distributions in respect of the capital stock of
the Company or any of its wholly owned Subsidiaries, prohibits
the pledging of the capital stock of the Company or any of its
wholly owned Subsidiaries or prohibits the issuance of
guarantees by any wholly owned Subsidiary of the Company;
A-25
(ix) any Contract, or group of Contracts with a Person (or
group of affiliated Persons) that relates to any guarantee or
assumption of other obligations of any third party or
reimbursement of any maker of a letter of credit, except for
agreements entered into in the ordinary course of business,
which agreements relate to obligations which do not individually
exceed $2,000,000;
(x) any Contract, or group of Contracts with a Person (or
group of affiliated Persons), the termination or breach of which
has had or would be reasonably expected to have a Company
Material Adverse Effect and is not disclosed pursuant to
clauses (i) through (viii) above.
(b) Section 3.12(b) of the Company Disclosure
Letter contains a complete and accurate list of all Material
Contracts to or by which the Company or any of its Subsidiaries
is a party or is bound and the Company and its Subsidiaries have
provided or made available to Newco copies of all Material
Contracts.
(c) Each Material Contract is valid and binding on the
Company (and/or each such Subsidiary of the Company party
thereto) and, to the Knowledge of the Company, each other party
thereto, and is in full force and effect, and enforceable in
accordance with its terms and neither the Company nor any of its
Subsidiaries that is a party thereto, nor, to the Knowledge of
the Company, any other party thereto, is in breach of, or
default under, any such Material Contract, and no event has
occurred that with notice or lapse of time or both would
constitute such a breach or default thereunder by the Company or
any of its Subsidiaries, or, to the Knowledge of the Company,
any other party thereto, except for such failures to be
enforceable and in full force and effect and such breaches and
defaults that have not had and would not be reasonably expected
to have a Company Material Adverse Effect. The Company has not
received any written notice from any counterparty that
(i) such counterparty intends to terminate, or not renew,
any Material Contract, or (ii) is seeking the renegotiation
thereof in any material respect or substitute performance
thereunder in any material respect. As of the date hereof, true
and complete copies of all Material Contracts (including all
exhibits and schedules thereto) have been (i) publicly
filed with the SEC or (ii) made available to Newco.
3.13 Real Property.
(a) Section 3.13(a) of the Company Disclosure
Letter contains a complete and accurate list of all of the real
property owned (the Owned Real Property) by
the Company and its Subsidiaries. The Company
and/or its
Subsidiaries have good and valid fee simple title to the Owned
Real Property free and clear of all Liens other than Permitted
Liens, except as has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(b) Section 3.13(b) of the Company Disclosure
Letter contains a complete and accurate list of all of the
existing material leases, subleases or other agreements
(collectively, the Leases) under which the
Company or any of its Subsidiaries uses or occupies or has the
right to use or occupy, now or in the future, any real property
(such property, the Leased Real Property).
The Company has heretofore delivered or made available to Newco
a complete and accurate copy of all Leases of Leased Real
Property (including all modifications, amendments, supplements,
waivers and side letters thereto). The Company
and/or its
Subsidiaries have and own valid leasehold estates in the Leased
Real Property, free and clear of all Liens other than Permitted
Liens, except as has not had and would not be reasonably
expected to have a Company Material Adverse Effect.
(c) Section 3.13(c) of the Company Disclosure
Letter contains a complete and accurate list of all of the
existing Leases granting to any Person, other than the Company
or any of its Subsidiaries, any right to use or occupy, now or
in the future, any of the Leased Real Property.
(d) All of the Leases set forth in
Section 3.13(b) or Section 3.13(c) of
the Company Disclosure Letter are each in full force and effect
and neither the Company nor any of its Subsidiaries is in breach
of or default under, or has received written notice of any
breach of or default under, any material Lease, and, to the
Knowledge of the Company, no event has occurred that with notice
or lapse of time or both would constitute a breach or default
thereunder by the Company or any of its Subsidiaries or any
other party thereto, except, in each case, for such breaches or
defaults that have not had and would not be reasonably expected
to have a Company Material Adverse Effect.
A-26
3.14 Personal Property and Assets. The
machinery, equipment, furniture, fixtures and other tangible
personal property and assets owned, leased or used by the
Company or any of its Subsidiaries (the
Assets) are, in the aggregate, sufficient and
adequate to carry on their respective businesses in all material
respects as presently conducted, and the Company and its
Subsidiaries are in possession of and have good title to, or
valid leasehold interests in or valid rights under contract to
use, such Assets that are material to the Company and its
Subsidiaries, taken as a whole, free and clear of all Liens
other than Permitted Liens.
3.15 Intellectual Property.
(a) Section 3.15(a) of the Company Disclosure
Letter contains a complete and accurate list of the following
Owned Company Intellectual Property: (i) all registered
Trademarks; (ii) all Patents; (iii) all registered
Copyrights; and (iv) all Domain Names, in each case
listing, as applicable, (A) the name of the
applicant/registrant and current owner, (B) the
jurisdiction where the application/registration is located and
(C) the application or registration number. All issued
Patents, Copyrights and registered Trademarks included within
such Owned Company Intellectual Property are valid and
enforceable, and all Trade Secrets included within such Owned
Company Intellectual Property are enforceable, except as have
not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(b) Section 3.15(b) of the Company Disclosure
Letter contain a complete and accurate list of all material
Contracts as of the date hereof (i) under which the Company
or any of its Subsidiaries uses or has the right to use any
Licensed Company Intellectual Property, other than non-material
software licenses from third-party software providers and
related services agreements for commercially available software
or (ii) under which the Company or any of its Subsidiaries
has licensed to others the right to use any Company Intellectual
Property or Company Intellectual Property Rights, other than
standard, non-material customer, developer and reseller licenses
entered into in the ordinary course of business, in each case
specifying the parties to the agreement (such agreements, the
Company Intellectual Property Agreements).
Neither the Company nor, to the Knowledge of the Company, no
third party to any Company Intellectual Property Agreements, is
in material breach of any Company Intellectual Property
Agreement. To the Knowledge of the Company, there are no pending
disputes, nor basis for any dispute, regarding the scope of such
Company Intellectual Property Agreements, performance under the
Company Intellectual Property Agreements, or with respect to
payments made or received under such Company Intellectual
Property Agreements.
(c) The Company and its Subsidiaries own all right, title
and interest in the Owned Company Intellectual Property, free
and clear of all Liens other than (i) Permitted Liens,
(ii) encumbrances, restrictions or other obligations
arising under any of the Company Intellectual Property
Agreements and (iii) Liens that have not had and would not
be reasonably expected to have a Company Material Adverse Effect.
(d) The Company and each of its Significant Subsidiaries
has taken reasonable and appropriate steps to protect and
preserve the confidentiality of the Trade Secrets that comprise
any part of the Company Intellectual Property, and to the
Knowledge of the Company, there are no unauthorized uses,
disclosures or infringements of Owned Company Intellectual
Property by any Person. Neither the Company nor any of its
Subsidiaries is party to any Legal Proceeding alleging any
unauthorized use, infringement or violation of Owned Company
Intellectual Property or has sent any writing or other notice
claiming any such use, infringement or violation (including by
invitations to take licenses to any such
Intellectual Property Rights). To the Knowledge of the Company
(and with respect to each of H3C and Tipping Point, to the
knowledge of each of H3C and Tipping Point), all use and
disclosure by the Company or any of its Subsidiaries of Trade
Secrets owned by another Person have been pursuant to the terms
of a written agreement with such Person or was otherwise lawful,
except to the extent that any use or disclosure of any Trade
Secret owned by another Person that was not done in accordance
with a written agreement has not and would not reasonably be
expected to give rise to a Company Material Adverse Effect.
Without limiting the foregoing, the Company and its Subsidiaries
have a policy requiring employees and certain consultants and
contractors to execute a confidentiality and assignment
agreement substantially in the Companys standard form
previously provided to Newco. The Company and its Significant
Subsidiaries have enforced such policy, except where any failure
to enforce would not reasonably be expected to give rise to a
Company Material Adverse Effect.
A-27
(e) None of the Company or any of its Subsidiaries or any
of its or their current products or services or other operation
of the Companys or its Subsidiaries business has
infringed upon or otherwise violated, or is infringing upon or
otherwise violating, in any respect the Intellectual Property or
Intellectual Property Rights of any third party, except where
such infringement has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(f) As of the date hereof, there is no suit, claim, action,
investigation or proceeding made, conducted or brought by a
third party that has been served upon or, to the Knowledge of
the Company, filed or threatened with respect to, and the
Company and its Subsidiaries have not been notified in writing
of, any alleged infringement or other violation in any material
respect by the Company or any of its Subsidiaries or any of its
or their current products or services or other operation of the
Companys or its Subsidiaries business of the
Intellectual Property Rights of such third party (including by
invitations to take licenses to any such
Intellectual Property Rights). As of the date hereof, to the
Knowledge of the Company (and with respect to each of H3C and
Tipping Point, to the knowledge of each of H3C and Tipping
Point), there is no pending or threatened claim challenging the
validity or enforceability of, or contesting the Companys
or any of its Significant Subsidiaries rights with respect
to, any of the Company Intellectual Property or Company
Intellectual Property Rights. As of the date hereof the Company
and its Subsidiaries are not subject to any Order that restricts
or impairs the use of any material Company Intellectual Property
or material Company Intellectual Property Rights, other than
restrictions or impairments that have not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(g) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not
result in (i) the Company or its Subsidiaries granting to
any third party any rights or licenses to any Intellectual
Property or Intellectual Property Rights; (ii) any right of
termination or cancellation under any Company Intellectual
Property Agreement; or (iii) the imposition of any Lien on
any Owned Company Intellectual Property, except where any of the
foregoing (in clauses (i) through (iii)) have not had and
would not reasonably be expected to have a Company Material
Adverse Effect.
(h) Owned Software means all Software
used by the Company and its Subsidiaries in the conduct of their
businesses that is owned or purported to be owned by the Company
or its Subsidiaries. Software means computer
software or firmware in any form, including but not limited to
computer instructions, commands, programs, modules, routines,
procedures, rules, libraries, macros, algorithms, tools, and
scripts, and all documentation of or for any of the foregoing.
(i) The Company and its Subsidiaries are in actual
possession of or have necessary control over: (i) the
source code and object code for all Owned Software; and
(ii) the object code and, to the extent required for the
use of the Company Software, the source code, for all other
Software material to the operation of their businesses. The
Company and its Subsidiaries are in possession of all
documentation (including all related engineering specifications,
program flow charts, installation and user manuals) and know-how
required for the use and revision of the Company Software as
currently used, or that is being designed
and/or
developed for use, in the businesses of Company and its
Subsidiaries.
(j) Except for source code for non-material Owned Software
that the Company has made a business decision to license on a
giveaway basis, the Company and its Subsidiaries
have disclosed source code to the Owned Software only pursuant
to written confidentiality terms that reasonably protect the
Companys rights in such Owned Software. Except as
disclosed in accordance with such confidentiality agreements or
valid source code escrow agreements, no Person (other than
Company and its Subsidiaries) is in possession of any source
code for any Software included in the Owned Software or has any
rights to the same.
(k) Except as has not and would not reasonably be expected
to have a Material Adverse Effect, (i) the Company and its
Significant Subsidiaries are not obligated to support or
maintain Software licensed to third parties except pursuant
to agreements terminable by the Company or relevant subsidiary
(other than for cause) on a periodic basis and that provide for
periodic payments to the Company; and (ii) except for
non-disclosure agreements entered into in the ordinary course of
business and except for source code agreements covered by
Section 3.15(j) above, none of the Company
Intellectual Property, including proprietary Software, is
subject to any Contract or other obligation that would require
the Company or any of its Subsidiaries to
A-28
divulge to any person, or to assign or license to any person,
any source code, proprietary algorithm, or Trade Secret.
(l) The Company and its Subsidiaries maintain policies and
procedures regarding data security and privacy that are
commercially reasonable and, in any event, in compliance with
all applicable Laws. To the Knowledge of the Company, there have
been no security breaches relating to, violations of any
security policy regarding or any unauthorized access of any data
used in the business of Company or its Subsidiaries. The use and
dissemination of any and all data and information concerning
individuals by their businesses is in compliance in all material
respects with all applicable privacy policies, terms of use, and
laws. The transactions contemplated to be consummated hereunder
will not violate any privacy policy, terms of use, or Laws
relating to the use, dissemination, or transfer of any such data
or information, except as has not had and would not reasonably
be expected to have a Company Material Adverse Effect.
(m) The participation by the Company and its Subsidiaries
in any standards setting or other industry organization is in
material compliance with all rules, requirements, and other
obligations of any such organization.
(n) No federal, state, local or other governmental entity
nor any university, college, or academic institution has
material rights in any material Owned Company Intellectual
Property other than pursuant to a valid, nonexclusive license
granted by the Company or any of its Subsidiaries.
3.16 Tax Matters. Except as has not had
and would not reasonably be expected to have a Company Material
Adverse Effect:
(a) The Company and each of its Subsidiaries (i) have
timely filed (taking into account any extensions of time in
which to file) all U.S. federal, state, local and
non-U.S. returns,
estimates, claims for refund, information statements and reports
or other similar documents required to be filed with respect to
Taxes with any Governmental Authority (including amendments,
schedules, or attachments thereto) relating to any and all Taxes
(Tax Returns) required to be filed by any of
them and all such filed Tax Returns are true, correct and
complete in all respects and were prepared in compliance with
all applicable Laws, (ii) have paid, or have adequately
reserved (in accordance with GAAP) on the Most Recent Financial
Statements (as defined below) for the payment of, all Taxes
required to be paid, and (iii) the most recent financial
statements contained in the Company SEC Reports (the
Most Recent Financial Statements) reflect an
adequate reserve (in accordance with GAAP) for all Taxes due or
payable by the Company and its Subsidiaries through the date of
such financial statements and neither the Company nor any of its
Subsidiaries has incurred any liability for Taxes since the
Balance Sheet Date other than in the ordinary course of
business. No deficiencies for any Taxes have been asserted or
assessed, or to the Knowledge of the Company, proposed, against
the Company or any of its Subsidiaries, nor has the Company or
any of its Subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or
collection of any Tax.
(b) All Taxes required to be withheld by the Company and
its Subsidiaries have been withheld and paid over to the
appropriate Tax authority.
(c) No audit or other examination, claim, investigation,
administrative or court proceeding against or with respect to
any Taxes of the Company or any of its Subsidiaries is presently
in progress, nor has the Company or any of its Subsidiaries been
notified in writing of any request for such an audit or other
examination, claim, investigation or proceeding.
(d) There are no Liens (other than Permitted Liens) on any
of the assets of the Company or its Subsidiaries for Taxes.
(e) Neither the Company nor any of its Subsidiaries is, nor
has been at any time, a United States Real Property
Holding Corporation within the meaning of
Section 897(c)(2) of the Code.
(f) Neither the Company nor any of its Subsidiaries has
constituted either a distributing corporation or a
controlled corporation in any distribution intended
to qualify for tax-free treatment under Section 355 of the
Code.
A-29
(g) Neither the Company nor any of its Subsidiaries has
engaged in a reportable transaction, as set forth in
Treas. Reg. § 1.6011-4(b), including any transaction that
is the same as or substantially similar to one of the types of
transactions that the Internal Revenue Service has determined to
be a tax avoidance transaction and identified by notice,
regulation or other form of published guidance as a listed
transaction, as set forth in Treas. Reg. §
1.6011-4(b)(2) or has entered into a potentially abusive
tax shelter as defined under Treas. Reg. §
301.6112-1(b).
(h) None of the Company nor any of its Subsidiaries has
(a) ever been a member of an affiliated group (within the
meaning of Code §1504(a)) filing a consolidated federal
income Tax Return (other than a group the common parent of which
was the Company), (b) ever been a party to any Tax sharing,
indemnification or allocation agreement (other than any such
agreement with customers, vendors or real property lessors, the
principal purpose of which is not to address Tax matters), nor
does the Company or any of its Subsidiaries owe any amount under
any such agreement or (c) any liability for the Taxes of
any person under Treas. Reg. § 1.1502-6 (or any similar
provision of state, local or foreign law, including any
arrangement for group or consortium relief or similar
arrangement), as a transferee or successor, by contract, or
otherwise.
(i) At May 31, 2007, the Company had net operating
loss carryforwards for U.S. federal income tax purposes of
approximately $2.5 billion expiring between fiscal years
2008 and 2027. To the Knowledge of the Company, as of the date
hereof, no ownership change as described in
Section 382(g)(1) of the Code has occurred with respect to
the Company that would subject such carryforwards to a
limitation under Section 382 of the Code.
3.17 Employee Plans.
(a) Section 3.17(a)(i) and
Section 3.17(a)(ii) of the Company Disclosure
Letter, respectively, set forth a complete and accurate list of
(i) all employee benefit plans (as defined in
Section 3(3) of ERISA and as defined under applicable
foreign Law), whether or not subject to ERISA and (ii) all
other employment, bonus, stock option, stock purchase or other
equity-based, benefit, incentive compensation, profit sharing,
savings, retirement (including early retirement and supplemental
retirement), disability, insurance, vacation, incentive,
deferred compensation, supplemental retirement (including
termination indemnities and seniority payments), severance,
termination, retention, change of control and other similar
fringe, welfare or other employee benefit plans, programs,
agreement, contracts, policies or binding arrangements (whether
or not in writing currently maintained) maintained or
contributed to for the benefit of or relating to any current or
former employee or director of the Company, any of its
Subsidiaries or any other trade or business (whether or not
incorporated) which would be treated as a single employer with
the Company or any of its Subsidiaries under Section 414 of
the Code (an ERISA Affiliate), or with
respect to which the Company or any of its Subsidiaries has or
may have any current Liability (together the Employee
Plans). With respect to each Employee Plan, to the
extent applicable the Company has made available to Newco
complete and accurate copies of (A) the most recent annual
report on Form 5500 required to have been filed with the
IRS for each Employee Plan, including all schedules thereto;
(B) the most recent determination letter, if any, from the
IRS for any Employee Plan that is intended to qualify under
Section 401(a) of the Code; (C) the plan documents and
summary plan descriptions, or a written description of the terms
of any Employee Plan that is not in writing; (D) any
related trust agreements, insurance contracts, insurance
policies or other documents of any funding arrangements;
(E) any notices to or from the IRS or any office or
representative of the DOL or any similar Governmental Authority
relating to any compliance issues in respect of any such
Employee Plan; and (F) with respect to each material
Employee Plan that is maintained in any
non-U.S. jurisdiction
(the International Employee Plans), to the
extent applicable, (x) the most recent annual report or
similar compliance documents required to be filed with any
Governmental Authority with respect to such plan and
(y) any document comparable to the determination letter
reference under clause (B) above issued by a Governmental
Authority relating to the satisfaction of Law necessary to
obtain the most favorable tax treatment.
(b) No Employee Plan is (1) a defined benefit
plan (as defined in Section 414 of the Code),
(2) a multiemployer plan (as defined in
Section 3(37) of ERISA), (3) a multiple employer
plan (as defined in Section 4063 or 4064 of ERISA)
(in each case under clause (1), (2) or (3) whether or
not subject to ERISA) or (4) subject to Section 302 of
ERISA, Section 412 of the Code or Title IV of ERISA.
A-30
(c) Each Employee Plan has been maintained, operated and
administered in material compliance with its terms and with all
applicable Law, including the applicable provisions of ERISA,
the Code and any applicable regulatory guidance issued by any
Governmental Authority.
(d) Each material Employee Plan that is subject to
Section 409A of the Code has not been materially modified
(as defined under Section 409A of the Code) since
October 3, 2004 and all such Employee Plans subject to
Section 409A of the Code have been operated and
administered in good faith compliance with Section 409A of
the Code from the period beginning December 31, 2004
through the date hereof.
(e) As of the date hereof, there are no Legal Proceedings
pending or, to the Knowledge of the Company, threatened on
behalf of or against any Employee Plan, the assets of any trust
under any Employee Plan, or the plan sponsor, plan administrator
or any fiduciary or any Employee Plan with respect to the
administration, accounting for or operation of such plans, other
than routine claims for benefits that have been or are being
handled through an administrative claims procedure.
(f) Except as set forth in the Company SEC Reports filed
between June 1, 2006 and the date hereof, since
June 1, 2006 no Employee Plan is the subject of an audit or
investigation by a Governmental Authority or is currently
participating in a Governmental Authority-sponsored voluntary
compliance amnesty or similar program.
(g) None of the Company, any of its Subsidiaries, or, to
the Knowledge of the Company, any of their respective directors,
officers, employees or agents has, with respect to any Employee
Plan, engaged in or been a party to any non-exempt
prohibited transaction, as such term is defined in
Section 4975 of the Code or Section 406 of ERISA,
which could reasonably be expected to result in the imposition
of a penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in each case
applicable to the Company, any of its Subsidiaries or any
Employee Plan or for which the Company or any of its
Subsidiaries has any indemnification obligation.
(h) No Employee Plan that is a welfare benefit
plan within the meaning of Section 3(1) of ERISA
provides benefits to former employees of the Company or its
ERISA Affiliates, other than pursuant to Section 4980B of
the Code or any similar Law.
(i) Except as would not result in material liability or as
set forth on Section 3.17(i) of the Company
Disclosure Letter:
(i) each Employee Plan that is intended to be
qualified under Section 401
and/or 409
of the Code has received a favorable determination letter from
the IRS to such effect and, to the Knowledge of the Company, no
fact, circumstance or event has occurred or exists since the
date of such determination letter that would reasonably be
expected to materially and adversely affect the qualified status
of any such Employee Plan;
(ii) to the extent applicable, each International Employee
Plan has been approved by the relevant taxation and other
Governmental Authorities so as to enable: (i) the Company
or any of its Subsidiaries and the participants and
beneficiaries under the relevant International Employee Plan and
(ii) in the case of any International Employee Plan under
which resources are set aside in advance of the benefits being
paid (a Funded International Employee Plan),
the assets held for the purposes of the Funded International
Employee Plans, to enjoy the most favorable taxation status
possible and the Company is not aware of any ground on which
such approval may cease to apply;
(iii) neither the execution or delivery of this Agreement
nor the consummation of the transactions contemplated by this
Agreement (whether alone or together with any other event), will
(A) result in any payment or benefit becoming due or
payable, or required to be provided, to any director, employee
or independent contractor of the Company or any of its
Subsidiaries, (B) increase the amount or value of any
benefit or compensation otherwise payable or required to be
provided to any such director, employee or independent
contractor, or (C) result in the acceleration of the time
of payment, vesting or funding of any such benefit or
compensation.
A-31
(iv) all contributions, premiums and other payments
required to be made with respect to any Employee Plan have been
timely made, accrued or reserved for;
(v) to the Knowledge of the Company, no event has occurred
and there currently exists no condition or set of circumstances
in connection with which the Company or any of its Subsidiaries
could be subject to any liability under the terms of any
Employee Plan, ERISA, the Code or applicable regulatory guidance
issued by any Governmental Authority, Collective Bargaining
Agreement or any other applicable Law; or
(vi) except as required by applicable Law or this
Agreement, no condition or term under any Employee Plan exists
which would prevent Newco or the Surviving Corporation or any of
its Subsidiaries from terminating or amending any Employee Plan
without liability to Newco or the Surviving Corporation or any
of its Subsidiaries (other than ordinary administration expenses
or routine claims for benefits).
(j) Except as required by applicable Law, neither the
Company nor any of its Subsidiaries has any plan or commitment
to amend or establish any new Employee Plan or to continue or
increase any benefits under any Employee Plan, or to maintain
any such benefits or the level of any such benefits generally
for any period.
(k) No deduction for federal income tax purposes has been
nor is any such deduction expected by the Company to be
disallowed for remuneration paid by the Company or any of its
Subsidiaries by reason of Section 162(m) of the Code,
including by reason of the transactions contemplated hereby.
(l) There is no contract, plan or arrangement (written or
otherwise) covering any current or former employee, director or
consultant of the Company or any Subsidiary that, individually
or collectively, would give rise to the payment of any amount
that would not be deductible pursuant to the terms of
Section 280G of the Code. The consummation of the
transactions contemplated by this Agreement, by itself, will not
cause or result in the acceleration of the vesting or payment of
any compensation or benefits in any material amount under any
Employee Plan.
3.18 Labor Matters.
(a) (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement,
labor union contract, or trade union agreement (each a
Collective Bargaining Agreement),
(ii) to the Knowledge of the Company, there are no
activities or proceedings of any labor or trade union to
organize any employees of the Company or any of its
Subsidiaries; (iii) no Collective Bargaining Agreement is
being negotiated by the Company or any of its Subsidiaries and
(iv) there is no strike, lockout, slowdown, or work
stoppage against the Company or any of its Subsidiaries pending
or, to the Knowledge of the Company, threatened.
(b) The Company and its Subsidiaries have complied in all
material respects with applicable Laws and Orders with respect
to employment (including applicable laws, rules and regulations
regarding wage and hour requirements, employee, classification,
immigration status, discrimination in employment, affirmative
action, employee health and safety, plant closings and mass
layoffs, and collective bargaining. As of the date hereof, there
are no material Legal Proceedings pending or, to the Knowledge
of the Company, threatened, concerning the Company or any its
Subsidiaries compliance with applicable Laws and Orders
with respect to employment.
(c) The Company and each of its Subsidiaries have withheld
all material amounts required by applicable Law to be withheld
from the wages, salaries, and other payments to employees, and
are not, to the Knowledge of the Company, liable for any
material arrears of wages or any material taxes or any material
penalty for failure to comply with any of the foregoing. Neither
the Company nor any of its Subsidiaries is liable for any
material payment to any trust or other fund or to any
Governmental Authority, with respect to unemployment
compensation benefits, social security or other benefits for
employees (other than routine payments to be made in the
ordinary course of business).
A-32
3.19 Permits. The Company and its
Subsidiaries have, and are in compliance with the terms of, all
permits, licenses, authorizations, certificates, consents,
approvals and franchises from Governmental Authorities required
to conduct their businesses (as currently conducted) lawfully
(Permits), and no suspension or cancellation
of any such Permits is pending or, to the Knowledge of the
Company, threatened, except for such noncompliance, suspensions
or cancellations that have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
3.20 Compliance with Laws. Except as set
forth in the Company SEC Reports filed between June 1, 2005
and the date hereof, since June 1, 2005, the Company and
each of its Subsidiaries are, and since June 1, 2005, have
been, in compliance with all Laws and Orders applicable to the
Company and its Subsidiaries (including the Foreign Corrupt
Practice Act of 1977 (15 U.S.C.
§§78dd-1,
et seq.) and any comparable foreign law or statute) except for
such violations or noncompliance that have not had and would not
reasonably be expected to have a Company Material Adverse
Effect. No representation or warranty is made in this
Section 3.20 with respect to (a) compliance
with the Exchange Act, to the extent such compliance is covered
in Section 3.8 and Section 3.9,
(b) applicable Laws with respect to Taxes, to the extent
such compliance is covered in Section 3.16,
(c) ERISA and other employee benefit-related matters, to
the extent such compliance is covered in
Section 3.17, (d) labor law matters, to the
extent such compliance is covered by Section 3.18,
or (e) Environmental Laws, to the extent such compliance is
covered in Section 3.21.
3.21 Environmental Matters. Except for
such matters as have not had and would not reasonably be
expected to have a Company Material Adverse Effect:
(a) The Company and its Subsidiaries are in compliance with
all applicable Environmental Laws, which compliance includes the
possession and maintenance of, and compliance with, all Permits
required under applicable Environmental Laws for the operation
of the business of the Company and its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries has
transported, produced, processed, manufactured, generated, used,
treated, handled, stored, released or disposed of any Hazardous
Substances, except in compliance with applicable Environmental
Laws, at any property that the Company or any of its
Subsidiaries has at any time owned, operated, occupied or leased.
(c) Neither Company nor any of its Subsidiaries has exposed
any employee or any third party to Hazardous Substances in
violation of any Environmental Law.
(d) None of the Company, any of its Subsidiaries, any real
property currently owned, leased or operated by the Company or
any of its Subsidiaries, or to the Knowledge of the Company, any
real property formerly owned, leased or operated by the Company
or any of its Subsidiaries, is a party to or is the subject of
any pending, or to the Knowledge of the Company threatened Legal
Proceeding or investigation alleging any Liability or
responsibility under or noncompliance with any Environmental Law
or seeking to impose any financial responsibility for any
investigation, cleanup, removal, containment or any other
remediation or compliance under any Environmental Law. Neither
the Company nor any of its Subsidiaries is subject to any Order,
settlement or agreement by or with any Governmental Authority or
third party imposing any material liability, obligation or
material uncompleted or unresolved requirement with respect to
any of the foregoing.
3.22 Litigation; Orders. There is no
Legal Proceeding pending or, to the Knowledge of the Company,
any bona fide threat of any such Legal Proceeding
(a) against the Company, any of its Subsidiaries or any of
the respective properties or assets of the Company or any of its
Subsidiaries that (i) involves a bona fide amount in
controversy in excess of $2,500,000, (ii) seeks material
injunctive relief and has a reasonable probability of success,
(iii) seeks to impose any legal restraint on or prohibition
against or limit the Surviving Corporations ability to
operate the business of the Company and its Subsidiaries
substantially as it was operated immediately prior to the date
of this Agreement (including by injunctive relief),
(iv) would individually or in the aggregate reasonably be
expected to prevent or materially delay or impede the
consummation of the transactions contemplated by this Agreement
or the ability of the Company to perform its covenants and
obligations under this Agreement, or (v) has had or would
reasonably be expected to have a Company Material Adverse
Effect, or (b) against any current or former director or
officer of the Company or any of its Subsidiaries (in their
respective capacities a such). Neither the Company nor any of
its Subsidiaries
A-33
is subject to any outstanding Order that, individually or in the
aggregate, (A) would prevent or materially delay or impede
the consummation of the transactions contemplated by this
Agreement or the ability of the Company to perform its covenants
and obligations under this Agreement or (B) has had or
would reasonably be expected to have a Company Material Adverse
Effect.
3.23 Insurance. The Company and its
Significant Subsidiaries have all material policies of insurance
covering the Company, its Significant Subsidiaries or any of
their respective employees, properties or assets, including
policies of life, property, fire, workers compensation,
products liability, directors and officers liability
and other casualty and liability insurance, that is in a form
and amount that is customarily carried by persons conducting
business similar to that of the Company, H3C or Tipping Point
and which is adequate (in terms of amount and losses and risks
covered) for the operation of its business and ownership of its
Assets and properties, or as is required under the terms of any
Contract. All such insurance policies are in full force and
effect, no notice of cancellation has been received, and there
is no existing default or event which, with the giving of notice
or lapse of time or both, would constitute a default, by any
insured thereunder, except for such defaults that have not had
or would not reasonably be expected to have a Company Material
Adverse Effect. There is no material claim pending under any of
such policies as to which coverage has been questioned, denied
or disputed by the underwriters of such policies and there has
been no threatened termination of, material alteration in
coverage, or material premium increase with respect to, any such
policies.
3.24 Related Party Transactions. Except
for compensation or other employment arrangements in the
ordinary course of business, arrangements contemplated by this
Agreement, and as set forth in the Company SEC Reports filed
between December 31, 2006 and the date hereof, since
December 31, 2006 there have not been any transactions,
agreements, arrangements or understandings or series of related
transactions, agreements, arrangements or understandings nor are
there currently proposed any such transactions, agreements,
arrangements or understandings between the Company or any of its
Subsidiaries, on the one hand, and any Affiliate (including any
director or officer) thereof, but not including any wholly owned
Subsidiary of the Company, on the other hand, that would be
required to be disclosed pursuant to Item 404 of
Regulation S-K
under the Securities Act in the Companys
Form 10-K
or proxy statement pertaining to an annual meeting of
stockholders.
3.25 Brokers. Except for Goldman
Sachs & Co., neither the Company nor any of its
Subsidiaries has any Liability to, or is subject to any claim
of, any financial advisor, investment banker, broker, finder,
agent or similar intermediary in connection with (i) this
Agreement or the transactions contemplated hereby or
(ii) any prior or prospective transaction relating to the
purchase or sale of securities by the Company or one or more of
its Subsidiaries or the purchase or sale of all or a substantial
portion of the assets of the Company or one or more of its
Subsidiaries.
3.26 Opinion of Financial Advisor. The
Company Board has received the opinion of Goldman
Sachs & Co., financial advisor to the Company, to the
effect that, as of the date of this Agreement and based upon
various qualifications and assumptions, the Per Share Price to
be received by the holders of shares of Company Common Stock in
the Merger is fair from a financial point of view to such
holders. The Company shall deliver executed copies of the
written opinion received from Goldman Sachs & Co. to
Newco promptly upon receipt thereof.
3.27 Company Rights Plan. The Company
has amended and the Company Board has taken all necessary action
prior to the date hereof to amend the Company Rights Plan so as
to (i) render the Rights (as defined in the Company Rights
Plan) inapplicable to this Agreement and the transactions
contemplated hereby, (ii) render the Rights inapplicable to
the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby, and (iii) ensure that
none of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby will result
in (A) the Rights becoming exercisable, (B) cause
Newco or any of its Affiliates or Associates (each as defined in
the Company Rights Plan) to become an Acquiring Person (as
defined in the Company Rights Plan), or (C) give rise to a
Distribution Date (as defined in the Company Rights Plan). The
Company has made available to Newco a complete and accurate copy
of the Rights Plan Amendment.
A-34
3.28 State Anti-Takeover Statutes.
Assuming that the representations of Newco and Merger Sub set
forth in Section 4.7 are accurate, the Company Board
has taken all necessary actions so that the restrictions on
business combinations set forth in Section 203 of the DGCL
and any other similar applicable Law are not applicable to this
Agreement and the transactions contemplated hereby. No other
state takeover statute or similar statute or regulation applies
to or purports to apply to the Merger or the other transactions
contemplated hereby.
3.29 Proxy Statement and Other Required
Filings.
(a) The proxy statement, letter to stockholders, notice of
meeting and form of proxy accompanying the proxy statement that
will be provided to the Company Stockholders in connection with
the solicitation of proxies for use at the Company Stockholder
Meeting (collectively, as amended or supplemented, the
Proxy Statement), as well as any other
document that is required to be filed by the Company with the
SEC in connection with the transactions contemplated by this
Agreement (each, an Other Required Company
Filing and collectively, the Other Required
Company Filings) will, at the date of its initial
filing with the SEC and at the date of any amendment or
supplement thereto, comply as to form in all material respects
with the applicable requirements of the Exchange Act. The Proxy
Statement will not, at the time the Proxy Statement is filed
with the SEC, at the time the Proxy Statement is first sent to
the Company Stockholders, at the date of any amendment or
supplement thereto, or at the time of the Company Stockholder
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
provided, however, that notwithstanding the foregoing, no
representation or warranty is made by the Company with respect
to information supplied by Newco or Merger Sub or any of their
partners, members, stockholders, directors, officers, employees,
affiliates, agents or other representatives that is included or
incorporated by reference in the Proxy Statement. None of the
Other Required Company Filings will, when filed with the SEC,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that notwithstanding the foregoing, no
representation or warranty is made by the Company with respect
to information supplied in writing by Newco or Merger Sub or any
of their respective partners, members, stockholders, directors,
officers, employees, affiliates, agents or other representatives
that is included or incorporated by reference in any of the
Other Required Company Filings.
(b) The information supplied by the Company or any of its
directors, officers, employees, affiliates, agents or other
representatives for inclusion or incorporation by reference in
any of the Other Required Newco Filings will not, at the time
the applicable Other Required Newco Filing is filed with the
SEC, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF
NEWCO AND
MERGER SUB
Newco and Merger Sub hereby represent and warrant to the Company
as follows:
4.1 Organization. Each of Newco and
Merger Sub is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the
requisite corporate power and authority to conduct its business
as it is presently being conducted and to own, lease or operate
its respective properties and assets. Each of Newco and Merger
Sub is duly qualified to do business and is in good standing in
each jurisdiction where the character of its properties owned or
leased or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or in
good standing would not, individually or in the aggregate,
prevent or materially delay the consummation of the transactions
contemplated by this Agreement or the ability of Newco and
Merger Sub to fully perform their respective covenants and
obligations
A-35
under this Agreement. Newco has delivered or made available to
the Company complete and accurate copies of the certificates of
incorporation and bylaws or other constituent documents, as
amended to date, of Newco and Merger Sub.
4.2 Authorization. Each of Newco and
Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations
hereunder. The execution and delivery of this Agreement by Newco
and Merger Sub and the consummation by Newco and Merger Sub of
the transactions contemplated hereby have been duly authorized
by all necessary corporate or other action on the part of Newco
and Merger Sub, and no other corporate or other proceeding on
the part of Newco or Merger Sub is necessary to authorize, adopt
or approve this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
each of Newco and Merger Sub and, assuming the due
authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of
Newco and Merger Sub, enforceable against each in accordance
with its terms, except that such enforceability (a) may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors
rights generally, and (b) is subject to general principles
of equity.
4.3 Non-Contravention and Required
Consents. The execution, delivery or performance
by Newco and Merger Sub of this Agreement, the consummation by
Newco and Merger Sub of the transactions contemplated hereby and
the compliance by Newco and Merger Sub with any of the
provisions hereof do not and will not (i) violate or
conflict with any provision of the certificates of incorporation
or bylaws of Newco or Merger Sub, (ii) violate, conflict
with, or result in the breach of or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination
or acceleration under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation
to which Newco or Merger Sub is a party or by which Newco,
Merger Sub or any of their properties or assets may be bound,
(iii) assuming the Consents set forth in
Section 4.4 are obtained, violate or conflict with
any Law or Order applicable to Newco or Merger Sub or by which
any of their properties or assets are bound or (iv) result
in the creation of any Lien (other than Permitted Liens) upon
any of the properties or assets of Newco or Merger Sub, except
in the case of each of clauses (ii), (iii) and
(iv) above, for such violations, conflicts, defaults,
terminations, accelerations or Liens which would not,
individually or in the aggregate, prevent or materially delay or
impede the consummation of the transactions contemplated by this
Agreement or the ability of Newco and Merger Sub to perform
their respective covenants and obligations under this Agreement.
4.4 Required Governmental Approvals. No
Consent of any Governmental Authority is required on the part of
Newco, Merger Sub or any of their Affiliates in connection with
the execution, delivery and performance by Newco and Merger Sub
of this Agreement and the consummation by Newco and Merger Sub
of the transactions contemplated hereby, except (i) the
filing and recordation of the Certificate of Merger with the
Secretary of State of the State of Delaware and such filings
with Governmental Authorities to satisfy the applicable laws of
states in which the Company and its Subsidiaries are qualified
to do business, (ii) such filings and approvals as may be
required by any federal or state securities laws, including
compliance with any applicable requirements of the Exchange Act,
(iii) filings required under, and compliance with any other
applicable requirements of, the HSR Act and any applicable
foreign Antitrust Laws, and (iv) such other Consents, the
failure of which to obtain would not, individually or in the
aggregate, prevent or materially delay the consummation of the
transactions contemplated by this Agreement or the ability of
Newco and Merger Sub to fully perform their respective covenants
and obligations under this Agreement.
4.5 Litigation. There are no Legal
Proceedings pending or, to the Knowledge of Newco, threatened
against Newco or Merger Sub that would, individually or in the
aggregate, prevent or materially delay the consummation of the
transactions contemplated by this Agreement or the ability of
Newco and Merger Sub to perform their respective covenants and
obligations under this Agreement. Neither Newco nor Merger Sub
is subject to any outstanding Order that would, individually or
in the aggregate, prevent or materially delay the consummation
of the transactions contemplated by this Agreement or the
ability of Newco and Merger Sub to perform their respective
covenants and obligations under this Agreement.
A-36
4.6 Proxy Statement and Other Required Filings.
(a) Any document that is required to be filed by Newco,
Merger Sub or any of their respective Affiliates with the SEC in
connection with the transactions contemplated by this Agreement
(each, a Other Required Newco Filing and
collectively, the Other Required Newco
Filings) will, at the date of its filing with the SEC
and at the date of any amendment or supplement thereto, comply
as to form in all material respects with the applicable
requirements of the Exchange Act. None of the Other Required
Newco Filings will, when filed with the SEC or at the time of
any amendment or supplement thereto, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that
notwithstanding the foregoing, no representation or warranty is
made by Newco or Merger Sub with respect to information supplied
by the Company or any of its directors, officers, employees,
affiliates, agents or other representatives that is included or
incorporated by reference in any of the Other Required Newco
Filings.
(b) The information supplied by Newco, Merger Sub or any of
their respective partners, members, stockholders, directors,
officers, employees, affiliates, agents or other representatives
that is included or incorporated by reference in the Proxy
Statement will not, at the time the Proxy Statement is filed
with the SEC or at the time of any amendment or supplement
thereto, at the time the Proxy Statement is first sent to the
Company Stockholders or at the time of the Company Stockholder
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
information supplied by Newco, Merger Sub or any of their
respective partners, members, stockholders, directors, officers,
employees, affiliates, agents or other representatives that is
included or incorporated by reference in any of the Other
Required Company Filings will not, at the time the applicable
Other Required Company Filing is filed with the SEC or at the
time of any amendment or supplement thereto, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading.
4.7 Ownership of Company Capital Stock.
As of the date hereof, none of Newco, Merger Sub or, to the
Knowledge of Newco, any of their Affiliates is an
affiliate of the Company within the meaning of
Rule 13e-3(a)(i)
under the Securities Exchange Act of 1934, nor at any time
during the last three years has been an interested
stockholder of the Company as defined in Section 203
of the DGCL.
4.8 Brokers. Except for Citigroup Global
Markets Inc., UBS Securities LLC and Bain Capital Partners, LLC,
(a) no agent, broker, finder or investment banker is
entitled to any brokerage, finders or other fee or
commission, or reimbursement of expense, and (b) Newco or
Merger Sub shall not be subject to any Liability to any such
Person, in each case in connection with the transactions
contemplated by this Agreement based upon arrangements made by
or on behalf of Newco or Merger Sub.
4.9 Operations of Newco and Merger Sub.
Each of Newco and Merger Sub has been formed solely for the
purpose of engaging in the transactions contemplated hereby and,
prior to the Effective Time, neither Newco nor Merger Sub will
have engaged in any other business activities and will have
incurred no liabilities or obligations other than as
contemplated by this Agreement.
4.10 Financing.
(a) Newco and Merger Sub have delivered to the Company a
true and complete copy of (i) an executed commitment
letter, dated September 28, 2007, and the related executed
fee letter (which includes the market flex
provisions, but redacts certain fee information), each dated
September 28, 2007, from Citibank N.A., Hong Kong Branch
Citigroup Global Markets Asia Limited, UBS AG Singapore Branch,
The Hong Kong and Shanghai Banking Corporation Limited, ABN AMRO
Bank N.V. and Bank of China (Hong Kong) Limited, and
(ii) an executed commitment letter, dated
September 28, 2007, and the related executed fee letter
(which redacts certain fee information), each dated
September 28, 2007, from UBS AG, Singapore Branch,
Citibank, N.A. Citigroup Global Markets Inc. and The Hong Kong
and Shanghai Banking Corporation Limited
A-37
(collectively, the Debt Commitment Letters),
pursuant to which the lender parties thereto (collectively, the
Financing Sources) have committed, subject to
the terms and conditions set forth therein, to provide debt
financing in an aggregate amount set forth therein for the
purpose of funding the transactions contemplated by this
Agreement (the Debt Financing). Newco and
Merger Sub have delivered to the Company true and complete
copies of an executed commitment letter (the Equity
Commitment Letter and together with the Debt
Commitment Letters, the Financing Commitment
Letters) from the Guarantors pursuant to which the
Guarantors have committed, subject to the terms and conditions
set forth therein, to provide equity financing in aggregate
amounts set forth therein (the Equity
Financing and together with the Debt Financing, the
Financing).
(b) As of the date hereof, (i) none of the Financing
Commitment Letters has been amended or modified, and
(ii) the respective commitments contained in the Financing
Commitment Letters have not been withdrawn or rescinded in any
respect. As of the date hereof, each of the Debt Commitment
Letters, in the form so delivered to the Company, is in full
force and effect and is a legal, valid and binding obligation of
Newco or Merger Sub, as applicable and, to the Knowledge of
Newco, the other parties thereto. The Equity Commitment Letter,
in the form so delivered to the Company, is in full force and
effect and is a legal, valid and binding obligation of Newco
and, to the Knowledge of Newco, the other parties thereto. The
Financing Commitment Letters contain all of the conditions
precedent to the obligations of the parties thereunder to make
the Financing available to Newco or Merger Sub, as applicable,
on the terms set forth therein. Subject to the terms and
conditions set forth in the Financing Commitment Letters, and
subject to the terms and conditions set forth in this Agreement,
and assuming the accuracy of the representations and warranties
set forth in Article III and performance by the
Company of its obligations under Section 5.1, the
net proceeds contemplated by the Financing Commitment Letters,
together with the available cash on hand of the Company, will be
sufficient for Newco and Merger Sub to consummate the
transactions contemplated hereby upon the terms contemplated by
this Agreement and to pay all related fees and expenses
associated therewith, including the payment of all amounts
payable pursuant to Article II. As of the date of
this Agreement, and assuming the accuracy of the representations
and warranties set forth in Article III, no event
has occurred which, with or without notice, lapse of time or
both, would constitute a default or breach on the part of Newco
or Merger Sub under any term or condition of the Financing
Commitment Letters. As of the date of this Agreement, and
assuming the accuracy of the representations and warranties set
forth in Article III, neither Newco nor Merger Sub
has any reason to believe that it will be unable to satisfy on a
timely basis any term or condition to be satisfied by it
contained in the Financing Commitment Letters. As of the date
hereof, Merger Sub has fully paid any and all commitment fees
that have been incurred and are due and payable on or prior to
the date hereof in connection with the Financing Commitment
Letters, and Merger Sub will pay when due all other commitment
fees arising under the Commitment Letters as and when they
become payable.
(c) As of the date hereof, other than as set forth on
Section 4.10(c) of the Newco Disclosure Schedule,
none of Newco, Merger Sub or, to the Knowledge of Newco, any of
their respective Affiliates have (i) any Contracts or other
arrangements with any Person who is a director, officer or
stockholder of the Company or who is or may be an Affiliate of
the Company concerning the contributions to be made to Newco or
Merger Sub in connection with the transactions contemplated by
this Agreement other than as set forth in the Financing
Commitment Letters, or (ii) any Contracts or other
arrangements with any Person who is a director, officer or
stockholder of the Company or who is or may be an Affiliate of
the Company concerning the ownership and operation of Newco,
Merger Sub or the Surviving Corporation.
(d) As of the date hereof, none of Newco, Merger Sub or any
of their respective Affiliates are a party to or have any
Contracts or arrangements or understandings with any Person
pursuant to which such Person has agreed (i) to provide or
otherwise make available debt financing (or to assist with the
arrangement of debt financing) for the transactions contemplated
by this Agreement to or for the benefit of Newco, Merger Sub, or
any of their respective Affiliates on an exclusive basis, or
(ii) to refrain from providing or making available debt
financing (or to assist with the arrangement of debt financing)
for the transactions contemplated by this Agreement to or for
the benefit of any other Person.
4.11 Solvency. As of the Effective Time
and immediately after giving effect to all of the transactions
contemplated by this Agreement, including the Financing, the
Merger and the payment of the aggregate Share
A-38
Consideration, Option Consideration and ESPP Payment pursuant
hereto, and payment of all related fees and expenses of Newco,
Merger Sub, the Company and their respective Subsidiaries in
connection therewith, and assuming (x) the accuracy of the
Representations and Warranties set forth in
Article III hereof (for such purposes the
Representations and Warranties will be read without giving
effect to any Company Material Adverse Effect
qualifiers therein), except for any inaccuracies that are not
material to the Company and its Subsidiaries, taken as a whole,
and (y) satisfaction or waiver of the conditions to Newco
and Merger Subs obligations to consummate the transactions
contemplated by this Agreement, and (z) any estimates,
projections or forecasts of the Company and its Subsidiaries
have been prepared in good faith based upon reasonable
assumptions, (i) the amount of the fair saleable
value of the assets of the Surviving Corporation and its
Subsidiaries taken as a whole will exceed (A) the value of
all liabilities of the Surviving Corporation and such
Subsidiaries taken as a whole, including contingent and other
liabilities as of such date, and (B) without duplication of
liability in clause (A), the amount that will be required to pay
the probable liabilities of the Surviving Corporation and such
Subsidiaries on their existing debts (including contingent
liabilities) as such debts become absolute and matured,
(ii) the Surviving Corporation will not have, as of such
date, an unreasonably small amount of capital for the operation
of the businesses in which it is engaged or proposed to be
engaged following such date, and (iii) the Surviving
Corporation will be able to pay its liabilities, including
contingent and other liabilities, as they mature. For purposes
of the foregoing, terms shall be generally defined in accordance
with the applicable federal Laws governing determinations of the
solvency of debtors.
ARTICLE V
COVENANTS
OF THE COMPANY
5.1 Interim Conduct of Business.
(a) Except (i) as contemplated or permitted by this
Agreement, (ii) as set forth in Section 5.1(a)
of the Company Disclosure Letter, or (iii) with the prior
written approval of Newco, at all times during the period
commencing with the execution and delivery of this Agreement and
continuing until the earlier to occur of the termination of this
Agreement pursuant to Article VIII and the Effective
Time, the Company shall, and shall cause each of its
Subsidiaries to, carry on its business in the ordinary course of
business and in compliance in all material respects with all
applicable Laws and use its reasonable best efforts to keep
available the services of the current officers, key employees
and consultants of the Company and each of its Subsidiaries and
to preserve the current relationships of the Company and each of
its Subsidiaries with each of the customers, suppliers and other
Persons with whom the Company or any of its Subsidiaries has
significant business relations as is reasonably necessary to
preserve substantially intact its business organization.
(b) Except (i) as contemplated or permitted by this
Agreement, (ii) as set forth in Section 5.1(b)
of the Company Disclosure Letter, or (iii) with the prior
written approval of Newco, at all times during the period
commencing with the execution and delivery of this Agreement and
continuing until the earlier to occur of the termination of this
Agreement pursuant to Article VIII and the Effective
Time, the Company shall not do any of the following and shall
cause its Subsidiaries not to do any of the following (it being
understood and hereby agreed that if any action is expressly
permitted by any of the following subsections, such action shall
be expressly permitted under Section 5.1(a)):
(i) amend its certificate of incorporation or bylaws or
comparable organizational documents, except in connection with
the dissolution or reorganization of a domestic wholly owned
Subsidiary of the Company in the ordinary course of business,
which Subsidiary is not necessary to the operation of the
business, or elect or approve any new executive officers or
directors of the Company or any Significant Subsidiary, except
in order to replace a previous executive officer or director;
(ii) issue, sell, deliver, pledge, dispose of, grant,
encumber or otherwise subject to any Lien (other than a
Permitted Lien), or agree, authorize or commit to any of the
foregoing (whether through the issuance or granting of
securities or rights convertible into, exchangeable or
exercisable for, or evidencing the right to subscribe for, or
the issuance or grant of any options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any Equity
Interests of the Company or any Subsidiary except as set
A-39
forth on Section 5.1(a)(ii) of the Company Disclosure
Letter or issuances of shares of Company Common Stock to
participants in the Company ESPP pursuant to the terms thereof;
(iii) directly or indirectly acquire, repurchase, redeem or
otherwise acquire any Equity Interests of the Company or any
Subsidiary, except in connection with (A) Company
Stock-Based Awards in the ordinary course of business or
(B) dissolution or reorganization of a wholly owned
Subsidiary of the Company in the ordinary course of business;
(iv) (A) split, combine, subdivide or reclassify any
shares of capital stock, or issue or authorize any other
securities in respect of, in lieu of, or in substitution for
shares of its capital stock or Equity Interests,
(B) declare, set aside or pay any dividend or other
distribution (whether in cash, shares or property or any
combination thereof) in respect of any shares of capital stock,
or (C) make any other actual, constructive or deemed
distribution in respect of the shares of capital stock or Equity
Interests, except for cash dividends made by any direct or
indirect wholly-owned Subsidiary of the Company to the Company
or one of its wholly owned Subsidiaries;
(v) propose or adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
of its Subsidiaries, except for (A) the transactions
contemplated by this Agreement or (B) the dissolution or
reorganization of a wholly owned Subsidiary of the Company in
the ordinary course of business;
(vi) (A) incur or assume any Indebtedness in excess of
$1,000,000 individually or $5,000,000 in the aggregate, provided
that any debt so incurred must be voluntarily prepayable without
material premium, penalties or any other material costs, except
for (1) debt incurred in the ordinary course of business
under letters of credit, lines of credit or other credit
facilities in effect on the date hereof or issuances or
repayment of commercial paper in the ordinary course of business
or (2) loans or advances to direct or indirect wholly-owned
Subsidiaries, (B) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person in excess of
$1,000,000 individually or $5,000,000 in the aggregate, except
with respect to obligations of direct or indirect wholly-owned
Subsidiaries of the Company, (C) make any loans, advances
or capital contributions to or investments in any other Person,
except for travel advances in the ordinary course of business to
employees of the Company or any of its Subsidiaries, or
(D) mortgage or pledge any of its or its Subsidiaries
assets, tangible or intangible, or create or suffer to exist any
Lien thereupon (other than Permitted Liens);
(vii) (A) enter into, adopt, amend (including
acceleration of vesting), modify or terminate any bonus, profit
sharing, incentive, compensation, severance, retention,
termination, option, appreciation right, performance unit, stock
equivalent, share purchase agreement, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for
the compensation, benefit or welfare of any director, officer or
employee in any manner, except in any such case (1) in
connection with the hiring of new employees who are not
directors or executive officers in the ordinary course of
business, (2) in connection with the promotion of employees
who are not directors or executive officers (and who will not be
directors or executive officers after such promotion) in the
ordinary course of business, and (3) in connection with any
amendment of an Employee Plan that is required by Law, or
(B) increase the compensation payable or to become payable
of any director, officer or employee, pay or agree to pay any
special bonus or special remuneration to any director, officer
or employee, or pay or agree to pay any benefit not required by
any plan or arrangement as in effect as of the date hereof,
except in the ordinary course of business with respect to any
employee who is not a director or executive officer;
(viii) pay, discharge, satisfy or settle any pending or
threatened Legal Proceeding, or any other disputed material
claim, liability or obligation, except for the payment,
discharge, satisfaction or settlement of any pending or
threatened Legal Proceeding or any disputed claim, liability or
obligation that does not include any material obligation (other
than the payment of money) to be performed by the Company or its
Subsidiaries following the Effective Time and (A) is fully
reserved against in the Company Financial Statements, or
(B) involves the payment of no more than $250,000
individually or
A-40
$1,500,000 in the aggregate or (C) results in a payment to
the Company or a Subsidiary thereof of no more than $1,000,000
individually or $5,000,000 in the aggregate;