defm14a
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:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to §240.14a-11(c) or §240.14a-2
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):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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Fee paid previously with preliminary materials.
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o
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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.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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3Com Corporation
350 Campus Drive
Marlborough, Massachusetts
01752-3064
December 15,
2009
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 Hewlett-Packard
Company. If the merger contemplated by the merger agreement is
completed, you will be entitled to receive $7.90 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, the 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 advisable and in the best
interests of and fair to 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 January 26, 2010 at
10 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,
Robert Y. L. Mao
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 December 15, 2009, and is
first being mailed to stockholders on or about December 21,
2009.
3Com Corporation
350 Campus Drive
Marlborough, Massachusetts
01752-3064
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held On January 26, 2010
To the Stockholders of 3Com Corporation:
A special meeting of stockholders of 3Com Corporation, a
Delaware corporation (3Com), will be held on
January 26, 2010 at 10 a.m. local time, at 3Coms
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
November 11, 2009, by and among Hewlett-Packard Company
(HP), Colorado Acquisition Corporation, a wholly
owned subsidiary of HP (Merger Sub), and 3Com. A
copy of the Merger Agreement is attached as Annex A.
Pursuant to the terms of the Merger Agreement, Merger Sub will
merge with and into 3Com (the Merger) and each
outstanding share of 3Coms common stock, par value $0.01
per share (the Common Stock) (other than shares
owned by HP, Merger Sub or 3Com, or by any direct or indirect
wholly owned subsidiary of HP, Merger Sub or 3Com, 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 their statutory rights of appraisal with
respect to the Merger), will be converted into the right to
receive $7.90 in cash, without interest and less any applicable
withholding tax.
2. Adjournment of the Special Meeting. To
approve the proposal to adjourn 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 Common Stock as of the close of
business on December 9, 2009 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 3Com 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
Secretary
Marlborough, Massachusetts
December 15, 2009
TABLE OF
CONTENTS
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ii
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 80.
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What is the proposed transaction? |
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The proposed transaction is the acquisition of 3Com by HP
pursuant to the Merger Agreement. After the Merger Agreement has
been adopted by the stockholders and other closing conditions
under the Merger Agreement have been satisfied or waived, at the
effective time of the Merger, Merger Sub, a wholly owned
subsidiary of HP, will merge with and into 3Com. 3Com will be
the surviving corporation and a wholly owned subsidiary of HP. |
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What will I receive in the Merger? |
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Upon completion of the Merger, you will be entitled to receive
$7.90 in cash, without interest and less any applicable
withholding taxes, 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 $790.00 in
cash in exchange for your shares of Common Stock, less any
applicable withholding taxes. You will not own any shares in the
surviving corporation or HP. |
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When and where is the special meeting? |
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The special meeting of stockholders of 3Com will be held on
January 26, 2010 at 10 a.m. local time, at 3Coms
headquarters, 350 Campus Drive, Marlborough, Massachusetts
01752-3064. |
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What vote of our stockholders is required to approve the
proposal to adopt the Merger Agreement? |
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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 effect as a vote against the
Merger Agreement. |
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What vote of our stockholders is required to approve the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies? |
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Approval of the proposal to adjourn 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. |
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How does 3Coms board of directors recommend that I
vote? |
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The board of directors unanimously recommends that you vote
FOR the proposal to adopt the Merger
Agreement and FOR the proposal to adjourn 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 the Board of Directors beginning on
page 26 for a discussion of the factors that the board of
directors considered in deciding to recommend the adoption of
the Merger Agreement. |
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What effects will the proposed Merger have on 3Com? |
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As a result of the proposed Merger, 3Com will cease to be a
publicly-traded company and will be wholly owned by HP. You will
no longer have any interest in our future earnings or growth.
Following consummation of the Merger, the registration of the
Common Stock and our reporting obligations with respect to the |
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Common Stock under the Securities 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 Common Stock will no longer be listed on any
stock exchange or quotation system, including the NASDAQ Global
Select Market. |
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What happens if the Merger is not consummated? |
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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
the NASDAQ Global Select Market. Under specified circumstances,
3Com may be required to pay a termination fee or reimburse HP
for its
out-of-pocket
expenses, as described under the caption The Merger
Agreement Termination Fees and Expenses
beginning on page 70. |
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What do I need to do now? |
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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, 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. |
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How do I vote? |
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You may vote by: |
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signing and dating each proxy card you receive and
returning it in the enclosed prepaid envelope;
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using the telephone number printed on your proxy
card;
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using the Internet voting instructions printed on
your proxy card;
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if you hold your shares in street name,
following the procedures provided by your broker, bank or other
nominee; or
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attending the special meeting and voting in person.
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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 the
special meeting, if necessary or appropriate, to solicit
additional proxies. |
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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? |
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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 the special meeting. |
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How can I change or revoke my vote? |
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You have the right to change or revoke your proxy at any time
before the vote taken at the special meeting: |
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by notifying our Secretary, Neal D. Goldman, at 3Com
Corporation, 350 Campus Drive, Marlborough, Massachusetts
01752-3064;
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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);
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by submitting a later-dated proxy card; or
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if you voted by telephone or the Internet, by voting
a second time by telephone or Internet.
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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. |
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What do I do if I receive more than one proxy or set of
voting instructions? |
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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. |
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What happens if I sell my shares before the special meeting
or before the completion of the Merger? |
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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 $7.90 per share in cash to be received by
our stockholders in the Merger. In order to receive the $7.90
per share, you must hold your shares through completion of the
Merger. |
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Am I entitled to exercise appraisal rights instead of
receiving the merger consideration for my shares? |
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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 77. |
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When is the Merger expected to be completed? |
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We are working toward completing the Merger as quickly as
possible, and the parties are targeting completion of the Merger
by the end of April 2010. 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). See The Merger
Agreement Effective Time and The Merger
Agreement Conditions to the Merger beginning
on pages 53 and 64, respectively. |
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Will a proxy solicitor be used? |
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Yes. 3Com has engaged Georgeson Inc. (Georgeson) to
assist in the solicitation of proxies for the special meeting,
and 3Com estimates it will pay Georgeson a fee of approximately
$20,000. 3Com 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. |
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Should I send in my stock certificates now? |
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No. After the Merger is completed, a payment agent will
send you a letter of transmittal with detailed written
instructions for exchanging your shares of 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. |
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What are the U.S. federal income tax consequences of the
Merger? |
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The receipt of cash by you in exchange for your shares of Common
Stock pursuant to the Merger will be a taxable transaction for
U.S. federal income tax purposes, and generally also will be a
taxable transaction under applicable state, local and non-U.S.
tax laws. In general, if you are a U.S. person (as defined
herein), you will recognize, for U.S. federal income tax
purposes, gain or loss equal to the difference, if any, between
the amount of cash received and your adjusted tax basis in the
shares of Common Stock |
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exchanged for cash pursuant to the Merger. If you are a U.S.
person and if the shares of Common Stock sold or exchanged
constitute capital assets in your hands, such gain or loss will
be capital gain or loss. In general, capital gains recognized by
an individual stockholder are eligible for preferential rates of
U.S. federal income tax if the shares of Common Stock were
held for more than one year. If the shares are held for one year
or less, such capital gains recognized by an individual
stockholder will be subject to tax at ordinary income tax rates.
We recommend that you consult your own tax advisors as to the
particular tax consequences to you of the Merger, including the
effect of U.S. federal, state and local tax laws or
non-U.S.
laws. See The Merger Material U.S. Federal
Income Tax Consequences of the Merger to Our Stockholders
beginning on page 48 for a more detailed description of the
U.S. federal income tax consequences of the Merger. |
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Who can help answer my other questions? |
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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, (2) call our Investor Relations
department at
(508) 323-1198,
or (3) call our proxy solicitor, Georgeson, toll free at
(866) 432-2786
(banks and brokers call
(212) 440-9800).
If your broker holds your shares, you should call your broker
for additional information. |
vi
Important Notice Regarding Internet Availability of Proxy
Materials for the Special Meeting of Stockholders to be held on
January 26, 2010. The Proxy Statement is available at
www.proxyvote.com
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.
SUMMARY
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 80.
Proposals
You are being asked to vote on a proposal to adopt the Agreement
and Plan of Merger, dated November 11, 2009 (the
Merger Agreement), by and among Hewlett-Packard
Company (HP), Colorado Acquisition Corporation, a
wholly owned subsidiary of HP (Merger Sub), and
3Com. Pursuant to the Merger Agreement, Merger Sub will merge
with and into 3Com and 3Com will be the surviving corporation
and a wholly owned subsidiary of HP (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 the special
meeting to solicit additional proxies. See The Special
Meeting beginning on page 15.
The
Parties to the Merger (Page 14)
3Com
Corporation
3Com Corporation is a global enterprise networking solutions
provider. 3Com has three global product and solutions
brands H3C, 3Com, and TippingPoint that
offer high-performance networking and security solutions to
enterprises large and small. The
H3C®
enterprise networking portfolio includes products that span from
the data center to the edge of the network and is targeted at
large enterprises. The
3Com®
family of products offers a strong price/performance value
proposition for the small and medium-size businesses. Our
security brand,
TippingPoint®,
features network-based intrusion prevention systems (IPS) and
network access control (NAC) solutions that deliver in-depth,
no-compromise application, infrastructure and performance
protection.
3Com was incorporated in California on June 4, 1979, and
reincorporated in Delaware on June 12, 1997. Our corporate
headquarters are currently located in Marlborough,
Massachusetts. 3Coms principal executive offices are
located at 350 Campus Drive, Marlborough, Massachusetts
01752-3064,
and our telephone number is
(508) 323-1000.
Hewlett-Packard
Company
Hewlett-Packard Company, a Delaware corporation, focuses on
simplifying technology experiences for all of its
customers from individual consumers to the largest
businesses. With a portfolio that spans printing, personal
computing, software, services and information technology (IT)
infrastructure, HP is among the worlds largest technology
companies, with revenue totaling $114.6 billion for the
four fiscal quarters ended October 31, 2009. HPs
principal executive offices are located at 3000 Hanover Street,
Palo Alto, California 94304, and its telephone number is
(650) 857-1501.
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Colorado
Acquisition Corporation
Colorado Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of HP, was formed solely for the purpose
of consummating the Merger. Colorado Acquisition Corporation has
not carried on any activities to date, except for activities
incidental to its formation and activities undertaken in
connection with the transactions contemplated by the Merger
Agreement. Colorado Acquisition Corporations principal
executive offices are located at 3000 Hanover Street, Palo Alto,
California 94304, and its telephone number is
(650) 857-1501.
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 HP,
Merger Sub or 3Com, or by any direct or indirect wholly owned
subsidiary of HP, Merger Sub or 3Com, and shares held by
stockholders, if any, who have properly and validly perfected
their statutory rights of appraisal with respect to the Merger)
will be converted into the right to receive $7.90 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 53)
If the Merger is completed, you will be entitled to receive
$7.90 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 or HP
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 January 26, 2010 at
10 a.m. local time, at 3Coms 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 3Com, and to approve the proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies.
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
December 9, 2009, 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
396,006,355 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 the
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 adoption of the Merger Agreement. Approval
of the proposal to adjourn the special
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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 Common Stock or an abstention will have no effect on the
approval of the proposal to adjourn the special meeting.
Common
Stock Ownership of Directors and Executive Officers
(Page 75)
As of the close of business on the record date, the directors
and executive officers of 3Com held in the aggregate
approximately 1% of the shares of Common Stock entitled to be
voted at the special meeting. In the aggregate, these shares
represent approximately 2% 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 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:
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by notifying our Secretary, Neal D. Goldman, at 3Com
Corporation, 350 Campus Drive, Marlborough, Massachusetts
01752-3064;
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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);
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by submitting a later-dated proxy card; or
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if you voted by telephone or the Internet, by voting a second
time by telephone or Internet.
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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 53)
Stock Options. At the effective time of the
Merger, each option to purchase shares of Common Stock that is
not yet vested or exercisable
and/or has a
per share exercise price that is equal to or greater than $7.90
per share and is outstanding immediately prior to the effective
time of the Merger will be assumed by HP and automatically
converted into an option to acquire, on the same terms and
conditions applicable to such option immediately prior to the
Merger, a number of shares of HP common stock (rounded down to
the nearest whole share) equal to the product of (x) the
number of shares of Common Stock subject to the option
immediately prior to the effective time of the Merger and
(y) a fraction, the numerator of which is $7.90 and the
denominator of which is the average closing price of HP common
stock on the New York Stock Exchange over the five
(5) trading days ending on the date that is two
(2) trading days prior to the closing date of the Merger
(this fraction is referred to herein as the exchange
ratio). The exercise price for each such assumed option
will equal the per share exercise price for the shares of Common
Stock purchasable pursuant to such option immediately prior to
the effective time of the Merger divided by the exchange ratio
(rounded up to the nearest whole cent).
3
At the effective time of the Merger, each option to purchase
shares of Common Stock that is vested and has a per share
exercise price that is less than $7.90 per share and is
outstanding immediately prior to the effective time of the
Merger will not be assumed, and will instead be cancelled and
automatically converted into the right to receive an amount in
cash equal to the number of shares of Common Stock subject to
the option immediately prior to the effective time of the Merger
multiplied by the amount by which $7.90 exceeds the per share
exercise price of such option, without interest, and less any
applicable withholding taxes.
Restricted Stock. At the effective time of the
Merger, all outstanding unvested shares of Common Stock will be
assumed by HP and automatically converted into a number of
unvested shares of HP common stock determined by multiplying the
number of unvested shares of Common Stock outstanding
immediately prior to the effective time of the Merger by the
exchange ratio (rounded down to the nearest whole share). The
unvested shares of HP common stock will continue to be subject
to the same terms and conditions, including vesting, applicable
to the unvested shares of Common Stock immediately prior to the
effective time of the Merger.
Restricted Stock Units. At the effective time
of the Merger, all outstanding restricted stock units payable in
shares of Common Stock will be assumed by HP and automatically
converted into restricted stock units payable in shares of HP
common stock. The number of shares of HP common stock payable
pursuant to such assumed restricted stock units will be
determined by multiplying the number of shares of Common Stock
subject to the restricted stock units immediately prior to the
effective time of the Merger by the exchange ratio (rounded down
to the nearest whole share). The assumed restricted stock units
will otherwise continue to be subject to the same terms and
conditions, including vesting, applicable to such restricted
stock units immediately prior to the effective time of the
Merger.
Employee Stock Purchase Plan. 3Com will
establish a new purchase date for the Amended and Restated 3Com
Corporation 1984 Employee Stock Purchase Plan (the
ESPP) for the offering period underway at the
effective time of the Merger, so that the offering period will
end as of the last business day prior to the effective time of
the Merger or, if more administratively advisable, the last
payroll date immediately prior to the effective time of the
Merger. All contributions made to the ESPP as of the new
purchase date will be used to purchase shares of Common Stock,
and 3Com will terminate the ESPP immediately after such
purchase, subject to and conditioned upon the occurrence of the
effective time of the Merger. At the effective time of the
Merger, the newly purchased shares of Common Stock will be
converted into the right to receive $7.90 per share in cash,
without interest, and less any applicable withholding taxes.
Recommendation
of the Board of Directors (Page 26)
The board of directors has unanimously (i) determined that
the Merger Agreement and the transactions contemplated thereby,
including the Merger, are advisable and in the best interests of
and fair to 3Com and our stockholders, (ii) authorized and
approved in all respects the Merger Agreement and any other
ancillary agreements contemplated thereby to which 3Com is a
party and authorized and directed the execution, of the Merger
Agreement and any other ancillary agreements contemplated
thereby to which 3Com is a party and (iii) resolved to
recommend that the stockholders of 3Com adopt the Merger
Agreement at a special meeting of the stockholders. The board
of directors unanimously recommends that our stockholders vote
FOR the proposal to adopt the Merger Agreement and
FOR the proposal to adjourn the special meeting, if
necessary or appropriate, to solicit additional proxies.
In reaching its decision, the 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 the Board of Directors beginning on
page 26.
4
Interests
of 3Coms Directors and Executive Officers in the Merger
(Page 39)
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:
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each of our current executive officers is covered by the terms
of one of our forms of management retention agreement (or with
respect to Robert Y.L. Mao, Chief Executive Officer of 3Com, and
Ronald A. Sege, President and Chief Operating Officer of 3Com,
their employment agreements) that provides certain severance
payments and benefits in the case of the executive
officers termination of employment under certain
circumstances on or following a change of control;
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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
3Com as a director or executive officer;
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Dr. Shusheng Zheng, Executive Vice President of 3Com and
Chief Executive Officer of H3C, has executed a retention term
sheet with HP pursuant to which Dr. Zheng will be eligible
to receive certain payments and benefits in connection with and
following the closing of the Merger, subject to certain
conditions including execution of an employment agreement with
HP under which he will agree to remain employed with HP for at
least three (3) years from the closing of the
Merger; and
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although, except with respect to Dr. Zheng, no other
agreements have been entered into as of the date of this proxy
statement, HP may request some of our executive officers to
remain after the Merger is completed, and such executive
officers may, prior to the closing of the Merger, enter into new
arrangements with HP or its affiliates regarding employment with
HP or the surviving corporation or the right to participate in
the equity plans of HP.
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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 Financial Advisor (Page 28)
Goldman, Sachs & Co. (Goldman Sachs)
delivered its opinion to the board of directors that, as of
November 11, 2009 and based upon and subject to the factors
and assumptions set forth therein, the $7.90 per share in cash
to be paid to the holders (other than HP or any of its
affiliates) of shares (other than shares of restricted stock) 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
November 11, 2009, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with such opinion, is attached
as Annex B. Goldman Sachs provided its opinion for the
information and assistance of the board of directors in
connection with its consideration of the Merger. Goldman
Sachss opinion is not a recommendation as to how any
holder of Common Stock should vote with respect to the Merger or
any other matter. Pursuant to an engagement letter between
Goldman Sachs and us, we agreed to pay Goldman Sachs a
transaction fee of approximately $41 million, approximately
$38 million of which is payable upon consummation of the
Merger.
Regulatory
Approvals (Page 49)
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), provide 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
5
terminated. 3Com and HP filed notification and report forms
under the HSR Act with the FTC and the Antitrust Division of the
DOJ on December 2, 2009.
The Merger is also subject to review by the governmental
authorities of various other jurisdictions under the antitrust
laws of those jurisdictions. HP has filed, or plans to file, in
these jurisdictions, including the European Union, China,
Brazil, Israel, Russia, South Africa, South Korea, Taiwan,
Turkey and Ukraine.
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 54)
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 certificates with the proxy card, and you should return
your stock certificates with the letter of transmittal.
Material
U.S. Federal Income Tax Consequences of the Merger to Our
Stockholders (Page 48)
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 that are
U.S. persons exchanging their shares of Common Stock in the
Merger generally will 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 U.S. federal, state and
local and/or
non-U.S. taxes.
Conditions
to the Merger (Page 64)
Conditions to Each Partys
Obligations. Each partys obligation to
complete the Merger is subject to the satisfaction or waiver of
the following conditions:
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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;
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(i) any waiting period (and extensions thereof) applicable
to the transactions contemplated by the Merger Agreement under
the HSR Act must have expired or been terminated; (ii) any
clearances, consents, approvals, orders and authorizations of
governmental authorities required by the antitrust laws of the
European Union, Israel, Russia, South Africa, South Korea,
Taiwan, Turkey and Ukraine must have been obtained
and/or any
waiting periods (and extensions thereof) applicable to the
transactions contemplated by the Merger Agreement under the
antitrust laws of such jurisdictions must have expired or been
terminated; and (iii) any required approval or deemed
approval of the transactions contemplated by the Merger
Agreement of the Ministry of Commerce must have been obtained
pursuant to the Anti-Monopoly Law of the Peoples Republic
of China; in each case, without any condition that would require
any action that HP and its subsidiaries would not be required to
take, or 3Com and our subsidiaries would not be permitted to
take, pursuant to the provisions of the Merger Agreement
described in the last paragraph under The Merger
Agreement Antitrust Regulatory Filings
beginning on page 60; and
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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 and has the effect of making
the Merger illegal or which has the effect of prohibiting or
otherwise preventing the consummation of the Merger.
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6
Conditions to HPs and Merger Subs
Obligations. The obligations of HP 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 HP:
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our representation and warranties contained in the Merger
Agreement with respect to the absence of any change or event
that has had or would reasonably be expected to have a
Company Material Adverse Effect since
August 28, 2009 through the date of the Merger Agreement
must be true and correct in all respects;
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our representations and warranties contained in the Merger
Agreement with respect to our authority to complete the Merger,
approval by our stockholders, our organization and good
standing, our capitalization, our 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);
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all of our other representations and warranties contained 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), except where any failure to be so true and correct has
not had and would not reasonably be expected to have a
Company Material Adverse Effect (without giving
effect to any qualification or exception as to materiality or
Company Material Adverse Effect (but not dollar
thresholds nor the reference to Company Material Adverse
Effect in the representation and warranty regarding
certain material contracts) set forth in such representations
and warranties);
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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;
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we must deliver to HP and Merger Sub at closing a certificate,
validly executed for and on behalf of 3Com and in our name by a
duly authorized officer, certifying that the foregoing
conditions have been satisfied; and
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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.
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For purposes of the Merger Agreement, Company Material
Adverse Effect means any effect, circumstance, change,
event or development, individually or in the aggregate, and
taken together with all other effects, circumstances, changes,
events or developments, that has (or have) a material adverse
effect on the business, operations, condition (financial or
otherwise) or results of operations of 3Com and our
subsidiaries, taken as a whole, other than:
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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;
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general conditions in the industries in which we and our
subsidiaries conduct business;
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any conditions arising out of acts of terrorism, war or armed
hostilities;
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the announcement of the Merger Agreement or the pendency of the
transactions contemplated thereby, including the impact on our
relationships with our suppliers, distributors, partners,
customers or employees;
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any action that is taken, or any failure to take action, by us
or our subsidiaries in either case which HP has requested in
writing;
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any changes in laws, orders or generally accepted accounting
principles or the interpretation of laws, orders or accounting
principles;
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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 changes may be considered in determining whether there
is a Company Material Adverse Effect, unless
otherwise excluded by this definition);
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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, unless otherwise excluded by this
definition);
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matters expressly set forth in 3Coms disclosure letter to
HP; or
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any legal proceedings made or brought by any of the current or
former stockholders of 3Com resulting from, relating to or
arising out of the Merger Agreement;
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except, in the case of the first three bullets above, to the
extent such conditions or changes referred to therein affect
3Com and its subsidiaries in a disproportionate manner relative
to other participants in the industries in which 3Com and its
subsidiaries conduct business.
Conditions to 3Coms Obligations. Our
obligation to complete the Merger is subject to the satisfaction
or waiver of the following additional conditions, any of which
may be waived exclusively by us:
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the representations and warranties of HP 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 HP 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;
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HP 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
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HP and Merger Sub must deliver to us at closing a certificate,
validly executed for and on behalf of HP and Merger Sub and in
their respective names by a duly authorized officer, with
respect to the satisfaction of the foregoing conditions relating
to representations, warranties and obligations.
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Restrictions
on Solicitations of Other Offers (Page 66)
From and after the date of the Merger Agreement, 3Com and our
subsidiaries have agreed not to, nor authorize or knowingly
permit our respective representatives to, directly or indirectly:
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solicit, initiate, propose or induce the making, submission or
announcement of, or knowingly encourage, facilitate or assist,
an alternative acquisition proposal;
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furnish to any person (other than HP, Merger Sub or any
designees of HP or Merger Sub) any non-public information
relating to 3Com 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
3Com or any of our subsidiaries (other than HP, Merger Sub or
any designees of HP or Merger Sub) in any such case with the
intent to induce or in a manner that reasonably would be
expected to lead to 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;
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participate, engage in or continue discussions or negotiations
with any person with respect to any alternative acquisition
proposal; or
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enter into, or authorize 3Com 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,
other than an acceptable confidentiality agreement.
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8
Notwithstanding the aforementioned restrictions, at any time
prior to the adoption 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 3Com 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 3Com or any of our subsidiaries to any person
that has made a bona fide unsolicited written acquisition
proposal, provided that the 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 HP 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 are also required to keep HP reasonably informed of
any material developments regarding any acquisition proposal
and, upon the reasonable request of HP, apprise HP of the status
of such acquisition proposal.
We are required contemporaneously to provide to HP any
non-public information concerning us or our subsidiaries
provided to such other person which was not previously provided
to HP. We have agreed that we and our subsidiaries will not
enter into any confidentiality agreement with any person which
will prohibit us from complying with these obligations.
For purposes of the Merger Agreement, an acquisition
proposal means any offer or proposal (other than an
offer or proposal by HP or Merger Sub) to engage in an
acquisition transaction from any person or group (as
defined in Section 13(d) of the Exchange Act). For purposes
of the Merger Agreement, 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 3Com 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 3Com pursuant to which the stockholders of
3Com immediately preceding such transaction (in their capacities
as such) hold eighty percent (80%) or less of the Common Stock
or consolidated assets of 3Com 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 3Com 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.
For purposes of the Merger Agreement, 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%) will be references to
fifty percent (50%) and the reference therein to
eighty percent (80%) will be a reference to
fifty percent (50%)) with respect to which the board
of directors must 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 3Coms
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 HP to 3Com in a written offer capable of acceptance
in response to such proposal or otherwise).
9
Termination
of the Merger Agreement (Page 69)
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:
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by mutual written agreement of HP and 3Com;
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by either 3Com or HP if:
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the Merger is not consummated by 11:59 p.m. (Pacific time)
on November 11, 2010 (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 the Merger Agreement, including those conditions
described above in Conditions to the
Merger beginning on page 6, having failed to be
satisfied by the Termination Date;
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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 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
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3Com has failed to obtain the stockholder approval at the
special meeting (or any adjournment or postponement thereof) at
which a vote is taken on the Merger Agreement;
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HP 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 HP and Merger Sub set forth in the Merger Agreement have
become inaccurate, as more fully described below in The
Merger Agreement Termination of the Merger
Agreement beginning on page 69; or
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The board of directors has received an acquisition proposal that
it determines in good faith (after consultation with its
independent financial advisors and outside legal counsel)
constitutes a superior proposal and the failure to enter into a
definitive agreement relating to such superior proposal would
reasonably be expected to be a breach of its fiduciary duties,
and 3Com has complied with the requirements for terminating in
connection with such superior proposal described in further
detail in The Merger Agreement Termination of
the Merger Agreement beginning on page 69;
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3Com 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 3Com set forth in
the Merger Agreement have become inaccurate, as more fully
described below in The Merger Agreement
Termination of the Merger Agreement beginning on
page 69; or
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(i) the 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 ten
(10) business days after the public announcement of the
commencement of such acquisition proposal, 3Com has not 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 3Coms stockholders reject such
acquisition proposal and not tender any shares of Common Stock
into such tender or exchange offer; (iii) 3Com fails to
timely hold a stockholder vote with respect to the adoption of
the Merger Agreement in accordance
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with the terms of the Merger Agreement; or (iv) the board
of directors has failed to publicly reconfirm the board of
directors recommendation in favor of the Merger within ten
(10) business days of a written request from HP to do so.
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Termination
Fees and Expenses (Page 70)
We have agreed to pay HP (or its designee) a termination fee of
$99 million if:
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the Merger Agreement is terminated pursuant to the provision
described in the second
sub-bullet
under the third bullet above under Termination
of the Merger Agreement beginning on page 10;
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the Merger Agreement is terminated pursuant to the provision
described in the second
sub-bullet
under the fourth bullet above under
Termination of the Merger Agreement
beginning on page 10;
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the Merger Agreement is terminated pursuant to the provision
described in the first
sub-bullet
under the second bullet above under
Termination of the Merger Agreement
beginning on page 10 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 3Com 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 HP 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 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
beginning on page 8 and provided that:
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prior to such termination a competing acquisition transaction
has been publicly announced, disclosed or communicated and not
withdrawn, a person or group has publicly disclosed an intention
to make, propose or communicate a proposal for a competing
acquisition transaction and not withdrawn such intention, or a
proposal for a competing acquisition transaction has become
publicly known and not withdrawn, and
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within twelve (12) months after such termination, we enter
into a definitive agreement providing for a competing
acquisition transaction and such competing acquisition
transaction is subsequently consummated;
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the Merger Agreement is terminated pursuant to the provision
described in the third
sub-bullet
under the second bullet above under
Termination of the Merger Agreement
beginning on page 10 and provided that:
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prior to the special meeting (or any postponement or adjournment
thereof) a competing acquisition transaction has been publicly
announced, disclosed or communicated and not withdrawn, a person
or group has disclosed an intention to make, propose or
communicate a proposal for a competing acquisition transaction
and not withdrawn such proposal or intention or a proposal for a
competing acquisition transaction has become publicly known and
not withdrawn,
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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, and
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provided that such payment will be less any expenses previously
paid to HP (or its designee) as described in the next paragraph.
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We have also agreed to reimburse HPs and Merger Subs
out-of-pocket
fees and expenses incurred in connection with the transaction
contemplated by the Merger Agreement, up to an aggregate of
$10 million, if either the Merger Agreement is terminated
pursuant to the provision described in the third
sub-bullet
under the second bullet above under
Termination of the Merger Agreement
beginning on page 10 and prior to the special meeting (or
any postponement or adjournment thereof) a competing acquisition
transaction has been publicly announced, disclosed or
communicated and not withdrawn, a person or group has disclosed
an intention to make, propose or communicate a proposal for a
competing acquisition transaction and not withdrawn such
proposal or intention or a proposal for a competing acquisition
transaction has become
11
publicly known and not withdrawn. For purposes of the Merger
Agreement, a competing acquisition
transaction has the same meaning as an acquisition
transaction except that all references therein to twenty
percent (20%) are references to fifty percent
(50%) and the reference to eighty percent
(80%) is a reference to fifty percent (50%).
Appraisal
Rights (Page 77)
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 74)
Our Common Stock is listed on the NASDAQ Global Select Market
under the trading symbol COMS. The closing sale
price of Common Stock on the NASDAQ Global Select Market on
November 10, 2009, the last trading day prior to the
execution of the Merger Agreement, was $5.41. The $7.90 per
share to be paid for each share of Common Stock in the Merger
represents:
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a premium of approximately 46% to the closing share price on
November 10, 2009;
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a premium of approximately 43% to the average closing share
price for the one-month period ending November 10, 2009;
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a premium of approximately 61% to the average closing share
price for the three-month period ending November 10,
2009; and
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a premium of approximately 116% to the average closing share
price for the one-year period ending November 10, 2009.
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The closing sale price of Common Stock on the NASDAQ Global
Select Market on December 14, 2009, the last trading day
before the date of this proxy statement, was $7.47.
12
CAUTIONARY
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
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 Questions and Answers about the Special
Meeting and the Merger, Summary, 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:
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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 $99 million termination fee;
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the outcome of any legal proceedings that have been or may be
instituted against 3Com and others relating to the Merger
Agreement;
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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;
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the inability to complete the Merger due to regulatory matters,
including obtaining antitrust clearances in the U.S., China, the
European Union, Israel, Russia, South Africa, South Korea,
Taiwan, Turkey and Ukraine or obtaining such clearances with
conditions that one or more parties are not required to agree to
under the Merger Agreement;
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the failure of the Merger to close for any other reason;
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risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention
as a result of the Merger;
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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;
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the ability to recognize the benefits of the Merger;
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the amount of the costs, fees, expenses and charges related to
the Merger; and
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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 80.
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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
Corporation
3Com Corporation is a global enterprise networking solutions
provider. 3Com has three global product and solutions
brands H3C, 3Com, and TippingPoint that
offer high-performance networking and security solutions to
enterprises large and small. The
H3C®
enterprise networking portfolio includes products that span from
the data center to the edge of the network and is targeted at
large enterprises. The
3Com®
family of products offers a strong price/performance value
proposition for the small and medium-size businesses. Our
security brand,
TippingPoint®,
features network-based intrusion prevention systems (IPS) and
network access control (NAC) solutions that deliver in-depth,
no-compromise application, infrastructure and performance
protection. 3Com was incorporated in California on June 4,
1979, and reincorporated in Delaware on June 12, 1997. Our
corporate headquarters are currently located in Marlborough,
Massachusetts.
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 80. 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 our telephone number is
(508) 323-1000.
Hewlett-Packard
Company
Hewlett-Packard Company, a Delaware corporation, focuses on
simplifying technology experiences for all of its
customers from individual consumers to the largest
businesses. With a portfolio that spans printing, personal
computing, software, services and IT infrastructure, HP is among
the worlds largest technology companies, with revenue
totaling $114.6 billion for the four fiscal quarters ended
October 31, 2009. HPs principal executive offices are
located at 3000 Hanover Street, Palo Alto, California 94304, and
its telephone number is
(650) 857-1501.
Colorado
Acquisition Corporation
Colorado Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of HP, was formed solely for the purpose
of consummating the Merger. Colorado Acquisition Corporation has
not carried on any activities to date, except for activities
incidental to its formation and activities undertaken in
connection with the transactions contemplated by the Merger
Agreement. Colorado Acquisition Corporations principal
executive offices are located at 3000 Hanover Street, Palo Alto,
California 94304, and its telephone
number is (650) 857-1501.
14
THE
SPECIAL MEETING
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 the board of directors
for use at the special meeting to be held on January 26,
2010 at 10 a.m., at 3Coms 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 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 December 21, 2009.
Record
Date and Quorum
We have fixed the close of business on December 9, 2009 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
396,006,355 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 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 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 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 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 the record date,
the directors and executive officers of 3Com held and are
entitled to vote, in the aggregate, 3,948,199 shares of
Common Stock, representing approximately 1% of the outstanding
Common Stock.
15
Proxies
and Revocation
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 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:
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by notifying our Secretary, Neal D. Goldman, at 3Com
Corporation, 350 Campus Drive, Marlborough, Massachusetts
01752-3064;
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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);
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by submitting a later-dated proxy card; or
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if you voted by telephone or the Internet, by voting a second
time by telephone or Internet.
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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 payment
agent will mail to you a separate letter of transmittal 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 if 3Com has not received sufficient votes to
approve the merger proposal at the special meeting. Any
adjournments may be made without notice (if such adjournment is
not for more than thirty (30) days), other than an
announcement at the special meeting, by approval of the
affirmative vote of holders of at least a majority of shares of
Common Stock who are present in person or represented by proxy
at 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.
At any time prior to convening the special meeting, 3Coms
board of directors may postpone the special meeting for any
reason without the approval of 3Com stockholders. If postponed,
3Com will provide notice of the new meeting date as required by
law. Although it is not currently expected, 3Coms board of
directors may postpone the special meeting for the purpose of
soliciting additional proxies if 3Com has not received
sufficient proxies to constitute a quorum or sufficient votes
for adoption of the Merger Agreement. Similar to adjournments,
any postponement of the special meeting for the purpose of
soliciting additional proxies will allow stockholders who have
already sent in their proxies to revoke them at any time prior
to their use.
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.
16
To exercise your appraisal rights, you must submit a written
demand for appraisal to 3Com 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 77 and the text of the
Delaware appraisal rights statute reproduced in its entirety as
Annex C.
Solicitation
of Proxies
This proxy solicitation is being made and paid for by 3Com on
behalf of its board of directors. In addition, we have retained
Georgeson 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, (2) call our Investor Relations
department at
(508) 323-1198,
or (3) call our proxy solicitor, Georgeson, toll free at
(866) 432-2786
(banks and brokers call
(212) 440-9800).
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 3Com during its regular
business hours by any interested holder of Common Stock.
17
THE
MERGER
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.
Background
of the Merger
On September 28, 2007, we entered into and announced a
merger agreement with Diamond II Holdings, Inc. and
Diamond II Acquisition Corp., which were entities
controlled by affiliates of Bain Capital Partners, LLC. Under
the terms of that merger agreement, these Diamond II
entities agreed to acquire all of the outstanding shares of 3Com
in a merger transaction in which our common stock would have
been exchanged for $5.30 per share in cash. We terminated that
merger agreement in April 2008.
Following the termination of our merger agreement with the
Diamond II entities, the board of directors and our senior
management team continued and expanded a detailed review of our
business strategy and operations. That review had begun during
our strategic planning for the merger transaction with the
Diamond II entities. As a result of the review, we
implemented a number of strategic changes and initiatives
intended to build long-term stockholder value. For example, in
April 2008, the board of directors appointed Robert Y.L. Mao as
our new Chief Executive Officer and Ronald A. Sege as our new
President and Chief Operating Officer. Dr. Shusheng Zheng,
the head of our H3C enterprise business in China was given
broader global responsibilities and promoted to Executive Vice
President of 3Com and Chief Executive Officer of H3C. We made
important investments in our direct-touch sales forces focused
on selling our solutions to large enterprises. In addition, we
launched a one company, three brands strategy
centered around our H3C enterprise brand, 3Com small-medium
business brand and TippingPoint security brand. We introduced
products to address the growing demand for data center
solutions, including our 12500 data center switch. We introduced
our H3C enterprise brand, which is an industry leader in China,
to the rest of the world through coordinated sales and marketing
efforts. Following these changes and initiatives, we have
announced significant enterprise customer wins and have
continued to generate more interest in our solutions on a global
basis.
In May 2009, Mr. Sege and other members of our senior
management team attended an industry trade show in Las Vegas,
Nevada. While attending this trade show, Mr. Sege had an
informal discussion with Marius Haas, Senior Vice President and
General Manager of the ProCurve Networking business of HP,
concerning a possible commercial relationship between 3Com and
HP. Messrs. Sege and Haas agreed that such a relationship
could have significant benefits for both companies and,
therefore, agreed to further consider such a relationship with
their respective business teams.
On June 12, 2009, Mr. Sege met with David A.
Donatelli, Executive Vice President and General Manager,
Enterprise Servers and Networking of HP, and Mr. Haas to
further discuss a possible commercial relationship between 3Com
and HP. During this meeting, Mr. Sege presented an overview
of 3Coms business strategy and operations to enable HP to
further assess the manner in which 3Com and HP could work
together for their mutual benefit.
On June 17, 2009, the board of directors held a regularly
scheduled meeting to discuss a variety of matters, including our
overall business performance, our fourth fiscal quarter results,
our financial plan for fiscal year 2010, a general business
update and the continued consideration of strategic initiatives
to enhance stockholder value. During this meeting, Mr. Sege
informed the board of his discussions with representatives of HP
concerning a possible commercial relationship between the two
companies, as well as various other strategic initiatives that
our senior management team was evaluating with other large
technology companies.
On July 1, 2009, Mr. Sege and other 3Com
representatives met with Mr. Haas and other HP
representatives to continue discussions concerning a possible
commercial relationship between 3Com and HP. During this
meeting, Mr. Sege and the 3Com team presented an overview
of 3Coms data center product line, and the parties
discussed the manner in which 3Coms products could fit
within and potentially enhance HPs product offerings.
18
To facilitate the further exchange of confidential information
in contemplation of a possible commercial relationship between
the two companies, we entered into a mutual non-disclosure
agreement with HP on July 15, 2009.
On July 20, 2009, representatives of 3Com met by telephone
with Mr. Haas and other HP representatives to provide a
broader overview of 3Coms product offerings and certain
technical due diligence background information in furtherance of
a possible commercial relationship between the two companies.
On July 29, 2009, Mr. Sege met with Mr. Haas and
other HP representatives to further discuss the possible
commercial relationship between the two companies. In
particular, Mr. Sege provided a broader overview of the
structure and operation of the 3Com business, its historical
background, the relationship with Huawei, and the lineage and
current roles and responsibilities of the current executive
C-Level staff. Mr. Sege also discussed the
China out strategy (which is designed to bring the
H3C product portfolio to the global market place), as well as
the one company, three brands strategy, in broad
terms, and described 3Coms business in China. In addition,
Mr. Sege discussed how the businesses are managed, and how
he views the business from a market segment perspective (i.e.,
Enterprise, MidMarket and SMB). He also provided a broad
overview of 3Coms data center offering, 3Coms supply
chain and of how 3Com goes to market.
On July 30, 2009, Eric A. Benhamou, Chairman of the board
of directors, Mr. Mao and Mr. Sege met with Shane V.
Robison, Executive Vice President and Chief Strategy and
Technology Officer of HP, Mr. Donatelli and Mr. Haas
to discuss further a possible commercial relationship between
3Com and HP and to engage in a dialogue about the networking
industry generally. During the course of this meeting,
Mr. Robison first expressed HPs potential interest in
acquiring 3Com in lieu of establishing a commercial relationship
between the two companies. HP conveyed its interest in 3Com in
general terms and indicated it would consider sending more
details, including a possible valuation, in a non-binding
written indication of interest to 3Com in the near-term. The
next day, on July 31, 2009, our senior management team
participated in discussions with representatives of Goldman,
Sachs & Co. (Goldman Sachs), our
long-standing financial advisor, to discuss the strategic
landscape of, and the potential for consolidation in, the
networking industry.
On August 5, 2009, we received from HP a non-binding
indication of interest in acquiring 3Com in a merger transaction
in which 3Com stockholders would receive $4.80 $5.15
per share in cash. HPs indication of interest was subject
to the satisfactory completion of due diligence and our
agreement to negotiate exclusively with HP for 60 days.
On August 10, 2009, the board of directors convened a
special meeting to consider HPs August
5th
indication of interest as well as other strategic initiatives
that were under consideration at that time. Representatives of
Wilson Sonsini Goodrich & Rosati, Professional
Corporation (Wilson Sonsini), our outside legal
counsel, also attended this meeting. At the outset,
representatives of Wilson Sonsini advised the board regarding
its fiduciary duties in connection with its consideration of
HPs August
5th
indication of interest. The board then discussed the retention
of an external financial advisor to assist the board and our
senior management team in their evaluation of a potential
acquisition by HP (including strategic alternatives to a
potential acquisition by HP). After discussion of various
alternatives, the board determined to engage Goldman Sachs and
authorized our senior management team to negotiate an engagement
agreement with Goldman Sachs to act as our financial advisor in
connection with a potential acquisition by HP and other
strategic alternatives. After considering the retention of a
financial advisor, the board discussed HPs indication of
interest, 3Coms recent financial performance and business
prospects, as well as the likelihood of consolidation in the
networking industry and the potential impact of such
consolidation on 3Com, its business prospects and stockholder
value. During this meeting, Messrs. Mao and Sege also
discussed our senior management teams ongoing evaluation
and discussions with other companies concerning potential
strategic and commercial partnerships.
Representatives of Goldman Sachs then joined the board meeting
and presented their preliminary financial analyses of 3Com based
on managements preliminary forecasts of 3Coms
financial performance and a preliminary analysis of the price
range proposed by HP in its August
5th
indication of interest relative to Goldman Sachs financial
analyses of 3Com. The board discussed Goldman Sachss
presentation, and, during
19
this discussion, Messrs. Mao and Sege advised the board on
3Coms financial prospects, taking into account the
uncertainty of macro-economic conditions in the U.S., China and
3Coms other significant global markets.
Representatives of Goldman Sachs then discussed the technology
industry landscape, including potential consolidation in the
networking industry and the role various industry participants
were likely to play in that consolidation. After discussion with
our senior management team, financial advisor and outside legal
counsel, the board of directors determined to reject HPs
August
5th
indication of interest, but authorized our senior management
team and financial advisor to continue discussions with HP
regarding a potential acquisition by HP and to provide
additional information to HP to support a higher purchase price
for 3Com. In addition, the board discussed the advisability of
seeking indications of interest from other companies that might
be interested in acquiring 3Com. After discussion among the
board members, the board determined not to seek alternative
indications of interest to acquire 3Com from other companies at
this time due to the preliminary nature of HPs indication
of interest, the relatively wide divergence in views between the
board and HP over 3Coms valuation, and the significant
risks of harm to 3Coms business and of employee
dislocation if speculation arose that 3Com was considering a
transaction with potential acquirors. Finally, in view of
current macro-economic conditions, as well as our senior
management teams current views with respect to our
companys financial performance, the board instructed our
senior management team to update 3Coms three-year business
plan and financial forecasts, which had been presented to the
board in January 2009, to reflect our senior management
teams most current view on the companys business and
prospects. The board of directors also instructed our senior
management team to continue discussions with other potential
partners to promote strategic product relationships.
From August 11 to August 12, 2009, Mr. Benhamou
contacted Mr. Robison, and Mr. Sege contacted
Mr. Haas, to convey the boards rejection of HPs
August
5th
indication of interest, but also to convey 3Coms
willingness to provide additional public and certain non-public
information that would support a higher valuation for a
potential acquisition by HP or possible commercial relationship
between the two companies. On August 14, 2009,
representatives of Goldman Sachs met with representatives of
Morgan Stanley & Co. Incorporated (Morgan
Stanley), HPs financial advisor, and representatives
of HP to further discuss 3Coms valuation and business and
financial outlook in the near-term and medium-term. These
discussions were followed by additional conversations on
August 24, 2009 and August 25, 2009 regarding the
valuation of 3Com reflected in HPs August
5th
indication of interest and HPs desire to conduct further
due diligence.
On August 26, 2009, we entered into an amendment to our
previously executed mutual non-disclosure agreement with HP in
order to enable HP to conduct additional technical due diligence
on 3Com, but to limit the scope of HP employees who would be
entitled to participate in this technical due diligence. HP
commenced its additional technical due diligence shortly
thereafter, focusing primarily on 3Com product testing.
On September 4, 2009, Mr. Sege met with Mr. Haas
to discuss HPs product testing efforts and related
matters. On September 17, 2009, Mr. Sege had further
discussions with Mr. Haas regarding HPs product
testing efforts and related matters.
On September 23, 2009, the board of directors held a
regularly scheduled meeting, which representatives of Goldman
Sachs and Wilson Sonsini also attended. During this meeting, our
senior management team presented a thorough review of each of
our business units and their current performance and future
prospects, and an updated three-year business plan, which we
refer to as the Management Long Range Plan, and financial
forecasts for the company based on this updated business plan.
In connection with this review, the board and our senior
management team discussed the key assumptions underlying the
Management Long Range Plan and the risks to the business that
could impact our ability to execute on the Management Long Range
Plan and financial forecasts, and compared those with possible
upside opportunities and downside risks.
Following this discussion, representatives of Goldman Sachs
discussed other strategic opportunities that could be under
consideration by HP as potential alternatives to an acquisition
of 3Com. Mr. Sege updated the board on HPs current
testing of 3Com products, and Messrs. Mao and Sege updated
the board on our ongoing strategic discussions with HP.
Representatives of Goldman Sachs also discussed the potential
for consolidation in the networking industry and the potential
or possible implications of such consolidation for 3Com and its
20
business prospects, including the potential interest of other
technology companies in acquiring 3Com. At this meeting Goldman
Sachs also discussed its updated preliminary financial analyses
of 3Com. Representatives of Wilson Sonsini then advised the
board regarding its fiduciary duties in connection with its
evaluation of strategic alternatives, including a possible
acquisition by HP or any other acquiror. At this meeting, the
board of directors also approved the terms of the engagement of
Goldman Sachs as our exclusive financial advisor.
On September 28, 2009, Messrs. Mao and Sege met with
Messrs. Donatelli and Haas and other HP representatives to
further discuss HPs proposed acquisition of 3Com. During
this meeting, the participants discussed the status of HPs
product testing efforts and various other operational matters.
The parties agreed to schedule a future meeting regarding
operational and due diligence matters.
On October 1, 2009, we entered into an engagement agreement
with Goldman Sachs, pursuant to which Goldman Sachs would act as
our exclusive financial advisor, effective as of
September 8, 2009, in connection with a potential
acquisition of 3Com.
On October 5, 2009, various media sources reported, based
on undisclosed sources, that HP may be interested in acquiring
one of our competitors. Representatives of 3Com contacted
Mr. Robison to inquire into these reports. Although
Mr. Robison declined to comment on the reports, he
indicated that HP desired to make an investment in the
networking equipment area and remained very interested in
further discussions regarding a possible acquisition of 3Com.
The board of directors convened a special meeting on
October 9, 2009 to further discuss the potential
acquisition by HP. Representatives of Goldman Sachs and Wilson
Sonsini also attended this meeting. Members of our senior
management team apprised the board of their recent discussions
with HP representatives, including the status of HPs
technical due diligence on 3Com products. Mr. Benhamou then
advised the board of his recent discussion with an HP executive
regarding HPs discussions with other strategic partners.
Representatives of Goldman Sachs then presented updated
preliminary financial analyses of 3Com based on the Management
Long Range Plan and financial forecasts that our senior
management team had discussed with the board at its special
meeting on September 23, 2009 and public or Wall
Street forecasts, among various other analyses. After
discussion with our senior management team, financial advisor
and outside legal counsel, the board of directors instructed our
senior management team and financial advisor to continue
discussions with HP regarding a possible acquisition by, or a
commercial relationship with, HP to determine if any such
acquisition or relationship would be in the best interests of
3Com and our stockholders.
Between October 14 and October 16, 2009, our senior
management team held a series of due diligence sessions in China
with HP representatives and Goldman Sachs representatives,
including management presentations in Beijing and tours of our
R&D facilities in Beijing and our China headquarters in
Hangzhou.
On October 19, 2009, we received another non-binding
indication of interest from HP in which HP proposed to acquire
3Com for a purchase price of $6.75 per share in cash. HP stated
that it had determined to increase its proposed price relative
to its August
5th
indication of interest following the recent meetings in China
and positive results from HPs product testing efforts.
HPs revised indication of interest was subject to the
satisfactory completion of due diligence and our agreement to
negotiate exclusively with HP for 28 days, but with an
objective of announcing a transaction no later than the week of
November 2, 2009.
The board of directors convened a special meeting on
October 20, 2009 to evaluate and consider HPs October
19th
indication of interest. Representatives of Goldman Sachs and
Wilson Sonsini also participated in this meeting.
Representatives of Wilson Sonsini advised the board on its
fiduciary duties in connection with its consideration of a
possible transaction. Members of our senior management team then
reported on their recent meetings with HP representatives in
China as well as our expected financial performance for the
current fiscal quarter and for the second half of the current
fiscal year. Representatives of Goldman Sachs then reviewed the
key terms of HPs October
19th
indication of interest and presented updated preliminary
financial analyses of 3Com, and their financial analysis of the
October
19th
indication of interest.
Following discussion of the Goldman Sachs presentation, the
board discussed 3Coms prospects as a stand-alone company
in view of the Management Long Range Plan and current financial
performance, and considered our product plans, sales and
marketing plans, market opportunities, competition and the macro-
21
economic environment. The board also considered the risks,
including the execution risks, associated with the Management
Long Range Plan, as well as the consolidation taking place in
the networking industry and the effect on the networking
industry should HP acquire one of our competitors, including our
future prospects as a stand-alone company in light of these
industry trends. After further deliberation, the board
determined to reject HPs October
19th
indication of interest, but instructed Mr. Mao to advise HP
to consider increasing its proposed purchase price to between
$8.00 and $8.50 per share, and to inform HP that 3Com would
consider a brief period of exclusive negotiations at a price in
this range.
Also at this October
20th
meeting, the board discussed the advisability of forming an ad
hoc transaction oversight committee of the board in view of the
discussions with HP and the need for directors to be regularly
available to guide and instruct our senior management team and
our financial advisor and outside legal counsel on discussions
with HP and its financial advisors and outside counsel. The
board of directors approved the formation of a board committee
referred to herein as the Strategic Transaction Oversight
Committee (the STOC), consisting of
Mr. Benhamou, Gary T. DiCamillo and James R. Long. The STOC
was established as a liaison between the board and our senior
management team, financial advisor and outside counsel to guide
and oversee discussions with HP or potentially other parties and
to report regularly to the board. The board did not empower the
STOC to approve or make any definitive determinations in respect
of a transaction with HP or any other party.
Following the board meeting on October 20, 2009,
Mr. Mao contacted Mr. Robison and conveyed the
boards rejection of HPs October
19th
indication of interest. In addition, Mr. Mao advised
Mr. Robison to consider increasing HPs proposed
purchase price to an amount between $8.00 and $8.50 per share,
and that in this price range, the board of directors would
consider entering into exclusive negotiations with HP for a
limited period of time. Mr. Robison indicated that HP would
consider Mr. Maos response and revert back to 3Com
after he had the opportunity to discuss it further with other HP
representatives.
On October 21, 2009, the STOC convened a meeting to discuss
the status of our discussions with HP. Representatives of
Goldman Sachs were also in attendance. Mr. Mao reported on
his discussion with Mr. Robison the previous day, and
representatives of Goldman Sachs reported on their continuing
discussions with representatives of Morgan Stanley, which were
similar to the discussions Mr. Mao had been having with HP
representatives. After discussion with our senior management
team and financial advisor, the STOC instructed our senior
management team to continue negotiations with HP to encourage HP
to increase its proposed purchase price for 3Com.
On October 25, 2009, we received another non-binding
indication of interest from HP in which HP proposed to acquire
3Com for a purchase price of $7.80 per share in cash. HPs
indication of interest was subject to the satisfactory
completion of diligence and our agreement to negotiate
exclusively with HP for 28 days. Mr. Robison contacted
Mr. Mao shortly thereafter to explain HPs rationale
for the higher purchase price reflected in HPs latest
indication of interest, and to emphasize that HP had increased
its proposed price substantially. During this discussion,
Mr. Robison also emphasized the importance of employee
retention to HPs overall plans for 3Coms business,
and HPs desire to announce a transaction by
November 9, 2009.
The STOC convened on October 25, 2009 to consider HPs
October
25th
indication of interest. Representatives of Goldman Sachs also
participated in this discussion. Mr. Mao reported on his
conversation with Mr. Robison earlier in the day.
Representatives of Goldman Sachs reviewed the terms of HPs
indication of interest, including HPs proposed period of
exclusive negotiations, the scope of HPs remaining due
diligence and HPs proposed timetable to an announcement of
any definitive transaction.
On October 26, 2009, the board of directors convened a
special meeting to consider and discuss HPs October
25th
indication of interest. Representatives of Goldman Sachs and
Wilson Sonsini also attended this meeting. Mr. Mao reported
on his October
25th
conversation with Mr. Robison, and the discussion that
occurred at the STOC meeting on October 25, 2009.
Representatives of Goldman Sachs then reviewed the terms of
HPs October
25th
indication of interest, and presented updates to certain
preliminary financial analyses of 3Com and the purchase price
reflected in HPs October
25th
indication of interest. The board considered 3Coms
prospects as a stand-alone company and HPs indication of
interest in view of the preliminary financial analyses presented
by Goldman Sachs. The board also considered further the
assumptions
22
underlying the Management Long Range Plan and the risks
(including the execution risks) inherent in the Management Long
Range Plan, including the competitive environment and industry
consolidation trends. After discussion, the board of directors
determined that the valuation reflected in HPs October
25th
indication of interest was attractive, but instructed our senior
management team and financial advisor to seek a further increase
in HPs proposed purchase price for 3Com.
The board then considered the advisability of seeking
indications of interest from other companies that might be
interested in acquiring 3Com. Goldman Sachs discussed other
large technology companies that would be reasonably likely to
have such an interest and the board discussed each of them as a
possible alternative acquiror of 3Com. After this discussion,
the board determined that there were very few companies that
would likely have a strategic interest and sufficient financial
resources to consider an acquisition of 3Com. The board further
noted that 3Com had been engaged in ongoing discussions with
certain of these companies regarding commercial relationships
for some time, but that none of them had expressed any interest
in discussing an acquisition of 3Com at this time. Moreover, the
board noted that the press had extensively reported on
acquisition trends and likely targets of consolidation in the
networking industry (including one of our primary competitors
and 3Com itself), but that no companies had approached 3Com to
discuss a potential acquisition in light of such press reports.
The board considered the fact that HP had been requesting a
period of exclusive negotiations for some time and was becoming
increasingly insistent on reaching agreement on exclusivity
before proceeding with further discussions with 3Com. Finally,
the board discussed with our outside legal counsel the likely
terms of the non-solicitation provisions that would be included
in any definitive agreement to acquire 3Com (including the
likely ability of 3Com to accept an unsolicited bona fide
superior transaction proposal), the likely amount of the
termination fee that would be payable as a condition to
accepting a superior transaction proposal from another company
after entering into a merger agreement with HP, and the related
effects of these provisions on our ability to consider and
respond to an alternative acquisition proposal following the
execution of a merger agreement with HP. After a discussion of
these matters, the board determined to approve the execution of
an exclusivity agreement with HP for a limited duration.
Following the board meeting on October 26, 2009,
Mr. Mao contacted Mr. Robison to inform him that,
although the board of directors appreciated the increased
purchase price that HP had proposed to acquire 3Com, the board
desired to continue discussions regarding the valuation of 3Com
and would consider a short period of exclusivity to pursue a
transaction at a valuation above $7.80 per share. In addition,
Mr. Mao reiterated the boards desire to maximize the
certainty that a transaction with HP would be consummated after
announcement.
Later on October 26, 2009, the STOC convened a telephone
call during which Mr. Mao reported on his conversation with
Mr. Robison. Representatives of Goldman Sachs also
participated in this telephone call. After a discussion, the
STOC advised our senior management team to continue its
discussions with HP in an effort to procure a higher purchase
price.
After the STOC meeting, Messrs. Mao and Robison had another
discussion regarding 3Coms valuation and the price
reflected in HPs October
25th
indication of interest. Following that discussion, on
October 26, 2009, we received another non-binding
indication of interest from HP in which HP proposed to acquire
3Com for a purchase price of $7.90 per share in cash, which
stated that it represented HPs best and final proposal.
HPs October
26th
indication of interest was subject to the satisfactory
completion of due diligence, the successful retention of key
employees and our agreement to negotiate exclusively with HP for
28 days, but with an objective of announcing a transaction
no later than November 9, 2009. By its terms, the
indication of interest would expire at 9:00 p.m.
(California time) on October 27, 2009 if HP did not receive
an executed copy of the exclusivity agreement by such time.
Also on October 26, 2009, Neal D. Goldman, Executive Vice
President, Chief Administrative and Legal Officer and Secretary
of 3Com, sent Mr. Robison a draft definitive merger
agreement, and a revised exclusivity agreement, which
contemplated that 3Com would negotiate exclusively with HP
regarding a possible acquisition transaction during the
exclusive negotiation period, which would end on
November 16, 2009, and
23
that HP would not negotiate with any of our competitors during
the exclusive negotiation period regarding a potential
acquisition.
We discussed the terms of the exclusivity agreement with HP
representatives on October 27, 2009. HP representatives
indicated that HP was unwilling to accept a mutual exclusive
negotiation arrangement that would preclude HP from exploring
acquisitions of any of our competitors during the period of
exclusive negotiations with 3Com. The STOC convened a telephone
call later that day to consider the terms of the exclusivity
agreement. Representatives of Goldman Sachs and Wilson Sonsini
also participated in this telephone call. Mr. Goldman
reported on HPs unwillingness to accept a mutual exclusive
negotiation arrangement, the effects of the mutual exclusive
negotiation arrangement and the implications of foregoing the
mutual exclusivity arrangement. After discussion, and noting the
increased purchase price set forth in HPs October
26th
indication of interest, the STOC authorized our senior
management team to withdraw our request for the mutual
exclusivity arrangement, provided that HP agreed that the
exclusive negotiation period would end on November 16, 2009
(as we had proposed), and approved entry into the exclusivity
agreement on the terms and conditions discussed with the STOC.
The parties entered into an exclusivity agreement on
October 27, 2009, which provided that the exclusive
negotiation period would end on November 16, 2009.
During the week of October 26, 2009, HP representatives
indicated to Mr. Mao the desire of HP to execute retention
arrangements with Dr. Shusheng Zheng, Executive Vice
President, 3Com, and Chief Executive Officer, H3C and certain
other members of the H3C senior management team. Discussions
regarding these retention arrangements occurred during this week
and the week of November 2, 2009, with Mr. Mao acting
as an intermediary between HP and Dr. Zheng, which resulted
in the execution of retention term sheets between HP, on the one
hand, and Dr. Zheng and certain other members of the H3C senior
management team, on the other hand, prior to the
November 10, 2009 meeting of the board of directors.
Subsequent to the execution of the Merger Agreement, HP and
Dr. Zheng amended the terms of his retention term sheet.
On October 28, 2009, we granted access to an electronic
data room to representatives of HP and its outside advisors,
including Cleary Gottlieb Steen & Hamilton LLP
(Cleary Gottlieb), HPs outside legal counsel,
and until November 11, 2009, HP conducted its due diligence
investigation of 3Com. HPs due diligence consisted of a
review of the data and other materials made available in the
electronic data room, various conference calls with
representatives of 3Com and Wilson Sonsini, and in-person
meetings with representatives of 3Com.
On October 30, 2009, HP delivered a draft definitive merger
agreement for the transaction. Thereafter, representatives of
Wilson Sonsini reviewed the draft merger agreement, discussed
the terms proposed in the draft merger agreement with
3Coms internal legal counsel, and prepared a revised draft
of the merger agreement.
On November 2, 2009, Messrs. Sege and Haas discussed
the status of the proposed transaction and the due diligence
efforts. These executives continued almost daily contact
thereafter to ensure the smooth conduct of HPs due
diligence process.
On November 4, 2009, representatives of Wilson Sonsini
delivered a revised draft of the merger agreement to
representatives of Cleary Gottlieb. Later that day,
representatives of Wilson Sonsini outlined for HPs
internal legal counsel and representatives of Cleary Gottlieb
the terms proposed in the revised merger agreement. On November
5 and November 6, 2009, representatives of Wilson Sonsini
and 3Coms internal legal counsel discussed with
representatives of Cleary Gottlieb and HPs internal legal
counsel the terms proposed in the revised merger agreement.
On November 7, 2009, representatives of Cleary Gottlieb
delivered a further revised draft of the merger agreement to
representatives of Wilson Sonsini and 3Coms internal legal
counsel. On November 8, 2009, representatives of Wilson
Sonsini reviewed the further revised merger agreement and
discussed the terms proposed in the further revised merger
agreement with 3Coms internal legal counsel. Between
November 9 and November 11, 2009, representatives of Wilson
Sonsini and 3Coms internal legal counsel met extensively
with representatives of Cleary Gottlieb and HPs internal
legal counsel to finalize the definitive merger
24
agreement. The negotiations with respect to the merger agreement
focused primarily on closing certainty, commitments to obtain
regulatory approvals, the amount of the termination fee and
other related matters.
Between November 5 and November 10, 2009, our senior
management team discussed with HP representatives on numerous
occasions certain due diligence items and other matters related
to the potential transaction. In this regard, Mr. Mao and
other 3Com representatives met with Mr. Robison and other
HP representatives on the evening of November 9, 2009 to
discuss certain key issues (primarily related to closing
certainty) in the proposed transaction that were unresolved at
the time. In addition, on November 10 and November 11,
2009, representatives of 3Com and HP met to finalize the
communications related to the announcement of the proposed
transaction.
On November 10, 2009, the board of directors held a special
meeting to consider the proposed acquisition by HP.
Representatives of Goldman Sachs and Wilson Sonsini also
attended this meeting. At this meeting, Messrs. Mao and
Sege reported on their discussions with senior representatives
of HP, and that negotiations were continuing on the merger
agreement. Representatives of Wilson Sonsini summarized the
terms of the merger agreement and led a discussion regarding the
major unresolved issues in the negotiation of the merger
agreement, including provisions related to closing certainty,
commitments to obtain regulatory approvals, employee benefit
matters, and the amount of the termination fee. Representatives
of Wilson Sonsini next advised the board on its fiduciary duties
in connection with its consideration of a transaction with HP.
Representatives of Goldman Sachs then presented updated
financial analyses of 3Com, based in part on the Management Long
Range Plan and a sensitivity case provided by our management,
which we refer to as the Management Sensitivity Case, and a
financial analysis of the proposed acquisition by HP. After
discussion, the board expressed their support for entering into
a definitive merger agreement on the terms proposed, subject to
satisfactory resolution of the unresolved matters and final
approval of the board.
The board of directors then met in executive session. During the
executive session, Mr. Mao informed the board that HP
entered into retention term sheets with Dr. Zheng and
certain other members of the H3C senior management team, and
summarized the terms of the retention term sheets for the board.
Mr. Mao advised the board that no other executive officer
of 3Com had been offered a retention arrangement by HP or had
any discussions with HP regarding such matters. Mr. Mao
also advised the board that no non-H3C employees had been
offered a retention arrangement by HP or had any discussions
with HP regarding such matters, other than HP having advised our
senior management team that it planned to fund a retention
program for additional H3C employees and non-H3C employees.
After the board meeting, we and representatives of Wilson
Sonsini continued to discuss with representatives of HP and
Cleary Gottlieb the major unresolved issues in the merger
agreement. Late in the evening on November 10, 2009, the
STOC convened a telephone call to discuss certain unresolved
issues in the merger agreement. Mr. Goldman and
representatives of Wilson Sonsini reported on the unresolved
issues, and after discussion, the STOC provided their assessment
of the issues. After the STOC meeting adjourned, Mr. Mao
and other 3Com representatives met with Mr. Robison and
other HP representatives to resolve the key remaining unresolved
issues in the proposed transaction.
The board of directors held another special meeting on
November 11, 2009. Representatives of Goldman Sachs and
Wilson Sonsini also participated in this meeting. At this
meeting, representatives of Wilson Sonsini reviewed the
resolution of each of the previously unresolved issues that had
been reported to the board. After further discussion,
representatives of Goldman Sachs then delivered its oral
opinion, which was subsequently confirmed in writing, to the
effect that as of the date thereof and based upon and subject to
the factors and assumptions set forth in its written opinion,
the $7.90 per share in cash to be paid to the holders (other
than HP or any of its affiliates) of shares (other than shares
of restricted stock) 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 November 11, 2009, 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. After considering each of the factors
described below in Reasons for the Merger;
Recommendation of the Board of Directors beginning on
page 26, the board of directors determined it was in the
best interests of 3Com and our stockholders to enter into the
Merger Agreement with HP. Accordingly, the board of directors
unanimously (i) determined that
25
the Merger Agreement and the transactions contemplated thereby,
including the Merger, are advisable and in the best interests of
and fair to 3Com and our stockholders, (ii) authorized and
approved in all respects the Merger Agreement and any other
ancillary agreements contemplated thereby to which 3Com is a
party and authorized and directed the execution of the Merger
Agreement and any other ancillary agreements contemplated
thereby to which 3Com is a party and (iii) resolved to
recommend that the stockholders of 3Com adopt the Merger
Agreement at a special meeting of the stockholders.
After the board meeting adjourned, the parties executed and
delivered the Merger Agreement and related documents, and
shortly after the close of the U.S. stock markets, HP and
3Com jointly announced the transaction by a press release dated
November 11, 2009.
Reasons
for the Merger; Recommendation of the Board of
Directors
The board of directors has unanimously (i) determined that
the Merger Agreement and the transactions contemplated thereby,
including the Merger, are advisable and in the best interests of
and fair to 3Com and our stockholders, (ii) authorized and
approved in all respects the Merger Agreement and any other
ancillary agreements contemplated thereby to which 3Com is a
party and authorized and directed the execution of the Merger
Agreement and any other ancillary agreements contemplated
thereby to which 3Com is a party and (iii) resolved to
recommend that the stockholders of 3Com adopt the Merger
Agreement at a special meeting of the stockholders.
In the course of reaching its determination, the board of
directors consulted with our senior management team, as well as
our legal and financial advisors, and 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:
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its knowledge of our business, operations, financial condition,
earnings and prospects, including the boards consideration
and evaluation of our updated three-year financial plan and the
execution risks and uncertainties related to achieving that
plan, compared to the relative certainty of realizing a fair
cash value for our stockholders in the Merger;
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its knowledge of the current environment in the networking
industry, including the information provided by our senior
management team and financial advisors with respect to
consolidation trends in the industry, the possibility of HP
entering a strategic transaction with one of our competitors and
the possibility of continued industry consolidation following
historical consolidation in recent years, and the likely effects
of these factors on our ability to remain competitive in the
industry going forward;
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the current and historical market prices of Common Stock and the
fact that the price of $7.90 per share represented a premium of
approximately:
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46% to the closing share price of Common Stock on
November 10, 2009, the last trading day prior to the
execution of the Merger Agreement;
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a premium of approximately 43% to the average closing price for
the one-month period ending November 10, 2009;
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a premium of approximately 61% to the average closing price for
the three-month period ending November 10, 2009; and
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a premium of approximately 116% to the average closing price for
the one-year period ending November 10, 2009;
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the possible alternatives to the sale of 3Com, including
continuing to operate 3Com on a stand-alone basis, and the range
of potential benefits to our stockholders of these alternatives,
as well as the boards assessment that none of these
alternatives was reasonably likely to present superior
opportunities for 3Com to create greater value for our
stockholders, taking into account the timing and the likelihood
of accomplishing such alternatives and the risks of execution,
as well as business, competitive, industry and market risks;
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26
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the price proposed by HP reflected extensive negotiations
between the parties and represented the highest price we had
received and, to the best knowledge of the board of directors,
could receive, from HP for the acquisition of 3Com, noting that
the final purchase price was substantially higher than the
original price range proposed by HP in its initial indication of
interest;
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the fact that the merger consideration is all cash, allowing our
stockholders to immediately realize a fair value for their
investment, while also providing our stockholders certainty of
value for their shares;
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the business reputation of HP and its management, the
substantial financial resources of HP, and HPs expressed
desire to complete a transaction promptly, which the board of
directors believed supported the conclusion that a transaction
with HP could be completed in an orderly and timely manner;
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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; and
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the terms of the Merger Agreement and the related agreements,
including:
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the limited number and nature of the conditions to HPs
obligation to consummate the Merger and the obligations of HP
with respect to obtaining all regulatory approvals required for
the consummation of the Merger, which were the product of
extensive arms-length negotiations among the parties and were
designed to provide a high degree of certainty that the Merger
would ultimately be consummated on a timely basis;
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our ability, under certain limited circumstances, to furnish
information to and conduct negotiations with third parties
regarding other proposals; and
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our ability to terminate the Merger Agreement in order to accept
a superior proposal, subject to paying HP a termination fee of
$99 million, which the board determined was reasonable in
light of, among other things, the benefits of the Merger to our
stockholders and the typical range and size of such fees in
similar transactions.
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The board of directors also considered the financial analyses
and opinion of Goldman Sachs, delivered orally to the board of
directors and subsequently confirmed in writing, to the effect
that, as of November 11, 2009, and based upon and subject
to the factors and assumptions set forth therein, the $7.90 per
share in cash to be paid to the holders (other than HP or any of
its affiliates) of shares (other than shares of restricted
stock) 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 November 11,
2009, 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 the
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 board of directors also considered a variety of risks and
other potentially negative factors concerning the Merger
Agreement and the Merger, including the following:
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the risks and costs to 3Com if the Merger does not close,
including the diversion of management and employee attention,
potential employee attrition and the potential effect on
3Coms business and its relationships with customers and
suppliers;
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the fact that the Merger will be subject to antitrust review in
certain jurisdictions which could delay or prevent completion of
the Merger, despite 3Coms efforts to negotiate terms and
conditions in the Merger Agreement that optimize the likelihood
that all required approvals will be obtained;
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the fact that our stockholders will not participate in any
future earnings or growth of 3Com and will not benefit from any
appreciation in value of 3Com, including any appreciation in
value that could be realized as a result of improvements to our
operations;
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27
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the restrictions on our ability to solicit or participate in
discussions or negotiations regarding alternative transactions,
subject to specified exceptions, and the requirement that we pay
HP a termination fee of $99 million if the board of
directors accepts a superior proposal or in certain other
circumstances specified in the Merger Agreement, which the board
of directors understood, while potentially having the effect of
discouraging an alternative transaction proposal, were
conditions to HPs willingness to enter into the Merger
Agreement and were reasonable when viewed in context with all
other aspects of the Merger Agreement, including the benefits of
the Merger to our stockholders;
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the restrictions on the conduct of our business prior to the
completion of the Merger, requiring us to conduct our business
only in the ordinary course (with various specified exceptions),
subject to specific limitations, which may delay or prevent us
from undertaking business opportunities that may arise during
the term of the Merger Agreement, whether or not the Merger is
completed;
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the fact that some of our directors and executive officers may
have interests in the Merger that are different from, or in
addition to, those of our stockholders generally, including as a
result of employment and compensation arrangements with us and
the manner in which they would be affected by the Merger,
retention arrangements with HP that one executive officer is a
party to, and rights to continued insurance and indemnification
for six years following the effective time of the
Merger; and
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the fact that an all cash transaction would be taxable for U.S.
income tax purposes to our stockholders that are
U.S. persons (and under certain circumstances to our
stockholders who are non-U.S. persons).
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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.
The 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.
Opinion
of Financial Advisor
Goldman Sachs rendered its opinion to the board of directors
that, as of November 11, 2009 and based upon and subject to
the factors and assumptions set forth therein, the $7.90 per
share in cash to be paid to the holders (other than HP or any of
its affiliates) of shares (other than shares of restricted
stock) 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
November 11, 2009, 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. Goldman Sachs provided its opinion for the
information and assistance of the board of directors in
connection with the board of directors consideration of
the Merger. The Goldman Sachs opinion is not a recommendation as
to how any holder of Common Stock should vote with respect to
the proposal to adopt 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:
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the Merger Agreement;
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annual reports to stockholders and Annual Reports on
Form 10-K
of 3Com for the five fiscal years ended May 29, 2009;
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28
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certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of 3Com;
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certain other communications from 3Com to our stockholders;
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certain publicly available research analyst reports for
3Com; and
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certain internal financial analyses and forecasts for 3Com
prepared by our management, as approved for Goldman Sachss
use by us, including our base-case long range plan, which we
refer to as the Management Long Range Plan, and additional
long-term estimates provided by our management using lower
revenue growth rates than the Management Long Range Plan, which
we refer to as the Management Sensitivity Case.
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Goldman Sachs also held discussions with members of the senior
management of 3Com regarding their assessment of the past and
current business operations, financial condition and future
prospects of 3Com. In addition, Goldman Sachs reviewed the
reported price and trading activity for 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 enterprise
networking 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 the opinion described above, 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 and Goldman Sachs does not assume any liability
for any such information. In that regard, Goldman Sachs assumed
with our consent that the Management Long Range Plan had been
reasonably prepared on a basis reflecting the best
then-currently available estimates and judgments of the
management of 3Com. 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 evaluation or appraisal of the assets
or liabilities of 3Com or any of our subsidiaries furnished to
Goldman Sachs. Goldman Sachs assumed that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the Merger will be obtained without any adverse
effect on the expected benefits of the Merger in any way
meaningful to its analysis. Goldman Sachs also assumed that the
Merger will be consummated on the terms set forth in the Merger
Agreement, without the waiver or modification of any term or
condition the effect of which would be in any way meaningful to
its analysis. In addition, Goldman Sachs did not express any
opinion as to the impact of the Merger on the solvency or
viability of 3Com or HP or the ability of 3Com or HP to pay its
obligations when they come due. Goldman Sachss opinion
does not address any legal, regulatory, tax or accounting
matters nor does it 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 be
available to 3Com. Goldman Sachs was not requested to solicit,
and did not solicit, interest from other parties with respect to
an acquisition of, or other business combination with, 3Com or
any other alternative transaction. Goldman Sachss opinion
addresses only the fairness from a financial point of view, as
of the date of the opinion, of the $7.90 per share in cash to be
paid to the holders (other than HP or any of its affiliates) of
shares (other than shares of restricted stock) of Common Stock
pursuant to the Merger Agreement. Goldman Sachs does not express
any view on, and its opinion does not address, any other term or
aspect of the Merger Agreement or the Merger or any term or
aspect of any other agreement or instrument contemplated by the
Merger Agreement or entered into or amended in connection with
the Merger, including, without limitation, the fairness of the
Merger to, or any consideration received in connection therewith
by, the holders of any other class of securities, creditors, or
other constituencies of 3Com; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of 3Com, or class of
such persons in connection with the Merger, whether relative to
the $7.90 per share in cash to be paid to the holders of shares
(other than shares of restricted stock) of Common Stock pursuant
to the Merger Agreement or otherwise. Goldman Sachss
opinion was necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made
available to it as of, the date of the opinion and Goldman Sachs
assumed no responsibility for updating, revising or reaffirming
its opinion based on
29
circumstances, developments or events occurring after the date
of its opinion. Goldman Sachss 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 the board of directors in
connection with rendering the opinion described above. The
following summary, however, does 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 Sachss 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
November 11, 2009 and is not necessarily indicative of
current market conditions.
Historical
Stock Trading Analysis
Goldman Sachs reviewed the historical trading prices for the
Common Stock for the five-year period ended November 10,
2009. In addition, Goldman Sachs analyzed the consideration to
be paid to holders of Common Stock pursuant to the Merger
Agreement in relation to the market price as of
November 10, 2009, the 52-week high market price as of
November 10, 2009, the five-year high market price as of
November 10, 2009 and the average market prices for the
one-month, three-month and one-year periods ended
November 10, 2009.
This analysis indicated that the price per share to be paid to
3Com stockholders pursuant to the Merger Agreement represented:
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a premium of 46.0% based on the November 10, 2009 market
price of $5.41 per share;
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a premium of 42.9% based on the latest one month average market
price of $5.53 per share;
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a premium of 61.2% based on the latest three month average
market price of $4.90 per share;
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a premium of 116.4% based on the latest one year average market
price of $3.65 per share;
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a premium of 35.3% based on the latest 52 weeks high
market price of $5.84 per share; and
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a premium of 35.3% based on the latest five years high
market price of $5.84 per share.
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Implied
Multiples Analysis
Goldman Sachs calculated and compared various financial
multiples and ratios of 3Com for calendar years 2009 and 2010
based on (a) Wall Street research estimates, (b) the
Management Long Range Plan and (c) the Management
Sensitivity Case. Goldman Sachs calculated an implied equity
value by multiplying the $7.90 in cash to be paid to holders of
Common Stock pursuant to the Merger Agreement by the total
number of outstanding shares of Common Stock and using the
treasury stock method for option and restricted stock unit, or
RSU, dilution based on (a) the capitalization information
reported in 3Coms public filings for the implied multiples
utilizing Wall Street research estimates and (b) the
capitalization information provided by our management for the
implied multiples utilizing the Management Long Range Plan and
the Management Sensitivity Case. Goldman Sachs then calculated
an implied enterprise value for us by adding the book value of
debt less cash, as of August 31, 2009, to the implied
equity value.
The implied multiples for 3Com earnings per share, or EPS, and
earnings before interest and taxes, or EBIT, were calculated
using Wall Street research estimates, the Management Long Range
Plan and the Management Sensitivity Case and exclude the effects
of any stock-based compensation charge. Goldman Sachs calculated
the EPS multiples both including and excluding the impact of an
operating subsidy from the Chinese tax authorities in the form
of a partial refund of value added taxes expected to be
collected by a subsidiary of 3Com in the Peoples Republic
of China through calendar year 2010 (the VAT
Rebate),
30
because of the non-recurring nature of the VAT Rebate. When
calculating implied multiples excluding the impact of the VAT
Rebate, the following adjustments were made:
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subtraction of $0.12, representing the per share present value
of the VAT Rebate through calendar year 2010, from the share
price, in the price to earnings, or P/E, multiple; and
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subtraction of $0.10 representing the per share reduction in EPS
from calendar year 2009 and 2010 EPS due to the absence of the
VAT Rebate.
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The results of this analysis are summarized in the table below:
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Management
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Management
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Street
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Long Range
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Sensitivity
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Enterprise Value to Calendarized:
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Estimates
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Plan
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Case
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2009 Revenue
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2.2
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x
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2.2
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x
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2.2
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x
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2010 Revenue
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2.2
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x
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2.1
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x
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2.1
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x
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2009 EBIT
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23.0
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x
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21.9
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x
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21.9
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x
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2010 EBIT
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24.2
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x
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21.1
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x
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21.9
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x
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Merger Price to Calendarized:
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2009 EPS (including VAT rebate)
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21.6
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x
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21.1
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x
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21.1
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x
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2010 EPS (including VAT rebate)
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22.7
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x
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21.8
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x
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22.4
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x
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2009 EPS (excluding VAT rebate)
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29.3
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x
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28.4
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x
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28.4
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x
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2010 EPS (excluding VAT rebate)
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31.3
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x
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29.6
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x
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30.8
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x
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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
traded companies in the enterprise networking industry:
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Aruba Networks, Inc.
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Blue Coat Systems, Inc.
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Brocade Communications Systems, Inc.
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Cisco Systems, Inc.
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D-Link Corporation
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Extreme Networks, Inc.
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F5 Networks, Inc.
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Juniper Networks, Inc.
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Netgear, Inc.
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Riverbed Technology, Inc.
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SonicWALL, Inc.
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Although none of the selected companies is directly comparable
to 3Com, the companies included were chosen because they are
publicly traded companies with operations and financial profiles
that for purposes of analysis may be considered similar to
certain operations of 3Com.
Goldman Sachs calculated and compared, on a calendarized basis,
various financial multiples and ratios based on financial data
as of November 10, 2009, information it obtained from SEC
filings and Wall Street research estimates. The multiples and
ratios for 3Com were calculated using the closing price for
Common Stock on November 10, 2009 of $5.41, the latest
publicly available financial statements and Wall Street research
estimates for calendar years 2009 and 2010, with adjustments to
calendarize each to December.
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Goldman Sachs calculated our implied equity value by multiplying
the market price of $5.41 as of November 10, 2009 by the
total number of shares of Common Stock outstanding and using
treasury stock method for option and RSU dilution based on the
capitalization information reported in 3Coms public
filings. Goldman Sachs then calculated an enterprise value for
us by adding the book value of our debt less cash, as provided
by our management, to the implied equity value.
The multiples and ratios for each of the selected companies were
calculated based on the closing price of such selected
companys common stock as of November 10, 2009, the
latest publicly available financial statements and Wall Street
research estimates for 2009 and 2010, with adjustments to
calendarize each to December. Equity values for the selected
companies were based on shares outstanding of their respective
common stocks and using treasury stock method for option and RSU
dilution based on the capitalization information as reported by
the respective issuers latest public filings. With respect
to the selected companies, Goldman Sachs calculated the
following and compared them to the results for 3Com:
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enterprise value, which is the market value of common equity
plus the book value of debt less cash, as a multiple of calendar
year 2009 and 2010 revenues based on Wall Street research
estimates; and
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enterprise value as a multiple of calendar year 2009 and 2010
EBIT based on Wall Street research estimates.
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The results of these analyses are summarized as follows:
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Selected Companies
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Enterprise Value as a Multiple of:
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Mean
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Median
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3Com
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2009 Revenues
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2.5
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x
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2.7
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x
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1.4
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x
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2010 Revenues
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2.2
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x
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2.4
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x
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1.4
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x
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2009 EBIT
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26.9
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x
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18.0
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x
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14.2
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x
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2010 EBIT
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18.7
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x
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13.9
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x
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14.9
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x
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Goldman Sachs also calculated estimated P/E multiples for
calendar year 2009 and 2010 for the selected companies based on
the market price of each of the selected companies as of
November 10, 2009 and Wall Street research estimates and
compared them to the results for 3Com based on the 3Com market
price as of November 10, 2009 and Wall Street research
estimates. The following table presents the results of this
analysis:
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Selected Companies
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Price/Earnings Multiples:
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Mean
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Median
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3Com
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2009
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27.5
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x
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26.2
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x
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14.8
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x
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2010
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22.6
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x
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20.0
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x
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15.5
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x
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Goldman Sachs also considered estimated calendar year 2010
growth rate of revenues and EBIT from prior year, estimated last
twelve months (LTM), gross margin, calendar year 2010 EBIT
margin and five-year EPS growth rate for the selected companies
and 3Com using Wall Street research estimates. The following
table presents the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Companies
|
|
|
Mean
|
|
Median
|
|
3Com
|
|
5 Year EPS Growth Rate
|
|
|
15.3
|
%
|
|
|
15.0
|
%
|
|
|
N/A
|
|
2010 EBIT Margin
|
|
|
15.6
|
%
|
|
|
16.5
|
%
|
|
|
9.3
|
%
|
2009 to 2010 EBIT Growth
|
|
|
16.0
|
%
|
|
|
22.0
|
%
|
|
|
(5.1
|
)%
|
2009 to 2010 Revenue Growth
|
|
|
11.7
|
%
|
|
|
15.0
|
%
|
|
|
(0.4
|
)%
|
LTM Gross Margin
|
|
|
N/A
|
|
|
|
65.9
|
%
|
|
|
57.6
|
%
|
32
Selected
Transactions Analysis
Goldman Sachs analyzed certain information relating to the
following eleven selected transactions in the enterprise
networking industry since November 11, 2005:
|
|
|
|
|
Cisco Systems, Inc.s acquisition of Tandberg ASA announced
on September 30, 2009.
|
|
|
|
Avaya PLCs acquisition of Nortel Network
Corporations Enterprise Solutions Unit announced on
September 14, 2009.
|
|
|
|
Brocade Communications Systems, Inc.s acquisition of
Foundry Networks, Inc. announced on July 21, 2008.
|
|
|
|
Convergys Corporations acquisition of Intervoice, Inc.
announced on July 16, 2008.
|
|
|
|
Blue Coat Systems, Inc.s acquisition of Packeteer, Inc.
announced on April 20, 2008.
|
|
|
|
Bain Capital Partners, LLCs acquisition of 3Com
Corporation announced on September 28, 2007.
|
|
|
|
Silver Lake Partners III, LPs and TPG Partners V,
LPs acquisition of Avaya PLC announced on June 4,
2007.
|
|
|
|
Cisco Systems, Inc.s acquisition of WebEx Communications,
Inc. announced on March 15, 2007.
|
|
|
|
3Com Corporations acquisition of the remaining stake of
Huawei-3Com announced on November 28, 2006.
|
|
|
|
Motorola Inc.s acquisition of Symbol Technologies, Inc.
announced on September 19, 2006.
|
|
|
|
Investment Group led by The Gores Group, LLC and Tennebaum
Capital Partners, LLCs acquisition of Enterasys Networks,
Inc. announced on November 11, 2005.
|
For each of the selected transactions, Goldman Sachs calculated
enterprise value as a multiple of next twelve months (NTM)
revenues and equity value as a multiple of NTM net income based
on SEC filings, Wall Street research estimates, Capital IQ,
Thomson SDC and Bloomberg and compared it to the proposed
transaction using (a) Wall Street research estimates,
(b) the Management Long Range Plan and (c) the
Management Sensitivity Case. While none of the companies that
participated in the selected transactions are directly
comparable to 3Com, the companies that participated in the
selected transactions are companies with operations that, for
the purposes of analysis, may be considered similar to certain
of 3Coms results, market size or product profile. The
following table presents the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Transactions
|
|
Proposed Transaction
|
|
|
|
|
|
|
|
|
|
|
Management
|
|
Management
|
|
|
|
|
|
|
|
|
Street Estimates
|
|
Long Range Plan
|
|
Sensitivity Case
|
|
|
|
|
|
|
|
|
Including
|
|
Excluding
|
|
Including
|
|
Excluding
|
|
Including
|
|
Excluding
|
|
|
|
|
|
|
|
|
VAT
|
|
VAT
|
|
VAT
|
|
VAT
|
|
VAT
|
|
VAT
|
|
|
Range
|
|
Mean
|
|
Median
|
|
Rebate
|
|
Rebate
|
|
Rebate
|
|
Rebate
|
|
Rebate
|
|
Rebate
|
|
Enterprise Value as a Multiple of NTM Revenues
|
|
|
0.5x - 5.7
|
x
|
|
|
1.9
|
x
|
|
|
1.5
|
x
|
|
|
2.2
|
x
|
|
|
2.2
|
x
|
|
|
2.1
|
x
|
|
|
2.1
|
x
|
|
|
2.1
|
x
|
|
|
2.1
|
x
|
Equity Value as a Multiple of NTM Net Income
|
|
|
19.9x - 35.6
|
x
|
|
|
26.7
|
x
|
|
|
26.1
|
x
|
|
|
24.8
|
x
|
|
|
35.1
|
x
|
|
|
23.0
|
x
|
|
|
31.5
|
x
|
|
|
23.6
|
x
|
|
|
32.7
|
x
|
Goldman Sachs also calculated the offer price as a premium to
the share price of the targets as of one week prior to the
announcement date in the 11 selected transactions and compared
it to the offer price as a premium to the market price as of
November 3, 2009 of Common Stock. The following table
represents the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range for
|
|
Mean for
|
|
Median for
|
|
|
|
|
Selected
|
|
Selected
|
|
Selected
|
|
Proposed
|
|
|
Transactions
|
|
Transactions
|
|
Transactions
|
|
Transaction
|
|
Premium to Target Closing Price (One Week Prior)
|
|
|
15.9% - 65.8%
|
|
|
|
34.8
|
%
|
|
|
28.4
|
%
|
|
|
49.1
|
%
|
33
Discounted
Cash Flow Analysis
Goldman Sachs performed an illustrative discounted cash flow
analysis on 3Com using the Management Long Range Plan and the
Management Sensitivity Case. In the illustrative discounted cash
flow analyses described in this paragraph and the following
paragraph, Goldman Sachs assumed that the VAT Rebate expires at
the end of calendar year 2010 and treated stock based
compensation as a cash expense. Goldman Sachs calculated
indications of net present value per share of Common Stock as of
August 31, 2009 based on unlevered free cash flows for the
years 2010 through 2013 using discount rates ranging from 11.5%
to 15.5%, reflecting estimates of 3Coms weighted average
cost of capital. Goldman Sachs calculated illustrative terminal
values in the year 2013 based on assumed perpetuity growth rates
of cash flow from year 2013 ranging from 2.0% to 4.0%. These
illustrative terminal values were then discounted to calculate
implied indications of present value using discount rates
ranging from 11.5% to 15.5%. The following table presents the
results of this analysis:
|
|
|
|
|
|
|
Illustrative Per-Share
|
|
|
Value Indications
|
|
Management Long Range Plan
|
|
$
|
5.07 - $8.05
|
|
Management Sensitivity Case
|
|
$
|
4.48 - $6.94
|
|
Goldman Sachs also performed an illustrative sensitivity
analysis to its discounted cash flow analysis by assuming a
range of
year-over-year
revenue growth rates of 10.0% above and 10.0% below both the
Management Long Range Plan and the Management Sensitivity Case,
respectively, for fiscal years 2010 through 2013 and a range of
EBIT percentage margins of 4.0% above and 4.0% below the EBIT
percentage margin for such years based on the Management Long
Range Plan and the Management Sensitivity Case, respectively.
For the illustrative sensitivity analysis, Goldman Sachs
calculated indications of net present value per share of Common
Stock as of August 31, 2009 based on unlevered free cash
flows for the years 2010 through 2013 using a discount rate of
13.5%. Goldman Sachs calculated illustrative terminal values in
the year 2013 based on assumed perpetuity growth rate of 3.0%.
These illustrative terminal values were then discounted to
calculate implied indications of present value using a discount
rate of 13.5%. The following table presents the results of this
analysis:
|
|
|
|
|
|
|
Illustrative Per-Share
|
|
|
Value Indications
|
|
Management Long Range Plan
|
|
$
|
3.77 - $9.65
|
|
Management Sensitivity Case
|
|
$
|
3.26 - $8.49
|
|
Illustrative
Present Value of Future Stock Price Analysis
Goldman Sachs performed an illustrative analysis of the implied
present value of the future price per share of Common Stock,
which is designed to provide an indication of the present value
of a theoretical future value of a companys equity as a
function of such companys estimated future earnings and
its assumed price to future EPS multiple or such companys
estimated future revenues and its assumed enterprise value to
revenues multiple. For this analysis, Goldman Sachs used the
Management Long Range Plan and Management Sensitivity Case for
each of the calendar years 2010 to 2012. Goldman Sachs used EPS
estimates that excluded the VAT Rebate and assumed a present
value of the VAT Rebate of $0.12 through the end of calendar
year 2010.
Goldman Sachs first calculated the implied values per share of
Common Stock for years 2010 to 2012, by applying price to
one-year forward EPS multiples ranging from 12.0x to 20.0x to
the Management Long Range Plan and Management Sensitivity Case
estimates of EPS for each of the years 2010 to 2012, and then
discounted such values for 2011 and 2012 back one year and two
years, respectively, using a range of discount rates from 10.0%
to 12.0%, reflecting estimates of our cost of equity. Goldman
Sachs also calculated the implied values per share of Common
Stock for years 2010 to 2012, by applying enterprise value to
revenue multiples ranging from 1.0x to 2.0x to the estimates of
revenues in the Management Long Range Plan and Management
Sensitivity Case, respectively, for each of the years 2010 to
2012, then added to the implied enterprise value the assumed net
cash positions based on the Management Long Range Plan and
Management
34
Sensitivity Case, as applicable. Goldman Sachs then divided this
amount by the estimated number of fully diluted shares
outstanding based on 3Com management information as of
November 10, 2009, and then discounted such per share
values for 2011 and 2012 back one year and two years,
respectively, using a range of discount rates from 10.0% to
12.0%, reflecting our cost of equity. This analysis resulted in
a range of implied present values of $3.12 to $10.07.
Illustrative
Present Value per Share of VAT Rebate
As outlined above, certain analyses were carried out by Goldman
Sachs assuming, per 3Com management guidance, that the VAT
Rebate may not continue after calendar year 2010. Goldman Sachs
performed an illustrative present value analysis per share of
Common Stock of the value of the VAT Rebate if the VAT Rebate
were to continue beyond the end of calendar year 2010 into
perpetuity and noted that, to the extent the board of directors
determined to consider the value of the VAT Rebate, the
resulting range of values would be additive to the range of
values per share resulting from Goldman Sachss discounted
cash flow analysis and illustrative present value of future
share price analysis. Goldman Sachs calculated a range of
implied indications of present value per share of Common Stock
as of August 31, 2009 based on an estimated
$40 million annual VAT Rebate for calendar year 2011, using
discount rates ranging from 11.5% to 15.5%, reflecting estimates
of 3Coms weighted average cost of capital. Goldman Sachs
calculated illustrative terminal values in the year 2011 based
on assumed perpetuity growth rates of the VAT Rebate from year
2011 ranging from 2.0% to 4.0%. These illustrative terminal
values were then discounted to calculate a range of implied
indications of present value using discount rates ranging from
11.5% to 15.5%. In addition, Goldman Sachs then applied
illustrative probabilities of 50% and 100% to this range of
implied indications of present value. The following table
presents the results of this analysis:
|
|
|
|
|
|
|
Illustrative Per-Share
|
|
|
Value Indications
|
|
50% probability
|
|
$
|
0.28 - $0.55
|
|
100% probability
|
|
$
|
0.56 - $1.10
|
|
General
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 Goldman Sachss 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 the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachss providing its opinion to the board of directors as
to the fairness from a financial point of view of the $7.90 per
share in cash to be paid to the holders (other than HP or any of
its affiliates) of shares (other than shares of restricted
stock) of Common Stock 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, HP, Goldman Sachs or any other person assumes
responsibility if future results are materially different from
those forecast.
The Merger consideration was determined through
arms-length negotiations between 3Com and HP and was
approved by the board of directors. Goldman Sachs provided
advice to 3Com during these negotiations. Goldman Sachs did not,
however, recommend any specific amount of consideration to us or
the board of directors or that any specific amount of
consideration constituted the only appropriate consideration for
the Merger.
35
As described above, Goldman Sachss opinion to the board of
directors was one of many factors taken into consideration by
the 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 are engaged in investment
banking and financial advisory services, commercial banking,
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 third parties, 3Com, HP 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. Goldman Sachs acted as financial
advisor to 3Com in connection with, and participated in certain
of the negotiations leading to, the Merger contemplated by the
Merger Agreement. In addition, Goldman Sachs has provided
certain investment banking and other financial services to 3Com
and its affiliates from time to time, including having acted as
our financial advisor in connection with our acquisition of a
minority interest in Huawei-3Com Co Ltd. in November 2006; 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; and as
our financial advisor in connection with the proposed sale of
3Com to Diamond II Holdings (a company controlled by Bain
Capital Fund IX, L.P. and Shenzhen Huawei Investment &
Holding Co., Ltd.) announced in September 2007. Goldman
Sachs also has provided certain investment banking and other
financial services to HP and its affiliates from time to time,
including having acted as co-manager with respect to a public
offering of HPs Floating Rate Global Notes due
March 1, 2012, 5.25% Global Notes due March 1, 2012
and 5.40% global Notes due March 1, 2017 (aggregate
principal amounts $600,000,000, $900,000,000 and $500,000,000,
respectively) in February 2007. Goldman Sachs also may provide
investment banking and other financial services to 3Com and HP
and their respective affiliates in the future. In connection
with the above-described services we have received, and may
receive, compensation.
The 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
September 8, 2009, we engaged Goldman Sachs to act as our
financial advisor in connection with the contemplated Merger.
Pursuant to the terms of this engagement letter, we agreed to
pay Goldman Sachs a transaction fee of approximately
$41 million, approximately $38 million of which is
payable upon consummation of the Merger. In addition, we agreed
to reimburse Goldman Sachs for its expenses, including
attorneys fees and disbursements, and to indemnify Goldman
Sachs and related persons against various liabilities, including
certain liabilities under the federal securities laws.
Projected
Financial Information
We do not as a matter of course publicly disclose long-term
forecasts or internal projections as to future performance,
revenues, earnings or financial condition. However, certain
prospective financial information, which we refer to as the
Management Long Range Plan, was prepared by our management,
extensively reviewed with and discussed among members of the
board of directors in September, October and November 2009,
and made available to Goldman Sachs prior to the execution and
delivery of the Merger Agreement. In addition, certain other
prospective financial information, which we refer to as the
Management Sensitivity Case, was prepared by our management
based on, but using lower revenue growth rates (and
proportionally lower sales and marketing expenses) than, the
Management Long Range Plan, reviewed with the board of directors
in November 2009, and made available to Goldman Sachs prior to
the execution and delivery of the Merger Agreement. We have
included the material portions of the Management Long Range Plan
and the Management Sensitivity Case below in order to give our
stockholders access to this information as well. The prospective
financial information included in the Management Long Range Plan
and
36
the Management Sensitivity Case and set forth below was prepared
for purposes of the board of directors consideration and
evaluation of the Merger and to facilitate Goldman Sachss
financial analyses in connection with the Merger. In addition,
the prospective financial information included in the Management
Long Range Plan and set forth below was made available to HP to
facilitate the due diligence review by HP and its advisors. The
inclusion of the prospective financial information below should
not be regarded as an indication that our management team, the
board of directors, Goldman Sachs, or HP considered, or now
considers, either the Management Long Range Plan or the
Management Sensitivity Case to be predictive of actual future
results.
Our senior management team advised the board of directors,
Goldman Sachs, and HP 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, geo-political, market and financial
conditions and other matters, all of which are difficult to
predict and beyond 3Coms 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 3Coms 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 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 not
prepared with a view toward public disclosure. Accordingly, the
prospective financial information set forth below was not
prepared with a view toward complying with 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 or U.S. generally accepted accounting
principles (GAAP), and some of the projections
present financial metrics that were not prepared in accordance
with GAAP. Neither 3Coms independent auditors nor any
other independent accountants have compiled, examined or
performed any procedures with respect to the prospective
financial information contained herein, nor have they expressed
any opinion or any other form of assurance on such information
or its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial
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 any revised prospects of our business, changes in
general business, geo-political 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 are forward-looking
statements and are based on estimates and assumptions that are
inherently subject to factors such as industry performance,
general business, economic, regulatory, geo-political, market
and financial conditions, as well as changes to the business,
financial condition or results of operation of 3Com, including
the factors described under Cautionary Note Concerning
Forward-Looking Statements beginning on page 13, that
could cause actual results to differ materially from those shown
below. 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. In
addition, the projections do not take into account any of the
transactions contemplated by the Merger Agreement, including the
Merger, which might also cause actual results to differ
materially.
We have made publicly available our actual results for the first
quarter of the 2010 fiscal year ended August 28, 2009. You
should review our Quarterly Report on
Form 10-Q
for the quarter ended August 28, 2009 to obtain this
information. See Where You Can Find More Information
beginning on page 80. You are cautioned not to place undue
reliance on the specific portions of the prospective financial
information set forth in the Management Long Range Plan and the
Management Sensitivity Case. No one has made or makes any
representation to any stockholder regarding the information
included in the prospective financial information set forth in
the Management Long Range Plan and the Management Sensitivity
Case.
37
For the foregoing reasons, as well as the bases and assumptions
on which the prospective financial information set forth in the
Management Long Range Plan and the Management Sensitivity Case
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, geo-political 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 Management Long Range Plan included the following estimates
of 3Coms future financial performance for fiscal years
2010 through 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending May 31,
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
|
($ in millions, except earnings per share
|
|
|
|
(non-GAAP))
|
|
|
Revenue
|
|
$
|
1,250
|
|
|
$
|
1,409
|
|
|
$
|
1,650
|
|
|
$
|
1,933
|
|
Gross Profit Margin (non-GAAP)(1)
|
|
|
57.4
|
%
|
|
|
57.3
|
%
|
|
|
57.1
|
%
|
|
|
56.8
|
%
|
Operating Profit (non-GAAP)(2)
|
|
$
|
113
|
|
|
$
|
148
|
|
|
$
|
228
|
|
|
$
|
317
|
|
Earnings per share (non-GAAP)(3)
|
|
$
|
0.32
|
|
|
$
|
0.39
|
|
|
$
|
0.59
|
|
|
$
|
0.82
|
|
The Management Sensitivity Case included the following estimates
of 3Coms future financial performance for fiscal years
2010 through 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending May 31,
|
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
|
($ in millions, except earnings per share
|
|
|
|
(non-GAAP))
|
|
|
Revenue
|
|
$
|
1,250
|
|
|
$
|
1,391
|
|
|
$
|
1,582
|
|
|
$
|
1,799
|
|
Gross Profit Margin (non-GAAP)(1)
|
|
|
57.4
|
%
|
|
|
57.3
|
%
|
|
|
57.1
|
%
|
|
|
56.8
|
%
|
Operating Profit (non-GAAP)(2)
|
|
$
|
113
|
|
|
$
|
141
|
|
|
$
|
199
|
|
|
$
|
258
|
|
Earnings per share (non-GAAP)(3)
|
|
$
|
0.32
|
|
|
$
|
0.38
|
|
|
$
|
0.53
|
|
|
$
|
0.69
|
|
|
|
|
(1) |
|
Defined to exclude the following charge from GAAP gross profit
margin: stock-based compensation expense. 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
profit: restructuring, amortization and stock-based compensation
expense. We are unable to provide a quantitative reconciliation
because the information is not available without unreasonable
effort. |
|
(3) |
|
Defined to exclude the following from GAAP earnings per share:
restructuring, amortization, stock-based compensation expense
and a one-time favorable tax adjustment expected to be recorded
in the second quarter of fiscal year 2010 reflecting the final
resolution of the calendar year 2008 China tax rate. 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 2010 through 2013 included in the Management Long Range
Plan and the Management Sensitivity Case, 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:
|
|
|
|
|
The global economic recovery will continue and accelerate over
time, resulting in increased revenues and profits in all regions.
|
38
|
|
|
|
|
Our China-out strategy will be successful on a
global basis, and larger enterprise customers will increasingly
choose 3Coms solutions, including our H3C enterprise
networking products.
|
|
|
|
Our China direct-touch sales will increase.
|
|
|
|
Channel sales to Huawei will continue to decline as expected.
|
|
|
|
No material changes to our competitive landscape will occur.
|
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.
|
|
|
|
With respect to the Management Long Range Plan, the prospective
financial information assumes that overall consolidated sales
would grow at a compound annual growth rate (CAGR)
of 15.6% for the fiscal year
2010-2013
planning period.
|
|
|
|
With respect to gross profit margins (non-GAAP), the prospective
financial information anticipates that such margins will remain
relatively flat for the planning period.
|
|
|
|
With respect to operating profit (non-GAAP), supporting the
projected increases are the following key assumption drivers:
increased revenue coupled with decreased operating expenses as a
percentage of total revenue for all of the major components of
operating expenses.
|
|
|
|
With respect to earnings per share (non-GAAP), the foregoing
assumptions are also relevant, as well as the following key
assumptions: a constant number of total shares outstanding,
constant tax rates and decreased interest expense as our loan
principal balance is amortized. We benefit from the VAT Rebate,
which is an operating subsidy from the Chinese tax authorities
in the form of a partial refund of value-added taxes, or VAT,
collected by H3C on the sales of our software. The VAT Rebate
program is currently scheduled to end on December 31, 2010,
is subject to the discretion of the Chinese authorities and may
be discontinued, reduced or deferred at any time. The
prospective financial information nonetheless assumes that the
program will be renewed or replaced with a similar program and
we would enjoy its uninterrupted benefits for the entire
planning period.
|
|
|
|
Finally, the Management Sensitivity Case contains the same
assumptions as the foregoing, subject to assuming lower revenue
growth rates for most of our largest and key geographic regions
(with proportionally lower sales and marketing expenses) than
the Management Long Range Plan. We made these lower assumptions
primarily to reflect the possible risks of a slower global
economic recovery and greater than expected execution risk on
our China-out strategy. Accordingly, with respect to
the Management Sensitivity Case, the prospective financial
information assumes that overall consolidated sales would grow
at a CAGR of 12.9% for the fiscal year
2010-2013
planning period.
|
Interests
of 3Coms 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, our current
executive officers and directors held approximately 12,553,897
options to purchase shares of Common Stock. Under the terms of
the Merger Agreement, at the effective time of the Merger, each
option that is unvested or has a per share exercise price
39
that is equal to or greater than $7.90 per share and is
outstanding immediately prior to the effective time of the
Merger will be assumed by HP and automatically converted into an
option to acquire, on the same terms and conditions applicable
to such option immediately prior to the Merger, a number of
shares of HP common stock (rounded down to the nearest whole
share) equal to the product of (x) the number of shares of
Common Stock subject to the option immediately prior to the
effective time of the Merger and (y) a fraction, the
numerator of which is $7.90 and the denominator of which is the
average closing price of HP common stock on the New York Stock
Exchange over the five (5) trading days ending on the date
that is two (2) trading days prior to the closing date of
the Merger (this fraction is referred to herein as the
exchange ratio). Each option that is vested and has
a per share exercise price that is less than $7.90 per share and
is outstanding immediately prior to the effective time of the
Merger will be cancelled and converted into the right to receive
a cash payment equal to the number of shares of Common Stock
subject to the option immediately prior to the effective time of
the Merger multiplied by the amount by which $7.90 exceeds the
per share exercise price of such option, without interest, and
less any applicable withholding taxes.
Treatment
of Restricted Stock
As of the close of business on the record date, our current
executive officers held 937,916 unvested shares of Common Stock.
Under the terms of the Merger Agreement, at the effective time
of the Merger, each outstanding unvested share of Common Stock
held by our executive officers will be assumed by HP and
automatically converted into a number of unvested shares of HP
common stock (rounded down to the nearest whole share) equal to
the product of (x) the number of unvested shares of Common
Stock outstanding immediately prior to the effective time of the
Merger and (y) the exchange ratio. The unvested shares of
HP common stock will remain unvested and continue to be subject
to the same terms and conditions as applied to the unvested
Common Stock prior to the Merger.
Treatment
of Restricted Stock Units
As of the close of business on the record date, our current
executive officers held restricted stock units covering
2,395,678 shares of Common Stock. Under the terms of the
Merger Agreement, at the effective time of the Merger, the
outstanding restricted stock units held by our executive
officers will be assumed by HP and automatically converted into
restricted stock units covering a number of shares of HP common
stock (rounded down to the nearest whole share) equal to the
product of (x) the number of shares of Common Stock subject
to the restricted stock units immediately prior to the effective
time of the Merger and (y) the exchange ratio. The
restricted stock units will otherwise continue to be subject to
the same terms and conditions applicable to such restricted
stock units immediately prior to the effective time of the
Merger.
New
Employment Arrangements
As of the date of this proxy statement, with the exception of
Dr. Shusheng Zheng, Executive Vice President of 3Com and
Chief Executive Officer of H3C, none of our executive officers
nor any member of the board of directors has entered into or is
in negotiations to enter 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 or is in negotiations to enter into any
agreement, arrangement or understanding with HP or its
affiliates regarding employment with HP or the surviving
corporation. Although no such agreement, arrangement or
understanding currently exists for any executive officer other
than Dr. Zheng (as described below), HP may request some of
our executive officers to remain after the Merger is completed,
and such executive officers may, prior to the closing of the
Merger, enter into new arrangements with HP or its affiliates
regarding employment with HP or the surviving corporation or the
right to participate in the equity plans of HP.
Dr. Shusheng Zheng. Dr. Zheng has
executed a retention term sheet with HP, pursuant to which
Dr. Zheng will be eligible to receive certain payments and
benefits in connection with and following the closing of the
Merger.
40
Specifically, pursuant to the retention term sheet and upon the
closing of the Merger, Dr. Zheng will receive full
accelerated vesting of all of his equity awards outstanding on
the date he signed the term sheet, subject to the following
conditions:
|
|
|
|
|
Dr. Zheng has executed an employment agreement with HP
under which he agrees to remain employed by HP for at least
three (3) years from the closing date of the Merger;
|
|
|
|
Dr. Zheng consents to the cancellation, immediately
following the first anniversary of the closing of the Merger, of
his management retention agreement (described below) and waives
any claim to amounts otherwise due under such agreement after
such time; and
|
|
|
|
The proper authorities approve the Merger and the Merger has
closed.
|
Dr. Zheng will remain eligible to receive any severance
benefits, other than any such benefits relating to any
outstanding equity awards, pursuant to his current management
retention agreement for a qualifying termination thereunder
until the first anniversary of the closing of the Merger.
The retention term sheet further provides for the following
three (3) installment payments to Dr. Zheng:
|
|
|
|
|
$2,000,000 (U.S.) will be payable twelve (12) months after
the closing of the Merger if Dr. Zheng is employed in his
current position on such date, 90% of his key management team
remains employed in their current positions, and his business
unit has achieved at least 95% of its year one (1) revenue
plan.
|
|
|
|
$2,000,000 (U.S.) will be payable twenty-four (24) months
after the closing of the Merger if Dr. Zheng is employed in
his current position on such date, 80% of his key management
team remains employed in their current positions, and his
business unit has achieved at least 95% of its year two
(2) revenue plan.
|
|
|
|
$3,000,000 (U.S.) will be payable thirty-six (36) months
after the closing of the Merger if Dr. Zheng is employed in
his current position on that date, 70% of his key management
team remains employed in their current positions, and his
business unit has achieved at least 95% of its year three
(3) revenue plan.
|
Forty percent (40%) of each of the three (3) installment
payments described above will be paid based on
Dr. Zhengs continued employment. The remaining sixty
percent (60%) will be paid only if Dr. Zheng also meets the
key management retention goals and the business goals for that
year.
If Dr. Zhengs employment is terminated by HP
involuntarily and not for cause before the
thirty-six (36) month anniversary of the closing of the
Merger, Dr. Zheng will be entitled to receive any unpaid
retention installment payments, subject to his execution of
HPs standard release agreement that includes customary
non-compete and non-solicitation provisions.
Change
of Control Benefits
Robert Y. L. Mao. On April 29, 2008, we
entered into an employment agreement for an at-will employment
arrangement with Mr. Mao to become our Chief Executive
Officer. As amended to date, the terms of Mr. Maos
employment with us provide the following change of control
severance benefits if Mr. Mao is involuntarily terminated
(other than for cause, death or
disability) or voluntarily terminates his employment
for good reason, in each case within three
(3) months prior to, or within twelve (12) months
following, a change of control (as such terms are
defined in his employment agreement):
|
|
|
|
|
Continued payment of Base Salary (as defined in his employment
agreement) for two (2) years, with payments commencing six
(6) months after Mr. Maos termination date;
|
|
|
|
Two (2) payments, each equal to 100% of his Target Annual
Incentive (as defined in his employment agreement) for the year
in which termination occurs, payable at the time bonuses are
normally paid or six (6) months after Mr. Maos
termination date, whichever is later;
|
|
|
|
Full vesting of outstanding equity awards (other than
performance-based awards);
|
41
|
|
|
|
|
Extension of the exercise period for vested stock options to the
earlier of (i) 165 days from the termination date; and
(ii) the original term of the option;
|
|
|
|
Reimbursement for premiums paid for continued health benefits
under 3Com health plans under COBRA until the earlier of:
(i) eighteen (18) months from the termination date, or
(ii) the date upon which Mr. Mao becomes eligible for
similar coverage elsewhere; and
|
|
|
|
Continued payment of premiums for the term life insurance policy
in effect immediately prior to termination until the earlier of
one (1) year or eligibility for similar coverage by another
employer.
|
The foregoing is subject to the requirement that Mr. Mao
sign a release agreement containing (i) a release of claims
against 3Com, (ii) a one (1) year non-solicitation
agreement, (iii) a one (1) year non-competition
agreement and (iv) a non-disparagement agreement.
If additional taxes would result:
|
|
|
|
|
due to Section 409A of the Internal Revenue Code, 3Com will
accrue payments otherwise due during the first six
(6) months after termination and pay them in a lump sum on
the date that is six (6) months and one (1) day after
the termination date; and
|
|
|
|
due to Section 280G of the Internal Revenue Code, 3Com is
required to make payments to Mr. Mao sufficient to pay the
excise tax and additional payments to cover the income and
excise taxes on the original payment itself.
|
Ronald A. Sege. On April 29, 2008, we
entered into an employment agreement for an at-will employment
arrangement with Mr. Sege to become our President and Chief
Operating Officer. As amended to date, the terms of
Mr. Seges employment with us provide the following
change of control severance benefits if Mr. Sege is
involuntarily terminated (other than for cause,
death or disability) or voluntarily terminates his
employment for good reason, in each case within
three (3) months prior to, or within twelve
(12) months following, a change of control (as
such terms are defined in his employment agreement):
|
|
|
|
|
Continued payment Base Salary (as defined in his employment
agreement) for two (2) years, with payments commencing six
(6) months after Mr. Seges termination date;
|
|
|
|
Two (2) payments, each equal to 100% of his Target Annual
Incentive (as defined in his employment agreement) for the year
in which termination occurs, payable at the time bonuses are
normally paid or six (6) months after Mr. Seges
termination date, whichever is later;
|
|
|
|
Full vesting of outstanding equity awards (other than
performance-based awards);
|
|
|
|
Extension of the exercise period for vested stock options to the
earlier of (i) 165 days from the termination date; and
(ii) the original term of the option;
|
|
|
|
Reimbursement for premiums paid for continued health benefits
under 3Com health plans under COBRA until the earlier of:
(i) eighteen (18) months from the termination date, or
(ii) the date upon which Mr. Sege becomes eligible for
similar coverage elsewhere; and
|
|
|
|
Continued payment of premiums for the term life insurance policy
in effect immediately prior to termination until the earlier of
one (1) year or eligibility for similar coverage by another
employer.
|
The foregoing is subject to the requirement that Mr. Sege
sign a release agreement containing (i) a release of claims
against 3Com, (ii) a one (1) year non-solicitation
agreement and (iii) a non-disparagement agreement.
If additional taxes would result:
|
|
|
|
|
due to Section 409A of the Internal Revenue Code, 3Com will
accrue payments otherwise due during the first six
(6) months after termination and pay them in a lump sum on
the date that is six (6) months and one (1) day after
the termination date; and
|
42
|
|
|
|
|
due to Section 280G of the Internal Revenue Code, 3Com is
required to make payments to Mr. Sege sufficient to pay the
excise tax and additional payments to cover the income and
excise taxes on the original payment itself.
|
Dr. Shusheng Zheng. On July 20,
2009, Hangzhou H3C Technologies Co., Limited, our China-based
subsidiary, entered into a new employment agreement with
Dr. Shusheng Zheng, effective as of April 27, 2009,
whereby Dr. Zheng would serve as our Executive Vice
President, 3Com and Chief Executive Officer, H3C. Pursuant to
this agreement, Dr. Zheng is entitled to the change of
control benefits described above and under the heading
Change of Control Severance Benefits below, provided
that such benefits are offset and reduced by the following, if
applicable:
|
|
|
|
|
If 3Com terminates Dr. Zheng without statutorily-defined
grounds for termination, he is entitled to:
|
|
|
|
|
|
a lump sum severance payment of one (1) months base
salary for each year of service with H3C, pro-rated for any
period of service less than one (1) year, provided
Dr. Zheng signs a release of claims and a non-disparagement
agreement; and
|
|
|
|
vesting and payout of any remaining H3C Equity Appreciation
Rights Plan shares.
|
In addition, in exchange for certain non-hire and non-compete
provisions in his employment agreement, upon termination of
employment for any reason, Dr. Zheng will be entitled to
receive one (1) year of his base salary in effect at the
time of his termination, payable in twelve (12) equal,
monthly installments in accordance with 3Coms regular
payroll practices.
However, as described above, Dr. Zheng has executed a
retention term sheet with HP, pursuant to which Dr. Zheng
will be entitled to receive certain payments if certain
conditions are satisfied, including that Dr. Zheng has
executed an employment agreement with HP. For purposes of this
discussion, we have assumed that any employment agreement
entered into by and between Dr. Zheng and HP will supersede
the terms of his existing employment agreement with H3C and that
Dr. Zheng will not be entitled to receive any of the
severance or other benefits described above.
Change of Control Severance Benefits. We have
approved two (2) forms of change of control benefits, which
take the form of individual management retention agreements for
our executive officers. The first form applies to Neal D.
Goldman, Executive Vice President, Chief Administrative and
Legal Officer and Secretary of 3Com. The second form applies to
Jay Zager, Executive Vice President and Chief Financial Officer
of 3Com, and Dr. Zheng (subject to the retention term sheet
with HP (described above)). Messrs. Mao and Sege have
change of control benefits in their respective employment
agreements and therefore such benefits are described under the
above descriptions.
The terms of these forms provide the following change of control
severance benefits if the executive officer is involuntarily
terminated (other than for cause, death or
disability) or voluntarily terminates his employment
for good reason, in each case within three
(3) months prior to, or within twelve (12) months
following, a change of control (as such terms are
defined in the form that applies to the executive officer)
(referred to herein as a qualifying termination):
|
|
|
|
|
A payment equal to 100% of such executive officers annual
base salary as in effect immediately prior to the change of
control and target annual bonus. Under the first form, the
payment is in a lump sum; under the second form, the payments
are payable over twelve (12) months in accordance with
regular payroll practices;
|
|
|
|
A pro-rated bonus payment. Under the first form, the payment is
equal to 100% of the target annual bonus in effect for the
fiscal year in which the change of control occurs, pro-rated
based on the number of days in the year prior to the change of
control event, and is paid in a lump sum. 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 the number of 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 number
of days in the bonus period prior to the change of control);
|
43
|
|
|
|
|
Continuation of 3Com-paid portion of the premiums for the
elected coverage under medical, dental and vision plans (and, in
the case of the first form, long-term disability plans) as well
as continued coverage of benefits for basic term life insurance
until the earlier of two (2) years from the date of
termination or when such executive officer becomes eligible to
receive 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 165 days
(in the case of the second form).
|
If the benefits provided constitute parachute payments 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 parachute payments are
at least 3.59 times the base amount under
Section 280G, the executive officer will receive (i) a
payment sufficient to pay such excise tax and (ii) an
additional payment sufficient to pay the income and excise taxes
arising as a result of such payment. If the parachute payments
are less than 3.59 times the base amount, the benefits will be
reduced to the extent necessary to avoid such tax.
The benefits described above are conditioned on the executive
signing a release of claims and a one-year non-solicitation
clause. With respect to the second form, the executive must also
sign a one-year non-competition agreement and abide by a
non-disparagement clause.
The following table reflects (i) the amount of severance
benefits, based on the executive officers current salary
and target incentive bonus, assuming that each executive officer
is involuntarily terminated for any reason other than cause or
each executive officer terminates his employment for good reason
following the Merger, based on a theoretical termination date of
April 3, 2010, and (ii) the amount of benefits payable
to Dr. Zheng in accordance with the terms and conditions of
his retention term sheet with HP, both upon the closing of the
Merger and assuming that he is terminated by HP involuntarily
and not for cause following the Merger (based on a theoretical
termination date of April 3, 2010):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
|
|
|
|
|
|
|
|
|
|
Benefits
|
|
|
Equity
|
|
|
Excise Tax
|
|
|
Severance Under HP
|
|
|
Change of
|
|
|
|
|
|
|
Pro-Rata
|
|
|
Continuation
|
|
|
Acceleration
|
|
|
Gross-up
|
|
|
Retention Term
|
|
|
Control
|
|
Name
|
|
Severance ($)
|
|
|
Bonus ($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
Sheet ($)(4)
|
|
|
Benefits ($)
|
|
|
Robert Y. L. Mao(5)
|
|
|
2,600,000
|
|
|
|
0
|
|
|
|
73,026
|
|
|
|
20,969,503
|
|
|
|
2,857,962
|
|
|
|
|
|
|
|
26,500,491
|
|
Jay Zager
|
|
|
709,500
|
|
|
|
94,446
|
|
|
|
188,268
|
|
|
|
4,328,250
|
|
|
|
0
|
|
|
|
|
|
|
|
5,320,464
|
|
Neal D. Goldman
|
|
|
660,000
|
|
|
|
217,973
|
|
|
|
151,276
|
|
|
|
3,689,200
|
|
|
|
0
|
|
|
|
|
|
|
|
4,718,449
|
|
Ronald A. Sege
|
|
|
1,800,000
|
|
|
|
0
|
|
|
|
74,230
|
|
|
|
14,818,761
|
|
|
|
0
|
|
|
|
|
|
|
|
16,692,991
|
|
Dr. Shusheng Zheng(6)
|
|
|
951,975
|
|
|
|
241,672
|
|
|
|
3,688
|
|
|
|
7,265,000
|
|
|
|
0
|
|
|
|
7,000,000
|
|
|
|
15,462,335
|
|
|
|
|
(1) |
|
For Messrs. Mao and Sege, reflects the cost of company-paid
benefits continuation for eighteen (18) months and payment
for the continuation of Messrs. Maos and Seges
term life policies for one (1) year. For Messrs. Zager
and Goldman, reflects the cost of company-paid benefits
continuation and conversion of basic term life insurance for
twenty-four (24) months. For Dr. Zheng, represents
estimated two (2) year contribution for Chinese
Compulsory Social Insurance. |
|
(2) |
|
To estimate the value of equity acceleration for each executive
officer, we multiplied 100% of the aggregate number of unvested
stock options, restricted stock units and shares of restricted
stock estimated to be held by such individual as of
April 3, 2010, by $7.90 less any applicable exercise price
per share. For executives that were granted performance-based
restricted stock units in August 2009, we assumed that the
Merger will close prior to the date 3Com publishes its financial
results for fiscal 2010. In accordance with the terms of the
performance-based restricted stock unit agreements and for
purposes of estimating the value of equity acceleration
attributable to such awards, the number of restricted stock
units was deemed earned at the target performance
level, which would result in the executive officer earning 100%
of the performance-based restricted stock units. Achievement of
such performance-based restricted stock unit awards at the
threshold performance level would result in the
executive officer earning 50% of the |
44
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performance-based restricted stock units; achievement at the
maximum performance level would result in the
executive officer earning 150% of the performance-based
restricted stock units. |
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(3) |
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Represents the additional amount estimated to be payable to
Mr. Mao to make him whole for the federal excise tax on
excess parachute payments (including payment of the income and
excise taxes on the additional amount itself). No other
executive officer is expected to trigger an excise tax gross-up
based on the assumptions used in preparing the excise tax
calculation. 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. In calculating the excise tax
gross-up
amount, if any, 3Com made a number of assumptions, including:
(a) for the acceleration and conversion of unvested stock
options, time-based restricted stock units and shares of
restricted stock, applying the method prescribed in Q&A
24(c) of the 280G Treasury Regulations to the conversion value
of the options based on a Black-Scholes value analysis;
(b) for the acceleration and conversion of unvested
performance-based restricted stock units, including the full
value of such units based on $7.90 per unit (the per share
amount of merger consideration); (c) deriving the net
present values of the change in control payments using the
November 2009 AFR of 0.85% (short-term), 3.08% (mid-term) and
4.76% (long-term), as applicable; and (d) for the
calculation of the excise tax
gross-up,
using the following tax rates: Federal (35% for 2010 and 39.6%
for 2011 and 2012), State tax (Massachusetts (5.30%), California
(10.55% for 2010 and 10.30% for 2011), and Virginia (5.75%)),
Medicare (1.45%), and OASDI (6.20%); assuming that all equity
awards granted between June 30, 2008 and June 30,
2009 may be valued by the method prescribed in Q&A
24(c) of the 280G Treasury Regulations. |
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(4) |
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As described above, Dr. Zheng has executed a retention term
sheet with HP, pursuant to which Dr. Zheng will be entitled
to receive $7,000,000 (U.S.) in three (3) installments
based on his continued employment and satisfaction of certain
key management retention goals and business goals; provided,
however, that if Dr. Zhengs employment is terminated
by HP involuntarily and not for cause before the
thirty-six (36) month anniversary of the closing of the
Merger, Dr. Zheng will be entitled to receive any unpaid
portion of the $7,000,000 (U.S.), subject to his execution of
HPs standard release agreement. |
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Under the terms of Mr. Maos employment agreement, he
is entitled to tax equalization payments in the event he is
subject to taxation in both the United States and China. The
total potential change of control benefits payable to
Mr. Mao were calculated based on the assumption that
Mr. Mao will only be subject to taxation in the United
States and not in China and will not be entitled to receive any
tax equalization payments pursuant to his employment agreement. |
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As described above, Dr. Zheng has executed a retention term
sheet with HP pursuant to which upon the closing of the Merger,
Dr. Zheng will be entitled to receive full accelerated
vesting of all of his equity awards that were outstanding as of
the date he signed the term sheet. This acceleration, and the
other benefits provided in the term sheet, are subject to
Dr. Zheng executing an employment agreement with HP prior
to the closing of the Merger under which (1) he will agree
to remain employed with HP for at least three (3) years
following the closing of the Merger and (2) he agrees to
the cancellation of his management retention agreement effective
on the first anniversary of the closing of the Merger. The value
of the equity acceleration component in the table above was
determined in the same manner as described in Note 2 above
to this table. For purposes of this table, we have assumed that
Dr. Zheng will execute the employment agreement which will
supersede his prior employment agreements; however, he will
remain eligible to receive the severance benefits, other than
the acceleration of any outstanding equity awards, under his
current management retention agreement following the closing of
the Merger in the event his employment is terminated other than
for cause or he has good reason to resign prior to the first
anniversary thereof, and the value of such severance benefits
has been included in the table above, based on a theoretical
qualifying termination thereunder on April 3, 2010. In the
event Dr. Zheng terminates his employment, with or without
good reason, he would not be eligible for any additional
installments of the $7,000,000 bonus (to the extent then unpaid)
described above. |
45
Deferred
Compensation Plan
Within thirty (30) days prior to the closing date of and
conditioned upon the occurrence of the Merger, 3Com will
terminate its 2005 Deferred Compensation Plan, as amended and
restated effective January 1, 2009 (the Deferred
Compensation Plan). As soon as is administratively
practicable following the termination of the Deferred
Compensation Plan and subject to the terms of the Deferred
Compensation Plan and its related trust and trust agreement,
3Com will begin distributing the assets of the Deferred
Compensation Plan. As of the record date, Mr. DiCamillo is
the only participant in the Deferred Compensation Plan who is a
director or executive officer of 3Com. As of the record date,
Mr. DiCamillo had an account balance of approximately
$395,000, which will be distributed to him as soon as is
administratively practicable following the termination of the
Deferred Compensation Plan and in no event later than fifteen
(15) business days following the Merger.
Bonus
Plan
3Coms standard employee bonus plan, the 3Bonus Plan,
provides for the payment of bonuses to employees based on the
achievement of certain financial performance metrics. 3Com will
be permitted to pay a prorated portion of the bonuses under its
3Bonus Plan for the six (6) month performance period in
which the closing of the Merger occurs, based upon
target levels of performance, prior to the closing
of the Merger. All of 3Coms executive officers are
currently eligible to receive bonus payments pursuant to the
3Bonus Plan and will be eligible to receive such prorated bonus
amount.
Continued
Benefits
For the period commencing on the effective time of the Merger
and ending on a date that is no earlier than the six-month
anniversary thereof, HP will maintain or provide for continuing
employees of 3Com (or our affiliates), and, as applicable, their
eligible dependents, health and welfare benefits under
3Coms (or our affiliates) benefits plans or the
employee benefit plans, programs or policies of HP or its
affiliates that are in the aggregate no less favorable than the
benefits maintained for and provided to such employees
immediately prior to the effective time of the Merger. All of
3Coms executive officers currently participate or are
eligible to participate in 3Coms (or our affiliates)
health and welfare benefit plans, which include medical, dental,
vision, life insurance, accidental death and dismemberment
insurance, short term and long term disability, employee
assistance program, flexible spending accounts, adoption
assistance, long-term care insurance, and other welfare benefit
plans.
From and after the effective time of the Merger, HP has also
agreed to permit continuing employees of 3Com, including
3Coms executive officers who remain with 3Com or HP
following the effective time of the Merger, to participate in
its or its subsidiaries employee benefit plans and
programs in accordance with its then applicable plans and
policies available to similarly situated employees, subject to
certain limited exceptions. Service with 3Com or its
subsidiaries, including predecessor employers, will be
recognized for purposes of service awards, determining the
amount of vacation accrual, and for purposes of vesting under
HPs 401(k) plan.
In addition, HP has agreed to honor all existing employment,
change of control, severance and retention agreements between
3Com or its subsidiaries and any current or former employee,
director or consultant of 3Com or its subsidiaries, including
3Coms executive officers. Finally, HP has agreed to honor
the severance plans maintained by 3Com or any of its
subsidiaries for the period commencing on the effective time of
the Merger and ending on the first anniversary thereof.
3Coms executive officers are eligible to participate in
one or more of the severance plans maintained by 3Com.
Indemnification
and Insurance
The Merger Agreement provides that HP will cause the surviving
corporation and its subsidiaries to honor and fulfill in all
respects the obligations of 3Com and our subsidiaries under any
and all indemnification contracts between 3Com or any of our
subsidiaries and any of our respective current or former
directors and
46
officers and any person who becomes a director or officer of
3Com 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 are
required to (and HP is required to 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 3Com and our subsidiaries as of the
date of the Merger Agreement, and during such six-year period,
such provisions may not be repealed, amended or otherwise
modified in any manner except as required by applicable law.
The surviving corporation and its subsidiaries are required (and
HP is required to cause the surviving corporation and its
subsidiaries), to the fullest extent permitted by law, 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 3Com 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. In
addition, to the fullest extent permitted by applicable law, the
surviving corporation and its subsidiaries are required (and HP
is required to cause the surviving corporation and its
subsidiaries) to advance, prior to the final disposition of any
claim, proceeding, investigation or inquiry for which
indemnification may be sought under this Agreement, promptly
following request by an Indemnified Person therefor, all costs,
fees and expenses (including reasonable attorneys fees and
investigation expenses) incurred by such Indemnified Person in
connection with any such claim, proceeding, investigation or
inquiry upon receipt of an undertaking by such Indemnified
Person to repay such advances if it is ultimately decided in a
final, non-appealable judgment by a court of competent
jurisdiction that such Indemnified Person is not entitled to
indemnification.
Prior to the effective time of the Merger, 3Com may purchase a
six-year tail prepaid policy on the directors
and officers liability insurance. In the event that 3Com
purchases such a tail policy prior to the effective
time of the Merger, HP and the surviving corporation are
required to maintain such tail policy in full force
and effect and continue to honor their respective obligations
thereunder, in lieu of all other obligations of HP and the
surviving corporation for so long as such tail
policy is maintained in full force and effect. In the event that
3Com 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, HP and the
surviving corporation are required to maintain in effect
3Coms 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 3Coms current directors and
officers liability insurance, on terms with respect to the
coverage and amounts that are equivalent to those of 3Coms
current directors and officers liability insurance.
In satisfying their obligations with respect to directors
and officers liability insurance, HP 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, HP and the surviving corporation are
obligated to obtain a policy with the greatest coverage
available for a cost not exceeding that 300% maximum.
47
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) and non-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:
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an individual who is a citizen or resident of the United States;
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a corporation created or organized under the laws of the United
States or any of its political subdivisions;
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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
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an estate the income of which is subject to U.S. federal
income tax regardless of its source.
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For purposes of this discussion, we use the term
non-U.S. person
to mean a beneficial owner, other than a partnership, of shares
of Common Stock that is not a U.S. person (as defined
above).
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 that 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 that 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, tax deferred or other retirement accounts,
stockholders subject to the alternative minimum tax,
U.S. persons that have a functional currency other than the
U.S. dollar, certain former citizens or residents of the
United States or stockholders that hold Common Stock as part of
a hedge, straddle, integration, constructive sale or conversion
transaction). This discussion does not address the assumption of
or receipt of consideration in connection with restricted stock,
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 any aspect of state, local or
non-U.S. tax
laws.
U.S.
Persons
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 by a U.S. person will be a
taxable transaction for U.S. federal income tax purposes.
In general, a stockholder the shares of Common Stock of which
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 must 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 complies
48
with the backup withholding rules. Each of our stockholders
should complete and sign the
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. Cash received in the
Merger also generally will be subject to information reporting.
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.
Non-U.S.
Persons
Exchange of Shares of Common Stock for Cash Pursuant to the
Merger Agreement. The receipt of cash in exchange
for shares of Common Stock in the Merger by a
non-U.S. person
generally will be exempt from U.S. federal income tax,
unless:
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the gain on shares of Common Stock, if any, is effectively
connected with the conduct by the
non-U.S. person
of a trade or business in the United States (and, if certain
income tax treaties apply, is attributable to the
non-U.S. persons
permanent establishment in the United States), in which event
(i) the
non-U.S. person
will be subject to U.S. federal income tax as described
under U.S. Persons above, but such
non-U.S. person
should provide a
Form W-8ECI
instead of a
Form W-9,
and (ii) if the
non-U.S. person
is a corporation, it also may be subject to branch profits tax
on such gain at a 30 percent rate (or such lower rate as
may be specified under an applicable income tax treaty); or
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the
non-U.S. person
is an individual who was present in the United States for
183 days or more in the taxable year and certain other
conditions are met, in which event the
non-U.S. person
will be subject to tax at a flat rate of 30 percent (or
such lower rate as may be specified under an applicable income
tax treaty) on the gain from the exchange of the shares of
Common Stock net of applicable U.S. losses from sales or
exchanges of other capital assets recognized during the year.
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Backup Withholding and Information
Reporting. In general, if you are a
non-U.S. person,
you will not be subject to backup withholding and information
reporting on a payment made with respect to shares of Common
Stock exchanged for cash in the merger if you have provided an
IRS FormW-8BEN (or a FormW-8ECI if your gain is effectively
connected with the conduct of a U.S. trade or business) as
part of the letter of transmittal. If shares are held through a
foreign partnership or other flow-through entity, certain
documentation requirements also apply to the partnership or
other flow-through entity.
Backup withholding is not an additional tax and any amounts
withheld under the backup withholding rules may be refunded or
credited against a
non-U.S. persons
U.S. federal income tax liability, if any, provided the
required information is timely furnished to the Internal Revenue
Service.
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 own 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
non-U.S. tax
laws, and, if applicable, the tax consequences of the assumption
of or receipt of consideration in connection with options to
purchase Common Stock, restricted stock, stock appreciation
rights or restricted stock units, including the transactions
described in this proxy statement relating to our other equity
compensation and benefit plans.
Regulatory
Approvals
Under the provisions of the HSR Act, the Merger may not be
completed until (1) the expiration or termination of a
30-day
waiting period following the filing of notification and report
forms with the Antitrust Division of the DOJ and the FTC by 3Com
and HP, or (2) if, during the initial
30-day
waiting period following the filing of notification and report
forms, the Antitrust Division of the DOJ or the FTC issues a
49
request for additional information and documentary material,
which we refer to as a second request, the expiration or
termination of a
30-day
waiting period following the certification of substantial
compliance with the second request by the parties. 3Com and HP
filed their respective notification and report forms with the
Antitrust Division of the DOJ and the FTC under the HSR Act on
December 2, 2009.
3Com and HP (and their subsidiaries) each conduct business in
member states of the European Union (EU), but their combined
activities are not sufficient to meet the prima facie thresholds
for an EC Merger Regulation filing requirement to the European
Commission. However, the parties together meet the national
merger notification thresholds in several EU member states,
including: Austria, Denmark, Germany, Greece, Ireland, Italy,
and Slovenia. Since the Merger meets the thresholds in at least
three member states, a voluntary application (Form RS) can
be made to the European Commission under Article 4(5) of
the EC Merger Regulation requesting it to take jurisdiction for
the Merger, in lieu of filings to the competent national
authorities. HP formally filed such an application with the
European Commission on November 27, 2009.
If one or more of the competent national authorities objects to
the Form RS within a specified period from receipt, the
application is deemed to be rejected and filings must instead be
made to, and approvals obtained from, each of the competent
national authorities under the respective national rules and
time periods.
However, if no such objections are raised to the Form RS
application, a full notification (Form CO or Short
Form CO, as appropriate) is to be submitted to the European
Commission, which must then review the Merger to determine
whether or not it is compatible with the European common market
and, accordingly, whether or not to permit it to proceed. A
merger or acquisition that does not significantly impede
effective competition in the European common market or in a
substantial part of it must be declared compatible with the
European common market and must be allowed to proceed. If,
following a preliminary Phase I investigation of twenty-five
(25) working days (which may be extended in certain
circumstances), the European Commission determines that it needs
to examine the Merger more closely because the Merger raises
serious doubts as to its compatibility with the European common
market, it must initiate a Phase II investigation. If it
initiates a Phase II investigation, the European Commission
must issue a final decision as to whether or not the Merger is
compatible with the European common market no later than ninety
(90) working days after the initiation of the Phase II
investigation (although this period may be extended in certain
circumstances).
The parties are required to make a notification in China. Under
the Anti-Monopoly Law of the Peoples Republic of China,
the parties are required to submit a filing to the Ministry of
Commerce (MOFCOM). The parties made a joint filing
on December 4, 2009. After the filing, a consultation
period with MOFCOM typically begins to ensure that MOFCOM has
sufficient information to begin its review. After MOFCOM
formally accepts the filing as complete, an initial waiting
period of thirty (30) days is commenced, at the end of
which MOFCOM will either notify the parties of its clearance
decision in writing or orally or issue a written notice of
further review. If the parties do not receive a notice of
further review at the end of the waiting period, the transaction
is deemed to be cleared. If the parties do receive a notice of
further review, the waiting period is extended ninety
(90) days (and in some circumstances, can further be
extended an additional sixty (60) days).
The parties also derive revenues in other jurisdictions where
merger control filings or approvals may be required or advisable
in connection with the consummation of the Merger. HP has filed,
or plans to file, in these jurisdictions, including Brazil,
Israel, Russia, South Africa, South Korea, Taiwan, Turkey and
Ukraine.
The Antitrust Division of the DOJ and the FTC frequently
scrutinize the legality under the antitrust laws of transactions
such as the Merger. At any time before or after the Merger, the
Antitrust Division of the DOJ, the FTC, a state attorney
general, or a foreign competition authority such as the European
Commission or MOFCOM, could take action under the antitrust or
other regulatory laws as it deems necessary or desirable in the
public or national interest or with respect to industrial
policy, including seeking to enjoin the Merger or seeking
divestiture of substantial businesses or assets of 3Com or HP or
their subsidiaries. Private parties may also bring objections or
legal actions under antitrust laws under certain circumstances.
50
While we believe that we will receive the requisite approvals
and clearances for the Merger, there can be no assurance that a
challenge to the Merger on antitrust or other regulatory grounds
will not be made, or, if a challenge is made, of the result of
such challenge. Similarly, there can be no assurance that 3Com
or HP will obtain the regulatory approvals necessary to
consummate the Merger or that the granting of these approvals
will not involve the imposition of conditions to the
consummation of the Merger or require changes to the terms of
the Merger. These conditions or changes could result in the
conditions to the Merger not being satisfied prior to the
termination date (which is described in The Merger
Agreement Termination of the Merger Agreement
beginning on page 69) or at all. Under the terms of the
Merger Agreement, the parties have agreed to use their
reasonable best efforts to cause the expiration or termination
of the applicable waiting periods under any applicable laws or
orders as soon as reasonably practicable and to use their
respective reasonable best efforts to offer to take, or cause to
be taken, all actions and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective
the transactions contemplated by the Merger Agreement, including
taking all such action and doing all such things necessary to
resolve such objections, if any, as the FTC, the Antitrust
Division of the DOJ, or any other governmental authority or
person may assert under any applicable laws or orders with
respect to the transactions contemplated by the Merger
Agreement, and to avoid or eliminate each and every impediment
under any law or order that may be asserted by the FTC, the
Antitrust Division of the DOJ or any other governmental
authority with respect to the transactions contemplated by the
Merger Agreement so as to enable such transactions to be
consummated as soon as expeditiously possible. Notwithstanding
the foregoing, HP and its subsidiaries are not required to, and
3Com and our subsidiaries will not, agree to any sale,
divestiture, license or other disposition of shares of capital
stock or of any business, assets or property, or the imposition
of any limitation on the ability of any of them to conduct their
respective businesses or to own or exercise control of such
stock, businesses, assets and properties, if such actions
reasonably would be expected to have:
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a material adverse effect on 3Com and our subsidiaries, taken as
a whole, or H3C and its subsidiaries, taken as a whole;
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a material adverse effect on the benefits expected to be derived
by HP and its subsidiaries from the transactions contemplated by
the Merger Agreement; or
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a material impact (including a material reputational impact) on
the operations or business (other than the networking business)
of HP and its subsidiaries (assuming for purposes of this
determination that HP and its subsidiaries are of equivalent
size to 3Com and our subsidiaries, taken as a whole) in any
material jurisdiction.
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Delisting
and Deregistration of Common Stock
If the Merger is completed, the Common Stock will be delisted
from the NASDAQ Global Select Market and deregistered under the
Exchange Act and we will no longer file periodic reports with
the SEC on account of the Common Stock.
Litigation
Related to the Merger
Between November 12, 2009 and November 24, 2009, eight
purported class action complaints were filed in the Court of
Chancery of the State of Delaware against 3Com and all of the
current members of 3Coms board of directors. Seven of the
complaints name HP as a defendant. Four of the complaints also
name Merger Sub as a defendant. The plaintiffs, David Shaev,
Leonard Ahern, Richard Hall, Larry McIntyre, Alan Kahn, Ashok
Madan, County of York Employees Retirement Plan, and Pipefitters
Local No. 636 Defined Benefit Plan, all claim that they
were stockholders of 3Com and that they filed their lawsuits on
behalf of themselves and a class consisting of all public
stockholders of 3Com. Among other things, the complaints,
captioned Shaev v. 3Com Corporation, et al.,
Civil Action No. 5067, Ahern v. Cote, et
al., Civil Action No. 5068, Hall v. 3Com
Corporation, et al., Civil Action No. 5073,
McIntyre v. 3Com Corporation, et al., Civil Action
No. 5080, Kahn v. 3Com Corporation, et al.,
Civil Action No. 5087, Madan v. 3Com Corporation,
et al., Civil Action No. 5092, County of York
Employees Retirement Plan v. 3Com Corporation, et al.,
Civil Action No. 5098, and Pipefitters Local
No. 636 Defined Benefit Plan v. Cote, et al.,
Civil Action No. 5103, generally allege that the members of
3Coms board
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of directors breached their fiduciary duties by failing to
maximize shareholder value in negotiating and approving the
Merger. Seven of the complaints also generally allege that HP
and, in four of the complaints, Merger Sub, aided and abetted
these alleged breaches of fiduciary duties. The complaints seek
class certification, certain forms of injunctive relief,
including enjoining the consummation of the Merger and
rescission of the Merger Agreement, as well as unspecified
damages. On December 2, 2009, the Chancery Court
consolidated the actions for all purposes under the caption
In re 3Com Shareholders Litigation, Case No. C.A.
No. 5067-CC.
On December 11, 2009, the plaintiffs filed their
Consolidated Amended Complaint. The Consolidated Amended
Complaint includes the allegations, defendants, and requested
relief described above, but does not name 3Com as a defendant
and adds allegations that the preliminary proxy statement failed
to provide information necessary for 3Coms shareholders to
vote on the Merger, including details of the financial analysis
conducted by 3Coms financial advisor, Goldman Sachs, and
the Management Plan. On December 11, 2009, the plaintiffs
moved for a preliminary injunction and for expedited
proceedings. 3Com and the members of its board intend to oppose
those motions.
On November 12, 2009 and November 25, 2009, two
separate purported class action complaints were filed in the
United States District Court for the District of Massachusetts,
by, respectively, plaintiffs Edward Tansey and Robert Levine,
et al., against 3Com and all of the current members of
3Coms board of directors. Like the plaintiffs in the
Delaware actions, the plaintiffs in these actions have asserted
that they were stockholders of 3Com and filed the lawsuit
purportedly on behalf of themselves and a class consisting of
all other stockholders of 3Com. Among other things, the
complaints, captioned Tansey v. 3Com Corporation,
et al., Case
No. 09-cv-11941,
and Levine and Duncan v. 3Com Corporation, et al.,
Case
No. 09-cv-12027,
generally allege that the members of 3Coms board of
directors breached their fiduciary duties by failing to maximize
shareholder value in negotiating and approving the Merger, and
that 3Com aided and abetted these alleged breaches of fiduciary
duties. The complaints seek class certification and certain
forms of injunctive relief, including enjoining the consummation
of the Merger and rescission of the acquisition. On
December 7, 2009, pursuant to the parties
stipulation, the Court adjourned sine die
defendants deadline for responding to the Tansey
complaint and administratively closed the case until a
response is filed. On December 14, 2009, the parties
stipulated to adjourn sine die defendants deadline
for responding to the Levine complaint.
On November 16, 2009, two other purported class action
complaints were filed in the Superior Court for the Commonwealth
of Massachusetts against 3Com, all of the current members of
3Coms board of directors, HP, and Merger Sub. Like the
plaintiffs in the Delaware actions and the federal actions in
Massachusetts, the plaintiffs in these actions, Dean Davenport
and Stanley Tanzer, both claim that they were stockholders of
3Com and that they filed their lawsuits on behalf of themselves
and a class consisting of all public stockholders of 3Com. Among
other things, the complaints, captioned Davenport v.
Benhamou, et al.,
Case No. 09-4886,
and Tanzer v. Benhamou, et al., Case
No. 09-4887,
generally allege that the members of 3Coms board of
directors breached their fiduciary duties by failing to maximize
shareholder value in negotiating and approving the Merger, and
that 3Com, HP and Merger Sub aided and abetted these alleged
breaches of fiduciary duties. On November 25, 2009, 3Com
and its board served a motion to dismiss or stay the action on
plaintiffs in both the Davenport and Tanzer cases.
On December 1, 2009, the plaintiffs in both
Davenport and Tanzer moved for expedited
proceedings. 3Com and the board of directors filed oppositions
to those motions on December 3, 2009. On December 7,
2009, the plaintiffs in both actions moved for consolidation.
3Com and its board intend to oppose that motion.
Amendment
to 3Coms Rights Agreement
On November 11, 2009, 3Com and American Stock
Transfer & Trust Company (the Rights
Agent) entered into Amendment No. 2 to the Third
Amended and Restated Preferred Shares Rights Agreement
between 3Com 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.
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THE
MERGER AGREEMENT
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 80.
The
Merger
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.
Effective
Time
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). 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 64. The parties are targeting completion of the
Merger by the end of April 2010. However, the parties cannot
predict the exact timing of the completion of the Merger or
whether the Merger will be completed at a later time as agreed
by the parties or at all.
Merger
Consideration
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 $7.90 in cash, without interest and less
any applicable withholding taxes, other than the following
shares:
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shares held by holders who have properly and validly perfected
their statutory rights of appraisal with respect to the
Merger; and
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shares owned by HP, Merger Sub or 3Com or any direct or indirect
wholly owned subsidiary of HP, Merger Sub or 3Com.
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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 77.
Treatment
of Options and Other Awards
Stock Options. At the effective time of the
Merger, each option to purchase shares of Common Stock that is
not yet vested or exercisable
and/or has a
per share exercise price that is equal to or greater than $7.90
per share and is outstanding immediately prior to the effective
time of the Merger will be assumed by HP and automatically
converted into an option to acquire, on the same terms and
conditions applicable to such option immediately prior to the
Merger, a number of shares of HP common stock (rounded down to
the nearest whole share) equal to the product of (x) the
number of shares of Common Stock subject to the option
immediately prior to the effective time of the Merger and
(y) a fraction, the numerator of which is $7.90 and the
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denominator of which is the average closing price of HP common
stock on the New York Stock Exchange over the five
(5) trading days ending on the date that is two
(2) trading days prior to the closing date of the Merger
(this fraction is referred to herein as the exchange
ratio). The exercise price for each such assumed option
will equal the per share exercise price for the shares of Common
Stock purchasable pursuant to such option immediately prior to
the effective time of the Merger divided by the exchange ratio
(rounded up to the nearest whole cent).
At the effective time of the Merger, each option to purchase
shares of Common Stock that is vested and has a per share
exercise price that is less than $7.90 per share and is
outstanding immediately prior to the effective time of the
Merger will not be assumed, and will instead be cancelled and
automatically converted into the right to receive an amount in
cash equal to the number of shares of Common Stock subject to
the option immediately prior to the effective time of the Merger
multiplied by the amount by which $7.90 exceeds the per share
exercise price of such option, without interest, and less any
applicable withholding taxes.
Restricted Stock. At the effective time of the
Merger, all outstanding unvested shares of Common Stock will be
assumed by HP and automatically converted into a number of
unvested shares of HP common stock determined by multiplying the
number of unvested shares of Common Stock outstanding
immediately prior to the effective time of the Merger by the
exchange ratio (rounded down to the nearest whole share). The
unvested shares of HP common stock will continue to be subject
to the same terms and conditions, including vesting, applicable
to the unvested shares of Common Stock immediately prior to the
effective time of the Merger.
Restricted Stock Units. At the effective time
of the Merger, all outstanding restricted stock units payable in
shares of Common Stock will be assumed by HP and automatically
converted into restricted stock units payable in shares of HP
common stock. The number of shares of HP common stock payable
pursuant to such assumed restricted stock units will be
determined by multiplying the number of shares of Common Stock
subject to the restricted stock units immediately prior to the
effective time of the Merger by the exchange ratio (rounded down
to the nearest whole share). The assumed restricted stock units
will otherwise continue to be subject to the same terms and
conditions, including vesting, applicable to such restricted
stock units immediately prior to the effective time of the
Merger.
Employee Stock Purchase Plan. 3Com will
establish a new purchase date for the ESPP for the offering
period underway at the effective time of the Merger, so that the
offering period will end as of the last business day prior to
the effective time of the Merger or, if more administratively
advisable, the last payroll date immediately prior to the
effective time of the Merger. All contributions made to the ESPP
as of the new purchase date will be used to purchase shares of
Common Stock, and 3Com will terminate the ESPP immediately after
such purchase, subject to and conditioned upon the occurrence of
the effective time of the Merger. At the effective time of the
Merger, the newly purchased shares of Common Stock will be
converted into the right to receive $7.90 per share in cash,
without interest, and less any applicable withholding taxes.
Payment
for the Shares of Common Stock
HP 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, HP 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 sufficient to pay the
aggregate share consideration when necessary for such payments.
Following the effective time of the Merger, we will close our
stock ledger. After that time, there will be no further
registration of transfers of shares of Common Stock.
Promptly following the effective time of the Merger, HP 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
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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 HP 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 HP. Any unclaimed amounts remaining immediately
prior to when such amounts would escheat to or become property
of any government entity will be returned to HP 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 HP (or any
agent designated by HP) 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 HP, post a bond in an amount that HP
reasonably directs as indemnity against any claim that may be
made against HP, 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 HP and Merger Sub and representations and
warranties made by HP and Merger Sub to us. The assertions
embodied in those representations and warranties were made
solely for the purpose of the Merger Agreement and may be
subject to important qualifications and limitations agreed to by
the parties in connection with the negotiating the terms of the
Merger Agreement. Moreover, these representation and warranties
have been qualified by certain disclosures that 3Com made to HP
in connection with the negotiations of the Merger Agreement,
which disclosures are not reflected in the Merger Agreement.
Furthermore, 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. Any specific material facts that qualify
the representations and warranties in the Merger Agreement have
been disclosed in this document or in the information
incorporated by reference herein, as applicable. Accordingly,
the representations and warranties and other provisions of the
Merger Agreement should not be read alone, but instead should be
read only in conjunction with the other information provided
elsewhere in this document or incorporated by reference herein.
The following description of the representations and warranties
is included to provide 3Coms stockholders with information
regarding the terms of the Merger Agreement.
In the Merger Agreement, 3Com, HP and Merger Sub each made
representations and warranties relating to, among other things:
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due organization, valid existence and good standing;
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corporate power and authority to enter into and perform its
obligations under, and enforceability of, the Merger Agreement;
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the absence of conflicts with or defaults under organizational
documents, other contracts and applicable laws;
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required regulatory filings and consents and approvals of
governmental entities;
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matters with respect to fees payable to advisors in connection
with the Merger; and
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information supplied for inclusion in this proxy statement.
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In the Merger Agreement, HP and Merger Sub also each made
representations and warranties relating to:
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their ownership of Common Stock;
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the existence, if any, of litigation or governmental orders that
would prevent or materially delay the Merger;
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the operations of Merger Sub; and
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their financial capability to perform their obligations under
the Merger Agreement.
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In the Merger Agreement, 3Com also made representations and
warranties relating to:
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our capitalization, including the number of outstanding shares
of Common Stock and the number of shares of Common Stock
reserved for issuance under 3Coms stock plans;
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the due organization, valid existence and good standing of our
subsidiaries and the ownership of such subsidiaries;
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documents filed with the SEC;
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required stockholder approval;
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financial statements;
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the existence, if any, of any undisclosed liabilities;
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the existence, if any, of certain changes or events since
August 28, 2009 (including the absence of a Company
Material Adverse Effect);
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matters with respect to 3Coms material contracts;
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matters with respect to 3Coms properties and assets and
absence of liens;
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intellectual property matters;
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tax matters;
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compliance with the Employee Retirement Income Securities Act of
1974, as amended, and other employee benefit matters;
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labor matters;
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permits;
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compliance with applicable laws;
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environmental matters;
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litigation and internal investigations;
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insurance;
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related party transactions;
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the receipt by the board of directors of a fairness opinion from
Goldman Sachs;
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our stockholder rights agreement;
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the inapplicability of state takeover statutes; and
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public grants.
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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 together with all other effects, circumstances,
changes, events or developments, that has (or have) a material
adverse effect on the business, operations, condition (financial
or otherwise) or results of operations of 3Com and our
subsidiaries, taken as a whole, other than:
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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;
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general conditions in the industries in which we and our
subsidiaries conduct business;
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any conditions arising out of acts of terrorism, war or armed
hostilities;
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the announcement of the Merger Agreement or the pendency of the
transactions contemplated thereby, including the impact on our
relationships with our suppliers, distributors, partners,
customers or employees;
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any action that is taken, or any failure to take action, by us
or our subsidiaries in either case which HP has requested in
writing;
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any changes in laws, orders or generally accepted accounting
principles or the interpretation of laws, orders or accounting
principles;
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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 changes may be considered in determining whether there
is a Company Material Adverse Effect, unless
otherwise excluded by this definition);
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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, unless otherwise excluded by this
definition);
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matters expressly set forth in 3Coms disclosure letter to
HP; or
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any legal proceedings made or brought by any of the current or
former stockholders of 3Com resulting from, relating to or
arising out of the Merger Agreement;
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except, in the case of the first three bullets above, to the
extent such conditions or changes referred to therein affect
3Com and its subsidiaries in a disproportionate manner relative
to other participants in the industries in which 3Com 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 approved of in writing by HP (which approval will
not be unreasonably withheld, delayed or conditioned), with
certain exceptions, we and our subsidiaries will:
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carry on our business in the ordinary course of business and in
compliance in all material respects with all applicable laws and
orders; and
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use our reasonable best efforts to keep available the services
of the current officers, key employees and consultants of 3Com
and each of our subsidiaries and preserve the current
relationships of 3Com 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.
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We have also agreed that, until the consummation of the Merger,
except as expressly contemplated by the Merger Agreement, with
certain exceptions, or approved of in writing by HP (which
approval will not be unreasonably withheld, delayed or
conditioned), we and our subsidiaries will not:
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amend our certificate of incorporation or bylaws or comparable
organizational documents;
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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 3Com or any of our subsidiaries except for issuances
of shares of Common Stock to participants in our ESPP pursuant
to the terms thereof or to holders of options or stock-based
awards, in each case outstanding as of the date of the Merger
Agreement or granted in compliance with the terms of the Merger
Agreement, upon the exercise or vesting thereof;
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directly or indirectly repurchase, redeem or otherwise acquire
any of our or our subsidiaries equity interests, except
for certain tax withholdings or exercise price settlements upon
the exercise of options or with respect to stock-based awards in
the ordinary course of business;
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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;
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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;
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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;
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propose or adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of 3Com or any of our
subsidiaries;
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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:
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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
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loans or advances from our direct or indirect wholly owned
subsidiaries;
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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;
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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;
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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);
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except as is required by applicable law or order or the terms of
any employee benefit plan in effect as of the date of the Merger
Agreement, 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,
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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:
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in connection with the hiring of new employees who are not
directors or executive officers in the ordinary course of
business;
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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
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in connection with any amendment of an employee benefit plan
that is required by law or order;
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except as is required by applicable law or order or the terms of
any employee benefit plan in effect as of the date of the Merger
Agreement, 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;
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except as is required by applicable law or order or the terms of
any employee benefit plan in effect as of the date of the Merger
Agreement, elect or approve any new executive officers or
directors of 3Com or any of our subsidiaries, except in order to
replace a previous executive officer or director;
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except as is required by applicable law or order or the terms of
any employee benefit plan in effect as of the date of the Merger
Agreement, accelerate the end of any performance period,
determination of performance criteria or payment of bonuses
under our 3Bonus Plan for executive officers or any other bonus
plan, policy or arrangement as a result of or in connection with
the transactions contemplated by the Merger Agreement
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pay, discharge, satisfy or settle any pending or threatened
legal proceeding, except for the payment, discharge,
satisfaction or settlement of any pending or threatened legal
proceeding 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, involves the
payment of no more than $500,000 individually or $2,500,000 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;
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except as required as a result of a change in applicable law or
order or generally accepted accounting principles, make any
material change in any of the accounting methods, principles or
practices used by us or affecting our assets, liabilities or
business;
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make any change in any material method of tax accounting or
material tax compliance practice, 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 order), or consent to any extension or waiver of any
limitation period with respect to any claim or assessment for
material taxes;
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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;
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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;
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enter into certain material contracts, or amend or modify in any
material respect, or terminate any material contract; or
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announce an intention, enter into a formal or informal
agreement, or otherwise make a commitment to take any of the
foregoing actions.
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Agreement
to Use Reasonable Best Efforts
Upon the terms and subject to the conditions set forth in the
Merger Agreement, the parties have agreed to use their
reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and
cooperate with the other party or parties in doing, all things
necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the transactions
contemplated by the Merger Agreement. This includes, but is not
limited to, using reasonable best efforts to:
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cause the conditions to the Merger described in
Conditions to the Merger beginning on
page 64 to be satisfied;
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obtain all necessary actions or non-actions, waivers, consents,
approvals, orders and authorizations from governmental
authorities and make all necessary registrations, declarations,
submissions of information, applications and other documents and
filings with governmental authorities in connection with the
Merger Agreement and the consummation of the transactions
contemplated thereby;
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obtain all necessary or appropriate consents, waivers and
approvals under any material contracts to which 3Com or any of
our subsidiaries is a party in connection with the Merger
Agreement and the consummation of the transactions contemplated
thereby so as to maintain and preserve the benefits under such
material contracts following the consummation of the
transactions contemplated by the Merger Agreement;
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execute or deliver any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, the Merger Agreement and
consummate the transactions contemplated thereby;
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defend against any lawsuit or other legal proceeding challenging
the Merger Agreement, or the transactions contemplated thereby
in order to enable the parties to consummate the transactions
contemplated the Merger Agreement; and
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contest, appeal and remove any order that is being proposed by
any governmental authority or other person, or any order that
has been issued, granted or entered, in either case which has or
may have the effect of prohibiting or otherwise preventing the
Merger in order to enable the parties to consummate the
transactions contemplated by the Merger Agreement.
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Notwithstanding the foregoing, 3Com is not required prior to the
effective time of the Merger to pay any consent fee,
profit sharing payment or other consideration
(including increased rent payments), or to provide any
additional security (including a guaranty), to obtain the
consent of any lessor or licensor under any lease.
Anti-Takeover
Laws
The parties have also agreed to use reasonable best efforts to
take all actions necessary so that no state takeover or other
similar statute, regulation or order becomes applicable to the
Merger and if any such statute, regulation or order 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, regulation or order on the
Merger.
Antitrust
Regulatory Filings
The parties have agreed that they will file with the FTC and the
Antitrust Division of the DOJ a Notification and Report Form
relating to the Merger Agreement and the transactions
contemplated thereby as required by the HSR Act no later than
December 7, 2009 and will file comparable pre-merger or
post-merger notification filings, forms and submissions with the
applicable foreign governmental authority that are required by
any of the antitrust laws of certain jurisdictions, including a
notification on Short Form or Form CO to the European
Commission based on Council Regulation 139/2004 (assuming
the prior application (on Form RS)
60
requesting the European Commission to take jurisdiction for the
Merger is accepted) and a jointly filed pre-merger notification
with MOFCOM as required by the Anti-Monopoly Law of the
Peoples Republic of China, as promptly as practicable (and
in any event, in relation to all pre-merger filings, no later
than January 18, 2010), unless HP or Merger Sub determine
that any such comparable pre-merger or post-merger notification
filings, forms and submissions with the applicable foreign
governmental authority are not required by applicable law.
Except for the filings expressly contemplated by the Merger
Agreement, none of the parties will make or submit any other
material filing, declaration, registration or notification to
any governmental authority in connection with any of the
transactions contemplated by the Merger Agreement without the
other partys prior consent.
The parties have agreed to cooperate and coordinate with each
other in the making of such filings, supply each other with any
material information that may be required in order for the other
party to make any filings required under applicable laws or
orders, and supply any additional information that reasonably
may be required or requested by the FTC, the Antitrust Division
of the DOJ or other governmental authorities of any other
applicable jurisdiction in which any such filing is made under
any other antitrust laws.
The parties also have agreed to promptly notify the other party
upon receipt of any material communication regarding any of the
transactions contemplated by the Merger Agreement in connection
with any filings, investigations with, by or before any
governmental authority relating to the Merger Agreement or the
transactions contemplated thereby, including any proceedings
initiated by a private party. The parties have agreed to use
their reasonable best efforts to make, or cause to be made, as
soon as reasonably practicable and after consultation with the
other party, an appropriate response in compliance with a
request for additional information or documentary material from
any governmental authority with respect to the transactions
contemplated by the Merger Agreement pursuant to the HSR Act or
any other laws with respect to which any such filings have been
made.
To the extent reasonably practicable and unless prohibited by
applicable law or by the applicable governmental authority, the
parties have agreed to give each other reasonable advance notice
of all meetings with any governmental authority relating to the
transactions contemplated by the Merger Agreement, give each
other an opportunity to participate in each of such meetings,
keep the other party reasonably apprised with respect to any
material oral communications with any governmental authority
regarding the transactions contemplated by the Merger Agreement,
cooperate in the filing of any analyses, presentations,
memoranda, briefs, arguments, opinions or other written
communications explaining or defending the transactions
contemplated by the Merger Agreement, articulating any
regulatory or competitive argument
and/or
responding to requests or objections made by any governmental
authority, provide each other with a reasonable advance
opportunity to review and comment upon, and consider in good
faith the views of the other with respect to, all written
communications (including any analyses, presentations,
memoranda, briefs, arguments and opinions) with a governmental
authority regarding the transactions contemplated by the Merger
Agreement, provide each other with copies of all written
communications to or from any governmental authority relating to
the transactions contemplated by this Agreement, and cooperate
and provide each other with a reasonable opportunity to
participate in, and consider in good faith the views of the
other with respect to, all material deliberations with respect
to all efforts to satisfy the closing conditions relating to
regulatory approvals and the absence of legal prohibitions.
The parties have agreed to use their reasonable best efforts to
cause the expiration or termination of the applicable waiting
periods under any applicable laws or orders as soon as
reasonably practicable and to use their respective reasonable
best efforts to offer to take, or cause to be taken, all actions
and do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions
contemplated by the Merger Agreement, including taking all such
action and doing all such things necessary to resolve such
objections, if any, as the FTC, the Antitrust Division of the
DOJ, or any other governmental authority or person may assert
under any applicable laws or orders with respect to the
transactions contemplated by the Merger Agreement, and to avoid
or eliminate each and every impediment under any law or order
that may be asserted by the FTC, the Antitrust Division of the
DOJ or any other governmental authority with respect to the
transactions contemplated by the Merger Agreement so as to
enable such transactions to be consummated as soon as
expeditiously possible. Notwithstanding the foregoing, HP and
its
61
subsidiaries are not required to, and 3Com and our subsidiaries
will not, agree to any sale, divestiture, license or other
disposition of shares of capital stock or of any business,
assets or property, or the imposition of any limitation on the
ability of any of them to conduct their respective businesses or
to own or exercise control of such stock, businesses, assets and
properties, if such actions reasonably would be expected to have:
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a material adverse effect on 3Com and our subsidiaries, taken as
a whole, or H3C and its subsidiaries, taken as a whole;
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a material adverse effect on the benefits expected to be derived
by HP and its subsidiaries from the transactions contemplated by
the Merger Agreement; or
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a material impact (including a material reputational impact) on
the operations or business (other than the networking business)
of HP and its subsidiaries (assuming for purposes of this
determination that HP and its subsidiaries are of equivalent
size to 3Com and our subsidiaries, taken as a whole) in any
material jurisdiction.
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Other
Regulatory Filings
3Com has agreed to prepare and file this proxy statement for use
in connection with the solicitation of proxies from our
stockholders for use at the special meeting. If we determine
that we are required to file with the SEC any other document in
connection with the transactions contemplated by the Merger
Agreement (a required filing) under applicable law
or order, we will promptly prepare and file with the SEC such
required filing. HP and Merger Sub have agreed to furnish all
information concerning HP and Merger Sub (and their respective
affiliates, if applicable) as is required to be included, or is
customarily included, in this proxy statement or other required
filings, in connection with the preparation and filing with the
SEC of this proxy statement and any other required filings. 3Com
will use its reasonable best efforts to cause this proxy
statement to be disseminated to our stockholders as promptly as
practicable following the filing thereof with the SEC and
confirmation from the SEC that it will not comment on, or that
it has no additional comments on, this proxy statement.
Unless the board of directors has changed its recommendation,
neither 3Com nor any of our affiliates will file with the SEC
any required filing, or any amendment or supplement thereto or
to this proxy statement, and neither 3Com nor any of our
affiliates, if applicable, will correspond or otherwise
communicate with the SEC or its staff with respect to this proxy
statement or any other required filing in any such case without
providing HP and Merger Sub a reasonable opportunity to review
and comment thereon or participate therein, as the case may be
and has agreed to include in this proxy statement and any other
required filings comments reasonably proposed by HP or Merger
Sub. Unless the Merger Agreement is earlier terminated pursuant
to its terms, 3Com will advise HP and Merger Sub promptly after
we receive notice of any receipt of a request by the SEC or its
staff for an amendment or revisions to, or additional
information in connection with, or any comments on this proxy
statement or any other required filing and will provide HP and
Merger Sub with copies of all correspondence with our
representatives, on the one hand, and the SEC or its staff, on
the other hand with respect to this proxy statement or other
required filings.
If at any time prior to the special meeting 3Com, HP or Merger
Sub discovers any information relating to 3Com, HP or Merger
Sub, or any of our/their respective directors, officers or
affiliates, which should be set forth in an amendment or
supplement to this proxy statement or any other required filing
so that such filing would not include any misstatement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, the party which discovers such information has
agreed to promptly notify the other, and an appropriate
amendment or supplement to this proxy statement or the
applicable required filing describing such information will be
promptly prepared and filed with the SEC and, to the extent
required by applicable law or order or the SEC or its staff,
disseminated to our stockholders. 3Com has agreed to cause this
proxy statement and any other required filing to comply as to
form in all material respects with the applicable requirements
of the Exchange Act and the rules of the SEC and the NASDAQ
Global Select Market. Unless the board of directors has changed
its recommendation, 3Com will, if applicable, include its
recommendation that our stockholders adopt the Merger Agreement
in any required filings, including this proxy statement.
62
Employee
Matters
Health and Welfare Benefits. For the period
commencing at the effective time of the Merger and ending on a
date that is no earlier than the six (6) month anniversary
thereof, HP has agreed to maintain or provide for all continuing
employees of 3Com, and, as applicable, their eligible
dependents, benefits under 3Coms employee benefit plans or
employee benefit plans, programs or policies of HP or its
affiliates that provide for health and welfare benefits
(excluding severance) that are in the aggregate no less
favorable than the benefits maintained for and provided to
continuing employees immediately prior to the effective time of
the Merger. HP has also agreed to waive any pre-existing
conditions or limitations and eligibility waiting periods under
any group health plans of HP or its affiliates with respect to
continuing employees and their eligible dependents to the extent
such individuals were not subject to such conditions,
limitations and waiting periods under the comparable employee
benefit plans of 3Com as of the time immediately preceding the
closing of the Merger, and to provide each continuing employee
with credit for any deductibles paid under 3Coms medical,
dental, vision and pharmaceutical plans during the plan year in
effect as of the date of the closing of the Merger in satisfying
any applicable deductible or out of pocket requirements under
any medical, dental, vision or pharmaceutical plans of HP or its
affiliates that such employees are eligible to participate in
after the effective time of the Merger to the same extent that
such expenses were recognized under the comparable employee
benefit plan of 3Com.
Severance Plans. For the period commencing at
the effective time of the Merger and ending on the first
anniversary thereof, HP has agreed to honor in accordance with
their terms as in effect immediately prior to the effective time
of the Merger the severance plans maintained by 3Com or our
subsidiaries, and has agreed to recognize continuous service
with 3Com or our subsidiaries, including predecessor employers,
of participating continuing employees under such plans, subject
to certain limitations. Thereafter, HP has agreed that
continuing employees located in the United States will be
eligible to participate in severance plans or programs available
to similarly situated employees of HP or its subsidiaries and
will recognize continuous service credited from and after the
effective time of the Merger.
401(k) Plans. 3Com has agreed to terminate its
401(k) plan effective as of no later than the day immediately
preceding the closing date of the Merger. HP is required to take
all steps necessary to permit each person who receives an
eligible rollover distribution to rollover his or her
distribution (including outstanding loans) into HPs 401(k)
Plan. HP has agreed that continuing employees located in the
United States will be eligible to participate in HPs
401(k) plan as soon as administratively practicable but in no
event later than three (3) months after the effective time
of the Merger, and that HP will recognize prior service with
3Com or our subsidiaries for purposes of vesting under HPs
401(k) plan. To the extent that HP is unable to provide
participation within such three (3) month period, HP has
agreed to pay continuing employees then employed an amount
substantially equivalent to what they would have received
pursuant to any match under HPs 401(k) plan had they
become participants in such plan, if any, without regard to any
tax benefit under such plan.
Other Employee Benefits and Service
Credit. From and after the effective time of the
Merger, HP has agreed that continuing employees will be eligible
to participate in employee benefit plans and programs of HP or a
subsidiary of HP, subject to certain limitations. From and after
the effective time of the Merger, HP has agreed to recognize
prior service with 3Com or our subsidiaries, including
predecessor employers (to the extent such service was recognized
by 3Com) only for purposes of service awards and determining the
amount of vacation accruals, and not for purposes of any other
plan, program or policy of HP or its subsidiaries, other than to
the extent required by local law or order or as otherwise set
forth in the Merger Agreement.
Employment, Change of Control, Severance and Retention
Agreements. Except as otherwise provided in the
Merger Agreement, HP has agreed that it will, or will cause its
subsidiaries to, honor in accordance with their terms as in
effect immediately prior to the effective time of the Merger all
existing employment, change of control, severance and retention
agreements, subject to HPs ability to amend or terminate
such plans or agreements in accordance with the terms thereof,
including specifically obtaining any necessary or required
consents.
63
PTO. Except as otherwise required by
applicable law, or as may be agreed upon by 3Com and HP prior to
the date of the closing of the Merger, HP has agreed that unused
paid-time off days accrued by continuing employees under the
plans and policies of 3Com and our subsidiaries will carry over
to HP or its subsidiaries to the extent administratively
practicable, and each such continuing employee will be paid by
3Com in cash for any accrued and unused paid-time off days that
HP determines are not administratively practicable to carry over.
Treatment of 3Coms Deferred Compensation
Plan. Within the thirty (30) day period
prior to the date of the closing of the Merger, and subject to
and conditioned upon, the occurrence of the effective time of
the Merger, 3Com is required to terminate its Deferred
Compensation Plan. As soon as administratively practicable
following the effective date of such termination, 3Com is
required to commence distributing the assets of the Deferred
Compensation Plan in accordance with the requirements of
Section 409A of the Internal Revenue Code. The termination
of the Deferred Compensation Plan and the distribution of the
assets are required to be completed as soon as administratively
practicable but in no event later than fifteen
(15) business days following the date of the closing of the
Merger.
Other
Covenants
Notification of Certain Matters. The parties
have agreed to promptly notify the other party upon becoming
aware of certain matters, including that any representation or
warranty made by it in the Merger Agreement has become untrue or
inaccurate in any material respect, or of any failure of by it
to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it
under the Merger Agreement, provided that 3Com need only provide
such notification if such untruth or inaccuracy, or such
failure, would reasonably be expected to cause any of the
closing conditions described above in the first four bullet
points in Conditions to HPs and Merger
Subs Obligations beginning on page 65 to fail
to be satisfied.
Public Statements and Disclosures. The parties
have agreed that they will not issue any public release or make
any public announcement or disclosure concerning the Merger
Agreement or the transactions contemplated by the Merger
Agreement without the prior written consent of the other party,
which consent may not be unreasonably withheld, delayed or
conditioned, unless such release is required by applicable law
or order, in which case the party required to make the release
or announcement is required to use its reasonable best efforts
to allow the other party reasonable time to comment on such
release or announcement in advance of such issuance. Such action
is not required, however, in connection with or after a
recommendation change by 3Com.
Confidentiality. The parties have acknowledged
that 3Com and HP previously executed a confidentiality
agreement, and agreed that such agreement will continue in full
force and effect in accordance with its terms.
Certain Litigation. 3Com has agreed to
promptly advise HP of any litigation commenced after the date of
the Merger Agreement against 3Com or any of our subsidiaries or
directors (in their capacity as such) relating to the Merger
Agreement or the transactions contemplated thereby, and will
keep HP reasonably informed regarding any such litigation. 3Com
has agreed to give HP the opportunity to consult with us
regarding the defense and strategy of any such litigation and
that we will consider HPs views with respect to such
litigation.
Conditions
to the Merger
Conditions to Each Partys
Obligations. Each partys obligation to
complete the Merger is subject to the satisfaction or waiver of
the following conditions:
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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;
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(i) any waiting period (and extensions thereof) applicable
to the transactions contemplated by the Merger Agreement under
the HSR Act must have expired or been terminated; (ii) any
clearances, consents, approvals, orders and authorizations of
governmental authorities required by the antitrust laws
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of the European Union, Israel, Russia, South Africa, South
Korea, Taiwan, Turkey and Ukraine must have been obtained
and/or any
waiting periods (and extensions thereof) applicable to the
transactions contemplated by the Merger Agreement under the
antitrust laws of such jurisdictions must have expired or been
terminated; and (iii) any required approval or deemed
approval of the transactions contemplated by the Merger
Agreement of MOFCOM must have been obtained pursuant to the
Anti-Monopoly Law of the Peoples Republic of China; in
each case, without any condition that would require any action
that HP and its subsidiaries would not be required to take, or
3Com and our subsidiaries would not be permitted to take,
pursuant to the provisions of the Merger Agreement described in
the last paragraph under Antitrust Regulatory
Filings beginning on page 60; and
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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 and has the effect of making
the Merger illegal or which has the effect of prohibiting or
otherwise preventing the consummation of the Merger.
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Conditions to HPs and Merger Subs
Obligations. The obligations of HP 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 HP:
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our representation and warranties contained in the Merger
Agreement with respect to the absence of any change or event
that has had or would reasonably be expected to have a
Company Material Adverse Effect since
August 28, 2009 through the date of the Merger Agreement
must be true and correct in all respects;
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our representations and warranties contained in the Merger
Agreement with respect to our authority to complete the Merger,
approval by our stockholders, our organization and good
standing, our capitalization, our 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);
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all of our other representations and warranties contained 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), except where any failure to be so true and correct has
not had and would not reasonably be expected to have a
Company Material Adverse Effect (without giving
effect to any qualification or exception as to materiality or
Company Material Adverse Effect (but not dollar
thresholds nor the reference to Company Material Adverse
Effect in the representation and warranty regarding
certain material contracts) set forth in such representations
and warranties);
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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;
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we must deliver to HP and Merger Sub at closing a certificate,
validly executed for and on behalf of 3Com and in our name by a
duly authorized officer, certifying that the foregoing
conditions have been satisfied; and
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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.
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Conditions to 3Coms Obligations. Our
obligation to complete the Merger is subject to the satisfaction
or waiver of the following additional conditions, any of which
may be waived exclusively by us:
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the representations and warranties of HP 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
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transactions contemplated by the Merger Agreement or the ability
of HP 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;
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HP 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
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HP and Merger Sub must deliver to us at closing a certificate,
validly executed for and on behalf of HP and Merger Sub and in
their respective names by a duly authorized officer, with
respect to the satisfaction of the foregoing conditions relating
to representations, warranties and obligations.
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Restrictions
on Solicitations of Other Offers
From and after the date of the Merger Agreement, 3Com and our
subsidiaries have agreed not to, nor authorize or knowingly
permit our respective representatives to, directly or indirectly:
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solicit, initiate, propose or induce the making, submission or
announcement of, or knowingly encourage, facilitate or assist,
an alternative acquisition proposal;
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furnish to any person (other than HP, Merger Sub or any
designees of HP or Merger Sub) any non-public information
relating to 3Com 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
3Com or any of our subsidiaries (other than HP, Merger Sub or
any designees of HP or Merger Sub) in any such case with the
intent to induce or in a manner that reasonably would be
expected to lead to 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;
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participate, engage in or continue discussions or negotiations
with any person with respect to any alternative acquisition
proposal; or
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enter into, or authorize 3Com 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,
other than an acceptable confidentiality agreement.
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Notwithstanding the aforementioned restrictions, at any time
prior to the adoption 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 3Com 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 3Com or any of our subsidiaries, to any person
that has made a bona fide unsolicited written acquisition
proposal, provided that the 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 HP 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 are also required to keep HP reasonably informed of
any material developments regarding any acquisition proposal
and, upon the reasonable request of HP, apprise HP of the status
of such acquisition proposal.
We are required contemporaneously to provide to HP any
non-public information concerning us or our subsidiaries
provided to such other person which was not previously provided
to HP. We have agreed that we and our subsidiaries will not
enter into any confidentiality agreement with any person which
will prohibit us from complying with these obligations.
For purposes of the Merger Agreement, an acquisition
proposal means any offer or proposal (other than an
offer or proposal by HP or Merger Sub) to engage in an
acquisition transaction from any person or
66
group (as defined in Section 13(d) of the
Exchange Act). For purposes of the Merger Agreement, 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 3Com 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 3Com pursuant
to which the stockholders of 3Com immediately preceding such
transaction (in their capacities as such) hold eighty percent
(80%) or less of the Common Stock or consolidated assets of 3Com
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 3Com 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.
For purposes of the Merger Agreement, 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%) will be references to
fifty percent (50%) and the reference therein to
eighty percent (80%) will be a reference to
fifty percent (50%)) with respect to which the board
of directors must 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 3Coms
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 HP to 3Com in a written offer capable of acceptance
in response to such proposal or otherwise).
Stockholder
Meeting
Under the Merger Agreement, 3Com is required to establish a
record date for, duly call, give notice of, convene and hold a
special meeting of our stockholders as promptly as practicable
and in any event within forty-five (45) days of the mailing
of this proxy statement (unless HP consents to a different
date), for the purpose of voting upon the adoption of the Merger
Agreement in accordance with Delaware law. Notwithstanding the
foregoing, 3Com may postpone or adjourn (for no longer than five
(5) business days in the case of the third bullet point
below) such special meeting if:
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there are insufficient shares of Common Stock present or
represented by a proxy at the special meeting to conduct
business at the special meeting;
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3Com is required to postpone or adjourn the special meeting by
applicable law or order; or
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the board of directors has determined in good faith (after
consultation with outside legal counsel) that it is necessary or
appropriate to postpone or adjourn the special meeting,
including in order to give our stockholders sufficient time to
evaluate any new information or disclosure that 3Com has sent to
our stockholders or otherwise made available to our stockholders
by issuing a press release, filing materials with the SEC or
otherwise (including in connection with a change in the
recommendation of the board of directors).
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Unless the board of directors has changed its recommendation,
3Com has agreed to use its reasonable best efforts to solicit
from our stockholders proxies in favor of the adoption of the
Merger Agreement in accordance with Delaware law and take all
other action necessary or advisable to secure the votes required
to
67
approve the Merger Agreement at the special meeting. 3Com is
required to provide HP with such information with respect to the
solicitation of such required vote as is reasonably requested by
HP.
Change in
Board Recommendation
The board of directors has unanimously resolved to recommend
that our stockholders adopt the Merger Agreement. The 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 HP, or
publicly propose to withhold, withdraw, amend, change, qualify
or modify in a manner adverse to HP, 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:
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we receive a bona fide written acquisition proposal and if the
board of directors determines in good faith (after consultation
with its independent financial advisors and outside legal
counsel) that such acquisition proposal constitutes a superior
proposal and the failure to take such action would reasonably be
expected to be a breach of its fiduciary duties and we have not
violated the terms described in this Change in
Board Recommendation section or in
Restrictions on Solicitations of Other
Offers beginning on page 66 in any material respect
in connection with such acquisition proposal; or
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a material fact, event, change, development or set of
circumstances that was not known by the board of directors as of
or at any time prior to the date of the Merger Agreement (other
than, and not relating in any way to, an acquisition proposal),
such material fact, event, change, development or set of
circumstances being an intervening event, occurs and
is continuing and if the board of directors determines in good
faith (after consultation with independent financial advisors
and outside legal counsel) that the failure to take such action
in light of the intervening event would reasonably be expected
to be a breach of its fiduciary duties.
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To the extent the board of directors proposes to take the
foregoing actions with regard to its recommendation, it may only
do so after:
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giving HP at least five (5) business days prior
written notice of its intention to take such action and
providing HP a copy of the relevant proposed transaction
agreement and other material documents with the party making
such superior proposal or, in the cases of an intervening event,
providing a HP with a written explanation of the board of
directors basis and rationale for proposing such action;
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negotiating in good faith with HP (if requested by HP) during
the five (5) business day notice period to enable HP to
propose changes to the terms of the Merger Agreement that would
cause such superior proposal to no longer constitute a superior
proposal or to obviate the need for a recommendation change;
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considering in good faith (after consultation with its
independent financial advisors and outside legal counsel) any
changes to the Merger Agreement proposed by HP in a written
offer capable of acceptance and determining that the superior
proposal would continue to constitute a superior proposal or
that the failure to take such action would reasonably be
expected to be a breach of its fiduciary duties if such changes
were to be given effect; and
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delivering to HP an additional notice and copies of the relevant
proposed transaction agreement and other material documents, as
applicable, and recommencing the five (5) business day
notice period in the event of any material change to the
financial or other material terms of such superior proposal or
the facts and circumstances relating to such intervening event.
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Notwithstanding the foregoing, the board of directors is not
prohibited under the Merger Agreement from taking and disclosing
to the stockholders a position contemplated by
Rule 14e-2(a)
under the Exchange Act or
68
complying with the provisions of
Rule 14d-9
promulgated under the Exchange Act, or making any disclosure to
our stockholders that the board of directors determines to make
in good faith (after consultation with its outside legal
counsel) in order to fulfill its fiduciary duties or satisfy
applicable state or federal securities laws, provided that any
such disclosure may still be deemed to be a recommendation
change pursuant to and in accordance with the terms described in
this Change in Board Recommendation
section.
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:
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by mutual written agreement of HP and 3Com;
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by either 3Com or HP if:
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the Merger is not consummated by 11:59 p.m. (Pacific time)
on November 11, 2010 (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 the Merger Agreement, including those conditions
described in Conditions to the Merger
beginning on page 64, having failed to be satisfied by the
Termination Date;
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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 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
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3Com has failed to obtain the stockholder approval at the
special meeting (or any adjournment or postponement thereof) at
which a vote is taken on the Merger Agreement;
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HP 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 HP 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
beginning on page 65 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 HPs and Merger Subs
Obligations beginning on page 65 not being
satisfied; or
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at any time prior to the receipt of 3Com stockholder approval of
the proposal to adopt the Merger Agreement, the board of
directors has received an acquisition proposal that it
determines in good faith (after consultation with its
independent financial advisors and outside legal counsel)
constitutes a superior proposal and the failure to enter into a
definitive agreement relating to such superior proposal would
reasonably be expected to be a breach of its fiduciary duties,
and 3Com has not violated the terms described in
Change in Board Recommendation beginning
on page 68 or in Restrictions on
Solicitations of Other Offers beginning on page 66 in
any material respect in connection with such acquisition
proposal, and provided that 3Com has:
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given HP at least five (5) business days prior
written notice of our intention to take such action (which
notice must specify the material terms and conditions of any
such superior proposal) and,
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no later than the time of such notice, provided HP a copy of the
relevant proposed transaction agreement and other material
documents with the party making such superior proposal;
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if requested by HP, negotiated in good faith with HP during the
five (5) business day period to enable HP to propose
changes to the terms of the Merger Agreement that would cause
such superior proposal to no longer constitute a superior
proposal;
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considered in good faith (after consultation with its
independent financial advisors and outside legal counsel) any
changes to the Merger Agreement proposed by HP in a written
offer capable of acceptance, and determined that the superior
proposal would continue to constitute a superior proposal if
such changes were accepted by 3Com;
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in the event of any material change to the financial or other
material terms of such superior proposal, in each case,
delivered to HP, an additional notice and copies of the relevant
proposed transaction agreement and other material documents and
have provided to HP another five (5) business day notice
period; and
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concurrently with the termination of the Merger Agreement, paid
HP the termination fee described in
Termination Fees and Expenses beginning
on page 70;
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3Com 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 3Com 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 HPs
and Merger Subs Obligations beginning on page 65 are
not capable of being satisfied (with or without cure) by the
Termination Date, provided that HP 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 beginning on page 65 not being
satisfied; or
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(i) the 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 ten
(10) business days after the public announcement of the
commencement of such acquisition proposal, 3Com has not 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 3Coms stockholders reject such
acquisition proposal and not tender any shares of Common Stock
into such tender or exchange offer; (iii) 3Com fails to
timely hold a stockholder vote with respect to the adoption of
the Merger Agreement in accordance with the terms of the Merger
Agreement at a stockholder meeting called in accordance with the
terms described in Stockholder Meeting
beginning on page 67; or (iv) the board of directors
has failed to publicly reconfirm the board of directors
recommendation in favor of the Merger within ten
(10) business days of a written request from HP to do so,
provided, however, that HP may not terminate the Merger
Agreement within the ten (10) business day period
contemplated by clause (ii) above.
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Termination
Fees and Expenses
We have agreed to pay HP (or its designee) a termination fee of
$99 million if:
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the Merger Agreement is terminated pursuant to the provision
described in the second
sub-bullet
under the third bullet above under Termination
of the Merger Agreement beginning on page 69;
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the Merger Agreement is terminated pursuant to the provision
described in the second
sub-bullet
under the fourth bullet above under
Termination of the Merger Agreement
beginning on page 69;
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the Merger Agreement is terminated pursuant to the provision
described in the first
sub-bullet
under the second bullet above under
Termination of the Merger Agreement
beginning on page 69 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 3Com 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 HP 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 approvals, 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
beginning on page 65 and provided that:
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prior to such termination a competing acquisition transaction
has been publicly announced, disclosed or communicated and not
withdrawn, a person or group has publicly disclosed an intention
to make, propose or communicate a proposal for a competing
acquisition transaction and not withdrawn such intention, or a
proposal for a competing acquisition transaction has become
publicly known and not withdrawn, and
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within twelve (12) months after such termination, we enter
into a definitive agreement providing for a competing
acquisition transaction and such competing acquisition
transaction is subsequently consummated;
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the Merger Agreement is terminated pursuant to the provision
described in the third
sub-bullet
under the second bullet above under
Termination of the Merger Agreement
beginning on page 69 and provided that:
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prior to the special meeting (or any postponement or adjournment
thereof) a competing acquisition transaction has been publicly
announced, disclosed or communicated and not withdrawn, a person
or group has disclosed an intention to make, propose or
communicate a proposal for a competing acquisition transaction
and not withdrawn such proposal or intention or a proposal for a
competing acquisition transaction has become publicly known and
not withdrawn,
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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, and
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provided that such payment will be less any expenses previously
paid to HP (or its designee) as described in the next paragraph.
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We have also agreed to reimburse HPs and Merger Subs
out-of-pocket
fees and expenses incurred in connection with the transaction
contemplated by the Merger Agreement, up to an aggregate of
$10 million, if either the Merger Agreement is terminated
pursuant to the provision described in the third
sub-bullet
under the second bullet above under
Termination of the Merger Agreement
beginning on page 69 and prior to the special meeting (or
any postponement or adjournment thereof) a competing acquisition
transaction has been publicly announced, disclosed or
communicated and not withdrawn, a person or group has disclosed
an intention to make, propose or communicate a proposal for a
competing acquisition transaction and not withdrawn such
proposal or intention or a proposal for a competing acquisition
transaction has become publicly known and not withdrawn. For
purposes of the Merger Agreement, a competing
acquisition transaction has the same meaning as an
acquisition transaction except that all references therein to
twenty percent (20%) are references to fifty
percent (50%) and the reference to eighty percent
(80%) is a reference to fifty percent (50%).
Remedies
The parties are entitled to specific performance of the terms
and provisions of the Merger Agreement, including an injunction
to prevent or restrain breaches or threatened breaches of the
Merger Agreement by the other party or parties and enforcing
compliance with the covenants and obligations of the other party
or parties under the Merger Agreement.
71
Indemnification
and Insurance
The Merger Agreement provides that HP will cause the surviving
corporation and its subsidiaries to honor and fulfill in all
respects the obligations of 3Com and our subsidiaries under any
and all indemnification contracts between 3Com or any of our
subsidiaries and any of our respective current or former
directors and officers and any person who becomes a director or
officer of 3Com 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 are required to (and HP is required to
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 3Com and
our subsidiaries as of the date of the Merger Agreement, and
during such six-year period, such provisions may not be
repealed, amended or otherwise modified in any manner except as
required by applicable law.
The surviving corporation and its subsidiaries are required (and
HP is required to cause the surviving corporation and its
subsidiaries), to the fullest extent permitted by law, 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 3Com 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. In
addition, to the fullest extent permitted by applicable law, the
surviving corporation and its subsidiaries are required (and HP
is required to cause the surviving corporation and its
subsidiaries) to advance, prior to the final disposition of any
claim, proceeding, investigation or inquiry for which
indemnification may be sought under this Agreement, promptly
following request by an Indemnified Person therefor, all costs,
fees and expenses (including reasonable attorneys fees and
investigation expenses) incurred by such Indemnified Person in
connection with any such claim, proceeding, investigation or
inquiry upon receipt of an undertaking by such Indemnified
Person to repay such advances if it is ultimately decided in a
final, non-appealable judgment by a court of competent
jurisdiction that such Indemnified Person is not entitled to
indemnification.
Prior to the effective time of the Merger, 3Com may purchase a
six-year tail prepaid policy on the directors
and officers liability insurance. In the event that 3Com
purchases such a tail policy prior to the effective
time of the Merger, HP and the surviving corporation are
required to maintain such tail policy in full force
and effect and continue to honor their respective obligations
thereunder, in lieu of all other obligations of HP and the
surviving corporation for so long as such tail
policy is maintained in full force and effect. In the event that
3Com 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, HP and the
surviving corporation are required to maintain in effect
3Coms 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 3Coms current directors and
officers liability insurance, on terms with respect to the
coverage and amounts that are equivalent to those of 3Coms
current directors and officers liability insurance.
In satisfying their obligations with respect to directors
and officers liability insurance, HP 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
72
insurance coverage exceed such amount, HP 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 will 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 in a writing
signed by us, HP and Merger Sub.
At any time before the consummation of the Merger, each of the
parties to the Merger Agreement may, by written instrument:
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extend the time for the performance of any of the obligations or
other acts of the other parties;
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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
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waive compliance with any of the agreements or conditions for
the benefit of such party contained in the Merger Agreement.
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73
MARKET
PRICE OF COMMON STOCK
Our Common Stock is listed for trading on the NASDAQ Global
Select Market under the symbol COMS. The following
table sets forth, for the fiscal quarters indicated, the high
and low closing prices per share as reported by the NASDAQ
Global Select Market.
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Common Stock
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High
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Low
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FISCAL YEAR 2008
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First Quarter (June 2 August 31)
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$
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4.81
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$
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3.24
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Second Quarter (September 1 November 30)
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$
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5.11
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$
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3.22
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Third Quarter (December 1 February 29)
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$
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4.60
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$
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2.76
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Fourth Quarter (March 1 May 30)
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$
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3.41
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$
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1.76
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FISCAL YEAR 2009
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First Quarter (June 1 August 29)
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$
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2.59
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$
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1.83
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Second Quarter (August 30 November 28)
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$
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2.85
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$
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1.43
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Third Quarter (November 29 February 27)
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$
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2.66
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$
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1.81
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Fourth Quarter (February 28 May 29)
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$
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4.39
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$
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2.06
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FISCAL YEAR 2010
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First Quarter (May 30 August 28)
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$
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5.16
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$
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3.66
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Second Quarter (August 29 November 27)
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$
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7.51
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$
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3.93
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Third Quarter (November 28 February 26)
(through December 14, 2009)
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$
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7.48
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$
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7.34
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The closing sale price of the Common Stock on the NASDAQ Global
Select Market on November 10, 2009, the last trading day
prior to the execution of the Merger Agreement, was $5.41 per
share. On December 14, 2009, the last trading day before
the date of this proxy statement, the closing price for the
Common Stock on the NASDAQ Global Select Market was $7.47 per
share. You are encouraged to obtain current market quotations
for Common Stock in connection with voting your shares.
74
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information, as of
November 11, 2009, the date of the Merger Agreement, with
respect to the beneficial ownership of Common Stock by:
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each individual or entity whom we know to own beneficially more
than five percent of Common Stock;
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each current director;
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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 3Com and two highly compensated executive officers
who are no longer employed by 3Com (the Named Executive
Officers); and
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all of our current directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules
and regulations of the SEC 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
|
|
Subject to
|
|
|
|
Percent of
|
|
|
Shares of
|
|
Right to
|
|
Total
|
|
Common Stock
|
|
|
Common
|
|
Acquire Within
|
|
Beneficial
|
|
Beneficially
|
Name and Address of Beneficial Owner
|
|
Stock Owned
|
|
60 Days
|
|
Ownership
|
|
Owned(1)
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barclays Global Investors, NA and related entities(2)
400 Howard Street
San Francisco, CA 94105
|
|
|
27,018,520
|
|
|
|
|
|
|
|
27,018,520
|
|
|
|
6.8
|
%
|
LSV Asset Management(3)
1 N. Wacker Drive, Suite 4000
Chicago, IL 60604
|
|
|
20,747,900
|
|
|
|
|
|
|
|
20,747,900
|
|
|
|
5.3
|
%
|
Non-Employee Directors and Director Nominees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric A. Benhamou(4)
|
|
|
1,208,146
|
|
|
|
2,380,744
|
|
|
|
3,588,890
|
|
|
|
*
|
|
Kathleen A. Cote
|
|
|
|
|
|
|
42,792
|
|
|
|
42,792
|
|
|
|
*
|
|
Gary T. DiCamillo
|
|
|
11,000
|
|
|
|
427,220
|
|
|
|
438,220
|
|
|
|
*
|
|
David H. Y. Ho
|
|
|
|
|
|
|
38,625
|
|
|
|
38,625
|
|
|
|
*
|
|
James R. Long
|
|
|
162,800
|
|
|
|
308,350
|
|
|
|
471,150
|
|
|
|
*
|
|
J. Donald Sherman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Dominique Trempont
|
|
|
|
|
|
|
130,458
|
|
|
|
130,458
|
|
|
|
*
|
|
Named Executive Officers PEO &
PFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Y. L. Mao(5)
|
|
|
476,429
|
|
|
|
564,750
|
|
|
|
1,041,179
|
|
|
|
*
|
|
Jay Zager(6)
|
|
|
379,879
|
|
|
|
550,000
|
|
|
|
929,879
|
|
|
|
*
|
|
Named Executive Officers Other Executives
(alphabetical)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neal D. Goldman(7)
|
|
|
750,844
|
|
|
|
1,512,500
|
|
|
|
2,263,344
|
|
|
|
*
|
|
Ronald A. Sege(8)
|
|
|
867,333
|
|
|
|
500,000
|
|
|
|
1,367,333
|
|
|
|
*
|
|
Dr. Shusheng Zheng
|
|
|
91,768
|
|
|
|
|
|
|
|
91,768
|
|
|
|
*
|
|
All directors and current executive officers as a group
(12 persons)(9)
|
|
|
3,948,199
|
|
|
|
6,455,439
|
|
|
|
10,403,638
|
|
|
|
2.6
|
%
|
75
|
|
|
(1) |
|
Percentage of beneficial ownership is based on
394,834,457 shares of Common Stock outstanding as of
November 11, 2009. Shares of Common Stock subject to right
to acquire within 60 days of November 11, 2009 (i.e.,
options currently exercisable, or exercisable within
60 days of November 11, 2009, and restricted stock
units vesting within 60 days of November 11, 2009),
are deemed outstanding for computing the percentage of the
person holding such rights but are not deemed outstanding for
computing the percentage for any other person. |
|
(2) |
|
Based on a Schedule 13G that was jointly filed with the SEC
on February 5, 2009 by Barclays Global Investors, NA,
Barclays Global Fund Advisors, Barclays Global Investors,
Ltd, Barclays Global Investors Japan Limited, Barclays Global
Investors Canada Limited, Barclays Global Investors Australia
Limited and Barclays Global Investors (Deutschland AG). |
|
(3) |
|
Based on a Schedule 13G that was filed with the SEC on
February 17, 2009 by LSV Asset Management. |
|
(4) |
|
Includes 1,208,146 shares of Common Stock held in a trust
of which of which Mr. Benhamou is a trustee. |
|
(5) |
|
Mr. Mao is also a director of 3Com. |
|
(6) |
|
Includes 187,500 unvested shares of restricted stock issued to
Mr. Zager. |
|
(7) |
|
Includes 83,750 unvested shares of restricted stock issued to
Mr. Goldman. Also includes 634,815 shares of Common
Stock held in The Neal D. Goldman Trust, a revocable trust of
which Mr. Goldman and Angela Goldman are trustees. |
|
(8) |
|
Includes 666,666 unvested shares of restricted stock issued to
Mr. Sege. Mr. Sege is also a director of 3Com. |
|
(9) |
|
Includes 937,916 unvested shares of restricted stock issued to
executive officers. |
76
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. 3Coms stockholders electing to
exercise appraisal rights must comply with the provisions of
Section 262 of the DGCL in order to perfect their rights.
3Com 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 3Coms 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:
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|
|
|
|
You must deliver to 3Com 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 3Com 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 3Com. 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 the demand for
77
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 will, 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 must 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 3Coms 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 will be compounded quarterly and will 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.
78
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, 3Coms
stockholders who may wish to dissent from the Merger and pursue
appraisal rights should consult their legal advisors.
79
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 2010 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 9, 2010. If the date of the 2010 annual
meeting of stockholders is moved more than thirty (30) days
before or after the anniversary date of the 2009 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 2010
annual meeting of stockholders, the stockholders written
notice must be received at our principal executive offices prior
to June 23, 2010, 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
2010 annual meeting, your nomination must be received no later
than June 23, 2010.
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.
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.
Statements contained in this proxy statement, or in any document
incorporated by reference in this proxy statement regarding the
contents of any contract or other document, are not necessarily
complete, and each
80
such statement is qualified in its entirety by reference to that
contract or other document filed as an exhibit with the SEC. The
SEC allows us to incorporate by reference into this
proxy statement documents we file with the SEC. 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. We incorporate by reference any documents
filed by us pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this proxy statement and
before the date of the special meeting.
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 3Coms 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 DECEMBER 15, 2009. 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.
81
ANNEX
A
AGREEMENT
AND PLAN OF MERGER
by and
among
HEWLETT-PACKARD
COMPANY
COLORADO
ACQUISITION CORPORATION
and
3COM
CORPORATION
Dated as
of November 11, 2009
TABLE OF
CONTENTS
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Page
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|
ARTICLE I DEFINITIONS & INTERPRETATIONS
|
|
|
A-1
|
|
Section 1.1
|
|
Certain Definitions
|
|
|
A-1
|
|
Section 1.2
|
|
Additional Definitions
|
|
|
A-8
|
|
Section 1.3
|
|
Certain Interpretations
|
|
|
A-10
|
|
|
|
|
|
|
ARTICLE II THE MERGER
|
|
|
A-10
|
|
Section 2.1
|
|
The Merger
|
|
|
A-10
|
|
Section 2.2
|
|
The Effective Time
|
|
|
A-10
|
|
Section 2.3
|
|
The Closing
|
|
|
A-11
|
|
Section 2.4
|
|
Effect of the Merger
|
|
|
A-11
|
|
Section 2.5
|
|
Certificate of Incorporation and Bylaws
|
|
|
A-11
|
|
Section 2.6
|
|
Directors and Officers
|
|
|
A-11
|
|
Section 2.7
|
|
Effect on Capital Stock
|
|
|
A-11
|
|
Section 2.8
|
|
Exchange of Certificates
|
|
|
A-15
|
|
Section 2.9
|
|
No Further Ownership Rights in Company Common Stock
|
|
|
A-16
|
|
Section 2.10
|
|
Lost, Stolen or Destroyed Certificates
|
|
|
A-17
|
|
Section 2.11
|
|
Necessary Further Actions
|
|
|
A-17
|
|
|
|
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
|
|
A-17
|
|
Section 3.1
|
|
Authorization
|
|
|
A-17
|
|
Section 3.2
|
|
Requisite Stockholder Approval
|
|
|
A-17
|
|
Section 3.3
|
|
Non-Contravention and Required Consents
|
|
|
A-18
|
|
Section 3.4
|
|
Required Governmental Approvals
|
|
|
A-18
|
|
Section 3.5
|
|
Organization and Standing
|
|
|
A-18
|
|
Section 3.6
|
|
Subsidiaries
|
|
|
A-18
|
|
Section 3.7
|
|
Capitalization
|
|
|
A-19
|
|
Section 3.8
|
|
Company SEC Reports
|
|
|
A-20
|
|
Section 3.9
|
|
Company Financial Statements
|
|
|
A-20
|
|
Section 3.10
|
|
No Undisclosed Liabilities
|
|
|
A-21
|
|
Section 3.11
|
|
Absence of Certain Changes
|
|
|
A-22
|
|
Section 3.12
|
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Material Contracts
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A-22
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Section 3.13
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Real Property
|
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A-24
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Section 3.14
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Personal Property and Assets
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A-24
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Section 3.15
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Intellectual Property
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A-24
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Section 3.16
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Tax Matters
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A-27
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Section 3.17
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Employee Plans
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A-29
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Section 3.18
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Labor Matters
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A-31
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Section 3.19
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Permits
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A-31
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Section 3.20
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Compliance with Laws
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A-32
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Section 3.21
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Environmental Matters
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A-32
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Section 3.22
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Litigation; Orders
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A-32
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Section 3.23
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Insurance
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A-33
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Section 3.24
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Related Party Transactions
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A-33
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Section 3.25
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Brokers
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A-33
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A-i
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Page
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Section 3.26
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Opinion of Financial Advisor
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A-33
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Section 3.27
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Company Rights Plan
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A-34
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Section 3.28
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State Anti-Takeover Statutes
|
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A-34
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Section 3.29
|
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Proxy Statement and Other Required Filings
|
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A-34
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Section 3.30
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Public Grants
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A-34
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
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A-35
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Section 4.1
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Organization
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A-35
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Section 4.2
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Authorization
|
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A-35
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Section 4.3
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Non-Contravention and Required Consents
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A-35
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Section 4.4
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Required Governmental Approvals
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A-35
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Section 4.5
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Litigation
|
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A-36
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Section 4.6
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Proxy Statement and Other Required Filings
|
|
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A-36
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Section 4.7
|
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Ownership of Company Capital Stock
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A-36
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Section 4.8
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Brokers
|
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A-36
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Section 4.9
|
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Operations of Merger Sub
|
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A-36
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Section 4.10
|
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Financial Capability
|
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A-36
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ARTICLE V COVENANTS OF THE COMPANY
|
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A-37
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Section 5.1
|
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Interim Conduct of Business
|
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A-37
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Section 5.2
|
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No Solicitation
|
|
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A-39
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Section 5.3
|
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Company Board Recommendation; Superior Proposals; Intervening
Events
|
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A-40
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Section 5.4
|
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Company Stockholder Meeting
|
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|
A-41
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Section 5.5
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Access
|
|
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A-42
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Section 5.6
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Certain Litigation
|
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A-42
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Section 5.7
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Section 16(b) Exemption
|
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A-42
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ARTICLE VI ADDITIONAL COVENANTS
|
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A-43
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Section 6.1
|
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Reasonable Best Efforts to Complete
|
|
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A-43
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Section 6.2
|
|
Regulatory Filings
|
|
|
A-43
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Section 6.3
|
|
Proxy Statement and Other Required Company Filings
|
|
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A-45
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Section 6.4
|
|
Anti-Takeover Laws
|
|
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A-45
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Section 6.5
|
|
Notification of Certain Matters
|
|
|
A-46
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Section 6.6
|
|
Public Statements and Disclosure
|
|
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A-46
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Section 6.7
|
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Directors and Officers Indemnification and Insurance
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A-46
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Section 6.8
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Employee Matters
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A-48
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Section 6.9
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Confidentiality
|
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A-50
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ARTICLE VII CONDITIONS TO THE MERGER
|
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|
A-50
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Section 7.1
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Conditions to Each Partys Obligations to Effect the Merger
|
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A-50
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Section 7.2
|
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Conditions to the Obligations of Parent and Merger Sub to Effect
the Merger
|
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A-50
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Section 7.3
|
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Conditions to the Companys Obligations to Effect the Merger
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A-51
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A-ii
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Page
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
|
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A-51
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Section 8.1
|
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Termination
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A-51
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Section 8.2
|
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Notice of Termination; Effect of Termination
|
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A-53
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Section 8.3
|
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Fees and Expenses
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A-53
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Section 8.4
|
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Amendment
|
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A-55
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Section 8.5
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Extension; Waiver
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A-55
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ARTICLE IX GENERAL PROVISIONS
|
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|
A-55
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Section 9.1
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Survival
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A-55
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Section 9.2
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Notices
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A-55
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Section 9.3
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Assignment
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A-56
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Section 9.4
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Entire Agreement
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A-56
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Section 9.5
|
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Third Party Beneficiaries
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A-56
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Section 9.6
|
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Severability
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A-56
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Section 9.7
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Specific Performance
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|
A-56
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Section 9.8
|
|
Governing Law
|
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|
A-57
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Section 9.9
|
|
Consent to Jurisdiction
|
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|
A-57
|
|
Section 9.10
|
|
WAIVER OF JURY TRIAL
|
|
|
A-57
|
|
Section 9.11
|
|
Company Disclosure Letter References
|
|
|
A-57
|
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Section 9.12
|
|
Counterparts
|
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A-57
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A-iii
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) is made and entered into as of
November 11, 2009 by and among Hewlett-Packard Company, a
Delaware corporation (Parent), Colorado
Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Parent (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.
W I T N E
S S E T H:
WHEREAS, the Company Board has (i) determined that it is
fair to 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 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 Parent 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
DGCL upon the terms and subject to the conditions set forth
herein.
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness
of Parent 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 A (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, Parent, 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, Parent,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS &
INTERPRETATIONS
Section 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.
(b) Acquisition Proposal shall
mean any offer or proposal (other than an offer or proposal by
Parent 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
A-1
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. 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 to 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 Order 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 August 28, 2009.
(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.
(l) Company ESPP shall mean the
Companys Amended and Restated 1984 Employee Stock Purchase
Plan, as approved by the Companys stockholders on
September 24, 2008.
(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.
A-2
(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 has (or have) a material adverse effect on 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 conditions or
changes 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 conditions or changes 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 of
the transactions contemplated hereby, including the impact
thereof on relationships (contractual or otherwise) with
suppliers, distributors, partners, customers or employees;
(v) any action that is taken, or any failure to take
action, by the Company or its Subsidiaries in either case which
Parent has requested in writing;
(vi) any changes in Laws, Orders or GAAP (or the
interpretation thereof);
(vii) 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 changes may be deemed to constitute a
Company Material Adverse Effect (unless otherwise
excluded by this definition) and may be taken into account in
determining whether there has been, is, or would be a Company
Material Adverse Effect);
(viii) any failure by the Company to meet any internal or
public projections, forecasts or estimates of revenues or
earnings in and of itself (it being understood that the
underlying cause of, and the facts, circumstances or occurrences
giving rise or contributing to such failure may be deemed to
constitute a Company Material Adverse Effect (unless
otherwise excluded by this definition) and may be taken into
account in determining whether there has been, is, or would be a
Company Material Adverse Effect);
(ix) subject to Section 9.11, matters expressly
set forth in the Company Disclosure Letter; 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.
A-3
(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 Amended and Restated 1983 Stock
Option Plan, as amended and restated effective
September 30, 2001, (ii) the Companys Director
Stock Option Plan, as amended and restated, (iii) the
TippingPoint Technologies, Inc. Fourth Amended and Restated 1999
Stock Option and Restricted Stock Plan, (iv) the
Companys 1994 Stock Option Plan, as amended and restated
effective April 30, 2002 (together with the Rules of the
2000 UK Sub-Plan), (v) the Companys 2003 Stock Plan,
as amended and restated effective January 1, 2009, and
(vi) any other compensatory equity or equity-based plans or
Contracts of the Company, including any stand alone
restricted stock agreement or stand alone option
agreement and any equity or equity-based plans or
Contracts assumed by the Company pursuant to a merger,
acquisition or other similar transaction.
(t) Company Stockholders shall
mean holders of shares of Company Capital Stock, in their
respective capacities as such.
(u) Company Termination Fee shall
mean $99,000,000.
(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 the mutual nondisclosure agreement between the
Company and Parent, dated as of July 15, 2009, as amended
as of August 26, 2009.
(x) Continuing Employees shall
mean all employees of the Company or any Subsidiary of the
Company who are offered and timely accept employment by Parent
or any Subsidiary of Parent, who continue their employment with
the Company at the request of Parent or, outside the U.S., who
remain or become employees of the Company, Parent or any
Subsidiary of Parent as required by applicable Law or Order.
(y) 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.
(z) Delaware Law shall mean the
DGCL and any other applicable law (including common law) of the
State of Delaware.
(aa) DOJ shall mean the United
States Department of Justice or any successor thereto.
(bb) DOL shall mean the United
States Department of Labor or any successor thereto.
(cc) 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.
(dd) Environmental Law shall mean
all federal, state, local and foreign Laws issued, promulgated,
approved or entered relating to environmental matters, the
protection of the environment, or exposure to Hazardous
Substances, including workplace health and safety Laws,
packaging and labeling Laws and Laws relating to the release or
threatened release of Hazardous Substances to the environment
(including ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the
A-4
presence, manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
(ee) 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).
(ff) ERISA shall mean the
Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder, or any
successor statute, rules and regulations thereto.
(gg) 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.
(hh) Excluded Disclosures means,
with respect to the Company SEC Reports, disclosure as to risk
factors, forward-looking statements and other similarly
cautionary disclosure contained or incorporated by reference
therein.
(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 or that is the subject of liability or a
requirement for investigation or remediation under any
Environmental Law.
(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) 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-5
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,
copyright 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 Parent with
respect to any matter in question, shall mean the actual
knowledge of any executive officers of Parent.
(ss) 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.
(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, rule, regulation or other similar legal
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, suit, litigation, proceeding (public or private) or
criminal prosecution brought by or pending 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) Most Recent Financial
Statements shall mean the Company Financial
Statements as of and for the quarterly period ended
August 28, 2009 contained in the Companys Quarterly
Report on
Form 10-Q
filed with the SEC on October 6, 2009.
(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) Order shall mean any order,
judgment, 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.
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(bbb) 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.
(ccc) Owned Software shall mean
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.
(ddd) 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 Most Recent Financial
Statements in accordance with GAAP, as adjusted for the passage
of time in the ordinary course of business;
(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 Most Recent
Financial Statements in accordance with GAAP; (iii) Liens
imposed by applicable Law (other than Tax Law) or Order (other
than Tax Order) arising in the ordinary course of business;
(iv) pledges or deposits to secure obligations under
workers compensation Laws or Orders 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 May 29, 2009 or the
Companys Quarterly Report on
Form 10-Q
for the period ended August 28, 2009; (viii) any Liens
disclosed on Section 1.1(ddd) of the Company Disclosure
Letter; and (ix) statutory or common law liens of landlords.
(eee) 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.
(fff) 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.
(ggg) SEC shall mean the United States
Securities and Exchange Commission or any successor thereto.
(hhh) 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.
(iii) Software shall mean
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.
(jjj) 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
A-7
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.
(kkk) 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 Parent to the Company in a written offer
capable of acceptance in response to such proposal or otherwise).
(lll) 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.
Section 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:
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Term
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Section Reference
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Agreement
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Preamble
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AML
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6.2(a)
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Assets
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3.14
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Assumed Options
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2.7(d)(i)
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Balance Sheet Date
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3.10(a)
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Certificates
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2.8(c)
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Certificate of Merger
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2.2
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Closing
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2.3
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Closing Date
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2.3
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Collective Bargaining Agreement
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3.18(a)
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Company
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Preamble
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Company Acquisition Agreement
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5.2(a)
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Company Board Recommendation
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3.1(b)
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Company Disclosure Letter
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Art. III
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Company Financial Statements
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3.9(a)
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Company Intellectual Property Agreements
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3.15(b)
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Company Rights Plan
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Recitals
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A-8
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Term
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Section Reference
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Company SEC Reports
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3.8
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Company Securities
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3.7(c)
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Company Stockholder Meeting
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5.4
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Consent
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3.4
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D&O Insurance
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6.7(c)
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Deferred Compensation Plan
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2.7(e)(v)
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Delaware Secretary of State
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2.2
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Designated Open Source
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3.15(k)
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DGCL
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Recitals
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Dissenting Company Shares
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2.7(c)(i)
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Effective Time
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2.2
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Employee Plans
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3.17(a)
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ERISA Affiliate
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3.17(a)
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Exchange Fund
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2.8(b)
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Exchange Ratio
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2.7(d)(i)
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Funded International Employee Plan
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3.17(i)(ii)
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Hangzhou H3C
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3.5
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Hangzhou Queenhive
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3.5
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Incentives
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3.16(n)
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Indemnified Persons
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6.7(a)
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International Employee Plans
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3.17(a)
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Intervening Event
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5.3(a)(ii)
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Leased Real Property
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3.13(b)
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Leases
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3.13(b)
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Material Contract
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3.12(a)
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Maximum Annual Premium
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6.7(c)
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Merger
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2.1
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Merger Sub
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Preamble
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Option Consideration
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2.7(d)(ii)
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Other Required Company Filings
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3.29
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Out of the Money Options
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2.7(d)(i)
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Owned Company Common Stock
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2.7(a)(ii)
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Owned Real Property
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3.13(a)
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Parent
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Preamble
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Parent Stock
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2.7(d)(i)
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Parents 401(k) Plan
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2.7(e)(iv)
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Payment Agent
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2.8(a)
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Per Share Price
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2.7(a)(i)
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Permits
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3.19
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Proxy Statement
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3.29
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Public Grants
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3.30
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Recommendation Change
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5.3(a)
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Representatives
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5.2(a)
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Requisite Stockholder Approval
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3.2
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A-9
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Term
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Section Reference
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Rights Plan Amendment
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Recitals
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Share Consideration
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2.7(a)(i)
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Subsidiary Securities
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3.6(d)
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Surviving Corporation
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2.1
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Tax Returns
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3.16(a)
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Terminating Plan
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2.7(e)
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Termination Date
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8.1(b)
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Transaction Expenses
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8.3(b)(v)
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Unassumed Options
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2.7(d)(ii)
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Unvested Options
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2.7(d)(i)
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Section 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) As used in this Agreement, the word extent
and the phrase to the extent shall mean the degree
to which a subject or other thing extends, and such word or
phrase shall not mean simply if.
(h) 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,
Order, 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
Section 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.
Section 2.2 The
Effective Time. Upon the terms and subject to
the conditions set forth in this Agreement, on the Closing Date,
Parent, Merger Sub and the Company shall cause the Merger to be
consummated under the DGCL by filing a certificate of merger in
customary form and substance (the
A-10
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 Parent, Merger Sub and the Company and specified
in the Certificate of Merger, being referred to herein as the
Effective Time).
Section 2.3 The
Closing. The consummation of the Merger (the
Closing) shall take place at a closing to
occur at the offices of Cleary Gottlieb Steen &
Hamilton LLP at One Liberty Plaza, New York New York on a date
and at a time to be agreed upon by Parent, 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 and by Law) 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), or at such other location, date and time as Parent,
Merger Sub and the Company shall mutually agree upon in writing.
The date upon which the Closing shall actually occur pursuant
hereto is referred to herein as the Closing
Date.
Section 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.
Section 2.5 Certificate
of Incorporation and Bylaws.
(a) Certificate of
Incorporation. At the Effective Time, subject
to the provisions of Section 6.7(a), the Certificate
of Incorporation of the Company shall be amended to read in its
entirety in the form of the Certificate of Incorporation
attached as Annex A 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 6.7(a), the
form of Bylaws attached as Annex B, 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.
Section 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.
Section 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 Parent, 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 Owned
Company Common Stock, (B) any Company Stock-Based Award and
(C) any Dissenting Company Shares) shall be cancelled and
extinguished and automatically converted into the right to
receive $7.90 in cash (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
A-11
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 Parent, Merger Sub or the Company, or by any direct or
indirect wholly owned Subsidiary of Parent, Merger Sub or the
Company, in each case immediately prior to the Effective Time
(Owned Company Common Stock), 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 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 Parent (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 Parent, 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) Treatment of Company Options and Company Stock
Based Awards.
(i) At the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, each
Company Option that is not yet vested or exercisable (the
Unvested Options)
and/or that
has an exercise price greater than or equal to the Per Share
Price (the Out of the Money Options and,
together with the Unvested Options, the Assumed
Options) and that is outstanding under any Company
Stock Plan immediately prior to the Effective Time shall be
assumed by Parent and converted automatically at the Effective
Time into an option, with respect to shares of the common stock,
par value $0.01 per share, of Parent (Parent
Stock), on terms and conditions otherwise the same as
those of such Assumed Options, except that (A) the number
of shares of Parent Stock subject to each such Assumed Options
shall be determined by multiplying the number of shares of
Company Common Stock underlying such Assumed
A-12
Options immediately prior to the Effective Time by a fraction
(the Exchange Ratio), the numerator of which
is the Per Share Price and the denominator of which is the
average closing price of Parent Stock on the New York Stock
Exchange as reported by the Wall Street Journal for the five
(5) full trading days ending on the date that is two
(2) trading days prior to the Closing Date (rounded down to
the nearest whole share), and (B) the exercise price per
share of Parent Stock (rounded up to the nearest whole cent)
shall equal (x) the per share exercise price for the
Company Common Stock otherwise purchasable pursuant to such
Assumed Options immediately prior to the Effective Time divided
by (y) the Exchange Ratio. The conversion of Assumed
Options shall comply with the requirements of Sections 409A
and 424 of the Code.
(ii) With respect to each Company Option other than the
Assumed Options (the Unassumed Options), upon
the terms and subject to the conditions set forth in this
Agreement, the Company shall take such action as may be
reasonably necessary so that immediately prior to the Effective
Time by virtue of and subject to the Merger, each Unassumed
Option that remains outstanding as of immediately prior to the
Effective Time shall be 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). Parent shall, or shall cause
the Company to, pay to holders of Unassumed 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. The
Company shall take all actions reasonably necessary to effect
the transactions contemplated by this
Section 2.7(d)(ii) under all agreements governing
such Unassumed Options 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. At
least five (5) Business Days prior to the Closing Date, the
Company shall deliver to Parent a resolution of the plan
administrator authorizing the treatment of the Unassumed Options
described herein and all such actions taken to effectuate this
Section 2.7(d)(ii) are consistent with the terms of
the applicable Company Stock Plan.
(iii) Each Company Stock-Based Award that is outstanding
under any Company Stock Plan immediately prior to the Effective
Time, whether or not then vested or earned, shall, by virtue of
the Merger and without any action on the part of the holder
thereof, be assumed by Parent and converted automatically at the
Effective Time into an award based upon Parent Stock, on terms
and conditions otherwise the same as those of the related
Company Stock-Based Award, except that the number of shares of
Parent Stock underlying the Company Stock-Based Award as of the
Effective Time shall be the number of shares of Company Common
Stock underlying such Company Stock-Based Award immediately
prior to the Effective Time multiplied by the Exchange Ratio
(rounded down to the nearest whole share).
(iv) As soon as reasonably practicable after the Effective
Time, and in no event later than ten (10) Business Days
thereafter, Parent shall file with the SEC a registration
statement on
Form S-8
with respect to (A) the shares of Parent Stock issuable
upon exercise of the Company Options that are assumed by Parent
hereunder and (B) the shares of Parent Stock subject to or
issued in respect of any Company Stock-Based Award that are
assumed by Parent hereunder, and Parent shall exercise
reasonable best efforts to maintain the effectiveness of such
registration statement for so long as such Company Options or
Company Stock-Based Awards remain outstanding. Notwithstanding
anything in this Agreement to the contrary, Parent shall not
issue any shares of Parent Stock in respect of any Company
Option or Company Stock-Based Award until the
Form S-8
to be filed as herein has become effective.
(v) At the Effective Time, Parent shall assume the
obligations and succeed to the rights of the Company under the
Company Stock Plans with respect to the Assumed Options and
Company Stock-Based Awards. Prior to the Effective Time, the
Company and Parent shall take all action required to reflect the
transactions contemplated by this Section 2.7(d),
including (A) the conversion of the Assumed Options that
are outstanding immediately prior to the Effective Time pursuant
to Section 2.7(d)(i), and (B) the conversion of the
Company Stock-Based Awards that are outstanding immediately
prior to the Effective Time pursuant to
Section 2.7(d)(iii), and the substitution of Parent
for the Company thereunder to the extent appropriate to
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effectuate the assumption of such Company Stock Plans by Parent.
From and after the Effective Time, all references to the Company
(other than any references relating to a change in
control of the Company) in each Company Stock Plan and in
each agreement evidencing any award of Assumed Options or
Company Stock-Based Awards shall be deemed to refer to Parent.
(vi) The Company agrees to take any and all actions
reasonably necessary to approve and effectuate the foregoing
provisions of this Section 2.7(d) including making
any determinations
and/or
resolutions of the Company Board or a committee thereof or of
any administrator of a Company Stock Plan.
(e) Company ESPP; Company 401(k) Plan; Deferred
Compensation Plan.
(i) Prior to the Effective Time, the Company shall take all
actions reasonably 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 Company Common Stock in accordance with
Section 2.7(a)(i).
(iii) The Company shall take all actions reasonably
necessary so that the Company ESPP shall terminate immediately
after the purchase described in Section 2.7(e)(i)
subject to and conditioned upon the occurrence of the Effective
Time. 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) Effective as of no later than the day immediately
preceding the Closing Date, each of the Company and any ERISA
Affiliate shall terminate any Employee Plan that includes a Code
Section 401(k) arrangement (a Terminating
Plan) pursuant to resolutions of the Company Board in
a form reasonably acceptable to Parent and approved by Parent
prior to their execution. The Company shall provide Parent with
evidence that such Terminating Plan(s) have been terminated
before the Closing Date, and shall take such other actions in
furtherance of terminating such Terminating Plan(s) as Parent
may reasonably require. Parent shall take all steps reasonably
necessary to permit each Person who has received an eligible
rollover distribution (as defined in Section 402(c)(4) of
the Code), including rollovers of any outstanding loans from
each 401(k) Plan, if any, to roll such eligible rollover
distribution as part of any lump sum distribution to the extent
permitted by each Terminating Plan into an account under
Parents 401(k) plan (the Parents 401(k)
Plan).
(v) Within the
30-day
period prior to the Closing Date, and subject to, and
conditioned upon, the occurrence of the Effective Time, the
Company shall terminate the 3Com Corporation 2005 Deferred
Compensation Plan, amended and restated effective
January 1, 2009 (the Deferred Compensation
Plan). Notwithstanding anything herein to the
contrary, nothing in Section 5.1 or any other
provision of this Agreement shall prohibit the Company from
taking, or otherwise require the Company to obtain Parents
approval to take, any and all action necessary to implement the
termination of the Deferred Compensation Plan. As soon as
administratively practicable following the effective date of the
termination of the Deferred Compensation Plan, the Company shall
commence distributing the assets of the Deferred Compensation
Plan in accordance with the requirements of Section 409A of
the Code. The termination of the Deferred Compensation Plan and
the distribution of the assets of the Deferred Compensation Plan
shall be complete as soon as administratively practicable but in
no event later than fifteen (15) Business Days following
the Closing Date.
(vi) The Company agrees to take any and all actions
reasonably necessary to approve and effectuate the foregoing
provisions of this Section 2.7(e) including making
any determinations
and/or
resolutions of the Company Board or a committee thereof or of
any plan administrator.
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Section 2.8 Exchange
of Certificates.
(a) Payment Agent. Prior to the
Effective Time, Parent shall select a bank or trust company
reasonably acceptable to the Company to act as the payment agent
for the Merger (the Payment Agent).
(b) Exchange Fund. On and after
the Effective Time, Parent 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 sufficient to pay
the aggregate Share Consideration when necessary for such
payments (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 Payment
Agent, as directed by Parent 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 Parent. 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 Payment Agent to promptly pay the cash amounts
contemplated by this Article II, Parent 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 Payment Agent to pay any outstanding Share Consideration.
(c) Payment Procedures. Promptly
following the Effective Time, Parent 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 Parent, 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 cancelled. 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,
Parent 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
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be required by the instructions, the holders of such book-entry
shares 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
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.
(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 Parent (or any agent
designated by Parent) any transfer or other similar 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 Parent (or any agent
designated by Parent) that such transfer or other similar Taxes
have been paid or are otherwise not payable.
(e) Required Withholding. Each of
the Payment Agent, Parent, Merger Sub 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 or Unassumed
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 and paid
over to the appropriate taxing authority, 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, Parent, 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 or Order.
(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 Parent 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 Parent, 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 Parent, free and clear of
any claims or interest of any Person previously entitled thereto.
Section 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 Company Common Stock are presented to
Parent or the Surviving Corporation for any reason, they shall
be cancelled and exchanged as provided in this
Article II.
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Section 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 Parent
may, in its discretion and as a 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 Parent, the Surviving Corporation or
the Payment Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
Section 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 Parent 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,
2009 and the date of this Agreement (excluding for purposes
hereof the exhibits thereto and the Excluded Disclosures), the
Company hereby represents and warrants to Parent and Merger Sub
as follows:
Section 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 Parent 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 to 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).
Section 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
this Agreement and consummate the transactions contemplated by
this Agreement.
A-17
Section 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 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, and, 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.
Section 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 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.
Section 3.5 Organization
and Standing. The Company is a corporation
duly organized, validly existing and in good standing under
Delaware Law. Each of Hangzhou H3C Technologies Co., Ltd.
(Hangzhou H3C) and Hangzhou Queenhive
Software Co, Ltd. (Hangzhou Queenhive) is a
company duly organized, validly existing and in good standing
(to the extent the good standing concept is
applicable) under the laws of the Peoples Republic of
China. The Company has delivered or made available to Parent
complete and accurate copies of the Amended and Restated
Certificate of Incorporation and Bylaws or other constituent
documents, each as amended to date, of the Company, Hangzhou H3C
and Hangzhou Queenhive, and none of the Company, Hangzhou H3C
nor Hangzhou Queenhive is in material violation thereof. Each of
the Company, Hangzhou H3C and Hangzhou Queenhive 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. The
Company 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.
Section 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) Each of the Companys Subsidiaries (excluding, for
purposes of this sentence, Hangzhou H3C and Hangzhou Queenhive)
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
A-18
of any jurisdiction outside the United States), except in the
case of such Subsidiaries 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
Companys Subsidiaries (excluding, for purposes of this
sentence, Hangzhou H3C and Hangzhou Queenhive) 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
Companys 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.
(c) The Company has delivered or made available to Parent
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
Subsidiaries. None of the Companys Subsidiaries
(excluding, for purposes of this sentence, Hangzhou H3C and
Hangzhou Queenhive) is in violation of its certificate of
incorporation, bylaws or other applicable constituent documents,
except for such violations which have not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(d) 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 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.
Section 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 the close of business on November 9, 2009:
(A) 394,780,516 shares of Company Common Stock were
issued and outstanding, of which 1,104,582 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) no 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. The Company has reserved
34,803,924 shares of Company Common Stock for future
issuance under the Company Stock Plans. As of the close of
business on November 9, 2009, there were 24,438,819
outstanding Company Options, 10,451,425 shares underlying
outstanding Company Stock-Based Awards (which does not include
the 1,104,582 shares of unvested restricted stock described
in this Section 3.7(a)).
(b) The Company has delivered to Parent a complete and
accurate list of all holders of Company Options and Company
Stock-Based Awards as of October 23, 2009 and, in each
case, the number of shares subject to the Company Options or
Company Stock-Based Awards, the date of grant and, in the case
of Company Options, the price per share at which such Company
Option may be exercised. Each Company Option (i) has an
exercise price that is not less than the fair market value of
the underlying equity as of the date such Company Option was
granted in accordance with all governing documents and in
compliance in all material respects with all applicable Law;
(ii) has no feature for the deferral of compensation other
than the deferral of recognition of income until the later of
exercise or disposition of such Company Option; (iii) to
the extent it was granted after December 31, 2004, was
granted with respect to a class of stock of Company that is
service
A-19
recipient stock (within the meaning of applicable
regulations under Code Section 409A); and (iv) has at
all times been properly accounted for in all material respects
in accordance with GAAP in the Companys audited financial
statements included in the Company SEC Reports.
(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.
(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.
Section 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 or Orders 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 or Orders 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 (or, if
amended or superseded by a filing prior to the date of this
Agreement, on the date of such filing), 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
Parent 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
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.
Section 3.9 Company
Financial Statements.
(a) The consolidated financial statements of the Company
and its Subsidiaries filed with the Company SEC Reports (the
Company Financial Statements) have been or
will be, as the case may be, prepared in
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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 fairly
present in all material respects, as the case may be, the
consolidated financial position of the Company and its
Subsidiaries 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.
(d) Except as set forth in the Company SEC Reports filed
between June 1, 2007 and the date hereof, since
June 1, 2007 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 Parent 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 or
(ii) as may be incurred in accordance with
Section 5.1(b)(vi).
Section 3.10 No
Undisclosed Liabilities. Neither the Company
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 Company Balance Sheet and notes thereto,
dated August 28, 2009 (the Balance Sheet
Date) contained in the Company SEC Reports filed prior
to the date hereof, (ii) Liabilities arising under this
Agreement or incurred in connection with the transactions
expressly contemplated by this Agreement, and
(iii) Liabilities incurred after the Balance Sheet Date
that have not had and would not reasonably be expected to have a
Company Material Adverse Effect.
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Section 3.11 Absence
of Certain Changes. Since the Balance Sheet
Date through the date hereof, except for actions expressly
contemplated by this Agreement, the business of the Company and
its 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 between two Subsidiaries of the
Company, 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
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 Subsidiaries,
(f) any change in any material method of Tax accounting or
material Tax compliance practices, (g) any change or
rescission of any material Tax election, (h) any closing
agreement, settlement or compromise of any claim or assessment,
in each case in respect of material Taxes, or consent to any
extension or waiver of any limitation period with respect to any
claim or assessment for material Taxes, (i) any material
acquisitions or dispositions (of assets or equity) other than in
the ordinary course of business, (j) any material capital
expenditures outside of the ordinary course of business,
(k) entry into any arrangements regarding material
Indebtedness of the Company or any of its Subsidiaries,
(l) the settlement, waiver or compromise of any material
Legal Proceeding that was not fully reserved against on the
Company Balance Sheet, and (m) the entry into any agreement
or contract (whether oral or written) to do any of the foregoing.
Section 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 (or, after consummation of the Merger, that would
limit the right of Parent 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, after consummation of the
Merger, that would prohibit or limit the right of Parent or any
of its Subsidiaries) 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 June 1, 2007,
(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;
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(v) any Company Intellectual Property Agreements set forth
in Section 3.15(b) of the Company Disclosure Letter and any
Contracts (including commitments in the form of letters of
assurance) with standards setting bodies where the Company or
any of its Subsidiaries agrees or is otherwise obligated to
license Intellectual Property or Intellectual Property Rights on
a royalty free or non-discriminatory basis;
(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 2009 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;
(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 joint marketing or joint development Contract under
which the Company or any of its Subsidiaries have continuing
minimum payment obligations or costs in excess of $5,000,000 per
year that may not be canceled without material liability upon
notice of ninety (90) days or less;
(xi) any Contract that contains any material take or
pay provisions applicable to the Company or any of its
Subsidiaries, or any provision that requires the purchase of all
of the Companys or any of its Subsidiaries
requirements for a given material product or material service
from a given third party;
(xii) any Contract that (A) contains most favored
customer pricing provisions which are material to the Company
and its Subsidiaries, taken as a whole, or (B) grants any
exclusive rights or rights of first refusal which are material
to the Company and its Subsidiaries, taken as a whole;
(xiii) any Contract that is a partnership, joint venture or
similar Contract, unless immaterial to the Company and its
Subsidiaries taken as a whole;
(xiv) any settlement agreement entered into after
June 1, 2007 in respect of a Legal Proceeding, other than
(A) releases immaterial in nature or amount,
(B) settlement agreements that contemplate the making of a
cash payment not in excess of $1,000,000 as to such settlement
or (C) settlement agreements that contemplate the making of
a cash payment to the Company or any of its Subsidiaries; or
(xv) 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 (xiv) 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 Parent copies of all Material Contracts or,
to the extent so indicated in Section 3.12(b) of the
Company Disclosure Letter, complete and accurate verbal
summaries thereof.
(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
A-23
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.
Section 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 Parent 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.
Section 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.
Section 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 and material unregistered 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 and Domain Names
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.
A-24
(b) Section 3.15(b) of the Company Disclosure Letter
contains 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, any
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 have been no
disputes during the four (4) years prior to the date of
this Agreement, and 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,
except as have not had and would not reasonably be expected to
have a Company Material Adverse Effect.
(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, licenses, 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 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, within the last two (2) years immediately prior to the
date hereof, 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,
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 Parent. 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.
(e) None of the Company or any of its Subsidiaries or any
of its or their current products or services, products and
services sold during the four (4) years prior to the date
of this Agreement, 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 pending 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, 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
A-25
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 as
a result of any Contract to which the Company or any of its
Subsidiaries is a party result in (i) Parent, the Company
or its Subsidiaries granting to any third party any rights or
licenses to any Intellectual Property or Intellectual Property
Rights, being bound by or subject to any non-compete or other
material restriction on the operation or scope of their
respective businesses, or the release or disclosure of any Trade
Secrets (other than pursuant to this Agreement) which would not
have been granted, bound or released absent such transaction;
(ii) any right of termination or cancellation under any
Company Intellectual Property Agreement which would not have
existed absent such transaction; or (iii) the imposition of
any Lien on any Owned Company Intellectual Property which would
not have been imposed absent such transaction, 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) To the Knowledge of the Company, the Owned Company
Intellectual Property, together with the Licensed Company
Intellectual Property, constitutes all the Intellectual Property
that is necessary for the conduct of the business of the Company
and its Subsidiaries as currently conducted, except where the
failure of the foregoing to be true and correct would not
reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(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 material Owned Software only
pursuant to written confidentiality terms that reasonably
protect the Companys rights in such Owned Software. Except
for source code for non-material Owned Software that the Company
has made a business decision to license on a
giveaway basis and 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 material Owned Software or has any rights to the same.
(k) To the Knowledge of the Company, neither the Company
nor any of its Subsidiaries is in violation of any open source
license, except for any such violation that has not had and
would not reasonably be expected to have a Company Material
Adverse Effect. To the Knowledge of the Company, no Software
that contains or is derived from Designated Open Source has been
incorporated by the Company or any of its Subsidiaries into any
Software that is Owned Company Intellectual Property, or has
otherwise been distributed or licensed by the Company or any of
its Subsidiaries to third parties, in a manner that renders
Software that is Owned Company Intellectual Property subject to
license terms applicable to Designated Open Source, except for
incidental bug fixes and any such incorporation, distribution or
licensing that has not had and would not reasonably be expected
to have a Company Material Adverse Effect. Designated
Open Source means freely available open source
Software that is licensed pursuant to a license that upon
distribution of such open source Software (and modifications
thereof), purports to require the distributing party to provide
access to the corresponding source code
and/or
restrict ones ability to charge for use of such Software,
including any Software licensed pursuant to any GNU general
public license or lesser general public license or other similar
open source Software license.
A-26
(l) To the Knowledge of the Company, as of the date hereof,
the Company and each of its Subsidiaries has in place,
consistent with general industry practices, systems adequate to
identify and detect any computer code which may:
(i) irreparably disrupt, disable, erase or harm operation
of material Software included in the Owned Company Intellectual
Property, or cause such Software to irreparably damage or
corrupt any data, hardware, storage media, programs, equipment
or communications, or (ii) permit any Person to access such
Software without authorization, except in either case under
clause (i) or (ii) above as would not reasonably be
expected to have a Company Material Adverse Effect.
(m) 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 divulge to any person,
or to assign or license to any person, any source code,
proprietary algorithm, or Trade Secret.
(n) The Company and its Subsidiaries maintain policies and
procedures regarding data security and privacy that are
commercially reasonable, consistent with general industry
practices and, in any event, in compliance in all material
respects 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
and data security policies, terms of use, customer contracts 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, nor will such transactions require the Company
or any of its Subsidiaries to provide any notice to, or seek any
consent from, any employee, customer, supplier, service provider
or other third party under any Company Privacy Policy, except
for any such violations that have not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(o) 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.
(p) No federal, state, local or other governmental entity
nor any university, college, or academic institution has
material rights in or to any material Owned Company Intellectual
Property other than pursuant to a valid, nonexclusive license
granted by the Company or any of its Subsidiaries.
Section 3.16 Tax
Matters.
(a) The Company and each of its Subsidiaries (i) have
timely filed (taking into account any extensions of time in
which to file) all material 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 material respects and were prepared in
compliance in all material respects with all applicable Laws,
(ii) have paid, or have adequately reserved (in accordance
with GAAP) on the Most Recent Financial Statements for the
payment of, all material Taxes required to be paid, and
(iii) the Most Recent Financial Statements reflect an
adequate reserve (in accordance with GAAP) for all material
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
material Taxes since the Balance Sheet Date other than in the
ordinary course of business. No deficiencies for any material
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
material Tax.
A-27
(b) All material 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 material 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 material
Taxes.
(e) The Company is not, nor has been at any relevant 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 within the last two (2) years or that otherwise could
constitute part of a plan or series of related
transactions (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
(g) Neither the Company nor any of its Subsidiaries has
engaged in 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).
(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 material
amount under any such agreement, or (c) any liability for
material 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) The Company has made available to Parent complete and
accurate copies of the portions applicable to each of the
Company and its Subsidiaries of the Companys
U.S. federal income tax returns and material foreign income
tax returns for the last three taxable years.
(j) As of the date hereof, neither the Company nor any of
its Subsidiaries is a party to any closing agreement pursuant to
Section 7121 of the Code or any predecessor provision
thereof, or any similar provision of state, local, or foreign
Law with respect to material Taxes.
(k) Neither the Company nor any of its Subsidiaries has
agreed or is required to make any material adjustments for any
taxable period (or portion thereof) ending after the Closing
Date pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign Law by reason of a change
in accounting method.
(l) No written claim, which remains unresolved, has been
made within the last five years by a taxing authority that the
Company or any of its Subsidiaries is subject to Tax in a
jurisdiction in which it does not file Tax Returns.
(m) No Subsidiary of the Company incorporated outside the
United States is a surrogate foreign corporation within the
meaning of Section 7874(a)(2)(B) of the Code, or is treated
as a domestic corporation under Section 7874(b) of the Code.
(n) Section 3.16(n) of the Company Disclosure Letter
lists each jurisdiction in which the Company or any of its
Subsidiaries benefits from any material Tax exemptions, Tax
holidays or other Tax reduction agreement or order
(Incentives) and describes the details of
such Incentives. The Company and each of its Subsidiaries are in
compliance in all material respects with all terms and
conditions of any Incentives.
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Section 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),
whether or not subject to ERISA, and all material International
Employee Plans, as defined under applicable foreign Laws, 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, director or consultant 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 Liability, other than International Employee Plans
that are not material (together the Employee
Plans). With respect to each Employee Plan, to the
extent applicable the Company has made available to Parent
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 (i) a defined benefit
plan (as defined in Section 414 of the Code),
(ii) a multiemployer plan (as defined in
Section 3(37) of ERISA), (iii) a multiple
employer plan (as defined in Section 4063 or 4064 of
ERISA) (in each case under clause (i), (ii) or
(iii) whether or not subject to ERISA), or
(iv) subject to Section 302 of ERISA, Section 412
of the Code or Title IV of ERISA. No Employee Plan provides
health benefits that are not fully insured through an insurance
contract (other than an Employee Plan that is a health or
dependent care flexible spending account).
(c) Each Employee Plan has been established, 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 Employee Plan that is a nonqualified deferred
compensation plan (as defined under Code Section 409A)
satisfies the applicable requirements of
Sections 409A(a)(2), (3), and (4) of the Code, and
has, since January 1, 2005, been operated in material good
faith compliance with Sections 409A(a)(2), (3), and
(4) of the Code, and no payment pursuant to any such
Employee Plan would subject any former or current employees,
contractor or director to Tax pursuant to
Section 409A(a)(1) of the Code if made in accordance with
the terms of the Employee Plan as in effect as of the date of
this Agreement. No Employee Plan requires Parent or any of its
Affiliates to gross up a payment to any former or current
employee, officer or director of Company or any of its
Subsidiaries for Tax related payments under Section 409A of
the Code.
(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,
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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, 2008 and the date hereof, since
June 1, 2008 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 as required 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: (1) the Company
or any of its Subsidiaries and the participants and
beneficiaries under the relevant International Employee Plan and
(2) 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) except for the treatment of the Unassumed Options,
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
(1) 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, (2) 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 (3) result in the acceleration of the time
of payment, vesting or funding of any such benefit or
compensation.
(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 material 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 Order or this
Agreement, no condition or term under any Employee Plan exists
which would prevent Parent or the Surviving Corporation or any
of its Subsidiaries from terminating or amending any Employee
Plan without material liability to Parent or the
A-30
Surviving Corporation or any of its Subsidiaries (other than
ordinary administration expenses or routine claims for benefits).
(j) Except as required by applicable Law or Order or the
terms of any Employee Plans as in effect as of the date of this
Agreement, neither the Company nor any of its Subsidiaries has
any plan or commitment to amend in any respect or establish any
new Employee Plan or to increase any benefits under any Employee
Plan.
(k) No deduction for federal income tax purposes is
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 Company has provided Parent
with good faith estimates of the potential excess parachute
payments to disqualified individuals (in each case within the
meaning of Section 280G of the Code) paid or payable by the
Company or any of its Subsidiaries as a result of the
transactions contemplated by this Agreement or in conjunction
with any other event. Except as expressly provided under the
terms of this Agreement, including with respect to the treatment
of Company Options, Company Stock-Based Awards, the Terminating
Plans, and the Deferred Compensation Plan, 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.
Section 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 of 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).
Section 3.19 Permits. The
Company and its Subsidiaries have, and are, and since
June 1, 2007, have been 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.
A-31
Section 3.20 Compliance
with Laws.
(a) The Company and each of its Subsidiaries are, and at
all times since June 1, 2007 have been, in compliance with
all Laws and Orders applicable to the Company and its
Subsidiaries (including the International Traffic in Arms
Regulations, the Export Administration Regulations and the
regulations administered by the Department of Treasury, Office
of Foreign Assets Control) 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.
(b) The Company and each of its Subsidiaries are, and at
all times during the last five (5) years have been, in
compliance with the Foreign Corrupt Practices Act of 1977, as
amended, or any rules or regulations thereunder, or 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.
Section 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, and during the
past five (5) years, have been, 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, and no Hazardous Substances are, and during the past
five (5) years, no Hazardous Substances have been, present
at any property that the Company or any of its Subsidiaries has
owned, operated, occupied or leased, except in compliance with
applicable Environmental Laws and under circumstances that would
not reasonably be expected to give rise to Liabilities under any
Environmental Laws.
(c) Neither the 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 requirements or
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
Liability, responsibility, or uncompleted or unresolved
requirement with respect to any of the foregoing.
Section 3.22 Litigation;
Orders. As of the date hereof, 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
A-32
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). As of the
date hereof, neither the Company nor any of its Subsidiaries 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. Except as set forth in the minutes of meetings of the
Company Board (or any committee thereof), there are no internal
investigations or internal inquiries that since June 1,
2007 and prior to the date hereof have been conducted by or at
the direction of the Company Board (or any committee thereof)
concerning any material financial, accounting or other material
misfeasance or material malfeasance issues other than any such
investigation that did not result in any material finding of any
misfeasance or malfeasance.
Section 3.23 Insurance. The
Company and its Subsidiaries have all material policies of
insurance covering the Company, its 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 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.
Section 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, 2008 and the date hereof, since
December 31, 2008 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.
Section 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
(a) this Agreement or the transactions contemplated hereby
or (b) any prior or prospective transaction, in either
case, contemplated at any time after June 1, 2007 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. True and complete copies of all Contracts
between the Company or any of its Subsidiaries and Goldman,
Sachs & Co. regarding such transactions have been
previously made available to Parent.
Section 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
such opinion and based upon and subject to the matters and the
limitations set forth therein, the Per Share Price to be paid to
the holders (other than Parent and its Affiliates) of shares of
Company Common Stock (other than restricted 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 Parent promptly
upon receipt thereof solely for informational purposes.
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Section 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 Parent 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 Parent a complete and accurate copy of the Rights
Plan Amendment.
Section 3.28 State
Anti-Takeover Statutes. Assuming that the
representations of Parent 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.
Section 3.29 Proxy
Statement and Other Required Filings. 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 Parent or Merger Sub or any of their
respective 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 Parent or
Merger Sub or any of their respective directors, officers,
employees, affiliates, agents or other representatives that is
included or incorporated by reference in any of the Other
Required Company Filings.
Section 3.30 Public
Grants. None of the public subsidies,
allowances, aids or other public grants, including within the
meaning of Article 87 of the EC Treaty and applicable
U.S. statutes, granted to the Company or any of its
Subsidiaries since January 1, 2006 and that are material to
the Company and its Subsidiaries, taken as a whole
(collectively, the Public Grants), will have
to be repaid as a result of the consummation of the transactions
contemplated by this Agreement other than any of the foregoing
that would have to be so repaid if the amount to be repaid is
not material to the Company and its Subsidiaries, taken as a
whole. Neither the Company nor any of its Subsidiaries is under
any obligation to maintain a certain number of employees at any
location or in any region, or to maintain any business at all or
in any region, other than any such obligation which is not
material to the Company and its Subsidiaries, taken as a whole,
under the terms of any of the Public Grants.
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ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the
Company as follows:
Section 4.1 Organization. Each
of Parent 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 Parent 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
Parent and Merger Sub to fully perform their respective
covenants and obligations under this Agreement. Parent 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 Parent and Merger
Sub.
Section 4.2 Authorization. Each
of Parent 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 Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby
have been duly authorized by all necessary corporate or other
action on the part of Parent and Merger Sub, and no other
corporate or other proceeding on the part of Parent 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 Parent and Merger
Sub and, assuming the due authorization, execution and delivery
by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against
each 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.
Section 4.3 Non-Contravention
and Required Consents. The execution,
delivery or performance by Parent and Merger Sub of this
Agreement, the consummation by Parent and Merger Sub of the
transactions contemplated hereby and the compliance by Parent
and Merger Sub with any of the provisions hereof do not and will
not (a) violate or conflict with any provision of the
certificates of incorporation or bylaws of Parent or Merger Sub,
(b) 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 Parent or Merger Sub is a
party or by which Parent, Merger Sub or any of their properties
or assets may be bound, (c) assuming the Consents set forth
in Section 4.4 are obtained, violate or conflict
with any Law or Order applicable to Parent or Merger Sub or by
which any of their properties or assets are bound, or
(d) result in the creation of any Lien (other than
Permitted Liens) upon any of the properties or assets of Parent
or Merger Sub, except in the case of each of clauses (b),
(c) and (d) 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 Parent and Merger Sub to perform
their respective covenants and obligations under this Agreement.
Section 4.4 Required
Governmental Approvals. No Consent of any
Governmental Authority is required on the part of Parent or
Merger Sub in connection with the execution, delivery and
performance by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub 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 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, (b) such
filings and approvals as may be required by any federal or state
securities laws, including compliance with any applicable
requirements
A-35
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 would not,
individually or in the aggregate, prevent or materially delay
the consummation of the transactions contemplated by this
Agreement or the ability of Parent and Merger Sub to fully
perform their respective covenants and obligations under this
Agreement.
Section 4.5 Litigation. As
of the date hereof, there are no Legal Proceedings pending or,
to the Knowledge of Parent, threatened against Parent 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 Parent and
Merger Sub to perform their respective covenants and obligations
under this Agreement. As of the date hereof, neither Parent 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 Parent and Merger Sub to perform
their respective covenants and obligations under this Agreement.
Section 4.6 Proxy
Statement and Other Required Filings. The
information supplied by Parent, Merger Sub or any of their
respective 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 Parent, Merger Sub or
any of their respective 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.
Section 4.7 Ownership
of Company Capital Stock. Except for shares
held in connection with or pursuant to any compensation,
severance, pension, retirement or other employee benefit plan,
agreement or other arrangement, whether such shares are held in
trust, a fund or otherwise, maintained by Parent or any of its
Subsidiaries or to which any employee, director or consultant of
Parent or any of its Subsidiaries is a party, neither Parent nor
any of its Subsidiaries owns, nor at any time during the last
three (3) years has owned, any shares of Company Capital
Stock. None of Parent, any of its Subsidiaries or, to the
Knowledge of Parent, any compensation, severance, pension,
retirement or other employee benefit plan, agreement or other
arrangement, whether such shares are held in trust, a fund or
otherwise, maintained by Parent or any of its Subsidiaries or to
which any employee, director or consultant of Parent or any of
its Subsidiaries is a party, either individually or
collectively, is an affiliate of the Company within
the meaning of
Rule 13e-3(a)(i)
under the Exchange Act, nor at any time during the last three
years has been an interested stockholder of the
Company within the meaning of Section 203 of the DGCL.
Section 4.8 Brokers. Except
for Morgan Stanley & Co. Incorporated, (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) Parent 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 Parent
or Merger Sub.
Section 4.9 Operations
of Merger Sub. Merger Sub has been formed
solely for the purpose of engaging in the transactions
contemplated hereby and, prior to the Effective Time, Merger Sub
will not have engaged in any other business activities and will
have incurred no liabilities or obligations other than as
contemplated by this Agreement.
Section 4.10 Financial
Capability. Parent currently has, and will
have (and will cause Merger Sub to have) immediately prior to
the Effective Time, sufficient funds to pay the aggregate Share
Consideration contemplated by this Agreement and to perform the
other obligations of Parent and Merger Sub contemplated
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by this Agreement. Parents and Merger Subs
obligations hereunder are not subject to a condition regarding
Parents or Merger Subs receipt of funds to
consummate the Merger and the other transactions contemplated by
this Agreement.
ARTICLE V
COVENANTS OF
THE COMPANY
Section 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 Parent (which approval will not be unreasonably
withheld, delayed or conditioned), 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 Orders 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 Parent (which approval will not be unreasonably
withheld, delayed or conditioned), 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;
(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 for issuances
of shares of Company Common Stock to (A) participants in
the Company ESPP pursuant to the terms thereof or (B) to
holders of Company Options or Company Stock-Based Awards, in
each case outstanding as of the date hereof or granted in
compliance with the terms of this Agreement as disclosed in
Section 5.1(b) of the Company Disclosure Letter, upon the
exercise or vesting thereof, as applicable;
(iii) directly or indirectly repurchase, redeem or
otherwise acquire any Equity Interests of the Company or any
Subsidiary, except for Tax withholdings and exercise price
settlements upon exercise of Company Options or with respect to
Company Stock-Based Awards 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;
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(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 from direct or
indirect wholly owned Subsidiaries of the Company,
(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) except as is expressly required by applicable Law or
Order or the terms of any Employee Plan as in effect on the date
hereof (it being understood that the foregoing exception does
not permit the exercise of any discretion), (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 Order, (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, or (C) elect or
approve any new executive officers or directors of the Company
or any of its Subsidiaries, except in order to replace a
previous executive officer or director;
(viii) except as is expressly required by applicable Law or
Order or the terms of any Employee Plan as in effect on the date
hereof (it being understood that the foregoing exception does
not permit the exercise of any discretion), accelerate the end
of any performance period, determination of performance criteria
or payment of bonuses under the 3Bonus Plan for Executive
Officers or any other bonus plan, policy or arrangement as a
result of or in connection with the transactions contemplated by
this Agreement;
(ix) pay, discharge, satisfy or settle any pending or
threatened Legal Proceeding, except for the payment, discharge,
satisfaction or settlement of any pending or threatened Legal
Proceeding 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,
(B) involves the payment of no more than $500,000
individually or $2,500,000 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;
(x) except as required as a result of a change in
applicable Law or Order or GAAP, make any material change in any
of the accounting methods, principles or practices used by it or
affecting its assets, liabilities or business;
(xi) (A) make any change in any material method of Tax
accounting or material Tax compliance practice, (B) make,
rescind or change any material Tax election, (C) settle or
compromise any material Tax liability, (D) surrender any
right to claim a material refund of Taxes, (E) file any
material amended
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Tax Return (except as required by Law or Order), or
(F) consent to any extension or waiver of any limitation
period with respect to any claim or assessment for material
Taxes;
(xii) other than in the ordinary course of business,
(A) 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 (B) dispose of any
material properties or assets of the Company or its Subsidiaries;
(xiii) make any capital expenditures in excess of
$1,000,000 individually or $5,000,000 in the aggregate for the
Company and its Subsidiaries taken as a whole, except as
budgeted on the Companys current plan set forth on
Section 5.1(b)(xiii) of the Company Disclosure Letter;
(xiv) enter into any Material Contract of the type
described in clauses (i), (ii), (iii), (iv), (v), (vi), (viii),
(x), (xi), (xii) or (xiii) of Section 3.12(a),
or amend or modify in any material respect, or terminate any
Material Contract; or
(xv) announce an intention, enter into a formal or informal
agreement, or otherwise make a commitment to take any of the
actions prohibited by this Section 5.1(b).
(c) The Company shall, and shall cause its Subsidiaries to,
use reasonable best efforts to make any filing, pay any fee, or
take any other action reasonably necessary to maintain the
existence, validity, and effectiveness of material Company
Intellectual Property and material Company Intellectual Property
Rights.
(d) Notwithstanding the foregoing, nothing in this
Agreement is intended to give Parent or Merger Sub, directly or
indirectly, the right to control or direct the business or
operations of the Company or its Subsidiaries at any time prior
to the Effective Time. Prior to the Effective Time, the Company
and its Subsidiaries shall exercise, consistent with the terms
and conditions of this Agreement, complete control and
supervision over their own business and operations.
Section 5.2 No
Solicitation.
(a) Subject to the terms
of Section 5.2(b), during the period
commencing on the date hereof and continuing until the earlier
to occur of the termination of this Agreement pursuant to
Article VIII and the Effective Time, the Company and
its Subsidiaries shall not, nor shall they authorize or
knowingly permit their respective directors, officers,
employees, affiliates, financial advisors, legal counsel,
accountants and other agents and representatives
(Representatives) to, directly or indirectly,
(i) solicit, initiate, propose or induce the making,
submission or announcement of, or knowingly encourage,
facilitate or assist, an Acquisition Proposal, (ii) furnish
to any Person (other than Parent, Merger Sub or any designees of
Parent or Merger Sub) any non-public information relating to the
Company or any of its 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 its Subsidiaries (other than Parent, Merger Sub or any
designees of Parent or Merger Sub), in any such case with the
intent to induce or in a manner that reasonably would be
expected to lead to the making, submission or announcement of,
or to encourage, facilitate or assist, an Acquisition Proposal
or any inquiries or the making of any proposal that would
reasonably be expected to lead to an Acquisition Proposal,
(iii) participate, engage in or continue discussions or
negotiations with any Person with respect to any Acquisition
Proposal or (iv) enter into, or authorize the Company or
any of its Subsidiaries to enter into, any letter of intent,
memorandum of understanding or other Contract or agreement in
principle contemplating or otherwise relating to an Acquisition
Transaction (other than an Acceptable Confidentiality Agreement)
(a Company Acquisition Agreement). It is
understood that any violation of the restrictions set forth in
this Section 5.2(a) by any Representative of the
Company or any of its Subsidiaries shall be deemed to be a
breach of this Section 5.2(a) by the Company.
(b) Notwithstanding anything to the contrary set forth in
this Section 5.2 or elsewhere in this Agreement, but
subject to the limitations set forth in this
Section 5.2(b), Section 5.2(c) and
Section 5.3, at all times during the period
commencing on the date hereof and continuing until the
Companys receipt of the Requisite Stockholder Approval,
the Company Board may, directly or indirectly through one or
more Representatives, (i) participate or engage in
discussions or negotiations with any Person that has made a
bona fide unsolicited
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written Acquisition Proposal after the date hereof which did not
result from a breach of this Section 5.2,
and/or
(ii) furnish any non-public information relating to the
Company or any of its 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 its
Subsidiaries pursuant to an Acceptable Confidentiality
Agreement, to any Person that has made a bona fide
unsolicited written Acquisition Proposal after the date
hereof which did not result from a breach of this
Section 5.2, provided that (A) the
Company Board determines 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 such Acquisition Proposal
either constitutes a Superior Proposal or is reasonably likely
to lead to a Superior Proposal, (B) contemporaneously with
furnishing any non-public information to such Person, the
Company furnishes such non-public information to Parent to the
extent such information has not been previously furnished to
Parent, and (C) upon receipt of such Acquisition Proposal,
the Company promptly (and in any event within 48 hours)
provides Parent (x) a copy of any such Acquisition Proposal
made in writing, or (y) a written summary of the material
terms of any such Acquisition Proposal not made in writing.
(c) From and after the date hereof, the Company shall keep
Parent reasonably informed of any material developments
regarding any Acquisition Proposal received by the Company and,
upon the reasonable request of Parent, shall apprise Parent of
the status of such Acquisition Proposal. The Company agrees that
it and its Subsidiaries shall not enter into any confidentiality
agreement with any Person subsequent to the date hereof which
prohibits the Company from complying with its obligations under
this Section 5.2.
Section 5.3 Company
Board Recommendation; Superior Proposals; Intervening
Events.
(a) The Company Board shall not (x) withhold,
withdraw, amend, change, qualify or modify in a manner adverse
to Parent, or publicly propose to withhold, withdraw, amend,
change, qualify or modify in a manner adverse to Parent, the
Company Board Recommendation, or (y) approve, adopt or
recommend to the stockholders of the Company any Acquisition
Proposal, or publicly propose to approve, adopt or recommend to
the stockholders of the Company any Acquisition Proposal, or
(z) make any public statement (other than a stop,
look and listen communication by the Company Board
pursuant to
Rule 14d9-f
of the Exchange Act) in connection with a tender offer or
exchange offer for shares of Company Common Stock unless such
statement includes a reaffirmation of the Company Board
Recommendation (a Recommendation Change).
Notwithstanding the foregoing or anything else to the contrary
provided herein, at any time prior to the receipt of the
Requisite Stockholder Approval, the Company Board may effect a
Recommendation Change if:
(i) the Company Board has received an Acquisition Proposal
that it determines in good faith (after consultation with its
independent financial advisors 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) constitutes a Superior Proposal
and the failure to take such action would reasonably be expected
to be a breach of its fiduciary duties, provided that
(A) the Company has not violated the terms of
Section 5.2 or this Section 5.3 in any
material respect in connection with such Acquisition Proposal,
(B) the Company shall have given Parent at least five
(5) Business Days prior written notice of its
intention to take such action (which notice shall specify the
material terms and conditions of any such Superior Proposal)
and, no later than the time of such notice, provided Parent a
copy of the relevant proposed transaction agreement and other
material documents with the party making such Superior Proposal,
(C) if requested by Parent, the Company shall have
negotiated in good faith with Parent during such five
(5) Business Day notice period to enable Parent to propose
changes to the terms of this Agreement that would cause such
Superior Proposal to no longer constitute a Superior Proposal,
(D) the Company Board shall have considered in good faith
(after consultation with independent financial advisors 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) any
changes to this Agreement proposed by Parent in a written offer
capable of acceptance and determined that the Superior Proposal
would continue to constitute a Superior Proposal if such changes
were to be given effect, and (E) in the event of any
material change to the financial or other material terms of such
Superior Proposal, the Company shall, in each case, have
delivered to Parent an additional notice and
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copies of the relevant proposed transaction agreement and other
material documents and the five (5) Business Day notice
period shall have recommenced; or
(ii) a material fact, event, change, development or set of
circumstances that was not known by the Company Board as of or
at any time prior to the date of this Agreement (other than, and
not relating in any way to, an Acquisition Proposal, it being
understood and hereby agreed that the Company Board may only
effect a Recommendation Change in response to or in connection
with an Acquisition Proposal pursuant to and in accordance with
Section 5.3(a)(i)) (such material fact, event,
change, development or set of circumstances, an
Intervening Event) shall have occurred and be
continuing; provided that (A) the Company Board
determines in good faith (after consultation with independent
financial advisors 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 failure to take such
action in light of the Intervening Event would reasonably be
expected to be a breach of its fiduciary duties, (B) the
Company shall have given Parent at least five (5) Business
Days prior written notice of its intention to take such
action and, no later than the time of such notice, provided
Parent with a written explanation of the Company Boards
basis and rationale for proposing to effect such Recommendation
Change, (C) if requested by Parent, the Company shall have
negotiated in good faith with Parent during such five
(5) Business Day notice period to enable Parent to propose
changes to the terms of this Agreement that would obviate the
need for the Company Board to effect such Recommendation Change,
(D) the Company Board shall have considered in good faith
(after consultation with independent financial advisors 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) any
changes to this Agreement proposed in writing by Parent and
determined that the failure to take such action would reasonably
be expected to be a breach of its fiduciary duties if such
changes were to be given effect, and (E) in the event of
any material change to the facts and circumstances relating to
such Intervening Event, the Company shall have delivered to
Parent an additional notice and the five (5) Business Day
notice period shall have recommenced.
(b) Nothing set forth in Section 5.2
or this Section 5.3 or elsewhere in this Agreement
shall prohibit the Company Board from (i) taking and
disclosing to the Company Stockholders a position contemplated
by
Rule 14e-2(a)
under the Exchange Act or complying with the provisions of
Rule 14d-9
promulgated under the Exchange Act, or (ii) making any
disclosure to the Company Stockholders that the Company Board
determines to make in good faith (after consultation with its
outside legal counsel) in order to fulfill its fiduciary duties
or satisfy applicable state or federal securities laws;
provided that any such disclosure may still be deemed to
be a Recommendation Change pursuant to and in accordance with
Section 5.3(a).
Section 5.4 Company
Stockholder Meeting. The Company shall
establish a record date for, duly call, give notice of, convene
and hold a meeting of the Company Stockholders (the
Company Stockholder Meeting) as promptly as
practicable following the date hereof, and (subject to the
following proviso) in any event within forty five (45) days
of the mailing of the Proxy Statement (unless Parent shall
consent to a different date), for the purpose of voting upon the
adoption of this Agreement in accordance with the DGCL;
provided, however, nothing herein shall prevent
the Company from postponing or adjourning (for no longer than
five (5) Business Days in the case of clause (c)) the
Company Stockholder Meeting if (a) there are insufficient
shares of the Company Common Stock present or represented by a
proxy at the Company Stockholder Meeting to conduct business at
the Company Stockholder Meeting, (b) the Company is
required to postpone or adjourn the Company Stockholder Meeting
by applicable Law or Order or (c) the Company Board shall
have determined in good faith (after consultation with outside
legal counsel) that it is necessary or appropriate to postpone
or adjourn the Company Stockholder Meeting, including in order
to give Company Stockholders sufficient time to evaluate any new
information or disclosure that the Company has sent to Company
Stockholders or otherwise made available to Company Stockholders
by issuing a press release, filing materials with the SEC or
otherwise (including in connection with any Recommendation
Change). Unless the Company Board has effected a Recommendation
Change, the Company shall use its reasonable best efforts to
solicit from the Company Stockholders proxies in favor of the
adoption of this Agreement in accordance with Delaware Law and
take all other action necessary or advisable to secure the
Requisite Stockholder Vote at the
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Company Stockholder Meeting. The Company shall provide Parent
with such information with respect to the solicitation of the
Requisite Stockholder Vote as is reasonably requested by Parent.
Section 5.5 Access. 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 its Subsidiaries to, afford Parent and
its financial advisors, business consultants, legal counsel,
accountants and other agents and representatives reasonable
access during normal business hours, upon reasonable notice, to
the properties, books and records, officers, agents and
personnel of the Company and its Subsidiaries and the Company
shall, and shall cause its Subsidiaries to furnish to Parent
promptly, such information concerning the Company and its
Subsidiaries business, personnel, assets, liabilities and
properties as Parent may reasonably request; provided,
however, that the Company may restrict or otherwise prohibit
access to any documents or information to the extent that
(a) any applicable Law or Order requires the Company to
restrict or otherwise prohibit access to such documents or
information, (b) access to such documents or information
would, in the Companys good faith opinion after
consultation with outside legal counsel, result in the loss of
attorney-client privilege, work product doctrine or other
applicable legal privilege applicable to such documents or
information, (c) access to a Contract to which the Company
or any of its Subsidiaries is a party or otherwise bound would
violate or cause a default under, or give a third party the
right terminate or accelerate the rights under, such Contract
(provided that such contract is listed on
Section 3.12 of the Company Disclosure Letter), or
(d) subject to the terms of Section 5.2(b) and
Section 5.2(c), such documents or information relate
directly or indirectly to any Acquisition Proposals that the
Company or any of its Representatives may have received from any
Person or any discussions or negotiations that the Company or
any of its Representatives is having with respect to any
Acquisition Proposal or any other proposals that could lead to
an Acquisition Proposal; and provided further, that no
information or knowledge obtained by Parent in any investigation
conducted pursuant to the access contemplated by this
Section 5.5 shall affect or be deemed to modify any
representation or warranty of the Company set forth in this
Agreement or otherwise impair the rights and remedies available
to Parent and Merger Sub hereunder. In the event that any of the
Company or its Subsidiaries does not provide access or
information in reliance on the preceding sentence, it shall use
its reasonable best efforts to communicate the applicable
information to Parent in a way that would not violate the
applicable Law, Order, Contract or obligation or waive such a
privilege. Any investigation conducted pursuant to the access
contemplated by this Section 5.5 shall be conducted
in a manner that does not unreasonably interfere with the
conduct of the business of the Company or its Subsidiaries, or
create an unreasonable risk of material damage or destruction to
any material property or assets of the Company or any of its
Subsidiaries. Any access to the Companys or its
Subsidiaries properties shall be subject to the
Companys reasonable security measures and insurance
requirements. The terms and conditions of the Confidentiality
Agreement shall apply to any information obtained by Parent or
any of its financial advisors, business consultants, legal
counsel, accountants and other agents and representatives in
connection with any investigation conducted pursuant to the
access contemplated by this
Section 5.5. All requests for data and
access under this Agreement shall be made only to and through
one or more of the individuals designated in writing by an
Executive Vice President of the Company.
Section 5.6 Certain
Litigation. The Company shall promptly advise
Parent of any litigation commenced after the date hereof against
the Company or any of its Subsidiaries or directors (in their
capacity as such) relating to this Agreement or the transactions
contemplated hereby, and shall keep Parent reasonably informed
regarding any such litigation. The Company shall give Parent the
opportunity to consult with the Company regarding the defense
and strategy of any such litigation and shall consider
Parents views with respect to such litigation.
Section 5.7 Section 16(b)
Exemption. The Company shall take all actions
reasonably necessary to cause the transactions contemplated by
this Agreement and any other dispositions of equity securities
of the Company (including derivative securities) in connection
with the transactions contemplated by this Agreement by each
individual who is a director or executive officer of the Company
to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
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ARTICLE VI
ADDITIONAL
COVENANTS
Section 6.1 Reasonable
Best Efforts to Complete. Upon the terms and
subject to the conditions set forth in this Agreement, each of
Parent, Merger Sub and the Company shall use its reasonable best
efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other
party or parties hereto in doing, all things necessary, proper
or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by
this Agreement, including, but not limited to using reasonable
best efforts to: (a) cause the conditions to the Merger set
forth in Article VII to be satisfied;
(b) obtain all necessary actions or non-actions, waivers,
consents, approvals, orders and authorizations from Governmental
Authorities and make all necessary registrations, declarations,
submissions of information, applications and other documents and
filings with Governmental Authorities in connection with this
Agreement and the consummation of the transactions contemplated
hereby; (c) obtain all necessary or appropriate consents,
waivers and approvals under any Material Contracts to which the
Company or any of its Subsidiaries is a party in connection with
this Agreement and the consummation of the transactions
contemplated hereby so as to maintain and preserve the benefits
under such Material Contracts following the consummation of the
transactions contemplated by this Agreement; (d) execute or
deliver any additional instruments reasonably necessary to
consummate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement and consummate the
transactions contemplated hereby; (e) defend against any
lawsuit or other Legal Proceeding challenging this Agreement, or
the transactions contemplated hereby or thereby in order to
enable the parties hereto to consummate the transactions
contemplated hereby; and (f) contest, appeal and remove any
Order that is being proposed by any Governmental Authority or
other Person, or any Order that has been issued, granted or
entered, in either case which has or may have the effect of
prohibiting or otherwise preventing the Merger in order to
enable the parties hereto to consummate the transactions
contemplated hereby. Notwithstanding anything to the contrary
herein, the Company shall not be required prior to the Effective
Time to pay any consent fee, profit sharing payment
or other consideration (including increased rent payments), or
to provide any additional security (including a guaranty), to
obtain the consent of any lessor or licensor under any Lease.
Section 6.2 Regulatory
Filings.
(a) (i) Each of Parent and Merger Sub (and their
respective Affiliates, if applicable), on the one hand, and the
Company, on the other hand, shall file with the FTC and the
Antitrust Division of the DOJ a Notification and Report Form
relating to this Agreement and the transactions contemplated
hereby as required by the HSR Act no later than December 7,
2009; and (ii) each of Parent and Merger Sub (and their
respective Affiliates, if applicable), on the one hand, and the
Company, on the other hand, or (except in the case of the joint
filing contemplated by clause (B) below) only the Parent
and the Merger Sub (and their respective Affiliates, if
applicable) shall file comparable pre-merger or post-merger
notification filings, forms and submissions with the applicable
foreign Governmental Authority that are required by any of the
Antitrust Laws of the jurisdictions set forth in
Section 6.2(a) of the Company Disclosure Letter, including
(A) a notification on Short Form or Form CO to the
European Commission based on Council Regulation 139/2004
and (B) a jointly filed pre-merger notification with the
Anti-Monopoly Bureau of the Ministry of Commerce relating to
this Agreement as required by the Anti-Monopoly Law of the
Peoples Republic of China (the AML), as
promptly as practicable (and in any event, in relation to all
pre-merger filings, no later than January 18, 2010, or such
later date as the parties may mutually agree in writing
following the execution and delivery of this Agreement), unless
Parent or Merger Sub determine that any such comparable
pre-merger or post-merger notification filings, forms and
submissions with the applicable foreign Governmental Authority
are not required by applicable Law. Except for the filings
described in this Section 6.2(a) and any filings
that may be required under applicable U.S. securities laws,
neither Parent nor any of its Affiliates, on the one hand, nor
the Company nor any of its Affiliates, on the other hand, shall
make or submit any other material filing, declaration,
registration or notification to any Governmental Authority in
connection with any of the transactions contemplated by this
Agreement without the other partys prior consent.
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(b) Each of Parent and the Company shall (i) cooperate
and coordinate with the other in the making of any filings or
submissions that are required to be made under any applicable
Laws or Orders or requested to be made by any Governmental
Authority in connection with the transactions contemplated by
this Agreement, (ii) supply the other or its outside
counsel with any material information that may be required or
requested by any Governmental Authority in connection with such
filings or submissions, (iii) supply any additional
information that may be required or requested by the FTC, the
DOJ or other Governmental Authorities in which any such filings
or submissions are made under any applicable Laws or Orders as
promptly as practicable, (iv) use their reasonable best
efforts to cause the expiration or termination of the applicable
waiting periods under any applicable Laws or Orders as soon as
reasonably practicable, and (v) use their respective
reasonable best efforts to offer to take, or cause to be taken,
all actions and do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the
transactions contemplated hereby, including taking all such
action and doing all such things necessary to resolve such
objections, if any, as the FTC, the DOJ, or any other
Governmental Authority or Person may assert under any applicable
Laws or Orders with respect to the transactions contemplated by
this Agreement, and to avoid or eliminate each and every
impediment under any Law or Order that may be asserted by the
FTC, the DOJ or any other Governmental Authority with respect to
the transactions contemplated by this Agreement so as to enable
the transactions contemplated hereby to be consummated as soon
as expeditiously possible. Notwithstanding anything to the
contrary set forth in this Agreement, nothing in this Agreement
shall be deemed to require Parent and its Subsidiaries to, and
the Company and its Subsidiaries shall not, agree to any sale,
divestiture, license or other disposition of shares of capital
stock or of any business, assets or property, or the imposition
of any limitation on the ability of any of them to conduct their
respective businesses or to own or exercise control of such
stock, businesses, assets and properties, if (A) such
actions reasonably would be expected to have a material adverse
effect on (1) the Company and its Subsidiaries, taken as a
whole, or H3C and its Subsidiaries, taken as a whole, or
(2) the benefits expected to be derived by Parent and its
Subsidiaries from the transactions contemplated by this
Agreement or (B) such actions reasonably would be expected
to have a material impact (including a material reputational
impact) on the operations or business (other than the networking
business) of Parent and its Subsidiaries (assuming for purposes
of this determination that Parent and its Subsidiaries are of
equivalent size to the Company and its Subsidiaries, taken as a
whole) in any material jurisdiction.
(c) Each of Parent and Merger Sub (and their respective
Affiliates, if applicable), on the one hand, and the Company, on
the other hand, shall keep the other party promptly informed of
any material communication regarding any of the transactions
contemplated by this Agreement in connection with any filings,
investigations with, by or before any Governmental Authority
relating to this Agreement or the transactions contemplated
hereby, including any proceedings initiated by a private party.
If any party hereto or Affiliate thereof shall receive a request
for additional information or documentary material from any
Governmental Authority with respect to the transactions
contemplated by this Agreement pursuant to the HSR Act or any
other Laws with respect to which any such filings have been
made, then such party shall use its reasonable best efforts to
make, or cause to be made, as soon as reasonably practicable and
after consultation with the other party, an appropriate response
in compliance with such request. In connection with and without
limiting the foregoing, to the extent reasonably practicable and
unless prohibited by applicable law or by the applicable
Governmental Authority, the parties hereto agree to
(i) give each other reasonable advance notice of all
meetings with any Governmental Authority relating to the
transactions contemplated by this Agreement, (ii) give each
other an opportunity to participate in each of such meetings,
(iii) keep the other party reasonably apprised with respect
to any material oral communications with any Governmental
Authority regarding the transactions contemplated by this
Agreement, (iv) cooperate in the filing of any analyses,
presentations, memoranda, briefs, arguments, opinions or other
written communications explaining or defending the transactions
contemplated by this Agreement, articulating any regulatory or
competitive argument
and/or
responding to requests or objections made by any Governmental
Authority, (v) provide each other with a reasonable advance
opportunity to review and comment upon, and consider in good
faith the views of the other with respect to, all written
communications (including any analyses, presentations,
memoranda, briefs, arguments and opinions) with a Governmental
Authority regarding the transactions contemplated by this
Agreement, (vi) provide each other (or counsel of each
party, as appropriate) with copies of all written communications
to or from any
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Governmental Authority relating to the transactions contemplated
by this Agreement, and (vii) cooperate and provide each
other with a reasonable opportunity to participate in, and
consider in good faith the views of the other with respect to,
all material deliberations with respect to all efforts to
satisfy the conditions set forth Section 7.1(b) and
Section 7.1(c).
Section 6.3 Proxy
Statement and Other Required Company
Filings. As soon as practicable following the
date hereof, but in any event no later than December 7,
2009, the Company shall prepare and file with the SEC the Proxy
Statement for use in connection with the solicitation of proxies
from the Company Stockholders for use at the Company Stockholder
Meeting. If the Company determines that it is required to file
with the SEC any Other Required Company Filing under applicable
Law or Order, the Company shall promptly prepare and file with
the SEC such Other Required Company Filing. Parent and Merger
Sub shall furnish all information concerning Parent and Merger
Sub (and their respective Affiliates, if applicable) as is
required to be included in the Proxy Statement or such other
filings, or that is customarily included in such Proxy Statement
or such other filings in connection with the preparation and
filing with the SEC of the Proxy Statement and any Other
Required Company Filing. The Company shall use reasonable best
efforts to cause the Proxy Statement to be disseminated to the
Company Stockholders as promptly as practicable following the
filing thereof with the SEC and confirmation from the SEC that
it will not comment on, or that it has no additional comments
on, the Proxy Statement. Unless the Company Board has effected a
Recommendation Change, neither the Company nor any of its
Affiliates shall file with the SEC the Proxy Statement or any
Other Required Company Filing, or any amendment or supplement
thereto, and neither the Company nor any of its Affiliates, if
applicable, shall correspond or otherwise communicate with the
SEC or its staff with respect to the Proxy Statement or any
Other Required Company Filing in any such case without providing
Parent and Merger Sub a reasonable opportunity to review and
comment thereon or participate therein, as the case may be and
shall include in such Proxy Statement or Other Required Company
Filing comments reasonably proposed by Parent or Merger Sub.
Unless this Agreement is earlier terminated pursuant to
Article VIII, the Company shall (i) advise
Parent and Merger Sub promptly after it receives notice thereof,
of any receipt of a request by the SEC or its staff for an
amendment or revisions to the Proxy Statement or any Other
Required Company Filing, any receipt of comments from the SEC or
its staff on the Proxy Statement or any Other Required Company
Filing or any receipt of a request by the SEC or its staff for
additional information in connection therewith, and
(ii) provide Parent and Merger Sub with copies of all
correspondence with its representatives, on the one hand, and
the SEC or its staff, on the other hand with respect to the
Proxy Statement or Other Required Company Filings. If at any
time prior to the Company Stockholder Meeting, any information
relating to the Company, Parent or Merger Sub, or any of their
respective directors, officers or Affiliates, should be
discovered by the Company, Parent or Merger Sub which should be
set forth in an amendment or supplement to the Proxy Statement
or any Other Required Company Filing so that the Proxy Statement
or any Other Required Company Filing would not include any
misstatement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, the party which discovers such
information shall promptly notify the other, and an appropriate
amendment or supplement to the Proxy Statement or the applicable
Other Required Company Filing describing such information shall
be promptly prepared and filed with the SEC and, to the extent
required by applicable Law or Order or the SEC or its staff,
disseminated to the Company Stockholders. The Company shall
cause the Proxy Statement and any Other Required Company Filing
to comply as to form in all material respects with the
applicable requirements of the Exchange Act and the rules of the
SEC and Nasdaq. Unless the Company Board has effected a
Recommendation Change, the Company shall include the Company
Board Recommendation in the Proxy Statement and, if applicable,
any Other Required Company Filings.
Section 6.4 Anti-Takeover
Laws. The Company, Parent and Merger Sub
shall use their respective reasonable best efforts to take all
actions necessary so that no state anti-takeover or other
similar Law or Order is or becomes applicable to this Agreement
or any of the transactions contemplated by this Agreement and,
if any anti-takeover statute is or becomes applicable, to use
their respective reasonable best efforts to ensure that the
transactions contemplated by this Agreement may be consummated
as promptly as practicable on the terms and subject to the
conditions set forth in this Agreement and otherwise to minimize
the effect of such Law or Order on this Agreement and the
transactions contemplated hereby.
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Section 6.5 Notification
of Certain Matters.
(a) 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 give prompt notice to Parent and Merger Sub upon
becoming aware that any representation or warranty made by it in
this Agreement has become untrue or inaccurate in any material
respect, or of any failure of the Company to comply with or
satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this
Agreement, in any such case if and only if such untruth or
inaccuracy, or such failure, would reasonably be expected to
cause any of the conditions set forth in
Section 7.2(a) or Section 7.2(b) to fail
to be satisfied, such notice to include a reasonably detailed
description of the fact, or the occurrence or non-occurrence of
any event or circumstance the occurrence or non-occurrence of
which resulted in such untruth, inaccuracy or failure;
provided, however, that no such notification shall affect
or be deemed to modify any representation or warranty of the
Company set forth in this Agreement or the conditions to the
obligations of Parent and Merger Sub to consummate the
transactions contemplated by this Agreement or the remedies
available to the parties hereunder; and provided further,
that the terms and conditions of the Confidentiality Agreement
shall apply to any information provided to Parent pursuant to
this Section 6.5(a).
(b) 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,
Parent shall give prompt notice to the Company upon becoming
aware that any representation or warranty made by it or Merger
Sub in this Agreement has become untrue or inaccurate in any
material respect, or of any failure of Parent or Merger Sub to
comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it
under this Agreement, such notice to include a reasonably
detailed description of the fact, or the occurrence or
non-occurrence of any event or circumstance the occurrence or
non-occurrence of which resulted in such untruth, inaccuracy or
failure; provided, however, that no such
notification shall affect or be deemed to modify any
representation or warranty of the Company set forth in this
Agreement or the conditions to the obligations of Parent and
Merger Sub to consummate the transactions contemplated by this
Agreement or the remedies available to the parties hereunder;
and provided further, that the terms and conditions of
the Confidentiality Agreement shall apply to any information
provided to the Company pursuant to this
Section 6.5(b).
Section 6.6 Public
Statements and Disclosure. The initial press
release relating to this Agreement shall be a joint press
release, the text of which has been agreed by each of Parent and
the Company. None of the Company, on the one hand, or Parent and
Merger Sub, on the other hand, hereby shall issue any public
release or make any public announcement or disclosure concerning
this Agreement or the transactions contemplated by this
Agreement without the prior written consent of the other (which
consent shall not be unreasonably withheld, delayed or
conditioned), except as such release, announcement or disclosure
may be required by applicable Law or Order or the rules or
regulations of any applicable United States securities exchange
or regulatory or Governmental Authority to which the relevant
party is subject or submits, wherever situated, in which case
the party required to make the release or announcement shall use
its reasonable best efforts to allow the other party or parties
hereto reasonable time to comment on such release or
announcement in advance of such issuance (it being understood
that the final form and content of any such release or
announcement, as well as the timing of any such release or
announcement, shall be at the final discretion of the disclosing
party); provided, however, that the restrictions
set forth in this Section 6.6 shall not apply to any
release, announcement or disclosure made or proposed to be made
following a Recommendation Change.
Section 6.7 Directors
and Officers Indemnification and Insurance.
(a) Parent 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 (the Indemnified Persons). In
addition, during the period commencing at the Effective Time and
ending on the sixth anniversary of the Effective Time, the
Surviving Corporation and its Subsidiaries shall
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(and Parent 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 hereof), in each case in their
respective capacities as such, occurring at or prior to the
Effective Time, 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 hereof, 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.
(b) Without limiting the generality of the provisions of
Section 6.7(a), to the fullest extent permitted by
applicable Law, the Surviving Corporation and its Subsidiaries
shall (and Parent 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, or
(ii) any of the transactions contemplated by this
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. In addition, to the
fullest extent permitted by applicable Law, the Surviving
Corporation and its Subsidiaries shall (and Parent shall cause
the Surviving Corporation and its Subsidiaries to) advance,
prior to the final disposition of any claim, proceeding,
investigation or inquiry for which indemnification may be sought
under this Agreement, promptly following request by an
Indemnified Person therefor, all costs, fees and expenses
(including reasonable attorneys fees and investigation
expenses) incurred by such Indemnified Person in connection with
any such claim, proceeding, investigation or inquiry upon
receipt of an undertaking by such Indemnified Person to repay
such advances if it is ultimately decided in a final,
non-appealable judgment by a court of competent jurisdiction
that such Indemnified Person is not entitled to indemnification.
In the event of any such claim, proceeding, investigation or
inquiry, (A) the Surviving Corporation and Parent shall
have the right (but not the obligation) to control the defense
thereof after the Effective Time (it being understood that, by
electing to control the defense thereof, Parent will be deemed
to have waived any right to object to the Indemnified
Persons entitlement to indemnification hereunder with
respect thereto), (B) each Indemnified Person shall be
entitled to retain his or her own counsel, which counsel shall
be reasonably satisfactory to Parent and the Surviving
Corporation, whether or not Parent shall elect to control the
defense of any such claim, proceeding, investigation or inquiry,
(C) the Surviving Corporation shall (and Parent shall cause
the Surviving Corporation to) pay all reasonable fees and
expenses of any counsel retained by an Indemnified Person,
promptly after statements therefor are received, whether or not
Parent shall elect to control the defense of any such claim,
proceeding, investigation or inquiry, and (D) neither
Parent or the Surviving Corporation on the one hand nor any
Indemnified Person on the other hand shall be liable for any
settlement effected without his or her prior express written
consent. Notwithstanding anything to the contrary set forth in
this Section 6.7(b) or elsewhere in this Agreement,
the Surviving Corporation and Parent shall not be obligated to
pay the fees and expenses of more than one counsel (selected by
a plurality of the applicable Indemnified Parties for any
Indemnified Parties in any jurisdiction with respect to any
single action) except to the extent that two or more of such
Indemnified Parties shall have actual material conflict of
interest in such action.
(c) Prior to the Effective Time, notwithstanding anything
to the contrary set forth in this Agreement, the Company may
purchase a six-year tail prepaid policy on the
D&O Insurance. In the event that the Company purchases such
a tail policy prior to the Effective Time, Parent
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 Parent and the Surviving Corporation under
the first sentence of this Section 6.7(c) for so
long as such tail policy shall be maintained in full
force and effect. In the event that the Company
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does not so purchase a tail policy prior to the
Effective Time, during the period commencing at the Effective
Time and ending on the sixth anniversary of the Effective Time,
Parent and the Surviving Corporation shall maintain in effect
the Companys current directors and officers
liability insurance (D&O Insurance) in
respect of acts or omissions occurring at or prior to the
Effective Time, covering each person covered by the D&O
Insurance, on terms with respect to the coverage and amounts
that are equivalent to those of the D&O Insurance;
provided however, in satisfying its obligations under
this Section 6.7(c), Parent and the Surviving
Corporation shall not be obligated to pay annual premiums in
excess of three hundred percent (300%) of the amount paid by the
Company for coverage for its last full fiscal year (such three
hundred percent (300%) amount, the Maximum Annual
Premium) (which premiums the Company represents and
warrants to be as set forth in Section 6.7(c) of the
Company Disclosure Letter), provided that if the annual
premiums of such insurance coverage exceed such amount, Parent
and the Surviving Corporation shall be obligated to obtain a
policy with the greatest coverage available for a cost not
exceeding the Maximum Annual Premium.
(d) If Parent or the Surviving Corporation or any of its
successors or assigns shall (i) consolidate with or merge
into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger,
or (ii) transfer all or substantially all of its properties
and assets to any Person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of
the Surviving Corporation shall assume all of the obligations of
Parent and the Surviving Corporation set forth in this
Section 6.7.
(e) The obligations set forth in this
Section 6.7 shall not be terminated, amended or
otherwise modified in any manner that adversely affects any
Indemnified Person (or any other person who is a beneficiary
under the D&O Insurance or the tail policy
referred to in Section 6.7(c) (and their heirs and
representatives)) without the prior written consent of such
affected Indemnified Person or other person who is a beneficiary
under the D&O Insurance or the tail policy
referred to in Section 6.7(c) (and their heirs and
representatives). Each of the Indemnified Persons or other
persons who are beneficiaries under the D&O Insurance or
the tail policy referred to in
Section 6.7(c) (and their heirs and representatives)
are intended to be third party beneficiaries of this
Section 6.7, with full rights of enforcement as if a
party thereto. The rights of the Indemnified Persons (and other
persons who are beneficiaries under the D&O Insurance or
the tail policy referred to in
Section 6.7(c) (and their heirs and
representatives)) under this Section 6.7 shall be in
addition to, and not in substitution for, any other rights that
such persons may have under the certificate or articles of
incorporation, bylaws or other equivalent organizational
documents, any and all indemnification agreements of or entered
into by the Company or any of its Subsidiaries, or applicable
Law (whether at law or in equity).
(f) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive or impair any rights to
directors and officers insurance claims under any
policy that is or has been in existence with respect to the
Company or any of its Subsidiaries for any of their respective
directors, officers or other employees, it being understood and
agreed that the indemnification provided for in this
Section 6.7 is not prior to or in substitution for
any such claims under such policies.
Section 6.8 Employee
Matters.
(a) (i) Health and Welfare
Plans. For the period commencing at the
Effective Time and ending on a date that is no earlier than the
six-month anniversary thereof, Parent shall, or shall cause the
Surviving Corporation, to maintain or provide for Continuing
Employees and, as applicable, their eligible dependents,
benefits under Employee Plans or employee benefit plans,
programs or policies of Parent or its Affiliates that provide
for health and welfare benefits (excluding severance) that are
in the aggregate no less favorable than such benefits maintained
for and provided to Continuing Employees immediately prior to
the Effective Time. From and after the Effective Time, Parent
shall, or shall cause the Surviving Corporation to,
(A) cause any pre-existing conditions or limitations and
eligibility waiting periods under any group health plans of
Parent or its Affiliates to be waived with respect to Continuing
Employees and their eligible dependents to the extent such
Continuing Employees and their eligible dependents were not
subject to such preexisting conditions and limitations and
eligibility waiting periods under the comparable Employee Plans
as of the time immediately preceding the Closing, and
(B) provide each Continuing Employee with credit for any
deductibles paid under any Employee Plan that provides medical,
dental, vision or pharmaceutical benefits in the plan year in
effect
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as of the Closing Date in satisfying any applicable deductible
or out of pocket requirements under any medical, dental, vision
or pharmaceutical plans of Parent, the Surviving Corporation or
its Subsidiaries that such employees are eligible to participate
in after the Effective Time to the same extent that such
expenses were recognized under the comparable Employee Plan. For
purposes of this Section 6.8(a), Continuing
Employees shall include expatriate employees working
outside the U.S. whose benefits and payroll are provided
under the plan, programs or arrangements offered to employees
located in the U.S.
(ii) Severance Plans. For the
period commencing at the Effective Time and ending on the first
anniversary thereof, Parent shall, and shall cause its
Subsidiaries to, honor in accordance with their terms as in
effect immediately prior to the Effective Time the severance
plans maintained by the Company or any of its Subsidiaries, and
shall recognize continuous service with the Company or its
Subsidiaries, including predecessor employers, of participating
Continuing Employees under such plans, but in all cases solely
to the extent such service would have been recognized by the
Company immediately prior to the Effective Time. From and after
the first anniversary of the Effective Time, Continuing
Employees located in the U.S. shall be eligible to
participate in severance plans or programs available to
similarly situated employees of Parent or its Subsidiaries
solely with respect to continuous service credited from and
after the Effective Time.
(iii) 401(k) Plan. Continuing
Employees located in the U.S. shall be eligible to
participate in Parents 401(k) plan as soon as
administratively practicable but in no event later than three
(3) months after the Effective Time, and shall recognize
prior service with the Company or its Subsidiaries, including
predecessor employers (but only to the extent recognized by the
Company immediately prior to the Effective Time) for purposes of
vesting under Parents 401(k) plan. To the extent that
Parent is unable to provide for the participation of such
Continuing Employees within the three (3) months after the
Effective Time, Parent shall pay to such Continuing Employees
(to the extent then still employed by Parent or its
Subsidiaries) an amount substantially equivalent to what they
would have received pursuant to any match by Parent under the
Parents 401(k) Plan had they become participants in
Parents 401(k) Plan, if any, without regard to any Tax
benefit under such plan.
(iv) Other Plan Participation; Service
Crediting. From and after the Effective Time,
and except as otherwise provided in this Section 6.8 or as
may result in duplication of coverage or benefits, Continuing
Employees shall be eligible to participate in employee benefit
plans and programs of Parent or a Subsidiary in accordance with
its then-applicable plans and policies available to similarly
situated employees. From and after the Effective Time, Parent
shall, or shall cause its Subsidiaries to, recognize prior
service with the Company or its Subsidiaries, including
predecessor employers (but only to the extent recognized by the
Company immediately prior to the Effective Time) only for
purposes of service awards and determining the amount of
vacation accruals, and not for purposes of any other plan,
program or policy of Parent or its Subsidiaries, other than to
the extent required by local Law or Order or as otherwise set
forth in this Section.
(b) Except as otherwise provided in this Agreement, Parent
shall, or shall cause its Subsidiaries to, honor in accordance
with their terms as in effect immediately prior to the Effective
Time all existing employment, change of control, severance and
retention agreements between the Company or any of its
Subsidiaries, on the one hand, and any current or former
employee, director or consultant of the Company or any of its
Subsidiaries, on the other hand; provided, however, that nothing
in this Agreement shall prohibit Parent or its Subsidiaries from
amending or terminating any such plans or agreements, so long as
such amendment or termination complies with the terms of any
such plans or agreements, including specifically obtaining any
necessary or required consents.
(c) Except as otherwise required by applicable Law, or as
may be agreed upon by the Company and Parent prior to the
Closing Date, unused paid-time off (PTO) days accrued by
Continuing Employees under the plans and policies of the Company
and its Subsidiaries shall carry over to Parent or its
Subsidiaries to the extent administratively practicable, and
each such Continuing Employee shall be paid by the Company in
cash for any accrued and unused paid-time off (PTO) days that
Parent determines are not administratively practicable to
continue to honor.
(d) The provisions of this Section 6.8 are not
intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder, and nothing herein shall be
deemed to amend any Employee Plan to
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reflect the terms of this Section 6.8. Furthermore, nothing
in this Section 6.8 shall limit the right of Parent, the
Surviving Corporation or any of their Subsidiaries to terminate
the employment of any Continuing Employee at any time.
Section 6.9 Confidentiality. Parent,
Merger Sub and the Company hereby acknowledge that Parent and
the Company have previously executed the Confidentiality
Agreement, which will continue in full force and effect in
accordance with its terms.
ARTICLE VII
CONDITIONS
TO THE MERGER
Section 7.1 Conditions
to Each Partys Obligations to Effect the
Merger. The respective obligations of Parent,
Merger Sub and the Company to consummate the Merger shall be
subject to the satisfaction or waiver (where permissible under
applicable Law) prior to the Closing Date, of each of the
following conditions:
(a) Requisite Stockholder
Approval. The Requisite Stockholder Approval
shall have been obtained.
(b) Requisite Regulatory
Approvals. (i) Any waiting period (and
extensions thereof) applicable to the transactions contemplated
by this Agreement under the HSR Act shall have expired or been
terminated, (ii) any clearances, consents, approvals,
orders and authorizations of Governmental Authorities required
by the Antitrust Laws of the jurisdictions set forth in
Section 7.1(b) of the Company Disclosure Letter shall have
been obtained
and/or any
waiting periods (and extensions thereof) applicable to the
transactions contemplated by this Agreement under the Antitrust
Laws of the jurisdictions set forth in Section 7.1(b) of
the Company Disclosure Letter shall have expired or been
terminated, and (iii) any required approval or deemed
approval of the transactions contemplated by this Agreement of
the Anti-Monopoly Bureau of the Ministry of Commerce shall have
been obtained pursuant to the AML, in each case, without any
condition that would require any action that Parent and its
Subsidiaries would not be required to take, or the Company and
its Subsidiaries would not be permitted to take, pursuant to
Section 6.2(b).
(c) No Legal Prohibition. 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 and has the effect of making the Merger
illegal or which has the effect of prohibiting or otherwise
preventing the consummation of the Merger.
Section 7.2 Conditions
to the Obligations of Parent and Merger Sub to Effect the
Merger. The obligations of Parent and Merger
Sub to consummate the Merger shall be subject to the
satisfaction or waiver prior to the Closing Date of each of the
following conditions, any of which may be waived exclusively by
Parent:
(a) Representations and
Warranties. The representations and
warranties of the Company set forth in this Agreement set forth
in (i) Section 3.11(a) shall be true and correct in
all respects, (ii) Section 3.1,
Section 3.2, Section 3.5,
Section 3.7(a), Section 3.7(c),
Section 3.25, Section 3.27 and
Section 3.28 shall be true and correct in all
material respects on and 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 set forth in such Sections
that address matters only as of a particular date, which shall
have been true and correct in all material respects only as of
such particular date) and (iii) all Sections of this
Agreement other than those Sections specifically referred to
above shall 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 for those representations and warranties set forth in
such Sections that address matters only as of a particular date,
which shall have been true and correct only as of such
particular date), except in the case of clause (iii) (including
the parenthetical herein) for any failure to be so true and
correct which has not had and would not reasonably be expected
to have a Company Material Adverse Effect; provided,
however, that, for purposes of determining the accuracy
of the representations and warranties of the Company set forth
in the Agreement under
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clause (iii) of this Section 7.2(a), all
Company Material Adverse Effect qualifications and
all qualifications and exceptions with respect to materiality
(but not dollar thresholds nor the reference to Company
Material Adverse Effect in
Section 3.12(a)(xv)) set forth in such
representations and warranties shall be disregarded.
(b) Performance of Obligations of the
Company. The Company shall have performed in
all material respects the obligations that are to be performed
by it under this Agreement at or prior to the Closing Date.
(c) Officers
Certificate. Parent and Merger Sub shall have
received a certificate of the Company, validly executed for and
on behalf of the Company and in its name by a duly authorized
officer thereof, certifying that the conditions set forth in
Section 7.2(a) and Section 7.2(b) have
been satisfied.
(d) Company Material Adverse
Effect. No Effect shall have arisen or
occurred following the execution and delivery of this Agreement
that is continuing and that shall have had or be reasonably
expected to have a Company Material Adverse Effect.
Section 7.3 Conditions
to the Companys Obligations to Effect the
Merger. The obligations of the Company to
consummate the Merger shall be subject to the satisfaction or
waiver prior to the Closing Date of each of the following
conditions, any of which may be waived exclusively by the
Company:
(a) Representations and
Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement
shall 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
(i) for any failure to be so true and correct that would
not, individually or in the aggregate, prevent or materially
delay the consummation of the transactions contemplated by this
Agreement or the ability of Parent and Merger Sub to fully
perform their respective covenants and obligations under this
Agreement, and (ii) for those representations and
warranties which address matters only as of a particular date,
which representations shall have been true and correct as of
such particular date, except for any failure to be so true and
correct as of such particular date that would not, individually
or in the aggregate, prevent or materially delay the
consummation of the transactions contemplated by this Agreement
or the ability of Parent and Merger Sub to fully perform their
respective covenants and obligations under this Agreement.
(b) Performance of Obligations of Parent and Merger
Sub. Each of Parent and Merger Sub shall have
performed in all material respects the obligations that are to
be performed by them under this Agreement at or prior to the
Closing Date.
(c) Officers
Certificate. The Company shall have received
a certificate of Parent and Merger Sub, validly executed for and
on behalf of Parent and Merger Sub and in their respective names
by a duly authorized officer thereof, certifying that the
conditions set forth in Section 7.3(a) and
Section 7.3(b) have been satisfied.
ARTICLE VIII
TERMINATION,
AMENDMENT AND WAIVER
Section 8.1 Termination. Notwithstanding
the prior adoption of this Agreement by the Company Stockholders
in accordance with the DGCL, this Agreement may be terminated
and the Merger may be abandoned at any time prior to the
Effective Time (it being agreed that the party hereto
terminating this Agreement pursuant to this
Section 8.1 shall give prompt written notice of such
termination to the other party or parties hereto):
(a) by mutual written agreement of Parent and the
Company; or
(b) by either Parent or the Company, if the Merger shall
have not been consummated by 11:59 p.m. (Pacific time) on
the first anniversary of the date of this Agreement (the
Termination Date); provided, however,
that the right to terminate this Agreement pursuant to this
Section 8.1(b) shall not be available to any party
hereto whose actions in breach of this Agreement or failure to
take action in breach of this
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Agreement has been the principal cause of or resulted in any of
the conditions to the Merger set forth in
Article VII having failed to be satisfied prior to
such date; or
(c) by either Parent or the Company if any 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 and has the effect of making the Merger
illegal or which has the effect of prohibiting or otherwise
preventing the Merger, and such Order has become final and
non-appealable; provided, however, that the right
to terminate this Agreement pursuant to this
Section 8.1(c) shall not be available to any party
hereto unless such party shall have used its reasonable best
efforts to contest, appeal and remove such Order; and
provided, further, that the right to terminate
this Agreement pursuant to this Section 8.1(c) shall
not be available to a party whose actions in breach of this
Agreement or failure to take action in breach of this Agreement
was the principal cause of, or resulted in, the passage of such
Law or the issuance of such Order; or
(d) by either Parent or the Company, if the Company shall
have failed to obtain the Requisite Stockholder Approval at the
Company Stockholder Meeting (or any postponement or adjournment
thereof) at which a vote is taken on this Agreement; or
(e) by the Company, in the event that Parent
and/or
Merger Sub shall have breached or otherwise violated any of
their respective covenants, agreements or other obligations
under this Agreement, or any of the representations and
warranties of Parent and Merger Sub set forth in this Agreement
shall have become inaccurate, in either case such that the
conditions to the Merger set forth in Section 7.3(a)
or Section 7.3(b) are not capable of being satisfied
(with or without cure of such breach or violation) by the
Termination Date; provided, however, that the
Company shall not have the right to terminate this Agreement
pursuant to this Section 8.1(e) if it is then in
breach of any representations, warranties, covenants or other
agreements hereunder that would result in the closing conditions
set forth in Section 7.2(a) or
Section 7.2(b) not being satisfied; or
(f) by Parent, in the event that the Company shall have
breached or otherwise violated any of its covenants, agreements
or other obligations under this Agreement, or any of the
representations and warranties of the Company set forth in this
Agreement shall have become inaccurate, in either case such that
the conditions to the Merger set forth in
Section 7.2(a) or Section 7.2(b) are not
capable of being satisfied (with or without cure) by the
Termination Date; provided, however, that Parent
shall not have the right to terminate this Agreement pursuant to
this Section 8.1(f) if it is then in breach of any
representations, warranties, covenants or other agreements
hereunder that would result in the closing conditions set forth
in Section 7.3(a) or Section 7.3(b) not
being satisfied; or
(g) by the Company if, at any time prior to the receipt of
the Requisite Stockholder Approval, (i) the Company Board
has received an Acquisition Proposal that it determines in good
faith (after consultation with its independent financial
advisors 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) constitutes a Superior Proposal and the
failure to enter into a definitive agreement relating to such
Superior Proposal would reasonably be expected to be a breach of
its fiduciary duties, (ii) the Company has not violated the
terms of Section 5.2 or this Section 5.3
in any material respect in connection with such Acquisition
Proposal, (iii) the Company shall have given Parent at
least five (5) Business Days prior written notice of
its intention to take such action (which notice shall specify
the material terms and conditions of any such Superior Proposal)
and, no later than the time of such notice, provided Parent a
copy of the relevant proposed transaction agreement and other
material documents with the party making such Superior Proposal,
(iv) if requested by Parent, the Company shall have
negotiated in good faith with Parent during such five
(5) Business Day period to enable Parent to propose changes
to the terms of this Agreement that would cause such Superior
Proposal to no longer constitute a Superior Proposal,
(v) the Company Board shall have considered in good faith
(after consultation with independent financial advisors and
outside legal counsel, it being understood and agreed that the
independence of the Company Boards independent
financial advisor will be determined by the
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Company Board) any changes to this Agreement proposed by Parent
in a written offer capable of acceptance, and determined that
the Superior Proposal would continue to constitute a Superior
Proposal if such changes were accepted by the Company,
(vi) in the event of any material change to the financial
or other material terms of such Superior Proposal, the Company
shall, in each case, have delivered to Parent, an additional
notice and copies of the relevant proposed transaction agreement
and other material documents and have provided to Parent another
five (5) Business Day notice period and
(vii) concurrently with the termination of this Agreement,
the Company pays Parent the Company Termination Fee in
accordance with Section 8.3(b)(iii); or
(h) by Parent, in the event that (i) the Company Board
or any committee of the Company Board shall have for any reason
effected a Recommendation Change; (ii) the Company shall
have failed to include the Company Board Recommendation in the
Proxy Statement, (iii) a tender offer or exchange offer for
Company Common Stock that constitutes an Acquisition Proposal
(whether or not a Superior Proposal) is commenced and, within
ten (10) Business Days after the public announcement of the
commencement of such Acquisition Proposal, the Company shall not
have 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 Company
Board Recommendation and recommending that the Company
Stockholders reject such Acquisition Proposal and not tender any
shares of Company Common Stock into such tender or exchange
offer, (iv) the Company fails to timely hold a stockholder
vote with respect to the adoption of this Agreement in
accordance with Section 5.4; or (v) the Company
Board shall have failed to publicly reconfirm the Company Board
Recommendation within ten (10) Business Days of a written
request from Parent to do so; provided that Parent shall
not be entitled to terminate this Agreement pursuant to this
clause (v) within the ten-Business Day period contemplated
by clause (iii) above.
Section 8.2 Notice
of Termination; Effect of Termination. Any
proper and valid termination of this Agreement pursuant to
Section 8.1 shall be effective immediately upon the
delivery of written notice of the terminating party to the other
party or parties hereto, as applicable. In the event of the
termination of this Agreement pursuant to
Section 8.1, this Agreement shall be of no further
force or effect without liability of any party or parties
hereto, as applicable (or any partner, member, stockholder,
director, officer, employee, affiliate, agent or other
representative of such party or parties) to the other party or
parties hereto, as applicable, except (a) for the terms of
Section 6.7, this Section 8.2,
Section 8.3 and Article IX, each of
which shall survive the termination of this Agreement, and
(b) nothing herein shall relieve any party or parties
hereto, as applicable, from liability for any willful breach of,
or fraud in connection with, this Agreement. In addition to the
foregoing, no termination of this Agreement shall affect the
obligations of the parties hereto set forth in the
Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their
terms and the terms of Section 6.9.
Section 8.3 Fees
and Expenses.
(a) General. Except as set forth
in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party or parties, as
applicable, incurring such expenses, whether or not the Merger
is consummated.
(b) Company Payments.
(i) The Company shall pay to Parent or its designee the
Company Termination Fee, by wire transfer of immediately
available funds to an account or accounts designated in writing
by Parent, within two Business Days after demand by Parent, in
the event that (A) this Agreement is terminated pursuant to
Section 8.1(b); (B) the failure of the Merger
to be consummated by the Termination Date is not the result of
actions taken by Parent or Merger Sub in breach of this
Agreement or any failure to take action by Parent or Merger Sub
in breach of this Agreement, which breach has resulted in a
failure to satisfy the conditions set forth in
Section 7.1(b), Section 7.1(c),
Section 7.3(a) or Section 7.3(b));
(C) at the time of such termination, the closing conditions
set forth in Section 7.1(b) and Section
7.1(c) are capable of being satisfied or would be capable of
being satisfied but for actions taken by the Company in breach
of this Agreement or any failure to take action by the Company
in breach of this Agreement; (D) following the execution
and delivery of this Agreement and prior to the termination of
this Agreement pursuant to Section 8.1(b),
(1) a Competing
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Acquisition Transaction shall have been publicly announced,
disclosed or communicated and not withdrawn, (2) a Person
or group shall have publicly disclosed an intention to make,
propose or communicate a proposal for a Competing Acquisition
Transaction and not withdrawn such intention, or (3) a
proposal for a Competing Acquisition Transaction shall have
become publicly known and not withdrawn; and (E) within
twelve months following the termination of this Agreement
pursuant to Section 8.1(b), the Company enters into
a definitive agreement providing for a Competing Acquisition
Transaction and such Competing Acquisition Transaction is
subsequently consummated.
(ii) The Company shall pay to Parent or its designee the
Company Termination Fee (less any Transaction Expenses, if any,
previously paid to Parent or its designees by the Company
pursuant to Section 8.3(b)(v)), by wire transfer of
immediately available funds to an account or accounts designated
in writing by Parent, within two Business Days after demand by
Parent, in the event that (A) this Agreement is terminated
pursuant to Section 8.1(d), (B) following the
execution and delivery of this Agreement and prior to the
Company Stockholder Meeting (or any postponement or adjournment
thereof), (1) a Competing Acquisition Transaction shall
have been publicly announced, disclosed or communicated and not
withdrawn, (2) a Person or group shall have disclosed an
intention to make, propose or communicate a proposal for a
Competing Acquisition Transaction and not withdrawn such
proposal or intention or (3) a proposal for a Competing
Acquisition Transaction shall have become publicly known and not
withdrawn, and (C) within twelve months following the
termination of this Agreement pursuant to
Section 8.1(d), the Company enters into a definitive
agreement providing for a Competing Acquisition Transaction and
such Competing Acquisition Transaction is subsequently
consummated.
(iii) The Company shall pay to Parent or its designee the
Company Termination Fee, by wire transfer of immediately
available funds to an account or accounts designated in writing
by Parent, prior to and as a condition to the effectiveness of
any termination, in the event that this Agreement is terminated
pursuant to Section 8.1(g).
(iv) The Company shall pay to Parent or its designee the
Company Termination Fee, by wire transfer of immediately
available funds to an account or accounts designated in writing
by Parent, within two (2) Business Days after demand by
Parent, in the event that this Agreement is terminated pursuant
to Section 8.1(h).
(v) In the event that (A) this Agreement is terminated
pursuant to Section 8.1(d) and (B) following the
execution and delivery of this Agreement and prior to the
Company Stockholder Meeting (or any postponement or adjournment
thereof), (1) a Competing Acquisition Transaction shall
have been publicly announced, disclosed or communicated and not
withdrawn, (2) a Person or group shall have publicly
disclosed an intention to make, propose or communicate a
proposal for a Competing Acquisition Transaction and not
withdrawn such intention, or (3) a proposal for a Competing
Acquisition Transaction shall have become publicly known and not
withdrawn, the Company shall pay Parent or its designee within
two (2) Business Days following delivery by Parent of an
invoice therefor, all
out-of-pocket
fees and expenses incurred by Parent or Merger Sub in connection
with the transaction contemplated by this Agreement (the
Transaction Expenses); provided that
the Company shall not be required to pay more than an
aggregate of $10,000,000 in Transaction Expenses pursuant to
this Section 8.3(b)(v).
(c) Single Payment Only. The
parties hereto acknowledge and hereby agree that in no event
shall the Company be required to pay the Company Termination Fee
on more than one occasion.
(d) Enforcement. The parties
hereto acknowledge and hereby agree that the covenants and
agreements set forth in this Section 8.3 are an
integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties
hereto would not have entered into this Agreement, and that any
amounts payable pursuant to this Section 8.3 do not
constitute a penalty. If the Company fails to pay as directed in
writing by Parent any amounts due to Parent pursuant to this
Section 8.3 within the time periods specified in
this Section 8.3, then the Company shall pay the
costs and expenses (including reasonable legal fees and
expenses) incurred by Parent in connection with any action,
including the filing of any lawsuit, taken to collect payment of
such amounts, together with interest on such unpaid amounts at
the prime lending rate prevailing during such period as
published in The Wall Street Journal, calculated on a daily
basis from the date such amounts were required to be paid until
the date of actual payment.
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Section 8.4 Amendment. Subject
to applicable Law and subject to the other provisions of this
Agreement, this Agreement may be amended by the parties hereto
at any time by execution of an instrument in writing signed on
behalf of each of Parent, Merger Sub and the Company;
provided, however, that in the event that this
Agreement has been adopted by the Company Stockholders in
accordance with Delaware Law, no amendment shall be made to this
Agreement that requires the approval of such Company
Stockholders without such approval.
Section 8.5 Extension;
Waiver. At any time and from time to time
prior to the Effective Time, any party or parties hereto may, to
the extent legally allowed and except as otherwise set forth
herein, (a) extend the time for the performance of any of
the obligations or other acts of the other party or parties
hereto, as applicable, (b) waive any inaccuracies in the
representations and warranties made to such party or parties
hereto contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the agreements
or conditions for the benefit of such party or parties hereto
contained herein. Any agreement on the part of a party or
parties hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party or parties, as applicable. Any delay in exercising
any right under this Agreement shall not constitute a waiver of
such right.
ARTICLE IX
GENERAL
PROVISIONS
Section 9.1 Survival. The
representations and warranties of the Company, Parent and Merger
Sub contained in this Agreement shall terminate at the Effective
Time. The covenants of the Company, Parent and Merger Sub that
by their terms survive the Effective Time shall so survive the
Effective Time and the provisions of Section 8.3,
Section 9.9 and Section 9.10 shall
survive the Effective Time. If this Agreement is terminated
pursuant to Article VIII, the provisions of
Article VIII and Article IX shall
survive such termination.
Section 9.2 Notices. All
notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by
commercial delivery service, or sent via telecopy (receipt
confirmed) to the parties at the following addresses or telecopy
numbers (or at such other address or telecopy numbers for a
party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
Attention: General Counsel
Telecopy No.:
(650) 857-4837
with a copy (which shall not constitute notice) to:
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attention: Christopher E. Austin
Benet J. OReilly
Telecopy No.:
(212) 225-3999
(b) if to the Company, to:
3Com Corporation
350 Campus Drive
Marlborough, Massachusetts 01752
Attention: Chief Legal Officer
Telecopy No.:
(508) 323-1044
A-55
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market Street
Spear Tower, Suite 3300
San Francisco, California 94105
Attention: Michael S. Ringler
Telecopy No.:
(415) 947-2099
Section 9.3 Assignment. No
party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective
successors and permitted assigns; provided,
however, that Merger Sub may assign this Agreement to any
Subsidiary of Parent (provided that such assignment shall
not impede or delay the consummation of the transactions
contemplated by this Agreement or otherwise materially impede
the rights of the stockholders of the Company under this
Agreement). No assignment by any party shall relieve such party
of any of its obligations hereunder.
Section 9.4 Entire
Agreement. This Agreement and the documents
and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company
Disclosure Letter and the Exhibits and Schedules hereto,
constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, among the parties and
their Affiliates with respect to the subject matter hereof;
provided, however, the Confidentiality Agreement
shall not be superseded. Without limiting the generality of the
foregoing, (a) Parent and Merger Sub acknowledge that the
Company has not made and is not making any representations or
warranties whatsoever, express or implied, regarding the subject
matter of this Agreement or any other matter, except for the
Companys representations and warranties in
Article III, and that they are not relying and have
not relied on any representations or warranties, express or
implied, of any Person regarding the subject matter of this
Agreement or any other matter, except as provided in
Article III, and (b) the Company acknowledges
that Parent and Merger Sub have not made and are not making any
representations or warranties whatsoever, express or implied,
regarding the subject matter of this Agreement or any other
matter, except as provided in Article IV, and that
it is not relying and has not relied on any representations or
warranties, express or implied, of any Person regarding the
subject matter of this Agreement or any other matter, except as
provided in Article IV.
Section 9.5 Third
Party Beneficiaries. This Agreement is not
intended to, and shall not, confer upon any other Person any
rights or remedies hereunder, except (a) as set forth in or
contemplated by the terms and provisions of
Section 6.7 and (b) from and after the
Effective Time, the rights of holders of shares of the Company
Common Stock, Company Options and Company Stock-Based Awards to
receive the consideration pursuant to the Merger, as set forth
in Article II.
Section 9.6 Severability. In
the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of
such void or unenforceable provision.
Section 9.7 Specific
Performance. The parties hereto hereby agree
that irreparable damage would occur in the event that any
provision of this Agreement were not performed in accordance
with its specific terms or were otherwise breached, and that
money damages or other remedies at law would not be an adequate
remedy for any such damages. Accordingly, the parties hereto
acknowledge and hereby agree that in the event of any breach or
threatened breach by any party, of any of its covenants or
obligations set forth in this Agreement, the non-breaching party
shall be entitled to an injunction or injunctions to prevent or
restrain
A-56
breaches or threatened breaches of this Agreement and to
specifically enforce the terms and provisions of this Agreement
to prevent breaches or threatened breaches of, or to enforce
compliance with, the covenants and obligations under this
Agreement, in addition to any other remedy that may be available
at law or in equity. The Company, on the one hand, and Parent
and Merger Sub, on the other hand, hereby agree not to raise any
objections to the availability of the equitable remedy of
specific performance to prevent or restrain breaches or
threatened breaches of this Agreement by such party (or
parties), and to specifically enforce the terms and provisions
of this Agreement to prevent breaches or threatened breaches of,
or to enforce compliance with, the covenants and obligations of
such party (or parties) under this Agreement.
Section 9.8 Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.
Section 9.9 Consent
to Jurisdiction. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction and venue of
any state court located within New Castle County, State of
Delaware in connection with any matter based upon or arising out
of this Agreement or the transactions contemplated hereby,
agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such persons
and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction, venue and
process. Each party hereto hereby agrees not to commence any
legal proceedings relating to or arising out of this Agreement
or the transactions contemplated hereby in any jurisdiction or
courts other than as provided herein.
Section 9.10 WAIVER
OF JURY TRIAL. EACH OF PARENT, THE COMPANY
AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
Section 9.11 Company
Disclosure Letter References. The parties
hereto agree that the disclosure set forth in any particular
section or subsection of the Company Disclosure Letter shall be
deemed to be an exception to (or, as applicable, a disclosure
for purposes of) (a) the representations and warranties (or
covenants, as applicable) of the Company that are set forth in
the corresponding section or subsection of this Agreement, and
(b) any other representations and warranties (or covenants,
as applicable) of the Company that are set forth in this
Agreement, but in the case of this clause (b) only if the
relevance of that disclosure as an exception to (or a disclosure
for purposes of) such other representations and warranties (or
covenants, as applicable) is reasonably apparent on the face of
such disclosure.
Section 9.12 Counterparts. This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed
by each of the parties and delivered to the other party, it
being understood that all parties need not sign the same
counterpart.
[Remainder of Page Intentionally Left Blank]
A-57
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed by their respective duly authorized officers to
be effective as of the date first above written.
HEWLETT-PACKARD COMPANY
|
|
|
|
By:
|
/s/ David
A. Donatelli
|
Name: David A. Donatelli
Title: Executive Vice President
COLORADO ACQUISITION CORPORATION
Name: Paul T. Porrini
Title: President and Secretary
3COM CORPORATION
Name: Robert Y.L. Mao
Title: Chief Executive Officer
A-58
ANNEX B
Goldman, Sachs & Co. | 85 Broad
Street | New York, New York 10004
Tel: 212-902-1000
PERSONAL
AND CONFIDENTIAL
November 11, 2009
The Board of Directors
3Com Corporation
350 Campus Drive
Marlborough, MA 01752
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders (other than
Hewlett-Packard Company (HP) and its affiliates) of
the outstanding shares (other than restricted stock (the
Excluded Shares)) of common stock, par value $0.01
per share (such shares other than the Excluded Shares, the
Shares), of 3Com Corporation (the
Company) of the $7.90 per Share in cash to be paid
to such holders of Shares pursuant to the Agreement and Plan of
Merger, dated as of November 11, 2009 (the
Agreement), by and among HP, Colorado Acquisition
Corp., a wholly owned subsidiary of HP, and the Company.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, commercial
banking, 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 & Co. 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 third parties, the Company, HP and any of
their respective affiliates or any currency or commodity that
may be involved in the transaction contemplated by the Agreement
(the Transaction) for their own account and for the
accounts of their customers. We have acted as financial advisor
to the Company in connection with, and have participated in
certain of the negotiations leading to, the Transaction. We
expect to receive fees for our services in connection with the
Transaction, the principal portion of which is contingent upon
consummation of the Transaction, and the Company has agreed to
reimburse our expenses arising, and indemnify us against certain
liabilities that may arise, out of our engagement. In addition,
we have provided certain investment banking and other financial
services to the Company and its affiliates from time to time,
including having acted as financial advisor to the Company in
connection with its acquisition of a minority interest in
Huawei-3Com Co. Ltd. in November 2006; as lead arranger with
respect to secured term loan facilities provided to H3C Holdings
Limited, an affiliate of the Company, (aggregate principal
amount $430,000,000) in May 2007; and as financial advisor to
the Company in connection with the proposed sale of the Company
to Diamond II Holdings (a company controlled by Bain
Capital Fund IX, L.P. and Shenzhen Huawei
Investment & Holdings Co., Ltd.) announced in
September 2007. We also have provided certain investment banking
and other financial services to HP and its affiliates from time
to time, including having acted as co-manager with respect to a
public offering of HPs Floating Rate Global Notes due
March 1, 2012, 5.25% Global Notes due March 1, 2012,
and 5.40% Global Notes due March 1, 2017 (aggregate
principal amounts $600,000,000, $900,000,000 and $500,000,000,
respectively) in February 2007. We also may provide investment
banking and other financial services to the Company and HP and
their respective affiliates in the future. In connection with
the above-described services we have received, and may receive,
compensation.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company for the five fiscal years ended May 29,
2009; certain interim reports to stockholders and Quarterly
Reports on
Form 10-Q
of the Company; certain other communications from the Company to
its stockholders; certain publicly available research analyst
reports for
B-1
the Company; and certain internal financial analyses and
forecasts for the Company prepared by its management, as
approved for our use by the Company (the Forecasts).
We also have held discussions with members of the senior
management of the Company regarding their assessment of the past
and current business operations, financial condition and future
prospects of the Company. In addition, we have reviewed the
reported price and trading activity for the Shares, compared
certain financial and stock market information for the Company
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 enterprise
networking industry specifically and in other industries
generally and performed such other studies and analyses, and
considered such other factors, as we considered appropriate.
For purposes of rendering this opinion, we have 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 us, and
we do not assume any liability for any such information. In that
regard, we have assumed with your consent that the Forecasts
have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of
the Company. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities (including
any contingent, derivative or off-balance-sheet assets and
liabilities) of the Company or any of its subsidiaries and we
have not been furnished with any such evaluation or appraisal.
We have assumed that all governmental, regulatory or other
consents and approvals necessary for the consummation of the
Transaction will be obtained without any adverse effect on the
expected benefits of the Transaction in any way meaningful to
our analysis. We also have assumed that the Transaction will be
consummated on the terms set forth in the Agreement, without the
waiver or modification of any term or condition the effect of
which would be in any way meaningful to our analysis. We are not
expressing any opinion as to the impact of the Transaction on
the solvency or viability of the Company or HP or the ability of
the Company or HP to pay its obligations when they come due. Our
opinion does not address any legal, regulatory, tax or
accounting matters.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction, or the relative merits
of the Transaction as compared to any strategic alternatives
that may be available to the Company. We were not requested to
solicit, and did not solicit, interest from other parties with
respect to an acquisition of, or other business combination
with, the Company or any other alternative transaction. This
opinion addresses only the fairness from a financial point of
view, as of the date hereof, of the $7.90 per Share in cash to
be paid to the holders (other than HP or any of its affiliates)
of Shares pursuant to the Agreement. We do not express any view
on, and our opinion does not address, any other term or aspect
of the Agreement or Transaction or any term or aspect of any
other agreement or instrument contemplated by the Agreement or
entered into or amended in connection with the Transaction,
including, without limitation, the fairness of the Transaction
to, or any consideration received in connection therewith by,
the holders of any other class of securities, creditors or other
constituencies of the Company; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of the Company, or
class of such persons, in connection with the Transaction,
whether relative to the $7.90 per Share in cash to be paid to
the holders of Shares pursuant to the Agreement or otherwise.
Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof and we assume no
responsibility for updating, revising or reaffirming this
opinion based on circumstances, developments or events occurring
after the date hereof. Our advisory services and the opinion
expressed herein are provided for the information and assistance
of the Board of Directors of the Company in connection with its
consideration of the Transaction and such opinion does not
constitute a recommendation as to how any holder of Shares
should vote with respect to such Transaction. This opinion has
been approved by a fairness committee of Goldman,
Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the $7.90 per Share in cash to be paid to
the holders (other than HP or any of its affiliates) of Shares
pursuant to the Agreement is fair from a financial point of view
to such holders.
Very truly yours,
(GOLDMAN, SACHS & CO.)
B-2
ANNEX C
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale
C-1
of all or substantially all of the assets of the corporation. If
the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b)
or (c) hereof that appraisal rights are available for any
or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders.
C-2
Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any
stockholder who has not commenced an appraisal proceeding or
joined that proceeding as a named party shall have the right to
withdraw such stockholders demand for appraisal and to
accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 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. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of
C-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation. (8 Del. C. 1953,
§ 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,
§ 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262, §§ 1-9; 70 Del. Laws, c. 79,
§ 16; 70 Del. Laws, c. 186, § 1; 70
Del. Laws, c. 299, §§ 2, 3; 70 Del. Laws, c. 349,
§ 22; 71 Del. Laws, c. 120, § 15; 71 Del.
Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16;
77 Del. Laws, c. 14, §§ 12, 13.)
C-4
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS
The stockholder(s) hereby appoint(s) Robert Y. L. Mao and Neal D. Goldman, or either of them, as
proxies, each with the power to appoint their substitute, and hereby authorizes them to represent
and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock
that the stockholder(s) is/are entitled to vote at the special meeting to be held January 26, 2010 at
10 a.m. local time, at 3Coms headquarters, 350 Campus Drive, Marlborough, Massachusetts
01752-3064, and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH
DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT, AND
FOR THE PROPOSAL TO ADJOURN THE MEETING, IF NECESSARY OR APPROPRIATE, TO SOLICIT
ADDITIONAL PROXIES.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
c/o American Stock Transfer & Trust Co.
59 Maiden Lane
New York, NY 10038
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your
voting instructions and for
electronic delivery of information
up until 11:59 P.M. Eastern Time
the day before the cut-off date or
special meeting date. Have your
proxy card in hand when you access
the web site and follow the
instructions to obtain your records
and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE
SHAREHOLDER COMMUNICATIONS
If you would like to reduce the
costs incurred by 3Com Corporation
in mailing proxy materials, you can
consent to receiving all future
proxy statements, proxy cards and
annual reports electronically via
e-mail or the Internet. To sign up
for electronic delivery, please
follow the instructions above to
vote using the Internet and, when
prompted, indicate that you agree
to receive or access shareholder
communications electronically in
future years.
VOTE BY TELEPHONE 1-800-690-6903
Use any touch-tone telephone to
transmit your voting instructions
up until 11:59 P.M. Eastern Time
the day before the cut-off date or
special meeting date. Have your
proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card
and return it in the postage-paid
envelope we have provided or return
it to 3Com Corporation,
c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE |
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OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
3COM CORPORATION
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Vote on Proposals
The Board of Directors recommends you vote FOR the following
proposal(s):
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For |
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Against |
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Abstain |
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1. |
Adoption of Merger Agreement.To adopt the Agreement and
Plan of Merger, dated as of November 11,
2009, by and among Hewlett-Packard Company, Colorado
Acquisition Corporation, a wholly owned subsidiary of
Hewlett-Packard Company, and 3Com Corporation. |
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2. |
Adjournment.To adjourn the special meeting
to a later date or time, if necessary or
appropriate, to solicit additional proxies
in the event there are insufficient votes at
the time of such adjournment to adopt the
Agreement and Plan of Merger. |
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date |