-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TmlQDsWD/23IfrHR5WrHHu09fF2JZmZny87xWPNuwk7KMmjLNtuA3MFg0AwIBAjk eCnL3FXmFvhaYSZzua5dUw== 0000891554-01-503384.txt : 20010706 0000891554-01-503384.hdr.sgml : 20010706 ACCESSION NUMBER: 0000891554-01-503384 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20010705 GROUP MEMBERS: DRAKE MERGER SUB, INC. GROUP MEMBERS: RADISYS CORP GROUP MEMBERS: RADISYS CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MICROWARE SYSTEMS CORP CENTRAL INDEX KEY: 0001003383 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 421073916 STATE OF INCORPORATION: IA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-49337 FILM NUMBER: 1675559 BUSINESS ADDRESS: STREET 1: 1500 N.W. 118TH STREET CITY: DES MOINES STATE: IA ZIP: 50325 BUSINESS PHONE: 515-223-8000 MAIL ADDRESS: STREET 1: 1500 N.W. 118TH STREET CITY: DES MOINES STATE: IA ZIP: 50325 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RADISYS CORP CENTRAL INDEX KEY: 0000873044 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930945232 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 5445 NE DAWSON CREEK DR CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036461800 MAIL ADDRESS: STREET 1: 5445 NE DAWSON CREEK DRIVE CITY: HILLSBORO STATE: OR ZIP: 97124 SC TO-T 1 d26190_sc-to.txt SCHEDULE TO-T ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- SCHEDULE TO TENDER OFFER STATEMENT (Under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934) ---------- Microware Systems Corporation (Name of Subject Company) Drake Merger Sub, Inc. (Offeror) RadiSys Corporation (Offeror) (Name of Filing Person (identifying status as offeror, issuer or other person)) Common Stock, Without Par Value (Title of Class of Securities) 595150103 (CUSIP Number of Class of Securities) Annette M. Mulee RadiSys Corporation 5445 NE Dawson Creek Drive Hillsboro, OR 97124 (503) 615-1100 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Filing Person) Copy to: John R. Thomas Stoel Rives LLP 900 SW Fifth Avenue, Suite 2600 Portland, OR 97204-1268 (503) 224-3380 CALCULATION OF FILING FEE Transaction Amount of Valuation: $13,479,174* Filing Fee: $2,696 - ----------------------- * Assumes purchase of 19,822,314 shares at $0.68 per share. [_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A [_] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] Third-party tender offer subject to Rule 14d-1. [_] Issuer tender offer subject to Rule 13e-4. [_] Going-private transaction subject to Rule 13e-3. [_] Amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [_] ================================================================================ This Tender Offer Statement on Schedule TO (this "Schedule TO") relates to the offer by Drake Merger Sub, Inc., an Iowa corporation ("Purchaser") and a wholly owned subsidiary of RadiSys Corporation, an Oregon corporation ("Parent"), to purchase all of the outstanding shares of common stock, without par value (the "Shares"), of Microware Systems Corporation, an Iowa corporation (the "Company"), at a purchase price of $0.68 per Share, net to the seller in cash, without interest, on the terms and subject to the conditions of the Offer to Purchase dated July 5, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal, copies of which are filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B). This Schedule TO is being filed on behalf of Purchaser and Parent. Capitalized terms not otherwise defined in this Schedule TO shall have the meanings ascribed to them in the Offer to Purchase. All information in the Offer to Purchase filed as Exhibit (a)(1)(A) is incorporated by reference in answer to all of the items in the Schedule TO except those items as to which information is specifically provided in this Schedule TO. Item 1. Summary Term Sheet The information set forth in the Offer to Purchase under "Questions and Answers" is incorporated herein by reference. Item 2. Subject Company Information (a) The subject company is Microware Systems Corporation, an Iowa corporation, with its principal executive offices located at 1500 NW 118th Street, Des Moines, Iowa 50325; telephone number (515) 223-8000. (b) The information set forth in the Introduction of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6, "Price Range of Shares; Dividends," of the Offer to Purchase is incorporated herein by reference. Item 3. Identity and Background of Filing Person (a), (b) and (c)(1), (c)(2) and (c)(5) The information set forth in Section 9, "Information Concerning Parent and Purchaser," and Annexes I and II of the Offer to Purchase is incorporated herein by reference. Neither Parent nor Purchaser has, during the past five years, (a) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining Parent or Purchaser from future violation of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. (c)(3) To the best knowledge of Parent and Purchaser, no person listed in Annexes I and II of the Offer to Purchase has, during the past 5 years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (c)(4) To the best knowledge of Parent and Purchaser, no person listed in Annexes I and II of the Offer to Purchase has, during the past 5 years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Item 4. Terms of the Transaction (a)(1)(i) through (v) The information set forth in the Introduction and Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments," of the Offer to Purchase is incorporated herein by reference. (a)(1)(vi) and (vii) The information set forth in Section 2, "Procedures for Tendering Shares," and Section 3, "Withdrawal Rights," of the Offer to Purchase is incorporated herein by reference. (a)(1)(viii) The information set forth in Section 4, "Acceptance for Payment and Payment of Offer Price," of the Offer to Purchase is incorporated herein by reference. 1 (a)(1)(ix), (x), (xi) Not applicable. (a)(1)(xii) The information set forth in Section 5, "Federal Income Tax Consequences," of the Offer to Purchase is incorporated herein by reference. Item 5. Past Contracts, Transactions, Negotiations and Agreements (a) and (b) The information set forth in Section 9, "Information Concerning Parent and Purchaser," Section 11, "Contacts with the Company; Background of the Offer," and Section 13, "Transaction Documents," of the Offer to Purchase is incorporated herein by reference. Item 6. Purposes of the Transaction and Plans or Proposals (a) and (c)(1) through (7) The information set forth in Section 12, "Purpose of the Offer; Short-Form Merger; Plans for the Company; Dissenters' Rights; Going-Private Transactions," Section 13, "Transaction Documents," and Section 14, "Dividends and Distributions," of the Offer to Purchase is incorporated herein by reference. Item 7. Source and Amount of Funds or Other Consideration (a), (b) and (d) The information set forth in Section 10, "Source and Amount of Funds," of the Offer to Purchase is incorporated herein by reference. Item 8. Interest in Securities of the Subject Company The information set forth in Section 9, "Information Concerning Parent and Purchaser," and in Section 13, "Transaction Documents," of the Offer to Purchase is incorporated herein by reference. Item 9. Persons/Assets, Retained, Employed, Compensated or Used The information set forth in Section 17, "Fees and Expenses," of the Offer to Purchase is incorporated herein by reference. Item 10. Financial Statements Not applicable because (a) the consideration offered consists solely of cash, (b) the offer is not subject to any financing condition and (c) the offer is for all outstanding securities of the subject class. Item 11. Additional Information (a)(1) Other than as elsewhere disclosed in this statement, none. (a)(2) through (5) The information set forth in Section 16, "Legal Matters," of the Offer to Purchase is incorporated herein by reference. (b) None or not applicable. Item 12. Exhibits Exhibit Number Description - ------ ----------- (a)(1)(A) Offer to Purchase dated July 5, 2001 (a)(l)(B) Letter of Transmittal (a)(1)(C) Notice of Guaranteed Delivery (a)(1)(D) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees (a)(1)(E) Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other Nominees (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(1)(G) Joint Press Release issued by Parent and the Company (incorporated herein by reference to Schedule TO-C filed July 2, 2001 by Parent) 2 (a)(1)(H) Summary Advertisement published July 5, 2001 (b) Not applicable (d)(1) Agreement and Plan of Merger, dated as of June 29, 2001, by and among RadiSys Corporation, Drake Merger Sub, Inc. and Microware Systems Corporation (d)(2) 19.9% Option Agreement, dated as of June 29, 2001, between RadiSys Corporation, and Microware Systems Corporation (d)(3) Form of Shareholder's Agreement, dated June 29, 2001, by and among RadiSys Corporation, Drake Merger Sub, Inc., and certain shareholders of Microware Systems Corporation (d)(4) Shareholder's Agreement, dated June 29, 2001 by and among RadiSys Corporation, Drake Merger Sub, Inc. and Motorola, Inc. (d)(5) Termination and Buy-out Agreement, dated June 29, 2001, by and among Microware Systems Corporation, Elder Court, LLC, Roth Capital Partners, Inc., Carbon Mesa Partners, LLC and Anthony Soich (g) Not applicable (h) Not applicable 3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: July 5, 2001 RadiSys Corporation By /s/ Glenford J. Myers ------------------------------------ Glenford J. Myers Chief Executive Officer Drake Merger Sub, Inc. By /s/ Glenford J. Myers ------------------------------------ Glenford J. Myers President 4 EXHIBIT INDEX Exhibit Number Description - ------ ----------- (a)(1)(A) Offer to Purchase dated July 5, 2001 (a)(l)(B) Letter of Transmittal (a)(1)(C) Notice of Guaranteed Delivery (a)(1)(D) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees (a)(1)(E) Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other Nominees (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(1)(G) Joint Press Release issued by Parent and the Company (incorporated herein by reference to Schedule TO-C filed July 2, 2001 by Parent) (a)(1)(H) Summary Advertisement published July 5, 2001 (b) Not applicable (d)(1) Agreement and Plan of Merger, dated as of June 29, 2001, by and among RadiSys Corporation, Drake Merger Sub, Inc. and Microware Systems Corporation (d)(2) 19.9% Option Agreement, dated as of June 29, 2001, between RadiSys Corporation, and Microware Systems Corporation (d)(3) Form of Shareholder's Agreement, dated June 29, 2001, by and among RadiSys Corporation, Drake Merger Sub, Inc., and certain shareholders of Microware Systems Corporation (d)(4) Shareholder's Agreement, dated June 29, 2001 by and among RadiSys Corporation, Drake Merger Sub, Inc. and Motorola, Inc. (d)(5) Termination and Buy-out Agreement, dated June 29, 2001, by and among Microware Systems Corporation, Elder Court, LLC, Roth Capital Partners, Inc., Carbon Mesa Partners, LLC and Anthony Soich (g) Not applicable (h) Not applicable EX-99.(A)(1)(A) 2 d26190_ex99a1a.txt OFFER TO PURCHASE Offer to Purchase for Cash All Outstanding Shares of Common Stock of Microware Systems Corporation at $0.68 Net Per Share By Drake Merger Sub, Inc., A Direct Wholly Owned Subsidiary of RadiSys Corporation THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON THURSDAY, AUGUST 2, 2001, UNLESS THE OFFER IS EXTENDED. THE OFFER (AS DEFINED BELOW) IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES OF COMMON STOCK (THE "SHARES") OF MICROWARE SYSTEMS CORPORATION (THE "COMPANY"), WHICH WOULD CONSTITUTE 90% OF THE OUTSTANDING SHARES. CERTAIN SHAREHOLDERS OF THE COMPANY HAVE AGREED TO TENDER 7,222,978 SHARES (CONSTITUTING APPROXIMATELY 37% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS) IN THE OFFER. THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE MERGER (AS DEFINED BELOW) ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT (AS DEFINED BELOW), THE OFFER AND THE MERGER AND RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ----------- Important Any shareholder desiring to tender all or any portion of the shareholder's Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile of it) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary indicated on the Letter of Transmittal and either deliver the certificate(s) for the tendered Shares to the Depositary along with the Letter of Transmittal or tender the Shares pursuant to the procedures for book-entry transfer set forth in Section 2 of this Offer to Purchase, or (2) request the shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the shareholder. Shareholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or other nominee if they desire to tender their Shares. A shareholder who desires to tender Shares and whose certificate(s) for Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender the Shares by following the procedures for guaranteed delivery set forth in Section 2 of this Offer to Purchase. Questions and requests for assistance may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. ----------- The Information Agent for the Offer is: Mellon Investor Services LLC Table of Contents Page ---- Questions and Answers.........................................................ii Introduction...................................................................1 The Tender Offer...............................................................3 1. Terms of the Offer; Extension of Tender Period; Termination; Amendments...............................................3 2. Procedure for Tendering Shares........................................6 3. Withdrawal Rights.....................................................9 4. Acceptance for Payment and Payment of Offer Price....................10 5. Federal Income Tax Consequences......................................12 6. Price Range of Shares; Dividends.....................................13 7. Effects of the Offer on the Market for Shares; Stock Quotations; Registration Under the Exchange Act .................................13 8. Information Concerning the Company...................................15 9. Information Concerning Parent and Purchaser..........................16 10. Source and Amount of Funds...........................................18 11. Contacts with the Company; Background of the Offer...................19 12. Purpose of the Offer; Short Form Merger; Plans for the Company; Dissenters' Rights; Going Private Transactions ......................22 13. Transaction Documents................................................24 14. Dividends and Distributions..........................................40 15. Conditions of the Offer..............................................41 16. Legal Matters........................................................43 17. Fees and Expenses....................................................45 18. Miscellaneous........................................................45 Annex I Certain Information Concerning the Directors and Executive Officers of Parent Annex II Certain Information Concerning the Sole Director and Executive Officer of Purchaser Questions and Answers Drake Merger Sub, Inc. is offering to purchase all of the outstanding common stock of Microware Systems Corporation for $0.68 per share, net to you in cash, without interest. The following are some of the questions you, as a shareholder of Microware, may have about the offer. We urge you to read carefully the remainder of this Offer to Purchase and the Letter of Transmittal because the information in this "Questions and Answers" section is not complete. Additional important information is contained in the remainder of this Offer to Purchase and in the Letter of Transmittal. Who is offering to buy my securities? Our name is Drake Merger Sub, Inc. We are an Iowa corporation formed for the purpose of making an offer to purchase all of the outstanding shares of common stock of Microware. To date, we have carried on no activities other than in connection with the offer. We are a wholly owned subsidiary of RadiSys Corporation, an Oregon corporation. RadiSys is a leading independent provider of building blocks enabling next-generation Internet and communications systems. See the "Introduction" to this Offer to Purchase and Section 9, "Information Concerning Parent and Purchaser." What are the classes and amounts of securities sought in the offer? We are seeking to purchase all of the outstanding shares of common stock of Microware. See the "Introduction" to this Offer to Purchase and Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments." How much are you offering to pay? What is the form of payment? Will I have to pay any fees or commissions? We are offering to pay $0.68 per share, net to you in cash, without interest. If you are the record owner of your shares and you tender your shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and your broker or other nominee tenders your shares on your behalf, your broker or nominee may charge you a fee and we will not be responsible for paying that fee. You should consult your broker or nominee to determine whether any charges will apply. See the "Introduction" to this Offer to Purchase. Under the terms of our offer, if the tender of shares to us results in a withholding tax obligation, we are entitled to satisfy that obligation, and to treat any withholding taxes paid to a tax authority as having been delivered to you. Do you have the financial resources to make payment? Yes. RadiSys, our parent company, will provide us with sufficient funds to purchase all shares validly tendered and not withdrawn in the offer and will provide us with sufficient funds for the merger, which is expected to follow the successful completion of the offer in accordance with the terms and conditions of the merger agreement. We anticipate that these funds will be obtained from working capital. See Section 10, "Source and Amount of Funds." ii Is your financial condition relevant to my decision to tender in the offer? No. We do not believe our financial condition is relevant to your decision. We base this conclusion on several factors. We are paying you cash for your shares. The offer is not subject to any financing condition. The offer is for any and all of the outstanding shares of common stock of Microware. See Section 10, "Source and Amount of Funds." How long do I have to decide whether to tender into the offer? Unless the offer is extended, you will have until the expiration of the offer at 5:00 p.m., New York City time, on Thursday, August 2, 2001, to tender your shares into the offer. We will purchase all properly tendered shares on the expiration date if the conditions to the offer are then met. If you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use the guaranteed delivery procedure, which is described later in this Offer to Purchase. See Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments," and Section 2, "Procedure for Tendering Shares." Can the offer be extended and under what circumstances? Subject to the terms of the merger agreement, we can extend the offer. We have agreed in the merger agreement that: In our sole discretion, we may extend the offer for any period required by applicable rules and regulations of the Securities and Exchange Commission. If all conditions to the offer have been satisfied or waived, we will accept for payment and pay for all shares validly tendered and not withdrawn at that time, and we may provide a "subsequent offering period" during which shareholders whose shares have not been accepted for payment may tender, but not withdraw, their shares and receive the offer price of $0.68 per share. We are not permitted under the federal securities laws to provide a subsequent offering period of less than three or more than twenty business days. Our rights and obligations to extend the offer are subject to the rights of RadiSys and Microware to terminate the merger agreement if the offer is not completed by September 30, 2001. For more details on our ability to extend the offer, see Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments." How will I be notified if the offer is extended? If the offer is extended past 5:00 p.m., New York City time, on Thursday, August 2, 2001, we will make a public announcement of the new expiration date not later than 9:00 a.m., New York City time, on the next business day after the day on which the offer was scheduled to expire and will inform Mellon Investor Services LLC, the depositary for the offer, of that fact. See Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments." iii What are the most significant conditions to the offer? We are not obligated to purchase any shares that are validly tendered unless the number of shares validly tendered and not withdrawn before the expiration date of the offer represents at least 90% of the then outstanding shares on a fully-diluted basis. We call this condition the "Minimum Condition." The offer is also subject to a number of other conditions. See Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments," and Section 15, "Conditions of the Offer." How do I tender my shares? To tender your shares, you must deliver the certificates representing your shares, together with a completed letter of transmittal and any other documents required by the letter of transmittal, to Mellon Investor Services LLC, the depositary for the offer, not later than the time the offer expires. If your shares are held in street name, the shares can be tendered by your nominee through Mellon Investor Services LLC. If you are unable to deliver any required document or instrument to the depositary by the expiration of the offer, you may gain some extra time by having a broker, a bank or other fiduciary that is an eligible institution guarantee that the missing items will be received by the depositary within three Nasdaq National Market trading days. For the tender to be valid, however, the depositary must receive the missing items within that three trading day period. See Section 2, "Procedures for Tendering Shares." Until what time may I withdraw previously tendered shares? You may withdraw tendered shares at any time before the offer expires at 5:00 p.m., New York City time, on Thursday, August 2, 2001. If the stated expiration date of the offer is extended, you may withdraw tendered Shares at any time before the new date and time of expiration. This right to withdraw will not apply to the subsequent offering period, if one is added. See Section 1, "Terms of the Offer; Extension of Tender Period; Termination; Amendments," and Section 3, "Withdrawal Rights." How do I withdraw previously tendered shares? To withdraw previously tendered shares, you must deliver a notice of withdrawal with the required information to the depositary while you still have the right to withdraw the shares. See Section 3, "Withdrawal Rights." What does Microware's board of directors think of the offer? We are making the offer pursuant to the merger agreement agreed to among RadiSys, us and Microware. Microware's board of directors has determined that the merger agreement, the offer and the merger are each advisable and fair to, and in the best interests of, the shareholders of Microware. Microware's board of directors has approved the execution, delivery and performance of the merger agreement and the completion of the transactions contemplated by the merger agreement, including the offer and the merger, and has recommended that you accept the offer. See the "Introduction" to this Offer to Purchase. iv Have any shareholders agreed to tender their shares? Yes. Shareholders who hold outstanding shares of Microware common stock representing approximately 37% of the shares of Microware common stock outstanding on a fully-diluted basis have agreed to tender and not withdraw their shares in the offer. See the "Introduction" to this Offer to Purchase. Will Microware continue as a public company? No. If the merger takes place, Microware will no longer be publicly owned. Even if the merger does not occur, if we purchase all of the tendered shares, there may be so few remaining shareholders and publicly held shares that the shares may no longer be eligible to be traded on the Nasdaq National Market or any other securities exchange, there may not be a public trading market for the shares, and Microware may cease making filings with the Securities and Exchange Commission or otherwise cease being required to comply with the Commission rules relating to publicly held companies. See Section 7, "Effects of the Offer on the Market for Shares; Stock Quotations; Registration under the Exchange Act." Will the offer be followed by a merger if all shares of Microware are not tendered in the offer? If we accept for payment and pay for 90 percent of the shares of Microware on a fully-diluted basis, we will be merged with and into Microware. If that merger takes place, RadiSys will own all of the shares of Microware, and all other persons who were shareholders of Microware immediately before the merger will receive $0.68 per share in cash, or any higher price per share that is paid in the offer. See the "Introduction" to this Offer to Purchase. If I decide not to tender, how will the offer affect my shares? If the merger described above takes place, shareholders not tendering in the offer will receive the same amount of cash per share that they would have received had they tendered their shares in the offer. Therefore, if the merger takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier if you tender your shares. If the merger does not take place, the number of shareholders and the number of shares of Microware that are still in the hands of the public may be so small that there may no longer be an active public trading market (or, possibly, there may not be any public trading market) for the Microware common stock. Also, as described above, Microware may cease making filings with the Securities and Exchange Commission or otherwise cease being required to comply with the Securities and Exchange Commission rules relating to publicly held companies. See the "Introduction" to this Offer to Purchase and Section 7, "Effects of the Offer on the Market for Shares; Stock Quotations; Registration under the Exchange Act." You may be entitled to dissenters' rights in connection with the Offer or Merger. See Section 12, "Purpose of the Offer; Short Form Merger; Plans for the Company; Dissenters' Rights; Going Private Transactions." v What is the market value of my shares as of a recent date? On June 29, 2001, the last trading day before we announced the signing of the merger agreement, the last sale price of Microware common stock reported on the Nasdaq National Market was $0.48 per share. We encourage you to obtain recent quotations for shares of Microware common stock in deciding whether to tender your shares. See Section 6, "Price Range of Shares; Dividends." What are the principal United States federal income tax consequences of tendering shares? The receipt of cash for shares pursuant to the offer or the merger will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign income tax purposes as well. In general, a shareholder who sells shares pursuant to the offer or receives cash in exchange for shares pursuant to the merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the shareholder's adjusted tax basis in the shares sold pursuant to the offer or exchanged for cash pursuant to the merger. See Section 5, "Federal Income Tax Consequences" for more detailed information. To whom may I speak if I have questions about the offer? You may call Mellon Investor Services LLC at (800) 504-8997 (toll free) or at (917) 320-6267 (international calls). Mellon Investor Services LLC is acting as the information agent for the offer. vi To the holders of common stock of Microware Systems Corporation Introduction Drake Merger Sub, Inc., an Iowa corporation ("Purchaser"), a wholly owned subsidiary of RadiSys Corporation, an Oregon corporation ("Parent"), offers to purchase all outstanding shares (the "Shares") of common stock of Microware Systems Corporation, an Iowa corporation (the "Company"), at $0.68 per Share, net to the seller in cash, on the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Parent has fully and unconditionally guaranteed the Offer. Tendering shareholders may be obligated to pay brokerage fees or commissions. They will not, subject to Instruction 6 of the Letter of Transmittal, be obligated to pay stock transfer taxes on the purchase of Shares by Purchase pursuant to the Offer. However, any tendering shareholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of up to 31% of the gross proceeds payable to the shareholder or other payee pursuant up to to the Offer. See Section 2 of this Offer to Purchase. The Purchaser will pay all charges and expenses of Mellon Investor Services LLC, as Information Agent (the "Information Agent"), and Mellon Investor Services LLC, as Depositary (the "Depositary"), incurred in connection with the Offer. See Section 17 of this Offer to Purchase. The Offer is subject to the condition (the "Minimum Condition"), among other things, that there be validly tendered and not withdrawn before the expiration of the Offer at least that number of Shares which would constitute 90% of the outstanding Shares on a fully diluted basis. Certain shareholders of the Company have agreed to tender 7,222,978 Shares (constituting approximately 37% of the outstanding Shares on a fully diluted basis) in the Offer. The Offer is also subject to other terms and conditions set forth in Section 15 of this Offer to Purchase. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 29, 2001 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that on the terms and subject to the conditions in the Merger Agreement, as soon as practicable after the completion of the Offer, Purchaser will be merged with and into the Company (the "Merger"), with the Company being the corporation surviving the Merger (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than Shares with respect to which appraisal rights are properly exercised ("Dissenting Shares") under the Iowa Business Corporation Act (the "IBCA") or owned by Parent, Purchaser or any other subsidiary of Parent) will be converted into and represent the right to receive $0.68 in cash or any higher price that may be paid per Share in the Offer (the "Per Share Amount"), without interest. See Section 13 of this Offer to Purchase. THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Houlihan Lokey Howard & Zukin Capital, the Company's financial advisor, has delivered to the Company's board of directors its written opinion that the aggregate consideration to be received by the shareholders of the Company pursuant to the Merger Agreement is fair to the shareholders from a financial point of view. A copy of that opinion is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 which is being distributed to the Company's shareholders with this Offer to Purchase. The Merger Agreement provides that, promptly upon the purchase of Shares pursuant to the Offer, Parent will be entitled to designate a number of directors, rounded up to the next whole number, on the board of directors of the Company that will give Parent, subject to compliance with Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), representation on the board of directors equal to the product of (a) the total number of directors on the board of directors and (b) the percentage that (i) the number of Shares beneficially owned by Parent or any of its affiliates following completion of the Offer bears to (ii) the total number of Shares outstanding. The Merger Agreement further provides that the Company will, upon request by Parent, promptly increase the size of the Board of Directors and/or exercise its reasonable efforts to secure the resignations of a number of directors that is necessary to enable Parent's designees to be elected to the board of directors and will cause Parent's designees to be elected. See Section 13 of this Offer to Purchase. The Company has informed Purchaser that as of June 29, 2001, (a) 19,168,155 Shares were issued and outstanding, (b) no shares of preferred stock were issued or outstanding, (c) 3,717,332 shares of the Company's common stock were reserved for future issuance pursuant to outstanding Company Options (as defined below), (d) 285,529 shares of the Company's common stock were reserved for future issuance pursuant to the Company Stock Purchase Plan (as defined below), (e) 1,423,736 shares of the Company's common stock were reserved for future issuance upon exercise of Company Warrants (as defined below) and (f) 6,698,033 shares of the Company's common stock were reserved for future issuance upon exercise of the conversion rights contained in the Buyout Agreement dated as of June 29, 2001 among the Company and Elder Court, LLC and other parties named in the Buyout Agreement. If the Minimum Condition is satisfied, Parent and Purchaser will have sufficient voting power to approve the Merger, even if no other shareholder votes in favor of the Merger. Under the IBCA, if a parent corporation owns at least 90% of the shares of each class of shares of a subsidiary corporation, the parent can merge with the subsidiary in a "short form" merger without a vote of shareholders. Assuming that Purchaser acquires 90% or more of the Shares, Purchaser would be able to effect the Merger pursuant to the short form merger provisions of the IBCA, without the action of any other shareholder of the Company. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 The Tender Offer 1. Terms of the Offer; Extension of Tender Period; Termination; Amendments. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the extension or amendment), Purchaser will accept for payment and pay for all Shares that are validly tendered on or before the Expiration Date (as defined below) and not withdrawn as permitted by Section 3 of this Offer to Purchase. The term "Expiration Date" means 5:00 p.m., New York City time, on Thursday, August 2, 2001, unless and until Purchaser (subject to the terms and conditions of the Merger Agreement) shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned on, among other things, the satisfaction of the Minimum Condition. Subject to the provisions of the Merger Agreement, Purchaser reserves the unilateral right, but shall not be obligated, to waive or reduce the Minimum Condition or to waive any or all of the conditions of the Offer other than the Minimum Condition. If, by 5:00 p.m., New York City time, on Thursday, August 2, 2001, or any subsequent Expiration Date, any or all of the conditions to the Offer have not been satisfied or waived, subject to the provisions of the Merger Agreement, Purchaser may elect to (a) terminate the Offer and return all tendered Shares to tendering shareholders, (b) waive all of the unsatisfied conditions, including the Minimum Condition, and subject to any required extension, purchase all Shares validly tendered by the Expiration Date and not withdrawn, (c) extend the Offer and, subject to the right of shareholders to withdraw Shares until the adjusted Expiration Date, retain the Shares that have been tendered until the expiration of the Offer as extended, or (d) delay acceptance for payment of, or payment for, the Shares, subject to complying with applicable law, until the satisfaction or waiver of the conditions of the Offer. Purchaser acknowledges that its reservation of the right to delay payment for Shares that it has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer. See Section 15 of this Offer to Purchase. Purchaser expressly reserves the right to modify the terms of the Offer, except that, without the consent of the Company, Purchaser shall not (a) reduce the number of Shares subject to the Offer, (b) reduce the Per Share Amount, (c) impose any other conditions to the Offer other than the conditions set forth in Annex I to the Merger Agreement (the "Offer Conditions") or modify the Offer Conditions (other than to waive any Offer Conditions to the extent permitted by the Merger Agreement), 3 (d) except as provided in the next sentence, extend the Offer, (e) change the form of consideration payable in the Offer, or (f) amend any other term of the Offer in any manner adverse to the holders of Shares. Purchaser may, without the consent of the Company, extend the Offer at any time, and from time to time, (a) if at the then scheduled expiration date of the Offer any of the conditions to Purchaser's obligation to accept for payment and pay for Shares (the "Offer Conditions") shall not have been satisfied or waived, until such time as those conditions are satisfied or waived, or (b) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "Commission") or its staff applicable to the Offer. Subject to the applicable regulations of the Commission and the provisions of the Merger Agreement, Purchaser also expressly reserves the rights, in its sole discretion, at any time or from time to time, (a) to extend the Offer and adjust the Expiration Date, (b) to terminate the Offer if any of the conditions referred to in Section 15 of this Offer to Purchase have not been satisfied or upon the occurrence of any of the events specified in Section 15, and (c) to waive any condition or otherwise amend the Offer in any respect, in each case by giving oral or written notice of the extension, termination, waiver or amendment to the Depositary and by making a public announcement of the extension, termination, waiver or amendment. If Purchaser accepts for payment any Shares pursuant to the terms of the Offer, it will accept for payment all Shares validly tendered before the Expiration Date and not withdrawn and will promptly pay for all Shares accepted for payment. Purchaser acknowledges that notwithstanding anything to the contrary contained in the Offer, Purchaser shall not be required to pay for the Shares and may terminate or amend the Offer only if, before the Expiration Date, any of the conditions referred to in Section 15 of this Offer to Purchase have not been satisfied or waived, or if any of the events specified in Section 15 have occurred. The rights reserved by Purchaser in the preceding paragraph are in addition to Purchaser's rights pursuant to Section 15 of this Offer to Purchase. Any extension, delay, termination or amendment of the Offer will be followed as promptly as practicable by public announcement of the extension, delay, termination or amendment. In the case of an extension, the announcement will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that any material change in the information published, sent or given to shareholders in connection with the Offer be promptly disseminated to shareholders in a manner reasonably designed to inform shareholders of the change), and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or 4 otherwise communicate any public announcement other than by making a release to the Dow Jones News Service. Rule 14d-11 under the Exchange Act permits Purchaser, subject to certain conditions, to provide a subsequent offering period following the expiration of the Offer on the Expiration Date (a "Subsequent Offering Period"). A Subsequent Offering Period is an additional period of time from three business days to twenty business days in length, beginning after Purchaser purchases Shares tendered in the Offer, during which shareholders may tender, but not withdraw, their Shares and receive the Per Share Amount. Under the terms of the Merger Agreement, Purchaser may provide for a Subsequent Offering Period without the consent of the Company. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer (including, subject to the Merger Agreement, the Minimum Condition), Purchaser will disseminate additional tender offer materials (including by public announcement as set forth above) and extend the Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price, percentage of securities sought or inclusion of or change to a dealer's soliciting fee, will depend on the facts and circumstances, including the materiality, of the changes. In the Commission's view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to shareholders, and, if material changes are made with respect to information that approaches the significance of price and share levels, a minimum of ten business days may be required to allow for adequate dissemination and investor response. With respect to a change in price or, subject to particular limitations, a change in the percentage of securities sought or inclusion of or change to a dealer's soliciting fee, a minimum ten business day period from the date of the change is generally required to allow for adequate dissemination to shareholders. Accordingly, if, before the Expiration Date, Purchaser decreases the number of Shares being sought or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from the date that notice of the increase or decrease is first published, sent or given to holders of Shares, the Offer will be extended at least until the expiration of the ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 5:00 p.m., New York City time. In connection with the Offer, the Company has provided or will provide Purchaser with the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to registered holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 5 2. Procedure for Tendering Shares. Except as set forth below, for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile of it), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or before the Expiration Date, and either (a) certificates representing tendered Shares must be received by the Depositary, or Shares must be tendered pursuant to the procedure for book-entry transfer set forth below (and confirmation of receipt of delivery must be received by the Depositary), in each case on or before the Expiration Date, or (b) the guaranteed delivery procedures set forth below must be complied with. No alternative, conditional or contingent tenders will be accepted. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (a) if the Letter of Transmittal is signed by the registered holder of the Shares tendered with the Letter of Transmittal, unless the holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in the Letter of Transmittal, or (b) if Shares are tendered for the account of a firm that is a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each referred to as an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signatory of the Letter of Transmittal (or a facsimile of it), or if payment is to be made, or Shares not accepted for payment or not tendered are to be returned to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate, with the signature(s) on the certificate or stock power guaranteed by an Eligible Institution. If the Letter of Transmittal or stock powers are signed or any certificate is endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should indicate this when signing and, unless waived by Purchaser, proper evidence satisfactory to Purchaser of their authority to act must be submitted. See Instruction 5 of the Letter of Transmittal. Book-Entry Transfer. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company ("DTC") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in DTC's system may make book-entry delivery of the Shares by causing DTC to transfer Shares into the Depositary's account in accordance with DTC's procedure for those transfers. Although delivery of Shares may be effected through book-entry transfer at DTC, however, a properly 6 completed and duly executed Letter of Transmittal (or facsimile of it), with any required signature guarantees, or an Agent's Message and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase before the Expiration Date, or the guaranteed delivery procedures described below must be complied with. The term "Agent's Message" means a message transmitted through electronic means by DTC to, and received by, the Depositary and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Shares that the participant has received, and agrees to be bound by, the terms of the Letter of Transmittal. Delivery of documents to DTC in accordance with DTC's procedures does not constitute delivery to the Depositary. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and the shareholder's certificates representing Shares are not immediately available (or the procedures for book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary before the Expiration Date, the Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (a) the tender is made by or through an Eligible Institution; (b) the Depositary receives, before the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser; and (c) the certificates representing all tendered Shares in proper form for transfer (or confirmation of a book-entry transfer of those Shares into the Depositary's account at DTC), together with a properly completed and duly executed Letter of Transmittal (or facsimile of it) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three trading days after the date of the Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq Stock Market ("Nasdaq") is open for business. The Notice of Guaranteed Delivery may be delivered by hand, or may be transmitted by telegram, telex, facsimile transmission or mail, to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates representing the Shares (or timely confirmation of a book-entry transfer of the Shares into the Depositary's account at DTC), (b) properly completed and duly executed Letter(s) of Transmittal (or facsimile(s) of it/them), together with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message), and (c) any other documents required by the Letter of Transmittal. 7 Accordingly, tendering shareholders may be paid at different times depending on when certificates representing Shares or confirmations of book-entry transfers of Shares are actually received by the Depositary. The method of delivery of all documents, including certificates for Shares, is at the option and risk of the tendering shareholder, and the delivery will be deemed made only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Determination of Validity. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tendered Shares will be determined by Purchaser in its sole discretion, and its determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders of any Shares that it determines are not in appropriate form or the acceptance for payment of or payment for which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular Shares or any particular shareholder, and Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the Instructions to the Letter of Transmittal) will be final and binding on all parties. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating to the tender have been expressly waived or cured to the satisfaction of Purchaser. None of Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any notification. Other Requirements. By executing the Letter of Transmittal, a tendering shareholder irrevocably appoints designees of Purchaser as the shareholder's proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of the shareholder's rights with respect to the Shares tendered by the shareholder and accepted for payment by Purchaser (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after July 5, 2001), effective if, when and to the extent that Purchaser accepts the Shares for payment pursuant to the Offer. Upon the acceptance for payment, all prior proxies given by the shareholder with respect to the Shares or other securities accepted for payment will, without further action, be revoked, and no subsequent proxies may be given by the shareholder nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of Purchaser will, with respect to the Shares and other securities or rights issuable in respect of the Shares, be empowered to exercise all voting and other rights of the shareholder as they, in their sole discretion, may deem proper in respect of any annual, special or adjourned meeting of the Company's shareholders, action by written consent in lieu of a meeting or otherwise. Purchaser reserves the right to require that, for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of the Shares, Purchaser must be able to exercise full voting rights with respect to the Shares. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. 8 To prevent backup withholding of federal income tax on payments made to shareholders with respect to Shares purchased pursuant to the Offer, each shareholder must provide the Depositary with his correct taxpayer identification number ("TIN") and certify that he is not subject to backup withholding of federal income tax by completing the Substitute Form W-9 included in the Letter of Transmittal. Non-United States holders must submit a completed Form W-8 to avoid backup withholding. This form may be obtained from the Depositary. See Instructions 10 and 11 of the Letter of Transmittal. 3. Withdrawal Rights. Tenders of Shares made pursuant to the Offer will be irrevocable, except that Shares tendered may be withdrawn at any time before the Expiration Date, and, unless earlier accepted for payment by Purchaser as provided in this Offer to Purchase, may also be withdrawn on or after September 3, 2001. For a withdrawal of Shares tendered to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name(s) in which the certificate(s) representing the Shares is/are registered, if different from that of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn must also be furnished to the Depositary before the physical release of the Shares to be withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 2 of this Offer to Purchase, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Shares and must otherwise comply with DTC's procedures. If Purchaser extends the Offer, is delayed in its acceptance for payment of any Shares tendered, or is unable to accept for payment or pay for Shares tendered pursuant to the Offer, for any reason, then, without prejudice to Purchaser's rights set forth in this Offer to Purchase, the Depositary may, on behalf of Purchaser, retain tendered Shares, and those Shares may not be withdrawn except to the extent that the tendering shareholder is entitled to and duly exercises withdrawal rights as described in this Section and as otherwise required by Rule 14e-1(c) under the Exchange Act. Any delay will be accompanied by an extension of the Offer to the extent required by law. Withdrawals of tenders of Shares may not be rescinded and Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer. Withdrawn Shares, however, may be retendered by again following the procedures described in Section 2 of this Offer to Purchase at any time before the Expiration Date. All questions as to the form and validity, including time of receipt, of notices of withdrawal will be determined by Purchaser, in its sole discretion, and its determination will be 9 final and binding on all parties. None of Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal, nor shall any of them incur any liability for failure to give any such notification. 4. Acceptance for Payment and Payment of Offer Price. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the extension or amendment), Purchaser will accept for payment and will pay for all Shares validly tendered before the Expiration Date (and not properly withdrawn in accordance with Section 3 of this Offer to Purchase) as soon as practicable after the latest to occur of (a) the Expiration Date, and (b) subject to compliance with Rule 14e-1(c) under the Exchange Act, the satisfaction or waiver of the conditions of the Offer set forth in Section 15 of this Offer to Purchase. Any determination concerning the satisfaction of the terms and conditions of the Offer shall be within the sole discretion of Purchaser, and that determination shall be final and binding on all tendering shareholders. See Section 15 of this Offer to Purchase. Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. If Purchaser desires to delay payment for Shares accepted for payment pursuant to the Offer, and the delay would otherwise be in contravention of Rule 14e-1(c) of the Exchange Act, Purchaser will formally extend the Offer. See Section 15 of this Offer to Purchase. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates representing the Shares (or a timely confirmation of a book-entry transfer of the Shares into the Depositary's account at DTC, as described in Section 2 of this Offer to Purchase), (b) a properly completed and duly executed Letter of Transmittal (or facsimile of it) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message), and (c) any other documents required by the Letter of Transmittal. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and by doing so purchased, tendered Shares when, as and if Purchaser gives oral or written notice to the Depositary, as agent for the tendering shareholders, of Purchaser's acceptance for payment of the Shares. Payment for Shares accepted for payment will be made by the deposit of the purchase price for the Shares with the Depositary, which will act as agent for the tendering shareholders for the purpose of receiving the payment from Purchaser and transmitting the payment to tendering shareholders. If, for any reason, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights under Section 1 of 10 this Offer to Purchase, the Depositary may, on behalf of Purchaser, retain tendered Shares, and those Shares may not be withdrawn, except to the extent that the tendering shareholders are entitled to withdrawal rights as described in Section 3 of this Offer to Purchase and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will interest be paid on the purchase price by reason of any delay in making those payments. If any tendered Shares are not accepted for payment and paid for, certificates representing those Shares will be returned (or, in the case of Shares delivered by book-entry transfer with DTC as permitted by Section 2 of this Offer to Purchase, those Shares will be credited to an account maintained with DTC) without expense to the tendering shareholder as promptly as practicable following the expiration or termination of the Offer. If, before the Expiration Date, Purchaser increases the consideration to be paid for Shares pursuant to the Offer, Purchaser will pay the increased consideration for all Shares accepted for payment pursuant to the Offer, whether or not such Shares have been tendered or accepted for payment before the increase in the consideration. Purchaser reserves the right, with the consent of the Company, to transfer or assign in whole or in part to one or more affiliates of Purchaser or Parent the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. Federal Income Tax Consequences. The receipt of cash for Shares pursuant to the Offer (or in the Merger) will be a taxable transaction for United States federal income tax purposes (and may also be a taxable transaction under applicable state, local or other tax laws). In general, a shareholder will recognize gain or loss for United States federal income tax purposes equal to the difference between the shareholder's adjusted tax basis for the Shares the shareholder sells in the transaction and the amount of cash received for the sale. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. That gain or loss will be capital gain or loss if the Shares are a capital asset in the hands of the shareholder and will be long term capital gain or loss if the Shares were held for more than one year on the date of sale (in the case of the Offer) or the effective time of the Merger (in the case of the Merger). The receipt of cash for Shares pursuant to the exercise of dissenters' rights, if any, will generally be taxed in the same manner as described above. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of up to 31%. Backup withholding generally applies if the shareholder (a) fails to furnish the shareholder's social security number or TIN, (b) furnishes an incorrect TIN, or 11 (c) under some circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is the shareholder's correct number and that the shareholder is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Some persons generally are entitled to exemption from backup withholding, including corporations, non-United States persons and financial institutions. Particular penalties apply for failure to furnish correct information and for failure to include reportable payments in income. Each shareholder should consult with his own tax advisor as to the shareholder's qualification for exemption from backup withholding and the procedure for obtaining the exemption. Tendering shareholders may be able to prevent backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. The foregoing discussion may not be applicable to a shareholder who acquired Shares pursuant to the exercise of employee stock options or otherwise as compensation, or to a shareholder who is not a United States person for United States federal income tax purposes, including a shareholder who is not a citizen or resident of the United States, or who is otherwise subject to special tax treatment under the Internal Revenue Code. In addition, the foregoing discussion does not address the tax treatment of holders of options or warrants to acquire Shares or of securities convertible into Shares. The federal income tax discussion set forth above is included for general information only and is based upon present law. Shareholders are urged to consult their tax advisors with respect to the specific tax consequences of the Offer and the Merger to them, including the application and effect of the alternative minimum tax, and state, local or non-United States income and other tax laws. 6. Price Range of Shares; Dividends. The Shares are traded on Nasdaq under the symbol "MWAR." The Company has received one or more notifications from Nasdaq informing it that the Shares do not meet the requirements for continued listing on Nasdaq. See Section 7. As a result, the Shares may cease to be authorized for quotation on Nasdaq. The following table sets forth, for the periods indicated, the high and low per Share sales prices on Nasdaq as reported by published financial sources. The Company has not declared or paid any cash dividends with respect to the Shares for the periods indicated. 12 High Low ---- --- Fiscal Year Ended March 31, 2000: First Quarter $2.000 $1.563 Second Quarter $2.625 $1.438 Third Quarter $6.250 $1.563 Fourth Quarter $10.750 $4.750 Fiscal Year Ending March 31, 2001: First Quarter $8.875 $2.375 Second Quarter $2.656 $1.438 Third Quarter $1.781 $0.438 Fourth Quarter $1.500 $0.500 Fiscal Year Ending March 31, 2002: First Quarter $1.010 $0.370 Second Quarter (through July 3, 2001) $0.690 $0.640 On June 29, 2001, the last trading day before the public announcement of the terms of the Offer and the Merger, the closing per Share sales price on Nasdaq was $0.48. On July 3, 2001, the last trading day before commencement of the Offer, the closing per Share sales price on Nasdaq was $0.66. Shareholders are urged to obtain a current market quotation for the Shares. 7. Effects of the Offer on the Market for Shares; Stock Quotations; Registration Under the Exchange Act. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly. Consequently, depending on the number of Shares purchased and the number of remaining holders of Shares, the purchase of Shares pursuant to the Offer may adversely affect the liquidity and market value of the remaining Shares held by the public. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the Offer price. The Shares are listed and traded on Nasdaq, which constitutes the principal trading market for the Shares. Depending on the aggregate market value and the number of Shares not purchased pursuant to the Offer, the Shares may no longer meet the quantitative maintenance criteria of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion on Nasdaq and may cease to be authorized for quotation on Nasdaq. Pursuant to the maintenance criteria, issuers on Nasdaq are required to have (a) (1) at least 750,000 publicly held shares, (2) at least 400 holders of round lots, (3) a market value of publicly held shares of at least $5 million, (4) a minimum bid price per share of $1, (5) net tangible assets of at least $4 million, and (6) at least two registered and active market makers for the Shares or 13 (b) (1) at least 1.1 million publicly held shares, (2) at least 400 holders of round lots, (3) a market value of publicly held shares of at least $15 million, (4) a market capitalization of at least $50 million or total assets and total revenue of at least $50 million (each for the most recently completed fiscal year or two of the last three most recently completed fiscal years), (5) a minimum bid price per share of $5, and (6) at least four registered and active market makers for the Shares. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares outstanding are not considered publicly held for this purpose. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in Nasdaq or in any other tier of Nasdaq, and the Shares are no longer included in Nasdaq or in any other tier of Nasdaq, the market for Shares could be adversely affected. If the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of Nasdaq, the Shares might continue to trade in the over-the-counter market and price quotations might therefore be reported by other sources. The extent of the public market for the Shares and the availability of quotations would, however, depend on the number of holders of Shares remaining at that time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. The Shares are registered under the Exchange Act. The registration may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 holders of record of the Shares. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its shareholders and to the Commission, and would make some of the provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with shareholders' meetings and the related requirement of an annual report to shareholders, and the requirements of Rule 13e-3 with respect to going private transactions, no longer applicable with respect to the Shares or to the Company. Furthermore, if registration of the Shares under the Exchange Act were terminated, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or, with respect to some persons, eliminated. According to the Company, as of May 31, 2001, there were approximately 275 holders of record of the Shares. The Shares are "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the Shares as collateral. Depending on factors similar to those described above regarding listing and market quotations, it is possible the Shares would no longer constitute "margin securities" for purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for loans made by brokers. 14 If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 8. Information Concerning the Company. Except as otherwise set forth in this Offer to Purchase, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based on publicly available documents and records on file with the Commission and other public sources including the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2001. Although neither Purchaser nor Parent has any knowledge that would indicate that the statements contained in this Offer to Purchase based on this information are untrue, neither Purchaser nor Parent takes any responsibility for the accuracy or completeness of the information concerning the Company furnished by the Company or contained in those documents and records or for any failure by the Company to disclose events or information which may have occurred or may affect the significance or accuracy of the information but which are unknown to Purchaser or Parent. The Company was incorporated in the State of Iowa in 1977 under the name Microware Systems Corporation. The Company's principal executive offices are located at 1500 NW 118th Street, Des Moines, Iowa 50325 and its telephone number is (515) 223-8000. The following description of the Company's business has been taken from the Company's Annual Report on Form 10-K for the year ended March 31, 2001. The Company develops, markets and supports sophisticated real-time operating system software, network and communications software and development tools for the embedded systems, communications and consumer products markets. The Company's operating system product line is built around its OS-9 real-time operating system, which was first introduced in 1980 and has been continually refined to incorporate advances in technology. OS-9 is a real-time operating system targeted at "embedded systems" - computers dedicated to specialized tasks embedded within application-specific industrial or computer products. The Company markets its products through its sales forces in North America, Europe and Japan. During the past fiscal year, the Company shifted its emphasis toward network and communications-oriented applications, including introduction of a product, the IXP 1200 Microcode Support Library (MSL), which provides a powerful microcode solution for the Intel IXP 1200 Network processor. This product line is operating system independent and thus can be used with Linux, OS-9 and other popular operating systems. The Company has also developed high performance routing software such as RIP, OSPF, etc., which can be used by the MSL and/or OS-9 network software. The Company's business includes developing and marketing system software and middleware for use in embedded systems; communications infrastructure products; networking equipment; networked applications; industrial automation; medical and governmental/military systems; and high volume connected embedded systems for consumer and business uses, such as digital television decoders, advanced wireless telephones and pagers, point-of-sale equipment, in-car navigation systems and Internet appliances. The Company markets its products primarily through its sales forces in North America, Europe and Japan. 15 Other Information. The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the information reporting requirements of the Exchange Act and, in accordance with those requirements, is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of those persons in transactions with the Company is required to be disclosed in the proxy statements and distributed to the Company's shareholders and filed with the Commission. These reports, proxy statements and other information should be available for inspection at the public reference facilities at the Commission's principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional offices of the Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a site on the World Wide Web, and the reports, proxy statements and other information filed by the Company with the Commission may be accessed electronically on the Web at http://www.sec.gov. Copies of these materials may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. 9. Information Concerning Parent and Purchaser. Purchaser is a newly formed Iowa corporation and is a direct wholly owned subsidiary of Parent. To date, Purchaser has not conducted any business other than incident to its formation, the execution and delivery of the Merger Agreement and the commencement of the Offer. Until immediately before the time Purchaser purchases Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger. Since Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information is available. The address of the principal office of Purchaser is 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124 and its business telephone number is (503) 615-1100. Parent is a leading provider of building blocks enabling next-generation Internet and communications systems. The building blocks provided to telecommunications equipment manufacturers include Intel-architecture embedded computers, network processors, DSP modules and algorithms, network interfaces and protocols, high-availability switch-fabric system platforms, and SS7/signaling blades and gateways. Parent primarily sells building blocks to original equipment manufacturers, or OEMs. Parent has a broad customer base of leading OEMs. Parent's primary focus in on the sale of custom, or "perfect fit" products that are designed to address the specific requirements of its OEM customers. Parent draws on its extensive experience and large design library to create products with varying degrees of customization. Parent's highly differentiated position in the market is a result of its focus on Intel-based technology, its broad array of building-block technology, its tight "virtual division" 16 relationships with its customers, and its use of intellectual property to generate "perfect fit" solutions for its customers. Parent is an Oregon corporation. Its registered and principal executive offices are located at 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124 and its telephone number is (503) 615-1100. Except as set forth in this Offer to Purchase, none of Parent, Purchaser or, to the best of their knowledge, any of the persons listed in Annex I or Annex II to this Offer to Purchase, or any of their associates (as defined in Rule 12b-2 promulgated under the Exchange Act) or subsidiaries, (a) beneficially owns any securities of the Company, (b) has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss, or the giving or withholding of proxies, (c) has engaged in contacts, negotiations or transactions with the Company or its affiliates concerning a merger, consolidation, acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets, or (d) has had any other transaction with the Company or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the Commission applicable to the Offer. 10. Source and Amount of Funds. The total amount of funds required by Parent and Purchaser to purchase all Shares pursuant to the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $16.5 million. Purchaser will obtain these funds from Parent or its affiliates. Parent has sufficient financial resources to satisfy Purchaser's obligations under the Offer and the Merger Agreement and Parent has fully and unconditionally guaranteed the Offer. This Offer is not conditioned on any financing arrangements. 11. Contacts with the Company; Background of the Offer. The information in this Section regarding the deliberations of the Company's board of directors and the actions of the Company's management and financial advisor is based on information furnished by the Company to Purchaser. Parent seeks strategic acquisitions in key technology areas from time to time as part of its growth strategy. In May 1998, Parent engaged Broadview International LLC ("Broadview") to assist it with corporate development, including possible strategic acquisitions. From time to time the Company has discussed potential business combinations with various third parties. Prior to the commencement of 17 the negotiations leading to the execution of the Merger Agreement, on September 22, 1999, the Company formally retained Houlihan Lokey Howard & Zukin Capital ("Houlihan") as its investment banker with respect to a potential transaction involving the sale of the Company or a significant amount of its securities or assets. Over the year and a half, Houlihan contacted over 150 prospects regarding a potential transaction involving the Company. In March 2001, Parent became aware of the Company's development of IXP technology. At the request of Glenford J. Myers, Parent's chief executive officer, Broadview contacted the Company to gauge its interest in an acquisition transaction. On April 2, 2001, Broadview contacted the Company's chief executive officer, Ken Kaplan, to discuss the potential for a meeting with Parent's management. At that time, Mr. Kaplan identified Houlihan Lokey Howard & Zukin Capital as the Company's financial advisor. On April 14, 2001, Messrs. Myers and Kaplan, George Leonard, the Company's chief financial officer, and Arif Kareem, Parent's senior vice president and general manager, telecommunications division, met at Parent's offices to discuss publicly available information regarding the Company's business, customers, product developments and financial statements. From April 22, 2001 through April 24, 2001, the parties negotiated a nondisclosure agreement, which was signed on April 24, 2001. On April 24, 2001, Broadview and Messrs. Kaplan and Leonard discussed various due diligence issues, including the Company's capital structure, debt, financing plans, cash situation, employee retention and stock option issues. Broadview and Messrs. Kaplan and Leonard also discussed the Company's general receptivity to an acquisition transaction. On May 8, 2001, Messrs. Myers, Kaplan and Leonard met at the Company's offices to continue discussing a possible business combination. Other members of the management of the Company also participated in this meeting. The parties held preliminary discussions about aspects of a potential combination, including organization, facilities, products, customers, employees, third party relationships and IXP software. From May 8 through May 24, 2001, the parties exchanged additional information and internally reviewed the potential benefits of a transaction and the possible structure of a transaction. On May 17, 2001, the Company's board discussed the Company's corporate development objectives at one of its regularly scheduled meetings. The Company's board discussed indications of interest regarding a possible transaction with Parent and two other prospects. After discussion, the Company's board recommended moving forward with discussions with Parent and a second interested party (the "Second Interested Party"). On May 18, 2001, Broadview and Mr. Leonard discussed the Company's capital structure. On May 25, 2001, Messrs. Myers, Kaplan and Leonard met at Parent's offices to continue discussing the potential acquisition of the Company by Parent. Members of the management of Parent and representatives of Broadview and Houlihan participated in these 18 meetings. The parties held discussions about aspects of a potential combination, including product synergies, financial projections and customers and markets. On June 5, 2001, the board of directors of Parent discussed a potential transaction with the Company. Officers of Parent discussed the opportunities for Parent in the IXP market and presented an overview of the Company, including a review of its technology, finances and operations. After discussion, the board approved management continuing negotiations regarding a strategic acquisition of the Company. Also on June 5, Broadview discussed possible terms of the transaction with the Company. On June 11, 2001, the Company requested a decision from the Second Interested Party regarding whether it was prepared to move forward on a potential transaction on an accelerated timetable. The Second Interested Party indicated only that it would be in contact with the Company. On June 12, 2001, the board of directors of the Company discussed the current status of the potential transcations and authorized the Company to enter into an exclusivity agreement with Parent. Parent and the Company then signed an exclusivity agreement in which the parties agreed to negotiate in good faith and to negotiate exclusively for a defined period. During the week of June 18 through June 23, 2001, representatives of Parent met at the Company to conduct legal, business and financial due diligence. Discussions between the parties about the terms of the transaction also continued during this week. During the week of June 25 through June 28, 2001, additional representatives of Parent met with representatives of the Company to conduct additional due diligence. From June 18 through June 28, 2001, the parties, assisted by their respective legal counsel and financial advisors, negotiated the terms of the definitive merger agreement and related transaction agreements. On June 22, 2001, Mr. Myers and R.F. (Bob) Dunne, Vice President of Sales of Parent, attended meetings at the Company with Messrs. Kaplan, Leonard and other senior management of the Company. On June 27, 2001, representatives of the Second Interested Party contacted the Company on an unsolicited basis. The representatives of the Second Interested Party orally outlined to Mr. Leonard the basis on which the Second Interested Party would be willing to proceed with a transaction with the Company. On June 28, 2001, the Second Interested Party also supplied a preliminary term sheet regarding the terms and conditions on which it would consider proceeding. The Company's board met on June 29, 2001. At the meeting o The Company's management and legal and financial advisors updated the Company's board on the status of negotiations with Parent and informed the Company's board that all substantive issues had been resolved, 19 o The Company's board determined that the proposal of the Second Interested Party was financially and structurally inferior to the Purchaser's proposal, o The Company's legal advisors made a presentation to the Company's board regarding the fiduciary duties of the Company's board, o The Company's board reviewed the current financial condition and liquidity needs of the Company, o The Company's legal advisors reviewed with the Company's board the terms of the proposed merger agreement with Parent and the regulatory filings and approvals that would be required in connection with the proposed transaction, o Houlihan made a financial presentation to the Company's board, and o Houlihan rendered its opinion that the offer consideration and the merger consideration is fair to the Company's shareholders from a financial point of view. Afterwards, the Company's board by a unanimous vote approved the merger agreement and the transactions contemplated by the agreement. The Company's board authorized the execution of the merger agreement and the related agreements by authorized officers of the Company, substantially in the forms presented to the Company's board. Parent's board met on June 29, 2001. At the meeting o Parent's management, including Parent's vice president and general counsel, and financial advisor updated Parent's board on the status of negotiations with the Company and informed Parent's board that all substantive issues had been resolved, o Parent's vice president and general counsel reviewed with Parent's board the terms of the proposed merger agreement with the Company and the regulatory filings and approvals that would be required in connection with the proposed transaction, o Parent's financial advisor made a financial presentation to Parent's board, and o Parent's financial advisor rendered its opinion that the merger consideration is fair to Parent's shareholders from a financial point of view. Afterwards, Parent's board by a unanimous vote approved the merger agreement and the transactions contemplated by the agreement. Parent's board authorized the execution of the merger agreement and the related agreements by authorized officers of Parent, substantially in the forms presented to Parent's board. On June 29, 2001 all documentation, including the disclosure schedules of each party, were finalized to the satisfaction of the designated officers, and all conditions with respect to execution of the Merger Agreement were satisfied. 20 Late in the day on June 29, 2001: o Parent and the Company executed and delivered the Merger Agreement and the 19.9% Option Agreement; and o specified shareholders of the Company executed and delivered Shareholder's Agreements in which they agreed, among other things, to tender their shares in the Offer. Before the opening of the financial markets on July 2, 2001, Parent and the Company issued a joint press release announcing the execution of the Merger Agreement. 12. Purpose of the Offer; Short Form Merger; Plans for the Company; Dissenters' Rights; Going Private Transactions. Purpose of the Offer. The purpose of the Offer is for Purchaser to acquire control of, and a majority equity interest in, the Company. The purpose of the Merger is to acquire the remaining equity interest. The acquisition of the entire common equity interest in the Company has been structured as a cash tender offer followed by a cash merger in order to provide a prompt and orderly transfer of ownership of the common equity of the Company from the public shareholders to Parent and to provide public shareholders with cash for all of their Shares. Accordingly, upon completion of the transactions contemplated by the Merger Agreement, Parent will own the entire equity interest in the Company. Under the IBCA and the Company's Restated and Amended Articles of Incorporation, the approval of the board of directors of the Company and the affirmative vote of a majority of the holders of outstanding Shares, voting as a single class, are required to approve and adopt the Merger Agreement and the Merger. The board of directors of the Company has approved the Offer, the Merger and the Merger Agreement and the transactions contemplated by the Offer, the Merger and the Merger Agreement, and, unless the Merger is completed pursuant to the short form merger provisions under the IBCA described below, the only remaining required corporate action of the Company is the approval and adoption of the Merger Agreement and the Merger by the affirmative vote of the holders of a majority of the outstanding Shares. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause the approval and adoption of the Merger Agreement and the Merger without the affirmative vote of any other shareholder. The Merger Agreement provides that, if approval of the Merger by the shareholders of the Company is required by law, the Company will, as soon as possible following payment for Shares in the Offer, duly call and hold a meeting of shareholders for the purpose of obtaining shareholder approval of the Merger, and the Company, through its Board of Directors, will recommend to shareholders that the approval be given. No Assurance. There can be no assurance that the Merger will take place, although each party has agreed in the Merger Agreement to use reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to complete and make effective as promptly as practicable the transactions contemplated by the Merger 21 Agreement. The Merger is subject to certain conditions, some of which are beyond the control of Parent, Purchaser or the Company. Because Parent's ultimate objective is to acquire ownership of all the Shares, if the Merger does not take place, Parent would consider the acquisition, whether directly or through an affiliate, of the Shares through private or open market purchases, or subsequent tender offers or a different type of merger or other combination of the Company with Purchaser or an affiliate or subsidiary thereof, or by any other permissible means deemed advisable by it. Any of those possible transactions might be on terms of the same as, or more or less favorable than, those of the Offer or the Merger. Short Form Merger. Under the IBCA, if Purchaser acquires at least 90% of the outstanding Shares, Purchaser will be able to approve the Merger without a vote of the Company's other shareholders. The Merger Agreement provides that if Purchaser, or any other direct or indirect subsidiary of Parent, acquires at least 90% of the outstanding Shares, Parent, Purchaser and the Company will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a meeting of shareholders of the Company, in accordance with Section 490.1104 of the IBCA. If Purchaser acquires at least 90% of the Shares in the Offer, it will be able to effect the Merger under Section 490.1104 of the IBCA. If all of the conditions to Purchaser's obligation to purchase Shares in the Offer are satisfied or waived and the number of Shares tendered is less than 90% of the outstanding Shares, Purchaser may, subject to the limitations set forth in the Merger Agreement, extend the Offer without the consent of the Company. See Section 1 of this Offer to Purchase. If Purchaser does not acquire at least 90% of the outstanding Shares, a significantly longer period of time may be required to effect the Merger, because a vote of the Company's shareholders would be required under the IBCA. Plans for the Company. Except as otherwise set forth in this Offer to Purchase, we expect that, initially following the Merger, the business and operations of the Company will be continued by the Surviving Corporation substantially as they are now being conducted. The Surviving Corporation will operate within the newly created Communications Software Division of Parent. The sole director and officer of Purchaser will be the initial director and officer of the Surviving Corporation. Upon completion of the Offer, Parent intends to conduct a detailed review of the Company and its assets, corporate structure, capitalization, operations, policies, management and personnel. After that review, Parent will determine what actions or changes, if any, would be desirable in light of the circumstances which then exist, and reserves the right to effect those actions or changes. Except as described in this Offer to Purchase, none of Parent or Purchaser have any present plans or proposals that would relate to or result in (a) any extraordinary transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (b) a purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (c) any change in the Company's board of directors or management, (d) any material change in the Company's indebtedness or capitalization or dividend rate or policy, (e) any other material change in the Company's corporate structure or business, 22 (f) a class of securities of the Company being delisted from a national securities exchange or ceasing to be authorized to be quoted in an automated quotation system operated by a national securities association, or (g) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act. Dissenters' Rights. No dissenters' rights are available in connection with the Offer. If the Merger is completed, however, shareholders of the Company may have rights under the IBCA to dissent, and demand appraisal of, and to obtain payment for, the fair value of their Shares. These rights, if the statutory procedures were complied with, could lead to a judicial determination of the fair value of the Shares (excluding any element of value arising from the accomplishment or expectation of the Merger) to be required to be paid in cash to the dissenting holders for their Shares. In addition, the dissenting shareholders would be entitled to receive payment of a fair rate of interest from the date of completion of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, an Iowa court would be required to take into account all relevant factors. Accordingly, the determination could be based on considerations other than, or in addition to, the market value of the Shares. Therefore, the value determined in an appraisal proceeding could be different from the price being paid in the Offer. Going Private Transactions. The Merger would have to comply with any applicable federal law operative at the time. The Commission has adopted Rule 13e-3 under the Exchange Act that is applicable to various "going private" transactions and which may under some circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Purchaser or Parent seeks to acquire the remaining Shares not held by it. Purchaser believes, however, that Rule 13e-3 will not be applicable to the Merger. If applicable, Rule 13e-3 requires, among other things, that specified financial information concerning the Company and specified information relating to the fairness of the transaction and the consideration offered to minority shareholders in the transaction be filed with the Commission and disclosed to shareholders before the completion of the transaction. 13. Transaction Documents. The Merger Agreement The following summary of material provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Schedule TO referred to in Section 18 of this Offer to Purchase, is qualified in its entirety by reference to the text of the Merger Agreement. Capitalized terms used in the following summary and not otherwise defined in this Offer to Purchase shall have the meanings set forth in the Merger Agreement. The Merger. The Merger Agreement provides that, following the completion of the Offer and subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the "Effective Time") Purchaser shall be merged with and into the Company and, as a result of the Merger, the separate corporate existence of Purchaser shall cease, and the Company shall continue as the Surviving Corporation and a direct subsidiary of Parent. 23 The respective obligations of Parent and Purchaser, on the one hand, and the Company, on the other hand, to effect the Merger are subject to the satisfaction or waiver at or before the Effective Time of each of the following conditions: (a) Parent or Purchaser or their affiliates shall have completed the Offer, unless the failure to purchase is a result of a breach of Purchaser's obligations to accept for payment or pay for Shares pursuant to the Offer in violation of the terms of the Offer or of the Merger Agreement, (b) the Company Proposals shall have been approved by the requisite vote of the shareholders, if required by applicable law, in order to complete the Merger, (c) no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority which prohibits or prevents the completion of the Merger which has not been vacated, dismissed or withdrawn before the Effective Time, and (d) all consents of any Governmental Authority required for the completion of the Merger and the transactions contemplated by the Merger Agreement shall have been obtained other than those consents the failure to obtain which is not reasonably likely to have a material adverse effect on the business, assets, condition (financial or other), liabilities or results of operations of the Surviving Corporation and its subsidiaries taken as a whole. At the Effective Time of the Merger, (a) each issued and outstanding Share (other than Shares that are held by shareholders properly exercising dissenters' rights under the IBCA and Shares to be cancelled pursuant to clause (c) below) will be canceled and extinguished and be converted into the right to receive the Per Share Amount in cash payable to the holder of the right, without interest, upon surrender of the certificate representing the Share, (b) each Share owned by Parent, Purchaser or any direct or indirect wholly owned subsidiary of Parent immediately before the Effective Time shall be cancelled and extinguished, and no payment or other consideration shall be made with respect to the Shares, and (c) the shares of Purchaser common stock outstanding immediately before the Merger will be converted into 1,000 shares of the common stock of the Surviving Corporation, which shares will constitute all of the issued and outstanding capital stock of the Surviving Corporation and shall be owned by Parent. From and after the Effective Time, the holders of certificates evidencing ownership of Shares outstanding immediately before the Effective Time shall cease to have any rights with respect to those Shares except as otherwise provided for in the Merger Agreement or by applicable Law. The Company's Board of Directors. The Merger Agreement provides that promptly upon the purchase by Purchaser of Shares pursuant to the Offer (and provided that the Minimum Condition has been satisfied), Parent will be entitled to designate the number of directors, rounded up to the next whole number, on the board of directors of the Company that will give Parent, subject to compliance with Section 14(f) of the Exchange Act, representation on the 24 board of directors of the Company equal to at least the number of directors that equals the product of the total number of directors on the board of directors of the Company (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or any affiliate of Parent (including Shares that are accepted for payment pursuant to the Offer, but excluding Shares held by the Company) bears to the number of Shares outstanding. At that time, if requested by Parent, the Company also will cause each committee of the board of directors of the Company to include persons designated by Parent constituting the same percentage of each committee as Parent's designees are of the board of directors of the Company. The Company will, upon request by Parent, promptly increase the size of the board of directors of the Company or exercise reasonable efforts to secure the resignations of the number of directors necessary to enable Parent's designees to be elected to the board of directors of the Company in accordance with terms of this section and to cause Parent's designees to be elected. Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to complete the Merger, duly call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable following the completion of the Offer for the purpose of voting on the Company Proposals. The Merger Agreement provides that the Company will, if required by applicable law in order to complete the Merger, prepare and file with the Commission and, when cleared by the Commission, will mail to shareholders a proxy statement in connection with a meeting of the Company's shareholders to vote on the Company Proposals, or an information statement, as appropriate, satisfying all requirements of the Securities Exchange Act. If Purchaser acquires at least a majority of the Shares and waives the Minimum Condition, it will have sufficient voting power to approve the Merger, even if no other shareholder votes in favor of the Merger. The Merger Agreement provides that if Parent or Purchaser acquires at least 90% of the outstanding Shares, Parent, Purchaser and the Company will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer, without a meeting of shareholders of the Company, in accordance with Section 490.1104 of the IBCA. Options, Warrants and Convertible Securities. The Merger Agreement provides that each option outstanding immediately before the Effective Time to purchase Shares ("Company Option") and each warrant outstanding immediately before the Effective Time to purchase Shares ("Company Warrant"), whether or not then exercisable or vested, shall constitute the right to receive an amount in cash equal to the positive difference, if any, between the Per Share Amount and the exercise price of the Company Option or Company Warrant, as applicable, multiplied by the number of Shares for which the Company Option or Company Warrant, as applicable, was exercisable immediately before the Effective Time, subject to reduction only for any applicable withholding taxes. The Company shall provide a period of at least 30 days before the Effective Time during which Company Options may be exercised to the extent exercisable at the Effective Time and, upon the expiration of that period, all unexercised Company Options shall immediately terminate. All unexercised Company Warrants shall terminate at the Effective 25 Time. In no event will any Company Options or Company Warrants be exercisable after the Effective Time, except to receive cash. The Company shall take such action as is necessary to cause the ending date of the then current offering period under the Company's employee stock purchase plan to be before the Effective Time and to terminate the plan as of the Effective Time. The Company has agreed to use reasonable efforts to ensure that, as soon as practicable following the date of the Merger Agreement, but in no event later than the Effective Time, no participant in the Company's 401(k) plan will have any right under that plan to acquire capital stock of the Company except for purchases on the open market. The Company also has agreed to use reasonable efforts to ensure that, following the Effective Time, no participant in any Company equity plans shall, subject to the treatment of Company options and warrants as described above, have any right under those plans to acquire capital stock of the Company or Parent except for purchases on the open market. Interim Operations; Covenants. Pursuant to the Merger Agreement, the Company has agreed that, before the Effective Time, each of the Company and the Company Subsidiaries will carry on its business in all material respects in the ordinary and usual manner and, to the extent consistent therewith, will use reasonable efforts to maintain its existing relationships with suppliers, customers, employees and business associates, and will not, without the prior written consent of Parent or as otherwise contemplated by the Merger Agreement: (a) amend its Articles of Incorporation or Bylaws; (b) enter into any new agreements or modify existing agreements respecting an increase in compensation or benefits payable to its officers or employees; (c) split, combine, reclassify any of the outstanding shares of its capital stock or otherwise change its authorized capitalization; (d) declare, set aside or pay any dividends payable in cash, stock or property with respect to shares of its capital stock; (e) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class (other than pursuant to exercise of outstanding Company Options and Company Warrants consistent with their terms); (f) redeem, purchase or otherwise acquire any shares of its capital stock, merge into or consolidate with any other corporation or permit any other corporation to merge into or consolidate with it, liquidate or sell or dispose of any of its assets, or close any plant or business operation; (g) except for the incurrence of accounts payable in the ordinary course of business consistent with past practice and of substantially similar nature to the accounts payable reflected in the Company Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2001, and the weighted average age of which does not 26 exceed 55 days, incur, assume or guarantee any indebtedness, including accounts payable, or modify or repay any existing indebtedness; (h) enter into any transaction, make any commitment (whether or not subject to the approval of the board of directors of the Company) or modify any Company Material Contracts, except as otherwise contemplated or permitted by the Merger Agreement or in the ordinary course of business and not exceeding $50,000 singly, or $100,000 in the aggregate, or take or omit to take any action which could be reasonably anticipated to have a Material Adverse Effect; (i) transfer, lease, license, guarantee, sell, mortgage, pledge, or dispose of, any property or assets (including without limitation any intellectual property), encumber any property or assets or incur or modify any liability, other than the sale of inventory in the ordinary and usual course of business; (j) authorize or make any capital expenditures, form any subsidiary, or make any acquisition of, or investment in, assets or stock of any other person or entity; (k) make any tax election; (l) permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled, terminated or renewed without prior notice to Parent; (m) change its method of accounting as in effect at March 31, 2001 except as required by changes in generally accepted accounting principles as concurred with by the Company's independent auditors, or change its fiscal year, or permit the weighted average age of its accounts receivable to exceed 105 days; or (n) authorize or enter into an agreement to do any of the actions referred to in paragraphs (a) through (m) above. The Merger Agreement further provides that the Company shall comply, in all material respects, with all Laws applicable to it. No Solicitation. Pursuant to the Merger Agreement, the Company and any Company Subsidiary shall not directly, or indirectly through any officer, director, agent, employee, financial advisor, affiliate, other advisor or representative or representative of its advisors or agents (each, a "Representative"), (a) encourage, initiate or solicit or otherwise facilitate, on or after the date of the Merger Agreement, any inquiries or the submission of any proposals or offers from any person relating to any merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of 10% or more of the assets or any class of equity securities of, the Company or any Company Subsidiary (each, a "Company Takeover Proposal"), (b) participate in any negotiations regarding, furnish to any other person any information with respect to, or otherwise assist or discuss or participate in, any attempt by any third party to propose or offer any Company Takeover Proposal, 27 otherwise facilitate any effort or attempt to make or implement a Company Takeover Proposal, (c) enter into or execute any agreement relating to a Company Takeover Proposal, or (d) make or authorize any public statement, recommendation or solicitation in support of any Company Takeover Proposal or any proposal or offer relating to a Company Takeover Proposal, in each case other than with respect to the Offer and the Merger. Notwithstanding the foregoing, nothing contained in the Merger Agreement prohibits the Company from: (a) complying with Rule 14d-9 or Rule 14e-2 promulgated under the Securities Exchange Act with regard to a Company Takeover Proposal; (b) providing information in response to a request for the information by a person who has made an unsolicited bona fide written Company Takeover Proposal if the board of directors of the Company receives from the person requesting the information an executed confidentiality agreement on terms no less protective of the confidential information of the Company, Parent and Purchaser than those in effect pursuant to the Mutual Disclosure Agreement dated June 12, 2001 between the Company and Parent (the "Confidentiality Agreement"); (c) engaging in any negotiations or discussions with any person who has made an unsolicited bona fide written Company Takeover Proposal; (d) withdrawing or modifying the approval or recommendation by the board of directors of the Company of the Merger Agreement, the Offer or the Merger in connection with recommending an unsolicited bona fide written Company Takeover Proposal to the shareholders of the Company or entering into any agreement with respect to an unsolicited bona fide written Company Takeover Proposal; or (e) after the Schedule TO is filed, referring a third party to Section 4.8 of the Merger Agreement or making a copy of Section 4.8 and/or the Confidentiality Agreement available to any third party; if and only to the extent that, both (a) in each case referred to in clause (b), (c) or (d) above, the board of directors of the Company determines in good faith after receipt of an opinion from outside legal counsel experienced in these matters that the action is necessary for its directors to comply with their respective fiduciary duties under applicable law, and (b) in each case referred to in clause (c) or (d) above, the board of directors of the Company determines in good faith (after consultation with its Financial Advisor) that the Company Takeover Proposal, if accepted, is reasonably likely to be completed, taking into account all legal, financial and regulatory aspects of the proposal and the person making the proposal and would, if completed, result in a transaction more favorable to the Company's shareholders from a financial point of view than the transaction contemplated by the Merger Agreement (any superior Company Takeover Proposal being referred to as a "Superior Proposal"). 28 Pursuant to the Merger Agreement, the Company has ceased and caused to be terminated any activities, discussions or negotiations with any parties conducted as of and before the date of the Merger Agreement that are prohibited by the non-solicitation provisions of the Merger Agreement. The Company has agreed to take the necessary steps to inform promptly its Representatives of the obligations undertaken in the Merger Agreement. The Company will immediately notify Parent if any inquiries, proposals or offers are received by, and information is requested from, or any discussions or negotiations are sought to be initiated or continued with, the Company or any of its Representatives relating to a Company Takeover Proposal, indicating, in connection with the notice, the name of the person and the material terms and conditions of any proposals or offers, and the Company will keep Parent informed, on a current basis, of the status and terms of any proposals or offers and the status of any negotiations or discussions. The Company also will promptly request each person (other than Parent) that has executed a confidentiality agreement in connection with its consideration of a Company Takeover Proposal to return all confidential information furnished to that person by or on behalf of it or any of its subsidiaries. June 30 Financial Statements. The Company will publicly announce, following consultation with Parent as required by Section 4.6 of the Merger Agreement, by means of a press release its financial results for the quarter ending June 30, 2001 (the "June 30 Financial Results") by no later than July 25, 2001. The June 30 Financial Results will summarize the financial statements that would otherwise be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, and will include, among other items and consistent with past practice, information regarding the Company's cash and cash equivalents, short-term investments, trade receivables net of allowances for doubtful accounts and accounts payable. It is a condition to the completion of the Offer that these items meet specified criteria. The June 30 Financial Results will be prepared in accordance with generally accepted accounting principles applied on a consistent basis and will present fairly, in all material respects, the financial position of the Company and the Company Subsidiaries as of June 30, 2001 and the results of their operations and cash flows for the quarter then ended, subject to normal year-end audit adjustments and the fact that some information has been condensed or omitted in accordance with the Company's past practice with respect to announcing its financial results before filing the corresponding Form 10-Q. Indemnification. On and after the Effective Time, for six years (or, if shorter, the applicable statute of limitations), Parent shall not permit the articles of incorporation of the Surviving Corporation to contain provisions any less favorable with respect to indemnification than are set forth in the articles of incorporation of the Company immediately before the Effective Time, which provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of individuals who both on the date of this Agreement and at the Effective Time were directors or officers of the Company (the "Indemnified Parties"); provided that each Indemnified Party represents and warrants that the person has no knowledge of any claim for which indemnification would be required. Notwithstanding the foregoing, Parent may cause the Surviving Corporation to repeal or otherwise eliminate from its articles of incorporation the indemnification provisions if a substantially similar indemnity is provided by Parent for the Indemnified Parties. The 29 Indemnified Parties shall be intended third-party beneficiaries of the foregoing provisions on indemnification. For two years from the Effective Time, Parent has agreed to maintain in effect the current directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy to the extent that it provides coverage for events occurring on or before the Effective Time, so long as the annual premium would not be in excess of $300,000. If the premiums for the insurance would at any time exceed $300,000, then Parent will maintain policies of insurance which in Parent's good faith determination provide the maximum coverage available at an annual premium equal to $300,000. Representations and Warranties. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things, its organization, capitalization, subsidiaries, authority relative to the Merger Agreement, governmental approvals with respect to the Merger Agreement, the absence of contractual or legal violations resulting from the Merger Agreement, public filings, financial statements, the absence of material adverse effects on the Company and certain other events since March 31, 2001, the absence of undisclosed liabilities, compliance with laws, governmental permits, litigation, material contracts, employee benefit plans, taxes, intellectual property, disclosure documents, labor matters, the absence of limitations on conduct of business, title to property, owned and leased premises, environmental matters, insurance, product liability and recalls, customers, interested party transactions, finders and investment bankers, fairness opinion, takeover statutes, full disclosure, absence of rights agreements, absence of certain unlawful payments, ability to pay debts and expense reduction. Reasonable Efforts. Under the Merger Agreement, each of the Company, Parent and Purchaser has agreed to use reasonable efforts to take all actions and to do all things necessary, proper or advisable to complete and make effective as promptly as practicable the transactions contemplated by the Merger Agreement, including obtaining all consents from governmental authorities and other third parties required for the completion of the Offer and the Merger and the transactions contemplated by the Offer and the Merger. The Company, Parent and Purchaser also have agreed to use reasonable efforts to take all actions and to do all things necessary to satisfy the other conditions of the closing of the Merger. Public Announcements. So long as the Merger Agreement is in effect, the parties will not, and will use reasonable efforts to cause their affiliates not to, issue or cause the publication of any press release or any other announcement with respect to the Offer or the Merger or the transactions contemplated by the Merger Agreement without the consent of the other parties (which shall not be unreasonably withheld or delayed), except where the release or announcement is required by applicable Law or pursuant to any applicable listing agreement with, or rules or regulations of, the NASD or Nasdaq, in which case the parties, before making the announcement, will consult with each other regarding the announcement. Parent publicly announced the transactions contemplated by the Merger Agreement, including the Offer and the Merger, immediately after the execution of the Merger Agreement. 30 Termination; Fees. The Merger Agreement may be terminated at any time before the Effective Time, whether before or after approval by the shareholders of the Company of the Merger: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company if any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the completion of the transactions contemplated by the Merger Agreement and the order, decree or ruling or other action shall have become final and nonappealable; (c) by Parent before paying for the Shares pursuant to the Offer if: (i) the Company shall have breached or failed to perform in any material respect any of its covenants or other agreements contained in the Merger Agreement, which breach or failure to perform is incapable of being cured or has not been cured within the lesser of (A) 5 days after the giving of written notice of the breach or failure to perform to the Company or (B) the number of days between the date Parent becomes aware of the breach or failure to perform (on which date Parent shall provide written notice of the breach or failure to perform to the Company) and the then scheduled expiration date of the Offer; (ii) any representation or warranty of the Company shall not have been true and correct when made (without for this purpose giving effect to qualifications of materiality contained in the representation and warranty), if the failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; or (iii) any representation or warranty of the Company shall cease to be true and correct at any later date (without for this purpose giving effect to qualifications of materiality contained in the representation and warranty) as if made on that date (other than representations and warranties made as of a specified date), other than as a result of a breach or failure to perform by the Company of any of its covenants or agreements under the Merger Agreement, if the failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; provided, however, that the representation or warranty is incapable of being cured or has not been cured within the lesser of (A) 5 days after the giving of written notice thereof to the Company or (B) the number of days between the date Parent becomes aware thereof (on which date Parent shall provide written notice thereof to the Company) and the then scheduled expiration date of the Offer; provided, further, that the right to terminate the Merger Agreement pursuant to provision described in this paragraph (iii) shall not be available to Parent if Purchaser or any other affiliate of Parent shall acquire Shares pursuant to the Offer; (d) by Parent if, whether or not permitted to do so by the Merger Agreement, the board of directors of the Company or any committee of the board of directors of the Company shall have, 31 (i) withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer or any of the Company Proposals; (ii) approved or recommended to the shareholders of the Company any Company Takeover Proposal; (iii) approved or recommended that the shareholders of the Company tender their Shares in any tender or exchange offer that is a Company Takeover Proposal; (iv) affirmatively taken any written position or made any written disclosures to the Company's shareholders permitted pursuant to the "No Solicitation" provisions of the Merger Agreement described above which has the effect of any of the foregoing; (v) resolved to take any of the foregoing actions; (e) by either Parent or the Company if, as the result of the failure of the Minimum Condition or any of the other conditions set forth in the Merger Agreement, the Offer shall have terminated or expired in accordance with its terms without Purchaser having purchased any Shares pursuant to the Offer; provided that if the failure to satisfy any conditions set forth in the Merger Agreement shall be a basis for termination of the Merger Agreement under any section other than the one described in this paragraph (e), a termination pursuant to the section described in this paragraph (e) shall be deemed a termination under the other section; (f) by either Parent or the Company if the Offer shall not have been completed on or before September 30, 2001; provided that the right to terminate the Merger Agreement pursuant to the section described in this paragraph (f) shall not be available to any party whose failure to perform any of its obligations under the Merger Agreement results in the failure of the Offer to be completed by such time; (g) by the Company, if Parent or Purchaser shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform is incapable of being cured or has not been cured within 5 days after the giving of written notice of the breach or failure to perform to Parent; or (h) by the Company in order to accept a Superior Proposal; provided that the board of directors of the Company reasonably determines in good faith after receipt of an opinion from outside legal counsel experienced in these matters that it is or is reasonably likely to be required to accept the proposal in order to discharge properly its fiduciary duties; the Company has given Parent three business days advance notice of the Company's intention to accept the Superior Proposal; the Company shall in fact accept the Superior Proposal; the Company shall have paid the fee and expenses described below; and the Company shall have complied in all respects with the no solicitation provisions of the Merger Agreement. In the event of termination of the Merger Agreement and the abandonment of the Offer or the Merger, the Merger Agreement (other than specified sections) shall become void and of no effect with no liability on the part of any party to the Merger Agreement (or of any of its directors, officers, employees, agents, legal or financial advisors or other representatives); 32 provided, however, that no termination pursuant to the Merger Agreement shall relieve any party from any liability for any willful breach of the Merger Agreement before termination. If the Merger Agreement is terminated as provided in the Merger Agreement, each party shall use all reasonable efforts to redeliver all documents, work papers and other material (including any copies of documents, work papers and other material) of any other party relating to the transactions contemplated by the Merger Agreement, whether obtained before or after the execution of the Merger Agreement, to the party furnishing the same. The Company agrees that if the Merger Agreement is terminated pursuant to (i) the provisions described in clause (d) above, (ii) the provision described in clause (h) above, or (iii) the provision described in clause (e) or (f) above and, with respect to this clause (iii), (A) at the time of such termination, there shall be outstanding a bona fide Company Takeover Proposal which has been made directly to the shareholders of the Company or has otherwise become publicly known or there shall be outstanding an announcement by any credible third party of a bona fide intention to make a Company Takeover Proposal (in each case whether or not conditional and whether or not the proposal shall have been rejected by the board of directors of the Company) or (B) a Company Takeover Proposal shall be publicly announced by the Company or any third party within nine months following the date of termination and the transaction shall at any time after that time be completed on substantially the terms announced, then the Company shall pay to Parent the sum of $775,000. Any payment required by the Merger Agreement shall be made as promptly as practicable but in no event later than two business days following termination of the Merger Agreement in the case of clause (i) above, upon termination of the Merger Agreement in the case of clause (ii) above and, in the case of clause (iii) above, upon completion of the Company Takeover Proposal, and shall be made by wire transfer of immediately available funds to an account designated by Parent. The Company is required to pay Parent's costs and expenses in connection with the transactions contemplated by the Merger Agreement if the Merger Agreement is terminated for other specified reasons. Guarantee. Parent has guaranteed the payment by Purchaser of the Per Share Amount and any other amounts payable by Purchaser pursuant to the Merger Agreement and has agreed to cause Purchaser to perform all of its other obligations under the Merger Agreement in accordance with its terms. Amendments, Extensions and Waivers. Subject to applicable law, the Merger Agreement may be amended by the parties to the Merger Agreement by a written agreement signed by all the parties. At any time before to the Effective Time, any party to the Merger Agreement may, to the extent legally allowed (a) extend the time for the performance of any of the obligations or other acts of the other parties to the Merger Agreement, (b) waive any inaccuracies in the representations and warranties made to that party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement, or (c) waive compliance with any of the agreements or conditions for the benefit of that party contained in the Merger Agreement. 33 Shareholder's Agreements As an inducement to Parent and the Purchaser entering into the Agreement with the Company, Kenneth B. Kaplan, Mesirow Capital Partners VI and Motorola, Inc. (the "Shareholders"), who own 6,972,978 Shares (or approximately 36% of the Shares on a fully diluted basis), have entered into Shareholder's Agreements (the "Shareholder's Agreements") with Parent and Purchaser. The following summary of material provisions of the Shareholder's Agreements, copies of which are filed as exhibits to the Schedule TO, is qualified in its entirety by reference to the text of the Shareholder's Agreements. Agreement to Tender. The Shareholders have agreed to tender their Shares in the Offer and that they will not withdraw any tendered Shares. The Shareholders have agreed to tender their Shares not later than five business days following commencement of the Offer. In connection with this agreement, the Company has agreed with, and covenanted to, Parent that the Company will not register the transfer of any certificate representing any of the Shareholders' Shares, unless the transfer is made to Parent or the Purchaser or otherwise in compliance with the Shareholder's Agreements. Grant of Irrevocable Proxy. Each of the Shareholders has irrevocably granted to, and appointed, Parent and any individual designated by Parent as the Shareholder's proxy and attorney-in-fact, to vote the Shareholder's Shares, or grant a consent or approval in respect of the Shares, at any meeting of shareholders of the Company or in any other circumstances upon which the Shareholder's vote, consent or other approval is sought, against (a) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, joint venture, recapitalization, dissolution, liquidation or winding up of or by the Company and (b) any amendment of the Company's articles of incorporation or bylaws or other proposal or transaction (including any consent solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement. Representations, Warranties, Covenants and Other Agreements. Each of the Shareholders has made representations and warranties in the Shareholder's Agreements, including with respect to (a) ownership of the Shareholder's Shares, (b) the authority to enter into and perform the Shareholder's obligations under the Shareholder's Agreement and the absence of required consents and statutory or contractual conflicts or violations, (c) the absence of liens, claims, security interests, proxies, voting trusts or other arrangements or any other encumbrances on or in respect of the Shares, except for those disclosed to the Purchaser, 34 (d) finder's fees, and (e) an acknowledgment of Parent's reliance on the Shareholder's execution of the Shareholder's Agreement in entering into, and causing the Purchaser to enter into, the Agreement. In addition, each of the Shareholders has agreed not to transfer, or consent to any transfer of any or all of the Shareholder's Shares or any interest in the Shareholder's Shares (except as contemplated by the Shareholder's Agreement), enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shareholder's Shares or any interest in the Shareholder's Shares, grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares or any interest in the Shares except with respect to election of directors at the Company's annual meeting, deposit the Shares into a voting trust or enter into a voting arrangement or agreement with respect to the Shares or take any other action that would in any way restrict, limit or interfere with the Shareholder's obligations under the Shareholder's Agreement. Each of the Shareholders also has agreed, directly or indirectly, not to solicit, initiate or encourage the submission of any Company Takeover Proposal or participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal. Termination. The Shareholder's Agreements, and all rights and obligations under the Shareholder's Agreements, shall terminate upon the earlier of (a) the date on which the Merger Agreement is terminated in accordance with its terms or (b) the date that Parent or the Purchaser purchases and pays for the Shares of the Shareholder pursuant to the terms of the Shareholder's Agreement; provided, however, that the termination of the Shareholder's Agreement will not relieve any party if liability for breach of the Shareholder's Agreement before its termination. In addition to the terms described above, Parent and Purchaser have agreed to obtain Motorola, Inc.'s consent if Parent and Purchaser propose to (a) reduce the number of Shares subject to the Offer, (b) reduce the Per Share Amount, (c) impose any other conditions to the Offer other than the Offer Conditions or modify the Offer Conditions (other than to waive any Offer Conditions to the extent permitted by the Merger Agreement), (d) except as provided in the Merger Agreement, extend the Offer, (e) change the form of consideration payable in the Offer, or (f) amend any other term of the Offer in any manner adverse to the holders of Shares. Failure to obtain Motorola's consent will result in the termination of Parent's shareholder's agreement with Motorola. 35 19.9% Option Agreement In connection with the Merger Agreement, Parent and the Company have entered into a 19.9% Option Agreement. Under this agreement, the Company granted to Parent an irrevocable option to purchase 3,814,462 shares of the Company's common stock (approximately 19.9% of the outstanding shares of the Company's common stock) for a purchase price of $0.48 per share. A copy of the option agreement is attached to the Schedule TO and is incorporated by reference. The following description is qualified in its entirety by reference to the text of the 19.9% Option Agreement. The option will become exercisable by Parent upon the occurrence of a "triggering event" before the option is terminated. The triggering events are the same events as those that trigger payment of the termination fee under the Merger Agreement discussed above. The option will terminate at the earlier of o the Effective Time, or o 180 days after the one year anniversary of the termination date of the merger agreement. If a triggering event occurs before the option is terminated, Parent can have the shares of the Company common stock underlying the option registered. In addition, within one year after the termination of the Merger Agreement, Parent can sell all or any portion of Company shares to the Company at either o the purchase price of $0.48 per share, or o the average closing price for the five trading days before notice of the sale is given to the Company. Instead of purchasing the Company's shares, Parent also has the option to receive a cash amount from the Company equal to the spread between the purchase price of the options and either o the closing price on the trading day before exercise of the option agreement, or o the highest price proposed to be paid in an acquisition of the Company multiplied by all or any portion of the options, as specified by Parent. The total amount received by Parent from the termination fee and the option agreement may not exceed a total of $775,000. Companies enter into arrangements like the option agreement to increase the likelihood that the transaction will be completed, to discourage other bidders and to compensate the recipient of the option for the efforts undertaken and costs incurred if the transaction is not completed because of an acquisition or potential acquisition by a third party of the issuer of the option. 36 The option agreement was entered into to accomplish these objectives and may discourage offers by third parties to acquire the Company. Parent required that the Company enter into the option agreement as a condition to Parent's entering into the Merger Agreement. Termination and Buy-out Agreement A copy of the termination and buy-out agreement is attached to the Schedule TO and is incorporated by reference. The following description is qualified in its entirety by reference to the text of the buyout agreement. As a condition to Parent and Purchaser entering into the Merger Agreement, the Company entered into a termination and buy-out agreement on June 29, 2001 with Elder Court, LLC and other specified parties (collectively, "Elder"). Under the agreement, Elder agreed to terminate a securities purchase agreement, an equity line of credit agreement and two registration rights agreements between it and the Company and to deliver to the Company for cancellation a convertible debenture and several warrants to purchase shares of the Company's common stock. The Company agreed to pay Elder $2.2 million as consideration for the termination and cancellation. Parent will advance to the Company the $2.2 million it is required to pay Elder under the agreement. In addition, Elder agreed to tender at least 250,000 shares of the Company's common stock owned by it (representing approximately 1% of the Shares on a fully diluted basis). The agreement may be terminated (a) by mutual written agreement of all the parties to the agreement, (b) if the Company, on the one hand, or any of the other parties to the agreement, on the other hand, commits a material breach of the agreement and fails to cure the breach within 5 days after receiving written notice by the non-breaching party after providing written notice of termination, or (c) by either party if the offering price per share for the Company's common stock in the Offer exceeds $1.00 per share. The agreement will terminate automatically if (a) the Merger Agreement is terminated pursuant to its terms, (b) the transactions contemplated by the buy-out agreement are not completed by September 30, 2001, or (c) the average closing price for the Company's common stock on Nasdaq for any period of 5 consecutive trading days is less than $0.33 per share. If the buy-out agreement is terminated as described above, the debenture held by Elder will be automatically amended to reduce its per share conversion price to the lower of (a) $0.69 or (b) 77% of the market price of the shares as defined in the debenture. The Company's equity 37 line of credit agreement with Elder also will be automatically amended to provide Elder with a 17% discount from the market price on the shares it purchases from the Company. The completion of the transactions contemplated by the buy-out agreement is a condition to the completion of the Offer. See Section 15 of this Offer to Purchase. 14. Dividends and Distributions. As discussed in Section 13, the Merger Agreement provides that the Company will not take specified actions including paying dividends on, or making any other distributions in respect of, any of its capital stock, splitting, combining, or reclassifying any of its capital stock or purchasing, redeeming, or otherwise acquiring any shares of capital stock of the Company. If on or after the date of the Merger Agreement and notwithstanding the provisions of the Merger Agreement, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire presently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or (c) issue or sell any shares of any class or any securities convertible into shares of any class, or any rights, warrants or options to acquire shares of any class or convertible securities (other than Shares issued pursuant to, and in accordance with the terms in effect on the date of the Merger Agreement of, stock options, warrants or convertible preferred shares issued before the date of the Merger Agreement), then, without prejudice to Purchaser's rights under the Merger Agreement, Purchaser (subject to the Merger Agreement), in its sole discretion, may make the adjustments in the Offer price and other terms of the Offer that it deems appropriate to reflect the Company's action. If, on or after the date of the Merger Agreement and notwithstanding the provisions of the Merger Agreement, the Company declares or pays any cash, non-cash or stock dividend or other distribution on, or issues any rights with respect to, the Shares, payable or distributable to shareholders of record on a date before the transfer to the name of Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's rights under the Merger Agreement, (a) the price per Share payable by Purchaser pursuant to the Offer may, subject to the provisions of the Merger Agreement, in the sole discretion of Purchaser, be reduced by the amount of the cash dividend or distribution, and (b) any non-cash dividend, distribution or right to be received by the tendering shareholders will (i) be received and held by the tendering shareholders for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of Purchaser, be exercised for the benefit of Purchaser, in which case the proceeds of such exercise will promptly be remitted to Purchaser. Pending remittance, Purchaser will be entitled, subject to applicable law, to all rights and privileges as owner of any non-cash dividend, distribution or right or proceeds and may withhold 38 the entire purchase price or deduct from the purchase price the amount or value of the non-cash dividend, distribution or right, as determined by Purchaser in its sole discretion. 15. Conditions of the Offer. Notwithstanding any other provision of the Offer, Purchaser will not be required to accept for payment or, subject to Rule 14e-1(c) and any other applicable rules and regulations of the Commission, pay for and, subject to the same rules or regulations, may delay the acceptance for payment of any tendered Shares and, except as provided in the Merger Agreement, amend or terminate the Offer as to any Shares not then paid for if: (a) the Minimum Condition has not been satisfied; or (b) immediately before acceptance for payment, (i) or the transactions contemplated by the Buy-out Agreement have not been completed, and the Company Warrants and other derivative securities held by third parties have not been delivered to the Company for cancellation, as contemplated by the Buy-out Agreement; (ii) all Consents (including without limitation Consents from Governmental Authorities or required under any Company Material Contract) required to be obtained by the Company for completion of the transactions contemplated by the Merger Agreement, the obtaining of which Consents shall not require any payment by Parent, Purchaser or the Company to any third parties, shall not have been obtained, (iii) all Company Options under the Company's 1991 Stock Option Plan, 1992 Stock Option Plan, 1995 Stock Option Plan or any other stock option plan or agreement of the Company have not been terminated; or (c) at any time after the date of the Merger Agreement and before the time of payment for any Shares, whether or not any Shares have previously been accepted for payment or paid for pursuant to the Offer, any of the following conditions exists: (i) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a Law shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any case (A) restrains or prohibits the making or completion of the Offer or the completion of the Merger, (B) prohibits or restricts the ownership or operation by Parent, or any of its affiliates or subsidiaries, of any portion of the Company's business or assets if it would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or compels Parent, or any of its affiliates or subsidiaries, to dispose of or hold separate any portion of the Company's business or assets if it would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, (C) imposes material limitations on the ability of Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including the right to vote Shares purchased by Purchaser pursuant to the Offer or the Merger on all matters properly presented to the shareholders of the Company, or (D) imposes any material limitations on the ability of Parent and/or its affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company; or 39 (ii) a Governmental Authority shall have instituted an action, or an action by a Governmental Authority shall be pending or threatened, seeking to restrain or prohibit the making or completion of the Offer or completion of the Merger, or to impose any other restriction, prohibition or limitation referred to in the foregoing paragraph (i); or (iii) the Company or Parent terminates the Merger Agreement in accordance with its terms; or (iv) any of the following events occurs: (A) any general suspension of, or limitation on prices for, trading in the Shares on Nasdaq, (B) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States or (C) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening of the events set forth in (A) or (B); or (v) Parent and the Company agree that Purchaser shall amend the Offer, terminate the Offer or postpone the payment for Shares pursuant to the Offer; or (vi) any of the representations and warranties made by the Company in the Merger Agreement shall not have been true and correct when made, or shall have ceased to be true and correct before the Closing (other than representations and warranties made as of a specified date) unless, with respect to any representations or warranties not qualified by a "Material Adverse Effect," the inaccuracies under those representations and warranties, taken as a whole, could not reasonably be expected to result in a Material Adverse Effect on the Company, or the Company shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under this Agreement; provided, however, that the breach or failure to perform is incapable of being cured or has not been cured within the lesser of (A) 5 days after the giving of written notice of the breach or failure to perform to the Company or (B) the number of days between the date Parent becomes aware of the breach or failure to perform (on which date Parent shall provide written notice of the breach or failure to perform to the Company) and the then scheduled expiration date of the Offer; or (vii) the Company's board of directors modifies or amends its recommendation of the Offer in any manner adverse to Parent or withdraws its recommendation of the Offer, or recommends acceptance of any Company Takeover Proposal or resolves to do any of the foregoing; or (viii) (A) any corporation, entity or "group," as defined in Section 13(d)(3) of the Securities Exchange Act ("person/group"), other than Parent and Purchaser or any person/group listed in the Company's definitive proxy statement filed on August 21, 2000, acquires beneficial ownership of more than 10% of the outstanding Shares, or is granted any options or rights, conditional or otherwise, to acquire a total of more than 10% of the outstanding Shares and which, in each case, does not tender the Shares beneficially owned by it in the Offer; (B) any new group is formed which beneficially owns more than 10% of the outstanding Shares and which does not tender the Shares beneficially owned by it in the Offer; or (C) any person/group, other than Parent or one or 40 more of its affiliates, enters into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company; or (ix) any change, development, effect or circumstance occurs or is threatened that would reasonably be expected to have a Material Adverse Effect with respect to the Company; or (x) the Company commences a case under any chapter of Title XI of the United States Code or any similar law or regulation; or a petition under any chapter of Title XI of the United States Code or any similar law or regulation is filed against the Company which is not dismissed within 5 business days. The preceding conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to the condition and may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of any right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Common Shares not accepted for payment shall be promptly returned to the tendering shareholders. 16. Legal Matters. General. Except as described in this Section 16, based on a review of publicly available filings by the Company with the Commission and other publicly available information concerning the Company, neither Parent nor Purchaser is aware of any license or regulatory permit that appears to be material to the business of the Company and that might be adversely affected by Purchaser's acquisition of Shares pursuant to the Offer, or of any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser pursuant to the Offer. Should any approval or other action be required, Purchaser expects the approval or action would be sought, except as described below under "State Takeover Laws." Though Purchaser does not intend to delay acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any of these matters, Purchaser does not assure you that an approval or other action, if required, would be obtained without substantial conditions or that adverse consequences would not result to the Company's business or that parts of the Company's business would not have to be disposed of in the event that the approvals were not obtained or the other actions were not taken or in order to obtain the approval or other action. If some types of adverse action are taken with respect to the matters discussed below, Purchaser may decline to accept for payment or pay for any Shares tendered. See Section 15 of this Offer to Purchase. 41 State Takeover Laws. The Company and some of its subsidiaries conduct business in a number of states throughout the United States, some of which have adopted laws and regulations applicable to offers to acquire shares of corporations that are incorporated or have substantial assets, shareholders and/or a principal place of business in those states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Statute, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and was therefore unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable only under certain conditions, in particular, that the corporation has a substantial number of shareholders in and is incorporated under the laws of the applicable state. The Company is incorporated under the laws of the State of Iowa. In general, Section 490.1110 of the IBCA ("Section 490.1110") prevents an "interested shareholder" (including a person who owns or has the right to acquire 10% or more of the corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and other actions) with an Iowa corporation for a period of three years following the date the person became an interested shareholder. The board of directors of the Company has taken all appropriate action so that neither Parent nor Purchaser is an "interested shareholder" pursuant to Section 490.1110. Neither Parent nor Purchaser has determined whether any other state takeover laws and regulations will by their terms apply to the Offer, and, except as set forth above, neither Parent nor Purchaser has presently sought to comply with any state takeover statute or regulation. Parent and Purchaser reserve the right to challenge the applicability or validity of any state law or regulation purporting to apply to the Offer or the Merger, and neither anything in this Offer nor any action taken in connection with the Offer is intended as a waiver of that right. If it is asserted that one or more state takeover statutes is applicable to the Offer or the Merger and an appropriate court does not determine that the statute is inapplicable or invalid as applied to the Offer or the Merger, Parent or Purchaser might be required to file information with, or to receive approval from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in completing the Offer. Antitrust. Based upon an examination of publicly available information relating to Parent and the Company, the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, do not apply to the Offer or the Merger. Purchaser does not assure you, however, that a challenge to the Offer on antitrust grounds will not be made, or, if a challenge is made, what the result would be. See Section 15 of this Offer to Purchase for conditions to the Offer, including conditions with respect to judicial or governmental actions. 17. Fees and Expenses. Purchaser has retained Mellon Investor Services LLC to act as the Information Agent and the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telecopy and personal interview and may request brokers, dealers and other nominee shareholders to forward the Offer materials to beneficial owners. The 42 Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for specified out-of-pocket expenses. Purchaser and Parent have also agreed to indemnify the Information Agent and the Depositary against specified liabilities and expenses in connection with the Offer, including specified liabilities under the federal securities laws. Neither Parent nor Purchaser will pay any fees or commissions to any broker or dealer or any other person (other than to the Information Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 18. Miscellaneous. The Offer is being made to all holders of Shares. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant to the Offer, Purchaser will make a good faith effort to comply with the state statute or seek to have the statute declared inapplicable to the Offer. If, after a good faith effort, Purchaser cannot comply with any the state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in that state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of that jurisdiction. No person has been authorized to give any information or make any representation on behalf of Parent, Purchaser or the Company not contained in this Offer to Purchase or in the related Letter of Transmittal and, if given or made, that information or representation must not be relied upon as having been authorized. Parent and Purchaser have filed with the Commission a Tender Offer Statement on Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. The Tender Offer Statement and any amendments to it, including exhibits, may be inspected and copies may be obtained from the offices of the Commission in the manner set forth in Section 8 of this Offer to Purchase (except that they will not be available at the regional offices of the Commission). 43 Drake Merger Sub, Inc. July 5, 2001 Annex I Information Concerning the Directors and Executive Officers of Parent The names and ages of the directors and executive officers of Parent, and their present principal occupations or employment and five-year employment history, are set forth below. Unless otherwise indicated, each individual is a citizen of the United States and has been employed by Parent for the last five years. Except as otherwise noted, the directors and executive officers of Parent have a business address of 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124 with a business telephone number of (503) 615-1100.
Name Age Position with the Company - ---- --- ------------------------- Dr. Glenford J. Myers............................ 54 Chairman of the Board, President and Chief Executive Officer Ronald A. Dilbeck................................ 48 Chief Operating Officer R.F. (Bob) Dunne................................. 47 Vice President of Sales Arif Kareem...................................... 47 Sr. Vice President and General Manager, Telecommunications Division Annette M. Mulee................................. 48 Vice President, General Counsel and Secretary James F. Dalton.................................. 42 Director Richard J. Faubert............................... 53 Director C. Scott Gibson.................................. 49 Director Jean-Pierre D. Patkay............................ 50 Director Jean-Claude Peterschmitt......................... 67 Director Carl W. Neun..................................... 57 Director
Dr. Glenford J. Myers founded Parent in March 1987 and has served as Parent's Chairman of the Board, President and Chief Executive Officer since that time. From 1981 to 1987, he held various management positions with Intel Corporation in microprocessor development. From 1968 to 1981, Dr. Myers held various engineering and management positions with IBM. Dr. Myers holds a Ph.D. from the Polytechnic Institute of New York, an M.S. from Syracuse University and a B.S.E.E. from Clarkson College. He is the author of eight books on computer architecture, software design and software testing. Ronald A. Dilbeck joined Parent in May 1996 as Vice President and General Manager, Automation and Control Division and was appointed to the position of Chief Operating Officer of the Company in October 2000. From 1994 to 1996, Mr. Dilbeck was President and Chief Executive Officer of nCUBE, Inc, a company that builds interactive multimedia servers. From 1983 to 1994, he held various engineering management positions with Sequent Computer Systems, a manufacturer and provider of information technology solutions, the most recent being Director of Integration Services. Mr. Dilbeck holds an M.S.E.E. from Washington State University and a B.S.E.E. and a B.S. in Mathematics from Oregon State University. I-1 R.F. (Bob) Dunne joined Parent in April 2001 as Vice President of Sales. Before joining Parent, Mr. Dunne successfully launched Webridge, Inc., an Internet software infrastructure company. Before joining Webridge, Mr. Dunne spent 12 years at Tektronix, Inc. in a variety of key management positions, including Vice President of Sales in Tektronix' Video & Networking Division and General Manager of the Network Computing Group. Mr. Dunne began his career with International Business Machines Corporation as a marketing representative and has held management positions with Mentor Graphics Corporation and Zycad, Inc. Arif Kareem joined Parent in July 1997 as Vice President, Telecom Business Unit, and was appointed Vice President and General Manager, Telecommunications Division in October 1997 and Senior Vice President in October 2000. From 1980 to 1997, Mr. Kareem held various engineering and marketing management roles at Tektronix, Inc. before serving as General Manger of Tektronix's Telecom Product Line and subsequently General Manager of the Communications Test Business Unit. His most recent role at Tektronix was as Director of Strategic Marketing for the Measurement Division. Mr. Kareem holds a B.S.E.E. and an M.S.E.E. from Lehigh University, and an M.B.A. from the University of Oregon. Annette M. Mulee joined Parent in November 2000 as Vice President, General Counsel and Secretary. Prior to joining Parent, Ms. Mulee was a partner at the Portland-based law firm of Stoel Rives LLP. During her 16-year career at Stoel Rives, she specialized in mergers and acquisitions, technology protection and licensing, venture financing and general corporate work for the firm's high technology clients. She holds a J.D. from Northwestern School of Law at Lewis and Clark College, an M.B.A. from Columbia University Graduate School of Business and a B.A. in economics from Cornell University. James F. Dalton has served as a Director since December 1993. Since April 1989, Mr. Dalton has been employed by Tektronix, Inc., a test, measurement and monitoring technology company. He presently serves as Vice President, Corporate Development, Law & Information Systems of Tektronix. He also presently serves as General Counsel and Secretary of Tektronix. Prior to that, he served as Director of Corporate Development at Tektronix. Richard J. Faubert has served as a Director since June 1993. From 1986 through 1992, Mr. Faubert served as Vice President of Product Development of GenRad, Inc. From 1992 through 1998, Mr. Faubert was employed by Tektronix, first as General Manager of its Instruments Business Unit and then as Vice President and General Manager of the Television and Communications Business Unit, Measurement Business Division. Since that time, Mr. Faubert has served as President and CEO of SpeedFam-IPEC, Inc., a semiconductor capital equipment manufacturing company. Mr. Faubert also serves on the Board of Directors of SpeedFam-IPEC, Inc. and the Semiconductor Industry Suppliers Association (SISA). C. Scott Gibson has served as a Director since June 1993. From January 1983 through February 1992, Mr. Gibson co-founded and served as President of Sequent Computer Systems, Inc., a computer systems company. Prior to co-founding Sequent, Mr. Gibson served as General Manager, Memory Components Operation, at Intel. Since March 1992, Mr. Gibson has been a director and consultant to high technology companies. Currently, Mr. Gibson is the Chairman of the Board of Trustees of Oregon Graduate Institute. Mr. Gibson also serves on the boards of several other companies, including Egghead.com, Inc., Emerald Solutions, Inc., Triquint I-2 Semiconductor, Inc., Integrated Measurement Systems, Inc., Webridge Inc., Cenquest, Inc., etrieve, Inc. and LiveBridge, Inc. Mr. Gibson holds a B.S.E.E. and an M.B.A. from the University of Illinois. Jean-Pierre D. Patkay has served as a Director since July 1998. From 1973 to 1990, Mr. Patkay held a variety of manufacturing and general management positions with Hewlett-Packard Company. From 1990 to 1994, Mr. Patkay was Vice President of Operations for Quantum Corp., a diversified mass storage company. From 1994 through March 2000, Mr. Patkay was employed by 3Com Corporation, a computer networking company, serving first as Vice President of Worldwide Manufacturing and later as Vice President and General Manager, 3Com OEM. Since April 2000, Mr. Patkay has served as Vice President of Operations of TollBridge Technologies, Inc., a telecom equipment company. Jean-Claude Peterschmitt has served as a Director since July 1996. From 1967 to 1987, Mr. Peterschmitt served in various capacities with Digital Equipment Corporation, a corporate information systems supplier, most recently as General Manager, Vice President, Europe and Chairman of the European Board of Directors. Prior to that time, Mr. Peterschmitt was a member of Arthur D. Little's European Operations Research Group. He currently serves on the advisory and supervisory boards of Euroventures B.V., a European venture fund, Le Reseau, a network structure for the creation and development of high-technology enterprises in Switzerland, and various private American and European companies. Mr. Peterschmitt received an engineering degree from Eidgenossiche Technische Hochscule (Zurich) and an M.S. degree from the MIT Sloan School of Business. Mr. Peterschimitt is a citizen of France. Carl W. Neun has served as a Director since June 2000. From March 1993 to January 2000, Mr. Neun was Senior Vice President and Chief Financial Officer of Tektronix. Since January 2000, Mr. Neun has served as Chairman of the Board of Directors of WireX Communications, Inc., a server appliance software company. Mr. Neun also serves on the Board of Directors of Planar Systems, Inc., Powerwave Technologies, Inc., SpeedFam-IPEC, Inc. and Sabrix, Inc. I-3 Annex II Information Concerning the Sole Director and Executive Officer of Purchaser The name and age of the sole director and executive officer of Purchaser, and his present principal occupations or employment and five-year employment history, are set forth below. Dr. Myers is a citizen of the United States and has been employed by Purchaser since it was organized in June 2001. The sole director and executive officer of Purchaser has a business address of 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, with a business telephone number of (503) 615-1100. Name Age Position with the Company - ---- --- ------------------------- Dr. Glenford J. Myers............. 54 President, Secretary and Director Dr. Glenford J. Myers has served as Purchaser's President, Secretary and Director since the Purchaser was organized by Parent in June 2001. He founded Parent in March 1987 and has served as Parent's Chairman of the Board, President and Chief Executive Officer since that time. From 1981 to 1987, he held various management positions with Intel Corporation in microprocessor development. From 1968 to 1981, Dr. Myers held various engineering and management positions with IBM. Dr. Myers holds a Ph.D. from the Polytechnic Institute of New York, an M.S. from Syracuse University and a B.S.E.E. from Clarkson College. He is the author of eight books on computer architecture, software design and software testing. II-1 Manually signed facsimile copies of the Letter of Transmittal will be accepted. Letters of Transmittal and certificates for Shares should be sent or delivered by each shareholder of the Company or his broker, dealer, commercial bank or trust company to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: Mellon Investor Services LLC By Mail: Mellon Investor Services LLC P.O. Box 3301 South Hackensack, NJ 07606 Attn.: Reorganization Department By Hand: Mellon Investor Services LLC 120 Broadway--13th Floor New York, NY 10271 Attn.: Reorganization Department By Overnight Courier Mellon Investor Services LLC 85 Challenger Road Mail Drop/Reorg. Ridgefield Park, NJ 07660 Attn.: Reorganization Department Any questions or requests for assistance may be directed to the Information Agent at its address and telephone numbers set forth below. Requests for additional copies of this Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent or the Depositary. Shareholders may also contact their brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: Mellon Investor Services LLC 44 Wall Street, 7th Floor New York, New York 10005 Call Toll Free: (800) 504-8997 International Calls: (917) 320-6267 EX-99.(A)(1)(B) 3 d26190_ex99a1b.txt LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL To Tender Shares of Common Stock of Microware Systems Corporation Pursuant to the Offer to Purchase dated July 5, 2001 by Drake Merger Sub, Inc. a Wholly Owned Subsidiary of RadiSys Corporation - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 p.m., NEW YORK TIME, ON THURSDAY, AUGUST 2, 2001 UNLESS THE OFFER IS EXTENDED - -------------------------------------------------------------------------------- The Depositary for the Offer is: Mellon Investor Services LLC
By First Class By Hand: or Express Mail: By Overnight: ------- --------------- ------------ Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC 120 Broadway P.O. Box 3301 85 Challenger Road 13th Floor South Hackensack, NJ 07606 Mail Drop-Reorg New York, NY 10271 Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept. Attn: Reorganization Dept.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
DESCRIPTION OF SHARES TENDERED - -------------------------------------------------------------- ------------------------------------------------- Name(s) & Address(es) of Registered Holder(s) Share Certificate(s) and Share(s) Tendered (Please fill in, if blank, exactly as name(s) appear(s) on (Attach additional signed list if necessary) certificate(s)) - -------------------------------------------------------------- ---------------- --------------- ---------------- Total Number Share of Shares Number Certificate(s) Represented By of Shares Number(s)* Certificate(s)* Tendered** ---------------- --------------- ---------------- ---------------- --------------- ---------------- ---------------- --------------- ---------------- ---------------- --------------- ---------------- ---------------- --------------- ---------------- ---------------- --------------- ---------------- Total Shares - -------------------------------------------------------------- ---------------- --------------- ----------------
* Need not be completed by Book-Entry Shareholders. ** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to have been tendered. See Instruction 4. Your bank or broker can assist you in completing this Letter of Transmittal. The instructions enclosed with this Letter of Transmittal must be followed and should be read carefully. Questions and requests for 1 additional copies of the Offer to Purchase (as defined below) and this Letter of Transmittal may be directed to the Information Agent as indicated in Instruction 8. Delivery of this Letter of Transmittal to an address other than as set forth above, or transmission of instructions via facsimile transmission or telex number other than as set forth above, will not constitute valid delivery. This Letter of Transmittal is to be completed by shareholders if certificates for Shares (as defined below) are to be forwarded with this letter of Transmittal or if tenders of Shares are to be made by book-entry transfer into the account of Mellon Investor Services LLC as Depositary (the "Depositary") at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Shareholders who tender Shares by book-entry transfer are referred to as "Book-Entry Shareholders." Holders of Shares whose certificates for those Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary before the Expiration Date (as defined in Section 1 of the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. See Instruction 2. [_] CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution __________________________________________________ Account Number _________________________________________________________________ Transaction Code Number ________________________________________________________ [_] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ________________________________________________ Window Ticket Number (if any) __________________________________________________ Date of Execution of Notice of Guaranteed Delivery _____________________________ Name of Institution which Guaranteed Delivery __________________________________ If delivered by book-entry transfer: Book-Entry Transfer Facility Account Number: ___________________________________ Transaction Code Number: _______________________________________________________ 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Drake Merger Sub, Inc., an Iowa corporation (the "Purchaser"), the above-described shares of common stock (the "Shares"), of Microware Systems Corporation, an Iowa corporation (the "Company"), at a purchase price of $0.68 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 5, 2001 and any amendments or supplements thereto (the "Offer to Purchase") and in this Letter of Transmittal (which together constitute the "Offer"), receipt of which is acknowledged. The undersigned understands that the Purchaser reserves the right, with the written consent of the Company, to transfer or assign, in whole or from time to time in part, the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment for the Shares tendered with this Letter of Transmittal in accordance with the terms and conditions of the Offer, the undersigned sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered by this Letter of Transmittal and any and all noncash dividends, distributions (including additional Shares) or rights declared, paid or issued with respect to the tendered Shares on or after July 5, 2001 and payable or distributable to the undersigned on a date before the transfer to the name of the Purchaser or a nominee or transferee of the Purchaser on the Company's stock transfer records of the Shares tendered with this Letter of Transmittal (a "Distribution"). The undersigned appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to the Shares (and any Distribution) with full power of substitution (this power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver Share Certificates (as defined below) (and any Distribution) or transfer ownership of the Shares (and any Distribution) on the account books maintained by a Book-Entry Transfer Facility, together in either case with appropriate evidence of transfer and authenticity, to the Depositary for the account of the Purchaser, (b) present the Shares (and any Distribution) for transfer on the books of the Company, and receive all benefits and otherwise exercise all rights of beneficial ownership of the Shares (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned irrevocably appoints designees of the Purchaser as the shareholder's proxy, each with full power of substitution to the full extent of the shareholder's rights with respect to the Shares tendered by the shareholder and accepted for payment by the Purchaser and with respect to any Distribution. This appointment will be effective when, and only to the extent that, the Purchaser accepts the Shares for payment. Upon acceptance for payment, all prior proxies given by the shareholder with respect to the Shares (and, if applicable, other shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consents executed (and if given or executed, will not be deemed effective). The designees of the Purchaser will be empowered to exercise all voting and other rights of the shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement, by written consent in lieu of a meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for the Shares, the Purchaser must be able to exercise full voting rights with respect to the Shares. The undersigned represents and warrants that (a) the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered by this Letter of Transmittal (and any Distribution) and (b) when the Shares are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title to the Shares (and any Distribution), free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered by this Letter of Transmittal (and any Distribution). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions in respect of the Shares tendered by this Letter of Transmittal, accompanied by appropriate documentation of transfer, and pending remittance or appropriate assurance of remittance, the Purchaser will be, subject to applicable law, entitled to all rights and privileges as owner of the Distribution and may withhold the entire purchase price or deduct from the purchase price the amount or value of the purchase price, as determined by the Purchaser in its sole discretion. 3 All authority conferred or agreed to be conferred in this Letter of Transmittal shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned under this Letter of Transmittal shall be binding upon the heirs, personal representatives, executors, administrators, successors and assigns of the undersigned. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time before the Expiration Date and, unless previously accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after September 3, 2001. See Section 3 of the Offer to Purchase. The undersigned understands that tenders of Shares pursuant to any of the procedures described in Section 2 of the Offer to Purchase and in the instructions to this Letter of Transmittal will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representations that the undersigned owns the Shares being tendered. Unless otherwise indicated in this Letter of Transmittal under "Special Payment Instructions" or "Special Delivery Instructions," please mail the check for the purchase price and/or issue or return any certificate(s) for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." If both the Special Delivery Instructions and Special Payment Instructions are completed, please issue the check for the purchase price and/or issue or return any certificate(s) for Shares not tendered or accepted for payment in the name of, and deliver the check and/or certificate to, the person or persons so indicated. The undersigned recognizes that the Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name(s) of the registered holder(s) of the Shares if the Purchaser does not accept for payment any of the Shares so tendered. 4 - -------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (See Instructions) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment, and/or if the check for the purchase price of Shares accepted for payment in connection with the Offer is to be issued to the order of someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal. Issue [ ] check to [ ] certificate to: Name __________________________________________________________________________ (Please Print) Address ________________________________________________________________________ ________________________________________________________________________________ (Include Zip Code) ________________________________________________________________________________ (Tax Identification or Social Security No.) (See Substitute Form W-9 included herein) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment, and/or if the check for the purchase price of Shares accepted for payment in connection with the Offer is to be mailed to someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or sent to an address different from that shown in the box entitled "Description of Shares Tendered" within this Letter of Transmittal. Mail [ ] check to [ ] certificate to: Name __________________________________________________________________________ (Please Print) Address ________________________________________________________________________ ________________________________________________________________________________ (Include Zip Code) ________________________________________________________________________________ (Tax Identification or Social Security No.) (See Substitute Form W-9 included herein) - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN ________________________________________________________________________________ ________________________________________________________________________________ (Signature(s) of Holder(s)) Dated: __________________________________________________________________, 2001 (Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) Name(s) ________________________________________________________________________ ________________________________________________________________________________ (Please Type or Print) Capacity (full title) __________________________________________________________ ________________________________________________________________________________ Address _______________________________________________________________________ ________________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number ________________________________________________________________________ Tax Identification or Social Security No. ____________________________________________________________ COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN Guarantee of Signature(s) (See Instructions 1 and 5) Authorized Signature ___________________________________________________________ Name ___________________________________________________________________________ (Please Type or Print) Title __________________________________________________________________________ Name of Firm ___________________________________________________________________ Address ________________________________________________________________________ Dated: ___________________________________________________________________, 2001 - -------------------------------------------------------------------------------- 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder(s) of Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Share(s)), unless the holder has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" included herein or (ii) if the Shares are tendered for the account of a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States (each of the foregoing being referred to as an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal is to be completed either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 2 of the Offer to Purchase. Share Certificates, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of the Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile of it), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein before the Expiration Date. Shareholders whose Share Certificates are not immediately available, or who cannot deliver their Share Certificates and all other required documents to the Depositary before the Expiration Date, or who cannot complete the procedure for delivery by book-entry transfer on a timely basis, may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant to that procedure: (i) the tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser (with any required signature guarantees) must be received by the Depositary before the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile of it), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or a facsimile of it), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space in this Letter of Transmittal is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached to this Letter of Transmittal. 4. Partial Tenders. (Not Applicable to Book-Entry-Shareholders.) If fewer than all the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In these cases, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the purchase of Shares pursuant to the Offer. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered, the signature(s) must correspond with the name(s) as written on the face of the certificate without alteration, enlargement or any change whatsoever. 7 If any of the Shares tendered are owned of record by two or more joint owners, all owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, attorney-in-fact, officer of a corporation or another acting in a fiduciary or representative capacity, that person should so indicate when signing, and proper evidence satisfactory to the Purchaser of the person's authority so to act must be submitted. When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price for Shares is to be made to or certificates for Shares not tendered or purchased are to be issued in the name of a person other than the registered holder(s). Signatures on those certificates or stock powers must then be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the certificate(s). Signatures on those certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as provided in this Instruction 6, the Purchaser will pay any stock transfer taxes with respect to the transfer and sale of the purchased Shares pursuant to the Offer. If, however, payment of the purchase price is to be made to, or (in the circumstances permitted hereby and if applicable) if certificates for Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of stock transfer taxes (whether imposed on the registered holder or that person) payable on account of the transfer to the person will be deducted from the purchase price if satisfactory evidence of the payment of those taxes, or exemption from them, is not submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) listed in this Letter of Transmittal. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal, or if a check and/or certificates are to be mailed to a person other than the signer of this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal should be completed. 8. Requests for Assistance or Additional Copies. Questions or requests for assistance may be directed to the Information Agent at the address and telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or brokers, dealers, commercial banks or trust companies. 9. Waiver of Conditions. The conditions of the Offer may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion. See Section 1 of the Offer to Purchase. 10. Substitute Form W-9. The tendering shareholder generally is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the shareholder's social security or federal employer identification number, on Substitute Form W-9 contained herein. Failure to provide the information on the form may subject the tendering shareholder to up to 31% federal income tax withholding on the payment of the purchase price for Shares. The box in Part I of the Substitute Form W-9 may be checked if the shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the box in Part I is checked and the Depositary is not provided with a TIN within 60 days, the Depositary will thereafter withhold up to 31% of any purchase price payment made for Shares before a TIN is provided to the Depositary. 11. Mutilated, Lost, Stolen or Destroyed Certificates for Microware Systems Corporation. Any holder of Microware Systems Corporation shares whose certificates for Microware Systems Corporation shares have been mutilated, 8 lost, stolen or destroyed should write to or telephone Wells Fargo Bank Minnesota, N.A., Corporate Trust Services, MAC N9303-110, 6th & Marquette, Minneapolis, Minnesota 55479, Attention: Michael Lechner, telephone (612) 316-4305. IMPORTANT TAX INFORMATION Under federal income tax law, a tendering shareholder whose tendered shares are accepted for purchase generally is required by law to provide the Depositary (as payer) with the shareholder's correct TIN on Substitute Form W-9 contained herein. If the shareholder is an individual, the TIN is the shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to any shareholder with respect to Shares pursuant to the Offer may be subject to backup withholding. Certain shareholders (including, among others, corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. These statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. Other exempt holders should furnish their TIN on Substitute W-9, write "Exempt" in Part II of that form, and sign and date the Substitute Form W-9. If backup withholding applies, the Depositary is required to withhold up to 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability for the year of the transaction of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be sought. Purpose of Substitute Form W-9 To prevent backup withholding on payments of the purchase price for Shares, each tendering shareholder, other than corporations, certain foreign individuals and certain others, generally is required to notify the Depositary of his or her correct TIN by completing the Substitute Form W-9 contained herein, certifying that the TIN provided on Substitute Form W-9 is correct (or that the shareholder is awaiting a TIN). What Number to Give the Depositary The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. 9 PAYER'S NAME: Mellon Investor Services LLC, as Depositary Agent - ---------------------------------- --------------------------------------------------------------------------------------- SUBSTITUTE FORM W-9 PART I -- Taxpayer Identification Number (TIN) Department of the Treasury, Please enter your correct number in the appropriate box below. NOTE: If the account Internal Revenue Service is more than one name, see the chart on the enclosed form, Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9, for guidance PAYER'S REQUEST FOR on which number to enter. TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION Social Security Number Or Employer Identification Number ___________________________ ___________________________________ If you do not have a TIN, see the instructions "How to Get a TIN" and check the box below. TIN Applied For [_] --------------------------------------------------------------------------------------- PART II -- For Payees Exempt from Backup Withholding (see Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9) --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- PART III Certification -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest and dividends, or (c) IRS has notified me that I am no longer subject to backup withholding. Certification Instructions. You must cross out Item (2) above if you have been notified by IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. Name _______________________________________________________________________________ (Please Print) (If multiple holders or you have changed your name, see Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9) Signature(s)____________________________ Date___________________ - -------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF UP TO 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 10 IMPORTANT: IF A SHAREHOLDER DESIRES TO ACCEPT THE OFFER, THIS LETTER OF TRANSMITTAL (OR A FACSIMILE OF IT), TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY BEFORE THE EXPIRATION DATE. THE INFORMATION AGENT FOR THE OFFER IS: MELLON INVESTOR SERVICES LLC 44 WALL STREET,7TH FLOOR NEW YORK, NEW YORK 10005 CALL TOLL FREE: 800-504-8997 INTERNATIONAL CALLS: (917) 320-6267 11 EX-99.(A)(1)(C) 4 d26190_ex99a1c.txt NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK OF MICROWARE SYSTEMS CORPORATION As set forth in Section 2 of the Offer to Purchase (as defined below), this instrument or one substantially equivalent to it must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available or the certificates for Shares and all other required documents cannot be delivered to the Depositary before the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This instrument may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary. THE DEPOSITARY FOR THE OFFER IS: MELLON INVESTOR SERVICES LLC
By First Class By Hand or Express Mail: By Overnight: ------- --------------- ------------ Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC 120 Broadway P.O. Box 3301 85 Challenger Road 13th Floor South Hackensack, NJ 07606 Mail Drop-Reorg New York, NY 10271 Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept. Attn: Reorganization Dept.
To Confirm Receipt of Notice of Guaranteed Delivery: FAX #: (201) 296-4293 FAX Confirmation #: (201) 296-4860 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OR TELEX NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE VALID DELIVERY. Ladies and Gentlemen: The undersigned tenders to Drake Merger Sub, Inc., an Iowa corporation (the "Purchaser"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 5, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is acknowledged, the number of shares of common stock (the "Shares"), indicated below of Microware Systems Corporation, an Iowa corporation, pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Signature(s) _____________________________ Address (escrows) _________________________ Name(s) __________________________________ ___________________________________________ Zip Code __________________________________________ Please Type or Print Area Code and Tel. No(s). _________________ Number of Shares _________________________ (Check one if Shares will be tendered by book-entry transfer) Certificate Nos. (If Available) __________________________________________ [_] The Depository Trust Company Dated __________________________ [_] Philadelphia Depository Trust Company
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, guarantees delivery to the Depositary of either the certificates evidencing all tendered Shares, in proper form for transfer, or delivery of Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility"), in either case together with the Letter of Transmittal (or a facsimile of it), properly completed and duly executed, with any required signature guarantees and any other required documents, all within three (3) New York Stock Exchange trading days after the date hereof. _____________________________________ _______________________________________ Name of Firm Authorized Signature _____________________________________ Name _________________________________ _____________________________________ _______________________________________ Address Please Type or Print _____________________________________ Title _________________________________ Zip Code Dated ________________________________ Area Code and Tel. No. _______________________ NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES ARE TO BE DELIVERED WITH YOUR LETTER OF TRANSMITTAL. EX-99.(A)(1)(D) 5 d26190_ex99a1d.txt LETTER TO BROKERS OFFER TO PURCHASE FOR CASH ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF MICROWARE SYSTEMS CORPORATION AT $0.68 NET PER SHARE BY DRAKE MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF RADISYS CORPORATION - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON THURSDAY, AUGUST 2, 2001 UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- To: Brokers, Dealers, Commercial Banks, Trust, Companies and Other Nominees: We are asking you to contact your clients for whom you hold shares of Common Stock (the "Shares") of Microware Systems Corporation, an Iowa corporation (the "Company"). Please bring to their attention as promptly as possible the offer being made by Drake Merger Sub, Inc. (the "Purchaser"), an Iowa corporation and a wholly owned subsidiary of RadiSys Corporation, an Oregon corporation ("RadiSys"), to purchase all of the outstanding Shares, at a purchase price of $0.68 per Share net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 5, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Enclosed for your information and for forwarding to your clients, for whose account you hold Shares registered in your name or in the name of your nominee, or hold Shares registered in their own names, are copies of the following documents: 1. The Offer to Purchase dated July 5, 2001; 2. The Letter of Transmittal to be used in accepting the Offer. Facsimile copies of the Letter of Transmittal may be used to accept the Offer; 3. A printed form of letter which may be sent to your clients for whose account you hold Shares in your name or in the name of your nominee, with space provided for obtaining the client's instructions with regard to the Offer; 4. A Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis; 5. Letter from the Company with attached Schedule 14D-9 (without exhibits); and 6. Guidelines of the Internal Revenue Service for certification of Taxpayer Identification Number on Substitute Form W-9. THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT (AS DESCRIBED IN THE OFFER TO PURCHASE) AND THE MAKING OF THE OFFER BY THE PURCHASER, AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, THE COMPANY'S SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. The Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. You will be reimbursed by the Purchaser for customary mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the sale and transfer of Shares to it or its order, except as otherwise provided in Instruction 6 of the Letter of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON THURSDAY, AUGUST 2, 2001 UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, (1) a duly executed and properly completed Letter of Transmittal, and, if necessary, any other required documents should be sent to the Depositary and (2) either certificates representing the tendered Shares should be delivered to the Depositary, or the Shares should be tendered by book-entry transfer into the Depositary's account at one of the book-entry transfer facilities (as defined in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents to the Depositary before the expiration of the Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 2 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Additional copies of the above documents may be obtained from the Information Agent, at the address and telephone number set forth on the back cover of the Offer to Purchase. Very truly yours, DRAKE MERGER SUB, INC. Nothing contained herein or in the enclosed documents shall constitute you or any person the agent of the Purchaser, RadiSys, the Company or the Depositary, or as agent of any affiliate of any of them, or authorize you or any other person to make any statements on behalf of any of them with respect to, or use any document in connection with, the Offer, except for statements expressly made in the Offer to Purchase or the Letter of Transmittal and the documents included herewith. EX-99.(A)(1)(E) 6 d26190_ex99a1e.txt LETTER TO CLIENTS OFFER TO PURCHASE FOR CASH ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF MICROWARE SYSTEMS CORPORATION AT $0.68 NET PER SHARE BY DRAKE MERGER SUB, INC. A WHOLLY OWNED SUBSIDIARY OF RADISYS CORPORATION - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON THURSDAY, AUGUST 2, 2001 UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- To Our Clients: Enclosed for your consideration is an Offer to Purchase dated July 5, 2001 (the "Offer to Purchase") and the related Letter of Transmittal relating to an offer by Drake Merger Sub, Inc., an Iowa corporation ("Purchaser") and a wholly owned subsidiary of RadiSys Corporation, an Oregon corporation, to purchase all of the outstanding shares of Common Stock (the "Shares") of Microware Systems Corporation, an Iowa corporation (the "Company"), at a purchase price of $0.68 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). We are the holder of record of Shares held by us for your account. A tender of your Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, pursuant to the terms and conditions set forth in the Offer to Purchase. Your attention is invited to the following: 1. The tender price is $0.68 per Share, net to you in cash. 2. The Offer is being made for all of the outstanding Shares. 3. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn before the expiration of the Offer a total of at least 90 percent of the outstanding Shares (on a fully diluted basis). 4. The Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on Thursday, August 2, 2001 unless the Offer is extended. 5. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. The Offer is not being made to, nor will tenders be accepted from, or on behalf of, holders of Shares residing in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of that jurisdiction. If you wish to have us tender any or all of the Shares held by us for your account, please instruct us by completing, executing and returning to us the instruction form contained in this letter. If you authorize us to tender your Shares, all of your Shares will be tendered unless otherwise specified in the instruction form. Your instruction should be forwarded to us in ample time to permit us to submit a tender on your behalf before the expiration of the Offer. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF MICROWARE SYSTEMS CORPORATION The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated July 5, 2001 (the "Offer to Purchase") and the related Letter of Transmittal pursuant to an offer by Drake Merger Sub, Inc., an Iowa corporation, to purchase all of the outstanding shares of Common Stock (the "Shares") of Microware Systems Corporation, an Iowa corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares which are held by you for the account of the undersigned), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal furnished to the undersigned. - -------------------------------------------------------------------------------- Number of Shares to be Tendered: SIGN HERE ______________ shares __________________________________________ Signature __________________________________________ Please print name(s) __________________________________________ __________________________________________ Address Area Code & Telephone Number __________________________________________ Tax Identification or Social Security Number(s) __________________________________________ - -------------------------------------------------------------------------------- EX-99.(A)(1)(F) 7 d26190_ex99a1f.txt GUIDELINES ON W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 (Section references are to the Internal Revenue Code of 1986, as amended.) Guidelines for Determining the Proper Taxpayer Identification Number ("TIN") to Give the Payer--Social security numbers ("SSNs") have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers ("EINs") have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. You must enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number ("ITIN"). Enter it in the social security number box. If you do not have an ITIN, see How To Get a TIN below. If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, using your EIN may result in unnecessary notices to the person requesting your TIN.
==================================================================================================================================== Give the NAME and Give the NAME and SOCIAL SECURITY EMPLOYER IDENTIFI- For this type of account: NUMBER of-- For this type of account: CATION NUMBER of-- - -------------------------------- -------------------------------- -------------------------------- -------------------------------- 1. Individual The individual 6. Sole Proprietorship The owner (3) 2. Two or more individuals The actual owner of the 7. A valid trust, estate, or Legal entity (4) (joint account) account or, if combined pension trust funds, the first individual on the account (1) 3. Custodian account of a The minor (2) 8. Corporate The corporation minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee (1) 9. Association, club, The organization revocable savings religious, charitable, trust (grantor) is also educational, or other trustee tax-exempt organization b. So-called trust The actual owner (1) 10. Partnership The partnership account that is not a legal or valid trust under state law 5. Sole proprietorship The owner (3) 11. A broker or registered The broker or nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments ====================================================================================================================================
- -------------------------------------------------------------------------------- (1) List above the signature line and circle the name of the person whose number you furnish (2) List minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use your social security number or employer identification number. (4) List the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title). - -------------------------------------------------------------------------------- Note: If no name above the signature line is listed when more than one name appears in the registration, the number will be considered to be that of the first name appearing in the registration. 2 Purpose of Form. -- A person who is required to file an information return with the IRS must get your correct TIN to report, for example, income paid to you, real estate transactions, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. Use Form W-9 to give your correct TIN to the person requesting your TIN and, when applicable, (1) to certify the TIN you are giving is correct (or you are waiting for a number to be issued), (2) to certify you are not subject to backup withholding, or (3) to claim exemption from backup withholding if you are an exempt payee. Note: If a requester gives you a form other than a W-9 to request your TIN, you must use the requester's form if it is substantially similar to Form W-9. What Is Backup Withholding? -- Persons making certain payments to you must withhold and pay to the IRS up to 31% of such payments under certain conditions. This is called "backup withholding." Payments that could be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding. If you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return, payments you receive will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: 1. You do not furnish your TIN to the requester, or 2. The IRS tells the requester that you furnished an incorrect TIN, or 3. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or 4. You do not certify to the requester that you are not subject to backup withholding under 3 above (for reportable interest and dividend accounts opened after 1983 only), or 5. You do not certify your TIN. Certain payees and payments are exempt from backup withholding and information reporting. See below. How To Get a TIN: If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5 from your local Social Security Administration office. Get Form W-7 to apply for an ITIN or Form SS-4 to apply for an EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676). If you do not have a TIN, check the box titled "Applied For" in the space for the TIN, sign and date the form, and give it to the requester. Generally, you will then have 60 days to get a TIN and give it to the requester. If the requester does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN. Note: Checking the box titled "Applied For" on the form means that you have already applied for a TIN OR that you intend to apply for one soon. As soon as you receive your TIN, complete another Form W-9, include your TIN, sign and date the form, and give it to the requester. Payees Exempt from Backup Withholding Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "Exempt" in Part II, and sign and date the form. If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester a completed Form W-8, Certificate of Foreign Status. The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except the payee listed in item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7). However, a corporation (other than certain hospitals or extended care facilities) that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions and patronage dividends. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States, the District of Columbia or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate 3 Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments Exempt from Backup Withholding Payments of dividends and patronage dividends that generally are exempt from backup withholding include the following: o Payments to nonresident aliens subject to withholding under section 1441. o Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. o Payments of patronage dividends not paid in money. o Payments made by certain foreign organizations. o Section 404(k) payments made by an ESOP. Payments of interest that generally are exempt from backup withholding include the following: o Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct TIN to the payer. o Payments of tax-exempt interest (including exempt-interest dividends under section 852). o Payments described in section 6049(b)(5) to nonresident aliens. o Payments on tax-free covenant bonds under section 1451. o Payments made by certain foreign organizations. o Mortgage interest paid to you. Other types of payments that generally are exempt from backup withholding include: o Wages o Distributions from a pension, annuity, profit-sharing or stock bonus plan, any IRA, or an owner-employee plan. o Certain surrenders of life insurance contracts. o Gambling winnings if withholding is required under section 3402(q). However, if withholding is not required under section 3402(q), backup withholding applies if the payee fails to furnish a TIN. o Real estate transactions reportable under section 6045(e). o Cancelled debts reportable under section 6050P. o Distributions from a medical savings account and long-term care benefits. o Fish purchases for cash reportable under section 6050R. Payments that are not subject to information reporting also are not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A, and 6050N, and their regulations. Privacy Act Notice.-- Section 6109 requires you to give your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation and to cities, states, and the District of Columbia to carry out their tax laws. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold up to 31% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply. Penalties (1) Failure to Furnish TIN.-- If you fail to furnish your TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information With Respect to Withholding.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) Misuse of TINS.--If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE 4 EX-99.(A)(1)(H) 8 d26190_ex99a1h.txt SUMMARY ADVERTISEMENT This announcement is neither an offer to purchase nor a solicitation of an offer to sell shares. The Offer is made solely by the Offer to Purchase, dated July 5, 2001, and the related Letter of Transmittal and is not being made to (nor will tenders be accepted from or on behalf of) holders of shares in any jurisdiction in which the making of the Offer or the acceptance of the Offer would not be in compliance with the laws of that jurisdiction. In any jurisdiction the securities laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of MICROWARE SYSTEMS CORPORATION at $0.68 Net Per Share by Drake Merger Sub, Inc. a direct wholly owned subsidiary of RADISYS CORPORATION Drake Merger Sub, Inc., an Iowa corporation (the "Purchaser") and a direct wholly owned subsidiary of RadiSys Corporation, an Oregon corporation ("RadiSys"), is offering to purchase all outstanding shares of common stock (the "Shares") of Microware Systems Corporation, an Iowa corporation (the "Company"), at $0.68 per Share, net to the seller in cash (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 5, 2001, and in the related Letter of Transmittal (which together constitute the "Offer"). RadiSys fully and unconditionally guarantees the Offer. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON THURSDAY, AUGUST 2, 2001, UNLESS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn before the expiration of the Offer at least that number of Shares which would constitute 90% of the outstanding Shares on a fully diluted basis (the "Minimum Condition"). Certain shareholders of the Company have agreed to tender 7,222,978 Shares (constituting approximately 37% of the outstanding Shares on a fully diluted basis) in the Offer. -1- The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 29, 2001 (the "Merger Agreement"), among RadiSys, the Purchaser and the Company, pursuant to which, following the completion of the Offer and the satisfaction or waiver of specified conditions, the Purchaser will be merged with and into the Company (the "Merger"). At the effective time of the Merger, each outstanding Share (other than Shares owned by RadiSys, the Purchaser or any other wholly owned subsidiary of RadiSys or held by shareholders, if any, who are entitled to and who properly exercise dissenters' rights under Iowa law) will be converted into the right to receive the Offer Price without interest. The Board of Directors of the Company has determined that the Offer and the Merger are fair to, and in the best interests of, the Company and its shareholders, has unanimously approved the Merger Agreement, the Offer and the Merger, and unanimously recommends that the holders of the Shares accept the Offer and tender their Shares pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to Mellon Investor Services LLC (the "Depositary") of the Purchaser's acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price for the Shares with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for the Shares or timely confirmation of book-entry transfer of the Shares into the Depositary's account at The Depository Trust Company ("DTC") pursuant to the procedures set forth in Section 2 of the Offer to Purchase, (b) a properly completed and duly executed Letter of Transmittal (or facsimile of it) with any required signature guarantees and (c) any other documents required by the Letter of Transmittal. Under no circumstances will interest be paid by the Purchaser on the purchase price of the Shares, regardless of any extension of the Offer or any delay in making payment. The term "Expiration Date" means 5:00 p.m., New York City time, on Thursday, August 2, 2001, unless and until the Purchaser, in its sole discretion (but subject to the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Purchaser expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement), at any time or from time to time, and regardless of whether or not any of the events set forth in Section 15 of the Offer to Purchase shall have occurred or shall have been determined by the Purchaser to have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of the extension to the Depositary. The Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares in the event the Purchaser exercises its right to extend the period of time during which the Offer is open. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any extension will be followed by a public announcement of the extension no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any extension, all Shares previously tendered and not withdrawn will -2- remain subject to the Offer, subject to the right of a tendering shareholder to withdraw the shareholder's Shares. Except as otherwise provided below, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time before 5:00 p.m., New York City time, on Thursday, August 2, 2001 (or, if the Purchaser shall have extended the period of time during which the Offer is open, the latest time and date at which the Offer, as so extended by the Purchaser, shall expire) and, unless earlier accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time on or after September 3, 2001. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, before the physical release of the certificates, the serial numbers shown on the certificates must be submitted to the Depositary and, unless the Shares have been tendered by an Eligible Institution (as defined in Section 2 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at DTC to be credited with the withdrawn Shares and otherwise comply with DTC's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 of the Offer to Purchase at any time before the Expiration Date. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(d)(1) under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and the related Letter of Transmittal contain important information and should be read in their entirety before any decision is made with respect to the Offer. Requests for copies of the Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent as set forth below, and copies will be furnished promptly at the Purchaser's expense. The Information Agent for the Offer is: -3- Mellon Investor Services LLC 120 Broadway, 7th Floor New York, New York 10271 Banks and Brokers, please call: (917) 320-6267 All others call toll-free: (800) 504-8997 -4- EX-99.(D)(1) 9 d26190_ex99d1.txt AGREEMENT AND PLAN OF MERGER Agreement and Plan of Merger by and among RadiSys Corporation and Drake Merger Sub, Inc. and Microware Systems Corporation ------------------------------ Dated as of June 29, 2001 Table of Contents Page Article I Tender Offer and Merger..............................................2 1.1 The Offer..........................................................2 1.2 Company Action.....................................................3 1.3 Directors..........................................................4 1.4 The Merger.........................................................5 1.5 Effective Time.....................................................5 1.6 Conversion of Common Shares........................................6 1.7 Dissenting Shares..................................................6 1.8 Surrender of Common Shares.........................................7 1.9 Options and Warrants; Other Equity Interests.......................8 1.10 Articles of Incorporation and Bylaws...............................9 1.11 Directors and Officers.............................................9 1.12 Other Effects of Merger............................................9 1.13 Proxy Statement...................................................10 1.14 Additional Actions................................................10 1.15 Merger Without Meeting of Shareholders............................11 1.16 Lost, Stolen or Destroyed Certificates............................11 1.17 Material Adverse Effect...........................................11 Article II Representations and Warranties of the Company......................11 2.1 Organization and Good Standing....................................11 2.2 Capitalization....................................................12 2.3 Subsidiaries......................................................12 2.4 Authorization; Binding Agreement..................................13 2.5 Governmental Approvals............................................13 2.6 No Violations.....................................................14 2.7 Securities Filings................................................14 2.8 Company Financial Statements; Operating Expenses..................14 2.9 Absence of Certain Changes or Events..............................15 2.10 No Undisclosed Liabilities........................................15 2.11 Compliance with Laws..............................................15 2.12 Permits...........................................................15 2.13 Litigation........................................................16 2.14 Contracts.........................................................16 2.15 Employee Matters..................................................17 2.16 Taxes and Returns.................................................19 2.17 Intellectual Property.............................................22 2.18 Disclosure Documents..............................................23 2.19 Labor Matters.....................................................23 2.20 Limitation on Business Conduct....................................24 2.21 Title to Property.................................................24 2.22 Owned and Leased Premises.........................................24 2.23 Environmental Matters.............................................24 2.24 Insurance.........................................................26 2.25 Product Liability and Recalls.....................................26 2.26 Customers.........................................................26 2.27 Interested Party Transactions.....................................27 2.28 Finders and Investment Bankers....................................27 2.29 Fairness Opinion..................................................27 2.30 Takeover Statute..................................................27 2.31 Full Disclosure...................................................27 2.32 Rights Agreements.................................................27 2.33 Absence of Certain Payments.......................................27 2.34 Ability to Pay Debts..............................................28 2.35 Expense Reduction.................................................28 Article III Representations and Warranties of Parent and Purchaser............28 3.1 Organization and Good Standing....................................28 3.2 Authorization; Binding Agreement..................................28 3.3 Governmental Approvals............................................29 ii 3.4 No Violations.....................................................29 3.5 Disclosure Documents..............................................29 3.6 Financing Arrangements............................................30 3.7 No Prior Activities...............................................30 Article IV Additional Covenants of the Company................................30 4.1 Conduct of Business of the Company and the Company Subsidiaries...30 4.2 Notification of Certain Matters...................................31 4.3 Access and Information............................................32 4.4 Shareholder Approval..............................................32 4.5 Reasonable Efforts................................................32 4.6 Public Announcements..............................................33 4.7 Compliance........................................................33 4.8 No Solicitation...................................................33 4.9 SEC and Shareholder Filings.......................................35 4.10 Takeover Statutes.................................................35 4.11 Company Options and Company Warrants..............................35 4.12 Expense Reduction.................................................35 4.13 June 30 Financial Statements......................................35 Article V Additional Covenants of Purchaser and Parent........................36 5.1 Further Assurance.................................................36 5.2 Compliance........................................................36 5.3 Directors and Officers Indemnity; Insurance.......................37 5.4 Voting of Common Shares...........................................37 5.5 Guarantee of Parent...............................................37 Article VI Merger Conditions..................................................37 6.1 Offer.............................................................37 6.2 Shareholder Approval..............................................38 6.3 No Injunction or Action...........................................38 iii 6.4 Governmental Approvals............................................38 Article VII Termination and Abandonment.......................................38 7.1 Termination.......................................................38 7.2 Effect of Termination and Abandonment.............................40 Article VIII Miscellaneous....................................................41 8.1 Confidentiality...................................................41 8.2 Amendment and Modification........................................41 8.3 Waiver of Compliance; Consents....................................41 8.4 Survival..........................................................42 8.5 Notices...........................................................42 8.6 Binding Effect; Assignment........................................43 8.7 Fees and Expenses.................................................43 8.8 Governing Law.....................................................44 8.9 Counterparts......................................................44 8.10 Interpretation....................................................44 8.11 Entire Agreement..................................................45 8.12 Severability......................................................45 8.13 Specific Performance..............................................45 8.14 Third Parties.....................................................46 8.15 Waiver of Jury Trial..............................................46 Annex I Conditions to the Offer iv Table of Disclosure Schedules Schedule No. Identification - ------------ -------------- 2.2 Capitalization 2.3 Subsidiaries 2.6 No Violations 2.9 Absence of Certain Changes or Events 2.10 No Undisclosed Liabilities 2.11 Compliance with Laws 2.12 Permits 2.13 Litigation 2.14 Contracts 2.15 Employee Matters 2.16 Taxes and Returns 2.17 Intellectual Property 2.19 Labor Matters 2.20 Limitation on Business Conduct 2.21 Title to Property 2.23 Environmental Matters 2.25 Product Liability and Recalls 2.26 Customers 2.27 Interested Party Transactions 2.35 Expense Reduction Index of Defined Terms Defined Term Section No. - ------------ ----------- 2001 Balance Sheet 2.10 Agreement Preamble Articles of Merger 1.4 Buy-out Agreement 2.14.2 Closing 1.5 Closing Date 1.5 Code 2.15.1 Common Shares Recitals Company Preamble Company Disclosure Letter Article II, Preamble Company Financial Statements 2.8 v Company Intellectual Property Rights 2.17.2 Company Material Contracts 2.14 Company Option 1.9.1 Company Permits 2.12 Company Proposals 1.13.1 Company Securities Filings 2.7 Company Subsidiary 2.1 Company Takeover Proposal 4.8.1 Company Warrant 1.9.1 Company's Current Premium 5.3.2 Confidentiality Agreement 4.8.1 (b) Consent 2.5 Credit Agreements 2.21 Dissenting Shares 1.7.1 Effective Time 1.5 Elder 2.14.2 Employee Plans 2.15.1 Enforceability Exceptions 2.4 Environmental Claim 2.23.5 (a) Environmental Laws 2.23.5 (b) ERISA 2.15.1 ERISA Affiliate 2.15.1 Evaluation Material 8.1.1 Exchange Agent 1.8.1 Fairness Opinion 1.2.1 Financial Advisor 1.2.1 Governmental Authority 2.5 Indemnified Parties 5.3.1 Intellectual Property 2.17.1 Iowa Code 1.4 IRS 2.15.2 ISO 2.15.3 June 30 Financial Results 4.13 Law 2.6 Liens 2.21 Litigation 2.13 Material Adverse Effect 1.17 Materials of Environmental Concern 2.23.5 (c) Merger Recitals Minimum Condition Annex I, Section (1) NASD 4.2 Nasdaq 2.5 Offer Recitals Offer Conditions 1.1.4 vi Offer Documents 1.1.2 Offer to Purchase 1.1.2 Parent Preamble Parent Expenses 8.7.3 (a) Parent Information 3.5 Per Share Amount Recitals person/group Annex I, Section (3)(h) Preferred Shares 2.2 Proxy Statement 1.13.1 Purchaser Preamble Representative 4.8.1 Schedule 14D-9 1.2.2 Schedule TO 1.1.2 SEC 1.1.2 Securities Act 2.7 Securities Exchange Act 1.1.1 Software 2.17.5 Stock Purchase Plan 1.9.2 (a) Superior Proposal 4.8.1 Surviving Corporation 1.4 Surviving Corporation Common Stock 1.6.3 Takeover Statute 4.10 Tax 2.16.2 Tax Return 2.16.2 vii Agreement and Plan of Merger This Agreement and Plan of Merger (this "Agreement") is made and entered into as of June 29, 2001, by and among RadiSys Corporation, an Oregon corporation ("Parent"), Drake Merger Sub, Inc., an Iowa corporation and a direct wholly owned subsidiary of Parent ("Purchaser"), and Microware Systems Corporation, an Iowa corporation (the "Company"). Recitals A. The respective Boards of Directors of the Company, Purchaser and Parent have approved the acquisition by Purchaser of the Company. B. To that end, Purchaser proposes to make a cash tender offer (the "Offer") to acquire all of the issued and outstanding shares of common stock of the Company ("Common Shares"), for $0.68 per share, or any higher price that may be paid in the Offer (the "Per Share Amount"), subject to any applicable withholding, net to the seller in cash without interest. C. In addition, the respective Boards of Directors of the Company, Purchaser and Parent have each approved the merger (the "Merger") of Purchaser with and into the Company following the Offer in accordance with the laws of the state of Iowa. D. Concurrently with the execution of this Agreement and as an inducement to Parent to enter into this Agreement, Parent, Purchaser and four shareholders of the Company are entering into Shareholder's Agreements pursuant to which the shareholders have, among other things, agreed to tender all of their Common Shares in the Offer, upon the terms and subject to the conditions set forth in the Shareholder's Agreement. E. Concurrently with the execution of this Agreement and as an inducement to Parent to enter into this Agreement, Parent, Purchaser and the Company are entering into a 19.9% Option Agreement pursuant to which the Company is granting Parent an option to purchase up to 19.9% of the Common Shares, upon the terms and subject to the conditions set forth in the 19.9% Option Agreement. F. The Board of Directors of the Company has approved and recommended acceptance of the Offer and the Merger to the holders of Common Shares and has determined that the consideration to be paid for each Share in the Offer and the Merger is fair to and in the best interest of the holders of Common Shares and recommended that the holders of Common Shares accept the Offer and approve this Agreement and the transactions contemplated by this Agreement. G. The Company, Purchaser and Parent desire to make certain representations, warranties and agreements in connection with, and establish various conditions precedent to, the transactions contemplated by this Agreement. Agreement Article I Tender Offer and Merger 1.1 The Offer. 1.1.1 Provided that this Agreement shall not have been terminated in accordance with Section 7.1 of this Agreement and that none of the events set forth in Annex I to this Agreement shall have occurred and be existing, Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Securities Exchange Act")) the Offer as promptly as practicable, but in no event later than five business days following the first public announcement of the Offer, and shall use reasonable efforts to complete the Offer. The obligation of Purchaser to accept for payment any Common Shares tendered shall be subject to the satisfaction of only those conditions set forth in Annex I to this Agreement. The Per Share Amount payable in the Offer shall be net to each seller in cash, subject to reduction only for any applicable withholding or stock transfer taxes payable by the seller. The Company agrees that no Common Shares held by the Company or any Company Subsidiaries (as defined below) will be tendered pursuant to the Offer. 1.1.2 The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") having only the conditions set forth in Annex I to this Agreement. As soon as practicable on the date the Offer is commenced, Purchaser shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule TO (together with all amendments and supplements, the "Schedule TO") with respect to the Offer that will comply in all material respects with the provisions of, and satisfy in all material respects the requirements of, Schedule TO and all applicable federal securities laws and will contain (including as an exhibit) or incorporate by reference the Offer to Purchase and forms of the related letter of transmittal and summary advertisement (which documents, together with any supplements or amendments, and any other SEC schedule or form which is filed in connection with the Offer and related transactions, are referred to collectively as the "Offer Documents"). Each of Parent, Purchaser and the Company agrees promptly to correct any information provided by it for use in the Schedule TO or the Offer Documents if and to the extent that the information shall have become false or misleading in any material respect and to supplement the information provided by it specifically for use in the Schedule TO or the Offer Documents to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and Purchaser further agrees to take all steps necessary to cause the Schedule TO, as so corrected or supplemented, to be filed with the SEC and the Offer Documents, as so corrected or supplemented, to be disseminated to holders of Common Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable 2 opportunity to review and comment on any Offer Documents before they are filed with the SEC, and Parent and Purchaser shall consider in good faith any comments received timely. 1.1.3 Upon the terms and subject to the conditions of the Offer, Purchaser shall accept for payment and pay for Common Shares as soon as permitted under the terms of the Offer and applicable law. 1.1.4 Purchaser expressly reserves the right to modify the terms of the Offer, except that, without the consent of the Company, Purchaser shall not (i) reduce the number of Common Shares subject to the Offer, (ii) reduce the Per Share Amount, (iii) impose any other conditions to the Offer other than the conditions set forth in Annex I to this Agreement (the "Offer Conditions") or modify the Offer Conditions (other than to waive any Offer Conditions to the extent permitted by this Agreement), (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) amend any other term of the Offer in any manner adverse to the holders of Common Shares. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, (i) extend the Offer, if at the scheduled or extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as those conditions are satisfied or waived or (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or its staff applicable to the Offer. 1.2 Company Action. 1.2.1 Subject to the Company's rights under Sections 4.8 and 7.1 of this Agreement, the Company approves and consents to the Offer and represents and warrants that the Board of Directors of the Company, at a meeting duly called and held on June 29, 2001, at which all of the directors were present, duly approved and adopted this Agreement and the transactions contemplated by this Agreement, including the Offer and the Merger, recommended that shareholders of the Company accept the Offer, tender their Common Shares pursuant to the Offer and approve this Agreement and the transactions contemplated by this Agreement, including the Merger, and determined that this Agreement and the transactions contemplated by this Agreement, including the Offer and the Merger, are fair to and in the best interests of the shareholders of the Company. The Company consents to the inclusion in the Offer Documents of the recommendation of the Board of Directors of the Company. The Company represents that its Board of Directors has received the opinion (the "Fairness Opinion") of Houlihan Lokey Howard & Zukin (the "Financial Advisor") that the proposed consideration to be received by the holders of Common Shares pursuant to the Offer and the Merger is fair to the holders from a financial point of view. The Company has been authorized by the Financial Advisor to permit, subject to the prior review and consent by the Financial Advisor (which consent shall not be unreasonably withheld), the inclusion of the Fairness Opinion (or a reference to it) in the Offer Documents, the Schedule 14D-9 (as defined below) and the Proxy Statement (as defined below), if required. 3 1.2.2 The Company shall file with the SEC, as promptly as practicable after the filing by Parent of the Schedule TO with respect to the Offer, a Tender Offer Solicitation/ Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements, the "Schedule 14D-9") that will comply in all material respects with the provisions of all applicable federal securities laws. The Company shall mail the Schedule 14D-9 to the shareholders of the Company as promptly as practicable after the commencement of the Offer. The Schedule 14D-9 and the Offer Documents shall contain the recommendations of the Board of Directors of the Company described in Section 1.2.1 of this Agreement. The Company agrees promptly to correct the Schedule 14D-9 if and to the extent that it becomes false or misleading in any material respect (and each of Parent and Purchaser, with respect to written information supplied by it specifically for use in the Schedule 14D-9, shall promptly notify the Company of any required corrections of the information and cooperate with the Company with respect to correcting the information) and to supplement the information contained in the Schedule 14D-9 to include any information that becomes necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company shall take all steps necessary to cause the Schedule 14D-9 as so corrected or supplemented to be filed with the SEC and disseminated to holders of Common Shares to the extent required by applicable federal securities laws. Purchaser and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 before it is filed with the SEC, and the Company shall consider in good faith any comments received timely. 1.2.3 In connection with the Offer, the Company shall promptly upon execution of this Agreement furnish Purchaser with mailing labels containing the names and addresses of all record holders of Common Shares and security position listings of Common Shares held in stock depositories, each as of a recent date, and shall promptly furnish Purchaser with additional information reasonably available to the Company, including updated lists of shareholders, mailing labels and security position listings, and any other information and assistance as Purchaser or its agents may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of Common Shares. Subject to the requirements of applicable law and except as necessary to disseminate the Offer Documents and otherwise for the purpose of effecting the transactions contemplated by this Agreement, Parent and Purchaser shall hold in confidence the materials furnished pursuant to this Section 1.2.3, use this information only in connection with the Offer, the Merger and the other transactions contemplated by this Agreement and, if this Agreement is terminated, as promptly as practicable return to the Company these materials and all copies thereof in the possession of Parent and Purchaser. 1.3 Directors. Promptly upon the purchase by Purchaser of Common Shares pursuant to the Offer (and provided that the Minimum Condition has been satisfied), Parent shall be entitled to designate the number of directors, rounded up to the next whole number, on the Board of Directors of the Company that will give Parent, subject to compliance with Section 14(f) of the Securities Exchange Act, representation on the Board of Directors of the Company equal to at least that number of directors which equals the product of the total 4 number of directors on the Board of Directors of the Company (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Common Shares beneficially owned by Parent or any affiliate of Parent (including for purposes of this Section 1.3 Common Shares that are accepted for payment pursuant to the Offer, but excluding Common Shares held by the Company) bears to the number of Common Shares outstanding. At that time, if requested by Parent, the Company will also cause each committee of the Board of Directors of the Company to include persons designated by Parent constituting the same percentage of each committee as Parent's designees are of the Board of Directors of the Company. The Company shall, upon request by Parent, promptly increase the size of the Board of Directors of the Company or exercise reasonable efforts to secure the resignations of the number of directors necessary to enable Parent's designees to be elected to the Board of Directors of the Company in accordance with the terms of this Section 1.3 and to cause Parent's designees so to be elected. Subject to applicable law, the Company shall promptly take all action necessary pursuant to Section 14(f) of the Securities Exchange Act and Rule 14f-1 promulgated thereunder to fulfill its obligations under this Section 1.3 and shall include in the Schedule 14D-9 mailed to shareholders promptly after the commencement of the Offer (or in an amendment or an information statement pursuant to Rule 14f-1 if Parent has not yet designated directors) the information with respect to the Company and its officers and directors required under Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 1.3. Parent will supply the Company, and be solely responsible for, any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. 1.4 The Merger. Upon the terms and subject to the conditions of this Agreement, the Merger shall be completed in accordance with the Iowa Business Corporation Act (the "Iowa Code"). At the Effective Time (as defined in Section 1.5), upon the terms and subject to the conditions of this Agreement, Purchaser shall be merged with and into the Company in accordance with the Iowa Code and the separate existence of Purchaser shall cease, and the Company, as the surviving corporation in the Merger (the "Surviving Corporation"), shall continue its corporate existence under the laws of the state of Iowa as a direct subsidiary of Parent. The parties shall prepare and execute articles of merger (the "Articles of Merger") that comply in all respects with the requirements of the Iowa Code and with the provisions of this Agreement. 1.5 Effective Time. The Merger shall become effective at the time of the filing of the Articles of Merger with the Secretary of State of Iowa in accordance with the applicable provisions of the Iowa Code or at any later time that may be specified in the Articles of Merger. As soon as practicable after all of the conditions set forth in Article VI of this Agreement have been satisfied or waived by the party or parties entitled to the benefit of the conditions, the parties shall cause the Merger to become effective. Parent and the Company shall mutually determine the time of the filing of the Articles of Merger and the place where the closing of the Merger (the "Closing") shall occur. The time when the Merger shall 5 become effective is referred to as the "Effective Time," and the date on which the Effective Time occurs is referred to as the "Closing Date." 1.6 Conversion of Common Shares. At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, the Company or the holder of any of the securities specified below: 1.6.1 Each Common Share issued and outstanding immediately before the Effective Time (other than any Dissenting Shares (as defined below) and Common Shares to be canceled pursuant to Section 1.6.2) shall be canceled and extinguished and be converted into the right to receive the Per Share Amount in cash payable to the holder of the Common Share, without interest, upon surrender of the certificate representing the Common Share in accordance with Section 1.8. From and after the Effective Time, the holders of certificates evidencing ownership of Common Shares outstanding immediately before the Effective Time shall cease to have any rights with respect to the Common Shares except as otherwise provided in this Agreement or by applicable Law (as defined below). 1.6.2 Each Common Share owned by Parent, Purchaser or any direct or indirect wholly owned subsidiary of Parent immediately before the Effective Time shall be canceled and extinguished, and no payment or other consideration shall be made with respect thereto. 1.6.3 The shares of Purchaser common stock outstanding immediately before the Merger shall be converted into 1,000 shares of the common stock of the Surviving Corporation (the "Surviving Corporation Common Stock"), which shares of the Surviving Corporation Common Stock shall constitute all of the issued and outstanding capital stock of the Surviving Corporation and shall be owned by Parent. 1.7 Dissenting Shares. 1.7.1 Notwithstanding any provision of this Agreement to the contrary, any Common Shares issued and outstanding immediately before the Effective Time and held by a holder who has demanded and perfected his demand for appraisal of his Common Shares in accordance with the Iowa Code (including Sections 490.1320 - 490.1328 of the Iowa Code), and as of the Effective Time has neither effectively withdrawn nor lost his right to appraisal ("Dissenting Shares"), shall not be converted into or represent a right to receive cash pursuant to Section 1.6 of this Agreement, but the holder shall be entitled only to the rights granted by the Iowa Code. 1.7.2 Notwithstanding the provisions of Section 1.7.1, if any holder of Common Shares who demands appraisal of his Common Shares under the Iowa Code shall effectively withdraw or lose (through failure to perfect or otherwise) his right to appraisal, then as of the Effective Time or the occurrence of such event, whichever occurs later, the holder's Common Shares shall automatically be converted into and represent only the right to receive 6 cash as provided in Section 1.6, without interest, upon surrender of the certificate or certificates representing the Common Shares. 1.7.3 The Company shall give Purchaser (i) prompt notice of any written demands for appraisal or payment of the fair value of any Common Shares, withdrawals of any demands and any other instruments served pursuant to the Iowa Code received by the Company after the date of this Agreement and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the Iowa Code. The Company shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of Purchaser, settle or offer to settle any demands for appraisal. 1.8 Surrender of Common Shares. 1.8.1 Before the Effective Time, Purchaser shall appoint Mellon Investor Services LLC or any other commercial bank or trust company designated by Purchaser and reasonably acceptable to the Company to act as exchange agent under this Agreement (the "Exchange Agent") for the payment of the Per Share Amount upon surrender of certificates representing the Common Shares. All of the fees and expenses of the Exchange Agent shall be borne by Purchaser. 1.8.2 Parent shall cause the Surviving Corporation to provide the Exchange Agent with cash in amounts necessary to pay for all of the Common Shares pursuant to Section 1.8.3 when and as these amounts are needed by the Exchange Agent. 1.8.3 On the Closing Date, Purchaser shall instruct the Exchange Agent to mail to each holder of record of a certificate representing any Common Shares canceled upon the Merger pursuant to Section 1.6.1, within five business days of receiving from the Company a list of the holders of record, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates shall pass, only upon delivery of the certificates to the Exchange Agent and shall be in the form and have other provisions that Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the certificates. Each holder of a certificate or certificates representing any Common Shares canceled upon the Merger pursuant to Section 1.6.1 may thereafter surrender the certificate or certificates to the Exchange Agent, as agent for the holder, to effect the surrender of the certificate or certificates on the holder's behalf for a period ending one year after the Effective Time. Upon the surrender of certificates representing the Common Shares, Parent shall cause the Exchange Agent to pay the holder of the certificates in exchange for the certificates cash in an amount equal to the Per Share Amount multiplied by the number of Common Shares represented by the certificate. Until so surrendered, each certificate (other than certificates representing Dissenting Shares) shall represent solely the right to receive the aggregate Per Share Amount relating to the certificate. 7 1.8.4 If payment of cash in respect of canceled Common Shares is to be made to a person other than the person in whose name a surrendered certificate or instrument is registered, it shall be a condition to the payment that the certificate or instrument so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting the payment shall have paid any transfer and other taxes required by reason of the payment in a name other than that of the registered holder of the certificate or instrument surrendered or shall have established to the satisfaction of Parent or the Exchange Agent that any tax either has been paid or is not payable. 1.8.5 At the Effective Time, the stock transfer books of the Company shall be closed, and no transfer of Common Shares shall be made thereafter, other than transfers of Common Shares that have occurred before the Effective Time. If, after the Effective Time, certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for cash as provided in Section 1.6.1. 1.8.6 The Per Share Amount paid in the Merger shall be net to the holder of Common Shares in cash, and without interest subject to reduction only for any applicable withholding or stock transfer taxes payable by the holder. 1.8.7 Promptly following the date which is one year after the Effective Time, the Exchange Agent shall deliver to Parent all cash, certificates and other documents in its possession relating to the transactions contemplated by this Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each holder of a certificate representing Common Shares (other than certificates representing Dissenting Shares and certificates representing Common Shares held directly or indirectly by Purchaser or Parent) may surrender the certificate to the Surviving Corporation and (subject to any applicable abandoned property, escheat or similar law) receive in consideration for the certificate the aggregate Per Share Amount relating thereto, without any interest. 1.8.8 None of the Company, Parent, Purchaser, the Surviving Corporation or the Exchange Agent shall be liable to any holder of Common Shares for any cash delivered to a public official pursuant to any abandoned property, escheat or similar law, rule, regulation, statute, order, judgment or decree. 1.9 Options and Warrants; Other Equity Interests. 1.9.1 Each option outstanding immediately before the Effective Time to purchase Common Shares (a "Company Option") under the Company's 1991 Stock Option Plan, 1992 Stock Option Plan, 1995 Stock Option Plan or any other stock option plan or agreement of the Company and each warrant outstanding immediately before the Effective Time to purchase Common Shares (a "Company Warrant"), whether or not then vested or exercisable, shall constitute the right to receive an amount in cash equal to the positive difference, if any, between the Per Share Amount and the exercise price of the Company Option or Company Warrant, as applicable, multiplied by the number of Common Shares for 8 which the Company Option or Company Warrant, as applicable, was exercisable immediately before the Effective Time, subject to reduction only for any applicable withholding taxes. The Company shall provide a period of at least 30 days before the Effective Time during which Company Options may be exercised to the extent exercisable at the Effective Time and, upon the expiration of that period, all unexercised Company Options shall immediately terminate. All unexercised Company Warrants shall terminate at the Effective Time. In no event will any Company Options or Company Warrants be exercisable after the Effective Time, except to receive cash as provided in the first sentence of this Section 1.9. 1.9.2 (a) Before the Effective Time, the Company will take all actions necessary (i) to shorten the offering periods under the Company's 1999 Employee Stock Purchase Plan (the "Stock Purchase Plan"), currently scheduled to terminate on September 30, 2001, so that the offering periods terminate on the day before the Effective Time if the Effective Time occurs on or before September 30, 2001, and (ii) to terminate the Stock Purchase Plan effective as of the earliest of the Effective Time or September 30, 2001. (b) The Company shall use reasonable efforts so that as soon as practicable following the date of this Agreement, but in no event later than the Effective Time, no participant in the Company's 401(k) plan shall have any right under that plan to acquire capital stock of the Company except for purchases on the open market. (c) The Company shall use reasonable efforts to ensure that following the Effective Time no participant in any Company equity plans shall, subject to Section 1.9.1, have any right under those plans to acquire capital stock of the Company or Parent except for purchases on the open market. 1.10 Articles of Incorporation and Bylaws. Subject to Section 5.3, unless otherwise determined by Parent before the Effective Time, at and after the Effective Time (a) the Articles of Incorporation of Purchaser, as in effect immediately before the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by the Iowa Code and the Articles of Incorporation; provided, however, that Article I shall be amended and restated in its entirety to provide that the name of the Surviving Corporation shall be RadiSys Microware, Inc.; and (b) the Bylaws of the Surviving Corporation shall be the Bylaws of Purchaser in effect at the Effective Time (subject to any subsequent amendments). 1.11 Directors and Officers. At and after the Effective Time, the directors and officers of Purchaser immediately before the Effective Time shall be the initial directors and officers of the Surviving Corporation, in each case until their successors are duly elected or appointed and qualified. 1.12 Other Effects of Merger. The Merger shall have all further effects as specified in the applicable provisions of the Iowa Code. 9 1.13 Proxy Statement. 1.13.1 Following the completion of the Offer and if required by the Securities Exchange Act because of action by the Company's shareholders necessary in order to complete the Merger, the Company shall prepare and file with the SEC and, when cleared by the SEC, shall mail to shareholders, a proxy statement in connection with a meeting of the Company's shareholders to vote upon the adoption of this Agreement and the Merger and the transactions contemplated by this Agreement and the Merger (the "Company Proposals"), or an information statement, as appropriate, satisfying all requirements of the Securities Exchange Act (the proxy or information statement in the form mailed by the Company to its shareholders, together with any and all amendments or supplements, is referred to as the "Proxy Statement"). 1.13.2 Parent will furnish the Company with the information concerning Parent and its subsidiaries that is necessary to cause the Proxy Statement, if required, insofar as it relates to Parent and its subsidiaries, to comply with applicable Laws. Parent agrees promptly to advise the Company if, at any time before the meeting of shareholders of the Company referenced in this Agreement, any Parent Information (as defined below) in the Proxy Statement, if required, is or becomes incorrect or incomplete in any material respect and to provide the Company with the information needed to correct the inaccuracy or omission. Parent will furnish the Company with any supplemental information that may be necessary to cause the Proxy Statement, if required, insofar as it relates to Parent and its subsidiaries, to comply with applicable Law after the mailing of the Proxy Statement to the shareholders of the Company. 1.13.3 The Company and Parent agree to cooperate in making any preliminary filings of the Proxy Statement, if required, with the SEC, as promptly as practicable, pursuant to Rule 14a-6 or Rule 14c-5, as applicable, under the Securities Exchange Act. 1.13.4 The Company shall provide Parent for its review a copy of the Proxy Statement, if required, before each filing with the SEC, with reasonable time and opportunity for review. Parent authorizes the Company to use in the Proxy Statement the information concerning Parent and its subsidiaries provided to the Company in connection with, or contained in, the Proxy Statement. 1.14 Additional Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of Purchaser or the Company or otherwise to carry out this Agreement, the officers and directors of the Company and Purchaser shall be authorized to execute and deliver, in the name and on behalf of Purchaser or the Company, any deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of Purchaser or the Company, any other actions and things as may be necessary or desirable to vest, perfect 10 or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. 1.15 Merger Without Meeting of Shareholders. Notwithstanding the foregoing provisions of this Article I, if Purchaser, or any other direct or indirect subsidiary of Parent, acquires at least 90% of the outstanding Common Shares, the parties agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a meeting of shareholders of the Company, in accordance with Section 490.1104 of the Iowa Code. 1.16 Lost, Stolen or Destroyed Certificates. If any certificates representing Common Shares shall have been lost, stolen or destroyed, the Exchange Agent shall make payment in exchange for such lost, stolen or destroyed certificates upon the making of an affidavit of that fact by the holder; provided, however, that Parent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen or destroyed certificates to deliver a bond in a sum that it may reasonably direct as indemnity against any claim that may be made against Parent or the Exchange Agent with respect to the certificates alleged to have been lost, stolen or destroyed. 1.17 Material Adverse Effect. When used in connection with the Company or any Company Subsidiaries (as defined below) or Parent, or any of its subsidiaries, as the case may be, the term "Material Adverse Effect" means any change, effect or circumstance that, individually or when taken together with all other similar changes, effects or circumstances that have occurred during the period relevant to the determination of the Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, assets (including intangible assets), financial condition or results of operations of the Company and any Company Subsidiaries or Parent and its subsidiaries, as the case may be, in each case taken as a whole. Article II Representations and Warranties of the Company The Company represents and warrants to Parent and Purchaser that, except as set forth in the correspondingly numbered Sections of the letter, dated the date of this Agreement, from the Company to Parent (the "Company Disclosure Letter"); provided, that disclosure of any fact or item in any section of the Company Disclosure Letter shall be deemed to be disclosed with respect to every other section so long as the level of particularity or manner of disclosure of the fact or item expressly disclosed in one section of the Company Disclosure Letter permits a reasonable person to find the disclosure relevant to another section: 2.1 Organization and Good Standing. The Company and each of the Company Subsidiaries is a corporation duly organized and validly existing under the laws of the state of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company and each of 11 the Company Subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the character of the property owned, leased or operated by it or the nature of the business conducted by it makes the qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent accurate and complete copies of the Restated and Amended Articles of Incorporation and Restated and Amended Bylaws, as currently in effect, of the Company. For purposes of this Agreement, the term "Company Subsidiary" shall mean any "subsidiary" (as that term is defined in Rule 1-02 of Regulation S-X of the SEC) of the Company. 2.2 Capitalization. The Company's capitalization is set forth in Section 2.2 of the Company Disclosure Letter, which lists, as of the date of this Agreement and as of the Effective Time, all authorized and outstanding Common Shares and shares of Series I Preferred Stock (the "Preferred Shares"), and all Common Shares reserved for issuance pursuant to outstanding Company Options and Company Warrants. Upon the exercise of all Company Options and Company Warrants that have exercise prices exceeding the Per Share Amount, the number of Common Shares issued and outstanding on a fully diluted basis shall be as set forth in Section 2.2 of the Company Disclosure Letter. No other capital stock of the Company is authorized or issued. All issued and outstanding Common Shares are duly authorized, validly issued, fully paid and non-assessable. Except as set forth in Section 2.2 of the Company Disclosure Letter, as of the date of this Agreement there are no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied preemptive rights, options or other agreements of any kind relating to any of the outstanding, or authorized but unissued, shares of the capital stock or any other security of the Company, and there is no authorized or outstanding security of any kind convertible into or exchangeable for any such capital stock or other security. There are no obligations, contingent or other, of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Common Shares or the capital stock of any Company Subsidiary or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Company Subsidiary or any other entity. 2.3 Subsidiaries. Section 2.3 of the Company Disclosure Letter sets forth the name and jurisdiction of incorporation of each Company Subsidiary, each of which is wholly owned by the Company. Except as set forth in Section 2.3 of the Company Disclosure Letter, all of the capital stock and other interests of the Company Subsidiaries so held by the Company are owned by it or a Company Subsidiary as indicated in Section 2.3 of the Company Disclosure Letter, free and clear of any claim, lien, encumbrance or security interest with respect thereto. All of the outstanding shares of capital stock of each of the Company Subsidiaries directly or indirectly held by the Company are duly authorized, validly issued, fully paid and non-assessable and were issued free of preemptive rights and in compliance with applicable Laws. No equity securities or other interests of any of the Company Subsidiaries are or may become required to be issued or purchased by reason of any options, warrants, rights to subscribe to, puts, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any Company 12 Subsidiary, and there are no contracts, commitments, understandings or arrangements by which any Company Subsidiary is bound to issue additional shares of its capital stock, or options, warrants or rights to purchase or acquire any additional shares of its capital stock or securities convertible into or exchangeable for shares of its capital stock. Except as set forth in Section 2.3 of the Company Disclosure Letter, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity, with respect to which interest the Company has invested or is required to invest $50,000 or more, excluding securities in any publicly traded company held for investment by the Company and comprising less than 5% of the outstanding stock of the company. 2.4 Authorization; Binding Agreement. The Company has all requisite corporate power and authority to execute and deliver this Agreement and to complete the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement, including, but not limited to, the Merger, have been duly and validly authorized by the Company's Board of Directors and no other corporate proceedings on the part of the Company or any Company Subsidiary are necessary to authorize the execution and delivery of this Agreement or to complete the transactions contemplated by this Agreement (other than adoption of this Agreement by the holders of Common Shares with voting power equal to a majority of the voting power of all outstanding Common Shares in accordance with the Iowa Code). This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability of this Agreement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies (the "Enforceability Exceptions"). 2.5 Governmental Approvals. No consent, approval, waiver or authorization of, notice to or declaration or filing with ("Consent") any nation or government, any state or other political subdivision or any entity, authority or body exercising executive, legislative, judicial or regulatory functions of or pertaining to government, including any governmental or regulatory authority, agency, department, board, commission or instrumentality, any court, tribunal or arbitrator and any self-regulatory organization ("Governmental Authority"), on the part of the Company or any of the Company Subsidiaries is required in connection with the execution or delivery by the Company of this Agreement or the completion by the Company of the transactions contemplated by this Agreement other than (i) the filing of the Articles of Merger with the Secretary of State of Iowa in accordance with the Iowa Code, (ii) filings with the SEC, (iii) filings pursuant to the rules and regulations of The Nasdaq Stock Market ("Nasdaq") and (iv) those Consents that, if they were not obtained or made, would not reasonably be expected to have a Material Adverse Effect. 13 2.6 No Violations. Except as set forth in Section 2.6 of the Company Disclosure Letter, the execution and delivery of this Agreement, the completion of the transactions contemplated by this Agreement and compliance by the Company with any of the provisions of this Agreement will not (i) conflict with or result in any breach of any provision of the Restated and Amended Articles of Incorporation or Restated and Amended Bylaws of the Company or similar documents of any of the Company Subsidiaries, (ii) require any Consent under or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of, any Company Material Contract (as defined below), (iii) result in the creation or imposition of any lien or encumbrance of any kind upon any of the assets of the Company or any Company Subsidiary or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 2.5, violate any applicable provision of any statute, law, rule or regulation or any order, decision, injunction, judgment, award or decree ("Law") to which the Company or any Company Subsidiary or its assets or properties are subject, except, in the case of each of clauses (ii), (iii) and (iv) above, for any deviations from the foregoing which would not reasonably be expected to have a Material Adverse Effect. 2.7 Securities Filings. The Company has made available to Parent true and complete copies of (i) its Annual Report on Form 10-K for the fiscal year ended March 31, 2001, as filed with the SEC, (ii) its proxy statements relating to all of the meetings of shareholders (whether annual or special) of the Company since July 1, 1996 as filed with the SEC, and (iii) all other reports, statements and registration statements and amendments (including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case as amended) filed by the Company with the SEC since July 1, 1996. The reports and statements set forth in clauses (i) through (iii) above, and those subsequently provided or required to be provided pursuant to this Section 2.7, are referred to collectively as the "Company Securities Filings." Except as set forth in Section 2.7 of the Company Disclosure Letter, as of their respective dates, or as of the date of the last amendment, if amended after filing, the Company Securities Filings were prepared in all material respects in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations promulgated thereunder, or the Securities Exchange Act, as the case may be, and none of the Company Securities Filings contained or, as to the Company Securities Filings subsequent to the date of this Agreement, will contain, any untrue statement of a material fact or omitted or, as to the Company Securities Filings subsequent to the date of this Agreement, will omit, to state a 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. 2.8 Company Financial Statements; Operating Expenses. The audited consolidated financial statements and unaudited interim financial statements of the Company included in the Company Securities Filings (the "Company Financial Statements") have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the Company Financial Statements or in the notes to the 14 Company Financial Statements) and present fairly, in all material respects, the financial position of the Company and the Company Subsidiaries as of the dates of the Company Financial Statements and the results of their operations and cash flows for the periods then ended, subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments, any other adjustments described in the Company Financial Statements and the fact that certain information and notes have been condensed or omitted in accordance with the Securities Exchange Act. 2.9 Absence of Certain Changes or Events. Except as set forth in Section 2.9 of the Company Disclosure Letter, from March 31, 2001 through the date of this Agreement there has not been: (i) any event that has had or would reasonably be expected to have a Material Adverse Effect; (ii) any declaration, payment or setting aside for payment of any dividend or other distribution or any redemption or other acquisition of any shares of capital stock or securities of the Company by the Company; (iii) any material damage or loss to any material asset or property, whether or not covered by insurance; (iv) any change by the Company in accounting principles or practices; (v) any material revaluation by the Company of any of its assets, including writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (vi) any sale of a material amount of property of the Company, except in the ordinary course of business; or (vii) any other action or event that would have required the consent of Parent pursuant to Section 4.1 had the action or event occurred after the date of this Agreement. 2.10 No Undisclosed Liabilities. Except as set forth in Section 2.10 of the Company Disclosure Letter, neither the Company nor any Company Subsidiary has any liabilities (absolute, accrued, contingent or other), except liabilities (a) adequately provided for in the Company's audited balance sheet (including any related notes) for the fiscal year ended March 31, 2001 included in the Company's 2001 Annual Report on Form 10-K (the "2001 Balance Sheet"), (b) incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected on the 2001 Balance Sheet, (c) incurred since March 31, 2001 in the ordinary course of business consistent with past practice, (d) incurred in connection with this Agreement or (e) which would not reasonably be expected to have a Material Adverse Effect. 2.11 Compliance with Laws. Except as set forth in Section 2.11 of the Company Disclosure Letter, the business of the Company and each of the Company Subsidiaries has been operated in compliance with all applicable Laws, except for any non-compliance which would not reasonably be expected to have a Material Adverse Effect. 2.12 Permits. Except as set forth in Section 2.12 of the Company Disclosure Letter, (i) the Company and the Company Subsidiaries have all permits, certificates, licenses, approvals and other authorizations from Governmental Authorities required in connection with the operation of their respective businesses (collectively, "Company Permits"), (ii) neither the Company nor any Company Subsidiary is in violation of any Company Permit and (iii) no proceedings are pending or, to the knowledge of the Company, threatened, to revoke or limit 15 any Company Permit, except, in the case of each of clauses (i), (ii) and (iii) above, those the absence or violation of which would not reasonably be expected to have a Material Adverse Effect. 2.13 Litigation. Except as disclosed in Section 2.13 of the Company Disclosure Letter, there is no suit, action or proceeding ("Litigation") pending or, to the knowledge of the Company, threatened against the Company or any of the Company Subsidiaries which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, nor is there any judgment, decree, injunction, rule or order of any Governmental Authority outstanding against the Company or any Company Subsidiary which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. 2.14 Contracts. 2.14.1 Section 2.14 of the Company Disclosure Letter includes, as of the date of this Agreement, a list of the Company's material contracts (the "Company Material Contracts"), which includes (i) all loan agreements, indentures, mortgages, pledges, conditional sale or title retention agreements, security agreements, guaranties, standby letters of credit, equipment leases or lease purchase agreements, each in an amount equal to or exceeding $50,000 to which the Company or any Company subsidiary is a party or by which any of them is bound; (ii) all contracts, agreements, commitments or other understandings or arrangements other than those addressed in Section 2.15 to which the Company or any of its subsidiaries is a party or by which any of them or any of their respective properties or assets are bound or affected, but excluding contracts, agreements, commitments or other understandings or arrangements entered into in the ordinary course of business and involving, in the case of any of these contacts, agreements, commitments, or other understandings or arrangements, individual payments or receipts by the Company or any Company Subsidiary that are reasonably expected to be less than $50,000 over the remaining term of the contract, commitment, agreement, or other understanding or arrangement; and (iii) all agreements which are required to be filed as "material contracts" with the SEC pursuant to the requirements of the Securities Exchange Act. The Company is not a party to any agreements to acquire in the future the stock or substantially all the assets of another person. Except as disclosed in Section 2.14 of the Company Disclosure Letter, all Company Material Contracts are valid and binding and are in full force and effect and enforceable against the Company or Company Subsidiary in accordance with their respective terms, subject to the Enforceability Exceptions, and neither the Company nor any Company Subsidiary is in violation or breach of or default under any Company Material Contract, except where the failure to be in full force and effect or where the violation or breach would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, no party (other than the Company or Company Subsidiaries) is in default, violation or breach of any Company Material Contract where the violation or breach would reasonably be expected to have a Material Adverse Effect. 2.14.2 The Company has entered into an agreement (the "Buy-out Agreement") with Elder Court, LLC and the related parties set forth in the Buy-out Agreement (collectively, 16 "Elder") pursuant to which Elder has agreed to terminate its equity line of credit agreement with the Company, the convertible debenture and warrants and other related rights Elder holds in return for the consideration specified in the Buy-out Agreement, which consideration is to be advanced to the Company by Parent. The Company has provided a true and complete copy of the Buy-out Agreement to Parent. The Buy-out Agreement will be completed immediately before Purchaser's acceptance of Common Shares tendered in the Offer. The Buy-out Agreement is valid and binding and is in full force and effect and enforceable in accordance with its terms, subject to the Enforceability Exceptions, and neither the Company nor, to the knowledge of the Company, Elder is in violation or breach of or default under the Buy-out Agreement. 2.15 Employee Matters. 2.15.1 Section 2.15.1 of the Company Disclosure Letter lists all employee pension benefit plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all employee welfare benefit plans (as defined in Section 3(1) of ERISA) and all other bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar fringe or employee benefit plans, programs or arrangements, and any employment, executive compensation or severance agreements, written or otherwise, as amended, modified or supplemented, for the benefit of, or relating to, any former or current employee, officer or consultant who is an individual or an individual doing business in a corporate form (or any of their beneficiaries) of the Company or any other entity (whether or not incorporated) which is treated as a single employer with the Company (an "ERISA Affiliate") under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the "Code") or Section 4001(a)(14) or (b) of ERISA, or any Company Subsidiary, with respect to which the Company has or could have any current (actual or contingent) material liability (together for purposes of this Section 2.15, the "Employee Plans"). Before the date of this Agreement, the Company has provided or made available to Parent copies of (i) each written Employee Plan (or a written description of any Employee Plan which is not written) and all related trust agreements, insurance and other contracts (including policies), summary plan descriptions, summaries of material modifications and any material communications to plan participants, (ii) the three most recent annual reports on Form 5500 series, with accompanying schedules and attachments, filed with respect to each Employee Plan required to make such a filing, and (iii) the most recent favorable determination letters issued for each Employee Plan and related trust which is intended to qualify under Section 401(a) of the Code (and, if an application for a determination is pending, a copy of the application for the determination). 2.15.2 (i) None of the Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person (other than in accordance with Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA), and none of the Employee Plans is a "multi-employer plan" as that term is defined in Section 3(37) of ERISA; (ii) no "party in interest" or "disqualified person" (as defined in Section 3(14) of ERISA and Section 4975 of the Code) has at any time engaged in a transaction with respect to any Employee Plan which 17 could subject the Company or any ERISA Affiliate, directly or indirectly, to a tax, penalty or other liability for prohibited transactions under ERISA or Section 4975 of the Code, except for any tax, penalty or liability that would not reasonably be expected to result in a Material Adverse Effect; (iii) to the knowledge of the Company, no fiduciary of any Employee Plan has breached any of the responsibilities or obligations imposed upon fiduciaries under Title I of ERISA, except where the breach would not reasonably be expected to result in a Material Adverse Effect; (iv) all Employee Plans have been established and maintained substantially in accordance with their terms and have operated in compliance with applicable law (including ERISA and the Code) and governmental and court orders (including all applicable requirements for notification to participants or the Department of Labor, the Internal Revenue Service (the "IRS") or the Secretary of the Treasury), except where failure to do so would not reasonably be expected to result in a Material Adverse Effect; and the Company and each Company Subsidiary have performed all obligations required to be performed by them under, are not in default under or in violation of any Employee Plan except where failure to do so would not reasonably be expected to result in a Material Adverse Effect, and have no knowledge of any default or violation by any other party to, any of the Employee Plans; (v) each Employee Plan to be qualified under Section 401 of the Code is the subject of a favorable recent determination letter from the IRS; (vi) all contributions required to be made with respect to any Employee Plan pursuant to the terms of the Employee Plan have been made on or before their due dates except for any failure to make contributions that would not reasonably be expected to result in a Material Adverse Effect; (vii) no facts exist or have existed under which the Company or any ERISA Affiliate could incur any liability under Title IV of ERISA; and (viii) there are no complaints, charges or claims against the Company pending or to the Company's knowledge threatened to be brought by or filed with any governmental authority based on, arising out of, in connection with or otherwise relating to the classification of any individual by the Company as an independent contractor or "leased employee" (within the meaning of Section 414(n) of the Code) rather than as an employee. 2.15.3 Section 2.15.3 of the Company Disclosure Letter sets forth a true and complete list of each current or former employee, officer or director of the Company or any Company Subsidiary who holds (i) any option to purchase Common Shares as of the date of this Agreement, together with the number of shares of Common Shares subject to the option, the option price of the option (to the extent determined as of the date of this Agreement), whether the option is intended to qualify as an incentive stock option within the meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of the option; (ii) any Common Shares that are restricted as a result of an agreement with, or stock plan of, the Company; and (iii) any other right, directly or indirectly, to receive Common Shares, except as otherwise disclosed in Section 2.15 of the Company Disclosure Letter, together with the number of shares of Company stock subject to the right. Section 2.15.3 of the Company Disclosure Letter also sets forth the total number of any ISOs and any nonqualified options and other rights. 2.15.4 Unless otherwise disclosed in Section 2.15.1 of the Company Disclosure Letter, Section 2.15.4 of the Company Disclosure Letter sets forth a true and complete list of 18 (i) all employment agreements with employees of the Company or any of the Company Subsidiaries; (ii) all agreements with consultants who are individuals obligating the Company or any of the Company Subsidiaries to make annual cash payments in an amount exceeding $25,000; (iii) all agreements which individually or in the aggregate are or could be material with respect to the services of independent contractors or leased employees who are individuals or individuals doing business in a corporate form whether or not they participate in any of the Employee Plans; (iv) all employees of the Company or any of the Company Subsidiaries who have executed a non-competition agreement with the Company or any of the Company Subsidiaries; (v) all severance agreements, programs and policies of the Company or any of the Company Subsidiaries with or relating to its employees, in each case with commitments exceeding $25,000, excluding programs and policies required to be maintained by law; (vi) all plans, programs, agreements and other arrangements of the Company with its officers or employees which contain change in control provisions; and (vii) all inventions and assignment agreements signed by an independent contractor or leased employee who worked on the development of any of the Company's products. 2.15.5 (i) Except as set forth in Section 2.15.5 of the Company Disclosure Letter, no Employee Plan is an employee stock ownership plan (within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in Company stock; and (ii) the completion of the transactions contemplated by this Agreement will not result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable in respect of any employee except as otherwise provided in Section 1.9 or disclosed in Section 2.15.5 of the Company Disclosure Letter. The Company will take all actions within its control to ensure that all actions required to be taken by a fiduciary of any Employee Plan in order to effect the transactions contemplated by this Agreement shall comply with the terms of the Employee Plan, ERISA and other applicable laws. The Company will take all actions within its control to ensure that all actions required to be taken by a trustee of any Employee Plan that owns Company stock shall have been duly authorized by the appropriate fiduciaries of the Employee Plan and shall comply with the terms of the Employee Plan, ERISA and other applicable laws. 2.15.6 Except as set forth in Section 2.15.6 of the Company Disclosure Letter, the Company maintains no Employee Plan covering non-U.S. employees. 2.15.7 The Company has fiduciary liability insurance of at least $500,000 in effect covering the fiduciaries of the Employee Plans (including the Company) with respect to whom the Company may have liability. 2.16 Taxes and Returns. 2.16.1 The Company and each of the Company Subsidiaries has timely filed, or caused to be timely filed, all Tax Returns (as defined below) required to be filed by it, and all Tax Returns are true, complete and correct in all respects, and has timely paid, deposited, collected or withheld, or caused to be paid, deposited, collected or withheld, all Taxes (as 19 defined below) required to be paid, deposited, collected or withheld, as shown on the Tax Returns or otherwise. Except as set forth in Section 2.16 of the Company Disclosure Letter, there are no claims or assessments pending, proposed or threatened against the Company or any of the Company Subsidiaries for any alleged deficiency in any Tax. No claim has ever been made by an authority in a jurisdiction where the Company or any of the Company Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Neither the Company nor any of the Company Subsidiaries has executed any waiver or extension of any applicable statute of limitations to assess any Tax. There are no outstanding requests by the Company or any of the Company Subsidiaries, or by any Governmental Authority with respect to the Company or any of the Company Subsidiaries, for any extension of time within which to file any Tax Return or within which to pay any Tax. There are no liens for Taxes on the assets of the Company or any of the Company Subsidiaries except for statutory liens for current Taxes not yet due and payable. There are no outstanding powers of attorney enabling any party to represent the Company or any of the Company Subsidiaries with respect to Tax matters. Neither the Company nor any Company Subsidiary is a party to any pending Tax letter ruling or similar request of a Governmental Authority. 2.16.2 For purposes of this Agreement, the term "Tax" shall mean any federal, state, local, foreign or provincial income, gross receipts, profits, property, sales, use, license, excise, franchise, employment, payroll, alternative or add-on minimum, ad valorem, transfer or excise, environmental (including taxes under Section 59A of the Code), capital stock, withholding, social security (or similar), unemployment, disability, estimated tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty or addition imposed by any Governmental Authority whether disputed or not. The term "Tax Return" shall mean a report, return or other information (including any attached schedules or any amendments to the report, return or other information) required to be supplied to or filed with a governmental entity with respect to any Tax, including an information return, claim for refund, amended return or declaration or estimated Tax. 2.16.3 Except as set forth in Section 2.16 of the Company Disclosure Letter, (i) neither the Company nor any of the Company Subsidiaries has been a member of an affiliated group within the meaning of Section 1504 of the Code or filed or been included in a combined, consolidated or unitary Tax Return, other than a group of which the Company is the common parent; (ii) other than with respect to the Company and the Company Subsidiaries, neither the Company nor any of the Company Subsidiaries is liable for Taxes of any other person, or is under any contractual obligation to indemnify any person with respect to Taxes (except for customary agreements to indemnify lenders or securityholders in respect of taxes other than income taxes), or is a party to any tax sharing agreement or any other agreement providing for payments by the Company or any of the Company Subsidiaries with respect to Taxes; (iii) neither the Company nor any of the Company Subsidiaries is a party to any joint venture, partnership or other arrangement or contract which could be treated as a partnership for federal income tax purposes; (iv) neither the Company nor any of the Company Subsidiaries has entered into any sale leaseback or any leveraged lease transaction that fails to 20 satisfy the requirements of Revenue Procedure 75-21, as modified (or similar provisions of foreign law); (v) neither the Company nor any of the Company Subsidiaries has requested or agreed or is required, as a result of a change in method of accounting or otherwise, to include any adjustment under Section 481 of the Code (or any corresponding provision of state, local or foreign law) in taxable income; (vi) neither the Company nor any of the Company Subsidiaries is a party to any agreement, contract, arrangement or plan that would result (taking into account the transactions contemplated by this Agreement), separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code; (vii) the prices for any property or services (or for the use of property) provided by the Company or any of the Company Subsidiaries to any other subsidiary or to the Company have been arm's length prices, determined using a method permitted by the Treasury Regulations under Section 482 of the Code; (viii) neither the Company nor any of the Company Subsidiaries is liable with respect to any indebtedness the interest of which is not deductible for applicable federal, foreign, state or local income tax purposes; (ix) neither the Company nor any of the Company Subsidiaries is a "consenting corporation" under Section 341(f) of the Code or any corresponding provision of state, local or foreign law; (x) the Company and each Company Subsidiary have complied with all applicable laws, rules, and regulations relating to the withholding and payment of Taxes; (xi) each of the Company and Company Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein which could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code; (xii) none of the assets owned by the Company or any of the Company Subsidiaries is property that is required to be treated as owned by any other person pursuant to Section 168(g)(8) of the Internal Revenue Code of 1954, as amended, as in effect immediately before the enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within the meaning of Section 168(h) of the Code; (xiii) neither the Company nor any of the Company Subsidiaries has been during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code a United States real property holding corporation as defined in Section 897(c) of the Code; (xiv) neither the Company nor any of the Company Subsidiaries has entered into a "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income tax law) executed on or prior to the Closing Date; (xv) neither the Company nor any of the Company Subsidiaries has any intercompany gain or excess loss account described in Treasury Regulations under Section 1502 or the Code (or any corresponding or similar provision of state, local or foreign income tax law); (xvi) neither the Company nor any of Company Subsidiaries has made an installment sale or open transaction disposition on or prior to the Closing Date; and/or (xvii) neither the Company nor any of the Company Subsidiaries has received any prepaid amount on or prior to the Closing Date. 2.16.4 The amount of net operating losses (as defined in Section 172 of the Code) of the Company and the Company Subsidiaries as of the end of the fiscal year ended March 31, 2001 is as set forth in the Company's financial statements for that year. The unpaid Taxes of the Company and the Company Subsidiaries (A) did not, as of the date of the 2001 Balance Sheet, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face 21 of the 2001 Balance Sheet (rather than in any notes to the 2001 Balance Sheet) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and the Company Subsidiaries in filing their Tax Returns. 2.17 Intellectual Property. 2.17.1 Section 2.17.1 of the Company Disclosure Letter sets forth a list of (i) all patents and patent applications owned or licensed by the Company and/or each of the Company Subsidiaries worldwide; (ii) all trademark and service mark registrations, trademark and service mark applications, common law trademarks, trade dress and material slogans, Internet domain names, and trade names owned or used by the Company and/or each of its subsidiaries worldwide; (iii) all copyright registrations, copyright applications, mask work registrations, and mask work applications owned or licensed by the Company and/or each of the Company Subsidiaries worldwide; and (iv) all licenses in which the Company and/or any of the Company Subsidiaries is (A) a licensor with respect to any Intellectual Property rights or (B) a licensee of any other person's Intellectual Property rights material to the Company. As used in this Agreement, "Intellectual Property" means all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, logos and slogans, Internet domain names, meta-tags, inventions, processes, formulae, copyrights and copyright rights, mask work and mask work rights, trade dress, business and product names, logos, slogans, trade secrets, industrial models, processes, designs, plans, proposals, methodologies, computer programs (including all source codes) and related documentation, technical data and information, manufacturing, engineering and technical drawings, know-how, all pending applications for and registrations of patents, trademarks, service marks, copyrights, and mask works and all licenses and rights with respect to any of the foregoing. 2.17.2 The Company and each Company Subsidiary owns, or is licensed or otherwise possesses the right to use, all Intellectual Property used in the respective businesses of the Company or the Company Subsidiaries as now conducted (the "Company Intellectual Property Rights"). 2.17.3 Except as disclosed in Section 2.17.3 of the Company Disclosure Letter, the Company and/or each Company Subsidiary has made all necessary filings and recordations for the patents, patent applications, trademark and service mark registrations, trademark and service mark applications, Internet domain name registrations and Internet domain name 22 applications, copyright registrations and copyright applications, and mask work registrations and mask work applications set forth in Section 2.17.1 of the Company Disclosure Letter, except where the failure to make such filings or recordations would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in Section 2.17.3 of the Company Disclosure Letter, none of the products manufactured, sold or licensed by, nor any of the processes used by, the Company or any Company Subsidiary infringes any Intellectual Property right of any third party. Except as set forth in Section 2.17.3 of the Company Disclosure Letter, from and after the Closing Date, Purchaser will have the right to make, have made, import, use, sell, license, or otherwise dispose of, any product or process used by the Company or any Company Subsidiary and will have a right to use all Intellectual Property rights that are material to the continued operation of the businesses of the Company and/or the Company Subsidiaries as now conducted. The Company has not been informed of any pending claims (i) that the business of the Company or any of the Company Subsidiaries infringes on any Intellectual Property Rights of any third party; (ii) against the use by the Company or any of the Company Subsidiaries of any Intellectual Property; or (iii) challenging the ownership, validity or effectiveness of any of the Company Intellectual Property Rights. 2.17.4 Except as set forth in Section 2.17 of the Company Disclosure Letter, the Company is not aware of any material unauthorized use, infringement or misappropriation of any of the Company Intellectual Property by any third party, including any employee or former employee of the Company or any of the Company Subsidiaries. 2.17.5 Except as set forth in Section 2.17 of the Company Disclosure Letter, the software licensed or otherwise distributed, or marketed for distribution, or which is being developed for future distribution, by the Company (the "Software") has been developed by the Company solely through the Company's own employees and is owned by the Company, and no license is required by the Company to use or distribute the Software. 2.18 Disclosure Documents. The Proxy Statement, if required, will comply in all material respects with the applicable requirements of the Securities Exchange Act except that no representation or warranty is being made by the Company with respect to the Parent Information included in the Proxy Statement. The Proxy Statement, if required, will not, at the time the Proxy Statement is filed with the SEC or first sent to shareholders or at the time of the Company's shareholders' 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 except that no representation or warranty is being made by the Company with respect to the Parent Information (as defined below) included in the Proxy Statement. The Schedule 14D-9 will comply in all material respects with the Securities Exchange Act except that no representation or warranty is being made by the Company with respect to the Parent Information included in the Schedule 14D-9. Neither the Schedule 14D-9 nor any of the information relating to the Company or its affiliates provided by or on behalf of the Company specifically for inclusion in the Schedule TO or the Offer Documents will, at the respective times the Schedule 14D-9, the Schedule TO and the Offer Documents are filed with the SEC and are first published, sent or given to shareholders of the Company, 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 light of the circumstances under which they were made, not misleading. 2.19 Labor Matters. Except as set forth in Section 2.19 of the Company Disclosure Letter, (i) there are no controversies pending or, to the knowledge of the Company or any of 23 the Company Subsidiaries, threatened, between the Company or any of the Company Subsidiaries and any of their respective employees that is reasonably likely to have a Material Adverse Effect; (ii) neither the Company nor any of the Company Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or the Company Subsidiaries, nor, as of the date of this Agreement, does the Company or any of the Company Subsidiaries know of any activities or proceedings of any labor union to organize any of these employees; and (iii) neither the Company nor any of the Company Subsidiaries has any knowledge of, or of threats of, any strikes, slowdowns, work stoppages or lockouts by or with respect to any employees of the Company or any of the Company Subsidiaries. 2.20 Limitation on Business Conduct. Except as set forth in Section 2.20 of the Company Disclosure Letter, neither the Company nor any of the Company Subsidiaries is a party to, or has any obligation under, any contract or agreement, written or oral, which contains any covenants currently or prospectively limiting in any material respect the freedom of the Company or any of the Company Subsidiaries to engage in any line of business or to compete with any entity. 2.21 Title to Property. Except as set forth in Section 2.21 of the Company Disclosure Letter, each of the Company and each of the Company Subsidiaries owns the properties and assets that it purports to own free and clear of all liens, charges, mortgages, security interests or encumbrances of any kind ("Liens"), except for Liens which arise in the ordinary course of business and do not materially impair the Company's or the Company Subsidiaries' ownership or use of its properties or assets, Liens for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which reserves have been established in accordance with GAAP and Liens securing obligations under the Company's credit agreements, loan agreements and equipment leases (the "Credit Agreements"). Except as set forth in Section 2.21 of the Company Disclosure Letter, with respect to the property and assets it leases, the Company, the Company Subsidiaries, and, to the Company's knowledge, each of the other parties to the leases, is in material compliance with the leases, and the Company or the Company Subsidiaries, as the case may be, holds a valid leasehold interest free of any Liens, except those referred to above. The rights, properties and assets presently owned, leased or licensed by the Company and the Company Subsidiaries include all rights, properties and assets necessary to permit the Company and the Company Subsidiaries to conduct their business in all material respects in the same manner as their businesses have been conducted before the date of this Agreement. 2.22 Owned and Leased Premises. Each of the buildings, structures and premises owned or leased by the Company or any of the Company Subsidiaries is in reasonably good repair and operating condition. 2.23 Environmental Matters. Except as set forth in Section 2.23 of the Company Disclosure Letter: 24 2.23.1 The Company and the Company Subsidiaries are in material compliance with the Environmental Laws (as defined below), which compliance includes the possession by the Company and the Company Subsidiaries of all material permits and governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions of the permits and authorizations. Neither the Company nor any of the Company Subsidiaries has received any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of the Company Subsidiaries is not in material compliance with Environmental Laws, and there are no circumstances that may prevent or interfere with compliance in the future. 2.23.2 There are no Environmental Claims (as defined below), including claims based on "arranger liability," pending or, to the knowledge of the Company, threatened against the Company or any of the Company Subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of the Company Subsidiaries has retained or assumed either contractually or by operation of law. 2.23.3 There are no past or present actions, inactions, activities, circumstances, conditions, events or incidents, including the release, emission, discharge, presence or disposal of any Material of Environmental Concern (as defined below), that would form the basis of any Environmental Claim against the Company or any of the Company Subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of the Company Subsidiaries have retained or assumed either contractually or by operation of law. 2.23.4 The Company is in compliance in all material respects with Environmental Laws as they relate to (i) any on-site or off-site locations where the Company or any of the Company Subsidiaries has stored, disposed or arranged for the disposal of Materials of Environmental Concern for itself (but not on behalf of others) or (ii) any underground storage tanks located on property owned or leased by the Company or any of the Company Subsidiaries. To the knowledge of Company, there is no asbestos contained in or forming part of any building, building component, structure or office space owned or leased by the Company or any of the Company Subsidiaries. To the knowledge of Company, no polychlorinated biphenyls (PCBs) or PCB-containing items are used or stored at any property owned or leased by the Company or any of the Company Subsidiaries. 2.23.5 For purposes of this Agreement: (a) "Environmental Claim" means any written claim, action, cause of action, investigation or notice by any person or entity alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (x) the presence, or release into the environment, of any Material of Environmental Concern at any location, whether or not owned or operated by the Company or 25 any of the Company Subsidiaries, or (y) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. (b) "Environmental Laws" means all federal, state, local and foreign laws or regulations relating to pollution or protection of human health and the environment (including ambient air, surface water, ground water, land surface or sub-surface strata), including laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern. (c) "Materials of Environmental Concern" means chemicals, pollutants, contaminants, hazardous materials, hazardous substances and hazardous wastes, toxic substances, petroleum and petroleum products that are listed, defined or otherwise regulated under the Environmental Laws. 2.24 Insurance. The Company maintains insurance that provides adequate coverage for normal risks incident to the business of the Company and the Company Subsidiaries and their respective properties and assets and in character and amount comparable to that carried by persons engaged in similar businesses. The insurance polices maintained by the Company are with reputable insurance carriers and have no premium delinquencies. 2.25 Product Liability and Recalls. 2.25.1 Except as disclosed in Section 2.25 of the Company Disclosure Letter, there is no claim pending or, to the knowledge of the Company, threatened, against the Company or any Company Subsidiaries for injury to person or property of employees or any third parties suffered as a result of the sale of any product or performance of any service by the Company or any Company Subsidiaries, including claims arising out of the defective or unsafe nature of its products or services, which would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. 2.25.2 Except as disclosed in Section 2.25 of the Company Disclosure Letter, there is no pending or, to the knowledge of the Company, threatened recall or investigation of any product sold by the Company or any Company Subsidiaries, which recall or investigation would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. 2.26 Customers. Section 2.26 of the Company Disclosure Letter sets forth a list of the Company's 10 largest customers (detailed, in the case of government agencies, by separate government agency) in terms of gross sales for the fiscal year ended March 31, 2001. Except as set forth in Section 2.26 of the Company Disclosure Letter, since March 31, 2001 there have not been any changes in the business relationships of the Company with any of these 26 customers that would constitute a Material Adverse Effect. Except as set forth in Section 2.26 of the Company Disclosure Letter, no customer of the Company accounted for more than 5% of the revenues of the Company and the Company Subsidiaries, taken as whole, for the fiscal year ended March 31, 2001. 2.27 Interested Party Transactions. Except as set forth in Section 2.27 of the Company Disclosure Letter, since the date of the Company's definitive proxy statement filed August 21, 2000, no event has occurred that would be required to be reported pursuant to Item 404 of Regulation S-K promulgated by the SEC. 2.28 Finders and Investment Bankers. Neither the Company nor any of its officers or directors has employed any broker, finder or financial advisor or otherwise incurred any liability for any brokerage fees, commissions, or financial advisors' or finders' fees in connection with the transactions contemplated by this Agreement, other than pursuant to agreements with the Financial Advisor, the terms of which have been disclosed to Parent. 2.29 Fairness Opinion. The Company's Board of Directors has received from the Financial Advisor an opinion dated as of the date of this Agreement and addressed to it for inclusion in the Schedule 14D-9 and the Proxy Statement, if required, to the effect that the consideration to be received by the shareholders of the Company pursuant to each of the Offer and the Merger is fair to the Company's shareholders from a financial point of view. 2.30 Takeover Statute. Assuming Parent and its "associates" and "affiliates" (as defined in Section 490.1110 of the Iowa Code) collectively beneficially own and have beneficially owned at all times during the three-year period before the date of this Agreement less than 10% of the Company stock outstanding, Section 490.1110 of the Iowa Code is, and shall be, inapplicable to the acquisition of Common Shares pursuant to the Offer and the Merger. 2.31 Full Disclosure. No statement contained in any certificate or schedule, including, without limitation, the Company Disclosure Letter, furnished or to be furnished by the Company or the Company Subsidiaries to Parent or Purchaser in, or pursuant to the provisions of, this Agreement contains or shall contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in the light of the circumstances under which it was made, in order to make the statements in this Agreement or in these documents not misleading. 2.32 Rights Agreements. There are no "rights agreements", "poison pills" or similar defensive installments, arrangements or agreements that would prevent or interfere with the completion of the transactions contemplated by this Agreement. 2.33 Absence of Certain Payments. None of the Company, any Company Subsidiaries or any of their respective affiliates, officers, directors, employees or agents or other people acting on behalf of any of them have (i) engaged in any activity prohibited by the 27 United States Foreign Corrupt Practices Act of 1977 or any other similar law, regulation, decree, directive or order of any other country and (ii) without limiting the generality of the preceding clause (i), used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to government officials or others. None of the Company, the Company Subsidiaries or any of their respective affiliates, directors, officers, employees or agents of other persons acting on behalf of any of them, has accepted or received any unlawful contributions, payments, gifts or expenditures. 2.34 Ability to Pay Debts. The Company has funds available to it sufficient to enable the Company to pay all amounts due (or which will, as a result of the transactions contemplated by this Agreement, become due) in respect of any indebtedness of the Company for money borrowed. 2.35 Expense Reduction. The Company has made preparations to commence the expense reduction plan described in Section 2.35 of the Company Disclosure Letter and will start implementing the expense reduction plan immediately following commencement of the Offer. Article III Representations and Warranties of Parent and Purchaser Parent and Purchaser jointly and severally represent and warrant to the Company that: 3.1 Organization and Good Standing. Each of Parent and Purchaser is a corporation duly organized, validly existing and, with respect to Purchaser only, in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. 3.2 Authorization; Binding Agreement. Parent and Purchaser have all requisite corporate power and authority to execute and deliver this Agreement and to complete the transactions contemplated by it. The execution and delivery of this Agreement and the completion of the transactions contemplated by it, including, but not limited to, the Merger, have been duly and validly authorized by the respective Boards of Directors of Parent and Purchaser, as appropriate, and no other corporate proceedings on the part of Parent or Purchaser are necessary to authorize the execution and delivery of this Agreement or to complete the transactions contemplated by this Agreement (other than the requisite approval by the sole shareholder of Purchaser of this Agreement and the Merger). This Agreement has been duly and validly executed and delivered by each of Parent and Purchaser and constitutes the legal, valid and binding agreement of Parent and Purchaser, enforceable against each of Parent and Purchaser in accordance with its terms, subject to the Enforceability Exceptions. 28 3.3 Governmental Approvals. No Consent from or with any Governmental Authority on the part of Parent and Purchaser is required in connection with the execution or delivery by Parent or Purchaser of this Agreement or the completion by Parent and Purchaser of the transactions contemplated by this Agreement other than (i) the filing of the Articles of Merger with the Secretary of State of Iowa in accordance with the Iowa Code; (ii) filings with the SEC; (iii) filings pursuant to the rules and regulations of Nasdaq; and (iv) those Consents that, if they were not obtained or made, would not reasonably be expected to have a Material Adverse Effect. 3.4 No Violations. The execution and delivery of this Agreement, the completion of the transactions contemplated by this Agreement and compliance by Parent or Purchaser with any of the provisions of this Agreement will not (i) conflict with or result in any breach of any provision of the Articles of Incorporation and the Bylaws or other governing instruments of Parent and Purchaser; (ii) require any Consent under or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of, any material note, bond, mortgage, indenture, contract, lease, license, agreement or instrument to which Parent or any subsidiary of Parent, including Purchaser, is a party or by which any of them or any of their respective assets or property is subject; (iii) result in the creation or imposition of any material lien or encumbrance of any kind upon any of the assets of Parent or any subsidiary of Parent, including Purchaser; or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 3.3 of this Agreement, violate any Law to which Parent or any subsidiary of Parent, including Purchaser, or its assets or properties are subject, except in any case for any conflicts, violations, breaches, defaults or other occurrences that would not prevent or delay completion of the Offer or the Merger, or otherwise materially and adversely affect the ability of Parent or Purchaser to perform their respective obligations under this Agreement. 3.5 Disclosure Documents. None of the information supplied by Parent, or Purchaser or their respective officers, directors, representatives, agents or employees (the "Parent Information") for inclusion in the Proxy Statement, if required, will, at the time the Proxy Statement is filed with the SEC or first mailed to the Company's shareholders, and at the time of the Company's shareholders' meeting, contain any untrue statement of a material fact, or will omit to state any material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the shareholders' meeting which has become false or misleading. Neither the Schedule TO or the Offer Documents or any amendments or supplements nor any of the Parent Information provided specifically for inclusion in the Schedule 14D-9 will, at the respective times the Schedule TO, the Offer Documents or the Schedule 14D-9 are filed with the SEC or first published, sent or given to the Company's shareholders, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, neither Parent nor Purchaser makes any representation or 29 warranty with respect to any information that has been supplied by the Company or its accountants, counsel or other authorized representatives for use in any of the foregoing documents. The Schedule TO and the Offer Documents will comply as to form in all material respects with the provisions of the Securities Exchange Act. 3.6 Financing Arrangements. Parent has funds available to it sufficient to enable the Purchaser to purchase the Common Shares in accordance with the terms of this Agreement. 3.7 No Prior Activities. Except for obligations or liabilities incurred in connection with its incorporation or organization or the negotiation and completion of this Agreement and the transactions contemplated by this Agreement (including any financing in connection with the completion of these transactions), Purchaser has not incurred any obligations or liabilities and has not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. Article IV Additional Covenants of the Company The Company covenants and agrees as follows: 4.1 Conduct of Business of the Company and the Company Subsidiaries. Before the Effective Time, each of the Company and the Company Subsidiaries will carry on its business in all material respects in the ordinary and usual manner and, to the extent consistent therewith, shall use reasonable efforts to maintain its existing relationships with suppliers, customers, employees and business associates, and will not, without the prior written consent of Parent or as otherwise contemplated by this Agreement: 4.1.1 amend its Articles of Incorporation or Bylaws; 4.1.2 enter into any new agreements or modify existing agreements respecting an increase in compensation or benefits payable to its officers or employees; 4.1.3 split, combine, reclassify any of the outstanding shares of its capital stock or otherwise change its authorized capitalization; 4.1.4 declare, set aside or pay any dividends payable in cash, stock or property with respect to shares of its capital stock; 4.1.5 issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class (other than pursuant to exercise of outstanding Company Options and Company Warrants consistent with their terms); 30 4.1.6 redeem, purchase or otherwise acquire any shares of its capital stock, merge into or consolidate with any other corporation or permit any other corporation to merge into or consolidate with it, liquidate or sell or dispose of any of its assets, or close any plant or business operation; 4.1.7 except for the incurrence of accounts payable in the ordinary course of business consistent with past practice and of substantially similar nature to the accounts payable reflected in the Company Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2001, and the weighted average age of which does not exceed 55 days, incur, assume or guarantee any indebtedness or modify or repay any existing indebtedness; 4.1.8 enter into any transaction, make any commitment (whether or not subject to the approval of the Board of Directors of the Company) or modify any Company Material Contracts, except as otherwise contemplated or permitted by this Agreement or in the ordinary course of business and not exceeding $50,000 singly, or $100,000 in the aggregate, or take or omit to take any action which could be reasonably anticipated to have a Material Adverse Effect; 4.1.9 transfer, lease, license, guarantee, sell, mortgage, pledge, or dispose of, any property or assets (including without limitation any intellectual property), encumber any property or assets or incur or modify any liability, other than the sale of inventory in the ordinary and usual course of business; 4.1.10 authorize or make any capital expenditures, form any subsidiary, or make any acquisition of, or investment in, assets or stock of any other person or entity; 4.1.11 make any tax election; 4.1.12 permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled, terminated or renewed without prior notice to Parent; 4.1.13 change its method of accounting as in effect at March 31, 2001 except as required by changes in generally accepted accounting principles as concurred with by the Company's independent auditors, or change its fiscal year, or permit the weighted average age of its accounts receivable to exceed 105 days; 4.1.14 authorize or enter into an agreement to do any of the actions referred to in paragraphs 4.1.1 through 4.1.13 above. 4.2 Notification of Certain Matters. The Company shall give prompt notice to Parent if any of the following occur after the date of this Agreement: (i) receipt of any notice or other communication in writing from any third party alleging that the Consent of the third party is or may be required in connection with the transactions contemplated by this 31 Agreement; (ii) receipt of any material notice or other communication from any Governmental Authority (including, but not limited to, the National Association of Securities Dealers ("NASD"), Nasdaq or any other securities exchange) in connection with the transactions contemplated by this Agreement; (iii) the occurrence of an event which would be reasonably likely (A) to have a Material Adverse Effect or (B) to causeany condition set forth in Annex I to this Agreement to be unsatisfied in any material respect at any time before the completion of the Offer; or (iv) the commencement or threat of any Litigation involving or affecting the Company or any of the Company Subsidiaries, or any of their respective properties or assets, or, to the Company's knowledge, any employee, agent, director or officer, in his or her capacity as such, of the Company or any of the Company Subsidiaries which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to this Agreement or which relates to the completion of the Offer or the Merger. 4.3 Access and Information. Between the date of this Agreement and the Effective Time, and without intending by this Section 4.3 to limit any of the other obligations of the parties under this Agreement, the Company will give, and shall direct its accountants and legal counsel to give, Parent and its authorized representatives (including its financial advisors, accountants and legal counsel), at reasonable times and without undue disruption to or interference with the normal conduct of the business and affairs of the Company, access as reasonably required in connection with the transactions provided for in this Agreement to all offices and other facilities and to all contracts, agreements, commitments, books and records of or pertaining to the Company and the Company Subsidiaries and will furnish Parent with (a) any financial and operating data and other information with respect to the business and properties of the Company and the Company Subsidiaries that Parent may from time to time reasonably request in connection with those transactions and (b) a copy of each material report, schedule and other document filed or received by the Company or any of the Company Subsidiaries pursuant to the requirements of applicable securities laws, the NASD or Nasdaq. 4.4 Shareholder Approval. As soon as practicable following the completion of the Offer, the Company will take all steps necessary to duly call, give notice of, convene and hold a meeting of its shareholders for the purpose of voting upon the Company Proposals and for any other purposes that may be necessary or desirable in connection with effecting the transactions contemplated by this Agreement, if such a meeting is required. Except as otherwise set forth in this Agreement, the Board of Directors of the Company will recommend to the shareholders of the Company that they approve the Company Proposals. 4.5 Reasonable Efforts. Subject to the terms and conditions of this Agreement, the Company agrees to use reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to complete and make effective as promptly as practicable the transactions contemplated by this Agreement, including obtaining all Consents from Governmental Authorities and other third parties required for the completion of the Offer and the Merger and the transactions contemplated by the Offer and the Merger. Upon the terms and subject to the conditions of this Agreement, the Company agrees to use reasonable efforts to take, or cause to be 32 taken, all actions and to do, or cause to be done, all things necessary to satisfy the other conditions of the Closing set forth in this Agreement. 4.6 Public Announcements. So long as this Agreement is in effect, neither the Company nor Parent shall, and each shall use reasonable efforts to cause its affiliates not to, issue or cause the publication of any press release or any other announcement with respect to the Offer or the Merger or the transactions contemplated by this Agreement without the consent of the other party (which shall not be unreasonably withheld or delayed), except where the release or announcement is required by applicable Law or pursuant to any applicable listing agreement with, or rules or regulations of, the NASD or Nasdaq, in which case the party, before making the announcement, will consult with Parent regarding the announcement. Notwithstanding the foregoing, the Company acknowledges that Parent will publicly announce the transactions contemplated by this Agreement, including the Offer and the Merger, immediately after the execution of this Agreement. 4.7 Compliance. In completing the transactions contemplated by this Agreement, the Company shall comply in all material respects with the provisions of the Securities Exchange Act and the Securities Act and shall comply, and cause the Company Subsidiaries to comply or to be in compliance, in all material respects, with, all other applicable Laws. 4.8 No Solicitation. 4.8.1 Unless and until this Agreement shall have been terminated pursuant to Section 7.1 of this Agreement or as otherwise set forth below, the Company and any Company Subsidiary shall not directly, or indirectly through any officer, director, agent, employee, financial advisor, affiliate, other advisor or representative or representative of its advisors or agents (each, a "Representative") (i) encourage, initiate or solicit or otherwise facilitate, on or after the date of this Agreement, any inquiries or the submission of any proposals or offers from any person relating to any merger, reorganization, share exchange, consolidation or similar transaction involving, or any purchase of 10% or more of the assets or any class of equity securities of, the Company or any Company Subsidiary (each, a "Company Takeover Proposal"); (ii) participate in any negotiations regarding, furnish to any other person any information with respect to, or otherwise assist or discuss or participate in, any attempt by any third party to propose or offer any Company Takeover Proposal, or otherwise facilitate any effort or attempt to make or implement a Company Takeover Proposal; (iii) enter into or execute any agreement relating to a Company Takeover Proposal; or (iv) make or authorize any public statement, recommendation or solicitation in support of any Company Takeover Proposal or any proposal or offer relating to a Company Takeover Proposal, in each case other than with respect to the Offer and the Merger. Notwithstanding the foregoing, nothing contained in this Agreement shall prohibit the Company from: (a) complying with Rule 14d-9 or Rule 14e-2 promulgated under the Securities Exchange Act with regard to a Company Takeover Proposal; 33 (b) providing information in response to a request therefor by a person who has made an unsolicited bona fide written Company Takeover Proposal if the Board of Directors of the Company receives from the person requesting the information an executed confidentiality agreement on terms no less protective of the confidential information of the Company, Parent and Purchaser than those in effect pursuant to the Mutual Disclosure Agreement dated June 12, 2001 between the Company and Parent (the "Confidentiality Agreement"); (c) engaging in any negotiations or discussions with any person who has made an unsolicited bona fide written Company Takeover Proposal; or (d) withdrawing or modifying the approval or recommendation by the Board of Directors of the Company of this Agreement, the Offer or the Merger in connection with recommending an unsolicited bona fide written Company Takeover Proposal to the shareholders of the Company or entering into any agreement with respect to an unsolicited bona fide written Company Takeover Proposal; or (e) after the Schedule TO is filed, referring a third party to this Section 4.8 or making a copy of this Section 4.8 and/or the Confidentiality Agreement available to any third party; if and only to the extent that, both (i) in each case referred to in clause (b), (c) or (d) above, the Board of Directors of the Company determines in good faith after receipt of an opinion from outside legal counsel experienced in these matters that the action is necessary for its directors to comply with their respective fiduciary duties under applicable law and (ii) in each case referred to in clause (c) or (d) above, the Board of Directors of the Company determines in good faith (after consultation with its Financial Advisor) that the Company Takeover Proposal, if accepted, is reasonably likely to be completed, taking into account all legal, financial and regulatory aspects of the proposal and the person making the proposal and would, if completed, result in a transaction more favorable to the Company's shareholders from a financial point of view than the transaction contemplated by this Agreement (any superior Company Takeover Proposal being referred to in this Agreement as a "Superior Proposal"). 4.8.2 The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted as of and before the date of this Agreement that are prohibited by Section 4.8.1 of this Agreement. The Company agrees it will take the necessary steps to inform promptly its Representatives of the obligations undertaken in this Section 4.8 and in the Confidentiality Agreement. The Company will immediately notify Parent if any inquiries, proposals or offers are received by, and information is requested from, or any discussions or negotiations are sought to be initiated or continued with, the Company or any of its Representatives relating to a Company Takeover Proposal, indicating, in connection with the notice, the name of the person and the material terms and 34 conditions of any proposals or offers and shall keep Parent informed, on a current basis, of the status and terms of any proposals or offers and the status of any negotiations or discussions. The Company also will promptly request each person (other than Parent) that has executed a confidentiality agreement in connection with its consideration of a Company Takeover Proposal to return all confidential information furnished to that person by or on behalf of it or any of its subsidiaries. 4.9 SEC and Shareholder Filings. The Company shall send to Parent a copy of all material public reports and materials as and when it sends them to its shareholders, the SEC or any state or foreign securities commission. 4.10 Takeover Statutes. If any "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under state or federal laws in the United States (each a "Takeover Statute"), including, Section 490.1110 of the Iowa Code, is or may become applicable to the Offer or the Merger, the Company will use reasonable efforts to grant the approvals and take actions that are necessary so that the transactions contemplated by this Agreement and the Company Proposals may be completed as promptly as practicable on the terms contemplated by this Agreement and otherwise act so as to eliminate or minimize the effects of any Takeover Statute on any of the transactions contemplated by this Agreement. 4.11 Company Options and Company Warrants. Before the completion of the Offer, the Company shall take all action necessary to effect the provisions of Section 1.9 of this Agreement relating to Company Options and Company Warrants. 4.12 Expense Reduction. The Company will implement the expense reduction plan described in Section 2.35 of the Company Disclosure Letter, and will complete the plan and pay all costs attributable to the plan before the completion of the Offer. 4.13 June 30 Financial Statements. The Company agrees to publicly announce, following consultation with Parent as required by Section 4.6, by means of a press release its financial results for the quarter ending June 30, 2001 (the "June 30 Financial Results") by no later than July 25, 2001. The June 30 Financial Results will summarize the financial statements that would otherwise be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, and will include, among other items and consistent with past practice, information regarding the Company's cash and cash equivalents, short-term investments, trade receivables net of allowances for doubtful accounts and accounts payable. As shown in the June 30 Financial Results, (a) cash and cash equivalents and short-term investments shall not be less than $1.5 million, (b) trade receivables net of allowances for doubtful accounts shall not exceed $3.75 million, 35 (c) accounts payable shall not exceed $900,000, (d) the trade receivables and accounts payable reflected in the June 30 Financial Results shall have been incurred only in the ordinary course consistent with past practice, and shall be of substantially similar quality and nature as the trade receivables and accounts payable reflected in the Company Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2001, and (e) the weighed average age of the trade receivables reflected in the June 30 Financial Results shall not exceed 105 days and the weighted average age of the accounts payable reflected in the June 30 Financial Results shall not exceed 55 days. The June 30 Financial Results will be prepared in accordance with generally accepted accounting principles applied on a consistent basis and will present fairly, in all material respects, the financial position of the Company and the Company Subsidiaries as of June 30, 2001 and the results of their operations and cash flows for the quarter then ended, subject to normal year-end audit adjustments and the fact that some information has been condensed or omitted in accordance with the Company's past practice with respect to announcing its financial results before filing the corresponding Form 10-Q. Article V Additional Covenants of Purchaser and Parent Parent and Purchaser covenant and agree as follows: 5.1 Further Assurance. Subject to the terms and conditions of this Agreement, Parent and Purchaser agree to use reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to complete and make effective as promptly as practicable the transactions contemplated by this Agreement, including obtaining all Consents from Governmental Authorities and other third parties required for the completion of the Offer and the Merger and the transactions contemplated by the Offer and the Merger. Upon the terms and subject to the conditions of this Agreement, Parent and Purchaser agree to use reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary to satisfy the other conditions of the Closing set forth in this Agreement. 5.2 Compliance. In completing the transactions contemplated by this Agreement, Parent and Purchaser shall comply in all material respects with the provisions of the Securities Exchange Act and the Securities Act and shall comply, and cause their subsidiaries to comply or to be in compliance, in all material respects, with all other applicable Laws. 36 5.3 Directors and Officers Indemnity; Insurance. 5.3.1 On and after the Effective Time, for six years (or, if shorter, the applicable statute of limitations), Parent shall not permit the articles of incorporation of the Surviving Corporation to contain provisions any less favorable with respect to indemnification than are set forth in the articles of incorporation of the Company immediately before the Effective Time, which provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of individuals who both on the date of this Agreement and at the Effective Time were directors or officers of the Company (the "Indemnified Parties"); provided that each Indemnified Party represents and warrants that the person has no knowledge of any claim for which indemnification would be required. Notwithstanding the foregoing, Parent may cause the Surviving Corporation to repeal or otherwise eliminate from its articles of incorporation the indemnification provisions if a substantially similar indemnity is provided by Parent for the Indemnified Parties. 5.3.2 For two years from the Effective Time, Parent shall maintain in effect the current directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy to the extent that it provides coverage for events occurring on or before the Effective Time (a copy of which has been delivered to Parent), so long as the annual premium would not be in excess of $300,000. If the premiums for the insurance would at any time exceed $300,000, then Parent shall cause to be maintained policies of insurance which in Parent's good faith determination provide the maximum coverage available at an annual premium equal to $300,000. 5.4 Voting of Common Shares. At any meeting of the Company's shareholders held for the purpose of voting upon the Company Proposals, if required, all of the Common Shares then owned by Parent, Purchaser or any other subsidiaries of Parent shall be voted in favor of the Company Proposals. 5.5 Guarantee of Parent. Parent hereby guarantees the payment by Purchaser of the Per Share Amount and any other amounts payable by Purchaser pursuant to this Agreement and will cause Purchaser to perform all of its other obligations under this Agreement in accordance with their terms. Article VI Merger Conditions The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or before the Effective Time of the following conditions: 6.1 Offer. The Offer shall have been completed; provided that this condition shall be deemed to have been satisfied with respect to the obligation of Parent and Purchaser to effect the Merger if Purchaser fails to accept for payment or pay for Common Shares pursuant to the Offer in violation of the terms of the Offer or of this Agreement. 37 6.2 Shareholder Approval. If required, the Company Proposals shall have been approved at or before the Effective Time by the requisite vote of the shareholders of the Company in accordance with the Iowa Code. 6.3 No Injunction or Action. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority which prohibits or prevents the completion of the Merger which has not been vacated, dismissed or withdrawn before the Effective Time. The Company and Parent shall use all reasonable efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time. 6.4 Governmental Approvals. All Consents of any Governmental Authority required for the completion of the Merger and the transactions contemplated by this Agreement shall have been obtained, except for those Consents the failure to obtain which will not have a Material Adverse Effect. Article VII Termination and Abandonment 7.1 Termination. This Agreement may be terminated at any time before the Effective Time, whether before or after approval of the shareholders of the Company described in this Agreement: 7.1.1 by mutual written consent of Parent and the Company; 7.1.2 by either Parent or the Company if any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the completion of the transactions contemplated by this Agreement and the order, decree or ruling or other action shall have become final and nonappealable; 7.1.3 by Parent before, subject to Rule 14e-1(c) and any other applicable rules or regulations of the SEC, paying for the Common Shares pursuant to the Offer if: (a) the Company shall have breached or failed to perform in any material respect any of its covenants or other agreements contained in this Agreement, which breach or failure to perform is incapable of being cured or has not been cured within the lesser of (i) 5 days after the giving of written notice of the breach or failure to perform to the Company or (ii) the number of days between the date Parent becomes aware of the breach or failure to perform (on which date Parent shall provide written notice of the breach or failure to perform to the Company) and the then scheduled expiration date of the Offer; 38 (b) any representation or warranty of the Company shall not have been true and correct when made (without for this purpose giving effect to qualifications of materiality contained in the representation and warranty), if the failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; or (c) any representation or warranty of the Company shall cease to be true and correct at any later date (without for this purpose giving effect to qualifications of materiality contained in the representation and warranty) as if made on that date (other than representations and warranties made as of a specified date), other than as a result of a breach or failure to perform by the Company of any of its covenants or agreements under this Agreement, if the failure to be true and correct, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; provided, however, that the representation or warranty is incapable of being cured or has not been cured within the lesser of (i) 5 days after the giving of written notice thereof to the Company or (ii) the number of days between the date Parent becomes aware thereof (on which date Parent shall provide written notice thereof to the Company) and the then scheduled expiration date of the Offer; provided, further, that the right to terminate this Agreement pursuant to this Section 7.1.3(c) shall not be available to Parent if Purchaser or any other affiliate of Parent shall acquire Common Shares pursuant to the Offer; 7.1.4 by Parent if, whether or not permitted to do so by this Agreement, (i) the Board of Directors of the Company or any committee of the Board of Directors of the Company shall have withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer or any of the Company Proposals; (ii) the Board of Directors of the Company or any committee of the Board of Directors of the Company shall have approved or recommended to the shareholders of the Company any Company Takeover Proposal; (iii) the Board of Directors of the Company or any committee of the Board of Directors of the Company shall have approved or recommended that the shareholders of the Company tender their Common Shares in any tender or exchange offer that is a Company Takeover Proposal; (iv) the Board of Directors of the Company or any committee of the Board of Directors of the Company shall have affirmatively taken any written position or make any written disclosures to the Company's shareholders permitted pursuant to Section 4.8.1(d) of this Agreement which has the effect of any of the foregoing; or (v) the Board of Directors of the Company or any committee of the Board of Directors of the Company shall have resolved to take any of the actions described in (i)-(iv); 7.1.5 by either Parent or the Company if, as the result of the failure of the Minimum Condition or any of the other conditions set forth in Annex I to this Agreement, the Offer shall have terminated or expired in accordance with its terms without Purchaser having purchased any Common Shares pursuant to the Offer; provided that if the failure to satisfy any conditions set forth in Annex I to this Agreement shall be a basis for termination of this 39 Agreement under any other section of this Section 7.1, a termination pursuant to this Section 7.1.5 shall be deemed a termination under the other section; 7.1.6 by either Parent or the Company if the Offer shall not have been completed on or before September 30, 2001; provided that the right to terminate this Agreement pursuant to this Section 7.1.6 shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Offer to be completed by that time; 7.1.7 by the Company, if Parent or Purchaser shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform is incapable of being cured or has not been cured within 5 days after the giving of written notice of the breach of failure to perform to Parent; or 7.1.8 by the Company in order to accept a Superior Proposal; provided that the Board of Directors of the Company reasonably determines in good faith after receipt of an opinion from outside legal counsel experienced in these matters that it is or is reasonably likely to be required to accept the proposal in order to discharge properly its fiduciary duties; the Company has given Parent 3 business days advance notice of the Company's intention to accept the Superior Proposal; the Company shall in fact accept the Superior Proposal; the Company shall have paid the fee and expenses contemplated by Section 8.7 of this Agreement; and the Company shall have complied in all respects with the provisions of Section 4.8 of this Agreement. The party desiring to terminate this Agreement pursuant to the preceding paragraphs shall give written notice of the termination to the other party in accordance with Section 8.5 of this Agreement. 7.2 Effect of Termination and Abandonment. If this Agreement is terminated and the Offer or the Merger is abandoned pursuant to this Article VII, this Agreement (other than Sections 7.2, 8.1, 8.3, 8.5, 8.6, 8.7, 8.8, 8.10, 8.11, 8.12, 8.13 and 8.15 of this Agreement) shall become void and of no effect with no liability on the part of any party to this Agreement (or of any of its directors, officers, employees, agents, legal or financial advisors or other representatives); provided, however, that no termination pursuant to this Article VII shall relieve any party to this Agreement from any liability for any willful breach of this Agreement before termination. If this Agreement is terminated as provided in this Article VII, each party shall use all reasonable efforts to redeliver all documents, work papers and other material (including any copies thereof) of any other party relating to the transactions contemplated by this Agreement, whether obtained before or after the execution of this Agreement, to the party furnishing the same. 40 Article VIII Miscellaneous 8.1 Confidentiality. 8.1.1 All nonpublic information furnished in writing or orally by either party or its Representative to the other party or its Representative is referred to as "Evaluation Material." Evaluation Material does not include information that (a) is or becomes publicly available other than as a result of a breach of this Agreement or the Confidentiality Agreement, or (b) is or becomes available to the recipient on a non-confidential basis from a source other than the other party or its Representatives. Both parties recognize and acknowledge the competitive value and confidential nature of the Evaluation Material and the damage that could result to the other party if any Evaluation Material or information contained in the Evaluation Material is disclosed to any third party in breach of this Agreement or the Confidentiality Agreement. Both parties also recognize and acknowledge that the Evaluation Material has been provided in reliance upon the mutual acceptance of the terms of the Confidentiality Agreement. 8.1.2 Both parties represent that the Evaluation Material has been and will continue to be used solely for the purpose of evaluating the transactions contemplated by, and performing the obligations contained in, this Agreement. Both parties also agree that the Evaluation Material of the other party will not be disclosed to any third party, except as required by applicable law or legal process, without the prior written consent of the other party; provided, however, that any Evaluation Materials may be disclosed to a party's Representatives who need to know the information for the purpose of evaluating the transactions contemplated by this Agreement and who agree to keep the information confidential. 8.1.3 If the transactions contemplated by this Agreement are not completed, (a) neither party nor any of its Representatives shall, without prior written consent of the other party, use any of the Evaluation Material now or hereafter received or obtained from the other party or its Representatives for any purpose, and (b) all Evaluation Material (and all copies, summaries, and notes of the contents or parts of the Evaluation Material) shall be returned upon the other party's request or destroyed and the destruction shall be confirmed in writing. 8.2 Amendment and Modification. This Agreement may be amended, modified or supplemented only by a written agreement among the Company, Parent and Purchaser. 8.3 Waiver of Compliance; Consents. Any failure of the Company on the one hand, or Parent and Purchaser on the other hand, to comply with any obligation, covenant, agreement or condition in this Agreement may be waived by Parent on the one hand, or the Company on the other hand, only by a written instrument signed by the party granting the waiver, but the waiver or failure to insist upon strict compliance with the obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any 41 subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party to this Agreement, the consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 8.3. 8.4 Survival. The respective representations, warranties, covenants and agreements of the Company and Parent contained in this Agreement or in any certificates or other documents delivered before or at the Closing shall survive the execution and delivery of this Agreement, notwithstanding any investigation made or information obtained by the other party, but shall terminate at the Effective Time, except for those contained in Sections 1.7, 1.8, 1.9, 1.14, 5.3, 5.5 and 8.7 of this Agreement and this Section 8.4, which shall survive beyond the Effective Time. 8.5 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person, by facsimile, receipt confirmed, or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at any other address for a party as shall be specified by like notice): (i) if to the Company, to: Microware Systems Corporation 1500 NW 118th Street Des Moines, IA 50325 Attention: Mr. Kenneth B. Kaplan Telecopy: (515) 327-5526 with a copy to: D'Ancona & Pflaum LLC 111 E. Wacker Drive, Suite 2800 Chicago, IL 60601-4205 Attention: Mr. Arthur Don Telecopy: (312) 602-3048 (ii) if to Parent or Purchaser, to: RadiSys Corporation 5445 NE Dawson Creek Drive Hillsboro, OR 97124 Attention: Mr. Glenford J. Myers Telecopy: (503) 615-1114 42 with a copy to: Stoel Rives LLP 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204 Attention: John R. Thomas Telecopy: (503) 220-2480 8.6 Binding Effect; Assignment. This Agreement and all of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by any of the parties to this Agreement before the Effective Time without the prior written consent of the Company, in the case of a proposed assignment by Parent or Purchaser, or by Parent, in the case of a proposed assignment by the Company. 8.7 Fees and Expenses. 8.7.1 If the transactions contemplated by this Agreement, including the Offer and the Merger, close, Parent will pay, to a maximum of $750,000, all costs and expenses incurred by the Company in connection with this Agreement and the transactions contemplated by this Agreement, and all costs and expenses incurred by the Company in connection with this Agreement and the transactions contemplated by this Agreement in excess of $750,000 shall be paid by the Company. Except as provided in Sections 8.7.2, 8.7.3 or 8.7.4 of this Agreement, if the transactions contemplated by this Agreement, including the Offer and the Merger, do not close by September 30, 2001 all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring the costs or expenses. 8.7.2 The Company agrees that, if this Agreement is terminated pursuant to (a) Section 7.1.4; (b) Section 7.1.8; or (c) Section 7.1.5 or 7.1.6 and, with respect to this clause (c), (A) at the time of the termination, there shall be outstanding a bona fide Company Takeover Proposal which has been made directly to the shareholders of the Company or has otherwise become publicly known or there shall be outstanding an announcement by any credible third party of a bona fide intention to make a Company Takeover Proposal (in each case whether or not conditional and whether or not the proposal shall have been rejected by the Board of Directors of the Company) or (B) a Company Takeover Proposal shall be publicly announced by the Company or any third party within 9 months following the 43 date of the termination and the transaction shall at any time thereafter be completed on substantially the terms theretofore announced, then the Company shall pay to Parent the sum of $775,000. Any payment required by this Section 8.7.2 shall be made as promptly as practicable but in no event later than two business days following termination of this Agreement in the case of clause (a) above, upon termination of this Agreement in the case of clause (b) above and, in the case of clause (c) above, upon completion of the Company Takeover Proposal, and shall be made by wire transfer of immediately available funds to an account designated by Parent. 8.7.3 The Company further agrees that if this Agreement is terminated pursuant to Section 7.1.3(a) of this Agreement, (a) the Company will pay to Parent, as promptly as practicable but in no event later than 2 business days following termination of this Agreement, the amount of all documented and reasonable costs and expenses incurred by Parent, Purchaser and their affiliates (including but not limited to fees and expenses of counsel, financial advisors and accountants) in connection with this Agreement or the transactions contemplated by this Agreement ("Parent Expenses"); and (b) if the Company completes a Company Takeover Proposal (whether or not solicited in violation of this Agreement) which is publicly announced within one year from the date of termination of this Agreement, the Company will pay to Parent the sum of $775,000, which payment shall be made not later than 2 business days following completion of the Company Takeover Proposal. 8.7.4 The Company further agrees that if this Agreement is terminated pursuant to Section 7.1.3(b) of this Agreement, the Company will pay to Parent, as promptly as practicable but in no event later than 2 business days following termination of this Agreement, the Parent Expenses. 8.8 Governing Law. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with the laws of, the State of Oregon, exclusive of choice of law provisions. 8.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.10 Interpretation. The article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. As used in this 44 Agreement, (i) the term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an association, an unincorporated organization, a Governmental Authority and any other entity, (ii) unless otherwise specified in this Agreement, the term "affiliate," with respect to any person, shall mean and include any person controlling, controlled by or under common control with that person and (iii) the term "subsidiary" of any specified person shall mean any corporation 50% or more of the outstanding voting power of which, or any partnership, joint venture, limited liability company or other entity 50% or more of the total equity interest of which, is directly or indirectly owned by the specified person. 8.11 Entire Agreement. This Agreement and the documents or instruments referred to in this Agreement including Annex I attached to this Agreement and the Company Disclosure Letter referred to in this Agreement, which Annex and Company Disclosure Letter are incorporated in this Agreement by reference, embody the entire agreement and understanding of the parties to this Agreement in respect of the subject matter contained in this Agreement. There are no restrictions, promises, representations, warranties, covenants, or undertakings other than those expressly set forth or referred to in this Agreement. This Agreement supersedes all prior agreements and understandings among the parties with respect to the subject matter of this Agreement. Notwithstanding the foregoing provisions of this Section 8.11, the Confidentiality Agreement shall remain in effect in accordance with its terms. 8.12 Severability. 8.12.1 In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, the provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of the provision be affected thereby in any other jurisdiction. 8.12.2 Parent and the Company agree that the payments to Parent provided in Section 8.7 of this Agreement are fair and reasonable in the circumstances, considering not only the consideration payable to the holders of Common Shares in the Offer and the Merger but also the outstanding funded indebtedness (including capital leases) of the Company and the Company Subsidiaries and Parent's anticipated costs, including lost opportunity costs, if the Offer and Merger are not completed. If a court of competent jurisdiction shall nonetheless, by a final, non-appealable judgment, determine that the amount of these payments exceeds the maximum amount permitted by law, then the amount of the payments shall be reduced to the maximum amount permitted by law in the circumstances, as determined by the court of competent jurisdiction. 8.13 Specific Performance. The parties to this Agreement agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties 45 further agree that each party shall be entitled to an injunction or restraining order to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction, this being in addition to any other right or remedy to which the party may be entitled under this Agreement, at law or in equity. 8.14 Third Parties. Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated by this Agreement shall create any rights in, or be deemed to have been executed for the benefit of, any person that is not a party to this Agreement or the instrument or document or a successor or permitted assign of such a party; provided, however, that the parties to this Agreement specifically acknowledge that the provisions of Section 5.3 of this Agreement are intended to be for the benefit of, and shall be enforceable by, the Indemnified Parties. 8.15 Waiver of Jury Trial. Parent, Purchaser and the Company hereby irrevocably waive, to the fullest extent permitted by law, all rights to trial by jury in any action, proceeding, or counterclaim (whether based upon contract, tort or otherwise) arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement. [Signature page follows.] 46 In witness whereof, Parent, Purchaser and the Company have caused this Agreement and Plan of Merger to be signed and delivered by their respective duly authorized officers as of the date first above written. RadiSys Corporation By /s/ Glenford J. Myers ------------------------------------ Glenford J. Myers Chief Executive Officer Drake Merger Sub, Inc. By /s/ Glenford J. Myers ------------------------------------ Glenford J. Myers President Microware Systems Corporation By /s/ Kenneth B. Kaplan ------------------------------------ Kenneth B. Kaplan Chief Executive Officer 47 Annex I Conditions to the Offer. Notwithstanding any other provision of the Offer, Purchaser will not be required to accept for payment or, subject to Rule 14e-1(c) and any other applicable rules and regulations of the SEC, pay for and, subject to the same rules or regulations, may delay the acceptance for payment of any tendered Common Shares and, except as provided in this Agreement, amend or terminate the Offer as to any Common Shares not then paid for if: (1) the condition that Common Shares representing at least 90% of the total number of issued and outstanding Common Shares on a fully diluted basis, excluding shares of common stock issuable upon exercise of Company Options that are not exercisable before September 30, 2001, have been validly tendered and not withdrawn before the expiration of the Offer (the "Minimum Condition") has not been satisfied; or (2) immediately before acceptance for payment, (a) the transactions contemplated by the Buy-out Agreement have not been completed, and the Company Warrants and other derivative securities held by third parties have not been delivered to the Company for cancellation, as contemplated by the Buy-out Agreement, (b) all Consents (including without limitation Consents from Governmental Authorities or required under any Company Material Contract) required to be obtained by the Company for completion of the transactions contemplated by this Agreement, the obtaining of which Consents shall not require any payment by Parent, Purchaser or the Company to any third parties, shall not have been obtained, or (c) all Company Options under the Company's 1991 Stock Option Plan, 1992 Stock Option Plan, 1995 Stock Option Plan or any other stock option plan or agreement of the Company have not been terminated; or (3) at any time after the date of this Agreement and before the time of payment for any Common Shares, whether or not any Common Shares have previously been accepted for payment or paid for pursuant to the Offer, any of the following conditions exists: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a Law shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any case (i) restrains or prohibits the making or completion of the Offer or the completion of the Merger, (ii) prohibits or restricts the ownership or operation by Parent, or any of its affiliates or subsidiaries, of any portion of the Company's business or assets if it would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or compels Parent, or any of its affiliates or subsidiaries, to dispose of or hold separate any portion of the Company's business or assets if it would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, (iii) imposes material limitations on the ability of Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Common Shares, including the right to vote Common Shares purchased by Purchaser pursuant to the Offer or the Merger on all matters properly presented to the shareholders of the Company, or (iv) imposes any material limitations on the ability of Parent and/or its affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company; or (b) a Governmental Authority shall have instituted an action, or an action by a Governmental Authority shall be pending or threatened, seeking to restrain or prohibit the making or completion of the Offer or completion of the Merger, or to impose any other restriction, prohibition or limitation referred to in the foregoing paragraph (a); or (c) the Company or Parent terminates this Agreement in accordance with its terms; or (d) any of the following events occurs: (i) any general suspension of, or limitation on prices for, trading in the Common Shares on Nasdaq, (ii) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States or (iii) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening thereof; or (e) Parent and the Company agree that Purchaser shall amend the Offer, terminate the Offer or postpone the payment for Common Shares pursuant to the Offer; or (f) any of the representations and warranties made by the Company in this Agreement shall not have been true and correct when made, or shall have ceased to be true and correct before the Closing (other than representations and warranties made as of a specified date) unless, with respect to any representations or warranties not qualified by a "Material Adverse Effect," the inaccuracies under these representations and warranties, taken as a whole, could not reasonably be expected to result in a Material Adverse Effect on the Company, or the Company shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under this Agreement; provided, however, that the breach or failure to perform is incapable of being cured or has not been cured within the lesser of (i) 5 days after the giving of written notice of the breach or failure to perform to the Company or (ii) the number of days between the date Parent becomes aware of the breach or failure to perform (on which date Parent shall provide written notice of the breach or failure to perform to the Company) and the then scheduled expiration date of the Offer; or (g) the Company's Board of Directors modifies or amends its recommendation of the Offer in any manner adverse to Parent or withdraws its recommendation of the Offer, or recommends acceptance of any Company Takeover Proposal or resolves to do any of the foregoing; or (h) (i) any corporation, entity or "group," as defined in Section 13(d)(3) of the Securities Exchange Act ("person/group"), other than Parent and Purchaser or any person/group listed in the Company's definitive proxy statement filed on August 21, 2000, acquires beneficial ownership of more than 10% of the outstanding Common Shares, or is granted any options or rights, conditional or otherwise, to acquire a total of more than 10% of the outstanding Common Shares and which, in each case, does not tender the Common Shares beneficially owned by it in the Offer; (ii) any new group is formed which beneficially owns more than 10% of the outstanding Common Shares and which does not tender the Common Shares beneficially owned by it in the Offer; or (iii) any person/group, other than Parent or one or more of its affiliates, A-2 enters into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any Common Shares or a merger, consolidation or other business combination with or involving the Company; or (i) any change, development, effect or circumstance occurs or is threatened that would reasonably be expected to have a Material Adverse Effect with respect to the Company; or (j) the Company commences a case under any chapter of Title XI of the United States Code or any similar law or regulation; or a petition under any chapter of Title XI of the United States Code or any similar law or regulation is filed against the Company which is not dismissed within 5 business days. The preceding conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to the condition and may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of any right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Common Shares not accepted for payment shall be promptly returned to the tendering shareholders. A-3 EX-99.(D)(2) 10 d26190_ex99d2.txt 19.9% OPTION AGREEMENT 19.9% Option Agreement This 19.9% Option Agreement (this "Agreement") is entered into as of June 29, 2001, between RadiSys Corporation, an Oregon corporation ("Parent"), and Microware Systems Corporation, an Iowa corporation (the "Company"). Recitals A. Contemporaneously with the execution and delivery of this Agreement, Parent, Drake Merger Sub, Inc., an Iowa corporation and a wholly owned subsidiary of Parent ("Newco"), and the Company are entering into an Agreement and Plan of Merger, dated as of the date of this Agreement (the "Merger Agreement"), which provides, among other things, for the merger of Newco with and into the Company (the "Merger"). B. As a condition to their willingness to enter into the Merger Agreement, Parent and Newco have requested that the Company grant to Parent an option to purchase shares of Common Stock, without par value, of the Company (the "Common Stock"), upon the terms and subject to the conditions of this Agreement. C. To induce Parent and Newco to enter into the Merger Agreement, the Company is willing to grant Parent the requested option and the board of directors of the Company has approved the granting of the option and authorized the Company to enter into this Agreement. Agreement 1. The Option; Exercise; Adjustments; Payment of Spread. 1.1. On the terms and subject to the conditions set forth in this Agreement, the Company grants to Parent an irrevocable option (the "Option") to purchase up to 3,814,462 shares of Common Stock (the "Shares") at a price per Share equal to $0.48 (the "Purchase Price"). Provided that Parent is not then in material breach of any representation, warranty, covenant or agreement contained in the Merger Agreement, the Option may be exercised by Parent, in whole or in part, at any time, or from time to time, following the termination by Parent of the Merger Agreement in any of the circumstances set forth in Sections 7.1.3(a), 7.1.4, 7.1.5, 7.1.6 and, subject to Section 10 of this Agreement, Section 7.1.8 of the Merger Agreement, and before the termination of the Option in accordance with the terms of this Agreement. 1.2. The number of Shares purchasable upon exercise of the Option and the Purchase Price are subject to adjustment as set forth in this Agreement. 1.3. If Parent wishes to exercise the Option, Parent shall send a written notice to the Company (the "Stock Exercise Notice") specifying a date for the closing of the purchase (subject to the HSR Act (as defined below) and obtaining other applicable regulatory approvals) not earlier than two business days following the date the Stock Exercise Notice is given. In the event of any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Company, the number of Shares subject to this Option and the Purchase Price shall be appropriately adjusted to restore Parent to its rights under this Agreement, including its right to purchase Shares representing 19.9% of the capital stock of the Company. 1.4. At any time after the Option is exercisable pursuant to the terms of Section 1.1 of this Agreement, Parent may elect, in lieu of purchasing the Shares under this Agreement, to receive from the Company an amount in cash (the "Cash Amount") equal to the Spread (as defined below) multiplied by all or the portion of the Shares subject to the Option that Parent shall specify in a written notice to the Company (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than five business days following the date the Cash Exercise Notice is given on which the Company shall pay to Parent the Cash Amount. As used in this Agreement, "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid or proposed to be paid by any person pursuant to a Company Takeover Proposal (as defined in the Merger Agreement) (the "Alternative Purchase Price") and (y) the closing price of the shares of Common Stock as quoted on the Nasdaq Stock Market and reported in The Wall Street Journal on the last trading day before the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price can be calculated by reference only to a cash amount paid or proposed to be paid for any shares of Common Stock outstanding, that cash amount shall be deemed to be the Alternative Purchase Price; if, in the case of clause (x) above, no shares of Common Stock will be purchased only for cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of the property other than cash included in the Alternative Purchase Price. If, in the case of clause (x) above, the other property consists of securities with an existing public trading market, the average of the closing prices (or the average of the closing bid and asked prices if closing prices are unavailable) for those securities in their principal public trading market on the five trading days ending one day before the date of the Cash Exercise Notice shall be deemed to equal the fair market value of the property. If the other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement by the parties to this Agreement on the value of the other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon Parent's receipt of the Cash 2 Amount, Parent shall not have the right to receive the Shares for which Parent shall have elected to be paid the Spread. 2. Conditions to Delivery of Shares. The Company's obligation to deliver Shares upon exercise of the Option is subject only to the conditions that: 2.1. No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and 2.2. Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (as defined in the Merger Agreement) shall have expired or been terminated. 3. The Closing. 3.1. Any closing under this Agreement shall take place on the date specified by Parent in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 9:00 A.M., local time, at the offices of Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2600, Portland, Oregon 97204, or, if Shares are to be delivered and the conditions set forth in Section 2.1 or Section 2.2 have not then been satisfied, on the second business day following the satisfaction of those conditions, or at any other time and place to which the parties to this Agreement may agree in writing (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1.2 of this Agreement, the Company shall deliver to Parent a certificate or certificates, representing the Shares in the denominations designated by Parent in its Stock Exercise Notice and Parent shall purchase those Shares from the Company at the Purchase Price or (ii) in the event of a closing pursuant to Section 1.3 of this Agreement, the Company shall deliver to Parent the Cash Amount. Any payment made by Parent to the Company, or by the Company to Parent, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of federal funds to a bank designated by the party receiving such funds. 3.2. The certificates representing the Shares shall bear an appropriate legend relating to the fact that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. Representations and Warranties of the Company. The Company represents and warrants to Parent that (a) the Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Iowa and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Company and the completion by it of the transactions contemplated by this Agreement have been duly authorized by the board of directors of the Company and this Agreement has been duly executed and delivered by a duly authorized officer of the Company 3 and constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Company has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option, and the Shares, when issued and delivered by the Company upon exercise of the Option and paid for by Parent as contemplated by this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise may be required by the HSR Act, the execution and delivery of this Agreement by the Company and the completion by it of the transactions contemplated by this Agreement do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of the Company's articles of incorporation or bylaws, or any indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, or decree, or restriction by which the Company or any of its subsidiaries or any of their respective properties or assets is bound; and (e) no restrictive provision of any "fair price", "moratorium", "control share acquisition", or other form of antitakeover statute or regulation, including, without limitation, the provisions of Section 490.1110 of the Iowa Business Corporation Act, or similar provision contained in the articles of incorporation or bylaws of the Company, is or shall be applicable to the acquisition of Shares by Parent pursuant to this Agreement. 5. Representations and Warranties of Parent. Parent represents and warrants to the Company that Parent is acquiring the Option and, if and when it exercises the Option, will be acquiring the Shares issuable upon the exercise of the Option for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. Listing of Shares; Filings; Governmental Consents. Subject to applicable law and the rules and regulations of the Nasdaq Stock Market, the Company shall promptly after receipt of the Stock Exercise Notice file a notification form for listing of additional shares to list the Shares on the Nasdaq Stock Market and shall use its best efforts to obtain approval of the listing and to effect all necessary filings by the Company under the HSR Act; provided, however, that if the Company is unable to effect the listing on the Nasdaq Stock Market by the Closing Date, the Company shall nevertheless be obligated to deliver the Shares upon the Closing Date and to continue diligently to pursue listing of the Shares on the Nasdaq Stock Market. Each of the parties to this Agreement shall use its best efforts to obtain consents of all third parties and governmental authorities necessary to the completion of the transactions contemplated. 7. Sale of Shares. At any time before the one year anniversary of the date the Merger Agreement is terminated pursuant to its terms (the "Merger Termination Date"), Parent shall have the right to sell (the "Sale Right") to the Company all or any portion of the Shares at the greater of (i) the Purchase Price, or (ii) the average of the last closing prices for shares of Common Stock on the last five trading days before the date Parent gives written notice of its intention to exercise the Sale Right. If Parent does not exercise the Sale Right before the one year anniversary of the Merger Termination Date, the Sale Right shall terminate. In the event Parent wishes to exercise the Sale Right, Parent shall send a written notice to the Company 4 specifying a date not later than 20 business days and not earlier than 5 business days following the date the notice is given for the closing of the sale. 8. Registration Rights. 8.1. If, within three years after Parent's purchase of the Shares pursuant to this Agreement, the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than Parent) any of its Common Stock under the Securities Act in connection with the public offering of the Common Stock (other than a registration relating solely to the sale of securities to participants in a Company stock plan), the Company shall, at that time, promptly give Parent written notice of the registration. Upon the written request of Parent given within 20 days after the giving of the notice by the Company in accordance with Section 12 of this Agreement, the Company shall include in the registration statement all of the Shares that Parent has requested to be registered. 8.2. If the Common Stock is registered pursuant to the provisions of this Section 8, the Company agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered by the registration statement and the prospectus in the numbers the Parent may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or prospectus, to prepare and file under the applicable securities laws the amendments and supplements that may be necessary to keep available for at least 90 days a prospectus covering the Common Stock meeting the requirements of the securities laws, and to furnish Parent the number of copies of the registration statement and prospectus as amended or supplemented that may reasonably be requested. The Company shall bear the cost of the registration, including all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Company, except that Parent shall pay the fees and disbursements of its counsel, and the underwriting fees and selling commissions applicable to the shares of Common Stock sold by Parent. Company shall indemnify and hold harmless (i) Parent, its affiliates and its officers and directors and (ii) each underwriter and each person who controls any underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (collectively, the "Underwriters") ((i) and (ii) being referred to as "Indemnified Parties"), against any losses, claims, damages, liabilities or expenses, to which the Indemnified Parties may become subject, insofar as such losses, claims, damages, liabilities (or actions in respect of the losses, claim, damages and liabilities) and expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained or incorporated by reference in any registration statement filed pursuant to this paragraph, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein 5 or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any case to the extent that any loss, liability, claim, damage or expense arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of those documents in reliance upon and in conformity with written information furnished to the Company by the Indemnified Parties expressly for use or incorporation by reference in those documents. As used in this Agreement, "person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended. 8.3. Parent and the Underwriters shall indemnify and hold harmless the Company, its affiliates and its officers and directors against any losses, claims, damages, liabilities or expenses to which the Company, its affiliates and its officers and directors may become subject, insofar as those losses, claims, damages, liabilities (or actions in respect of those losses, claims, damages and liabilities) and expenses arise out of or are based upon any untrue statement of any material fact contained or incorporated by reference in any registration statement filed pursuant to this paragraph, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by Parent or the Underwriters, as applicable, specifically for use or incorporation by reference in the registration statement. 9. Expenses. Each party to this Agreement shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided in this Agreement or in the Merger Agreement. 10. Limitation on Profit. 10.1. Notwithstanding any other provision of this Agreement, in no event shall the Total Profit (as defined below) plus any Liquidation Amount (as defined below) exceed in the aggregate $775,000 and, if it otherwise would exceed this amount, Parent, at its sole election, shall either (i) reduce the number of Shares subject to the Option, (ii) deliver to the Company for cancellation Shares previously purchased by Parent pursuant to the Option, (iii) pay to the Company cash or refund in cash Liquidation Amounts previously paid or reduce or waive the amount of any Liquidation Amount payable pursuant to Section 8.7 of the Merger Agreement, or (iv) any combination of the above, so that Parent's realized Total Profit, when aggregated with any Liquidation Amounts so paid or payable to Parent, shall not exceed $775,000 after taking into account the foregoing actions. 6 10.2. The term "Liquidation Amounts" means the aggregate amount of any termination fee payable or paid to Parent pursuant to Section 8.7 of the Merger Agreement (and not repaid or refunded to the Company pursuant to this Section 10 or otherwise). 10.3. As used in this Agreement, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: the total amount of (i) any Cash Amounts received by Parent pursuant to Section 1.3 of this Agreement and (ii) any amounts received by Parent pursuant to Section 7 of this Agreement upon the Company's repurchase of the Shares pursuant to Section 7, less (iii) in the case of the Company's repurchase of Shares pursuant to Section 7 of this Agreement, the total amounts paid by Parent for all of those Shares. 11. Specific Performance. The Company acknowledges that if the Company fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to Parent for which money damages would not be an adequate remedy. In that event, the Company agrees that Parent shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if Parent should institute an action or proceeding seeking specific enforcement of the provisions of this Agreement, the Company waives the claim or defense that Parent has an adequate remedy at law and agrees not to assert in any action or proceeding the claim or defense that a remedy at law exists. The Company further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any equitable relief. 12. Notice. All notices or other communications under this Agreement shall be in writing and shall be deemed duly given, effective (i) three business days later, if sent by registered or certified mail, return receipt requested, postage prepaid, (ii) when sent, if sent by telecopier or fax, provided that the telecopy or fax is promptly confirmed by telephone confirmation, (iii) when served, if delivered personally to the intended recipient, and (iv) one business day later, if sent by overnight delivery via a national courier service, and in each case, addressed to the intended recipient at the address set forth below. Any party may change the address to which notices or other communications under this Agreement are to be delivered by giving the other party notice in the manner set forth in this Section 12: If to Parent: RadiSys Corporation 5445 NE Dawson Creek Drive Hillsboro, Oregon 97124 Attn: Mr. Glenford J. Myers Telecopy: (503) 615-1114 7 With a copy to: Stoel Rives LLP 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204, Attn: John R. Thomas Telecopy: (503) 220-2480 If to the Company: Microware Systems Corporation 1500 NW 118th Street Des Moines, Iowa 50325 Attn: Mr. Kenneth B. Kaplan Telecopy: (515) 327-5526 With a copy to: D'Ancona & Pflaum LLC 111 E. Wacker Drive, Suite 2800 Chicago, Illinois 60601-4205 Attn: Mr. Arthur Don Telecopy: (312) 602-3048 13. Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties named in this Agreement and their respective successors and assigns; provided, however, that the successor in interest or assigns shall agree to be bound by the provisions of this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any person other than the Company or Parent, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 14. Entire Agreement; Amendments. This Agreement, together with the Merger Agreement and the other documents referred to in the Merger Agreement, contains the entire agreement between the parties to this Agreement with respect to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to those transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 15. Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party to this Agreement, except that Parent may assign its rights and obligations under this Agreement to any of its direct or indirect wholly owned subsidiaries (including Newco), but no such transfer shall relieve Parent of its obligations under this Agreement if the transferee does not perform the obligations. 8 16. Headings. The section headings in this Agreement are for convenience only and shall not affect the construction of this Agreement. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Oregon (regardless of the laws that might otherwise govern under applicable Oregon principles of conflicts of law). 19. Termination. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (i) the Effective Time (as defined in the Merger Agreement); and (ii) 180 days after the Merger Termination Date (the date referred to in clause (ii) being hereinafter referred to as the "Option Termination Date"); provided that, if the Option cannot be exercised or the Shares cannot be delivered to Parent upon exercise of the Option because the conditions set forth in Section 2.1 or Section 2.2 of this Agreement have not yet been satisfied, the Option Termination Date shall be extended until thirty days after the impediment to exercise or delivery has been removed. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 20. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of the provision to any person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted for that provision in order to carry out, so far as may be valid and enforceable, the intent and purpose of the invalid or unenforceable provision and (b) the remainder of this Agreement and the application of the provision to other persons or circumstances shall not be affected by the invalidity or unenforceability, nor shall the invalidity or unenforceability affect the validity or enforceability of the provision, or the application of the provision, in any other jurisdiction. 21. Public Announcement. Parent shall consult with the Company and the Company shall consult with Parent before issuing any press release with respect to the initial announcement of this Agreement, the Option, the Merger Agreement or the transactions contemplated by this Agreement and neither party shall issue any press release before that consultation except as may be required by law or the applicable rules and regulations of the Nasdaq Stock Market or any listing agreement with the NASD. [Signature page follows.] 9 In witness whereof, the parties to this 19.9% Option Agreement have executed this Agreement as of the day and year first above written. Microware Systems Corporation By: /s/ Kenneth B. Kaplan ---------------------------------- Kenneth B. Kaplan Chief Executive Officer RadiSys Corporation By: /s/ Glenford J. Myers ---------------------------------- Glenford J. Myers Chief Executive Officer EX-99.(D)(3) 11 d26190_ex99d3.txt FORM OF SHAREHOLDER'S AGREEMENT Shareholder's Agreement This Shareholder's Agreement (this "Agreement") is made and entered into as of this 29th day of June, 2001, among RadiSys Corporation, an Oregon corporation ("Parent"), Drake Merger Sub, Inc., an Iowa corporation and a wholly owned subsidiary of Parent ("Purchaser"), and _______________________ (the "Shareholder"). Recitals A. The Shareholder desires that Microware Systems Corporation, an Iowa corporation (the "Company"), Parent and Purchaser enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement") with respect to the merger of Purchaser with and into the Company (the "Merger"); and B. The Shareholder is executing this Agreement as an inducement to Parent to enter into and execute, and to cause Purchaser to enter into and execute, the Merger Agreement. Now, therefore, in consideration of the execution and delivery by Parent and Purchaser of the Merger Agreement and the mutual covenants, conditions and agreements contained herein and therein, the parties agree as follows: Agreement 1. Representations and Warranties. The Shareholder represents and warrants to Parent and Purchaser as follows: (a) The Shareholder is the record and beneficial owner of the number of shares of Common Stock of the Company (the "Company Common Stock") set forth opposite his name on the attached Annex I (as may be adjusted from time to time pursuant to Section 5, the Shareholder's "Shares"). Except for the Shareholder's Shares and any other shares of Company Common Stock subject to this Agreement, the Shareholder is not the record or beneficial owner of any shares of Company Common Stock. (b) This Agreement constitutes the legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally. Neither the execution and delivery of this Agreement nor the completion by the Shareholder of the transactions contemplated by this Agreement will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Shareholder is a party or bound or to which any of the Shareholder's Shares are subject. To the best of the Shareholder's knowledge, completion by the Shareholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to the Shareholder or the Shareholder's Shares. (c) The Shareholder's Shares and the certificates representing such Shares are now and at all times during the term of this Agreement will be held by the Shareholder, or by a nominee or custodian for the benefit of the Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any encumbrances or proxies arising under this Agreement or as listed on Annex I. (d) No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission from Parent, Purchaser or the Company in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Shareholder. (e) The Shareholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon the Shareholder's execution and delivery of this Agreement. The Shareholder acknowledges that the irrevocable proxy set forth in Section 4 of this Agreement is granted in consideration for the execution and delivery of the Merger Agreement by Parent and Purchaser. 2. Agreement to Tender or Sell. (a) The Shareholder agrees that he shall tender his Shares into the Offer (as defined in the Merger Agreement) and that he shall not withdraw any Shares so tendered (it being understood that the obligation contained in this sentence is unconditional). (b) The Shareholder shall tender his Shares not later than five business days following commencement of the Offer. 3. Covenants. The Shareholder agrees with, and covenants to, Parent and Purchaser as follows: (a) The Shareholder shall not, except as contemplated by the terms of this Agreement, (i) transfer (for purposes of this Agreement, the term "transfer" includes, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shareholder's Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to such Shares except with respect to election of directors at the Company's annual meeting, (iv) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of its obligations under this Agreement or the transactions contemplated by this Agreement. (b) Subject to Section 8, the Shareholder shall not, nor shall he permit any investment banker, attorney or other adviser or representative of the Shareholder to, directly or indirectly, (i) solicit, initiate or encourage the submission of, any Company Takeover Proposal 2 (as defined in the Merger Agreement) or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal. 4. Grant of Irrevocable Proxy; Appointment of Proxy. (a) The Shareholder irrevocably grants to, and appoints, Parent and Glenford J. Myers, Annette M. Mulee and any other individual who shall hereafter be designated by Parent, the Shareholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of the Shareholder, to vote the Shareholder's Shares, or grant a consent or approval in respect of such Shares, at any meeting of shareholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, against (i) any Company Takeover Proposal and (ii) any amendment of the Company's Restated and Amended Articles of Incorporation or Restated and Amended Bylaws or other proposal or transaction (including any consent solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement. (b) The Shareholder represents that any proxies heretofore given in respect of the Shareholder's Shares are not irrevocable, and that any such proxies are hereby revoked. (c) The Shareholder affirms that the irrevocable proxy set forth in this Section 4 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of the Shareholder under this Agreement. The Shareholder further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. The Shareholder ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 490.722 of the Iowa Business Corporation Act (the "Corporation Law"). 5. Certain Events. The Shareholder agrees that this Agreement and the obligations hereunder shall attach to the Shareholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation the Shareholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares listed on Annex I beside the name of the Shareholder shall be adjusted appropriately and this Agreement and the obligations under this Agreement shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. 3 6. Stop Transfer. The Company agrees with, and covenants to, Parent that the Company shall not register the transfer of any certificate representing any Shareholder's Shares, unless such transfer is made to Parent or Purchaser or otherwise in compliance with this Agreement. 7. Voidability. If, prior to the execution of this Agreement, the Board of Directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action the acquisition of Company Common Stock by Parent and Purchaser and the other transactions contemplated by this Agreement and the Merger Agreement, so that by the execution and delivery of this Agreement, Parent or Purchaser would become, or could reasonably be expected to become, an "interested shareholder" with whom the Company would be prevented for any period pursuant to Section 490.1110 of the Corporation Law from engaging in any "business combination" (as such terms are defined in Section 490.1110 of the Corporation Law) then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. 8. Shareholder Capacity. The Shareholder does not make any agreement or understanding in his capacity as a director or officer of the Company. The Shareholder signs solely in his capacity as the record holder and beneficial owner of his Shares and nothing herein shall limit or affect any actions taken by the Shareholder in his capacity as a director or officer of the Company. 9. Further Assurances. The Shareholder shall, upon request of Parent or Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Purchaser to be necessary or desirable to carry out the provisions of this Agreement and to vest the power to vote the Shareholder's Shares as contemplated by Section 4 in Parent and the other irrevocable proxies described therein. 10. Termination. This Agreement, and all rights and obligations of the parties under this Agreement, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is terminated in accordance with its terms or (b) the date that Parent or Purchaser shall have purchased and paid for the Shares of the Shareholder pursuant to Section 2; provided, however, that the termination of this Agreement shall not relieve any party of liability for breach of this Agreement prior to termination. 11. Public Announcements. The Shareholder will consult with Parent before issuing, and provide Parent with the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. 12. Miscellaneous. (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to them in the Merger Agreement. 4 (b) All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or Purchaser, to the address set forth in Section 8.5 of the Merger Agreement; and (ii) if to the Shareholder, to the address set forth on Annex I hereto, or such other address as may be specified in writing by the Shareholder. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement. (e) This Agreement (including the documents and instruments referred to in this Agreement) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the state of Oregon, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties, except by laws of descent. Any assignment in violation of the foregoing shall be void. (h) If any term, provision, covenant or restriction in this Agreement, or the application thereof to any circumstance, shall, in any event, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions in this Agreement and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (i) The Shareholder agrees that irreparable damage would occur and that Parent and Purchaser would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent and Purchaser shall be entitled to an injunction or injunctions to prevent breaches by any Shareholder of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each of the parties to this Agreement (i) consents to submit itself to the personal jurisdiction of any federal court located in the state of Oregon in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, and (ii) agrees that it will not attempt to deny or defeat the personal jurisdiction consented to in (i) above by motion or other request for leave 5 from the applicable court. The prevailing party in any judicial action shall be entitled to receive from the other party reimbursement for the prevailing party's reasonable attorneys' fees and disbursements, and court costs. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. [Signature page follows.] 6 In witness whereof, Parent, Purchaser and the Shareholder have caused this Shareholder's Agreement to be duly executed and delivered as of the date first written above. Shareholder By /s/ ----------------------------------- Print Name: ----------------------- Title: ---------------------------- Purchaser Drake Merger Sub, Inc. By: /s/ Glenford J. Myers ---------------------------------- Glenford J. Myers President Parent RadiSys Corporation By: /s/ Glenford J. Myers ---------------------------------- Glenford J. Myers Chief Executive Officer Acknowledged and agreed to as to Sections 6: Company Microware Systems Corporation By: /s/ Kenneth B. Kaplan -------------------------------- Kenneth B. Kaplan Chief Executive Officer 7 EX-99.(D)(4) 12 d26190_ex99d4.txt SHAREHOLDER'S AGREEMENT Shareholder's Agreement This Shareholder's Agreement (this "Agreement") is made and entered into as of this 29th day of June 2001, among RadiSys Corporation, an Oregon corporation ("Parent"), Drake Merger Sub, Inc., an Iowa corporation and a wholly owned subsidiary of Parent ("Purchaser"), and Motorola, Inc. (the "Shareholder"). Recitals A. Microware Systems Corporation, an Iowa corporation (the "Company"), and Parent and Purchaser desire to enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement") with respect to the merger of Purchaser with and into the Company (the "Merger"); and B. As a condition to the Merger, Parent and Purchaser have requested that the Shareholder execute this Agreement as an inducement to Parent to enter into and execute, and to cause Purchaser to enter into and execute, the Merger Agreement. Now, therefore, in consideration of the execution and delivery by Parent and Purchaser of the Merger Agreement and the mutual covenants, conditions and agreements contained herein and therein, the parties agree as follows: Agreement 1. Representations and Warranties. The Shareholder represents and warrants to Parent and Purchaser as follows: (a) The Shareholder is the record and beneficial owner of the number of shares of Common Stock of the Company (the "Company Common Stock") set forth opposite his name on the attached Annex I (as may be adjusted from time to time pursuant to Section 5, the Shareholder's "Shares"). Except for the Shareholder's Shares and any other shares of Company Common Stock subject to this Agreement, the Shareholder is not the record or beneficial owner of any shares of Company Common Stock. (b) This Agreement constitutes the legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally. Neither the execution and delivery of this Agreement nor the completion by the Shareholder of the transactions contemplated by this Agreement will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Shareholder is a party or bound or to which any of the Shareholder's Shares are subject. To the best of the Shareholder's knowledge, completion by the Shareholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to the Shareholder or the Shareholder's Shares. (c) The Shareholder's Shares and the certificates representing such Shares are now and at all times during the term of this Agreement will be held by the Shareholder, or by a nominee or custodian for the benefit of the Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any encumbrances or proxies arising under this Agreement or as listed on Annex I. (d) No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission from Parent, Purchaser or the Company in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Shareholder. (e) The Shareholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon the Shareholder's execution and delivery of this Agreement. The Shareholder acknowledges that the irrevocable proxy set forth in Section 4 of this Agreement is granted in consideration for the execution and delivery of the Merger Agreement by Parent and Purchaser. 2. Agreement to Commence Offer; Modification of Offer. (a) Parent agrees to cause Purchaser to, and Purchaser agrees to, make the Offer for all of the Shares within the time and upon the terms as provided for in the Merger Agreement, and subject to the conditions therein contained. (b) Parent agrees that it will not cause or permit the Purchaser to, and Purchaser agrees not to, amend, modify or change the Offer without the prior written consent of the Shareholder if, the effect of ay such amendment, modification or change would be to (i) reduce the number of Common Shares subject to the Offer, (ii) reduce the Per Share Amount, (iii) impose any other conditions to the Offer other than the Offer Conditions or modify the Offer Conditions (other than to waive any Offer Conditions to the extent permitted by the Merger Agreement), (iv) except as provided by the second sentence of Section 1.1.4 of the Merger Agreement, extend the Offer, (v) change the form of consideration payable in the Offer, or (vi) amend any other term of the Offer in any manner adverse to the Shareholder. 2. Tender or Sell. (a) The Shareholder agrees that during the term of this Agreement he shall tender his Shares into the Offer (as defined in the Merger Agreement) and that he shall not withdraw any Shares so tendered (it being understood that the obligation contained in this sentence is unconditional during the term of this Agreement. (b) The Shareholder shall tender his Shares not later than five business days following commencement of the Offer. 3. Covenants. For the term of this Agreement, the Shareholder agrees with, and covenants to, Parent and Purchaser as follows: (a) The Shareholder shall not, except as contemplated by the terms of this Agreement, (i) transfer (for purposes of this Agreement, the term "transfer" includes, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shareholder's Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to such Shares except with respect to election of directors at the Company's annual meeting, (iv) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of its obligations under this Agreement or the transactions contemplated by this Agreement, provided, however, the Shareholder shall be permitted to transfer any or all of the Shareholders's Shares to a subsidiary of the Shareholder who agrees to be bound by the terms of this Agreement. (b) Subject to Section 8, the Shareholder shall not, nor shall he engage any investment banker, attorney or other adviser or representative to act on the Shareholder's behalf in order to, directly or indirectly, (i) solicit, initiate or encourage the submission of, any Company Takeover Proposal (as defined in the Merger Agreement) or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Company Takeover Proposal. 4. Grant of Irrevocable Proxy; Appointment of Proxy. (a) The Shareholder irrevocably (during the term of this Agreement) grants to, and appoints, Parent and Glenford J. Myers, Annette M. Mulee and any other individual who shall hereafter be designated by Parent, the Shareholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of the Shareholder, to vote the Shareholder's Shares, or grant a consent or approval in respect of such Shares, at any meeting of shareholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, against (i) any Company Takeover Proposal and (ii) any amendment of the Company's Restated and Amended Articles of Incorporation or Restated and Amended Bylaws or other proposal or transaction (including any consent solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement. (b) The Shareholder represents that any proxies heretofore given in respect of the Shareholder's Shares are not irrevocable, and that any such proxies are hereby revoked. (c) The Shareholder affirms that the irrevocable proxy set forth in this Section 4 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of the Shareholder under this Agreement. The Shareholder further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked prior to the termination of this Agreement. The Shareholder ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 490.722 of the Iowa Business Corporation Act (the "Corporation Law"). 5. Certain Events. The Shareholder agrees that this Agreement and the obligations hereunder shall attach to the Shareholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation the Shareholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares listed on Annex I beside the name of the Shareholder shall be adjusted appropriately and this Agreement and the obligations under this Agreement shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. 6. Stop Transfer. The Company agrees with, and covenants to, Parent that the Company shall not register the transfer of any certificate representing any Shareholder's Shares, unless such transfer is made to Parent or Purchaser or otherwise in compliance with this Agreement. 7. Voidability. If, prior to the execution of this Agreement, the Board of Directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action the acquisition of Company Common Stock by Parent and Purchaser and the other transactions contemplated by this Agreement and the Merger Agreement, so that by the execution and delivery of this Agreement, Parent or Purchaser would become, or could reasonably be expected to become, an "interested shareholder" with whom the Company would be prevented for any period pursuant to Section 490.1110 of the Corporation Law from engaging in any "business combination" (as such terms are defined in Section 490.1110 of the Corporation Law) then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. 8. Shareholder Capacity. The Shareholder does not make any agreement or understanding in his capacity as a director or officer of the Company. The Shareholder signs solely in his capacity as the record holder and beneficial owner of his Shares and nothing herein shall limit or affect any actions taken by the Shareholder in his capacity as a director or officer of the Company. 9. Further Assurances. The Shareholder shall, upon request of Parent or Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Purchaser to be necessary or desirable to carry out the provisions of this Agreement and to vest the power to vote the Shareholder's Shares as contemplated by Section 4 in Parent and the other irrevocable proxies described therein. 10. Termination. This Agreement, and all rights and obligations of the parties under this Agreement, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is terminated in accordance with its terms, (b) the date that Parent or Purchaser shall have purchased and paid for the Shares of the Shareholder pursuant to Section 2; and (c) September 30, 2001 if the Offer has not been completed by such date; provided, however, that Shareholder may terminate this Agreement if the Offer does not substantially conform with, or subject to Section 2(b) hereof is amended, modified or changed in a manner so as not to conform with, the description of the Offer provided to Shareholder in the Draft Merger Agreement provided to Shareholder on June 27, 2001 or Shares deposited under the Offer (including Shareholder's Shares) have not, for any reason, been taken up and paid for on or before the end of the tenth day following expiry of the Offer; provided, further, however, the termination of this Agreement shall not relieve any party of liability for breach of this Agreement prior to termination. 11. Public Announcements. The Shareholder will consult with Parent before issuing, and provide Parent with the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. 12. Miscellaneous. (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to them in the Merger Agreement. (b) All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or Purchaser, to the address set forth in Section 8.5 of the Merger Agreement; and (ii) if to the Shareholder, to the address set forth on Annex I hereto, or such other address as may be specified in writing by the Shareholder. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement. (e) This Agreement (including the documents and instruments referred to in this Agreement) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the state of Oregon, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties, except by laws of descent. Any assignment in violation of the foregoing shall be void. (h) If any term, provision, covenant or restriction in this Agreement, or the application thereof to any circumstance, shall, in any event, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions in this Agreement and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (i) The Shareholder agrees that irreparable damage would occur and that Parent and Purchaser would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent and Purchaser shall be entitled to an injunction or injunctions to prevent breaches by any Shareholder of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each of the parties to this Agreement (i) consents to submit itself to the personal jurisdiction of any federal court located in the state of Oregon in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, and (ii) agrees that it will not attempt to deny or defeat the personal jurisdiction consented to in (i) above by motion or other request for leave from the applicable court. The prevailing party in any judicial action shall be entitled to receive from the other party reimbursement for the prevailing party's reasonable attorneys' fees and disbursements, and court costs. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. [Signature page follows.] In witness whereof, Parent, Purchaser and the Shareholder have caused this Shareholder's Agreement to be duly executed and delivered as of the date first written above. Shareholder Motorola, Inc. Print Name:/s/ Carl F. Koenemann ------------------------------- Address for Notices: 1303 E. Algonquin Road Schaumburg, Illinois 60196 Attention: General Counsel Fax: 847 576-3628 Purchaser Drake Merger Sub, Inc. By: /s/ Glenford J. Myers --------------------------------------- Name: Glenford J. Myers ------------------------------------- Title: President ------------------------------------ Parent Radisys Corporation By: /s/ Glenford J. Myers --------------------------------------- Name: Glenford J. Myers ------------------------------------- Title: Chief Executive Officer ------------------------------------ Acknowledged and agreed to as to Sections 6: Company Microware Systems Corporation By: /s/ Kenneth B. Kaplan -------------------------- Name: Kenneth B. Kaplan ------------------------ Title: Chief Executive Officer ----------------------- Annex I To Shareholder's Agreement Number of Shares Owned: 1,526,232 shares EX-99.(D)(5) 13 d26190_ex99d5.txt TERMINATION AND BUY-OUT AGREEMENT TERMINATION AND BUY-OUT AGREEMENT THIS AGREEMENT, dated as of June 29, 2001 (this "Agreement"), is made by and between Microware Systems Corporation, an Iowa corporation (the "Company"), Elder Court, LLC, a Cayman Islands limited liability company ("Elder Court"), Roth Capital Partners, Inc., a California corporation ("Roth"), Carbon Mesa Partners, LLC, a Nevada limited liability company ("Carbon Mesa"), and Anthony Soich, an individual ("Soich", and together with Elder Court, Roth, and Carbon Mesa, each an "Investor" and collectively, the "Investors"). R E C I T A L S: WHEREAS, upon the terms and subject to the conditions of the Securities Purchase Agreement, dated as of November 28, 2000, between Elder Court and the Company (the "Securities Purchase Agreement"), the Company issued and sold to Elder Court an 8% Convertible Debenture, in the principal amount of $2,000,000 (the "Debenture") and entered into a registration rights agreement, dated November 28, 2000 (the "November Registration Rights Agreement") relating thereto. WHEREAS, in connection with the issuance of the Debenture, the Company also issued (a) a warrant to Elder Court, dated November 28, 2000, to purchase 500,000 shares of common stock (the "Elder Court November Warrant"), (b) a warrant to Roth Capital Partners, Inc., dated November 28, 2000, to purchase 45,000 shares of common stock (the "Roth November Warrant"), and (c) a warrant to Carbon Mesa, dated November 28, 2000, to purchase 5,000 shares of common stock (the "Carbon Mesa November Warrant"). WHEREAS, upon the terms and subject to the conditions of the private equity credit agreement, dated December 15, 2000, between the Company and Elder Court (the "Credit Agreement"), the Company has the obligation to issue and sell to Elder Court that number of shares of its common stock representing a minimum $1.5 million draw down under the Credit Agreement, all as set forth therein. WHEREAS, in connection with the execution of the Credit Agreement, the Company also issued (a) a warrant to Elder Court, dated December 15, 2000, to purchase 1,400,000 shares of common stock (the "Elder Court December Warrant"), (b) a warrant to Roth Capital Partners, Inc., dated December 15, 2000, to purchase 126,000 shares of common stock (the "Roth December Warrant"), (c) a warrant to Soich, dated December 15, 2000, to purchase 54,000 shares of common stock (the "Soich December Warrant"), and (d) a warrant to Carbon Mesa, dated November 28, 2000, to purchase 20,000 shares of common stock (the "Carbon Mesa December Warrant"). 1 WHEREAS, on April 30, 2000, the Company entered into a second registration rights agreement with Elder Court (the "April Registration Rights Agreement") relating to the funding of the second tranche of the Debenture. WHEREAS, the Company now desires to enter into a transaction with a third party which the Board of Directors of the Company deems to be in the best interest of its shareholders (the "Transaction"). WHEREAS, as a condition precedent to entering into definitive agreements regarding the Transaction, the third party acquirer has required that the Company enter into this Agreement with the Investors and terminate each of the Securities Purchase Agreement, the Debenture, the November Registration Rights Agreement, the Elder Court November Warrant, the Roth November Warrant, the Carbon Mesa November Warrant, the Credit Agreement, the Elder Court December Warrant, the Roth December Warrant, the Soich December Warrant, the Carbon Mesa December Warrant and the April Registration Rights Agreement, all on the terms and as set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Elder Court hereby agree as follows: 1. Incorporation of Recitals. The Recitals to this Agreement are hereby incorporated by reference and made a part hereof. 2. Agreement to Terminate. Subject to the terms and conditions set forth herein, the parties agree as follows: (a) Agreement to Terminate. Upon the Company's making the payment described in Section 2(b) below, then immediately and without any further action of the Company or any Investor, each "Investor Agreement" (as defined below) shall be terminated and neither the Company nor any Investor will have any further obligations to, or rights or claims against, the other under any Investor Agreement. In connection with such termination, each of the Company and each Investor hereby waive any notice required to be given pursuant to any applicable Investor Agreement. For purposes hereof, the term "Investor Agreement" shall mean each of: (i) the Securities Purchase Agreement; (ii) the Debenture; (iii) the November Registration Rights Agreement; (iv) the Elder Court November Warrant; (v) the Roth November Warrant; 2 (vi) the Carbon Mesa November Warrant; (vii) the Credit Agreement; (viii) the Elder Court December Warrant; (ix) the Roth December Warrant; (x) the Soich December Warrant; (xi) the Carbon Mesa December Warrant; and (xii) the April Registration Rights Agreement Each Investor hereby represents and warrants that there are no other derivative instruments, securities, agreements, arrangements or understandings regarding the issuance of securities between such Investor and the Company. (b) Redemption Payments by the Company. (i) In consideration of the agreement of the Investors to enter into this Agreement and terminate each of the Investor Agreements in accordance with the terms hereof, at the Closing (as defined below) the Company shall pay to Elder Court an aggregate amount equal to Two Million Two Hundred Thousand Dollars ($2,200,000), (the "Redemption Amount"). (ii) The closing of the transactions contemplated by this agreement (the "Closing") shall take place immediately prior to the consummation of the Transaction, which shall occur no later than September 30, 2001. The Company shall provide the Investors with at least five (5) days prior written notice of the anticipated closing date. 3. Closing. (a) In connection with the closing of the transactions contemplated hereby, on the date of closing (the "Closing Date"): (i) The Company shall pay the Redemption Amount to Elder Court by wire transfer to a single deposit account designated in advance by Elder Court; and (ii) The Investors shall deliver to the Company the executed original copies of each of the Debenture, the Roth November Warrant, the Carbon Mesa November Warrant, the Elder Court December Warrant, the Roth December Warrant, the Soich December Warrant, and the Carbon Mesa December Warrant. 3 4. Term and Termination. This Agreement may be terminated solely as follows: (a) This Agreement shall terminate automatically and immediately upon the mutual written agreement of all the parties hereto. (b) In the event that the Company, on one hand, or any Investor, on the other hand, (the "Defaulting Party") commits a material breach of this Agreement and fails to cure such breach within five (5) calendar days after receipt of written notice from the other party, such other party shall have the right to terminate this Agreement immediately upon written notice to the Defaulting Party. (c) This Agreement shall automatically terminate in the event the definitive agreement regarding the Transaction is terminated by written action of any of the parties thereto. (d) Subject to the rights of the parties in Section 5 below, this Agreement will terminate automatically if the Closing has not occurred on or before September 30, 2001. (e) This Agreement may be terminated by written notice by the Company, on one hand, or a majority in interest of the Investors, on the other hand, if the price per share for the Company's common stock included in the Transaction exceeds $1.00 per share. (f) This Agreement shall automatically terminate in the event the average closing price for the Company's common stock (as quoted on the Nasdaq National Market) for any period of five (5) consecutive trading days shall be less than $0.33 per share . 5. Specific Performance. Investors, on one hand, and the Company, on the other hand, each agree that any violation of the provisions of this Agreement by the other party would be highly injurious to such party and would cause irreparable harm to the non-breaching party. By reason of the foregoing, each party consents and agrees that if it violates any provision of this Agreement, the non-defaulting party shall be entitled, in addition to any other rights and remedies that it may have, to apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any continuing violation of, the provisions of such section, without the necessity of posting bond. In addition, in the event of any such violation the defaulting party shall reimburse the non-defaulting party for any and all fees, expenses and costs incurred in connection with such violation (including, without limitation, attorneys fees). 6. Covenants. (a) Each of the parties hereto acknowledge and reaffirm that the terms of the confidentiality letters between the Company and each respective investor shall remain in full force and effect until the Closing or earlier termination of this Agreement. 4 (b) Each Investor covenants and agrees that at all times this Agreement is in effect, such Investor shall not buy, sell or otherwise trade in the securities of the Company, except for the transactions expressly contemplated by this Agreement and shares owned in excess 250,000 as described in Section 6(c) below which are under no restrictions hereunder. (c) At all times this Agreement is in effect, Elder Court shall promptly tender at least 250,000 of the shares of common stock of the Company in any tender offer under the federal securities laws made in connection with the Transaction. Elder Court agrees not to sell or otherwise transfer ownership of such shares of common stock (other than as contemplated by any such tender offer). (d) The Company covenants and agrees that in the event this Agreement is terminated under Section 4(a), by Investors pursuant to Section 4(b), Section 4(c), Section 4(d), the Investors pursuant to Section 4(e) or Section 4(f), then immediately, and without further action by any party hereto, the following will occur: (i) Section 4.A. of the Debenture shall be amended to read in its entirety as follows: "The Holder of this Debenture is entitled, at its option, subject to the following provisions of this Section 4, to convert all or a portion of this Debenture into shares of Common Stock of the Company, no par value per share ("Common Stock") of the Company at any time until the Maturity Date, at a conversion price for each share of Common Stock (the "Conversion Rate") equal to the lower of (x) $0.69, or (y) the Current Market Price (as defined below) multiplied by seventy-seven percent (77%); provided that the principal amount being converted is the lower of (x) at least $5,000 (unless if at the time of such election to convert the aggregate principal amount of all Debentures registered to the Holder is less than Ten Thousand Dollars $5,000, then the whole amount thereof) or (y) the maximum amount which the Holder can then convert pursuant to the terms of Section 4.E. hereof." (ii) The definition of the term "Discount" in the Credit Agreement shall be amended to read in its entirety as follows: " "DISCOUNT" shall mean seventeen percent (17%)." The Company will promptly provide Elder Court with a replacement Debenture and Credit Agreement reflecting the foregoing following the termination of this Agreement. 5 7. Miscellaneous. (a) For purposes of this Agreement, Elder Court shall be deemed to be agent for all of the Investors, and communications by the Company to all the Investors may be made, at the option of the Company, solely to Elder Court. (b) Any notice or communication required or permitted by this Agreement shall be given in writing addressed as follows: If to Company: Microware Systems Corporation 1500 Northwest 118th Street Des Moines, Iowa 50325 ATTN: CFO Telephone No.: (515) 223-8000 Telecopier No.: (515) 327-5528 with a copy to: Arthur Don, Esq. D'Ancona & Pflaum, Esq. 111 E. Wacker Drive, Ste. 2800 Chicago, Illinois 60601 Telephone No.: (312) 602-2000 Telecopier No.: (312) 602-3000 If to Investors: c/o Navigator Management (as Investor Agent) P.O. Box 972 Road Town Tortola, British Virgin Islands Telephone No.: (284) 494-4770 Telecopier No.: (284) 494-4771 All notices shall be served personally by telecopy, by telex, by overnight express mail service or other overnight courier, or by first class registered or certified mail, postage prepaid, return receipt requested. If served personally, or by telecopy, notice shall be deemed delivered upon receipt (provided that if served by telecopy, sender has written confirmation of delivery); if served by overnight express mail or overnight courier, notice shall be deemed delivered forty-eight (48) hours after deposit; and if served by first class mail, notice shall be deemed delivered seventy-two (72) hours after mailing. Any party may give written notification to the other parties of any change of address for the sending of notices, pursuant to any method provided for herein. 6 (c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. (d) This Agreement and all agreements entered into in connection herewith shall be governed by and interpreted in accordance with the laws of the State of California for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Any litigation based thereon, or arising out of, under, or in connection with, this Agreement or any course of conduct, course of dealing, statements (whether oral or written) or actions of the Company or any Investor shall be brought and maintained exclusively in the state or Federal courts of the State of California, sitting in the City of Los Angeles. The Company hereby expressly and irrevocably submits to the jurisdiction of the state and federal Courts of the State of California for the purpose of any such litigation as set forth above and irrevocably agrees to be bound by any final judgment rendered thereby in connection with such litigation. The Company further irrevocably consents to the service of process by registered mail, postage prepaid, or by personal service within or without the State of California. The Company hereby expressly and irrevocably waives, to the fullest extent permitted by law, any objection which it may have or hereafter may have to the laying of venue of any such litigation brought in any such court referred to above and any claim that any such litigation has been brought in any inconvenient forum. To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) with respect to itself or its property, the Company hereby irrevocably waives such immunity in respect of its obligations under this Agreement and the related agreements entered into in connection herewith. (e) If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. (f) This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. (g) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. (h) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof. (i) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by telephone 7 line facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement. (j) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement may be amended only by an instrument in writing signed by the parties to be charged with enforcement thereof. (k) Any default by an individual Investor hereunder shall not be deemed a default by any other Investor and shall not excuse the Company's performance hereunder or thereunder with respect to the non-defaulting Investors. (l) In the event of any action for breach of or to enforce or declare rights under any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and costs, to be paid by the losing party. (m) The obligations of each of the Investors hereunder shall be several, not joint, and no Investor shall have any liability hereunder of any nature whatsoever resulting from a breach or any other action of any other Investor. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. Microware Systems Corporation By: /s/ ------------------------------- Name: Title: Elder Court, LLC By: /s/ ------------------------------- Manager Roth Capital Partners, Inc. By: /s/ ------------------------------- Name: Title: Carbon Mesa Partners, LLC By: /s/ ------------------------------- Manager /s/ ------------------------------- Anthony Soich -----END PRIVACY-ENHANCED MESSAGE-----